Tri-S Security Announces Results for
the 1st Quarter Ended March 31, 2008
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.
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.
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)
Source: Tri-S Security Corp.
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