SOURCE: First Aviation Services Inc.

November 20, 2008 17:02 ET

FAVS Continues Strong Improvement in Third Quarter

WESTPORT, CT--(Marketwire - November 20, 2008) - 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
                                               ============   ============

Contact Information

  • Contact:
    James Howell
    Chief Financial Officer
    Aerospace Products International, Inc.
    (901) 259-3470