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 November 30, 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
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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 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
Company's common stock outstanding as of January 10, 2001 was 2,190,198.
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARYINDEX
Page No.
--------
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
May 31, 2000 and November 30, 2000 3
Condensed Consolidated Statements of Earnings
for the Three Months and Six Months
Ended November 30, 1999 and 2000 4
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended November 30, 1999 and 2000 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition 10
Part II OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a
Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
- 2 -
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
May 31, November 30
2000* 2000
------------- -----------
(unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 721,111 $ 701,296
Accounts receivable, net of allowance for doubtful
accounts of approximately $172,722 at May 31, 2000
and $261,163 at November 30, 2000 2,647,215 2,272,661
Inventories 12,807,512 6,999,589
Deferred tax benefit - current 1,053,888 1,053,888
Other current assets 583,626 435,396
------- -------
Total current assets 17,813,352 11,462,830
Property and equipment
Aircraft in operations 1,114,919 -
Aircraft and engines held for lease 12,832,298 18,339,506
Leasehold improvements 176,594 166,991
Machinery and equipment 1,074,576 1,082,604
--------- ---------
15,198,387 19,589,101
Accumulated depreciation 2,263,110 2,530,613
--------- ---------
Property and equipment, net 12,935,277 17,058,488
Other assets
Investment in joint ventures 3,860,136 5,020,494
Notes receivable affiliate - 848,540
Deferred debt costs, net 228,066 151,367
Deferred tax benefit 345,883 195,961
------- -------
Total other assets 4,434,085 6,216,362
--------- ---------
$ 35,182,714 $ 34,737,680
= ========== = ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term obligations $ 1,748,642 $ 2,340,115
Accounts payable 1,359,998 2,014,239
Deferred rent - 366,667
Accrued expenses 1,261,147 983,419
--------- -------
Total current liabilities 4,369,787 5,704,440
Long-term obligations, less current maturities 18,345,079 16,378,732
Commitments and contingencies
Stockholders' equity
Preferred stock - $.001 par value; authorized
2,000,000 shares; 0 shares outstanding at May 31, 2000
and November 30, 2000. - -
Common stock - $.001 par value; authorized
20,000,000 shares; issued and outstanding 2,661,723
shares at May 31, 2000 and 2,661,723 shares
at November 30, 2000. 2,661 2,661
Additional paid-in capital 13,902,909 13,902,909
Retained earnings 527,769 714,429
Common stock held in treasury, at cost - 471,525
shares at May 31, 2000 and November 30, 2000 (1,965,491) (1,965,491)
--------- ---------
Total stockholders' equity 12,467,848 12,654,508
---------- ----------
$ 35,182,714 $ 34,737,680
= ========== = ==========
</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 SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
1999 2000 1999 2000
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues
Net sales $ 5,249,175 $ 3,648,533 $ 13,578,257 $ 9,828,730
Aircraft operations - - - 171,579
Lease and service revenue 958,258 1,026,302 1,627,687 1,444,696
---------- --------- ---------- ----------
Total revenues 6,207,433 4,674,835 15,205,944 11,445,005
Cost of sales 3,843,089 2,660,639 9,961,421 7,672,877
Selling, general and administrative expenses 1,354,107 1,449,083 3,060,978 2,886,053
Depreciation and amortization 313,187 295,444 590,954 515,751
---------- --------- ---------- ----------
Total operating costs 5,510,384 4,405,166 13,613,353 11,074,681
Equity in net earnings of
unconsolidated subsidiaries 420,737 457,720 821,802 928,235
---------- --------- ---------- ----------
Earnings from operations 1,117,786 727,389 2,414,393 1,298,559
Interest expense 390,574 481,999 719,740 1,013,659
Interest income and other (income) expenses (23,887) 26,499 (27,829) (51,682)
---------- --------- ---------- ----------
Earnings before income taxes 751,099 218,891 1,722,782 336,582
Provision for income taxes 297,532 101,915 671,720 149,922
---------- --------- ---------- ----------
Net earnings $ 453,567 $ 116,976 $ 1,050,762 $ 186,660
========== ========= ========== ==========
Per share data:
Earnings per share available for
common stockholders - basic $ 0.21 $ 0.05 $ 0.48 $ 0.09
Weighted average number of common
stock outstanding - basic 2,187,198 2,190,198 2,187,762 2,190,198
========== ========= ========== ==========
Earnings per share available for
common stockholders - diluted $ 0.20 $ 0.05 $ 0.45 $ 0.09
Weighted average number of common
stock outstanding - diluted 2,324,796 2,190,645 2,326,034 2,190,795
========== ========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements
- 4 -
<PAGE>
FORM 10-Q
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six Months ended
November 30,
1999 2000
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,050,762 $ 186,660
Adjustments to reconcile net earnings to net cash
(used in) provided by operating activities:
Depreciation and amortization 590,954 515,751
Loss on sale of investment - -
Undistributed equity in earnings of subsidiaries (821,802) (928,235)
Provision for income taxes - deferred 671,720 149,922
Changes in assets and liabilities (1,312,291) 2,176,010
---------- ---------
Total adjustments (871,419) 1,913,448
Net cash provided by operating activities 179,343 2,100,108
Cash flows from investing activities:
Capital equipment additions (66,841) (15,858)
Investment in unconsolidated joint ventures - (287,649)
Proceeds from sale of investment - -
Distributions received from joint venture, net 153,155 180,000
Additions to aircraft and engines held for lease, net (6,375,000) (2,871,428)
---------- ---------
Net cash used in investing activities (6,288,686) (2,994,935)
Cash flows from financing activities:
Net increase in debt obligations 6,004,056 875,012
Proceeds from exercise of employee stock options 10,707 -
---------- ---------
Net cash provided by financing activities 6,014,763 875,012
---------- ---------
Net (decrease) in cash (94,580) (19,815)
Cash and cash equivalents at beginning of period 892,283 721,111
---------- ---------
Cash and cash equivalents at end of period $ 797,703 $ 701,296
= ======= = =======
</TABLE>
- 5 -
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY
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. and its Subsidiary's condensed consolidated balance sheets
as of May 31, 2000 and November 30, 2000, the condensed consolidated statements
of earnings for the three and six months ended November 30, 1999 and 2000, and
the condensed consolidated statements of cash flows for the six months ended
November 30, 1999 and 2000.
The accounting policies followed by the Company are described in the May
31, 2000 financial statements.
The results of operations for the three and six months ended November 30,
2000 are not necessarily indicative of the results to be expected for the full
year.
2. Inventories consisted of the following:
May 31, 2000 November 30, 2000
-------------- --------------------
Aircraft parts $ 7,382,143 $ 6,999,589
Aircraft and Engines
available for sale 5,425,369 -
--------- -----------
$ 12,807,512 $ 6,999,589
============ ============
3. Earnings Per Share
The Company's basic earnings per share are 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.
Financial Accounting Standards Board (FASB) Statement 128 "Earnings
Per Share" was adopted by the Company on January 1, 1998 and requires the dual
presentation of basic and diluted earnings per share on the face of the
statement of earnings. The reconciliation between the computation is as
follows:
Three Months
Ended Net Basic Basic Diluted Diluted
November 30, Earnings Shares EPS Shares EPS
------------- -------- ------ --- ------ ---
1999 $ 435,567 2,187,198 $0.21 2,324,796 $0.20
2000 $ 116,976 2,190,198 $0.05 2,191,092 $0.05
- 6 -
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Six Months
Ended Net Basic Basic Diluted Diluted
November 30, Earnings Shares EPS Shares EPS
------------- -------- ------ --- ------ ---
1999 $1,050,762 2,187,279 $0.48 2,326,034 $0.45
2000 $ 186,660 2,190,198 $0.09 2,190,795 $0.09
Included in diluted shares are common stock equivalents relating to stock
options of 137,598 and 894 for the three months ended November 30, 1999 and
2000, respectively, and 138,755 and 597 for the six months ended November 30,
1999 and 2000, respectively.
Options to purchase 529,947 shares of common stock at exercise prices
ranging from $2.75 to $3.44 per share, which were outstanding during the six
months ended November 30, 2000, were not included in the computation of Diluted
EPS as of November 30, 2000 because the options' exercise prices were greater
than the average market price of the common stock during the period.
4. Credit Facility
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 eleven times to create several
new term loan facilities and to increase the revolving credit to $14 million
(collectively referred to as the "Credit Facility"). In the most recent
amendment, which occurred subsequent to the end of the quarter, the maturity of
the revolving credit facility and the term loan were extended to December 2005,
as well as providing an increase in availability as a result of the new term
loan. The interest rate that the Company is assessed is subject to fluctuation
and may change based upon certain financial covenants. As of January 10, 2001,
the interest rate under the Credit Facility was the lender's base rate minus
0.25% (8.75%). 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 and in the Amendments to the Credit
Facility filed on various dates as listed below in Item 6. Exhibits and Reports
on Form 8-K.
- 7 -
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. Supplemental Cash Flow Disclosures:
Cash payments for interest were $550,127 and $851,059 for the six months
ended November 30, 1999 and November 30, 2000, respectively. Cash and cash
equivalents include $335,519 and $117,498 of restricted cash at May 31, 2000 and
November 30, 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. Related Party Transactions:
The Company had a notes receivables affiliate in the principal amount of
$848,540 as of November 30, 2000 relating to loans provided to North-South
Airways, which are secured by aircraft operated by the airline. The loans are
priced at market rates, ranging from 8.75% to 9.50%, with monthly principal
payments extending through August 2004. For more information, see Note 7 -
Joint Venture/Airline Subsidairy.
As of November 30, 2000, the Company leased one EMB-120 aircraft to North-South
Airways. The lease originated in September 2000 and has a three-year term. The
lease contains similar terms and conditions to other EMB-120 aircraft leases
completed by the Company. The Company anticipates leasing a second EMB-120
aircraft to North-South Airways, under the same terms and conditions, during the
third quarter of Fiscal 2001.
7. Unconsolidated Subsidiaries
On September 16, 1998, the Company entered into a joint venture (the "Air
41 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 Air
41 Joint Venture was approximately $1.5 million. The Company's Air 41 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 Air 41 Joint Venture is accounted for under the equity method and the leases
are treated as operating leases.
- 8 -
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. Unconsolidated Subsidiaries (cont.)
Equity in Net Earnings of Unconsolidated Joint Venture for the first six
months of fiscal 2001 was $980,000. Without the Company's share of Air 41's
earnings the Company would have had a pretax loss for the first six months of
fiscal 2001. It should also be noted that substantially all of Air 41's cash
flow is pledged to service Air 41's indebtedness. Although Air 41 was able to
re-lease the first aircraft returned off-lease from SAS, two additional aircraft
have been returned to Air 41 subsequent to the end of the quarter and other
aircraft are scheduled to be returned in the near term. Air 41 is in discussion
with a number of carriers for the re-lease of these aircraft and has signed a
Letter of Intent for one of the aircraft, however there can be no assurance that
any of these aircraft will be able to be re-leased on as favorable terms, if at
all. Should Air 41 be unable to re-lease or sell these aircraft, the Company's
stated operating income would be significantly impacted.
The Company is exploring opportunities for the aircraft after the end of
the term of the leases with SAS. Such opportunities include re-leasing the
aircraft with SAS, leasing the aircraft to one or more different lessees,
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. At this time, other than as previously mentioned, the
Company has no firm commitment for the aircraft after the SAS leases expire.
During the quarter, the Company's regional airline subsidiary, doing
business as North-South Airways, sold additional shares of stock raising
approximately $1,000,000. This sale of stock reduced the Company's ownership
interest commencing September 1, 2000 in North-South Airways from 100% to
approximately 35%. Accordingly, the Company is accounting for their investment
in North-South Airways under the equity method.
- 9 -
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
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 six months ended November 30, 2000 was $4.7
million and $11.4 million, respectively, compared to $6.2 million and $15.2
million, respectively, during the three and six months ended November 30, 1999.
Net sales for the three and six months ended November 30, 2000 were $3.6 million
and $9.8 million, respectively, compared to $5.2 million and $13.6 million,
respectively, during the three and six months ended November 30, 1999, primarily
relating to a decrease in parts sales and aircraft and engine sales. Net sales
have been negatively impacted due to increased pricing pressure arising from the
financial difficulties of many airlines and other spare parts redistributers.
The airlines have been facing higher fuel prices and interest rates, while banks
are electing to liquidate insolvent competitors as opposed to reorganization.
The Company has attempted to offset and mitigate these negative sales trends by
expanding its product lines, but no assurances can be made that sales revenue
will increase in the short term. 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. Lease and service revenue
increased to $1,026,000 for the three months ended November 30, 2000 from
$958,000 for the three ended November 30, 1999, primarily due to more assets
being under lease. Lease and service revenue decreased to $1.4 million for the
six months ended November 30, 2000 from $1.6 million for the six months ended
November 30, 1999, primarily due to fewer assets under lease during the first
three months of fiscal 2001 . Under the equity method of accounting, lease
revenue from the Air 41 Joint Venture is not included in the Company's revenue.
- 10 -
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY
Cost of Sales
---------------
Cost of sales decreased 29% from $3.8 million during the three months ended
November 30, 1999 to $2.7 million during the three months ended November 30,
2000. Cost of sales decreased 23% from $10.0 million during the six months
ended November 30, 1999 to $7.7 million during the six months ended November 30,
2000. These decreases were due primarily to a corresponding decrease in
revenue. As a percentage of total revenues, cost of sales for the three and six
months ended November 30, 1999 was 61.9% and 65.5%, respectively, compared to
56.9% and 67.0% during the three and six months ended November 30, 2000,
respectively. The decrease in costs of sales as a percentage of total revenue
for the three-month period is due to improved margins on part sales. The
increase in costs of sales as a percentage of total revenue for the six-month
period is due to aircraft and engine sales, which typically carry a lower margin
than part sales, being a higher percentage of total sales during the six-month
period in 2000 than the corresponding period in 1999.
Selling, General and Administrative Expenses
------------------------------------------------
Selling, general and administrative expenses increased 7% from $1.35
million during the three months ended November 30, 1999 to $1.45 million during
the three months ended November 30, 2000, primarily due to an increase in
insurance costs, travel and entertainment expenses, professional fees, and the
provision for doubtful accounts. Selling, general and administrative expenses
decreased 6% from $3.1 million during the six months ended November 30, 1999 to
$2.9 million during the six months ended November 30, 2000, primarily due to
lower professional fees, outside commissions and temporary help, partially
offset by higher insurance costs.
Depreciation and Amortization
-------------------------------
Depreciation and amortization for the three and six months ended November
30, 2000 totaled $295,000 and $516,000, respectively, compared to $313,000 and
$591,000, respectively, for the three and six months ended November 30, 1999,
respectively. This decrease was due to an increase in assets with longer useful
lives and therefore lower monthly depreciation expenses being leased.
Interest Expense
-----------------
Interest expense for the three and six months ended November 30, 1999 was
$391,000 and $720,000, respectively, compared to $482,000 and $1,014,000 for the
three and six months ended November 30, 2000, respectively. This increase in
interest expense was due to a higher average of total debt outstanding during
this period and an increase in the interest rate paid by the Company (see
Liquidity and Capital Resources).
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<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY
Net Earnings
-------------
Earnings per share - diluted for the second quarter of fiscal 2000 were
$0.20, based on 2,324,796 weighted average shares outstanding, compared to
earnings per share - diluted for the second quarter of fiscal 2001 of $0.05,
based on 2,191,092 weighted average shares outstanding. Earnings per share -
diluted for the first six months of fiscal 2000 were $0.45, based on 2,326,034
weighted average shares outstanding, compared to earnings per share - diluted
for the first six months of fiscal 2001 of $0.09 per share - diluted, based on
2,190,795 weighted average shares outstanding.
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 eleven times to create several
new term loan facilities and to increase the revolving credit to $14 million
(collectively referred to as the "Credit Facility"). In the most recent
amendment, which occurred subsequent to the end of the quarter, the maturity of
the revolving credit facility and the term loan were extended to December 2005,
as well as providing an increase in availability as a result of the new term
loan. The interest rate that the Company is assessed is subject to fluctuation
and may change based upon certain financial covenants. As of January 10, 2001,
the interest rate under the Credit Facility was the lender's base rate minus
0.25% (8.75%). 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 and in the Amendments to the Credit
Facility filed on various dates as listed below in Item 6. Exhibits and Reports
on Form 8-K.
Net cash provided by operating activities for the six months ended November 30,
2000 and November 30, 1999 were $2,100,000 and $179,000, respectively. The cash
provided by operating activities for six months ended November 30, 1999 was due
primarily to improved collection of accounts receivables. The cash used in
operating activities for the six months ended November 30, 2000 was due
primarily to a reduction in accounts receivables, a decrease in inventories and
an increase in accounts payable.
Net cash used for investing activities for the six months ended November
30, 1999 amounted to $6,289,000 compared to $2,995,000 for the six months ended
November 30, 2000. The net cash used for investing activities for the six
months ended November 30, 1999 was primarily the result of the use of $6,375,000
to purchase aircraft and engines. The net cash used for investing activities
for the six months ended November 30, 2000 was primarily the result of the
purchase of an aircraft.
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<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY
Liquidity and Capital Resources (cont.)
-------------------------------------------
Net cash provided by financing activities for the six months ended November
30, 1999 amounted to $6,015,000 compared to $875,000 for the six months ended
November 30, 2000. The net cash provided by financing activities for the six
months ended November 30, 1999 was the result of a net increase in debt
obligations of $6 million due to the borrowing of funds for the acquisition of
aircraft and engines. The net cash provided by financing activities for the six
months ended November 30, 2000 was primarily the result of the borrowing of
funds to purchase an aircraft.
At January 12, 2001, the Company was permitted to borrow up to an
additional $3.4 million pursuant to the revolving credit facility. As
operations are currently conducted, the Company believes that amounts available
to be borrowed pursuant to the Credit Agreement and its working capital 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 November 30, 2000.
Recent Accounting Pronouncements
----------------------------------
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (FAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." FAS No. 133, as amended by FAS
138, 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.
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 SUBSIDIARY
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Registrant conducted an annual meeting of its stockholders on October
4, 2000. The Registrant solicited proxies pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended. There was no solicitation in
opposition to management's solicitation and all persons nominated by the
Registrant for election to its Board of Directors at the annual meeting were so
elected. The following sets forth a brief description of each other matter
acted upon during the Annual Meeting, indicating the number of votes cast for,
against and withheld, and the number of broker non-votes as to each matter.
1. The election of two Class II directors to hold office until the annual
stockholders meeting in 2003, or until their successors are duly elected and
qualified.
The following table sets forth certain information regarding the votes cast
by the holders of the Company's Common Stock with respect to the election of
directors.
Director Votes For Abstentions
-------- ---------- -----------
Alexius A. Dyer III 1,546,565 104,751
George Murnane III 1,546,565 104,751
2. The approval of amendments to the Registrant's Restated and Amended
Certificate of Incorporation to provide for a one-for-four reverse stock split
with respect to the Company's Common Stock.
For: 1,516,865 Against: 483,688
Abstain: 181,540 Broker Non-Vote: 0
3. The approval of an amendment to the Company's 1996 Long Term Incentive
and Share Award Program to increase by 109,000 (27,250 if the reverse stock
split is completed) the number of shares available for grant under the Plan.
For: 1,464,492 Against: 529,660
Abstain: 187,941 Broker Non-Vote: 0
- 14 -
<PAGE>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (cont.)
4. To ratify the appointment of Grant Thornton LLP as the Company's
independent auditors for the fiscal year ending May 31, 2001.
For: 1,929,677 Against: 70,556
Abstain: 181,860 Broker Non-Vote: 0
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Exhibits
--------
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, Incorporated by Reference.
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 Incorporated by Reference.
Amendment and Agreement,
dated as of September 9,
1997, between BNY Financial
Corporation and the Registrant
and related to the Credit
Agreement.
2.7 Third
Amendment and Incorporated by Reference.
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 Incorporated by Reference.
Agreement, dated as of
February 2, 1998, between
BNY Financial Corporation
and the Registrant and
related to the Credit
Agreement.
2.9 Fifth
Amendment, Incorporated by Reference.
dated as of July 16, 1998,
between BNY Financial
Corporation and the
Registrant and related
to the Credit Agreement.
2.10 Sixth
Amendment, Incorporated by Reference
dated as of May 30, 1998,
between BNY Financial
Corporation and the
Registrant and related
to the Credit Agreement.
2.11 Seventh
Amendment, Incorporated by Reference.
dated as of October 28,
1998, between BNY Financial
Corporation and the Registrant
and related to the Credit
Agreement.
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<PAGE>
EXHIBIT
NUMBER DESCRIPTION PAGE NUMBER OR METHOD OF FILING
2.12 Eight
Amendment and Agreement Incorporated by Reference.
dated as of December 8,
1998, by and among BNY
Financial Corporation and
the Registrant and related
to the Credit Agreement.
2.13 Ninth
Amendment and Agreement Incorporated by Reference.
dated as of July 1,
1999, by and between the
Registered and BNY Factoring
LLC, as successor in interest
to BNY Financial Corporation and
related to the Credit Agreement.
2.14 Tenth
Amendment and Agreement Incorporated by Reference.
dated as of November 17,
1999, by and between the
Registered and GMAC Commercial
Credit LLC, as successor in interest
By merger to BNY Financial Corporation
And related to the Credit Agreement.
2.15 Eleventh
Amendment, Waiver and Incorporated by Reference.
Agreement dated as of
January 5, 2001, by and between the
Registered and GMAC Commercial
Credit LLC, as successor in interest
By merger to BNY Financial Corporation
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.
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<PAGE>
EXHIBIT
NUMBER DESCRIPTION PAGE NUMBER OR METHOD OF FILING
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.
10.18 Securities Purchase Filed herewith
Agreement, dated September,
18, 2000, among Diamond
Aviation, Inc., the Registrant
And the purchasers named therein.
10.19 Stockholders Agreement, dated
September 18, 2000, among
Diamond Aviation, Inc., and
The stockholders therof.
27 Financial Filed herewith.
Data
Schedule.
</TABLE>
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<PAGE>
(b) Reports on Form 8-K
----------------------
None
- 18 -
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES
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 January 16, 2001
---------------------- ------------------
James M. Isaacson Date
Chief Financial Officer
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