-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ht9HK76dZOnwlvevlFDBAkjEQWzFxtYS9YOHpzzjGeSZNo2BcEeymSdJeVUfmOfw AOe+IBH1fbHgcTrmyMXHWg== /in/edgar/work/0000950144-00-013829/0000950144-00-013829.txt : 20001115 0000950144-00-013829.hdr.sgml : 20001115 ACCESSION NUMBER: 0000950144-00-013829 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KELLSTROM INDUSTRIES INC CENTRAL INDEX KEY: 0000918275 STANDARD INDUSTRIAL CLASSIFICATION: [3724 ] IRS NUMBER: 133753725 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23764 FILM NUMBER: 766122 BUSINESS ADDRESS: STREET 1: 1100 INTERNATIONAL PARKWAY CITY: SUNRISE STATE: FL ZIP: 33323 BUSINESS PHONE: 9548450427 MAIL ADDRESS: STREET 1: 1100 INTERNATIONAL PARKWAY CITY: SUNRISE STATE: FL ZIP: 33323 FORMER COMPANY: FORMER CONFORMED NAME: ISRAEL TECH ACQUISITION CORP DATE OF NAME CHANGE: 19940301 10-Q 1 g65156e10-q.txt KELLSTROM INDUSTRIES 10-Q DATED 09/30/00 1 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 September 30, 2000 [ ] 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 0-23764 KELLSTROM INDUSTRIES, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 13-3753725 - -------- ---------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 1100 INTERNATIONAL PARKWAY, SUNRISE, FLORIDA 33323 - -------------------------------------------- ----- (Address of principal executive offices) (Zip Code) (954) 845-0427 ---------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: 11,910,981 shares of common stock, $.001 par value per share, were outstanding as of October 31, 2000. 2 KELLSTROM INDUSTRIES, INC. -------------------------- INDEX -----
Page Number ----------- PART I ------ Item 1. Financial Statements: Condensed Consolidated Balance Sheets ..................................................... 3 Condensed Consolidated Statements of Earnings ............................................. 4 Condensed Consolidated Statements of Cash Flows ........................................... 5 Notes to Condensed Consolidated Financial Statements ...................................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................................................................... 11 Item 3. Quantitative and Qualitative Disclosures About Market Risk ................................. 17 PART II ------- Item 1. Legal Proceedings........................................................................... 18 Item 2. Changes in Securities and Use of Proceeds .................................................. 18 Item 3. Defaults Upon Senior Securities............................................................. 18 Item 4. Submission of Matters to a Vote of Security Holders......................................... 18 Item 5. Other Information........................................................................... 18 Item 6. Exhibits and Reports on Form 8-K............................................................ 19
2 3 ITEM 1. FINANCIAL STATEMENTS - ----------------------------- KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30, 2000 December 31, 1999 ------------------ ----------------- ASSETS Current Assets: Cash and cash equivalents $ 2,954,668 $ 272,140 Trade receivables, net of allowances for returns and doubtful accounts of $6,978,909 and $8,575,684 for 2000 and 1999, respectively 60,585,763 60,674,708 Inventories 219,258,237 194,490,995 Equipment under short-term operating leases, net 83,252,414 92,135,910 Prepaid expenses 5,744,571 5,199,429 Deferred tax assets 6,977,347 8,280,101 ------------- ------------- Total current assets 378,773,000 361,053,283 Equipment under long-term operating leases, net 33,885,626 58,001,190 Property, plant and equipment, net 28,494,731 25,339,940 Goodwill, net 86,007,605 87,825,058 Other assets 15,069,494 9,225,952 ------------- ------------- Total Assets $ 542,230,456 $ 541,445,423 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term debt $ 155,911,163 $ 165,773,805 Notes payable -- 2,145,920 Current maturities of long-term debt 200,000 200,000 Accounts payable 28,606,721 17,713,220 Accrued expenses 16,711,754 18,133,718 ------------- ------------- Total current liabilities 201,429,638 203,966,663 Long-term debt, less current maturities 17,520,000 17,720,000 Convertible subordinated notes 140,250,000 140,250,000 Deferred tax liabilities 8,434,941 8,295,682 ------------- ------------- Total Liabilities 367,634,579 370,232,345 Stockholders' Equity: Common stock, $ .001 par value; 50,000,000 shares authorized; 11,910,981 shares issued and outstanding in 2000 and 1999 11,911 11,911 Additional paid-in capital 121,103,653 121,103,653 Retained earnings 55,243,449 51,668,184 Loans receivable from directors and officers (1,744,002) (1,572,730) Accumulated other comprehensive (loss) income (19,134) 2,060 ------------- ------------- Total Stockholders' Equity 174,595,877 171,213,078 ------------- ------------- Total Liabilities and Stockholders' Equity $ 542,230,456 $ 541,445,423 ============= =============
See accompanying notes to condensed consolidated financial statements 3 4 KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, -------------------------------- -------------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ Sales revenues, net $ 96,139,438 $ 59,607,297 $241,338,213 $205,638,182 Rental revenues 4,886,796 11,123,405 16,406,032 32,375,428 ------------ ------------ ------------ ------------ Total revenues 101,026,234 70,730,702 257,744,245 238,013,610 Cost of goods sold 74,344,258 40,396,903 178,682,741 139,907,012 Depreciation of equipment under operating leases 4,255,390 7,405,205 14,219,452 20,589,612 Selling, general and administrative expenses 11,888,778 10,233,587 35,154,137 29,399,496 Depreciation and amortization 1,713,661 1,405,755 4,816,439 3,916,919 Other non-recurring expenses -- -- -- 2,200,000 ------------ ------------ ------------ ------------ Total operating expenses 92,202,087 59,441,450 232,872,769 196,013,039 Operating income 8,824,147 11,289,252 24,871,476 42,000,571 Interest expense, net of interest income 6,400,499 5,865,778 19,159,513 15,318,253 ------------ ------------ ------------ ------------ Income before income taxes 2,423,648 5,423,474 5,711,963 26,682,318 Income taxes 904,021 2,012,122 2,136,698 10,089,643 ------------ ------------ ------------ ------------ Net income $ 1,519,627 $ 3,411,352 $ 3,575,265 $ 16,592,675 ============ ============ ============ ============ Earnings per common share - basic $ 0.13 $ 0.29 $ 0.30 $ 1.40 ============ ============ ============ ============ Earnings per common share - diluted $ 0.13 $ 0.27 $ 0.30 $ 1.17 ============ ============ ============ ============ Weighted average number of common shares outstanding - basic 11,910,981 11,910,981 11,910,981 11,836,984 ============ ============ ============ ============ Weighted average number of common shares outstanding - diluted 11,941,619 14,471,242 11,944,704 16,672,356 ============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements 4 5 KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, --------------------------------- 2000 1999 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,575,265 $ 16,592,675 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 4,816,439 3,916,919 Depreciation of equipment under operating leases 14,219,452 20,589,612 Amortization of deferred financing costs 1,557,477 1,523,333 Deferred income taxes 1,442,013 (641,854) Changes in operating assets and liabilities: Decrease (increase) in trade receivables, net 1,441,480 (12,815,795) Increase in inventories (10,835,380) (39,611,046) Decrease (increase) in equipment under operating leases 5,150,512 (39,073,535) Increase in prepaid expenses and other current assets (545,142) (2,298,635) Increase in other assets (2,385,430) (245,792) Increase in accounts payable 8,307,233 560,590 Increase in accrued expenses 1,060,389 470,514 Increase in income taxes payable -- (1,203,407) ------------ ------------ Net cash provided by (used in) operating activities 27,804,308 (52,236,421) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions, net of cash acquired (5,927,294) (19,694,299) Acquisition earn-out payments (3,618,646) (5,058,887) Purchase of property, plant and equipment (3,196,007) (10,204,051) Proceeds from sales of property, plant and equipment -- 56,763 ------------ ------------ Net cash used in investing activities (12,741,947) (34,900,474) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings under line of credit agreement (10,062,642) 97,855,245 Debt repayment, including capital lease obligation (2,145,920) (5,045,207) Proceeds from the issuance of common stock -- 1,096,538 Loans to directors and officers (171,271) (192,658) Payment of deferred financing costs -- (474,372) ------------ ------------ Net cash (used in) provided by financing activities (12,379,833) 93,239,546 ------------ ------------ NET INCREASE IN CASH & CASH EQUIVALENTS 2,682,528 6,102,651 CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD 272,140 1,107,102 ------------ ------------ CASH & CASH EQUIVALENTS, END OF PERIOD $ 2,954,668 $ 7,209,753 ============ ============
(continued) See accompanying notes to condensed consolidated financial statements 5 6 KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued)
Nine Months Ended September 30, ------------------------------- 2000 1999 ----------- ----------- Supplemental disclosures of non-cash investing and financing activities: Acquisition assets acquired with payment due in 2000 and 2001 $ 2,546,549 $ -- =========== =========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $16,289,653 $12,116,504 =========== =========== Income taxes $ 555,527 $14,660,263 =========== =========== Supplemental disclosure of fair value of assets acquired and liabilities assumed in connection with acquisitions: Receivables -- 3,570,615 Inventory 260,000 13,014,566 Prepaid expenses and other current assets -- 453,861 Property, plant and equipment 2,116,000 -- Goodwill 1,250,000 12,933,723 Other assets 4,847,843 85,280 ----------- ----------- Total assets $ 8,473,843 $30,058,045 =========== =========== Accrued expenses $ -- $ 368,219 Accounts payable -- 4,658,250 Income taxes payable -- 423,435 Notes payable -- 2,727,224 Deferred tax liabilities -- 2,186,618 ----------- ----------- Total liabilities $ -- $10,363,746 =========== =========== Net assets acquired 8,473,843 19,694,299 Less payments due in 2000 and 2001 2,546,549 -- ----------- ----------- Net cash used in acquisitions $ 5,927,294 $19,694,299 =========== ===========
See accompanying notes to condensed consolidated financial statements 6 7 KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION The accompanying condensed consolidated financial statements include the accounts of Kellstrom Industries, Inc. and its subsidiaries (the "Company") after elimination of intercompany accounts and transactions. These statements have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The condensed consolidated balance sheet as of December 31, 1999 has been derived from audited financial statements. In order to prepare the financial statements in conformity with generally accepted accounting principles, management has made a number of estimates and assumptions relating to the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to such rules and regulations of the SEC. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's latest annual report on Form 10-K. Certain 1999 financial statement amounts have been reclassified to conform with the 2000 presentation. In the opinion of management of the Company, the condensed consolidated financial statements reflect all adjustments (which consist only of normal recurring adjustments) necessary to present fairly the condensed consolidated financial position of the Company as of September 30, 2000, the condensed consolidated results of operations for the three and nine month periods ended September 30, 2000 and 1999, and the condensed consolidated statements of cash flows for the nine month periods ended September 30, 2000 and 1999. The results of operations for such interim periods are not necessarily indicative of the results for the full year. NOTE 2 - ACQUISITIONS On April 29, 1999, the Company acquired all of the outstanding capital stock of Certified Aircraft Parts, Inc. ("Certified") for $16.7 million in cash, and assumed $2.7 million in debt. During the third quarter of 2000, the Company completed two acquisitions for $5.9 million in cash, $2.5 million in payments due in 2000 and 2001, plus up to $11.7 million cash consideration which may be paid in the form of an earn-out payable over ten years based on certain specified criteria. These acquisitions were accounted for using the purchase method of accounting for business combinations and accordingly, those companies' operating results have been included in the Company's results of operations since the dates of acquisition. Purchase price allocations related to these acquisitions are preliminary. 7 8 NOTE 3 - EARNINGS PER SHARE Diluted earnings per share for the three and nine month periods ended September 30, 2000 and 1999 were calculated as follows:
Three Months Ended Nine Months Ended September 30, September 30, ------------------------------ ------------------------------ 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Net income $ 1,519,627 $ 3,411,352 $ 3,575,265 $16,592,675 Income adjustment relating to reduction of debt based on the if converted method -- 488,261 -- 2,921,374 ----------- ----------- ----------- ----------- Net income available to common and common equivalent shares $ 1,519,627 $ 3,899,613 $ 3,575,265 $19,514,049 =========== =========== =========== =========== Weighted average number of common shares outstanding - basic 11,910,981 11,910,981 11,910,981 11,836,984 Dilutive common stock equivalents from stock options and warrants based on the treasury stock method 30,638 596,625 33,723 1,102,505 Dilutive convertible subordinated notes based on the if converted method -- 1,963,636 -- 3,732,867 ----------- ----------- ----------- ----------- Weighted average number of common shares outstanding - diluted 11,941,619 14,471,242 11,944,704 16,672,356 =========== =========== =========== ===========
In the computation of diluted earnings per common share for the three-month periods ended September 30, 1999 and 2000, approximately 1.1 million and 3.6 million stock options, respectively, were excluded because their inclusion would have been antidilutive. Conversion of the 5 1/2% convertible subordinated notes was not assumed for the three-month period ended September 30, 1999 because of its antidilutive effect. Additionally, conversion of the 5 1/2% and 5 3/4% convertible subordinated notes was not assumed for the three-month period ended September 30, 2000 because of its antidilutive effect. In the computation of diluted earnings per common share for the nine-month periods ended September 30, 1999 and 2000, approximately .9 million and 3.7 million stock options, respectively, were excluded because their inclusion would have been antidilutive. Additionally, conversion of the 5 1/2% and 5 3/4% convertible subordinated notes was not assumed for the nine-month period ended September 30, 2000 because of its antidilutive effect. NOTE 4 - SEGMENT REPORTING The Company is organized based on the products that it offers. Under this organizational structure, the Company has four reportable segments: (i) Commercial Engine Parts, (ii) Defense (iii) Whole Engine and Aircraft and (iv) Airframe Avionics and Rotables. The Commercial Engine Parts segment is involved in the business of purchasing, overhauling (primarily through subcontractors), reselling and leasing of engine parts for large turbo-fan engines manufactured by CFM International, General Electric, Pratt & Whitney and Rolls Royce. The Defense segment is an after-market reseller of aircraft parts and turbojet engines and engine parts for helicopters and large transport aircraft. The segment's primary focus is on the Lockheed Martin C-130 Hercules aircraft, a widely used military transport aircraft, the Allison (Rolls Royce) T56/501 engine, which powers this aircraft, and the Allison 250, with approximately 16,000 units actively in use by helicopters. The acquisition of Certified on April 29, 1999 enhanced the Company's presence in this market segment. The Whole Engine and Aircraft segment leases and resells whole engines and aircraft. The Airframe Avionics and Rotables segment is engaged in the sale of a wide variety of aircraft rotables and expendable components including flight data recorders, electrical and mechanical equipment and radar and navigation systems. The Company's reportable segments are managed separately because each business requires different technology and product knowledge. The Company has not historically allocated selling, general and administrative expenses, depreciation and amortization, interest expense or income taxes to its business 8 9 segments. Rather, the Company evaluates performance of the business segments based on revenue and gross margins. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The following table sets forth the revenue and margins for each of the Company's business segments for the three and nine month periods ended September 30, 2000 and 1999:
Three Months Ended Nine Months Ended September 30, September 30, -------------------------------- -------------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ REVENUES Commercial Engine Parts $ 21,946,698 $ 20,675,571 $ 65,524,127 $ 52,410,489 Defense 19,861,284 13,679,164 54,730,079 33,507,626 Airframe Avionics and Rotables 17,691,456 12,722,562 45,751,007 37,883,067 Whole Engine and Aircraft 41,526,796 23,653,405 91,739,032 114,212,428 ------------ ------------ ------------ ------------ Total revenue $101,026,234 $ 70,730,702 $257,744,245 $238,013,610 ============ ============ ============ ============ GROSS MARGIN Commercial Engine Parts $ 6,103,791 $ 7,286,622 $ 21,812,580 $ 18,029,213 Defense 6,770,380 4,846,416 19,285,365 11,987,739 Airframe Avionics and Rotables 4,614,087 3,722,338 12,509,408 9,968,142 Whole Engine and Aircraft 4,938,328 7,073,218 11,234,699 37,531,892 ------------ ------------ ------------ ------------ Total gross margin $ 22,426,586 $ 22,928,594 $ 64,842,052 $ 77,516,986 ============ ============ ============ ============
NOTE 5 - COMPREHENSIVE INCOME The Company's total comprehensive income, comprised of net income and foreign currency translation adjustments, for the three and nine month periods ended September 30, 2000 and 1999 was as follows:
Three Months Ended Nine Months Ended September 30, September 30, ------------------------------- ------------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Net income $ 1,519,627 $ 3,411,352 $ 3,575,265 $16,592,675 Foreign currency translation adjustments (10,079) 5,793 (21,194) 4,906 ----------- ----------- ----------- ----------- Other comprehensive income, net of taxes (10,079) 5,793 (21,194) 4,906 ----------- ----------- ----------- ----------- Total Comprehensive income $ 1,509,548 $ 3,417,145 $ 3,554,071 $16,597,581 =========== =========== =========== ===========
NOTE 6 - OTHER MATTERS On July 7, 1999, the Company settled a lawsuit brought by the Estate of the late Mr. Joram Rosenfeld (a former Director of the Company) with respect to, among other things, a claim alleging entitlement to a stock option grant in late 1996. The settlement was entered into in order to limit the expense of litigating the suit as well as the protracted use of management's time and related corporate resources. For the second quarter ended June 30, 1999, the Company recorded a one-time pre-tax charge of approximately $2.2 million to fulfill its obligation under the settlement and for accrued legal expenses. The Company is not aware of any material legal proceedings pending against the Company or any of its property. However, the Company may become party to various claims, legal actions and complaints arising in the ordinary course of business or otherwise. The Company cannot determine whether such actions would have a material impact on the financial condition, results of operations or cash flows of the Company. On September 20, 2000, the Company entered into a definitive agreement to acquire the aircraft and engine parts resale business of Aviation Sales Company, which is operated through its Aviation Sales 9 10 Distribution Services Company ("AVSDC") subsidiary. Specifically, the Company will acquire select AVSDC non-inventory assets and assume a portion of AVSDC's accounts payable and accrued expenses. In connection with this agreement, the Company and Aviation Sales Company will also establish an off-balance sheet joint venture that will acquire the inventory of AVSDC and enter into an exclusive arrangement with the Company to sell the inventory through its inventory management business. The Company expects to consolidate the operations of AVSDC with its Solair and Commercial Engine Divisions. Consummation of the transaction is contingent upon completion of required financing and approval by the parties' existing lenders. 10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE KELLSTROM INDUSTRIES, INC. (THE "COMPANY") UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO INCLUDED ELSEWHERE HEREIN. IN ADDITION, REFERENCE SHOULD BE MADE TO THE COMPANY'S AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO AND RELATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INCLUDED IN THE COMPANY'S MOST RECENT ANNUAL REPORT ON FORM 10-K. Certain matters discussed in this Form 10-Q may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995, with respect to the Company's business, financial condition and results of operations. Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Investors are cautioned that any 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. Factors that may cause actual future events to differ materially from the Company's forward-looking statements include, but are not limited to the following: o the Company's continuing ability to effectively integrate acquired companies and the effects of increased indebtedness as a result of the Company's business acquisitions; o the Company's continuing ability to acquire adequate inventory and to obtain favorable pricing for such inventory; o the Company's ability to arrange for the repair of aircraft engines and engine parts by third-party contractors prior to resale or lease; o the Company's ability to control costs; o competitive pricing for the Company's products; o customer concentration; o fluctuations in demand for the Company's products, which are dependent upon the condition of the airline industry and the Company's ability to collect receivables; o changes in government regulation; o the availability to the Company of acquisitions and expansion opportunities on attractive terms; o the Company's ability to develop and implement systems to manage rapidly growing operations; o the availability of capital to fund current operations, growth and acquisition opportunities; o the ability to consummate the transaction with Aviation Sales Company; and o adverse conditions in the capital markets or in the general economy. GENERAL The Company is a leader in the airborne equipment segments of the international aviation services after-market. The Company's principal business is the purchasing, overhauling (primarily through subcontractors), reselling and leasing of aircraft, avionics and aircraft rotables, and aircraft engines and engine parts. The Company's historical growth has resulted from a number of factors, including the expansion of the Company's product lines, customer base and market share, increases in the Company's internal growth, cost controls and overall operating efficiencies, acquisitions in existing and adjacent markets and significant capital investments. On April 29, 1999 the Company acquired Certified. Additionally, during the third quarter of 2000, the Company completed two acquisitions. These acquisitions were accounted for using the purchase method of accounting for business combinations and accordingly, those companies' operating results have been included in the Company's results of operations since the respective dates of acquisition. Consequently, the results of operations for the three and nine month periods ended September 30, 2000 are not comparable to the corresponding periods of the prior year in certain material respects. On September 20, 2000, the Company entered into a definitive agreement to acquire the aircraft and engine parts resale business of Aviation Sales Company, which is operated through its Aviation Sales Distribution Services Company ("AVSDC") subsidiary. Specifically, the Company will acquire select AVSDC non-inventory assets and assume a portion of AVSDC's accounts payable and accrued expenses. The Company expects to consolidate the operations of AVSDC with its Solair and Commercial Engine Divisions. Consummation of the transaction is contingent upon completion of required financing and approval by the parties' existing lenders. Consummation of the transaction is contigent upon completion of required financing and approval by the parties' existing lenders. 11 12 RESULTS OF OPERATIONS For the periods indicated, the following table sets forth the percentage of certain income statement items to total revenues derived from the Company's condensed consolidated statements of earnings.
Percentage of Total Revenues Percentage of Total Revenues -------------------------------- ------------------------------- Three Months Ended September 30, Nine Months Ended September 30, -------------------------------- ------------------------------- 2000 1999 2000 1999 ------ ------ ------ ------ Revenues: Sales revenues, net 95.2% 84.3% 93.6% 86.4% Rental revenues 4.8% 15.7% 6.4% 13.6% Total revenues 100.0% 100.0% 100.0% 100.0% Operating expenses: Cost of goods sold 73.6% 57.1% 69.3% 58.8% Depreciation of equipment under operating leases 4.2% 10.5% 5.5% 8.7% Selling, general and administrative expenses 11.8% 14.5% 13.6% 12.4% Depreciation and amortization expense 1.7% 2.0% 1.9% 1.6% Other non-recurring expenses 0.0% 0.0% 0.0% 0.9% Total operating expenses 91.3% 84.0% 90.4% 82.4% Operating income 8.7% 16.0% 9.6% 17.6% Interest expense (net of interest income) 6.3% 8.3% 7.4% 6.4% Income before income taxes 2.4% 7.7% 2.2% 11.2% Income taxes 0.9% 2.8% 0.8% 4.2% Net income 1.5% 4.8% 1.4% 7.0%
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 Consolidated sales revenues increased by 61% to $96.1 million for the three months ended September 30, 2000 as compared to $59.6 million for the three months ended September 30, 1999. Sales revenues from the Company's commercial engine parts segment increased to $21.9 million as compared with $20.7 million for the three months ended September 30, 2000 and September 30, 1999, respectively. Sales revenues from the Company's defense segment increased to $19.9 million as compared with $13.7 million for the three months ended September 30, 2000 and September 30, 1999, respectively. Sales revenues from the Company's airframe avionics and rotables segment increased to $17.7 million as compared with $12.7 million for the three months ended September 30, 2000 and September 30, 1999, respectively. The increase in sales in the Company's commercial engine parts, defense and airframe avionics and rotables segments was primarily due to the continued expansion of the Company's nose to tail inventory management programs, coupled with an increase in the Company's customer base due to continued investments in marketing and higher levels of inventory availability. Sales revenues from the Company's whole engine and aircraft segment increased to $36.6 million as compared with $12.5 million for the three months ended September 30, 2000 and September 30, 1999, respectively. The increase in revenues from the sale of whole engine and aircraft are a result of the Company's continuing efforts to reposition the lease portfolio and change its composition to newer models. Rental revenues from the Company's whole engine and aircraft segment decreased by 56% to $4.9 million for the three months ended September 30, 2000 as compared to $11.1 million for the three months ended September 30, 1999. The decrease in rental revenues was primarily due to a reduction in fleet utilization and a reduction in the size of the fleet. Consolidated cost of goods sold increased by 84% to $74.3 million for the three months ended September 30, 2000 as compared to $40.4 million for the three months ended September 30, 1999. Consolidated gross profit margin on sales was 22.7% for the three months ended September 30, 2000 as compared with 32.2% for the three months ended September 30, 1999. Gross margin for the three months ended September 30, 2000 for the commercial engine parts, defense and airframe avionics and rotables segments were 27.8%, 34.1% and 26.1%, respectively, as compared to 35.2%, 35.4% and 29.3%, respectively, for the three months ended September 30, 1999. The decrease in gross margins at the commercial engine parts and airframe avionics and rotables segments 12 13 reflects current market conditions. Gross margins from the sale of whole engines and aircraft were 11.8% for the third quarter of 2000 as compared to 26.8% for the third quarter of 1999, reflecting current market conditions and the Company's efforts to reposition its lease portfolio. Depreciation of equipment under operating leases decreased by 43% to $4.3 million for the three months ended September 30, 2000 as compared to $7.4 million for the three months ended September 30, 1999. Gross profit margin on rental revenues decreased to 12.9% in 2000 from 33.4% in 1999. The decrease in the gross profit margin was primarily due to the impact of depreciation expense incurred on a higher level of idle equipment. Selling, general and administrative expenses increased by 16% to $11.9 million for the three months ended September 30, 2000 as compared to $10.2 million for the three months ended September 30, 1999. The increase in selling, general and administrative expenses was primarily due to the Company's continued investment in personnel and facilities for the defense, commercial engine parts and airframe avionics and rotables segments in order to support the Company's growth model. Depreciation and amortization expense increased by 22% to $1.7 million for the three months ended September 30, 2000 as compared to $1.4 million for the three months ended September 30, 1999. The increase in depreciation and amortization expense was primarily due to depreciation on recent investments in facilities to support the Company's growth plans. Interest expense (net of interest income) increased by 9% to $6.4 million for the three months ended September 30, 2000 as compared to $5.9 million for the three months ended September 30, 1999. The increase in interest expense was primarily driven by an increase in interest rates partially offset by a decrease in the Company's average debt levels. The Company's effective tax rate for the three months ended September 30, 2000 was 37.3% as compared to 37.1% for the three months ended September 30, 1999. Net income decreased by 55% to $1.5 million for the three months ended September 30, 2000 as compared to $3.4 million for the three months ended September 30, 1999. Basic earnings per common share decreased by 55% to $0.13 for the three months ended September 30, 2000 as compared to $0.29 for the three months ended September 30, 1999. Diluted earnings per common share decreased by 52% to $0.13 for the three months ended September 30, 2000 as compared to $0.27 for the three months ended September 30, 1999. NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 Consolidated sales revenues increased by 17% to $241.3 million for the nine months ended September 30, 2000 as compared to $205.6 million for the nine months ended September 30, 1999. Sales revenues from the Company's commercial engine parts segment increased to $65.5 million as compared with $52.4 million for the nine months ended September 30, 2000 and September 30, 1999, respectively. Sales revenues from the Company's defense segment increased to $54.7 million as compared with $33.5 million for the nine months ended September 30, 2000 and September 30, 1999, respectively. Sales revenues from the Company's airframe avionics and rotables segment increased to $45.8 million as compared with $37.9 million for the nine months ended September 30, 2000 and September 30, 1999, respectively. The increase in sales in the Company's commercial engine parts, defense and airframe avionics and rotables segments was primarily due to the continued expansion of the Company's nose to tail inventory management programs, coupled with an increase in the Company's customer base due to continued investments in marketing and higher levels of inventory availability. In addition, sales in the Company's defense segment were impacted by the acquisition of Certified in April 1999. Sales revenues from the Company's whole engine and aircraft segment decreased to $75.3 million as compared with $81.8 million for the nine months ended September 30, 2000 and September 30, 1999, respectively. The decrease in revenues from the sale of whole engine and aircraft reflect current market conditions and the Company's decision to limit the growth of the lease portfolio and change its composition to newer engine models. 13 14 Rental revenues from the Company's whole engine and aircraft segment decreased by 49% to $16.4 million for the nine months ended September 30, 2000 as compared to $32.4 million for the nine months ended September 30, 1999. The decrease in rental revenues was primarily due to a reduction in fleet utilization and a reduction in the size of the fleet. Consolidated cost of goods sold increased by 28% to $178.7 million for the nine months ended September 30, 2000 as compared to $139.9 million for the nine months ended September 30, 1999. Consolidated gross profit margin on sales was 26.0% for the nine months ended September 30, 2000 as compared with 32.0% for the nine months ended September 30, 1999. Gross margin for the nine months ended September 30, 2000 for the commercial engine parts and airframe avionics and rotables segments was 33.3% and 27.3%, respectively, as compared to 34.4% and 26.3%, respectively, for the nine months ended September 30, 1999. Gross margin for the nine months ended September 30, 2000 for the defense segment was relatively unchanged at 35.2% as compared to 35.8% for the same period last year. Gross margins from the sale of whole engines and aircraft were 12.0% for the nine months ended September 30, 2000 as compared to 31.5% for the nine months ended September 30, 1999, reflecting current market conditions and the Company's efforts to reposition its lease portfolio. Depreciation of equipment under operating leases decreased by 31% to $14.2 million for the nine months ended September 30, 2000 as compared to $20.6 million for the nine months ended September 30, 1999. Gross profit margin on rental revenues decreased to 13.3% in 2000 from 36.4% in 1999. The decrease in the gross profit margin was primarily due to the impact of depreciation expense incurred on a higher level of idle equipment. Selling, general and administrative expenses increased by 20% to $35.2 million for the nine months ended September 30, 2000 as compared to $29.4 million for the nine months ended September 30, 1999. The increase in selling, general and administrative expenses was primarily due to (i) the acquisition of Certified being combined into the Company and (ii) the Company's continued investment in personnel and facilities for the defense, commercial engine parts and airframe avionics and rotables segments in order to support the Company's growth model. Depreciation and amortization expense increased by 23% to $4.8 million for the nine months ended September 30, 2000 as compared to $3.9 million for the nine months ended September 30, 1999. The increase in depreciation and amortization expense was primarily due to amortization of goodwill related to the Certified acquisition in addition to depreciation on recent investments in facilities to support the Company's growth plans. Other non-recurring expenses for the nine months ended September 30, 1999 reflect a $2.2 million charge to fulfill the Company's obligation under the settlement of a lawsuit brought by the Estate of a late Director of the Company, with respect to, among other things, a claim alleging entitlement to a stock option grant in late 1996, and for accrued legal expenses incurred in connection with the settlement. Interest expense (net of interest income) increased by 25% to $19.2 million for the nine months ended September 30, 2000 as compared to $15.3 million for the nine months ended September 30, 1999. The increase in interest expense was primarily driven by an increase in interest rates and the Company's average debt levels, resulting from the acquisition of Certified and growth in inventories offset by decreases in equipment under operating leases. The Company's effective tax rate for the nine months ended September 30, 2000 was 37.4% as compared to 37.8% for the nine months ended September 30, 1999. Net income decreased by 78% to $3.6 million for the nine months ended September 30, 2000 as compared to $16.6 million for the nine months ended September 30, 1999. Basic earnings per common share decreased by 79% to $0.30 for the nine months ended September 30, 2000 as compared to $1.40 for the nine months ended September 30, 1999. Diluted earnings per common share decreased by 74% to $0.30 for the nine months ended September 30, 2000 as compared to $1.17 for the nine months ended September 30, 1999. 14 15 LIQUIDITY AND CAPITAL RESOURCES As of September 30, 2000, the Company's liquidity and capital resources included cash and cash equivalents of $3.0 million and working capital of $177.3 million. At September 30, 2000, total outstanding debt was $313.9 million as compared to $326.1 million as of December 31, 1999. As of September 30, 2000, the outstanding principal balance on the Company's convertible subordinated notes was $140.3 million and the Company had contractual lines of credit totaling $256.7 million of which $162.4 million was outstanding and $26.8 million was available (excluding a temporary acquisition reserve). Cash flow provided by operating activities for the nine months ended September 30, 2000 was $27.8 million compared with cash flow used in operating activities of $52.2 million for the nine months ended September 30, 1999. The primary sources of cash from operating activities were net income of $3.6 million, adjusted for non-cash expenses related to depreciation and amortization of $19.0 million and an increase in accounts payable of $8.3 million. The primary use of cash for operating activities was for increases in inventories of $10.8 million to support the Company's growth. Cash flow used for investing activities for the nine months ended September 30, 2000 was $12.7 million compared with $34.9 million for the nine months ended September 30, 1999. The primary uses of cash for investing activities were acquisitions of $5.9 million, earn-out payments of $1.4 million and $2.2 million in connection with the acquisitions of Aero Support and ITC, respectively, and purchases of property, plant and equipment of $3.2 million. Cash flow used for financing activities for the nine months ended September 30, 2000 was $12.4 million compared with cash flow provided by financing activities of $93.2 million for the nine months ended September 30, 1999. The primary uses of cash for financing activities were a decrease in borrowings under the Company's line of credit agreement of $10.1 million and the repayment of a note payable of $2.1 million. As previously noted, on September 20, 2000, the Company entered into a definitive agreement to acquire the aircraft and engine parts resale business of Aviation Sales Company, which is operated through its Aviation Sales Distribution Services Company ("AVSDC") subsidiary. Specifically, the Company will acquire select AVSDC non-inventory assets and assume a portion of AVSDC's accounts payable and accrued expenses. In connection with this agreement, the Company and Aviation Sales Company will also establish an off-balance sheet joint venture that will acquire the inventory of AVSDC and enter into an exclusive arrangement with the Company to sell the inventory through its inventory management business. The Company expects to consolidate the operations of AVSDC with its Solair and Commercial Engine Divisions. The Company expects to invest approximately $50 million in the transaction. The Company plans to finance the transaction with a combination of funding from its current revolving credit facility and a new $30 million, 7-year mezzanine debt financing with Key Principal Partners, LLC, an affiliate of Key Corporation of Cleveland, Ohio. Consummation of the transaction is contingent upon completion of required financing and approval by the parties' existing lenders. The Company intends to take advantage of growth opportunities that are consistent with the Company's expansion and profit objectives. It is anticipated that such growth opportunities will require the investment of cash 15 16 into inventories of aircraft and aircraft parts, engines and engine parts and avionics and rotables. Greater availability of such inventories will better enable the Company to continue to increase its revenues as well as to encourage the development of strategic relationships with new customers. The Company intends to finance its inventory expansion program through its cash flows and through its syndicated credit facility. In the future, the Company may require additional sources of capital to continue to fund its expansion. The Company's management believes that free cash flow (net income plus depreciation of property, plant and equipment and amortization of goodwill), combined with the Company's syndicated credit facility should be sufficient for the Company's current level of operations. However, the Company may elect to seek equity capital or other debt financing in the future depending upon market conditions and the capital needs of the Company. 16 17 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's exposure to market risk is limited primarily to the fluctuating interest rates associated with variable rate indebtedness outstanding under the Company's $256.7 million bank credit facility. The bank credit facility, which expires in 2003, bears interest at the bank's prime rate plus 0-50 basis points or, at the Company's option, LIBOR plus 150-250 basis points. These variable interest rates are subject to interest rate changes in the United States and Eurodollar markets. The Company does not currently use, and has not historically used, derivative financial instruments to hedge against such market interest rate risk. At September 30, 2000, the Company had approximately $162.4 million in variable rate indebtedness outstanding under the credit facility, representing approximately 52% of the Company's total debt outstanding, at an average interest rate of 9.1%. An increase in interest rates by 1% would have a $250,000 quarterly impact on net income. 17 18 PART II ITEM 1. LEGAL PROCEEDINGS. None. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 5. OTHER INFORMATION. Not applicable. 18 19 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. 10.1 - Amended and Restated Employment Agreement dated July 1, 2000 between Kellstrom and John S. Gleason. 27 - Financial Data Schedule (for SEC use only). (b) Reports on Form 8-K. The Company filed a Report on Form 8-K dated September 27, 2000, which included a copy of a press release announcing that the Company had entered into a definitive agreement to acquire the aircraft and engine parts resale business of Aviation Sales Company. 19 20 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. November 14, 2000 KELLSTROM INDUSTRIES, INC. (Registrant) /s/ Oscar E. Torres ----------------------------------- Oscar E. Torres Chief Financial Officer (principal financial and accounting officer) 20 21 Exhibit Index Exhibit No. Description - ----------- ----------- 10.1 Amended and Restated Employment Agreement dated July 1, 2000 between Kellstrom and John S. Gleason. 27 Financial Data Schedule EX-10.1 2 g65156ex10-1.txt AMENDED & RESTATED EMPLOYMENT AGREEMENT 1 Exhibit 10.1 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement (the "Agreement") is entered into as of July 1, 2000, between Kellstrom Industries, Inc., a Delaware corporation, having its principal place of business at 1100 International Parkway, Sunrise, FL 33323 (the "Company"), and John S. Gleason, an individual residing at 100 Macfarlane Drive #2C, Delray Beach, FL 33483 (the "Employee"). RECITALS The Employee and the Company are parties to that certain Employment Agreement entered into on May 18, 1995, as amended on April 18, 1996, January 1, 1997 and December 27, 1999 (the "Prior Employment Agreement"), pursuant to which the Employee is employed by the Company as its Executive Vice President. The Company desires to provide for the continued employment of the Employee by the Company and the Employee desires to continue such employment, on the terms and conditions set forth herein. TERMS OF AGREEMENT In consideration of the above recitals and the mutual promises herein contained, the Company and the Employee hereby agree as follows: 1. DEFINITIONS. (a) The "Board" shall mean the Board of Directors of the Company. (b) "Change of Control" shall mean (i) any transaction that has the result that shareholders of the Company immediately before such transaction cease to own at least 51% of (x) the voting stock of the Company or (y) of any entity that results from the participation of the Company in a reorganization, liquidation or any other form of corporate transaction; (ii) a merger, consolidation, reorganization, liquidation or dissolution in which the Company does not survive; or (iii) a sale, lease, exchange or other disposition of all or substantilly all the property and assets of the Company. (c) The "Company Target" shall mean, with respect to any period, the target net income of the Company for such period as determined in the sole discretion of the Board (or the Executive Committee). (d) The "Division" shall mean the Kellstrom Kellcad division of the Company, as determined by the Board in its sole discretion. 1 2 (e) The "Division Target" shall mean, with respect to any period, the target net income of the Division, before taxes and corporate overhead allocations, for such period as determined in the sole discretion of the Board (or the Executive Committee). (f) The "Division Net Income" shall mean, with respect to any period, the actual net income, before taxes and corporate overhead allocations, of the Division for such period as determined by the Company in its sole discretion. (g) The "Effective Date" shall mean July 1, 2000. (h) The "Employment Period" shall mean the period commencing on the Effective Date and continuing until the fifth year anniversary of the Effective Date, unless earlier terminated in accordance with the terms of this Agreement. (i) The "Executive Committee" shall mean the Executive Committee of the Board of Directors of the Company. (j) "GAAP" shall mean generally accepted accounting principles in the United States as in effect from time to time. (k) "Net Income" shall mean, with respect to any period, actual net income for such period as determined by the Company in its sole discretion in accordance with GAAP. 2. EMPLOYMENT PERIOD. The Company hereby agrees to employ the Employee, and the Employee hereby agrees to be employed by the Company, for the duration of the Employment Period and pursuant to the other terms and conditions provided herein. This Agreement shall terminate at the end of the Employment Period, unless earlier terminated under Section 5 below. 3. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. During the Employment Period the Employee shall serve as Executive Vice President and General Manager of the Division. The Employee shall perform such duties as the Board or the Chief Executive Officer or other senior officers of the Company shall from time to time determine. In the performance of his duties, the Employee shall comply with the stated policies of the Company. (b) LOCATION. The principal place of employment of the Employee shall be the principal offices of the Company. (c) COMPENSATION. (1) BASE SALARY. The Employee's annual salary (the "Salary") shall be at the rate of $265,000 per annum for the duration of the Employee's employment hereunder. The Salary shall be paid in regular intervals in accordance with the Company's payroll practices. 2 3 (2) ANNUAL COMPANY BONUS. Subject to subsection (C) below, for each calendar year during the Employment Period commencing with the year ending December 31, 2000, at the end of which year the Employee is employed by the Company, the Employee shall be eligible to be paid a bonus as follows: (A) CALENDAR YEAR ENDING DECEMBER 31, 2000. For the calendar year ending December 31, 2000, the Employee shall be eligible to be paid a bonus, a portion of which shall be computed based upon the Company's Net Income as compared to the Company Target for such year (the "Company Bonus"), and a portion of which shall be computed based upon Division Net Income as compared to the Division Target for such year (the "Division Bonus"). The bonus payable, if any, for the year ending December 31, 2000 shall be the sum of the Company Bonus and the Division Bonus. (i) COMPANY BONUS. The Company Bonus, if any, payable on account of any calendar year during the Employment Period commencing with the year ending December 31, 2000 shall be computed as follows: (a) if the Net Income of the Company for such year is an amount equal to the Company Target for such year, the Employee shall be entitled to a Company Bonus in the amount of $62,500. (b) if the Net Income of the Company for such year is more than the Company Target and less than 125% of the Company Target, the Employee shall be entitled to a Company Bonus as calculated below: CB = $62,500 + [$62,500 x 2 X (NI - CT)] ------------- CT where: CB = the Company Bonus earned in such year. CT = the Company Target for such year. NI = the Net Income of the Company for such year. (c) If the Net Income of the Company for such year is equal to or greater than 125% of the Company Target, the Employee shall be entitled to a Company Bonus in the amount of $93,750. (d) If the Net Income of the Company for such year is greater than 75% of the Company Target but less than the Company Target, the Employee shall be entitled to a Company Bonus as calculated below: CB = $62,500 - [$62,500 x 4 X (CT -NI)] ------------ CT where: CB = the Company Bonus earned in such year. CT = the Company Target for such year. NI = the Net Income of the Company for such year. 3 4 (e) If the Net Income of the Company for such year is equal to or less than 75% of the Company Target, the Employee shall not be entitled to a Company Bonus. (ii) DIVISION BONUS. The Division Bonus, if any, payable on account of any calendar year during the Employment Period commencing with the year ending December 31, 2000 shall be computed as follows: (a) if the Division Net Income for such year is an amount equal to the Division Target for such year, the Employee shall be entitled to a Division Bonus in the amount of $62,500. (b) if the Division Net Income for such year is more than the Division Target and less than 125% of the Division Target, the Employee shall be entitled to a Division Bonus as calculated below: DB = $62,500 + [$62,500 x 2 X (NI - DT)] ------------- DT where: DB = the Division Bonus earned in such year. DT = the Division Target for such year. NI = Division Net Income for such year. (c) If the Division Net Income for such year is equal to or greater than 125% of the Division Target, the Employee shall be entitled to a Division Bonus in the amount of $93,750. (d) If the Division Net Income for such year is greater than 75% of the Division Target but less than the Division Target, the Employee shall be entitled to a Division Bonus as calculated below: DB = $62,500 - [$62,500 x 4 X (DT -NI)] ------------ DT where: DB = the Division Bonus earned in such year. DT = the Division Target for such year. NI = Division Net Income for such year. (e) If the Division Net Income for such year is equal to or less than 75% of the Division Target, the Employee shall not be entitled to a Division Bonus. (B) CALENDAR YEAR ENDING DECEMBER 31, 2001 THROUGH THE EMPLOYMENT PERIOD. For each calendar year during the Employment Period, commencing with the year ending December 31, 2001, the Employee shall be eligible to be paid a bonus, a portion 4 5 of which shall be the Company Bonus and a portion of which shall be the Division Bonus. The bonus payable, if any, with respect to any calendar year during the Employment Period commencing with the year ending December 31, 2001 shall be the sum of the Company Bonus and the Division Bonus for such year. (i) COMPANY BONUS. The Company Bonus, if any, payable on account of any calendar year during the Employment Period commencing with the year ending December 31, 2001 shall be computed as follows: (a) if the Net Income of the Company for such year is an amount equal to the Company Target for such year, the Employee shall be entitled to a Company Bonus in the amount of $70,000. (b) if the Net Income of the Company for such year is more than the Company Target and less than 125% of the Company Target, the Employee shall be entitled to a Company Bonus as calculated below: CB = $70,000 + [$70,000 x 2 X (NI - CT)] ------------- CT where: CB = the Company Bonus earned in such year. CT = the Company Target for such year. NI = the Net Income of the Company for such year. (c) If the Net Income of the Company for such year is equal to or greater than 125% of the Company Target, the Employee shall be entitled to a Company Bonus in the amount of $105,000. (d) If the Net Income of the Company for such year is greater than 75% of the Company Target but less than the Company Target, the Employee shall be entitled to a Company Bonus as calculated below: CB = $70,000 - [$70,000 x 4 X (CT -NI)] ------------ CT where: CB = the Company Bonus earned in such year. CT = the Company Target for such year. NI = the Net Income of the Company for such year. (e) If the Net Income of the Company for such year is equal to or less than 75% of the Company Target, the Employee shall not be entitled to a Company Bonus. (ii) DIVISION BONUS. The Division Bonus, if any, payable on account of any calendar year during the Employment Period commencing with the year ending December 31, 2001 shall be computed as follows: 5 6 (a) if the Division Net Income for such year is an amount equal to the Division Target for such year, the Employee shall be entitled to a Division Bonus in the amount of $70,000. (b) if the Division Net Income for such year is more than the Division Target and less than 125% of the Division Target, the Employee shall be entitled to a Division Bonus as calculated below: DB = $70,000 + [$70,000 x 2 X (NI - DT)] ------------- DT where: DB = the Division Bonus earned in such year. DT = the Division Target for such year. NI = Division Net Income for such year. (c) If the Division Net Income for such year is equal to or greater than 125% of the Division Target, the Employee shall be entitled to a Division Bonus in the amount of $105,000. (d) If the Division Net Income for such year is greater than 75% of the Division Target but less than the Division Target, the Employee shall be entitled to a Division Bonus as calculated below: DB = $70,000 - [$70,000 x 4 X (DT -NI)] ------------ DT where: DB = the Division Bonus earned in such year. DT = the Division Target for such year. NI = Division Net Income for such year. (e) If the Division Net Income for such year is equal to or less than 75% of the Division Target, the Employee shall not be entitled to a Division Bonus. (C) For any calendar year regarding which the Employee is entitled to a bonus under the foregoing provisions of this subsection (2) but during which year the Employee did not work the entire calendar year, unless otherwise provided herein, the Employee shall be entitled to a bonus equal to the product of the bonus, as calculated under the foregoing provisions, multiplied by a fraction, the numerator of which is the number of months during such calendar year that the Employee was employed by the Company and the denominator of which is twelve. (3) WITHHOLDING, ETC. The payment of any Salary and bonus to the Employee shall be subject to all applicable withholding and payroll taxes, and such other deductions as may be required under the Company's employee benefit plans. 6 7 (d) BENEFITS. In addition to the compensation payable to the Employee as set forth in Section 3(c) above, during the Employment Period the Employee shall be eligible similar incentive, stock option grants, savings, welfare (including without limitation medical and dental insurance) plans, practices, policies and programs applicable on or after the Effective Date to other employees of the Company as determined in the discretion of the Board (or the Executive Committee). (e) VACATION. During the Employment Period, the Employee shall be entitled to paid vacation in accordance with the policies and practices applicable on or after the Effective Date to other employees of the Company, PROVIDED that the Employee shall be entitled to a minimum of three (3) weeks of paid vacation per full calendar year (pro rated if the Employee serves for less than the full calendar year). Vacation accrued but unused at the end of a calendar year may be carried over into the following calendar year or years, PROVIDED that unused vacation days shall be accrued up to a maximum of six weeks. All earned, unused and accrued vacation will be paid to the Employee at the termination of this Agreement. (f) HOLIDAYS AND SICK LEAVE. The Employee shall be entitled to all holidays that are prescribed by the Company's policies and practices. The Employee shall be entitled to six (6) days paid sick leave per year (pro rated if the Employee serves for less than the full calendar year). Unused sick leave days may not be carried over to the following calendar year or years. (g) AUTOMOBILE. During the Employment Period, the Company shall make available to the Employee an automobile, or shall provide to the Employee an allowance for an automobile, in either case of a type or in the amount, as applicable, to be determined in the sole discretion of the Board (or the Executive Committee) for use by the Employee in connection with the performance of his duties hereunder. The Company shall pay or reimburse the Employee for all reasonable, documented expenses of insurance, maintenance and operation of such automobile. (h) EXPENSES. The Company shall pay or reimburse the Employee for reasonable expenses incurred or paid by him during the Employment Period in the performance of his services under this Agreement upon presentation of expense statements or such other supporting information as may be required for other employees of the Company in accordance with the Company's policy. 4. EMPLOYEE'S OBLIGATIONS AND REPRESENTATIONS. (a) During the Employment Period, and excluding any periods of vacation and sick leave to which the Employee is entitled, the Employee agrees to devote substantially all of his attention and time during normal business hours to the business and affairs of the Company and to perform faithfully and efficiently the responsibilities assigned to the Employee by the Company. 7 8 (b) The Employee represents and warrants to the Company that there are no agreements or arrangements, whether written or oral, in effect which would prevent the Employee from rendering the service required of him hereunder to the Company during the Employment Period. The Employee further represents, warrants and agrees with the Company that as of the Effective Date he has not made and will not make during the Employment Period any commitment or do any act in conflict with this Agreement, or take any action that might divert from the Company any opportunity which would be in the scope of any present or future business of the Company or any subsidiary thereof. 5. TERMINATION. (a) DEATH. This Agreement shall terminate automatically upon the Employee's death. If the Employee's employment is terminated by reason of the Employee's death, the Company shall have no further obligations to the Employee's legal representatives under this Agreement, other than (i) those obligations accrued, earned or vested by the Employee as of the date of his death, (ii) that portion of any bonus determined pursuant to Section 3(c)(2) of this Agreement in respect of a prior calendar year that had been deferred, which amount shall be paid to the Employee's legal representatives as soon as practicable, and (iii) with respect to the calendar year in which the Employee's death occurs, in the event that a bonus would have been payable to the Employee pursuant to Section 3(c)(2) of this Agreement in respect of such calendar year had the Employee not died, the Employee's legal representatives shall be entitled to receive a pro-rated amount of such bonus based on a fraction in which the numerator is the number of days the Employee remained employed with the Company in the calendar year in which the Employee died and the denominator is 365, with such bonus payment to be paid in one cash lump sum paid as soon as practicable following delivery of audited financial statements for the year in which the Employee dies. (b) DISABILITY. If the Company determines in good faith that the Employee has a "disability" (as defined below), it may give the Employee written notice of its intention to terminate the Employee's employment. In such event, the Employee's employment with the Company shall terminate effective on the 60th day after receipt by the Employee of such notice. No such notice of termination by reason of disability shall be given until the Employee has experienced a period of three (3) consecutive months of disability and the disability is continuing. The notice of termination shall not be effective if the Employee returns to full-time performance of his duties prior to the expiration of the 60 day notice period. For purposes of this Agreement, "disability" shall mean a physical or mental condition which, three months after its commencement, is determined by a physician selected by the Company to be a total and permanent condition which substantially prevents the Employee from performing the services to be provided by him hereunder. The Employee shall be entitled to all compensation and benefits provided for under this Agreement during the three month waiting period for the disability determination and during the 60 day notice of termination period. In the event that the Company provides long-term disability benefits for the Employee, such benefits shall not commence until after the employment of the Employee has been terminated and the Company has ceased paying the Employee compensation pursuant to the foregoing sentence. If the Employee's employment is terminated by reason of the Employee's disability, this Agreement shall terminate without further obligations to the Employee or the Employee's legal representatives under this 8 9 Agreement, other than (i) those obligations accrued, earned or vested by the Employee as of the date of the termination, (ii) that portion of any bonus determined pursuant to Section 3(c)(2) of this Agreement in respect of a prior calendar year that had been deferred, which amount shall be paid to the Employee's legal representatives as soon as practicable, and (iii) with respect to the calendar year in which the Employee's employment is terminated, in the event that a bonus would have been payable to the Employee pursuant to Section 3(c)(2) of this Agreement in respect of such calendar year had the Employee's employment not terminated, the Employee shall be entitled to a pro-rated amount of such bonus based on a fraction in which the numerator is the number of days in the calendar year in which the Employee was terminated that the Employee was employed with the Company and which were prior to the period of the Employee's disability and the denominator is 365, with such bonus payment to be paid in one cash lump sum paid as soon as practicable following delivery of audited financial statements for the year in which the Employee's employment is terminated. (c) CAUSE. During the Employment Period, the Company may terminate the Employee's employment for cause, as determined by the Board (or the Executive Committee) and as defined below. For purposes of this Agreement, "cause" shall mean: (i) an act or acts of fraud, embezzlement or any other act by the Employee that would constitute a felony under the laws of the State of Florida; (ii) repeated violations by the Employee of his obligations under Section 4a of this Agreement or a breach by the Employee of his representations or obligations under any of Sections 3(a), 4(b), 7, 8 or 9 of this Agreement; (iii) the indictment of the Employee of a crime, if the Company reasonably believes such indictment would impair the Employee's ability to perform his services under this Agreement; (iv) willful and gross misconduct by the Employee in the performance of his duties hereunder; or (v) the commission by the Employee of an act (other than good faith exercise of business judgment in the exercise of his responsibilities pursuant to this Agreement) resulting in material damage to the Company. If the Employee's employment is terminated for cause, this Agreement shall terminate without further obligations to the Employee under this Agreement, other than those obligations accrued, earned or vested by the Employee as of the date of the termination. The Employee shall not be entitled to any bonus in respect of the year of termination in the event the Employee's employment is terminated for cause pursuant to this Section 5(c). (d) INVOLUNTARY TERMINATION. Notwithstanding anything herein to the contrary, the Company shall have the right, at any time upon notice to the Employee, to terminate the Employee's employment. If during the Employment Period the Company 9 10 terminates the Employee's employment other than for cause or disability it shall be deemed to be an involuntary termination and the Company shall pay to the Employee the following amounts: (i) to the extent not theretofore paid, the Company shall pay the Employee's Salary through the date of such involuntary termination and, when calculated, the pro-rated bonus (if any) as set forth in Section 3(c)(2)(C) above, in each case payable as and when such Salary and bonus (if any) would otherwise have been paid to the Employee; and (ii) the Company shall pay in one cash lump sum an amount equal to four (4) months salary as severance pay; or, in the case of an involuntary termination following the occurrence of a Change of Control, an amount equal to twelve (12) months salary as severance pay. (e) VOLUNTARY TERMINATION. The Employee agrees to provide the Company with thirty (30) days' written notice prior to voluntarily terminating his employment. At the end of such 30-day period, this Agreement shall terminate automatically and the Company shall have no further obligations to the Employee under this Agreement, other than those obligations accrued, earned or vested by the Employee as of the date of the termination. The Employee shall not be entitled to any bonus in respect of the year of termination in the event the Employee's employment is terminated pursuant to this Section 5(e). (f) GOOD REASON. During the Employment Period, the Employee may terminate his employment for "good reason" as defined below. For purposes of this Agreement, "good reason" shall mean: (i) the assignment to the Employee of any duties inconsistent in any respect with Employee's position, duties and responsibilities as set forth in Section 3(a) of this Agreement or any action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose any isolated, insubstantial and inadvertent action by the Company which is not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Employee; (ii) any failure by the Company to comply with any of the provisions of Sections 3(c) through 3(h) of this Agreement regarding the Employee's compensation, benefits, expenses, fringe benefits, vacation, holidays and sick leave other than an isolated, insubstantial and inadvertent action by the Company which is not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Employee; (iii) the Company's requiring the Employee to be based at any office or location other than that described in Section 3(b) of this Agreement, except for travel reasonably required in the performance of the Employee's responsibilities; or (iv) any failure by the Company to comply with and satisfy Section 11 of this Agreement with respect to successors. 10 11 In the event that the Employee terminates his employment for good reason as defined in this Section 5(f), it shall be deemed to be an "involuntary termination" as set forth in Section 5(d) above and the Employee shall be entitled to all payments and obligations set forth in Sections 5(d)(i) and 5(d)(ii) of this Agreement as if the Employee's employment had been involuntarily terminated. 6. INDEMNIFICATION. If the Employee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and the Employee had no reasonable cause to believe that his conduct was unlawful or detrimental to the Company, the Company shall indemnify and hold harmless the Employee and his heirs and legal representatives from and against any and all claims, losses, liabilities, damages, costs, demands, causes of action (whether legal, equitable, administrative, civil or criminal), judgments, settlements (subject to the last sentence of Section 6(b)), fines, court costs and other expenses of any kind or nature whatsoever, including, without limitation, attorneys' fees and disbursements (collectively, "Losses"), which may be threatened against, incurred or suffered by the Employee or his heirs and legal representatives in connection with, relating to or arising out of, directly or indirectly, the Employee's performance, duties and responsibilities to, for and on behalf of, the Company, including, without limitation, (i) the Agreement and all actions or omissions taken thereunder and (ii) any acts, omissions or alleged acts or omissions arising out of the Employee's activities on behalf of the Company or in furtherance of the interests of the Company. (a) EXCEPTIONS. Notwithstanding anything contained herein or in the By-Laws of the Company, the Company shall have no obligation to indemnify the Employee if the Loss incurred by the Employee (i) arises out of an action brought directly by the Company against the Employee or (ii) arises, directly or indirectly, as a result of the Employee being terminated for cause (as defined in Section 5(c)). (b) NOTIFICATION OF CLAIM. Promptly after receipt by the Company of notice of any claim against the Employee pursuant to which the Employee is entitled to indemnification, the Company shall have the right to assume the defense of such claim, including the employment of counsel of its choice. Although the Employee shall have the right to employ his own counsel, the fees and expenses of such counsel shall be at the expense of the Employee. The Company shall not be liable for any settlement of any claim or action effected without its written consent, provided that such consent was not unreasonably withheld. (c) PAYMENT OF INDEMNITY AMOUNTS. The Company agrees to pay all amounts payable in respect of Losses immediately upon its receipt of a statement with respect thereto rendered by the Employee, together with appropriate supporting documentation thereof. It is the express intention of the parties hereto that all such amounts shall be paid by the Company on or before the date payment thereof is due, and that the Employee shall not be required at any time to bear any costs or expenses on account of Losses. 7. CONFIDENTIALITY. (a) ACKNOWLEDGMENT AND PURPOSES. The Employee acknowledges that during the Employment Period he will learn, develop and have access to Confidential Information 11 12 relating to the business and affairs of the Company and its affiliates. As used in this Agreement, "Confidential Information" shall mean any and all trade secrets and other confidential information concerning the Company and/or its affiliates including, without limitation, information regarding the operations, future plans, projected and historical sales, marketing, costs, production, growth and distribution, customer lists, customer information, information relating to governmental relations and information relating to products or services of such companies, in each case whether patentable or not. The Company is engaged in a highly competitive business; its competitive position depends in great measure upon the ability to develop or acquire and maintain the confidentiality of Confidential Information; and it may have expended and is likely to continue to expend considerable efforts and resources in the development or acquisition of Confidential Information. Based upon the foregoing, the Employee recognizes that the unauthorized disclosure of Confidential Information in violation of the terms hereof is likely to result in serious and irrevocable harm to the Company. (b) RESTRICTIONS ON THE USE OF CONFIDENTIAL INFORMATION. The Employee agrees and covenants as follows: (i) All documents and other materials made or compiled by or made available to the Employee prior to the date hereof or at any time hereafter, including during the Employment Period, by the Company or any of its affiliates and any copies thereof, whether or not containing Confidential Information, are and shall be the property of the Company or its affiliates and shall, at the request of the Company or its affiliates, be delivered to the Company or by the Employee immediately upon the conclusion of his engagement as an employee. Except as required in connection with the services to be performed hereunder, the Employee agrees not to remove from the premises of the Company or any of its affiliates, without permission, any papers or drawings belonging to the Company or its affiliates, including those prepared or worked on by him. The Employee will treat as trade secrets all Confidential Information acquired by him prior to the date hereof or at any time hereafter, including during the Employment Period, and shall not at any time use any Confidential Information for his own benefit nor disclose it or any part of it to any other person, firm or corporation not connected with the Company or its affiliates (a) without the prior written consent of the Company, or (b) unless such disclosure is required by law or in response to a legal order or (c) unless such Confidential Information has become generally available to the public other than through the breach by the Employee of the terms hereof. (ii) All ideas, reports, and other creative works conceived by the Employee during the Employment Period and relating to Confidential Information, shall be disclosed to the Company and shall be the sole property of the Company. 8. NON-COMPETITION. The Employee agrees that during the Non-Compete Period (as defined below) he will not, within the continental United States, Israel or any other country in which the Company has operations, directly or indirectly, engage or participate or make any financial investments in or become employed by or render advisory or other services to or for any person, firm or corporation, or in connection with any business activity which directly or 12 13 indirectly is in competition with any of the business operations or activities of the Company or any of its affiliates as of the date of termination of his employment, whether such companies are presently existing or hereafter acquired. Nothing herein contained, however, shall restrict the Employee from making any investments in any company (but without otherwise participating in the activities of such company) whose stock is listed on a national securities exchange or actively traded in the over-the-counter market, as long as such investment does not give him the right to control or influence the policy decisions of any such business or enterprise which is or might be directly or indirectly in competition with any of such business operations or activities of the Company or its affiliates. For purposes of this Section, the Non-Compete Period shall mean the period beginning on the date hereof and ending: (i) If the Company shall terminate the Employee's employment with the Company "for cause" under Section 5(c) of this Agreement or the Employee shall terminate his employment with the Company other than for "good reason" pursuant to Section 5(f) of this Agreement, two (2) years following the later of (i) the last day of the Employment Period, or (ii) the last day on which the Employee is employed by the Company; or (ii) If the Company shall terminate the Employee's employment with the Company other than "for cause" under Section 5(c) of this Agreement or the Employee shall terminate his employment with the Company for "good reason" pursuant to Section 5(f) of this Agreement, four (4) months (or, if any such termination of the Employee's employment with the Company occurs following a "Change of Control" of the Company, one (1) year ) following the later of (i) the last day of the Employment Period, or (ii) the last day on which the Employee is employed by the Company; provided, however, that the Company shall have the right exercisable by delivery of written notice to the Employee at least thirty (30) days prior to the date on which such Non-Compete Period would otherwise have ended to extend such period for up to an additional eight (8) months (unless such termination of the Employee's employment with the Company occurs following a "Change of Control" of the Company) by agreeing to pay the Employee an amount equal to one twelfth of the Employee's Base Salary in effect on the last day of the Employee's employment by the Company for each month by which the Company desires to extend such period. 9. RESTRICTION ON SOLICITATION. The Employee agrees that during the longer of (i) the Employment Period, and (ii) the period during which the Employee is employed by the Company, and in either such case, for a period of two (2) years thereafter he will not: (i) directly or indirectly solicit, raid, entice or induce any employee of the Company or any of its affiliates to become an employee of any person, firm or corporation which is, directly or indirectly, in competition with the business or activities of the Company or any of its affiliates; or (ii) directly or indirectly approach any such employee for these purposes; or (iii) authorize or knowingly approve the taking of such actions by other persons on behalf of any such person, firm or corporation, or assist any such person, firm or corporation in taking such action; or 13 14 (iv) directly or indirectly solicit, raid, entice or induce any person, firm or corporation who or which on the date hereof is, or at the time during his employment with the Company or any of its affiliates shall be, a customer of the Company or any of its affiliates, to become a customer for the same or similar products which it purchased from the Company or any of its affiliates, of any other person, firm or corporation, and the Employee shall not approach any such customer for such purpose or authorize or knowingly approve the taking of such actions by any other person. 10. REMEDIES. The Employee hereby acknowledges that in the event of a breach or threatened breach by him of the provisions of Sections 7, 8 or 9 of this Agreement, the Company would suffer irreparable harm for which there would be no adequate remedy at law. Accordingly, the Employee agrees that in such event, in addition to any other remedies which the Company may have in law or in equity for money damages or other relief, the Company shall be entitled to temporary and/or injunctive relief to enforce the provisions hereof. In addition, the parties hereto agree and acknowledge if any provision of Section 7, 8 or 9 as applied to any party or to any circumstance is adjudged by a court to be invalid or unenforceable, the same shall in no way affect any other circumstance or the validity or enforceability of any other provision of this Agreement. If any such provision, or any part thereof, is held to be unenforceable because of the duration of such provision or the area covered thereby, the parties agree that the court making such determination shall have the power to reduce the duration and/or area of such provision, and/or to delete specific words or phrases, and in its reduced form, such provision shall then be enforceable and shall be enforced. 11. SUCCESSORS. This Agreement is personal to the Employee and without the prior written consent of the Company shall not be assignable by the Employee. The Company may assign its rights and obligations hereunder, provided that the Company will require the assignee to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such assignment had taken place. 12. BINDING ARBITRATION. In the event that the Company and the Employee cannot agree on an interpretation of any provision of this Agreement, or in the event that either of the parties fails to make any payments or otherwise fulfill any obligations required by the terms of this Agreement, the Company and the Employee agree to resolve any such dispute through arbitration in Broward County, Florida, under the then-current rules of the American Arbitration Association in the State of Florida. For the purposes of confirming any such award and entering judgment thereon, each party hereby submits to the exclusive jurisdiction and venue of the State and Federal courts located in Broward County, Florida. In the event the Employee prevails in an arbitration with the Company, any legal fees, expenses or other costs incurred by the Employee in connection with such arbitration shall be borne by the Company. 13. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Florida. Each party to this Agreement hereby irrevocably (a) accepts and consents to the exclusive personal jurisdiction of the courts of Broward County, Florida or in the 14 15 U.S. District Court for the Southern District of Florida for the purpose of any suit, action or proceeding against the Employee, the Company, Kellstrom or any affiliate of Kellstrom arising out of, or relating in any way to, this Agreement or the Company's employment of the Employee, (b) waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding or any judgment entered by any court in respect thereof brought in such courts and (c) waives any claim that any suit, action or proceedings brought in such courts has been brought in an inconvenient forum. Each party further agrees that service of process, summons, notice or document by U.S. registered mail in accordance with this Agreement shall be effective service of process for any action, suit or proceeding brought against a party in any such court. (b) The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (c) All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been given if sent by facsimile transmission, delivered by overnight or other carrier service, or mailed, certified first class mail, postage prepaid, return receipt requested, to the parties hereto at the following addresses: If to the Company, to: Kellstrom Industries, Inc. 1100 International Parkway Sunrise, Florida 33323 Attn: Chief Executive Officer Telecopier: (954) 858-2449 If to the Employee, to: John S. Gleason 100 Macfarlane Drive #2C Delray Beach, FL 33483 or to such other address as either party shall have furnished to the other in accordance herewith. (d) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (e) A party's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision thereof. (f) This Agreement embodies the entire agreement between the Company and the Employee and supersedes all prior agreements and understandings (including, without 15 16 limitation, the Prior Employment Agreement), oral or written, with respect to the subject matter hereof. (g) This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which, together, shall constitute one and the same instrument. [signatures on following page] 17 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the day and year first above written. KELLSTROM INDUSTRIES, INC. By: /s/ Zivi R. Nedivi ---------------------------------- Name: Zivi R. Nedivi -------------------------------- Title: President --------------------------------- EMPLOYEE /s/ John S. Gleason -------------------------------------- John S. Gleason 16 EX-27 3 g65156ex27.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE KELLSTROM INDUSTRIES, INC. BALANCE SHEET AND STATEMENT OF EARNINGS FOR THE PERIOD ENDED SEPTEMBER 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 2,955 0 60,586 6,979 219,258 378,773 28,495 7,660 542,230 201,430 140,250 0 0 12 174,584 542,230 257,744 257,744 192,902 232,873 0 0 19,160 5,712 2,137 3,575 0 0 0 3,575 .30 .30
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