Pentacon, Inc. Announces Management Changes, Relocation of Corporate Office And First Quarter Results

Apr 25, 2001, 01:00 ET from Pentacon, Inc.

    HOUSTON, April 25 /PRNewswire/ -- Pentacon, Inc. (NYSE:   JIT) today
 announced results for the first quarter ended March 31, 2001 and provided
 guidance concerning its business outlook for the remainder of 2001.  The
 Company also announced that Mark E. Baldwin, Chairman and Chief Executive
 Officer has resigned these positions and that Robert L. ("Rob") Ruck,
 currently President of Pentacon's Aerospace Group, has been elected Chief
 Executive Officer and Board Member, and Cary M. Grossman, an outside director
 and co-founder of the Company has been elected Chairman.
 
     MANAGEMENT CHANGES AND RELOCATION OF CORPORATE OFFICE
     Rob will retain his position as president of the Aerospace Group and
 assume the additional responsibility of Chief Executive Officer.
     Mr. Ruck, who graduated from the U.S. Military Academy at West Point,
 served as Vice President - General Manager, Business and General Aviation of
 Honeywell Aerospace immediately prior to joining Pentacon.  His duties in that
 $1.7 billion business included leadership of marketing, sales and service for
 the business units that design, produce, and support products ranging from
 hardware to main propulsion engines.  He previously served in varying
 capacities with Honeywell and its predecessor AlliedSignal since 1986.
     Mr. Grossman is the managing partner of the investment banking firm
 McFarland, Grossman & Company, and has been a member of Pentacon's Board since
 the inception of the Company.
     Pentacon also announced that it would be closing its corporate office in
 Houston, Texas and relocating those functions to Chatsworth, California.
 Concerning the relocation of the corporate office, Mr. Ruck stated, "While the
 details are still being finalized, the relocation of our corporate
 headquarters will be accomplished over the next several months.  We will make
 the transition seamless to our customers and we expect to substantially reduce
 corporate expenses."
     Mr. Grossman said, "We wish to thank Mark Baldwin for his leadership and
 service to Pentacon over the past three and a half years and express our
 appreciation to all our corporate staff in Houston.  The decision to move our
 corporate headquarters was a difficult one, but is necessary in Pentacon's
 quest to reduce our overall cost of doing business and attain consistent
 profitability."
     "We are delighted to have an executive of Rob Ruck's caliber in Southern
 California, where the Company will now be headquartered, to serve as CEO.
 Rob's track record of leadership, customer focus and delivering results is
 impressive.  Since joining the Company in September 2000, Rob has made
 significant changes in our Aerospace business and has made great progress in
 growing revenues, improving operational efficiencies and motivating
 employees," added Mr. Grossman.
     Mr. Ruck commented, "I am thrilled to have been selected for this
 challenging assignment.  I look forward to working with the board and our
 employees to deliver to our customers unsurpassed performance across our
 impressive portfolio of products and services."
 
     FIRST QUARTER RESULTS
     For the quarter ended March 31, 2001, Pentacon reported net income of
 $0.1 million compared to net income of $0.4 million for the same period in the
 prior year.  On a per share basis, Pentacon reported net income of $0.00 per
 share in the current quarter compared to $0.02 per share for the prior year
 period.  Revenues for the quarter were $71.3 million, a decrease of 4% from
 revenues of $74.4 million in the prior year.  EBITDA (earnings before
 interest, income taxes, depreciation and amortization) was $6.3 million in the
 quarter, compared to $7.3 million reported in the corresponding quarter of
 2000.
 
     Aerospace Group
     Pentacon Aerospace Group's newly assembled leadership team delivered a
 solid quarter.  Revenues increased 12% to $35.0 million and operating income
 increased 10% to $3.4 million compared to the prior year period.  Operating
 expenses decreased 5% and gross profit per employee grew 29%.
 
     Industrial Group
     Pentacon Industrial Group's results were in line with our expectations.
 The first quarter revenues of $36.3 million declined 16% from the prior year
 period.  The decline was caused by an industry wide slow down in the heavy
 duty truck market and, to a lesser extent, the telecommunications sector.
 Despite posting higher gross margins and slightly lower operating expenses in
 the first quarter of 2001, the group's operating income declined 27% as a
 result of the decreased revenues.
 
     OPERATIONAL COMMENTS AND FUTURE OUTLOOK
     Mr. Ruck continued, "Our Aerospace Group had an excellent quarter and
 reported its highest quarterly revenues and operating income since the second
 quarter of 1999.  Our Industrial Group's results for the quarter were
 respectable, considering the severe market declines we have seen in the heavy
 duty truck and telecommunications sectors and the fact that year ago sales
 were at record levels."
     "During the first quarter, working capital turnover showed a 5%
 improvement from the fourth quarter of 2000.  We remain focused on working
 capital management to improve free cash flow and minimize interest costs.  We
 generated $3.3 million of cash from operations during the first quarter of
 which $0.8 million was used for capital expenditures, primarily for
 integration of our information systems, and $2.5 million was used for debt
 reduction.  Additionally, we booked approximately $3.5 million of annualized
 revenues in new contracts, principally in our Aerospace Group."
     "Consistent with our focus on working capital management to improve free
 cash flow and reduce debt, management has decided to offer up to $10 million
 of slower moving inventory at our Aerospace Group at substantially discounted
 prices.  The disposal of this inventory will allow us to improve our inventory
 mix, satisfy new and existing customers, obtain refunds of previously paid
 taxes of approximately $2.4 million and eliminate the current year tax
 liability.  We are in the process of identifying the specific inventory and
 will take a charge for the loss in the second quarter when quantified."
     "In total for Pentacon, we continue to expect EBITDA for 2001, prior to
 current year inventory disposal charges, to look a lot like 2000 with positive
 Aerospace Group comparisons offset by softening market conditions in certain
 Industrial Group segments."
 
     OTHER INFORMATION
     Today's quarterly earnings conference call with management will be
 available via webcast (http://www.videonewswire.com/PENTACON/042501/) at
 9:00 a.m. Central Time.  A replay of the call will be available via the
 webcast or by dialing 888-203-1112 (confirmation code:  450012) through
 May 10, 2001.
 
     This document contains forward-looking statements that are subject to
 certain risks, uncertainties and assumptions.  Should one or more of these
 risks or uncertainties materialize, or should underlying assumptions prove
 incorrect, actual results may vary materially from those anticipated,
 estimated or projected.  Key factors that could cause actual results to differ
 materially from expectations include, but are not limited to:  (1) estimates
 of costs or projected or anticipated changes to cost estimates relating to
 entering new markets or expanding in existing markets; (2) changes in economic
 and industry conditions; (3) changes in regulatory requirements; (4) changes
 in interest rates; (5) levels of borrowings under the Company's Bank Credit
 Facility; (6) accumulation of excess inventories by certain customers; and
 (7) volume or price adjustments with respect to sales to major customers.
 These and other risks and assumptions are described in the Company's reports
 that are available from the United States Securities and Exchange Commission.
 
     Pentacon is a leading distributor of fasteners and other small parts and
 provider of related inventory management services.  Pentacon presently has
 35 distribution and sales facilities in the U.S., along with sales offices in
 Europe, Canada, Mexico and Australia.  For more information, visit the
 Company's web site at 'www.pentacon-inc.com'.
 
                               (Table to follow)
 
                                 PENTACON, INC.
 
                UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands except per share amounts)
 
                                                          Quarter Ended
                                                            March 31,
                                                       2001           2000
 
     Revenues                                         $71,311        $74,365
     Cost of sales                                     49,992         51,637
       Gross profit                                    21,319         22,728
 
     Operating expenses                                15,752         16,173
     Goodwill amortization                                864            864
       Operating income                                 4,703          5,691
 
     Other (income) expense, net                            2            (23)
     Interest expense                                   4,599          4,820
 
         Income before taxes                              102            894
 
     Income taxes                                          20            489
 
         Net income                                       $82           $405
 
     Net income per share:
         Basic                                          $0.00          $0.02
         Diluted                                        $0.00          $0.02
 
     Shares utilized:
         Basic                                         16,788         16,697
         Diluted                                       16,800         16,706
 
     EBITDA (A)                                        $6,334         $7,299
 
                               PERCENTAGE OF REVENUES
 
     Revenues                                          100.0%         100.0%
     Gross profit                                       29.9%          30.6%
     Operating expenses                                 22.1%          21.7%
     Goodwill amortization                               1.2%           1.2%
     Operating income                                    6.6%           7.7%
     Net income                                          0.1%           0.5%
 
      (A)  EBITDA is earnings before interest, income taxes, depreciation,
          amortization and write-off of debt issuance costs.
 
 
                                 PENTACON, INC.
 
          UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
 
                         Additional Segment Information
 
                                                          Quarter Ended
                                                            March 31,
                                                       2001          2000
                                                          (in thousands)
     Revenues:
       Industrial                                     $36,348        $43,168
       Aerospace                                       34,963         31,197
         Total segment revenues                       $71,311        $74,365
 
     Operating income:
       Industrial                                      $3,171         $4,380
       Aerospace                                        3,422          3,143
         Total segment operating income                 6,593          7,523
 
       General corporate expense                        1,026            968
       Goodwill amortization                              864            864
 
           Operating income                            $4,703         $5,691
 
 
                               PERCENTAGE OF REVENUES
 
     Revenues:
       Industrial                                       51.0%          58.0%
       Aerospace                                        49.0%          42.0%
         Total segment revenues                        100.0%         100.0%
 
     Operating income:
       Industrial                                        8.7%          10.1%
       Aerospace                                         9.8%          10.1%
         Total segment operating income                  9.2%          10.1%
 
       General corporate expense                         1.4%           1.2%
       Goodwill amortization                             1.2%           1.2%
 
           Operating income                              6.6%           7.7%
 
                     MAKE YOUR OPINION COUNT -  Click Here
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SOURCE Pentacon, Inc.
    HOUSTON, April 25 /PRNewswire/ -- Pentacon, Inc. (NYSE:   JIT) today
 announced results for the first quarter ended March 31, 2001 and provided
 guidance concerning its business outlook for the remainder of 2001.  The
 Company also announced that Mark E. Baldwin, Chairman and Chief Executive
 Officer has resigned these positions and that Robert L. ("Rob") Ruck,
 currently President of Pentacon's Aerospace Group, has been elected Chief
 Executive Officer and Board Member, and Cary M. Grossman, an outside director
 and co-founder of the Company has been elected Chairman.
 
     MANAGEMENT CHANGES AND RELOCATION OF CORPORATE OFFICE
     Rob will retain his position as president of the Aerospace Group and
 assume the additional responsibility of Chief Executive Officer.
     Mr. Ruck, who graduated from the U.S. Military Academy at West Point,
 served as Vice President - General Manager, Business and General Aviation of
 Honeywell Aerospace immediately prior to joining Pentacon.  His duties in that
 $1.7 billion business included leadership of marketing, sales and service for
 the business units that design, produce, and support products ranging from
 hardware to main propulsion engines.  He previously served in varying
 capacities with Honeywell and its predecessor AlliedSignal since 1986.
     Mr. Grossman is the managing partner of the investment banking firm
 McFarland, Grossman & Company, and has been a member of Pentacon's Board since
 the inception of the Company.
     Pentacon also announced that it would be closing its corporate office in
 Houston, Texas and relocating those functions to Chatsworth, California.
 Concerning the relocation of the corporate office, Mr. Ruck stated, "While the
 details are still being finalized, the relocation of our corporate
 headquarters will be accomplished over the next several months.  We will make
 the transition seamless to our customers and we expect to substantially reduce
 corporate expenses."
     Mr. Grossman said, "We wish to thank Mark Baldwin for his leadership and
 service to Pentacon over the past three and a half years and express our
 appreciation to all our corporate staff in Houston.  The decision to move our
 corporate headquarters was a difficult one, but is necessary in Pentacon's
 quest to reduce our overall cost of doing business and attain consistent
 profitability."
     "We are delighted to have an executive of Rob Ruck's caliber in Southern
 California, where the Company will now be headquartered, to serve as CEO.
 Rob's track record of leadership, customer focus and delivering results is
 impressive.  Since joining the Company in September 2000, Rob has made
 significant changes in our Aerospace business and has made great progress in
 growing revenues, improving operational efficiencies and motivating
 employees," added Mr. Grossman.
     Mr. Ruck commented, "I am thrilled to have been selected for this
 challenging assignment.  I look forward to working with the board and our
 employees to deliver to our customers unsurpassed performance across our
 impressive portfolio of products and services."
 
     FIRST QUARTER RESULTS
     For the quarter ended March 31, 2001, Pentacon reported net income of
 $0.1 million compared to net income of $0.4 million for the same period in the
 prior year.  On a per share basis, Pentacon reported net income of $0.00 per
 share in the current quarter compared to $0.02 per share for the prior year
 period.  Revenues for the quarter were $71.3 million, a decrease of 4% from
 revenues of $74.4 million in the prior year.  EBITDA (earnings before
 interest, income taxes, depreciation and amortization) was $6.3 million in the
 quarter, compared to $7.3 million reported in the corresponding quarter of
 2000.
 
     Aerospace Group
     Pentacon Aerospace Group's newly assembled leadership team delivered a
 solid quarter.  Revenues increased 12% to $35.0 million and operating income
 increased 10% to $3.4 million compared to the prior year period.  Operating
 expenses decreased 5% and gross profit per employee grew 29%.
 
     Industrial Group
     Pentacon Industrial Group's results were in line with our expectations.
 The first quarter revenues of $36.3 million declined 16% from the prior year
 period.  The decline was caused by an industry wide slow down in the heavy
 duty truck market and, to a lesser extent, the telecommunications sector.
 Despite posting higher gross margins and slightly lower operating expenses in
 the first quarter of 2001, the group's operating income declined 27% as a
 result of the decreased revenues.
 
     OPERATIONAL COMMENTS AND FUTURE OUTLOOK
     Mr. Ruck continued, "Our Aerospace Group had an excellent quarter and
 reported its highest quarterly revenues and operating income since the second
 quarter of 1999.  Our Industrial Group's results for the quarter were
 respectable, considering the severe market declines we have seen in the heavy
 duty truck and telecommunications sectors and the fact that year ago sales
 were at record levels."
     "During the first quarter, working capital turnover showed a 5%
 improvement from the fourth quarter of 2000.  We remain focused on working
 capital management to improve free cash flow and minimize interest costs.  We
 generated $3.3 million of cash from operations during the first quarter of
 which $0.8 million was used for capital expenditures, primarily for
 integration of our information systems, and $2.5 million was used for debt
 reduction.  Additionally, we booked approximately $3.5 million of annualized
 revenues in new contracts, principally in our Aerospace Group."
     "Consistent with our focus on working capital management to improve free
 cash flow and reduce debt, management has decided to offer up to $10 million
 of slower moving inventory at our Aerospace Group at substantially discounted
 prices.  The disposal of this inventory will allow us to improve our inventory
 mix, satisfy new and existing customers, obtain refunds of previously paid
 taxes of approximately $2.4 million and eliminate the current year tax
 liability.  We are in the process of identifying the specific inventory and
 will take a charge for the loss in the second quarter when quantified."
     "In total for Pentacon, we continue to expect EBITDA for 2001, prior to
 current year inventory disposal charges, to look a lot like 2000 with positive
 Aerospace Group comparisons offset by softening market conditions in certain
 Industrial Group segments."
 
     OTHER INFORMATION
     Today's quarterly earnings conference call with management will be
 available via webcast (http://www.videonewswire.com/PENTACON/042501/) at
 9:00 a.m. Central Time.  A replay of the call will be available via the
 webcast or by dialing 888-203-1112 (confirmation code:  450012) through
 May 10, 2001.
 
     This document contains forward-looking statements that are subject to
 certain risks, uncertainties and assumptions.  Should one or more of these
 risks or uncertainties materialize, or should underlying assumptions prove
 incorrect, actual results may vary materially from those anticipated,
 estimated or projected.  Key factors that could cause actual results to differ
 materially from expectations include, but are not limited to:  (1) estimates
 of costs or projected or anticipated changes to cost estimates relating to
 entering new markets or expanding in existing markets; (2) changes in economic
 and industry conditions; (3) changes in regulatory requirements; (4) changes
 in interest rates; (5) levels of borrowings under the Company's Bank Credit
 Facility; (6) accumulation of excess inventories by certain customers; and
 (7) volume or price adjustments with respect to sales to major customers.
 These and other risks and assumptions are described in the Company's reports
 that are available from the United States Securities and Exchange Commission.
 
     Pentacon is a leading distributor of fasteners and other small parts and
 provider of related inventory management services.  Pentacon presently has
 35 distribution and sales facilities in the U.S., along with sales offices in
 Europe, Canada, Mexico and Australia.  For more information, visit the
 Company's web site at 'www.pentacon-inc.com'.
 
                               (Table to follow)
 
                                 PENTACON, INC.
 
                UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands except per share amounts)
 
                                                          Quarter Ended
                                                            March 31,
                                                       2001           2000
 
     Revenues                                         $71,311        $74,365
     Cost of sales                                     49,992         51,637
       Gross profit                                    21,319         22,728
 
     Operating expenses                                15,752         16,173
     Goodwill amortization                                864            864
       Operating income                                 4,703          5,691
 
     Other (income) expense, net                            2            (23)
     Interest expense                                   4,599          4,820
 
         Income before taxes                              102            894
 
     Income taxes                                          20            489
 
         Net income                                       $82           $405
 
     Net income per share:
         Basic                                          $0.00          $0.02
         Diluted                                        $0.00          $0.02
 
     Shares utilized:
         Basic                                         16,788         16,697
         Diluted                                       16,800         16,706
 
     EBITDA (A)                                        $6,334         $7,299
 
                               PERCENTAGE OF REVENUES
 
     Revenues                                          100.0%         100.0%
     Gross profit                                       29.9%          30.6%
     Operating expenses                                 22.1%          21.7%
     Goodwill amortization                               1.2%           1.2%
     Operating income                                    6.6%           7.7%
     Net income                                          0.1%           0.5%
 
      (A)  EBITDA is earnings before interest, income taxes, depreciation,
          amortization and write-off of debt issuance costs.
 
 
                                 PENTACON, INC.
 
          UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
 
                         Additional Segment Information
 
                                                          Quarter Ended
                                                            March 31,
                                                       2001          2000
                                                          (in thousands)
     Revenues:
       Industrial                                     $36,348        $43,168
       Aerospace                                       34,963         31,197
         Total segment revenues                       $71,311        $74,365
 
     Operating income:
       Industrial                                      $3,171         $4,380
       Aerospace                                        3,422          3,143
         Total segment operating income                 6,593          7,523
 
       General corporate expense                        1,026            968
       Goodwill amortization                              864            864
 
           Operating income                            $4,703         $5,691
 
 
                               PERCENTAGE OF REVENUES
 
     Revenues:
       Industrial                                       51.0%          58.0%
       Aerospace                                        49.0%          42.0%
         Total segment revenues                        100.0%         100.0%
 
     Operating income:
       Industrial                                        8.7%          10.1%
       Aerospace                                         9.8%          10.1%
         Total segment operating income                  9.2%          10.1%
 
       General corporate expense                         1.4%           1.2%
       Goodwill amortization                             1.2%           1.2%
 
           Operating income                              6.6%           7.7%
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X23172983
 
 SOURCE  Pentacon, Inc.