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FIRST AVIATION SERVICES, INC.
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(Name of Registrant as Specified in its Charter)
WYNNEFIELD PARTNERS SMALL CAP VALUE, L.P.
WYNNEFIELD PARTNERS SMALL CAP VALUE, L.P. I
WYNNEFIELD SMALL CAP VALUE OFFSHORE FUND, LTD.
WYNNEFIELD CAPITAL MANAGEMENT, LLC
WYNNEFIELD CAPITAL, INC.
NELSON OBUS
JOSHUA H. LANDES
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Wynnefield Capital Nominates Independent Director
For First Aviation Services Board
New York, New York, June 6, 2003 - Wynnefield Capital, Inc. (WCI), today
announced that it will nominate Nelson Obus, WCI's president, for election to
the board of directors of First Aviation Services, Inc. Mr. Obus will appear at
First Aviation's annual meeting of shareholders in Memphis, Tennessee, on June
10, 2003, at 9:30 a.m. CDT. WCI has filed a proxy to elect Mr. Obus in
opposition to management's nominees for one of two open seats on the board of
directors.
"We believe it is time for outside shareholders to have a new voice on the First
Aviation board," said Obus. "WCI, as a holder of 30 percent of the company's
common stock, has asked for board representation since 1999. Management has
denied our request, leaving us no other option but to nominate a director
candidate in opposition to management. This is a company that has failed to
develop and execute a consistently profitable business plan over the three and
one-half years since they sold National Airmotive Corporation (NAC) and has lost
$6,512,000 over the last three years. As of the end of the last quarter, the
stock traded at 66 percent of book value and 73 percent of net/net working
capital. We need different outside representation to either quickly develop a
profitable business plan or create a value-releasing transaction for ALL outside
holders."
Obus continued, "Although we recognize that the events of September 11, 2001,
have no doubt affected aviation-related businesses, a competitor of the company,
Aviall, Inc., made over $25 million in 2002 and recently announced net earnings
for the first quarter of 2003 of $7.2 million versus net earnings of $4.5
million, or a 58% increase, over the comparable 2002 period. After dropping to a
low of $4.64 following September 11, 2001, the Aviall stock rebounded to $9.85
on May 15, 2003 (a 112 percent increase over the post-9/11 low). We think this
shows that companies in First Aviation's industry can succeed in the current
environment by executing the proper strategy."
Obus also noted, "Over the last three years, First Aviation paid over $1 million
in retainer fees to First Equity Group, a company owned entirely by First
Aviation's chairman Aaron Hollander and chief executive officer Michael Culver,
for 'investment and financial advisory services relating to potential
acquisitions and other financial transactions'." WCI questions whether the
Company has received an adequate return for these fees. "For these fees and
'advice,' First Aviation has undertaken a failed business-to-businesses
e-commerce initiative and made one minor parts-distribution related acquisition,
of which almost 50 percent of the purchase price was written off at the end of
last fiscal year. WCI believes a new outside board member with a 30 percent
stake in the company could hardly negatively impact the quality of advice that
First Aviation has been receiving."
Obus observed that the situation at First Aviation is unfortunately an
increasingly common one in smaller publicly held companies. "While WCI would
prefer to see companies fulfill the promise that created its desire to invest in
the first place through quality execution of a business plan, companies that
consistently fail to generate profits (leading to low valuations and withered
trading volumes), must consider going private or merging. The Sarbanes-Oxley Act
and increasingly strict regulatory requirements have made it much more expensive
for smaller companies to remain standalone public entities."
Obus concluded with the observation that outside shareholders are only rewarded
through the success of a company's equity. "We receive no consulting fees,
salaries, or other benefits. A company such as First Aviation that has failed to
execute its original business plan or develop a consistently profitable
alternative, should either quickly develop such a plan or should not remain as a
standalone public entity. Our desire for representation on the board is to move
these initiatives forward without further delay. Three years is enough."
Wynnefield Capital, Inc. is a value investor specializing in U.S. small cap
companies. For more information, contact Nelson Obus at (212) 760-0134.