Allen-Vanguard announces financial results for third quarter of fiscal 2007

    - Slow deliveries in third quarter a prelude to anticipated strong
      deliveries and record performance in fourth quarter

    - Company maintains guidance for exceptionally strong finish to fiscal
      2007, with quantum growth anticipated from Lockheed Martin orders and
      Med-Eng and HMS acquisitions

    OTTAWA, Aug. 14 /CNW Telbec/ - Allen-Vanguard Corporation (the "Company"
or "Allen-Vanguard") (TSX: VRS) of Ottawa, Canada reported today its financial
results for the third quarter ("Q3") ended June 30, 2007. All figures are in
Canadian dollars.

    Summary of Q3 financial results

    Revenue was $12.4 million in Q3 2007, a decrease of 14% over
$14.5 million in Q3 2006. EBITDA(1) was a loss of ($1.3) million in Q3 2007,
compared to EBITDA of $1.9 million in Q3 2006. The net loss for Q3 2007, was
$1.8 million or $0.03 per share, compared to net earnings of $0.6 million or
$0.02 per share in Q3 2006.
    The Company noted that third quarter activity was a period of slow
deliveries and increased administrative and development expense to ramp up for
anticipated record deliveries in Q4 of bomb disposal robots and volume orders
for Symphony electronic counter measures (ECM) equipment from Lockheed Martin,
which are tracking to schedule. Unusual expenses also included a residual
one-time stock based compensation charge of $0.6 million.

    Outlook and subsequent events

    "As stated in our update of July 5, 2007, we continue to expect a very
strong finish to fiscal 2007, with most deliveries expected to occur in the
fourth quarter," said David E. Luxton, President and CEO. "ECM orders from
Lockheed Martin are now flowing as anticipated. Advance deliveries began in
July and are continuing at a brisk pace through Q4 and are expected to provide
a healthy backlog as we enter fiscal 2008." The Company said that it expects
ECM deliveries and the contribution from its acquisition of Hazard Management
Solutions Ltd (HMS) to push revenue for the second half of fiscal 2007 to a
new high of $45-$50 million, with record EBITDA and profitability on the year
    The Company confirmed its expectation, as stated in its update of July 5,
2007, that the kind of volume orders of ECM component systems now flowing from
Lockheed Martin will continue to build towards stable multi-year production
commitments as the Symphony program matures.
    "The Symphony ECM program, plus the effect of long-term services
contracts from HMS, and the quantum leap in revenue and backlog from our
announced acquisition of Med-Eng, are expected to result in greater visibility
as well as less quarter-to-quarter volatility in our reported financial
results going forward," said Mr. Luxton.
    The Company announced on August 3, 2007, that it had entered into a
definitive agreement to acquire Med-Eng Systems Inc. (Med-Eng) in an all-cash
deal for $600 million plus an adjustment for excess working capital estimated
at $50 million,, with closing expected on or around August 31, 2007. Depending
upon the actual closing date the Med-Eng contribution to Allen-Vanguard's
fourth quarter results could cause revenue to double and EBITDA to triple for
the quarter ending September 30, 2007. For fiscal 2008, the Company
anticipates revenue of approximately $500 million on a consolidated basis,
with EBITDA of approximately $160 million based on current backlog and order

    Financial highlights for the third quarter ("Q3") and nine months ("YTD")
ended June 30, 2007:


    - Allen-Vanguard's revenue was $12.4 million in Q3 2007 and $46.1 million
      in YTD 2007, compared to $14.5 million in Q3 2006 and $36.8 million in
      YTD 2006.
    - Revenue from ECM products represented 45% of Q3 2007 revenue, compared
      to 47% in Q3 2006. Revenue from Lockheed Martin accounted for the
      majority of the Q3 2007 ECM tally, with a relatively minor portion
      attributed to international contracts.
    - Revenue from EOD products was down 12% year over year in Q3 2007, but
      up 19% in YTD 2007. Systems integration revenue totaled $0.6 million in
      Q3 2007 compared to $1.4 million in Q3 2006, accounting for most of
      difference in the quarter.
    - Revenue from CBRN products was down approximately 42% in Q3 2007 and
      23% in YTD 2007, compared to the prior year figures. Sales of
      decontaminant products to the Swiss military contributed $0.7 million
      to Q3 2006 revenue, but there were no similar sized orders in Q3 2007.
      The Company also benefited from $1.1 M of contract R&D work under the
      CRTI program in YTD 2006, but these programs terminated last year.
    - Revenue generated in North America totaled $7.9 million in Q3 2007 and
      $24.7 million in YTD 2007, compared to $3.5 million in Q3 2006 and
      $8.9 million in YTD 2006. Deliveries of ECM equipment under the LM
      Agreement accounted for the majority of the increase in both Q3 2007
      and YTD 2007, although stronger EOD equipment purchases in the U.S.
      also contributed to the improved results.
    - Revenue generated outside of North America totaled $4.5 million in
      Q3 2007 and $21.4 million in YTD 2007, compared to $11.0 million in
      Q3 2006 and $27.9 million in YTD 2006.  The year over year decline is
      due almost entirely to lower international ECM revenue.

    Gross margin

    - Gross margin was 51% in Q3 2007 and 46% in YTD 2007, compared to 42% in
      Q3 2006 and 41% in YTD 2006. The prior year figures were adversely
      affected by charges of $0.5 million and $1.5 million in Q3 2006 and YTD
      2006 respectively related to its Iraq Inventory (see the 2006 Third
      Quarter Report for details).


    - Selling and administration expenses were $6.2 million in Q3 2007 and
      $15.4 million in YTD 2007, compared to $3.7 million in Q3 2006 and
      $11.5 million in YTD 2006. Spending levels have increased over the
      past nine months as Allen-Vanguard put the necessary infrastructure in
      place to accommodate the ramp up of its ECM business. In particular,
      the Company has substantially expanded its Tewkesbury facility,
      installation and service team, and added financial and administrative
      support staff.
    - Research and development expenses, net of grants received and
      investment tax credits, were $1.4 million in Q3 2007 and $4.0 million
      in YTD 2007, compared to $0.4 million in Q3 2006 and $2.2 million in
      YTD 2006. The vast majority of R&D activities in the U.K. are self-
      funded. For the past two quarters, Allen-Vanguard's R&D effort has been
      focused on technology enhancements related to the Symphony components
      supplied to LM, and on next generation technology integrated into LM's
      July 2007 submission for the CREW3 program.
    - Stock-based compensation was $0.7 million in Q3 2007 and $4.0 million
      in YTD 2007, compared to $0.1 million in Q3 2006 and $0.3 million in
      YTD 2006. Pursuant to the employment contracts of the CEO and CFO,
      management bonuses equal to 2.5% of the increase in equity value of the
      Company as at 01-Jun-07 over a base of $50 million were paid in Q3
      2007, resulting in charges of $0.6 million in Q3 2007 and $3.7 million
      in YTD 2007. These bonuses were for past performance and will be
      replaced with bonus arrangements that are a function of several factors
      including the performance of the company, shareholder returns and other
      measurable parameters

    Earnings Measures

    - Earnings before interest, taxes, amortization, stock-based
      compensation, foreign exchange, and goodwill impairment ("EBITDA") was
      a loss of $1.3 million in Q3 2007. EBITDA was $1.7 million in YTD
      2007. These figures compare to EBITDA of $1.9 million in Q3 2006 and
      $1.4 million in YTD 2006.
    - The net provision for recovery of income taxes was $0.9 million and
      $0.6 million in Q3 2007 and YTD 2007 respectively, compared to income
      tax provisions of $0.6 million in Q3 2006 and $0.7 million in YTD 2006.
      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 other jurisdictions.
    - The net loss for Q3 2007 was $1.8 million or $0.03 per share, compared
      to net earnings of $0.6 million or $0.02 per share in Q3 2006. The net
      loss for YTD 2007 was $3.4 million or $0.07 per share, compared to a
      net loss of $1.7 million or $0.04 per share in YTD 2006.

    Liquidity and Capital Resources

    - Allen-Vanguard's cash and short-term investments, net of bank
      indebtedness, at the end of Q3 2007 amounted to $31.9 million, a
      reduction of $34.5 million from the beginning of the quarter.  Working
      capital totaled $69.5 million at the end of Q3 2007, a reduction of
      $16.0 million from the beginning of the quarter.
    - The acquisition of HMS used cash of $14.2 million in Q3 2007, and a
      further $14.8 million was used to fund the escrow in respect of the HMS
      Vendor Notes. The Company liquidated short-term investments in the
      amount of $32.3 million to assist with the HMS acquisition funding.
      These short-term investments were established earlier in FY 2007 from
      the proceeds of the Company's prospectus financings.
    - Allen-Vanguard had common shares outstanding of 58.7 million and fully
      diluted common shares outstanding of 61.8 million at 30-Jun-07.

    Financial Statements and the Management Discussion and Analysis for the
third quarter ended June 30, 2007 are filed on
    The Company will be hosting an investor and analyst conference call at
8:30 am on Tuesday August 14, 2007. The call will include a presentation on
third quarter results for fiscal 2007. This will be followed by a question and
answer period with analysts.

    Date:             Tuesday August 14, 2007

    Time:             8:30 a.m. EST

    Dial-in numbers:  416 915 5651 or 866-250-4907

    Web access

    For those unable to listen to the call live, a replay will be available
for a two week period beginning at 10:30 on August 14, 2007. The replay phone
number is 877-289-8525 and the access code is 21243716#.

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

    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
or training operations in Stoney Creek, Ontario; Wiltshire UK, 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:

    This press release contains 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.
    To find out more about Allen-Vanguard Corporation (TSX:VRS), visit our
website at
    %SEDAR: 00018026E

For further information:

For further information: David Luxton, President and CEO, (613)

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