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Press release from CNW Group

Results for the third quarter ended October 31, 2011

Thursday, December 08, 2011

Results for the third quarter ended October 31, 201110:24 EST Thursday, December 08, 2011FINANCIAL HIGHLIGHTS:All results are disclosed in accordance with International Financial Reporting Standards ("IFRS").-Revenues amounted to $11.2 million, an 18% decrease compared with those for the same quarter of the previous fiscal year.-ADF Group closed the third quarter with net earnings of $0.4 million or $0.01 per share (basic and diluted).-Because of its profitability, the Corporation recorded an increase in the surplus of available short-term liquidities over total debt, which now stands at $18.6 million.TERREBONNE, QC, Dec. 8, 2011 /CNW Telbec/ - ADF GROUP INC. ("ADF" or the "Corporation") (TSX: DRX) closed the third quarter of the 2012 fiscal year with revenues of $11.2 million, compared with $13.7 million for the same quarter last year. Besides the weak economy, this decline is attributable for the most part to a different mix of revenues billed, notably in terms of fabrication hours and the supply of raw material and other.The gross profit margin as a percentage of revenues declined from 20% in the third quarter of fiscal 2011 to 15% in the third quarter of fiscal 2012. This decline is explained by the start of fabrication on new lower-margin contracts consistent with its action plan implemented at the beginning of the current fiscal year, the short-term objective of which being to increase the order backlog. To a certain extent, the gross margin was also affected by the recognition of a portion of the costs associated with contractual changes and adjustments in connection with mandates in progress, whereas the related revenues should be recognized at a later date. The revenues and profits derives from these contractual changes should be recognized in the coming months.For the third quarter ended October 31, 2011, the Corporation posted net earnings of $0.4 million or $0.01 per share (basic and diluted), compared with $0.9 million or $0.03 per share (basic and diluted) for the third quarter of the previous year.For the nine-month period ended October 31, 2011, ADF Group recorded year-to-date revenues of $37.6 million, compared with $40.3 million for the same period of fiscal 2011. Additionally to the reasons previously outlined, this decline is also attributable to the 5% increase in the Canadian dollar in relation to the U.S. dollars between the two reporting periods. However, the gross margin only slightly decreased, from 24% of revenues to 21% of revenues.For the nine-month period, net earnings totalled $2.3 million or $0.07 per share (basic and diluted), compared with $3.7 million or $0.11 per share (basic and diluted) for the same period last year. In addition to the factors listed above, this decline is partly attributable to the non-recurrence of certain favourable items recognized a year ago, and the realization of lower foreign exchange gains than last year.The Corporation's operating activities provided cash flows of $7.9 million during the first nine months of the current fiscal year, compared with $6.6 million for the same period last year. Cash flows from operating activities contributed to further strengthen the financial health of the Corporation which, as of October 31, 2011, had working capital of $43.2 million, including short-term available liquidities (cash, cash equivalents and short-term investments) of $25.4 million. Therefore, available liquidities exceeded ADF Group's total debt by $18.6 million.Major Events Since October 31, 2011Over the last few weeks, ADF Group and the various parties involved in the World Trade Center ("WTC") projects, in New York, U.S.A., have reached an agreement to expedite the contractual changes review process and the collection of debts. The Corporation had previously availed itself of measures available under the different contracts.In addition, the Corporation is announcing the postponement of its development project in Western Canada after ADF's minimum requirements were refused by the both provincial and municipal bodies. It must be noted that ADF Group Inc. was actively negotiating for the past 18 months with the Province of Manitoba and the City of Winnipeg to purchase an industrial lot in order to build a new fabrication plant of 9,290 m2 (100,000 ft2). This acquisition was conditional to the conclusion of a due diligence, including notably an environmental remediation, satisfactory to ADF Group Inc. and its partner. Consistent with its responsible management, the Corporation decided to end these negotiations and analyze other options to increase its coverage of the Western Canada markets.OutlookAs at October 31, 2011, ADF Group's order backlog stood at $49 million, the execution schedule of which should extend until the third quarter of the Corporation's 2013 fiscal year."In response to a particularly challenging economic environment in our targeted markets, especially in the United States, we are maintaining our focus on preserving the Corporation's operating profitability and the soundness of its balance sheet. Our large-scale contracts currently in progress in connection with the reconstruction of the WTC site in New York City (U.S.A.) will remain a source of profitability for ADF Group in the coming months," indicated Jean Paschini, Chairman of the Board and Chief Executive Officer.In the short-term, the Corporation is especially banking on the Canadian market, where the economic outlook is brighter, to build its order backlog,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 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 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 YearAnnual Q4 Q3 Q2 Q1 12-month period ended 3-month periods ended 01.31.2011 01.31.2011 10.31.2010 07.31.2010 04.30.2010(In thousands of $)$ $ $ $ $Net Income          Previous GAAP3,743 1,037 630 878 1,198  Impact of IFRS standards, after income taxes:           - Exchange differences on translation of foreign operations1,623 639 308 (70) 746  - Share-based compensation51 4 (28) 31 44  - Amortization of property, plant and equipment and intangible assets(26) (6) (7) (6) (7) 1,648 637 273 (45) 783IFRS5,391 1,674 903 833 1,981           2011 FiscalYearAnnual  Q4 Q3 Q2 Q112-monthperiodended 3-monthperiods ended 01.31.2011 01.31.2011 10.31.2010 07.31.2010 04.30.2010(In thousands of $)$ $ $ $ $Gross Margin          Previous GAAP17,072 5,146 3,495 3,850 4,581  Impact of IFRS standards:          - Reclassification of amortization of property,plant and equipment and intangible assets(2,936) (735) (739) (782) (680) IFRS14,136 4,411 2,756 3,068 3,901Gross Margin (as a % of revenues)          Previous GAAP31% 34% 26% 30% 34% IFRS26% 29% 20% 24% 29%EBITDA1          Previous GAAP10,871 3,122 2,069 2,525 3,155  Impact of IFRS standards:          - Share-based compensation51 4 (28) 31 44 IFRS10,922 3,126 2,041 2,556 3,199Non-IFRS MeasuresEBITDA is not a performance measure recognized by IFRS standards, and is not likely to be comparable to similar measures presented by other issuers. Management, as well as investors, consider this to be useful information to assist them in assessing the Corporation's profitability and ability to generate funds to finance its operations.All amounts are in Canadian dollars, unless otherwise indicated.CONFERENCE CALL WITH INVESTORSTO DISCUSS ADF GROUP'S RESULTSFOR THE THIRD QUARTER ENDED OCTOBER 31, 2011Thursday December 8, 2011 at 2:00 p.m. (Montreal Time)To participate in the conference call, please dial 1-800-732-1073 a few minutes before the start of the call.For those unable to participate, a taped rebroadcast will be available from December 8, 2011 at 5:00 p.m.until midnight December 15, 2011, by dialing 1-877-289-8525; access code4491508#.The conference call (audio) will also be available at www.adfgroup.comMembers of the media are invited to listen in. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)  3 Months 9 MonthsPeriods Ended October 31,2011 2010 2011 2010(In thousands of CA$, except for per-share amounts)$ $ $ $        Revenues11,208 13,687 37,555 40,295Cost of goods sold9,480 10,931 29,598 30,570Gross margin1,728 2,756 7,957 9,725Selling and administrative expenses1,567 1,565 4,906 4,463Financial revenues(36) (79) (244) (261)Finance charges60 103 179 299Foreign exchange gain(330) (822) (1,068) (1,817) 1,261 767 3,773 2,684Income before income tax expense467 1,989 4,184 7,041Income tax expense64 1,086 1,926 3,324Net income for the period403 903 2,258 3,717Earnings per share        Basic and diluted per share0,01 0,03 0,07 0,11Average number of outstanding shares (in thousands)32,792 32,997 32,785 33,936Average number of outstanding diluted shares (in thousands)33,259 33,598 33,347 34,631        CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)         3 Months 9 MonthsPeriods Ended October 31,  2011 2010 2011 2010(In thousands of CA$)  $ $ $ $        Net income for the period403 903 2,258 3,717Other comprehensive income        Exchange differences on translation of foreign operations,net of hedging activities and related income taxes of $311,106 (310) (160) (983)Comprehensive income for the period1,509 593 2,098 2,734CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)           Capitalstock Contributedsurplus  Accumulatedothercomprehensiveincome Retainedincome Total(In thousands of CA$)$ $ $ $ $          Balance, February 1, 201075,436 3,659 144 13,348 92,587Net income for the period― ― ― 3,717 3,717Other comprehensive income for the period― ― (983) ― (983)Comprehensive income for the period― ― (983) 3,717 2,734Share-base compensation― 172 ― ― 172Options exercised260 (92) ― ― 168Subordinate voting share redemption(5,681) 1,945 ― ― (3,736)Balance, October 31, 201070,015 5,684 (839) 17,065 91,925                     Capitalstock Contributedsurplus  Accumulatedothercomprehensiveincome Retainedincome Total(In thousands of CA$)$ $ $ $ $          Balance, February 1, 201170,032 5,740 (1,477) 18,739 93,034Net income for the period― ― ― 2,258 2,258Other comprehensive income for the period― ― (160) ― (160)Comprehensive income for the period― ― (160) 2,258 2,098Share-base compensation― 92 ― ― 92Options exercised20 (7) ― ― 13Dividends― ― ― (656) (656)Balance, October 31, 201170,052 5,825 (1,637) 20,341 94,581CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)    ASATOctober 31, 2011 January 31, 2011(In thousands of CA$)$ $    ASSETS   Current assets    Cash and cash equivalents19,832 18,677 Short-term investments5,558 2,787 Accounts receivable21,885 22,215 Holdbacks on contracts4,946 167 Work in progress1,241 403 Inventories3,668 3,865 Prepaid expenses and other current assets1,313 985 Derivative financial instruments47 741 Total current assets58,490 49,840Non-current assets    Holdbacks on contracts― 3,562 Property, plant and equipment45,774 46,871 Intangible assets2,581 2,601 Other non-current assets2,866 2,852 Deferred income tax assets4,790 6,960Total assets114,501 112,686LIABILITIES   Current liabilities    Accounts payable and other current liabilities8,051 5,365 Income tax liabilities98 159 Deferred revenues4,582 4,994 Derivative financial instruments98 45 Current portion of long-term debt2,511 2,513 Total current liabilities15,340 13,076Non-current liabilities    Long-term debt4,294 6,151 Deferred income tax liabilities286 425Total liabilities19,920 19,652SHAREHOLDERS' EQUITY    Retained income20,341 18,739 Accumulated other comprehensive income(1,637) (1,477) 18,704 17,262 Capital stock70,052 70,032 Contributed surplus5,825 5,740 Total shareholders' equity94,581 93,034Total liabilities and shareholders' equity114,501 112,686     CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)         3 Months 9 MonthsPeriods Ended October 31,2011 2010 2011 2010(In thousands of CA$)$ $ $ $        OPERATING ACTIVITIES        Net income403 903 2,258 3,717 Non-cash items:         Amortization of property, plant and equipment758 764 2,312 2,283  Amortization of intangible assets90 86 268 251  Gain (loss) on disposal of property, plant and equipment10 ― 10 (52)  Unrealized gain (loss) on derivative financial instruments116 (127) 747 195  Non-cash exchange loss (gain)882 (57) 482 (415)  Share-based compensation21 59 92 172  Income tax expense64 1,086 1,926 3,324  Financial revenues(36) (79) (244) (261) Finance charges60 103 179 299 Net income adjusted for non-cash items2,368 2,738 8,030 9,513 Changes in non-cash working capital items 1(3,569) 4,092 62 (2,483) Income tax expense received (paid)― (202) (174) (393)Cash flows from (used in) operating activities(1,201) 6,628 7,918 6,637        INVESTING ACTIVITIES        Disposal (acquisition) of short-term investments22 (50) (2,906) 3,884 Acquisition of property, plant and equipment(495) (111) (1,133) (2,264) Acquisition of intangible assets(85) (60) (248) (260) Reduction in other non-current assets(16) (10) (15) (6) Interest received22 66 232 224Cash flows from (used in) investing activities(552) (165) (4,070) 1,578        FINANCING ACTIVITIES        Issuance of long-term debt― ― ― 4,370 Repayment of long-term debt(610) (625) (1,829) (1,692) Issuance of subordinate voting shares― 4 13 168 Redemption of subordinate voting shares― (950) ― (3,736) Dividends paid(328) ― (656) ― Interest paid on the interest rate swap(9) (24) (26) (24) Interest paid(49) (74) (151) (195)Cash flows from (used in) financing activities(996) (1,669) (2,649) (1,109)Impact of fluctuations in foreign exchange rate on cash378 (42) (44) (164)Net (decrease) increase in cash and cash equivalents(2,371) 4,752 1,155 6,942Cash and cash equivalents, beginning of period22,203 7,960 18,677 5,770Cash and cash equivalents, end of period19,832 12,712 19,832 12,7121. The following table sets out in detail the components of the "Changes in non-cash working capital items": 3 Months 9MonthsPeriods ended October 31,20112010 20112010(In thousands of CA$)$$ $$       Accounts receivable(7,822)1,373 (469)(9,725) Holdbacks on contracts(384)(889) (1,415)285 Income tax(130)90 (2)424 Work in progress195417 (881)1,092 Inventories110105 197(481) Prepaid expenses and other current assets(15)(655) (331)(1,130) Accounts payable and other current liabilities1,917(962) 3,184890 Deferred revenues2,5604,613 (221)6,162Changes in non-cash working capital items(3,569)4,092 62(2,483)      Financing and investing activities without impact on cash were as follows:       3 Months 9 MonthsPeriods ended October 31,20112010 20112010(In thousands of CA$)$$ $$      Disposal of property, plant and equipment in exchange for new ones39― 39139Capital-lease37― 37―Changes in non-cash working capital items76― 76139      For the purpose of the Consolidated Statements of Cash Flows, cash and cash equivalents are disclosed as follows:      As atOctober 31, 2011 January 31, 2011(In thousands of CA$)$ $    Cash19,832 15,918Cash equivalents - term deposits― 2,759 19,832 18,677Segmented 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. 3Months 9 MonthsPeriods ended October 31,2011 2010 2011 2010(In thousands of CA$)  $ $ $ $        Revenues        Canada2,360 4 2,835 567 United States8,848 13,683 34,720 39,728 11,208 13,687 37,555 40,295            As at  October 31, 2011 January 31, 2011(In thousands of CA$)$ $    Property, Plant and Equipment    Canada45,092 46,767 United States682 104 45,774 46,871All intangible assets and investment tax credits included under "Other non-current assets" at, January 31, 2011 and October 31, 2011, originated from Canada.During the nine-month period ended October 31, 2011, one client accounted for 89% of the Corporation's revenues (one client accounted for 89% of the revenues during the nine-month period ended October 31, 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