Allen-Vanguard announces financial results for first quarter of fiscal 2009



    
    - Strong quarterly revenue growth continues with Q1 revenue of
      $72.7 million, an increase of 57% over Q4 2008
    - EBITDA(1) of $15.0 million reflecting margin improvement over last
      quarter and savings due to restructuring since Q4 2008
    - Net loss of $34.0 million includes unrealized foreign exchange loss of
      $30.2 million
    

    OTTAWA, Feb. 13 /CNW Telbec/ - Allen-Vanguard Corporation (the "Company"
or "Allen-Vanguard") (TSX: VRS) of Ottawa, Canada reported today its financial
results for the first quarter of fiscal 2009 ("Q1 2009"), which ended December
31, 2008. All figures are in Canadian dollars.

    Summary of Q1 results

    Revenue was $72.7 million in Q1 2009, compared to revenue of $140.2
million in Q1 2008. EBITDA(1) was $15.0 million in Q1 2009, versus EBITDA of
$44.3 million in Q1 2008. Net loss was $34.0 million or $(0.31) cents per
share compared to net earnings of $6.8 million or $0.06 cents per share in Q1
2008.
    The Company continued to generate strong cash flow in the quarter. Cash
flow provided by operating activities was $8.8 million, all of which was
retained to fund future operations. As at December 31, 2008, the Company's
long-term debt stood at $224.6 million and shareholders' equity was $66.7
million.
    Order backlog at the end of Q1 2009 stood at $97 million.
    "We are very pleased to report another quarter of strong sequential
growth in revenues, as well as a turnaround in our operating profit
performance, thanks to a combination of robust demand for our products and a
significant reduction in our cost base," said David E. Luxton, President and
CEO of Allen-Vanguard. "It is especially gratifying to see increased momentum
in revenue and cost management in a quarter where we were also working hard to
successfully stabilize our credit facilities and achieve agreement on the
previously announced transaction with Tailwind Financial Inc. to de-leverage
and strengthen our balance sheet."
    The Company noted that first quarter revenue was higher than plan due to
accelerated shipments, and that it has not changed its overall revenue and
EBITDA expectations for 2009, which are discussed in SEDAR filings and in the
Investor Presentation on its website at www.allenvanguard.com.

    Events subsequent to Q1 2009

    Tailwind transaction

    On January 26, Allen-Vanguard and Tailwind Financial Inc. (NYSE Alternext
US:TNF, TNF.U, TNF.WS) ("Tailwind"), a Delaware-based special purpose
acquisition company ("SPAC") with US$100 million in cash as its sole asset,
announced a transaction whereby Tailwind will acquire all of the shares of
Allen-Vanguard in exchange for shares of Tailwind with closing in mid April,
2009. The result will be a recapitalized Allen-Vanguard, listed on the NYSE
Alternext US. The Tailwind transaction is subject to shareholder approval and
certain other conditions.
    An Investor Presentation explaining the transaction is on SEDAR and the
Company's website at www.allenvanguard.com, and a list of frequently asked
questions ("FAQ") will also be added to the Company's website to assist
investors to understand this transaction and the timetable of events to
closing.

    Shareholder rights offering

    On February 10, Allen-Vanguard filed a Final Short-form Prospectus in
respect of a rights offering of up to $100 million, closing of which is
contingent on the successful completion of the Tailwind transaction.

    Financial Highlights of Q1 2009

    Revenue

    
    - Allen-Vanguard's revenue was $72.7 million in Q1 2009, compared to
      $140.2 million in Q1 2008.

    - Revenue from Electronic Services ("ES") products represented 61.7% of
      revenue in Q1 2009, compared to 75.2% in Q1 2008. Sales to General
      Dynamics Armaments and Technical Products ("GDATP") comprised the
      majority of ES revenue in both periods

    - Revenue from Personal Protection Systems ("PPS") products accounted for
      24.6% of Q1 2009 revenue, compared to 19.1% in Q1 2008. Sales of
      Med-Eng ballistic protection systems were the largest contributor to
      sales, with the balance derived primarily from sales of EOD search and
      tactical equipment, cooling systems and robots.

    - Revenue from Systems & Services accounted for 13.6% of Q1 2009 revenue,
      compared to 5.5% in Q1 2008, and was generated almost entirely by the
      Company's HMS subsidiaries.

    - Customers based in the United States continue to generate a significant
      majority of Allen-Vanguard's revenue. Revenue generated in the United
      States comprised 86% of Q1 2009 revenue, compared to 92% of Q1 2008
      revenue.

    Gross margin

    - Gross margin was 40.2% in Q1 2009, compared to 35.7% in Q4 2008 and
      43.2% in Q1 2008. ES gross margin was relatively stable at 43% in Q1
      2009, compared to 44% in Q1 2008 reflecting. PPS gross margin was 30%
      in Q1 2009, down from 44% in Q1 2008, due to under-absorption of
      overhead burden allocation. Services gross margin was 45% in Q1 2009,
      compared to 32% in Q1 2008, a sharp turnaround from the weak
      performance of the past two quarters where under-absorption of overhead
      costs due to order delays negatively impacted margin.

    Overheads

    - Selling and administration expenses were $11.0 million in Q1 2009
      compared to $12.2 million in Q1 2008 and represented a sharp reduction
      from $17.0 million in the fourth quarter of last year. 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 $3.3 million in Q1 2009, compared to
      $4.0 million in Q1 2008. Grants received and investment tax credits
      totaled $1.2 million in Q1 2009.

    Acquisition and financing-related charges, amortization and foreign
    exchange

    - Allen-Vanguard incurred acquisitions and financing-related charges and
      amortization of $7.3 million in Q1 2009, a decrease from $37.4 million
      recorded in Q1 2008, reflecting write-downs to goodwill and other
      intangible assets which were recorded in Q4 2008.

    - The Company recorded an unrealized foreign exchange loss of
      $30.2 million in Q1 2009. This was a non-cash charge and was entirely
      due to the increase in the Canadian dollar equivalent value of the US$
      denominated term loan as the US dollar rose by 14.5% against the
      Canadian dollar during the quarter.

    Earnings measures

    - EBITDA(1) was $15.0 million in Q1 2009, representing 20.6% of revenue.
      This compares to EBITDA of $44.3 million in Q1 2008, representing 31.6%
      of revenue, and is a sharp turnaround from the EBITDA(1) loss of
      $5.3 million recorded in the fourth quarter of last year.

    - The net provision for income taxes was $3.8 million in Q1 2009,
      compared to a net provision for recovery of $7.6 million in Q1 2008.

    - Net loss was $34.0 million or ($0.31) per share in Q1 2009. Of this
      loss, $30.2 million was attributable to an unrealized foreign exchange
      loss. This compared to net earnings of $6.8 million or $0.06 per share
      in Q1 2008. At December 31, 2008, Allen-Vanguard had common shares
      outstanding of approximately 109.1 million (approximately 148.2 million
      fully diluted).

    Liquidity and cash flow

    - Allen-Vanguard's cash and cash equivalents totaled $15.3 million at the
      end of Q1 2009, an increase of $6.8 million from the beginning of the
      quarter.

    - The Company had borrowings of $16.4 million on its short-term bank
      facilities.

    - Operating cash flow, defined as net earnings before adjustment for
      changes in non-cash operating working capital items, was $3.8 million
      in Q1 2009, compared to operating cash flow of $24.2 million in Q1
      2008.

    - Changes in non-cash working capital items provided cash of $5.0 million
      in Q1 2009, compared to cash used of $14.0 million in Q1 2008.

    - Purchases of capital and intangible assets totaled $0.4 million in Q1
      2009, consisting primarily of general additions to ES and PPS equipment
      and facilities.
    

    (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
first quarter ended December 31, 2008 will be filed on www.sedar.com by
February 14, 2009.
    The Company will be hosting an investor and analyst conference call at
8:00 am on Tuesday February 17, 2009. This will be followed by a question and
answer period with analysts. The call-in details are as follows:

    
    Date:              Tuesday, February 17, 2009
    Time:              8:00 a.m. ET
    Dial-in numbers:   1-800-731-5774
                       1-416-644-3416
    

    Web access:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2551120

    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. ET on February 17, 2009. The
replay phone number is 877-289-8525 and the access code is 21297809 (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 (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 DefenderTM 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 TritonTM 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.allen-vanguard.com.
    %SEDAR: 00018026E




For further information:

For further information: Robin Sundstrom, Allen-Vanguard Corporation,
(647) 822-8111, ir@allenvanguard.com

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ALLEN-VANGUARD CORPORATION

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