EX-99.1 2 ex991e.txt 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