SOURCE: Fortress International Group

November 12, 2008 07:50 ET

Fortress International Group, Inc. Reports Financial Results for the Third Quarter of 2008

Revenues Rise 27.9% Sequentially to $25.8 Million; Reports $855,470 Adjusted EBITDA Profit; Backlog at $218 Million

COLUMBIA, MD--(Marketwire - November 12, 2008) - 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 third quarter of 2008.

For the three months ended September 30, 2008, the Company reported revenue of $25.8 million and a net loss of $3.2 million, or $0.26 per basic and diluted share, compared to revenue of $12.7 million and a net loss of $2.6 million, or $0.22 per basic and diluted share, for the third quarter of 2007. The results included an impairment loss on goodwill totaling $3.0 million.

For the nine months ended September 30, 2008, the Company reported revenue of $65.4 million and a net loss of $11.5 million, or $0.95 per basic and diluted share, compared to revenue of $32.2 million and a net loss of $6.2 million, or $0.53 per basic and diluted share, for the nine months ended September 30, 2007. The results included an impairment loss on goodwill totaling $4.2 million.

Adjusted EBITDA, which the company defines as earnings before non-cash stock-based compensation, interest, taxes, depreciation, amortization and impairment losses, reflected a profit of $0.9 million for the quarter ended September 30, 2008, compared to an adjusted EBITDA loss of $1.4 million for the quarter ended September 30, 2007.

In addition, the adjusted EBITDA profit for the third quarter ended September 30, 2008 included a one time charge to selling, general and administrative expenses of $0.4 million in deferred acquisition costs associated with the company's acquisition strategy which, if excluded, adjusted EBITDA for the quarter would have been $1.3 million for the period.

Timothy C. Dec, Chief Financial Officer of Fortress, said, "It has been our objective to get this company to profitability, and we have taken a significant step towards accomplishing that goal in the third quarter of 2008. For the first time, we have reported an adjusted EBITDA profit, and were it not for the costs associated with our acquisition program, our adjusted EBITDA profit for the third quarter would have been approximately $1.3 million. In fact, excluding this deferred acquisition cost and impairment loss on goodwill, our reportable net income would have been positive for the quarter. We believe we have turned a significant corner with this quarter, and we look forward to building on this momentum in the fourth quarter of 2008."

Thomas P. Rosato, Chief Executive Officer of Fortress, said, "We continue to increase revenues and maintain our backlog in an industry that from our vantage point continues to show potential growth. We have increased our revenue seven straight quarters in a row. We are seeing revenue gains in both our technology consulting and facilities management divisions, in addition to construction management. The re-alignment of our cost structure last quarter has already begun to be reflected in our bottom line, and combined with a positive outlook for the industry, we believe that we are well positioned to continue to grow revenues and profitability in the coming quarters."

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.

Conference Call Information

The Company will conduct a conference call and webcast to discuss its financial results on Wednesday, November 12, 2008 at 8:30 a.m. EST. The call may be accessed live by dialing 877-741-4241, 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 their completion and will remain available through November 19, 2008 by dialing 888-203-1112 and entering replay passcode 5847577.

ABOUT FORTRESS INTERNATIONAL GROUP, INC.

Fortress International Group, Inc. (NASDAQ: FIGI), and its subsidiaries, Total Site Solutions (TSS), Rubicon, Vortech and Innovative Power, plan, design, build and maintain specialized facilities such as data centers, trading floors, call centers, laboratories, medical facilities, network operation centers, communication facilities, and secure facilities. For nearly 30 years, the FIGI 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. FIGI'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.

                   FORTRESS INTERNATIONAL GROUP, INC.
                      CONSOLIDATED BALANCE SHEETS


                                              September 30,  December 31,
                                                  2008           2007
                                              -------------  -------------
                                               (unaudited)     (audited)
Current Assets
   Cash and cash equivalents                  $   6,856,253  $  13,172,210
   Contract and other receivables, net           20,932,470     18,349,140
   Costs and estimated earnings in excess of
    billings on uncompleted contracts             4,721,578      1,322,254
   Prepaid expenses and other current assets        499,497        301,487
   Income taxes receivable                          893,322        893,322
                                              -------------  -------------
Total current assets                             33,903,120     34,038,413
Property and equipment, net                         903,669      1,044,545
Goodwill                                         18,813,509     20,714,967
Intangible assets, net                           19,838,552     21,089,136
Other assets                                        150,973        512,000
                                              -------------  -------------
Total assets                                  $  73,609,823  $  77,399,061
                                              =============  =============

Liabilities and Stockholders’ Equity
Current Liabilities
   Notes payable, current portion             $     182,384  $   1,650,306
   Accounts payable and accrued expenses         16,266,264     16,121,492
   Billings in excess of costs and estimated
    earnings on uncompleted contracts            11,145,410      3,880,279
                                              -------------  -------------
Total current liabilities                        27,594,058     21,652,077
Notes payable, less current portion               4,230,013      7,848,661
Other liabilities                                    59,960         44,648
                                              -------------  -------------
Total liabilities                                31,884,031     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; 12,730,629
    and 12,150,400 issued; 12,557,669 and
    11,992,325 outstanding at September 30,
    2008 and December 31, 2007, respectively          1,273          1,214
   Additional paid-in capital                    60,699,980     55,268,012
   Treasury stock, 172,960  and 158,075
    shares at cost at September 30, 2008
    and December 31, 2007, respectively            (861,663)      (814,198)
   Accumulated deficit                          (18,113,798)    (6,601,353)
                                              -------------  -------------
Total stockholders' equity                       41,725,792     47,853,675
                                              -------------  -------------
Total liabilities and stockholders’ equity    $  73,609,823  $  77,399,061
                                              =============  =============




                   FORTRESS INTERNATIONAL GROUP, INC.
                 CONSOLIDATED STATEMENTS OF OPERATIONS


                                                  Successor (Fortress
                                               International Group, Inc.)
                                              ----------------------------
                                                   Three Months Ended
                                              ----------------------------
                                              September 30,  September 30,
                                                  2008           2007
                                              ----------------------------
                                               (unaudited)    (unaudited)
Results of Operations:
   Revenue                                    $  25,781,523  $  12,692,772
   Cost of revenue                               20,660,103     10,749,331
                                              -------------  -------------
   Gross profit                                   5,121,420      1,943,441
   Operating expenses:
      Selling, general and administrative         4,838,291      3,964,468
      Depreciation                                  125,716        137,032
      Amortization of intangibles                   702,569        567,109
      Impairment loss on goodwill                 2,973,000              -
                                              -------------  -------------
   Total operating costs                          8,639,576      4,668,609
   Operating loss                                (3,518,156)    (2,725,168)
   Interest income (expense), net                   (49,653)       104,116
                                              -------------  -------------
   Loss from operations before income taxes      (3,567,809)    (2,621,052)
   Income tax expense (benefit)                    (349,898)             -
                                              -------------  -------------
   Net loss                                   $  (3,217,911) $  (2,621,052)
                                              =============  =============
Per Common Share (Basic and Diluted):
   Basic and diluted net loss                 $       (0.26) $       (0.22)
   Weighted average common shares
    Outstanding - basic and diluted              12,326,397     11,715,512


                                                  Successor (Fortress
                                               International Group, Inc.)
                                              ----------------------------
                                                    Nine Months Ended
                                              ----------------------------
                                              September 30,  September 30,
                                                  2008           2007
                                              ----------------------------
                                               (unaudited)    (unaudited)
Results of Operations:
   Revenue                                    $  65,363,481  $  32,232,016
   Cost of revenue                               54,719,170     27,378,926
                                              -------------  -------------
   Gross profit                                  10,644,311      4,853,090
   Operating expenses:
      Selling, general and administrative        15,275,116     10,026,448
      Depreciation                                  355,810        289,708
      Amortization of intangibles                 2,104,067      1,574,671
      Impairment loss on goodwill                 4,190,000              -
                                              -------------  -------------
   Total operating costs                         21,924,993     11,890,827
   Operating loss                               (11,280,682)    (7,037,737)
   Interest income (expense), net                  (194,661)       476,388
                                              -------------  -------------
   Loss from operations before income taxes     (11,475,343)    (6,561,349)
   Income tax expense (benefit)                      37,102       (349,325)
                                              -------------  -------------
   Net loss                                   $ (11,512,445) $  (6,212,024)
                                              =============  =============
Per Common Share (Basic and Diluted):
   Basic and diluted net loss                 $       (0.95) $       (0.53)
   Weighted average common shares
    Outstanding - basic and diluted              12,164,454     11,743,186




                   FORTRESS INTERNATIONAL GROUP, INC.
                     ADJUSTED EBITDA RECONCILIATION


                                                  Successor (Fortress
                                               International Group, Inc.)
                                              ----------------------------
                                                   Three Months Ended
                                              ----------------------------
                                              September 30,  September 30,
                                                  2008           2007
                                              ----------------------------
                                               (unaudited)    (unaudited)

Net loss                                      $  (3,217,911) $  (2,621,052)
Interest                                             49,653       (104,116)
Taxes                                              (349,898)             -
Depreciation                                        125,716        137,032
Amortization                                        818,075        681,184
                                              -------------  -------------
EBITDA                                           (2,574,365)    (1,906,952)
Non-cash equity based compenstion                   456,835        533,763
Impairment loss on intangibles                    2,973,000              -
                                              -------------  -------------
Adjusted EBITDA                               $     855,470  $  (1,373,189)
                                              =============  =============


                                                  Successor (Fortress
                                               International Group, Inc.)
                                              ----------------------------
                                                    Nine Months Ended
                                              ----------------------------
                                              September 30,    September
                                                  2008          30,2007
                                               (unaudited)    (unaudited)

Net loss                                      $ (11,512,445) $  (6,212,024)
Interest                                            194,661       (476,388)
Taxes                                                37,102       (349,325)
Depreciation                                        355,810        289,708
Amortization                                      2,491,485      1,891,419
                                              -------------  -------------
EBITDA                                           (8,433,387)    (4,856,610)
Non-cash equity based compenstion                 1,469,248        999,196
Impairment loss on intangibles                    4,190,000              -
                                              -------------  -------------
Adjusted EBITDA                               $  (2,774,139) $  (3,857,414)
                                              =============  =============

Contact Information

  • 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
    Email Contact