Pemco Aviation Group, Inc. (NASDAQ: PAGI), a leading provider of
aircraft maintenance and modification services, today reported the
operating results for its year ended and three months ended
December 31, 2006. The Company reported that revenue increased to
$160.7 million in 2006 compared to $134.8 million in 2005, an
increase of 19.2%, and income from continuing operations of $0.1
million for the year ended December 31, 2006, compared to a loss
from continuing operations of $6.1 million for the year ended
December 31, 2005. The income from continuing operations in 2006
was positively impacted by the settlement of the H-3 Request for
Equitable Adjustment with the U.S. Government, the sale of
receivables related to the Northwest Airlines bankruptcy,
amendments to the settlement agreement on the Falcon Air claim, and
the settlement of claims by the EEOC and was negatively impacted by
losses incurred on the U.S. Navy P-3 contract. The loss from
continuing operations for 2005 was negatively affected by several
unusual events, including the Northwest Airlines bankruptcy, the
two-month lockout of the union employees at the Company�s Dothan,
Alabama facility, the initial settlement of the Falcon Air claim,
the temporary suspension of KC-135 inputs earlier in 2005, and
losses incurred completing the U.S. Coast Guard contract. Ronald
Aramini, Pemco�s President and CEO, stated �We are very pleased to
return to profitable operations and report net income for 2006. In
addition, we are progressing with several strategic initiatives to
increase shareholder value. In the fourth quarter of 2006 we sold
our Pemco Engineers subsidiary. Several companies have now
approached us with an interest in purchasing our Space Vector
subsidiary in California. One of those parties has signed a letter
of intent, and we expect to sell Space Vector in the second quarter
of 2007. In the first quarter of 2007 we engaged investment bankers
to assist Pemco with either taking our Commercial Services business
public or selling that business. We are presently in discussions
with several interested parties. Consummation of these strategic
transactions should enable to the Company to meet its goal of
eliminating its debt and providing the necessary working capital to
support the Government Services business. We remain very optimistic
about winning the KC-135 contract. We believe we have submitted the
best proposal based on our track record on highest quality,
significantly lower flow days and reduced cost to our customer. We
expect the U.S. Government to award the contract in May 2007.�
2006��vs. 2005 Results � �Summary of comparative results for the
year ended December 31, 2006: (Dollars in Millions) � 2006� 2005� %
Change� Revenue $ 160.7� $ 134.8� 19.2% Gross profit 20.7� 10.9�
89.9% Operating income/(loss) from continuing operations 3.3� (8.6)
138.4% Income/(loss) from continuing operations before taxes 0.3�
(9.7) 103.1% Income/(loss) from continuing operations 0.1� (6.1)
101.6% Net income/(loss) 0.5� (5.8) 108.6% EBITDA from continuing
operations 6.7� (4.3) 255.7% � (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. Revenue at GSS increased $3.5 million primarily due
to an increase in C-130 and P-3 deliveries. The KC-135 PDM program,
which accounted for 84% of GSS revenue in 2006, allows for the
Company to provide services on PDM aircraft, drop-in aircraft, and
other aircraft related areas. Revenue from the KC-135 program
increased $1.1 million during 2006. During 2006, the Company
delivered 19 PDM KC-135 aircraft and two drop-ins, compared to 20
PDM aircraft and three drop-ins during 2005. The amount of
non-routine work performed per aircraft varies as a result of
differences in aircraft condition and model mix. Year-over-year the
Company realized an increase in revenue per PDM aircraft delivered
in 2006 due to an increase in the amount of work performed on each
aircraft delivered. The Company delivered two USCG C-130 aircraft
during 2006 compared to one USCG C-130 during 2005 for depot level
maintenance. Revenue from the USCG program decreased $3.6 million
due to a decrease in revenue from non-routine services which is
recorded as the work is performed versus when the aircraft is
redelivered for routine services revenue. GSS delivered three P-3
aircraft in 2006 compared with zero in 2005. Revenue for the P-3
program increased $4.6 million from 2005 during which no revenue
was recorded. GSS revenue increased $1.4 million under contracts to
perform non-routine maintenance work on other aircraft, primarily
C-130 aircraft. Revenue increased as a result of more C-130
aircraft in process during 2006 which increased the amount of
non-routine services provided to the program. CSS revenue increased
$22.3 million, primarily due to increases in cargo conversion
revenues of $11.9 million, increases in maintenance, repair and
overhaul (�MRO�) revenue from Southwest Airlines of $15.5 million
and increases in revenue from Northwest Airlines of $6.1 million.
It was offset by decreases in revenue from various miscellaneous
customers of $9.8 million. CSS delivered six cargo conversions
during 2006 compared to one during 2005. Three of the six cargo
conversions were performed in mainland China. Both Southwest
Airlines and Northwest Airlines have maintained consistent
nose-to-tail lines that provide for more efficient use of hangar
space. CSS has several customers that provide drop-in aircraft on
an inconsistent basis. These drop-in aircraft from various
customers accounted for a larger percentage of revenue in 2005. MRO
revenues were adversely impacted in the third and fourth quarters
of 2005 by the bankruptcy of CSS�s largest customer and by a
two-month lockout of all union employees at the Company�s Dothan,
Alabama facility. Cost of sales increased to $140.0 million in 2006
from $123.9 million in 2005. Cost of sales increased at a slightly
lower rate than revenue because of charges related to the USCG
C-130 program and fixed expenses. Cost of sales in 2005 was
adversely impacted by $5.3 million of losses on the USCG contract
compared to losses of $0.5 million in 2006 to complete this
program. The Company also incurred losses of $3.7 million and $0.4
million during 2006 and 2005, respectively, related to costs
incurred for implementing a new maintenance line and learning curve
costs for the new U.S. Navy P-3 program. Cost of sales was impacted
by a charge for the Falcon Air settlement of $1.1 million in 2005
and the reversal of $1.0 million in 2006 as a result of amendments
to the settlement agreement. Gross profit at GSS decreased $1.0
million due to decreased deliveries of KC-135 aircraft. Gross
profit at CSS increased from $3.0 million in 2005 to $13.8 million
in 2006. Gross profit in 2005 was adversely impacted by the lockout
of all union employees at the Company�s Dothan, Alabama facility
from August 11, 2005 to October 9, 2005, the bankruptcy of CSS�s
largest customer 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, of which $1.0 million was
reversed in 2006 as a result of amendments to the settlement
agreement. Gross profit at CSS in 2006 was positively impacted by
the settlement of the H-3 REA which resulted in an increase in
revenue of $0.8 million. Overall, the Company�s gross profit
percentage increased to 12.9% in 2006 from 8.1% in 2005. The
increase in gross profit as a percent of revenue in 2006 is
primarily due to the revenue growth at CSS from both cargo
conversions and MRO activities. Gross profit in 2005 was adversely
impacted by the impact of losses on the USCG program at GSS and low
facility utilization at CSS as a result of the lockout of union
employees in Dothan and a decline in revenue due to the bankruptcy
of Northwest Airlines. Selling, general and administrative
(�SG&A�) expenses increased $0.1 million, or 0.5%, to $18.1
million in 2006 from $18.0 million in 2005. As a percent of sales,
SG&A expenses decreased to 11.3% in 2006 from 13.3% in 2005.
The increase in SG&A expense is primarily attributable to stock
option expense of $1.0 million in 2006 which was offset by cost
reductions to improve the profitability of 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 of Northwest Airlines. The Company�s claim to the $1.5
million of accounts receivable related to the bankruptcy was sold
in 2006 for $0.6 million. Fourth Quarter Results � Summary of
comparative results for the three months ended December 31, 2006:
(Dollars in Millions) � 2006� 2005� % Change� Revenue $ 45.9� $
32.8� 40.0% Gross profit/(loss) 5.5� (1.0) (625.9%) Operating
income/(loss) from continuing operations 1.3� (4.2) (130.3%)
Income/(loss) from continuing operations before taxes 0.4� (4.7)
(108.7%) Income/(loss) from continuing operations 0.2� (3.1)
(107.1%) Net income/(loss) 0.5� (2.9) (119.5%) EBITDA from
continuing operations 2.3� (3.2) (171.6%) � (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 decreased $3.1 million,
or 13.3%, due to decreased delivery of KC-135 aircraft compared
with the prior year fourth quarter due to fewer inductions of
aircraft. The USAF has reduced the total number of KC-135 aircraft
in operation, resulting in fewer aircraft being outsourced for
maintenance. The GSS delivered five KC-135 PDM aircraft during the
fourth quarter of 2006, compared with six in the fourth quarter of
2005. In addition, the GSS delivered one aircraft under the USCG
C-130 UDLM contract and one aircraft under a subcontract to perform
maintenance services on U.S. Navy P-3 during the fourth quarter of
2006 for which there were no comparable deliveries in the fourth
quarter of 2005. CSS revenue increased from $9.6 million in the
fourth quarter of 2005 to $25.8 million in the fourth quarter of
2006. Fourth quarter 2006 was positively impacted by the delivery
of three cargo conversions and additional work from Southwest
Airlines and Northwest Airlines when compared to the fourth quarter
of 2005. During the fourth quarter of 2005, revenues at CSS 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 took several months
for operations to return to normal levels of activity. Gross profit
increased to $5.5 million during the fourth quarter of 2006,
compared with ($1.0) million during the fourth quarter of 2005. The
increase in gross profit quarter-over-quarter is primarily
attributable to increased revenue at CSS. CSS gross profit improved
from ($2.1) million in the fourth quarter of 2005 to $4.9 million
in the fourth quarter of 2006 due to the delivery of three cargo
conversions in the fourth quarter of 2006 and increased revenue
from Southwest Airlines and Northwest Airlines. In addition, the
profitability in the fourth quarter of 2006 compared to the fourth
quarter of 2005 was positively impacted by the reversal of $0.5
million for a Falcon Air claim for which an accrual of $1.1 million
was made in the fourth quarter of 2005. (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 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 new and
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) � Fourth Quarter Ended December 31, 2006�
2005� Sales: Government Services Segment $ 20,159� $ 23,258�
Commercial Services Segment 25,791� 9,596� Inter-segment Revenue
(70) (52) Total Sales 45,880� 32,802� � Cost of Sales 40,329�
33,850� Gross Profit/(Loss) 5,551� (1,048) � Selling, General and
Administrative Expenses 4,253� 3,171� � Operating Income/(Loss)
from Continuing Operations 1,298� (4,219) � Other Income (Expense):
Interest Expense (919) (440) � Income/(loss) from Continuing
Operations Before Income Taxes 379� (4,659) Income Tax
Expense/(Benefit) 175� (1,599) Income/(loss) from Continuing
Operations 204� (3,060) Income from Discontinued Operations, Net of
Tax 339� 202� Net Income/(Loss) $ 543� $ (2,858) � Weighted Average
Common Shares Outstanding: Basic 4,126� 4,112� Diluted 4,132�
4,112� � Net Income/(Loss) Per Common Share: Basic net
income/(loss) from continuing operations $ 0.05� $ (0.74) Basic net
income/(loss) from discontinued operations 0.08� 0.05� Basic net
income/(loss) per share $ 0.13� $ (0.70) � Diluted net
income/(loss) from continuing operations $ 0.05� $ (0.74) Diluted
net income/(loss) from discontinued operations 0.08� 0.05� Diluted
net income/(loss) per share $ 0.13� $ (0.70) � EBITDA
Reconciliation(a) Income/(Loss) from Continuing Operations $ 204� $
(3,060) Interest Expense 919� 440� Income Tax Expense/(Benefit)
175� (1,599) Depreciation and Amortization 961� 1,019� EBITDA from
Continuing Operations $ 2,259� $ (3,200) � (a) See note above on
Use of Non-GAAP Financial Measures. PEMCO AVIATION GROUP, INC. (In
thousands, except per share information) � Year Ended December 31,
2006� 2005� Sales: Government Services Segment $ 85,499� $ 81,960�
Commercial Services Segment 75,507� 53,217� Inter-segment Revenue
(297) (345) Total Sales 160,709� 134,832� � Cost of Sales 140,004�
123,931� Gross Profit 20,705� 10,901� � Selling, General and
Administrative Expenses 18,092� 17,997� Provision for/(Reversal of)
Doubtful Accounts (638) 1,519� � Operating Income/(Loss) from
Continuing Operations 3,251� (8,615) � Other Income (Expense):
Other Income -� 650� Interest Expense (2,914) (1,741) �
Income/(Loss) from Continuing Operations Before Income Taxes 337�
(9,706) Income Tax Expense (Benefit) 207� (3,576) Income/(Loss)
from Continuing Operations 130� (6,130) Income from Discontinued
Operations, Net of Tax 389� 316� Net Income/(Loss) $ 519� $ (5,814)
� Weighted Average Common Shares Outstanding: Basic 4,123� 4,108�
Diluted 4,228� 4,108� � Net Income/(Loss) Per Common Share: � Basic
net income/(loss) from continuing operations 0.03� (1.49) Basic net
income from discontinued operations 0.09� 0.08� Basic net
income/(loss) per share $ 0.13� $ (1.42) � Diluted net
income/(loss) from continuing operations 0.03� (1.49) Diluted net
income from discontinued operations 0.09� 0.08� Diluted net income
(loss) per share $ 0.12� $ (1.42) � EBITDA Reconciliation(a)
Income/(Loss) from Continuing Operations $ 130� $ (6,130) Interest
Expense 2,914� 1,741� Income Tax Expense/(Benefit) 207� (3,576)
Depreciation and Amortization 3,441� 3,704� EBITDA from Continuing
Operations $ 6,692� $ (4,261) (a) See note above on Use of Non-GAAP
Financial Measures.
Pemco Aviation Grp. (MM) (NASDAQ:PAGI)
Historical Stock Chart
From Jul 2024 to Aug 2024
Pemco Aviation Grp. (MM) (NASDAQ:PAGI)
Historical Stock Chart
From Aug 2023 to Aug 2024