- Earnings Per Share of $1.31 Before Long Term Performance Based
Compensation Charge
- 1st Quarter Revenues Increase 100% to $889 Million
- $2.7 Billion Funded Backlog as of March 31, 2007
JACKSONVILLE, Fla., April 19 /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 first quarter ended March 31, 2007.
First Quarter Results
For the first quarter ended March 31, 2007, the Company reported revenue
of $889 million, an increase of 100%, compared to $445 million in the first
quarter last year. Net income for the first quarter was $36 million or $0.94
per diluted share, versus $41 million or $1.11 per diluted share in the first
quarter last year. Earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the first quarter increased by 17% to $83 million
versus $71 million in the year-ago quarter.
Current quarter results include a long term performance based compensation
charge related to a long term performance based award approved by our Board of
Directors in the first half of 2005. This award was established exclusively
for Messrs. Warren B. Kanders and Robert R. Schiller, the Company's CEO and
President, respectively, to align their three-year compensation with Company
performance and shareholder interests. As set forth in our shareholder
approved 2005 Stock Incentive Plan, and as more fully described in the
Company's 2005 and 2006 Proxy Statements, this award becomes payable in the
event that the Company achieves within a three year period, both a rolling
four-quarter EBITDA of $305 million and a per share closing stock price of
$70.00 or more for five consecutive trading days. When established by the
Board of Directors, these targets represented compounded annual growth rates
over the three-year period of 24% and 14% in EBITDA and Common Stock price,
respectively. Given our record first quarter results, the EBITDA target was
achieved and the Company now believes that it is probable that the $70.00 per
share stock price condition also will be achieved. Net income before long term
performance based compensation charge and fully diluted earnings per share
before long term performance based compensation charge were $50 million and
$1.31 per share, respectively, for the three months ended March 31, 2007,
compared to $41 million and $1.11 per share, respectively, for the prior year
period.
Following this press release is a reconciliation of net income as reported
to EBITDA and net cash (used in)/provided by operating activities to free cash
flow for the three months ended March 31, 2007 and 2006.
"Our business continues to expand, as the first quarter financial results
indicate," said Robert R. Schiller, President & COO. "Better than anticipated
sales and earnings were driven primarily by outperformance from our ground
vehicle armoring operations, which benefited from the ongoing demand for armor
components, supplemental equipment and spare parts for the military tactical
truck fleet. Additionally, our OEM truck business continued to achieve
targeted rates of production, and we received significant awards in each
product category of our soldier equipment business."
Internal revenue growth, which include increases or decreases in acquired
companies' current quarter revenues since the date of acquisition versus the
comparable prior year period, was 54%. Internal revenue growth by segment was
68% for the Aerospace & Defense Group, 2% for the Products Group and 12% for
the Mobile Security Division from the same period last year.
-- The Aerospace & Defense Group's internal revenue growth was primarily
due to higher volumes in ground vehicle armoring operations, where we
experienced strong demand for basic armor components for the M1151 and
supplemental armor components, such as motorized gunner protection
kits and enhanced armored doors.
-- The Products Group's internal revenue growth was primarily due to
increased sales of law enforcement duty gear, partially offset by a
decrease in our international markets.
-- The Mobile Security Division's revenue increase was driven by
increased availability of key base unit chassis, such as the Chevrolet
Suburban.
The Company's gross profit margin in the first quarter was 18.5% versus
23.5% in the year-ago quarter. This reduction resulted primarily from the OEM
truck business that was acquired in May 2006, which operates at lower average
gross margins.
-- The acquired OEM truck business reduced the Aerospace & Defense
Group's gross margin, which declined to 16.4% versus 20.1% in the
year-ago quarter. However, excluding the impact of this acquisition,
the Aerospace & Defense Group's gross margin would have been 21.1% for
the quarter.
-- The Products Group's gross margin increased to 39.9% versus 39.0% in
the year-ago quarter, primarily due to improved manufacturing
processes, expanded outsourcing and higher capacity utilization.
-- The Mobile Security Division's gross margin decreased to 16.2% from
22.8% 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 ("SG&A") as a
percentage of revenue increased to 9.4% versus 8.1% in the year-ago quarter.
This increase was primarily due to the long term performance based
compensation charge. Excluding the impact of the long term performance based
compensation charge, SG&A as a percentage of revenue was 6.9%.
Cash flow used in operating activities for the first quarter was ($108)
million versus $28 million in cash flow provided by operating activities in
the year-ago quarter. Free cash flow, defined as net cash (used in)/provided
by operating activities less capital expenditures, was $(118) million versus
$19 million in the same period last year. The decrease in free cash flow was
primarily due to an unanticipated change in the government's advance payments
process under the FMTV contract, temporarily reducing the quantity of trucks
eligible for advance payments. Normal advance payments have resumed and we
currently expect to receive the majority of the deferred progress payments
during the balance of the current year.
Balance Sheet
As of March 31, 2007, the Company reported:
-- Cash, cash equivalents, short-term investment securities and equity-
based securities of $45 million compared to $40 million at December
31, 2006.
-- Total debt (short-term, current portion and long-term) was $896
million at March 31, 2007, compared to $767 million at December 31,
2006.
The aggregate of cash, cash equivalents and short-term investment
securities increased slightly and total debt increased during the three months
ended March 31, 2007, primarily due to a change in the government's advance
payments process under the FMTV contract as outlined above.
Guidance
The Company reiterates anticipated fiscal 2007 financial performance as
follows:
-- Revenues of $3.4 billion to $3.6 billion; and
-- 2007 free cash flow of approximately $100 million, which excludes
approximately $20 million from the long term performance based
compensation award and 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.
The Company is revising fiscal 2007 earnings per share guidance, to
include the impact of the long term performance based compensation charge
previously discussed, as follows:
-- Fully diluted earnings per share of $4.29 to $4.69, which reflects an
estimated long term performance based compensation charge of ($0.51)
for the full year. Excluding this charge, the Company's full year
guidance would have been unchanged from the previously provided range
of $4.80 to $5.20; and
-- Second quarter 2007 diluted earnings per share of $0.73 to $0.78,
which includes an estimated ($0.15) after tax charge for the long term
compensation award as previously explained. Excluding this charge, the
Company's second quarter guidance would have been $0.88 to $0.93.
The second quarter earnings guidance for both fully diluted earnings per
share and free cash flow reflect the assumption that market conditions will
cause the Company's closing share price to close at or above $70.00 per share
for five consecutive trading days. The Company has not yet finally determined
its ultimate method of settlement.
CONFERENCE CALL SCHEDULED FOR APRIL 19, 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 1-888-428-4479 for domestic callers
or 1-612-332-0637 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 870715 for domestic callers, or 1-320-365-3844 -- access
code 870715 for international callers. The teleconference replay will be
available beginning at 12:00 a.m. on Friday, April 20th, and ending at 11:59
p.m. on Thursday, April 26th.
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., 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 Company's filings with the Securities and Exchange
Commission, including the Company's Registration Statement on Form S-3, its
2006 Form 10-K and most recently filed Forms 8-K.
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
March 31, 2007 March 31, 2006
REVENUES:
Aerospace & Defense $783,008 $345,103
Products 79,795 76,836
Mobile Security 26,386 23,501
Total revenues 889,189 445,440
COSTS AND EXPENSES:
Cost of revenues 724,363 340,810
Cost of exchange program/warranty revision 2,450 -
Selling, general and administrative expenses
(Note A) 83,643 36,142
Amortization 8,093 2,259
Integration 1,399 470
OPERATING INCOME 69,241 65,759
Interest expense, net 11,561 259
Other income, net (354) (807)
INCOME BEFORE PROVISION
FOR INCOME TAXES 58,034 66,307
PROVISION FOR INCOME TAXES 21,995 24,898
NET INCOME $36,039 $41,409
BASIC EARNINGS PER SHARE $1.01 $1.17
DILUTED EARNINGS PER SHARE $0.94 $1.11
WEIGHTED AVERAGE SHARES - BASIC 35,548 35,342
WEIGHTED AVERAGE SHARES - DILUTED 38,303 37,205
Note A: Includes long term performance based compensation charge of
$22,750.
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Net Income as Reported to EBITDA
(Unaudited)
(in thousands) Three Months Ended
March 31, 2007 March 31, 2006
Net income $36,039 $41,409
Plus: Provision for income taxes 21,995 24,898
Less: Other income, net (354) (807)
Plus: Interest expense, net 11,561 259
Operating income 69,241 65,759
Plus: Amortization (Note B) 8,093 2,259
Plus: Depreciation 5,754 2,884
EBITDA (Note C) $83,088 $70,902
Note B: Amortization of acquired intangibles with finite useful lives.
Note C: 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
March 31, 2007 March 31, 2006
Net cash (used in)/provided by operating
activities $(107,515) $28,294
Less: Capital Expenditures (10,174) (9,199)
Free cash flow (Note D) $(117,689) $19,095
Note D: Free cash flow, which represents net cash provided by operating
activities less capital expenditures, 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 Net Income Before Long Term
Performance Based Compensation (Unaudited)
(In thousands, except per share amounts)
(in thousands) Three Months Ended
Diluted Diluted
March 31, 2007 EPS March 31, 2006 EPS
Net income $36,039 $0.94 $41,409 $1.11
Performance incentives,
(net of tax) 14,128 0.37 - -
Net Income Before Perf.
Based Charge (Note E) $50,167 $1.31 $41,409 $1.11
Weighted average diluted
shares 38,303 37,205
Note E: The Company believes that presentation of net income before
long term performance based compensation 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.
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
Gross Profit by Business Segment
(Unaudited)
(in thousands) Three Months Ended
March 31, 2007 March 31, 2006
Aerospace & Defense $128,735 $69,328
Products 31,804 29,943
Mobile Security 4,287 5,359
Total gross profit $164,826 $104,630
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
Gross Profit Percentage by Business Segment
(Unaudited)
Three Months Ended
March 31, 2007 March 31, 2006
Aerospace & Defense 16.4% 20.1%
Products 39.9% 39.0%
Mobile Security 16.2% 22.8%
Total gross profit percent 18.5% 23.5%
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
Operating Income/(Loss) by Business Segment
(Unaudited)
(in thousands) Three Months Ended
March 31, 2007 March 31, 2006
Aerospace & Defense $95,380 $58,588
Products (Note F) 7,885 12,152
Mobile Security 429 889
Corporate (Note G) (34,453) (5,870)
Total operating income $69,241 $65,759
Note F: Operating Income for Products includes ($2) million for the
Zylon Vest Exchange program.
Note G: Includes ($23) million long term performance based compensation
charge.
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
Depreciation/Amortization by Business Segment
(Unaudited)
(in thousands) Three Months Ended
March 31, 2007 March 31, 2006
Aerospace & Defense $11,163 $2,688
Products 1,812 1,630
Mobile Security 680 611
Corporate 192 214
Total depreciation/amortization $13,847 $5,143
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
Capital Expenditures by Business Segment
(Unaudited)
(in thousands) Three Months Ended
March 31, 2007 March 31, 2006
Aerospace & Defense $8,865 $6,566
Products 1,036 585
Mobile Security 172 1,195
Corporate 101 853
Total capital expenditures $10,174 $9,199
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
Working Capital Analysis by Business Segment
(Unaudited)
Days Sales Outstanding
March 31, 2007 December 31, 2006
Aerospace & Defense 39 37
Products 53 52
Mobile Security 35 41
Total (Note H) 40 39
Note H: Days Sales Outstanding are calculated as follows:
Net Receivables at period end
Current period net sales / 91.5 days
Inventory Turns
March 31, 2007 December 31, 2006
Aerospace & Defense 10.6 10.4
Products 3.2 3.6
Mobile Security 2.4 3.5
Total (Note I) 8.5 8.4
Note I: Inventory Turns are calculated as follows:
Current quarter cost of sales *4
Net Inventory at period end
SOURCE Armor Holdings, Inc.
CONTACT: Company: Robert R. Schiller, President & Chief Operating
Officer of Armor Holdings, Inc., +1-904-741-5400; Media: Michael Fox,
President, Corporate Communications Group, +1-203-682-8218, mfox@icrinc.com,
or Investor Relations: James R. Palczynski, Principal, +1-203-682-8229,
jp@icrinc.com, both of Integrated Corporate Relations, Inc.
