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Press release from CNW Group

ADF GROUP ANNOUNCES ITS RESULTS FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED OCTOBER 31, 2010

Thursday, December 09, 2010

ADF GROUP ANNOUNCES ITS RESULTS FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED OCTOBER 31, 201007:00 EST Thursday, December 09, 2010Highlights:Revenues of $40.3 million for the nine months ended October 31, 2010.Gross margin of 29.6% of revenues for the nine-month period ended October 31, 2010 compared with 27.1% at the same date last year.Net earnings of $0.6 million for the quarter ended October 31, 2010 and $2.7 million for the nine-month period ended at the same date.Available liquidities (including cash, cash equivalents and short term investments) of $20.3 million as at October 31, 2010 exceeded the total debt by $11 million.TERREBONNE, QC, Dec. 9 /CNW Telbec/ - ADF GROUP INC. ("ADF" or the "Corporation") (ticker symbol: DRX/TSX) closed the third quarter ended October 31, 2010, with revenues of $13.7 million compared with $15.8 million for the same quarter of the previous fiscal year. This decrease is primarily attributable to the different revenue mix and the increase in the Canadian dollar in relation to the U.S. dollar. For the nine-month period ended October 31, 2010, revenues totalled $40.3 million compared with $51.3 million for the same period last year.Gross margin as a percentage of revenues rose from 24.9% in the third quarter of fiscal 2010 to 25.5% in the third quarter of fiscal 2011. For the nine-month period ended October 31, 2010, the gross margin represented 29.6% of revenues versus 27.1% last year. "This performance is attributable to the quality of the contracts awarded to ADF — the complexity of which notably carries strong added value — combined with the investments made over the past two years to optimize our facilities, and the know-how of our personnel" said Jean Paschini, Chairman of the Board and Chief Executive Officer.The third-quarter earnings before interest, taxes, depreciation and amortization ("EBITDA") amounted to $2.1 million, or 15% of revenues compared with $3.3 million or 21% of revenues in the third quarter of the previous fiscal year. For the first nine months of the current fiscal year, EBITDA totalled $7.7 million, or 19% of revenues versus $10.9 million or 21% of revenues last year.ADF Group closed the quarter with net earnings of $0.6 million or $0.02 per share (basic and diluted), compared with net earnings of $1.4 million or $0.04 per share (basic and diluted) in the same period of the previous year. For the first nine months ended October 31, 2010, net earnings amounted to $2.7 million or $0.08 per share (basic and diluted) compared with net earnings of $5.5 million or $0.15 per share (basic and diluted) in the same period a year earlier. Besides a lower business volume and unfavourable currency fluctuations, this decrease is explained by an increase in the effective tax rate. For information purposes, the higher effective tax rate had a negative impact of $0.01 on third-quarter earnings per share (basic and diluted), although it did not affect the Corporation's cash outflows.Operating activities generated cash flows of $6.5 million since the beginning of the current fiscal year, contributing to maintain ADF Group in an excellent financial position. As at October 31, 2010, ADF Group had a working capital of $39.2 million for a current ratio of 3.45:1 and total cash (including cash, cash equivalents and short-term investments) of $20.3 million. The Corporation's available short-term liquidities exceeded its total interest-bearing debt by $11 million."ADF Group's business environment was practically the same in the third quarter than in the first half of fiscal 2011. We were faced with the slow economic recovery in the United States and the strength of the Canadian dollar against the U.S. dollar. Despite this challenging context, ADF Group remained profitable and financially solid" said Mr. Paschini.OutlookAs at October 31, 2010, ADF's order backlog amounted to $83 million, compared with $137 million on the same date in 2009. It should be noted that ADF's order backlog as at October 31, 2010 does not entirely reflect the revenues likely to be recognized in upcoming quarters, as it includes a portion only of the contractual changes brought to existing orders at the request of customers during the previous months. Thus, based on ADF's order backlog as at October 31, 2010 and the contractual changes underway, the Corporation estimates that it will be busy with profitable work for the next 12 to 15 months at least."Although we remain cautious in light of current market conditions, we are confident as to ADF Group's outlook for the short, medium and long term. We are witnessing increased activity in the non-residential construction sector in Western Canada where we have teamed up with a partner in order to set up an operational centre. In the United States, we believe it will take some time for the industry's activity to return to a more normal level. With this in mind, we will keep our focus on our vision of value creation and niche positioning by bidding exclusively on projects meeting our strict criteria in terms of differentiation, profit margins and cash flow generation, and that fully leverage our expertise. It is by pursuing this strategy that we managed to maintain a good profitability and preserve an excellent financial position during the worst economic crisis of the past 80 years. Likewise, our strategy will best serve the interests of our shareholders when our markets recover, especially since the investments we have made in recent years — in the midst of the economic turmoil — have enhanced our lead over the competition and our ability not only to meet the highest criteria in our industry, but to set new standards" concluded Mr. Jean Paschini.About ADF Group Inc.ADF Group Inc. is a North American leader in the connections design and engineering, fabrication and installation of complex steel structures, heavy built-ups, as well as miscellaneous and architectural metals for the non-residential construction industry. ADF is one of the few players in the industry capable of handling highly technically complex mega projects, as well as projects subject to fast-track schedules, in the commercial, institutional, industrial and public sectors.Forward-Looking InformationThis press release contains forward-looking statements reflecting ADF Group's 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 INVESTORSTo discuss ADF Group's results for the third quarter and first nine months ended October 31, 2010Thursday, December 9, 2010 at 10:00 a.m. (Montreal time)   To participate in the conference call, please dial 1-866-865-3087 a few minutes before the start of the call.   For those unable to participate, a taped rebroadcast will be available fromThursday, December 9, 2010 at 1:00 p.m. until midnight Wednesday, December 15, 2010, by dialing1-800-642-1687; access code 27883045.The conference call (audio) will also be available at www.cnw.ca,and archived for a 90-day period.Members of the media are invited to listen in.CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME  ThreeMonthsNineMonths      Periods Ended October 31, 2010200920102009(In thousands of $ except per-share amounts) $$$$      Revenues    13,687   15,769   40,295   51,269Cost of goods sold 10,19211,83728,36937,367Gross margin before foreign exchange variation 3,4953,93211,92613,902Gain on foreign exchange (517)(120)(842)(1,446)Gross margin 4,0124,05212,76815,348Selling and administrative expenses 1,4266564,1772,965Earnings before undernoted items: 2,5863,3968,59112,383Amortization      Amortization of property, plant and equipment 7586862,2652,017 Amortization of intangible assets 8684251238  8447702,5162,255Earnings before financial charges (interest income) and income taxes 1,7422,6266,07510,128Financial charges (interest income) 24(48)38(263)Earnings before income taxes 1,7182,6746,03710,391Income taxes      Current 171108352283 Future 9171,1862,9794,643  1,0881,2943,3314,926Net earnings and comprehensive income 6301,3802,7065,465Basic earnings per share 0.020.040.080.15Diluted earnings per share 0.020.040.080.15Average number of outstanding shares (in thousands) 32,99735,32233,93635,498Average number of outstanding diluted shares (in thousands) 33,59536,18734,62436,323      CONSOLIDATED STATEMENTS OF RETAINED EARNINGS   ThreeMonthsNineMonths      Periods Ended October 31, 2010200920102009(In thousands of $) $$$$      Retained earnings, beginning of period    11,8755,857   9,7991,772Net earnings 6301,3802,7065,465Retained earnings, end of period 12,5057,23712,5057,237      CONSOLIDATED STATEMENTS OF CONTRIBUTED SURPLUS  ThreeMonthsNineMonths      Periods Ended October 31, 2010200920102009(In thousands of $) $$$$      Contributed surplus, beginning of period    4,9032,653   3,3712,175Stock-based compensation 3189219216Exercise of options -(5)(94)(29)Excess of the book value over the acquisition cost of redeemed subordinate voting shares 5074151,945790Contributed surplus, end of period 5,4413,1525,4413,152      CONSOLIDATED BALANCE SHEETS          At October 31, 2010  At January 31, 2010  (Audited)(In thousands of $) $  $    ASSETS   Current    Cash and cash equivalents 12,7125,770 Short-term investments 7,59611,652 Accounts receivable 24,74414,850 Income taxes 66442 Holdbacks on contracts 6672,692 Investment tax credits 536536 Work in progress 4281,574 Inventories 3,5743,093 Prepaid expenses 615334 Derivative financial instruments 703832 Future income tax assets 3,4883,182  55,12944,957Holdbacks on long-term contracts 2,8761,297Investment tax credits 2,0652,065Property, plant and equipment 42,81142,760Intangible assets 2,5992,590Other assets 253247Future income tax assets 5,6229,452  111,355103,368LIABILITIES   Current    Accounts payable 3,1181,955 Accrued charges 1,146994 Salaries and fringe benefits payable 8961,732 Deferred revenues 8,2192,242 Derivative financial instruments 66- Current portion of long-term debt 2,5162,422  15,9619,345Long-term debt 6,8184,645Future income tax liabilities 554713  23,33314,703Shareholders' equity   Retained earnings 12,5059,799Accumulated other comprehensive income 144144  12,6499,943Capital stock 69,93175,351Contributed surplus 5,4423,371  88,02288,665  111,355103,368    CONSOLIDATED STATEMENTS OF CASH FLOWS  ThreeMonthsNineMonths      Periods Ended October 31,  2010200920102009(In thousands of $) $$$$      OPERATING ACTIVITIES      Net earnings 6301,3802,7065,465 Adjustments for:       Amortization of property, plant and equipment 7586862,2652,017  Amortization of intangible assets 8684251238  Gain on disposal of property, plant and equipment --(52)-  Change in the fair value of derivative financial instruments (127)689195(2,839)  Non-cash exchange loss 16621281,178  Interest capitalized on long-term debt 351115  Stock-based compensation 3189219216  Future income taxes 9171,1862,9794,643 Net earnings adjusted for non-monetary items 2,4644,1218,70210,933 Changes in non-cash operating items       Accounts receivable 543(2,499)(9,894)(7,524)  Short-term and long-term holdbacks on contracts (853)135446949  Income taxes 57109376(137)  Work in progress 4191271,146(654)  Inventories 105335(481)381  Prepaid expenses 270311(281)38  Accounts payable, accrued charges, salaries and fringe benefits payable (991)(2,331)479(7,249)  Deferred revenues 4,518(1,321)5,977(441)  4,068(5,134)(2,232)(14,637)  6,532(1,013)6,470(3,704)      INVESTING ACTIVITIES      Disposal (acquisition) of short-term investments 14-4,056(6,400) Acquisition of property, plant and equipment (111)(1,060)(2,264)(1,782) Acquisition of intangible assets (60)(98)(260)(563) Decrease in other assets (10)(60)(6)(56)  (167)(1,218)1,526(8,801)      FINANCING ACTIVITIES      Issuances of subordinate voting shares 41016857 Issuance of long-term debt --4,370- Repayment of long-term debt (625)(217)(1,692)(1,684) Redemption of subordinate voting shares (950)(2,234)(3,736)(3,687)  (1,571)(2,441)(890)(5,314)Impact of fluctuations in foreign exchange rate on cash (42)7(164)(233)Net cash inflows (outflows) 4,752    (4,665)6,942   (18,052)Cash and cash equivalents, beginning of period 7,9609,1035,77022,490Cash and cash equivalents, end of period 1    12,7124,438   12,7124,438Supplemental cash flow information      Income taxes paid 1022393206 Interest (paid) received (32)(6)5107 Non-cash financing and investing activities:       Property, plant and equipment given in exchange for new equipment --139-      At October 31, 2010, cash and cash equivalents were composed of $12,712,000 in cash ($4,416,000 in cash and $22,000 in cash equivalents as at October 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 installation of complex steel structures, heavy built-ups, as well as miscellaneous and architectural metals.  ThreeMonths NineMonths      Periods ended October 31,    2010200920102009(In thousands of $) $$$$      Revenues     — Canada 41,4135679,106— United States    13,683   14,356   39,728   42,163  13,68715,76940,29551,269            At October 31, 2010  At January 31,2010  (Audited)(In thousands of $)$  $   Property, plant and equipment     — Canada42,70542,620— United States106140 42,81142,760   During the nine-month period ended October 31, 2010, 89% of the Corporation's revenues were recorded with one client (72% 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 contracts with one client during fiscal year 2011.For further information: Source: ADF Group Inc. Contact: Jean Paschini, Chairman of the Board and Chief Executive OfficerJean-François Boursier,CA, Chief Financial Officer Telephone:   (450) 965-1911 / 1 (800) 263-7560Web Site:  www.adfgroup.com Media: Mathieu Beaudoin, Morin Relations Publiques Tel. 514-289-8688, ext. 225 Cell. : 514-473-4649 or Charles Durivage, Morin Relations Publiques Tel. 514-289-8688, ext. 223 Cell. : 514-894-4186