Flying High Recent acquisitions and a focus on quality help airline supplier take flight

The company: Kellstrom Industries Inc. in Sunrise, Florida, is arapidly growing independent dealer of refurbished jet engines andparts.

Markets: As a fast-growing player in the $3.75 billionaircraft engine parts industry, Kellstrom provides its products to26 major airlines worldwide. The current trend of airlinesoutsourcing is providing independents such as Kellstrom with growthopportunities.

The company is one of the few resellers of its type to havereceived ISO 9000 quality certification, an important factor assafety and quality become larger purchasing determinants than pricein the wake of recent airline safety problems. The Federal AviationAdministration requires airlines to use only accredited suppliers,and partly due to the ISO 9000 certification, Kellstrom hasobtained approved supplier status from more than 50 customers insix countries.

The Sizzle: Kellstrom's top seven officers have acombined 135 years of experience in the aircraft industry. Theirdepth of experience and worldwide industry contacts are a drivingfactor behind their success. Earlier this year, when Kellstrombought out its former rival, the $22 million International AircraftSupport Inc., it acquired complementary product lines that todaypower more than
65 percent of the world's aircraft.

Reduced inventories at major airlines in response to financialcontrols, shrinking lists of approved suppliers, worldwidederegulation and projected growth in numbers of passengers are alltrends that should provide additional opportunities forKellstrom.

The Risks: Revenue slowdown could occur if the company isunable to continue making financially prudent acquisitions.However, since the industry is highly fragmented, with many smallsuppliers that may be acquired, the risk is not significant overthe near term.

Historical Financial Performance: Since 1994, revenueshave increased from $8.2 million to $24.9 million last year. Duringthe first half of 1996, European sales nearly quintupled. Theexplosive growth in overall sales and earnings is largelyattributable to increased working capital and available creditsources.

Projected Financial Performance: With the airlineindustry likely to become even more selective, Kellstrom should beable to maintain above-normal growth for the foreseeable future.Present financing should be sufficient for revenue growth to $150million within the next two years. Projections in the chart (left)are based on current operations and the company's potential touse capital in ways that will boost earnings per share, such asthrough prudent acquisitions. Given the company's rapid growthand industry position, the price-earnings ratio should reach 18 to20 in the next two years.

The Outlook ast and projected sales and earnings

Year 1995 1996 1997* 1998*

Revenues ($M) $14.7 $24.9 $75 $100

Net income ($M) $1.4 $2.6 $8.1 $11.3

Revenue growth rate N/A 69% 273% 47%

Earnings growth rate N/A 85% 311% 39%

Shares outstanding (M) 7.2 8.2 8.9 9.6

Share price N/A N/A $18 $24

At A Glance

Name: Kellstrom Industries Inc.

Reported 1996 revenues:
$24.9 million

Reported 1996 net income:
$2.6 million

Recent price: $13.63 (3/31/97)

Price-earnings ratio: 14.5
(1997 estimate)

Market: OTC

Symbol: Kell