Published:
FAVS Continues Strong Improvement in Third Quarter
First Aviation Services Inc. (PINKSHEETS: FAVS) today announced significantly improved financial results for the
three months ended October 31, 2008 on 2.6% lower revenue. Earnings from
operations for the three and nine month periods ended October 31, 2008 were
a positive $293,000 and $662,000, respectively, versus negative ($939,000)
and ($2,733,000) in the comparable prior year three and nine month periods,
after adjusting for the effect of the one-time repurchase of $2.1 million
of previously classified slow moving and obsolete inventory by a major
original equipment manufacturer in the nine month period ended October 31,
2007. The net loss of ($80,000) in the current year quarter represents a
significant improvement over the ($1,207,000) loss incurred in the three
months ended October 31, 2007.
Gross Margin pre-freight, as a percentage of sales, improved to 18.5% in
the current year quarter versus 15.7% in the prior year three month period
and 18.9% versus 16.3% (ex the repurchase) in the prior year nine month
period. SG&A expenses were 13.1% lower in the current year quarter and
7.9% less than the costs incurred in the prior year nine month period,
while corporate expenses were 26.3% lower in the current year nine month
period versus the comparable prior year period. Interest expense was
approximately 33% lower in the current nine month period compared to the
prior year, and net freight expense was 1.5% of revenue for the nine months
ended October 31, 2008 versus 1.8% in the 2007 period resulting in
significant savings in operational expenses.
Mr. Aaron Hollander, Chairman and CEO of First Aviation, said: "The team
continues to make strong operational and financial progress.
Notwithstanding the difficult economy, we have increased margins,
controlled costs and improved the service levels of our product. We are
attentive to the changing economic environment and are constantly striving
to increase our competitiveness."
The results of operations for the nine months ended October 31, 2007 have
been restated from the results reported in the prior year period. The
effect of the restatement is more fully described in a note to the
consolidated statements of operations.
First Aviation and its principal operating subsidiary Aerospace Products
International, Inc. ("API"), based in Memphis, Tennessee, is a leading
provider of services to the aviation industry worldwide. With locations in
the U.S., Canada, Asia Pacific, and China plus partners throughout the
world, services to the aviation industry include the sale of aircraft parts
and components, the provision of supply chain management services, and
overhaul and repair services.
More information about First Aviation can be found on the Company's and
API's websites, which are located at http://www.favs.com and
http://www.apiworldwide.com.
Forward-Looking Statements
Certain statements discussed in this release constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform
Act of 1995. Forward-looking statements are not statements of historical
facts, but rather reflect our current expectations concerning future events
and results. Such forward-looking statements, including those concerning
our expectations, involve known and unknown risks, uncertainties and other
factors, some of which are beyond the Company's control, that may cause our
actual results, performance or achievements, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such risks,
uncertainties and other important factors include, among others: our
ability to obtain parts and components from principal suppliers on a timely
basis; depressed domestic and international market and economic conditions;
especially those currently facing the aviation industry as a whole,
including terrorism and terrorism related impacts, the impact of changes in
fuel and other freight related costs, major adverse weather related effects
such as hurricanes impacting our customer base, relationships with
customers, the ability of our customers to meet their financial obligations
to us, our ability to obtain and service supply chain management contracts,
changes in regulations or accounting standards, the ability to consummate
suitable acquisitions and expand, the loss of the use of facilities and
distribution hub in Southaven, Mississippi, significant failure of our
computer systems, telephone systems or networks, and other items that are
beyond our control and may cause actual results to differ from management's
expectations. The Company undertakes no obligation to update any
forward-looking statements or cautionary factors except as required by law.
First Aviation Services Inc.
Consolidated Condensed Statements of Operations
(in thousands, except share and per share amounts)
Three months ended
October 31,
2008 2007
-------------- --------------
(unaudited) (as restated)(1)
Net sales $ 30,040 $ 30,876
Cost of sales 25,027 26,486
-------------- --------------
Gross profit 5,013 4,390
Selling, general and administrative
expenses 4,336 4,988
Corporate expenses 384 341
-------------- --------------
Income (loss) from operations 293 (939)
Net interest income (expense) and other (361) (559)
Foreign currency transaction gain (loss) (5) 309
-------------- --------------
Loss before income taxes (73) (1,189)
Provision for income taxes (7) (18)
-------------- --------------
Net loss $ (80) $ (1,207)
============== ==============
(EBIDTA) Earnings before taxes depreciation
and amortization $ 655 $ (520)
============== ==============
Basic net loss per share, and net loss
per share - assuming dilution:
Basic net loss per share $ (0.01) $ (0.16)
============ ============
Net loss per share - assuming dilution $ (0.01) $ (0.16)
============ ============
Weighted average shares outstanding - basic 7,476,593 7,396,110
============ ============
Weighted average shares outstanding -
assuming dilution 7,476,593 7,396,110
============ ============
(1) The results of operations for the quarter ended October 31, 2007 have
been restated from the results in the prior year period in the amount
of ($82,000) in SG&A costs and ($135,000) in non-cash cost of goods
sold related to the prior year quarter.
First Aviation Services Inc.
Consolidated Condensed Statements of Operations
(in thousands, except share and per share amounts)
Nine months ended
October 31,
2008 2007 2007
------------- ------------- -------------
(unaudited) (as restated)(1) (as restated)(1)
(Ex Raytheon)(2)
Net sales $ 89,462 $ 93,634 $ 95,718
Cost of sales 74,194 80,201 80,982
------------- ------------- -------------
Gross profit 15,268 13,433 14,736
Selling, general and
administrative expenses 13,462 14,613 14,613
Corporate expenses 1,144 1,553 1,553
------------- ------------- -------------
Income (loss) from
operations 662 (2,733) (1,430)
Net interest income
(expense) and other (1,001) (1,505) (1,505)
Foreign currency
transaction gain (loss) (3) 707 707
------------- ------------- -------------
Loss before income taxes (342) (3,531) (2,228)
Provision for income
taxes (15) (75) (75)
------------- ------------- -------------
Net loss $ (357) $ (3,606) $ (2,303)
============= ============= =============
(EBIDTA) Earnings before
taxes depreciation and
amortization $ 1,857 $ (1,477) $ (174)
============= ============= =============
Basic net loss per share,
and net loss per share -
assuming dilution:
Basic net loss per share $ (0.05) $ (0.49) $ (0.31)
============= ============= =============
Net loss per share -
assuming dilution $ (0.05) $ (0.49) $ (0.31)
============= ============= =============
Weighted average shares
outstanding - basic 7,443,373 7,381,214 7,381,214
============= ============= =============
Weighted average shares
outstanding - assuming
dilution 7,443,373 7,381,214 7,381,214
============= ============= =============
(1) The results of operations for the nine months ended October 31, 2007
have been restated from the results reported in the prior year period
in the amount of $523,000 in non-cash income resulting from the
correction of the foreign exchange revaluation calculation on the
Canadian dollar denominated balance sheet, ($527,000) in non-cash cost
of goods sold (COGS) expense related to the correction of intercompany
service billings, ($155,000) in COGS costs for a reduction in customer
service billings, ($183,000) in additional SG&A expenses and $144,000
in income for China operations start-up costs previously reported in
the quarter ended April 30, 2007 and incurred in the prior fiscal year
ended January 31, 2007.
(2) Excluding the effect of the $2.1 million Raytheon repurchase and
resulting $1.3 million gain recognized in the nine months ended
October 31, 2007.
First Aviation Services Inc.
Consolidated Condensed Balance Sheets
(in thousands, except share and per share amounts)
October 31, January 31,
2008 2008
------------ ------------
(unaudited) (Audited)
Assets
Current assets:
Cash and cash equivalents $ 1,852 $ 750
Trade receivables, net of allowance for
doubtful accounts of $874 and $1,847,
respectively 14,886 17,096
Inventory, net of allowance for obsolete and
slow moving inventory of $4,566 and $5,426,
respectively 30,834 30,751
Prepaid expenses and other 2,087 1,415
------------ ------------
Total current assets 49,659 50,012
Plant and equipment, net 3,490 4,064
------------ ------------
Total Assets $ 53,149 $ 54,076
============ ============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 7,739 $ 10,654
Accrued compensation and related expenses 548 762
Other accrued liabilities 1,144 1,480
Revolving line of credit 23,988 20,374
Notes payable 537 598
------------ ------------
Total current liabilities 33,956 33,868
Related Party - JEM III LLC 2,000 2,000
Notes payable, less current portion - 445
------------ ------------
Total liabilities 35,956 36,313
Stockholders' equity:
Common stock, $0.01 par value, 10,000,000
shares authorized, 9,135,699 shares issued 91 91
Additional paid-in capital 38,879 38,782
Accumulated deficit (13,085) (12,931)
Accumulated other comprehensive income 392 835
------------ ------------
26,277 26,777
Less: Treasury stock, at cost, 1,652,700 and
1,713,774 shares, respectively (9,084) (9,014)
------------ ------------
Total stockholders' equity 17,193 17,763
------------ ------------
Total liabilities and stockholders' equity $ 53,149 $ 54,076
============ ============
First Aviation Services Inc.
Consolidated Condensed Statements of Cash Flows (Unaudited)
(in thousands)
Nine months ended
October 31,
2008 2007
------------ ------------
(unaudited) (as restated)
Cash flows from operating activities
Net loss $ (357) $ (2,303)
Adjustments to reconcile net loss to net
cash used in operating activities - non-cash
expense (income):
Depreciation and amortization 1,195 1,256
Equity based compensation 28 62
(Increase) decrease in working capital assets:
Trade receivables 2,210 4,503
Inventory (83) 3,281
Prepaid expenses and other (672) 207
Increase (decrease) in working capital
liabilities:
Accounts payable (2,713) (8,354)
Accrued compensation and related
expenses, and other accrued liabilities (550) (1,702)
------------ ------------
Net cash used in operating activities (942) (3,050)
Cash flows from investing activities
Purchases of plant and equipment (621) (521)
------------ ------------
Net cash used in investing activities (621) (521)
Cash flows from financing activities
Borrowings (repayments), net on revolving line
of credit 3,614 626
Borrowings on related party note - 3,000
Repayments on notes payable (506) (254)
------------ ------------
Net cash provided by (used in) financing
activities 3,108 3,372
------------ ------------
Effect of exchange rate changes on cash and
cash equivalents (443) 408
Net decrease in cash and cash equivalents 1,102 209
Cash and cash equivalents at beginning of
period 750 1,745
------------ ------------
Cash and cash equivalents at end of period $ 1,852 $ 1,954
============ ============
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