- Achieved record fourth quarter performance: revenue of $20.0 million,
EBITDA of $3.0 million, EPS of $0.04
- Generated free cash flow of $1.6 million in year
- Balance sheet further strengthened by recent net $14.5 million
financing
- Announces co-development program with Lockheed Martin
OTTAWA, Dec. 14 /CNW Telbec/ - Allen-Vanguard Corporation (the "Company"
or "Allen-Vanguard") (TSX: VRS) of Ottawa, Canada today reported its financial
results for the fiscal year ended September 30, 2006. All figures are in
Canadian dollars.
Fourth Quarter ("Q4") and FY 2006 Highlights
Revenue was $20.0 million in Q4 2006, more than double the $9.1 million
recorded in Q4 2005. For the year, revenue was $56.8 million, an increase of
11% over $51.4 million in FY 2005.
EBITDA(1) was $3.0 million in Q4 2006, compared to an EBITDA loss of
$3.4 million in Q4 2005. For the year, EBITDA was $4.3 million compared to an
EBITDA loss of $3.8 million in FY 2005.
Net earnings for Q4 2006 were $1.7 million or $0.04 per share. These
compare to a net loss of $23.3 million or a loss of $0.89 per share in
Q4 2005, when the Company recorded several non-recurring items including an
impairment to goodwill. For the year, net income was $0.0 million or $0.00 per
share, compared to a net loss of $29.1 million and a loss per share of $1.09
in FY2005.
General Progress Report and Outlook
"We are very pleased to report a record fourth quarter in terms of
revenue, operating earnings and earnings per share performance," said David E.
Luxton, President and CEO. "Following the completion of the restructuring of
the Company early in our second quarter, profitability has been firmly
restored as demonstrated by three strong back to back quarters."
Allen-Vanguard's cash and cash equivalents, net of bank indebtedness were
$4.0 million at the end of FY 2006 and working capital was $16.1 million. The
Company's financial position improved significantly throughout the year as
profitability was restored, free cash flow was positive, and long-term bank
debt was restructured and reduced. This resulted in a reduction in net
borrowings from $6.1 million at the end of FY2005 to $4.3 million at
September 30th, 2006. Shareholders' equity at the end of FY2006 was
$39.4 million, and subsequent to year end, the Company raised net proceeds of
approximately $14.5 million in a bought deal equity offering, which closed on
November 2, 2006.
At fiscal year end the Company announced a major order for its electronic
counter measures (ECM) equipment from Lockheed Martin, worth an initial
$8 million with an option for an additional $22 million.
"The Company turned a page in fiscal 2006 and has entered fiscal 2007 in a
very favourable position, with a strong balance sheet, a large order backlog
and visibility on even stronger order flow," said Mr. Luxton. "We expect the
combination of top line growth and operating leverage to deliver record
results in fiscal 2007."
The Company expects moderate growth in its traditional explosive ordnance
disposal ("EOD") business and will be focusing on important program wins in
its Chemical, Biological, Radiological, Nuclear ("CBRN) business. "In fiscal
2007 we also plan to review our EOD and CBRN business portfolio, in order to
evolve more product lines with the kind of sustainability, visibility and
predictability we are now beginning to see in our ECM business," said
Mr. Luxton. "We will continue to evaluate each of our individual product lines
to optimize our operational and financial model."
In fiscal 2007 and beyond, the Company expects organic growth to be driven
primarily by exceptional demand for its ECM products. "Demand follows the
threat," said David Luxton. "Remotely detonated improvised explosive devices
have become such a permanent feature of terrorism and insurgency that demand
for countermeasures including ECM looks like it will be with us for a very
long time."
Allen-Vanguard is announcing today that it has committed to a
co-development program with Lockheed Martin for new versions of ECM products
to meet the requirements of large, long-term programs of the U.S. Department
of Defense. The majority of the development program is to be funded by
Lockheed and both companies will jointly own the resulting new technology, as
provided in the seven year Technology License and Supply Agreement announced
in January, 2006. "As we've already seen, Lockheed Martin is very strongly
positioned to compete on new ECM programs in the U.S.," said Mr. Luxton.
"Therefore we took the important step of committing to a joint development
program and trading off smaller, short-term opportunities against much larger
ones for the long term." As a consequence, in recent weeks the Company decided
to forego some opportunistic sales and defer some deliveries in order to
accommodate engineering and production requirements and mobilization of its
supply chain to service much larger anticipated orders commencing in the
second quarter. "The result will be a slow first quarter followed by strong
financial performance in the balance of the year," said David Luxton.
In the U.S., new multi-year programs have been announced for upgraded ECM
technology. While there continues to be some procurement from legacy suppliers
under the second generation CREW2 program, the next significant opportunities
on the near horizon are the new CREW3 spiral program to equip U.S. forces,
plus important new U.S.-sponsored programs for coalition forces and others.
"We are not part of the legacy CREW2 program but we believe that with Lockheed
we are a strong contender in all the new programs and we are optimistic that
we will secure our share of this business," commented Mr. Luxton. "We are
encouraged that Lockheed, using our ECM technology, was sole sourced and is
the incumbent for the new coalition force program in a directed contract
following extensive trials, and we believe that this success means favourable
positioning for follow on orders and other new programs." Apart from the U.S.
market, Allen-Vanguard also expects continued strength in overseas sales
opportunities for its ECM equipment.
The Company announced that its Annual General Meeting of Shareholders will
take place in late April, 2007, in Ottawa, with further details to be
announced shortly. "Between now and then, we anticipate an intense pace of
business activity as we bring our volume ECM manufacturing on stream and
pursue significant business opportunities. We look forward to reporting these
developments to our stakeholders at that time," concluded Mr. Luxton.
Financial Highlights for the Fourth Quarter ("Q4") and Fiscal Year ("FY")
ended September 30, 2006:
Selected Quarterly Financial Information
(Amounts in millions of Canadian dollars,
except share amounts and per share amounts)
-------------------------------------------------------------------------
Fiscal 2006 Fiscal 2005
-------------------------------------------------------------------------
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
-------------------------------------------------------------------------
Revenue $ 20.0 $ 14.5 $ 13.4 $ 8.9 $ 9.1 $ 11.3 $ 13.5 $ 17.5
-------------------------------------------------------------------------
Gross
profit 8.6 6.1 5.5 3.6 3.7 4.9 5.6 7.8
-------------------------------------------------------------------------
EBITDA 3.0 1.9 1.1 (1.7) (3.4) (3.5) 0.1 3.0
-------------------------------------------------------------------------
Other
charges(1) 0.1 0.1 0.1 0.1 20.5 0.2 0.5 2.2
-------------------------------------------------------------------------
Net
earnings
(loss) 1.7 0.6 0.2 (2.5) (23.3) (3.9) (0.7) (0.7)
-------------------------------------------------------------------------
EPS,
basic $ 0.04 $ 0.02 $ 0.01 $(0.07) $(0.89) $(0.14) $(0.03) $(0.03)
-------------------------------------------------------------------------
Capital
expen-
ditures 1.2 1.1 0.3 0.2 0.2 0.4 0.4 0.5
-------------------------------------------------------------------------
Working
capital 16.1 16.7 17.4 17.6 18.4 6.9 4.4 5.4
-------------------------------------------------------------------------
Total
assets 64.5 58.9 57.9 57.9 58.4 73.6 73.0 74.3
-------------------------------------------------------------------------
Shares
outstanding
(millions) 37.7 37.4 37.4 37.4 37.3 26.7 26.7 26.4
-------------------------------------------------------------------------
(1) Amortization of intangible assets and goodwill impairment charges
Revenue
- Allen-Vanguard's revenue was $20.0 million in Q4 2006 and $56.8 million
in FY 2006, compared to $9.1 million in Q4 2005 and $51.4 million in
FY 2005. The contract for equipping and training the Iraqi police force
(the "Iraq Contract") accounted for revenue of $7.9 million in FY 2005,
all of which was generated prior to Q4 2005.
- Revenue from ECM products represented 55% of Q4 2006 revenue, compared
to only 4% in Q4 2005. The majority of ECM FY 2006 revenue has been
generated from international contracts. During Q4 2006, Allen-Vanguard
received its first major ECM order from LM, valued at approximately
$8 million for urgent delivery commencing in Q1 2007 with a follow-on
option valued at approximately $22 million.
- Revenue from EOD products was down 11% year over year in Q4 2006, and
down 25% in FY 2006 excluding the Iraq Contract in the prior year
period.
- Revenue generated in North America totaled $8.2 million in Q4 2006 and
$17.0 million in FY 2006, compared to $3.2 million in Q4 2005 and
$22.6 million in FY 2005. Revenue generated outside of North America
totaled $11.8 million in Q4 2006 and $39.8 million in FY 2006, compared
to $5.9 million in Q4 2005 and $28.8 million in FY 2005.
Gross Margin
- Gross margin was 49% in Q4 2006 and 46% in FY 2006, excluding an
accounting adjustment that affected the reported margin on sales of the
Iraq Contract inventory. Final gross margin after this adjustment was
43% of revenue in Q4 2006 and 42% in FY 2006, compared to 41% in
Q4 2005 and 43% in FY 2005.
Overheads
- Selling and administration expenses, including integration charges,
were $4.6 million in Q4 2006 and $16.4 million in FY 2006, compared to
$4.8 million in Q4 2005 and $22.2 million in FY 2005.
- Research and development expenses, net of grants received and
investment tax credits, were $1.2 million in Q4 2006 and $3.4 million
in FY 2006, compared to $2.3 million in Q4 2005 and $3.9 million in
FY 2005.
Earnings Measures
- Earnings before interest, taxes, amortization, stock-based
compensation, foreign exchange, and goodwill impairment ("EBITDA") was
$3.0 million in Q4 2006 and $4.3 million in FY 2006. These figures
compared to an EBITDA loss of $3.4 million in Q4 2005 and $3.8 million
in FY 2005.
- The net provision for income taxes was $0.7 million and $1.5 million in
Q4 2006 and FY 2006 respectively, compared to an income tax recovery of
$1.1 million in Q4 2005 and $0.5 million in FY 2005. Allen-Vanguard's
overall tax expense is significantly affected by the distribution of
taxable income between the Company and its principal subsidiaries in
the U.K., U.S., and Ireland. The Company's current income tax provision
relates primarily to its U.K. operations, with only partial tax relief
recorded in respect of operating losses sustained in the Canadian, U.S.
and Ireland operations. The amortization of intangible assets is non-
deductible for tax purposes, which distorted the Company's tax
provision for accounting purposes relative to its reported earnings or
loss before income taxes throughout FY 2005. The basic income tax rate
was 27% in FY 2006 and 33% in FY 2005. Allen-Vanguard is examining
alternatives to structure its domestic and international operations in
a manner which is more tax effective.
- Net earnings for Q4 2006 were $1.7 million or $0.04 per share, compared
to a net loss of $23.3 million or $0.89 per share in Q4 2005. Net
earnings for FY 2006 was $0.0 million or $0.00 per share, compared to a
net loss of $28.6 million or $1.09 per share in FY 2005.
Liquidity and Capital Resources
- Allen-Vanguard's cash and cash equivalents, net of bank indebtedness,
at the end of Q4 2006 amounted to $4.0 million, an increase of
$2.7 million from the beginning of the quarter and a reduction of
$1.2 million from the beginning of FY 2006.
- Purchases of property, plant and equipment totaled $1.1 million in
Q4 2006 and $2.7 million in FY 2006, compared to $0.2 million in
Q4 2005 and $1.5 million in FY 2005. The increase in FY 2006 consisted
primarily of improvements and equipment additions made in the second
half of the year to Allen-Vanguard's Tewkesbury facility to increase
ECM production capacity in response to strong demand for this product
group.
- Net Borrowings totaled $4.3 million at the end of FY 2006 with a ratio
of debt to debt plus equity of 0.10:1, compared to Net Borrowings of
$6.1 million and a ratio of debt to debt plus equity of 0.14:1 at the
end of FY 2005.
- Allen-Vanguard had common shares outstanding of 37.7 million and fully
diluted shares outstanding of 46.8 million at the end of FY 2006.
Financial Statements and the Management Discussion and Analysis for the
fiscal year ended September 30, 2006 will be filed on www.sedar.com on
December 14th, 2006.
(1) Earnings before interest, taxes, amortization, stock-based
compensation, and foreign exchange.
Allen-Vanguard will host an investor and analyst conference call and
webcast as follows:
Date: Thursday, December 14, 2006
Time: 8:00 a.m. ET
Dial-in numbers: 1-800-733-7560
1-416-644-3423
Web access:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal sign)1680140
or
Access from allen-vanguard.com
For those unable to listen to the call live, a replay will be available
for a two week period beginning at 10:00 a.m. on December 14, 2006. The replay
phone number is 877-289-8525 and the access code is 21212439 (pound key).
About Allen-Vanguard
Allen-Vanguard Corporation and its subsidiaries worldwide operate under
the brand "Allen-Vanguard". The Company develops and markets technologies,
tools and training for defeating and minimizing the effects of hazardous
devices and materials, whether Chemical, Biological, Radiological, Nuclear or
Explosive (CBRNE). The Company's equipment is in service with leading security
and military forces 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, vehicle barrier
systems, and personal protective wear for use in dealing with bio-chemical
agents. Allen-Vanguard is the sole, worldwide licensee and/or developer of
patented technologies such as the Universal Containment System and CASCAD Foam
for blast mitigation and decontamination of bio-chemical warfare agents. Head
office operations are located in Ottawa, Ontario, Canada, with manufacturing
operations in Stoney Creek, Ontario; Tewkesbury, U.K.; and Cork, Ireland, and
sales offices in Canada, the U.S., the U.K. and Asia. The Company's shares are
listed on The Toronto Stock Exchange (TSX: VRS).
This press release may contain forward-looking statements relating to,
among other things, the Company's expectations concerning future product
demand and growth opportunities and customer acceptance of Company's products.
These forward-looking statements are neither promises nor guarantees, but
involve risks and uncertainties that may cause actual results to differ
materially from those in the forward-looking statements. The Company disclaims
any obligation to publicly update or revise any such statements. The Toronto
Stock Exchange has neither approved nor disapproved the contents of this press
release.
To find out more about Allen-Vanguard Corporation, visit our website at
www.allen-vanguard.com.
%SEDAR: 00018026E