EBITDA, as adjusted, improves to a positive $629,000
ATLANTA, May 5 /PRNewswire-FirstCall/ -- Tri-S Security Corp. (NASDAQ:TRIS), a provider of security services and equipment for government and private entities, today announced its results of operations for the first quarter ended March 31, 2008. Tri-S provides security services through its two wholly-owned subsidiaries, The Cornwall Group, Inc. ("Cornwall") and Paragon Systems, Inc. ("Paragon").
First Quarter Ended March 31, 2008 -- Revenues increased 31% to $26.5 million for the quarter ended March,
31, 2008. -- Gross profit increased 20% to $2.2 million from a year ago. Included in
this figure are start-up costs on government contracts totaling $0.5
million in the quarter ended March 31, 2008. -- Gross margins were 8.4% compared to 9.2% a year ago. The difference
between 2008 and 2007 is primarily attributable to sales mix, as
Paragon sales accounted for 62% of total sales compared with 50% a year
ago. -- Net loss per basic and diluted share was $(0.43) for the quarter ended
March 31,2008 compared to $(0.19) a year ago. -- EBITDA, as adjusted (see "EBITDA, as adjusted" definition below)
improved to a positive $629,000 from a negative $200,000 a year ago. Recent Highlights -- Awarded $58.0 million contract for Federal facilities in the State of
Georgia. -- Awarded $220 million contract for the national headquarters of the
Social Security Administration. -- Awarded an initial six-month contract with a six-month renewal option
by the Department of Homeland Security in Southern California which is
expected to generate up to $29 million annual revenue. -- Awarded $56 million contract by U.S. Department of Homeland Security
for Federal Facilities in the Washington, DC area and the States of
Maryland and Northern Virginia. -- Total contract pipeline of approximately $510 million, including
approximately $230 million of contracts under bid and approximately
$280 million of contracts for which bids have been solicited and are
being prepared. "Our first quarter 2008 results showed significant improvement compared to both the first quarter of 2007 and the previous quarter ended December 31, 2007," said Ronald Farrell, CEO, Tri-S Security Corp. "We believe our contract pipeline continues to be strong and we remain very encouraged about winning new contracts at both Paragon and Cornwall. Since the first of this year, Paragon has been awarded new contracts worth $363 million and we are very encouraged with this success. With our current book of business we can anticipate revenue for 2008 through 2011 of approximately $140 million per year," added Farrell.
"We are excited with our financial performance this quarter which resulted in solid improvements in our revenue, margins and EBITDA," Farrell stated. "The trends in our contract pipeline remain very encouraging for continued top line growth and improved bottom line performance. I am optimistic about our 2008 results based upon our first quarter numbers," Farrell concluded.
Financial Discussion for First Quarter Ended March 31, 2008 During the first quarter of 2008, revenue for Tri-S Security grew 31% to $26.5 million from $20.2 million in the first quarter of 2007. This increase was the result of internal growth principally at Paragon.
The gross profit for the first quarter of 2008 was $2.2 million compared to $1.9 million for the first quarter of 2007. Included in this figure are start-up costs totaling $0.5 million in the quarter ended March 31, 2008.
Gross margins were 8.4% compared to 9.2% a year ago. The difference between 2008 and 2007 is primarily attributable to sales mix, as Paragon sales accounted for 62% of total sales compared with 50% a year ago. Gross margins improved by 4.9% to 8.4% for the quarter ended March 31, 2008 when compared with the previous quarter ended December 31, 2007.
General and administrative costs were $3.0 million for the first quarter of 2008 compared to $2.6 million in the first quarter of 2007. This increase was primarily attributable to a $0.4 million expense for stock based compensation. General and Administrative costs represented 11.1% of revenue for the first quarter of 2008 down from 13% of revenue in the same quarter for 2007.
The operating loss for the first quarter of 2008 was $0.9 million, compared to an operating loss of $1.0 million for the first quarter of 2007. Included in this figure are start-up costs totaling $0.5 million in the quarter ended March 31, 2008.
EBITDA, as adjusted, was a positive $629,000 for the first quarter of 2008 as compared to a negative $200,000 for the first quarter of 2007.
Interest expense, net, increased to $868,000 in the first quarter of 2008 compared to $533,000 million in the first quarter of 2007. This increase is primarily attributable to a higher borrowing base due to increased revenue and interest on our $2.5 million term loan issued in March 2007. In the first quarter of 2007, we recorded a one-time gain of $550,000 as a result of the settlement with the former shareholders of Cornwall. As a result, the loss before income tax was $1.8 million in the first quarter of 2008 compared to $1.0 million in the comparable period last year.
A tax expense of $47,000 was recorded for the quarter ended March 31, 2008 compared to a tax benefit of $305,000 for the quarter ended March 31, 2007 due to management's decision to record a valuation allowance of $537,000 against deferred tax assets in the first quarter of 2008. Net loss for the first quarter of 2008 was $1.8 million compared to a net loss of $0.7 million in the first quarter of 2007.
In this release, we use the non-GAAP financial measure, EBITDA, as adjusted. EBITDA, as adjusted, is calculated as earnings before interest; taxes; depreciation and amortization; income from joint venture, net; non-cash stock-based compensation; start-up costs on new contracts; and other income/expense. A reconciliation of EBITDA, as adjusted, to net loss for the three-month period ended March 31, 2008 and 2007, is attached to this press release.
Tri-S Security will host a conference call at 10:00 a.m. EDT on Tuesday, May 6, 2008 to discuss its first quarter results and respond to appropriate questions. Anyone interested in participating should call 800-259-2693 if calling within the United States or 913-661-9178 (internationally) approximately five to ten minutes prior to 10:00 a.m. EDT. Participants should ask for the Tri-S Security First Quarter 2008 Financial Results conference call.
This call is being webcast by Thomson Financial and can be accessed at Tri-S Security's website at http://www.trissecurity.com/ . The webcast may also be accessed at Thomson's website at http://www.earnings.com/ . The webcast can be accessed through Tuesday, May 20, 2008 on either site. To access the webcast, you will need to have the Windows Media Player on your desktop. For the free download of the Media Player, please visit: http://www.microsoft.com/windows/windowsmedia/en/download/default.asp.
About Tri-S Security Corp.
Based in Atlanta, GA, Tri-S Security Corp. (NASDAQ:TRIS) is a provider of security services and equipment for government and private entities. Security services include uniformed guards, electronic monitoring systems, personnel protection, access control, crowd control and the prevention of sabotage, terrorist and criminal activities. As a leading aggregator of elite security companies, Tri-S Security is designed to build a strong enterprise in which to service a unique customer base that ensures America's safety at home and work. Tri-S Security assumes responsibility for the marketing, infrastructure and overall operational performance for its subsidiaries. Tri-S Security's management leverages highly trained government officers, experienced industry leaders, proven financial executives and infrastructure experts to consolidate the fragmented security industry into one efficient and effective security force.
Forward-Looking Statements This press release includes "forward-looking statements" within the meaning of the Federal securities laws. Forward-looking statements are commonly identified by such terms and phrases as "should", "expects", "plans", "anticipates", "believes", "estimates", "projects" and other terms with similar meaning indicating potential impact on our business. Although we believe that the assumptions upon which such forward looking statements are based are reasonable, we can give no assurance that these assumptions will prove to be correct. Important factors that could cause actual results to differ materially from our projections and expectations are disclosed in our filings with the Securities and Exchange Commission, including the "Risk Factors" section set forth in our Annual Report on Form 10-K for the year ended December 31, 2007. All forward-looking statements in this press release are expressly qualified by such cautionary statements and by reference to their underlying assumptions. We do not undertake to publicly update the forward-looking statements contained herein to conform to actual results or changes in our expectations, whether as a result of new information, future events or otherwise. You may obtain and review our filings with the Securities and Exchange Commissions by visiting http://www.sec.gov/ .
Tri-S Security Corporation and Subsidiaries
Statements of Operations
Unaudited
(In thousands, except per share data) Three Months Three Months
Ended Ended
March 31, 2008 March 31, 2007
Revenues $ 26,465 $ 20,205
Cost of revenues:
Direct labor 16,466 12,695
Indirect labor and other contract
support costs 7,370 5,251
Amortization of customer contracts 405 406
24,241 18,352 Gross profit 2,224 1,853
Selling, general and administrative 2,953 2,616
Amortization of intangible assets 176 235
3,129 2,851 Operating income (loss) (905) (998) Other income (expense):
Interest expense, net (868) (458)
Interest on series C redeemable
preferred stock - (75)
Other income 5 550
(863) 17 Loss before income taxes (1,768) (981)
Income tax benefit 47 (305)
Net loss $ (1,815) $ (676) Basic and diluted net income (loss)
per common share $ (0.43) $ (0.19)
Basic and diluted weighted average
number of common shares 4,203 3,503 Tri-S Security Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands, except per share data) Unaudited Audited
March 31, 2008 December 31, 2007
Assets
Current assets:
Cash and cash equivalents $ 571 $ 465
Restricted cash 412 348
Unbilled revenues and trade
accounts receivable, net of
allowance of $750 and $701,
respectively 15,912 13,993
Prepaid expenses and other assets 988 353
Total current assets 17,883 15,159
Property and equipment, less
accumulated depreciation 763 476
Goodwill 16,078 16,078
Intangibles, net
Customer contracts 2,243 2,647
Deferred loan costs 398 515
Other 736 769
Total assets $ 38,101 $ 35,644 Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable $ 1,884 $ 1,983
Other accrued expenses 1,323 895
Accrued interest expense - short term 326 -
Accrued salary and benefits 5,661 3,940
Income taxes payable 630 586
Asset-based lending facility 13,085 11,625
10% convertible notes 7,527 7,473
Term loan 2,500 -
Long-term debt - current portion - 8
Total current liabilities 32,936 26,510 Other liabilities:
Term loan - 2,500
Accrued interest expense - long term 334 353
Series D preferred stock subject to
mandatory redemption 1,500 1,500
Total liabilities 34,770 30,863
Stockholders' equity:
Common stock, $0.001 par value,
25,000,000 shares authorized;
4,248,704 shares issued at
March 31, 2008 and December 31, 2007 4 4
Treasury stock - 45,424 shares at cost (105) (105)
Additional paid-in capital 16,733 16,368
Deficit (13,301) (11,486)
Total stockholders' equity 3,331 4,781
Total liabilities and stockholders'
equity $ 38,101 $ 35,644
Tri-S Security Corporation and Subsidiaries
Statements of Cash Flows
Unaudited
(In thousands) Three Months Three Months
Ended Ended
March 31, 2008 March 31, 2007
Cash flow from operating activities:
Net income (loss) $ (1,815) $ (676)
Adjustments to reconcile net
income (loss) to net cash provided
(used) by operating activities:
Gain on Cornwall settlement - (250)
Bad debt expense 50 65
Depreciation and amortization 677 719
Deferred income tax benefits - (179)
Non-cash employee stock option expense 365 76
Non-cash interest expense 54 48
Changes in operating assets and
liabilities:
Unbilled revenues and trade accounts
receivable (1,969) 2,324
Prepaid expenses and other assets (635) (174)
Trade accounts payable (99) (126)
Accrued liabilities 2,448 (83)
Income taxes payable 44 (140) Net cash provided (used) by operating
activities (880) 1,604 Cash flow from investing activities:
Acquisition of subsidiary, net of cash
acquired - -
Restricted cash (64) -
Purchase of property and equipment (384) (12) Net cash provided (used) by investing
activities (448) (12) Cash flow from financing activities:
Proceeds from exercise of stock options - -
Proceeds from (payments on) asset based
lending facility, net 1,460 (1,577)
Proceeds of (repayments on) of term loans - 100
Deferred financing costs (26) (40)
Deferred initial public offering costs - - Net cash provided (used) by financing
activities 1,434 (1,517) Net increase (decrease) in cash and cash
equivalents 106 75
Cash and cash equivalents at beginning
of period 465 66
Cash and cash equivalents at end
of period $ 571 $ 141 Supplemental disclosures of cash
flow information:
Interest paid $ 571 $ 410
Income taxes paid $ 4 $ 14
Tri-S Security Corporation and Subsidiaries
EBITDA, as adjusted
(In thousands) Three Months Ended Three Months Ended
March 31, 2008 March 31, 2007 Net Loss ($1,815) ($676)
Adjustments:
Income tax expense (benefit) 47 (305)
Interest expense, net 868 458
Interest on preferred stock
subject to mandatory redemption 0 75
Other income/(expense) (5) (550)
Amortization of intangible assets 176 235
Amortization of customer contracts 404 406
Depreciation 97 78
Start up costs on new contracts 492 3
Non-cash stock based compensation 365 76 EBITDA, as adjusted $ 629 $ (200)
DATASOURCE: Tri-S Security Corp.
CONTACT: Ronald Farrell, Chief Executive Officer, of Tri-S Security Corporation, +1-678-808-1540, ; or Investor Relations Counsel, of Booke and Company, Inc., +1-212-490-9095, for Tri-S Security Corp.
Web site: http://www.trissecurity.com/ http://www.earnings.com/
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