[ARMOR HOLDINGS, INC.]
FOR IMMEDIATE RELEASE
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COMPANY CONTACT: MEDIA CONTACT: INVESTOR RELATIONS CONTACT:
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Xxxxxx X. Xxxxxxxx Xxxxxxx Xxx Xxxxx X. Xxxxxxxxxx
President & Chief Operating Officer President, Corporate Communications Group Principal
Armor Holdings, Inc. Integrated Corporate Relations, Inc. Integrated Corporate Relations, Inc.
904.741.5400 203.682.8218 203.682.8229
xxx.xxxxxxxxxxxxx.xxx xxxx@xxxxxx.xxx xx@xxxxxx.xxx
ARMOR HOLDINGS, INC. REPORTS RECORD REVENUES
IN THE THIRD QUARTER
- 3Q05 EPS INCREASE 5.7% TO $0.74 VS. PRIOR YEAR OF $0.70 -
- 3Q05 INCLUDES CHARGE OF $0.33 RELATING TO VOLUNTARY ZYLON(R) VEST EXCHANGE
PROGRAM -
- RESETS FY05 EPS GUIDANCE TO $3.55 TO $3.65 TO REFLECT ZYLON(R) CHARGE,
IMPROVED OPERATING OUTLOOK -
- MANAGEMENT COMMENTS THAT FY06 EXPECTATIONS CONTINUE TO IMPROVE -
JACKSONVILLE, FLORIDA - OCTOBER 20, 2005 - ARMOR HOLDINGS, INC. (NYSE:AH), a
leading manufacturer and distributor of security products and vehicle armor
systems serving military, law enforcement, homeland security and commercial
markets, announced today financial results for the third quarter ended September
30, 2005.
THIRD QUARTER RESULTS
For the third quarter ended September 30, 2005, the Company reported revenue of
$447.7 million, an increase of 74.3% versus the year-ago quarter's $256.8
million. Net income for the third quarter was $26.5 million, or $0.74 per
diluted share, versus the year-ago quarter net income of $23.9 million, or $0.70
per diluted share. Included in the third quarter 2005 results is a $19.4 million
pre-tax charge, or $0.33 per diluted share after tax charge, due to a voluntary
Zylon(R) vest exchange program previously announced in August 2005, as well as
$0.7 million of pre-tax integration costs, or $0.01 per diluted share, on an
after-tax basis. There is also a $1.3 million net pre-tax gain included in other
income, or $0.03 per diluted share after tax, resulting from the unexercised
expiration of 1.5 million previously announced put option contracts, as well as
an increase in the fair market value of 1 million put option contracts expiring
prior to July 2006. Included in the results for the third quarter ended
September 30, 2004, is a $5.0 million pre-tax charge, or $0.09 per diluted share
on an after-tax basis, for the prior year warranty revision and product exchange
program concerning the Company's Zylon(R)-based ballistic vests, as well as $0.9
million, or $0.02 per diluted share on an after-tax basis, of integration and
other charges.
Internal revenue growth (decline), assuming that companies acquired after
December 31, 2003, were owned effective January 1, 2004, was 48.4%, including
0.4% for foreign currency movements. Internal revenue growth (decline) by
segment, including foreign currency movements, was 83.7% for the Aerospace &
Defense Group, (10.7%) for the Products Division and 2.3% for the Mobile
Security Division. Excluding Second Chance, which was purchased out of
bankruptcy and had experienced legal and financial troubles, internal revenue
growth (decline) was (4.0%) for the Products Division.
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00000 XXXXXXXXXXXXX XXXXXXX XXXXXXXXXXXX, XX 00000 TEL: 000.000.0000
FAX: 000.000.0000
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The Company's gross profit margin in the third quarter decreased to 22.2% of
revenues versus 27.8% in the year-ago quarter. The reduction in gross profit
margin from the prior year was largely a function of revenue mix within the
Aerospace & Defense Group. The gross profit margin excludes separately
identified cost associated with the vest exchange program/warranty revision for
both 2005 and 2004. The Company's selling, general and administrative expenses
as a percentage of revenue improved to 7.8% of revenue versus 8.8% of revenue in
the year-ago quarter. This improvement was primarily due to the Company's
ability to continue to scale its business.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") for
the third quarter increased by 5.9% to $47.5 million versus $44.8 million in the
year-ago quarter. Following this press release is a reconciliation of net income
to EBITDA for the three months ended September 30, 2005 and 2004.
Net cash provided by operating activities for the third quarter was $1.4 million
versus $13.9 million in the year-ago quarter. Free cash flow, defined as net
cash provided by operating activities less purchase of property and equipment,
was negative ($1.5) million versus positive $9.9 million in the same period last
year. Following this press release is a reconciliation of net cash provided by
operating activities to free cash flow for the three months ended September 30,
2005 and 2004. The decrease in net cash provided by operating activities and
free cash flow was primarily due to a $55 million increase in the Aerospace &
Defense Group receivables during the third quarter. This increase in Aerospace &
Defense Group receivables corresponds with a $70 million increase in Aerospace &
Defense Group revenues generated in the last two months of the third quarter of
2005 versus the last two months of the second quarter of 2005.
Xxxxxx X. Xxxxxxxx, President and Chief Operating Officer of Armor Holdings,
Inc., commented, "We are pleased with our current period results, our near-term
outlook, and the strategic progress we continue to make in a variety of markets.
We believe that we are now effectively positioned for sustainable volume as a
result of our research and development efforts and the high level of interest
for the M1151/52 light armored vehicle program. Further, we are very excited
about our evolving competitive advantages in the individual equipage market. Our
acquisition of Specialty Defense and the purchase of assets from the Second
Chance bankruptcy proceeding have improved our presence in this growing market
and helped to diversify our revenue base."
YEAR-TO-DATE RESULTS
For the nine months ended September 30, 2005, the Company reported revenue of
$1,184.3 million, an increase of 84.4% versus the year-ago comparable period's
$642.1 million. Net income for the nine months ended September 30, 2005, was
$94.9 million, or $2.66 per diluted share, versus the year-ago level of $54.2
million, or $1.72 per diluted share. Included in the nine months ended September
30, 2005, results is a previously announced $19.4 million charge or $0.33 per
diluted share after tax, due to a voluntary Zylon(R) vest exchange program.
There are also $2.3 million of pre-tax integration costs, or $0.04 per diluted
share on an after-tax basis, recorded in the first nine months of 2005. There is
also a $5.0 million, net pre-tax gain included in other income, or $0.14 per
diluted share after tax, resulting from the unexercised expiration of our 2.5
million put option contracts and an increase in the fair market value of 1
million put option contracts expiring prior to July 2006. Included in the first
nine months of 2004 results was a $6.3 million, or $0.20 per share, non-cash
charge due to the accelerated vesting of performance based, long-term,
restricted stock awards granted to certain senior executives in 2002, as well as
a $5.0 million pre-tax charge, or $0.09 per diluted share on an after-tax basis,
for the prior year warranty revision and product exchange program concerning the
Company's Zylon(R)-based ballistic vests. The Company also incurred
approximately $3.4 million, or $0.06 per share on an after-tax basis, of
integration and other charges in the first nine months of 2004.
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Internal revenue growth (decline), assuming that companies acquired after
December 31, 2003, were owned effective January 1, 2004, was 60.0%, including
0.5% for foreign currency movements. Internal revenue growth (decline) by
segment, including foreign currency movements, was 101.0% for the Aerospace &
Defense Group, (2.7%) for the Products Division and 22.9% for the Mobile
Security Division. Excluding Second Chance, which was purchased out of
bankruptcy and had experienced legal and financial troubles, internal revenue
growth (decline) was flat for the Products Division.
The Company's gross profit margin in the nine months ended September 30, 2005,
decreased to 24.2% of revenues versus the year-ago level of 28.9% of revenues.
The reduction in gross profit margin was largely a function of revenue mix
within the Aerospace & Defense Group and lower selling prices negotiated on the
HMMWV contract renewal, which began to impact gross margins in the third quarter
of 2004. Aerospace & Defense Group margins were also negatively impacted by
short term increases in costs associated with the Company's ceramic SAPI plate
program. The Company expects its SAPI gross margins to rebound by the first
quarter of 2006. The Company's selling, general and administrative expenses as a
percentage of revenue improved to 8.8% of revenue versus the year-ago level of
10.8% of revenue. This improvement was primarily due to the Company's ability to
continue to scale its business.
EBITDA for the nine months ended September 30, 2005, increased by 57.2% to
$169.1 million versus the year-ago level of $107.6 million. Following this press
release is a reconciliation of net income to EBITDA for the nine months ended
September 30, 2005 and 2004.
Net cash provided by operating activities for the nine months ended September
30, 2005, was $59.5 million versus the year-ago level of $23.7 million. Free
cash flow, defined as net cash provided by operating activities less purchase of
property and equipment, was $48.4 million versus the year-ago level of $12.7
million. The Company is targeting $100.0 million of free cash flow for the
fiscal year 2005. Following this press release is a reconciliation of net cash
provided by operating activities to free cash flow for the nine months ended
September 30, 2005 and 2004. The increase in net cash provided by operating
activities and free cash flow resulted primarily from increased profitability.
BALANCE SHEET
As of September 30, 2005, the Company reported a combined cash and cash
equivalents and short-term investments balance of $426.9 million compared to
$234.5 million at September 30, 2004. Total debt (short-term, current portion
and long-term) at September 30, 2005, of $498.1 million includes the Company's
$345 million, 2% Senior Subordinated Convertible Notes issued in the fourth
quarter of 2004. This compares to total debt (short-term, current portion and
long-term) at September 30, 2004, of $157.0 million.
As of September 30, 2005, the Company has sold put options covering 3.5 million
shares of the Company's common stock in various private transactions of which
put options covering 2.5 million shares expired unexercised. The remaining put
options covering 1 million shares (2.9% of outstanding shares) have a weighted
average strike price of $40.00 per share and expire prior to July 2006. If the
purchasers exercise the put options, the Company will be required to repurchase
its shares or enter into alternative cash settlement arrangements at the
negotiated strike price. If all of these put options are exercised, the Company
would have 6.3 million shares remaining under its repurchase programs. If the
Company's stock price were to decline below $38.18 on the settlement date of the
remaining put options, the Company would be required to record a loss on the put
options that may be material depending on the final closing price of the
Company's stock on the expiration dates.
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GUIDANCE
The Company has increased the guidance range that it issued on July 21, 2005,
for fiscal 2005 revenues to $1.60 billion to $1.63 billion from $1.45 billion to
$1.55 billion. Diluted earnings per share are now expected to be in a range of
$3.55 to $3.65, which includes a $0.33 charge related to the voluntary Zylon(R)
vest exchange program. The current guidance range also includes $0.05 to $0.06
of integration costs, and $0.09 of put option income, net of non-operating asset
write-offs. The Company expects fourth quarter diluted earnings per share of
$0.92 to $0.97 after approximately $0.01 of integration costs. The Company would
like to note that its earnings per share estimates for the fourth quarter 2005
exclude the additional potential impact of any non-operating, non-cash expense
or income associated with outstanding put options. This potential put option
expense or income will fluctuate with Armor Holdings' share price movement.
Xxxxxx Xxxxxxxx commented, "We are focused on the fact that Armor Holdings'
common stock is currently trading at a discount to its peer group for a variety
of reasons, and we continuously evaluate strategies to maximize shareholder
value. We are increasingly comfortable with our prospects for fiscal 2006.
Ongoing interest in the M1151/52 program, continued demand for the M1114
Up-Armored HMMWV into 2006, as well as growth in individual soldier equipment,
prompts us to believe that fiscal year 2006 revenue should be at least equal to
fiscal year 2005 actual revenue, or approximately $1.6 billion. As a result, we
expect minimum earnings per share in 2006 of $3.55 prior to any acquisitions,
which given our cash balance could be meaningfully accretive."
CONFERENCE CALL SCHEDULED FOR OCTOBER 20, 2005, AT 5:00 PM (EASTERN)
As previously announced, the Company will hold a teleconference at 5:00 PM
(Eastern) on October 20, 2005, to discuss its third quarter results.
There are two ways to participate in the conference call - via teleconference or
webcast. Access the webcast by visiting the Armor Holdings, Inc. website
(xxxx://xxx.xxxxxxxxxxxxx.xxx). You may listen by selecting Investor Relations
and clicking on the microphone.
Via telephone, the dial-in number is 0-000-000-0000 for domestic callers or
0-000-000-0000 for international callers. There is no passcode required for this
call. There will be a question/answer session at the end of the conference call,
at which point only securities analysts will be able to ask questions. However,
all callers will be able to listen to the questions and answers during this
period.
An archived copy of the call will be available via replay at 0-000-000-0000 -
access code 799733 for domestic callers, or 0-000-000-0000 - access code 799733
for international callers. The teleconference replay will be available beginning
at 9:30 p.m. on Thursday, October 20th, and ending at 11:59 p.m. on Thursday,
October 27th.
ABOUT ARMOR HOLDINGS
Armor Holdings, Inc. (NYSE: AH) is a diversified manufacturer of branded
products for the military, law enforcement, and personnel safety markets.
Additional information can be found at xxxx://xxx.xxxxxxxxxxxxx.xxx.
Certain matters discussed in this press release constitute forward-looking
statements that involve risks and uncertainties that could cause actual results
to differ materially from those projected. The Company may use words such as
"anticipates," "believes," "plans," "expects," "intends," "future," and similar
expressions to identify forward-looking statements. These risks and
uncertainties are described in the Company's filings with the Securities and
Exchange Commission, including the Company's Registration Statement on Form S-3,
its 2004 Form 10-K and amendments thereto and most recently filed Forms 8-K and
10-Q.
All references to earnings per share amounts in this press release are on a
fully diluted basis.
- TABLES FOLLOW -
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ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 SEPTEMBER 30, 2005 SEPTEMBER 30, 2004
-------------------- ------------------- ------------------- --------------------
REVENUES:
Aerospace & Defense $ 339,113 $ 160,238 $ 856,271 $ 371,019
Products 75,911 64,659 221,274 184,242
Mobile Security 32,640 31,906 106,726 86,874
-------------------- ------------------- ------------------- --------------------
Total revenues 447,664 256,803 1,184,271 642,135
COSTS AND EXPENSES:
Cost of revenues 348,238 185,457 897,733 456,771
Cost of vest exchange program/warranty
revision 19,400 5,000 19,400 5,000
Selling, general and administrative
expenses 34,723 22,695 104,073 69,332
Amortization 2,141 984 6,217 2,937
Integration 673 551 2,307 2,034
Other charges - 381 - 7,702
-------------------- ------------------- ------------------- --------------------
OPERATING INCOME 42,489 41,735 154,541 98,359
Interest expense, net 1,379 1,400 5,138 5,185
Other (income) expense, net (1,370) 154 (3,340) (121)
-------------------- ------------------- ------------------- --------------------
INCOME FROM CONTINUING
OPERATIONS BEFORE PROVISION
FOR INCOME TAXES 42,480 40,181 152,743 93,295
PROVISION FOR INCOME TAXES 15,997 16,307 57,816 39,072
-------------------- ------------------- ------------------- --------------------
INCOME FROM CONTINUING
OPERATIONS 26,483 23,874 94,927 54,223
(LOSS) FROM DISCONTINUED
OPERATIONS, NET OF TAX - - - (38)
-------------------- ------------------- ------------------- --------------------
NET INCOME $ 26,483 $ 23,874 $ 94,927 $ 54,185
==================== =================== =================== ====================
NET INCOME PER COMMON SHARE -
BASIC
INCOME FROM CONTINUING
OPERATIONS $ 0.76 $ 0.73 $ 2.76 $ 1.79
(LOSS) FROM DISCONTINUED
OPERATIONS - - - 0.00
-------------------- ------------------- ------------------- --------------------
BASIC EARNINGS PER SHARE $ 0.76 $ 0.73 $ 2.76 $ 1.79
==================== =================== =================== ====================
NET INCOME PER COMMON SHARE -
DILUTED
INCOME FROM CONTINUING $ 0.74 $ 0.70 $ 2.66 $ 1.72
OPERATIONS
(LOSS) FROM DISCONTINUED
OPERATIONS - - - 0.00
-------------------- ------------------- ------------------- --------------------
DILUTED EARNINGS PER SHARE $ 0.74 $ 0.70 $ 2.66 $ 1.72
==================== =================== =================== ====================
WEIGHTED AVERAGE DILUTED 35,959 34,198 35,675 31,498
SHARES ==================== =================== =================== ====================
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ARMOR HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO EBITDA
(UNAUDITED)
(IN THOUSANDS) THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 SEPTEMBER 30, 2005 SEPTEMBER 30, 2004
-------------------- ------------------- ------------------- --------------------
Net income $ 26,483 $ 23,874 $ 94,927 $ 54,185
Plus: Loss from discontinued operations,
net of tax - - - 38
Plus: Provision for income taxes 15,997 16,307 57,816 39,072
Plus: Other (income) expense, net (1,370) 154 (3,340) (121)
Plus: Interest expense, net 1,379 1,400 5,138 5,185
-------------------- ------------------- ------------------- --------------------
Operating income 42,489 41,735 154,541 98,359
Plus: Amortization (Note A) 2,141 984 6,217 2,937
Plus: Depreciation 2,848 2,128 8,359 6,281
-------------------- ------------------- ------------------- --------------------
EBITDA (Note B) $ 47,478 $ 44,847 $ 169,117 $ 107,577
==================== =================== =================== ====================
Note A. Amortization for acquired intangibles with finite useful lives.
Note B. EBITDA, which represents the results from continuing operations
before interest, other (income) expense, income taxes, and certain
non-cash items, including depreciation and amortization, is presented
in the earnings release because our credit facility and the trust
indentures under which our $150 million 8.25% Senior Subordinated Notes
maturing in 2013 and our $345 million 2% Senior Subordinated
Convertible Notes maturing in 2024, unless earlier converted, redeemed
or repurchased, are issued, contain financial covenants which generally
are based, in part, on EBITDA. Additionally, management believes that
EBITDA, as defined, is a common alternative to measure value and
performance. We cannot assure you that these measures are comparable to
similarly titled measures presented by other companies.
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(UNAUDITED)
(IN THOUSANDS) THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 SEPTEMBER 30, 2005 SEPTEMBER 30, 2004
-------------------- ------------------- ------------------- --------------------
Net cash provided by operating activities $1,446 $ 13,894 $ 59,477 $ 23,741
Less: Purchase of property and equipment (2,909) (3,957) (11,055) (11,061)
-------------------- ------------------- ------------------- --------------------
Free cash flow (Note C) $ (1,463) $ 9,937 $ 48,422 $ 12,680
==================== =================== =================== ====================
Note C. Free cash flow, which represents the net cash provided by operating
activities less purchase of property and equipment, is presented in the
earnings release because management believes that free cash flow is a
common alternative to liquidity. Management considers the purchase of
property and equipment to be a normal and recurring expenditure. By
deducting purchase of property and equipment from net cash provided by
or used in operations, management believes this measure provides a more
thorough measurement of operating cash flow. We cannot assure you that
this measure is comparable to similarly titled measures presented by
other companies.
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