Exhibit 99.1
HALIFAX ANNOUNCES FOURTH QUARTER
AND FISCAL 2007 FINANCIAL RESULTS
Alexandria, VA - July 11, 2007 - Halifax Corporation (AMEX: HX) today
announced its financial results for the fourth quarter and fiscal year
ended March 31, 2007.
Revenues for fiscal 2007 were $50.7 million compared to prior fiscal 2006
revenues of $54.9 million. The revenue decrease, which was primarily due
to the cessation of an unprofitable nationwide contract in April 2006,
was partially offset by new more profitable business.
Halifax reported gross margins of $4.4 million, or 9% of revenues, for
the 2007 fiscal year, versus $3.7 million, or 7% of revenues, for the
previous year. The margin improvement in fiscal 2007 was due to a better
mix of more profitable business. The Company's current year margins were
negatively impacted as a result of a contract loss in the fourth quarter
and a non-cash charge of $640,000 taken in the fourth quarter related to
inventory reserves. In fiscal 2006, margins were negatively impacted by
the unprofitable nationwide contract referenced above. This contract was
concluded in April 2006.
The Company reported breakeven results for operating profit in fiscal
2007, versus an operating loss of $1.5 million for the prior year.
Halifax also recognized a gain of $2.5 million on the sale of its Secure
Network Services business in fiscal 2006.
The net loss for fiscal 2007 was $2.8 million, or $0.88 per share. The
principal reason for the loss was a non-cash charge of approximately $2.2
million related to recording a full valuation allowance against a
deferred tax asset, which had been carried on the balance sheet. For
fiscal 2006 the Company reported net income of $1.5 million, or $0.48 per
basic and diluted share.
According to Charles McNew, president and chief executive officer, "Were
it not for certain non-cash adjustments, we would have reported a
marginally profitable year for fiscal 2007, as contrasted to a loss from
continuing operations of $1.3 million for fiscal 2006. From an
operational standpoint, we have a healthy backlog and as mentioned in
recent releases, despite the competitive marketplace, we are encouraged
by the present volume of potential new deals."
McNew added, "We are continuing to evaluate various strategic
alternatives to further position our Company for near and longer term
growth opportunities."
For the quarter ended March 31, 2007, revenues were $13.0 million
compared to $12.9 million for the same period last year. Gross margin was
$225,000 for the quarter ended March 31, 2007, compared to gross margin
of $1.1 million for the same period last year. The primary reason for
the decrease in gross margin was a non-cash charge for inventory
obsolescence and a loss on a contract that has been terminated. The
operating loss for the quarter ended March 31, 2007, was $822,000 as
compared to an operating loss of $74,000 for the same period last year.
Primarily as a result of the non-cash deferred tax asset adjustment, the
Company reported a net loss of $2.9 million for the quarter ended March
31, 2007, or $0.93 per share, as compared to net income of $233,000, or
$0.07 per basic and diluted share, for the same period last year, which
included a gain on the sale of discontinued operations.
The Company will host a conference call for investors at 11:00 a.m. EDT
on Wednesday, July 11, 2007, to review the financial and operational
results for the quarter. The conference call phone number is 800-926-
6531 for U.S. callers and 415-226-5360 for international callers. The
conference call replay will be available from 1 p.m. EDT on Wednesday,
July 11, 2007, to 1 p.m EDT on Thursday, July 12, 2007. The replay
number is 800-633-8284 for U.S. callers and 402-977-9140 for
international callers. The reservation number is 21343980.
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 March 31, ended March 31,
2007 2006 2007 2006
Revenues $12,977 $12,884 $50,695 $54,911
Cost of Services 12,752 11,774 46,268 51,211
Gross margin 225 1,110 4,427 3,700
Selling, marketing,
general & administrative 1,047 1,184 4,427 5,032
Severance costs - - - 144
Operating loss (822) (74) - (1,476)
Other income 9 - 32 6
Interest expense (181) (125) (673) (583)
Loss before income taxes (994) (199) (641) (2,053)
Income tax expense 1,953 (112) 2,149 (777)
benefit
Loss from continuing
operations (2,947) (87) (2,790) (1,276)
Income from discontinued
operations - - - 310
Gain on sale of
discontinued operations - 320 - 2,502
Net (loss) income $(2,947) $233 $(2,790) $1,536
Earnings per common
share - basic
Continued operations $(.93) $(.03) $(.88) $ (.40)
Discontinued - - - .09
operations
Gain on sale of - .10 - .79
discontinued operations
$(.93) $.07 $(.88) $.48
Earnings per common
share - diluted
Continued operations $(.93) $(.03) $(.88) $ (.40)
Discontinued - - - .09
operations
Gain on sale of - .10 - .79
discontinued operations
$(.93) $.07 $(.88) $.48
Weighted average number
of common Shares
outstanding
Basic 3,175 3,172 3,175 3,174
Diluted 3,180 3,183 3,180 3,188
Balance Sheets March 31,2007 March 31,2006
Current assets
Cash $1,078 $400
Restricted cash 673 625
Trade accounts receivable, net 11,345 11,415
Inventory, net 4,946 6,363
Prepaid expenses and other current
assets 584 722
Deferred tax asset - 1,332
Total current assets 18,626 20,857
Property and equipment, net 1,225 1,381
Goodwill and intangibles, net 3,865 4,213
Other assets 121 130
Deferred tax asset - 828
Total assets $23,837 $27,409
Liabilities and stockholders' equity
Current liabilities
Accounts payable and accrued
expenses $6,375 $7,135
Deferred maintenance revenue 3,058 3,515
Notes payable - 168
Income tax payable 11 331
Bank debt 6,880 -
Auxiliary line of credit 1,000 -
Current portion of long-term debt 31 34
Total current liabilities 17,355 11,183
Long-term bank debt 7,880 6,891
Other long-term debt 120 154
Subordinated debt - affiliate 1,000 1,000
Deferred income 159 218
Total liabilities 18,634 19,446
Stockholders' equity 5,203 7,963
Total liabilities and stockholders'
equity $23,837 $27,409