Integrated Alarm Services (NASDAQ:IASGE)
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Integrated Alarm Services Group, Inc. (NASDAQ: IASGE) a
total solution provider to independent security alarm dealers located
throughout the United States announced results for the fourth quarter
and fiscal 2004 ended December 31, 2004.
Revenue for the fourth quarter was $20.7 million up 64 percent
over fiscal 2003 fourth quarter revenue of $12.6 million. The net loss
for the fourth quarter ending December 31, 2004 was $8.1 million, or
$0.33 per share, compared to a net loss of $1.5 million, or $0.06 per
share, in the fourth quarter of 2003. During the fourth quarter of
2004 the Company recorded approximately $1.6 million of accelerated
debt amortization costs and facility closure costs. The aggregate
owned portfolio annualized attrition rate for the fourth quarter of
2004 declined to 11.3 percent from 12.5 percent in 2003.
IASG completed several significant transactions in the fourth
quarter of 2004. On November 16, 2004, the Company completed the sale
of $125 million of 12% Senior Secured Notes due 2011 in a private
placement. Concurrent with the sale of these Notes the Company entered
into a $30 million senior secured credit facility with LaSalle Bank,
N.A. The Company also completed the purchase of certain National Alarm
Computer Center (NACC) assets on November 19 from a subsidiary of Tyco
International for $50.6 million in cash. The assets acquired include:
a state-of-the-art electronic security alarm center in Irvine,
California; $800,000 of third party alarm monitoring recurring monthly
revenues (RMR); collateralized loans to alarm dealers totaling
approximately $25 million. The Company also sold $154,000 of RMR from
its owned portfolio at a favorable sales price multiple of 34 times
RMR.
In announcing the results, Timothy M. McGinn, Chairman and CEO,
said, "We are pleased to have filed our Form 10-K for 2004 earlier
this week. This milestone puts us well along the process of being in
good standing with the SEC, NASDAQ and the Senior Note Holders. We
look forward to fulfilling our final requirement on this path with the
filing of our Form 10-Q for March 31, 2005 by June 27."
McGinn in commenting on the 2004 results added, "Good progress was
made at IASG in 2004. Revenue approximately doubled to $80 million,
EBITDA increased to over $22 million from less than $11 million in
2003 and we achieved our 2004 year-end attrition goal with our owned
portfolio annualized attrition at 11.3 percent for the fourth quarter.
This operating performance at the end of 2004 positions IASG well for
2005 and our attrition goal of eleven percent. The addition of the
NACC central station operating assets from Tyco permits IASG to embark
on a top to bottom review of operations, and where appropriate,
restructure our business. This will enable us to more efficiently and
effectively serve our alarm customers. When we completed the NACC
transaction we announced expected annualized operating savings of
approximately $2.8 million by the end of the third quarter of 2005. We
are well on our way to achieve this goal. Also, during the fourth
quarter of 2004 we secured $155 million of capital and banking
commitments. This capital along with operating cash flow is sufficient
to fund the Company's 2005 account addition plans of 80,000 to 100,000
contract equivalents."
McGinn concluded by stating, "Since going public in July 2003 we
have acquired the equivalent of 133,000 contracts at an average
acquisition multiple of 28 times RMR. This is below the target
acquisition multiple of 30 times we discussed on the road show and has
resulted in acquisition savings versus the target of $8 million.
During 2004, we saw several new parties enter the alarm market and
several existing parties increase their activities relative to
acquiring new accounts. In 2004, the alarm industry experienced a
modest increase in the average contract purchase price to 32.5 times
RMR.
At December 31, 2004, IASG had $31.6 million in cash, $31.4
million of collateralized notes receivable from dealers and
stockholders' equity of $142.8 million. The Company had $131.3 million
of debt and capital leases at December 31, 2004 and ended fiscal 2004
with a net debt (debt less cash) to equity ratio of 0.7 to 1. In the
fourth quarter the Company used approximately $52 million of the
proceeds from the Senior Note sale to retire debt and approximately
$51 million to acquire the NACC assets. IASG had no outstanding
balance on the $30 million senior credit facility at the end of 2004.
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*T
IASG Portfolio Data:
Annualized Attrition Rate
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full-year
2004 2004 2004 2004 2004
------- ------- ------- ------- ----------
IASG Owned Portfolio
Legacy Portfolio 17.7% 10.8% 15.2% 14.6% 13.8%
New Residential 13.5% 9.9% 12.5% 11.3% 11.3%
New Commercial 9.1% 13.4% 10.4% 8.6% 10.0%
Aggregate Owned Portfolio 13.4% 11.2% 12.6% 11.3% 11.6%
Annualized Growth Rate - excluding acquisitions
Wholesale Monitoring Accts 4.0% (17.9%) (9.1%) 0.5% (5.7%)
*T
IASG ended fiscal 2004 with an owned portfolio of approximately
149,000 contract equivalents generating RMR of approximately $4.5
million and wholesale monitoring of approximately 720,000 alarms
(including IASG's owned portfolio accounts) generating approximately
$3.1 million in RMR. Revenue from the owned portfolio is split 80
percent residential and 20 percent commercial. The wholesale
monitoring portfolio experienced a 31.7 percent growth in accounts in
2004.
See the attached financial highlights for the fourth quarter 2004
and the year end December 31, 2004.
About IASG
Integrated Alarm Services Group provides total integrated
solutions to independent security alarm dealers located throughout the
United States to assist them in serving the residential and commercial
security alarm market. IASG's services include alarm contract
financing including the purchase of dealer alarm contracts for its own
portfolio and providing loans to dealers collateralized by alarm
contracts. IASG, with approximately 5,600 independent dealer
relationships, is also the largest wholesale provider of alarm
contract monitoring and servicing. For more information about IASG
please visit our web site at http://www.iasg.us.
This press release may contain statements, which are not
historical facts and are considered forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements contain projections of IASG's future
results of operations, financial position or state other
forward-looking information. In some cases you can identify these
statements by forward looking words such as "anticipate", "believe",
"could", "estimate", "expect", "intend", "may", "should", "will", and
"would" or similar words. You should not rely on forward-looking
statements because IASG's actual results may differ materially from
those indicated by these forward looking statements as a result of a
number of important factors. These factors include, but are not
limited to: general economic and business conditions; our business
strategy for expanding our presence in our industry; anticipated
trends in our financial condition and results of operation; the impact
of competition and technology change; existing and regulations
effecting our company and business, and other risks and uncertainties
discussed under the heading "Risks Related to our Business" in IASG's
Form 10-K report for the period ending December 31, 2004 as filed with
the Securities and Exchange Commission on June 13, 2005, and other
reports IASG files from time to time with the Securities and Exchange
Commission. IASG does not intend to and undertakes no duty to update
the information contained in this press release.
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*T
INTEGRATED ALARM SERVICES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of
---------------------------
December 31, December 31,
2003 2004
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 35,435,817 $ 31,554,609
Current portion of notes receivable 735,149 5,186,965
Accounts receivable, net 4,312,990 6,289,787
Inventories 1,107,899 1,233,785
Prepaid expenses 1,548,105 1,127,581
Due from related parties 232,300 70,655
------------ ------------
Total current assets 43,372,260 45,463,382
Property and equipment, net 5,762,586 7,926,324
Notes receivable, net of current
portion and allowance 4,525,973 22,211,283
Dealer relationships, net 23,113,617 34,529,962
Customer contracts, net 73,571,131 85,169,085
Goodwill, net 85,515,985 91,434,524
Debt issuance costs, net 1,768,281 5,322,089
Other identifiable intangibles, net 2,187,464 3,054,247
Restricted cash and cash equivalents 1,100,000 757,104
Deferred installation costs - 5,946,059
Other assets 119,033 270,122
------------ ------------
Total assets $241,036,330 $302,084,181
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 18,765,000 $ 5,225,000
Current portion of capital lease
obligations 431,555 459,987
Accounts payable 2,873,707 3,720,197
Accrued expenses 8,816,766 9,185,263
Current portion of deferred revenue 7,576,993 9,756,134
Other liabilities 139,066 160,809
------------ ------------
Total current liabilities 38,603,087 28,507,390
Long-term debt, net of current portion 46,977,612 125,000,000
Capital lease obligations, net of
current portion 453,811 575,502
Deferred revenue, net of current
portion 312,343 4,034,675
Deferred income taxes 759,425 1,112,778
Other liabilities 374,119 -
Due to related parties 153,203 4,009
------------ ------------
Total liabilities 87,633,600 159,234,354
------------ ------------
Commitments and Contingencies
Stockholders' equity
Preferred stock, $0.001 par value;
authorized 3,000,000 shares and
none issued and outstanding - -
Common stock, $0.001 par value; authorized
100,000,000 shares; issued and outstanding
24,607,731 shares at December 31, 2003 and
24,681,462 at December 31, 2004 24,608 24,682
Common stock subscribed 315,342 -
Paid-in capital 205,086,659 206,566,067
Accumulated deficit (52,023,879) (63,740,922)
------------ ------------
Total stockholders' equity 153,402,730 142,849,827
------------ ------------
Total liabilities and
stockholders' equity $241,036,330 $302,084,181
============ ============
INTEGRATED ALARM SERVICES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
for the Three Months and Year Ended December 31, 2003 and 2004
Three months ended Year ended
December 31, December 31,
2003 2004 2003 2004
------------ ------------ ------------- -------------
(unaudited)
Revenue:
Monitoring fees $6,227,011 $6,736,612 $24,099,653 $24,103,270
Revenue from
customer
accounts 6,107,432 13,653,528 15,854,509 50,758,967
Billing fees 24,366 - 112,127 -
Related party
monitoring fees 10,718 33,029 292,968 170,876
Related party
placement fees - - 90,437 -
Service and
installation
revenue 249,403 318,432 417,904 5,336,047
------------ ------------ ------------- -------------
Total revenue 12,618,930 20,741,601 40,867,598 80,369,160
Cost of revenue
(excluding
depreciation
and amortization) 4,392,348 9,810,535 16,393,439 32,748,642
------------ ------------ ------------- -------------
8,226,582 10,931,066 24,474,159 47,620,518
------------ ------------ ------------- -------------
Operating expenses:
Selling and
marketing 424,090 1,110,920 1,108,621 4,357,046
Depreciation and
amortization 3,713,132 6,766,694 12,322,558 23,012,590
Loss (gain) on
sale of assets - (184,076) - (184,076)
General and
administrative 3,896,941 7,630,836 11,167,460 22,561,726
General and
administrative
- related party - - 3,525,000 -
------------ ------------ ------------- -------------
Total operating
expenses 8,034,163 15,324,374 28,123,639 49,747,286
------------ ------------ ------------- -------------
Income (loss)
from operations 192,419 (4,393,308) (3,649,480) (2,126,768)
Other income
(expense):
Other income,
net 90,489 13,412 295,984 10,332
Amortization of
debt issuance
costs (275,522) (1,008,844) (3,168,315) (1,750,151)
Related party
interest
expense - - (914,229) -
Interest
expense (1,835,001) (3,384,387) (12,655,617) (8,885,904)
Interest
income 500,084 741,799 1,613,669 1,453,227
------------ ------------ ------------- -------------
Income (loss)
before income
taxes (1,327,531) (8,031,328) (18,477,988) (11,299,264)
Income tax
expense
(benefit) 195,227 99,752 3,526,572 417,779
------------ ------------ ------------- -------------
Net income
(loss) $(1,522,758) $(8,131,080) $(22,004,560) $(11,717,043)
============ ============ ============= ============
Basic and diluted
income (loss)
per share $(0.06) $(0.33) $(1.95) $(0.47)
============ ============ ============= =============
Weighted average
number of common
shares
outstanding 24,584,386 24,681,462 11,263,455 24,667,960
============ ============ ============= =============
Unaudited:
Pro Forma income
tax to give effect to
the conversion from S to C
Corporation status:
Income (loss)
before benefit
from income
taxes $(1,327,531) $(8,031,328) $(18,477,988) $(11,299,264)
Income tax
expense
(benefit) 195,227 99,752 (89,916) 417,779
------------ ------------ ------------- -------------
Net income
(loss) $(1,522,758) $(8,131,080) $(18,388,072) $(11,717,043)
============ ============ ============= =============
Basic and diluted
income (loss)
per share $(0.06) $(0.33) $(1.63) $(0.47)
============ ============ ============= =============
INTEGRATED ALARM SERVICES GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(unaudited)
Three months ended Year ended
December 31, December 31,
------------------------- ---------------------------
2003 2004 2003 2004
------------ ------------ ------------- -------------
Net income
(loss) $(1,522,758) $(8,131,080) $(22,004,560) $(11,717,043)
Adjust for:
Income tax
expense
(benefit) 195,227 99,752 3,526,572 417,779
Interest
expense 1,835,001 3,384,387 13,569,846 8,885,904
Amortization
of debt
issuance
costs 275,522 1,008,844 3,168,315 1,750,151
Depreciation
and
amortization 3,713,132 6,766,694 12,322,558 23,012,590
------------ ------------ ------------- -------------
EBITDA $4,496,124 $3,128,597 $10,582,731 $22,349,381
============ ============ ============= =============
The Company believes EBITDA is an appropriate metric of operating
performance as it presents results that management has direct control
over period to period.
*T