Allen-Vanguard Corporation provides general update to shareholders

    OTTAWA, Nov. 13 /CNW Telbec/ - Allen-Vanguard Corporation
("Allen-Vanguard" or the "Company") (TSX:VRS) today provided a general update,
including its revenue for the fourth quarter of fiscal 2008, an update to the
business and financial drivers and opportunities for fiscal 2009 which
commenced October 1, 2008, as well as further commentary on the progress of
its financial discussions. All amounts are in Canadian dollars unless
otherwise noted.

    Recent Performance

    The Company recorded a pronounced upturn in the finish to its fiscal year
ended September 30, 2008 after a very disappointing third quarter. Revenue for
the fourth quarter grew by roughly 50% over the third quarter to approximately
$45 million, which resulted in estimated revenue for fiscal 2008 in the range
of $300-$310 million, with all figures subject to final audit. Allen-Vanguard
noted that its year-end financial report will show the previously announced
restructuring charge for severance and other costs of downsizing its global
workforce and rationalizing manufacturing facilities, and will also show a
large write-down of goodwill and other intangible assets.
    The Company also reported a very strong start to its new fiscal year
which began October 1, 2008, with a sharp increase in its services business in
particular, resulting in order backlog as of October 31st of approximately
$120 million. The pace of orders six weeks into the new fiscal year
represented an annualized revenue rate of $325 million, which is in line with
the Company's expectations for fiscal 2009.

    Business and Financial Drivers for Fiscal 2009

    The Company has just completed an exacting analysis and forecast for
F2009, against a macro environment where improvised explosive devices ("IEDs")
are projected to remain a persistent global threat, per world-wide military
doctrine and per U.S. Homeland Security doctrine. Allen-Vanguard's suite of
products and services are core to the world-wide counter-IED mission.
    The revenue expectations for fiscal 2009 represent an increase of
approximately 5% over fiscal 2008, led by a 50%+ increase in service revenues.
More than 60% of forecast 2009 revenue is estimated to come from the combined
Systems and Services and the Personal Protection Systems business segments.
Systems and Services comprises counter-IED training programs as the Company
enlarges its incumbency in key, long-term counter-IED training programs for
U.S. and NATO Special Forces, as well as additional revenue streams from its
proprietary global data base of IED incidents. Personal Protection Systems
comprises established products such as bomb suits, bomb tools and robots and
new proprietary products including micro climate systems, blast protection
seats and personal armor. Following the disappointing performance of sales of
electronic counter measures ("ECM") equipment in fiscal 2008 due to order
delays, the fiscal 2009 revenue expectations for the Electronic Systems
business unit have been limited to high-visibility contracts already in
backlog and high probability opportunities already well advanced in the sales
process. The Electronic Systems business is concentrated in two major U.S.
military programs and thus carries the most exposure to any change in spending
priorities, in contrast to the Systems and Services segment and in particular
the Personal Protection Systems segment with its highly diversified product
and customer base.
    The Company noted that revenue by quarter is expected to be more
consistent compared to fiscal 2008, when 75% of revenues were recorded in the
first half of the year. Quarterly revenue is expected to expand as the year
progresses. Predictability of revenue is high due to the program nature of the
service revenue component, as well as the strong backlog of product revenue.
    Mr. David Luxton, President and CEO of Allen-Vanguard said, "After
disappointing our stakeholders in the second half of last year, we have been
particularly rigorous in our forecasts for F2009, ensuring that all of our
product line revenue forecasts are supported by order backlog, pending orders
or through pipelines of advanced sales opportunities. The result is a forecast
that is driven by our own sales and technical efforts, and is less susceptible
to external factors and program delays. In addition, we continue to increase
market reach through expanded partnerships, alliances and teaming agreements
with prime contractors and system integrators. We have recently signed a
teaming agreement with a global electronics and communications firm for an ECM
opportunity with an expected potential value to Allen-Vanguard of more than
$100 million over two years. We are also in active discussions with other
global players to take several of our product lines into more markets and
programs. At this juncture we see limited downside risk, attributable mainly
to timing of ECM orders as we and others in our industry await clarification
of defense spending priorities following the U.S. presidential election. As
against that, we see upside potential from our new products, in particular
Micro Climate Systems, vehicle blast seats and personal counter-IED armor, as
well as opportunities to improve our product margins."
    The Company anticipates that its overall gross margin will be
approximately 40%, which will be an average of the high margins on proprietary
personal protection products where the company has global market shares in
excess of 50% and the lower margins on services and systems. General and
administrative expenses have been reduced to an estimated $10 million per
quarter, or $40 million on an annualized basis, following the restructuring
announced September 25, which included a 15% reduction in headcount as well as
consolidation of manufacturing facilities. Research and development expense is
forecast at $14 million on a net basis, slightly below the level of F2008 due
to financial prudence, but with continued emphasis on defending the Company's
technology leadership position, as well as new product development.
    With these financial metrics, the Company anticipates strong levels of
operating cash flow with free cash flow available for debt reduction and a
steady reduction in the ratio of debt/cash flow throughout the year.

    Update on Financial Discussions

    After an initial rapid pay-down of the debt incurred in the acquisition
of Med-Eng Systems in September 2007, the Company has been unable to make
quarterly debt repayments since September 30, 2008 due largely to significant
order delays by the US DoD for ECM equipment.
    As at August 31st, 2008, the Company had debt outstanding of $188 million
on its $200 million term loan facility. The Company has obtained
accommodations from its lending syndicate to November 28, 2008, which defers
compliance with certain financial covenants, including the deferral of the $10
million quarterly principal repayment which was due September 30, 2008. The
accommodation permits the parties to continue a constructive dialogue
regarding revisions to the existing credit terms. The Company is currently
meeting its operating cash requirements with cash flow generated from
operations.
    Allen-Vanguard is also in discussions with potential investors to provide
adequate working capital and to explore recapitalization alternatives. The
Company and its board of directors, advised by its investment bankers,
continue to explore potential investments and strategic transactions, some of
which entail new capital and financial de-leveraging.
    "We recognize that all our stakeholders are anxious to know the outcome
of these deliberations as soon as possible, especially given the severely
deteriorated condition of financial and credit markets," concluded David
Luxton. "In the meantime, we are continuing our practice of updating
shareholders on highlights of our progress and our business plan."

    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 (RCIEDs).
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 Stoney Creek and Pembroke, Ontario; Ogdensburg, New York;
Tewkesbury, U.K.; and Cork, Ireland; 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.allenvanguard.com.
    %SEDAR: 00018026E

For further information: David Luxton, CEO, (613) 288-5555,
ir@allenvanguard.com