EX-99.1 2 ex991e.txt 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