ATLANTA, March 26 /PRNewswire-FirstCall/ -- Tri-S Security Corp. , a provider of security services and equipment for government and private entities, today announced its results of operations for the fourth quarter and year ended December 31, 2007. Tri-S provides security services through its two wholly-owned subsidiaries, The Cornwall Group ("Cornwall") and Paragon Systems, Inc. ("Paragon").
Fourth Quarter and Year Ended December 31, 2007 and Recent Highlights -- Revenues increased 13.8% for the quarter and 17.5% for the year, to $23.5 million and $88.9 million, respectively, from a year ago. -- Gross profit decreased for the quarter and for the year, to $0.8 million and $5.5 million, respectively, from $1.8 million and $7.5 million a year ago, primarily due to start-up costs on new contracts and one-time workers compensation claims totaling $0.8 million for the quarter and $2.8 million for the year. -- Finalized $25 million asset-based lending agreement. -- Expect 2008 revenues to range from $140-$150 million, which is an increase of 57%-68%. -- 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. -- Total contract pipeline of approximately $600 million, including approximately $320 million of contracts under bid and approximately $280 million of contracts for which bids have been solicited and are in preparation.
"The objective we set last year for 2007 of top line growth has been achieved with a 17.5% increase in revenue and total contract awards of $90 million. This amount has been significantly increased by three additional contracts awarded in the last ninety days for up to $306 million." said Ronald Farrell, CEO, Tri-S Security Corp. "The focus remains on continuing this top line growth and improving our margins. Based on our current top line run rate, we expect revenues to increase between 57% and 68% to between $140 million and $150 million in 2008."
"I am pleased with the changes we have made to the business to operate in the current environment," Farrell added. "In addition we have obtained a new asset-based lending facility from our current senior lender which increases the maximum amount available to us to $25 million. So far in 2008, we have continued to maintain our flat operating costs and expect this trend to continue. Overall, we are extremely focused on continuing to grow our business and are excited about our opportunities during the coming year."
Financial Discussion for Fourth Quarter and Year Ended December 31, 2007
During the fourth quarter of 2007, revenue for Tri-S grew 13.8% to $23.5 million from $20.7 million in the fourth quarter of 2006. The revenue increase was primarily the result of new contracts awarded to both Cornwall and Paragon. For the year 2007, revenue grew $13.2 million or 17.5% to $88.9 million as a result of new contract awards. Since 2004, Tri-S has grown revenue at a compound annual rate of 51.8%.
During 2007, Paragon was awarded six new contracts which were transitioned into operation during the latter part of the second quarter and the beginning of the third and fourth quarters. These new contracts and the new business obtained by Cornwall are responsible for driving the revenue growth at Tri-S.
The gross profit for the fourth quarter of 2007 was $0.8 million down from the $1.8 million gross profit in the fourth quarter of 2006. Gross profit for the year decreased to $5.5 million from $7.5 million in 2006. Both of these decreases were primarily due to start-up costs on new contracts and workers compensation adjustments totaling $0.8 million for the fourth quarter of 2007 and $2.8 million for the year. Selling, general and administrative costs were $3 million for both the fourth quarter of 2007 and 2006, while revenue rose in the fourth quarter of 2007 by 13.8% compared to the fourth quarter of 2006. These costs decreased to $11.4 million for the year compared with $11.7 million in 2006 while revenue increased for the same period by 17.5%. These costs represented 12.7% of revenue for the fourth quarter of 2007 down from 14.5% of revenue in the same quarter for 2006. For the year ended December 31, 2007, these same costs represented 12.8% of revenue down from 15.4% for the year ended December 31, 2006. The operating loss for the fourth quarter of 2007 was $2.4 million compared to an operating loss for the fourth quarter of 2006 of $1.4 million. The operating loss for the year was $6.8 million compared to $5.1 million in 2006. Both of these increases were primarily due to start-up costs on new contracts and workers compensation adjustments totaling $0.8 million for the quarter and $2.8 million for the year.
Net interest expense increased to $570,000 in the fourth quarter 2007 compared to $516,000 in the fourth quarter of 2006. For the year, interest expense decreased from $3.4 million in 2006 to $2.7 million in 2007.
EBITDA, as adjusted, was a loss of approximately $1.6 million for the fourth quarter of 2007 compared to a loss of $556,000 for the fourth quarter of quarter of 2006. For the year 2007, EBITDA, as adjusted, was a loss of $3.7 million compared to a loss of $1.8 million for 2006 (see "EBITDA, as adjusted" definition below). Both of these increases were mainly due to start up costs on new contracts and workers compensation adjustments totaling $0.8 million for the quarter and $2.8 million for the year. TRI-S' net loss for the fourth quarter was $1.7 million compared to a net loss of $1.3 million in the fourth quarter of 2006. For the year, TRI-S' net loss was $3.8 million, the same as 2006.
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; and other income/expense. A reconciliation of EBITDA, as adjusted, to net loss for the three -month period ended December 31, 2007, and the twelve-month period ended December 31, 2007 and 2006 is attached to this press release.
Tri-S Security will host a conference call at 10:00 a.m. EDT on Thursday, March 27, 2008. The conference call may be accessed by dialing 877-879-6209 (within the United States) or 719-325-4774 (internationally). Participants should ask for the Tri-S Security 2007 Financial Results conference call.
This call is being webcast by Thomson Financial and can be accessed at Tri-S Security's website at http://trissecurity.com/. The website may also be accessed at Thomson's website at http://earnings.com/. The webcast can be accessed through April 10, 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 . (Due to its length, this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists.)
About Tri-S Security Corp.
Based in Atlanta, GA, Tri-S Security Corp. 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, 2006. 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 Audited (In thousands, except per share data) Three Three Twelve Twelve Months Months Months Months Ended Ended Ended Ended December December December December 31, 2007 31, 2006 31, 2007 31, 2006 Revenues $23,507 $20,664 $88,943 $75,725 Cost of revenues: Direct labor 15,006 13,115 56,681 47,353 Indirect labor and other contract support costs 7,271 5,280 25,173 19,256 Amortization of customer contracts 404 405 1,617 1,638 22,681 18,800 83,471 68,247 Gross profit 826 1,864 5,472 7,478 Selling, general and administrative 2,981 2,987 11,370 11,682 Amortization of intangible assets 251 232 927 928 3,232 3,219 12,297 12,610 Operating (loss) (2,406) (1,355) (6,825) (5,132) Income from investment in Army Fleet Support, LLC - - - 384 Other income (expense): Interest expense, net (570) (441) (2,454) (3,134) Interest on series C redeemable preferred stock - (75) (211) (300) Gain on sale of Army Fleet Support, LLC - - - 1,903 Other income 98 (102) 2,549 752 (472) (618) (116) (779) Loss before income taxes (2,878) (1,973) (6,941) (5,527) Income tax benefit (1,173) (662) (3,120) (1,694) Net loss $(1,705) $(1,311) $(3,821) $(3,833) Basic and diluted net (loss) per common share $(0.46) $(0.37) $(0.91) $(1.11) Basic and diluted weighted average number of common shares 3,723 3,544 4,203 3,448 Tri-S Security Corporation and Subsidiaries Balance Sheets (In thousands, except per share data) Audited Audited December 31, December 31, 2007 2006 Assets Current assets: Cash and cash equivalents $465 $66 Trade accounts receivable, net 13,993 13,313 Prepaid expenses and other assets 701 649 Total current assets 15,159 14,028 Property and equipment, less accumulated depreciation 476 597 Deferred taxes 482 - Goodwill 16,078 16,078 Intangibles Customer contracts 2,647 4,264 Deferred loan costs 515 1,143 Other 769 991 Total assets $36,126 $37,101 Liabilities and Stockholders' Equity Current liabilities: Trade accounts payable $1,983 $1,104 Other accrued expenses 895 1,227 Accrued salary and benefits 3,940 3,240 Factoring facility 11,625 7,506 Income taxes payable 586 1,269 10% convertible notes 7,473 Series C preferred stock subject to mandatory redemption - 6,000 Long-term debt - current portion 8 284 Total current liabilities 26,510 20,630 Other liabilities: 10% convertible notes - 7,273 Deferred income taxes - 1,974 2007 term loan 2,500 - Accrued interest expense - long term 353 400 Series D preferred stock subject to mandatory redemption 1,500 - 4,353 9,647 Total liabilities 30,863 30,277 Stockholders' equity: Common stock, $0.001 par value, 25,000,000 shares authorized, 4,248,704 and 3,503,280 shares issued and outstanding at December 31, 2007 and December 31, 2006, respectively 4 3 Treasury stock (105) (105) Additional paid-in capital 16,368 14,109 Retained deficit (11,004) (7,183) Total stockholders' equity 5,263 6,824 Total liabilities and stockholders' equity $36,126 $37,101 Tri-S Security Corporation and Subsidiaries Statements of Cash Flows Audited (In thousands) Twelve Months Twelve Months Ended Ended December 31, December 31, 2007 2006 Cash flow from operating activities: Net (loss) $(3,821) $(3,833) Adjustments to reconcile net (loss) to net cash (used) by operating activities: Gain on Paragon settlement (1,888) - Gain on Cornwall settlement (250) - Gain on sale of non-core assets - (2,381) Payment made for Paragon settlement (1,250) - Income from joint venture, net - (384) Bad debt expense 488 59 Depreciation and amortization 2,920 2,909 Deferred income tax benefits (2,456) (3,095) Common shares, options and warrants in exchange for services and interest 238 377 Non-cash interest expense 837 875 Changes in operating assets and liabilities: Unbilled revenues and trade accounts receivable (1,168) (2,345) Prepaid expenses and other assets (52) 418 Trade accounts payable 878 (95) Accrued liabilities 319 (1,486) Income taxes payable (683) 1,426 Net cash (used) by operating activities (5,888) (7,555) Cash flow from investing activities: Acquisition of subsidiary, net of cash acquired - (3) Proceeds from sale of investment in joint venture - 10,810 Distributions from investment in joint venture - 175 Proceeds from sale of assets - 1,301 Purchase of property and equipment (254) (203) Net cash provided (used) by investing activities (254) 12,080 Cash flow from financing activities: Proceeds from exercise of stock options - 9 Proceeds from factoring facility, net 4,119 315 Proceeds of (repayments on) of term loans 2,500 (5,092) Deferred financing costs (78) (43) Deferred initial public offering costs - (111) Net cash provided (used) by financing activities 6,541 (4,922) Net increase (decrease) in cash and cash equivalents 399 (397) Cash and cash equivalents at beginning of period 66 463 Cash and cash equivalents at end of period $465 $66 Supplemental disclosures of cash flow information: Interest paid $1,850 $1,873 Income taxes paid $15 $149 Satisfaction of officer note through issuance of treasury stock $- $105 Tri-S Security Corporation and Subsidiaries EBITDA, as adjusted Three Three Twelve Twelve Months Months Months Months Ended Ended Ended Ended December 31, December 31, December 31, December 31, 2007 2006 2007 2006 Net Loss $(1,705) $(1,311) $(3,821) $(3,833) Adjustments: Income tax expense (benefit) (1,173) (662) (3,120) (1,694) Interest expense, net 570 441 2,454 3,134 Interest on preferred stock subject to mandatory redemption - 75 211 300 Gain on sale of assets - - (1,888) (2,381) Other income/(expense) (98) 102 (661) (274) Income from Investment in Army Fleet Support, LLC - - - (384) Amortization of intangible assets 252 232 928 942 Amortization of customer contracts 404 405 1,617 1,624 Depreciation 108 84 375 341 Non-cash stock based compensation 74 78 236 377 EBITDA, as adjusted $(1,568) $(556) $(3,669) $(1,848)
