Pemco Aviation Group Reports a Significantly Improved Results of Operations for the Third Quarter and First Nine Months of 2006

Share Name	Share Symbol	Market	Type
Pemco Aviation Grp. (MM)	NASDAQ:PAGI	NASDAQ	Common Stock

Pemco Aviation Grp. (MM) (NASDAQ:PAGI)
Historical Stock Chart

From Jul 2019 to Jul 2024

Click Here for more Pemco Aviation Grp. (MM) Charts.

Pemco Aviation Group, Inc. (NASDAQ: PAGI), a leading provider of aircraft maintenance and modification services, today announced the operating results for its third quarter and nine months ended September 30, 2006. Revenue for the third quarter of 2006 was $38.3 million versus revenue of $29.7 million in the third quarter of 2005, an increase of 29.0%. Loss from continuing operations for the third quarter of 2006 was $0.6 million compared to a loss from continuing operations in the third quarter of 2005 of $3.6 million. Income from continuing operations for the first nine months of 2006 was $0.4 million, compared with a loss from continuing operations of $2.6 million in the first nine months of 2005. Revenue for the nine months ended September 30, 2006 was $123.5 million, compared to $109.9 million in the nine months ended September 30, 2005, an increase of 12.4%. The Company�s results of operations for the nine months ended September 30, 2006 was impacted by the reversal of $0.6 million of a $1.5 million provision for Northwest Airlines bankruptcy accounts receivable recorded during the nine-month period ended September 30, 2005. The Company sold this receivable during the third quarter of 2006 for $0.6 million. Ronald Aramini, Pemco�s President and CEO, stated: �Pemco�s third quarter reflects a $5.3 million improvement in operating income for the Commercial Services Segment (�CSS�). During the third quarter, CSS delivered a passenger-to-freighter conversion with Taikoo (Xiamen) Aircraft Engineering Co. Ltd. (�TAECO�) in Mainland China, the second delivery from China this year. Work is continuing on additional conversions with TAECO in 2006 with further conversion deliveries expected throughout 2007 which will provide revenue and profitability growth. We remain optimistic about the growth potential in China and our relationship with TAECO. Revenue at the Company�s Dothan, Alabama, facility also benefited from the continued growth in maintenance work. We expect further conversion revenue growth from passenger-to-freighter conversions for Alaska Airlines and other customers in 2007. Maintenance services revenue for Northwest Airlines and Southwest Airlines is expected to increase in 2007 as a result of increased volume of aircraft.� Mr. Aramini stated: �Gross profit for the Government Services Segment (�GSS�) decreased by $0.5 million during the third quarter primarily due to $0.9 million in charges related to the Navy P-3 program. Pemco has been working on the P-3 program for the last twelve months and a substantial number of aircraft are scheduled for delivery in the fourth quarter of 2006. The charges on the P-3 program relate to learning curve and start-up costs for the program. The experience with the program has developed to a level that should produce profits in early 2007. GSS submitted a proposal as a prime contractor for the KC-135 PDM program in September 2006. The profitability on the KC-135 program was lower than expected due to the bid and proposal cost in the third quarter. GSS also incurred substantial expenses related to redesigning workflows and maintaining the workforce and infrastructure necessary to handle the estimated 24 KC-135 aircraft expected under the new contract. An award announcement is expected during the first quarter of 2007. We look forward to continuing to provide maintenance services for the KC-135. With our unique facility, strong workforce and past results in producing superior quality and reduction in flow days, we believe that Pemco is well positioned to win the contract.� Subsequent to September 30, 2006, the Company entered into an amended credit agreement with its lenders, Wachovia Bank and Compass Bank, to extend its revolving credit facility until August 31, 2007. The extended credit line modifies the existing borrowing base calculation to provide increased availability. In addition, the total amount of the revolving credit facility will increase if Pemco is awarded the new KC-135 Programmed Depot Maintenance (�PDM�) contract. Pemco also sold substantially all of the assets and operations of its California subsidiary, Pemco Engineers, Inc. (�Pemco Engineers�). Pemco Engineers designs and manufactures cargo handling systems and components for freight carriers worldwide. Third Quarter 2006 vs. 2005 Results � Summary of comparative results for the third quarter ended September 30, 2006: (Dollars in Millions) � 2006� 2005� Change Revenue $ 38.34� $ 29.73� 29.0% Gross profit 5.07� 1.84� 175.3% Operating loss from continuing operations (0.04) (5.49) 99.2% Loss from continuing operations before taxes (0.88) (5.95) 85.3% Loss from continuing operations (0.57) (3.60) 84.2% Net loss (0.55) (3.75) 85.3% EBITDA(a) 0.74� (4.42) 116.7% � (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 income/(loss) from continuing operations to EBITDA is provided at the end of this press release. Government Services Segment (�GSS�) revenue remained flat during the third quarter of 2006 with a slight increase of $0.6 million, or 3.5%, from third quarter revenue in 2005. GSS delivered one additional aircraft during the third quarter of 2006, as compared to the same quarter of 2005, under the KC-135 PDM program. However, fewer non-routine maintenance and repairs were performed during the third quarter of 2006 causing a decrease in program revenue of $1.1 million when compared to third quarter of 2005, offset by increased parts sales of $0.5 million. The second P-3 aircraft under the basic PDM contract with the US Navy was delivered in the third quarter of 2006 and generated revenue of $1.1 million. Additional non-routine maintenance was performed under this program producing $1.0 million in revenue. This contract was obtained in late 2005 and there were no related deliveries as of September 30, 2005. Unscheduled depot level maintenance (�UDLM�) is a repair falling outside the PDM cycle. UDLM revenue for all C-130 aircraft decreased slightly for the three-month period ended September 30, 2006, when compared to the same period in 2005. UDLM for C-130 Air Force aircraft generated an additional $2.2 million for the three-month period ended September 30, 2006, for which there was no comparable revenue in the third quarter of 2005. Offsetting the increase in the C-130 Air Force program revenue was a decrease in revenue of $2.3 million from the delivery of a C-130 UDLM Coast Guard aircraft during the third quarter of 2005, for which there were no comparable deliveries during the same period of 2006. CSS revenue increased $7.6 million during the third quarter of 2006 when compared to the same quarter in 2005 as a result of increased cargo conversions and increased inductions for maintenance, repair and overhaul (�MRO�) services. During the third quarter of 2006, CSS delivered one cargo conversion producing $2.7 million in additional revenue when compared to the same period in 2005. The cargo conversion was performed under a subcontract by TAECO, a China-based company. There were no cargo conversion deliveries for the three-month period ended September 30, 2005. Also, increased inductions from our largest commercial MRO customers generated $4.9 million of additional CSS revenue for the three months ended September 30, 2006, when compared to the same period of 2005. Revenue during the third quarter of 2005 was substantially lower than historical levels due to the bankruptcy of our largest commercial customer and a lockout of unionized employees at the Company�s Dothan, Alabama, facility. Manufacturing and Components Segment (�MCS�) revenue increased 13.5%, or $0.4 million, in the third quarter of 2006 compared to revenue for the same period in 2005. Financial data relating to the MCS represents work on U.S. government launch vehicle programs at Space Vector Corporation. Revenue and related costs from Pemco Engineers, a manufacturer of high precision machined parts and other aircraft components, have been excluded. As noted above, substantially all of the assets and the operations of Pemco Engineers were sold in October 2006 and have been presented as discontinued operations as of September 30, 2006. All related 2006 and 2005 financial data for Pemco Engineers is reported separately as income from discontinued operations, net of tax. Consolidated cost of sales increased $5.4 million, or 19.3%, to $33.3 million during the third quarter of 2006 as a result of the higher revenue base. Cost of sales was 86.8% and 93.8% of revenue in the third quarter of 2006 and 2005, respectively. Gross profit was significantly impacted by the results of CSS which experienced positive gross profit of $2.9 million for the third quarter of 2006 as a result of the TAECO cargo conversion and an increase in MRO services performed for our largest two commercial customers. The additional MRO services and the cargo conversion in the third quarter of 2006, compared with operating results in the third quarter of 2005 which included the impact of the lockout of the Company�s unionized employees in Dothan, resulted in a $3.2 million increase of CSS gross profit for the third quarter of 2006 when compared to the same period in 2005. Gross profit at GSS was negatively impacted by charges related to the Navy P-3 program totaling $0.9 million in the third quarter of 2006. Because the Navy P-3 program was contracted in late 2005, there were no comparable charges during the third quarter 2005. Selling, General and Administrative (�SG&A�) expenses decreased $0.7 million, or 12.0%, to $5.1 million in 2006. As a percentage of sales, SG&A expenses decreased to 13.3% in 2006 from 19.5% in 2005. The decrease in SG&A expense as a percentage of sales was primarily caused by the higher sales volume at CSS and expense controls implemented throughout the Company. The Company also recorded a $1.5 million provision for doubtful accounts during the third quarter of 2005 related to the Chapter 11 bankruptcy filing by Northwest Airlines. The Company�s claim to the $1.5 million of accounts receivable related to the bankruptcy was sold in the third quarter of 2006 for $0.6 million. Nine Months 2006 vs. 2005 Results � Summary of comparative results for the nine months ended September 30, 2006: (Dollars in Millions) � 2006� 2005� Change Revenue $ 123.48� $ 109.86� 12.4% Gross profit 18.22� 14.10� 29.2% Operating income/(loss) from continuing operations 2.97� (3.62) 182.0% Income/(loss) from continuing operations before taxes 0.71� (4.33) 116.4% Income/(loss) from continuing operations 0.41� (2.61) 115.7% Net loss (0.02) (2.96) 99.3% EBITDA(a) 5.55� (0.22) 2622.7% � (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 income/(loss) from continuing operations to EBITDA is provided at the end of this press release. GSS revenue increased by $6.6 million for the nine-month period ended September 30, 2006 versus the nine-month period ended September 30, 2005. The number of aircraft for which routine and non-routine maintenance was performed in conjunction with the KC-135 PDM program was comparable to the first nine months of 2005. The KC-135 program generated an additional $4.9 million in revenue when compared to the nine-month period ended September 30, 2005, due to additional parts sales of $2.5 million and an increase in the contract prices. This increase was partially offset, however, by the completion of the Coast Guard C-130 contract in early 2006 which resulted in a decrease in revenue of $3.6 million during the first nine months of 2006 as compared to the first nine months of 2005. The C-130 UDLM Air Force aircraft contract generated $3.7 million in revenue for the nine-month period ended September 30, 2006, for which there was no comparable revenue for the nine-month period ended September 30, 2005. The first two P-3 aircraft under the basic PDM contract with the US Navy were delivered in the first three quarters of 2006 and generated revenue of $1.7 million. Additional non-routine maintenance was performed under this program producing $1.5 million in revenue. This contract was obtained in late 2005 and there were no related deliveries as of September 30, 2005. CSS delivered two additional cargo conversions during the first nine months of 2006 when compared to the same period in 2005 generating an additional $6.1 million in revenue. One cargo conversion was performed under a subcontract by TAECO. MRO revenues during the first nine months of 2006 were comparable to the first nine months of 2005. Revenue of $0.8 million related to settlement of a Request for Equitable Adjustment (�REA�) claim was also recognized during the first nine months of 2006, for which there was no comparable revenue during the same period of 2005. Revenue at the MCS increased $0.8 million, or 10.5%, in the first nine months of 2006 versus the first nine months of 2005. Revenue at Space Vector increased due to additional work on U.S. government launch vehicle programs. Revenue and related costs from Pemco Engineers have been excluded. As noted above, substantially all of the assets and the operations of Pemco Engineers were sold in October 2006 and have been presented as discontinued operations as of September 30, 2006. All related 2006 and 2005 financial data for Pemco Engineers is reported separately as income from discontinued operations, net of tax. Consolidated cost of sales increased $9.5 million, or 9.9%, to $105.3 million during the first nine months of 2006 primarily as a result of the higher revenue base. Cost of sales was 85.2% and 87.2% of revenue for the nine months ended September 30, 2006 and 2005, respectively. Cost of sales was negatively impacted by the delivery of two Coast Guard aircraft during the first quarter of 2006, for which no profit or loss was recognized due to the provisions for losses being recorded in 2005. Gross profit was negatively impacted by charges related to the Navy P-3 program totaling $1.1 million in the first nine months of 2006 as a result of starting this new program. Because the first Navy P-3 induction occurred in late 2005, there were no comparable charges during the first nine months of 2005. As a percentage of sales, cost of sales was positively impacted by $0.8 million of revenue from the settlement of the REA claim for which the related cost of sales was recognized in periods prior to 2005. Gross profit was significantly impacted by the results of CSS, which experienced positive gross profit of $8.9 million for the first nine months of 2006. The two additional cargo conversions and decreases in production cost rates per hour in 2006 coupled with the 2005 lockout of union employees in Dothan resulted in a $3.9 million increase of CSS gross profit for the nine-month period ended September 30, 2006 when compared to the same period in 2005. In addition, CSS recorded a $0.4 million positive adjustment in the estimated cost to settle the Falcon Air claim due to additional regulatory approval granted during the second quarter of 2006. Gross profit for MCS increased to 35.4% of revenue in 2006, as compared to 27.9% of revenue in 2005 due to increases in revenue and tighter expense controls. SG&A expenses decreased $0.3 million, or 2.0%, to $15.9 million in 2006. As a percentage of sales, SG&A expenses decreased to 12.9% in 2006 from 14.7% in 2005. The decrease in SG&A expense as a percentage of sales was primarily caused by the higher sales volume at CSS and expense controls implemented throughout the Company. The Company also recorded a $1.5 million provision for doubtful accounts during the third quarter of 2005 related to the Chapter 11 bankruptcy filing by our largest commercial customer. During the second quarter of 2006, the Company reversed $0.6 million of the $1.5 million provision to reflect the net realizable value of the receivables based on purchase offers from unrelated third parties. The Company sold this receivable related to the Chapter 11 bankruptcy during the third quarter of 2006 for $0.6 million. In the second quarter of 2005, the Company recorded a gain of $0.65 million on the assignment of a lease located at the St. Petersburg-Clearwater International Airport. (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, EBITDA has been used as one of the components to calculate the Company�s debt covenants. Pemco believes EBITDA is also 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 as well as 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,� �anticipate,� �estimate� 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 most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. 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. PEMCO AVIATION GROUP, INC. (In thousands, except per share information) � Third Quarter Ended September 30, 2006� 2005� Sales: Government Services Segment $ 18,671� $ 18,041� Commercial Services Segment 16,753� 9,122� Manufacturing and Components Segment 3,021� 2,660� Inter-segment Revenue (102) (96) Total Sales 38,343� 29,727� � Cost of Sales 33,274� 27,886� Gross Profit 5,069� 1,841� � Selling, General and Administrative Expenses 5,113� 5,807� Provision for Doubtful Accounts -� 1,519� � Operating Loss from Continuing Operations (44) (5,485) � Other Income (Expense): Interest Expense (833) (468) � Loss from Continuing Operations Before Income Taxes (877) (5,953) Income Tax Benefit (303) (2,357) Loss from Continuing Operations $ (574) $ (3,596) Income/(Loss) from Discontinued Operations, Net of Tax 27� (151) Net Loss $ (547) $ (3,747) � Weighted Average Common Shares Outstanding: Basic 4,125� 4,111� Diluted 4,125� 4,111� � Net Income/(Loss) Per Common Share: Basic net loss from continuing operations $ (0.14) $ (0.87) Basic net income/(loss) from discontinued operations 0.01� (0.04) Basic net loss per share $ (0.13) $ (0.91) � Diluted net loss from continuing operations $ (0.14) $ (0.87) Diluted net income/(loss) from discontinued operations 0.01� (0.04) Diluted net loss per share $ (0.13) $ (0.91) � EBITDA Reconciliation(a) Loss from Continuing Operations $ (574) $ (3,596) Interest Expense 833� 468� Income Tax Benefit (303) (2,357) Depreciation and Amortization 785� 1,072� EBITDA $ 741� $ (4,413) (a) See note above on Use of Non-GAAP Financial Measures. PEMCO AVIATION GROUP, INC. (In thousands, except per share information) Nine Months Ended September 30, 2006� 2005� Sales: Government Services Segment $ 65,340� $ 58,702� Commercial Services Segment 49,716� 43,622� Manufacturing and Components Segment 8,649� 7,826� Inter-segment Revenue (227) (294) Total Sales 123,478� 109,856� � Cost of Sales 105,261� 95,758� Gross Profit 18,217� 14,098� � Selling, General and Administrative Expenses 15,882� 16,203� Provision for/(Reversal of) Doubtful Accounts (638) 1,519� � Operating Income/(Loss) from Continuing Operations 2,973� (3,624) � Other Income (Expense): Other Income -� 650� Interest Expense (2,263) (1,352) � Income/(Loss) from Continuing Operations Before Income Taxes 710� (4,326) Income Tax Expense (Benefit) 298� (1,718) Income/(Loss) from Continuing Operations 412� (2,608) Loss from Discontinued Operations, Net of Tax (435) (348) Net Loss $ (23) $ (2,956) � Weighted Average Common Shares Outstanding: Basic 4,122� 4,107� Diluted 4,122� 4,107� � Net Income/(Loss) Per Common Share: � Basic net income/(loss) from continuing operations 0.10� (0.64) Basic net loss from discontinued operations (0.11) (0.08) Basic net loss per share $ (0.01) $ (0.72) � Diluted net income/(loss) from continuing operations 0.10� (0.64) Diluted net loss from discontinued operations (0.11) (0.08) Diluted net loss per share $ (0.01) $ (0.72) � EBITDA Reconciliation(a) Income/(Loss) from Continuing Operations $ 412� $ (2,608) Interest Expense 2,263� 1,352� Income Tax Expense/(Benefit) 298� (1,718) Depreciation and Amortization 2,583� 2,760� EBITDA $ 5,556� $ (214) (a) See note above on Use of Non-GAAP Financial Measures. Pemco Aviation Group, Inc. (NASDAQ: PAGI), a leading provider of aircraft maintenance and modification services, today announced the operating results for its third quarter and nine months ended September 30, 2006. Revenue for the third quarter of 2006 was $38.3 million versus revenue of $29.7 million in the third quarter of 2005, an increase of 29.0%. Loss from continuing operations for the third quarter of 2006 was $0.6 million compared to a loss from continuing operations in the third quarter of 2005 of $3.6 million. Income from continuing operations for the first nine months of 2006 was $0.4 million, compared with a loss from continuing operations of $2.6 million in the first nine months of 2005. Revenue for the nine months ended September 30, 2006 was $123.5 million, compared to $109.9 million in the nine months ended September 30, 2005, an increase of 12.4%. The Company's results of operations for the nine months ended September 30, 2006 was impacted by the reversal of $0.6 million of a $1.5 million provision for Northwest Airlines bankruptcy accounts receivable recorded during the nine-month period ended September 30, 2005. The Company sold this receivable during the third quarter of 2006 for $0.6 million. Ronald Aramini, Pemco's President and CEO, stated: "Pemco's third quarter reflects a $5.3 million improvement in operating income for the Commercial Services Segment ("CSS"). During the third quarter, CSS delivered a passenger-to-freighter conversion with Taikoo (Xiamen) Aircraft Engineering Co. Ltd. ("TAECO") in Mainland China, the second delivery from China this year. Work is continuing on additional conversions with TAECO in 2006 with further conversion deliveries expected throughout 2007 which will provide revenue and profitability growth. We remain optimistic about the growth potential in China and our relationship with TAECO. Revenue at the Company's Dothan, Alabama, facility also benefited from the continued growth in maintenance work. We expect further conversion revenue growth from passenger-to-freighter conversions for Alaska Airlines and other customers in 2007. Maintenance services revenue for Northwest Airlines and Southwest Airlines is expected to increase in 2007 as a result of increased volume of aircraft." Mr. Aramini stated: "Gross profit for the Government Services Segment ("GSS") decreased by $0.5 million during the third quarter primarily due to $0.9 million in charges related to the Navy P-3 program. Pemco has been working on the P-3 program for the last twelve months and a substantial number of aircraft are scheduled for delivery in the fourth quarter of 2006. The charges on the P-3 program relate to learning curve and start-up costs for the program. The experience with the program has developed to a level that should produce profits in early 2007. GSS submitted a proposal as a prime contractor for the KC-135 PDM program in September 2006. The profitability on the KC-135 program was lower than expected due to the bid and proposal cost in the third quarter. GSS also incurred substantial expenses related to redesigning workflows and maintaining the workforce and infrastructure necessary to handle the estimated 24 KC-135 aircraft expected under the new contract. An award announcement is expected during the first quarter of 2007. We look forward to continuing to provide maintenance services for the KC-135. With our unique facility, strong workforce and past results in producing superior quality and reduction in flow days, we believe that Pemco is well positioned to win the contract." Subsequent to September 30, 2006, the Company entered into an amended credit agreement with its lenders, Wachovia Bank and Compass Bank, to extend its revolving credit facility until August 31, 2007. The extended credit line modifies the existing borrowing base calculation to provide increased availability. In addition, the total amount of the revolving credit facility will increase if Pemco is awarded the new KC-135 Programmed Depot Maintenance ("PDM") contract. Pemco also sold substantially all of the assets and operations of its California subsidiary, Pemco Engineers, Inc. ("Pemco Engineers"). Pemco Engineers designs and manufactures cargo handling systems and components for freight carriers worldwide. -0- *T Third Quarter 2006 vs. 2005 Results Summary of comparative results for the third quarter ended September 30, 2006: (Dollars in Millions) 2006 2005 Change -------- -------- -------- Revenue $38.34 $29.73 29.0% Gross profit 5.07 1.84 175.3% Operating loss from continuing operations (0.04) (5.49) 99.2% Loss from continuing operations before taxes (0.88) (5.95) 85.3% Loss from continuing operations (0.57) (3.60) 84.2% Net loss (0.55) (3.75) 85.3% EBITDA(a) 0.74 (4.42) 116.7% (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 income/(loss) from continuing operations to EBITDA is provided at the end of this press release. *T Government Services Segment ("GSS") revenue remained flat during the third quarter of 2006 with a slight increase of $0.6 million, or 3.5%, from third quarter revenue in 2005. GSS delivered one additional aircraft during the third quarter of 2006, as compared to the same quarter of 2005, under the KC-135 PDM program. However, fewer non-routine maintenance and repairs were performed during the third quarter of 2006 causing a decrease in program revenue of $1.1 million when compared to third quarter of 2005, offset by increased parts sales of $0.5 million. The second P-3 aircraft under the basic PDM contract with the US Navy was delivered in the third quarter of 2006 and generated revenue of $1.1 million. Additional non-routine maintenance was performed under this program producing $1.0 million in revenue. This contract was obtained in late 2005 and there were no related deliveries as of September 30, 2005. Unscheduled depot level maintenance ("UDLM") is a repair falling outside the PDM cycle. UDLM revenue for all C-130 aircraft decreased slightly for the three-month period ended September 30, 2006, when compared to the same period in 2005. UDLM for C-130 Air Force aircraft generated an additional $2.2 million for the three-month period ended September 30, 2006, for which there was no comparable revenue in the third quarter of 2005. Offsetting the increase in the C-130 Air Force program revenue was a decrease in revenue of $2.3 million from the delivery of a C-130 UDLM Coast Guard aircraft during the third quarter of 2005, for which there were no comparable deliveries during the same period of 2006. CSS revenue increased $7.6 million during the third quarter of 2006 when compared to the same quarter in 2005 as a result of increased cargo conversions and increased inductions for maintenance, repair and overhaul ("MRO") services. During the third quarter of 2006, CSS delivered one cargo conversion producing $2.7 million in additional revenue when compared to the same period in 2005. The cargo conversion was performed under a subcontract by TAECO, a China-based company. There were no cargo conversion deliveries for the three-month period ended September 30, 2005. Also, increased inductions from our largest commercial MRO customers generated $4.9 million of additional CSS revenue for the three months ended September 30, 2006, when compared to the same period of 2005. Revenue during the third quarter of 2005 was substantially lower than historical levels due to the bankruptcy of our largest commercial customer and a lockout of unionized employees at the Company's Dothan, Alabama, facility. Manufacturing and Components Segment ("MCS") revenue increased 13.5%, or $0.4 million, in the third quarter of 2006 compared to revenue for the same period in 2005. Financial data relating to the MCS represents work on U.S. government launch vehicle programs at Space Vector Corporation. Revenue and related costs from Pemco Engineers, a manufacturer of high precision machined parts and other aircraft components, have been excluded. As noted above, substantially all of the assets and the operations of Pemco Engineers were sold in October 2006 and have been presented as discontinued operations as of September 30, 2006. All related 2006 and 2005 financial data for Pemco Engineers is reported separately as income from discontinued operations, net of tax. Consolidated cost of sales increased $5.4 million, or 19.3%, to $33.3 million during the third quarter of 2006 as a result of the higher revenue base. Cost of sales was 86.8% and 93.8% of revenue in the third quarter of 2006 and 2005, respectively. Gross profit was significantly impacted by the results of CSS which experienced positive gross profit of $2.9 million for the third quarter of 2006 as a result of the TAECO cargo conversion and an increase in MRO services performed for our largest two commercial customers. The additional MRO services and the cargo conversion in the third quarter of 2006, compared with operating results in the third quarter of 2005 which included the impact of the lockout of the Company's unionized employees in Dothan, resulted in a $3.2 million increase of CSS gross profit for the third quarter of 2006 when compared to the same period in 2005. Gross profit at GSS was negatively impacted by charges related to the Navy P-3 program totaling $0.9 million in the third quarter of 2006. Because the Navy P-3 program was contracted in late 2005, there were no comparable charges during the third quarter 2005. Selling, General and Administrative ("SG&A") expenses decreased $0.7 million, or 12.0%, to $5.1 million in 2006. As a percentage of sales, SG&A expenses decreased to 13.3% in 2006 from 19.5% in 2005. The decrease in SG&A expense as a percentage of sales was primarily caused by the higher sales volume at CSS and expense controls implemented throughout the Company. The Company also recorded a $1.5 million provision for doubtful accounts during the third quarter of 2005 related to the Chapter 11 bankruptcy filing by Northwest Airlines. The Company's claim to the $1.5 million of accounts receivable related to the bankruptcy was sold in the third quarter of 2006 for $0.6 million. -0- *T Nine Months 2006 vs. 2005 Results Summary of comparative results for the nine months ended September 30, 2006: (Dollars in Millions) 2006 2005 Change -------- -------- -------- Revenue $123.48 $109.86 12.4% Gross profit 18.22 14.10 29.2% Operating income/(loss) from continuing operations 2.97 (3.62) 182.0% Income/(loss) from continuing operations before taxes 0.71 (4.33) 116.4% Income/(loss) from continuing operations 0.41 (2.61) 115.7% Net loss (0.02) (2.96) 99.3% EBITDA(a) 5.55 (0.22) 2622.7% (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 income/(loss) from continuing operations to EBITDA is provided at the end of this press release. *T GSS revenue increased by $6.6 million for the nine-month period ended September 30, 2006 versus the nine-month period ended September 30, 2005. The number of aircraft for which routine and non-routine maintenance was performed in conjunction with the KC-135 PDM program was comparable to the first nine months of 2005. The KC-135 program generated an additional $4.9 million in revenue when compared to the nine-month period ended September 30, 2005, due to additional parts sales of $2.5 million and an increase in the contract prices. This increase was partially offset, however, by the completion of the Coast Guard C-130 contract in early 2006 which resulted in a decrease in revenue of $3.6 million during the first nine months of 2006 as compared to the first nine months of 2005. The C-130 UDLM Air Force aircraft contract generated $3.7 million in revenue for the nine-month period ended September 30, 2006, for which there was no comparable revenue for the nine-month period ended September 30, 2005. The first two P-3 aircraft under the basic PDM contract with the US Navy were delivered in the first three quarters of 2006 and generated revenue of $1.7 million. Additional non-routine maintenance was performed under this program producing $1.5 million in revenue. This contract was obtained in late 2005 and there were no related deliveries as of September 30, 2005. CSS delivered two additional cargo conversions during the first nine months of 2006 when compared to the same period in 2005 generating an additional $6.1 million in revenue. One cargo conversion was performed under a subcontract by TAECO. MRO revenues during the first nine months of 2006 were comparable to the first nine months of 2005. Revenue of $0.8 million related to settlement of a Request for Equitable Adjustment ("REA") claim was also recognized during the first nine months of 2006, for which there was no comparable revenue during the same period of 2005. Revenue at the MCS increased $0.8 million, or 10.5%, in the first nine months of 2006 versus the first nine months of 2005. Revenue at Space Vector increased due to additional work on U.S. government launch vehicle programs. Revenue and related costs from Pemco Engineers have been excluded. As noted above, substantially all of the assets and the operations of Pemco Engineers were sold in October 2006 and have been presented as discontinued operations as of September 30, 2006. All related 2006 and 2005 financial data for Pemco Engineers is reported separately as income from discontinued operations, net of tax. Consolidated cost of sales increased $9.5 million, or 9.9%, to $105.3 million during the first nine months of 2006 primarily as a result of the higher revenue base. Cost of sales was 85.2% and 87.2% of revenue for the nine months ended September 30, 2006 and 2005, respectively. Cost of sales was negatively impacted by the delivery of two Coast Guard aircraft during the first quarter of 2006, for which no profit or loss was recognized due to the provisions for losses being recorded in 2005. Gross profit was negatively impacted by charges related to the Navy P-3 program totaling $1.1 million in the first nine months of 2006 as a result of starting this new program. Because the first Navy P-3 induction occurred in late 2005, there were no comparable charges during the first nine months of 2005. As a percentage of sales, cost of sales was positively impacted by $0.8 million of revenue from the settlement of the REA claim for which the related cost of sales was recognized in periods prior to 2005. Gross profit was significantly impacted by the results of CSS, which experienced positive gross profit of $8.9 million for the first nine months of 2006. The two additional cargo conversions and decreases in production cost rates per hour in 2006 coupled with the 2005 lockout of union employees in Dothan resulted in a $3.9 million increase of CSS gross profit for the nine-month period ended September 30, 2006 when compared to the same period in 2005. In addition, CSS recorded a $0.4 million positive adjustment in the estimated cost to settle the Falcon Air claim due to additional regulatory approval granted during the second quarter of 2006. Gross profit for MCS increased to 35.4% of revenue in 2006, as compared to 27.9% of revenue in 2005 due to increases in revenue and tighter expense controls. SG&A expenses decreased $0.3 million, or 2.0%, to $15.9 million in 2006. As a percentage of sales, SG&A expenses decreased to 12.9% in 2006 from 14.7% in 2005. The decrease in SG&A expense as a percentage of sales was primarily caused by the higher sales volume at CSS and expense controls implemented throughout the Company. The Company also recorded a $1.5 million provision for doubtful accounts during the third quarter of 2005 related to the Chapter 11 bankruptcy filing by our largest commercial customer. During the second quarter of 2006, the Company reversed $0.6 million of the $1.5 million provision to reflect the net realizable value of the receivables based on purchase offers from unrelated third parties. The Company sold this receivable related to the Chapter 11 bankruptcy during the third quarter of 2006 for $0.6 million. In the second quarter of 2005, the Company recorded a gain of $0.65 million on the assignment of a lease located at the St. Petersburg-Clearwater International Airport. (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, EBITDA has been used as one of the components to calculate the Company's debt covenants. Pemco believes EBITDA is also 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 as well as 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," "anticipate," "estimate" 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 most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. 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) Third Quarter Ended September 30, --------------------- 2006 2005 --------- ---------- Sales: Government Services Segment $18,671 $18,041 Commercial Services Segment 16,753 9,122 Manufacturing and Components Segment 3,021 2,660 Inter-segment Revenue (102) (96) --------- ---------- Total Sales 38,343 29,727 Cost of Sales 33,274 27,886 --------- ---------- Gross Profit 5,069 1,841 Selling, General and Administrative Expenses 5,113 5,807 Provision for Doubtful Accounts - 1,519 --------- ---------- Operating Loss from Continuing Operations (44) (5,485) Other Income (Expense): Interest Expense (833) (468) --------- ---------- Loss from Continuing Operations Before Income Taxes (877) (5,953) Income Tax Benefit (303) (2,357) --------- ---------- Loss from Continuing Operations $(574) $(3,596) Income/(Loss) from Discontinued Operations, Net of Tax 27 (151) --------- ---------- Net Loss $(547) $(3,747) ========= ========== Weighted Average Common Shares Outstanding: Basic 4,125 4,111 ========= ========== Diluted 4,125 4,111 ========= ========== Net Income/(Loss) Per Common Share: Basic net loss from continuing operations $(0.14) $(0.87) Basic net income/(loss) from discontinued operations 0.01 (0.04) --------- ---------- Basic net loss per share $(0.13) $(0.91) ========= ========== Diluted net loss from continuing operations $(0.14) $(0.87) Diluted net income/(loss) from discontinued operations 0.01 (0.04) --------- ---------- Diluted net loss per share $(0.13) $(0.91) ========= ========== EBITDA Reconciliation(a) ----------------------------------------------- Loss from Continuing Operations $(574) $(3,596) Interest Expense 833 468 Income Tax Benefit (303) (2,357) Depreciation and Amortization 785 1,072 --------- ---------- EBITDA $741 $(4,413) ========= ========== (a) See note above on Use of Non-GAAP Financial Measures. *T -0- *T PEMCO AVIATION GROUP, INC. (In thousands, except per share information) Nine Months Ended September 30, ---------------------- 2006 2005 ---------- ---------- Sales: Government Services Segment $65,340 $58,702 Commercial Services Segment 49,716 43,622 Manufacturing and Components Segment 8,649 7,826 Inter-segment Revenue (227) (294) ---------- ---------- Total Sales 123,478 109,856 Cost of Sales 105,261 95,758 ---------- ---------- Gross Profit 18,217 14,098 Selling, General and Administrative Expenses 15,882 16,203 Provision for/(Reversal of) Doubtful Accounts (638) 1,519 ---------- ---------- Operating Income/(Loss) from Continuing Operations 2,973 (3,624) Other Income (Expense): Other Income - 650 Interest Expense (2,263) (1,352) ---------- ---------- Income/(Loss) from Continuing Operations Before Income Taxes 710 (4,326) Income Tax Expense (Benefit) 298 (1,718) ---------- ---------- Income/(Loss) from Continuing Operations 412 (2,608) Loss from Discontinued Operations, Net of Tax (435) (348) ---------- ---------- Net Loss $(23) $(2,956) ========== ========== Weighted Average Common Shares Outstanding: Basic 4,122 4,107 ========== ========== Diluted 4,122 4,107 ========== ========== Net Income/(Loss) Per Common Share: Basic net income/(loss) from continuing operations 0.10 (0.64) Basic net loss from discontinued operations (0.11) (0.08) ---------- ---------- Basic net loss per share $(0.01) $(0.72) ========== ========== Diluted net income/(loss) from continuing operations 0.10 (0.64) Diluted net loss from discontinued operations (0.11) (0.08) ---------- ---------- Diluted net loss per share $(0.01) $(0.72) ========== ========== EBITDA Reconciliation(a) ---------------------------------------------- Income/(Loss) from Continuing Operations $412 $(2,608) Interest Expense 2,263 1,352 Income Tax Expense/(Benefit) 298 (1,718) Depreciation and Amortization 2,583 2,760 ---------- ---------- EBITDA $5,556 $(214) ========== ========== (a) See note above on Use of Non-GAAP Financial Measures. *T

Market Data

News

Trading Tools

Markets

Discover

Hot Features

Follow Feed

Options Flow

Monitor

PAGI Pemco Aviation Grp. (MM)