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
Pemco Aviation Grp. (MM) (NASDAQ:PAGI)
Historical Stock Chart
From May 2024 to Jun 2024
Pemco Aviation Grp. (MM) (NASDAQ:PAGI)
Historical Stock Chart
From Jun 2023 to Jun 2024