Charys Holding Company Reports 2007 Fiscal Third Quarter Results of Operations
ATLANTA--March 27, 2007--Charys Holding Company, Inc. ("Charys" or the "Company") (OTC Bulletin Board: CHYS - News), a company focused on the high growth Remediation and Reconstruction and Wireless Communications and Data Infrastructure sectors, today announced its financial results for the three and nine month periods ended January 31, 2007. These reported results do not include revenues reflecting the recently completed acquisition of 100% interest in Cotton Companies ("Cotton"). The results also do not include revenues from the acquisitions of Complete Tower Sources, Inc. ("CTSI") and Mitchell Site Acquisition, Inc. ("MSAI"), the completion of which took place in the 2007 fourth fiscal quarter. Also included in this release are pro forma non-GAAP financial results which reflect the impact of previously announced acquisitions and adjustments for certain charges to demonstrate the business operations' managed earnings.
Third Quarter Financial Highlights:
Highlights of the 2007 third quarter performance, as compared to the 2006 third quarter, are:
- GAAP net revenue decreased for the quarter due to strategic sales mix changes:
- The restructuring of CCI services to eliminate low margin construction projects and re-focus on higher margin telecommunications services increasing overall gross margin from 12% to 25% incremental margins.
- Transition of the Viasys sales mix from transportation and industrial maintenance to a greater telecommunications focus offering higher growth and increased gross margins.
- Pro forma non-GAAP revenue increased 85% to $40.4 million compared with $21.8 million for the third quarter 2006. The increased revenue is attributable to the inclusion of acquisitions previously announced.
- Financing activity generated non-cash interest expense charges of $22.1 million and the Company incurred $526,000 in redemption premiums.
- GAAP operating income was negative $32.6 million or $0.87 per share on a basic and diluted basis.
- Operating income on a pro forma non-GAAP basis increased 81% to $2.2 million or $0.06 per share on a basic and fully diluted basis.
- EBITDA of negative $4.7 million and pro forma non-GAAP EBITDA of $6.2 million.
"With the completion of the financing necessary to finalize the CTSI, MSAI and Cotton transactions at the start of our fourth quarter, Charys will finally be able to include the results of these wholly owned subsidiary operations as reported numbers rather than pro forma. The fourth quarter will also be impacted by the payment of redemption premiums on the convertible debentures and write-offs of financing cost that were being amortized over the life of the debentures. Charys continues to recognize significant non-cash charges associated with its warrants and options as a result of the Black-Scholes calculations as required by FASB 123R. As we move forward with the integration of the Disaster Remediation and Telecommunication divisions we expect to see a clearer picture of the operations of Charys." said Billy V. Ray, Jr., Chairman and CEO of Charys.
Nine Month Financial Highlights:
Highlights for the nine months ending January 31, 2007 as compared to the nine months ending January 31, 2006, are:
- GAAP net revenue of $57 million increased 73% from $33 million, attributable to the inclusion of the acquisitions made in the third and fourth quarters of fiscal 2006 as well as the inclusion of Crochet and Borel Services, Inc. ("C&B"), LFC, Inc. ("LFC"), and Digital Communication Services, Inc. ("DCS") in the first fiscal quarter of 2007.
- Pro forma non-GAAP revenue increased to $136.3 million for the nine months, reflecting the impact for the full period of revenues from the Company's acquisition of 100% interest in Cotton Companies ("Cotton"), Florida Tel Con ("FTC"), Complete Tower Sources, Inc. ("CTSI") and Mitchell Site Acq. Inc. ("MSAI") in the fourth fiscal quarter of 2007.
- Financing activity generated non-cash interest expense charges of $29 million and the Company incurred $1.7 million in redemption premiums for the nine months. GAAP operating income was negative $67.7 million or $2.22 per share on a basic and diluted basis. Operating income on a pro forma non-GAAP basis increased $6.7 million or $0.22 per share on a basic and fully diluted basis. EBITDA was negative $8 million and pro forma non-GAAP EBITDA increased to $24.7 million.
Selected GAAP results of operations for the three and nine month periods ending January 31, 2007 are as follows:
Charys Holding Company, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
($ in thousands)
Three Months Ended Nine Months Ended
January 31, January 31,
------------------ ------------------
2007 2006 2007 2006
------------------ ------------------
Net revenues $ 15,048 $ 21,769 $ 57,024 $ 33,047
Cost of revenues 13,284 17,719 45,994 26,507
------------------ ------------------
Gross profit 1,764 4,050 11,030 6,540
------------------ ------------------
Operating expenses:
General and administrative 6,415 2,871 19,070 5,548
Depreciation and amortization 2,173 383 5,803 640
------------------ ------------------
Total operating expenses 8,588 3,254 24,873 6,188
------------------ ------------------
------------------
Income (loss) from operations (6,824) 796 (13,843) 352
------------------ ------------------
Other income (expense):
Loss on Impairment of goodwill - - (17,158) -
Interest expense (25,665) (410) (36,671) (630)
Earnings in Investment (197) - (197) -
Gain on debt retirement - - - 229
Gain on sale of property and
equipment, net 40 6 109 18
Other income, net 12 (28) 54 1,336
------------------ ------------------
Total other (expense)
income (25,810) (432) (53,863) 953
------------------ ------------------
Net (loss) income from
operations, before income taxes (32,634) 364 (67,706) 1,305
Income tax expense (benefit) - - - -
------------------ ------------------
Net (loss) earnings $(32,634)$ 364 $(67,706)$ 1,305
================== ==================
Per share data - basic:
Net (loss) earnings $ (0.87)$ 0.03 $ (2.22)$ 0.13
================== ==================
Weighted average common
shares outstanding 37,398 12,380 30,491 9,814
================== ==================
Per share data - diluted:
Net (loss) earnings $ (0.87)$ 0.02 $ (2.22)$ 0.11
================== ==================
Weighted average common
shares outstanding 37,398 16,953 30,491 12,227
================== ==================
Charys Holding Company, Inc.
Condensed Consolidated Statements of Operations
Reconciliation of GAAP to Non-GAAP Measures
($ in thousands)
Three Months Ended January 31, 2007
---------------------------------------------------
2007 2007
GAAP Adjustments Non-GAAP
---------------------------------------------------
Net revenues $ 15,048 $ 25,304 A, B, C, D, E $ 40,352
Cost of revenues 13,284 12,611 A, B, C, D 25,895
---------------------------------------------------
Gross profit 1,764 12,693 14,457
---------------------------------------------------
Operating expenses:
General and
administrative 6,415 1,822 A, B, C, D, E 8,237
Depreciation and
amortization 2,173 340 A, B, C, D, E 2,513
---------------------------------------------------
Total
operating
expenses 8,588 2,162 10,750
---------------------------------------------------
---------------------------------------------------
Income (loss) from
operations (6,824) 10,531 3,707
---------------------------------------------------
Other income
(expense):
Loss on Impairment
of goodwill - - -
Interest expense (25,665) 24,197 A, C, G, H, I, (1,468)
J, K
Earnings in
Investment (197) 197 F -
Gain on debt
retirement - - -
Gain on sale of
property and
equipment, net 40 - 40
Other income
(expenses), net 12 (99) B, C (87)
---------------------------------------------------
Total other
income
(expense) (25,810) 24,295 (1,515)
---------------------------------------------------
Net (loss)
income from
operations,
before
income
taxes (32,634) 34,826 2,192
Income tax expense
(benefit) - - -
---------------------------------------------------
Net (loss) earnings$ (32,634) $ 34,826 $ 2,192
===================================================
Per share data -
basic:
Net (loss)
earnings $ (0.87) $ 0.06
===================================================
Weighted average
common shares
outstanding 37,398 37,398
===================================================
Per share data -
diluted:
Net (loss)
earnings $ (0.87) $ 0.06
===================================================
Weighted average
common shares
outstanding 37,398 37,398
===================================================
EBITDA $ (4,651) $ 10,871 $ 6,220
===================================================
A. Addition of financial activity for CTSI for the three month period
ending January 31, 2007.
B. Addition of financial activity for MSAI for the three month period
ending January 31, 2007.
C. Addition of normalized financial activity for Cotton for the three
month period ending January 31, 2007.
D. Addition of annualized financial activity for Florida Tel-Con for
the three month period ending January 31, 2007.
E. Elimination of Holding Company Expenses. These expenses associated
with acquisition of subsidiaries.
F. Elimination of equity method of accounting as reported for the
acquisition of 40% of Cotton
G. Elimination of Interest expense accrued and paid for the period
$2.7 million.
H. Elimination of redemption premiums totaling $526,316 paid to two
lenders at the date the indebtedness was redeemed as provided for in
the Security Purchase Agreements.
I. Elimination of the amortization of the recorded value of the common
stock warrants issued to certain lenders totaling $19.3 million.
J. Elimination of financing costs totaling $2.9 million.
K. Elimination of accrued dividends related to the Series D preferred
stock in the amount of $253,178.
Charys Holding Company, Inc.
Condensed Consolidated Statements of Operations
Reconciliation of GAAP to Non-GAAP Measures
($ in thousands)
Nine Months Ended January 31, 2007
--------------------------------------------------
2007 2007
GAAP Adjustments Non-GAAP
--------------------------------------------------
Net revenues $ 57,024 $ 79,271 A, B, C, D $ 136,295
Cost of revenues 45,994 39,880 A, B, C, D, F 85,874
--------------------------------------------------
Gross profit 11,030 39,391 50,421
--------------------------------------------------
Operating expenses:
General and
administrative 19,070 6,572 A, B, C, D, E 25,642
Depreciation and
amortization 5,803 1,894 A, B, C, D, E 7,697
--------------------------------------------------
Total
operating
expenses 24,873 8,466 33,339
--------------------------------------------------
--------------------------------------------------
Income (loss) from
operations (13,843) 30,925 17,082
--------------------------------------------------
Other income
(expense):
Loss on Impairment
of goodwill (17,158) 17,158 G -
Interest expense (36,671) 26,226 A, B, C, I, J, (10,445)
K, L, M
Earnings in
Investment (197) 197 H -
Gain on debt
retirement - - -
Gain on sale of
property and
equipment, net 109 - 109
Other income
(expenses), net 54 (99) B, C (45)
--------------------------------------------------
Total other
income
(expense) (53,863) 43,482 (10,381)
--------------------------------------------------
Net (loss) income
from operations,
before income
taxes (67,706) 74,407 6,701
Income tax expense
(benefit) - - -
--------------------------------------------------
Net (loss) earnings $ (67,706)$ 4,407 $ 6,701
==================================================
Per share data -
basic:
Net (loss)
earnings $ (2.22) $ 0.22
==================================================
Weighted average
common shares
outstanding 30,491 30,491
==================================================
Per share data -
diluted:
Net (loss)
earnings $ (2.22) $ 0.22
==================================================
Weighted average
common shares
outstanding 30,491 30,491
==================================================
EBITDA $ (8,040)$ 32,819 $ 24,779
==================================================
A. Addition of financial activity for CTSI for the nine month period
ending January 31, 2007.
B. Addition of financial activity for MSAI for the nine month period
ending January 31, 2007.
C. Addition of normalized financial activity for Cotton for the nine
month period ending January 31, 2007.
D. Addition of annualized financial activity for Florida Tel-Con for
the nine month period ending January 31, 2007.
E. Elimination of Holding Company Expenses. These expenses associated
with acquisition of subsidiaries.
F. Adjustment of $2.5 million for non-reoccurring expenses incurred by
Viasys related to legacy job project
G. For the nine months ended January 31, 2007, Charys incurred a non-
cash charge of $17.2 million for impairment to goodwill based on the
annual evaluation for MIQ and Viasys. SFAS No. 142 requires the
Company to review the recorded values of our goodwill for impairment
on an annual basis. Goodwill arises from the purchase price exceeding
the assigned value of net assets of acquired businesses, and
represents the value attributable to unidentifiable intangible
elements being acquired. The evaluation methodology is inherently
complex, and involves significant management judgment in the use of
estimates and assumptions. The evaluation was prepared using the help
of independent appraisers using the discounted cash-flow method.
H. Elimination of equity method of accounting as reported for the
acquisition of 40% of Cotton
I. Elimination of Interest expense accrued and paid for the period
$5.2 million.
J. Elimination of redemption premiums totaling $1.7 million paid to
two lenders at the date the indebtedness was redeemed as provided for
in the Security Purchase Agreements.
K. Elimination of the amortization of the recorded value of the common
stock warrants issued to certain lenders totaling $24.6 million.
L. Elimination of financing costs totaling $4.4 million.
M. Elimination of accrued dividends related to the Series D preferred
stock in the amount of $723,667.
Selected Balance Sheet information as of January 31, 2007, October 31, 2006, July 31, 2006 and April 30, 2006.
Consolidated Balance Sheet
($ in thousands)
Period Period Period Period
Ending Ending Ending Ending
1/31/07 10/31/06 7/31/06 4/30/06
Cash $ 920 $ 10,906 $ 3,184 $ 1,355
Accounts Receivable 49,310 51,374 74,960 10,283
Other Current Assets 9,131 10,497 10,340 6,229
Total Current Assets 59,361 72,777 88,484 17,867
Net Equipment 15,306 15,949 15,898 9,410
Other Assets 364,683 241,208 181,984 31,424
TOTAL ASSETS $ 439,350 $ 329,934 $ 286,366 $ 58,701
Accounts Payable $ 28,760 $ 28,115 $ 30,873 $ 10,681
Accrued Expenses 15,540 11,501 11,346 11,047
Accrued Acquisition Cost 2,370 44,003 42,081 ---
Short Term Borrowings 46,983 33,940 47,660 18,319
Notes Payable Short Term 1,464 1,659 1,798 1,795
Other Current Liabilities 2,633 2,089 2,483 2,611
Total Current Liabilities 97,750 121,307 136,241 44,453
Redeemable Preferred 13,000 13,000 13,000 ---
Notes Payable Long Term 81,763 23,662 2,457 5,986
TOTAL LIABILITIES 192,513 157,969 151,698 50,439
Total Shareholders Equity 246,837 171,965 134,668 8,262
TOTAL LIABILITIES & EQUITY $ 439,350 $ 329,934 $ 286,366 $ 58,701
Working Capital $ (38,389) $ (48,530) $ (47,757) $ (26,586)
Sellers Notes $ 67,484 $ 67,484 $ 67,484 $ 17,300
Adjusted Working Capital
After Reclassifying Sellers
Notes $ 29,095 $ 18,954 $ 19,727 $ (9,286)
For the nine months ended January 31, 2007, Charys incurred a non-cash charge of $17.2 million for impairment to goodwill based on the annual evaluation for MIQ and Viasys. SFAS No. 142 requires the Company to review the recorded values of our goodwill for impairment on an annual basis. Goodwill arises from the purchase price exceeding the assigned value of net assets of acquired businesses, and represents the value attributable to unidentifiable intangible elements being acquired. The evaluation methodology is inherently complex, and involves significant management judgment in the use of estimates and assumptions. The evaluation was prepared using the help of independent appraisers using the discounted cash-flow method.
For the quarter ended January 31, 2007 Charys financing activity generated non-cash charges, reported as interest expense of $22.1 million for the current quarter and $29.0 million for the nine month period ended January 31, 2007. In addition the Company incurred redemption premiums of $526,000 and $1.7 million for the quarter and nine month ended January 31, 2007. Net earnings after interest and amortization expense for the quarter and nine month period ended January 31, 2007 were negative $32.6 million or $0.87 per share on a basic and diluted basis and $67.7 or $2.22 per share on a basic and diluted basis respectively. For the quarter and nine month period ended January 31, 2006, the Company reported net earnings of $364,000 or $0.03 per share on a basic basis and $0.02 on a diluted basis and $1.3 million or $0.13 per share on a basic basis and $0.11 on a diluted basis respectively.
"The results on a pro-forma comparative basis continue to show our significant gains in revenues for Charys, while the reported revenue levels for the quarter were impacted by several factors which the Company continues to positively address. The delay in funding of awarded post Katrina projects and the lower than anticipated revenues from the absence of a significant hurricane season become offset with the less seasonally sensitive business volume from Cotton, CTSI and MSAI, as well as the continued successful integration of the Wireless Communications and Data Infrastructure line of business and the transition to a higher value sales mix. Our strategy continues to center on our customers, and increasing the total value we provide to them. Our customers tell us they are pleased with our progress. And then, for the increased value they receive from us, they continue to award us more of their key business opportunities," stated Mr. Ray.
An earnings report conference call is being scheduled, with the date, time and call in number to be announced at a later time.
About Charys Holding Company, Inc.
Headquartered in Atlanta, Georgia, Charys is a publicly traded company providing infrastructure services in two primary markets. In the Remediation and Reconstruction markets, Charys services include emergency planning and coordination, response to catastrophic losses, reconstruction and restoration and environmental remediation. In Wireless Communications and Data Infrastructure markets Charys provides an array of services including engineering, program management, construction, installation and maintenance, tower services, radio and advanced technology implementation and integration services to large service providers and other business enterprises.