Garda World Security Corporation
TSX : GW

Garda World Security Corporation

April 30, 2009 08:02 ET

Garda Delivers Strong Results Despite a Non-Cash Impairment Charge Related to Its US Cash Logistics Intangible Assets

Record gross margin - Improved EBITDA - Favourable Outlook for 2010

MONTREAL, QUEBEC, CANADA--(Marketwire - April 30, 2009) - Garda World Security Corporation (TSX:GW) (Garda), one of the most trusted cash logistics, physical security and global risk consulting firms in the world, announced today its financial results for the fiscal year ended January 31, 2009 and a positive outlook for the current fiscal year.

For the fiscal year ended January 31, 2009 (all figures adjusted for non-recurring items)

- Revenue increased by 7.8% to $1.26 billion

- Gross margin reached an unprecedented 25.1% in spite of the recording of an additional non-cash provision of $3.7 million in the fourth quarter relative to our workers compensation program

- EBITDA grew by 11.0% to reach $113.0 million reflecting a strong operating performance in all business segments

- Net income adjusted for non-recurring items amounted to $5.3 million or $0.17 per share

- Total assets reached $990 million



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- One-time non-recurring items include:

- One-time financing fees of $5.8 million (net of taxes)

- An unrealized non-cash loss on a derivative financial instrument of
$16.9 million (net of taxes)

- A non-cash goodwill impairment of $55.1 million

- Loss on discontinued operations of $24.7 million

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- The unprecedented level of gross margin and the higher EBITDA is mainly due to a performance increase in the US cash logistics business resulting from operational efficiencies, the implementation of costs control measures and the completion of the integration of activities since the change in leadership in December 2007.

- During the fourth quarter of fiscal 2009, the Corporation decided to divest the CashLINK products and services and the US and Mexico Guarding operations

"We are entering Fiscal 2010 as a stronger company strategically well-positioned to achieve our key growth objectives," said Francois Rodrigue, Senior Vice President and Chief Financial Officer. "We accomplished this through major changes in our US Cash Logistics business and our excellent operational performance. Garda benefited from the rigorous review of our business units and re-focused on our core competencies. As a result, we have created an optimal organization and expect strong performance and growth in 2010 and beyond."

"We have taken decisive measures over the past year to refocus on our mission of delivering quality, value-added solutions to the markets we serve," said Stephan Cretier, President and CEO. "Garda has always been recognized as one of the most profitable companies in the security industry. We will continue to relentlessly pursue what we started in 2009 - to improve customer service levels, efficiencies, control costs and to invest in technology to facilitate and extend our ability to more precisely automate, better track, and manage our business. We are confident that this focus will allow us to continue improving profitability and provide more value for our shareholders."

"Each of our operating sectors is singularly focused on key objectives," Mr. Cretier noted. "In Cash Logistics, we are strengthening our key technologies as we continue to bring innovation to our clients. As banks outsource their cash management and opportunities arise in niche markets in the retail and commercial sectors, we are proactively responding with the essential services they need."

"As we solidify our undisputed leadership position in the Canadian Physical Security market, we continue to build superior premium services and cultivate a more profitable book of business while reinforcing our brand image and operational efficiencies.

"In Global Risk Consulting, we are focused on key international growth markets - in specific industries such as natural resources, development, government and humanitarian relief organizations - solidifying our established operations in Kurdistan and Iraq and working toward solid profitability in Afghanistan and Pakistan as we expand further into Latin America and North Africa," Mr. Cretier concluded.



FINANCIAL HIGHLIGHTS (excluding all discontinued operations)

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For the Fiscal Year ended January 31
(in thousands of dollars except per
share amounts) 2009 2008 2007
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Revenues from continuing operations 1,104,788 1,014,164 380,207

Earnings before interest, income taxes,
depreciation and amortization
("EBITDA") from continuing operations 114,561 93,046 35,251

Income before financing expenses and
income taxes from continuing operations 7,629 56,080 25,499

Net income (loss) for the year (97,148) 15,603 10,968

Basic net income (loss) per share (3.09) 0.50 0.50

Diluted net income (loss) per share (3.09) 0.49 0.47

Cash flows from operations 44,184 58,505 30,739

Total assets 988,957 955,374 444,822

Total long-term debt 661,002 623,148 159,336
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(1) EBITDA (earnings before interest, income taxes, depreciation and
amortization) and cash flows from operations are not an accepted
performance measures as per Canadian GAAP.


FORWARD-LOOKING STATEMENTS

Certain statements in this press release may constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to Garda's future outlook and anticipated events, business, operations, financial performance, financial condition or results and, in some cases, can be identified by terminology such as "may"; "will"; "should"; "expect"; "plan"; "anticipate"; "believe"; "intend"; "estimate"; "predict"; "potential"; "continue"; "foresee", "ensure" or other similar expressions concerning matters that are not historical facts. In particular, statements regarding the company's future operating results and economic performance and its objectives and strategies are forward-looking statements. These statements are based on certain factors and assumptions including expected growth, results of operations, performance and business prospects and opportunities, which Garda believes are reasonable as of the current date. While management considers these assumptions to be reasonable based on information currently available to the company, they may prove to be incorrect. The company cautions the reader that the current adverse economic conditions make forward-looking information and the underlying assumptions subject to greater uncertainty and that, consequently, they may not materialize, or the results may significantly differ from the company's expectations. It is impossible for Garda to predict with certainty the impact that the current economic downturn may have on future results. Forward-looking information is also subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what Garda currently expects. These factors include technological changes, changes in market and competition, governmental or regulatory developments, general economic conditions, the development of new services, the enhancement of existing services, and the introduction of competing products having technological or other advantages, many of which are beyond the company's control. Therefore, future events and results may vary significantly from what management currently foresees. The reader should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While management may elect to, the company is under no obligation (and expressly disclaims any such obligation), and does not undertake to update or alter this information before the next quarter.

This analysis should be read in conjunction with the company's consolidated financial statements, and the notes thereto, prepared in accordance with Canadian GAAP and the MD&A included in the company's 2009 Annual Report. Throughout this discussion, all amounts are in Canadian dollars unless otherwise indicated.

MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)

Overall Performance

During fiscal year 2009, market conditions were defined by the general economic slowdown and the critical credit environment in the United States, as well as the strengthening of the US dollar. We observed that our businesses, in the cash logistics and physical security segments, have performed well in this challenging environment.

Revenues adjusted for special items totaled $1,256,214 in fiscal 2009, an increase of $90,772 or 7.8% compared with revenues for fiscal 2008.

In the US cash logistics market, we have experienced a relative stability in our level of activity and a stronger US dollar in the last few months has translated into increased revenues for the last semester of fiscal 2009. In the Canadian cash logistics market, we had a solid performance in fiscal 2009 with a 7% organic growth when compared with fiscal 2008.

In the US physical security market, our customer base has a high level of awareness for quality security services and therefore current market conditions have had a minimal impact on the demand for our services. Throughout the fiscal year, we gained sustainable revenues with the long-awaited start of new contracts in emerging markets. In the Canadian physical security market, we experienced an organic growth of 10% in Quebec partially offset by a decrease of 7% in the level of activity for the rest of Canada due to the continued pruning of the lower margin book of business throughout the last fiscal year.

Gross profit rose by 20.8% or $47,776 from $229,227 for fiscal 2008 to $277,003 in fiscal 2009. This increase in gross profit is attributable to the business acquisitions completed during the fiscal year 2008 and the increase in revenues generated by the cash logistics and physical security segments. The gross margin as a percentage of revenues reached unprecedented levels at 25.1% (22.6% for fiscal 2008) mainly due to a performance increase in the US cash logistics business resulting from operational efficiencies, the implementation of cost control measures and the integration of activities since the change in leadership in December 2007.

EBITDA adjusted for special items reached $112,971 (or 9.0% of revenues) in fiscal 2009 compared with $101,650 (or 8.7% of revenues) in fiscal 2008, an increase of $11,321 or 11.1% reflecting a strong operating performance in all business segments. The increase in EBITDA was mainly achieved through an improved performance in the US cash logistics segment resulting from operational efficiencies realized after the change in leadership in December 2007, an improved performance in the US physical security segment related to global risk consulting in emerging markets, and strong organic growth in the Canadian cash logistics segment.

Net income adjusted for special items amounted to $5,267 ($0.17 basic per share and $0.17 diluted per share) for fiscal 2009 compared with a net income of $7,897 ($0.26 basic per share and $0.25 diluted per share) for fiscal 2008, a decrease of $2,630 ($0.08 basic per share and $0.07 diluted per share).

Results of operations - fiscal 2009

During the fourth quarter of fiscal 2009, the Corporation decided to divest the CashLINK products and services and the US and Mexican Guarding operations. As a result of these decisions, revenues and expenses of the CashLINK products and services and of the US and Mexican Guarding operations for the years ended January 31, 2009 and 2008 have been reclassified from continuing operations to discontinued operations.

Revenues

Results of operations for the year ended January 31, 2009 exclude the revenues and expenses reclassified from continuing operations to discontinued operations.

Revenues for the year ended January 31, 2009 rose to $1,104,788 from $1,014,164 in the previous year, an increase of $90,624 or 8.9%. This increase in revenues results mainly from the additional revenues related to the business acquisitions of ATI international and GSS Global during the first quarter last year.

Revenues in the physical security segment rose to $483,063 in fiscal 2009 from $480,748 in fiscal 2008, an increase of $2,315 or 0.5%. This increase is directly attributable to the increase in revenues in the global risk consulting services in the US physical security segment as well as a better performance of the pre-board security screening services partially offset by a decrease in the pre-employment screening services following the sale of Keyfacts in fiscal 2008. Revenues in the cash logistics segment rose to $621,725 in fiscal 2009 from $533,416 in fiscal 2008, an increase of $88,309 or 16.6%. This increase in revenues is attributable to the acquisition of ATI International in April 2007.

Revenues in Canada rose to $482,523 in fiscal 2009 from $479,522 in fiscal 2008, while revenues in the United States and other rose to $622,265 from $534,642 in fiscal 2008.

Gross profit

Gross profit rose by 20.8% or $47,776 from $229,227 for fiscal 2008 to $277,003 in fiscal 2009. This increase in gross profit is attributable to the business acquisitions completed during the fiscal year 2008 and the increase in revenues generated by the cash logistics and physical security segments. The gross margin as a percentage of revenues reached unprecedented levels at 25.1% (22.6% for fiscal 2008) mainly due to a performance increase in the US cash logistics business resulting from operational efficiencies, the implementation of cost control measures and the integration of activities since the change in leadership in December 2007.

Net income (loss) for the year

Net loss for the year was $97,148 ($3.09 basic and diluted per share) for fiscal 2009, compared with a net income of $15,603 ($0.50 basic per share and $0.49 diluted per share) for 2008, a decrease of $112,751 ($3.60 basic per share).

Cash flows

Cash position of the Corporation amounted to $23,993 at the end of fiscal 2009, a decrease of $9,847 compared with a cash position of $33,840 at the end of fiscal 2008. This reduction mainly resulted from the net impact of 1) the cash flows from operations of $44,184 consistent with the EBITDA level of the business units, net of the financing expenses, goodwill impairment (non-cash) and the recovery of income taxes, 2) the positive variance of $35,466 in non-cash working capital items driven by the tight monitoring and management of working capital, 3) the net repayment of $67,933 in revolving facilities and senior term loan, and 4) the addition of $22,266 to property, plant and equipment (net of the proceeds from disposals).

Operating activities

Cash flows from operations amounted to $44,184 for fiscal 2009, compared with $58,505 for the previous fiscal year. This decrease of $14,321 or 24.5% is mainly attributable to the higher interest charges in fiscal 2009.

Changes in non-cash working capital items generated cash of $35,466 during fiscal 2009, compared to cash used in the amount of $21,555 in the previous fiscal year.

Operating activities generated cash of $79,650 during fiscal 2009, compared to cash generated in the amount of $36,950 in the previous fiscal year.

MD&A Filing

Garda's Management's Discussion and Analysis for the fiscal year 2009 ended January 31, 2009 was filed with SEDAR on April 30, 2009 and available on the web site http://www.gardaglobal.com in the investor's section as of April 30, 2009.

ABOUT GARDA

Garda, one of the largest integrated physical security and cash logistics firm worldwide, is well known for addressing complex security and investigations issues. As a leading provider in consulting, investigation and security services, Garda is recognized as one of the fastest growing companies with operations across Canada, the United States, Latin America, Europe, the Middle East, Africa, and Asia. With approximately 50,000 dedicated professionals, Garda offers integrated solutions in cash logistics, physical security, consulting and investigations, and enterprise intelligence services. Its team includes specialists and some of the most highly qualified and best-trained experts in the industry. For more information, visit: http://www.gardaglobal.com, http://www.gardacashlogistics.com and http://www.garda-world.com.

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