Pemco Aviation Grp. (MM) (NASDAQ:PAGI)
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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."
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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.
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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.
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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.
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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.
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