UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[Mark One]
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ________________
Commission File No. 1-11775
AVIATION SALES COMPANY
----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 65-0665658
------------------------------ ------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6905 NW 25TH STREET 33122
MIAMI, FLORIDA -------
------------------------------------- (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (305) 592-4055
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report(s), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: 8,562,500 shares of
common stock, $.001 par value per share, were outstanding as of August 11, 1997.
<PAGE>
<TABLE>
<CAPTION>
AVIATION SALES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 JUNE 30, 1997
----------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,262,149 $ 2,435,956
Accounts receivable, net of allowances for doubtful
accounts of $3,779,580 and $3,900,017 and
allowances for sales returns of $1,227,598 and
$1,249,098 in 1996 and 1997, respectively 37,086,899 50,662,620
Inventories 72,974,397 89,644,998
Prepaid expenses 4,067,332 985,226
Deferred income taxes 1,972,410 2,639,029
-------------- --------------
Total current assets 117,363,187 146,367,829
-------------- --------------
SPARE PARTS ON LEASE, net of accumulated
amortization of $2,601,069 in 1996 and $2,961,497
in 1997 17,950,783 22,444,293
-------------- --------------
FIXED ASSETS
Property and equipment 4,333,070 5,490,251
Less - Accumulated depreciation (2,027,197) (2,455,453)
-------------- --------------
Total fixed assets 2,305,873 3,034,798
-------------- --------------
AMOUNTS DUE FROM RELATED PARTIES 2,914,615 2,872,987
-------------- --------------
OTHER ASSETS
Deposits and other 369,191 532,616
Deferred income taxes 3,406,331 3,314,774
Deferred financing costs, net 872,568 789,474
-------------- --------------
Total other assets 4,648,090 4,636,864
-------------- --------------
Total assets $ 145,182,548 $ 179,356,771
============== ==============
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
AVIATION SALES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Continued)
DECEMBER 31, 1996 JUNE 30, 1997
----------------- -------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 15,736,276 $ 19,312,319
Accrued expenses 7,746,156 7,262,938
Income taxes payable 755,228 1,588,616
Notes payable, current maturities
Senior 7,428,571 7,428,571
Revolver 16,697,985 43,301,014
------------- -------------
Total current liabilities 48,364,216 78,893,458
------------- -------------
LONG-TERM LIABILITIES
Deferred income 890,065 1,728,045
Notes payable - Senior 14,857,143 11,142,857
------------- -------------
Total long-term liabilities 15,747,208 12,870,902
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none outstanding -- --
Common stock, $.001 par value, 30,000,000 shares
authorized, 8,562,500 shares outstanding in 1996
and 1997, respectively 8,563 8,563
Additional paid-in capital 71,305,305 71,305,305
Retained earnings 9,757,256 16,278,543
------------- -------------
Total stockholders' equity 81,071,124 87,592,411
------------- -------------
Total liabilities and stockholders' equity $ 145,182,548 $ 179,356,771
============= =============
</TABLE>
The accompanying notes are on integral part of these
condensed consolidated balance sheets.
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<PAGE>
<TABLE>
<CAPTION>
AVIATION SALES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------------- -----------------------------
1996 1997 1996 1997
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Sales of aircraft parts, net $ 33,240,026 $ 47,567,442 $ 66,618,869 $ 94,241,539
Rentals from leases and other 2,918,858 3,090,745 5,094,161 5,467,384
Gain on sale of spare parts on lease -- 752,922 -- 752,922
------------- ------------- ------------- -------------
36,158,884 51,411,109 71,713,030 100,461,845
COST OF SALES 24,559,767 35,306,744 47,795,210 70,534,482
------------- ------------- ------------- -------------
11,599,117 16,104,365 23,917,820 29,927,363
------------- ------------- ------------- -------------
OPERATING EXPENSES
Operating 2,057,011 2,949,927 4,570,775 5,687,432
Selling 1,817,841 2,368,045 3,407,269 4,312,240
General and administrative 2,180,725 2,620,386 4,509,576 5,423,749
Depreciation and amortization 516,732 707,713 977,537 1,381,649
------------- ------------- ------------- -------------
6,572,309 8,646,071 13,465,157 16,805,070
------------- ------------- ------------- -------------
INCOME FROM OPERATIONS 5,026,808 7,458,294 10,452,663 13,122,293
OTHER EXPENSES
Interest expense and amortization of deferred
financing costs 1,837,317 1,423,557 3,868,285 2,431,659
------------- ------------- ------------- -------------
INCOME BEFORE INCOME TAXES 3,189,491 6,034,737 6,584,378 10,690,634
INCOME TAX (BENEFIT) EXPENSE (714,459) 2,353,547 (714,459) 4,169,347
------------- ------------- ------------- -------------
NET INCOME $ 3,903,950 $ 3,681,190 $ 7,298,837 $ 6,521,287
============= ============= ============= =============
EARNINGS PER SHARE:
Net income per share $ 0.43 $ 0.76
============= =============
PRO FORMA EARNINGS PER SHARE
(NOTE 3):
Pro forma net income per share $ 0.36 $ 0.74
============= =============
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING 5,400,000 8,600,282 5,400,000 8,600,282
============= ============= ============= =============
</TABLE>
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<PAGE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
- 5 -
<PAGE>
<TABLE>
<CAPTION>
AVIATION SALES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS
ENDED JUNE 30,
----------------------------
1996 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 7,298,837 $ 6,521,287
Adjustments to reconcile net income to net cash used
in operating activities
Depreciation and amortization 1,348,064 1,544,987
Provision for doubtful accounts 334,247 570,000
Increase in deferred income taxes (914,459) (575,062)
Gain on sale of spare parts on lease -- (752,922)
(Increase) decrease in accounts receivable, net (2,500,461) (14,145,721)
(Increase) decrease in inventory (2,473,642) (16,670,601)
(Increase) decrease in prepaid expenses (240,706) 3,082,106
(Increase) decrease in deposits and other (707,616) (163,425)
Increase (decrease) in accounts payable (1,218,698) 3,576,043
Increase (decrease) in accrued expenses 1,105,666 (483,218)
Increase (decrease) in income taxes payable 64,343 833,388
Increase (decrease) in deferred income 12,750 837,980
------------ ------------
Net cash provided by (used in) operating activities 2,108,325 (15,825,158)
------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of equipment, net (607,251) (1,157,181)
Purchase of spare parts on lease (5,843,464) (8,023,981)
Proceeds from sale of spare parts on lease -- 3,330,000
Payments from related parties 56,268 41,628
------------ ------------
Net cash used in investing activities (6,394,447) (5,809,534)
------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES
Distribution to partners (3,041,936) --
Repayment of senior debt (5,000,000) --
Net borrowings under senior revolving facility 15,763,592 --
Net borrowings under new credit facility -- 26,603,029
Payment under new credit facility -- (3,714,286)
Payment of deferred financing costs (232,885) (80,244)
------------ ------------
Net cash provided by financing activities 7,488,771 22,808,499
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 3,202,649 1,173,807
------------ ------------
CASH AND CASH EQUIVALENTS, beginning of period 253,307 1,262,149
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 3,455,956 $ 2,435,956
============ ============
Interest paid $ 2,909,842 $ 1,992,189
============ ============
Income taxes paid $ 120,126 $ 3,888,080
============ ============
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
- 6 -
<PAGE>
AVIATION SALES COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
1. BASIS OF PRESENTATION:
Interim Condensed Financial Statements
The accompanying unaudited interim condensed consolidated financial statements
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission for reporting on Form 10-Q. Pursuant to such rules and
regulations, certain information and footnote disclosure normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The accompanying unaudited interim
condensed financial statements should be read in conjunction with the Company's
December 31, 1996 financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 (File
No. 1-11775).
In the opinion of management, the accompanying unaudited interim condensed
consolidated financial statements of Aviation Sales Company (the "Company")
contain all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the financial position of the Company as of June
30, 1997 and the results of its operations and cash flows for the three and six
month periods ended June 30, 1997 and 1996. The results of operations and cash
flows for the six month period ended June 30, 1997 are not necessarily
indicative of the results of operations or cash flows which may be reported for
the year ending December 31, 1997.
Accounting Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Recently Issued Accounting Standards
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
No. 128"), is effective for fiscal years ending after December 15, 1997. This
statement specifies the computation, presentation and disclosure requirements
for earnings per share for entities with publicly held common stock or potential
common stock. This pronouncement is not expected to have a material impact on
the financial statements of the Company.
- 7 -
<PAGE>
2. ACQUISITIONS:
On December 10, 1996, the Company acquired AvEng Trading Partners, Inc.
("AvEng") for consideration of 400,000 shares of the Company's common stock. The
acquisition was accounted for using the pooling of interests method of
accounting, and therefore, the Company's consolidated statements of income,
partners' capital and stockholders' equity and cash flows for the year ended
December 31, 1996 reflect the results of operations of AvEng as if the
acquisition had occurred on January 1, 1996.
On August 9, 1996, the Company completed the acquisition of certain assets of
the business of Dixie Bearings, Incorporated ("Dixie") relating primarily to the
sale of new bearings for use in aircraft for a purchase price of approximately
$9 million. The acquisition was accounted for using the purchase method of
accounting. Accordingly, the operations of Dixie since the acquisition have been
included in the accompanying consolidated financial statements from the date of
acquisition. The historical operations of Dixie, when compared to the historical
operations of the Company, are not significant.
3. PRO FORMA DISCLOSURES:
Pro Forma Income Taxes
Prior to June 26, 1996, the business of the Company was conducted by a
partnership and not subject to income taxes. As a result of the transfer of the
net assets of the partnership to the Company and the initial public offering of
its common stock in June 1996, the Company became subject to federal and state
income taxes.
The following pro forma adjustments to record income taxes at the Company's
estimated effective tax rate have been reflected in the pro forma earnings per
share data presented in the accompanying condensed consolidated statements of
income of all periods presented:
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, 1996 ENDED JUNE 30, 1996
-------------------- -------------------
Historical income before
income taxes $ 3,081,182 $ 6,584,378
Pro forma provision for
income taxes (1,201,661) (2,567,907)
----------- -----------
Pro form net income $ 1,879,521 $ 4,016,471
=========== ===========
Pro Forma Net Income Per Share
Pro forma net income per share has been computed by dividing pro forma net
income by the weighted average number of common and common equivalent shares
outstanding during the period. Outstanding stock options are considered common
stock equivalents and are included in the calculation using the treasury stock
method.
- 8 -
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following discussion and analysis should be read in conjunction with the
information set forth under Management's Discussion and Analysis of Financial
Condition and Results of Operations on pages 15 through 22 of Aviation Sales
Company's Annual Report on Form 10-K for the year ended December 31, 1996. This
discussion contains forward looking information which involve risks and
uncertainties and is based upon information currently available to the Company.
Actual results could differ from those described herein and future results may
be subject to numerous factors, many of which are beyond the control of the
Company.
RESULTS OF OPERATIONS
Second quarter operating revenues rose 42.2% to $51.4 million, compared with
$36.2 million for the same period last year. Operating revenues for the six
months ended June 30, 1997 increased 40.1% to $100.5 million, compared with
$71.7 million, for the same period last year. Operating revenues increased due
to the Company's entrance into the bearings distribution business, increased
revenues from leasing activities, the addition of new sales personnel,
increased customer penetration, increased investment in and availability of
inventory and the continued expansion of services offered to customers and
customers utilizing the Company's services.
Gross profit increased 38.8% to $16.1 million for the second quarter ended June
30, 1997, compared with $11.6 million for the same period last year. Gross
margin declined to 31.3% for the 1997 second quarter from 32.1% for the 1996
second quarter and increased from 28.2% for the 1997 first quarter. Gross profit
for the first half of 1997 increased 25.1% to $29.9 million compared with $23.9
million for the same period in 1996. Gross margin declined to 29.8% for the
first half of 1997 from 33.4% for the first half of 1996. The decline in gross
profit margin compared to 1996 was expected as the mix of inventories sold
during the period continued to reflect a declining contribution from higher
margin bulk inventories acquired prior to 1995 and an increase in revenues from
the Company's lower margin bearings distribution business acquired in August,
1996. Gross profit margin from bearings distribution was 17.4% for the second
quarter of 1997. The Company expects that its gross margin from period to period
will fluctuate between 27% and 31% of revenues based on the mix of products and
services.
The Company's operating expenses increased $2.1 million in the second quarter of
1997 compared with the second quarter of 1996, due to higher sales levels
resulting in higher selling and operating expenses as well as the increased
costs associated with being a public company. Operating expenses as a percentage
of operating revenues declined, however, to 16.8% in the 1997 second quarter
from 18.2% in the corresponding period of 1996. Operating expenses were $13.5
million for the first half of 1996, or 18.8% of operating revenues, compared
with $16.8 million for the first half of 1997, or 16.7% of operating revenues.
Lower operating expenses as a percentage of operating revenues reflect the
continuing benefits of economies of scale and operating efficiencies.
Interest expense and amortization of deferred financing costs declined from
period to period due to the repayment of $52,806,400 of indebtedness during the
third quarter of 1996 from the proceeds of the Company's initial public
offering.
-9-
<PAGE>
As a result of the above factors, income before income taxes increased $2.8
million, or 89%, from $3.2 million to $6.0 million, respectively, from the three
month period ended June 30, 1996 to the same period ending in 1997. Income
before income taxes for the first half of 1997 increased 62% to $10.7 million,
compared with $6.6 million, for the same period last year.
After accounting for pro forma income taxes (as if the Company had been taxed as
a C Corporation), pro forma net income for the three and six months ended June
30, 1996 were $1.9 million ($0.36 per share) and $4.0 million ($0.74 per share),
respectively, as compared to net income of $3.7 million ($0.43 per share) and
$6.5 million ($0.76 per share), respectively for the three and six months ended
June 30, 1997. Weighted average shares outstanding were 8.6 million during the
three and six months ended June 30, 1997, compared to 5.4 million during the
three and six periods ended June 30, 1996.
LIQUIDITY AND FINANCIAL RESOURCES
Cash provided by operations was $2.1 million for the six month period ended June
30, 1996 and cash used in operations was $15.8 million for the six month period
ended June 30, 1997. Cash used in investing activities for the six month periods
ended June 30, 1996 and 1997 was $6.4 million and $5.8 million, respectively.
During the six month periods ended June 30, 1996 and 1997, the Company financed
its operating and investing activities primarily with its cash flow from
financing activities, amounting to $7.5 million and $22.8 million, respectively.
On July 2, 1996, the Company completed the repayment of indebtedness and
restructuring of its credit facility per the terms of an Amended and Restated
Credit Facility (the "Amended Credit Facility"), dated June 27, 1996. The
Amended Credit Facility consists of (a) a term loan facility (the "Amended Term
Loan") in an original principal amount of $20 million, and (b) a $50.0 million
revolving loan, letter of credit and acquisition loan facility, subject to an
availability calculation based on the eligible borrowing base (the "Amended
Revolving Credit Facility"). The eligible borrowing base includes certain
receivables and inventories of the Company. At June 30, 1997, the Company had
availability under the Amended Credit Facility of approximately $10.5 million.
On May 19, 1997, the Amended Revolving Credit Facility was amended and increased
by an additional $10.0 million. On July 7, 1997, the Amended Revolving Credit
Facility was further amended and increased by an additional $10.0 million for a
period from July 7, 1997 through August 31, 1997. Both of such increases are
temporary and at September 1, 1997 the amount of Amended Revolving Credit
Facility will return to the amount in effect prior to such amendments. The
letter of credit portion of the Amended Revolving Credit Facility is subject to
a $10.0 million sublimit and the acquisition loan portion of the Amended
Revolving Credit Facility is subject to a $30.0 million sublimit with the
imposition of certain borrowing criteria based on the satisfaction of certain
debt ratios. The unused portion of the acquisition loan portion of the Amended
Revolving Credit Facility expires on the second anniversary of the closing date
of the Amended Credit Facility. The interest rate on the Amended Credit Facility
is, at the option of the Company, (a) prime plus a margin, or (b) LIBOR plus a
margin, where the margin determination is made based upon the Company's
financial performance over the prior 12 month period (ranging from 0.25% to
1.25% in the event prime is utilized, or 1.75% to 2.75% in the event LIBOR is
utilized). At June 30, 1997, the margin was .75% for prime rate loans and 2.25%
for LIBOR rate loans.
The Amended Term Loan amortizes in equal quarterly installments and terminates
on December 1, 1999. Interim payments under the Amended Revolving Credit
Facility will be made from daily collections of the Company's accounts
receivable. The Amended Revolving Credit Facility will terminate on
- 10 -
<PAGE>
December 1, 1999. The Amended Credit Facility contains financial and other
covenants and mandatory prepayment events, as defined. At June 30, 1997, the
Company was in compliance with all covenants of the Amended Credit Facility. The
Amended Credit Facility is secured by a lien on substantially all of the assets
of the Company. At June 30, 1997, the outstanding balances under the Amended
Term Loan and Amended Revolving Credit Facility were $18.6 million and $43.3
million, respectively.
During the six month period ended June 30, 1997, the Company incurred capital
expenditures of approximately $1.2 million, primarily to make enhancements to
the Company's management information systems, telecommunication systems and
other capital equipment and improvements.
The repayment of indebtedness with the net proceeds of the Company's June 1996
initial public offering improved the Company's liquidity by reducing both the
Company's interest expense and the principal amount of the indebtedness required
to be repaid in the future. The Company believes that cash flow from operations
and borrowing availability under the Amended Credit Facility will be sufficient
to satisfy the Company's anticipated working capital requirements over the next
12 months.
As part of its growth strategy, the Company intends to pursue acquisitions of
bulk inventories of aircraft spare parts and complementary businesses.
Additionally, the Company is currently evaluating the prospect of purchasing and
implementing a new management information system and exploring the possibility
of consolidating its various facilities into a single warehouse facility.
Financing for such activities would be provided from operations and from the
proceeds of the Amended Credit facility. The Company may also issue additional
debt and/or equity securities or seek to borrow additional funds under its
Amended Credit Facility in connection with its business activities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
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<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not applicable
Item 2. CHANGES IN SECURITIES
Not applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.1 Amendment No. 2 to Amended and Restated Credit Agreement
10.2 Amendment No. 3 to Amended and Restated Credit Agreement
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None
- 12 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AVIATION SALES COMPANY
By: /s/ DALE S. BAKER August 14, 1997
----------------------------
Dale S. Baker, President and
Chief Executive Officer
By: /s/ JOSEPH E. CIVILETTO August 14, 1997
-----------------------------
Joseph E. Civiletto, Vice President
and Chief Financial Officer
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<PAGE>
EXHIBITT INDEX
EXHIBIT PAGE
- ------- ----
10.1 Amendment No. 2 to Amended and Restated Credit Agreement 14
10.2 Amendment No. 3 to Amended and Restated Credit Agreement 18
27 Financial Data Schedule
EXHIBIT 10.1
AMENDMENT NO. 2
Dated as of May 19, 1997
to
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of June 26, 1996
This Amendment No. 2 ("Amendment") dated as of May 19, 1997 is entered
into among AVIATION SALES OPERATING COMPANY, a Delaware corporation ("Borrower")
and the "Lenders" (as defined in the Credit Agreement identified below)
signatory hereto. Capitalized terms used herein without definition are used
herein as defined in the Credit Agreement.
PRELIMINARY STATEMENT:
WHEREAS, Borrower, Citicorp USA, Inc., Heller Financial, Inc., Congress
Financial Corporation, The Sumitomo Bank, Limited, and National City Commercial
Finance, Inc., as Lenders, and Citicorp USA, Inc., as Agent, are parties to that
certain Amended and Restated Credit Agreement dated as of June 26, 1996, as
amended (the "Credit Agreement");
WHEREAS, Borrower has requested that the Revolving Credit Commitments
be increased by $10,000,000 in the aggregate; and
WHEREAS, subject to the terms and conditions stated herein, the
Borrower and the Lenders have agreed to amend the Credit Agreement as set forth
in SECTION 1;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. AMENDMENTS TO THE CREDIT AGREEMENT. Effective as of May 19, 1997,
subject to the satisfaction of the conditions precedent set forth in
SECTION 2 hereof, the Credit Agreement is hereby amended as follows:
a. ARTICLE I is amended to delete the definition of "Revolving Credit
Commitment" in its entirety and substitute the following therefor:
"REVOLVING CREDIT COMMITMENT" means, with respect to any Revolving
Lender, the obligation of such Lender to make Revolving Loans and Loans
under the Acquisition Subfacility and to participate in Letters of
Credit pursuant to the terms and conditions of this Agreement, in an
aggregate amount at any time outstanding which shall not exceed the
principal amount set forth opposite such Lender's name under the
heading "Revolving Credit Commitment" below:
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<PAGE>
REVOLVING CREDIT
LENDER COMMITMENT
------------------------------------- ----------------
Citicorp USA, Inc. $15,428,571.66
Heller Financial, Inc. $12,342,857.22
Congress Financial Corporation $12,342,857.22
The Sumitomo Bank, Limited $ 6,171,428.34
National City Commercial Finance, Inc. $ 7,714,285.56
or the signature page of the Assignment and Acceptance by which it
became a Lender, as modified from time to time pursuant to the
terms of this Agreement, or to give effect to any applicable
Assignment and Acceptance, and "REVOLVING CREDIT COMMITMENTS" means
the aggregate principal amount of the Revolving Credit Commitment
of all Revolving Lenders, the maximum amount of which shall be
$54,000,000, as reduced from time to time pursuant to SECTION 4.01.
b. SECTION 2.02(E) is amended to delete the provisions thereof
in their entirety and substitute the following therefor:
(c) MAXIMUM REVOLVING CREDIT FACILITY. Notwithstanding
anything in this Agreement to the contrary, in no event shall the
aggregate principal Revolving Credit Obligations exceed the lesser
of (i) the Maximum Revolving Credit Amount and (ii) $54,000,000,
such amount in CLAUSE (II) being reduced by the amount of each
permanent reduction of the Revolving Credit Commitments made
pursuant to SECTION 4.01(A) and SECTION 4.01(B).
2. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AMENDMENT.
a. This Amendment shall become effective as of May 19, 1997, if,
and only if, the Agent shall have received on or before May
19, 1997, (a) a facsimile or original executed copy of this
Amendment executed by the Borrower, the Requisite Lenders and
each Lender whose Revolving Credit Commitment is increased
pursuant to the terms hereof, and (b) a facsimile or original
executed copy of the fee letter dated as of the date hereof
related to this Amendment, executed by the Borrower, and the
fee referenced in that fee letter.
3. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants as follows:
a. This Amendment and the Credit Agreement as previously
executed and delivered and as amended hereby constitute
legal, valid and binding obligations of the Borrower and are
enforceable against the Borrower in accordance with their
terms.
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<PAGE>
b. No Event of Default or Potential Event of Default exists or
would result from any of the transactions contemplated by
this Amendment.
c. Upon the effectiveness of this Amendment, the Borrower hereby
reaffirms all covenants, representations and warranties made
by it in the Credit Agreement to the extent the same are not
amended hereby and agree that all such covenants,
representations and warranties shall be deemed to have been
remade as of the date this Amendment becomes effective
(unless a representation and warranty is stated to be given
on and as of a specific date, in which case such
representation and warranty shall be true, correct and
complete as of such date).
4. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT.
a. Upon the effectiveness of this Amendment, each reference in
the Credit Agreement to "this Agreement," "hereunder,"
"hereof," or words of like import shall mean and be a
reference to the Credit Agreement, as amended hereby, and
each reference to the Credit Agreement in an other document,
instrument or agreement executed and/or delivered in
connection with the Credit Agreement shall mean and be a
reference to the Credit Agreement as amended hereby.
b. Except as specifically amended above, the Credit Agreement,
the Notes and all other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed.
c. The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy
of any Lender or Issuing Bank or the Agent under the Credit
Agreement, the Notes or any of the other Loan Documents, nor
constitute a waiver of any provision contained therein,
except as specifically set forth herein.
5. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall
be deemed to be an original and all of which taken together shall
constitute but one and the same instrument. Delivery of an
executed counterpart of this Amendment by telecopier shall be
effective as delivery of a manually executed counterpart of this
Amendment.
6. GOVERNING LAW. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York.
7. HEADINGS. Section headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part
of this Amendment for any other purpose.
- 16 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
AVIATION SALES OPERATING
COMPANY
By:
------------------------
Title: Chief Financial Officer
CITICORP USA, INC. HELLER FINANCIAL, INC.
By: By:
------------------------- ---------------------------
Shapleigh B. Smith Name:
Attorney-in-Fact Title:
CONGRESS FINANCIAL NATIONAL CITY COMMERCIAL
CORPORATION FINANCE, INC.
By: By:
------------------------ --------------------------
Name: Name:
Title: Title:
THE SUMITOMO BANK, LIMITED
By: By:
----------------------- --------------------------
Name: Name:
Title: Title:
- 17 -
EXHIBIT 10.2
AMENDMENT NO. 3
Dated as of July 7, 1997
to
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of June 26, 1996
This Amendment No. 3 ("Amendment") dated as of July 7, 1997 is entered into
among AVIATION SALES OPERATING COMPANY, a Delaware corporation ("Borrower") and
the "Lenders" (as defined in the Credit Agreement identified below) signatory
hereto. Capitalized terms used herein without definition are used herein as
defined in the Credit Agreement.
PRELIMINARY STATEMENT:
WHEREAS, Borrower, Citicorp USA, Inc., Heller Financial, Inc., Congress
Financial Corporation, The Sumitomo Bank, Limited, and National City Commercial
Finance, Inc., as Lenders, and Citicorp USA, Inc., as Agent, are parties to that
certain Amended and Restated Credit Agreement dated as of June 26, 1996, as
amended (the "Credit Agreement");
WHEREAS, Borrower has requested that the Revolving Credit Commitments be
increased by $10,000,000 in the aggregate; and
WHEREAS, subject to the terms and conditions stated herein, the Borrower
and the Lenders have agreed to amend the Credit Agreement as set forth below in
SECTION 1;
NOW THEREFORE, the parties hereto hereby agree as follows:
SECTION 8. AMENDMENTS TO THE CREDIT AGREEMENT. Effective as of July 7,
1997, subject to the satisfaction of the conditions precedent set forth in
SECTION 2 hereof, the Credit Agreement is hereby amended as follows:
8.1 ARTICLE I is amended to delete the definition of "Revolving Credit
Commitment" in its entirety and substitute the following therefor:
"REVOLVING CREDIT COMMITMENT" means, with respect to any Revolving
Lender, the obligation of such Lender to make Revolving Loans and Loans
under the Acquisition Subfacility and to participate in Letters of
Credit pursuant to the terms and conditions of this Agreement, in an
aggregate amount at any time outstanding
- 18 -
<PAGE>
which shall not exceed, (i) from July 7, 1997 through August 31, 1997,
the principal amount set forth opposite such Lender's name under the
heading "Revolving Credit Commitment" below:
LENDER REVOLVING CREDIT COMMITMENT
------ ---------------------------
Citicorp USA, Inc. $18,285,714.29
Heller Financial, Inc. $14,628,571.43
Congress Financial Corporation $14,628,571.43
The Sumitomo Bank, Limited $ 7,314,285.71
National City Commercial Finance, Inc. $ 9,142,857.14
and (ii) from and after September 1, 1997, the principal amount
set forth opposite such Lender's name under the heading "Revolving
Credit Commitment" below:
LENDER REVOLVING CREDIT COMMITMENT
------ ---------------------------
Citicorp USA, Inc. $12,571,428.57
Heller Financial, Inc. $10,057,142.86
Congress Financial Corporation $10,057,142.86
The Sumitomo Bank, Limited $ 5,028,571.43
National City Commercial Finance, Inc. $ 6,285,714.29
or on the signature page of the Assignment and Acceptance by which
it became a Lender, as modified from time to time pursuant to the
terms of this Agreement, or to give effect to any applicable
Assignment and Acceptance, and "REVOLVING CREDIT COMMITMENTS"
means the aggregate principal amount of the Revolving Credit
Commitments of all Revolving Lenders, the maximum amount of which
shall be (a) $64,000,000 during the period July 7, 1997 through
August 31, 1997 and (b) $44,000,000 from and after September 1,
1997, in each instance, as reduced from time to time pursuant to
SECTION 4.01.
8.2 SECTION 2.02(e) is amended to delete the provisions thereof in their
entirety and substitute the following therefor:
- 19 -
<PAGE>
(e) MAXIMUM REVOLVING CREDIT FACILITY. Notwithstanding
anything in this Agreement to the contrary, in no event shall the
aggregate principal Revolving Credit Obligations exceed the lesser
of (i) the Maximum Revolving Credit Amount and (ii) $64,000,000
during the period July 7, 1997 through August 31, 1997 or
$44,000,000 from and after September 1, 1997, such applicable
amount is CLAUSE (ii) being reduced by the amount of each
permanent reduction of the Revolving Credit Commitments made
pursuant to SECTION 4.01(a) and SECTION 4.01(b).
SECTION 9. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AMENDMENT.
9.1 This Amendment shall become effective as of July 7, 1997, if,
and only if, the Agent shall have received on or before July 8, 1997, (a) a
facsimile or original executed copy of this Amendment executed by the Borrower,
the Requisite Lenders and each Lender whose Revolving Credit Commitment is
increased pursuant to the terms hereof and (b) a facsimile or original executed
copy of the fee letter dated as of the date hereof related to this Amendment,
executed by the Borrower, and payment of the fee referenced in such fee letter.
SECTION 10. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants as follows:
10.1 This Amendment and the Credit Agreement as previously
executed and delivered and as amended hereby constitute legal, valid and binding
obligations of the Borrower and are enforceable against the Borrower in
accordance with their terms.
10.2 No Event of Default or Potential Event of Default exists or
would result from any of the transactions contemplated by this Amendment.
10.3 Upon the effectiveness of this Amendment, the Borrower hereby
reaffirms all covenants, representations and warranties made by it in the Credit
Agreement to the extent the same are not amended hereby and agree that all such
covenants, representations and warranties shall be deemed to have been remade as
of the date this Amendment becomes effective (unless a representation and
warranty is stated to be given on and as of a specific date, in which case such
representation and warranty shall be true, correct and complete as of such
date).
SECTION 11. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT.
11.1 Upon the effectiveness of this Amendment, each reference in
the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein", or
words of like import shall mean and be a reference to the Credit Agreement, as
amended hereby, and each reference to the Credit Agreement in any other
document, instrument or agreement executed and/or delivered in connection with
the Credit Agreement shall mean and be a reference to the Credit Agreement as
amended hereby.
- 20 -
<PAGE>
11.2 Except as specifically amended above, the Credit Agreement,
the Notes and all other Loan Documents shall remain in full force and effect and
are hereby ratified and confirmed.
11.3 The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of any Lender or
Issuing Bank or the Agent under the Credit Agreement, the Notes or any of the
other Loan Documents, nor constitute a waiver of any provision contained
therein, except as specifically set forth herein.
SECTION 12. EXECUTION IN COUNTERPARTS. This Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument. Delivery of an executed counterpart of this Amendment by
telecopier shall be effective as delivery of a manually executed counterpart of
this Amendment.
SECTION 13. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 14. HEADINGS. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
AVIATION SALES OPERATING HELLER FINANCIAL, INC.
COMPANY
By: By:
----------------------- -----------------------
Joseph E. Civiletto Name:
Chief Financial Officer Title
CITICORP USA, INC. CONGRESS FINANCIAL
CORPORATION
By: By:
----------------------- -----------------------
Shapleigh B. Smith Name:
Attorney-in-Fact Title:
- 21 -
<PAGE>
THE SUMITOMO BANK, LIMITED NATIONAL CITY COMMERCIAL
FINANCE, INC.
By: By:
------------------------ ----------------------
Name: Name:
Title: Title:
- 22 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 10-Q AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 2,435,956
<SECURITIES> 0
<RECEIVABLES> 50,662,620<F1>
<ALLOWANCES> 3,900,017
<INVENTORY> 89,644,998
<CURRENT-ASSETS> 146,367,829
<PP&E> 5,490,251
<DEPRECIATION> 2,455,453
<TOTAL-ASSETS> 179,356,771
<CURRENT-LIABILITIES> 78,893,458
<BONDS> 11,142,857<F2>
0
0
<COMMON> 8,563
<OTHER-SE> 87,583,848
<TOTAL-LIABILITY-AND-EQUITY> 179,356,771
<SALES> 94,241,539
<TOTAL-REVENUES> 100,461,845
<CGS> 70,534,482
<TOTAL-COSTS> 70,534,482
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,431,659
<INCOME-PRETAX> 10,690,634
<INCOME-TAX> 4,169,347
<INCOME-CONTINUING> 6,521,287
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,521,287
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.76
<FN>
<F1>Net of allowance for doubtful accounts of $3,900,017
<F2>Comprised of Long-term debt
</FN>
</TABLE>
