RE: Where are the analysts?So it's clear Razor is short :)
I think you've overstated the difficulties just a tad.
ARF has been quite clear on the first half challenges. From their year end report issued March 10
Outlook
During 2010 the revenue and gross margin performance deteriorated relative to 2009 as many engineered solutions projects experienced delays and production inefficiencies due to the complex nature of some of the projects, coupled with a very robust performance in 2009 given the large projects booked prior to the recession. The impact of these contracts will be reduced as projects are completed and the backlog is rebuilt with more traditional work. Management noted improving trends in ES bookings in 2010, reflected in a higher dollar volume of projects in backlog, improving bid margins and projects more consistent with core production competencies. The ES project backlog at Dec. 31, 2010, was approximately $140-million, or approximately 20 per cent higher at the end of 2010 than 2009. Due to seasonal factors, as well as the specific construction schedules on projects in the backlog, management expects the improved margins in the ES business will not have a meaningful impact until the second half of 2011.
CIA revenues are highly influenced by weather conditions. Construction activity tapers off with the onset of winter weather conditions and remains at low levels through the first quarter. Fiscal 2010 started very strong as weather conditions were unusually favourable and the impact of several government initiatives created a purchasing anomaly in the first half of the year. The 2011 season has started with a typical cold Canadian winter and accordingly management does not anticipate the same level of CIA revenue as experienced in the first half of 2010, with a return to historical seasonal patterns. As a result, EBITDA levels in the first and fourth quarters are expected to be lower than the second and third quarters in the fiscal year for these products.
Armtec has yet to see a full recovery in its private markets. Natural resource markets are showing signs of improved activity, however, residential markets tapered off after some improvement in the first half of 2010 and are not expected to show significant growth. The commercial and industrial construction market has stabilized, but remains well off historical levels and a return to prerecession levels is not anticipated in the near future given current vacancy rates for commercial and industrial properties. The current commercial and industrial market conditions will continue to significantly impact Armtec's Central region results in 2011.
Based on the current outlook, management anticipates some improvement in the ES business in 2011, relative to 2010, as a result of the stronger backlog coming into 2011. ES gross margin levels are anticipated to improve over the latter part of 2011, though are not expected to fully rebound to prerecession levels.
From a balance sheet perspective, management and the board of directors have established a target leverage ratio of approximately two times total debt to adjusted EBITDA and are committed to reducing leverage to the target ratio through a combination of the anticipated recovery in the core ES business, accretive acquisitions and/or issuing equity. The recapitalization of the balance sheet in 2010, and subsequent amendment to the financial covenants in the senior revolving facility, are aimed at mitigating the anticipated short-term effects of the unusual volatility in the ES business, which will remain a factor through the first half of 2011. Armtec converted to a corporation on Jan. 1, 2011, thereby removing the restrictions on its ability to issue equity.
As a result of the conversion, Armtec does not anticipate paying material cash taxes in 2011.
Following the conversion to a corporate structure, Armtec announced its intention to declare quarterly dividends at an initial annualized rate of $1.60 per share.
Conference call and webcast
Management will host a conference call at 10 a.m. (ET) on Friday, March 11, 2011, to discuss the results. Investors who wish to participate can access the call using the following numbers: 416-644-3414 or 1-800-814-4859. The call will be webcast live and archived on Armtec's website.
A taped rebroadcast will be available to listeners following the call until 12 a.m. on Friday, March 18, 2011. To access the rebroadcast, please dial 416-644-3414 or 1-877-289-8525 and enter the passcode 4406908, followed by the number sign..
Armtec's full consolidated financial statements, notes to financial statements, and management's discussion and analysis are available at SEDAR or the company's website.
We seek Safe Harbor.
So they have more debt than is comfortable but are confident that the increased revenues from their recent purchases will allow the company to pay down the debt. They say no increases in dividend until the debt is down to more typical levels. They don't mention anything about cutting the dividend. Right now the market is skeptical they can keep the dividend and pay down debt. I'm in a small positiion today. Will wait for results before deciding on more.