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Second graph, last sentence should read: The majority of these
orders are still pending and have not yet been released. (sted: The
majority of these orders are still pending, as shipments have now
returned to their pre-slowdown levels.)
The corrected release reads:
Gales Industries Incorporated (OTCBB: GLDS), a holding company
established to consolidate manufacturers, engineering integrators and
specialized service providers to the aerospace/defense industry, today
announced its financial results for the fourth quarter and full year
ended December 31, 2006. The Company reported record annual revenues
of $33,044,996, an increase of 7.5% from the prior year.
Fourth Quarter 2006 Financial Results
Net sales for the three months ended December 31, 2006 were
$7,043,074, as compared to net sales of $8,883,571 in the fourth
quarter of 2005. The decrease in net sales was primarily attributable
to a delay in order releases for parts and related defense components
to one of the Company's prime aerospace customers. This delay was the
result of a strike at the customer's facility in mid-2006. The
majority of these orders are still pending and have not yet been
released.
Gross profit in the fourth quarter 2006 was $255,100 as compared
to gross profit of $1,507,184 for the same period in 2005. The
decrease in the gross profit for the fourth quarter of 2006 reflects
the lower level of revenue and continued production of parts in
anticipation of order resumption in the ensuing quarter. To this end,
the Company's inventory and backlog at the end of the year were
inflated relative to the prior quarter. This inventory level is
expected to decline through the first half of 2007.
Selling, general and administrative ("SG&A") expenses for the
fourth quarter were $934,254 as compared to $1,266,189 for the same
period in 2005. The decrease in SG&A reflects the higher than normal
expenses incurred in the 2005 period from the legal, finance and
related professional fees associated with the Company's capital raise
and acquisition of Air Industries Machining Corporation (AIM).
The Company incurred a net loss before provision for income taxes
of ($253,031) for the three months ended December 31, 2006, as
compared to a net loss of ($182,127) for the three months ended
December 31, 2005. The net loss for the fourth quarter of 2006 was
($580,346) including a nonrecurring net tax of $327,315 related to the
gain we realized from the sale/leaseback of our corporate campus. A
comparison of net income with the prior year is not informative
because the predecessor company was an "S" Corporation.
Full Year 2006 Financial Results
Net sales for the full year of 2006 was $33,044,996, an increase
of $2,309,893, or 7.5%, from net sales of $30,735,103 for the same
period in 2005. SG&A expenses for 2006 were $4,390,598, as compared to
$2,798,048 for all of 2005. The higher level of expenses reflects the
cost of converting from a large "S" corporation to a fully compliant
public "C" corporation. A large portion of this increase in expense
can be classified as non-recurring. Income before provision for income
taxes was $153,400 for the twelve months of 2006 and $676,046 for the
2005 period. The Company's net loss for 2006 was ($336,569) after
nonrecurring items. A comparison of net income with prior year results
is not informative because the predecessor company was an "S"
Corporation.
At December 31, 2006, Gales had bank and other long term debt of
$5.8 million, and availability of $3.7 million under the Company's
loan facilities. All cash balances are applied on a daily basis to
amounts outstanding under the revolving portion of our loan facility,
therefore as of December 31, 2006; the Company's cash balance was $0.
Management's Comments
"In 2006, Gales Industries' dual focus was to build the
infrastructure necessary to execute its acquisition strategy and our
organic growth strategy of our subsidiary Air Industries Machining
Corp.," commented Peter Rettaliata, Gales President and CEO. "I view
2006 as a year in which we invested heavily in both initiatives -
building AIM and our platform. In my opinion, 2006 financial results
reflect the necessary investment to position the Company to achieve
our long term objectives. I believe that we have succeeded.
"We expect a substantial contribution in the near future from our
investment in the core business and our industry consolidation
strategy. As previously announced, we are in the process of closing on
our second and third acquisitions. These new businesses collectively
had trailing revenues of approximately $23 million and are expected to
significantly contribute to our earnings in 2007.
"Certainly, in recent quarters we have derived a substantial
portion of revenues from Sikorsky Aircraft Corporation. Orders from
this customer were delayed in the fourth quarter - and that negatively
impacted our performance. The majority of these orders are still
pending and have not been released, but we were nevertheless able to
deliver a record year in terms of net revenues. In the fourth quarter,
management progressed with its acquisition and growth initiatives
implemented earlier in the year to diversify the Company's revenue
base.
"From an internally generated growth perspective, our achievements
include additional defense-related work and diversification through
new commercial projects. We received contract awards for a prototype
engine mount to re-engine the popular 737/A320 aircraft from Northrop
Grumman Corporation; a contract for from a leading landing gear
company to produce Drag Strut Brace Assemblies for the A380 Airbus
Aircraft; and, a contract extension with Sikorsky through 2012 for
long term general purchase agreements covering $50 million in parts
for the BLACK HAWK helicopter program. Additionally, we received a
commercial contract from a new customer, Erickson Air-Crane, for their
line of heavy-lift helicopters used in firefighting, lumbering and
heavy lift activities worldwide."
Backlog and Guidance for 2007
The Company provides firm backlog as well as its projected backlog
as two indicators of future activity. As of March 31, 2007, Gales
Industries had a firm backlog, representing fully authorized orders
for products to be delivered, exceeding $37.3 million. Additionally,
Gales' projected backlog, which includes both the firm backlog as well
as anticipated order releases, totaled approximately $60 million.
"Our record backlog is another indication of the progress we have
made while executing a series of growth initiatives in 2006,"
commented Gales' Vice Chairman and Chief Financial Officer Louis
Giusto. "Our backlog figures, however, do not include the potential of
new awards for contracts presently in the bidding process or the
addition of the two acquisitions - Sigma Metals and Welding Metallurgy
- which we are about to complete, as well as other acquisitions that
may be added by the end of the current year.
"We are providing, for the first time, guidance for financial
results which includes the consolidation of operations from Air
Industries and the two acquisitions pending completion. Our guidance
for consolidated quarterly run rates by the end of 2007 includes
revenue within the range of $57 million to $60 million, earnings
before interest, taxes, depreciation and amortization ("EBITDA")
within the range of $4.5 million to $6.0 million, and net income
within the range of $2.0 million to $2.5 million."
Gales considers EBITDA to be important financial indicators of the
Company's operational strength and performance, and uses such
indicators when making decisions regarding investments in the various
components of its business and acquisition valuations. Because EBITDA
is not a measurement determined in accordance with generally accepted
accounting principles ("GAAP"), and is thus susceptible to varying
calculations, EBITDA, as presented, may not be directly comparable to
other similarly titled measures reported by other companies.
Earnings Results Conference Call
Management of Gales Industries will conduct a conference call for
investors to discuss financial results for the fourth quarter and full
year ended December 31, 2006, today, April 9, 2007, at 9:00 a.m.
Eastern Time. To access the teleconference, please dial 1-866-272-9941
(domestic) or 1-617-213-8895 (international) and use "46042321" as the
pass code, approximately 10 minutes prior to the start time.
For those unable to listen to the live broadcast, a replay will be
available by dialing 1-888-286-8010 (domestic) or 1-617-801-6888
(international), with playback access code 52357099, starting
approximately two hours after the conclusion of the call and available
until April 16, 2007.
ABOUT GALES INDUSTRIES INCORPORATED
Gales Industries Incorporated (OTCBB: GLDS) is a holding company
established to engage in the consolidation of manufacturers,
engineering integrators and related service providers to the
aerospace/defense and commercial aviation industries. The Company is
focused on flight safety and other critical componentry. The Company's
first acquisition was of Air Industries Machining Corp., a leading
aerospace/defense manufacturer and engineering integrator based in Bay
Shore, Long Island, NY. Consolidation opportunities include companies
operating within highly synergistic disciplines of manufacturing,
technical services and strategic products distribution. The Company's
strategy and attendant tactical plan is to execute its consolidation
principally amongst Tier III, IV and V aerospace/defense
subcontractors. Gales offers a tailored exit strategy or management
continuity strategy in exchange for qualified acquisitions, and
targets technically superior middle market organizations with revenues
of up to $100 million annually. Information on the Company and its
products may be found online at www.airindmc.com.
Certain matters discussed in this press release are
'forward-looking statements' intended to qualify for the safe harbors
from liability established by the Private Securities Litigation Reform
Act of 1995. In particular, the Company's statements regarding trends
in the marketplace, firm backlog, projected backlog, potential future
results and acquisitions, are examples of such forward-looking
statements. The forward-looking statements include risks and
uncertainties, including, but not limited to, the timing of projects
due to the variability in size, scope and duration of projects,
estimates, projections and forecasts made by management with respect
to the Company's critical accounting policies, firm backlog, projected
backlog, regulatory delays, government funding and budgets, matters
pertaining to potential and pending acquisitions subject to and after
closings, and other factors, including results of financial audits and
general economic conditions, not within the Company's control. Certain
of the Company's forward looking statements, with the projected
backlog in particular, are formulated based on management's extensive
industry experience and understanding and assessment of industry
trends, customer requirements, and related government spending.
Projected backlog may be subject to variability and may increase or
decrease at any time based on a variety of factors, including but not
limited to modifications of previously released orders, acceleration
of orders under general purchase agreements, etc. The factors
discussed herein and expressed from time to time in the Company's
filings with the Securities and Exchange Commission could cause actual
results and developments to be materially different from those
expressed in or implied by such statements. The forward-looking
statements are made only as of the date of this press release and the
Company undertakes no obligation to publicly update such
forward-looking statements to reflect subsequent events or
circumstances.
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