Pemco Aviation Grp. (MM) (NASDAQ:PAGI)
Historical Stock Chart
From Jul 2019 to Jul 2024
![Click Here for more Pemco Aviation Grp. (MM) Charts. Click Here for more Pemco Aviation Grp. (MM) Charts.](/p.php?pid=staticchart&s=N%5EPAGI&p=8&t=15)
Pemco Aviation Group, Inc. (NASDAQ: PAGI), a leading
provider of aircraft maintenance and modification services, today
reported its results for the fourth quarter and year ended December
31, 2005. The Company announced that unusual events occurring in 2005
resulted in a net loss of $5.8 million for the year ended December 31,
2005, compared to a net loss of $3.0 million for the year ended
December 31, 2004. The Company recorded a net loss of $2.9 million for
the fourth quarter of 2005, versus a net loss of $3.2 million for the
fourth quarter of 2004. Revenue for the fourth quarter of 2005 was
$36.6 million compared to $59.5 million in fourth quarter of 2004, a
decrease of 38.5%.
According to Ronald Aramini, Pemco's President and CEO, "Our
reduced fourth quarter net loss on significantly lower revenue was the
result of investments in streamlining our operations, improving
quality and reducing our average cycle times during 2004 that allowed
us to enter 2005 with more efficient operations. However, because of
the following unusual and unforeseeable events, the operating results
for the year and the fourth quarter were negatively impacted:
-- Provision for bad debts related to the Northwest Airlines
bankruptcy in the third quarter of 2005,
-- Expenses related to starting a new maintenance line for the
U.S. Navy P-3 contract,
-- Two-month lockout of the union employees at the Dothan,
Alabama facility,
-- Settlement of the Falcon Air claim,
-- Temporary suspension of KC-135 inputs in 2005, and
-- Losses incurred completing the U.S. Coast Guard contract.
None of these events are expected to impact significantly the
Company's 2006 results of operations."
Mr. Aramini continued, "We are very excited about beginning work
on three major programs. Under our contract with L-3 Communications,
Pemco has begun providing maintenance work on the P-3 Orion maritime
patrol and antisubmarine warfare aircraft for the U.S. Navy at our
Birmingham, Alabama facility. The first P-3 aircraft should be
delivered in the first quarter of 2006, ahead of schedule. We have
also begun the first-ever conversion of B737-400 aircraft from
passenger to freighter for Alaska Airlines at our Dothan, Alabama
facility. This agreement calls for the conversion of five B737-400s
with options for two additional conversions. The first Alaska
conversion should deliver early in the second quarter of 2006.
Finally, in January 2006, the Company received the first Southwest
Airlines B737 at its Dothan facility. Southwest Airlines is a leader
in the commercial airline industry. The second full line of B737 heavy
maintenance has recently started and we are working toward a long and
successful partnership with Southwest."
Mr. Aramini concluded, "I am excited about the prospects for 2006
and beyond. Many of the issues that adversely affected our
profitability the last two years were non-recurring in nature. That,
coupled with new revenue sources from customers with strong revenue
growth potential, should allow significant revenue growth and a return
to profitable operations."
-0-
*T
2005 Results
Summary of comparative results for the year ended December 31:
(Dollars In Millions)
Revenue $150.3 $201.2 (25.3%)
Gross Profit 15.7 25.1 (37.5%)
Operating loss (8.4) (3.0) (180.0%)
Loss before taxes (9.6) (4.3) (123.3%)
Net loss (5.8) (3.0) (93.3%)
EBITDA (a) (3.8) 2.0 (290.0%)
(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 loss to EBITDA is provided at the end of this
release.
Summary of revenues by segment for the year ended December 31:
(Dollars In Millions)
2005 2004 Change % Change
------ ------ ------- ---------
GSS $ 82.0 $133.5 $(51.5) (38.6%)
CSS 53.2 64.8 (11.6) (17.9%)
MCS 15.6 7.7 7.9 102.6%
Eliminations (0.5) (4.8) 4.3
------ ------ ------
Total $150.3 $201.2 $(50.9) (25.3%)
------ ------ ------
*T
The $51.5 million decrease in sales at the Government Services
Segment ("GSS") was primarily due to a decrease in aircraft deliveries
under the KC-135 PDM program of $49.2 million. The scope of the KC-135
PDM program allows for the Company to provide services on PDM
aircraft, drop-in aircraft, and other aircraft related areas. In 2004
and 2005, the U.S. Air Force ("USAF") reduced the total number of
KC-135 aircraft in operation resulting in fewer aircraft being
outsourced for maintenance. Due to fewer aircraft being inducted, the
Company delivered 20 PDM aircraft and three drop-ins in 2005, compared
to 31 PDM aircraft during 2004. The Company does not expect any
further reductions in KC-135 inductions in 2006. The Company delivered
one C-130 aircraft during 2005 compared to three C-130 aircraft during
2004 for depot level maintenance under a contract with the U.S. Coast
Guard ("USCG"). The remaining two USCG C-130s are expected to be
delivered in the first quarter of 2006. The Company also delivered
three C-130 aircraft under contracts with other government agencies to
perform limited scope maintenance work during 2005 compared to ten
during 2004. The KC-135 PDM programs represented 86.7% of the revenue
of the GSS during 2005 compared to 90.1% during 2004. GSS is currently
operating under a new labor contract with the International Union,
United Automobile, Aerospace Workers of America and its Local No. 1155
which does not expire until March 2010.
The decrease in the Commercial Services Segment ("CSS") revenue of
$11.6 million was primarily due to a decrease in cargo conversion
revenues of $4.3 million, a decrease in military flight control
revenues of $2.8 million, a decrease in maintenance, repair and
overhaul ("MRO") revenue of $1.7 million and a decrease in parts sales
of $0.6 million. CSS delivered one cargo conversion during 2005,
compared to three during 2004. The military flight controls program
was transferred from CSS to GSS at the end of 2004. MRO revenues were
adversely impacted in the third and fourth quarters of 2005 by the
bankruptcy of CSS's largest customer, Northwest Airlines, and by a
two-month lockout of all union employees at the Dothan, Alabama
facility. The Company expects significant growth in CSS's cargo
conversion revenues in 2006 due to the Alaska Airlines contract. MRO
revenues are expected to return to historical levels due to the return
of Northwest Airlines after the end of the lockout and the new
Southwest Airlines contract. In addition, the Company now enjoys labor
stability with the union contract (International Association of
Machinists and Aerospace Workers AFL-CIO Local Lodge No. 1632) running
until October 2008.
Revenue in the Manufacturing and Components Segment ("MCS")
increased to $15.6 million, an increase of $7.9 million from the prior
year. Revenue increased primarily as a result of increased work on
launch vehicles, design engineering and cargo system sales. The
Company expects continued demand from both the U.S. government and
commercial customers for these services.
Cost of sales decreased to $134.6 million in 2005 from $176.1
million in 2004. Cost of sales decreased at a slightly lower rate than
revenue because of charges related to the USCG C-130 program and fixed
expenses. Cost of sales was adversely impacted in 2005 by $5.3 million
of losses expected to complete the USCG contract, compared to losses
of $2.7 million in 2004. The last USCG aircraft is expected to be
delivered prior to the end of the first quarter of 2006. The Company
also incurred expenses of $0.4 million in 2005 related to costs
incurred for implementing a new maintenance line for the new U.S. Navy
P-3 program and the related losses expected on the first two aircraft.
The Company expects that all P-3 aircraft inducted during 2006 will be
profitable.
Gross profit at the CSS decreased from $9.6 million in 2004 to
$3.0 million in 2005. The decrease in gross profit at the CSS was
primarily due to the lockout of all union employees at the Dothan,
Alabama facility for a period of two months, the bankruptcy of
Northwest Airlines, and fewer cargo conversion deliveries in 2005. The
CSS also recorded a charge of $1.1 million in 2005 related to the
settlement of the Falcon Air claim.
MCS cost of sales increased by 56.5%, from $6.9 million in 2004 to
$10.8 million in 2005 primarily as a result of a 103% increase in
revenue. Included in 2005 cost of sales is $0.4 million in expenses
related to the relocation of the Pemco Engineers facility to
Chatsworth, California.
Overall, the Company's gross profit percentage decreased to 10.4%
in 2005 from 12.5% in 2004. The decrease in gross profit as a percent
of revenue in 2005 and 2004 from historical levels is attributable to
several factors discussed above. Gross profit at the GSS decreased
from $14.7 million in 2004 to $7.9 million in 2005. As a percentage of
sales, gross profit decreased from 11.0% in 2004 to 9.6% in 2005. The
impact from losses on the USCG program and fixed expenses were
partially offset by improvement in the flow days for KC-135 aircraft
as a result of productivity initiatives implemented in 2004.
Selling, general, and administrative ("SG&A") expenses decreased
$5.6 million, or 20.0%, to $22.5 million in 2005 from $28.1 million in
2004. As a percent of sales, SG&A expenses increased to 15.0% in 2005
from 13.9% in 2004 due to the lower revenue base. The decrease in SG&A
expense is primarily attributable to approximately $2.5 million in
accounting and legal charges during 2004 related to restating the
Company's financial statements. In addition, the Company recorded a
$0.9 million charge during the second quarter of 2004 related to the
settlement of an equity compensation arrangement. SG&A expense also
decreased due to cost reductions implemented as a result of reduced
revenue in 2005.
Interest expense increased to $1.9 million in 2005 from $1.3
million in 2004. The effective average interest rate on the Company's
revolving credit facility was approximately 5.8% in 2005 versus 4.1%
in 2004. In addition, the Company's average debt outstanding increased
to $30.6 million in 2005 compared to $28.4 million in 2004.
-0-
*T
Fourth Quarter Results
Summary of unaudited comparative results for the fourth quarter
ended December 31: (Dollars In Millions)
2005 2004 % Change
----- ----- ---------
Revenue $36.6 $59.5 (38.5%)
Gross Profit 0.2 1.4 (85.7%)
Loss From Operations (4.3) (4.2) (2.4%)
Loss Before Income Taxes (4.8) (4.6) (4.3%)
Net Loss (2.9) (3.2) 9.4%
EBITDA (3.3) (2.8) (17.9%)
Summary of unaudited revenues by segment for the fourth quarter
ended December 31: (Dollars In Millions)
2005 2004 Change % Change
----- ----- ------- ---------
GSS $23.3 $41.3 $(18.0) (43.6%)
CSS 9.6 16.6 (7.0) (42.2%)
MCS 3.8 2.2 1.6 71.7%
Eliminations (0.1) (0.6) 0.5
----- ----- ------
Total $36.6 $59.5 $(22.9) (38.5%)
----- ----- ------
*T
The decrease in GSS sales was due to decreased delivery of
aircraft compared with the prior year due to fewer inductions of
aircraft. The USAF reduced the total number of KC-135 aircraft in
operation, resulting in fewer aircraft being outsourced for
maintenance. The GSS delivered six KC-135 PDM aircraft during the
fourth quarter of 2005, compared with ten in the fourth quarter of
2004. In addition, the GSS delivered one aircraft under the USCG C-130
UDLM contract during the fourth quarter of 2004 for which there were
no comparable deliveries in the fourth quarter of 2005.
Fourth quarter CSS sales were adversely impacted by the lockout of
union employees at the Dothan, Alabama facility which ended on October
11, 2005. Few aircraft were inducted during the two-month lockout, and
it has taken several months for operations to return to normal levels
of activity.
MCS revenue increased primarily as a result of increased work on
launch vehicles, design engineering and cargo system sales.
Gross profit decreased to $0.2 million during the fourth quarter
of 2005, compared with $1.4 million during the fourth quarter of 2004.
The decrease in gross profit quarter-over-quarter is attributable to
lower sales at the GSS and CSS, a $1.5 million charge related to
losses on the USCG contract in the fourth quarter of 2005 versus a
charge of $0.6 million in the fourth quarter of 2004, and $1.1 million
in charges related to settlement of the Falcon Air claim.
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 loss 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 "believes," "expects," "intends,"
"may," "will," "should," "could" 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, 2005. 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)
Fourth Quarter Ended
December 31,
-------------------------
2005 2004
------- -------
Sales:
Government Services Segment $23,258 $41,261
Commercial Services Segment 9,595 16,630
Manufacturing and Components Segment 3,836 2,244
Inter-segment Revenue (49) (643)
------- -------
Total Sales 36,640 59,492
Cost of Sales 36,432 58,128
------- -------
Gross Profit 208 1,364
Selling, General and Administrative Expenses 4,458 5,538
------- -------
Loss from Operations (4,250) (4,174)
Other (income) expenses:
Interest Expense (515) (451)
------- -------
Loss Before Income Taxes (4,765) (4,625)
Benefit From Income Taxes (1,907) (1,443)
------- -------
Net Loss $(2,858) $(3,182)
======= =======
Weighted Average Common Shares Outstanding:
Basic 4,112 4,102
======= =======
Diluted 4,112 4,102
======= =======
Net Loss Per Common Share:
Basic $ (0.70) $ (0.78)
Diluted $ (0.70) $ (0.78)
EBITDA Reconciliation:
Net Loss $(2,858) $(3,182)
Interest Expense (515) (451)
Income Taxes (1,907) (1,443)
Depreciation and Amortization 983 1,340
------- -------
EBITDA $(3,267) $(2,834)
======= =======
PEMCO AVIATION GROUP, INC.
(In thousands except per share information)
Year Ended
December 31,
-------------------
2005 2004
-------- --------
Sales:
Government Services Segment $ 81,960 $133,538
Commercial Services Segment 53,217 64,794
Manufacturing and Components Segment 15,627 7,688
Inter-segment Revenue (492) (4,855)
-------- --------
Total Sales 150,312 201,165
Cost of Sales 134,613 176,115
-------- --------
Gross Profit 15,699 25,050
Selling, General and Administrative
Expenses 22,545 28,055
Provision for Doubtful Accounts 1,519 -
-------- --------
Loss from Operations (8,365) (3,005)
Other (income) expenses:
Interest Expense (1,912) (1,304)
Other Income 650 -
-------- --------
Loss Before Income Taxes (9,627) (4,309)
Benefit From Income Taxes (3,813) (1,321)
-------- --------
Net Loss $ (5,814) $ (2,988)
======== ========
Weighted Average Common Shares
Outstanding:
Basic 4,108 4,072
======== ========
Diluted 4,108 4,072
======== ========
Net Loss Per Common Share:
Basic $ (1.42) $ (0.73)
Diluted $ (1.42) $ (0.73)
EBITDA Reconciliation:
Net Loss $ (5,814) $ (2,988)
Interest Expense (1,912) (1,304)
Income Taxes (3,813) (1,321)
Depreciation and Amortization 3,866 5,021
-------- --------
EBITDA $ (3,849) $ 2,016
======== ========
*T