TRI-S SECURITY CORPORATION 
By Revenue for 2009 Forecasted at
Fourth Quarter and Year Ended
-- Revenues increased 52% for the quarter and 59% for the year, to $35.8
million and $141 million, respectively, from $23.5 million and $88.9
million, respectively, a year ago.
-- Gross profit increased for the quarter and for the year, to $2.2 million
and $11.2 million, respectively, from $0.8 million and $5.5 million,
respectively, a year ago, primarily due to the impact of the significant
contracts awarded to Paragon.
-- The operating loss for the year 2008 was $9.3 million compared to $6.8
million for the year 2007. The operating loss for the year 2008 includes
a goodwill impairment charge of $6.2 million. Without this goodwill
impairment charge, the operating loss for the year 2008 would have been
reduced to $3.1 million, an improvement of $3.7 million over the year
2007.
-- Net loss for the year was $14.1 million compared to a net loss of $4.3
million a year ago. Net loss per share for the year was $3.36 per share
compared to $1.21 per share a year ago.
-- EBITDA, as adjusted, for the year was a positive $1.1 million compared
to a negative $2.9 million a year ago, an improvement of $4.0 million
(see "EBITDA, as adjusted" definition below).
Recent Highlights
-- As part of Tri-S's strategic review of its results and operations,
Tri-S decided to explore the sale of the Cornwall business in order to
focus on the government business conducted by Paragon and to reduce the
overall debt load. After reviewing a number of potential offers, Tri-S
has entered into a non-binding Letter of Intent to sell the Cornwall
business and anticipates closing such sale within forty-five days,
subject to the execution of definitive transaction documents and the
satisfaction of customary closing conditions.
-- Expect 2009 revenue to range from $140-$145 million for Paragon only,
which is an increase year over year for Paragon of 35-40%.
-- Signed a non-binding term sheet, subject to certain closing conditions
with Wells Fargo Business Credit, for a new $25 million asset-based
lending facility which will reduce our fees and interest charges by
approximately $2.0 million on a full-year basis.
-- Paragon awarded two new contracts to provide armed guard services in Los
Angeles and San Diego, California. Both contracts are with the
Department of Homeland Security and include security for the counties
surrounding Los Angeles and San Diego. The Los Angeles contract and the
San Diego contract are valued at approximately $94 and $47 million,
respectively, for a combined total of $141 million in revenue over five
years.
-- Paragon awarded a contract to provide armed and unarmed guard services
in Southern Virginia, scheduled to start April 1, 2009. The contract is
with the Department of Homeland Security and is valued at approximately
$42.5 million in revenue over five years.
-- Total contract pipeline of approximately $531 million, including
approximately $507 million of contracts under bid and approximately $24
million of contracts for which bids have been solicited and are in
preparation.
-- Settlement reached with respect to the litigation regarding Tri-S's
initial public offering, subject to approval by the court.
-- Agreement in principle reached regarding the investigation by Miami Dade
County.
"The objective we set last year for top line growth in 2008 has been achieved with a 59% increase in revenue and total contract awards of
"I am pleased that we are exploring the sale of our Cornwall business in order to concentrate on the government business and to substantially reduce our debt load. So far in 2009, we have continued to maintain our operating costs flat and expect this trend to continue. Overall, we are focused on continuing to grow our government business and are excited about our opportunities during the coming year as evidenced by our current pipeline and the anticipated reduction to our debt costs."
Financial Discussion for Fourth Quarter and Year Ended
During the fourth quarter of 2008, revenue for Tri-S grew 52% to
During the year 2008, Paragon was awarded five new contracts which were transitioned into operations during the latter part of the second quarter and the beginning of the third and fourth quarters.
The gross profit for the fourth quarter of 2008 increased
Selling, general and administrative costs were
The operating loss for the fourth quarter of 2008 was
Net interest expense increased to
Income taxes increased by
For the fourth quarter 2008, Tri-S's net loss was
EBITDA, as adjusted, was a loss of approximately
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; and other income/expense. A reconciliation of EBITDA, as adjusted, to net loss for the quarters and years ended
Tri-S will host a conference call at
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
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About Tri-S Security Corp.
Based in
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
Tri-S Security Corporation and Subsidiaries
Statements of Operations
Unaudited
(In thousands, except per share data)
Three Three Twelve Twelve
Months Months Months Months
Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2008 2007 2008 2007
Revenues $35,824 $23,507 $141,332 $88,943
Cost of revenues:
Direct labor 22,912 15,006 89,938 56,681
Indirect labor and other
contract support costs 10,325 7,271 38,594 25,173
Amortization of
customer contracts 405 404 1,619 1,617
33,642 22,681 130,151 83,471
Gross profit 2,182 826 11,181 5,472
6.1% 3.5% 7.9% 6.2%
Selling, general
and administrative 3,679 2,981 13,590 11,370
Goodwill impairment
loss 2,213 - 6,253 -
Amortization of
intangible assets 110 251 626 927
6,002 3,232 20,469 12,297
Operating income
(loss) (3,820) (2,406) (9,288) (6,825)
Other income (expense):
Interest expense,
net (1,267) (570) (4,966) (2,454)
Interest on series C
Redeemable
preferred stock - - - (211)
Other income 1 98 49 2,549
(1,266) (472) (4,917) (116)
Loss before
income taxes (5,086) (2,878) (14,205) (6,941)
Income tax benefit (55) (691) (87) (2,638)
Net loss $(5,031) $(2,187) $(14,118) $(4,303)
Basic and diluted
net income (loss)
per common share $(1.20) $(0.60) $(3.36) $(1.21)
Basic and diluted
weighted average number
of common shares 4,203 3,661 4,203 3,561
Tri-S Security Corporation and Subsidiaries
Balance Sheets
(In thousands, except per share data)
Draft Audited
Dec. 31, Dec. 31,
2008 2007
Assets
Current assets:
Cash and cash equivalents $1,246 $465
Restricted cash 75 348
Trade accounts receivable, net 16,610 13,993
Prepaid expenses and other assets 903 353
Total current assets 18,834 15,159
Property and equipment, less accumulated
depreciation 611 476
Goodwill 9,825 16,078
Intangibles
Customer contracts 1,028 2,647
Deferred loan costs 797 515
Other 665 769
Total assets $31,760 $35,644
Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable $1,885 $1,983
Other accrued expenses 1,949 903
Accrued salary and benefits 4,055 3,940
Asset based lending facility 19,641 11,625
Accrued interest 534 -
Income taxes payable 67 586
10% convertible notes 1,025 7,473
Total current liabilities 29,156 26,510
Other liabilities:
14% convertible notes 6,470 -
Term loan 2,500 2,500
Accrued interest expense - long term 277 353
Series D preferred stock subject to
mandatory redemption 1,500 1,500
10,747 4,353
Total liabilities 39,903 30,863
Stockholders' equity:
Common stock, $0.001 par value, 25,000,000 4 4
shares authorized, 4,203,280 shares issued
and outstanding at September 30, 2008 and
December 31, 2007.
Treasury stock (105) (105)
Additional paid-in capital 17,562 16,368
Retained deficit (25,604) (11,486)
Total stockholders' equity (8,143) 4,781
Total liabilities and stockholders' equity $31,760 $35,644
Tri-S Security Corporation and Subsidiaries
Statements of Cash Flows
Unaudited
(In thousands)
Three Three Twelve Twelve
Months Months Months Months
Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2008 2007 2008 2007
Cash flow from operating
activities:
Net income (loss) $(5,031) $(2,187) $(14,118) $(4,303)
Adjustments to reconcile net
income (loss) to net cash
provided (used) by operating
activities:
Gain on Paragon settlement - - (1,888)
Gain on Cornwall settlement - - (250)
Bad debt expense 292 188 777 488
Depreciation and amortization 667 763 2,725 2,920
Goodwill impairment loss 2,213 6,253 -
Deferred income tax benefits - (749) (1,974)
Common shares, options and
warrants in exchange for
services and interest 158 74 831 238
Non-cash interest expense (155) 264 22 837
Changes in operating assets
and liabilities:
Unbilled revenues and trade
accounts receivable 9,096 (1,889) (3,394) (1,168)
Prepaid expenses and other
assets 450 238 (550) (52)
Trade accounts payable 685 227 (98) 878
Accrued liabilities (2,291) (702) 1,619 319
Income taxes payable (56) 54 (519) (683)
Net cash provided (used) by
operating activities 6,028 (3,719) (6,452) (4,638)
Cash flow from investing
activities:
Restricted cash - - 273 -
Purchase of property and
Equipment (39) (78) (615) (254)
Net cash provided (used)
by investing activities (39) (78) (342) (254)
Cash flow from financing
activities:
Payment on Paragon settlement - - (1,250)
Proceeds from (payments on) asset
based lending facility, net (5,412) 4,172 8,016 4,119
10% convertible notes tendered - -
14% convertible notes issued - -
Proceeds of (repayments on) of
term loans - - - 2,500
Deferred financing costs (296) (13) (441) (78)
Net cash provided (used) by
financing activities (5,708) 4,159 7,575 5,291
Net increase (decrease) in
cash and cash equivalents 281 362 781 399
Cash and cash equivalents at
beginning of period 465 66 465 66
Cash and cash equivalents at
end of period $746 $428 $1,246 $465
Supplemental disclosures of cash
flow information:
Interest paid $1,178 $540 $4,377 $1,850
Income taxes paid $0 $- $432 $15
Tender of 10% convertible notes
for 14% convertible notes $- $- $6,460
Payment of deferred financing
costs through issuance of
warrants 363
Tri-S Security Corporation and Subsidiaries
EBITDA, as adjusted
Three Three Twelve Twelve
Months Months Months Months
Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2008 2007 2008 2007
Net Loss ($5,031) ($2,187) $(14,118) $(4,303)
Adjustments:
Income tax benefit (55) (691) (87) (2,638)
Interest expense, net 1,267 570 4,966 2,454
Interest on preferred stock
subject to mandatory redemption 0 - 211
Gain on sale of assets 0 0 0 (1,888)
Other income (1) (98) (49) (661)
Amortization of intangible assets 110 251 626 928
Goodwill impairment loss 2,213 - 6,253 -
Amortization of customer
contracts 405 405 1,619 1,617
Depreciation 152 107 480 375
Non-cash stock based
Compensation 158 72 831 236
Start Up Costs 0 198 549 757
EBITDA, as adjusted $ (782) $(1,373) $1,070 $(2,912)
SOURCE Tri-S Security Corp.
