OTTAWA, May 14 /CNW Telbec/ - Allen-Vanguard Corporation (the "Company" or "Allen-Vanguard") (TSX: VRS) of Ottawa, Canada reported today its financial results for the second quarter of fiscal 2009 ("Q2 2009"), which ended March 31, 2009. All figures are in Canadian dollars, except where noted.
Summary of Q2 results
Revenue was $56.6 million in Q2 2009, compared to revenue of $91.3 million in Q2 2008. EBITDA(1) was $8.6 million in Q2 2009, versus EBITDA of $21.6 million in Q2 2008. Net loss was $19.6 million, or $(0.18) cents per share, compared to a net loss of $34.2 million, or $(0.32) per share in Q2 2008. The loss in fiscal 2009 included impairment of goodwill and intangible assets of $6.0 million and an unrealized foreign exchange loss of $6.7 million.
Cash flow from operations was $1.9 million in the quarter ended March 31, 2009, and after changes in working capital, cash used in operating activities was $3.8 million. The Company repaid $3.4 million in bank indebtedness net of proceeds in the quarter, and at March 31, 2009 is fully compliant with all of the covenants and terms of its credit facility. At March 31, 2009, $4.2 million was drawn under the new revolving facility of $16.0 million under that credit facility. Net debt was $239.5 million at March 31, 2009.
"The lower revenue reported in Q2 partly reflects the over-performance from accelerated shipments in Q1 of this fiscal year," said David E. Luxton, President and CEO. "On the expense side we continue to track to our reduced target cost base as a result of the reduction measures announced at the end of fiscal 2008, with scope for additional operating efficiencies in the remainder of the year."
In the six months ended March 31, 2009, revenue was $129.3 million, EBITDA was $23.6 million and net loss was $53.6 million, or $(0.49) per share. This compares to the first half of fiscal 2008 when revenue was $231.6 million, EBITDA was $66.0 million and the net loss was $27.4 million or $(0.26) per share.
While macro conditions for Allen-Vanguard products and services remain favorable with the new U.S. defense budget emphasis on counter-insurgency, the post-U.S. presidential election budget process created a pronounced pause in order approval and processing Thus, considering this and the current global economic instability, the Company has decided to suspend revenue guidance for the time being. Order backlog at the end of Q2 2009 stood at approximately $88.0 million vs. $45.0 million at the end of Q2 F08. This order backlog represented increases in all three business lines: Electronic Systems was 20.6 million compared to 12 million a year ago; PPS was 42.4 million compared to 22.3 million a year ago and S&S which was 25 million compared to 10.8 million a year ago.
"Our jammer business is currently in transition as our legacy Chameleon product reduces to sustainment levels while we ramp up for Symphony program requirements, which now have much stronger visibility, and as we introduce our next-generation Equinox platform," continued Mr. Luxton. "Equinox is a leap-ahead technology with applications far beyond jamming, and early indications are that there is a receptive international market which we expect will drive significant growth commencing in 2010."
The Company added that its traditional Personal Protection Systems business is also evolving, with a changing sales mix as it introduces new products, in particular its family of blast protection seats. "This new product has already surpassed our revenue expectations for this fiscal year," said Mr. Luxton. "This partially offsets a pause in our bomb disposal program where we upgraded technology and relocated manufacturing, which slowed the pace of robot deliveries against plan."
The Company reported that its Systems and Services business continues to track well to plan, anchored by a significant multi-year Program-of-Record to provide training to U.S. forces, plus ongoing requirements for field service representatives overseas.
Events subsequent to Q2 2009
On April 6, 2009 Allen-Vanguard announced the termination of its arrangement agreement with Tailwind Financial Inc. and that it had entered into an exclusivity agreement with an unrelated U.S. investor for a period of three weeks ending April 24, 2009, which was subsequently extended. The investor is undertaking discussions with Allen-Vanguard's stakeholders and performing due diligence with the objective of entering into a binding agreement pursuant to which Allen-Vanguard would be taken private. Any such transaction would be subject to the approval of Allen-Vanguard shareholders and other customary conditions.
On April 30, 2009 the Company announced that it had elected to issue 16,496,000 warrants exercisable at $0.2114 per share for a period of five years to certain members of its lending syndicate, under the terms of the credit facility entered into on December 29, 2008.
Financial Highlights of Q2 2009
Revenue
- Allen-Vanguard's revenue was $56.6 million in Q2 2009, compared to
$91.3 million in Q2 2008.
- Revenue from Electronic Services ("ES") products represented 51% of
revenue in Q2 2009, compared to 81% in Q2 2008. Q2 and YTD 2008 ES
revenues are on track with current US Department of Defense program
expenditures expectations, augmented by equipment sales into other
markets.
- Revenue from Personal Protection Systems ("PPS") products accounted for
35% of Q2 2009 revenue, compared to 13% in Q2 2008. Sales in fiscal
2009 included ballistic protection products, demining, cooling systems
and EOD search and tactical equipment as well as initial shipments of
blast protection seats.
- Revenue from Systems & Services accounted for 14% of Q2 2009 revenue,
compared to 6% in Q2 2008, with most of the increase relating to the
award of a new services contract in Q2 2009.
- Customers based in the United States continue to generate a significant
majority of Allen-Vanguard's revenue. Revenue generated in the United
States comprised 74% of Q2 2009 revenue, compared to 89% of Q2 2008
revenue.
Gross margin
- Overall gross margin was 37% in Q2 2009, compared to 40% in both Q1
2009 and Q2 2008. ES gross margin was relatively stable at 39% in Q2
2009. PPS gross margin was 37% in Q2 2009, up from 30% in Q1 2009, and
down from 44% in Q2 2008. Services gross margin was 34% in Q2 2009,
down from 45% in Q1 2009 and a sharp turnaround from 9% in Q2 2008,
reflecting the impact of increased sales over a fixed cost base.
Overheads
- Selling and administration expenses were $7.9 million in Q2 2009 a
sharp reduction from $11.0 million in Q1 2009 and $10.6 million in Q2
2008. The reduction reflects savings realized as a result of
restructuring initiatives announced in Q4 2008, as well as company-wide
operational efficiencies.
- Research and development expenses, net of grants received and
investment tax credits, were $4.5 million in Q2 2009, compared to
$4.7 million in Q2 2008.
Acquisition and financing-related charges, amortization and foreign
exchange
- Allen-Vanguard incurred acquisitions and financing-related charges and
amortization of $7.2 million in Q2 2009, a decrease from $54.9 million
recorded in Q2 2008.
- The Company recorded an unrealized foreign exchange loss of
$6.7 million in Q2 2009 and $36.9 million in YTD 2009. These were
non-cash charges and were primarily due to the increase in the Canadian
dollar equivalent value of the US$ denominated term loan during the
periods. The company carries its debt in US$ because of its strong
US$ denominated revenue stream.
Earnings measures
- EBITDA(1) was $8.6 million in Q2 2009, representing 15.3% of revenue.
This compares to EBITDA of $15.0 million or 20.6% of revenue in Q1 2009
and EBITDA of $21.6 million or 23.7% of revenue in Q2 2008, reflecting
the decline in revenue and gross profit in the quarter offset by lower
selling and administration costs.
- Net loss was $19.6 million or $(0.18) per share in Q2 2009. Of this
loss, $12.7 million was attributable to the combination of an
unrealized foreign exchange loss and an impairment of goodwill and
intangible assets. This compared to a net loss of $34.2 million or
$(0.32) per share in Q2 2008. At March 31, 2009, Allen-Vanguard had
common shares outstanding of approximately 109.2 million (approximately
148.2 million fully diluted).
Liquidity and cash flow
- Allen-Vanguard's cash and cash equivalents totaled $6.6 million at the
end of Q2 2009, a decrease of $8.7 million from the beginning of the
quarter.
- Operating cash flow, defined as net earnings before adjustment for
changes in non-cash operating working capital items, was $1.9 million
in Q2 2009, compared to operating cash flow of $2.3 million in Q2 2008.
- Changes in non-cash working capital items used cash of $5.7 million in
Q2 2009, compared to generating cash of $58.9 million in Q2 2008.
- Purchases of capital and intangible assets totaled $1.0 million in Q2
2009, consisting primarily of demonstration equipment and computer
equipment.
(1) EBITDA means earnings before interest, income taxes, depreciation,
amortization, stock-based compensation, foreign exchange, goodwill
impairment, intangible asset impairment, restructuring and
acquisition and financing-related charges and amortization
Filing and conference call details
Financial Statements and the Management Discussion and Analysis for the
second quarter ended March 31, 2009 will be filed on www.sedar.com by May 15,
2009.
The Company will be hosting an investor and analyst conference call at
9:00 am on Friday May 15, 2009. This will be followed by a question and answer
period with analysts. The call-in details are as follows:
Date: Friday, May 15, 2009
Time: 9:00 a.m. ET
Dial-in numbers: 1-800-590-1817
1-416-644-3422
Web access:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal sign)2666840
For those unable to listen to the call live, a replay will be available
for a two week period beginning at 11:00 a.m. ET on May 15, 2009. The replay
phone number is 877-289-8525 and the access code is 21305913 (pound key).
Forward looking statements
This press release may contain forward-looking statements, which reflect Allen-Vanguard's current expectations regarding future events, its strategy, expected performance and condition. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects," "anticipates," "plans," "believes," "estimates" or negative versions thereof and similar expressions. In addition, any statement that may be made concerning future performance, strategies or prospects, and possible future acquisitions or dispositions, is also a forward-looking statement. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to, among other things, risks, uncertainties and assumptions about the Company and economic factors. Forward-looking statements are not promises or guarantees of future performance, and actual events and results could differ materially from those expressed or implied in any forward-looking statements made about the Company. Any number of important factors could contribute to these digressions, including, but not limited to, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings, and catastrophic events. We stress that the above-mentioned list of important factors is not exhaustive. We encourage you to consider these and other factors carefully before making any investment decision and we urge you to avoid placing undue reliance on forward-looking statements. Further, you should be aware that the Company disclaims any obligation to publicly update or revise any such forward-looking statements whether as a result of new information, future events or otherwise, prior to the release of the next Management Discussion and Analysis to be released by the Company or except as required by law.
About Allen-Vanguard
Allen-Vanguard Corporation supports the mission of military and homeland security forces around the world with leading proprietary solutions for protection and counter-measures against hazardous devices of all kinds, whether chemical, biological, radiological or explosive ("CBRNE"), including improvised explosive devices (IEDs) and remotely controlled IEDs ("RCIED"s). Allen-Vanguard equipment is in service in more than 120 countries. Products include Electronic Counter-Measures ("ECM") equipment for jamming remote detonation of terrorist devices, specialty security equipment for Explosive Ordnance Disposal ("EOD"), remote intervention robots for hazardous applications, and personal protective wear for use in dealing with explosive and bio-chemical agents. Allen-Vanguard is the developer and/or sole, worldwide licensee of proprietary technologies such as the Med-Eng bomb suit, the Defender(TM) and Vanguard(TM) Mk2 bomb disposal robots, and the Universal Containment System and CASCAD Foam system for blast mitigation and decontamination of bio-chemical warfare agents. Professional services encompass counter-IED intelligence, training and advisory services, including the Triton(TM) Report on terrorist incidents around the world. The Company operates globally through its wholly-owned subsidiaries under the names "Allen-Vanguard", "Med-Eng" and "Hazard Management Solutions". Head office operations are located in Ottawa, Ontario, Canada, with manufacturing operations in Pembroke, Ontario; Ogdensburg, New York; and Tewkesbury, U.K.. The Company has professional services operations in Shrivenham, UK, Canada and in the U.S. in Arlington, Virginia, plus sales offices in Canada, the U.S., the U.K. and Asia. Allen-Vanguard's shares are listed on The Toronto Stock Exchange (TSX) under the symbol "VRS".
To find out more about Allen-Vanguard Corporation (TSX: VRS), visit our website at www.allen-vanguard.com.
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