General
and administrative expenses.
General and administrative expenses increased to $6.9
million for the year ended December 31, 2007 from $3.9 million for the year ended December
31, 2006, an increase of 76.9%, principally as a result of increased professional fees of
$425,000
arising from being a public company, increased compensation expenses of
$150,000 attributable to executives that were hired or promoted to manage our increased
level of operations, bonus payments of $400,000 paid in connection with our initial public
offering, and increased stock-based compensation expense of $390,000. General and
administrative expenses as a percentage of revenues increased to 10.0% for the year ended
December 31, 2007 from 6.6% for the year ended December 31, 2006. We expect our general
and administrative expenses to decrease as percentage of revenues in 2008.
Amortization
of intangibles.
Our amortization of intangibles decreased slightly to $474,000 for the
year ended December 31, 2007 from $478,000 for the year ended December 31, 2006.
Operating
income.
Our operating income increased to $7.9 million for the year ended December 31,
2007 from $7.3 million for the year ended December 31, 2006, an increase of 8.2%. The
operating income of our MRO services segment increased to $10.3 million for the year ended
December 31, 2007 from $9.1 million for the year ended December 31, 2006, an increase of
18.4%. This increase is attributable primarily to the growth of this business segment. The
operating income of our parts services segment increased to $2.8 million for the year
ended December 31, 2007 from approximately $1.3 million for the year ended December 31,
2006, an increase of approximately 115.4%. This increase is attributable to our increased
parts revenues. Overall the increase in our operating income generate by our business
segments was offset by an increase of $2,241 from unallocated corporate expenses which
have been discussed above.
Interest
income.
Interest income increased to $897,000 for the year ended December 31, 2007
from $166,000 for the year ended December 31, 2006, an increase of 440.4%, principally as
a result of our investment of a portion of the proceeds of our initial public offering and
higher prevailing interest rates.
Interest
expense.
Interest expense increased to $732,000 for the year ended December 31, 2007
from $637,000 for the year ended December 31, 2006, an increase of 14.9%. The increase
reflects higher interest rates.
Income
taxes.
Income taxes increased to $2.9 million for the year ended December 31, 2007
from $2.5 million for the year ended December 31, 2006, an increase of 16.0%, principally
as a result of our increased profitability. Our effective tax rate declined to 35.6% in
the year ended December 31, 2007 from 36.8% in the year ended December 31, 2006,
principally as a result of our receipt of tax-exempt interest from a portion of our
investments, which was offset in part by non-deductible stock-based compensation expenses.
Year Ended December 31,
2006 Compared with Year Ended December 31, 2005
Revenues.
Total revenues increased to $59.0 million for the year ended December 31,
2006 from $31.7 million for the year ended December 31, 2005, an increase of
86.4%. This increase was primarily attributable to the inclusion of a full year
of revenues generated by our Piedmont subsidiary that was acquired in July
2005. In 2005, we included $16.1 million in revenues attributable to Piedmont
while in 2006 Piedmont generated $42.3 million of revenues. Revenues
attributable to Limco increased from $15.5 million for the year ended December
31, 2005 to $16.8 million for the year ended December 31, 2006. This increase
was a result of an increase in the volume of Limcos MRO services business
for heat transfer components.
Revenues
from MRO services, including OEM sales, increased to $43.8 million for the year ended
December 31, 2006 from $27.6 million for the year ended December 31, 2005, an increase of
58.8%. The increase in MRO services revenues in 2006 was primarily attributable to the $27
million of MRO services revenues generated by Piedmont in 2006 compared to $12.2 million
generated by it in the second half of 2005. The organic growth in our MRO services segment
is primarily a result of increased sales to Piedmonts customers and sales to new
customers. Revenues from heat transfer components increased to approximately $16.8 million
for the year ended December 31, 2006 from approximately $15.5 million for the year ended
December 31, 2005, an increase of 8.0%. Of such MRO services, OEM product sales increased
from $3.6 million for the year ended December 31, 2005 to $4.0 million for the year ended
December 31, 2006.
Parts
services revenues increased by 274.7% to $15.2 million for the year ended December 31,
2006 from $4.1 million for the year ended December 31, 2005, when we acquired the parts
business of Piedmont. The organic growth in parts sales is attributable to increased
purchases by existing customers and the recruitment of four new customers that require
parts for the general overhaul of their aircraft.
22
Cost
of revenues.
Cost of revenues increased to $45.0 million for the year ended December
31, 2006 from $24.3 million for the year ended December 31, 2005, an increase of 85.6%.
Cost of revenues for MRO services increased to $32.2 million for the year ended December
31, 2006 from $21.5 million for the year ended December 31, 2005, an increase of 50.1%,
primarily as a result of our increased revenues due to our acquisition of Piedmont. Cost
of revenues for parts services increased to $12.8 million for the year ended December 31,
2006 from $2.8 million for the year ended December 31, 2005, an increase of 356.4%,
principally as a result of our increased parts revenues.
Selling
and marketing expenses.
Selling and marketing expenses increased to $2.3 million for
the year ended December 31, 2006 from $1.4 million for the year ended December 31, 2005,
an increase of 67.5%. As a result of the cost savings arising from the integration of the
Piedmont marketing staff with the marketing staff of Limco, our selling and marketing
expenses as a percentage of revenues decreased to 3.9% for the year ended December 31,
2006 from 4.3% for the year ended December 31, 2005.
General
and administrative expenses.
General and administrative expenses increased to $3.9
million for the year ended December 31, 2006 from $2.6 million for the year ended December
31, 2005, an increase of 51.8%. General and administrative expenses as a percentage of
revenues decreased to 6.6% for the year ended December 31, 2006 from 8.1% for the year
ended December 31, 2005, primarily as a result of our reorganization of Piedmonts
operational structure from five business units to three business units and
managements efforts to streamline the number of levels of management at Piedmont
after the acquisition.
Amortization
of intangibles.
Our amortization of intangibles increased to $478,000 for the year
ended December 31, 2006 from $237,000 for the year ended December 31, 2005, an increase of
101.9%, reflecting a full years ownership of Piedmont.
Operating
income.
Our operating income increased to $7.3 million for the year ended December 31,
2006 from $3.2 million for the year ended December 31, 2005, an increase of 127.2%. The
operating income of our MRO services segment increased to $8.7 million for the year ended
December 31, 2006 from $4.0 million for the year ended December 31, 2005, an increase of
116.7%. This increase is attributable primarily to improved operating margins at Piedmont.
The operating income of our parts services segment increased to $1.3 million for the year
ended December 31, 2006 from approximately $769,000 for the year ended December 31, 2005,
an increase of approximately 74.9%. This increase is attributable primarily to the
inclusion of a full year of revenues of the parts services segment of Piedmont which we
acquired in July 2005.
Interest
income.
Interest income increased to $166,000 for the year ended December 31, 2006
from $145,000 for the year ended December 31, 2005, an increase of 15.0%, principally as a
result of higher prevailing interest rates.
Interest
expense.
Interest expense increased to $637,000 for the year ended December 31, 2006
from $357,000 for the year ended December 31, 2005, an increase of 78.6%. The increase
reflects a full year of interest expense attributable to the loans we incurred to acquire
Piedmont in July 2005.
Income
taxes.
Income taxes increased to $2.5 million for the year ended December 31, 2006
from $1.1 million for the year ended December 31, 2005, an increase of 135.0%, principally
as a result of our increased profitability. Our effective tax rate was 36.8% in the year
ended December 31, 2006 and 35.7% in the year ended December 31, 2005.
Quarterly Results of
Operations
The
following table presents the consolidated statements of operations data for each of the
eight fiscal quarters ended December 31, 2007, in dollars and as a percentage of revenues.
In managements opinion, this unaudited information has been prepared on the same
basis as our audited consolidated financial statements and includes all adjustments,
consisting only of normal recurring adjustments, necessary for fair presentation of the
unaudited information for the quarters presented. The results of operations for any
quarter are not necessarily indicative of results that we might achieve for any subsequent
periods.
23
|
For the Three Month Periods Ending
|
|
Dec. 31,
2007
|
Sept. 30,
2007
|
June 30,
2007
|
Mar 31,
2007
|
Dec. 31,
2006
|
Sept. 30,
2006
|
June 30,
2006
|
Mar 31,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
$
|
14,876
|
|
$
|
16,644
|
|
$
|
18,042
|
|
$
|
20,214
|
|
$
|
18,640
|
|
$
|
14,477
|
|
$
|
13,652
|
|
$
|
12,252
|
|
Cost of revenues
|
|
|
|
11,691
|
|
|
12,425
|
|
|
12,309
|
|
$
|
15,383
|
|
|
14,883
|
|
|
10,668
|
|
|
10,259
|
|
|
9,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing
|
|
|
expenses
|
|
|
|
638
|
|
|
673
|
|
|
662
|
|
|
640
|
|
|
618
|
|
|
564
|
|
|
560
|
|
|
534
|
|
General administrative
|
|
|
expenses
|
|
|
|
1,590
|
|
|
1,552
|
|
|
2,132
|
|
|
1,707
|
|
|
901
|
|
|
1,120
|
|
|
1,077
|
|
|
798
|
|
Amortization of
|
|
|
intangibles
|
|
|
|
119
|
|
|
119
|
|
|
118
|
|
|
118
|
|
|
135
|
|
|
115
|
|
|
115
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
838
|
|
|
1,875
|
|
|
2,821
|
|
|
2,366
|
|
|
2,104
|
|
|
2,010
|
|
|
1,640
|
|
|
1,569
|
|
Financial income
|
|
|
(expenses), net
|
|
|
|
340
|
|
|
93
|
|
|
(167
|
)
|
|
(101
|
)
|
|
(59
|
)
|
|
(127
|
)
|
|
(145
|
)
|
|
(140
|
)
|
Income before taxes
|
|
|
|
1,178
|
|
|
1,968
|
|
|
2,654
|
|
|
2,265
|
|
|
2,044
|
|
|
1,883
|
|
|
1,495
|
|
|
1,429
|
|
Income taxes
|
|
|
|
389
|
|
|
538
|
|
|
1,089
|
|
|
855
|
|
|
742
|
|
|
696
|
|
|
563
|
|
|
522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
789
|
|
$
|
1,430
|
|
$
|
1,565
|
|
$
|
1,410
|
|
$
|
1,302
|
|
$
|
1,187
|
|
$
|
933
|
|
$
|
907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Cost of revenues
|
|
|
|
78.6
|
|
|
74.6
|
|
|
68.2
|
|
|
76.1
|
|
|
79.8
|
|
|
73.7
|
|
|
75.2
|
|
|
75.4
|
|
Selling and marketing
|
|
|
expenses
|
|
|
|
4.3
|
|
|
4.0
|
|
|
3.7
|
|
|
3.2
|
|
|
3.3
|
|
|
3.9
|
|
|
4.1
|
|
|
4.4
|
|
General administrative
|
|
|
expenses
|
|
|
|
10.7
|
|
|
9.4
|
|
|
11.8
|
|
|
8.4
|
|
|
4.9
|
|
|
7.7
|
|
|
7.9
|
|
|
6.5
|
|
Amortization of
|
|
|
intangibles
|
|
|
|
0.8
|
|
|
0.7
|
|
|
0.7
|
|
|
0.6
|
|
|
0.7
|
|
|
0.8
|
|
|
0.8
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
5.6
|
|
|
11.3
|
|
|
15.6
|
|
|
11.7
|
|
|
11.3
|
|
|
13.9
|
|
|
12.0
|
|
|
12.8
|
|
Financial income
|
|
|
(expenses), net
|
|
|
|
2.3
|
|
|
0.5
|
|
|
(0.9
|
)
|
|
(0.5
|
)
|
|
(0.3
|
)
|
|
(0.9
|
)
|
|
(1.1
|
)
|
|
(1.1
|
)
|
Income before taxes
|
|
|
|
7.9
|
|
|
11.8
|
|
|
14.7
|
|
|
11.2
|
|
|
11.0
|
|
|
13.0
|
|
|
10.9
|
|
|
11.7
|
|
Income taxes
|
|
|
|
2.6
|
|
|
3.2
|
|
|
6.0
|
|
|
4.2
|
|
|
4.0
|
|
|
4.8
|
|
|
4.1
|
|
|
4.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
5.3
|
%
|
|
8.6
|
%
|
|
8.7
|
%
|
|
7.0
|
%
|
|
7.0
|
%
|
|
8.2
|
%
|
|
6.8
|
%
|
|
7.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We
expect our operating results will fluctuate significantly in the future as a result of
various factors, many of which are outside our control, including the timing of orders,
the provision of services and deliveries. Consequently, we believe that period-to-period
comparisons of our operating results may not necessarily be meaningful, and as a result,
you should not rely on them as an indication of future performance.
Seasonality
Historically,
we have seen many airlines decrease their maintenance requirements in the peak air travel
summer months and increase their maintenance requirements in the winter months when air
travel is not as great.
Off-balance Sheet
Arrangements
As
of December 31, 2007, we had no off-balance sheet arrangements as defined in Item
303(a)(4) of the SECs Regulation S-K.