Exhibit 99.1
HALIFAX ANNOUNCES FOURTH QUARTER
AND FISCAL 2006 FINANCIAL RESULTS
Company Reports Gross Margin Increase for the Quarter and Year;
Annual Revenues Up 13%
ALEXANDRIA, VA - June 22, 2006 - Halifax Corporation (AMEX:HX) today
announced its financial results for the fourth quarter and fiscal year
ended March 31, 2006.
For the year, revenues were $54.9 million, up 13% compared to prior
year revenues of $48.4 million. The revenue increase was the result of
growth in both high-availability nationwide maintenance services and
site-based managed services.
Halifax reported a gross margin of $3.7 million, or 7% of revenues, for
the 2006 fiscal year versus $1.9 million, or 4% of revenues, for the
previous year. As previously reported, fiscal year 2006 included costs
related to the cessation of a large nationwide enterprise maintenance
contract that had generated significant losses for the Company over the
last two years. This contract was concluded in April 2006.
The operating loss for fiscal 2006 was $4.7 million versus an operating
loss of $3.8 million for the prior year. The operating loss for fiscal
year 2006 included non-recurring goodwill charges of $3.2 million and
certain contract cessation costs. The writedown of goodwill had no
impact on cash flow or tangible net worth. Halifax also recognized a
gain of $5.7 million from the sale of its Secure Network Services
business on June 30, 2005.
Net income for fiscal year 2006 was $1.5 million, or $0.48 per diluted
share, compared to a net loss of $1.4 million, or $0.46 per share, a
year ago.
According to Charles McNew, president and chief executive officer, "We
are extremely pleased with our top line growth and our gross margin
improvement. Our current backlog stands at a healthy $80 million and
our pipeline for prospective new business is strong. We expect to
return to sustainable profitability for the quarter ended June 30,
2006, and hope to have some exciting new revenue announcements in the
near future. It's also worth noting that our balance sheet continues
to strengthen as working capital improves and debt is reduced."
For the quarter ended March 31, 2006, revenues were $12.9 million
compared to $13.9 million for the same period last year. The revenue
drop was attributable to the expiration of several contracts. The
gross margin was $1.1 million, or 8.6%, for the 2006 fourth quarter
versus $339,000, or 2.4%, for the comparable quarter a year ago. The
operating loss for the quarter ended March 31, 2006, was $74,000 versus
an operating loss of $1.1 million for the same period last year. Net
income for the three months ended March 31, 2006, was $233,000, or
$0.07 per diluted share, versus a net loss of $511,000, or $0.16 per
share, for the same period in 2005. The net income improvement for the
fiscal 2006 fourth quarter was due to the strengthening margin and
certain tax benefits recorded during the period.
McNew noted, "Our confidence in the long-term prospects for Halifax
remains high, despite the challenging marketplace. As we approach our
return to profitability, we're looking forward to building our stature
in the enterprise maintenance solutions and managed services
marketplace. In addition, we're continuing to evaluate various
strategic alternatives to further position our Company for near and
longer term growth opportunities."
The Company will host a conference call for investors at 11:00 a.m. EDT
on Thursday, June 22, 2006, to review the financial and operational
results for the quarter. The conference call phone number is 800-847-
8127 for U.S. callers and 212-676-5269 for international callers. The
conference call replay will be available from 11 a.m. EDT on Thursday,
June 22, 2006, to 11 a.m. EDT on Friday, June 23, 2006. The replay
number is 800-633-8284 for U.S. callers and 402-977-9140 for
international callers. The reservation number is 21296626.
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 Thousands, except per share amounts)
Statement of operations For the three months For the years ended
ended March 31, March 31,
2006 2005 2006 2005
Revenues $12,884 $13,915 $54,911 $48,426
Cost of Services 11,774 13,576 51,211 46,530
Gross margin 1,110 339 3,700 1,896
Selling, marketing, general &
administrative 1,184 1,454 5,032 5,496
Abandonment of facility - - - 179
Severance costs - - 144 -
Goodwill impairment - - 3,211 -
Operating (loss) (74) (1,115) (4,687) (3,779)
Other income
Other income (expense) 1 (3) 6 -
Interest expense (126) (201) (583) (663)
(Loss) before income taxes (199) (1,319) (5,264) (4,442)
Income tax (benefit) (112) (553) (777) (1,653)
(Loss) from continuing
operations (87) (766) (4,487) (2,789)
Income from discontinued
operations - 255 310 1,378
Gain on sale of discontinued
operations 320 - 5,713 -
Net income (loss) $233 $(511) $1,536 $(1,411)
Income (loss) Earnings per
common share - basic
Continued operations $(.03) $(.24) $ (1.41) $(.92)
Discontinued operations - .08 .09 .46
Gain on sale of discontinued
operations .10 - 1.80 -
$.07 $(.16) $.48 $(.46)
Income (loss) Earnings per
common share - diluted
Continued operations $(.03) $(.24) $ (1.41) $(.92)
Discontinued operations - .08 .09 .46
Gain on sale of discontinued
operations .10 - 1.80 -
$.07 $(.16) $.48 $(.46)
Weighted average number of
common shares outstanding
Basic 3,175 3,168 3,174 3,043
Diluted 3,183 3,227 3,188 3,095
Balance Sheets March 31, March 31,
2006 2005
Current assets
Cash $400 $1,264
Restricted cash 625 -
Trade accounts receivable, net 11,415 9,626
Inventory, net 6,363 5,600
Prepaid expenses and other current assets 722 487
Deferred tax asset 1,332 3,814
Assets held for sale - 2,869
Total current assets 20,857 23,660
Property and equipment, net 1,381 1,581
Goodwill and intangibles, net 4,213 7,438
Other assets 130 141
Deferred tax asset 828 930
Total assets $27,409 $33,750
Liabilities and stockholders' equity
Current liabilities
Accounts payable and accrued expenses $7,135 $9,112
Deferred maintenance revenue 3,515 3,776
Notes payable 168 662
Income tax payable 331 -
Current portion of long-term debt 34 17
Liabilities from discontinued operations - 1,619
Total current liabilities 11,183 15,186
Long-term bank debt 6,891 9,463
Other long-term debt 154 3
Subordinated debt - affiliate 1,000 2,400
Deferred income 218 278
Total liabilities 19,446 27,330
Stockholders' equity 7,963 6,420
Total liabilities and stockholders' equity $27,409 $33,750