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Press release from CNW Group

Results for the Second Quarter July 31, 2010 - ADF Group maintained strong profit margins

Thursday, September 09, 2010

Results for the Second Quarter July 31, 2010 - ADF Group maintained strong profit margins07:00 EDT Thursday, September 09, 2010 << ------------------------------------------------------------------------- Highlights: - Revenues totalled $13 million compared with $18.7 million during the same quarter in 2009. - The Corporation maintained high profit margins, of which a gross margin of 30% and an EBITDA margin of 19%. - ADF closed the second quarter of the 2011 fiscal year with net earnings of $0.9 million or $0.03 per share (basic and diluted), compared with $1.8 million or $0.05 per share (basic and diluted) in the second quarter of 2009. - As at July 31, 2010, ADF had a current ratio of 4.15:1 and a $5.5 million liquidities surplus over its long-term debt (including the current portion). ------------------------------------------------------------------------- >> TERREBONNE, QC, Sept. 9 /CNW Telbec/ - ADF GROUP INC. ("ADF" or the "Corporation") (ticker symbol: DRX/TSX) closed the second quarter of the 2011 fiscal year with revenues of $13 million compared with $18.7 million in the corresponding quarter of 2009. For the first six months, revenues totalled $26.6 million, compared with $35.5 million for the first half of the previous year.The second-quarter gross margin stood at $3.9 million or 30% of revenues, compared with $4.6 million or 24% of revenues for the second quarter ended July 31, 2009. For the first six months, it stood at $8.4 million or 32% of revenues, compared with $10 million or 28% of revenues for the first half of the previous year. For the second quarter of the fiscal year, the EBITDA (earnings before interest, taxes, depreciation and amortization) margin remained high at 19% of revenues, similar to the corresponding quarter of the previous year. It stood at 21% for the first half ended July 31, 2010, compared with 22% for the corresponding period of the previous year.ADF posted second-quarter net earnings of $0.9 million or $0.03 per share (basic and diluted), compared with $1.8 million or $0.05 per share (basic and diluted) for the second quarter of the previous year. For the first six months, net earnings amounted to $2.1 million or $0.06 per share (basic and diluted), down from $4.1 million or $0.11 per share (basic and diluted) for the first half of the previous year. Besides the decline in business volume, these lower results are attributable to the negative impact of the increase in the Canadian dollar, as well as the increase in certain costs including amortization and financial charges.ADF Group closed the period in an excellent financial position, as notably attested to by its 4.15:1 current ratio, long-term debt to equity ratio of just 0.11:1 and its $5.5 million liquidities surplus, including cash, cash equivalents and short-term investments, net of the long-term debt (including the current portion).Order BacklogAs at July 31, 2010, the order backlog stood at close to $90 million, with an execution period extending over a period of 15 to 18 months considering the various contractual changes brought to our existing contracts over the past months.Outlook"Although revenues and net earnings are down, we are proud that we were able to perform well and to thereby maintain strong profit margins on several of our contracts in progress. We remain focused on our profitability strategy as attested to by the gross margin (as a percentage of revenues) increases of 6% and 4% respectively for the second quarter and six-month period ended July 31, 2010, compared with the same periods the previous year. In addition, our financial solidity allows us to foresee the future enthusiastically and position us to seize growth opportunities when they arise" said Jean Paschini, Chairman of the Board and Chief Executive Officer.The Corporation and a partner made an offer of $1 million to acquire an industrial lot in Western Canada. This offer is conditional, notably, to a due diligence of the site and the making of agreements with the local governments satisfactory to the Corporation and its partner, within a 120-day period commencing July 21, 2010.Redemption of Subordinate Voting Shares in the Normal Course of BusinessDuring the second quarter ended July 31, 2010, the Corporation redeemed 1,380,200 subordinate voting shares for a net consideration of $2.6 million, representing an average price of $1.91 per share.About ADF Group Inc.ADF Group Inc. is a North American leader in the design, engineering, fabrication and selective installation in the non-residential construction industry of complex steel structures, heavy built-ups, as well as in miscellaneous and architectural metals. ADF is one of the few players in the industry capable of handling highly technically complex mega projects on fast-track schedules in the commercial, institutional, industrial and public sectors.Forward-Looking InformationThis press release contains forward-looking statements reflecting ADF objectives and expectations. These statements are identified by the use of verbs such as "expect" as well as by the use of future or conditional tenses. By their very nature these types of statements involve risks and uncertainty. Consequently, reality may differ from ADF's expectations.Non-GAAP MeasuresEBITDA is a financial measure not prescribed by Canadian generally accepted accounting principles ("GAAP") and is not likely to be comparable to similar measures presented by other issuers. Management, as well as investors, consider this to be useful information to assist them in assessing the Corporation's profitability and ability to generate funds to finance its operations.All amounts are in Canadian dollars. << ------------------------------------------------------------------------- CONFERENCE CALL WITH INVESTORS TO DISCUSS ADF GROUP'S RESULTS FOR THE SECOND QUARTER ENDED JULY 31, 2010 September 9, 2010 at 10:00 a.m. (Montreal time) To participate in the conference call, please dial 1-888-231-8191 a few minutes before the start of the call. For those unable to participate, a taped rebroadcast will be available from Thursday, September 9, 2010 at 1:00 p.m. until midnight Wednesday, September 15, 2010, by dialing 1-800-642-1687; access code 92220862 The conference call (audio) will also be available at www.cnw.ca. Members of the media are invited to listen in. ------------------------------------------------------------------------ CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME Three Months Six Months -------- -------- Periods Ended July 31, 2010 2009 2010 2009 ------------------------------------------------------------------------- (In thousands of $ except per-share amounts) $ $ $ $ Revenues 12,967 18,748 26,608 35,500 Cost of goods sold 9,117 14,162 18,177 25,530 ------------------------------------------------------------------------- Gross margin before foreign exchange variation 3,850 4,586 8,431 9,970 (Gain) loss on foreign exchange 99 (765) (325) (1,326) ------------------------------------------------------------------------- Gross margin 3,751 5,351 8,756 11,296 Selling and administrative expenses 1,325 1,005 2,751 2,309 ------------------------------------------------------------------------- Earnings before undernoted items: 2,426 4,346 6,005 8,987 Amortization Amortization of property, plant and equipment 821 667 1,507 1,331 Amortization of intangible assets 81 81 165 154 ------------------------------------------------------------------------- 902 748 1,672 1,485 ------------------------------------------------------------------------- Earnings before financial charges (interest income) and income taxes 1,524 3,598 4,333 7,502 ------------------------------------------------------------------------- Financial charges (interest income) Interest on long-term debt 131 50 192 110 Interest income (160) (166) (182) (325) Other interest (7) (18) 4 - ------------------------------------------------------------------------- (36) (134) 14 (215) ------------------------------------------------------------------------- Earnings before income taxes 1,560 3,732 4,319 7,717 ------------------------------------------------------------------------- Income taxes Current 60 7 181 175 Future 622 1,880 2,062 3,457 ------------------------------------------------------------------------- 682 1,887 2,243 3,632 ------------------------------------------------------------------------- Net earnings and comprehensive income 878 1,845 2,076 4,085 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic earnings per share 0.03 0.05 0.06 0.11 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Diluted earnings per share 0.03 0.05 0.06 0.11 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Average number of outstanding shares (in thousands) 34,335 36,013 34,413 36,002 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Average number of outstanding diluted shares (in thousands) 34,964 36,868 35,140 36,801 ------------------------------------------------------------------------- ------------------------------------------------------------------------- -------- -------- CONSOLIDATED STATEMENTS OF RETAINED EARNINGS Three Months Six Months -------- -------- Periods Ended July 31, 2010 2009 2010 2009 ------------------------------------------------------------------------- (In thousands of $) $ $ $ $ Retained earnings, beginning of period 10,997 5,047 9,799 2,807 Net earnings 878 1,845 2,076 4,085 ------------------------------------------------------------------------- Retained earnings, end of period 11,875 6,892 11,875 6,892 ------------------------------------------------------------------------- ------------------------------------------------------------------------- -------- -------- CONSOLIDATED STATEMENTS OF CONTRIBUTED SURPLUS Three Months Six Months -------- -------- Periods Ended July 31, 2010 2009 2010 2009 ------------------------------------------------------------------------- (In thousands of $) $ $ $ $ Contributed surplus, beginning of period 3,409 2,373 3,371 2,175 Stock-based compensation 88 66 188 127 Exercise of options - (17) (94) (24) Excess of the book value over the acquisition cost of redeemed subordinate voting shares 1,406 231 1,438 375 ------------------------------------------------------------------------- Contributed surplus, end of period 4,903 2,653 4,903 2,653 ------------------------------------------------------------------------- ------------------------------------------------------------------------- -------- -------- CONSOLIDATED BALANCE SHEETS --------- As at As at July 31, January 31, 2010 2010 (Audited) ------------------------------------------------------------------------- (In thousands of $) $ $ ASSETS Current Cash and cash equivalents 7,960 5,770 Short-term investments 7,610 11,652 Accounts receivable 25,287 14,850 Income taxes 123 442 Holdbacks on contracts 583 2,692 Investment tax credits 536 536 Work in progress 847 1,574 Inventories 3,679 3,093 Prepaid expenses 885 334 Derivative financial instruments 569 832 Future income tax assets 3,630 3,182 ------------------------------------------------------------------------- 51,709 44,957 Holdbacks on long-term contracts 2,107 1,297 Investment tax credits 2,065 2,065 Property, plant and equipment 43,458 42,760 Intangible assets 2,625 2,590 Other assets 243 247 Future income tax assets 6,721 9,452 ------------------------------------------------------------------------- 108,928 103,368 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES Current Accounts payable 3,977 1,955 Accrued charges 1,118 994 Salaries and fringe benefits payable 1,056 1,732 Deferred revenues 3,701 2,242 Derivative financial instruments 59 - Current portion of long-term debt 2,537 2,422 ------------------------------------------------------------------------- 12,448 9,345 Long-term debt 7,485 4,645 Future income tax liabilities 688 713 ------------------------------------------------------------------------- 20,621 14,703 ------------------------------------------------------------------------- Shareholders' equity Retained earnings 11,875 9,799 Accumulated other comprehensive income 144 144 ------------------------------------------------------------------------- 12,019 9,943 Capital stock 71,385 75,351 Contributed surplus 4,903 3,371 ------------------------------------------------------------------------- 88,307 88,665 ------------------------------------------------------------------------- 108,928 103,368 ------------------------------------------------------------------------- ------------------------------------------------------------------------- --------- CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Six Months Three Months Six Months -------- -------- Periods Ended July 31, 2010 2009 2010 2009 ------------------------------------------------------------------------- (In thousands of $) $ $ $ $ OPERATING ACTIVITIES Net earnings 878 1,845 2,076 4,085 Adjustments for: Amortization of property, plant and equipment 821 667 1,507 1,331 Amortization of intangible assets 81 81 165 154 Gain on disposal of property, plant and equipment - - (52) - Change in the fair value of derivative financial instruments 701 (2,345) 322 (3,528) Non-cash exchange loss (gain) 150 973 (23) 1,911 Interest capitalized on long-term debt 4 5 8 10 Stock-based compensation 88 66 188 127 Future income taxes 622 1,880 2,062 3,457 ------------------------------------------------------------------------- Net earnings adjusted for non-monetary items 3,345 3,172 6,253 7,547 ------------------------------------------------------------------------- Changes in non-cash operating items Accounts receivable (5,735) 299 (10,437) (5,025) Short-term and long-term holdbacks on contracts (328) 181 1,299 814 Income taxes (20) (213) 319 (246) Work in progress 859 161 727 (781) Inventories (191) 23 (586) 46 Prepaid expenses (362) (613) (551) (273) Accounts payable, accrued charges, salaries and fringe benefits payable 334 (1,508) 1,470 (4,918) Deferred revenues 2,019 (281) 1,459 880 ------------------------------------------------------------------------- (3,424) (1,951) (6,300) (9,503) ------------------------------------------------------------------------- (79) 1,221 (47) (1,956) ------------------------------------------------------------------------- INVESTING ACTIVITIES Disposal (acquisition) of short-term investments 3,952 (7,000) 4,042 (6,400) Acquisition of property, plant and equipment (504) (332) (2,153) (722) Acquisition of intangible assets (81) (127) (200) (465) Decrease in other assets 1 4 4 4 ------------------------------------------------------------------------- 3,368 (7,455) 1,693 (7,583) ------------------------------------------------------------------------- FINANCING ACTIVITIES Issuances of subordinate voting shares 2 30 164 47 Issuance of long-term debt - - 4,370 - Repayment of long-term debt (656) (703) (1,067) (1,467) Redemption of subordinate voting shares (2,636) (1,087) (2,786) (1,453) ------------------------------------------------------------------------- (3,290) (1,760) 681 (2,873) ------------------------------------------------------------------------- Impact of fluctuations in foreign exchange rate on cash 59 (255) (137) (975) ------------------------------------------------------------------------- Net cash inflows (outflows) 58 (8,249) 2,190 (13,387) Cash and cash equivalents, beginning of period 7,902 17,352 5,770 22,490 ------------------------------------------------------------------------- Cash and cash equivalents, end of period(1) 7,960 9,103 7,960 9,103 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Supplemental cash flow information Income taxes paid - - 191 204 Interest received 4 95 37 113 Non-cash financing and investing activities: Property, plant and equipment given in exchange for new equipment - - 139 - ------------------------------------------------------------------------- ------------------------------------------------------------------------- -------- -------- 1. At July 31, 2010, cash and cash equivalents were composed of $7,960,000 in cash ($9,032,000 in cash and $71,000 in cash equivalents as at July 31, 2009.) >> SEGMENTED INFORMATIONThe Corporation operates in the non-residential construction sector, primarily in North America. Its operations include the connections design and engineering, fabrication and selective installation of complex steel structures, heavy built-ups as well as miscellaneous and architectural metal work. << Three Months Six Months -------- -------- Periods Ended July 31, 2010 2009 2010 2009 ------------------------------------------------------------------------- (In thousands of $) $ $ $ $ Revenues - Canada 123 3,752 563 7,693 - United States 12,844 14,996 26,045 27,807 ------------------------------------------------------------------------- 12,967 18,748 26,608 35,500 ------------------------------------------------------------------------- ------------------------------------------------------------------------- -------- -------- --------- As at As at July 31, January 31, 2010 2010 (Audited) ------------------------------------------------------------------------- (In thousands of $) $ $ Property, plant and equipment - Canada 43,345 42,620 - United States 113 140 ------------------------------------------------------------------------- 43,458 42,760 ------------------------------------------------------------------------- ------------------------------------------------------------------------- --------- >> During the six-month period ended July 31, 2010, 90% of the Corporation's revenues were recorded with one client (76% with four clients during the same period in 2009 each of which accounted for more than 10% of revenues.). However, revenues were recorded on five distinct projects.For further information: Contact: Jean Paschini, Chairman of the Board and Chief Executive Officer, Telephone: (450) 965-1911, 1 (800) 263-7560, Web Site: www.adfgroup.com; Media: Mathieu Beaudoin, Morin Relations Publiques, Tel. 514-289-8688, ext. 225; Source: ADF Group Inc.