BRS Reports FY07 Earnings Results
March 07 2008 - 3:00PM
Business Wire
Ballistic Recovery Systems, Inc. (Pink Sheets: BRSI), a
manufacturer of whole-aircraft emergency parachute systems,
announced today its earnings results for Fiscal Year 2007 which
ended September 30th, 2007. On March 7, BRS filed its Form 10-KSB
for FY07 and its restated Form 10-QSBs for the quarters ended March
30, 2007 and June 30, 2007. BRS announced a total of $9,402,351 in
sales for the fiscal year ended September 30, 2007. This total
represents an increase of 2.3% over the $9,191,729 in sales
reported for the fiscal year ended September 30, 2006. The Company
reported net loss of ($1,681,177) for the year ended September 30,
2007 compared to a net income of $27,377 for the year ended
September 30, 2006. BRS also restated its previously filed 10-QSB
for the 2nd and 3rd quarters of FY2007. As a result of errors in
financial statements relating to the valuation of inventories and
accounting methods utilized for its Mexican subsidiary, the Company
restated the financial statements to correct accounting methods and
related issues. The Company historically fully absorbed the
operational costs for its Mexico manufacturing facility into
inventory as cost of goods sold. Upon review, and in connection
with the Company�s Form 10-KSB for the fiscal year ended September
30, 2007, it was determined that these costs were not directly
accounted to the production and processing of goods sold, and
therefore were not included as cost of goods sold. Commenting on
the results, Larry E. Williams, Chief Executive Officer said,
"While we are disappointed with the overall loss for FY 2007, we
clearly understand the need for BRS to invest now for future years.
The vast majority of the loss is directly attributable to our
increased investment in product diversification and expanding
operations to address current and potential business gains.� Gross
margin as a percentage of revenues was 16.0% for FY2007 compared to
36.2% for FY2006. The largest factors contributing to the reduction
in gross margin were: (1) a product price reduction to Cirrus
associated with increased purchase quantities; (2) investment in
new product lines such as Head Lites to meet our diversification
strategy; and (3) delays and limitations of the accounting system
associated with the internal accounting of the Mexico operations
and related allocation of production overhead. Mr. Williams further
commented, �Diversification is a key part of our out-year growth
strategy which means we must invest today in new products and
processes. To achieve this goal, we hired production staff which
ultimately had an impact to the cost of goods sold due to
production facility inefficiencies, particularly the down time
associated with training and prototyping which created excess
non-productive labor. We also saw a sharp rise in production
overhead due to the delays in the closing of the ATF acquisition.�
A number of factors contributed to BRS�s late filing of its Form
10-KSB and restatement of its two previous Form 10-QSBs with the
primary factors being related to the costing of inventory and the
associated monitoring of inventory controls connected with
operations in Mexico. As a result, the Company performed additional
analyses and other procedures with both internal and external
resources During the year, BRS expanded parachute production in
Mexico to include manufacturing for CIMSA, a Barcelona-based
parachute manufacturer which has also invested in BRS. BRS General
Manager David Blanchard commented, �We now have three primary
production lines in Mexico: BRS parachutes and components, CIMSA
parachutes, and our newly acquired Advanced Tactical Fabrication
line. We have expensed all costs in our Mexican production facility
that would include inefficiencies and additional costs inherent in
changing a production site.� Blanchard continued, �We have reduced
our personnel in Mexico since we are continually evaluating the
required workforce levels as they relate to revenue generation. We
specifically eliminated a higher portion of non-production
employees in order to reduce overhead. We are closely monitoring
all costs to operate the Mexico facility using timely and accurate
variance analysis. We are also reviewing all product offerings with
the goal of standardizing our products as much as possible. This
will allow us to re-examine our pricing and margins for all BRS,
ATF and Mexico products. We will continue our strong focus on
identifying cost savings and reductions on an ongoing basis.� Chief
Financial Officer Carl Langr said, �We believe this investment
enhances our ability to achieve consistent growth in revenue and a
return to profitability. We are building on the market acceptance
of whole airplane emergency recovery parachutes as we grow. With
the addition of ATF, we expect to see significant growth in sales
as we build market demand. Labor and operating expenses are the
focus moving forward to assure profitability." Highlighted Results
of Operations for the Fiscal Year 2007: G&A expenses remained
stable at 27.9% of sales in FY07 R&D investment increased to
5.9% of sales in FY07 Williams added, �The Company has realized for
some time that growing the basic infrastructure in Mexico would
take significant capital investment at the outset with little
payback in the short term. In fact, Fiscal Year 2007 saw what we
believe are unprecedented opportunities for the Mexico operation
which had only minimal impact to fiscal 2007 revenues. In order to
take advantage of new customers and processes, BRS invested heavily
in both capital equipment and personnel to meet these
opportunities. The payback for these investments is only now
becoming apparent through increased orders and improving
efficiencies.� In particular, the Company has set its goals going
forward on several new programs which were only just beginning to
form as FY08 began. VP of Sales & Marketing, Gary Moore,
commented, �These programs, over the next few months to a year and
a half, will continue to grow and develop into substantial new
product lines. In addition, the recent establishment of our newest
facility in Pinebluff, North Carolina will provide a great
opportunity for BRS Fabrication to gain Department of
Defense-related market share.� About Ballistic Recovery Systems and
Advanced Tactical Fabrication Based in South Saint Paul, Minnesota,
BRS designs, manufactures, and distributes whole-aircraft emergency
parachute systems for general aviation and recreational aircraft.
ATF (or Advanced Tactical Fabrication), a joint venture of BRS and
Head Lites Corp (HLC), is a leader in the safety apparel and �cut
& sew� industry. Ballistic Recovery Systems is a publicly
traded company (BRSI.PK). Since 1981, BRS has delivered more than
28,000 parachute systems to aircraft owners worldwide, including
over 3,500 systems on FAA-certificated aircraft such as the Cirrus
Design SR20 and SR22 manufactured in Duluth, Minnesota. To date,
BRS parachute recovery systems have been credited with saving the
lives of 211 pilots and passengers This press release contains
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are
often, but not always, made through the use of words such as
�anticipates,� �expects,� �plans,� �believes,� �intends,� and other
similar words or phrases. These statements are only predictions,
and are based on current information and expectations. Such
statements involve a number of risks and uncertainties, including
market fluctuations, pricing, procurement, manufacturing
efficiencies, operating risks, and other risks that could cause the
actual results to differ materially from those projected. For more
information, review the company�s filings with the Securities and
Exchange Commission, particularly the Company�s annual report on
Form 10-KSB. All forward-looking statements are qualified in their
entirety by this cautionary statement, and BRS undertakes no
obligation to revise or update this press release to reflect events
or circumstances after the date hereof.
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