EXHIBIT 99.1
For Immediate Release
AVIALL REPORTS 37% EARNINGS PER SHARE GROWTH FOR THE THIRD QUARTER
DALLAS, TEXAS October 20, 2005 — Aviall, Inc. [NYSE: AVL] today reported the financial results for the third quarter ended September 30, 2005:
Highlights :
| • | | Earnings per share (diluted) for the third quarter of 2005 were $0.41 compared to $0.30 per share (diluted) reported for the year-earlier period, up 37%. |
| • | | Net sales for the third quarter grew 13% year-over-year to $334 million in 2005 from $295 million in 2004. |
| • | | Total selling and administrative expense as a percentage of sales continued to decline, falling to 9.3% in the third quarter of 2005 from 9.8% in the same period last year. |
| • | | Operating income increased $7.3 million, or 40%, to $25.5 million for the third quarter of 2005 from $18.2 million in the third quarter of 2004. |
(MORE)
AVIALL REPORTS 37% EARNINGS PER SHARE GROWTH FOR THE THIRD QUARTER
Page 2
Third Quarter Results
Third quarter 2005 net sales rose $39.0 million to $333.7 million, or 13% over last year’s level of $294.7 million. Aviall Services’ net sales growth reflected increases across all geographic regions. In the business sectors served by Aviall Services, the general aviation/corporate and the commercial airlines each showed “organic” growth; that is, growth in our traditional businesses occurred independent of the new GE product lines and despite the challenging domestic airline environment. The GE transition was successfully completed on July 18, 2005, and, as a result, Aviall’s third quarter net sales include CF6 part sales from that date forward. Finally, on the military side, the military/government sector sales declined 4% year-over-year due to a softening of demand and select military part shortages.
Aviall’s gross profit of $56.6 million for the third quarter of 2005 increased 21% versus the prior year level of $46.9 million. Each of the sectors performed well at the gross margin level – particularly the military/government sector where the sales decline was more than offset by an improved product mix and higher margins.
Compared to the third quarter of 2004, selling and administrative (S&A) expense increased by $2.3 million, or 8%, to $31.1 million, mainly the result of planned expenses required to support the new GE product lines. Despite these increases, S&A expense as a percentage of net sales improved to 9.3% in the third quarter of 2005 from 9.8% for the third quarter of 2004.
Overall, Aviall’s operating income for the third quarter of 2005 was $25.5 million, up $7.3 million or 40% from the third quarter of 2004. The lower effective tax rate (29.5%) for the third quarter of 2005 compared to the previous quarter was due to a resolution of certain of our tax reserves.
(MORE)
AVIALL REPORTS 37% EARNINGS PER SHARE GROWTH FOR THE THIRD QUARTER
Page 3
Net earnings for the third quarter of 2005 were $14.3 million, an increase of $4.3 million, or 42%, over the $10.0 million reported in the third quarter of 2004. Aviall’s earnings per share (diluted) rose 37% to $0.41 in the third quarter of 2005 versus $0.30 per share (diluted) in the third quarter of 2004.
During the third quarter, the Company made additional investments – approximately $52.5 million of variable working capital – necessary to complete transition of the new GE product lines. Notwithstanding this additional investment, Aviall has continued to generate positive cash flow from operations amounting to $38.7 million for the first nine months of 2005. The cash flow from operations has been used primarily to repay debt.
Review and Outlook
“Our performance in this quarter again exhibits impressive gains and shows that our value proposition continues to prove out during our industry’s challenging period,” said Paul E. Fulchino, Aviall’s chairman, president and chief executive officer. “Despite record-high fuel prices affecting the entire aviation industry and bankruptcies of key domestic airlines, all our business sectors continued to post increases in earnings. In addition, we are starting to see the benefits of our contract diversification in the military/government sector. Our general aviation and commercial airline markets continue to perform well, highlighted by the performance of our new GE products.”
Fulchino added, “The smooth transition of the new GE product lines supports our belief that Aviall can efficiently integrate major new product lines without disrupting our existing product lines or the support we provide our traditional supplier partners. Our focus on superior technology and
(MORE)
AVIALL REPORTS 37% EARNINGS PER SHARE GROWTH FOR THE THIRD QUARTER
Page 4
customer service has given the Company a strong competitive advantage in the marketplace that has paid dividends in our top and bottom lines. Sustaining this advantage with a continued aggressive business development strategy supported by operational efficiencies will continue to be our top priority.”
Aviall will host a conference call on Friday, October 21, 2005, at 11 a.m. ET. The conference call can be accessed by calling (888) 791-2132 (toll-free) or (210) 234-0006 (toll) and referencing Aviall. A replay will be available until 7 p.m. ET on Friday, November 4, 2005, at (800) 841-8570 (toll-free) or (402) 280-9932 (toll). The conference call is also being webcast and can be accessed atwww.aviall.com under the section “Investor Relations” or atwww.vcall.com.
# # #
Forward-Looking Statements
The statements contained in this release that are not historical facts are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Actual results may differ materially from those expected in the forward-looking statements. These forward-looking statements involve risks and uncertainties, including competitive factors and pricing and supply pressures, shifts in market demand, general economic conditions and other factors including, among others, those that affect flight activity in military, commercial, business and general aviation, the business activities of the Company’s customers and suppliers and developments in information and communications technology.
About Aviall, Inc.
Aviall, Inc. [NYSE: AVL] is a leading solutions provider of aftermarket supply-chain management services for the aviation and marine industries. Aviall is comprised of two operating units. As the world’s largest independent provider of new aviation parts and related aftermarket services, the Aviall Services business unit markets and distributes products for approximately 220 manufacturers and offers approximately 650,000 catalog items from customer service centers located in North America, Europe, and Asia-Pacific. Aviall Services also offers a full line of aviation batteries, hoses, wheels and brakes, oxygen and paint services. The Inventory Locator Service (ILS) business unit, headquartered in Memphis, Tennessee, provides information and facilitates global eCommerce via its electronic marketplace that enables subscribers to buy and sell commercial parts, equipment and services, as well as provides eBusiness Services to the aviation, marine and defense industries. Additional information on Aviall is available atwww.aviall.com.
AVIALL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per share data)
(Unaudited)
| | | | | | | | | |
| | | Three Months Ended
September 30,
| | Nine Months Ended
September 30,
|
| | | 2005
| | 2004
| | 2005
| | 2004
|
Net sales | | $ | 333,741 | | 294,707 | | 947,261 | | 892,287 |
Cost of sales | | | 277,173 | | 247,772 | | 777,097 | | 748,110 |
| | |
|
| |
| |
| |
|
Gross profit | | | 56,568 | | 46,935 | | 170,164 | | 144,177 |
Selling and administrative expense | | | 31,070 | | 28,784 | | 90,605 | | 86,036 |
| | |
|
| |
| |
| |
|
Operating income | | | 25,498 | | 18,151 | | 79,559 | | 58,141 |
Interest expense, net | | | 5,277 | | 4,169 | | 15,642 | | 12,721 |
| | |
|
| |
| |
| |
|
Earnings before income taxes | | | 20,221 | | 13,982 | | 63,917 | | 45,420 |
Provision for income taxes (a) | | | 5,959 | | 3,961 | | 21,284 | | 11,957 |
| | |
|
| |
| |
| |
|
Net earnings | | $ | 14,262 | | 10,021 | | 42,633 | | 33,463 |
| | |
|
| |
| |
| |
|
| | | | |
Basic net earnings per share | | $ | 0.42 | | 0.31 | | 1.28 | | 1.05 |
Weighted average common shares | | | 33,754,488 | | 32,105,401 | | 33,346,225 | | 31,913,426 |
| | |
|
| |
| |
| |
|
| | | | |
Diluted net earnings per share | | $ | 0.41 | | 0.30 | | 1.22 | | 1.00 |
Weighted average common and potentially dilutive common shares | | | 35,141,449 | | 33,820,849 | | 34,900,831 | | 33,516,655 |
| | |
|
| |
| |
| |
|
| (a) | Cash tax payments were $1.2 million and $3.0 million for the three months and nine months ended September 30, 2005, respectively. |
AVIALL, INC.
SEGMENT INFORMATION
(In Thousands)
| | | | | | | | | | | | | |
| | | Three Months Ended
September 30,
| | | Nine Months Ended
September 30,
| |
Net Sales
| | 2005
| | | 2004
| | | 2005
| | | 2004
| |
Aviall Services | | $ | 326,275 | | | 287,592 | | | 924,928 | | | 870,886 | |
ILS | | | 7,466 | | | 7,115 | | | 22,333 | | | 21,401 | |
| | |
|
|
| |
|
| |
|
| |
|
|
Total net sales | | $ | 333,741 | | | 294,707 | | | 947,261 | | | 892,287 | |
| | |
|
|
| |
|
| |
|
| |
|
|
| | | | |
Profit
| | | | | | | | | | | | |
Aviall Services | | $ | 26,730 | | | 19,415 | | | 84,364 | | | 62,020 | |
ILS | | | 2,788 | | | 2,475 | | | 8,264 | | | 7,726 | |
| | |
|
|
| |
|
| |
|
| |
|
|
Reportable segment profit | | | 29,518 | | | 21,890 | | | 92,628 | | | 69,746 | |
Corporate | | | (4,020 | ) | | (3,739 | ) | | (13,069 | ) | | (11,605 | ) |
Interest expense, net | | | (5,277 | ) | | (4,169 | ) | | (15,642 | ) | | (12,721 | ) |
| | |
|
|
| |
|
| |
|
| |
|
|
Earnings before income taxes | | $ | 20,221 | | | 13,982 | | | 63,917 | | | 45,420 | |
| | |
|
|
| |
|
| |
|
| |
|
|
RECONCILIATION OF CHANGES IN VARIABLE WORKING CAPITAL TO
CHANGES IN WORKING CAPITAL
(In Thousands)
| | | | | | | |
| | | Three Months Ended
September 30,
| |
| | | 2005
| | | 2004
| |
Receivables, net | | $ | 4,652 | | | (11,301 | ) |
Plus: Inventories | | | 8,976 | | | (1,277 | ) |
Less: Accounts payable | | | 38,876 | | | (4,537 | ) |
| | |
|
|
| |
|
|
Variable Working Capital | | | 52,504 | | | (17,115 | ) |
| | |
|
|
| |
|
|
Plus: | | | | | | | |
Cash and cash equivalents | | | (29,907 | ) | | 22,648 | |
Prepaid expenses and other current assets | | | 146 | | | (65 | ) |
Deferred income taxes | | | (7,677 | ) | | — | |
Less: | | | | | | | |
Current portion of long-term debt | | | 106 | | | 607 | |
Cash overdrafts due to outstanding checks | | | (23,661 | ) | | (13 | ) |
Revolving line of credit | | | 17,609 | | | 367 | |
Accrued expenses | | | 11,560 | | | 12,559 | |
| | |
|
|
| |
|
|
Working capital | | $ | 20,680 | | | 18,988 | |
| | |
|
|
| |
|
|
We define Variable Working Capital as receivables plus inventories less accounts payable. In no event should Variable Working Capital be considered as an alternative to working capital or any GAAP measure as an indicator of our performance, nor should Variable Working Capital be considered as an alternative to working capital as an indicator of our relative liquidity to meet our obligations within an ordinary business cycle. We believe that Variable Working Capital is a useful measure, along with measurements under GAAP, in evaluating our financial performance and our ability to leverage sales and earnings from our Variable Working Capital. In addition, we use Variable Working Capital as a financial measure to evaluate our management of working capital and as a metric to measure contract and supplier performance.
AVIALL, INC.
SELECTED BALANCE SHEET DATA
(In Thousands)
| | | | | |
| | | September 30,
2005
| | December 31,
2004
|
Cash and cash equivalents | | $ | 5,978 | | 91,632 |
Receivables, net | | $ | 177,097 | | 144,087 |
Inventories | | $ | 352,643 | | 328,129 |
Deferred income taxes | | $ | 25,341 | | 43,661 |
Total assets | | $ | 856,034 | | 749,476 |
Accounts payable | | $ | 123,839 | | 98,629 |
Total debt | | $ | 244,561 | | 203,430 |
Shareholders’ equity | | $ | 405,789 | | 349,001 |
| | |
|
| |
|
SELECTED CASH FLOW DATA
(In Thousands)
| | | | | | | | | | |
| | | Three Months Ended
September 30,
| | Nine Months Ended
September 30,
|
| | | 2005
| | | 2004
| | 2005
| | 2004
|
Net cash (used for) provided by operating activities | | $ | (34,297 | ) | | 25,393 | | 38,661 | | 85,450 |
Net cash used for investing activities | | $ | 2,653 | | | 2,907 | | 168,760 | | 8,092 |
Capital expenditures | | $ | 2,439 | | | 2,476 | | 8,077 | | 6,866 |
| | |
|
|
| |
| |
| |
|
DEPRECIATION AND AMORTIZATION
(In Thousands)
| | | | | | | | | |
| | | Three Months Ended
September 30,
| | Nine Months Ended
September 30,
|
| | | 2005
| | 2004
| | 2005
| | 2004
|
Depreciation | | $ | 2,511 | | 2,236 | | 7,120 | | 6,457 |
Amortization | | | 3,774 | | 1,784 | | 10,155 | | 5,319 |
Debt issue cost | | | 496 | | 506 | | 1,489 | | 1,424 |
| | |
|
| |
| |
| |
|
| | | $ | 6,781 | | 4,526 | | 18,764 | | 13,200 |
| | |
|
| |
| |
| |
|
