10-Q 1 0001.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended November 30, 2000 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from ________________ to __________________. Commission file number 0-18352 ------- INTERNATIONAL AIRLINE SUPPORT GROUP, INC. -------------------------------------------- Delaware 59-2223025 ---------------------------------- ---------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 1954 Airport Road, Suite 200, Atlanta, GA 30341 ----------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (770) 455-7575 -------------- Indicate by check mark whether the registrant (1) has filed all reports Required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. The number of shares of the Company's common stock outstanding as of January 10, 2001 was 2,190,198. INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARYINDEX Page No. -------- Part I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets as of May 31, 2000 and November 30, 2000 3 Condensed Consolidated Statements of Earnings for the Three Months and Six Months Ended November 30, 1999 and 2000 4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended November 30, 1999 and 2000 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 10 Part II OTHER INFORMATION Item 1. Legal Proceedings 14 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 6. Exhibits and Reports on Form 8-K 15 - 2 - INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS ASSETS
May 31, November 30 2000* 2000 ------------- ----------- (unaudited) Current assets Cash and cash equivalents $ 721,111 $ 701,296 Accounts receivable, net of allowance for doubtful accounts of approximately $172,722 at May 31, 2000 and $261,163 at November 30, 2000 2,647,215 2,272,661 Inventories 12,807,512 6,999,589 Deferred tax benefit - current 1,053,888 1,053,888 Other current assets 583,626 435,396 ------- ------- Total current assets 17,813,352 11,462,830 Property and equipment Aircraft in operations 1,114,919 - Aircraft and engines held for lease 12,832,298 18,339,506 Leasehold improvements 176,594 166,991 Machinery and equipment 1,074,576 1,082,604 --------- --------- 15,198,387 19,589,101 Accumulated depreciation 2,263,110 2,530,613 --------- --------- Property and equipment, net 12,935,277 17,058,488 Other assets Investment in joint ventures 3,860,136 5,020,494 Notes receivable affiliate - 848,540 Deferred debt costs, net 228,066 151,367 Deferred tax benefit 345,883 195,961 ------- ------- Total other assets 4,434,085 6,216,362 --------- --------- $ 35,182,714 $ 34,737,680 = ========== = ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current maturities of long-term obligations $ 1,748,642 $ 2,340,115 Accounts payable 1,359,998 2,014,239 Deferred rent - 366,667 Accrued expenses 1,261,147 983,419 --------- ------- Total current liabilities 4,369,787 5,704,440 Long-term obligations, less current maturities 18,345,079 16,378,732 Commitments and contingencies Stockholders' equity Preferred stock - $.001 par value; authorized 2,000,000 shares; 0 shares outstanding at May 31, 2000 and November 30, 2000. - - Common stock - $.001 par value; authorized 20,000,000 shares; issued and outstanding 2,661,723 shares at May 31, 2000 and 2,661,723 shares at November 30, 2000. 2,661 2,661 Additional paid-in capital 13,902,909 13,902,909 Retained earnings 527,769 714,429 Common stock held in treasury, at cost - 471,525 shares at May 31, 2000 and November 30, 2000 (1,965,491) (1,965,491) --------- --------- Total stockholders' equity 12,467,848 12,654,508 ---------- ---------- $ 35,182,714 $ 34,737,680 = ========== = ==========
*Condensed from audited Financial Statements The accompanying notes are an integral part of these condensed financial statements - 3 - FORM 10-Q INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Three Months Ended Six Months Ended November 30, November 30, 1999 2000 1999 2000 ----------- ----------- ---------- ---------- Revenues Net sales $ 5,249,175 $ 3,648,533 $ 13,578,257 $ 9,828,730 Aircraft operations - - - 171,579 Lease and service revenue 958,258 1,026,302 1,627,687 1,444,696 ---------- --------- ---------- ---------- Total revenues 6,207,433 4,674,835 15,205,944 11,445,005 Cost of sales 3,843,089 2,660,639 9,961,421 7,672,877 Selling, general and administrative expenses 1,354,107 1,449,083 3,060,978 2,886,053 Depreciation and amortization 313,187 295,444 590,954 515,751 ---------- --------- ---------- ---------- Total operating costs 5,510,384 4,405,166 13,613,353 11,074,681 Equity in net earnings of unconsolidated subsidiaries 420,737 457,720 821,802 928,235 ---------- --------- ---------- ---------- Earnings from operations 1,117,786 727,389 2,414,393 1,298,559 Interest expense 390,574 481,999 719,740 1,013,659 Interest income and other (income) expenses (23,887) 26,499 (27,829) (51,682) ---------- --------- ---------- ---------- Earnings before income taxes 751,099 218,891 1,722,782 336,582 Provision for income taxes 297,532 101,915 671,720 149,922 ---------- --------- ---------- ---------- Net earnings $ 453,567 $ 116,976 $ 1,050,762 $ 186,660 ========== ========= ========== ========== Per share data: Earnings per share available for common stockholders - basic $ 0.21 $ 0.05 $ 0.48 $ 0.09 Weighted average number of common stock outstanding - basic 2,187,198 2,190,198 2,187,762 2,190,198 ========== ========= ========== ========== Earnings per share available for common stockholders - diluted $ 0.20 $ 0.05 $ 0.45 $ 0.09 Weighted average number of common stock outstanding - diluted 2,324,796 2,190,645 2,326,034 2,190,795 ========== ========= ========== ==========
The accompanying notes are an integral part of these condensed financial statements - 4 - FORM 10-Q INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Six Months ended November 30, 1999 2000 ---------- ---------- Cash flows from operating activities: Net earnings $ 1,050,762 $ 186,660 Adjustments to reconcile net earnings to net cash (used in) provided by operating activities: Depreciation and amortization 590,954 515,751 Loss on sale of investment - - Undistributed equity in earnings of subsidiaries (821,802) (928,235) Provision for income taxes - deferred 671,720 149,922 Changes in assets and liabilities (1,312,291) 2,176,010 ---------- --------- Total adjustments (871,419) 1,913,448 Net cash provided by operating activities 179,343 2,100,108 Cash flows from investing activities: Capital equipment additions (66,841) (15,858) Investment in unconsolidated joint ventures - (287,649) Proceeds from sale of investment - - Distributions received from joint venture, net 153,155 180,000 Additions to aircraft and engines held for lease, net (6,375,000) (2,871,428) ---------- --------- Net cash used in investing activities (6,288,686) (2,994,935) Cash flows from financing activities: Net increase in debt obligations 6,004,056 875,012 Proceeds from exercise of employee stock options 10,707 - ---------- --------- Net cash provided by financing activities 6,014,763 875,012 ---------- --------- Net (decrease) in cash (94,580) (19,815) Cash and cash equivalents at beginning of period 892,283 721,111 ---------- --------- Cash and cash equivalents at end of period $ 797,703 $ 701,296 = ======= = =======
- 5 - INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain adjustments (consisting only of normal and recurring adjustments) necessary to present fairly International Airline Support Group, Inc. and its Subsidiary's condensed consolidated balance sheets as of May 31, 2000 and November 30, 2000, the condensed consolidated statements of earnings for the three and six months ended November 30, 1999 and 2000, and the condensed consolidated statements of cash flows for the six months ended November 30, 1999 and 2000. The accounting policies followed by the Company are described in the May 31, 2000 financial statements. The results of operations for the three and six months ended November 30, 2000 are not necessarily indicative of the results to be expected for the full year. 2. Inventories consisted of the following: May 31, 2000 November 30, 2000 -------------- -------------------- Aircraft parts $ 7,382,143 $ 6,999,589 Aircraft and Engines available for sale 5,425,369 - --------- ----------- $ 12,807,512 $ 6,999,589 ============ ============ 3. Earnings Per Share The Company's basic earnings per share are calculated by dividing net earnings by the weighted average shares outstanding during the period. The computation of diluted earnings per share includes all dilutive common stock equivalents in the weighted average shares outstanding. Financial Accounting Standards Board (FASB) Statement 128 "Earnings Per Share" was adopted by the Company on January 1, 1998 and requires the dual presentation of basic and diluted earnings per share on the face of the statement of earnings. The reconciliation between the computation is as follows: Three Months Ended Net Basic Basic Diluted Diluted November 30, Earnings Shares EPS Shares EPS ------------- -------- ------ --- ------ --- 1999 $ 435,567 2,187,198 $0.21 2,324,796 $0.20 2000 $ 116,976 2,190,198 $0.05 2,191,092 $0.05 - 6 - INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Six Months Ended Net Basic Basic Diluted Diluted November 30, Earnings Shares EPS Shares EPS ------------- -------- ------ --- ------ --- 1999 $1,050,762 2,187,279 $0.48 2,326,034 $0.45 2000 $ 186,660 2,190,198 $0.09 2,190,795 $0.09 Included in diluted shares are common stock equivalents relating to stock options of 137,598 and 894 for the three months ended November 30, 1999 and 2000, respectively, and 138,755 and 597 for the six months ended November 30, 1999 and 2000, respectively. Options to purchase 529,947 shares of common stock at exercise prices ranging from $2.75 to $3.44 per share, which were outstanding during the six months ended November 30, 2000, were not included in the computation of Diluted EPS as of November 30, 2000 because the options' exercise prices were greater than the average market price of the common stock during the period. 4. Credit Facility The Credit Agreement originally entered into by the Company in October of 1996 provided for a $3 million term loan and up to an $11 million revolving credit. The Credit Agreement has been amended eleven times to create several new term loan facilities and to increase the revolving credit to $14 million (collectively referred to as the "Credit Facility"). In the most recent amendment, which occurred subsequent to the end of the quarter, the maturity of the revolving credit facility and the term loan were extended to December 2005, as well as providing an increase in availability as a result of the new term loan. The interest rate that the Company is assessed is subject to fluctuation and may change based upon certain financial covenants. As of January 10, 2001, the interest rate under the Credit Facility was the lender's base rate minus 0.25% (8.75%). The Credit Facility is secured by substantially all of the assets of the Company and availability of amounts for borrowing is subject to certain limitations and restrictions. Such limitations and restrictions are discussed in the Company's Proxy Statement/Prospectus filed with the Securities and Exchange Commission on August 29, 1996 and in the Amendments to the Credit Facility filed on various dates as listed below in Item 6. Exhibits and Reports on Form 8-K. - 7 - INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 5. Supplemental Cash Flow Disclosures: Cash payments for interest were $550,127 and $851,059 for the six months ended November 30, 1999 and November 30, 2000, respectively. Cash and cash equivalents include $335,519 and $117,498 of restricted cash at May 31, 2000 and November 30, 2000, respectively. Restricted cash includes customer receipts deposited into the Company's lockbox account, which are applied the next business day against the outstanding amount of the Credit Facility, and customer deposits on aircraft and engines leases. 6. Related Party Transactions: The Company had a notes receivables affiliate in the principal amount of $848,540 as of November 30, 2000 relating to loans provided to North-South Airways, which are secured by aircraft operated by the airline. The loans are priced at market rates, ranging from 8.75% to 9.50%, with monthly principal payments extending through August 2004. For more information, see Note 7 - Joint Venture/Airline Subsidairy. As of November 30, 2000, the Company leased one EMB-120 aircraft to North-South Airways. The lease originated in September 2000 and has a three-year term. The lease contains similar terms and conditions to other EMB-120 aircraft leases completed by the Company. The Company anticipates leasing a second EMB-120 aircraft to North-South Airways, under the same terms and conditions, during the third quarter of Fiscal 2001. 7. Unconsolidated Subsidiaries On September 16, 1998, the Company entered into a joint venture (the "Air 41 Joint Venture") for the acquisition of 20 DC-9-41H aircraft from Scandinavian Airlines System ("SAS"). The aircraft were leased back to SAS and the leases had an average term of 39 months. The Company's original investment in the Air 41 Joint Venture was approximately $1.5 million. The Company's Air 41 Joint Venture partner is AirCorp, Inc., a privately held company. The aircraft were financed through the joint venture, utilizing non-recourse debt to the partners. The Air 41 Joint Venture is accounted for under the equity method and the leases are treated as operating leases. - 8 - INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 7. Unconsolidated Subsidiaries (cont.) Equity in Net Earnings of Unconsolidated Joint Venture for the first six months of fiscal 2001 was $980,000. Without the Company's share of Air 41's earnings the Company would have had a pretax loss for the first six months of fiscal 2001. It should also be noted that substantially all of Air 41's cash flow is pledged to service Air 41's indebtedness. Although Air 41 was able to re-lease the first aircraft returned off-lease from SAS, two additional aircraft have been returned to Air 41 subsequent to the end of the quarter and other aircraft are scheduled to be returned in the near term. Air 41 is in discussion with a number of carriers for the re-lease of these aircraft and has signed a Letter of Intent for one of the aircraft, however there can be no assurance that any of these aircraft will be able to be re-leased on as favorable terms, if at all. Should Air 41 be unable to re-lease or sell these aircraft, the Company's stated operating income would be significantly impacted. The Company is exploring opportunities for the aircraft after the end of the term of the leases with SAS. Such opportunities include re-leasing the aircraft with SAS, leasing the aircraft to one or more different lessees, selling the aircraft, parting out the aircraft, or directly placing the aircraft into either passenger or cargo service, whereby the Company may have a principal interest in an airline. At this time, other than as previously mentioned, the Company has no firm commitment for the aircraft after the SAS leases expire. During the quarter, the Company's regional airline subsidiary, doing business as North-South Airways, sold additional shares of stock raising approximately $1,000,000. This sale of stock reduced the Company's ownership interest commencing September 1, 2000 in North-South Airways from 100% to approximately 35%. Accordingly, the Company is accounting for their investment in North-South Airways under the equity method. - 9 - INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following is management's discussion and analysis of certain significant factors which have affected the Company's operating results and financial position during the periods included in the accompanying condensed consolidated financial statements. RESULTS OF OPERATIONS: ------------------------ Revenues -------- Total revenue for the three and six months ended November 30, 2000 was $4.7 million and $11.4 million, respectively, compared to $6.2 million and $15.2 million, respectively, during the three and six months ended November 30, 1999. Net sales for the three and six months ended November 30, 2000 were $3.6 million and $9.8 million, respectively, compared to $5.2 million and $13.6 million, respectively, during the three and six months ended November 30, 1999, primarily relating to a decrease in parts sales and aircraft and engine sales. Net sales have been negatively impacted due to increased pricing pressure arising from the financial difficulties of many airlines and other spare parts redistributers. The airlines have been facing higher fuel prices and interest rates, while banks are electing to liquidate insolvent competitors as opposed to reorganization. The Company has attempted to offset and mitigate these negative sales trends by expanding its product lines, but no assurances can be made that sales revenue will increase in the short term. Aircraft and engine sales are unpredictable transactions and may fluctuate significantly from year to year, dependent, in part, upon the Company's ability to purchase an aircraft or engine at an attractive price and resell it within a relatively brief period of time, as well as the overall market for used aircraft or engines. Lease and service revenue increased to $1,026,000 for the three months ended November 30, 2000 from $958,000 for the three ended November 30, 1999, primarily due to more assets being under lease. Lease and service revenue decreased to $1.4 million for the six months ended November 30, 2000 from $1.6 million for the six months ended November 30, 1999, primarily due to fewer assets under lease during the first three months of fiscal 2001 . Under the equity method of accounting, lease revenue from the Air 41 Joint Venture is not included in the Company's revenue. - 10 - INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY Cost of Sales --------------- Cost of sales decreased 29% from $3.8 million during the three months ended November 30, 1999 to $2.7 million during the three months ended November 30, 2000. Cost of sales decreased 23% from $10.0 million during the six months ended November 30, 1999 to $7.7 million during the six months ended November 30, 2000. These decreases were due primarily to a corresponding decrease in revenue. As a percentage of total revenues, cost of sales for the three and six months ended November 30, 1999 was 61.9% and 65.5%, respectively, compared to 56.9% and 67.0% during the three and six months ended November 30, 2000, respectively. The decrease in costs of sales as a percentage of total revenue for the three-month period is due to improved margins on part sales. The increase in costs of sales as a percentage of total revenue for the six-month period is due to aircraft and engine sales, which typically carry a lower margin than part sales, being a higher percentage of total sales during the six-month period in 2000 than the corresponding period in 1999. Selling, General and Administrative Expenses ------------------------------------------------ Selling, general and administrative expenses increased 7% from $1.35 million during the three months ended November 30, 1999 to $1.45 million during the three months ended November 30, 2000, primarily due to an increase in insurance costs, travel and entertainment expenses, professional fees, and the provision for doubtful accounts. Selling, general and administrative expenses decreased 6% from $3.1 million during the six months ended November 30, 1999 to $2.9 million during the six months ended November 30, 2000, primarily due to lower professional fees, outside commissions and temporary help, partially offset by higher insurance costs. Depreciation and Amortization ------------------------------- Depreciation and amortization for the three and six months ended November 30, 2000 totaled $295,000 and $516,000, respectively, compared to $313,000 and $591,000, respectively, for the three and six months ended November 30, 1999, respectively. This decrease was due to an increase in assets with longer useful lives and therefore lower monthly depreciation expenses being leased. Interest Expense ----------------- Interest expense for the three and six months ended November 30, 1999 was $391,000 and $720,000, respectively, compared to $482,000 and $1,014,000 for the three and six months ended November 30, 2000, respectively. This increase in interest expense was due to a higher average of total debt outstanding during this period and an increase in the interest rate paid by the Company (see Liquidity and Capital Resources). - 11 - INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY Net Earnings ------------- Earnings per share - diluted for the second quarter of fiscal 2000 were $0.20, based on 2,324,796 weighted average shares outstanding, compared to earnings per share - diluted for the second quarter of fiscal 2001 of $0.05, based on 2,191,092 weighted average shares outstanding. Earnings per share - diluted for the first six months of fiscal 2000 were $0.45, based on 2,326,034 weighted average shares outstanding, compared to earnings per share - diluted for the first six months of fiscal 2001 of $0.09 per share - diluted, based on 2,190,795 weighted average shares outstanding. Liquidity and Capital Resources ---------------------------------- The Credit Agreement originally entered into by the Company in October of 1996 provided for a $3 million term loan and up to an $11 million revolving credit. The Credit Agreement has been amended eleven times to create several new term loan facilities and to increase the revolving credit to $14 million (collectively referred to as the "Credit Facility"). In the most recent amendment, which occurred subsequent to the end of the quarter, the maturity of the revolving credit facility and the term loan were extended to December 2005, as well as providing an increase in availability as a result of the new term loan. The interest rate that the Company is assessed is subject to fluctuation and may change based upon certain financial covenants. As of January 10, 2001, the interest rate under the Credit Facility was the lender's base rate minus 0.25% (8.75%). The Credit Facility is secured by substantially all of the assets of the Company and availability of amounts for borrowing is subject to certain limitations and restrictions. Such limitations and restrictions are discussed in the Company's Proxy Statement/Prospectus filed with the Securities and Exchange Commission on August 29, 1996 and in the Amendments to the Credit Facility filed on various dates as listed below in Item 6. Exhibits and Reports on Form 8-K. Net cash provided by operating activities for the six months ended November 30, 2000 and November 30, 1999 were $2,100,000 and $179,000, respectively. The cash provided by operating activities for six months ended November 30, 1999 was due primarily to improved collection of accounts receivables. The cash used in operating activities for the six months ended November 30, 2000 was due primarily to a reduction in accounts receivables, a decrease in inventories and an increase in accounts payable. Net cash used for investing activities for the six months ended November 30, 1999 amounted to $6,289,000 compared to $2,995,000 for the six months ended November 30, 2000. The net cash used for investing activities for the six months ended November 30, 1999 was primarily the result of the use of $6,375,000 to purchase aircraft and engines. The net cash used for investing activities for the six months ended November 30, 2000 was primarily the result of the purchase of an aircraft. - 12 - INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY Liquidity and Capital Resources (cont.) ------------------------------------------- Net cash provided by financing activities for the six months ended November 30, 1999 amounted to $6,015,000 compared to $875,000 for the six months ended November 30, 2000. The net cash provided by financing activities for the six months ended November 30, 1999 was the result of a net increase in debt obligations of $6 million due to the borrowing of funds for the acquisition of aircraft and engines. The net cash provided by financing activities for the six months ended November 30, 2000 was primarily the result of the borrowing of funds to purchase an aircraft. At January 12, 2001, the Company was permitted to borrow up to an additional $3.4 million pursuant to the revolving credit facility. As operations are currently conducted, the Company believes that amounts available to be borrowed pursuant to the Credit Agreement and its working capital will be sufficient to meet the requirements of the Company's business for the foreseeable future. The Company had no material commitments for capital expenditures as of November 30, 2000. Recent Accounting Pronouncements ---------------------------------- In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (FAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." FAS No. 133, as amended by FAS 138, establishes standards for accounting and reporting for derivative instruments, and conforms the requirements for treatment of different types of hedging activities. This statement is effective for all fiscal years beginning after June 15, 2000. Management does not expect this standard to have a significant impact on the Company's operations. Forward Looking Statements ---------------------------- This Form 10-Q contains statements that may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Those statements include statements regarding the capital spending and future financing plans of the Company and reflect the intent, belief or current expectations of the Company and members of its management team. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. - 13 - INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS The Company is from time to time subject to legal proceedings and claims that arise in the ordinary course of its business. On the date hereof, no such proceedings are pending and no such claims have been asserted. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Registrant conducted an annual meeting of its stockholders on October 4, 2000. The Registrant solicited proxies pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. There was no solicitation in opposition to management's solicitation and all persons nominated by the Registrant for election to its Board of Directors at the annual meeting were so elected. The following sets forth a brief description of each other matter acted upon during the Annual Meeting, indicating the number of votes cast for, against and withheld, and the number of broker non-votes as to each matter. 1. The election of two Class II directors to hold office until the annual stockholders meeting in 2003, or until their successors are duly elected and qualified. The following table sets forth certain information regarding the votes cast by the holders of the Company's Common Stock with respect to the election of directors. Director Votes For Abstentions -------- ---------- ----------- Alexius A. Dyer III 1,546,565 104,751 George Murnane III 1,546,565 104,751 2. The approval of amendments to the Registrant's Restated and Amended Certificate of Incorporation to provide for a one-for-four reverse stock split with respect to the Company's Common Stock. For: 1,516,865 Against: 483,688 Abstain: 181,540 Broker Non-Vote: 0 3. The approval of an amendment to the Company's 1996 Long Term Incentive and Share Award Program to increase by 109,000 (27,250 if the reverse stock split is completed) the number of shares available for grant under the Plan. For: 1,464,492 Against: 529,660 Abstain: 187,941 Broker Non-Vote: 0 - 14 - Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (cont.) 4. To ratify the appointment of Grant Thornton LLP as the Company's independent auditors for the fiscal year ending May 31, 2001. For: 1,929,677 Against: 70,556 Abstain: 181,860 Broker Non-Vote: 0 Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -------- EXHIBIT NUMBER DESCRIPTION PAGE NUMBER OR METHOD OF FILING 2.4 Credit Incorporated by reference to Exhibit 2.4 to Agreement Amendment No. 2 to the Company's Registration between BNY Statement on Form S-4 filed on August 29, 1996 (File Financial No. 333-08065). Corporation and the Registrant (the "Credit Agreement"). 2.5 First Amendment, Incorporated by Reference. Waiver and Agreement, dated as of March 24, 1997, between BNY Financial Corporation and the Registrant and related to the Credit Agreement. 2.6 Second Incorporated by Reference. Amendment and Agreement, dated as of September 9, 1997, between BNY Financial Corporation and the Registrant and related to the Credit Agreement. 2.7 Third Amendment and Incorporated by Reference. Agreement, dated as of October 15, 1997, between BNY Financial Corporation and the Registrant and related to the Credit Agreement. 2.8 Fourth Amendment and Incorporated by Reference. Agreement, dated as of February 2, 1998, between BNY Financial Corporation and the Registrant and related to the Credit Agreement. 2.9 Fifth Amendment, Incorporated by Reference. dated as of July 16, 1998, between BNY Financial Corporation and the Registrant and related to the Credit Agreement. 2.10 Sixth Amendment, Incorporated by Reference dated as of May 30, 1998, between BNY Financial Corporation and the Registrant and related to the Credit Agreement. 2.11 Seventh Amendment, Incorporated by Reference. dated as of October 28, 1998, between BNY Financial Corporation and the Registrant and related to the Credit Agreement. - 15 - EXHIBIT NUMBER DESCRIPTION PAGE NUMBER OR METHOD OF FILING 2.12 Eight Amendment and Agreement Incorporated by Reference. dated as of December 8, 1998, by and among BNY Financial Corporation and the Registrant and related to the Credit Agreement. 2.13 Ninth Amendment and Agreement Incorporated by Reference. dated as of July 1, 1999, by and between the Registered and BNY Factoring LLC, as successor in interest to BNY Financial Corporation and related to the Credit Agreement. 2.14 Tenth Amendment and Agreement Incorporated by Reference. dated as of November 17, 1999, by and between the Registered and GMAC Commercial Credit LLC, as successor in interest By merger to BNY Financial Corporation And related to the Credit Agreement. 2.15 Eleventh Amendment, Waiver and Incorporated by Reference. Agreement dated as of January 5, 2001, by and between the Registered and GMAC Commercial Credit LLC, as successor in interest By merger to BNY Financial Corporation And related to the Credit Agreement. 3.1 Amended and Incorporated by reference to Exhibit 3.1 to the Restated Company's Annual Report on Form 10-K for the fiscal Certificate year ended May 31, 1996 (the "1996 Form 10-K"). of Incorporation of the Registrant. 3.2 Restated and Incorporated by reference to Exhibit 3.2 to the 1996 Amended Form 10-K. Bylaws of the Registrant. 4.1 Specimen Incorporated by reference to Exhibit 4.1 to the 1996 Common Stock Form 10-K. Certificate. 10.1.1 Employment Incorporated by reference to Exhibit 10.1.1 to the Agreement, 1996 Form 10-K dated as of December 1, 1995, between the Registrant and Alexius A. Dyer III, as amended on October 3, 1996. 10.1.2 Employment Incorporated by reference to Exhibit 10.1.2 to the Agreement Company's Quarterly Report for the quarter ended dated as of February 28, 1997. October 3, 1996, between the Registrant and George Murnane III. 10.2.1 1996 Long- Incorporated by reference to Appendix B to the Proxy Term Statement/Prospectus included in the Company's Incentive and Registration Statement on Form S-4 (File Share Award No. 333-08065), filed on July 12, 1996. Plan. - 16 - EXHIBIT NUMBER DESCRIPTION PAGE NUMBER OR METHOD OF FILING 10.2.2 401(k) Plan. Incorporated by reference to Exhibit 10-H to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1992 (the "1992 Form 10-K"). 10.2.3 Bonus Plan. Incorporated by reference to Exhibit 10.2.4 to the 1992 Form 10-K. 10.2.4 Cafeteria Incorporated by reference to Exhibit 10.2.5 of the Plan. Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1993. 10.2.5 Form of Incorporated by reference to Exhibit 10.2.5 to the Option 1996 Form 10-K. Certificate (Employee Non-Qualified Stock Option). 10.2.6 Form of Incorporated by reference to Exhibit 10.2.6 to the Option 1996 Form 10-K. Certificate (Director Non-Qualified Stock Option). 10.2.7 Form of Incorporated by reference to Exhibit 10.2.7 to the Option 1996 Form 10-K. Certificate (Incentive Stock Option). 10.14 Commission Incorporated by reference to Exhibit 10.14 to the Agreement 1996 Form 10-K. Dated December 1, 1995 between the Registrant and J.M. Associates, Inc. 10.15 Operating Incorporated by reference to Exhibit 10.14 to the Air41 LLC, Exhibit 10.15 to the 1999 Form 10-K dated as of September 9, 1998, by and between AirCorp, Inc. and the Company 10.16 Office Lease Incorporated by reference to Exhibit 10.17 to the Agreement 1997 Form 10-K. dated January 31, 1997 between the Registrant and Globe Corporate Center, as amended. 10.17 Lease Incorporated by reference to Exhibit 10.18 to the Agreement 1997 Form 10-K. dated March 31, 1997 between the Registrant and Port 95- 4, Ltd. 10.18 Securities Purchase Filed herewith Agreement, dated September, 18, 2000, among Diamond Aviation, Inc., the Registrant And the purchasers named therein. 10.19 Stockholders Agreement, dated September 18, 2000, among Diamond Aviation, Inc., and The stockholders therof. 27 Financial Filed herewith. Data Schedule.
- 17 - (b) Reports on Form 8-K ---------------------- None - 18 - INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INTERNATIONAL AIRLINE SUPPORT GROUP, INC. -------------------------------------------- (Registrant) /s/James M. Isaacson January 16, 2001 ---------------------- ------------------ James M. Isaacson Date Chief Financial Officer - 19 -