##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION  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 March 31, 2004 OR [  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 1-11775 TIMCO AVIATION SERVICES, INC. (Exact name of registrant as specified in its charter) Delaware
(State or other jurisdiction of
incorporation or organization)
    
    65-0665658
(IRS Employer
Identification No.)623 Radar Road
Greensboro, North Carolina
(Address of principal executive offices)
    
    27410
(Zip Code)
 Registrants telephone number, including area code: (336) 668-4410 (x3016) Indicate by checkmark 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 report(s), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [  ] Indicate by checkmark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X] Indicate the number of shares outstanding of each of the issuers classes of
common equity, as of the latest practicable date: 31,640,994 shares of common
stock, $.001 par value per share, were outstanding as of May 13, 2004.




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TIMCO AVIATION SERVICES, INC. INDEX   PagePart I. Financial InformationItem 1.
    
    FINANCIAL STATEMENTSCondensed Consolidated Balance Sheets at March 31, 2004 and December 31, 2003 (unaudited)
    
    
    3-4Condensed Consolidated Statements of Operations for the three months ended March 31, 2004 and 2003 (unaudited)
    
    
    5Condensed
Consolidated Statements of Stockholders Deficit and Comprehensive Income for the three months ended March 31, 2004 (unaudited)
    
    
    6Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2004 and 2003 (unaudited)
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    16Item 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    
    
    24Item 4.
    
    CONTROLS AND PROCEDURES
    
    
    24Part II. Other InformationItem 1.
    
    LEGAL PROCEEDINGS
    
    
    25Item 2.
    
    CHANGES IN SECURITIES AND USE OF PROCEEDS
    
    
    25Item 3.
    
    DEFAULTS UPON SENIOR SECURITIES
    
    
    25Item 4.
    
    SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
    
    
    25Item 5.
    
    OTHER INFORMATION
    
    
    25Item 6.
    
    EXHIBITS AND REPORTS ON FORM 8-K
    
    
    25
 2




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##### 



TIMCO AVIATION SERVICES, INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED BALANCE SHEETS   March 31,
    
    December 31,2004
    
    2003ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    213
    
    
    $
    1,603Accounts receivable, net
    
    
    53,637
    
    
    
    36,950Inventories
    
    
    25,217
    
    
    
    25,724Net assets of discontinued operations
    
    
    
    
    
    
    459Other current assets
    
    
    4,043
    
    
    
    4,986Total current assets
    
    
    83,110
    
    
    
    69,722Fixed assets, net
    
    
    29,909
    
    
    
    55,100Other Assets:Goodwill, net
    
    
    26,124
    
    
    
    26,124Deferred financing costs, net
    
    
    2,292
    
    
    
    1,590Other
    
    
    388
    
    
    
    355Total other assets
    
    
    28,804
    
    
    
    28,069Total assets
    
    $
    141,823
    
    
    $
    152,891LIABILITIES & STOCKHOLDERS DEFICITCurrent Liabilities:Accounts payable
    
    $
    25,967
    
    
    $
    21,446Accrued expenses
    
    
    19,390
    
    
    
    16,854Revolving loan
    
    
    17,348
    
    
    
    14,705Customer deposits
    
    
    15,303
    
    
    
    12,586Accrued interest
    
    
    647
    
    
    
    992Current maturities of notes payable to financial
institutions
    
    
    582
    
    
    
    291Current maturities of capital lease obligations
    
    
    415
    
    
    
    1,510Net liabilities of discontinued operations
    
    
    234
    
    
    
    278Total current liabilities
    
    
    79,886
    
    
    
    68,662Senior subordinated notes, net:New notes due 2006
    
    
    115,800
    
    
    
    115,800Old notes due 2008
    
    
    16,247
    
    
    
    16,247Term loan with a related party
    
    
    13,250
    
    
    
    8,250Capital lease obligations, net of current portion
    
    
    3,635
    
    
    
    26,188Junior subordinated notes due 2007, net
    
    
    3,176
    
    
    
    3,063Notes payable to financial institutions, net of
current portion
    
    
    2,918
    
    
    
    8,209Deferred income
    
    
    1,431
    
    
    
    1,473Other long-term liabilities
    
    
    1,127
    
    
    
    764Total long-term liabilities
    
    
    157,584
    
    
    
    179,994
 3




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##### 



March 31,
    
    December 31,2004
    
    2003Commitments and Contingencies (see notes)Stockholders Deficit:Preferred stock, $.01 par value, 1,000,000 shares
authorized, none outstanding, 15,000 shares
designated Series A Junior Participating
    
    
    
    
    
    
    Common stock, $.001 par value, 500,000,000 shares
authorized, 31,640,994 shares issued and
outstanding at March 31, 2004 and December 31, 2003
    
    
    32
    
    
    
    32Additional paid-in capital
    
    
    182,088
    
    
    
    182,088Accumulated deficit
    
    
    (277,767
    )
    
    
    (277,885
    )Total stockholders deficit
    
    
    (95,647
    )
    
    
    (95,765
    )Total liabilities and stockholders deficit
    
    $
    141,823
    
    
    $
    152,891
 The accompanying notes are an integral part of these condensed consolidated
financial statements. 4




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TIMCO AVIATION SERVICES, INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  For the Three MonthsEnded March 31,2004
    
    2003Operating revenue:Sales, net
    
    $
    83,532
    
    
    $
    51,266Other
    
    
    
    
    
    
    1883,532
    
    
    
    51,284Cost of sales
    
    
    77,239
    
    
    
    47,765Gross profit
    
    
    6,293
    
    
    
    3,519Operating expenses
    
    
    5,616
    
    
    
    3,064Income from operations
    
    
    677
    
    
    
    455Interest expense
    
    
    2,308
    
    
    
    2,075Other income  net
    
    
    (1,678
    )
    
    
    (1,514
    )Income (loss) before income taxes and discontinued
operations
    
    
    47
    
    
    
    (106
    )Income tax benefit
    
    
    
    
    
    
    (174
    )Income from continuing operations before discontinued
operations
    
    
    47
    
    
    
    68Income from discontinued operations, net of income taxes
    
    
    71
    
    
    
    251Net income
    
    $
    118
    
    
    $
    319Basic income per share:Income from continuing operations
    
    $
    
    
    
    $
    Income from discontinued operations
    
    
    
    
    
    
    0.01Net income
    
    $
    
    
    
    $
    0.01Diluted income per share:Income from continuing operations
    
    $
    
    
    
    $
    Income from discontinued operations
    
    
    
    
    
    
    Net income
    
    $
    
    
    
    $
    Weighted average shares outstanding:Basic
    
    
    31,640,994
    
    
    
    31,640,994Diluted
    
    
    324,805,453
    
    
    
    311,249,431
 The accompanying notes are an integral part of these condensed consolidated
financial statements. 5




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##### 



TIMCO AVIATION SERVICES, INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS DEFICIT AND COMPREHENSIVE INCOME   TotalCommon Stock
    
    Additional
    
    
    
    
    
    StockholdersDeficit andPaid-in
    
    Accumulated
    
    ComprehensiveShares
    
    Amount
    
    Capital
    
    Deficit
    
    IncomeBalance as of
December 31, 2003
    
    
    31,640,994
    
    
    $
    32
    
    
    $
    182,088
    
    
    $
    (277,885
    )
    
    $
    (95,765
    )Net income and comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    118
    
    
    
    118Balance as of
March 31, 2004
    
    
    31,640,994
    
    
    $
    32
    
    
    $
    182,088
    
    
    $
    (277,767
    )
    
    $
    (95,647
    )
 The accompanying notes are an integral part of these condensed consolidated
financial statements. 6




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##### 



TIMCO AVIATION SERVICES, INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   For the ThreeMonths EndedMarch 31,2004
    
    2003CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    118
    
    
    $
    319Adjustments to reconcile net income to cash used in
operating activities:Income from discontinued operations
    
    
    (71
    )
    
    
    (251
    )Paid-in-kind interest note obligations
    
    
    476
    
    
    
    112Gain on Aerocell settlement, net of cash received
    
    
    
    
    
    
    (455
    )Depreciation and amortization
    
    
    1,396
    
    
    
    1,400Amortization of deferred financing costs
    
    
    264
    
    
    
    558Gain on disposition of fixed assets
    
    
    (825
    )
    
    
    Provision for (recovery of) doubtful accounts
    
    
    476
    
    
    
    (56
    )Change in working capital:Accounts receivable
    
    
    (17,163
    )
    
    
    (9,917
    )Inventories
    
    
    507
    
    
    
    (955
    )Other assets
    
    
    957
    
    
    
    (388
    )Accounts payable
    
    
    4,522
    
    
    
    5,724Customer deposits
    
    
    2,717
    
    
    
    (215
    )Other liabilities
    
    
    2,251
    
    
    
    (1,978
    )Net cash used in operating activities
    
    
    (4,375
    )
    
    
    (6,102
    )CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sale of fixed assets, net of transaction
expenses
    
    
    24,861
    
    
    
    Purchases of fixed assets
    
    
    (342
    )
    
    
    (182
    )Net cash provided by (used in) investing activities
    
    
    24,519
    
    
    
    (182
    )CASH FLOWS FROM FINANCING ACTIVITIES:Borrowings under senior debt facilities
    
    
    75,838
    
    
    
    47,935Payments under senior debt facilities
    
    
    (73,195
    )
    
    
    (41,308
    )Payments on capital leases
    
    
    (23,648
    )
    
    
    (405
    )Payments of deferred financing costs
    
    
    (966
    )
    
    
    (250
    )Net cash (used in) provided by financing activities
    
    
    (21,971
    )
    
    
    5,972Net cash provided by discontinued operations
    
    
    437
    
    
    
    206Net decrease in cash and cash equivalents
    
    
    (1,390
    )
    
    
    (106
    )Cash and cash equivalents, beginning of period
    
    
    1,603
    
    
    
    339Cash and cash equivalents, end of period
    
    $
    213
    
    
    $
    233SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Interest paid
    
    $
    (1,775
    )
    
    $
    (1,804
    )Income taxes refunded
    
    $
    
    
    
    $
    174
 The accompanying notes are an integral part of these condensed consolidated
financial statements. 7




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TIMCO AVIATION SERVICES, INC. AND SUBSIDIARIES 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2004 (Unaudited) (Amounts and Shares in Thousands, Except Per Share Data) 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION and LIQUIDITY DESCRIPTION OF BUSINESS TIMCO Aviation Services, Inc. (the Company) is a Delaware corporation that,
through its subsidiaries, provides aircraft maintenance, repair and overhaul
(MR&O) services to commercial passenger airlines, air cargo carriers,
aircraft leasing companies, maintenance and repair facilities and aircraft
parts redistributors throughout the world. BASIS OF PRESENTATION The accompanying unaudited interim condensed consolidated financial statements
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission for reporting on Form 10-Q. Pursuant to such rules and
regulations, certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles
generally accepted in the United States have been condensed or omitted. The
accompanying unaudited interim condensed consolidated financial statements
should be read in conjunction with the Companys consolidated financial
statements and the notes thereto included in the Companys Annual Report on
Form 10-K for the fiscal year ended December 31, 2003, File No. 001- 11775 (the
Form 10-K). In the opinion of management, the accompanying unaudited interim condensed
consolidated financial statements of the Company contain all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the financial position of the Company as of March 31, 2004, the results of its
operations for the three month periods ended March 31, 2003 and 2004 and its
cash flows for the three month periods ended March 31, 2003 and 2004. The
results of operations and cash flows for the three month period ended March 31,
2004 are not necessarily indicative of the results of operations or cash flows
which may be reported for the year ending December 31, 2004. LIQUIDITY The Company has recently refinanced all of its senior debt. On April 8, 2004,
the Company closed on an agreement with the CIT Group in which the Company
obtained a $35,000 senior secured revolving line of credit (the CIT Group
Revolving Line of Credit) and a $6,400 senior secured term loan (the CIT
Group Term Loan, and collectively with the CIT Group Revolving Line of Credit,
the CIT Group Credit Facility). The CIT Group Credit Facility matures on
December 31, 2007. Effective on the same date, the Company obtained an $8,000
senior secured term loan from Hilco Capital LP (the Hilco Term Loan) and
refinanced the $14,412 of aggregate term debt due to its principal stockholder.
In addition, on March 31, 2004, the Company sold its office and warehouse
facility located in Miramar, Florida and used the proceeds to repay in full the
Companys TROL financing obligation ($23,624 as of March 31, 2004). For
details of these events, see Notes 5 and 10. For the year ended December 31, 2003, the Company incurred a loss from
continuing operations of $3,967. The Company also had a net stockholders
deficit as of December 31, 2003 and continued to require additional cash flow
above amounts currently being provided from operations to meet its working
capital requirements. The Companys ability to service its debt obligations as
they come due, including maintaining compliance with the covenants and
provisions of all of its debt obligations, is dependent upon the Companys
future financial and operating performance. That performance, in turn, is
subject to various factors, including certain factors beyond the Companys
control, such as changes in conditions affecting the airline industry and
changes in the overall economy. Additionally, as a result of the state of the
general economy, fluctuations in the price of jet fuel, a significant decline,
from calendar year 2000, in passenger airline travel, the currently on-going
war on terrorism, the war in Iraq, and a competitive price reduction in airfare
prices, the airline industry, and thus the Companys customer base, has been
significantly impacted. The result for some carriers has been the filing for
protection under Chapter 11 of the United States Bankruptcy Code. These factors
have also resulted in some of the Companys competitors exiting the
maintenance, repair, and overhaul business. 8




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The Company is highly leveraged and has significant obligations under its
outstanding debt agreements. As a result, significant amounts of cash flow from
operations is required to make required payments of the Companys debt
obligations, thereby reducing funds available for other purposes. Even if the
Company is able to meet its debt service and other obligations when due, the
Company may not be able to comply with the covenants and other provisions under
its debt instruments. A failure to comply, unless waived by the lenders and
noteholders, would be an event of default and would permit the lenders to
accelerate the maturity of these debt obligations. It would also permit the
lenders to terminate their commitments to extend additional credit under their
financing agreements. If the Company was unable to meet its obligations under
its debt instruments, or if the Company could not obtain waivers of defaults
under any such agreements (including defaults caused by the failure to meet
financial covenants), the lenders could proceed against the collateral securing
these financing obligations and exercise all other rights available to them.
While the Company expects that it will make all required debt payments and meet
all financial covenants in 2004, there can be no assurance that it will be able
to do so. 2. SALE OF ASSETS AND OPERATING ENTITIES In March 2004, the Company sold its office and warehouse facility located in
Miramar, Florida for a gross sales price of $26,000. See Note 5 for
particulars of this sales transaction and resulting repayment of the Companys
TROL financing arrangement which was secured by the assets of this facility. In December 2003, the Company entered into an agreement to sell an idle
facility located in Covington, Kentucky. This facility was previously part of
the Companys manufacturing operations and had no operations since fiscal 2000.
The net sales price was $454 and is included within net assets of discontinued
operations as of December 31, 2003 within the accompanying condensed
consolidated balance sheet. The resulting gain on this sale, which was
recognized with the consummation of the sale during the fourth quarter of 2003,
was $411. The cash proceeds related to this sale were fully funded in February
2004. 3. SENIOR CREDIT FACILITIES Commencing January 30, 2004, the Company entered into a series of two
amendments and limited waiver agreements pursuant to which the maturity date of
the Companys existing senior revolving credit and term loan facilities, which
were scheduled to mature on January 31, 2004, were extended until July 31,
2004. Through these series of amendments and limited waiver agreements, the
Company temporarily extended its senior revolving credit facility and term loan
(the Amended Credit Agreement), which was offered through a syndicate of four
lenders led by Citicorp USA Inc. and UPS Capital Corporation. Under the Amended
Credit Agreement, the Company had a $30,000 senior secured revolving line of
credit (the Amended Revolving Credit Facility) and a $3,500 senior secured
term loan (the Amended Term Loan and collectively with the Amended Revolving
Credit Facility, the Amended Credit Facility). Borrowings under the Amended
Credit Facility were secured by a lien on substantially all of the Companys
assets and the borrowing base consisted primarily of certain of the Companys
account receivables, inventory, and machinery and equipment. The interest rate
on the Amended Revolving Credit Facility was, at the Companys option, (a)
prime plus 3% per annum, or (b) LIBOR plus 4.5% per annum. The interest rate on
the Amended Term Loan was 12% per annum. The Amended Credit Agreement contained certain financial covenants regarding
the Companys financial performance and certain other covenants, including
limitations on the amount of annual capital expenditures and the incurrence of
additional debt, and provided for the termination of the Amended Credit
Facility and repayment of all debt in the event of a material adverse change in
the business or a change in control, as defined. A default and acceleration of
repayment under the Amended Credit Facility could also have potentially
resulted in repayment acceleration under other agreements to which the Company
is a party, including the TROL financing agreement. Generally, the Amended
Credit Agreement required mandatory repayments and reduction of the commitments
thereunder from proceeds of a sale of assets or an issuance of equity or debt
securities. Mandatory repayments were also required as a result of insufficient
collateral to meet the borrowing base requirements thereunder or in the event
the outstanding obligations under the Amended Credit Facility exceeded the
commitments thereunder. During the first quarter of 2003, the Company was not
in compliance with certain covenants contained in the Amended Credit Agreement.
The senior lenders, however, waived, and in some instances, amended all such
events of non-compliance and as March 31, 2003, the Company was in compliance
with all covenant requirements, as amended. As of March 31, 2004, the
outstanding aggregate amount borrowed under the Amended Revolving Credit
Facility was $17,348, the outstanding Amended Term Loan was $3,500 and the
amount of outstanding letters of credit under the Amended Revolving Credit
Facility was $9,120. See Note 10 for a discussion of the Companys refinancing
subsequent to March 31, 2004 of all amounts due under the Amended Credit
Agreement. 9




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##### 



In addition, the Company had a $5,000 term loan with Bank of America (BofA),
which had been credit supported by various parties, including the Companys
principal stockholder, and which was scheduled to mature on January 31, 2004.
In connection with the above-described short-term extension of the revolving
credit and term loan facilities, the Companys principal stockholder repaid
BofA and agreed to extend the term of this loan, under the same terms
previously extended by BofA, except the maturity date was extended until July
31, 2004. Under these terms, this $5,000 related party term loan bore interest
at the rate of LIBOR plus 2%. In April 2004, the Company refinanced all of its
previously outstanding debt (principal plus accrued and unpaid interest),
including this $5,000 term loan, with its principal stockholder. See Note 10. 4. TERM LOAN TO A RELATED PARTY As discussed above, in January 2004, the Companys principal stockholder repaid
the Companys previously outstanding $5,000 term loan with BofA and continued
to extend this loan to the Company under the same terms previously extended by
BofA, except the maturity date was extended until July 31, 2004. See Note 3
for particulars of this related party term loan. Also see Note 10 for
particulars of a refinancing of all of the Companys outstanding debt
obligations due to the Companys principal stockholder. On May 14, 2003, the Company entered into an agreement with its principal
stockholder pursuant to which the principal stockholder loaned the Company
$6,050. This term loan was used for working capital requirements. This term
note had a three-year maturity, was secured and bore paid-in-kind interest at
the rate of 16% per annum. From inception through March 31, 2004, all interest
obligations of $1,127 had been paid-in-kind and are included within other
long-term liabilities within the accompanying condensed consolidated balance
sheet for the quarter ended March 31, 2004. Further, the $1,300 loan obtained
from the principal stockholder in connection with the acquisition of Brice
Manufacturing in October 2002 was added to this $6,050 loan, and the Keepwell
agreement, under which the Companys principal stockholder was required to fund
any Brice Manufacturing EBITDA losses, was eliminated. Additionally, in
September 2003, the Company agreed to increase this note by $900 reflecting the
Companys purchase from its principal stockholder of the aircraft parts
inventory located at the Goodyear facility (which inventory was acquired by the
Companys principal stockholder in the AMS bankruptcy proceedings; see Note 7).
This term loan from the Companys principal stockholder contained cross
acceleration provisions if the obligations to the Companys senior lenders were
accelerated. Both of these related party term loans were refinanced in April 2004. See Note
10. In connection with the funding of the $6,050 term loan, the Company issued a
warrant to its principal stockholder to acquire, for nominal consideration, 30%
of the Companys outstanding common stock (on a fully-diluted basis) as of the
day the warrant is exercised. The warrant is exercisable on or before January
31, 2007. The warrant valuation, as determined by an independent business
valuation specialist through a fair market value assessment of the Company, was
recorded at $1,258 as of May 14, 2003. The Company has recorded the value of
this warrant as deferred financing costs and is amortizing this amount to
expense over a three-year period. 5. TAX RETENTION OPERATING LEASE (TROL) FINANCING The Companys TROL financing arrangement was originally utilized to develop two
facilities: (i) a corporate headquarters and warehouse facility, which was
being subleased to Kellstrom Aerospace, LLC, and (ii) a facility to house the
Companys Caribe operations, which was sold in May 2001. Substantially all of
the Companys subsidiaries had guaranteed the Companys obligations under the
TROL financing arrangement. Payments were at a rate of Prime plus 3.25% to
4.00% and the Company was responsible for all property taxes, insurance and
maintenance of the property. Under the terms of the Amended TROL Financing
Agreement, entered into in July 2002, the maturity date of the TROL financing
was extended until June 30, 2005 and the base monthly rental under the TROL was
increased to the greater of: (i) the amount being received by the Company under
its sublease for the Companys Miramar facility plus, commencing July 1, 2003,
an additional monthly payment by the Company, or (ii) $210. The TROL financing contained certain financial covenants regarding the
Companys financial performance and certain other covenants, which overall
substantially mirrored the covenant requirements under the Amended Credit
Agreement, and provided for the termination of the TROL financing agreement and
repayment of all debt in the event of a material adverse change in the
Companys business. For the first quarter of 2003, the Company was not in
compliance with certain of the covenants contained in the TROL financing
agreement. Additionally, as a result of a cross default provision between the
TROL financing agreement and the Amended Credit Agreement, for which the
Company was also in violation of covenant requirements during the first quarter
of 2003, the Company was also in default of the TROL financing agreement. The
lessor under the TROL financing agreement and senior lenders of the Amended
Credit Facility, however, waived, and in certain instances 10




---



##### 



amended,
all such events of non-compliance and as of March 31, 2003,
the Company was in compliance with all covenant requirements, as amended. On February 5, 2004, the Company entered into a definitive agreement to sell
its office and warehouse facility located in Miramar, Florida, and on March 31,
2004, the Company closed on the sale contemplated by this definitive agreement.
The gross sales price was $26,000. The proceeds of the sale were used to repay
in full the TROL financing obligation ($23,624). The balance, net of
transaction expenses and other Miramar property related expenses which the
Company was obligated to pay, which approximates $320, was used to repay
amounts outstanding under the Amended Term Loan (which repayment occurred in
April 2004 as part of Companys refinance of all of its senior debt
obligations. See Note 10). Additionally, as a result of this sale, the
Company has recorded a gain on disposal of fixed assets of $825. This gain is
included within other income-net within the accompanying condensed consolidated
statement of operations for the quarter ended March 31, 2004. Finally, as was
required under the Companys previous senior credit facility, in February 2004,
the Company entered into an amendment and limited waiver agreement with its
previous senior lenders for the purpose of releasing the Miramar facility for
sale. 6. SUBORDINATED NOTES 8% SENIOR SUBORDINATED PIK NOTES DUE 2006 On February 28, 2002, in connection with its capital and debt restructuring,
the Company issued $100,000 face value, in aggregate, principal amount of 8.0%
senior subordinated convertible paid-in-kind (PIK) notes (New Notes), which
mature on December 31, 2006. The New Notes bear interest from the date of
issuance and are payable at the Companys option either in cash or paid-in-kind
through the issuance of additional New Notes semiannually on June 30 and
December 31 of each year. See Notes 5 and 10 to Notes to Consolidated Financial
Statements contained in the Companys 2003 Form 10-K for particulars of the
Companys February 2002 capital and debt restructuring and for further details
regarding the New Notes. The New Notes are redeemable for cash at the Companys option at the following
percentages of par plus accrued interest on the par value through the date of
redemption: 2004  73.0%, 2005  75.625% and 2006  77.5%. The New Notes also
provide that the holders will receive an aggregate of 3,003 shares of common
stock if the New Notes are redeemed in 2004, 2005 or 2006. If the New Notes have not already been redeemed or repurchased, the New Notes,
including those New Notes previously issued as paid-in-kind interest and all
accrued but unpaid interest, will automatically convert on December 31, 2006
into an aggregate of 270,276 shares of common stock. Holders of New Notes will
not receive any cash payment representing principal or accrued and unpaid
interest upon conversion; instead, holders will receive a fixed number of
shares of common stock and a cash payment to account for any fractional shares. 8 1/8% SENIOR SUBORDINATED NOTES DUE 2008 In 1998, the Company sold $165,000 of senior subordinated notes (Old Notes)
with a coupon rate of 8.125%, which mature on February
15, 2008. On February 28, 2002, $149,000 face value of these notes were
cancelled as part of a note exchange in exchange for cash and securities, and
substantially all of the covenants contained in the indenture relating to the
remaining Old Notes was extinguished. As a result of the exchange offer and
consent solicitation, $16,247 in aggregate principal amount, net of unamortized
discount, of Old Notes remain outstanding at March 31, 2004. Interest on the
Old Notes is payable on February 15 and August 15 of each year. See Note 5 to
the Notes to Consolidated Financial Statements in the Companys 2003 Form 10-K
for details regarding the Old Notes. The Old Notes are redeemable, at the Companys option, in whole or in part, at
any time after February 15, 2003, at the following redemption prices, plus
accrued and unpaid interest and liquidated damages, if any, to the redemption
date: (i) 2004102.708%; (ii) 2005101.354%; and (iii) 2006 and
thereafter100%. Upon the occurrence of a change in control, the Company will
be required to make an offer to repurchase all or any part of each holders
senior subordinated notes at a repurchase price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest and liquidated damages, if
any, thereon to the repurchase date. There can be no assurance that the Company
will have the financial resources necessary to purchase the remaining Old Notes
upon a change in control or that such repurchase will then be permitted under
the Companys senior credit facilities. 11




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8% JUNIOR SUBORDINATED PIK NOTES DUE 2007 In September 2002, as part of a class action settlement, the Company issued
$4,000 face value, in aggregate, new junior subordinated convertible PIK notes
(Junior Notes). The Junior Notes bear interest at 8% and mature on January
2, 2007. Interest on the Junior Notes is payable at the Companys option
either in cash or paid-in-kind through the issuance of additional notes
semiannually on June 30 and December 31 of each year. Additionally, the Junior
Notes have been recorded as of September 20, 2002 (the effective date) at the
then current redemption value of $2,500. The discount is being accreted to the
maturity redemption value, due in January 2007, of approximately $4,400. See
Notes 5 and 7 of Notes to Consolidated Financial Statements in the Companys
2003 Form 10-K for particulars of the class action settlement and for further
details regarding the Junior Notes. The Junior Notes are redeemable for cash at the Companys option at the
following percentages of par plus accrued interest on the par value through the
date of redemption: 2004  73.0%, 2005  75.625% and 2006  77.5%. The Junior
Notes also provide that the holders will receive an aggregate of 104 shares of
common stock if the Junior Notes are redeemed in 2004, 2005 or 2006. If the Junior Notes have not already been redeemed or repurchased, the Junior
Notes, including those Junior Notes previously issued as paid-in-kind interest
and all accrued but unpaid interest, will automatically convert on January 2,
2007 into an aggregate of 9,320 shares of common stock. Holders of Junior
Notes will not receive any cash payment representing principal or accrued and
unpaid interest upon conversion; instead, holders will receive a fixed number
of shares of common stock and a cash payment to account for any fractional
shares. 7. COMMITMENTS AND CONTINGENCIES ENVIRONMENTAL MATTERS The Company is taking remedial action pursuant to Environmental Protection
Agency and Florida Department of Environmental Protection (FDEP) regulations
at TIMCO-Lake City. Testing and evaluation for all known sites on TIMCO-Lake
Citys property is substantially complete and the Company has commenced a
remediation program. The Company is currently monitoring the remediation, which
will extend into the future. Based on current testing, technology,
environmental law and clean-up experience to date, the Company believes that it
has established an adequate accrual for the estimated costs associated with its
current remediation strategies. Based upon the most recent cost estimates
provided by environmental consultants, it is estimated that the total remaining
testing, remediation and compliance costs for this facility will be $768.
Additionally, during 2003 the Company secured an insurance policy to comply
with financial assurances required by the FDEP. Additionally,
there are other areas adjacent to TIMCO-Lake Citys facility that
could also require remediation. The Company does not believe that it is
responsible for these areas; however, it may be asserted that the Company and
other parties are jointly and severally liable and are responsible for the
remediation of those properties. Accrued expenses in the accompanying March 31, 2004 and December 31, 2003
condensed consolidated balance sheets include $768 and $810, respectively,
related to obligations to remediate the environmental matters described above.
Future information and developments will require the Company to continually
reassess the expected impact of the environmental matters discussed above.
Actual costs to be incurred in future periods may vary from the estimates,
given the inherent uncertainties in evaluating environmental exposures. These
uncertainties include the extent of required remediation based on testing and
evaluation not yet completed and the varying costs and effectiveness of
remediation methods. In the opinion of management, the ultimate resolution of
these environmental exposures will not have a material adverse effect upon the
financial condition or results of operations of the Company. LEASE COMMITMENTS WITH RELATED PARTIES During December 2002, an entity controlled by the Companys principal
stockholder acquired the operating assets of Aviation Management Systems, Inc.
(AMS) located in Phoenix, Arizona. Additionally, this entity assumed a lease
with the City of Phoenix for facilities previously leased by AMS at the
Goodyear Airport. In April 2003, the Company entered into an operating sublease
agreement with the principal stockholder to operate the business in the
facilities that were previously leased to AMS. The term of the sublease is for
three years with rental payments of $432 annually. Under the sublease
agreement, the Company is also responsible for insurance, taxes and charges
levied by the City of Phoenix under the main lease. In addition, as discussed
in Note 4, the Company has agreed to increase its related party term loan by
$900 12




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reflecting the purchase from its principal stockholder of the aircraft parts inventory located at the Goodyear
facility (which inventory was acquired by the Companys principal stockholder
in the AMS bankruptcy proceedings). Further, subsequent to March 31, 2004,
the Company entered into an equipment lease with its principal stockholder with
respect to the equipment and tooling used at the Goodyear facility (which
equipment and tooling had been acquired by the Companys principal stockholder
in the AMS bankruptcy proceedings). The lease, which will be recorded as a
capital lease, is for a two-year term and requires monthly payments of $74.
Both the inventory sale and the equipment lease are believed to be on terms not
less favorable to the Company than could be obtained from an unaffiliated third
party. During October 2002, the Company sold its real estate and fixtures located at
the Companys Aircraft Interior Design, Inc. (AID) operation in Dallas, Texas,
to the Companys principal stockholder. The gross sale price for these assets
was approximately $2,400, which was the estimated fair market value, based on a
third party appraisal, on the sale date. Simultaneous with this sale, the
Company entered into a lease agreement with the principal stockholder for
substantially all of these assets. The term of this lease is ten years. Annual
rental payments are approximately $300 per year, with the Company being
responsible for, among other things, taxes, insurance and utilities. The sale
and resulting leaseback qualify for sale leaseback accounting pursuant to SFAS
No. 98, Accounting for Leases. The Company deferred the gain on sale of
approximately $1,700 and is amortizing this gain to income over the term of the
lease agreement as an offset to rent expense. Deferred income within the
accompanying March 31, 2004 and December 31, 2003 condensed consolidated
balance sheets includes $1,431 and $1,473, respectively, relating to this sale
leaseback transaction. LITIGATION AND CLAIMS The Company is involved in various lawsuits and contingencies arising out of
its operations in the normal course of business. In the opinion of management,
the ultimate resolution of these claims and lawsuits will not have a material
adverse effect upon the financial condition or results of operations of the
Company. OTHER MATTERS In connection with a previously outstanding term loan, the Company granted one
of its lenders common stock purchase warrants to purchase 13 shares of the
Companys common stock exercisable for par value at any time until December 31,
2005. The warrants entitle the holder to require the Company to repurchase the
warrants or common shares issued upon prior exercise of the warrants at $85.00
per share. As of March 31, 2004, the lender has not required the Company to
repurchase any warrants. If the repurchase right relating to these warrants
were to be exercised in full, the Company would be obligated to pay its lender
an aggregate of $1,097. This aggregate obligation is included within accrued
expenses in the accompanying condensed consolidated balance sheets. In April
2004, in connection with the refinancing of its senior debt, the Company
settled its repurchase obligation by making a cash payment of $870. See Note 10. On June 30, 2003, the Company entered into a long-term purchase agreement for
various inventory components to be used in the Companys Oscoda, Michigan
engine center. Contingent upon the achievement of guaranteed sales volume to
the Company by the third party supply vendor, the Company has committed to this
vendor to purchase an aggregate of $2,800 of inventory components over an
approximate two-year period. An initial inventory purchase of $500 took place
on June 30, 2003. The residual inventory purchase obligation of $2,300 will
occur in $100 monthly increments. These monthly purchase commitments will
first be reduced by inventory used in the normal course of business that is
currently on consignment from this third party supplier. Through March 31,
2004, the third party supply vendor did not achieve the guaranteed sales volume
levels and thus was in default of this purchase agreement. The Company is
currently considering its options with respect to this default. The Company has employment agreements with its executive officers and certain
of its key employees. The employment agreements provide that such officers and
key employees may earn bonuses, based upon a sliding percentage scale of their
base salaries, provided the Company achieves certain financial operating
results, as defined. Further, certain of these employment agreements provide
for severance benefits in the event of a change of control. 13




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8. WEIGHTED AVERAGE SHARES Basic income per share is computed using the weighted-average number of shares
outstanding during the period. Diluted income per share uses the
weighted-average number of shares outstanding during the period plus the
dilutive effect of stock options calculated using the treasury stock method.
Weighted average shares used in the computation of basic and diluted income per
share is as follows: For the ThreeMonths EndedMarch 31,2004
    
    2003Weighted average common and common
equivalent shares outstanding:Basic
    
    
    31,640,994
    
    
    
    31,640,994Effect of dilutive securities
    
    
    293,164,459
    
    
    
    279,608,437Diluted
    
    
    324,805,453
    
    
    
    311,249,431Common stock equivalents outstanding
which are not included in the
calculation of diluted earnings
per share because their impact
is antidilutive
    
    
    15,318,787
    
    
    
    14,143,612
 9. STOCK COMPENSATION PLANS As permissible under SFAS No. 123, Accounting for Stock-Based Compensation,
the Company accounts for all stock-based compensation arrangements using the
intrinsic value method prescribed by Accounting Principles Board Opinion No.
25, Accounting for Certain Transactions Involving Stock Compensation.
Accordingly, no compensation cost is recognized for stock option awards granted
to employees at or above fair market value. The following table illustrates the effects on net income and earnings per
share if the Company had applied the fair value recognition of FASB Statement
No. 123 to stock-based employee compensation: Quarter Ended March 31,2004
    
    2003Net income  as reported
    
    $
    118
    
    
    $
    319Additional expense
    
    
    (177
    )
    
    
    (233
    )Net (loss) income  pro forma
    
    
    (59
    )
    
    
    86Net income per share, basic  as reported
    
    
    0.00
    
    
    
    0.01Net income per share, diluted  as reported
    
    
    0.00
    
    
    
    0.00Net (loss) income per share, basic  pro forma
    
    
    (0.00
    )
    
    
    0.00Net (loss) income per share, diluted  pro forma
    
    
    (0.00
    )
    
    
    0.00
 In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure; an amendment of FASB Statement No.
123. This Statement provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. The Company has currently decided to continue to use
the intrinsic value method for accounting for stock-based employee
compensation, but has adopted all disclosure requirements for reporting in
interim financial statements. 14




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10. SUBSEQUENT EVENTS On April 8, 2004, the Company closed on a refinancing of its senior debt as
contemplated by a financing agreement dated April 5, 2004. Under
the financing agreement, which is between the Company and the
CIT Group, the Company obtained a $35,000 senior secured revolving
line of credit (the CIT Group Revolving Line of Credit) and a $6,400 senior
secured term loan (the CIT Group Term Loan, and collectively with the CIT
Group Revolving Line of Credit, the CIT Group Credit Facility). The Company
used the proceeds from the CIT Group Credit Facility to repay in full amounts
outstanding under its Amended Revolving Credit Facility, to repay the warrant
repurchase obligation due to a previous lender (as described in Note 7) and for
working capital. The CIT Group Revolving Line of Credit is due December 31, 2007 and bears
interest, at the Companys option, at (a) Prime plus an advance rate ranging
from 0.00% to 0.75% with the advance rate contingent on the Companys leverage
ratio, or (b) LIBOR plus an advance rate ranging from 2.50% to 4.00% with the
advance rate contingent on the Companys leverage ratio. The CIT Group Term
Loan is due in quarterly installments of $291, commencing on October 1, 2004,
with the final quarterly installment due on December 31, 2007. The CIT Group
Term Loan bears interest at the prevailing rate of the CIT Group Revolving Line
of Credit plus one percent. Also, the CIT Group Credit Facility contains
certain financial covenants regarding the Companys financial performance and
certain other covenants, including limitations on the incurrence of additional
debt. In addition, an event of default under the Hilco Term Loan (described
below) will also result in a default under the CIT Group Credit Facility.
Borrowings under the CIT Group Credit Facility are secured by a lien on
substantially all of the Companys assets. Borrowings under the CIT Group
Revolving Line of Credit are based on a borrowing base formula that takes into
account the value of the Companys receivables and inventory from time to time.
Further, the amount the Company can borrow under the CIT Group Revolving Line
of Credit is affected by various availability reserves that are established by
the lenders under the financing agreement and the Companys borrowings under
the CIT Group Revolving Line of Credit are capped based on the ratio of the
Companys debt to EBITDA and by the maximum amount of the CIT Group Revolving
Line of Credit. At May 12, 2004, the Companys availability under the CIT
Group Revolving Line of Credit was $13,794. Additionally,
simultaneous with its obtaining the CIT Group Credit Facility,
the Company borrowed $8,000 from Hilco Capital LP (the Hilco Term Loan). The
Company used the proceeds from the Hilco Term Loan to repay amounts outstanding
under its Amended Revolving Credit Facility and Amended Term Loan. The Hilco
Term Loan matures on December 31, 2007 and bears interest at Prime plus an
advance rate ranging from 3.00% and 6.00% with the advance rate contingent upon
the Company meeting (from time to time) a ratio of its secured debt to
EBITDA. In addition, the Hilco Term Loan bears PIK interest ranging from 2.00%
to 5.00% with the prevailing rate also being contingent upon the ratio of the
Companys level of secured debt to EBITDA. At no time during the term of this
loan, however, will the combined cash and PIK interest rate be less then 9.00%
nor greater then 18.00% per annum. Also, the Hilco Term Loan contains certain
financial covenants regarding the Companys financial performance and certain
other covenants, including limitations on the incurrence of additional debt.
In addition, an event of default under the CIT Group Credit Facility (described
above) will also result in a default under the Hilco Term Loan. Borrowings
under the Hilco Term Loan are secured by a lien on substantially all of the
Companys assets. In connection with the CIT Group Credit Facility and the Hilco Term Loan, the
Company paid aggregate fees of approximately $2,000. These fees will be
amortized as deferred financing fees, starting in the second quarter of 2004,
over the term of the new loans. In addition, as a result of these financing
activities, the Company will expense approximately $145 of deferred financing
costs in April 2004 which relate to the Amended Credit Facility. In
connection with the refinancing of its senior debt, the Company settled its warrant repurchase
obligations to its prior lender by paying $870 in cash. See Note 7. On April 8, 2004, the Company also refinanced all of its previously outstanding
debt (principal plus accrued and unpaid interest) with its principal
stockholder with a new $14,412 term loan due on January 31, 2008 (the LJH Term
Loan). The LJH Term Loan combines the $5,000 loan which replaced the BofA term
loan, the $6,050 related party term loan made in May 2003, the $1,300 loan
relating to the Brice acquisition, the $900 obligation related to the AMS
inventory purchase, and PIK interest previously paid on these obligations. See
Notes 3 and 4. The LJH Term Loan bears interest at 18% per annum, 6% of which
is payable in cash and the balance of which will be PIK. The LJH Term Loan is
pari-passu with the New Notes, but is secured by a lien on substantially all of
the Companys assets. The LJH Term Loan also contains cross acceleration
provisions if the obligations to the CIT Group and Hilco are accelerated. 15




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ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS Unless
the context otherwise requires, references to TIMCO, we, our and
us in this Quarterly Report on Form 10-Q includes TIMCO Aviation Services,
Inc. and its subsidiaries. This Quarterly Report on Form 10-Q contains or may
contain forward-looking statements, such as statements regarding our strategy
and anticipated trends in the industry in which we operate. These
forward-looking statements are based on our current expectations and are
subject to a number of risks, uncertainties and assumptions relating to our
operations and results of operations, competitive factors, shifts in market
demand, and other risks and uncertainties, including, in addition to those
described below and elsewhere in this Quarterly Report of Form 10-Q and in our
Annual Report on Form 10-K for 2003 (the Form 10-K), our ability to continue
to generate sufficient working capital to meet our operating requirements and
service our indebtedness, our maintaining good working relationships with our
vendors and customers, competitive pricing for our products and services, our
ability to achieve gross profit margins at which we can be profitable,
including margins on services we perform at a fixed price basis, competition in
the aircraft maintenance, repair and overhaul market and the impact on that
market and the Company of the war on terrorism, the Iraq war, the state of the
domestic passenger airline industry and the financial condition of our airline
customers, our ability to attract and retain qualified personnel in our
businesses, utilization rates for our MR&O facilities, our ability to
effectively integrate future acquisitions, our ability to effectively manage
our business, economic factors which affect the airline industry
generally, including the amount of aircraft maintenance outsourced by various airlines,
and changes in government regulations. Should one or more of these risks or
uncertainties materialize, or should the assumptions underlying these forward
looking statements prove
incorrect, actual results may differ significantly from results expressed or
implied in any forward-looking statements made by us in this Quarterly Report
on Form 10-Q. We do not undertake any obligation to revise these
forward-looking statements to reflect future events or circumstances. The following discussion and analysis should be read in conjunction with the
information set forth under Managements Discussion and Analysis of Financial
Condition and Results of Operations in the Form 10-K. GENERAL TIMCO Aviation Services, Inc. is among the worlds largest providers of fully
integrated aviation maintenance, repair and overhaul (MR&O) services for major
commercial airlines, regional air carriers, aircraft leasing companies,
government and military units and air cargo carriers. We provide four MR&O
services: TIMCO, which, with its four active locations, is one of the largest
independent providers of heavy aircraft maintenance services in the world;
Aircraft Interior Design and Brice Manufacturing, which specialize in the
refurbishment of aircraft interior components and the manufacture and sale of
aftermarket parts and new aircraft seats; TIMCO Engineered Systems, which
provides engineering services to both our MR&O operations and our customers;
and TIMCO Engine Center, which refurbishes JT8D engines and performs on-wing
repairs for both JT8D and CFM-56 series engines. Visit TIMCO online at
www.timco.aero. Our strategy is to be the vendor of choice to our customers, providing aircraft
maintenance solutions to meet our customers MR&O requirements. The services
that we offer allow our customers to reduce their costs by outsourcing some of
their MR&O functions. We were incorporated in Delaware in 1996 under the name Aviation Sales
Company. We changed our corporate name to TIMCO Aviation Services, Inc. in
February 2002. Our principal operating business, TIMCO, commenced operations in
1992. Our principal executive offices are at 623 Radar Road, Greensboro, North
Carolina 27410, and our telephone number is (336) 668-4410. 16




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RESULTS OF OPERATIONS General Operating revenues consist primarily of service revenues and sales of materials
consumed while providing services, net of allowances for any reworks,
discounts, or returns. Cost of sales consists primarily of labor, materials,
overhead, and freight charges. Our operating results have fluctuated in the past and may fluctuate
significantly in the future. Many factors affect our operating results,
including:  
    
    the timing of repair orders and payments from large customers,
    
    the state of the economy generally, the state of the airline
industry generally, and the financial condition of our airline
customers specifically,
    
    competition from other third-party MR&O service providers,
    
    the number of airline customers seeking repair services at any time,
    
    the impact of fixed pricing on gross margins and our ability to
accurately project our costs in a dynamic environment,
    
    our ability to fully utilize our hangar space dedicated to
maintenance and repair services,
    
    the volume and timing for 727 cargo conversions and the impact
during future periods on airline use of out-of-production aircraft
(such as 727, DC 8, DC 9 and DC 10) and JT8D engines as a result of
increased fuel costs and other factors,
    
    our ability to retain the services of our executive officers and
key employees,
    
    our ability to attract and retain a sufficient number of
qualified mechanics
to perform the maintenance, overhaul and repair services requested by
our customers, and
    
    the timeliness of customer aircraft arriving for scheduled
maintenance. Large portions of our operating expenses are relatively fixed. Since we
typically do not obtain long-term commitments from our customers, we must
anticipate the future volume of orders based upon the historic patterns of our
customers and upon discussions with our customers as to their future
requirements. Cancellations, reductions or delays in orders by a customer or
group of customers have in the past and could in the future have a material
adverse effect on our business, financial condition and results of operations. Three Months Ended March 31, 2004 and 2003 Operating revenue for the three months ended March 31, 2004 increased $32,248
or 62.9% to $83,532, from $51,284 for the three months ended March 31, 2003.
Operating revenue for the first quarter of 2004 included $11,540 in revenue
from our Goodyear, Arizona facility, which was subleased from our principal
stockholder in April 2003. Prior to executing this sublease agreement, during
the first quarter ended March 31, 2003, we generated $926 in revenue for this
facility. Without the revenue from our Goodyear facility, first quarter 2004
revenue would have been $71,992 and first quarter 2003 revenue would have been
$50,358 (we are providing this information in order to allow comparison of the
revenue derived from facilities fully operational in both the first quarter of
2004 and 2003). The increase in revenue for the quarter ended March 31, 2004 compared to the
revenue for the quarter ended March 31, 2003 can primarily be attributed to
additional revenue in our aircraft heavy maintenance operations (described
below), including revenues from our
Goodyear, Arizona facility (as discussed above), and to revenues from our Brice operation,
which was acquired in October 2002 and has benefited from the cross sales of
our other service offerings, and our engine center operation. Revenue for the three months ended March 31, 2004 were favorably impacted by a
significant influx of airframe heavy maintenance work to our MR&O operations.
Adverse market conditions during the first half of fiscal 2003 resulted in
delays of maintenance service work by several of our significant customers and
adversely impacted our 2003 first quarter results of operations. Many of these delayed
maintenance programs, however, were inducted for service during the third
quarter of 2003 and have continued through the first quarter of fiscal 2004.
The impact on revenue for the first quarter of 2004 was an increase in revenue
for our airframe MR&O facilities, including Goodyear, over the prior year first
quarter of 2003 of approximately $29,375. This increase within our airframe
MR&O facilities, coupled with the increased revenue for our engine center
operation and our Brice operation, resulted in a $31,583 improvement in revenue
(out of the $32,248 increase in revenue from period to period) for the first quarter of 2004 over the first quarter of 2003. 17




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While significantly improved over the first quarter of 2003, our revenue for
the quarter ended March 31, 2004 continued to be unfavorably impacted by
economic conditions in the airline industry. For the first quarter of fiscal 2004, these
unfavorable impacts include increased jet fuel prices, increased price
competition and continued downward pricing pressures from airline customers. These
factors forced us, particularly during the early part of fiscal 2003, to reduce
pricing and take fixed priced work at lower rates, which adversely impacted
revenues and gross margins. Additionally, instability in the Middle East, the
currently on-going war on terrorism, and the war in Iraq have unfavorably
impacted airline passenger levels during fiscal 2004, which has equated to some
further delays of maintenance service by some of our customers. Finally,
future changes in customer maintenance schedules, similar to those described
above, have impacted us in the past and are likely to impact us in the future. Gross profit increased to $6,293 for the quarter ended March 31, 2004 compared
with a gross profit of $3,519 for the quarter ended March 31, 2003. The
improvement of the gross margin results for the quarter ended March 31, 2004
compared to the quarter ended March 31, 2003 was spurred by the receipt of
long-term repetitive customer maintenance programs (referred to in the industry
as nose-to-tail lines), where greater efficiencies are generally achieved.
During the first quarter of 2003, because we did not have significant
nose-to-tail lines during this period, we were forced to take a higher
proportion of single-visit customers which resulted in a deterioration of gross
margin results due to lower efficiency in our operations. In addition to the increase in
nose-to-tail maintenance programs, an overall increase in sales levels,
particularly for our engine center operation and Brice operation, resulted in
an improved gross margin. Gross profit as a percentage of revenue increased to
7.5% for the quarter ended March 31, 2004, from 6.9% for the quarter ended
March 31, 2003. Gross profit levels are impacted by the fact that many of the costs of
operating our facilities are relatively fixed and therefore revenues above a
break-even level have a more than proportional favorable impact on gross
margins. Further, gross margins during any particular period are dependent
upon the number and type of aircraft serviced, the contract terms under which
services are performed and the efficiencies that can be obtained in the
performance of such services. Significant changes in any one of these factors
could have a material impact on the amount and percentage of gross profits.
Additionally, gross profit could be impacted in the future by considerations as
to the value of our inventory. While we believe that we have appropriately
valued our inventory at the lower of cost or market value, additional
allowances may be required in the future, depending on the market for aircraft
parts and the fleet types of the parts in our inventory compared to the types
of aircraft for which we are performing maintenance procedures. We continue to
evaluate all market and industry exposures in connection with the establishment
of appropriate inventory valuation levels. Operating expenses
for the first quarter ended March 31, 2004 were $5,616,
compared to $3,064 for the first quarter ended March 31, 2003. Operating
expenses as a percentage of revenues were 6.7% and 6.0%, respectively, for the
three month periods ended March 31, 2004 and 2003. During the first quarter of
fiscal 2003 we were able to extend a sublease agreement with a third party for
a facility that we currently lease in Opa-locka, Florida. As a result of this
sublease extension, we eliminated an accrual previously established for the
shortfall in the operating lease commitment and the amount of the original
sublease income. The reversal of this accrual resulted in a $300 benefit
during the 2003 first quarter and is reflected as a reduction to operating
expenses for the quarter ended March 31, 2003. Also, as a result of a revised
estimate of workers compensation insurance claims, we reduced our accrual for
workers compensation insurance by $400 during the first quarter of 2003. This
reduction is also reflected as an offset to operating expenses for the quarter
ended March 31, 2003. Had these offsets to operating expenses not occurred,
2003 first quarter operating expenses as a percentage of revenues would have
been 7.3% The combination of these offsets to operating expenses for the first
quarter of 2003, coupled with a significant increase in revenues for the first
quarter of 2004 compared to the first quarter of 2003, resulted in the
increased operating expenses reflected above. As a result of these factors, income from operations was $677 for the first
quarter of 2004, compared to income from operations of $455 for the first
quarter of 2003. Interest expense (excluding amortization of deferred financing fees) for the
three months ended March 31, 2004 increased by $527 or 34.7% to $2,044, from
$1,517 for the three months ended March 31, 2003. The increase is primarily
attributable to non-cash interest expense (since the note is a PIK instrument)
of $363 on a portion of our related party term loan (which portion was
substantially funded in July 2003) and by increased borrowing levels,
quarter-over-quarter, under our credit facility. Amortization of deferred financing costs was $264 and $558 for the three months
ended March 31, 2004 and 2003, respectively. The decrease is primarily
attributable to deferred financing fees related to our July 2002 financing
being fully amortized at the end of January 2004 (the original maturity date
for our Amended Credit Facility and BofA Term Loan) with minimal additional
financing fees incurred related to the extension of the Amended Credit Facility
through July 2004 (see Note 3 to Notes of Condensed Consolidated Financial
Statements for 18




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particulars
of this short-term extension). Partially offsetting this reduction is amortization of deferred financing fees incurred in
conjunction with our May 2003 amendment to our July 2002 credit facility and
TROL financing arrangement, in addition to deferred financing fees incurred in
conjunction with the warrant that was delivered to our majority stockholder in
conjunction with securing a portion of our related party term loan. The
warrant valuation, as determined by an independent business valuation
specialist through a fair market value assessment of the Company, was recorded
at $1,258 as of May 14, 2003 and is being amortized over a three year period. Other income  net was $1,678 for the three month period ended March 31, 2004
and $1,514 for the three month period ended March 31, 2003. Other income  net
for the first quarter of fiscal 2004 was primarily comprised of a gain on the
disposition of our office and warehouse facility located in Miramar, Florida
($825) and rental income from this office and warehouse facility received prior
to its disposition ($688). See Note 5 of the Notes to the Condensed
Consolidated Financial Statements. Other income  net for the first quarter of
fiscal 2003 was primarily comprised of rent from the Companys Miramar facility
(approximately $700) and a gain on the settlement of outstanding purchase price
adjustments and other obligations and funds held in escrow related to the July
2002 sale of our Aerocell Structure operations ($570). See Note 3 of the Notes
to the Consolidated Financial Statements in our 2003 Form 10-K. As a result of the above factors, our income from continuing operations before
income taxes and discontinued operations for the three months ended March 31,
2004 was $47, compared to our loss from continuing operations before income
taxes and discontinued operations of $106 for the three months ended March 31,
2003. For the first quarter of 2003, we have recognized a tax benefit of $174 for the
receipt of miscellaneous state carryback refunds. For the reasons set forth above, our income from continuing operations for the
three months ended March 31, 2004 was $47, or $0.00 per basic share and diluted
share, compared to income of $68, or $0.00 per basic share and diluted share,
for the three months ended March 31, 2003. Income from discontinued operations for the first quarter ended March 31, 2004
was $71, or $0.00 per basic share and diluted share, compared to income of
$251, or $0.01 per basic share and $0.00 per diluted share, for the first
quarter ended March 31, 2003. Income from discontinued operations for the
first quarter of 2004 and 2003 is primarily comprised of collections on
receivables retained from the sale of our redistribution operations that had
been fully reserved and the sale of residual inventory that remains from the
sale of our redistribution operation and new parts bearings
operation. These operations were sold in fiscal 2000 and the process
of collection of these assets is winding down. As a result, income
from discontinued operations is not expected to be significant in
future periods. LIQUIDITY AND CAPITAL RESOURCES Developments Concerning the Aviation Industry and Our Operations The condition of the airline industry has a substantial effect on our business,
since our customers consist of airlines, maintenance and repair facilities that
service airlines, as well as original equipment manufacturers. Generally, when
economic factors adversely affect the airline industry, they tend to reduce the
overall demand for maintenance and repair services, causing downward pressure
on pricing and increasing the credit risks associated with doing business with
airlines. Additionally, the price of jet fuel affects the maintenance and
repair markets, since older aircraft, which consume more fuel and which
currently account for a significant portion of our maintenance and repair
services business, become less viable as the price of fuel increases. The September 11, 2001 terrorist attacks against the United States of America
and the resulting increase in airline insurance costs, additional government
mandated passenger taxes and fees, and increased airport security costs, have
had a severe impact on the aviation industry. These factors, in conjunction
with an overall slowdown in the U.S. economy, a reduction in passenger levels
from fiscal 2001 through the first quarter of 2004, and the overall instability
in the Middle East (including the currently on-going war on terrorism and the
war in Iraq) have resulted in operating losses for U.S. airline carriers in
excess of $10.3 billion for 2001, $8.6 billion for 2002,
and approximately $2.5 billion for 2003. As a result of these factors, many commercial passenger
airlines and air cargo carriers reported significant reductions in their
capacity and have taken out of service upwards of 20% of their aircraft. This
reduction in capacity has lessened the aircraft maintenance required by such
airlines (and thereby the amount of maintenance being outsourced to companies
like TIMCO). The impact of these factors has resulted with the filing for
bankruptcy protection under Chapter 11 of the United States Bankruptcy Court by
several carriers. The most notable for us has been the filing for protection
from creditors under Chapter 11 by United Air Lines on December 9, 2002 (United
was our largest customer during the last three fiscal years). As of the date
of this report, United Air Lines has not emerged from protection under the
Bankruptcy Court. In addition to United Air Lines, other carriers have
publicly discussed the potential of seeking protection from creditors through a
voluntary bankruptcy filing. As related to us, current exposures to carriers
that are at risk of filing for protection are being continuously evaluated and
monitored, 19




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though
we have in the past, and may in the future, experience losses relating to these credit exposures. Additionally,
the Company is positioning itself for potential favorable implications of these
Chapter 11 filings and resurgence of the airlines as it is anticipated that
additional maintenance outsourcing opportunities could result as these airlines
look for cost reduction alternatives. We believe that all of the above factors could continue to have a negative
impact on our business in the foreseeable future. In response, we have taken
steps to reduce our costs. These terrorist attacks and related aftermath events
and the overall slowdown in the U.S. economy have also impacted our
competition, with several of our competitors exiting the MR&O business. Liquidity For the year ended December 31, 2003, we incurred losses from continuing
operations of $3,967. We also had a net stockholders deficit as of December
31, 2003 and March 31, 2004, and continued to require additional cash flow
above amounts currently being provided from operations to meet our working
capital requirements. Additionally, as a result of operating activities, we
were not in compliance during the first quarter ended March 31, 2003 with debt
covenant requirements under our previous revolving credit and term loan
facilities and our TROL financing arrangement. We, however, obtained a waiver
of non-compliance with all financial covenants and thereby cured these covenant
violations. Our ability to service our debt and note obligations, as they come due,
including maintaining compliance with the covenants and provisions under our
debt instruments, is and will be dependent upon our future financial and
operating performance. This performance, in turn, is subject to various
factors, including certain factors beyond our control, such as changes in
conditions affecting the airline industry and changes in the overall economy.
Additionally, our customer base has been adversely impacted in the past by
various factors, such as the state of the general economy, fluctuations in the
price of jet fuel, a significant decline, from calendar year 2000, in passenger
airline travel, the currently on-going war on terrorism, the war in Iraq, the
outbreak of the SARS virus in Asia, and a competitive price reduction in
airfare prices. These and other factors may adversely affect our customers in
the future. Cash flow from operations service payments due on our debt and note
obligations, thereby reducing funds available for other purposes. Even if we
are able to meet our debt service and other obligations when due, we may not be
able to comply with the covenants and other provisions under our debt and note
obligations. A failure to comply, unless waived by the lenders and noteholders,
would be an event of default and would permit the lenders and noteholders to
accelerate the maturity of these debt and note obligations. It would also
permit them to terminate their commitments to extend credit under their
financing agreements. If we were unable to repay the debt to the lenders or
obligations to the noteholders, or otherwise obtain a waiver, the lenders and
holders could proceed against the collateral securing the financing obligations
and notes, and exercise all other rights available to them. While we expect to
be in a position to continue to meet our obligations in future periods, there
can be no assurance we will be able to do so. On April 8, 2004, we completed the refinancing of all of our outstanding senior
credit facilities. As part of our refinancing, we obtained a new a $35,000 senior
secured revolving line of credit and a $6,400 senior secured term loan from a
group of financial institutions led by CIT Group. Additionally, we obtained an
$8,000 senior secured term loan from Hilco Capital, LP. The proceeds of these
new facilities were primarily used to repay amounts outstanding under our
previous revolving credit and term loan facilities. Additional borrowings
available under the revolving credit portion of this new facility will be used
for working capital. As of May 12, 2004, we had availability under our new
revolving credit facility of $13,794. Additionally, we have refinanced all of
the previously outstanding debt due to our principal stockholder with a new
$14,412 term loan. Finally, we have recently sold our office and warehouse
facility located in Miramar, Florida for a gross purchase price of $26,000. We
used a portion of the proceeds from the sale to repay the $23,624 outstanding
principal balance of our TROL financing arrangement and we used the balance of
the proceeds, net of transaction expenses and other Miramar property related costs that
we were obligated to pay, to repay amounts outstanding under our previous term
loan facility. See Notes 3, 4, 5 and 10 of Notes to Condensed Consolidated
Financial Statements for a complete description of all of these transactions. 20




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Additionally, the degree to which we are leveraged could have important
consequences to us, including:  
    
    our vulnerability to adverse general economic and industry conditions;
    
    our ability to obtain additional financing for future working capital
expenditures, general corporate or other purposes,
particularly where our current lenders have a lien on all of our assets;
    
    the requirement that we obtain the consent from our lenders if we wish
to borrow additional amounts; and
    
    the dedication of a significant portion of our cash flow from operations
to the payment of principal and interest on
indebtedness, thereby reducing the funds available for operations. In addition, subject to the limitations set forth in the indenture for the New
Notes, we and our subsidiaries may incur substantial amounts of additional
indebtedness. Finally, our senior credit facilities are secured by a lien on
substantially all of our assets. We believe that we will meet our working capital requirements during 2004 from
funds available under our revolving credit agreement and from our operations.
We may also sell assets or our equity securities, or borrow additional funds,
to the extent required and available. While we expect that required financing
will be available to meet our working capital requirements, there can be no
assurance of this fact. Cash Net cash used in continuing operating activities during the three months ended
March 31, 2004 was $4,375, compared to net cash used in continuing operating
activities of $6,102 for the same period in 2003. Cash used in operating
activities was primarily the result of net income, adjusted for non-cash charges of $1,834 and increases in accounts receivable of $17,163, offset
by decreases in inventories and other current assets, and increases in accounts
payable, customer deposits, and other liabilities, together aggregating $10,954. The increase in accounts receivable provided
additional borrowing base for our revolving credit facility, which funded this
use of cash. Cash of $24,519 was provided by investing activities during the
first quarter of 2004, which included cash proceeds of $24,861 from the sale of
the Companys Miramar facility, offset by $342 for the purchase of fixed
assets. Cash used in financing activities during the period was $21,971. Net
proceeds from borrowings under our senior revolving credit facilities ($2,643)
and from the sale of our Miramar facility were used for operations, to pay $966
of bank and refinancing fees and to pay $23,648 of capital leases obligations,
including $23,624 under our TROL financing arrangement. Cash of $437 was
provided by our discontinued operations. Senior Credit Facilities See discussion of our senior credit facilities in Notes 3 and 10 to Notes to
Condensed Consolidated Financial Statements and in our 2003 Form 10-K. Subordinated Notes See discussion of our subordinated note obligations in Note 6 to Notes to
Condensed Consolidated Financial Statements. TROL Financing See discussion of our TROL financing in Note 5 to Notes to Condensed
Consolidated Financial Statements. CONTINGENCIES We are involved in various litigation and environmental matters arising in the
ordinary course of business. These are discussed in Note 7 of Notes to
Condensed Consolidated Financial Statements. We maintain insurance coverage
against certain potential claims in amounts that we believe to be adequate.
Although the final outcome of these legal and environmental matters cannot be
determined, based on the facts presently known, it is managements opinion that
the final resolution of these matters will not have a material adverse effect
on our financial position or future results of operations. 21




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CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES Financial Reporting Release No. 60 requires all companies to include a
discussion of critical accounting policies or methods used in the preparation
of its financial statements. Our consolidated financial statements include a
summary of the significant accounting policies and methods used in the
preparation of our consolidated financial statements. Revenue Recognition Revenues from MR&O services are recognized and unbilled receivables are
recorded based upon the percentage of completion method. Unbilled receivables
are billed on the basis of contract terms (generally upon completion of an
aircraft) and deliveries. Revenues related to engine overhaul services are
recognized upon shipment of the overhauled engine. We regularly review our
progress on percentage-of-completion contracts and review the estimated costs
of fulfilling our obligations. If we do not accurately estimate the scope of
the work to be performed or do not manage these contracts properly within the
planned periods of time or satisfy our obligations under the contracts, then
future revenue and margins may be significantly and negatively affected, or
losses on existing contracts may need to be recognized. Any resulting
reductions in revenues, margins or contract losses could be material to our
results of operations. Use of Estimates Managements discussion and analysis of financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of our financial statements requires
management to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and the related disclosure of
contingent assets and liabilities. On an ongoing basis, management evaluates
these estimates, including those related to estimated losses on disposal of
discontinued operations, the provision to reduce inventory to the lower of cost
or fair value, the estimated profit or loss to be recognized as aircraft
maintenance, design and construction services are performed, the allowances for
doubtful accounts and notes receivable, the realizability of its investment in
affiliates, the recovery of long lived assets and goodwill, medical benefit
accruals, the estimated fair values of facilities under capital leases and
allowances for litigation and environmental costs. Management bases their
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions and conditions. Inventory Valuation Inventories, which consist primarily of new, overhauled, serviceable and
repairable aircraft parts, are stated at the lower of cost or market on
primarily a specific identification basis and aircraft parts usage analysis.
Although we believe that we have adequately provided for any such declines in
inventory value, any unanticipated change in technology or customer aircraft
fleet for which our inventory relates could significantly affect the value of
our inventory and thereby adversely affect gross margins and results of
operations. Customer demand, general economic conditions and industry market
factors may also impact the value of our inventory. In instances where bulk
purchases of inventory items are made, cost is determined based upon an
allocation by management of the bulk purchase price to the individual
components. Expenditures required for the recertification of parts are
capitalized as inventory and are expensed as the parts associated with the
recertification are sold. Accounts Receivable  Allowance for Doubtful Accounts Substantially all of our accounts receivable are due primarily from airlines,
aircraft leasing companies and air cargo carriers. During 2003 and the first
quarter of 2004, there has been significant change in the aviation industry,
including the filing for bankruptcy protection under Chapter 11 of the United
States Bankruptcy Court by certain carriers. This in turn has affected service
providers within the aviation industry and has resulted in us experiencing
higher credit losses. We continuously perform credit evaluations of our
customers, considering numerous inputs including the customers financial
position, past payment history, cash flows, historical loss experience and
economic conditions. While management believes that adequate allowances for
doubtful accounts have been provided in the consolidated financial statements,
it is possible that we could experience additional unexpected credit losses. 22




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Goodwill Valuation As of January 1, 2002, we adopted Statement of Financial Accounting Standards
(SFAS) No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 represents
a substantial change in the accounting for goodwill. SFAS No. 142 requires that
goodwill no longer be amortized, but that goodwill be tested for impairment by
comparing the reporting units carrying value to its fair value as of January
1, 2002 and as of an annual assessment date. In
accordance with SFAS No. 142, we have elected
July 31st as our annual
impairment assessment date. We completed our initial impairment assessment as
of January 1, 2002 and our annual impairment assessment as of July 31, 2002 and
2003, and concluded that no impairment charge was required. Any impairment
charges in the future, based on the evaluation requirements under SFAS No. 142,
could be material to the Companys results of operations. Long-Lived Assets Management reviews long-lived assets, which consists of property, plant and
equipment, for impairment whenever events or changes in circumstances indicate
that the carrying value of the asset may not be recovered. Recoverability of
long-lived assets to be held and used is evaluated by a comparison of the
carrying amount of the asset to future net undiscounted cash flows expected to
be generated by the asset group. If the carrying amount of an asset exceeds its
estimated future cash flows, an impairment charge is recognized for the excess
of the carrying amount over the fair value of the asset. Assets to be disposed
of are reported at the lower of the carrying value or fair value less cost to
sell when we have committed to a disposal plan. In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets. We adopted SFAS No. 144 as of
January 1, 2002 with no material impact to our consolidated financial
statements. 23




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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK We are exposed to market risk for changes in interest rates. We have no
exposure to foreign currency exchange rates or to commodity price risk. We do
not hold or issue any financial instruments for trading or other speculative
purposes. Our obligations as of March 31, 2004 under our Amended Revolving Credit
Facility and a portion of our related party term loan (the $5,000 portion
repaid to BofA by our principal stockholder in January 2004) bear interest at
floating rates and therefore, we are impacted by changes in prevailing interest
rates. However at the same date, our $3,500 Amended Term Loan, a portion of
our related party term loan ($8,250), and our New Notes, Old Notes, and Junior
Notes all bore fixed interest rates and therefore were not subject to the risk
of interest rate fluctuations. A 10% change in market interest rates that
affect our financial instruments would impact earnings during 2004 by
approximately $137 before taxes and would change the fair value of our
financial instruments by approximately $12,448. 
 ITEM 4: CONTROLS AND PROCEDURES  (a)
    
    Our Chief Financial Officer and Chief Executive Officer evaluated our
disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) promulgated under the Securities Exchange Act of 1934, as
amended (the Exchange Act)). Based on that evaluation, these
officers have concluded that as of March 31, 2004 our disclosure
controls and procedures were effective in timely alerting them to
material information relating to our company (including our
consolidated subsidiaries) required to be included in our reports
filed or submitted by us under the Exchange Act.As of March 31, 2004, we have carried out an evaluation, under the
supervision and with the participation of our management, including
our principal executive officer and principal financial officer, of
the effectiveness of the design and operation of our disclosure
controls and procedures. Based on such evaluation, our principal
executive officer and principal financial officer concluded that the
Companys disclosure controls and procedures are effective.(b)
    
    There has been no change in our internal controls over financial reporting during the quarter ended March 31, 2004 that
has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. 24




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PART II. OTHER INFORMATION 
 ITEM 1. LEGAL PROCEEDINGS See Note 7 to the Companys Unaudited Condensed Consolidated Financial
Statements included in this filing. 
 ITEM 2. CHANGES IN SECURITIES None 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES None 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS The results of the Companys 2003 annual meeting of stockholders (held on
January 13, 2004) were reported in the Companys 2003 Annual Report on Form
10-K. 
 ITEM 5. OTHER INFORMATION None 
 ITEM 6. EXHIBITS AND REPORTS ON FORMS 8-K (a) Exhibits  31.1
    
    Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer under Section 302 the Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer under Section 906 the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer under Section 906 the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K During the quarter ended March 31, 2004, the Company did not file any reports
on Form 8-K. 25




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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized. TIMCO Aviation Services, Inc. By:
    /s/ C. Robert CampbellExecutive Vice President and ChiefFinancial Officer
(Principal Financial Officer) Dated: May 13, 2004 26




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Exhibit Index ExhibitNumber
    
    Description31.1
    
    Certification of Chief Executive Officer under Section 302 the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer under Section 302 the Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer under Section 906 the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer under Section 906 the Sarbanes-Oxley Act of 2002
 27