AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 2002
REGISTRATION NO. 333-89484
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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AVIALL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 65-0433083
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
JEFFREY J. MURPHY, ESQ.
SENIOR VICE PRESIDENT, LAW & HUMAN RESOURCES,
AVIALL, INC. SECRETARY AND GENERAL COUNSEL OF AVIALL, INC.
2750 REGENT BOULEVARD 2750 REGENT BOULEVARD
DFW AIRPORT, TEXAS 75261 DFW AIRPORT, TEXAS 75261
(972) 586-1000 (972) 586-1000
(Address, including zip code, and telephone (Name, address, including zip code, and
number, telephone
including area code, of registrant's principal number, including area code, of agent for
executive offices) service)
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COPIES OF COMMUNICATIONS TO:
JANICE V. SHARRY, ESQ.
GARRETT A. DEVRIES, ESQ.
HAYNES AND BOONE, LLP
901 MAIN STREET, SUITE 3100
DALLAS, TEXAS 75202
(214) 651-5000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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The information contained in this prospectus is not complete and may be changed.
The selling stockholders may not sell the shares of common stock until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell the shares of common stock
and it is not soliciting an offer to buy the shares of common stock in any state
where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED AUGUST 7, 2002
PROSPECTUS
[AVIALL LOGO]
AVIALL, INC.
1,750,000 SHARES OF COMMON STOCK
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This prospectus relates to the offer and sale from time to time of up to
1,750,000 shares of our common stock by the selling stockholders identified in
this prospectus under the heading "Selling Stockholders." This prospectus covers
offers and sales of the shares of common stock by the selling stockholders, but
it does not cover the issuance of the shares of common stock by us to the
selling stockholders.
We will not receive any proceeds from sales of the shares of common stock
by the selling stockholders. All of the net proceeds from sales of the shares of
common stock will be retained by the selling stockholders. Except for
underwriting discounts and selling commissions which may be paid by the selling
stockholders, we have agreed to pay all expenses incurred in connection with the
registration of the shares of common stock covered by this prospectus.
The selling stockholders may sell the shares of common stock from time to
time at market prices prevailing at the time of sale, prices related to
prevailing market prices or privately negotiated prices. The selling
stockholders may sell the shares of common stock to or through underwriters,
brokers or dealers or directly to purchasers. Underwriters, brokers or dealers
may receive discounts, commissions or concessions from the selling stockholders,
purchasers in connection with sales of the shares of common stock, or both.
Additional information relating to the distribution of the shares of common
stock by the selling stockholders can be found in this prospectus under the
heading "Plan of Distribution."
Our common stock is traded on the New York Stock Exchange under the symbol
"AVL." On August 6, 2002, the last reported sales price of our common stock on
the New York Stock Exchange was $12.62 per share.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is , 2002
WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS CONCERNING THE OFFERING OF THE SHARES OF COMMON STOCK COVERED BY
THIS PROSPECTUS EXCEPT THOSE WHICH ARE CONTAINED IN OR INCORPORATED BY REFERENCE
INTO THIS PROSPECTUS. IF ANYONE GIVES YOU ANY OTHER INFORMATION OR MAKES ANY
REPRESENTATION CONCERNING THE OFFERING OF THE SHARES OF COMMON STOCK COVERED BY
THIS PROSPECTUS, YOU SHOULD NOT RELY ON IT AS HAVING BEEN AUTHORIZED BY US. THIS
PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SHARES OF COMMON STOCK COVERED BY THIS PROSPECTUS.
THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE
SHARES OF COMMON STOCK COVERED BY THIS PROSPECTUS UNDER ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
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TABLE OF CONTENTS
PAGE
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Summary..................................................... 1
Risk Factors................................................ 5
Use of Proceeds............................................. 14
Selected Financial Data..................................... 15
Selling Stockholders........................................ 17
Incorporation of Certain Information by Reference........... 20
Where You Can Find Additional Information................... 20
Plan of Distribution........................................ 21
Legal Matters............................................... 22
Experts..................................................... 22
Cautionary Language Regarding Forward-Looking Statements.... 22
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We have a number of registered trademarks, including "Aviall" and "ILS." In
this prospectus, the words "Aviall," "Company," "we," "our," "ours," and "us"
refer to Aviall, Inc. and its subsidiaries unless otherwise stated or unless the
context otherwise requires.
SUMMARY
This summary highlights some of the information contained in, and
incorporated by reference into, this prospectus. You should carefully read this
prospectus and any documents incorporated by reference into this prospectus
before deciding whether to invest in our common stock.
ABOUT OUR BUSINESS
We are a major provider of aftermarket parts sales, supply-chain management
services and related value-added services for the aviation industry. Our Aviall
Services business is the largest independent global provider of new aviation
parts and related supply-chain management services for the aviation industry.
Our Inventory Locator Service business operates leading electronic marketplaces
for buying and selling parts, equipment and services for the aviation and marine
industries and the U.S. government procurement market.
Aviall Services sells a broad range of new aviation parts, components and
supplies from approximately 180 original equipment manufacturers to nearly
17,000 commercial, military and general aviation customers, including over 250
airlines. Aviall Services also provides value-added services to our customers
and suppliers, such as repair and assembly services, supply-chain management
services and information gathering and delivery services.
Inventory Locator Service, or ILS, maintains global aviation and
marine-related information and electronic marketplaces with approximately 10,000
users in more than 78 countries. ILS's marketplaces contain more than 50 million
line items representing over five billion parts for sale. ILS also maintains
databases of over 100 million cross-referenced U.S. government records, allowing
users to research manufacturers of specific parts, locate alternate parts, find
additional uses and markets for parts and review U.S. government procurement
histories. ILS has been the leader in aviation-related electronic marketplaces
for more than two decades.
We were incorporated in 1993 as a Delaware corporation. Aviall Services was
incorporated in 1993 as a Delaware corporation. ILS was originally incorporated
in 1979 as a Tennessee corporation and in March 2001 was reorganized as a
Delaware limited liability company. Our principal offices are located at 2750
Regent Boulevard, DFW Airport, Texas 75261, and our telephone number is (972)
586-1000.
RECENT DEVELOPMENTS
Rolls-Royce Agreement and Related Financing. On December 17, 2001, we
entered into an exclusive, ten-year worldwide agreement with Rolls-Royce
Corporation to become its exclusive service provider for Rolls-Royce Model T56
engine parts. To finance our obligations under this agreement and to refinance
our then-existing $160.0 million revolving credit facility and term loan, we
consummated the following transactions on December 21, 2001:
- We sold 45,000 shares of our Series B Senior Convertible Participating
Preferred Stock, or Series B Preferred Stock, for $45.0 million to
certain affiliates of The Carlyle Group. The Series B Preferred Stock was
automatically converted into 45,110 shares of our Series D Senior
Convertible Participating Preferred Stock, or Series D Redeemable
Preferred Stock, upon stockholder approval of the terms and issuance of
the Series D Redeemable Preferred Stock at a special meeting of our
stockholders held on March 15, 2002.
- Aviall Services sold $80.0 million of senior unsecured notes due 2007 to
the selling stockholders, and we issued warrants to purchase 1,750,000
shares of our common stock covered by this prospectus (subject to
adjustment for antidilution events) to the selling stockholders upon
stockholder approval of the terms and issuance of the warrants at a
special meeting of our stockholders held on March 15, 2002.
- We entered into a new $200.0 million senior secured credit facility and
repaid our previous $160.0 million senior secured revolving credit
facility and term loan.
1
Our senior unsecured notes and senior secured credit facility contain
various restrictive financial covenants, including several that are based on
earnings before interest, taxes, depreciation, amortization, extraordinary gains
or losses, and one-time items, or Adjusted EBITDA. Our most restrictive Adjusted
EBITDA covenant requires us to generate Adjusted EBITDA of at least $25.0
million during the first six months of 2002 and $40.0 million during the first
nine months of 2002. On December 31, 2002, our Adjusted EBITDA covenants will be
replaced with maximum leverage ratio covenants that will measure the ratio of
our outstanding debt to our Adjusted EBITDA for the trailing four quarters. Our
most restrictive maximum leverage ratio covenant will initially be set at 4.75
to 1 on December 31, 2002, and it will periodically decline until it reaches
3.00 to 1 for December 31, 2004 and all periods thereafter.
On December 31, 2002, we must also comply with minimum interest coverage
covenants that will measure the ratio of our Adjusted EBITDA for the trailing
four quarters to our interest expense during the trailing four quarters. Our
most restrictive minimum interest coverage covenant will initially be set at
2.50 to 1 on December 31, 2002, and it will periodically increase until it
reaches 3.50 to 1 for December 31, 2004 and all periods thereafter. In addition,
we must maintain a tangible net worth at or above certain levels, including a
minimum tangible net worth of $149.6 million on June 30, 2002. We must also
limit our capital expenditures to $7.3 million during 2002, $12.4 million during
2003, and $12.1 million during each of 2004, 2005 and 2006. As of June 30, 2002,
we had complied in all material respects with the financial covenants contained
in our senior unsecured notes and senior secured credit facility.
Revised Earnings Guidance. On June 14, 2002, based on our operating
results through May 31, 2002 and the outlook for the remainder of 2002, we
raised our earnings estimate for 2002 to the range of $0.82 to $0.85 per share
on a pro forma, diluted basis. This estimate excludes the impact of a $20.5
million one-time, noncash deemed dividend and approximately $4.0 million of
noncash preferred stock dividends to be paid in 2002. The $20.5 million deemed
dividend was recorded in March 2002 when our stockholders approved the
conversion of our shares of Series B Preferred Stock into shares of Series D
Redeemable Preferred Stock and reflects the difference between the $5.80 per
share conversion price of the Series D Redeemable Preferred Stock negotiated in
December 2001 and the closing price of our common stock on the New York Stock
Exchange on the date of the stockholder approval, multiplied by the number of
shares of common stock into which the Series D Redeemable Preferred Stock could
have been converted on March 15, 2002. The noncash preferred stock dividends are
excluded from the estimate because the estimate is calculated as if the Series D
Redeemable Preferred Stock was fully converted into shares of common stock on
January 1, 2002 and as if the warrants were fully exercised for shares of common
stock on January 1, 2002. As a result, this estimate is calculated using
approximately 28.7 million shares of common stock.
This increase in our 2002 earnings estimate is due mainly to
greater-than-expected revenues from our new Rolls-Royce Model T56 engine parts
agreement and from expectations for continued strong Rolls-Royce Model T56
engine parts sales throughout the remainder of 2002. In addition, increased
sales from better-than-expected performance in the general aviation segment
largely offsets weakness in the airline segment.
Our estimate of pro forma, diluted earnings per share for 2002 has not been
calculated in accordance with generally accepted accounting principles and is
higher than our estimate of basic earnings per share for 2002, which has been
calculated in accordance with generally accepted accounting principles. We
believe that our estimate of pro forma, diluted earnings per share for 2002
provides investors with a measure that we believe may be of value in evaluating
our operating performance and the dilution to our earnings per share if the
Series D Redeemable Preferred Stock is fully converted and the warrants are
fully exercised.
We estimate our basic earnings per share for 2002 to be in the range of a
loss of $0.02 per share to a loss of $0.06 per share. This estimate includes the
impact of the $20.5 million one-time, noncash deemed dividend and the
approximately $4.0 million of noncash preferred stock dividends. In addition,
the calculation of basic earnings per share uses 18.6 million shares of common
stock outstanding. Because we expect our diluted earnings per share will not be
dilutive, or lower than our basic earnings per share in
2
2002, we expect to report diluted earnings per share for 2002 equal to our basic
earnings per share for 2002 in accordance with generally accepted accounting
principles.
Honeywell PT6/PW100/JT15D Fuel Controls Agreement. Aviall Services was
recently awarded ten-year non-exclusive worldwide aftermarket parts fulfillment
rights for Honeywell fuel controls used on PT6, PW100 and JT15D turbine engines.
Under this agreement, we will be responsible for aftermarket component sales,
marketing and customer order administration, service and support, as well as
full-service product warehousing and distribution of Honeywell fuel controls
used on PT6, PW100 and JT15D turbine engines.
Second Quarter 2002 Earnings Release. On July 18, 2002, we reported that
our net earnings for the second quarter of 2002 were $7.8 million, which
represented an increase of approximately 118.0% over our net earnings of $3.6
million for the second quarter of 2001. In addition, we also reported that our
basic earnings per share for the second quarter of 2002 and our diluted earnings
per share for the second quarter of 2002 were each $0.26 per share. Our diluted
earnings per share for the second quarter of 2002 were not dilutive, or lower
than our basic earnings per share for the second quarter of 2002. Accordingly,
we reported diluted earnings per share for the second quarter of 2002 that were
equal to basic earnings per share for the second quarter of 2002 in accordance
with generally accepted accounting principles.
In addition, we also reported that our net sales for the second quarter of
2002 were $193.1 million, which represented an increase of approximately 43.8%
over our net sales of $134.3 million for the second quarter of 2001. Our net
sales for the second quarter of 2002 did not include approximately $36 million
of sales, at our contractual prices, of Rolls-Royce Model T56 engine parts made
directly by Rolls-Royce to the U.S. military as part of our Rolls-Royce Model
T56 engine parts transition program. However, we did receive our full margin for
Rolls-Royce's direct sales of these parts. During June 2002, we successfully
transitioned all Rolls-Royce Model T56 engine parts for sale to our end
customers.
We also reported that our gross profit for the second quarter of 2002 was
$43.6 million, which represented an increase of approximately 41.4% over our
gross profit of $30.8 million for the second quarter of 2001. Our gross profit
percentage as a percentage of net sales decreased to 22.6% for the second
quarter of 2002 reflecting incorporation of the lower-margin Rolls-Royce Model
T56 engine parts sales. On a pro forma basis, if we had included in our net
sales the approximately $36 million of sales, at our contractual prices, of
Rolls-Royce Model T56 engine parts made directly by Rolls-Royce to the U.S.
military, our gross profit percentage as a percentage of net sales would have
decreased to approximately 19.0% for the second quarter of 2002.
We reported that our selling and administrative expenses for the second
quarter of 2002 were $25.5 million, which represented 5.7% of the second quarter
year-over-year net sales increase and just 3.6% of the pro forma second quarter
net sales increase when including the approximately $36 million of sales, at our
contractual prices, of Rolls-Royce Model T56 engine parts made directly by
Rolls-Royce to the U.S. military. Our selling and administrative expenses as a
percentage of our net sales decreased to 13.2% for the second quarter of 2002.
On a pro forma basis, if we had included in our net sales the approximately $36
million of sales, at our contractual prices, of Rolls-Royce Model T56 engine
parts made directly by Rolls-Royce to the U.S. military, our selling and
administrative expenses as a percentage of our net sales would have decreased to
approximately 11.1% for the second quarter of 2002.
THE OFFERING
This prospectus relates to the offer and sale of up to 1,750,000 shares of
our common stock by the selling stockholders upon the exercise of warrants held
by them. The warrants entitle the selling stockholders to acquire up to
1,750,000 shares of our common stock (subject to adjustment for antidilution
events) at a purchase price of $0.01 per share and expire on March 15, 2012. We
issued the warrants to the selling stockholders to obtain a lower interest rate
on Aviall Services' senior unsecured notes. In connection with our advisors, we
determined that the combination of a lower interest rate on the senior unsecured
notes and the issuance of the warrants was the most favorable financing
structure available to us at the time.
3
We are registering the 1,750,000 shares of common stock that the selling
stockholders may acquire upon exercise of the warrants pursuant to a
registration rights agreement originally entered into with the selling
stockholders in March 2002. Registration of the shares of common stock does not
mean that all or any portion of these shares will be offered or sold by the
selling stockholders pursuant to this prospectus. Except for underwriting
discounts and selling commissions that may be paid by the selling stockholders,
we have agreed to pay all of the expenses incurred in connection with the
registration of the shares of common stock.
4
RISK FACTORS
Investing in our common stock involves a high degree of risk. You should
carefully consider the following risks in addition to the other information set
forth in this prospectus and incorporated by reference into this prospectus
before you decide whether to invest in our common stock. If any of the following
risks actually occur, the trading price of our common stock could decline and
you may lose all or part of your investment.
RISKS RELATED TO US
BECAUSE OUR BUSINESS DEPENDS HEAVILY UPON THE AVIATION INDUSTRY, WE ARE
SUSCEPTIBLE TO NEGATIVE TRENDS AND ADVERSE ECONOMIC CONDITIONS IN THE AVIATION
INDUSTRY.
Virtually all of Aviall Services' net sales and operating income are
derived from the sale of parts, components, supplies and services to customers
in the aviation industry. As a result, Aviall Services' business is directly
affected by trends and economic factors that affect flight activity in the
aviation industry, including fuel prices, economic cycles, inflation, labor
instability and regulatory oversight, as well as other factors that affect
flying activity by the U.S. military and its allies.
Reduced flight activity generally results in reduced demand for parts,
components, supplies and services by customers in the aviation industry. Because
a high proportion of Aviall Services' operating costs are relatively fixed,
reduced sales have a negative impact on its earnings, as lower gross profits
cannot be offset by lower expenses. Further, because we purchase parts,
components and supplies from our suppliers in advance of orders from our
customers based upon our estimates of future demand, the effect of reduced
demand can have an even greater impact on our earnings. If expected sales do not
materialize, our inventory levels could increase, resulting in increased
financing requirements and interest expense and reducing the credit available
under our senior secured credit facility.
As a result of the global economic downturn and the terrorists attacks and
their aftermath, many commercial airlines and air freight carriers have reduced
their flight operations, taken aircraft out of service, retired older aircraft
and deferred nonessential aircraft maintenance and overhaul services. At the
same time, however, the U.S. military and certain foreign militaries have
significantly increased their flight activities, especially in connection with
the increase in military operations around the world after the terrorist
attacks.
The adverse economic conditions in the commercial aviation industry and the
terrorist attacks and their related aftermath have had a significant impact on
our business. Due to decreases in the flight activity of commercial airlines and
air freight carriers and the number of older commercial aircraft being retired,
we have experienced a reduction in demand for our parts, components and supplies
used on commercial aircraft. Although we believe that, over time, the flight
activity of commercial airlines and air freight carriers will generally
increase, more favorable economic conditions in the commercial aviation industry
may not develop.
Although adverse economic conditions and the terrorists attacks and their
related aftermath have negatively impacted the commercial aviation industry, the
U.S. military and certain foreign militaries have increased their flight
activities. In December 2001, we entered into an agreement with Rolls-Royce to
provide Rolls-Royce Model T56 engine parts for certain military aircraft.
Because of this agreement, we have experienced increased sales of parts and
components for military aircraft, although at lower margins. However, the U.S.
military and certain foreign militaries may not sustain their current levels of
flight activity and the demand for parts and components for military aircraft
utilizing the Model T56 engine may not continue to increase. As a result, we may
be unable to realize the benefits that we expect to receive from our Model T56
engine parts agreement with Rolls-Royce. Under the terms of the agreement, we
are required to purchase approximately $325.0 million of Rolls-Royce Model T56
engine parts from Rolls-Royce in 2002. If demand for Rolls-Royce Model T56
engine parts decreases substantially, our inventory levels of Rolls-Royce Model
T56 engine parts could grow too large, increasing our financing requirements and
interest expense and reducing the credit available under our senior secured
credit facility. Any
5
reduction in the demand for our military parts could have a material adverse
effect on our business, financial condition, results of operation or the market
price of our common stock.
In addition, the demand for our parts, components and supplies could
decrease if one or more of our customers were to eliminate or retire one or more
of their aircraft fleet types. Further, the demand for our parts, components and
supplies could decrease if intense competition in the aviation industry or other
factors causes one or more of our customers to go out of business. Any decreases
in demand for our parts, components and supplies could have a material adverse
effect on our business, financial condition, results of operation or the market
price of our common stock.
IF WE ARE UNABLE TO GENERATE POSITIVE CASH FLOWS OR OBTAIN ADDITIONAL
FINANCING, WE MAY BE UNABLE TO SERVICE OUR SUBSTANTIAL INDEBTEDNESS OR REDEEM
OUR SERIES D REDEEMABLE PREFERRED STOCK.
In 2001, we entered into a $200.0 million senior secured credit facility
due December 2006, sold $80.0 million of senior unsecured notes due December
2007 and sold 45,000 shares of our Series B Preferred Stock for $45.0 million.
As of June 30, 2002, we had approximately $105.0 million outstanding on our
senior secured credit facility bearing interest at floating rates, which
averaged approximately 5.0%, and had issued letters of credit for approximately
$0.3 million. The amount of money we can borrow under our senior secured credit
facility is based upon a borrowing base calculated using our eligible accounts
receivable and inventory. As of June 30, 2002, we had $60.2 million available
for additional borrowings under our senior secured credit facility and our
borrowing base was $165.5 million. As of June 30, 2002, we had $80.4 million of
senior unsecured notes outstanding bearing interest at a fixed rate of 14.0%, of
which 13.0% is paid in cash and 1.0% is paid by issuing additional senior
unsecured notes. As of June 30, 2002, the maturities of our indebtedness for 12
month periods ending after June 30, 2002 were as follows ($ in thousands):
TWELVE MONTH PERIODS ENDING JUNE 30,
------------------------------------
2003........................................................ $108,533
2004........................................................ 2,908
2005........................................................ 1,867
2006........................................................ 723
2007........................................................ 284
Thereafter.................................................. 82,772
--------
$197,087
========
We are required to make scheduled principal and interest payments on our
indebtedness, pay cash dividends on our Series D Redeemable Preferred Stock
after December 31, 2005 (if funds are legally available therefor), and redeem
outstanding shares of our Series D Redeemable Preferred Stock, including any
accrued and unpaid dividends thereon, on June 21, 2008. During the twelve months
ending June 30, 2003, we expect to make scheduled cash principal and interest
payments on our senior unsecured notes of approximately $10.5 million and
scheduled interest payments on our senior secured credit facility of
approximately $5.3 million, assuming the amount of borrowings, the borrowing
base and interest rates related to such financings remain unchanged from June
30, 2002.
Our ability to make scheduled principal and interest payments on our
indebtedness, pay cash dividends on our Series D Redeemable Preferred Stock and
redeem shares of our Series D Redeemable Preferred Stock depends primarily upon
the future operating performance of our business. To an extent, the future
operating performance of our business will be subject to economic, financial,
competitive and other factors that are beyond our control. Accordingly, our
future cash flows may not be sufficient to satisfy our payment obligations under
our indebtedness or our Series D Redeemable Preferred Stock.
In 2001, we had negative cash flow from operating activities of
approximately $93.4 million, and in the first quarter of 2002, we had negative
cash flow from operating activities of approximately $4.0 million. If we are
unable to generate sufficient cash flows to satisfy our payment obligations
under our indebtedness
6
or our Series D Redeemable Preferred Stock, we may be required to seek
additional capital or undertake alternative financing plans to satisfy these
payment obligations. Accordingly, we may be required to restructure our
indebtedness and our Series D Redeemable Preferred Stock, refinance all or a
portion of our indebtedness, incur new indebtedness or sell additional shares of
preferred stock, sell all or a portion of our assets, or reduce or delay our
capital expenditures. Any of these actions could result in unanticipated costs,
disrupt the implementation of our business plan or otherwise hinder our growth.
Moreover, we may be unable to take any of these actions on satisfactory terms,
in a timely manner or to the extent necessary to enable us to satisfy our
payment obligations on our indebtedness or our Series D Redeemable Preferred
Stock. If any of these events were to occur, they could have a material adverse
effect on our business, financial condition, results of operation or the market
price of our common stock.
IF WE ARE UNABLE TO SATISFY OUR PAYMENT OBLIGATIONS UNDER OUR INDEBTEDNESS OR
OUR SERIES D REDEEMABLE PREFERRED STOCK WHEN REQUIRED, WE MAY BE FORCED INTO
BANKRUPTCY OR WE MAY BE FORCED TO LIQUIDATE OR SELL ALL OR A SUBSTANTIAL PORTION
OF OUR ASSETS.
If we are unable to make scheduled principal and interest payments on our
indebtedness when required or we fail to generate sufficient earnings to satisfy
our financial covenants, we would be in default under that indebtedness. As a
result, the holders of the affected indebtedness could declare all outstanding
principal and interest due and payable, which, in turn, could cause the
acceleration of the maturity of all, or substantially all, of our other
indebtedness. In such event, we may not have sufficient funds available, or we
may be unable to obtain sufficient capital from other sources on satisfactory
terms, to repay any accelerated indebtedness.
A substantial portion of our indebtedness (primarily our senior secured
credit facility) bears interest at a floating rate. As of June 30, 2002, we had
outstanding approximately $106.0 million in borrowings bearing interest at
floating rates, which averaged approximately 5.0%. In the event that market
interest rates increase, our interest expense on these floating rate borrowings
would increase as well. For example, a 1.0% increase in our average interest
rate on these floating rate borrowings would in turn increase our interest
expense by approximately $1.1 million per year.
Additionally, substantially all of our assets are subject to liens securing
our payment obligations under our senior secured credit facility. If any
outstanding amounts under our senior secured credit facility were accelerated,
the lenders under our senior secured credit facility could terminate their
commitments and foreclose on their liens. Accordingly, if our indebtedness is
accelerated and we are unable to meet our payment obligations under our
indebtedness, we could be forced into bankruptcy or we may be forced to
liquidate or sell all or a substantial portion of our assets to satisfy these
payment obligations.
Additionally, we may be unable to generate sufficient cash flows or obtain
additional capital on satisfactory terms to redeem our Series D Redeemable
Preferred Stock when required. If we are unable to redeem our Series D
Redeemable Preferred Stock when required, we could be forced into bankruptcy or
we may be forced to liquidate or sell all or a substantial portion of our assets
to redeem our Series D Redeemable Preferred Stock.
THE TERMS OF OUR INDEBTEDNESS AND OUR SERIES D REDEEMABLE PREFERRED STOCK
COULD RESTRICT THE EXPANSION OF OUR BUSINESS.
Without the prior consent of the holders of our indebtedness and our Series
D Redeemable Preferred Stock, we are prohibited from, among other things,
incurring certain types of additional debt, making specified payments and
capital expenditures, consolidating, merging with or acquiring another business,
or selling certain of our assets. In addition, the terms of our indebtedness
also require us to achieve and maintain certain specified financial ratios.
These restrictions may limit our ability to engage in activities which could
expand our business, including obtaining future financing, making needed capital
expenditures, or taking advantage of business opportunities such as strategic
acquisitions and dispositions.
7
IF OUR PRINCIPAL SUPPLIERS TERMINATE OR LIMIT THEIR RELATIONSHIPS WITH US, OUR
NET SALES COULD DECLINE SUBSTANTIALLY AND OUR BUSINESS COULD OTHERWISE BE
ADVERSELY AFFECTED.
Since November 1, 1999, we have entered into four new agreements with
Honeywell and two new agreements with Rolls-Royce to sell lines of their parts.
During 2001, sales of parts from Honeywell accounted for approximately 4.0% of
Aviall Services' net sales, and sales of parts from Rolls-Royce accounted for
approximately 28.0% of Aviall Services' net sales. We estimate the percentage of
Aviall Services' net sales represented by sales of parts supplied by Rolls-Royce
will increase to over 50.0% of Aviall Services' net sales in 2002. This estimate
includes the sale of parts by Rolls-Royce directly to the U.S. military during
the transition phase of the agreement. In the event that Honeywell or
Rolls-Royce discontinue the products we sell, terminate our agreements with them
or are unable to perform under our agreements with them, our business, financial
condition, results of operations or the market value of our common stock would
likely be materially adversely affected.
CONTRACTS REPRESENTING A LARGE PERCENTAGE OF OUR NET SALES CONTAIN
PROVISIONS THAT ALLOW THE OTHER PARTY TO TERMINATE FOR CONVENIENCE OR UPON OTHER
EVENTS.
While our agreements with Honeywell and Rolls-Royce are ten-year
agreements, each of these agreements contains a termination for convenience
provision that allows Honeywell and Rolls-Royce to terminate the agreement after
a specified date after giving us prior written notice. The notice requirement
for the termination for convenience provisions are as follows:
EARLIEST DATE FOR NOTICE
OF TERMINATION FOR NOTICE
SUPPLIER PARTS CONVENIENCE REQUIREMENT
-------- ----- ------------------------ -----------
Rolls-Royce Rolls-Royce Model T56 engine parts January 1, 2007 120 days
Rolls-Royce Rolls-Royce Model 250 engine parts January 1, 2003 120 days
Honeywell Hydromechanical controls for Rolls-Royce January 1, 2002 60 days
Model 250 and Honeywell LT101 series
engines
Honeywell Honeywell engine systems accessories and April 1, 2006 60 days
environmental control systems
Honeywell Hydromechanical controls for Rolls-Royce June 30, 2004 60 days
Model T56 engines
Honeywell and Rolls-Royce may also terminate these agreements if we
materially breach these agreements, if we become bankrupt or insolvent or
commence bankruptcy proceedings, or if we fail to make payments under these
agreements. Furthermore, Rolls-Royce may terminate our agreements to provide
Roll-Royce Model T56 engine parts and Rolls-Royce Model 250 engine parts upon
120-days prior written notice:
- upon a change of control of Rolls-Royce;
- if we are acquired by a competitor of Rolls-Royce; or
- if we are acquired by a person that is not a competitor of Rolls-Royce
and the acquisition causes our credit rating, as determined by Standard &
Poor's or Moody's, to fall one notch below our credit rating prior to the
acquisition.
Accordingly, our agreements with Honeywell or Rolls-Royce could be
terminated for convenience or for other reasons. Because these agreements
represent a substantial percentage of our current and expected net sales, the
termination of one or more of these agreements or product lines would likely
have a material adverse effect on our business, financial condition, results of
operations, or the market value of our common stock.
8
WE MAY FACE DIFFICULTY IN INTEGRATING OUR AGREEMENT WITH ROLLS-ROYCE TO
PROVIDE ROLLS-ROYCE MODEL T56 ENGINE PARTS INTO OUR BUSINESS MODEL AND MANAGING
ANY CONSEQUENTIAL GROWTH.
We believe our agreement with Rolls-Royce to provide Rolls-Royce Model T56
engine parts will cause our business to grow rapidly. We forecast that this
agreement will result in additional net sales by Aviall Services in 2002 of at
least $250.0 million. Currently, revenues from this agreement are exceeding our
forecast. This estimate includes the sale of parts by Rolls-Royce directly to
the U.S. military during the implementation of this agreement. In 2001, Aviall
Services had net sales of $479.7 million. The integration of this agreement, and
our duties under it, into our current business structure may place significant
burdens on our management and operations. Accordingly, our future operating
results will depend on the ability of our officers and other key employees to
effectively implement this agreement. During June 2002, we successfully
transitioned all Rolls-Royce Model T56 engine parts for sale to our end
customers. If we are unable to successfully manage this expansion, this
agreement could be terminated or we could otherwise experience a material
adverse effect on our business, financial condition, results of operation or the
market value of our common stock.
OUR AGREEMENTS WITH HONEYWELL AND ROLLS-ROYCE FOR DISTRIBUTION OF ROLLS-ROYCE
MODEL T56 ENGINE PARTS WILL SUBSTANTIALLY INCREASE OUR SALES TO THE U.S.
GOVERNMENT AND ITS CONTRACTORS. WE HAVE LIMITED EXPERIENCE IN CONDUCTING
BUSINESS WITH THE U.S. GOVERNMENT OR COMPLYING WITH THE REGULATIONS ASSOCIATED
WITH ITS PROCUREMENT PROCESS.
In 2001, Aviall Services' ten largest customers represented, in the
aggregate, approximately 15.0% of its net sales, and its single largest customer
accounted for approximately 3.0% of its net sales. In 2002, we anticipate that
Rolls-Royce will be our largest customer for Rolls-Royce Model T56 engine parts
representing approximately 28.0% of Aviall Services' estimated 2002 net sales.
Our resale of Model T56 engine parts to Rolls-Royce is primarily related to
Rolls-Royce's role as prime contractor for sales of Rolls-Royce Model T56 engine
parts to the U.S. government. We expect that sales to government and military
customers or their contractors will account for more than 45.0% of our estimated
net sales in the last six months of 2002.
We have limited experience in conducting business with the U.S. government
and complying with the regulations associated with its procurement process. Our
inexperience in dealing with the U.S. government and its agents may result in,
among other things, delays, additional costs or a reduction in or cancellation
of orders for parts under our agreements. If any of these events were to occur,
our business, financial condition, results of operation or the market price of
our common stock would likely be materially adversely affected.
COMPETITION IN OUR INDUSTRY IS INTENSE. IF WE DO NOT COMPETE EFFECTIVELY, WE
COULD LOSE MARKET SHARE AND OUR BUSINESS COULD OTHERWISE BE NEGATIVELY AFFECTED.
Sales of aviation parts, components and supplies. The market for aviation
parts, components and supplies is extremely competitive, and we face competition
from a number of sources. In addition, the aviation parts aftermarket is large,
and highly fragmented, with no single proprietary or independent provider
holding a dominant position. Aviall Services competes with independent
distributors, redistribution suppliers and aerospace original equipment
manufacturers who, in the aggregate, offer most of the same product lines to the
same customers. Many of our existing and potential competitors have greater
resources than us. Certain of our agreements with our suppliers are
non-exclusive, some of which are significant to our business. Other than those
circumstances in which we have exclusive agreements with our suppliers, although
our suppliers have determined to use outside distributors for their products,
they could sell their products directly to our customers. Additionally, from
time to time, we also face competition from individual airlines liquidating or
reducing their inventories, and in the future, we may face pricing pressures
from airline consortiums pooling their resources to purchase parts, components
and supplies at discounted prices. These competitive pressures could have a
material adverse effect on our business, financial condition, results of
operations or the market value of our common stock.
9
Global aviation and marine-related electronic marketplaces. Numerous
companies compete with ILS in the operation of global aviation and
marine-related electronic marketplaces. Our competitors in this area include
airlines, manufacturers, distributors, independent companies, and their
alliances, and we expect the competition in this area to increase in the future.
Competitive pressures in these marketplaces could have a material adverse affect
on our business, financial condition, results of operations or the market value
of our common stock.
IF WE ARE UNABLE TO RETAIN OUR EXECUTIVE OFFICERS AND KEY EMPLOYEES, WE MAY BE
UNABLE TO SUCCESSFULLY EXECUTE OUR BUSINESS STRATEGY AND OUR BUSINESS COULD
OTHERWISE BE ADVERSELY AFFECTED.
Our continued success is dependent to a significant degree upon the
services of our executive officers and key employees and upon our ability to
attract and retain qualified personnel who are experienced in the various phases
of our business. If we lose the services of one or more of our executive
officers or key employees, our business, financial condition, results of
operations or the market value of our common stock could be materially adversely
affected. We do not maintain key man life insurance for any of our executive
officers or key employees.
WE MAY FAIL TO INTRODUCE NEW SERVICES IN RESPONSE TO TECHNOLOGICAL ADVANCES
AND EVOLVING INDUSTRY STANDARDS.
The electronic marketplace business which ILS operates is characterized by
evolving industry standards and changing customer requirements. The introduction
of new hardware or software or the emergence of new industry trends or standards
could render our existing services obsolete and cause us to incur significant
hardware, software, development or labor costs. Our failure to introduce new
services and enhancements to our existing services in response to changing
market conditions or customer or technology requirements could have a material
adverse effect on our business, financial condition, results of operations or
the market value of our common stock.
A SIGNIFICANT FAILURE OF OUR COMPUTER SYSTEMS OR NETWORKS COULD INCREASE OUR
OPERATING COSTS SIGNIFICANTLY, CAUSE US TO LOSE CUSTOMERS AND OTHERWISE
ADVERSELY AFFECT OUR BUSINESS.
We depend upon our computer systems and networks to deliver our products
and services, respond to the needs of our customers, sell and manage our
inventory, perform accounting and administrative functions, provide product and
other informational services and create ILS's electronic marketplaces. The
success of our businesses depend upon our ability to provide superior
reliability, capacity and security for both our Internet-based and dial-up
systems. We are continually upgrading our computer networks and software. Our
computer systems and networks, and the networks upon which we depend, are
subject to factors that may cause interruptions in service or reduce capacity
for our customers, including, but not limited to, physical damage, problems
upgrading or integrating new hardware or software, power loss, capacity
limitations, software defects and breaches of security due to computer viruses,
break-ins or otherwise. Significant interruptions in service, capacity
limitations or security breaches could have a material adverse effect on our
business, financial condition, results of operations or the market value of our
common stock.
IF WE FAIL TO ACCURATELY FORECAST OUR INVENTORY REQUIREMENTS, WE MAY INCUR
SIGNIFICANT COSTS OR LOSE CUSTOMERS AND OUR BUSINESS COULD OTHERWISE BE
ADVERSELY AFFECTED.
We use complex rolling forecasts based upon our anticipated product orders
to determine what we purchase from our suppliers. Lead times for our product
orders vary significantly and depend on factors such as specific supplier
requirements, contract terms and the then-current market demand for particular
products. If we underestimate our product requirements, we may have insufficient
inventory to meet demand, which could result in shipping delays, lost sales and
dissatisfied customers. Alternatively, if we overestimate our product
requirements, we may accumulate excess inventory, which could result in
increased carrying costs and inventory write offs.
10
In December 2001, we wrote off $5.0 million of parts used on older
commercial aircraft. Because many of these aircraft were temporarily grounded or
permanently retired in the aftermath of the September 11th terrorist attacks, we
experienced reduced demand for replacement parts and components used on these
aircraft. As a result, we wrote off this excess inventory because of the
likelihood that we would not be able to sell it in the future. In addition, we
may be required to write off inventory when we stop selling a supplier's parts
or components or when a supplier chooses to compete against us. For example, in
December 1999, we wrote off $1.6 million of inventory from a product line that
was discontinued. Any of these occurrences could have a material adverse effect
on our business, financial condition, results of operations or the market value
of our common stock.
WE ARE SUBJECT TO RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS, AND WE
MAY FAIL TO IMPLEMENT STRATEGIES THAT ADEQUATELY PROTECT US AGAINST THESE RISKS.
We sell our products to customers located in many countries around the
world. Because we sell our products and services outside of the United States,
we are exposed to risks associated with selling and operating in foreign
countries. These risks include:
- fluctuations in currency exchange rates;
- political instability;
- limitations on the conversion of foreign currencies into U.S. dollars;
and
- economic volatility.
During 2001, we derived approximately 31.9% of our total net sales from
selling our products and services to customers located outside of the United
States. The percentage of our total net sales derived from selling our products
and services outside of the United States could increase in the future.
Although we may enter into certain transactions to hedge the risk of
foreign currency exchange rate fluctuations or take other steps to protect
against these risks, we may be unable to fully protect ourselves against these
risks. Any of these risks could have a material adverse effect on our business,
financial condition, results of operations or the market value of our common
stock.
IF OUR INVENTORY DOES NOT MEET SPECIFICATIONS ESTABLISHED BY CERTAIN
GOVERNMENTAL AGENCIES, WE COULD INCUR SIGNIFICANT COSTS AND OUR OPERATING
PERFORMANCE COULD OTHERWISE BE NEGATIVELY AFFECTED.
Our inventory consists primarily of new aviation parts, components and
supplies that we purchase from our suppliers. Before any part, component or
supply item may be used on an aircraft, it must meet certain standards of
condition established by the FAA, the U.S. Department of Defense or the
equivalent regulatory agencies in other countries, such as the Canadian
Transport Authority in Canada, the Joint Aviation Authority in the European
Union and the Civil Aviation Authority in Australia, New Zealand, Singapore and
the United Kingdom. Although regulatory requirements in other countries
generally coincide with applicable U.S. requirements, specific regulations may
vary from country to country. In some instances, parts, supplies and components
that we purchase must also be traceable to sources deemed acceptable by the
appropriate regulatory agency.
Parts and components that we own or acquire may not meet applicable
standards, and are subject to changing standards, which could require us to
modify or eliminate parts and components contained in our inventory. Aircraft
parts manufacturers may also develop new parts and components to be used in lieu
of parts and components already contained in our inventory. In all such cases,
to the extent that we have such parts and components in our inventory, their
value may be reduced.
IF OUR FAA REPAIR AUTHORITY IS REVOKED OR LIMITED, WE COULD INCUR SIGNIFICANT
COSTS AND OUR GROWTH COULD BE HINDERED.
In 2001, Aviall Services' product overhaul, repair and final assembly
facilities, which are regulated by the FAA, represented approximately 12.0% of
our net sales, including the parts used in these activities.
11
The FAA prescribes standards and licensing requirements for aircraft components
and effectively regulates component repair stations worldwide. Comparable
agencies also regulate these matters in each of the foreign countries in which
Aviall Services conducts operations. If Aviall Services does not have required
FAA authority for its overhaul, repair and final assembly facilities, or loses
the authority once it has been granted, the operation of that facility may be
prohibited until it is able to reobtain FAA authority.
While we believe that Aviall Services possesses all required domestic and
foreign governmental certifications, the revocation or limitation of its FAA
repair authority would have a material adverse effect on its overhaul, repair
and final assembly operations. In addition, we may be forced to incur
unanticipated costs to adapt Aviall Services' overhaul, repair and final
assembly operations to any changes in FAA regulations. Moreover, for purposes of
their own compliance with FAA requirements, some of our customers may require us
to certify that our facilities, products and services meet certain standards and
specifications. If we fail to meet these certification requirements or fail to
maintain our certified status with one or more of our customers, our reputation
could be harmed and our growth hindered.
IF WE IMPROPERLY SHIP HAZARDOUS MATERIALS, WE COULD INCUR SUBSTANTIAL FINES OR
DAMAGES.
The FAA exercises regulatory jurisdiction over the shipment of hazardous
materials by air. Some of the products that we sell contain hazardous materials
that are subject to these regulations, such as chemicals, oxygen generators,
oxygen bottles and life rafts. We share responsibility with the air carrier for
compliance with FAA regulations in shipping hazardous materials by air, and we
are primarily responsible for the proper packaging and labeling of these items.
If we mislabel or otherwise improperly ship hazardous materials, we may be
liable for damage to the aircraft and other property as well as substantial
monetary penalties. If any of these events were to occur, they could have a
material adverse effect on our business, financial condition, results of
operation or the market value of our common stock. The FAA actively monitors the
shipment of hazardous materials.
WE COULD INCUR SIGNIFICANT COSTS AND EXPENSES RELATED TO ENVIRONMENTAL
PROBLEMS.
Various federal, state, local and foreign laws and regulations require
property owners or operators to pay for the costs of removal or remediation of
hazardous or toxic substances located on or emanating from their property. Some
of our current operations, such as our battery repair and brake service centers,
use small quantities of hazardous or toxic substances in their operations. Some
of our previously owned businesses used certain chemicals classified by various
federal, state, local and foreign agencies as hazardous substances. We retain
certain environmental liabilities related to these businesses for the period
prior to their sale. We are involved in various stages of investigation and
cleanup to comply with federal, state, local and foreign regulations related to
these businesses.
These same laws and regulations also impose liability on persons who
arrange for the disposal or treatment of hazardous or toxic substances for the
costs of their removal or remediation at the disposal or treatment facility.
These laws and regulations generally impose liability regardless of whether the
entity arranging for disposal ever owned or operated the disposal facility.
We have been named a potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act and the Superfund
Amendments and Reauthorization Act at five third-party disposal sites to which
wastes were allegedly sent by the previous owner of assets used in our
discontinued engine services operations. We did not use these identified
disposal sites. Accordingly, the previous owner has retained, and has been
discharging, all liability associated with the cleanup of these sites pursuant
to the sales agreement. Although we could be potentially liable in the event of
nonperformance by the previous owner, we do not anticipate nonperformance.
We have been named a potentially responsible party for certain hazardous
waste cleanup at Miami International Airport. We have preliminarily investigated
our responsibilities utilizing a local engineering firm in the Miami area. Based
on the investigation to date, we believe that our exposure for remediation
costs, if any, will not be material. Local authorities are currently researching
and negotiating with potentially responsible parties.
12
As a past operator of businesses that used hazardous or toxic substances,
we may be liable for additional removal or remediation costs, governmental
penalties, property damage and related expenses. Payment of any of these costs
and expenses could have a material adverse effect on our business, financial
condition, results of operations or the market value of our common stock.
OUR ABILITY TO USE OUR FEDERAL NET OPERATING LOSS CARRYFORWARD IN THE FUTURE
COULD BE LIMITED.
As of December 31, 2001, we had a federal net operating loss carryforward
of approximately $137.3 million which substantially expires during 2009 through
2011. If certain substantial changes in our stock ownership should occur, there
could be an annual limitation on the amount of our federal net operating loss
carryforward that we could utilize.
During 2001, we issued warrants to the selling stockholders and issued
45,000 shares of our Series B Preferred Stock to certain affiliates of The
Carlyle Group. The Series B Preferred Stock was automatically converted into
45,110 shares of our Series D Redeemable Preferred Stock upon stockholder
approval of the terms and issuance of the Series D Redeemable Preferred Stock at
a special meeting of our stockholders held on March 15, 2002. These issuances
did not result in a limitation on the amount of our federal net operating loss
carryforward that we could utilize. In addition, the future exercise of the
warrants and the conversion of our Series D Redeemable Preferred Stock will not
be deemed to be additional changes to our stock ownership, separate and apart
from the original issuance of those securities. However, if there are
significant additional changes to our equity ownership prior to December 31,
2004, there could be a limitation on our ability to use our federal net
operating loss carryforward in the future. A limitation on our ability to use a
significant portion of our federal net operating loss carryforward could have a
material adverse effect on our financial condition, results of operations or the
market value of our common stock.
RISKS RELATED TO OUR COMMON STOCK
OTHER COMPANIES MAY HAVE DIFFICULTY ACQUIRING US, EVEN IF DOING SO WOULD
BENEFIT OUR STOCKHOLDERS.
Provisions in our restated certificate of incorporation, amended and
restated by-laws, preferred share rights plan, the Delaware general corporation
law and our agreements with Rolls-Royce could make it more difficult for other
companies to acquire us, even if doing so would benefit our stockholders. Our
restated certificate of incorporation and amended and restated by-laws contain
the following provisions, among others, which may discourage or prevent another
company from acquiring us:
- a staggered board of directors, where our stockholders each year elect
only a minority of the directors who serve on our board of directors;
- a limitation on who may call stockholder meetings;
- a prohibition on stockholder action by written consent; and
- advance notification procedures for matters to be brought before
stockholder meetings.
In addition, our preferred share rights plan contains provisions which
could require us to issue shares of our preferred stock under certain
circumstances, and this could delay, deter or prevent a takeover attempt that
our stockholders might consider in their best interests. Furthermore, we are
subject to provisions of the Delaware general corporation law that prohibit us
from engaging in a business combination with any "interested stockholder." These
provisions generally mean that a stockholder who owns more than 15.0% of our
voting stock cannot acquire us for a period of three years from the date that
the stockholder became an "interested stockholder," unless various conditions
are met, such as approval of the transaction by our board of directors. Finally,
our agreements with Rolls-Royce contain provisions allowing Rolls-Royce to
terminate the agreements in certain cases if we are acquired.
13
YOU MAY NOT RECEIVE CASH DIVIDENDS ON YOUR INVESTMENT.
Our policy has been to reinvest our earnings to fund our future growth.
Furthermore, except in limited circumstances, the terms of our indebtedness and
our Series D Redeemable Preferred Stock prevent us from declaring, paying or
setting aside cash dividends on shares of common stock without the consent of
the various parties thereto. Accordingly, we do not anticipate paying cash
dividends on shares of our common stock in the foreseeable future.
THE HOLDERS OF OUR COMMON STOCK WILL SUFFER DILUTION IF THE SERIES D
REDEEMABLE PREFERRED STOCK IS CONVERTED INTO SHARES OF COMMON STOCK OR IF THE
WARRANTS ARE EXERCISED.
As of August 1, 2002, we had 18,651,783 shares of common stock outstanding
and 47,158 shares of Series D Redeemable Preferred Stock outstanding. As of
August 1, 2002, the shares of Series D Redeemable Preferred Stock were
convertible into 8,130,687 shares of our common stock at a conversion price of
$5.80 per share and were entitled to vote with the common stock on an
as-converted basis. In addition, the selling stockholders are entitled to
purchase up to 1,750,000 shares of our common stock at a purchase price of $0.01
per share upon exercise of warrants held by them. If the selling stockholders
fully exercise their warrants for cash or the holders of our Series D Redeemable
Preferred Stock convert their shares into common stock, our common stockholders
will experience dilution. The following table illustrates the dilution to the
holders of our common stock assuming the warrants were fully exercised for cash
and the shares of Series D Redeemable Preferred Stock were converted into shares
of common stock on August 1, 2002:
PREFERRED STOCKHOLDERS SELLING STOCKHOLDERS
------------------------------------------------------ ------------------------
AGGREGATE
CONVERSION PURCHASE PRICE
PERCENT OF PRICE PER OF PREFERRED PERCENT OF
SHARES OF COMMON SHARE OF STOCK PLUS SHARES OF COMMON
COMMON STOCK COMMON DECLARED COMMON STOCK
STOCK HELD OUTSTANDING STOCK DIVIDENDS STOCK HELD OUTSTANDING
---------- ----------- ---------- -------------- ---------- -----------
Prior to exercise of
warrants and
conversion of
preferred stock.... -- -- -- $47,165,243(1) -- --
After exercise of
warrants and
conversion of
preferred stock.... 8,130,687 28.5% $5.80 $47,165,243(1) 1,750,000 6.1%
SELLING STOCKHOLDERS TOTAL
-------------------------- -----------
EXERCISE
PRICE PER SHARES OF
SHARE OF AGGREGATE COMMON
COMMON PURCHASE PRICE STOCK
STOCK OF WARRANTS OUTSTANDING
--------- -------------- -----------
Prior to exercise of
warrants and
conversion of
preferred stock.... -- $11,060,000(2) 18,651,783
After exercise of
warrants and
conversion of
preferred stock.... $0.01 $11,060,000(2) 28,532,470
---------------
(1) Consists of $45.0 million purchase price for preferred stock and declared
dividends of approximately $2.2 million paid through June 30, 2002, of which
approximately $2.2 million have been paid by issuing additional shares of
preferred stock and approximately $7,200 have been paid in cash in lieu of
issuing fractional shares of preferred stock.
(2) We issued the warrants to the selling stockholders in connection with the
sale of $80.0 million of senior unsecured notes to obtain a lower interest
rate on the notes. The purchase agreement for the senior unsecured notes did
not allocate the $80.0 million purchase price between the notes and the
warrants, which were not issued until March 2002. When the warrants were
issued in March 2002, we allocated approximately $11.1 million of the $80.0
million purchase price to the warrants.
USE OF PROCEEDS
We will not receive any proceeds from sales of the shares of common stock
by the selling stockholders. All of the net proceeds from sales of the shares of
common stock will be retained by the selling stockholders. We will receive up to
$17,500 from the exercise of the warrants. Any proceeds we receive from the
exercise of the warrants will be added to our working capital and used for
general corporate purposes.
14
SELECTED FINANCIAL DATA
The following table summarizes certain of our selected financial
information that has been derived from our audited Consolidated Financial
Statements. You should read the information set forth below in conjunction with
"Item 7: Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Consolidated Financial Statements and Notes thereto
included in our Annual Report on Form 10-K as of and for the year ended December
31, 2001.
2001 2000 1999 1998 1997
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Selected Operating Data:
Net sales(a)............................. $ 506,160 $ 485,920 $ 371,901 $ 404,207 $ 389,887
Cost of sales............................ 389,466 374,656 276,476 302,604 288,863
Cost of sales -- inventory and intangible
writedowns(b).......................... 6,977 -- 1,559 -- --
Gross profit............................. 109,717 111,264 93,866 101,603 101,024
Selling and administrative expenses(c)... 90,107 84,765 75,987 69,361 71,739
Unusual gain (loss)(d)................... (2,810) -- (4,470) -- 1,436
Interest expense......................... 10,291 8,407 3,345 2,681 3,201
Provision (benefit) for income
taxes(e)(f)............................ 3,046 7,526 4,949 (32,175) 1,096
Earnings from continuing operations(e)... 3,463 10,566 5,115 61,736 26,424
Earnings from discontinued
operations(g).......................... 322 1,062 4,588 2,821 2,673
Earnings before extraordinary loss....... 3,785 11,628 9,703 n/a n/a
Adjusted earnings before extraordinary
loss(k)................................ 5,701 13,544 11,932 n/a n/a
Extraordinary loss(h).................... (1,026) -- -- -- --
Net earnings(b)(c)(d)(e)(f)(g)(h)........ 2,759 11,628 9,703 64,557 29,097
Adjusted net earnings(k)................. $ 4,675 $ 13,544 $ 11,932 n/a n/a
=========== =========== =========== =========== ===========
Other Financial Data:
Net cash (used for) provided by operating
activities............................. $ (93,388) $ 7,668 $ (11,980) $ 20,252 $ 10,111
Net cash (used for) provided by investing
activities............................. (37,008) (16,581) (21,089) (9,370) 7,762
Net cash (used for) provided by financing
activities............................. 128,057 12,393 31,318 (15,302) (14,508)
Total assets............................. 533,229 395,451 340,640 304,646 259,392
Total debt............................... 200,854 90,422 78,011 45,628 36,560
Convertible redeemable preferred stock... 40,161 -- -- -- --
Total debt to total capital(i)........... 50.76% 32.05% 30.33% 21.30% 22.30%
=========== =========== =========== =========== ===========
Basic Net Earnings Per Share Data:
Earnings from continuing operations...... $ 0.18 $ 0.58 $ 0.28 $ 3.22 $ 1.34
Earnings from discontinued operations.... 0.02 0.06 0.25 0.15 0.14
Extraordinary loss....................... (0.06) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net earnings(b)(c)(d)(e)(f)(g)(h)........ 0.14 0.64 0.53 3.37 1.48
Adjusted net earnings(k)................. 0.25 0.74 0.65 n/a n/a
----------- ----------- ----------- ----------- -----------
Weighted average common shares............. $18,380,975 $18,313,401 $18,222,526 $19,150,869 $19,711,105
=========== =========== =========== =========== ===========
Diluted Net Earnings Per Share Data:(j)
Earnings from continuing operations...... $ 0.18 $ 0.58 $ 0.28 $ 3.17 $ 1.32
Earnings from discontinued operations.... 0.02 0.06 0.25 0.15 0.13
Extraordinary loss....................... (0.06) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net earnings(b)(c)(d)(e)(f)(g)(h)........ 0.14 0.64 0.53 3.32 1.45
Adjusted net earnings(k)................. $ 0.25 $ 0.74 $ 0.65 n/a n/a
----------- ----------- ----------- ----------- -----------
Weighted average common and dilutive
potential common shares.................. $18,718,979 $18,337,161 $18,474,038 $19,466,419 $20,061,205
=========== =========== =========== =========== ===========
15
---------------
(a) Net sales for the years 1999, 1998 and 1997 have been restated as a result
of the implementation of EITF 00-10 in 2000.
(b) In 2001, the inventory and intangible writedowns primarily related to the
aviation industry changes resulting from the September 11th terrorist
attacks. In 1999, the inventory writedown was for discontinued product
lines. Both amounts were originally shown as unusual items and have been
reclassified to cost of sales.
(c) In 2001, we expensed $1.4 million, which was included in selling and
administrative expenses, related to the relocation of our Dallas, Texas
facility.
(d) The unusual loss in 2001 consists of unfavorable leases and doubtful
accounts related to the downturn in the economy after the events of
September 11th and costs related to our new capital structure. The unusual
loss in 1999 resulted from costs incurred for the strategic review process
and executive severance pay. The 1997 unusual gain resulted from the
repayment of a discounted note. Amounts previously disclosed in unusual
items for inventory and intangible writedowns have been reclassified to
cost of sales.
(e) Earnings from continuing operations and net earnings in 1998 included a
$32.2 million tax benefit due to the release of a $33.5 million deferred
tax valuation allowance offset by provisions of certain U.S. state and
foreign taxes.
(f) Our cash payments for taxes are substantially below reported tax expense
due to our use of net operating losses, which are not expected to be fully
utilized for several years.
(g) In January 1996, we announced our intention to exit certain businesses
and, accordingly, reported these businesses as discontinued operations.
The earnings from discontinued operations resulted from changes in
estimates for certain retained liabilities.
(h) The extraordinary loss in 2001 resulted from the write-off of unamortized
financing costs in connection with refinancing our senior credit facility.
(i) Total capital consists of total debt and shareholders' equity.
(j) Diluted net earnings per share were not dilutive, or lower than basic, in
2001. Therefore, diluted net earnings per share for 2001 is presented
equal to basic net earnings per share.
(k) Effective January 1, 2002, we adopted the provisions of Statement of
Financial Accounting Standards No. 142 "Goodwill and Other Intangible
Assets" ("SFAS 142"). SFAS 142 addresses financial accounting and
reporting for acquired goodwill and other intangible assets. The statement
eliminates amortization of goodwill and intangible assets with indefinite
lives and requires a transitional impairment test of these assets within
six months of the date of adoption and an annual impairment test
thereafter and in certain circumstances. We have completed the
transitional impairment tests of goodwill as of January 1, 2002, and no
impairment was noted. The following table presents earnings and earnings
per share, as adjusted for goodwill amortization recognized in periods
prior to our adoption of SFAS 142:
2001 2000 1999
------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT
SHARE DATA)
Reported net earnings.................................... $2,759 $11,628 $ 9,703
Add: Goodwill amortization............................... 1,916 1,916 2,229
------ ------- -------
Adjusted net earnings.................................... $4,675 $13,544 $11,932
====== ======= =======
Basic net earnings per share:
Reported net earnings.................................. $ 0.14 $ 0.64 $ 0.53
Goodwill amortization.................................. 0.11 0.10 0.12
------ ------- -------
Adjusted net earnings.................................... $ 0.25 $ 0.74 $ 0.65
====== ======= =======
16
2001 2000 1999
------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT
SHARE DATA)
Diluted net earnings per share:
Reported net earnings.................................. $ 0.14 $ 0.64 $ 0.53
Goodwill amortization.................................. 0.11 0.10 0.12
------ ------- -------
Adjusted net earnings.................................... $ 0.25 $ 0.74 $ 0.65
====== ======= =======
SELLING STOCKHOLDERS
The following table identifies the selling stockholders, the number and
percentage of shares of common stock beneficially owned by the selling
stockholders before this offering, the number of shares of common stock that the
selling stockholders may offer or sell in this offering, and the number and
percentage of shares of common stock beneficially owned by the selling
stockholders after this offering, assuming they sell all of the shares that may
be sold by them in this offering. We have prepared this table based upon
information furnished to us by or on behalf of the selling stockholders. Based
on the information provided to us by or on behalf of the selling stockholders,
no selling stockholder beneficially owns any shares of common stock other than
the shares listed below.
SHARES OF COMMON STOCK
SHARES OF COMMON STOCK BENEFICIALLY BENEFICIALLY OWNED AFTER
OWNED BEFORE THE OFFERING THE OFFERING
---------------------------------------- --------------------------
NUMBER OF NUMBER OF
SHARES NUMBER OF SHARES
BENEFICIALLY PERCENT OF SHARES BEING BENEFICIALLY PERCENT OF
NAME OF SELLING STOCKHOLDER OWNED(1) CLASS(2) OFFERED(3) OWNED(4) CLASS(2)(4)
--------------------------- ------------ ---------- ------------ ------------ -----------
Blackstone Mezzanine Holdings L.P.(5) 32,812 * 32,812 -- --
Blackstone Mezzanine Partners L.P.(5) 514,063 2.7% 514,063 -- --
Carlyle High Yield Partners, L.P.(6) 8,393,187 31.0% 262,500 8,130,687 30.4%
J. H. Whitney Mezzanine Fund, L.P.(7) 424,375 2.2% 424,375 -- --
Lerner Enterprises, L.P.(8) 16,406 * 16,406 -- --
Oak Hill Securities Fund II, L.P.(9) 76,562 * 76,562 -- --
Oak Hill Securities Fund, L.P.(10) 76,563 * 76,563 -- --
P & PK Family Limited Partnership(8) 5,469 * 5,469 -- --
Whitney Limited Partner Holdings,
LLC(11) 13,125 * 13,125 -- --
Whitney Private Debt Fund, L.P.(12) 328,125 1.7% 328,125 -- --
---------------
* Less than one percent.
(1) Represents the shares of common stock that the selling stockholders may
acquire by exercising the warrants. With respect to Carlyle High Yield
Partners, L.P., the number of shares beneficially owned also represents the
shares of common stock that Carlyle High Yield Partners, L.P. and certain
of its affiliates may acquire upon conversion of the shares of our Series D
Redeemable Preferred Stock outstanding as of August 1, 2002.
(2) Computed based on 18,651,783 shares of common stock outstanding as of
August 1, 2002. Percentage ownership has been calculated in accordance with
Rule 13d-3 under the Securities Exchange Act of 1934, as amended.
(3) Represents the shares of common stock that the selling stockholders may
acquire by exercising the warrants. Registration of the shares of common
stock does not mean that all or any portion of these shares will be offered
or sold by the selling stockholders pursuant to this prospectus.
(4) Assumes that the selling stockholders sell all of the shares of common
stock covered by this prospectus.
17
(5) Blackstone Mezzanine Management Associates, L.L.C. is the general partner
of Blackstone Mezzanine Associates L.P., which is the general partner of
each of Blackstone Mezzanine Holdings L.P. and Blackstone Mezzanine
Partners L.P. Accordingly, Blackstone Mezzanine Management Associates,
L.L.C. may be deemed to beneficially own the shares of common stock that
may be purchased by Blackstone Mezzanine Holdings L.P. and Blackstone
Mezzanine Partners L.P. upon the exercise of warrants held by them. Peter
G. Peterson and Stephen A. Schwarzman are the founding members of
Blackstone Mezzanine Management Associates, L.L.C. and, in such capacity,
may be deemed to share beneficial ownership of shares of common stock
beneficially owned by each of Blackstone Mezzanine Holdings L.P. and
Blackstone Mezzanine Partners L.P. Such individuals disclaim any such
beneficial ownership, except to the extent of their individual pecuniary
interest in such securities.
(6) The shares of common stock beneficially owned by Carlyle High Yield
Partners, L.P. and certain of its affiliates include: (i) 6,957,068 shares
of common stock issuable upon conversion of 40,351 shares of Series D
Redeemable Preferred Stock owned of record by Carlyle Partners III, L.P.,
(ii) 586,896 shares of common stock issuable upon conversion of 3,404
shares of Series D Redeemable Preferred Stock owned of record by CP III
Coinvestment, L.P., (iii) 406,206 shares of common stock issuable upon
conversion of 2,356 shares of Series D Redeemable Preferred Stock owned of
record by Carlyle High Yield Partners, L.P., (iv) 180,517 shares of common
stock issuable upon conversion of 1,047 shares of Series D Redeemable
Preferred Stock owned of record by Carlyle-Aviall Partners II, L.P. and (v)
262,500 shares of common stock issuable upon exercise of a warrant held by
Carlyle High Yield Partners, L.P. TC Group III, L.P. is the sole general
partner of Carlyle Partners III, L.P., CP III Coinvestment, L.P. and
Carlyle-Aviall Partners II, L.P. TC Group III, L.L.C. is the sole general
partner of TC Group III, L.P. TCG High Yield, L.L.C. is the sole general
partner of Carlyle High Yield Partners, L.P. TCG High Yield Holdings,
L.L.C. is the sole managing member of TCG High Yield, L.L.C. TC Group,
L.L.C. is the sole managing member of TC Group III, L.L.C. and TCG High
Yield Holdings, L.L.C. TCG Holdings, L.L.C. is the sole managing member of
TC Group, L.L.C. Accordingly, (i) TC Group III, L.P. and TC Group III,
L.L.C. each may be deemed to be a beneficial owner of shares of common
stock and Series D Redeemable Preferred Stock owned of record by each of
Carlyle Partners III, L.P., CP III Coinvestment, L.P. and Carlyle-Aviall
Partners II, L.P.; (ii) TCG High Yield, L.L.C. and TCG High Yield Holdings,
L.L.C. each may be deemed to be a beneficial owner of shares of common
stock and Series D Redeemable Preferred Stock owned of record by Carlyle
High Yield Partners, L.P. and (iii) TC Group, L.L.C. and TCG Holdings,
L.L.C. each may be deemed to be a beneficial owner of shares of common
stock and Series D Redeemable Preferred Stock owned of record by each of
Carlyle Partners III, L.P., CP III Coinvestment, L.P., Carlyle-Aviall
Partners II, L.P. and Carlyle High Yield Partners, L.P. William E. Conway,
Jr., Daniel A. D'Aniello and David M. Ruberstein are managing members of
TCG Holdings, L.L.C. and, in such capacity, may be deemed to share
beneficial ownership of shares of common stock beneficially owned by TCG
Holdings, L.L.C. Such individuals expressly disclaim any such beneficial
ownership. The principal address and principal offices of TCG Holdings,
L.L.C. and certain affiliates is c/o The Carlyle Group, 1001 Pennsylvania
Avenue, N.W., Suite 220 South, Washington, D.C. 20004-2505.
(7) Whitney GP, L.L.C. is the sole general partner of J.H. Whitney Mezzanine
Fund, L.P. Peter M. Castleman, Michael R. Stone, William Laverack, Jr.,
Jeffrey R. Jay, Daniel J. O'Brien, James H. Fordyce and Joseph D.
Carrabino, Jr. are managing members of Whitney GP, L.L.C. Accordingly, each
of them may be deemed to share beneficial ownership of the securities owned
by J.H. Whitney Mezzanine Fund. L.P., although each of them disclaims such
beneficial ownership, except to the extent of his pecuniary interest in
J.H. Whitney Mezzanine Fund, L.P.
(8) Oak Hill Asset Management, Inc. is the investment advisor to each of Lerner
Enterprises, L.P. and P & PK Family Limited Partnership. By virtue of the
investment advisory agreements between Oak Hill Asset Management, Inc. and
each of Lerner Enterprises, L.P. and P & PK Limited Partnership, Oak Hill
Asset Management, Inc. may be deemed to share, directly or indirectly,
voting and/or investment power over the shares of common stock that may be
purchased by Lerner Enterprises,
18
L.P. and P & PK Family Limited Partnership upon the exercise of warrants
held by them. Glenn R. August is the sole stockholder of Oak Hill Asset
Management, Inc. and, in such capacity, may be deemed to share, directly or
indirectly, voting and/or investment power over shares of common stock
beneficially owned by each of Lerner Enterprises, L.P. and P & PK Family
Limited Partnership.
(9) Oak Hill Securities MGP II, Inc. is the general partner of Oak Hill
Securities GenPar II L.P., which is the general partner of Oak Hill
Securities Fund II, L.P. Accordingly, Oak Hill Securities MGP II, Inc. may
be deemed to share, directly or indirectly, voting and/or investment power
over the shares of common stock that may be purchased by Oak Hill
Securities Fund II, L.P. upon the exercise of warrants held by it. Glenn R.
August is the sole stockholder of Oak Hill Securities MGP II, Inc. and, in
such capacity, may be deemed to share, directly or indirectly, voting
and/or investment power over shares of common stock beneficially owned by
Oak Hill Securities Fund II, L.P.
(10) Oak Hill Securities MGP, Inc. is the general partner of Oak Hill Securities
GenPar L.P., which is the general partner of Oak Hill Securities Fund, L.P.
Accordingly, Oak Hill Securities MGP, Inc. may be deemed to share, directly
or indirectly, voting and/or investment power over the shares of common
stock that may be purchased by Oak Hill Securities Fund, L.P. upon the
exercise of warrants held by it. Glenn R. August is the sole stockholder of
Oak Hill Securities MGP, Inc. and, in such capacity, may be deemed to
share, directly or indirectly, voting and/or investment power over shares
of common stock beneficially owned by Oak Hill Securities Fund, L.P.
(11) Michael R. Stone and Daniel J. O'Brien are managing members of Whitney
Limited Partner Holdings, LLC. Accordingly, each of them may be deemed to
share beneficial ownership of the securities owned by Whitney Limited
Partner Holdings, LLC, although each of them disclaims such beneficial
ownership, except to the extent of his pecuniary interest in Whitney
Limited Partner Holdings, LLC.
(12) Whitney Private Debt GP, LLC, is the sole general partner of Whitney
Private Debt Fund, L.P. Peter M. Castleman, Michael R. Stone, William
Laverack, Jr., Jeffrey R. Jay, Daniel J. O'Brien, James H. Fordyce, Joseph
D. Carrabino, Jr., Julian Allen, Michael B. DeFlorio, John C. Hockin,
Stephen E. Rodgers, Paul R. Vigano and Robert E. Williams, Jr. are managing
members of Whitney Private Debt GP, LLC. Accordingly, each of them may be
deemed to share beneficial ownership of the securities owned by Whitney
Private Debt Fund, L.P., although each of them disclaims such beneficial
ownership, except to the extent of his pecuniary interest in Whitney
Private Debt Fund, L.P.
19
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" into this prospectus the
information that we regularly file with the SEC. This means that we can disclose
important information to you by referring to the documents that we have filed
with the SEC which contain this important information. The information
incorporated by reference into this prospectus is an important part of this
prospectus, and information that we file later with the SEC will automatically
update and supersede this information. We incorporate by reference into this
prospectus the following documents:
- our Annual Report on Form 10-K for the year ended December 31, 2001,
filed with the SEC on March 28, 2002;
- our Quarterly Report on Form 10-Q for the quarterly period ended March
31, 2002, filed with the SEC on May 14, 2002, and amended on May 15,
2002;
- the description of our capital stock appearing under the heading
"Description of Capital Stock" contained in our Registration Statement on
Form 10 (Commission File No.: 1-12380), filed with the SEC on September
24, 1993 and amended on November 4, 1993, November 19, 1993, November 30,
1993, December 22, 1993 and May 30, 2002; and
- all documents filed by us with the SEC pursuant to Section 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, as amended,
subsequent to the date of this prospectus and prior to the termination of
the effectiveness of the registration statement of which this prospectus
is a part.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We are subject to the reporting requirements of the Securities Exchange Act
of 1934, as amended, and we file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy, at
prescribed rates, our annual, quarterly and current reports, proxy statements
and other information filed with the SEC at the SEC's Public Reference Room, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549. You may call the SEC at
1-800-SEC-0330 to obtain further information about the operation of the Public
Reference Room. In addition, you may read and obtain copies of our annual,
quarterly and current reports, proxy statements and other information filed with
the SEC by visiting the SEC's website at http://www.sec.gov. Copies of our
annual, quarterly and current reports, proxy statements and other information
filed with the SEC are also available at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
This prospectus is part of a registration statement on Form S-3 that we
have filed with the SEC under the Securities Act of 1933, as amended, and omits
certain information contained in this registration statement as permitted by the
SEC's rules and regulations. We have also filed exhibits and schedules with this
registration statement that are omitted from this prospectus as permitted by the
SEC's rules and regulations. You may read and copy, at prescribed rates, this
registration statement (including the exhibits and schedules attached thereto)
by visiting the Public Reference Room, the SEC's website or the offices of the
New York Stock Exchange.
In addition, you can obtain any of the documents incorporated by reference
into this prospectus through us. Documents incorporated by reference into this
prospectus are available from us without charge, excluding any exhibits or
schedules to those documents that we do not specifically incorporate by
reference into this prospectus. You can request a copy of the documents
incorporated by reference into this prospectus by writing or calling us at the
following address or telephone number:
Aviall, Inc.
2750 Regent Boulevard
DFW Airport, Texas 75261
Attention: Shareholder Services
Telephone: (972) 586-1000
20
PLAN OF DISTRIBUTION
The selling stockholders, or their pledgees, donees, transferees or any of
their successors in interest may sell from time to time the shares of common
stock covered by this prospectus. The selling stockholders may sell the shares
of common stock in one or more transactions at market prices prevailing at the
time of sale, at prices related to prevailing market prices or at privately
negotiated prices. The selling stockholders may sell from time to time the
shares of common stock through one or more of the following transactions:
- transactions on the New York Stock Exchange, on any other national
securities exchange or in the over-the-counter market on which shares of
our common stock may be listed or quoted at the time of any sale;
- block trades in which a broker or dealer will attempt to sell the shares
of common stock as agent for the selling stockholders, but may take a
position and resell a portion of the block as principal to facilitate the
transaction;
- ordinary brokerage transactions and transactions in which a broker or
dealer solicits purchasers;
- privately negotiated transactions with purchasers, underwriters, brokers
or dealers;
- transactions in connection with short sales of the shares of common
stock;
- transactions involving the writing of options on the shares of common
stock which may be listed on an options exchange or otherwise;
- transactions involving the pledge of the shares of common stock to secure
debt or other obligations;
- hedging transactions;
- to the extent required to be registered, transactions involving the
distribution of the shares of common stock by any selling stockholder to
its partners, members or securityholders; or
- any combination of the transactions identified above.
In effecting sales of the shares of common stock covered by this
prospectus, underwriters, brokers, dealers or agents may receive compensation
from the selling stockholders, purchasers of these shares for whom they may act
as agents or principals, or both, in the form of discounts, concessions or
commissions. These discounts, concessions or commissions as to any particular
underwriter, broker, dealer or agent may be in excess of those discounts,
concessions or commissions that are customary in the types of transactions
involved. The selling stockholders, underwriters, brokers, dealers or agents
that participate in the distribution of the shares of common stock may be deemed
to be "underwriters" under the Securities Act of 1933, as amended, and any
discounts, concessions or commissions received by them from the selling
stockholders or purchasers of these shares from whom they may act as agents or
principals and any profit received on sales of the shares of common stock may be
deemed to be underwriting discounts or commissions under the Securities Act of
1933, as amended.
The selling stockholders may also sell all or a portion of the shares of
common stock covered by this prospectus in open market transactions in reliance
upon Rule 144 under the Securities Act of 1933, as amended, provided that any
such sales meet the criteria of and otherwise conform to the requirements of
Rule 144.
The selling stockholders and other persons participating in the sale or
distribution of the shares of common stock covered by this prospectus will be
subject to the applicable provisions of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, including Regulation M.
Regulation M may limit the timing of purchases and sales of the shares of common
stock covered by this prospectus by the selling stockholders and any other
person. In addition, Regulation M may restrict the ability of any person engaged
in the distribution of the shares of common stock covered by this prospectus to
engage in market-making activities with respect to such shares for a period of
up to five business days before such distribution. These restrictions may affect
the marketability of the shares of common stock
21
covered by this prospectus and the ability of any person to engage in
market-making activities with respect to such shares.
Blackstone Mezzanine Holdings L.P. and Blackstone Mezzanine Partners L.P.
are affiliates of broker-dealers, and each of these selling stockholders
acquired its shares of common stock in the ordinary course of its business. At
the time each of these selling stockholders acquired its shares of common stock,
neither of them had any agreements or understandings, directly or indirectly,
with any person to distribute its shares of common stock.
We entered into a registration rights agreement for the benefit of the
selling stockholders pursuant to which we registered the shares of common stock
covered by this prospectus under applicable federal and state securities laws.
This agreement also provides that we will indemnify the selling stockholders,
their directors, officers and controlling persons, for certain liabilities,
including liabilities under the Securities Act of 1933, as amended, and that the
selling stockholders will indemnify us and our directors, officers and
controlling persons for certain liabilities, including liabilities under the
Securities Act of 1933, as amended. The offering of the shares of common stock
will terminate on the date on which all of the shares of common stock have been
sold by the selling stockholders.
LEGAL MATTERS
The validity of the issuance of the shares of common stock covered by this
prospectus is being passed upon for us by our lawyers, Haynes and Boone, LLP,
Dallas, Texas.
EXPERTS
The consolidated financial statements and financial statement schedule
incorporated in this prospectus by reference to the Annual Report on Form 10-K
for the year ended December 31, 2001 have been so incorporated in reliance on
the report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
CAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements" concerning our
business, operations and financial performance and condition. When we use the
words "estimates," "expects," "forecasts," "anticipates," "projects," "plans,"
"intends," "believes" and variations of such words or similar expressions in
this prospectus, we intend to identify forward-looking statements.
We have based our forward-looking statements on our current assumptions and
expectations about future events. We have expressed our assumptions and
expectations in good faith, and we believe that there is a reasonable basis for
them. However, our assumptions and expectations may not prove to be accurate.
A number of risks and uncertainties could cause our actual results to
differ materially from the forward-looking statements contained in this
prospectus. These risks, uncertainties and other important factors include,
without limitation, those described under "Risk Factors" as well as:
- loss of key suppliers or significant customers;
- termination or curtailment of material contracts;
- changes in demand or prevailing market prices for the products and
services we sell;
- changes in economic conditions;
- increased competition;
- failure to execute or realize anticipated benefits from new agreements;
22
- changes in our business strategy or development plans;
- changes in government regulations and policies;
- limited operational flexibility due to our substantial leverage;
- foreign currency fluctuations and devaluations and political instability
in our foreign markets; and
- changes in the aviation and insurance industries resulting from the
September 11, 2001 terrorist attacks.
Other factors may cause our actual results to differ materially from the
forward-looking statements contained in this prospectus. These forward-looking
statements speak only as of the date of this prospectus and except as required
by law, we do not undertake any obligation to publicly update or revise our
forward-looking statements. We caution you not to place undue reliance on these
forward-looking statements.
---------------------
23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth various expenses and costs (other than
underwriting discounts and commissions) expected to be incurred by us in
connection with the offering, distribution and registration of the shares of
common stock described by this Registration Statement. All of the amounts shown
in the following table are estimated except for the Securities and Exchange
registration fee.
EXPENSE AMOUNT
------- --------
Securities and Exchange Commission registration fee $ 1,465
Legal fees and expenses $ 85,000
Printing and engraving expenses $ 5,000
Accounting fees and expenses $ 59,500
Miscellaneous expenses $ 5,000
--------
Total $155,965
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "Delaware Law")
permits indemnification of the directors and officers of Aviall, Inc., a
Delaware corporation (the "Company"), involved in a civil or criminal action,
suit or proceeding, including, under certain circumstances, suits by or in the
right of the Company, for any expenses, including attorney's fees, and (except
in the case of suits by or in the right of the Company), any liabilities which
they may have incurred in consequences of such action, suit or proceeding under
conditions stated in said Section.
Article XI of the Company's Restated Certificate of Incorporation (the
"Certificate") limits the personal liability of the Company's directors to the
Company or its stockholders for monetary damages for breaches of fiduciary duty.
In addition, Article VI of the Company's Amended and Restated By-Laws (the
"By-Laws") defines and clarifies the rights of certain individuals, including
the Company's directors and officers, to indemnification by the Company against
personal liability or expenses incurred by them as a result of certain
litigation against them.
Set forth below is a description of Article XI of the Certificate and
Article VI of the By-Laws. Such descriptions are intended only as summaries and
are qualified in their entirety by reference to the Company's Certificate and
By-Laws.
Article XI of the Certificate protects the directors of the Company against
personal liability for breaches of their duty of care. Articles XI of the
Certificate absolves directors of liability for negligence in the performance of
their duties, including gross negligence. Directors remain liable for breaches
of the duty of loyalty to the Company and its stockholders as well as for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law and transactions from which a director derived improper
personal benefit. In addition, Article XI of the Certificate does not absolve
directors of liability for unlawful dividends or stock repurchases or
redemptions to which a negligence standard presently applies under the Delaware
Law. Also, there may be certain liabilities, such as those under the federal
securities laws or other state or federal laws, which a court may hold are
unaffected by Article XI of the Certificate.
Although Article XI of the Certificate provides the directors of the
Company with protections against personal liability for monetary damages for
breaches of their duty of care, it does not eliminate the directors' duty of
care. Accordingly, Article XI of the Certificate would have no effect on the
availability of equitable remedies such as an injunction to prevent a proposed
action or rescission of a contract based upon a director's breach of his or her
duty of care. Although both directors and officers of the Company
II-1
are covered by indemnification provisions under Article VI of the By-Laws (as
discussed below), Article XI of the Certificate limits liability only with
respect to a person acting in the capacity of a director.
Article VI of the By-Laws provides that each person who was or is made a
party to, or is involved in any action, suit or proceeding by reason of the fact
that he or she is or was a director, officer or employee of the Company (or was
serving at the request of the Company as a director, officer or employee of
another entity, including service with respect to employee benefit plans
maintained or sponsored by the Company) will be indemnified and held harmless by
the Company, to the fullest extent authorized by the Delaware Law, as currently
in effect (or, to the extent indemnification in broadened, as it may be amended)
against all expense, liability or loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts to be paid in settlement)
reasonably incurred by such person in connection therewith.
Article VI of the By-Laws provides that persons indemnified thereunder may
bring suit against the Company to recover unpaid amounts claimed thereunder, and
that if such suit is successful, the expense of bringing such a suit will be
reimbursed by the Company. Article VI of the By-Laws further provides that while
it is a defense to such a suit that the person claiming indemnification has not
met the applicable standards of conduct making indemnification permissible under
the Delaware Law, the burden of proving the defense will be on the Company.
Neither the failure of the Company's Board of Directors to have made a
determination that indemnification is proper, nor an actual determination by the
Company's Board of Directors that the claimant has not met the applicable
standard of conduct, will be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct. Following any
"change in control," as described in the Company's By-Laws, any determination as
to entitlement to indemnification is to be made by independent legal counsel
selected by the claimant, which such independent legal counsel shall be retained
by the Board of Directors on behalf of the Company.
Article VI of the By-Laws also provides that the rights to indemnification
and the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred therein will not be exclusive of any other right
which any person may have or acquire under any statute, provision of the
Company's Certificate or By-Laws, or otherwise. Article VI of the By-Laws also
provides that the Company may maintain insurance, at its expense, to protect
itself and any of its directors, officers, employees or agents against any
expense, liability or loss, whether or not the Company would have the power to
indemnify such person against such expense, liability or loss under the Delaware
Law.
Article VI of the By-Laws further provides that the rights conferred
therein are contract rights and include the right to be paid by the Company for
the expenses incurred in defending the proceedings specified above, in advance
of their final disposition, except that, if the Delaware Law so requires, such
payment will only be made upon delivery to the Company by the indemnified party
of an undertaking to repay all amounts so advanced if it is ultimately
determined that the person receiving such payments is not entitled to be
indemnified under the By-Laws or otherwise. Article VI of the By-Laws also
provides that the Company may, by action of its Board of Directors, provide
indemnification to its agents with the same scope and effect as the foregoing
indemnification of directors, officers and employees.
Pursuant to a registration right agreement entered into by the Company and
the selling stockholders, under certain circumstances, each of the Company and
the selling stockholders have agreed to indemnify each other and their
respective directors and officers for certain liabilities, including liabilities
incurred under the Securities Act of 1933, as amended, in connection with the
registration of the shares of Common Stock which may be acquired by the selling
stockholders upon exercise of the warrants.
II-2
ITEM 16. EXHIBITS
EXHIBIT
NO. DESCRIPTION
------- -----------
4.1 Restated Certificate of Incorporation of Aviall, Inc.
(Exhibit 3.1 to Aviall, Inc.'s Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 (the "1993 Form
10-K") and incorporated herein by reference)
4.2 Amended and Restated By-Laws of Aviall, Inc. (Exhibit 3.1 to
Aviall, Inc.'s Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1999 and incorporated
herein by reference)
4.3 Form of Common Stock Certificate of Aviall, Inc. (Exhibit 4
to Aviall, Inc.'s Registration Statement on Form 10, as
amended (Commission File No. 1-12380), and incorporated
herein by reference)
4.4 Rights Agreement, dated as of December 7, 1993, by and
between Aviall, Inc. and The First National Bank of Boston
(Exhibit 10.7 to Aviall, Inc.'s 1993 Form 10-K and
incorporated herein by reference)
4.5 Amendment No. 1 to Rights Agreement, dated as of March 14,
2000, by and between Aviall, Inc. and BankBoston, N.A., a
national banking association (as successor to The First
National Bank of Boston) (Exhibit 4.3 to Aviall, Inc.'s
Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 (the "1999 Form 10-K") and incorporated
herein by reference)
4.6 Amendment No. 2 to Rights Agreement, dated as of December
17, 2001, by and between Aviall, Inc. and EquiServe Trust
Company, N.A., a national banking association (as successor
to The First National Bank of Boston) (Exhibit 4.6 to
Aviall, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 2001 (the "2001 Form 10-K") and
incorporated herein by reference)
4.7 Amendment No. 3 to Rights Agreement, dated as of December
21, 2001, by and between Aviall, Inc. and EquiServe Trust
Company, N.A., a national banking association (as successor
to The First National Bank of Boston) (Exhibit 4.7 to
Aviall, Inc.'s 2001 Form 10-K and incorporated herein by
reference)
4.8 Securities Purchase Agreement, dated as of December 17,
2001, by and between Aviall, Inc., Aviall Services, Inc., J.
H. Whitney Mezzanine Fund, L.P., Whitney Private Debt Fund,
L.P., Whitney Limited Partner Holdings, LLC, Blackstone
Mezzanine Partners L.P., Blackstone Mezzanine Holdings L.P.,
Carlyle High Yield Partners, L.P., Oak Hill Securities Fund,
L.P., Oak Hill Securities Fund II, L.P., Lerner Enterprises,
L.P. and P & PK Limited Partnership (Exhibit 4.8 to Aviall,
Inc.'s 2001 Form 10-K and incorporated herein by reference)
4.9 Form of Warrant to purchase common stock of Aviall, Inc.,
entered into as of March 15, 2002, between Aviall, Inc. and
each of J. H. Whitney Mezzanine Fund, L.P., Whitney Private
Debt Fund, L.P., Whitney Limited Partner Holdings, LLC,
Blackstone Mezzanine Partners L.P., Blackstone Mezzanine
Holdings L.P., Carlyle High Yield Partners, L.P., Oak Hill
Securities Fund, L.P., Oak Hill Securities Fund II, L.P.,
Lerner Enterprises, L.P. and P & PK Family Limited
Partnership (Exhibit 4.10 to Aviall, Inc.'s 2001 Form 10-K
and incorporated herein by reference)
4.10 Amended and Restated Registration Rights Agreement, dated as
of March 15, 2002, by and between Aviall, Inc., J. H.
Whitney Mezzanine Fund, L.P., Whitney Private Debt Fund,
L.P., Whitney Limited Partner Holdings, LLC, Blackstone
Mezzanine Partners L.P., Blackstone Mezzanine Holdings L.P.,
Carlyle High Yield Partners, L.P., Oak Hill Securities Fund,
L.P., Oak Hill Securities Fund II, L.P., Lerner Enterprises,
L.P. and P & PK Family Limited Partnership (Exhibit 4.11 to
Aviall, Inc.'s 2001 Form 10-K and incorporated herein by
reference)
5.1* Legal Opinion of Haynes and Boone, LLP
23.1** Consent of PricewaterhouseCoopers LLP
23.2* Consent of Haynes and Boone, LLP (included in its legal
opinion filed as Exhibit 5.1)
24.1* Power of Attorney of the Directors of Aviall, Inc.
(incorporated in the signature page of this Registration
Statement)
---------------
* Previously filed.
** Filed herewith.
II-3
ITEM 17. UNDERTAKINGS.
(a) The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to the Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20.0% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that the undertakings set forth in clauses (i)
and (ii) above do not apply if the information required to be included
in a post-effective amendment by those clauses is contained in periodic
reports filed with or furnished to the Commission by the Company
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in this Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
II-4
(d) The Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this Registration Statement as of the time it was declared effective;
and
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of DFW Airport, State of Texas, on the 7th day of
August, 2002.
AVIALL, INC.
By: /s/ PAUL E. FULCHINO
------------------------------------
Paul E. Fulchino
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons and
in the following capacities on the 7th day of August, 2002.
SIGNATURE TITLE
--------- -----
/s/ PAUL E. FULCHINO Chairman, President and Chief Executive Officer
------------------------------------------------ (Principal Executive Officer)
Paul E. Fulchino
/s/ JACQUELINE K. COLLIER* Vice President and Controller
------------------------------------------------ (Principal Accounting Officer)
Jacqueline K. Collier
/s/ CORNELIUS VAN DEN HANDEL* Vice President and Treasurer
------------------------------------------------ (Principal Financial Officer)
Cornelius Van Den Handel
/s/ PETER J. CLARE* Director
------------------------------------------------
Peter J. Clare
/s/ ALLAN M. HOLT* Director
------------------------------------------------
Allan M. Holt
/s/ DONALD R. MUZYKA* Director
------------------------------------------------
Donald R. Muzyka
/s/ RICHARD J. SCHNIEDERS* Director
------------------------------------------------
Richard J. Schnieders
/s/ JONATHAN M. SCHOFIELD* Director
------------------------------------------------
Jonathan M. Schofield
II-6
SIGNATURE TITLE
--------- -----
/s/ ARTHUR E. WEGNER* Director
------------------------------------------------
Arthur E. Wegner
/s/ BRUCE N. WHITMAN* Director
------------------------------------------------
Bruce N. Whitman
*/s/ JEFFREY J. MURPHY
------------------------------------------------
Jeffrey J. Murphy
(As Attorney-in-fact for each person indicated)
II-7
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
------- -----------
4.1 Restated Certificate of Incorporation of Aviall, Inc.
(Exhibit 3.1 to Aviall, Inc.'s Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 (the "1993 Form
10-K") and incorporated herein by reference)
4.2 Amended and Restated By-Laws of Aviall, Inc. (Exhibit 3.1 to
Aviall, Inc.'s Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1999 and incorporated
herein by reference)
4.3 Form of Common Stock Certificate of Aviall, Inc. (Exhibit 4
to Aviall, Inc.'s Registration Statement on Form 10, as
amended (Commission File No. 1-12380), and incorporated
herein by reference)
4.4 Rights Agreement, dated as of December 7, 1993, by and
between Aviall, Inc. and The First National Bank of Boston
(Exhibit 10.7 to Aviall, Inc.'s 1993 Form 10-K and
incorporated herein by reference)
4.5 Amendment No. 1 to Rights Agreement, dated as of March 14,
2000, by and between Aviall, Inc. and BankBoston, N.A., a
national banking association (as successor to The First
National Bank of Boston) (Exhibit 4.3 to Aviall, Inc.'s
Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 (the "1999 Form 10-K") and incorporated
herein by reference)
4.6 Amendment No. 2 to Rights Agreement, dated as of December
17, 2001, by and between Aviall, Inc. and EquiServe Trust
Company, N.A., a national banking association (as successor
to The First National Bank of Boston) (Exhibit 4.6 to
Aviall, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 2001 (the "2001 Form 10-K") and
incorporated herein by reference)
4.7 Amendment No. 3 to Rights Agreement, dated as of December
21, 2001, by and between Aviall, Inc. and EquiServe Trust
Company, N.A., a national banking association (as successor
to The First National Bank of Boston) (Exhibit 4.7 to
Aviall, Inc.'s 2001 Form 10-K and incorporated herein by
reference)
4.8 Securities Purchase Agreement, dated as of December 17,
2001, by and between Aviall, Inc., Aviall Services, Inc., J.
H. Whitney Mezzanine Fund, L.P., Whitney Private Debt Fund,
L.P., Whitney Limited Partner Holdings, LLC, Blackstone
Mezzanine Partners L.P., Blackstone Mezzanine Holdings L.P.,
Carlyle High Yield Partners, L.P., Oak Hill Securities Fund,
L.P., Oak Hill Securities Fund II, L.P., Lerner Enterprises,
L.P. and P & PK Limited Partnership (Exhibit 4.8 to Aviall,
Inc.'s 2001 Form 10-K and incorporated herein by reference)
4.9 Form of Warrant to purchase common stock of Aviall, Inc.,
entered into as of March 15, 2002, between Aviall, Inc. and
each of J. H. Whitney Mezzanine Fund, L.P., Whitney Private
Debt Fund, L.P., Whitney Limited Partner Holdings, LLC,
Blackstone Mezzanine Partners L.P., Blackstone Mezzanine
Holdings L.P., Carlyle High Yield Partners, L.P., Oak Hill
Securities Fund, L.P., Oak Hill Securities Fund II, L.P.,
Lerner Enterprises, L.P. and P & PK Family Limited
Partnership (Exhibit 4.10 to Aviall, Inc.'s 2001 Form 10-K
and incorporated herein by reference)
4.10 Amended and Restated Registration Rights Agreement, dated as
of March 15, 2002, by and between Aviall, Inc., J. H.
Whitney Mezzanine Fund, L.P., Whitney Private Debt Fund,
L.P., Whitney Limited Partner Holdings, LLC, Blackstone
Mezzanine Partners L.P., Blackstone Mezzanine Holdings L.P.,
Carlyle High Yield Partners, L.P., Oak Hill Securities Fund,
L.P., Oak Hill Securities Fund II, L.P., Lerner Enterprises,
L.P. and P & PK Family Limited Partnership (Exhibit 4.11 to
Aviall, Inc.'s 2001 Form 10-K and incorporated herein by
reference)
5.1* Legal Opinion of Haynes and Boone, LLP
23.1** Consent of PricewaterhouseCoopers LLP
23.2* Consent of Haynes and Boone, LLP (included in its legal
opinion filed as Exhibit 5.1)
24.1* Power of Attorney of the Directors of Aviall, Inc.
(incorporated in the signature page of this Registration
Statement)
---------------
* Previously filed.
** Filed herewith.