Pemco Aviation Group Reports First Quarter 2005 Results
May 10 2005 - 10:15AM
Business Wire
Pemco Aviation Group, Inc. (NASDAQ: PAGI), a leading provider of
aircraft maintenance and modification services, today announced
2005 first quarter net income of $1.16 million ($0.26 per diluted
share) compared with $1.04 million ($0.23 per diluted share) in the
first quarter of 2004, an increase of 11.5%. Revenue for the first
quarter of 2005 was $44.0 million compared to $43.2 million in
first quarter of 2004, an increase of 1.9%. "Pemco's efforts last
year to improve productivity and to diversify the core business are
beginning to yield positive results," stated Ronald Aramini,
President and Chief Executive Officer. "First quarter sales at our
Commercial Services Segment (CSS) increased over 60% and sales at
our Manufacturing and Components Segment (MCS) increased 99%. While
the volume is down in the Government Services Segment (GSS), we
have improved profit margins over the past three quarters by
focusing on more efficient operations and a reduction of flow days
to perform the maintenance and modification services on KC-135
aircraft." Mr. Aramini further commented that "before the GSS
process improvements, we utilized 60% of the hanger facility for
the KC-135 program; after implementation we utilize only 30%. Thus
we have considerable hanger space for new business. Pemco Aeroplex
now provides to its military maintenance customers and partners,
Boeing, Lockheed and L3, growth capability and continued excellent
quality at cost effective pricing. We believe that new business
opportunities exist that can utilize fully our facilities. We
expect our CSS commercial modification partnerships with Taikoo
(Xiamen) Aircraft Engineering Co. Ltd. ("TAECO") in Mainland China
and Malaysian Airline System ("MAS") for B737 cargo conversions to
show growth in late 2005 and beyond. Also, we believe that the
airline maintenance outsourcing business is growing. Our MCS in
Chatsworth, CA, has recently won several contracts, including one
from Lockheed Martin related to the National Missile Defense
Targets and Countermeasures Program, and other customers that
position it well for revenue growth in 2005 and beyond. We expect
2005 to serve as a return to profitability and a stepping stone for
future growth." -0- *T First Quarter 2005 vs. 2004 Results Summary
of comparative results for the quarter ended March 31: (Dollars In
Millions) 2005 2004 % Change --------- --------- --------- Revenue
$44.05 $43.25 1.9% Gross Profit 8.18 8.94 (8.5)% Operating Income
2.38 1.91 24.6% Income Before Taxes 1.94 1.69 14.8% Net Income 1.16
1.04 11.5% EBITDA (a) 3.29 2.95 11.5% (a) A description of the
Company's use of non-GAAP information is provided below under "Use
of Non-GAAP Financial Measures." A reconciliation of net income to
EBITDA is provided at the end of this release. *T Revenue increased
1.9% to $44.0 million in 2005 on the strength of higher sales in
CSS and MCS. This was partially offset by a decrease in GSS sales.
Gross profit decreased $0.8 million due to lower volume in GSS.
Operating income increased $0.5 million due to a $1.2 million
reduction of selling, general and administrative ("SG&A")
expenses. -0- *T Summary of revenue by segment for the quarter
ended March 31: (Dollars In Millions) 2005 2004 % Change ---------
--------- --------- Government Services (GSS) $21.47 $29.58 (27.4)%
Commercial Services (CSS) 19.56 12.16 60.9% Manufacturing and
Components (MCS) 3.55 1.78 99.4% Less Intercompany (0.53) (0.27)
96.3% Total Revenue 44.05 43.25 1.9% *T GSS revenue decreased $8.1
million primarily as a result of decreased sales under the KC-135
Programmed Depot Maintenance ("PDM") program for both routine and
non-routine services. During the first quarter of 2005, revenue
from routine KC-135 services decreased $3.6 million due to the GSS
delivering fewer KC-135 PDM aircraft compared to the same period of
2004. In addition, GSS experienced a change in workscope between
quarters that decreased revenue from routine services. The amount
of non-routine services performed per KC-135 PDM aircraft, which
varies with each aircraft based on model and condition, decreased
$4.6 million. The $4.6 million reduction was attributable to an
overall decrease in the number of aircraft inducted into the PDM
process, a reduction of flow days for KC-135 aircraft and
differences in aircraft condition. Non-routine maintenance services
and material sales on C-130 aircraft under contracts with the U.S.
Navy and U.S. Coast Guard decreased $0.5 million and $0.2 million,
respectively. The decreases in revenue were partially offset by
sales of approximately $0.7 million related to the delivery of two
aircraft under a new contract to perform painting services for the
U.S. Air Force. CSS revenue increased $7.4 million due to increased
maintenance, repair and overhaul ("MRO") revenues of $4.2 million,
increased revenue in passenger-to-cargo conversion services of $2.9
million, and increased revenue of $0.3 million from engineering
services. MRO revenues increased due to a diversifying customer
base. During the first quarter of 2005, approximately 65% of MRO
revenue was generated from a major passenger airline compared to
99% during the same period of 2004. MCS revenue increased $1.8
million due to a $1.4 million increase in revenue at Space Vector
and a $0.4 million increase in revenue at Pemco Engineers. Space
Vector's revenue increased due to additional work awarded on U.S.
government launch vehicle programs. Pemco Engineers' revenue
increased due to strengthening demand for aircraft cargo system
parts. Cost of sales increased $1.6 million, or 5%, to $35.9
million during 2005. Approximately $0.6 million of the increase was
the result of the higher sales base. The remaining increase in cost
of sales was the result of a change in business mix from GSS to
CSS. Historically, GSS has maintained a higher gross profit margin
than CSS due to the efficiencies gained from higher volumes of
work. Gross profit decreased $0.8 million as a result of the
changes in business mix. SG&A expenses decreased $1.2 million,
or 17.4%, to $5.8 million in 2005. As a percentage of sales,
SG&A expenses decreased to 13.2% in 2005 from 16.2% in 2004.
The decrease in SG&A expense is primarily attributable to
approximately $0.9 million in accounting and legal charges during
the first quarter of 2004 related to the 2003 financial statement
audit and the restatement of the Company's financial statements
filed in connection with the first three quarters of 2003. (a) Use
of Non-GAAP Financial Measures EBITDA is defined as earnings before
interest, taxes, depreciation and amortization. Pemco presents
EBITDA because its management uses the measure to evaluate the
Company's performance and to allocate resources. In addition, Pemco
believes EBITDA is a measure of performance used by some commercial
banks, investment banks, investors, analysts and others to make
informed investment decisions. EBITDA is an indicator of cash
generated to service debt and fund capital expenditures. EBITDA is
not a measure of financial performance under generally accepted
accounting principles and should not be considered as a substitute
for or superior to other measures of financial performance reported
in accordance with GAAP. EBITDA as presented herein may not be
comparable to similarly titled measures reported by other
companies. See the reconciliation of net income to EBITDA at the
end of this release. About Pemco Pemco Aviation Group, Inc., with
executive offices in Birmingham, Alabama, and facilities in Alabama
and California, performs maintenance and modification of aircraft
for the U.S. Government and for foreign and domestic commercial
customers. The Company also provides aircraft parts and support and
engineering services, in addition to developing and manufacturing
aircraft cargo systems, rocket vehicles and control systems, and
precision components. For more information:
www.pemcoaviationgroup.com This press release contains
forward-looking statements made in reliance on the safe harbor
provisions of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These statements may be identified by their use of words,
such as "believe," "expect," "intend" and other words and terms of
similar meaning, in connection with any discussion of the Company's
prospects, financial statements, business, financial condition,
revenues, results of operations or liquidity. Factors that could
affect the Company's forward-looking statements include, among
other things: changes in global or domestic economic conditions;
the loss of one or more of the Company's major customers; the
Company's ability to obtain additional contracts and perform under
existing contracts; the outcome of pending and future litigation
and the costs of defending such litigation; financial difficulties
experienced by the Company's customers; potential environmental and
other liabilities; the inability of the Company to obtain
additional financing; material weaknesses in the Company's internal
control over financial reporting; regulatory changes that adversely
affect the Company's business; loss of key personnel; and other
risks detailed from time to time in the Company's SEC reports,
including its Annual Report on Form 10-K for the fiscal year ended
December 31, 2004. The Company cautions readers not to place undue
reliance on any forward-looking statements, which speak only as of
the date on which they are made. The Company does not undertake any
obligation to update or revise any forward-looking statements and
is not responsible for changes made to this release by wire
services or Internet services. -0- *T PEMCO AVIATION GROUP, INC.
(In thousands except per share information) First Quarter Ended
March 31, --------------------- 2005 2004 ---------- ----------
Sales: Government Services Segment $21,465 $29,581 Commercial
Services Segment 19,563 12,159 Manufacturing and Components Segment
3,552 1,776 Inter-segment Revenue (532) (269) ---------- ----------
Total Sales 44,048 43,247 Cost of Sales 35,864 34,312 ----------
---------- Gross Profit 8,184 8,935 Selling, General and
Administrative Expenses 5,805 7,025 ---------- ---------- Income
from Operations 2,379 1,910 Other expense: Interest expense 442 225
Income Before Income Taxes 1,937 1,685 Provision For Income Taxes
778 649 ---------- ---------- Net Income $1,159 $1,036 ==========
========== Weighted Average Common Shares Outstanding: Basic 4,105
4,045 ========== ========== Diluted 4,411 4,544 ==========
========== Net Income Per Common Share: Basic $0.28 $0.26
========== ========== Diluted $0.26 $0.23 ========== ==========
EBITDA Reconciliation (a) ------------------------- Net Income
$1,159 $1,036 Interest 442 225 Taxes 778 649 Depreciation and
Amortization 906 1,039 ---------- ---------- EBITDA $3,285 $2,949
========== ========== (a) See note above on Use of Non-GAAP
Financial Measures. *T
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