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Exhibit 99.1
FOR IMMEDIATE RELEASE
KELLSTROM INDUSTRIES TO ACQUIRE PARTS RESALE BUSINESS
OF AVIATION SALES COMPANY
KELLSTROM TO EMERGE AS THE WORLD'S LEADING AVIATION INVENTORY MANAGEMENT COMPANY
Sunrise, Florida, September 20, 2000 -- Kellstrom Industries, Inc.
("Kellstrom") (Nasdaq:KELL) today announced that it has entered into a
definitive agreement to acquire the aircraft and engine parts resale business of
Aviation Sales Company ("AVS") (NYSE:AVS), which is operated through its
Aviation Sales Distribution Services Company ("AVSDC") subsidiary.
In connection with this agreement, Kellstrom and AVS will establish an
off-balance sheet joint venture ("JV") that will acquire the inventory of AVSDC
and enter into an exclusive arrangement with Kellstrom to sell the inventory
through its inventory management business (together the "Transaction").
Kellstrom expects to invest approximately $50 million in the Transaction,
including its investment in the JV, financing and other related costs.
Kellstrom expects to consolidate the operations of AVSDC with its Solair and
Commercial Engine Divisions. AVSDC's sales on a stand-alone basis were
approximately $125 million and its gross margin was 19% for the six-months ended
June 30, 2000. Kellstrom will seek to improve AVSDC's gross margin as it did
with its Solair Division following its acquisition in January 1999, through
refinement of its sales mix and minimization of lower margin revenues. The
Transaction is expected to be accretive to Kellstrom's earnings for fiscal year
2001 as a result of synergies in the operations, expansion of distribution
channels and Kellstrom's emergence as the industry's leading inventory
management supplier offering e-commerce solutions combined with the largest
variety of products and services.
Kellstrom plans to finance the Transaction with a combination of funding from
its current revolving credit facility and a new $30 million, 7-year mezzanine
debt financing with Key Principal Partners, LLC, an affiliate of Key Corporation
of Cleveland, Ohio. Advisors for Kellstrom and AVS in this Transaction were
Deutsche Banc Alex. Brown and Salomon Smith Barney, respectively. Consummation
of the Transaction is contingent upon Hart-Scott-Rodino approval, completion of
required financing and approval by the parties' existing lenders. Assuming
receipt of necessary approvals, closing is expected to take place mid-to-late
October 2000.
THE TRANSACTION DETAILS INCLUDE:
Kellstrom to acquire select AVSDC non-inventory assets and assume a portion of
AVSDC's accounts payable and accrued expenses;
Kellstrom and AVS to form a 50/50 JV to purchase the inventory of AVSDC having
a book value, as of August 31, 2000, of approximately $185 million;
JV to be funded by investments and loans from both AVS and Kellstrom and by an
approximately $120 million senior debt facility from Bank of America;
JV to enter into an exclusive agreement with Kellstrom for the sale of the JV's
inventory over the next five years, providing for consignment fees of up
to 35%;
AVS to exit the parts resale business and focus on the expansion of its
Maintenance Repair and Overhaul ("MR&O") operations; and
Kellstrom to enter a long-term supply agreement with AVS, delivering parts and
providing comprehensive inventory management services to AVS's MR&O
operations.
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Kellstrom Industries, Inc. News Release Page 2
September 20, 2000
IN CONNECTION WITH THE TRANSACTION:
Aviation Sales employees and management involved in AVSDC to be invited to join
Kellstrom; Kellstrom to lease a new 545,000 square foot AVSDC facility in
Miramar, Florida, where it will relocate and consolidate its Commercial Engine
and Solair Divisions; and Kellstrom to purchase AVS's parts distribution
facility in Pearland, TX and assume AVSDC's worldwide sales offices.
KELLSTROM AND AVS TO JOINTLY MARKET TOTAL MAINTENANCE SOLUTIONS TO AIRLINES AND
AIR FORCES
In connection with the Transaction, Kellstrom and AVS will enter into a
comprehensive cooperation agreement, under which they will collaborate on
certain nose-to-tail total maintenance proposals. This arrangement is intended
to capitalize on Aviation Sales' position as a leading independent airframe
maintenance supplier and Kellstrom's position as the worldwide market leader in
the aviation inventory management business.
Zivi R. Nedivi, President &Chief Executive Officer of Kellstrom commented, "With
this Transaction, we have agreed to assume certain desirable contracts which
will expand our customer base, broaden our distribution channels and increase
our market share. We plan to limit low-profit activities, which would initially
reduce the revenue of the acquired business, but allow us to focus on higher
margin, value-added programs. We envision significant operational savings from
consolidating the two organizations. With the purchase of AVSDC's assets,
Kellstrom will obtain the additional facilities needed for further expansion
eliminating the need for construction of a new building. We expect the
Transaction to enhance our cash flow performance over the next few years. We are
structuring the acquisition and the financing to fit our on-going corporate
objective of minimizing short-term debt while improving return on equity. We
welcome AVSDC's experienced management and employees, and while we expect a
transition period to take several months, we are confident that the integration
will go smoothly and that the marriage of our Internet commerce capabilities
with AVSDC's large customer network will create a winning combination."
Kellstrom's Chairman of the Board, Yoav Stern, stated, "Once this Transaction is
consummated, Kellstrom will become the world's leading independent inventory
management company in the aviation industry. The two companies' inventory
overlap is minimal (less than 10% duplicity in inventory) and therefore the
complementary nature of this arrangement creates not only size, but also
uniquely complete and comprehensive coverage of products and distribution
channels. Our capabilities in airframe products are expected to be enhanced by
several orders of magnitude, especially with AVSDC's management and field teams
who will add years of experience and know-how to our own. This arrangement also
gives us a major new customer in AVS's MR&O operations, as well as a quality and
fast turnaround source for our airframe overhaul work." Mr. Stern concluded,
"This agreement creates an important strategic relationship. Each company will
focus its efforts on its core competencies, while working together in tailoring
unique and competitive solutions for Total Inventory Management."
Dale S. Baker, Chairman & Chief Executive Officer of Aviation Sales pointed out,
"Along with our recent moves, the Transaction will relieve us of immediate
financial pressures, allowing management to focus its resources on our $450
million per year MR&O business. Our cooperation arrangement with Kellstrom will
enable the two companies to offer an unprecedented package of Total Inventory
Management and Total Aircraft Maintenance (TIM/TAM), led by a world leader in
inventory management on one side, and the leading independent airframe
maintenance company on the other. We look forward to utilizing Kellstrom's
unique e-commerce capacity to manage one of the most comprehensive airframe
inventories in the world, which will reside in our JV. On a personal note, I am
particularly pleased that our parts business staff and management will be
joining Kellstrom's organization and will continue to call AVSDC's Miramar
facilities their place of business."
(more)
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Kellstrom Industries, Inc. News Release Page 3
September 20, 2000
Kellstrom Industries, Inc. is a leader in delivering innovative and value added
nose-to-tail programs in the fields of inventory control and supply chain
management to the international aviation market. This is achieved by uniting
cutting edge information technology with quality assurance methodology. The
Company specializes in providing engines and parts for large turbo-fan engines
manufactured by CFMI, General Electric, Pratt & Whitney and Rolls Royce, in
addition to components for the aircraft they power. Kellstrom is also a leading
inventory management and components provider of engines and parts for large
military transport aircraft, jet fighters and helicopters. The Company is an
approved supplier to an international customer base including major domestic and
international airlines, military air forces, original equipment manufacturers
and engine overhaul shops.
Aviation Sales Company is a leading independent provider of fully integrated
aviation maintenance and inventory services, including aircraft heavy
maintenance, component repair and overhaul, leasing, the distribution of
aircraft spare parts and the manufacture of new components for major commercial
airlines, original equipment manufacturers and maintenance and repair
facilities.
KELLSTROM INDUSTRIES, INC. SAFE HARBOR STATEMENT
THE COMPANY, FROM TIME TO TIME, MAY DISCUSS FORWARD-LOOKING INFORMATION. THIS
PRESS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING
STATEMENTS ARE BASED ON MANY ASSUMPTIONS AND FACTORS, AND ARE SUBJECT TO MANY
CONDITIONS, INCLUDING THE COMPANY'S CONTINUING ABILITY TO EFFECTIVELY INTEGRATE
THE ACQUIRED BUSINESS, ACQUIRE ADEQUATE INVENTORY AND TO OBTAIN FAVORABLE
PRICING FOR SUCH INVENTORY, THE ABILITY TO ARRANGE FOR THE REPAIR OF AIRCRAFT
ENGINES BY THIRD-PARTY CONTRACTORS PRIOR TO RESALE OR LEASE, COMPETITIVE PRICING
FOR THE COMPANY'S PRODUCTS, CUSTOMER CONCENTRATION, DEMAND FOR THE COMPANY'S
PRODUCTS WHICH DEPENDS UPON THE CONDITION OF THE AIRLINE INDUSTRY, ABILITY TO
COLLECT RECEIVABLES, GOVERNMENT REGULATION, AND THE EFFECTS OF INCREASED
INDEBTEDNESS AS A RESULT OF THE COMPANY'S BUSINESS ACQUISITIONS. EXCEPT FOR THE
HISTORICAL INFORMATION CONTAINED IN THIS RELEASE, ALL FORWARD-LOOKING STATEMENTS
ARE ESTIMATES BY THE COMPANY'S MANAGEMENT AND ARE SUBJECT TO VARIOUS RISKS AND
UNCERTAINTIES THAT MAY BE BEYOND THE COMPANY'S CONTROL AND MAY CAUSE RESULTS TO
DIFFER FROM MANAGEMENT'S CURRENT EXPECTATIONS. CERTAIN OF THESE RISKS ARE
DESCRIBED IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION
(SEC). COPIES OF THE COMPANY'S SEC FILINGS ARE AVAILABLE FROM THE SEC OR MAY BE
OBTAINED UPON REQUEST FROM THE COMPANY. THE COMPANY DOES NOT UNDERTAKE ANY
OBLIGATION TO UPDATE THE INFORMATION CONTAINED HEREIN, WHICH SPEAKS ONLY AS OF
THIS DATE.
AVIATION SALES SAFE HARBOR STATEMENT
THIS RELEASE CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT ARE MADE PURSUANT
TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES REFORM ACT OF 1995.
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES,
WHICH MAY CAUSE THE COMPANY'S ACTUAL RESULTS IN FUTURE PERIODS TO DIFFER
MATERIALLY FROM FORECASTED RESULTS. A NUMBER OF FACTORS, INCLUDING THOSE
IDENTIFIED BELOW, COULD ADVERSELY AFFECT THE COMPANY'S ABILITY TO OBTAIN THESE
RESULTS: AVAILABLE CAPITAL TO CONTINUE TO SUPPORT AND FURTHER EXPAND THE
COMPANY'S OPERATIONS, THE COMPANY'S ABILITY TO ACQUIRE ADEQUATE INVENTORY AND TO
OBTAIN FAVORABLE PRICING FOR SUCH INVENTORY, COMPETITIVE PRICING FOR THE
COMPANY'S PRODUCTS AND SERVICES, INCREASED COMPETITION IN THE AIRCRAFT SPARE
PARTS REDISTRIBUTION AND MR&O MARKETS, THE ABILITY TO CONSUMMATE SUITABLE
ACQUISITIONS, THE CONTINUING ABILITY TO EFFECTIVELY INTEGRATE ACQUISITIONS,
ECONOMIC FACTORS WHICH AFFECT THE AIRLINE INDUSTRY, AND CHANGES IN GOVERNMENT
REGULATIONS. CERTAIN OF THESE RISKS ARE DESCRIBED IN THE COMPANY'S FILINGS WITH
THE SECURITIES AND EXCHANGE COMMISSION (SEC). COPIES OF THE COMPANY'S SEC
FILINGS ARE AVAILABLE FROM THE SEC OR MAY BE OBTAINED UPON REQUEST FROM THE
COMPANY. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO UPDATE THE INFORMATION
CONTAINED HEREIN, WHICH SPEAKS ONLY AS OF THIS DATE.
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CONTACT:
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KELLSTROM INDUSTRIES, INC. (954) 845-0427 KELL'S INVESTOR RELATIONS COUNSEL:
ZIVI R. NEDIVI, PRES. & CEO THE EQUITY GROUP INC.
YOAV STERN, CHAIRMAN OF THE BOARD LINDA LATMAN (212) 836-9609
OSCAR TORRES, CHIEF FINANCIAL OFFICER BOB GOLDSTEIN (212) 371-8660
MICHAEL SHOKOUHI, DIRECTOR OF INVESTOR RELATIONS WWW.THEEQUITYGROUP.COM
WWW.KELLSTROM.COM
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