Exhibit 99.1
HALIFAX ANNOUNCES THIRD QUARTER
FINANCIAL RESULTS
Company Reports Revenue Increase of 6% and Positive Gross Margin
ALEXANDRIA, VA - February 14, 2006 - Halifax Corporation (AMEX:HX)
today announced its financial results for the quarter ended December
31, 2005.
Revenues for the third quarter of fiscal 2006 were $13.4 million versus
$12.6 million for the same period in fiscal 2005, an increase of 6%,
primarily as a result of new enterprise maintenance contract business
and growth within its existing contract base. The Company reported a
gross margin of $314,000 in the 2006 third quarter versus a loss of
$372,000 in the same quarter a year ago. Included in the cost of
services for the 2006 third quarter was a significant charge related to
the potential cessation of one of the Company's large nationwide
enterprise maintenance contracts.
The operating loss for the third quarter of 2006 was $4.3 million
versus an operating loss of $1.8 million for the comparable quarter of
last year. The operating loss for this year's third quarter included
non-recurring charges of $3.2 million for goodwill impairment and
$144,000 for severance costs. The writedown of goodwill had no impact
on cash flow or tangible net worth. Halifax also recognized a gain on
the sale of discontinued operations for $5.4 million due to the sale of
the Company's Secure Network Services business on June 30, 2005.
The net income for the third quarter of 2006 was $1.4 million, or $0.44
per share, compared to a net loss of $1.0 million, or $0.33 per share,
for the comparable period in fiscal 2005.
According to Charles McNew, president and chief executive officer, "We
are encouraged by our continued top line growth in a difficult
marketplace, and the outlook for new enterprise maintenance business is
very promising. We have a strong balance sheet and an excellent
working capital position. We're continuing to evaluate various
strategic alternatives to further position our Company for near- and
longer-term growth opportunities."
For the nine months ended December 31, 2005, revenues were $42.0
million, up 22% compared to $34.5 million for the same period last
year. The operating loss for the nine months ended December 31, 2005,
was $4.6 million versus an operating loss of $2.7 million for the same
period last year. The net income for the nine months ended December
31, 2005, was $1.3 million, or $0.41 per share, versus a net loss of
$900,000, or $0.30 per share, for the nine months ended December 31,
2004.
McNew noted, "We are working diligently to resolve the issues
associated with the losses on one large nationwide enterprise
maintenance account, and we will not allow the ongoing losses related
to this contract to continue. We expect to have final resolution this
quarter, and we believe we can return our Company to sustained
profitability."
The Company will host a conference call for investors at 9 a.m. EST on
Wednesday, February 15, 2006, to review the financial and operational
results for the quarter. The conference call phone number is 866-503-
1968 for U.S. callers and 212-341-7080 for international callers. The
conference call replay will be available from 11 a.m. EST on Wednesday,
February 15, 2006, to 11 a.m. EST on Thursday, February 16, 2006. The
replay number is 800-633-8284 for U.S. callers and 402-977-9140 for
international callers. The reservation number is 21283722.
Founded in 1967, Halifax Corporation is an enterprise maintenance
solutions company providing a wide range of technology services to
commercial and government customers throughout the United States. The
Company's principal products are high availability hardware maintenance
services, technology deployment and integration services. More
information on Halifax can be found at www.hxcorp.com.
Certain statements made by the Company which are not historical facts
may be considered forward-looking statements, including, without
limitation, statements as to trends, management's beliefs, views,
expectations and opinions, which are based upon a number of assumptions
concerning future conditions that ultimately may prove to be
inaccurate. Such forward-looking statements are subject to risks and
uncertainties and may be affected by various factors described in the
Risk Factors Section in the Company's Annual Report on Form 10-K that
may cause actual results to differ materially from those in the forward-
looking statements. For further information that could affect the
Company's financial statements, please refer to the Company's reports
filed with the Securities and Exchange Commission.
Halifax Corporation
Summary Financial Data
(in 000's except per share Three Months Ended Nine Months Ended
amounts) December 31, December 31,
Statements of Operations 2005 2004 2005 2004
Revenues $ 13,390 $ 12,645 $ 42,027 $ 34,511
Cost of services 13,076 13,017 39,437 32,956
Gross Margin 314 (372) 2,590 1,555
Selling, Marketing, General 1,259 1,384 3,848 4,041
& Administrative
Abandonment of facility - - - 179
Severance costs 144 - 144 -
Goodwill impairment 3,211 - 3,211 -
Operating (loss) income (4,300) (1,756) (4,613) (2,665)
Other income - - 5 3
Interest expense (135) (163) (458) (462)
(loss) before income taxes (4,435) (1,919) (5,066) (3,124)
Income tax (benefit) (441) (668) (665) (1,107)
Loss from continuing (3,994) (1,251) (4,401) (2,017)
operations
Income from continuing - 216 310 1,117
operations
Gain on sale of discontinued 5,393 - 5,393 -
operations
Net income (loss) $ 1,399 $ (1,035) $ 1,302 $ (900)
Income (loss) earnings per
common share - basic:
Continuing operations $ (1.26) $ (.40) $ (1.39) $ (.67)
Discontinued operations - .07 .10 .37
Gain on sale of 1.70 - 1.70 -
discontinued operations
$ .44 $ (.33) $ .41 $ (.30)
Income (loss) earnings per
common share - diluted:
Continuing operations $ (1.26) $ (.40) $ (1.39) $ (.67)
Discontinued operations - .07 .10 .37
Gain on sale of 1.70 - 1.70 -
discontinued operations
$ .44 $ (.33) $ .41 $ (.30)
Weighted average number of
common shares outstanding:
Basic 3,172 3,166 3,172 3,002
Diluted 3,183 3,238 3,188 3,052
Balance Sheets December 31, March 31, 2005
2005
Current assets
Cash $ 555 $ 1,264
Restricted cash 2,024 -
Trade accounts receivable, net 11,147 12,468
Inventory, net 6,323 5,600
Prepaid expense and other 500 487
current assets
Deferred tax asset 1,083 3,814
Total current assets 21,632 23,633
Property and equipment, net 1,220 1,608
Goodwill and intangibles, net 4,306 7,438
Other assets 133 141
Deferred tax asset 750 930
Total assets $ 28,041 $ 33,750
Liabilities and Stockholders'
Equity
Current liabilities
Accounts payable and accrued $ 7,742 $ 10,731
expenses
Deferred maintenance revenue 3,529 3,776
Notes payable 168 662
Income tax payable 609 -
Current portion of long-term 4 17
debt
Total current liabilities 12,052 15,186
Long-Term bank debt 7,028 9,463
Other long-term debt - 3
Subordinated debt-affiliate 1,000 2,400
Deferred income 233 278
Total liabilities 20,313 27,330
Stockholders' equity 7,728 6,420
Total liabilities and $ 28,041 $ 33,750
stockholders' equity