Ballistic Recovery Systems (CE) (USOTC:BRSI)
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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.