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Press release from CNW Group

RESULTS FOR THE FIRST QUARTER ENDED APRIL 30, 2011 - ADF GROUP INC. MAINTAINS GOOD PROFIT MARGINS AND AN EXCELLENT FINANCIAL POSITION

Wednesday, June 15, 2011

RESULTS FOR THE FIRST QUARTER ENDED APRIL 30, 2011 - ADF GROUP INC. MAINTAINS GOOD PROFIT MARGINS AND AN EXCELLENT FINANCIAL POSITION07:00 EDT Wednesday, June 15, 2011FINANCIAL HIGHLIGHTS FOR THE FIRST QUARTER ENDED APRIL 30, 2011The results are disclosed in accordance with the new International Financial Reporting Standards ("IFRS").Revenues amounted to $13.2 million compared with $13.6 million for the same quarter of fiscal 2011.The Corporation closed the quarter with a net income of $1.1 million or $0.03 per share (basic and diluted), compared with a net income of $2.0 million or $0.06 per share (basic and diluted) in the same period of fiscal 2011.As at April 30, 2011, ADF's posted a cash surplus of more than $17 million over its total debt of, representing a significant increase of 35% compared with January 31, 2011.Operating cash flows improved considerably, compared with the quarter ended on April 30, 2010, reaching $5.0 million during the first quarter of fiscal 2012.TERREBONNE, QC, June 15, 2011 /CNW Telbec/ - For the three-month period ended April 30, 2011, ADF GROUP INC. ("ADF" or the "Corporation") (TSX: DRX) revenues were comparable to those for the same period of the previous year, and even posted a slight increase notwithstanding the increase in relative value of more than 5% of the Canadian dollar against the U.S. dollar between the two reporting periods. Revenues thus amounted to $13.2 million for the first quarter of the current fiscal year, compared with $13.6 million for the same quarter of last year.The gross margin as a percentage of revenues stood at 24%, versus the high of 29% achieved in the first quarter of the previous year. This change is primarily explained by the fact that the supply of steel accounted for a larger proportion of the revenue mix this year. However, it should be noted that the gross margin achieved during the first quarter of the 2012 fiscal year corresponds to the average margin posted by ADF over the last eight quarters.Income before interest, income taxes, depreciation and amortization (or EBITDA) amounted to $2.1 million, compared with $3.2 million the previous year.Net income totalled $1.1 million or $0.03 per share, compared with a net income of $2.0 million or $0.06 per share in the same period last year. Notwithstanding the reversal of provisions and a gain on disposal of property, plant and equipment recognized in the first quarter of fiscal 2011, the results for the first quarter ended April 30, 2011 would have been similar to those for the corresponding period a year ago. In addition, a lesser exchange gain than in the previous year and a slightly higher tax rate, have also reduced the first quarter's net income.ADF closed the first quarter of the 2012 fiscal year with working capital of $38.4 million, of which $29.4 million in short-term available liquidities (cash, cash equivalents and short-term investments), provided notably by the cash flows from operating activities of $5.0 million. Consequently as at April 30, 2011, ADF Group's short-term available liquidities exceeded its total interest-bearing debt by $17.3 million.Jean Paschini, Chairman of the Board and Chief Executive Officer indicated that "these results reflect the added value of our contracts in progress, our rigorous operating practices and the positive impact of our recent investments on the overall efficiency of our fabrication activities. They also reflect efficient cost control and a profit margin that remains above the industry average."Implementation of a Dividend PolicyAs announced in April 2011, the Corporation's Board of Directors approved the payment of a semi-annual dividend policy. Consequently, on May 16, 2011, ADF Group paid a first semi-annual dividend of $0.01 per share to shareholders of record as at April 29, 2011.Order BacklogAs at April 30, 2011, the Corporation's order backlog stood at $62 million, extending over an execution period of 12 months. However, the order backlog at that date does not reflect all the revenues likely to be recognized in upcoming quarters as it only includes a portion of the contractual changes requested by clients over the past months in connection with its current mandates.OutlookIn regard to business development, the Corporation expects Western Canada to offer the greatest opportunities within the short term, considering the increase in bidding activity it is currently witnessing in this region. It is therefore carrying on its plans to establish its local presence through a joint venture with a Manitoba-based partner. The goal of the new entity will be to build and operate an ultramodern fabrication plant that will enable the Corporation to serve all of Western Canada, in particular the energy and potash sectors and the public infrastructures segment, where significant investments are expected in the coming years. Furthermore, it will provide ADF with greater access to the large American Midwest market.Over the longer term, the regions in the Eastern and Midwest U.S., and especially New York City, remain natural and high-potential markets for ADF Group, where it is strongly positioned and enjoys an excellent reputation.Based on its current order backlog and considering its development targets as well as a certain stability of the Canadian dollar, management expects ADF Group's revenues within the next few quarters to be comparable to, or up slightly over previous quarters."Today, with an enhanced fabrication capacity, very healthy financial position and development projects well on their way, ADF Group is embarking on a new profitable growth phase, having all the resources in hand to achieve a solid performance once the economy is back on track" concluded Mr. Jean Paschini.Annual Meeting of ShareholdersADF Group's Annual Meeting of Shareholders will take place this morning, June 15, 2011 at 11:00 am at the Omni Mount-Royal Hotel in Montreal.About ADF Group Inc.ADF Group Inc. is a North American leader in the design and engineering of connections, fabrication and installation of complex steel structures, heavy steel built-ups, as well as in 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 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.Transition to International Financial Reporting Standards (IFRS)All financial information, including comparative figures pertaining to ADF Group's 2011 results, has been prepared in accordance with International Financial Reporting Standards (IFRS). In previous periods, the Corporation prepared its consolidated financial statements and interim financial statements in accordance with Canadian generally accepted accounting principles ("Previous GAAP"), in effect prior to February 1, 2011. Comparative figures presented pertaining to ADF's results have been restated to be in accordance with IFRS. A reconciliation of net income, gross margin and EBITDA reported under the previous GAAP and the IFRS is provided in the table below:             2011 Fiscal Year AnnualQ4Q3Q2Q1 12 monthsended 2011.01.313 monthsended 2011.01.313 monthsended 2010.10.313 monthsended 2010.07.313 monthsended 2010.04.30(In thousands of $)$$$$$Net Income      Previous GAAP3,7431,0376308781,198  Impact of IFRS standards, after income taxes       -Exchange differences on translation of the foreign operations1,623639308(70)746  -Share-based compensation514(28)3144  -Amortization of property, plant and equipment and intangible assets(26)(6)(7)(6)(7) 1,648637273(45)783 IFRS5,3911,6749038331,981      Gross Margin      Previous GAAP17,0725,1463,4953,8504,581  Impact of IFRS standards :       -Reclassification of amortization of property, plant and equipment and intangible assets(2,936)(735)(739)(782)(680) IFRS14,1364,4112,7563,0683,901      Gross Margin (as a % of revenues)      Previous GAAP31%34%26%30%34% IFRS26%29%20%24%29%      EBITDA      Previous GAAP10,8713,1222,0692,5253,155  Impact of IFRS standards :       -Share-based compensation514(28)3144 IFRS10,9223,1262,0412,5563,199Non-IFRS MeasuresEBITDA is not a performance measure recognized by IFRS standards, 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, unless otherwise indicated. CONFERENCE CALL WITH INVESTORS To discuss ADF Group's results for the first quarter ended April 30, 2011,Wednesday, June 15, 2011 at 09:30 a.m. (Montreal time)To participate in the conference call, please dial 1-800-731-5319 a few minutes before the start of the call.For those unable to participate, a taped rebroadcast will be available from June 15, 2011 at 12:30 p.m.until midnight June 21, 2011, by dialing 1-877-289-8525; access code 4445591#.The conference call (audio) will also be available at www.adfgroup.com Members of the media are invited to listen in.CONSOLIDATED STATEMENTS OF INCOME    (Unaudited)              3-Month Periods Ended April 30, 2011 2010(In thousands of $, except per-share amounts) $ $Revenues 13,229 13,641Cost of goods sold 10,123 9,740Gross margin 3,106 3,901Selling and administrative expenses 1,892 1,478Financial revenues (95) (22)Finance charges 60 72Foreign exchange gain (755) (1,167)  1,102 361Income before income tax expense 2,004 3,540Income tax expense 923 1,559Net income for the period 1,081 1,981Earnings per share     Basic per share 0.03 0.06 Diluted per share 0.03 0.06Average number of outstanding shares (in thousands) 32,775 34,494Average number of outstanding diluted shares (in thousands) 33,390 35,341          CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Unaudited)              3-Month Periods Ended April 30, 2011 2010(In thousands of $) $ $Net income for the period 1,081 1,981Other comprehensive income     Exchange differences on translation of foreign operations (1,495) (749)Comprehensive income for the period (414) 1,232     CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY(Unaudited)       CapitalstockContributed surplus Accumulated other comprehensive incomeRetainedincomeTotal(In thousands of $)$$$$$Balance, February 1, 201075,436 3,659 144 13,348 92,587Net income for the period— — — 1,981 1,981Other comprehensive income for the period— — (749) — (749)Comprehensive income for the period— — (749) 1,981 1,232Share-base compensation— 56 — — 56Options exercised255 (93) — — 162Subordinate voting share redemption(182) 32 — — (150)Balance, April 30, 201075,509 3,654 (605) 15,329 93,887           Capital stockContributed surplus Accumulated other comprehensiveincomeRetained incomeTotal(In thousands of $)$$$$$Balance, February 1, 201170,032 5,740 (1,477) 18,739 93,034Net income for the period— — — 1,081 1,081Other comprehensive income for the period— — (1,495) — (1,495)Comprehensive income for the period— — (1,495) 1,081 (414)Share-based compensation— 59 — — 59Dividends— — — (328) (328)Balance, April 30, 201170,032 5,799 (2,972) 19,492 92,351CONSOLIDATED STATEMENTS OF FINANCIAL POSITION(Unaudited)                As atApril 30, 2011January 31, 2011February 1, 2010(In thousands of $)$$$ASSETS      Current assets       Cash and cash equivalents19,394 18,677 5,770  Short-term investments5,547 2,787 11,652  Accounts receivable21,725 22,215 13,421  Income tax assets174 — 442  Holdbacks on contracts1,128 167 2,692  Work in progress539 403 1,574  Inventories3,923 3,865 3,093  Prepaid expenses and other current assets711 985 2,299  Derivative financial instruments1,088 741 832  Total current assets54,229 49,840 41,775 Non-current assets       Holdbacks on contracts2,391 3,562 1,297  Property, plant and equipment46,103 46,871 47,438  Intangible assets2,600 2,601 2,590  Other non-current assets2,850 2,852 2,312  Deferred income tax assets5,661 6,960 11,569 Total assets113,834 112,686 106,981 LIABILITIES      Current liabilities       Accounts payable and other current liabilities5,336 5,365 5,649  Income tax liabilities— 159 —  Deferred revenues7,989 4,994 1,274  Derivative financial instruments166 45 —  Current portion of long-term debt2,379 2,513 2,422  Total current liabilities15,870 13,076 9,345 Non-current liabilities       Long-term debt5,247 6,151 4,645  Deferred income tax liabilities366 425 404 Total liabilities21,483 19,652 14,394 SHAREHOLDERS' EQUITY       Retained income19,492 18,739 13,348  Accumulated other comprehensive income(2,972) (1,477) 144  16,520 17,262 13,492  Capital stock70,032 70,032 75,436  Contributed surplus5,799 5,740 3,659  Total shareholders' equity92,351 93,034 92,587 Total liabilities and shareholders' equity113,834 112,686 106,981                      CONSOLIDATED STATEMENTS OF CASH FLOWS      (Unaudited)                    3-Month Periods Ended April 30,  20112010(In thousands of $)  $$OPERATING ACTIVITIES       Net income  1,081 1,981  Non-cash items:        Amortization of property, plant and equipment  792 692   Amortization of intangible assets  89 84   Gain on disposal of property, plant and equipment  — (52)   Unrealized gain on derivative financial instruments  (226) (379)   Non-cash exchange gain  (244) (496)   Share-based compensation  59 56   Income tax expense  923 1,559   Financial revenues  (95) (22)   Finance charges  60 72  Net income adjusted for non-cash items  2,439 3,495  Changes in non-cash working capital items 1  2,961 (3,101)  Income tax expense paid  (368) (191) Cash flows from (used in) operating activities  5,032 203 INVESTING ACTIVITIES       Acquisition of short-term investments  (2,905) (131)  Acquisition of property, plant and equipment  (29) (1,649)  Acquisition of intangible assets  (88) (120)  Reduction in other non-current assets  1 3  Interest received  77 94 Cash flows from (used in) investing activities  (2,944) (1,803) FINANCING ACTIVITIES      Issuance of long-term debt  — 4,370 Repayment of long-term debt  (600) (411) Issuance of subordinate voting shares  — 162 Redemption of subordinate voting shares  — (150) Interest paid on the interest rate swap  (9) — Interest paid  (53) (61) Cash flows from (used in) financing activities  (662) 3,910 Impact of fluctuations in foreign exchange rate on cash  (709) (178) Net increase in cash and cash equivalents  717 2,132 Cash and cash equivalents, beginning of period  18,677 5,770 Cash and cash equivalents, end of period2  19,394 7,902             1. The following table sets out in detail the components of the "Changes in non-cash working capital items":    3-Month Periods Ended April 30, 20112010(In thousands of $) $$ Accounts receivable (749) (5,051)  Holdbacks on contracts 5 1,473  Current tax (12) 415  Work in progress (166) (212)  Inventories (58) (395)  Prepaid expenses and other current assets 273 (586)  Accounts payable and other current liabilities 233 754  Deferred revenues 3,435 501 Changes in non-cash working capital items 2,961 (3,101)Financing and investing activities without impact on cash were nil as at April 30, 2011, and $139,000 as at April 30, 2010, relating to the disposal of property, plant and equipment given in exchange for new ones.2. For the purpose of the Consolidated Statements of Cash Flows, cash and cash equivalents are disclosed as follows:     April 30, 2011January 31, 2011February 1, 2010(In thousands of $)$$$Cash19,394 15,918 5,770 Cash equivalents - term deposits— 2,759 —  19,394 18,677 5,770Segmented InformationThe Corporation operates in the non-residential construction sector, primarily in the United States and Canada. Its operations include the connections design and engineering, fabrication and installation of complex steel structures, heavy steel built-ups, as well as miscellaneous and architectural metalwork.                3-Month Periods Ended April 30, 20112010 (In thousands of CA$) $$  Revenues        Canada 225 440    United States 13,004 13,201     13,229 13,641                            As at April 30, 2011January 31, 2011February 1, 2010(In thousands of CA$) $$  $Property, Plant and Equipment        Canada 46,010 46,767 47,293  United States 93 104 145   46,103 46,871 47,438          All intangible assets and investment tax credits included under "Other non-current assets" at February 1, 2010, January 31, 2011 and April 30, 2011, originated from Canada.During the three-month period ended April 30, 2011, one client accounted for 94% of the Corporation's revenues (one client accounted for 90% of the revenues during the three-month period ended April 30, 2010), and therefore accounted for more than 10% of revenues.     For further information: Source:  ADF Group Inc.     Contact: Jean Paschini, Chairman of the Board of Directors and Chief Executive OfficerJean-François Boursier, CA, Chief Financial Officer     Telephone:   (450) 965-1911 / 1 (800) 263-7560     Web Site:   www.adfgroup.com     Medias:  Caroline Couillard Morin Public Relations (514) 289-8688, ext. 233