Charys Holding Company Reports Fourth Quarter and Fiscal Year 2007 Results

ATLANTA--(BUSINESS WIRE)--Charys Holding Company, Inc. ("Charys" or the "Company") (Pink Sheets: CHYS - News), a provider of wireless communications, data infrastructure and restoration and reconstruction services, today announced its financial results for its fourth quarter and fiscal year ended April 30, 2007.

Fiscal 2007 Results

Total revenue for the year ended April 30, 2007 was $77.3 million, an increase of 59% as compared to the prior year. Total revenue on a pro-forma basis, reflecting the operational performance of all acquisitions completed through April 30, 2007, had each been owned for the entire fiscal year, was $167.7 million. The Earnings (Loss) per Share for the fiscal year ended April 30, 2007 was ($9.33) as compared to ($0.13) for the prior year.

EBITDA, as adjusted, for the fiscal year ended April 30, 2007 was a loss of $19.8 million compared to $2.6 million in the prior fiscal year. EBITDA, as adjusted, is defined as income (loss) from continuing operations before interest, taxes, depreciation, amortization, gain on sale of assets and share-based payments, including value of shares issued in settlement of liabilities.

Total revenue on a pro-forma basis and EBITDA, as adjusted, should be considered in addition to, but not in lieu of, total revenue and net income (loss) or income (loss) from operations, respectively, reported under generally accepted accounting principles ("GAAP").

Fiscal 2007 Pro-forma and Other Financial Highlights

• Pro-forma fiscal 2007 revenue, to include all 2007 acquisitions, was $167.7 million, as compared to Pro-forma revenue, of all companies owned as of April 30, 2006, of $82 million.
• Pro-forma EBITDA for the fiscal year was $23.4 million, as compared to a negative EBITDA of $0.8 million for fiscal 2006.
• Cash flow from operations totaled $54.5 million, as compared to $1 million cash used in operations for fiscal 2006.
• Charys completed a $201 million convertible debt financing in February 2007, and a total of $319 million in seventeen financings during Fiscal 2007.
• Charys completed the acquisitions of Crochet and Borel Services, the Cotton Companies, Complete Tower Sources, and Mitchell Site Acquisition.
• Total cash and equivalents, including restricted cash, was $13.7 million at April 30, 2007

Filing Delay

Charys determined late during the audit process and preparation of the Form 10-KSB that its accounting for detachable warrants issued in connection with certain financing transactions was not in accordance with Accounting Principles Board Opinion 14 (APB 14). In prior periods, Charys, following the FASB 123R Black Scholes calculation, recorded the fair value of the warrants as financings costs and amortizing such costs to interest expense. To be in compliance with APB 14, the Company recalculated Interest Expense for the previous three quarters to correct the accounting for detachable warrants issued in connection with ten financing transactions completed during fiscal 2007. This recalculation is reflected in the Form 10-KSB and the Company will restate the previous three quarters in the near future. Under the restatement, the proceeds of the financings are allocated between the warrants and debt securities based on their relative fair values at the time of issuance, and the resulting discounts on the debt securities are being amortized to interest expense.

Billy V. Ray, Jr., Charys’ Chairman and CEO stated, "No one is more disappointed in this delay than I am. This delay was primarily caused by the significant complexities related to the restatement of our financial statements for the past year. Restating and rolling forward each quarterly and annual report, and making adjustments for virtually every acquisition and financing that was completed during that period has taken significant time and effort. Now that the annual report is completed we will quickly complete the report for the first quarter 2008 and expect to report second quarter 2008 results on time."

Fourth Quarter Results

On a GAAP basis, total revenues for the quarter were $22.8 million. Total revenues on a pro-forma basis for the quarter were $32.3 million. EBITDA, as adjusted, for the quarter ended April 30, 2007 was ($0.3 million).

"The fourth quarter represented an important inflection point for Charys. We completed a number of significant transactions that transformed the company into a nationwide telecommunications infrastructure and disaster restoration company. We added significant scale to our telecom operations with the acquisitions of CTSI and MSAI – firmly establishing Charys as a leading wireless services company. By finalizing the acquisition of the Cotton Companies we have formed one of the largest publicly traded disaster restoration and reconstruction companies in the country. And through the integration of these acquisitions, we are unique in providing a complete package of communications, restoration and disaster preparedness services to our broad base of customers," added Mr. Ray.

At April 30, 2007, the Company’s total debt was $315.1 million, as compared to $26.1 million at April 30, 2006. The increase in debt is primarily related to the $201 million financing that was completed in February 2007 and a $14.5 million financing that was completed in December 2006.

During fiscal 2007, Charys incurred a one-time, non-cash charge of approximately $202.5 million related to the write-down of goodwill. GAAP require that value of the intangible assets be tested annually for impairment.

"The majority of this write-down is attributable to our restoration business, as the lack of storm activity and catastrophic events significantly reduced the value under the discounted cash flow analysis required as part of goodwill impairment testing," commented Billy Ray. "Despite the accounting treatment, we remain extremely optimistic about the future opportunities for Cotton."

Business Outlook

For the quarter ending July 31, 2007, the Company expects to report revenue in the range of $27 million to $29 million and an ending cash position of over $8.5 million. For the quarter ending October 31, 2007, the Company expects to report revenue in the range of $29 million to $30 million and an approximate ending cash balance of nearly $3 million.

"We are following through on our operating plans for fiscal 2008 and have seen some general market trends that we believe will favorably impact us for the remainder of the fiscal year. Looking at the opportunity pipeline in the telecom division, I feel very confident that the strategy we put in place will begin to pay dividends. Although fiscal 2008 got off to a slow start, we believe there are a number of macro factors that will have a positive impact on Charys," said Billy Ray. "For instance, just as we saw a slowdown in spending in the early part of fiscal 2007 from the major carriers, we have seen a marked increase in capital spending activity from our large customers. On the restoration side, we continue to build a stable day-to-day business. Two initiatives which we believe will help get us there are our Federal government opportunities, including growth under our GSA contract, and our Preferred Client Program. The GSA contract allows us to more easily provide services to federal, state and local governments, eliminating the due diligence and bidding process. Our Preferred Client Program consists of selling contingency contracts to Fortune 500 and other large companies. The addition of Michael Brown to our Board of Directors and his active involvement in the leadership of Cotton has allowed us to significantly expand our efforts in this area," added Mr. Ray.

"We are pursuing all avenues to improve performance for our creditors and shareholders. We will be investing in growing the more profitable business units and exploring alternatives for the underperforming ones, which may include the sale of certain operations to third parties," continued Mr. Ray. "We are also evaluating several offers that we have received to acquire assets from our wireless tower portfolio. These offers are in the range of approximately $13 million to $15 million. Net proceeds from the sale of tower assets would be used to enhance our working capital position and reduce debt. Such a transaction would be consistent with our strategy to buy and build tower assets, increase their value by adding tenants, and sell appreciated assets to fund additional growth."

Working Capital

New Stream Commercial Finance, LLC has recently renewed and restructured existing revolving credit facilities with Charys and its subsidiaries CTSI, Ayin Tower Management, Cotton Commercial USA and C&B/Cotton Holdings. These credit facilities are part of a restructuring of working capital financing that aligns credit availability with operating performance and opportunity. The restructured line immediately increased working capital availability by $5.7 million.

Billy Ray stated, "We have a long-standing and excellent relationship with New Stream. This agreement demonstrates the confidence that they have in our business strategy. Likewise, our major institutional creditors have fully supported this financing by consenting to this restructuring of our working capital facilities."

"With the New Stream line in place, Charys currently has credit facilities which management believes should provide working capital to satisfy near-term liquidity requirements," added Mr. Ray. "Looking forward, we believe the amount of committed contracts in backlog, the timing of cash collections from day-to-day operations and assuming reasonable near-term collections from our receivables we will find ourselves in a much improved position by the end of the third quarter."

Engagement of AlixPartners

Charys has retained AlixPartners, LLP to advise the company with respect to improvements to Charys’ operations and cost structure as well as aligning the capital structure to better match expected operating performance. Discussions with various creditors have commenced regarding potential changes to the capital structure, and the Company is also in discussions with several financial institutions about refinancing portions of the existing debt.

Forbearance

Charys entered into a forbearance agreement with a majority of its senior convertible note holders in which the holders agreed, subject to certain conditions, not to exercise their remedies under the Indenture with respect to certain default events. This forbearance agreement expired on October 16, 2007, and the Company is currently in discussions with note holders about a further forbearance, until November 15, 2007.

"Our institutional note holders have been very co-operative, working with us toward our common goal of improving our profitability," stated Billy Ray. "We are proceeding with cost-cutting, while simultaneously remaining focused on running our business more efficiently. We believe this will allow us to position ourselves to more effectively capitalize on the large market opportunity before us."

Conference Call Details

The Company will hold a conference call Wednesday, November 7, 2007 at 4:00 p.m. ET, to discuss all of the above. To hear the conference call live, please dial 888-680-0869 (domestic) or 617-213-4854 (international) five to ten minutes before the call and reference the passcode: 10959745. A simultaneous live Webcast of the call will be available over the Internet at http://www.charys.com, under the Investor Relations heading.

A replay of the call will be available beginning on November 7, 2007 at 6:00 p.m. (ET) by dialing 888-286-8010 (domestic) or 617-801-6888 (international) and providing the following replay code 54272940. In addition, the Webcast will be available on the Company's web site at http://www.charys.com.

In thepast, participants reported difficulty in asking questions during the call. In an effort to resolve these issues please submit any questions to irdept@charys.com before 4:00 p.m. Eastern on Tuesday, November 6, 2007.

Additional information regarding the Company's financial performance as of and for the fiscal year and quarter ended April 30, 2007 and a comparison to the fiscal year and quarter ended April 30, 2006 can be found on the attached balance sheet and statement of operations and in the Company's Annual Report on Form 10-K.

This press release contains forward-looking statements. These statements are based upon Charys’ current expectations and speak only as of the date hereof. Actual results may differ materially and adversely from those expressed in any forward-looking statements as a result of various factors and uncertainties, including uncertainties as to the nature of the industry, including changing customer demand, the impact of competitive products and pricing, dependence on existing management and general economic conditions. Charys’ Annual Report on Form 10-KSB, recent and forthcoming Quarterly Reports on Form 10-QSB, Form 10-Q, recent Current Reports on Form 8-K and other SEC filings discuss some of the important risk factors that may affect Charys’ business, results of operations and financial condition. Management undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

About AlixPartners

AlixPartners is a global performance improvement, corporate turnaround and financial advisory services firm. The AlixPartners’ "results, not reports" approach applies to its full suite of services which range from operational performance improvement and financial restructuring across all major corporate disciplines (manufacturing, supply chain, IT, and sales and marketing), to financial advisory services (financial reporting, corporate governance and investigations), to IT management. Founded in 1981, the firm has more than 600 employees in Chicago, Dallas, Detroit, Düsseldorf, London, Los Angeles, Milan, Munich, New York, Paris, San Francisco, Shanghai, and Tokyo. It is on the Web at www.alixpartners.com.

About Charys Holding Company, Inc.

Headquartered in Atlanta, Georgia, Charys is a publicly traded company providing infrastructure services in two primary markets. In the restoration and reconstruction markets, Charys services include emergency planning and coordination, response to catastrophic losses, reconstruction and restoration and environmental restoration. In the 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.