<PAGE> 1
================================================================================
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 PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD ENDED FROM __________ TO __________
COMMISSION FILE NUMBER 1-12380
--------------------------------------------
AVIALL, INC.
(Exact name of Registrant as specified in its Charter)
DELAWARE 65-0433083
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2075 DIPLOMAT DRIVE
DALLAS, TEXAS 75234-8999
(Address of principal executive offices) (Zip Code)
(972) 406-2000
(Registrant's telephone number, including area code)
Indicate by check X 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 reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares of Common Stock, par value $.01 per share,
outstanding at August 4, 1997 was 19,706,241.
================================================================================
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
AVIALL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------- --------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 96,063 93,594 187,745 185,762
Cost of sales 71,830 69,823 140,468 137,395
----------- ----------- ----------- -----------
Gross profit 24,233 23,771 47,277 48,367
Operating and other expenses:
Selling and administrative expenses 16,827 20,199 33,018 41,673
Nonrecurring items -- -- (1,436) 3,850
Interest expense 991 3,390 1,725 6,153
----------- ----------- ----------- -----------
Earnings (loss) from continuing operations before income taxes 6,415 182 13,970 (3,309)
Provision for income taxes 288 211 900 447
----------- ----------- ----------- -----------
Earnings (loss) from continuing operations 6,127 (29) 13,070 (3,756)
Discontinued operations:
Gain on disposal -- 10,500 -- 10,500
----------- ----------- ----------- -----------
Earnings from discontinued operations -- 10,500 -- 10,500
----------- ----------- ----------- -----------
Net earnings $ 6,127 10,471 13,070 6,744
=========== =========== =========== ===========
Net earnings (loss) per share:
Earnings (loss) from continuing operations $ 0.31 (0.00) 0.66 (0.19)
Earnings from discontinued operations -- 0.54 -- 0.54
----------- ----------- ----------- -----------
Net earnings $ 0.31 0.54 0.66 0.35
=========== =========== =========== ===========
Weighted average common and common equivalent shares 19,946,003 19,556,335 19,820,216 19,506,953
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
AVIALL, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 3,999 4,191
Receivables 55,329 60,716
Inventories 75,112 73,088
Prepaid expenses and other current assets 1,783 2,649
Deferred income taxes 12,551 12,551
----------- -----------
Total current assets 148,774 153,195
----------- -----------
Property, plant and equipment 7,955 8,727
Intangible assets 56,183 59,560
Deferred income taxes 36,581 36,593
Other assets 3,584 2,802
----------- -----------
Total assets $ 253,077 260,877
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 7,221 5,237
Accounts payable 31,175 28,478
Accrued expenses 42,765 52,499
----------- -----------
Total current liabilities 81,161 86,214
----------- -----------
Long-term debt 33,288 48,971
Other liabilities 30,492 31,731
Shareholders' equity (includes common stock of $.01 par value per share with
80,000,000 shares authorized; 19,665,130 shares and 19,551,688 shares issued
and outstanding at June 30, 1997 and at December 31, 1996, respectively;
preferred stock of $.01 par value per share with 10,000,000
shares authorized and no shares issued and outstanding) 108,136 93,961
----------- -----------
Total liabilities and shareholders' equity $ 253,077 260,877
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
AVIALL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended June 30,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 13,070 6,744
Gain on disposal of discontinued operations -- (10,500)
Nonrecurring items (1,436) 3,850
Depreciation and amortization 2,735 4,881
Deferred income taxes 12 (2,419)
Changes in:
Receivables (5,085) (1,307)
Inventories (2,024) 947
Accounts payable 2,697 8,491
Accrued expenses (7,456) 5,727
Other, net (233) (2,878)
Discontinued operations working capital changes -- 4,725
----------- -----------
2,280 18,261
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from note repayment 12,000 --
Proceeds from businesses sold -- 232,565
Capital expenditures (1,094) (895)
Sales of property, plant and equipment 96 168
Net change in discontinued operations property, plant and equipment -- 602
----------- -----------
11,002 232,440
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in revolving credit facility (2,069) (149,932)
Debt repaid (12,510) (100,315)
Debt issue costs paid -- (1,624)
Issuance of common stock 1,105 182
----------- -----------
(13,474) (251,689)
----------- -----------
Change in cash (192) (988)
Cash, beginning of period 4,191 4,690
----------- -----------
Cash, end of period $ 3,999 3,702
=========== ===========
CASH PAID FOR INTEREST AND INCOME TAXES:
Interest $ 2,274 15,437
Income taxes $ 991 367
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
AVIALL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, these financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the
three- and six-month periods ended June 30, 1997 are not necessarily indicative
of the results that may be expected for the year ending December 31, 1997. For
further information, refer to the financial statements and footnotes thereto
included in Aviall, Inc.'s Form 10-K for the year ended December 31, 1996.
NOTE 2 - NEW ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings per Share" effective for interim and annual
periods ending after December 15, 1997. FASB Statement No. 128 establishes
standards for computing and presenting earnings per share ("EPS") and
simplifies the standards for computing EPS previously found in APB Opinion No.
15, "Earnings Per Share." If Aviall had computed net earnings (loss) per share
in accordance with the provisions of FASB Statement No. 128, the pro forma
basic and diluted net earnings per share for the three-month periods ended June
30, 1997 and 1996 would have been $0.31 and $0.54, respectively. The pro forma
basic net earnings per share for the six-month periods ended June 30, 1997 and
1996 would have been $0.67 and $0.35, respectively, and the pro forma diluted
net earnings per share for the six-month periods ended June 30, 1997 and 1996
would have been $0.66 and $0.35, respectively.
5
<PAGE> 6
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 Item 7: Management's Discussion and
Analysis of Financial Condition and Results of Operations on pages 12 through
18 of Aviall, Inc.'s (the "Company") Form 10-K for the year ended December 31,
1996.
The following table sets forth net sales, gross profit, and selling and
administrative expenses for the ongoing business separate from the aerospace
fastener distribution business (the "Fastener Business") which was sold in
September 1996, excluding nonrecurring charges and interest:
<TABLE>
<CAPTION>
Three months ended Six months ended
(Unaudited) June 30, June 30,
---------------------------------------------
(In thousands) 1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales:
Ongoing business $ 96,063 85,719 187,745 170,070
Fastener Business -- 7,875 -- 15,692
--------- --------- --------- ---------
Total net sales $ 96,063 93,594 187,745 185,762
========= ========= ========= =========
Gross profit:
Ongoing business $ 24,233 21,379 47,277 43,659
Fastener Business -- 2,392 -- 4,708
--------- --------- --------- ---------
Total gross profit $ 24,233 23,771 47,277 48,367
========= ========= ========= =========
Selling and administrative expenses:
Ongoing business $ 16,827 18,312 33,018 37,801
Fastener Business -- 1,887 -- 3,872
--------- --------- --------- ---------
Total selling and administrative expenses $ 16,827 20,199 33,018 41,673
========= ========= ========= =========
</TABLE>
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE
MONTHS ENDED JUNE 30, 1996. Net sales for the ongoing business in the second
quarter of 1997 were $96.1 million, up $10.3 million or 12% from the $85.7
million recorded in the same 1996 quarter. The increase was driven primarily by
strong international growth in parts distribution as well as greater than 10%
growth in the North American general aviation and airline markets.
Gross profit for the ongoing business of $24.2 million was $2.9 million
higher than the $21.4 million in the 1996 second quarter. Gross profit as a
percentage of sales increased from 24.9% to 25.2%. This increase in gross
profit percentage was primarily a result of a year-to-date 1996
reclassification of expenses between selling and administrative expenses and
cost of sales.
Selling and administrative expenses for the ongoing business decreased
$1.5 million, or 8%, to $16.8 million in the second quarter of 1997. The
decrease was primarily due to high severance expenses in 1996 and savings from
staff reductions implemented throughout 1996.
Interest expense was lower than in the second quarter 1996, reflecting
lower debt, lower amortization of debt issuance costs, and lower interest rates
from the new bank agreement completed in September 1996.
The 1996 results include a $10.5 million gain from the disposal of
discontinued operations due to the receipt of cash rather than an anticipated
partial stock payment.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS
ENDED JUNE 30, 1996. Net sales in the first half of 1997 were $187.7 million,
an increase of $17.7 million or 10%, from the $170.1 million recorded by the
ongoing business in the comparable 1996 period. Higher sales for the ongoing
business came from growth in general aviation, airline and information services
in North America, Europe and the Asia-Pacific regions.
Gross profit of $47.3 million in the first six months of 1997 increased
$3.6 million, or 8%, from the first half of 1996 for the ongoing business.
Gross profit as a percentage of sales decreased from 25.7% in 1996 to 25.2% in
1997. This decrease stemmed from lower margins on international sales.
6
<PAGE> 7
Selling and administrative expenses from the ongoing business decreased by
$4.8 million, or nearly 13%, to $33.0 million in the first six months of 1997.
The decrease was primarily due to staff reductions implemented during 1996, and
the high expenses in 1996 related to amending the Company's former bank
agreement.
The $1.4 million nonrecurring item was related to the repayment in January
1997 of a $12.0 million unsecured subordinated note received in connection with
the 1995 sale of the business aviation engine overhaul, and aircraft and
terminal services operations. The Company had carried the note at a discounted
value of $10.5 million. The 1996 nonrecurring charge of $3.9 million consisted
of the writedown of inventory and accrual of estimated expenses related to the
expected sale of the Fastener Business.
Interest expense was lower in 1997, reflecting lower debt, lower interest
rates and lower debt issuance amortization under the new bank agreement
completed in September 1996.
The 1996 results include a $10.5 million gain from the disposal of
discontinued operations due to the receipt of cash rather than an anticipated
partial stock payment.
FINANCIAL CONDITION. Cash flows from operations were $2.3 million in the first
six months of 1997 and $18.3 million in the comparable 1996 period. In the
first half of 1997, improved profitability was largely offset by $5.9 million
in expenditures related to liabilities retained for previously owned
businesses, receivables due to sales growth and increased inventory for new
suppliers. In 1996, the cash flow came from positive working capital changes in
the continuing business and improved cash flow from the discontinued
operations.
The Company believes that its expected cash flow from operations and
availability under its revolving lines of credit are sufficient to meet its
current working capital and operating needs. Improvements in earnings will
further enhance the Company's access to capital and will enable the Company to
finance future investment opportunities.
In January 1997, a $12.0 million unsecured subordinated note received in
connection with the 1995 sale of the business aviation engine overhaul, and
aircraft and terminal services operations was repaid. The Company applied the
proceeds as a permanent reduction of the Company's secured term loan due
through 2001.
OUTLOOK. Management continues to be encouraged by the progress being made by
the Company and intends to continue to work on operational improvements while
positioning to take advantage of growth opportunities. The Company has recently
realigned its sales organization to maximize customer coverage, while
maintaining the market specialization that our customers demand. The Company
has also started to improve its systems to better meet the expectations of our
customers and suppliers. The Company intends to seek further progress in
reducing costs and improving operational efficiencies throughout the Company.
In addition, the Company's estimated $180 million net operating loss
carryforward as of December 31, 1996 will minimize U.S. federal income tax
payments for several years.
CERTAIN FORWARD-LOOKING STATEMENTS. This report contains certain
forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995) relating to the Company that are based on the
beliefs of the management of the Company, as well as assumptions and estimates
made by and information currently available to the Company's management. When
used in this report, the words "anticipate," "believe," "estimate," "expect,"
"intend" and similar expressions, as they relate to the Company or the
Company's management, identify forward-looking statements. Such statements
reflect the current views of the Company with respect to future events and are
subject to certain risks, uncertainties and assumptions relating to the
operations and results of operations of the Company as well as its customers
and suppliers, including as a result of competitive factors and pricing
pressures, shifts in market demand, general economic conditions and other
factors including, among others, those that effect flight activity in
commercial, business and general aviation, the business activities of the
Company's customers and suppliers and developments in information and
communication technology. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions or estimates prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated, expected or intended.
7
<PAGE> 8
PART II - OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on June 13, 1997, at
which meeting the shareholders took action with respect to three proposals, (i)
the election of Eric E. Anderson and Henry A. McKinnell to serve as directors
of the Company for a term expiring at the Company's 2000 Annual Meeting of
Shareholders, (ii) the amendment of the Aviall, Inc. Directors Stock Plan and
(iii) the ratification of the appointment of Price Waterhouse LLP to serve as
independent auditors for the Company and its subsidiaries for the fiscal year
ending December 31, 1997.
The number of votes cast for, against or withheld, as well as the number
of abstentions as to each proposal is set forth below. There were no broker
non-votes with respect to any of the proposals.
<TABLE>
<CAPTION>
Election of Directors
---------------------
Total Votes For Total Votes Withheld
--------------- --------------------
<S> <C> <C>
Eric E. Anderson 17,982,691 222,634
Henry A. McKinnell 17,982,949 222,375
</TABLE>
The other directors of the Company whose terms of office continued after
the meeting were Robert L. Lambert, Donald P. Muzyka and Henry Wendt.
Amendment to Aviall, Inc. Directors Stock Plan
----------------------------------------------
For Against Abstain
--- ------- -------
16,151,858 1,996,864 56,602
Ratification of Appointment of Independent Auditors
---------------------------------------------------
For Against Abstain
--- ------- -------
18,114,323 75,037 15,964
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Amended and Restated Directors Stock Plan
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
8
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AVIALL, INC.
August 8, 1997 By /s/ Jacqueline K. Collier
------------------------------
Jacqueline K. Collier
Vice President and Controller
(Principal Accounting Officer)
August 8, 1997 By /s/ Cornelius Van Den Handel
------------------------------
Cornelius Van Den Handel
Treasurer and Director of Planning
(Principal Financial Officer)
9
<PAGE> 10
INDEX TO EXHIBITS
Exhibit
Number Description
- ------------------------------------------------------------------------------
10.1 Amended and Restated Directors Stock Plan
27.1 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1
AVIALL, INC.
AMENDED AND RESTATED
DIRECTORS STOCK PLAN
SECTION I
PURPOSES OF THE PLAN
The Aviall, Inc. Amended and Restated Directors Stock Plan (the "Plan") is
intended to enable Aviall, Inc. (the "Company") to attract and retain persons of
outstanding competence to serve as members of the Board of Directors of the
Company and to provide a direct link between Directors' compensation and
stockholder value.
SECTION II
ADMINISTRATION OF THE PLAN
A. Board -- The Plan shall be administered by the Board of Directors of the
Company or a duly authorized committee thereof (the Board of Directors of the
Company or any such committee being hereinafter referred to as the "Board").
Grants of stock to eligible participants under the Plan and the amount, nature
and timing of the grants shall be determined as set forth in Sections IV and V.
B. Authority of the Board -- Subject to the limitations and restrictions
set forth in the Plan, the Board shall have full and final authority to
interpret the Plan; to prescribe, amend and rescind rules and regulations, if
any, relating to the Plan; and to make all determinations necessary or advisable
for the administration of the Plan. No member of the Board shall be liable for
anything done or omitted to be done by him or by any other member of the Board
in connection with the Plan, except for his own willful misconduct or gross
negligence. All decisions which are made by the Board with respect to
interpretation of the terms of the Plan and with respect to any questions or
disputes arising under the Plan shall be final and binding on the Company and
the participants, their heirs or beneficiaries.
C. Acts of the Board -- A majority of the Board will constitute a quorum
and the acts of a majority of the members present at any meeting at which a
quorum is present, or acts approved in writing by all members of the Board
without a meeting, will be the acts of the Board.
SECTION III
STOCK SUBJECT TO THE PLAN
A. Common Stock -- The stock which is the subject of grants under the Plan
shall be the Company's Common Stock, par value $.01 per share ("Common Stock"),
which shares shall be subject to the terms, conditions and restrictions
described in the Plan.
B. Maximum Number of Shares That May Be Granted -- There may be granted
under the Plan an aggregate of not more than eighty-seven thousand five hundred
(87,500) shares of Common Stock, subject to adjustment as provided in Section
VII hereof. Shares of Common Stock granted pursuant to the Plan may be either
authorized, but unissued, shares or reacquired shares, or both.
C. Rights With Respect To Shares -- A Director to whom a grant of Common
Stock has been made shall have absolute beneficial ownership of the shares of
Common Stock granted to that Director, including the right to vote the shares
and to receive dividends thereunder; subject, however, to the terms, conditions
and restrictions described in the Plan, including, but not limited to, under
Section V. The certificate(s) for such shares shall be held by the Company (or
by an agent designated by the Secretary of the Company) for the Director's
benefit until the terms, conditions and restrictions lapse, whereupon the
certificates shall be delivered to the Director.
<PAGE> 2
SECTION IV
PARTICIPATION
A. Directors -- Participation in the Plan shall be limited to persons who
serve as members of the Board of Directors of the Company and who, at the time
of grant, are not "employees" of the Company and/or any of its subsidiaries,
within the meaning of the Employee Retirement Income Security Act of 1974
("ERISA"). A Director who is an employee and who retires or resigns from
employment with the Company and/or any of its subsidiaries, but remains a
Director of the Company, shall become eligible to participate in the Plan at the
time of such termination of employment.
B. Elections -- Any eligible Director may elect to participate in the Plan
and receive grants of Common Stock as set out in Paragraph C of this Section IV
by delivering to the Committee a written notice to such effect. Any such
election shall remain in effect until revoked by the participating Director by
delivering to the Board a written notice to such effect. An election shall be
made at least six (6) months prior to the Grant Date (as defined below), and
according to procedures established by the Board.
C. Grants -- Each participating Director who has made an election to
participate in the Plan pursuant to Paragraph B of this Section IV shall be
eligible to receive annually, on the first New York Stock Exchange trading day
in July of each calendar year (the "Grant Date"), following such election, in
lieu of such Director's annual retainer for service as a director of the Company
(the "Annual Retainer") a grant of Common Stock. The number of shares of Common
Stock that shall be granted to participating Director will be the number of
whole shares which can be purchased for Thirty Thousand Dollars ($30,000.00)
(the "Share Value") based on the Fair Market Value of the shares on the Grant
Date. Fractional shares shall not be granted. "Fair Market Value" will be the
mean of the highest and lowest sale price for the Common Stock as reported on
the New York Stock Exchange Composite Transaction Reporting System on the Grant
Date.
D. Adjustment of Share Value -- In the event that there shall be an
increase or decrease in the Annual Retainer, the Share Value shall adjust
automatically so that the ratio between the Annual Retainer and the Share Value
is maintained.
SECTION V
TERMS AND CONDITIONS OF STOCK GRANTS
A. Vesting -- Each grant of Common Stock to a participating Director in
accordance with the Plan shall be vested on the six-month anniversary of the
Grant Date, so long as the Director has served continuously as a director of the
Company during the intervening six-month period; provided, however, that a
participating Director who leaves the Board of Directors of the Company
following the completion of the term of service for which the Director was
elected prior to the end of such six-month period or whose service during such
six-month period was interrupted due to death or disability shall be vested in a
pro rata number of such shares. Except as described in the preceding sentence,
in the event a Director's service to the Company terminates before the shares
have vested, then all shares granted to such Director which have not vested
shall be cancelled and such shares shall be forfeited and retransferred to the
Company, with the Director having no further right or interest in such forfeited
and retransferred shares.
B. Restrictions on Transfer -- Shares of Common Stock granted to a
participating Director may not be assigned, transferred, pledged, hypothecated
or otherwise disposed of (i) before they have vested in accordance with
Paragraph A of this Section V and (ii) until six (6) months after the
termination of the Director's service to the Company as a director.
A-2
<PAGE> 3
SECTION VI
COMPLIANCE WITH LAW AND OTHER CONDITIONS
A. Restrictions Upon Grant Of Common Stock -- The listing upon the New York
Stock Exchange, or any other stock exchange, or the registration or
qualification under any federal or state law of any shares of Common Stock to be
granted pursuant to the Plan may be necessary or desirable as a condition of, or
in connection with, such grant and, in any such event, delivery of the
certificates for such shares of Common Stock shall, if the Board, in its sole
discretion, shall determine, not be made until such listing, registration or
qualification shall have been completed.
B. Restrictions Upon Resale Of Unregistered Stock -- If the issuances of
the shares of Common Stock that have been granted to a participating Director
pursuant to the terms of the Plan are not registered under the Securities Act of
1933, as amended, pursuant to an effective registration statement, such
Director, if the Board shall deem it advisable, may be required to represent and
agree in writing:
(i) that any shares of Common Stock acquired by such Director pursuant
to the Plan will not be sold, except pursuant to an effective registration
statement under the Securities Act of 1933, as amended, or pursuant to an
exemption from registration under such Act, and
(ii) that such Director is acquiring such shares of Common Stock for
his own account and not with a view to the distribution thereof.
SECTION VII
ADJUSTMENT
The number of shares of Common Stock of the Company reserved for grants
under the Plan shall be subject to adjustment by the Board to reflect any stock
split, stock dividend, recapitalization, merger, consolidation, reorganization,
combination or exchange of shares or similar event.
SECTION VIII
MISCELLANEOUS PROVISIONS
A. Nothing in the Plan shall be construed to give any Director of the
Company any right to a grant of Common Stock under the Plan unless all
conditions described within the Plan are met as determined in the sole
discretion of the Board.
B. Neither the Plan, nor the granting of Common Stock nor any other action
taken pursuant to the Plan, shall constitute or be evidence of any agreement or
understanding, express or implied, that the Company will retain a Director for
any period of time. Nothing in the Plan shall in any manner be construed to
limit in any way the right of the Company or its stockholders to reelect or not
reelect or renominate or not renominate a participating Director.
C. Any shares of Common Stock of the Company issued as a stock dividend, or
as a result of stock splits, combinations, exchanges of shares, reorganizations,
mergers, consolidations or otherwise with respect to shares of Common Stock
granted pursuant to the Plan shall have the same status and be subject to the
same restrictions as the shares granted.
D. The costs and expenses of administering the Plan shall be borne by the
Company and not charged to any grant of Common Stock nor to any participating
Director.
E. The Company may make such provisions and take such steps as it may deem
necessary or appropriate for the withholding of any taxes which the Company is
required by any law or regulation of any governmental authority, whether
federal, state or local, to withhold in connection with any event or action
under the plan.
A-3
<PAGE> 4
SECTION IX
AMENDMENT
The Board may suspend or terminate the Plan at any time. In addition, the
Board may, from time to time, amend the Plan in any manner; provided however,
that the Board shall not amend Paragraph B of Section III to increase the total
number of shares of Common Stock that may be granted under the Plan without the
approval of the Company's stockholders. Notwithstanding the foregoing (i) an
adjustment increasing the total number of shares of Common Stock reserved for
grants under the Plan pursuant to Section VII shall not require stockholder
approval, and (ii) the suspension, termination or amendment of the Plan shall
not, without the consent of any participant involved, adversely affect rights
under a previous grant of Common Stock.
SECTION X
GOVERNING LAW
The Plan and all determinations made and actions taken pursuant thereto
shall be governed by the laws of the State of Texas and construed accordingly.
SECTION XI
APPROVAL BY STOCKHOLDERS
The Plan was approved by the stockholders of the Company on June 13, 1997.
A-4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AVIALL,
INC.'S SECOND QUARTER 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH SECOND QUARTER 1997 FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
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0
0
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</TABLE>
