Fortress International Group, Inc. Reports $6.0 Million Loss for the Second
Quarter of 2008
Company Recorded $1.2 Million of Goodwill Impairment Charge;
COLUMBIA, Md., Aug. 12 /PRNewswire-FirstCall/ -- Fortress International
Group, Inc. (Nasdaq: FIGI), a company providing comprehensive services for the
planning, design, development and maintenance of mission-critical facilities
and information infrastructure, announced today financial results for the
second quarter of 2008.
For the three months ended June 30, 2008, the Company reported revenue of
$20.1 million and a net loss of $6.0 million, or $0.50 per basic and diluted
share, compared to revenue of $10.9 million and a net loss of $2.6 million, or
$0.21 per basic and diluted share, for the second quarter of 2007. The loss
included a charge to cost of revenue of $645,000 associated with a customer
collections concern and a charge to selling, general and administrative
expenses of $675,000 in deferred acquisition costs associated with the
Company's ongoing acquisition strategy. The results also included a total of
$1.2 million of impairment charges to goodwill.
For the six months ended June 30, 2008, the Company reported revenue of
$39.6 million and a loss of $8.3 million, or $0.69 per basic and diluted
share, compared to revenue of $19.5 million and a net loss of $3.6 million, or
$0.31 per basic and diluted share, for the six months ended June 30, 2007.
The loss included a charge to cost of revenue of $645,000 associated with a
customer collections concern and a charge to selling, general and
administrative expenses of $675,000 in deferred acquisition costs associated
with the Company's ongoing acquisition strategy. The results also included a
total of $1.2 million of impairment charges to goodwill.
Excluding the $1.2 million impairment charge, and $0.7 million in non-cash
compensation, the adjusted EBITDA loss for the quarter ended June 30, 2008 was
approximately $2.7 million compared to an adjusted EBITDA loss of $1.7 million
for the quarter ended June 30, 2007.
Excluding the $1.2 million impairment charge, and $1.0 million in non-cash
compensation, the adjusted EBITDA loss for the six months ended June 30, 2008
was approximately $3.6 million compared to an adjusted EBITDA loss of $2.6
million for the six months ended June 30, 2007.
Timothy C. Dec, Chief Financial Officer of Fortress said, "It is our
objective to get this company to profitability in 2008. Although our revenues
increased and we continue to be awarded new business and build backlog, we
have not generated the financial results that we were anticipating to achieve.
As a result, we are taking corrective actions immediately to address the
losses we have incurred. The actions we are taking should result in an initial
annual cost savings of more than $4 million. The moves are across the board,
including reductions in the salaries of senior management. While difficult to
make, these actions should reduce our fixed cost structure going forward.
During the second quarter of 2008, we evaluated the carrying value of goodwill
and other long lived intangible assets for impairment. Utilizing a third
party, we determined that the carrying value was in excess of fair value,
resulting in an impairment charge of approximately $1.2 million."
Thomas P. Rosato, Chief Executive Officer of Fortress said, "The industry
in which we operate remains vibrant and our customer satisfaction level
remains very high. The re-alignment of our cost structure should not affect
our go-to-market strategy or our ability to respond to our customer
requirements. The ramp-up of higher margin facilities management business has
taken longer than we hoped so these latest moves position us to operate more
effectively with our existing backlog of business."
The Company defines adjusted EBITDA as earnings before non-cash
stock-based compensation, interest, taxes, depreciation, amortization and
impairment losses. The Company uses adjusted EBITDA as a measure of the
Company's operating trends. Investors are cautioned that adjusted EBITDA is
not a measure of liquidity or of financial performance under Generally
Accepted Accounting Principles (GAAP). The adjusted EBITDA numbers presented
may not be comparable to similarly titled measures reported by other
companies. Adjusted EBITDA, while providing useful information, should not be
considered in isolation or as an alternative to net income or cash flows as
determined under GAAP. Consistent with Regulation G under the U.S. federal
securities laws, the non-GAAP measures in this press release have been
reconciled to the nearest GAAP measure, and this reconciliation is located
under the heading "Adjusted EBITDA Reconciliation" following the Consolidated
Statements of Operations included in this press release.
The Company will conduct a conference call and webcast to discuss its
financial results and other development in the business on Wednesday, August
13, 2008 at 8:30 a.m. EDT. The call may be accessed live by dialing
877-545-1407, passcode 4784711, five minutes before the start of the call.
The audio webcast will be available via the Internet at:
www.thefigi.com
The webcast and conference call will be archived after its completion and
will remain available through August 28, 2008 by dialing 888-203-1112 and
entering replay passcode 4784711.
FORTRESS INTERNATIONAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2008 2007
----------- -----------
(unaudited) (audited)
Current Assets
Cash and cash equivalents $8,401,630 $13,172,210
Contract and other receivables,
net 17,261,140 18,349,140
Costs and estimated earnings in
excess of billings on
uncompleted contracts 1,775,891 1,322,254
Prepaid expenses and other
current assets 602,156 301,487
Income taxes receivable 893,322 893,322
---------- ----------
Total current assets 28,934,139 34,038,413
Property and equipment, net 998,380 1,044,545
Goodwill 21,786,509 20,714,967
Intangible assets, net 20,656,626 21,089,136
Other assets 362,580 512,000
----------- -----------
Total assets $72,738,234 $77,399,061
Liabilities and Stockholders'
Equity
Current Liabilities
Notes payable, current portion $1,252,227 $1,650,306
Accounts payable and accrued
expenses 18,530,298 16,121,492
Billings in excess of costs and
estimated earnings on
uncompleted contracts 4,788,740 3,880,279
---------- ----------
Total current liabilities 24,571,265 21,652,077
Notes payable, less current
portion 7,106,238 7,848,661
Other liabilities 54,506 44,648
---------- ----------
Total liabilities 31,732,009 29,545,386
Commitments and Contingencies - -
Stockholders' Equity
Preferred stock- $.0001 par
value; 1,000,000 shares
authorized; no shares
issued or outstanding - -
Common stock -- $.0001 par
value, 100,000,000 shares
authorized; 12,263,963
and 12,150,400 issued;
12,099,898 and 11,992,325
outstanding at June 30,
2008 and December 31,
2007, respectively 1,226 1,214
Additional paid-in capital 56,743,192 55,268,012
Treasury stock, 164,065 and
158,075 shares at cost at June
30, 2008 and December 31,
2007, respectively (842,312) (814,198)
Accumulated deficit (14,895,881) (6,601,353)
----------- ----------
Total stockholders' equity 41,006,225 47,853,675
----------- -----------
Total liabilities and
stockholders' equity $72,738,234 $77,399,061
FORTRESS INTERNATIONAL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Successor
(Fortress International Group, Inc.)
Three Months Ended
--------------------------------
June 30, 2008 June 30, 2007
----------- -----------
(unaudited) (unaudited)
Results of Operations:
Revenue $20,149,876 $10,862,307
Cost of revenue 18,038,179 9,424,029
---------- ---------
Gross profit 2,111,697 1,438,278
Operating expenses:
Selling, general and
administrative 5,657,424 3,424,040
Depreciation 123,217 97,245
Amortization of intangibles 619,436 567,108
Impairment loss on goodwill 1,217,000 -
--------- ---------
Total operating costs 7,617,077 4,088,393
Operating loss (5,505,380) (2,650,115)
Interest income (expense), net (101,938) 273,467
--------- ----------
Loss from operations before
income taxes (5,607,318) (2,376,648)
Income tax expense (benefit) 387,000 182,316
--------- ---------
Net loss $(5,994,318) $(2,558,964)
Per Common Share (Basic and
Diluted):
Basic and diluted net loss $(0.50) $(0.21)
Weighted average common shares
outstanding-basic and diluted 12,093,895 12,013,491
Predecessor
Successor (TSS/
(Fortress International Group, Inc.) Vortech)
For the
period
January 1,
Six Months Ended through
---------------------------- January 19,
June 30, 2008 June 30, 2007 2007
------------ ------------- ----------
(unaudited) (unaudited) (audited)
Results of Operations:
Revenue $39,581,956 $19,539,244 $1,412,137
Cost of revenue 34,059,068 16,629,595 1,108,276
---------- ---------- ---------
Gross profit 5,522,888 2,909,649 303,861
Operating expenses:
Selling, general and
administrative 10,428,454 6,061,980 555,103
Depreciation 238,456 152,676 33,660
Amortization of
intangibles 1,401,498 1,007,562 -
Impairment loss on
goodwill 1,217,000 - -
---------- --------- -------
Total operating costs 13,285,408 7,222,218 588,763
Operating loss (7,762,520) (4,312,569) (284,902)
Interest income (expense),
net (145,008) 372,272 3,749
--------- --------- -------
Loss from operations before
income taxes (7,907,528) (3,940,297) (281,153)
Income tax expense (benefit) 387,000 (349,325) -
---------- ---------- --------
Net loss $(8,294,528) $(3,590,972) $(281,153)
Per Common Share (Basic and
Diluted):
Basic and diluted net loss $(0.69) $(0.31) $-
Weighted average common
shares outstanding-basic
and diluted 12,083,483 11,592,599 -
FORTRESS INTERNATIONAL GROUP, INC.
ADJUSTED EBITDA RECONCILIATION
Successor
(Fortress International Group, Inc.)
Three Months Ended
-------------------------------
June 30, 2008 June 30, 2007
------------- -------------
(unaudited) (unaudited)
Net loss $(5,994,318) $(2,558,964)
Interest 101,938 (273,467)
Taxes 387,000 182,316
Depreciation 123,217 97,245
Amortization 816,102 567,108
--------- ---------
EBITDA (4,566,061) (1,985,762)
Non-cash equity based
compensation 654,667 263,074
Impairment loss on intangibles 1,217,000 -
--------- ---------
Adjusted EBITDA $(2,694,394) $(1,722,688)
Predecessor
Successor (TSS/
(Fortress International Group, Inc.) Vortech)
For the
period
January 1,
Six Months Ended through
---------------------------- January 19,
June 30, 2008 June 30, 2007 2007
------------- ------------- -----------
(unaudited) (unaudited) (unaudited)
Net loss $(8,294,528) $(3,590,972) $(281,153)
Interest 145,008 (372,272) (3,749)
Taxes 387,000 (349,325) -
Depreciation 238,456 152,676 33,660
Amortization 1,673,412 1,057,559 -
--------- ---------- -------
EBITDA (5,850,652) (3,102,334) (251,242)
Non-cash equity based
compensation 1,012,413 465,433 -
Impairment loss on
goodwill 1,217,000 - -
---------- --------- -------
Adjusted EBITDA $(3,621,239) $(2,636,901) $(251,242)
ABOUT FORTRESS INTERNATIONAL GROUP, INC.
Fortress International Group, Inc. (FIGI), operating through its principal
division Total Site Solutions (TSS), plans, designs, builds and maintains
specialized facilities such as data centers, trading floors, call centers,
network operation centers, communication facilities, laboratories and secure
facilities. For more than a quarter-century, the TSS team has pioneered
building robust and scalable infrastructure into mission-critical facilities.
The firm offers unsurpassed expertise in the infrastructure systems
(electrical, mechanical, telecommunications, security, fire protection and
building automation) that are the critical facility's lifeblood. TSS's
comprehensive portfolio of services and multi-disciplinary expertise provide
customers a highly respected single source for critical services that bridge
the gap between IT and facilities.
Headquartered in the Baltimore-Washington corridor, FIGI provides complete
turnkey facility services from the initial planning stages, to construction,
to ongoing maintenance of the completed project. Its clients include the
world's most demanding mission-critical organizations, including Fortune 500
firms and US government agencies. For more information, visit
www.totalsiteteam.com or call 888-321-4TSS (4877).
FORWARD-LOOKING STATEMENTS
This press release contains "forward-looking statements"-that is,
statements related to future-not past-events, plans, and prospects. In this
context, forward-looking statements may address matters such as our expected
future business and financial performance, and often contain words such as
"guidance," "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"should," or "will." Forward-looking statements by their nature address
matters that are, to different degrees, uncertain. Particular uncertainties
that could adversely affect the Company's future results include: the
Company's reliance on a significant portion of its revenues from a limited
number of customers; the uncertainty as to whether the Company can replace its
declining backlog; risks involved in properly managing complex projects; risks
relating to revenues under customer contracts, many of which can be canceled
on short notice; risks related to the implementation of the Company's
strategic plan, including the ability to make acquisitions and the performance
and future integration of acquired businesses; and other risks and
uncertainties disclosed in the Company's filings with the Securities and
Exchange Commission. These uncertainties may cause the Company's actual
future results to be materially different than those expressed in the
Company's forward-looking statements. The Company does not undertake to
update its forward-looking statements.
Company Contact:
Timothy C. Dec
Chief Financial Officer
Fortress International Group, Inc.
Phone: (410) 312-9988 x 224
Investor Relations:
John McNamara
Cameron Associates
(212) 245-8800 x 205
john@cameronassoc.com
SOURCE Fortress International Group, Inc.
Media, Timothy C. Dec, Chief Financial Officer of Fortress International
Group, Inc., +1-410-312-9988 x 224; Investor Relations, John McNamara of
Cameron Associates, +1-212-245-8800 x 205, john@cameronassoc.com
