Garda has a different definition than I do of "Strong Year-End Results"

Hey, 2009 was a tough year. Plenty of people took a loss in 2009 and it's nothing to be ashamed of (though, I suppose, nothing to celebrate either). Here's hoping, certainly, that everything really does turn around in 2010 the way it's looking like it might. However, I'm having a little bit of difficulty reconciling Garda's announcement that it has delivered "strong year-end results" with the fact that it lost $35 million last year. Perhaps they have a different definition of "strong year-end results" than I do. Here's their spin:
For the fiscal year ended January 31, 2010, Garda improved all areas of its business: * Operating profit increased by 10% to C$128.2 million, despite a 2% reduction in revenues due to the weakened U.S. economy, showing improvement for the third year in a row at 11.8% of revenues compared to 10.5% in 2009 and 9.3% in 2008.
Okay. You're getting people work harder and cheaper and saving some gas by not making left-hand turns or something. But there's a reason that "operating profit" is non-GAAP. As in: You can pretty much make that look however you'd like.
* Adjusted net income of C$10 million or C$0.32 per share versus a loss of C$0.8 million or C$0.03 per share in 2009, a direct result of a more efficient organization. Specific items in 2010 represent expenditures related to the refinancing transaction process, fair value of derivative instruments and discontinued operations. In 2009, specific items related to goodwill impairments, fair value of derivative instruments and discontinued operations. Net loss of C$35 million or C$1.12 per share compared with loss of C$98 million or C$3.12 per share in 2009.
Again, adjusted net income is non-GAAP for a reason. And real net income is a loss of $35 million. It's better than losing $98 million, no doubt, but still a little hard to swallow as "strong" results. Perhaps they could have gone with "not a total and utter disaster; generally better than the utter wasteland that was last year." Headed in the right direction? No doubt. Strong results? Not if I'm a shareholder.
* Gross profit at an unprecedented 25.9% of revenues versus 25.1% in 2009, a direct result of operational efficiency programs and a reduction of 5.4% in SG&A expenses. * Cash flow from operations of C$56.7 million, an increase of 32% compared to 2009.
I guess this is just a reminder that I never want to be in the guarding business (where Garda derives most of its revenue, between what it calls "physical security" and cash handling). I'm supposed to be psyched by less than 26% gross margin? Ick. And it's less than 16% in physical security. A billion bucks in revenue to generate $56 million in cash flow? No thanks.
During FY2010, in spite of what was perhaps the most challenging time in Garda's history, the company achieved a solid performance that demonstrated resilience, determination and the fundamental soundness of its corporate strategy.
If you say so. I don't want to kick anyone in the teeth, but just go ahead and say, "yeah, 2009 kind of sucked, but wasn't a total disaster. The economy was tough, but we lost less money than we did last year and we think there's a profitable year in our near future. Anyway, we don't think the business model is completely out of whack, and we managed to pay down our debt by more than $100 million, so there's that."


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