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 February 29, 2000 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from ________________ to __________________.
Commission file number 0-18352
-------
INTERNATIONAL AIRLINE SUPPORT GROUP, INC.
--------------------------------------------
Delaware 59-2223025
- ---------------------------------- ----------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1954 Airport Road, Suite 200, Atlanta, GA 30341
- ----------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 455-7575
--------------
Indicate by check mark 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 __
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
The number of shares of the registrant's common stock outstanding as of
April 7, 2000 was 2,190,198.
FORM 10-Q
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
INDEX
Page No.
---------
Part I FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
Condensed Consolidated Balance Sheets as of
May 31, 1999 and February 29, 2000 3
Condensed Consolidated Statements of Earnings
for the Three Months and Nine Months
Ended February 28, 1999 and February 29, 2000 4
Condensed Consolidated Statements of Cash Flows for
The Nine Months ended February 28, 1999
and February 29, 2000 5
Notes to Unaudited Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 9
Part II OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
<PAGE>
The accompanying notes are an integral part of these condensed financial
statements
3
FORM 10-Q
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
May 31, February 29,
1999* 2000
------------- -----------
(unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 892,283 $ 838,008
Accounts receivable, net of allowance for
doubtful accounts of approximately $342,000
at May 31, 1999 and $477,000 at
February 29, 2000 2,812,500 3,054,183
Inventories 11,131,059 14,731,691
Deferred tax benefit - current 1,128,302 1,128,302
Other current assets 134,274 759,916
------- -------
Total current assets 16,098,418 20,512,100
Property and equipment
Aircraft and engines held for lease 4,593,854 9,928,854
Leasehold improvements 157,175 162,639
Machinery and equipment 988,983 1,055,247
------- ---------
5,740,012 11,146,740
Accumulated depreciation 1,734,503 2,362,052
--------- ---------
Property and equipment, net 4,005,509 8,784,688
Other assets
Investment in joint venture 2,373,572 3,396,954
Deferred debt costs, net 360,406 317,623
Deferred tax benefit 1,071,959 347,172
Deposits and other assets 66,155 -
------ ---------
Total other assets 3,872,092 4,061,749
--------- ---------
$ 23,976,019 $ 33,358,537
= ========== = ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term obligations $ 1,455,600 $ 2,340,633
Accounts payable 910,029 1,260,560
Accrued expenses 2,209,191 2,153,867
--------- ---------
Total current liabilities 4,574,820 5,755,060
Long-term obligations, less current maturities 8,138,059 15,234,564
Stockholders' equity
Preferred stock - $.001 par value; authorized
2,000,000 shares; 0 shares outstanding at May 31, 1999
and February 29, 2000 - -
Common stock - $.001 par value; authorized
20,000,000 shares; issued and outstanding
2,655,723 shares at May 31, 1999 and 2,658,723
shares at February 29, 2000 2,655 2,658
Additional paid-in capital 13,936,089 13,903,738
(Accumulated deficit) retained earnings (728,824) 437,839
Common stock held in treasury, at cost - 467,325
shares at May 31, 1999 and 471,525 shares at
February 29, 2000 (1,946,780) (1,975,322)
--------- ---------
Total stockholders' equity 11,263,140 12,368,913
--------- ---------
$ 23,976,019 $ 33,358,537
= ========== = ==========
</TABLE>
*Condensed from audited Financial Statements
The accompanying notes are an integral part of these condensed financial
Statements
3
<PAGE>
FORM 10-Q
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 28, February 29, February 28, February 29,
1999 2000 1999 2000
------------ ----------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues
Net sales $ 4,435,864 $ 4,872,593 $ 14,265,975 $ 18,457,102
Lease and service revenue 1,293,517 485,926 2,874,315 2,107,362
------------- ------------- ------------- ---------------
Total revenues 5,729,381 5,358,519 17,140,290 20,564,464
Cost of sales 2,934,173 3,680,504 9,693,079 13,641,925
Selling, general and administrative expenses 1,627,168 1,231,872 3,787,906 4,292,851
Depreciation and amortization 279,442 266,115 875,114 857,069
------------- ------------- ------------- ---------------
Total operating costs 4,840,783 5,178,491 14,356,099 18,791,845
Equity in net earnings of
unconsolidated joint venture 357,589 441,735 705,695 1,263,537
------------- ------------- ------------- ---------------
Earnings from operations 1,246,187 621,763 3,489,886 3,036,156
Interest expense 359,723 444,138 1,011,751 1,163,877
Interest and other income (16,006) (11,343) (6,620) (39,171)
------------- ------------- ------------- ---------------
Earnings before income taxes 902,470 188,968 2,484,755 1,911,450
Provision for income taxes 347,066 73,066 948,333 744,787
------------- ------------- ------------- ---------------
Net earnings $ 555,404 $ 115,902 $ 1,536,422 $ 1,166,663
============= ============= ============= ===============
Per share data:
Earnings per share available for
common stockholders - Basic $ 0.22 $ 0.05 $ 0.60 $ 0.53
Weighted average number of shares of
common stock outstanding - Basic 2,541,111 2,187,198 2,558,051 2,187,448
============= ============= ============= ===============
Earnings per share available for
common stockholders - Diluted $ 0.21 $ 0.05 $ 0.56 $ 0.51
Weighted average number of shares of
common stock outstanding - Diluted 2,708,302 2,240,141 2,751,896 2,289,300
============= ============= ============= ===============
</TABLE>
The accompanying notes are an integral part of these condensed financial
Statements
4
<PAGE>
FORM 10-Q
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine months ended
February 28, February 29,
1999 2000
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,536,422 $ 1,166,663
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 875,114 857,069
Loss on sale of investment 20,074 -
Undistributed equity in earnings of joint venture (705,695) (1,263,537)
Provision for income taxes - deferred 948,333 744,787
Changes in assets and liabilities (1,632,948) (3,203,554)
------------ -------------
Total adjustments (495,122) (2,865,235)
Net cash provided by (used in)
operating activities 1,041,300 (1,698,572)
Cash flows from investing activities:
Capital equipment and leasehold improvements (64,284) (71,728)
Investment in unconsolidated joint venture (1,514,000) (29,845)
Proceeds from sale of investment 94,665 -
Distributions received from joint venture - 270,000
Additions to aircraft and engines held for lease, net (1,949,917) (6,375,000)
------------ -------------
Net cash used in investing activities (3,433,536) (6,206,573)
Cash flows from financing activities:
Net increase in debt obligations 3,831,180 7,981,538
Proceeds from exercise of employee stock options 23,250 10,707
Repurchase of common stock (986,855) (18,000)
Payment of debt offering costs - (123,375)
---------- ---------
Net cash provided by financing activities 2,867,575 7,850,870
------------ -------------
Net (decrease) increase in cash 475,339 (54,275)
Cash and cash equivalents at beginning of period 438,403 892,283
------------ -------------
Cash and cash equivalents at end of period $ 913,742 $ 838,008
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed financial
Statements
5
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain adjustments (consisting only of normal
and recurring adjustments) necessary to present fairly International Airline
Support Group, Inc.'s condensed consolidated balance sheets as of May 31, 1999
and February 29, 2000, the condensed consolidated statements of earnings for the
three and nine months ended February 28, 1999 and February 29, 2000, and the
condensed consolidated statements of cash flows for the nine months ended
February 28, 1999 and February 29, 2000.
The accounting policies followed by the Company are described in the May
31, 1999 financial statements.
The results of operations for the three and nine months ended February 29, 2000
are not necessarily indicative of the results to be expected for the full year.
2. Inventories consisted of the following:
May 31,1999 February 29,2000
------------ ------------------
Aircraft parts $ 8,679,059 $ 7,325,209
Aircraft and Engines
available for sale 2,452,000 7,406,482
----------- -----------
$11,131,059 $14,731,691
=========== ===========
3. Earnings Per Share
The Company's basic earnings per share is calculated by dividing net
earnings by the weighted average shares outstanding during the period. The
computation of diluted earnings per share includes all dilutive common stock
equivalents in the weighted average shares outstanding. e reconciliation
between the computation is as follows:
Three Months
Ended
February 28/ Net Basic Basic Diluted Diluted
February 29, Earnings Shares EPS Shares EPS
------------- -------- ------ --- ------ ---
1999 $555,404 2,541,111 $0.22 2,708,302 $0.21
2000 $115,902 2,187,198 $0.05 2,240,141 $0.05
6
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Nine Months
Ended
February 28/ Net Basic Basic Diluted Diluted
February 29, Earnings Shares EPS Shares EPS
- ------------- -------- ------ --- ------ ---
1999 $1,536,422 2,558,051 $0.60 2,751,896 $0.56
2000 $1,166,663 2,187,448 $0.53 2,289,300 $0.51
Included in diluted shares are common stock equivalents relating to stock
options of 167,191 and 52,943 for the three months ended February 28, 1999 and
February 29, 2000, respectively, and 193,845 and 101,852 for the nine months
ended February 28 1999 and February 29, 2000, respectively.
4. Credit Facility
On October 3, 1996, the Company entered into the Credit Agreement, which
provided for a $3 million term loan and up to an $11 million revolving credit.
The Credit Agreement was amended on various occasions to create new term loan
facilities and to increase the revolving credit to $14 million (collectively
referred to as the "Credit Facility"). The Credit Facility is secured by
substantially all of the assets of the Company and availability of amounts for
borrowing is subject to certain limitations and restrictions. Such limitations
and restrictions are discussed in the Company's Proxy Statement/Prospectus filed
with the Securities and Exchange Commission on August 29, 1996.
5. Supplemental Cash Flow Disclosures:
Cash payments for interest were $891,000 and $1,005,000 for the nine months
ended February 28, 1999 and February 29, 2000, respectively. Cash and cash
equivalents include $582,651 and $84,639 of restricted cash at May 31, 1999 and
February 29, 2000, respectively. Restricted cash includes customer receipts
deposited into the Company's lockbox account, which are applied the next
business day against the outstanding amount of the Credit Facility, and customer
deposits on aircraft and engines leases.
6. Joint Venture
On September 16, 1998, the Company entered into a joint venture (the "Air41
Joint Venture") for the acquisition of 20 DC-9-41H aircraft from Scandinavian
Airlines System ("SAS"). The aircraft were leased back to SAS and the leases
had an average term of 39 months. The Company's original investment in the
Air41 Joint Venture was approximately $1.5 million. The Company's Air41 Joint
Venture partner is AirCorp, Inc., a privately held company. The aircraft were
financed through the joint venture, utilizing non-recourse debt to the partners.
The Air41 Joint Venture is accounted for under the equity method and the leases
are treated as operating leases.
7
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6. Joint Venture (cont.)
The Company is exploring opportunities for the aircraft after the end of
the term of the leases with SAS. Such opportunities include releasing the
aircraft with SAS, leasing the aircraft to one or more different lessee(s),
selling the aircraft, parting out the aircraft, or directly placing the aircraft
into either passenger or cargo service, whereby the Company may have a principal
interest in an airline. The first aircraft was returned by SAS and was
immediately leased to a domestic lessee for a three-year term at a higher rental
rate. At this time, the Company has no firm commitment for the remaining
aircraft after the SAS leases expire.
7. Treasury Stock
In the third quarter of 1999, the Company began acquiring shares of its
common stock in connection with a stock repurchase program approved by the
Company's Board of Directors and lender in December 1998. During the nine
months ended February 29, 2000, the Company repurchased 6,500 shares of its
common stock at an average price of $4.39 for a total expenditure of $28,542.
This repurchase brings the total number of shares repurchased to 471,525 at an
average price of $4.19 and a total expenditure of $1,975,322. The Company does
not have a formal plan in place to purchase any additional shares; however, the
Company is authorized by the Board to make further purchases if deemed to be in
the best interest of the Company. The Company's lender must also approve any
such purchases.
8
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following is management's discussion and analysis of certain
significant factors which have affected the Company's operating results and
financial position during the periods included in the accompanying condensed
consolidated financial statements.
RESULTS OF OPERATIONS:
- ------------------------
Revenues
- --------
Total revenue for the three and nine months ended February 29, 2000 was
$5.4 million and $20.6 million, respectively, compared to $5.7 million and $17.1
million, respectively, during the three and nine months ended February 28, 1999.
Net sales for the three and nine months ended February 29, 2000 were $4.9
million and $18.5 million, respectively, compared to $4.4 million and $14.3
million, respectively, during the three and nine months ended February 28, 1999.
Net sales include parts sales as well as aircraft and engine sales. Aircraft
and engine sales are unpredictable transactions and may fluctuate significantly
from year to year, dependent, in part, upon the Company's ability to purchase an
aircraft or engine at an attractive price and resell it within a relatively
brief period of time, as well as the overall market for used aircraft or
engines. For the nine-month period, total revenue and net sales were higher due
to an increase in aircraft and engine sales offset by a reduction in lease and
service revenue. For the three-month period, total revenue was lower as the
increase in net sales was not enough to offset the reduction in lease and
service revenue. Lease and service revenue decreased from $1.3 million and $2.9
million, respectively, for the three and nine months ended February 28, 1999 to
$486,000 and $2.1 million, respectively, for the three and nine months ended
February 29, 2000, primarily due to a reduction in service revenue as well as
lower lease revenue as the Company has fewer aircraft and engines currently on
lease. Under the equity method of accounting, lease revenue from the Air41
Joint Venture is not included in the Company's revenue.
Cost of Sales
- ---------------
Cost of sales increased 25.4% from $2.9 million during the three months
ended February 28, 1999 to $3.7 million during the three months ended February
29, 2000. Cost of sales increased 40.7% from $9.7 million during the nine months
ended February 28, 1999 to $13.6 million during the nine months ended February
29, 2000. As a percentage of total revenues, cost of sales for the three and
nine months ended February 29, 2000 was 69% and 66%, respectively, compared to
51% and 57% for the three and nine months ended February 28, 1999, respectively.
These increases were due primarily to increases in net sales, an increase in the
sale of brokered parts and a higher cost of sales for aircraft and engines. As
the Company continues to expand its brokered part sales, gross margins should
decrease from historical levels, which reflect higher levels of sales of parts
out of inventory.
9
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
Selling, General and Administrative Expenses
- ------------------------------------------------
Selling, general and administrative expenses decreased 24.3% from $1.6
million during the three months ended February 28, 1999 to $1.2 million during
the three months ended February 29, 2000, primarily due to a decrease in salary
and bonuses partially offset by an increase in insurance expenses. Selling,
general and administrative expenses increased 13.3% from $3.8 million during the
nine months ended February 28, 1999 to $4.3 million during the nine months ended
February 29, 2000, primarily due to an increase in insurance costs, professional
fees, commissions and advertising and marketing expenses.
Depreciation and Amortization
- -------------------------------
Depreciation and amortization for the three and nine months ended February
28, 1999 totaled $279,000 and $875,000, respectively, compared to $266,000 and
$857,000 for the three and nine months ended February 29, 2000, respectively.
Interest Expense
- -----------------
Interest expense for the three and nine months ended February 28, 1999 was
$360,000 and $1.0 million, respectively, compared to $444,000 and $1.2 million
for the three and nine months ended February 29, 2000, respectively. The
increase in interest expense from 1999 to 2000 was due to an increase in total
debt outstanding during this period from $13.5 million at February 28, 1999 to
$17.6 million at February 29, 2000.
Interest and other income
- ----------------------------
Interest and other income for the three and nine months ended February 29,
2000 was $11,000 and $39,000, respectively, compared to $16,000 and $7,000 for
the three and nine months ended February 28, 1999, respectively.
Net Earnings
- -------------
Earnings per share - diluted for the third quarter of fiscal 2000 were
$0.05 compared to earnings per share - diluted for the third quarter of fiscal
1999 of $0.21, based on 2,240,141 and 2,708,302 weighted average shares
outstanding, respectively. Earnings per share - diluted for the first nine
months of fiscal 2000 were $0.51 compared to earnings per share - diluted for
the first nine months of fiscal 1999 of $0.56 per share - diluted, based on
2,289,300 and 2,751,896 weighted average shares outstanding, respectively. The
decrease in the weighted average shares outstanding - basic and diluted is the
result of the Company's stock repurchase program.
10
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
Treasury Stock
- ---------------
In the third quarter of 1999, the Company began acquiring shares of its
common stock in connection with a stock repurchase program approved by the
Company's Board of Directors and lender in December 1998. During the nine
months ended February 29, 2000, the Company repurchased 6,500 shares of its
common stock at an average price of $4.39 for a total expenditure of $28,542.
This repurchase brings the total number of shares repurchased to 471,525 at an
average price of $4.19 and a total expenditure of $1,975,322. The Company does
not have a formal plan in place to purchase any additional shares; however, the
Company is authorized by the Board to make further purchases if deemed to be in
the best interest of the Company. The Company's lender must also approve any
such purchases.
Liquidity and Capital Resources
- ----------------------------------
The Credit Agreement originally entered into by the Company in October of
1996 provided for a $3 million term loan and up to an $11 million revolving
credit. The Credit Agreement has been amended to create several new term loan
facilities and to increase the revolving credit to $14 million (collectively
referred to as the "Credit Facility"). The revolving credit facility matures in
October 2001 and the term loans mature on various dates through October 2001.
The interest rate that the Company is assessed is subject to fluctuation and may
change based upon certain financial covenants. As of April 7, 2000, the
interest rate under the Credit Facility was the lender's base rate (9.00%) minus
0.25%. The Credit Facility is secured by substantially all of the assets of the
Company and availability of amounts for borrowing is subject to certain
limitations and restrictions. Such limitations and restrictions are discussed
in the Company's Proxy Statement/Prospectus filed with the Securities and
Exchange Commission on August 29, 1996.
Net cash provided by (used in) operating activities for the nine months ended
February 29, 2000 and February 28, 1999 were ($1,699,000) and $1,041,000,
respectively. The cash used in operating activities for nine months ended
February 29, 2000 was due primarily to an increase in inventory relating to the
acquisition of aircraft and engines held for sale. The cash provided by
operations for the nine months ended February 28, 1999 was due to net earnings
offset by an increase in accounts receivables and inventory.
Net cash used for investing activities for the nine months ended February
29, 2000 amounted to $6,207,000 compared to $3,434,000 for the nine months ended
February 28, 1999. The net cash used for investing activities for the nine
months ended February 29, 2000 was primarily the result of the addition of
aircraft and engines held for lease. The net cash used for investing activities
for the nine months ended February 28, 1999 was primarily the result of an
investment in the Air41 Joint Venture and the addition of certain Pratt &
Whitney JT8D engines held for lease.
11
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
Liquidity and Capital Resources (cont.)
- -------------------------------------------
Net cash provided by financing activities for nine months ended February 29,
2000 amounted to $7,851,000 compared to $2,868,000 million for the nine months
ended February 28, 1999. The net cash provided by financing activities for the
nine months ended February 29, 2000 was the result of a net increase in debt
obligations primarily resulting from the acquisition of aircraft and engines
held for sale and for lease. The net cash provided by financing activities for
the nine months ended February 28, 1999 was primarily the result of a net
increase in debt obligations of $3.8 million due to the borrowing of funds for
the acquisition of certain Pratt & Whitney JT8D engines and the investment in
the Air41 Joint Venture.
At April 7, 2000, the Company was permitted to borrow up to an additional
$2.8 million pursuant to the revolving credit facility. The Company believes
that amounts available to be borrowed pursuant to the Credit Agreement and cash
flow from operations will be sufficient to meet the requirements of the
Company's business for the foreseeable future. The Company had no material
commitments for capital expenditures as of February 29, 2000.
Recent Accounting Pronouncements
- ----------------------------------
In June 1998, the FASB issued Statement of Financial Accounting Standards
(FAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities."
FAS No. 133 establishes standards for accounting and reporting for derivative
instruments, and conforms the requirements for treatment of different types of
hedging activities. This statement is effective for all fiscal years beginning
after June 15, 2000. Management does not expect this standard to have a
significant impact on the Company's operations.
Year 2000 Issues
- ------------------
The Company experienced no disruptions in the operation of its internal
information systems or in the availability of its facilities during its
transition to year 2000. The Company is not aware that any of its vendors
experienced any disruptions during their transitions to year 2000 or that there
have been any year 2000 problems with its material held for sale. The Company
will continue to monitor the transition to year 2000 and will act promptly to
resolve any problems that occur.
12
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
Recent Developments
- --------------------
On April 11, 2000, the Company signed a definitive agreement to
acquire a small regional air cargo airline that operates three piston light twin
and two light turboprop Part 23 aircraft under an Air Carrier Certificate under
Part 135 of the regulations of the Federal Aviation Administration. Besides
providing ad hoc charter operations, the airline is currently under contract to
provide cargo services to certain express carriers. The Company has agreed to
pay $125,000, plus certain contingent consideration including assuming the debt
relating to the aircraft, for the airline. Consummation of the acquisition is
subject to customary approvals. The Company expects that the acquisition will
close during the fourth quarter of fiscal 2000. If the acquisition is
consummated, the airline will become a wholly owned subsidiary of the Company.
A Part 135 certificate permits the holder to operate aircraft for
cargo transportation service up to a maximum payload of 7,500 pounds or
on-demand passenger charter service for up to 30 passengers. The Company
intends to expand the air cargo operations conducted by the airline during the
first quarter of fiscal 2001. Although the Company expects the acquisition to
be accretive, earnings could be negatively impacted due to the resulting
investment in the airline and the intended expansion. The Company is evaluating
the possibility of raising capital by issuing debt or equity securities of the
subsidiary to finance the acquisition, continued operations and expansion of
this subsidiary.
As of April 7, 2000, the Company owns four Embraer EMB-120 aircraft that
are not currently under lease. The Company intends to sell or lease these
aircraft; however, the aircraft are currently in maintenance for repairs. While
these aircraft are in maintenance and until they are utilized, future earnings
could be negatively impacted because the interest expense associated with debt
incurred to purchase the aircraft may not be offset by revenues generated from
the sale or lease of the aircraft. One or more of these aircraft may be leased
to the above-mentioned subsidiary.
Forward Looking Statements
- ----------------------------
This Form 10-Q contains statements that may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Those statements include statements regarding the capital spending and future
financing plans of the Company and reflect the intent, belief or current
expectations of the Company and members of its management team. Prospective
investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those contemplated by such
forward-looking statements. The Company undertakes no obligation to update or
revise forward-looking statements to reflect changed assumptions, the occurrence
of unanticipated events or changes to future operating results over time.
13
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is from time to time subject to legal proceedings and claims
that arise in the ordinary course of its business. On the date hereof, no such
proceedings are pending and no such claims have been asserted.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
<TABLE>
<CAPTION>
Exhibit
NUMBER DESCRIPTION PAGE NUMBER OR METHOD OF FILING
<S> <C> <C>
2.4 Credit Incorporated by reference to Exhibit 2.4 to
Agreement Amendment No. 2 to the Company's Registration
between BNY Statement on Form S-4 filed on August 29, 1996 (File
Financial No. 333-08065).
Corporation
and the
Registrant
(the "Credit
Agreement").
2.5 First
Amendment, Filed herewith.
Waiver and Agreement,
dated as of March 24,
1997, between BNY Financial
Corporation and the
Registrant and related
to the Credit Agreement.
2.6 Second Filed herewith.
Amendment and Agreement,
dated as of September 9,
1997, between BNY Financial
Corporation and the Registrant
and related to the Credit
Agreement.
<PAGE>
2.7 Third
Amendment and Filed herewith.
Agreement, dated as of
October 15, 1997, between
BNY Financial Corporation
and the Registrant
and related to the Credit
Agreement.
2.8 Fourth
Amendment and Filed herewith.
Agreement, dated as of
February 2, 1998, between
BNY Financial Corporation
and the Registrant and
related to the Credit
Agreement.
2.9 Fifth
Amendment, Filed herewith.
dated as of July 16, 1998,
between BNY Financial
Corporation and the
Registrant and related
to the Credit Agreement.
2.10 Sixth
Amendment, Filed herewith.
dated as of May 30, 1998,
between BNY Financial
Corporation and the
Registrant and related
to the Credit Agreement.
2.11 Seventh
Amendment, Filed herewith.
dated as of October 28,
1998, between BNY Financial
Corporation and the Registrant
and related to the Credit
Agreement.
2.12 Eighth Amendment Filed herewith
dated as of December 8, 1998
1999, between BNY Financial
Corporation and the Registrant
and related to the Credit
Agreement.
2.13 Ninth Amendment Filed herewith
dated as of July 1, 1999
between BNY Financial
Corporation and the Registrant
and related to the Credit
Agreement.
3.1 Amended and Incorporated by reference to Exhibit 3.1 to the
Restated Company's Annual Report on Form 10-K for the fiscal
Certificate year ended May 31, 1996 (the "1996 Form 10-K").
of
Incorporation
of the
Registrant.
3.2 Restated and Incorporated by reference to Exhibit 3.2 to the 1996
Amended Form 10-K.
Bylaws of the
Registrant.
4.1 Specimen Incorporated by reference to Exhibit 4.1 to the 1996
Common Stock Form 10-K.
Certificate.
10.1.1 Employment Incorporated by reference to Exhibit 10.1.1 to the
Agreement, 1996 Form 10-K
dated as of
December 1,
1995, between
the
Registrant
and Alexius
A. Dyer III,
as amended on
October 3,
1996.
10.1.2 Employment Incorporated by reference to Exhibit 10.1.2 to the
Agreement Company's Quarterly Report for the quarter ended
dated as of February 28, 1997.
October 3,
1996, between
the
Registrant
and George
Murnane III.
10.2.1 1996 Long- Incorporated by reference to Appendix B to the Proxy
Term Statement/Prospectus included in the Company's
Incentive and Registration Statement on Form S-4 (File
Share Award No. 333-08065), filed on July 12, 1996.
Plan.
16
<PAGE>
10.2.2 401(k) Plan. Incorporated by reference to Exhibit 10-H to the
Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1992 (the "1992 Form 10-K").
10.2.3 Bonus Plan. Incorporated by reference to Exhibit 10.2.4 to the
1992 Form 10-K.
10.2.4 Cafeteria Incorporated by reference to Exhibit 10.2.5 of the
Plan. Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1993.
10.2.5 Form of Incorporated by reference to Exhibit 10.2.5 to the
Option 1996 Form 10-K.
Certificate
(Employee
Non-Qualified
Stock
Option).
10.2.6 Form of Incorporated by reference to Exhibit 10.2.6 to the
Option 1996 Form 10-K.
Certificate
(Director
Non-Qualified
Stock
Option).
10.2.7 Form of Incorporated by reference to Exhibit 10.2.7 to the
Option 1996 Form 10-K.
Certificate
(Incentive
Stock
Option).
10.14 Commission Incorporated by reference to Exhibit 10.14 to the
Agreement 1996 Form 10-K.
Dated
December 1,
1995 between
the
Registrant
and J.M.
Associates,
Inc.
10.15 Operating Incorporated by reference to Exhibit 10.14 to the
Air41 LLC, Exhibit 10.15 to the 1999 Form 10-K
dated as of
September 9,
1998, by and
between
AirCorp, Inc.
and the
Company
10.16 Office Lease Incorporated by reference to Exhibit 10.17 to the
Agreement 1997 Form 10-K.
dated January
31, 1997
between the
Registrant
and Globe
Corporate
Center, as
amended.
10.17 Lease Incorporated by reference to Exhibit 10.18 to the
Agreement 1997 Form 10-K.
dated March
31, 1997
between the
Registrant
and Port 95-
4, Ltd.
27 Financial Filed herewith.
Data
Schedule.
</TABLE>
(b) Reports on Form 8-K
----------------------
None
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY
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.
INTERNATIONAL AIRLINE SUPPORT GROUP, INC.
- --------------------------------------------
(Registrant)
/s/James M. Isaacson April 14, 2000
- ---------------------- ----------------
James M. Isaacson Date
Chief Financial Officer
<TABLE> <S> <C>
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<PERIOD-END> Feb-29-2000
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0
0
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