<PAGE> 1
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________ to ______________
Commission File Number 1 - 2380
A. Full title of the Plan and the address of the Plan, if different from
that of the issuer named below:
Aviall, Inc. Employee Savings Plan
B. Name of the issuer of the securities held pursuant to the Plan and the
address of its principal executive office:
Aviall, Inc.
2055 Diplomat Drive
Dallas, Texas 75234-8989
Page 1 of 21
The Exhibit Index appears on Page 20
<PAGE> 2
REQUIRED INFORMATION
The financial statements listed in the accompanying index on page 3 are filed as
part of this Form 11-K.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Benefits Administration Committee of the Plan has duly caused this annual report
to be signed on its behalf by the undersigned hereunto duly authorized.
AVIALL, INC. EMPLOYEE SAVINGS PLAN
By: /s/ Jeffrey J. Murphy
----------------------------------------
Jeffrey J. Murphy
Chairman, Aviall, Inc. Employee Savings Plan
By: /s/ Jacqueline K. Collier
----------------------------------------
Jacqueline K. Collier
Vice President and Controller, Aviall, Inc.
Date: June 28, 1999
2
<PAGE> 3
AVIALL, INC.
EMPLOYEE SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Accountants............................................................................4
Financial Statements:
Statement of Net Assets Available for Plan Benefits, with Fund Information
as of December 31, 1998.................................................................................5
Statement of Net Assets Available for Plan Benefits, with Fund Information
as of December 31, 1997.................................................................................6
Statement of Changes in Net Assets Available for Plan Benefits, with
Fund Information for the Year Ended December 31, 1998...................................................7
Statement of Changes in Net Assets Available for Plan Benefits, with
Fund Information for the Year Ended December 31, 1997...................................................8
Notes to Financial Statements................................................................................9
Supplemental Schedules:
Item 27a - Schedule of Assets Held for Investment Purposes
as of December 31, 1998................................................................................17
Item 27c - Schedule of Loans in Default or Classified as Uncollectible
as of December 31, 1998................................................................................18
Item 27d - Schedule of Reportable Transactions for the Year Ended
December 31, 1998......................................................................................19
</TABLE>
All other schedules required by Section 2520.103-10 of the Department of Labor
Rules and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974 have been omitted because they are not applicable or
are not required.
3
<PAGE> 4
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrator of
the Aviall, Inc. Employee Savings Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Aviall, Inc. Employee Savings Plan (the "Plan") at December 31, 1998 and
1997, and the changes in net assets available for benefits for the years then
ended in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Plan's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of Assets Held
for Investment Purposes, Loans in Default or Classified as Uncollectible and
Reportable Transactions are presented for the purpose of additional analysis and
are not a required part of the basic financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The fund information in the statements of net assets available for
benefits and the statement of changes in net assets available for benefits is
presented for purposes of additional analysis rather than to present the net
assets available for plan benefits and changes in net assets available for
benefits of each fund. These supplemental schedules and fund information are the
responsibility of the Plan's management. The supplemental schedules and fund
information have been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
PricewaterhouseCoopers LLP
Dallas, Texas
June 24, 1999
4
<PAGE> 5
AVIALL, INC.
EMPLOYEE SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Participant Directed
---------------------------------------------------------------------------
Aviall Putnam Putnam Putnam OTC Putnam Divf'd
Stock Fund Voyager Fund G&I Fund & EG Fund Inc Trust
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments:
Mutual funds $ -- $ 12,240,678 $ 6,448,445 $ 1,275,825 $ 472,537
Pooled investment funds -- -- -- -- --
Money market funds 146,165 -- -- -- --
Common stock of participating employer 1,653,578 -- -- -- --
Participant loans receivable -- -- -- -- --
Cash -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total investments 1,799,743 12,240,678 6,448,445 1,275,825 472,537
Contributions receivable and other -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total assets 1,799,743 12,240,678 6,448,445 1,275,825 472,537
------------ ------------ ------------ ------------ ------------
LIABILITIES
Excess contributions payable -- -- -- -- --
Other liabilities -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total liabilities 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
Net assets available for Plan benefits $ 1,799,743 $ 12,240,678 $ 6,448,445 $ 1,275,825 $ 472,537
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Participant Directed
----------------------------------------------------------
Putnam Putnam Stable Stable
Int'l Gr Fund Value Fund Value Fund Loan Fund
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Investments:
Mutual funds $ 1,160,365 $ -- $ -- $ --
Pooled investment funds -- -- 5,207,246 --
Money market funds -- -- 1,613,034 --
Common stock of participating employer -- -- -- --
Participant loans receivable -- -- -- 835,464
Cash -- -- -- --
------------ ------------ ------------ ------------
Total investments 1,160,365 0 6,820,280 835,464
Contributions receivable and other -- -- (7,653) --
------------ ------------ ------------ ------------
Total assets 1,160,365 0 6,812,627 835,464
------------ ------------ ------------ ------------
LIABILITIES
Excess contributions payable -- -- -- --
Other liabilities -- -- -- --
------------ ------------ ------------ ------------
Total liabilities 0 0 0 0
------------ ------------ ------------ ------------
Net assets available for Plan benefits $ 1,160,365 $ 0 $ 6,812,627 $ 835,464
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Non-Participant
Directed
-----------------
Aviall Restricted
Stock Fund Cash Total
----------------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Investments:
Mutual funds $ -- $ -- $ 21,597,850
Pooled investment funds -- -- 5,207,246
Money market funds -- -- 1,759,199
Common stock of participating employer 151,575 -- 1,805,153
Participant loans receivable -- -- 835,464
Cash -- 21,205 21,205
------------ ------------ ------------
Total investments 151,575 21,205 31,226,117
Contributions receivable and other -- -- (7,653)
------------ ------------ ------------
Total assets 151,575 21,205 31,218,464
------------ ------------ ------------
LIABILITIES
Excess contributions payable -- 10,416 10,416
Other liabilities -- 7,783 7,783
------------ ------------ ------------
Total liabilities 0 18,199 18,199
------------ ------------ ------------
Net assets available for Plan benefits $ 151,575 $ 3,006 $ 31,200,265
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
AVIALL, INC.
EMPLOYEE SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND INFORMATION
----------------------------------------------------------------------------------
Aviall Putnam Putnam Putnam OTC Putnam Divf'd
Stock Fund Voyager Fund G&I Fund & EG Fund Inc Trust
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments:
Mutual funds $ -- $ 10,406,532 $ 6,741,840 $ 707,014 $ 280,639
Guaranteed investment contracts -- -- -- -- --
Pooled investment funds -- -- -- -- --
Common stock of participating employer 2,449,186 -- -- -- --
Participant loans receivable -- -- -- -- --
-------------- -------------- -------------- -------------- --------------
Total investments 2,449,186 10,406,532 6,741,840 707,014 280,639
Contributions receivable and other 4,492 18,898 12,268 4,540 623
-------------- -------------- -------------- -------------- --------------
Total assets 2,453,678 10,425,430 6,754,108 711,554 281,262
-------------- -------------- -------------- -------------- --------------
LIABILITIES
Other liabilities -- -- -- -- --
-------------- -------------- -------------- -------------- --------------
Total liabilities 0 0 0 0 0
-------------- -------------- -------------- -------------- --------------
Net assets available for Plan benefits $ 2,453,678 $ 10,425,430 $ 6,754,108 $ 711,554 $ 281,262
============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
FUND INFORMATION
------------------------------------------------
Putnam Putnam Stable
Int'l Gr Fund Value Fund Loan Fund Total
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS
Investments:
Mutual funds $ 764,957 $ -- $ -- $ 18,900,982
Guaranteed investment contracts -- 1,072,656 -- 1,072,656
Pooled investment funds -- 4,943,358 -- 4,943,358
Common stock of participating employer -- -- -- 2,449,186
Participant loans receivable -- -- 954,876 954,876
-------------- -------------- -------------- --------------
Total investments 764,957 6,016,014 954,876 28,321,058
Contributions receivable and other 2,553 12,081 (12,637) 42,818
-------------- -------------- -------------- --------------
Total assets 767,510 6,028,095 942,239 28,363,876
-------------- -------------- -------------- --------------
LIABILITIES
Other liabilities -- -- -- 0
-------------- -------------- -------------- --------------
Total liabilities 0 0 0 0
-------------- -------------- -------------- --------------
Net assets available for Plan benefits $ 767,510 $ 6,028,095 $ 942,239 $ 28,363,876
============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
AVIALL, INC.
EMPLOYEE SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS,
WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Participant Directed
--------------------------------------------------------------------
Aviall Putnam Putnam Putnam OTC
Stock Fund Voyager Fund G&I Fund & EG Fund
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net assets available for Plan benefits at
beginning of period $ 2,453,678 $ 10,425,430 $ 6,754,108 $ 711,554
-------------- -------------- -------------- --------------
Investment income:
Dividends -- 836,386 583,449 40,540
Interest -- -- -- --
Net appreciation (depreciation) in fair
value of investments (411,248) 1,574,709 303,566 75,704
Contributions:
Employer 13,339 63,541 37,851 11,212
Employee 102,199 598,526 379,337 153,873
Participant loan repayments 24,282 149,884 77,806 30,220
Interfund transfers (275,972) (456,970) (971,315) 356,259
-------------- -------------- -------------- --------------
Total additions (547,400) 2,766,076 410,694 667,808
-------------- -------------- -------------- --------------
Distributions and other (63,946) (776,588) (663,496) (83,953)
Plan fees and expenses (215) (1,187) (587) (218)
Loans to participants (42,374) (173,053) (52,274) (19,366)
-------------- -------------- -------------- --------------
Total deductions (106,535) (950,828) (716,357) (103,537)
-------------- -------------- -------------- --------------
Transfer between Stable Value Funds -- -- -- --
Net increase (decrease) in Plan assets (653,935) 1,815,248 (305,663) 564,271
-------------- -------------- -------------- --------------
Net assets available for Plan benefits
at end of period $ 1,799,743 $ 12,240,678 $ 6,448,445 $ 1,275,825
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Participant Directed
----------------------------------------------------------------------------------
Putnam Divf'd Putnam Putnam Stable Stable
Inc Trust Int'l Gr Fund Value Fund Value Fund Loan Fund
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net assets available for Plan benefits at
beginning of period $ 281,262 $ 767,510 $ 6,028,095 $ -- $ 942,239
-------------- -------------- -------------- -------------- --------------
Investment income:
Dividends 27,381 29,401 -- -- --
Interest -- -- 272,196 158,434 76,766
Net appreciation (depreciation) in fair
value of investments (38,459) 114,472 -- -- --
Contributions:
Employer 3,700 9,665 32,513 3,741 --
Employee 37,061 116,291 166,467 96,336 --
Participant loan repayments 6,041 18,688 43,397 21,402 (371,720)
Interfund transfers 163,063 239,458 189,458 756,206 --
-------------- -------------- -------------- -------------- --------------
Total additions 198,787 527,975 704,031 1,036,119 (294,954)
-------------- -------------- -------------- -------------- --------------
Distributions and other (2,785) (118,918) (532,213) (375,364) (155,982)
Plan fees and expenses (36) (142) (11,340) (358) --
Loans to participants (4,691) (16,060) (26,914) (9,429) 344,161
-------------- -------------- -------------- -------------- --------------
Total deductions (7,512) (135,120) (570,467) (385,151) 188,179
-------------- -------------- -------------- -------------- --------------
Transfer between Stable Value Funds -- -- (6,161,659) 6,161,659 --
Net increase (decrease) in Plan assets 191,275 392,855 (6,028,095) 6,812,627 (106,775)
-------------- -------------- -------------- -------------- --------------
Net assets available for Plan benefits
at end of period $ 472,537 $ 1,160,365 $ 0 $ 6,812,627 $ 835,464
============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Non-Participant
Directed
------------------
Aviall Restricted
Stock Fund Cash Total
------------------ ------------ ------------
<S> <C> <C> <C>
Net assets available for Plan benefits at
beginning of period $ -- $ -- $ 28,363,876
------------ ------------ ------------
Investment income:
Dividends -- -- 1,517,157
Interest -- 187 507,583
Net appreciation (depreciation) in fair
value of investments (43,624) -- 1,575,120
Contributions:
Employer 202,903 3,006 381,471
Employee -- -- 1,650,090
Participant loan repayments -- -- 0
Interfund transfers -- (187) 0
------------ ------------ ------------
Total additions 159,279 3,006 5,631,421
------------ ------------ ------------
Distributions and other (7,704) -- (2,780,949)
Plan fees and expenses -- -- (14,083)
Loans to participants -- -- 0
------------ ------------ ------------
Total deductions (7,704) -- (2,795,032)
------------ ------------ ------------
Transfer between Stable Value Funds -- -- 0
Net increase (decrease) in Plan assets 151,575 3,006 2,836,389
------------ ------------ ------------
Net assets available for Plan benefits
at end of period $ 151,575 $ 3,006 $ 31,200,265
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
AVIALL, INC.
EMPLOYEE SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS,
WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND INFORMATION
--------------------------------------------------------------------------------------
Aviall Putnam Putnam Putnam Putnam OTC
Stock Fund Voyager Fund G&I Fund GG Fund & EG Fund
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net assets available for Plan benefits at
beginning of period $ 985,200 $ 10,247,528 $ 5,579,710 $ 3,639,516 $ --
-------------- -------------- -------------- -------------- --------------
Investment income:
Dividends -- 611,992 848,044 -- --
Interest -- -- -- -- --
Net appreciation (depreciation) in fair
value of investments 712,954 1,673,711 497,141 (43,268) 44,813
Contributions:
Employer 8,389 53,916 32,490 -- 7,903
Employee 116,284 562,159 336,915 -- 95,694
Participant loan repayments 17,914 135,674 67,941 167 22,972
Interfund transfers 758,062 (874,994) 627,974 (3,595,902) 724,692
-------------- -------------- -------------- -------------- --------------
Total additions 1,613,603 2,162,458 2,410,505 (3,639,003) 896,074
-------------- -------------- -------------- -------------- --------------
Distributions and other (131,559) (1,866,306) (1,169,451) -- (168,035)
Plan fees and expenses (650) (2,161) (1,240) -- (186)
Loans to participants (12,916) (116,089) (65,416) (513) (16,299)
-------------- -------------- -------------- -------------- --------------
Total deductions (145,125) (1,984,556) (1,236,107) (513) (184,520)
-------------- -------------- -------------- -------------- --------------
Net increase (decrease) in Plan assets 1,468,478 177,902 1,174,398 (3,639,516) 711,554
-------------- -------------- -------------- -------------- --------------
Net assets available for Plan benefits
at end of period $ 2,453,678 $ 10,425,430 $ 6,754,108 $ 0 $ 711,554
============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
FUND INFORMATION
-------------------------------------------------------------------
Putnam Divf'd Putnam Putnam Stable
Inc Trust Int'l Gr Fund Value Fund Loan Fund Total
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net assets available for Plan benefits at
beginning of period $ -- $ -- $ 5,356,964 $ 1,179,319 $ 26,988,237
-------------- -------------- -------------- -------------- --------------
Investment income:
Dividends 16,520 44,703 -- -- 1,521,259
Interest -- -- 440,957 73,566 514,523
Net appreciation (depreciation) in fair
value of investments 4,514 72,758 -- -- 2,962,623
Contributions:
Employer 783 3,516 46,546 -- 153,543
Employee 11,337 77,056 332,530 -- 1,531,975
Participant loan repayments 878 12,910 92,619 (351,075) 0
Interfund transfers 248,256 683,545 1,428,367 -- 0
-------------- -------------- -------------- -------------- --------------
Total additions 282,288 894,488 2,341,019 (277,509) 6,683,923
-------------- -------------- -------------- -------------- --------------
Distributions and other (986) (114,183) (1,607,706) (243,445) (5,301,671)
Plan fees and expenses (17) (137) (2,222) -- (6,613)
Loans to participants (23) (12,658) (59,960) 283,874 0
-------------- -------------- -------------- -------------- --------------
Total deductions (1,026) (126,978) (1,669,888) 40,429 (5,308,284)
-------------- -------------- -------------- -------------- --------------
Net increase (decrease) in Plan assets 281,262 767,510 671,131 (237,080) 1,375,639
-------------- -------------- -------------- -------------- --------------
Net assets available for Plan benefits
at end of period $ 281,262 $ 767,510 $ 6,028,095 $ 942,239 $ 28,363,876
============== ============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 9
AVIALL, INC.
EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. DESCRIPTION OF PLAN
The following description of the Aviall, Inc. Employee Savings Plan (the
"Plan") is provided for general information purposes only. Participants
should refer to the Plan agreement for more complete information.
GENERAL
The Plan, sponsored by Aviall, Inc. ("Aviall" or the "Company") was
established on December 7, 1993 in accordance with and subject to the
provisions of the Employee Retirement Income Security Act of 1974
("ERISA"). The Plan is a defined contribution plan and, as such, is
subject to some, but not all, of the provisions of ERISA. It is excluded
from coverage under Title IV of ERISA, which generally provides for
guaranty and insurance of retirement benefits, and it is not subject to
the funding requirements of Title I of ERISA. The Plan is, however,
subject to those provisions of Title I and II of ERISA which, among other
things, require that each participant be furnished with an annual
financial report and a comprehensive description of the participants'
rights under the Plan, set minimum standards of responsibility applicable
to fiduciaries of the Plan, and establish minimum standards for
participation and vesting.
Participation in the Plan is voluntary. However, to participate in the
Plan, an employee must be 21 years of age. Participants may make elective
contributions to the Plan beginning their date of hire but must have one
year of qualified service before receiving employer matching
contributions. In general, new employees of the Company are eligible to
participate in the Plan; however, employees of certain businesses sold
who were in a unit represented by a collective bargaining agent were
excluded from participation in the Plan unless the unit had negotiated
coverage under the Plan.
PLAN INVESTMENTS
Putnam Investments was the Plan trustee and custodian of Plan assets for
the plan year 1997 and through June 30, 1998. On July 1, 1998, the Plan
became a self-trusteed plan with The 401K Company as recordkeeper. Plan
assets are held by various investment fund houses in separate investment
accounts. Plan assets in the Putnam Stable Value Fund were transferred to
a new stable value fund with The 401K Company. All other investment
options were not affected by the transition from Putnam.
Participants may elect to contribute to, or transfer among, any of the
funds except for the Aviall Restricted Stock Fund established during
1998. Earnings are allocated based on number of shares attributed to
participants' accounts.
Aviall Restricted Stock Fund: The fund consists of Aviall, Inc. common
stock contributed by the Company in 1998 through a one-time grant of
shares to eligible employees, as defined in the 1997 Plan amendment. The
Fund is not a participant directed Fund and, as such, participants do not
have access to the Fund while employed with the Company. All dividends
are automatically reinvested in Aviall Common Stock.
9
<PAGE> 10
AVIALL, INC.
EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Aviall Stock Fund: The fund consists of Aviall, Inc. common stock, which
is purchased on a regular and continuous basis on the open market, and
money market funds, which represent participant contributions made to the
fund which have not been used to purchase shares. Stock is purchased in
whole shares, and participant contributions representing partial shares
are accumulated in the money market funds.
Putnam Voyager Fund: The fund consists primarily of common or capital
stock, though it may invest in other types of securities, including
convertible bonds, convertible preferred stock, warrants, preferred
stock, or debt securities.
Putnam Fund for Growth and Income (Putnam G&I Fund): The fund consists
primarily of investments in attractively priced stocks that offer
long-term growth potential while also providing income.
Putnam Global Growth Fund (Putnam GG Fund): The fund consists primarily
of investments in the Pacific Rim, across Europe, within the Americas and
elsewhere in the world to pursue a wide range of growth potential. The
fund was liquidated in January 1997.
Putnam OTC Emerging Growth Fund (Putnam OTC & EG Fund): The fund consists
primarily of investments in over-the-counter stocks of small to
medium-sized emerging growth companies. The fund was introduced in
January 1997.
Putnam Diversified Income Trust (Putnam Divf'd Inc Trust): The fund
invests primarily in interest-paying bonds from the U.S. government,
high-yield, and international sectors. Seeks current income consistent
with capital preservation. The fund was introduced in January 1997.
Putnam International Growth Fund (Putnam Int'l Gr Fund): The fund
consists primarily of investments in stocks of companies located outside
of the United States to seek capital appreciation. The fund was
introduced in January 1997.
Putnam Stable Value Fund: The fund consists of investments in
high-quality annuity (or similar) investment contracts issued by
insurance companies or banks. The fund was liquidated in May 1998 as part
of the transition to The 401K Company. Plan assets were placed in a
Putnam Short Term Investment Fund until the transfer to the Stable Value
Fund in July 1998.
Stable Value Fund: The fund consists of investments in a diversified
portfolio of investment contracts with insurance companies, banks or
other financial institutions as well as investments in money market
accounts. The Fund was introduced in July 1998.
10
<PAGE> 11
AVIALL, INC.
EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
CONTRIBUTIONS, VESTING AND FORFEITURES
The Plan was established in accordance with Sections 401(a) and 401(k) of
the Internal Revenue Code ("IRC"). The Plan entitles non-highly
compensated employees to defer up to 15% of their pre-tax compensation.
Highly compensated employees as defined under IRC Section 414(q) may
defer pre-tax compensation only up to the percentage allowed pursuant to
the non-discrimination tests. The maximum employee contribution for 1998
and 1997 is $10,000 and $9,500, respectively, and is limited by law. The
Company matches 50% of the employee's annual contribution up to $400 per
person based on certain requirements.
Participants are immediately 100% vested in the earnings of their
individual contributions to the Plan. Participants vest 25% per year in
Company contributions and the earnings attributable to such contributions
beginning with their second year of service, and are 100% vested in their
fifth year of service. Vesting in Company contributions also occurs upon
attainment of retirement age, death or disability. Upon a distribution to
a participant, non-vested Company contributions are forfeited and are
used to offset future Company contributions.
In 1997 the Plan was amended to allow the Company to make discretionary
contributions of Company common stock to the Plan. Such contributions,
when made, are fully-vested and nonforfeitable. There were no
discretionary contributions of Aviall stock in 1997. In 1998, the Company
made a discretionary contribution of 50 shares of Company common stock to
all eligible employees, as defined in the amendment.
All contributions to the Plan are deposited in the trust. At the
employee's option, contributions are directed into separate participant
directed investment funds, as discussed above.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contribution, the Company's matching contribution, as eligible, and the
allocation of the investment fund earnings, as well as charged with the
allocation of Plan administrative expenses.
ROLLOVERS
Distributions from another qualified plan can be transferred into the
Plan. In 1998 and 1997, rollover accounts in the amount of $40,513 and
$91,568, respectively, were transferred into the Plan and are included in
employee contributions on the statement of changes in net assets
available for Plan benefits.
11
<PAGE> 12
AVIALL, INC.
EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
PAYMENT OF BENEFITS
In the event of a participant's termination of employment, disability or
death, the participant or beneficiary shall receive an amount equal to
the vested value of their account in a lump-sum payment. Upon disability
or death, a participant's Plan account balance immediately becomes fully
vested. The lump-sum payment shall be automatically made within 90 days
of the distribution value date for amounts less than $3,500. For amounts
greater than $3,500, consent of the participant or beneficiary is
required.
Upon a participant's attainment of retirement age, a participant's Plan
account balance immediately becomes fully vested and nonforfeitable.
Retirement age is defined as the earlier of the date on which a
participant attains age 65 or the date on which a participant has both
attained age 55 and completed at least 10 years of service. A lump-sum
payment of the participant's account balance shall be made within 90 days
of the distribution value date.
The Plan allows hardship withdrawals for the following reasons:
(1) Payment of medical expenses;
(2) Purchase of a principal residence;
(3) Payment of tuition of post secondary education;
(4) Payments to prevent the eviction or foreclosure of
principal residence;
(5) Payment of income taxes;
(6) Payments for custodial rights expenses;
(7) Payments for expenses incurred by natural disaster;
(8) Payment of funeral expenses;
(9) Loss of income resulting from bad health or disability; and
(10) Any other reason deemed a financial hardship by the
Internal Revenue Service ("IRS").
Certain restrictions are placed on participants withdrawing from the
Plan. Such restrictions include:
(1) The amount withdrawn may not exceed the amount of immediate
financial need.
(2) The participant must obtain all non-taxable loans available
under the Plan prior to applying for hardship withdrawal.
(3) The participant must limit tax-deferred and other elective
contributions under the Plan for the next taxable year to
the applicable limit under section 402(g) of the IRC, minus
the employee's elective contributions for the year of the
hardship distribution.
(4) The participant may not make tax-deferred contributions and
other elective or voluntary contributions to the Plan for
at least 12 months after receipt of the hardship
withdrawal.
There were no distributions or withdrawals which had been approved but
remained unpaid as of December 31, 1998 and 1997.
12
<PAGE> 13
AVIALL, INC.
EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
LOANS
After participating in the Plan, or a combination of the Plan and another
employer's qualified Plan for a minimum of 24 months, a participant may
borrow from their vested account balance. Loans are limited to 50% of the
vested account balance, and must be greater than $1,000 but less than
$50,000. In general, loans must be repaid within five years through
payroll deductions, unless utilized for a principal residence, in which
case the Retirement Committee of the Plan determines the term. Loans
accrue interest at a rate which is comparable to that of most major
lending institutions. Such rates range from 6.0% to 10.0% for loans
outstanding at December 31, 1998. All principal and interest repayments
are allocated to the Plan's investment funds based on the participant's
investment elections at the time of repayment. Loans which are granted
and repaid in compliance with the Plan provisions will not be considered
distributions to the participant for tax purposes.
For the period January 1, 1996 through June 30, 1998, the Plan's loan
provisions allowed participants to have no more than one loan outstanding
at a given time. Participants with more than one loan outstanding prior
to January 1, 1996 were not required to consolidate existing loans.
Participants with loans outstanding issued after January 1, 1996 could
obtain new loans provided that the proceeds of the new loan were used to
repay the old loan.
Effective July 1, 1998, the Plan's loan provisions were amended to allow
participants to have up to two loans outstanding at a given time. The
amendment also disqualifies Aviall, Inc. stock classified as "restricted"
(Aviall Restricted Stock Fund) from being used to calculate loanable
account balances or fund loans unless otherwise determined by the Plan
Administrator. Additionally, the Plan, as amended, does not allow loans
to be refinanced.
Loans to participants and participant loan repayments as included on the
statement of changes in net assets available for plan benefits represent
new borrowings and repayments, respectively, but do not include new
borrowings to refinance existing loans.
PLAN TERMINATION
The Company expects to continue the Plan indefinitely but reserves the
right to terminate the Plan at any time and for any reason. Upon
termination of the Plan, all benefits shall be nonforfeitable and fully
vested, and each participant shall be entitled to the entire amount
credited to his account. Payments shall be made by the trustee in a
nondiscriminatory manner as directed by the Retirement Committee of the
sponsor.
13
<PAGE> 14
AVIALL, INC.
EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared on the accrual basis of
accounting. Purchases and sales of securities are recorded on a trade
date basis, cost is determined based on historical average cost, and
dividends are reinvested at the date-of-record market price.
PLAN FEES AND EXPENSES
All commissions, brokerage fees and expenses incident of the income or
assets of the trust and the purchase or sale of securities by the trustee
were paid with Plan assets. Other administrative expenses such as trustee
fees and recordkeeping fees are paid by either the Company or the Plan.
Additionally, certain administrative services were performed by the
Company at no cost to the Plan.
PARTICIPANT LOANS RECEIVABLE
Participant loans receivable represent cash advances to participants of
the Plan less any payments made.
INVESTMENT VALUATION
The recordkeeper uses quoted market values to value all investments other
than Guaranteed Investment Contracts ("GICs") and participant loans
receivable. Due to the nature of GICs, no estimable market value is
available; therefore, these investments are valued at contract value
which is historical cost plus accrued interest. The recordkeeper has
considered the credit quality of the issuer of guaranteed investment
contracts in determining the requirement for a potential valuation
allowance. No allowance has been provided at December 31, 1997 and the
Plan did not have investments in GICs at December 31, 1998. Participant
loans receivable are valued at cost which approximates fair value.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Gains and losses on securities transactions are recorded on a current
value basis. For purposes of reporting under ERISA, gains and losses on
investments sold are calculated as sales proceeds less current value of
such investments at the beginning of the Plan year or acquisition cost if
acquired during the Plan year. Unrealized gains and losses are calculated
as current value of investments at the end of the Plan year less current
value at the beginning of the Plan year or acquisition cost if acquired
during the Plan year.
14
<PAGE> 15
AVIALL, INC.
EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires the use of estimates and
assumptions that affect the reported amounts of net assets available for
Plan benefits and the related changes in net assets available for Plan
benefits. Actual results could differ from those estimates.
3. INVESTMENTS
Investments held by the Plan at December 31, 1998 and 1997 consisted of
the following:
<TABLE>
<CAPTION>
1998 1997
--------------------------- ---------------------------
Current Current
Cost Value Cost Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Mutual funds $ 16,607,983 $ 21,597,850 $ 14,887,523 $ 18,900,982
Money market funds 1,759,199 1,759,199 -- --
Guaranteed investment contracts -- -- 1,072,656 1,072,656
Pooled investment funds 5,207,246 5,207,246 4,943,358 4,943,358
Common stock 1,981,130 1,805,153 1,882,109 2,449,186
Participant loans receivable 835,464 835,464 954,876 954,876
Cash 21,205 21,205 -- --
------------ ------------ ------------ ------------
$ 26,412,227 $ 31,226,117 $ 23,740,522 $ 28,321,058
============ ============ ============ ============
</TABLE>
For the years ended December 31, 1998 and 1997, the average annual yield
earned on the guaranteed investment contracts was 5.08% and 5.78%,
respectively.
The fair value of individual investments representing 5 percent or more
of the Plan's net assets at December 31, 1998 was as follows:
<TABLE>
<CAPTION>
Number of Current
Description of Investment Shares Value
------------------------- -------------- -------------
<S> <C> <C>
Aviall, Inc. Common Stock Funds
Aviall, Inc. Common Stock 153,630 $ 1,805,153
Alliance Gov't. Reserves N/A 146,165
Putnam Voyager Fund 558,425 12,240,678
The Putnam Fund for Growth and Income 314,711 6,448,445
Stable Value Fund
Invesco Stable Value Fund 5,207,246 5,207,246
Putnam Money Market Fund 1,505,577 1,505,577
Alliance Money Reserves 107,457 107,457
</TABLE>
15
<PAGE> 16
AVIALL, INC.
EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
4. TAX STATUS OF THE PLAN
The IRS granted a favorable letter of determination under the applicable
section of the IRC on September 1, 1995 and, therefore, the trust is
exempt from taxation under Section 501(a) of the IRC. Once qualified, the
Plan is required to operate in conformity with the IRC to maintain its
qualification. Generally, contributions to a qualified plan are
deductible by the Company when made, earnings of the trust are tax exempt
and participants are not taxed on their benefits until withdrawn from the
Plan.
During 1997, the Plan sponsor determined that the Plan was not in
compliance with certain regulatory requirements in prior years. As a
result, the Plan sponsor subjected the Plan to a Voluntary Compliance
Review (VCR) with the IRS. While the outcome of the VCR cannot be
predicted, the Plan sponsor does not believe these matters will adversely
affect the Plan's tax status.
5. LIQUIDATION OF GLOBAL GROWTH FUND
On December 31, 1996, the Global Growth Fund was scheduled to be
liquidated and all shares in the fund were to be transferred into the
Stable Value Fund. The shares in Global Growth did not transfer on
December 31, as intended. The transfer occurred on January 2, 1997. The
change in effective date resulted in a price decrease of $.13 per share.
To assure participants received the value of their accounts at December
31, 1996, the Plan sponsor made an additional Plan deposit of $44,198 in
April 1997 to make up the $.13 per share difference plus accrued
interest. Earnings were calculated using the Stable Value Fund interest
rate. The deposit was credited to the Stable Value Fund.
6. SUBSEQUENT EVENTS
On February 1, 1999, the Plan switched to several new mutual funds to
offer participants a wider range of investment options. The funds offered
are no longer limited to the Putnam fund family.
16
<PAGE> 17
AVIALL, INC.
EMPLOYEE SAVINGS PLAN
ITEM 27a FORM 5500 - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(c)
(a) (b) Description of Investment including (e)
Party in Identity of Issue, Borrower, Lessor Maturity Date, Rate of Interest, (d) Current
Interest or Similar Party Collateral, Par or Maturity Value Cost Value
- ---------- ----------------------------------------- --------------------------------------- ------------ ------------
<S> <C> <C>
Corporate Common Stocks:
* Aviall, Inc. 153,630 shares $ 1,981,130 $ 1,805,153
Mutual Funds:
The Putnam Fund for Growth and Income 314,711 shares 5,382,147 6,448,445
Putnam Voyager Fund 558,425 shares 8,556,157 12,240,678
Putnam OTC and Emerging Growth Fund 73,960 shares 1,145,960 1,275,825
Putnam Diversified Income Trust 41,090 shares 497,377 472,537
Putnam International Growth Fund 60,341 shares 1,026,342 1,160,365
Pooled Investment Funds:
Invesco Stable Value Fund 5,207,246 shares 5,207,246 5,207,246
Money Market Funds:
Putnam Money Market Fund Putnam Fund House Account 1,505,577 1,505,577
Alliance Gov't. Reserves Aviall Stock Wrap Account 146,165 146,165
Alliance Money Reserves Invesco Wrap Account 107,457 107,457
Cash:
Bank One Cash Accounts Balance at 12/31/98 21,205 21,205
* Participant Loans Interest rates range from 6.0% to 10.0% 835,464 835,464
------------ ------------
Total Assets Held for Investment $ 26,412,227 $ 31,226,117
============ ============
</TABLE>
17
<PAGE> 18
AVIALL, INC.
EMPLOYEE SAVINGS PLAN
ITEM 27c FORM 5500 - SCHEDULE OF LOANS IN DEFAULT OR CLASSIFIED
AS UNCOLLECTIBLE
DECEMBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount received during
reporting year Unpaid
Identity and address Original amount ----------------------- balance at Origination Maturity Interest
of obligor of loan Principal Interest end of year Date Date Rate
- --------------------------- ---------------- --------- -------- ----------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Eduardo Aparicio (1) $ 3,500 $ 562 $ 108 $ 2,016 12/16/96 01/01/00 9.25%
141 E. 56th Street
Hialeah, FL 33013
Steven B. Bridges (2) 4,000 - - 4,000 03/12/98 04/01/00 9.50%
3944 Misty Meadow Dr.
Ft. Worth, TX 76133
Edward L. Brown (1) 3,500 860 100 1,685 03/31/97 04/01/99 9.25%
204 Trailridge Dr.
Richardson, TX 75081
Regulo E. Colonga (1) 1,800 - - 1,800 10/14/97 04/01/98 9.50%
1603 Brandon Street
Dallas, TX 75208
Avis N. Mulberry (1) 2,177 - - 2,177 01/02/98 01/01/03 9.50%
2502 Buttonwood Dr.
Flower Mound, TX 75028
Thomas Reddick (1) 5,000 231 136 4,769 11/20/97 11/01/02 9.50%
1454-a Cimarron Parkway
Wake Forrest, NC 27587
John M. Smith (1) 14,590 664 237 9,916 03/31/94 11/01/02 6.00%
15224 Oleander Court
Canyon Country, CA 91351
</TABLE>
<TABLE>
<CAPTION>
Amount overdue
Identity and address ------------------------------
of obligor Principal Interest
- --------------------------- --------------- --------------
<S> <C> <C>
Eduardo Aparicio (1) $ 689 $ 92
141 E. 56th Street
Hialeah, FL 33013
Steven B. Bridges (2) 844 243
3944 Misty Meadow Dr.
Ft. Worth, TX 76133
Edward L. Brown (1) 1,056 64
204 Trailridge Dr.
Richardson, TX 75081
Regulo E. Colonga (1) 1,800 42
1603 Brandon Street
Dallas, TX 75208
Avis N. Mulberry (1) 325 177
2502 Buttonwood Dr.
Flower Mound, TX 75028
Thomas Reddick (1) 661 336
1454-a Cimarron Parkway
Wake Forrest, NC 27587
John M. Smith (1) 1,040 285
15224 Oleander Court
Canyon Country, CA 91351
</TABLE>
(1) Loan was offset as a distribution against participant's 401(k) balance in
1999.
(2) Loan was renegotiated in 1999.
18
<PAGE> 19
AVIALL, INC.
EMPLOYEE SAVINGS PLAN
ITEM 27d FORM 5500 - SCHEDULE OF REPORTABLE TRANSACTIONS (1)
FOR THE YEAR ENDED DECEMBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(a) Number of (c) (d) (e)
Identity of (b) Purchases Purchase Selling Lease
Party Involved Description of Asset or Sales Price Price Rental
- --------------------- --------------------------------------- ----------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Putnam Investments Putnam Voyager Fund 121 $ 2,896,519 $ - $ -
Putnam Investments Putnam Voyager Fund 83 $ - $ 2,637,303 $ -
Putnam Investments Putnam Stable Value Fund 131 $ 1,591,653 $ - $ -
Putnam Investments Putnam Stable Value Fund 113 $ - $ 7,609,879 $ -
Putnam Investments The Putnam Fund for Growth and Income 104 $ 1,593,742 $ - $ -
Putnam Investments The Putnam Fund for Growth and Income 128 $ - $ 2,190,971 $ -
Invesco Stable Value Fund 44 $ 8,076,069 $ - $ -
Invesco Stable Value Fund 37 $ - $ 1,265,364 $ -
Pershing Aviall, Inc. Common Stock 70 $ 764,703 $ - $ -
Pershing Aviall, Inc. Common Stock 85 $ - $ 798,120 $ -
</TABLE>
<TABLE>
<CAPTION>
(h)
(f) Current Value
(a) Expense (g) of Asset on (i)
Identity of (b) Incurred with Cost of Transaction Net Gain
Party Involved Description of Asset Transaction Asset Date (Loss)
- --------------------- --------------------------------------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Putnam Investments Putnam Voyager Fund $ - $ 2,896,519 $ 2,896,519 $ 0
Putnam Investments Putnam Voyager Fund $ - $ 1,952,808 $ 2,637,303 $ 684,495
Putnam Investments Putnam Stable Value Fund $ - $ 1,591,653 $ 1,591,653 $ 0
Putnam Investments Putnam Stable Value Fund $ - $ 7,609,879 $ 7,609,879 $ 0
Putnam Investments The Putnam Fund for Growth and Income $ - $ 1,593,742 $ 1,593,742 $ 0
Putnam Investments The Putnam Fund for Growth and Income $ - $ 1,830,917 $ 2,190,971 $ 360,054
Invesco Stable Value Fund $ - $ 8,076,069 $ 8,076,069 $ 0
Invesco Stable Value Fund $ - $ 1,265,364 $ 1,265,364 $ 0
Pershing Aviall, Inc. Common Stock $ - $ 764,703 $ 764,703 $ 0
Pershing Aviall, Inc. Common Stock $ - $ 701,145 $ 798,120 $ 96,975
</TABLE>
(1) Transactions in excess of five percent of the current value of the Plan's
assets as of December 31, 1997 as defined in Section 2520.103-6 of the
Department of Labor Rules and Regulations for Reporting and Disclosure
under the Employee Retirement Income Security Act of 1974.
19
<PAGE> 20
AVIALL, INC.
EMPLOYEE SAVINGS PLAN
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description Page
- -------- ----------- ----
<S> <C> <C>
23 Consent of Independent Accountants 21
</TABLE>
20
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-72600) of Aviall, Inc. of our report dated June
24, 1999 relating to the financial statements, which appears in this Form 11-K.
PRICEWATERHOUSECOOPERS LLP
Dallas, Texas
June 28, 1999
21
