Allen-Vanguard announces financial results for first quarter of fiscal 2008, provides general update to shareholders

    - Record revenue of $140.2 million, record EBITDA of $44.3 million
    - Long-term debt reduced by $18.6 million to $226.2 million, with
      favourable covenant amendments
    - Improved program visibility on electronic counter measures (ECM or
      'jammers') revenue
    - Increased growth potential in the Personal Protection Systems (PPS) and
      Services businesses
    - Recurring revenue base strengthening across all business segments

    OTTAWA, Feb. 14 /CNW Telbec/ - Allen-Vanguard Corporation (the "Company"
or "Allen-Vanguard") (TSX: VRS) of Ottawa, Canada reported today its financial
results for the first quarter ("Q1 2008") ended December 31, 2007. All figures
are in Canadian dollars.

    Summary of Q1 results

    Revenue was $140.2 million in Q1 2008, a 14-fold increase over
$10.2 million in Q1 2007. EBITDA(1) was $44.3 million in Q1 2008, compared to
an EBITDA loss of $0.4 million in Q1 2007. Net earnings were $6.8 million or
$0.06 per share compared to a net loss of $0.5 million or a loss of
$0.01 per share in Q1 2007. In Q1 2008 net earnings were after acquisition and
financing related charges and amortization of $37.4 million related to the
acquisition of Med-Eng Systems Inc. ("Med-Eng") and Hazard Management
Solutions Inc. ("HMS").
    "Q1 2008 was our first full quarter of financial results following the
acquisition of Med-Eng, and the strong revenue and EBITDA performance was
driven largely by the delivery of jammers in backlog in our Electronic Systems
business," said David E. Luxton, President & CEO.
    The Company used cash generated from operations in the quarter to
continue rapid repayment of long-term debt under its Senior Debt Facility by a
further $18.6 million, to $226.2 million. At the same time, the Company
recognized that upon issuance of the financial statements, the Company would
have been in default of certain financial covenants, and accordingly, the
Company's lenders have provided a waiver for these financial covenants at
December 31, 2007 and favourably amended the financial covenants under the
Senior Debt Facility for its remaining term. The terms of this amending
agreement are detailed in the Financial Highlights of Q1 2008 section below.
    Developments subsequent to the quarter end substantially improved
visibility on jammer programs and revenue for fiscal 2008 through 2013. "We
saw the U.S. Department of Defense (DoD) announce its intention to ramp up the
Symphony program to significant production levels in each of the next
three years on a sole-source basis to Lockheed Martin, with whom we are
partnered," said David Luxton. As well, the Company was advised just
subsequent to Q1 2008 of customer plans to sustain the installed base of its
approximately 9,500 Chameleon jammers to 2013 and possibly longer, which would
constitute a major source of recurring revenue. The Company expects these
developments, plus other sales, to significantly refresh its backlog by early
Q3 2008. Total Company backlog stood at approximately $92 million at the end
of Q1 2008.
    "From these and other developments in Q1 2008 we saw a strengthening base
of recurring revenue across all our business segments," added Mr. Luxton. "Our
Personal Protection Systems business, while not a backlog business, delivers
repeatable performance in the range of $125 million in annual revenue, and has
significant upside from new products with large addressable markets. As well,
our Services business, currently on an annualized run rate of approximately
$50 million, continues to more than double in size as it gains more contracts
with multi-year renewal options."
    The Company has previously indicated that it expects revenue in fiscal
2008 of approximately $500 million and at that revenue level targets an EBTIDA
margin of approximately 33%, with jammers overall representing approximately
65% of that revenue. "We continue to expect that revenue in the first half of
the year will be approximately $250 million, and that the second half of the
year will depend critically on the timing of orders for jammers from our U.S.
partners, General Dynamics and Lockheed Martin, which should be known by early
in Q3," said Mr. Luxton.

    Electronic Systems (ES)

    As noted, visibility on orders for Symphony jammers from Lockheed Martin
has strengthened considerably with the announcement on January 31, 2008 that
the DoD intends to direct an indefinite quantity, indefinite delivery ("IDIQ")
contract to Lockheed Martin for up to 2,500 jammers per year for three years,
plus spares, training and accessories, with a likely value to Allen-Vanguard
of approximately $100 million per year."
    The Company also sees a strong opportunity for recurring revenue through
2013 in support of its installed base of Chameleon jammers, which will number
approximately 10,000 units by the end of this fiscal year. "In our primary
Chameleon program, fiscal 2008 marks a transition from ramp-up to
sustainment," said Mr. Luxton. "Sustainment is now the customer's chief
priority, and we are working to establish requirements and budgets for
maintenance, repair and overhaul ("MRO"), field service support, significant
upgrades, and additional new units required for attrition due to battle damage
and wear and tear." The Company stated that this could represent recurring
Chameleon revenue among all customers in the same range as the Symphony
    "We also have excellent prospects for additional jammer sales to other
existing customers and to new customers, particularly in Commonwealth
countries," said Mr. Luxton. The Company said that it expects pending
opportunities including Chameleon and Symphony orders to significantly refresh
its backlog in Q3. At December 31, 2007, total Electronic Systems backlog
stood at approximately $73 million.

    Personal Protection Systems (PPS)

    The Company's PPS business is expected to account for approximately 25%
of fiscal 2008 revenues, and has introduced a number of new products with
break-out growth potential. "Our core expertise in PPS under the Med-Eng brand
has for many years ensured global leadership in protection for bomb
specialists," said David Luxton. "Now, it has spawned derivative products for
the much larger 'survivability systems' market for military and civil security
forces, including body armor against IEDs, plus personnel cooling systems,
and-as reported a few weeks ago in USA Today-helmet-mounted sensors to monitor
blunt trauma. The addressable market for each one of these survivability
products far exceeds the traditional market for our PPS equipment."


    The Company's Services segment is comprised of HMS, acquired in June,
2007, and is expected to account for approximately 10% of revenues in fiscal
2008. "We are extremely pleased at the performance of HMS, which continues to
grow at a rate in excess of 100% annually," said David Luxton. "As well, it is
proving to be a strong foundation for systems integration in counter-IED,
assembling products and services in a complete solutions package for end-users
and for large prime contractors and systems integrators." The Company stated
that it expects continued strong growth in this segment of its business, with
rapid evolution into a 'Systems' as well as 'Services' capability.
    With increased scale to the business, large programs under management,
and a growing pipeline of systems solutions opportunities for major customers,
the Company continues to strengthen its management team and operating
structure. On January 16, 2008 it appointed Mr. Bob Adams as Chief Operating
Officer. Mr. Adams has senior operational experience in the industry,
including as the former Managing Director of the Communications Operating Unit
of Thales UK, and prior to that was Managing Director EADS Defence Systems and
Electronics UK. The Company has also created the new position of
Vice-President, Corporate Relations, responsible for investor relations and
public communications, and expects to name a senior industry professional to
this position very shortly. As well, the Company has recruited a senior
financial expert highly experienced in U.S. GAAP reporting, to establish the
necessary financial and accounting controls to migrate the Company to U.S.
reporting in conjunction with the Company's stated plans to explore a U.S.
listing of its shares.

    Financial Highlights of Q1 2008


    - Allen-Vanguard's revenue was $140.2 million in Q1 2008 compared to
      $10.2 million in Q1 2007.

    - Revenue from ES products represented 75% of total Q1 2008 revenue,
      compared to 42% in Q1 2007. Sales to General Dynamics comprised the
      majority of ES revenue in Q1 2008, while Q1 2007 ES revenue was derived
      primarily from Lockheed Martin.

    - Revenue from PPS products accounted for 19% of total Q1 2008 revenue,
      compared to 53% in Q1 2007. Approximately 66% of Q1 2008 PPS revenue
      was attributable to sales of Med-Eng ballistic protection and cooling

    - Revenue from Services accounted for 6% of Q1 2008 revenue, almost
      entirely generated by the Company's HMS subsidiary.

    - Revenue generated in North America totaled $133.3 million in Q1 2008,
      compared to $4.9 million in Q1 2007. Revenue generated outside of
      North America totaled $7.0 million in Q1 2008, compared to $5.3 million
      in Q1 2007.

    Gross margin

    - Gross margin was 43% in Q1 2008, compared to 47% in Q1 2007. ES margin
      was 44% in Q1 2008, compared to the prior year comparative of 56%.
      PPS margin was 44% in Q1 2008, compared to 40% in Q1 2007. Services
      margin was 32% in Q1 2008, slightly higher than the Company's
      expectation of a 30% ongoing margin.


    - Selling and administration expenses were $12.2 million in Q1 2008,
      compared to $4.1 million in Q1 2007. Med-Eng and HMS represented about
      $4.3 million of the Q1 2008 total, with the balance of the year over
      year increase attributable to sharply higher audit and legal costs,
      expansion of Allen-Vanguard's Tewkesbury and Ireland facilities, new
      ERP system expenditures, capital taxes and additions to the Corporate
      financial and administrative support staff.

    - Research and development expenses, net of grants received and
      investment tax credits, were $4.0 million in Q1 2008, compared to
      $1.0 million in Q1 2007. The Company believes that its focused
      R&D program is a key strategy in defending and strengthening its
      position in the markets which it serves. Med-Eng represented 73% of the
      Q1 2008 spending, primarily related to development of ES upgrade
      modifications and next-generation technology as well as new
      PPS offerings. The balance of Q1 2008 R&D spending was directed to
      Symphony technology development and enhancements to the Company's robot
      product suite.

    Acquisition and financing related charges and amortization

    - Allen-Vanguard incurred charges and amortization of $37.4 million in
      Q1 2008 pertaining to the Med-Eng and HMS acquisitions and attendant

    Earnings measures

    - EBITDA was $44.3 million in Q1 2008, compared to an EBITDA loss of
      $0.4 million in Q1 2007.

    - The net provision for income tax recovery was $7.6 million in Q1 2008,
      compared to a recovery of $0.4 million in Q1 2007. The Company had
      approximately $30.4 million of non-capital losses carried forward for
      income taxes at the end of FY 2007, the majority of which expire by
      FY 2027.

    - Net earnings for Q1 2008 were $6.8 million or $0.06 per share, compared
      to a net loss of $0.5 million or $0.01 per share in Q1 2007.

    Liquidity and cash flow

    - Allen-Vanguard's cash and short-term investments at the end of Q1 2008
      amounted to $13.0 million, a reduction of $7.4 million from the
      beginning of the quarter.

    - The Company had no borrowings on its $20 million revolver facility.

    - Operating cash flow, defined as net earnings adjusted for non-cash
      items, was $24.2 million in Q1 2008, compared to $0.0 in Q1 2007.

    - The Company paid the scheduled Q1 2008 principal payment of
      $18.6 million in respect of the Term Loan Facility.

    Amendment to the Senior Debt Facility

    The Company, pursuant to the terms of the Senior Debt Facility, is
required to maintain certain financial covenants, including among others,
covenants relating to revenue backlog, pro forma EBITDA and the ratio of
EBITDA to annualized fixed charges. The Company recognized that upon issuance
of the financial statements, the Company would have been in default of the
preceding covenants. Accordingly, the Company's lenders have provided a waiver
for these financial covenants at December 31, 2007 and favourably amended the
financial covenants under the Senior Debt Facility for its remaining term.
    In consideration for the waiver and amendments to the covenants, the
Company agreed to pay the lenders a fee in the amount of 4% of the committed
outstanding Senior Debt Facility, consisting of a cash payment, within
3 business days from the date upon which the amending agreement was signed,
equal to approximately $5.0 million, and, subject to regulatory approval, the
issuance of 1,167,143 common shares of the Company. If for any reason
whatsoever the Company issues less than 1,167,143 Common Shares, the Company
shall pay to the lenders an amount in cash equal to (i) 1,167,143 minus the
aggregate number of common shares actually issued, multiplied by (ii)
$4.54 per share. These amounts will be expensed in the Company's statement of
earnings in the three month period ended March 31, 2008.
    With the amendments, the Company anticipates it will remain in compliance
with all revised financial covenants and terms of its amended Senior Debt
Facility agreement throughout its remaining term. In addition the Company
anticipates that it will be able to achieve forecast projections which will be
sufficient to make payments to the facility as payments are due under the
terms of the agreement. Accordingly, the Senior Debt Facility continues to be
classified as long-term, except for payments due within the next twelve months
from the balance sheet date of December 31, 2007.

    Shares Outstanding

    - Allen-Vanguard had common shares outstanding of approximately
      105.7 million and fully diluted common shares outstanding of
      approximately 117.8 million at the end of Q1 2008.

    (1) Earnings before interest, taxes, amortization, stock-based
        compensation, foreign exchange and integration costs.

    Investor and analyst call and webcast

    The Company will be hosting an investor and analyst conference call and
webcast at 7:30 a.m. ET Friday February 15, 2008.

    Dial-in numbers:     1-800-595-8550
    Web access:

    For those unable to listen to the call live, a replay will be available
for a two week period beginning at 9:30 a.m. on February 15, 2008. The replay
phone number is 877-289-8525 and the access code is 21262822 (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 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
    %SEDAR: 00018026E

For further information:

For further information: David Luxton, CEO, (613) 288-5555, (613)
769-5353; Rob Ryan, CFO, (416) 277-0288

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