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Financial Release
Armor Holdings, Inc. Reports Fourth Quarter Results
- 4th Quarter Earnings Per Share of $1.02 -
- 4th Quarter Revenues Increase 77% to $801 Million -
- $821 Million of Funded Sales Orders Were Announced in 4th Quarter -
- $2.7 Billion Funded Backlog as of December 31, 2006 -
- Stewart & Stevenson Integration Continues to Proceed Smoothly and
Ahead of Plan -
- Reiterates FY2007 Earnings Per Share Expectation of $4.80- $5.20 -
JACKSONVILLE, Fla., Jan. 31 /PRNewswire-FirstCall/ -- Armor Holdings, Inc.
(NYSE: AH), a leading manufacturer and distributor of military vehicles,
vehicle armor systems and life safety and survivability systems serving
military, law enforcement, homeland security and commercial markets, announced
today financial results for the fourth quarter and fiscal year ended December
31, 2006.
Fourth Quarter Results
For the fourth quarter ended December 31, 2006, the Company reported
revenue of $801 million, an increase of 77%, compared to $453 million in the
fourth quarter last year. Net income for the fourth quarter was $38 million or
$1.02 per diluted share, versus $38 million or $1.04 per diluted share in the
fourth quarter last year. Earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the fourth quarter increased by 23% to $82 million
versus $67 million in the year-ago quarter.
Excluding the impact of the Stewart & Stevenson ("S&S") acquisition and a
number of other operating and non-operating items in both periods, pro forma
net income and pro forma diluted earnings per share were $38 million and $1.03
per share, respectively, for the three-months ended December 31, 2006,
compared to $39 million and $1.08 per share, respectively, for the prior year
period. Following this press release is a reconciliation of net income as
reported to pro forma net income, net income as reported to EBITDA and net
cash provided by operating activities to free cash flow for the three-months
ended December 31, 2006 and 2005.
Robert R. Schiller, President and Chief Operating Officer of Armor
Holdings, Inc., commented, "We are pleased to have finished fiscal 2006, a
truly transformational year, with a strong fourth quarter performance. We
believe our OEM vehicle assembly operations, vehicle armor and safety systems
business, individual soldier equipment, law-enforcement products and
commercial vehicle armoring businesses are all positioned to continue to show
growth and improvements in profitability as we move forward. In the year
ahead, we intend to make substantial investments in our capability for design,
development and production in each of our major product areas."
Mr. Schiller continued, "In addition to the ongoing strong demand for the
FMTV and Up-Armored HMMWVs, we are pleased with the many opportunities that
are emerging to potentially provide other types of vehicles and to support
other organizations with armor components. At the same time, for the long-
term, we continue to be excited by our team's role to develop the next
generation of light tactical vehicle, JLTV. We believe that our broad
capabilities for all manner of armoring and assembly operations position us
well to serve the diverse needs for light and medium tactical wheeled
vehicles."
Internal revenue growth/(decline), which includes increases or decreases
in acquired companies' current quarter revenues since the date of acquisition
versus the comparable prior year period, was 31%, including 0.5% impact for
foreign currency movements. Internal revenue growth/(decline) by segment,
including foreign currency movements, was 39% for the Aerospace & Defense
Group, 8% for the Products Group and (3%) for the Mobile Security Division
from the same period last year.
-- The Aerospace & Defense Group internal revenue growth was primarily
due to higher volumes of HMMWV related business partially offset by a
reduction in medium and heavy truck kit business.
-- The Products Group internal revenue growth was primarily due to a
large international shipment within our hard armor business and strong
sales of law enforcement duty gear.
-- The Mobile Security Division internal revenue decline was the result
of a lower level of demand from the Middle East.
The Company's gross profit margin in the fourth quarter was 17.6% versus
22.5% in the year-ago quarter. This reduction resulted primarily from the
acquisition of S&S, which operates at lower average gross margins.
-- The S&S acquisition also impacted the Aerospace & Defense Group's
gross margins, which declined to 14.8% versus 19.5% in the year-ago
quarter. However, excluding the impact of the S&S acquisition, the
Aerospace & Defense Group's gross margins would have been 18.8% for
the quarter.
-- The Products Group's gross margins increased to 38.7% versus 36.1% in
the year-ago quarter due to a variety of factors, including improved
manufacturing processes, better outsourcing and higher capacity
utilization.
-- The Mobile Security Division's gross margins decreased to 18.0% from
20.4% in the same period last year, primarily due to a lower-margin
mix of vehicles shipped in the quarter.
The Company's selling, general and administrative expenses as a percentage
of revenue decreased to 7.7% versus 7.8% in the year-ago quarter. This
improvement was primarily due to the inclusion of the S&S business, which
operates with lower average operating expenses as a percentage of revenue.
This was partially offset by additional investments in research and
development and in sales and marketing, as well as higher legal fees.
Cash flow provided by operating activities for the fourth quarter was $29
million versus $75 million in the year-ago quarter. Free cash flow, defined as
net cash provided by operating activities less purchases of property and
equipment, was $18 million versus $71 million in the same period last year.
The decrease in free cash flow was primarily due to an increase in working
capital necessary to support a 42% increase in fourth quarter revenues over
third quarter, and an increased investment in capital expenditures.
Year-to-Date Results
For the fiscal year ended December 31, 2006, the Company reported revenue
of $2,361 million, an increase of 44%, compared to $1,637 million in the
fiscal year ended December 31, 2005. Net income for the fiscal year ended
December 31, 2006, was $135 million, or $3.64 per diluted share, versus $133
million, or $3.70 per diluted share, for the fiscal year ended December 31,
2005. EBITDA for the fiscal year ended December 31, 2006, increased by 19% to
$280 million versus $236 million in the year-ago comparable period.
Excluding the impact of the S&S acquisition and a number of other
operating and non-operating items in both periods, pro forma net income and
pro forma diluted earnings per share were $148 million and $4.00 per share,
respectively, for the fiscal year ended December 31, 2006, compared to $144
million and $4.03 per share, respectively, for the comparable period in 2005.
Following this press release is a reconciliation of net income as reported to
pro forma net income, net income as reported to EBITDA and net cash provided
by operating activities to free cash flow for the fiscal year ended December
31, 2006 and 2005.
Internal revenue growth/(decline), which includes increases or decreases
in acquired companies' current year revenues since the date of acquisition
versus the comparable prior year period, was 15%, including 0.1% impact for
foreign currency movements. Internal revenue growth/(decline) by segment,
including foreign currency movements, was 22% for the Aerospace & Defense
Group, 5% for the Products Group and (24%) for the Mobile Security Division
from the same period last year.
-- The Aerospace & Defense Group internal revenue growth was primarily
due to higher volumes of HMMWV related business partially offset by a
reduction in medium and heavy truck kit business.
-- The Products Group internal revenue growth was primarily due to
stronger sales of domestic soft body armor and increased sales within
our law enforcement duty gear and automotive businesses.
-- The Mobile Security Division internal revenue decline was primarily
the result of continued issues with the availability of base units to
support customer orders and a lower level of demand from the Middle
East.
The Company's gross profit margin for the fiscal year ended December 31,
2006, decreased to 19.6% versus 23.7% in the year-ago level. The reduction in
gross margins resulted primarily from the acquisition of S&S, which operates
at lower average gross margins.
-- As a result of the S&S acquisition, the Aerospace & Defense Group's
gross margins decreased to 16.3% versus 20.7% in the year-ago level.
Excluding the impact of S&S, gross margins declined to 20.0% versus
the prior year period.
-- The Products Group's gross margins increased to 39.4% versus 37.0% in
the year-ago level due to select selling price increases, continued
expansion of lean manufacturing initiatives, increased utilization of
our lower-cost manufacturing plants, and improved outsourcing of
externally manufactured products.
-- The Mobile Security Division's gross margins decreased to 19.0% from
22.7% in the same period last year, primarily due to decreased
overhead absorption caused by reduced production through-put, lower
demand in the Middle East, and a less profitable sales mix.
The Company's selling, general and administrative expenses as a percentage
of revenue improved to 8.3% versus 8.5% in the year-ago period. This
improvement was primarily due to the inclusion of the S&S business, which
operates with lower average operating expenses as a percentage of revenue.
This was partially offset by additional investments in research and
development and in sales and marketing, as well as higher legal fees.
Cash flow provided by operating activities for the fiscal year ended
December 31, 2006, was $139 million versus $135 million in the year-ago
comparable period. Free cash flow, defined as net cash provided by operating
activities less purchases of property and equipment, was $104 million for the
fiscal year ended December 31, 2006, versus $119 million in the same period
last year.
Balance Sheet
As of December 31, 2006, the Company reported:
-- Cash, cash equivalents, short-term investment securities and equity-
based securities of $40 million compared to $500 million at December
31, 2005. Cash equivalents at December 31, 2005 excluded $29 million
that was invested in equity-based securities, which was reflected on
our balance sheet as a long-term asset in accordance with U.S. GAAP.
-- Total debt (short-term, current portion and long-term) was $767
million at December 31, 2006, compared to $497 million at December 31,
2005.
The aggregate of cash, cash equivalents and short-term investment
securities declined and total debt increased during the fiscal year ending
December 31, 2006, primarily to fund the acquisition of S&S.
Guidance
The Company anticipates fiscal 2007 financial performance as follows:
-- Revenues of $3.4 billion to $3.6 billion with fully diluted earnings
per share of $4.80 to $5.20.
-- 2007 integration costs of $0.04 to $0.06 per share.
-- 2007 internal research and development expenses of $30 million to $34
million.
-- 2007 free cash flow of approximately $100 million, which includes $100
million to $120 million of capital expenditures for expansion of our
medium vehicle capacity and a ramp up of our capability to implement
LTAS for the FMTV, expanded ballistic materials manufacturing
capability and additional capacity for production of the M1151/52 and
certain soldier equipage products.
-- First quarter 2007 diluted earnings per share of $1.07 to $1.12.
CONFERENCE CALL SCHEDULED FOR JANUARY 31, 2007, AT 5:00 PM (EASTERN)
There are two ways to participate in the conference call - via
teleconference or webcast. You may access the webcast by visiting the Armor
Holdings, Inc. website (http://www.armorholdings.com); listen by selecting
Investor Relations and clicking on the microphone.
Via telephone, the dial-in number is 1-877-260-8897 for domestic callers
or 1-612-332-1213 for international callers. There is no passcode required
for this call. There will be a question/answer session at the end of the
conference call, at which point only securities analysts will be able to ask
questions. However, all callers will be able to listen to the questions and
answers during this period.
An archived copy of the call will be available via replay at 1-800-475-
6701 - access code 860954 for domestic callers, or 1-320-365-3844 - access
code 860954 for international callers. The teleconference replay will be
available beginning at 12:00 a.m. on Thursday, February 1st, and ending at
11:59 p.m. on Wednesday, February 7th.
Use of Non-GAAP Measures
The Company reports its financial results in accordance with U.S.
generally accepted accounting principles (GAAP). The Company also believes
that presentation of certain non-GAAP measures, i.e., pro forma net income,
pro forma earnings per share, EBITDA and free cash flow, provides useful
information for the understanding of its ongoing operations and enables
investors to focus on period-over-period operating performance, and thereby
enhances the user's overall understanding of the Company's current financial
performance relative to past performance and provides, to the nearest GAAP
measures, a better baseline for modeling future earnings expectations. Non-
GAAP measures are reconciled in the financial tables accompanying this news
release. The Company cautions that non-GAAP measures should be considered in
addition to, but not as a substitute for, the Company's reported GAAP results.
About Armor Holdings
Armor Holdings, Inc. (NYSE: AH) is a diversified manufacturer of branded
products for the military, law enforcement, and personnel safety markets.
Additional information can be found at http://www.armorholdings.com.
Forward-looking Statements
This press release includes "forward-looking statements'' within the
meaning of the Private Securities Litigation Reform Act of 1995. All of these
forward-looking statements are based on estimates and assumptions made by our
management that, although believed by the Company to be reasonable, are
inherently uncertain. Forward-looking statements involve risks and
uncertainties, including, but not limited to, economic, competitive,
governmental and technological factors outside of its control, that may cause
its business, strategy or actual results to differ materially from the
forward-looking statements. The Company may use words such as "anticipates,"
"believes," "plans," "expects," "intends," "future," and similar expressions
to identify forward-looking statements. These risks and uncertainties are
described in the "Risk Factors" section of the Company's filings with the
Securities and Exchange Commission, including the Company's Registration
Statement on Form S-3, its latest annual report on Form 10-K and amendments
thereto and most recently filed Forms 8-K and 10-Q.
All references to earnings per share amounts in this press release are on
a fully diluted basis.
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31, December 31, December 31,
2006 2005 2006 2005
REVENUES:
Aerospace & Defense $678,635 $339,232 $1,930,359 $1,213,113
Products 90,207 80,699 324,214 284,363
Mobile Security 31,871 32,728 106,311 139,454
Total revenues 800,713 452,659 2,360,884 1,636,930
COSTS AND EXPENSES:
Cost of revenues 659,506 350,863 1,897,682 1,248,596
Selling, general and
administrative
expenses 61,670 35,231 196,659 139,304
Cost of vest exchange
program 650 500 3,600 19,900
Amortization 8,061 2,410 22,484 8,627
Integration 1,251 1,362 2,508 3,669
Other charges - 1,200 (1,530) 1,200
OPERATING INCOME 69,575 61,093 239,481 215,634
Interest expense, net 10,471 1,143 30,155 6,281
Other income, net (1,786) (685) (5,012) (4,025)
INCOME BEFORE PROVISION
FOR INCOME TAXES 60,890 60,635 214,338 213,378
PROVISION FOR
INCOME TAXES 23,077 23,052 79,776 80,868
NET INCOME $37,813 $ 37,583 $134,562 $132,510
BASIC EARNINGS
PER SHARE $1.06 $1.07 $3.80 $3.83
DILUTED EARNINGS
PER SHARE $1.02 $1.04 $3.64 $3.70
WEIGHTED AVERAGE SHARES -
DILUTED 36,983 36,243 37,018 35,822
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Net Income as Reported to EBITDA
(Unaudited)
(in thousands) Three Months Ended Twelve Months Ended
December 31, December 31, December 31, December 31,
2006 2005 2006 2005
Net income $37,813 $37,583 $134,562 $132,510
Plus: Provision for
income taxes 23,077 23,052 79,776 80,868
Less: Other income, net (1,786) (685) (5,012) (4,025)
Plus: Interest
expense, net 10,471 1,143 30,155 6,281
Operating income 69,575 61,093 239,481 215,634
Plus: Amortization
(Note A) 8,061 2,410 22,484 8,627
Plus: Depreciation 4,595 3,420 17,746 11,779
EBITDA (Note B) $82,231 $ 66,923 $279,711 $236,040
Note A: Amortization for acquired intangibles with finite useful lives.
Note B: EBITDA, which represents the results from operations before
interest, other (income) expense, income taxes, and depreciation
and amortization, is presented in the earnings release because
our credit facility and the trust indentures under which our
$150 million 8.25% Senior Subordinated Notes maturing in 2013 and
our $345 million 2% Senior Subordinated Convertible Notes
maturing in 2024, unless earlier converted, redeemed or
repurchased, are issued, contain financial covenants that,
generally, are based, in part, on EBITDA. Additionally,
management believes that EBITDA, as defined above, is a common
alternative to measure value and performance. We cannot assure
you that this measure is comparable to similarly titled measures
presented by other companies.
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Net Cash Provided by Operating Activities to
Free Cash Flow
(Unaudited)
(in thousands) Three Months Ended Twelve Months Ended
December 31, December 31, December 31, December 31,
2006 2005 2006 2005
Net cash provided by
operating activities $28,668 $ 75,398 $138,531 $134,875
Less: Purchase of
property and equipment (10,872) (4,538) (34,049) (15,593)
Free cash flow (Note C) $17,796 $ 70,860 $104,482 $119,282
Note C: Free cash flow, which represents net cash provided by operating
activities less purchase of property and equipment, is presented
in the earnings release because management believes that free
cash flow is a common alternative to measure liquidity.
Management considers the purchase of property and equipment to be
a normal and recurring expenditure. By deducting the purchase of
property and equipment from net cash provided by operations,
management believes this measure provides a more thorough
measurement of operating cash flow. We cannot assure you that
this measure is comparable to similarly titled measures presented
by other companies.
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Net Income as Reported to Pro Forma Net Income
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
December 31, Diluted December 31, Diluted
2006 EPS 2005 EPS
Net income $37,813 $1.02 $37,583 $1.04
S&S Impact (net of tax);
Operating (income) loss
before amortization and
interest (11,147) - -
Additional amortization 3,359 - -
Related interest
expense, net 3,658 - -
Foregone interest income
on cash used in S&S
acquisition 3,649 - -
Subtotal S&S Impact (481) (0.01) - -
Integration (net of tax); 776 0.02 846 0.02
Write-off of loan costs on
convertible debentures
(net of tax) - - - -
Cost of vest exchange,
(net of tax) 404 0.01 310 0.01
Legal Settlement
(net of tax); (932) (0.03) - -
Write-off of high yield
loan fees (net of tax); 675 0.02
Non operating asset write-off - - - -
Gain on sale of land - - - -
Export fine accrual/(reversal) - - 1,200 0.03
Put options gains - - (857) (0.02)
Pro forma net
income (Note D) $38,255 $1.03 $39,082 $1.08
Weighted average
diluted shares 36,983 36,243
Twelve Months Ended
December 31, Diluted December 31, Diluted
2006 EPS 2005 EPS
Net income $134,562 $3.64 $132,510 $3.70
S&S Impact (net of tax);
Operating (income) loss
before amortization and
interest (14,071) - -
Additional amortization 7,990 - -
Related interest
expense, net 8,624 - -
Foregone interest income
on cash used in S&S
acquisition 8,659 - -
Subtotal S&S Impact 11,202 0.30 - -
Integration (net of tax); 1,557 0.04 2,280 0.06
Write-off of loan costs
on convertible debentures
(net of tax) 3,109 0.08 - -
Cost of vest exchange,
(net of tax) 2,236 0.07 12,367 0.35
Legal Settlement
(net of tax); (932) (0.03) - -
Write-off of high yield
lloan fees (net of tax); 675 0.02
Non operating asset write-off - - 1,890 0.05
Gain on sale of land (2,206) (0.06) - -
Export fine accrual/
(reversal) (1,530) (0.04) 1,200 0.03
Put options gains (710) (0.02) (5,905) (0.16)
Pro forma net
income (Note D) $147,963 $4.00 $144,342 $4.03
Weighted average
diluted shares 37,018 35,822
Note D: The Company believes that presentation of pro forma net income
provides useful information for the understanding of
its ongoing operations and enables investors to focus on
period-over-period operating performance, and thereby enhances
the user's overall understanding of the Company's current
financial performance relative to past performance and provides
a better baseline for modeling future earnings expectations.
Gross Profit by Business Segment
(Unaudited)
(in thousands) Three Months Ended Twelve Months Ended
December 31, December 31, December 31, December 31,
2006 2005 2006 2005
Aerospace & Defense $100,574 $ 66,030 $315,187 $251,482
Products 34,885 29,101 127,774 105,210
Mobile Security 5,748 6,665 20,241 31,642
Total gross profit $ 141,207 $101,796 $463,202 $388,334
Gross Profit Percentage by Business Segment
(Unaudited)
(in thousands) Three Months Ended Twelve Months Ended
December 31, December 31, December 31, December 31,
2006 2005 2006 2005
Aerospace & Defense 14.8% 19.5% 16.3% 20.7%
Products 38.7% 36.1% 39.4% 37.0%
Mobile Security 18.0% 20.4% 19.0% 22.7%
Total gross
profit percent 17.6% 22.5% 19.6% 23.7%
Operating Income/(Loss) by Business Segment
(Unaudited)
(in thousands) Three Months Ended Twelve Months Ended
December 31, December 31, December 31, December 31,
2006 2005 2006 2005
Aerospace & Defense $ 65,452 $53,651 $221,718 $208,338
Products 13,619 11,260 48,355 22,861
Mobile Security 3,824 592 5,518 14,066
Corporate (13,320) (4,410) (36,110) (29,631)
Total operating
income $ 69,575 $61,093 $239,481 $215,634
Depreciation/Amortization by Business Segment
(Unaudited)
(in thousands) Three Months Ended Twelve Months Ended
December 31, December 31, December 31, December 31,
2006 2005 2006 2005
Aerospace & Defense $9,824 $3,061 $29,389 $10,402
Products 1,889 1,824 7,242 6,399
Mobile Security 732 728 2,740 2,749
Corporate 211 217 859 856
Total depreciation/
amortization $12,656 $5,830 $40,230 $20,406
Capital Expenditures by Business Segment
(Unaudited)
(in thousands) Three Months Ended Twelve Months Ended
December 31, December 31, December 31, December 31,
2006 2005 2006 2005
Aerospace & Defense $9,312 $2,130 $26,792 $6,878
Products 1,227 1,157 3,677 4,118
Mobile Security 213 898 2,090 2,290
Corporate 120 354 1,490 2,307
Total capital
expenditures $10,872 $4,539 $34,049 $15,593
Net Working Capital by Business Segment
(Unaudited)
Days Sales Outstanding
December 31, 2006 December 31, 2005
Aerospace & Defense 37 42
Products 52 49
Mobile Security 41 42
Total (Note E) 39 43
Note E: Days Sales Outstanding are calculated as follows:
Net Receivables at period end
Current period net sales / 91.5 days
Inventory Turns
December 31, 2006 December 31, 2005
Aerospace & Defense 10.4 8.7
Products 3.6 3.5
Mobile Security 3.5 3.8
Total (Note F) 8.4 6.7
Note F: Inventory Turns are calculated as follows:
Current quarter cost of sales *4
Net Inventory at period end
Full Year Guidance
2007 Revenue and Gross Profit Estimates by Business Segment
(Unaudited)
(in thousands)
Revenue Gross Profit %
Aerospace & Defense $2,900,000 - $3,000,000 14% - 16%
Products $350,000 - $400,000 39% - 41%
Mobile Security $125,000 - $150,000 20% - 22%
SOURCE Armor Holdings, Inc.
CONTACT: Company Contact, Robert R. Schiller, President & Chief Operating
Officer of Armor Holdings, Inc., +1-904-741-5400; or Media Contact, Michael
Fox, President, Corporate Communications Group, +1-203-682-8218, or
mfox@icrinc.com, or Investor Relations Contact, James R. Palczynski,
Principal, +1-203-682-8229, or jp@icrinc.com, both of Integrated Corporate
Relations, Inc.
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