SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
April 9, 2007
GALES INDUSTRIES INCORPORATED
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(Exact Name of Registrant as Specified in its Charter)
Delaware 000-29245 20-4458244
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State of Commission IRS Employer
Incorporation File Number I.D. Number
1479 North Clinton Avenue, Bay Shore, NY 11706
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Address of principal executive offices
Registrant's telephone number: (631) 968-5000
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION and
ITEM 7.01 REGULATION FD DISCLOSURE.
The following information is furnished under Item 2.02 - Results of
Operations and Financial Condition, and Item 7.01 - Regulation FD Disclosure:
On April 9, 2007, Gales Industries Incorporated issued a press release
announcing its financial results for the year ended December 31, 2006 ("Fiscal
2006") and the fourth quarter of Fiscal 2006. A copy of such press release is
attached to this report as Exhibit 99.1 and is incorporated herein by reference.
EXHIBIT
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99.1 Press Release, dated April 9, 2007, of Gales Industries Incorporated
announcing its financial results for the fiscal year ended December 31,
2006 and for the fourth quarter of 2006.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: April 9, 2007
GALES INDUSTRIES INCORPORATED
By: /s/ Peter Rettaliata
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Peter Rettaliata, President
EXHIBIT INDEX
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99.1 Press Release, dated April 9, 2007, of Gales Industries Incorporated
announcing its financial results for the fiscal year ended December 31,
2006 and for the fourth quarter of 2006.
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EXHIBIT 99.1
For Immediate Release
Gales Industries Incorporated Reports Record Revenue for Full Year
2006 Financial Results
BAY SHORE, NY - April 9, 2007 -- 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.
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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.