TRI-S SECURITY CORPORATION 
By Sale of Cornwall business will reduce debt by approximately
First Quarter Ended
-- Revenues increased 80% to $29.3 million for the quarter ended March 31,
2009.
-- Gross profit increased 28% to $0.9 million from a year ago.
-- Gross margins were 3.1% compared to 4.3% a year ago. The difference
between 2009 and 2008 is primarily attributable to an existing contract
awarded to Paragon with a lower margin.
-- EBITDA, as adjusted (see "EBITDA, as adjusted" definition
below), declined to a negative $398,000 from a break-even position a
year ago.
-- Net loss per basic and diluted share was $(0.77) for the quarter ended
March 31, 2009, compared to $(0.51) a year ago.
Recent Highlights
-- In March 2009, Tri-S Security determined to sell substantially all of
the assets (except accounts receivable) of its wholly-owned subsidiary,
The Cornwall Group, Inc. ("Cornwall"), and certain of its
subsidiaries. Cornwall is based in Miami, Florida and provides physical
security for clients in Miami, Fort Lauderdale, and West Palm Beach,
Florida. Tri-S Security determined to sell the Cornwall business so that
Tri-S could focus on growing the government business and reduce its
overall debt load. The sale was completed on May 13, 2009. This
transaction will reduce our overall debt load by approximately $7.0
million, $750,000 of which will be held in escrow to secure the
continuation of certain contracts transferred as part of the sale.
-- Total Paragon contract pipeline of approximately $583 million, all of
which has already been bid. We expect these contracts to be awarded over
the next six months.
"Our top line growth showed significant improvement compared to the first quarter of 2008 and was stable compared to the previous quarter ended
"The trends in our contract pipeline remain very encouraging for continued top line growth. I am pleased we were able to complete the sale of the Cornwall business and to reduce our debt by approximately
Financial Discussion for First Quarter Ended
During the first quarter of 2009, revenue for Tri-S Security grew 80% to
The gross profit for the first quarter of 2009 was
Gross margins were 3.1% compared to 4.3% a year ago. The difference between 2009 and 2008 is primarily attributable to an existing contract awarded to Paragon with a lower margin.
General and administrative costs were
The operating loss for the first quarter of 2009 was
EBITDA, as adjusted, was a negative
Interest expense, net, increased to
A loss of
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; loss from discontinued operations; 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 quarters ended
Tri-S Security 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://www.trissecurity.com. The webcast may also be accessed at Thomson's website at http://www.earnings.com. The webcast can be accessed through
http://www.microsoft.com/windows/windowsmedia/download/alldownloads.aspx.
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)
Adjusted Adjusted
Three Months Three Months
Ended Ended
Mar. 31, 2009 Mar. 31, 2008
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Revenues $29,322 $16,291
Cost of revenues:
Direct labor 18,473 9,896
Indirect labor and other contract
support costs 9,929 5,626
Amortization of customer contracts 23 67
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28,425 15,589
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Gross profit 897 702
3.1% 4.3%
Selling, general and administrative 2,043 1,690
Amortization of intangible assets 118 163
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2,161 1,853
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Operating income (loss) (1,264) (1,151)
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Other income (expense):
Interest expense, net (1,384) (765)
Other income 5 5
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(1,379) (760)
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Loss before income taxes (2,643) (1,911)
Income tax expense (benefit) 2 47
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Net loss, prior to discontinued
operations $(2,645) $(1,958)
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Discontinued Operations, net of tax (574) (171)
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Net Loss $(3,219) $(2,129)
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Basic and diluted net income (loss) per
common share $(0.77) $(0.51)
Basic and diluted weighted average
number of common shares 4,203 4,203
Tri-S Security Corporation and Subsidiaries
Balance Sheets
(In thousands, except per share data)
Unaudited Audited
Mar. 31, December 31,
2009 2008
--------- ------------
Assets
Current assets:
Cash and cash equivalents $- $422
Restricted cash - -
Trade accounts receivable, net 15,426 12,465
Prepaid expenses and other assets 775 676
Assets Held for Sale 7,389 9,028
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Total current assets 23,590 22,591
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Property and equipment, less accumulated
depreciation 664 597
Goodwill 7,747 7,747
Intangibles
Customer contracts - 22
Deferred loan costs 695 797
Other - 6
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Total assets $32,696 $31,760
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Liabilities and Stockholders' Equity
Current liabilities:
Bank Overdraft $85 $-
Trade accounts payable 1,932 1,556
Other accrued expenses 476 1,315
Accrued salary and benefits 6,765 5,134
Asset based lending facility 18,984 15,776
Accrued interest 946 534
Income taxes payable 59 67
10% convertible notes 900 1,025
Liabilities Held for Sale 4,632 5,480
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Total current liabilities 34,779 30,886
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Other liabilities:
14% convertible notes 6,607 6,470
Deferred income taxes - -
Term loan 2,500 2,500
Accrued interest
expense - long term 259 277
Series D preferred stock subject to
mandatory redemption 1,500 1,500
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10,866 10,747
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Total liabilities 45,645 41,633
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Stockholders' equity:
Common stock, $0.001 par value, 25,000,000
shares authorized, 4,203,280 shares issued
and outstanding at September 30, 2008 and
December 31, 2007. 4 4
Treasury stock (105) (105)
Additional paid-in capital 17,705 17,562
Retained deficit (30,553) (27,334)
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Total stockholders' equity (12,949) (9,873)
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Total liabilities and stockholders' equity $32,696 $31,760
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Tri-S Security Corporation and Subsidiaries
Statements of Cash Flows
Unaudited
(In thousands)
Three Months Three Months
Ended Ended
Mar. 31, 2009 Mar. 31, 2008
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Cash flow from operating activities:
Net income (loss) $(2,645) $(1,958)
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating
activities:
Depreciation and amortization 231 272
Non-cash employee stock option expense 134 365
Non-cash interest expense 12 54
Changes in operating assets and liabilities:
Unbilled revenues and trade accounts
receivable (2,961) (2,213)
Prepaid expenses and other assets (99) (624)
Trade accounts payable 376 85
Accrued liabilities 1,186 3,130
Income taxes payable 29 44
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Net cash provided (used) by operating
activities (3,737) (845)
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Cash flow from investing activities:
Purchase of property and equipment (158) (384)
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Net cash provided (used) by investing
activities (158) (384)
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Cash flow from financing activities:
Bank Overdraft 85 -
Proceeds from (payments on) asset
based lending facility, net 3,208 1,889
Deferred financing costs (1) (26)
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Net cash provided (used) by financing
activities 3,292 1,863
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Cash flow from discontinued operations:
Net cash provided (used) by operating
activities (401) (128)
Net cash provided (used) by investing
activities
Net cash provided (used) by financing
activities 582 (624)
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Net cash provided (used) by discontinued
operations 181 (752)
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Net increase (decrease) in cash and cash
equivalents (422) (118)
Cash and cash equivalents at beginning of period 422 373
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Cash and cash equivalents at end of period - 255
= ===
Supplemental disclosures of cash flow information:
Interest paid - continuing operations $969 $468
Interest paid - discontinued operations 91 103
Income taxes paid 10 4
Tender of 10% convertible notes for 14%
convertible notes 116
Payment of deferred financing
costs through issuance of warrants 9
Tri-S Security Corporation and Subsidiaries
EBITDA, as adjusted
Three Months Three Months
Ended Ended
Mar. 31, 2009 Mar. 31, 2008
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Net Loss ($3,219) ($2,129)
Adjustments:
------------
Discontinued operations, net of tax 574 171
Income tax expense (benefit) 2 47
Interest expense, net 1,384 765
Interest on preferred stock
subject to mandatory redemption 0 0
Gain on sale of assets 0 0
Other income (5) (5)
Amortization of intangible assets 118 163
Goodwill impairment loss - -
Amortization of customer contracts 23 67
Depreciation 90 41
Non-cash stock based compensation 134 365
Start Up Costs 501 519
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EBITDA, as adjusted $(398) $4
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SOURCE Tri-S Security Corp.
