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