Argyle Security, Inc. Announces Financial Results for the Fourth Quarter and Full Year 2007.Fourth Quarter 2007 Adjusted Pro Forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma (1) Financial Highlights vs. Fourth Quarter 2006 * Revenues Increased by 63% to $27.0 Million * Gross Margins Increased by 783 Basis Points to 26.7% * EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become Margin Rose to 8.6%, Up from 2.3% * EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. (Diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. ) of $0.15, Compared to Net Loss per Share of $0.04 Full Year 2007 Adjusted Pro Forma Financial Highlights vs. Full Year 2006 * Revenues Increased by 51% to $87.2 Million * Gross Margins Increased by 374 Basis Points to 24.1% * EBITDA Margin Rose to 7.0%, Up from 3.1% * EPS (Diluted) of $0.39, Compared to Net Loss per Share of $(0.12) Business Highlights * Completed Three Strategic Acquisitions in January 2008 * Reorganized re·or·gan·ize v. re·or·gan·ized, re·or·gan·iz·ing, re·or·gan·iz·es v.tr. To organize again or anew. v.intr. To undergo or effect changes in organization. Business Units in February 2008 to Better Support Growth Initiatives SAN ANTONIO San Antonio (săn ăntō`nēō, əntōn`), city (1990 pop. 935,933), seat of Bexar co., S central Tex., at the source of the San Antonio River; inc. 1837. -- Argyle Security, Inc. (OTC OTC See: Over-the-counter. OTC See over-the-counter market (OTC). BB:ARGL), ("Argyle") a service and solutions provider in the physical electronic security industry, today announced financial results for the three months and full year ended December 31, 2007. Adjusted Pro Forma Results For the three months ended December 31, 2007, Argyle's adjusted pro forma revenues increased by 63%, to $27.0 million, compared to $16.5 million for the same period last year. Adjusted pro forma gross profit increased by 131% to $7.2 million, or 26.7% of sales, compared to $3.1 million, or 18.9% of sales, in the comparable period of 2006. The improvement in adjusted pro forma gross margin was largely due to a greater percentage of design-build versus hard-bid contracts, the development of software to automate To turn a set of manual steps into an operation that goes by itself. See automation. production and increased margins in service revenues. Adjusted pro forma operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. for the fourth quarter of 2007 was $1.9 million, compared to an adjusted pro forma operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $15,000 in the fourth quarter of 2006. EBITDA rose to $2.3 million in the fourth quarter of 2007, compared to $375,000 in the prior year period. The EBITDA margin increased to 8.6% from 2.3%. In the fourth quarter of 2007, adjusted pro forma net income was $962,000, or $0.17 per share (basic) and $0.15 per share (diluted), compared to an adjusted pro forma net loss of $246,000, or $(0.04) per share (basic and diluted), in the prior-year period. For the full year ended December 31, 2007, Argyle's adjusted pro forma revenues increased by 51% to $87.2 million, compared to $57.8 million in the same period of 2006. Adjusted pro forma gross profit increased by 79% to $21.0 million, or 24.1 % of sales, compared to $11.8 million, or 20.4% of sales, for 2006. The improvement in gross margin was largely due to a greater percentage of design-build versus hard-bid contracts, the development of software to automate production and increased margins in service revenues. EBITDA more than tripled in 2007, rising to $6.1 million, compared to $1.8 million in 2006. The EBITDA margin increased to 7.0%, up from 3.1%. Adjusted pro forma net income for the year ended December 31, 2007 was $2.7 million, or $0.46 and $0.39 per basic and diluted share, respectively, compared to a net loss of $674,000, or $(0.12) per share basic and diluted share, in the prior-year period. Argyle consummated con·sum·mate tr.v. con·sum·mat·ed, con·sum·mat·ing, con·sum·mates 1. a. To bring to completion or fruition; conclude: consummate a business transaction. b. its acquisition of ISI ISI International Sensitivity Index, see there Security Group (now Argyle Security USA) on July 31, 2007. Argyle Security USA was Argyle's first acquisition (prior to which Argyle was a blank check Blank check A check that is duly signed, but the amount of the check is left blank to be supplied by the drawee. company) and, accordingly, Argyle does not believe that a comparison of the results of operations for the quarter and year ended December 31, 2007, versus Argyle's December 31, 2006 results of operations for the same periods is useful to stockholders. Hence, Argyle is reporting adjusted pro forma results of operations for the Company as if the acquisition of Argyle Security USA occurred on January 1, 2006. Additionally, Argyle has excluded the amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. and goodwill associated with the merger. (See Disclosure Regarding Non-GAAP Financial Measures below.) Argyle derived the adjusted pro forma results of operations from (i) the audited consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge of ISI for the period from January 1, 2007 to July 31, 2007 (the date of the ISI acquisition) and (ii) our audited consolidated financial statements for the years ended December 31, 2007 and December 31, 2006. Actual Results Revenues and gross profit for the fourth quarter of 2007 were $27.0 million and $6.4 million, respectively; Argyle had no revenues or gross profit in the fourth quarter of 2006. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. was $696,600 for the three months ended December 31, 2007 compared to an operating loss of $215,200 in the fourth quarter of 2006. Argyle's net income for the three months ended December 31, 2007 was $234,300 or $(0.04) per share (basic and diluted), compared to net income of $101,400, or $0.02 per share, in the fourth quarter of 2006. Revenues and gross profit for the full year ended December 31, 2007 were $44.1 million and $10.0 million, respectively. Argyle began to generate revenues and gross margin in August 2007 in connection with the acquisition of ISI Security Group; therefore, Argyle had no revenues or gross profit in 2006. Argyle's operating income was $221,000 for 2007, compared to an operating loss of $1.0 million for 2006. Net income for 2007 was $219,000, or $0.04 per basic and diluted share, respectively, compared to net income of $173,000, or $0.04 per basic and diluted share, for 2006. Backlog((2)) Argyle's backlog as of December 31, 2007 was $106.6 million, compared to $84.6 million as of December 31, 2006. In January 2008, Argyle received notice from a customer disputing certain terms and conditions related to its contract with the Company, and pursuant to subsequent negotiations, the Company and the customer mutually decided to amend the contract. The $106.6 million backlog is the net backlog after taking into account the anticipated reduction of $15.6 million as a result of amending the contract. Under the amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. contract, Argyle will continue to sell its products to the customer through a third party, from which Argyle expects to receive approximately $3.4 million of additional revenues in March. Management Overview Bob Marbut, Chairman and Co-CEO of Argyle Security, stated, "We're very proud of the goals that have been achieved since Argyle Security became an operating company operating company A business that engages in transactions with outsiders. . For example, since July 2007, we have reported two full quarters of impressive pro forma financial results, completed three strategic acquisitions and reorganized our business units to better support our strategic growth initiatives. While our search for strategic acquisitions continues, it is important to note that our organic growth remains extremely robust. The 63% increase in adjusted pro forma revenues for the fourth quarter was entirely organic, as the three recently announced acquisitions didn't close until the first quarter of 2007. Because we now have a strong platform in place from which to further grow our business, we remain very optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about our prospects for 2008." Sam Youngblood, President of Argyle Security USA, commented, "Our fourth quarter pro forma results not only reflect the continued strength of industry demand, but also solid execution on our part. The improvement in our gross and EBITDA margins is indicative of this execution, as we were able to generate a greater proportion of design-build versus hard-bid revenues, reduce our production and delivery costs through software tool development, code compression and training, and improve the margins of our service revenues. "Since January 1, 2008, Argyle has begun to implement several new initiatives aimed at maximizing revenues and minimizing costs; this includes leveraging the best technology from each of our businesses across the entire organization. As an example, we discovered that some of the technology used by the acquired companies was superior to the technology that Argyle was using, especially as it pertained to lowering production costs. Conversely con·verse 1 intr.v. con·versed, con·vers·ing, con·vers·es 1. To engage in a spoken exchange of thoughts, ideas, or feelings; talk. See Synonyms at speak. 2. , some software development systems that were created by Argyle are much faster and more efficient than those of the acquired companies. The current effort to "swap technology" is proceeding on plan, and we expect to see production cost savings as a result. Similarly, the vertical integration we gained through one of these acquisitions, and the ability to more effectively market our products by packaging sales among our existing and new operating units operating unit A type of operating company that engages in transactions with outsiders and that is owned by another business. For example, in 1995 the stockholders of Capital Cities/ABC approved a $19 billion merger with the Walt Disney Company, whereupon , should help to drive revenue growth," he concluded. Ron Chaimovski, Vice-Chairman and Co-CEO of Argyle Security, added, "Amid slowdowns in many other sectors of the economy, the corrections market continues to flourish. An increase in incarceration Confinement in a jail or prison; imprisonment. Police officers and other law enforcement officers are authorized by federal, state, and local lawmakers to arrest and confine persons suspected of crimes. The judicial system is authorized to confine persons convicted of crimes. rates and prison overcrowding overcrowding overcrowding of animal accommodation. Many countries now publish codes of practice which define what the appropriate volumetric allowances should be for each species of animal when they are housed indoors. Breaches of these codes is overcrowding. remains a critical concern in the U.S., particularly within some of the states in which we operate. Furthermore, in the commercial and governmental markets, we see increased demand for security in key vertical markets, such as utilities, chemical plants, ports and energy providers, which we expect will drive growth in 2008." Argyle Reiterates Guidance for 2008 Including the acquisitions completed in January 2008, Argyle continues to expect full-year 2008 pro forma revenues to be in the range of $128 to $142 million. Argyle expects 2008 pro forma EBITDA margins to be in the range of 9 to 10%. Conference Call Information Argyle Security will host a conference call at 10 A.M. ET on Wednesday, March 26 to discuss its financial results for the fourth quarter and full year ended December 31, 2007. Interested parties should call 888-679-8035 (domestic) or 617-213-4848 (international) at least five minutes before the scheduled start time; the passcode is 89344078. Participants may also access this call via the Internet at: http://www.argylesecurity.com/ For those who are unavailable to listen to the live broadcast, a replay will be available through April 9, 2008 and can be accessed by dialing 888-286-8010 (domestic), and 617-801-6888 (international). The passcode is 80350095. Disclosure Regarding Non-GAAP Financial Measures EBITDA (earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). . Argyle and ISI compute To perform mathematical operations or general computer processing. For an explanation of "The 3 C's," or how the computer processes data, see computer. EBITDA using the same consistent method from quarter to quarter. Following the attached financial statements is a reconciliation of EBITDA to net loss. As discussed in "Adjusted Pro Forma Results("), Argyle excludes amortization expense from such results, since the amortization expense is a direct result of the acquisition of ISI and may not be indicative of future expenditures or business combinations.. The presentation of EBITDA and Adjusted Pro Forma Results is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP. (1) The adjusted pro forma results of operations are not necessarily indicative of the results of operations that may have actually occurred had the merger taken place on the dates noted, or the future financial position or operating results of Argyle or ISI. The pro forma adjustments are based upon available information and assumptions that we believe are reasonable. A reconciliation to GAAP financials is provided in this release. (2) After adjusting for intercompany eliminations, the adjusted backlog was $86.9 million as of December 31, 2007, $66.3 million as of December 31, 2006. The adjusted backlog for December 31, 2007 reflects a reduction of $13.0 million related to the amended customer contract. About Argyle Security, Inc. Formed in 2005 and headquartered in San Antonio, TX, Argyle Security's goal is to become a leading global provider of services and solutions in the physical electronic security industry through an integrated buildup build·up also build-up n. 1. The act or process of amassing or increasing: a military buildup; a buildup of tension during the strike. 2. strategy. Argyle's channel focus is Video Surveillance, Access Control, Perimeter The boundary of a system or network, which defines the inside and outside. It is typically determined by firewalls and addresses. See DMZ. Protection, Intrusion Protection, Fire Detection and Threat Analysis, serving selected commercial, governmental and residential markets. In July 2007, Argyle acquired ISI Security Group. In February 2008, Argyle formed Argyle Security USA, which encompasses the former ISI Security Group's operations in both the corrections and commercial sectors, plus the PDI PDI Protein Disulfide Isomerase PDI Personal Docente e Investigador (Spanish: Personal Educational and Investigating) PDI Pre Delivery Inspection PDI Professional Development Institute , Com-Tec and FireQuest acquisitions. Argyle Security, Inc. currently has two reporting segments: Argyle Corrections and MCS-Commercial. Argyle Corrections is the controlling entity for ISI-Detention, PDI, Com-Tec and MCS-Detention. Argyle Corrections Group is one of the nation's largest providers of detention equipment products and service solutions, as well as turnkey See turnkey system. , electronic security systems. These systems include unique engineering competencies and proprietary software products. MCS-Commercial operates as its own entity, under Argyle Security USA, and provides turnkey, electronic security systems to the commercial market. Please visit http://www.argylesecurity.com/ or http://www.argylesecurityusa.com/ for additional information on Argyle Security and ISI. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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