SOURCE: Fortress International Group, Inc.

Fortress International Group, Inc.

August 13, 2009 06:00 ET

Fortress International Group, Inc. Reports Second Quarter 2009 Financial Results

Company Reports Revenue of $14.9 Million and a Net Loss of $16.8 Million in Second Quarter; Reports $13.1 Million Impairment Loss on Goodwill and Other Intangibles; Adjusted EBITDA in Second Quarter Reaches a Negative $1.4 Million

COLUMBIA, MD--(Marketwire - August 13, 2009) - Fortress International Group, Inc. (NASDAQ: FIGI) ("Fortress"), a provider of consulting and engineering, construction management and 24/7/365 site services for mission-critical facilities, today announced its financial results for the second quarter ended June 30, 2009.

For the three-month period ended June 30, 2009, the Company reported revenue of $14.9 million, compared to revenue of $20.1 million for the second quarter of 2008. The decrease in revenue was primarily attributable to $2.2 million in lower revenue from our construction management division and $2.0 million from our facilities management division.

Gross profit for the second quarter of 2009 was $1.8 million, or 12.0%, compared to gross profit of $2.1 million, or 10.4%, for the second quarter of 2008.

Net loss for the second quarter of 2009 was ($16.8) million, or ($1.32) per share, compared to a net loss of ($6.0) million, or ($0.50) per share, for the second quarter of 2008. Adjusted EBITDA loss for the second quarter ended June 30, 2009 was approximately ($1.4) million, compared to adjusted EBITDA loss of ($2.7) million for the second quarter of 2008. The Company defines adjusted EBITDA as earnings before non-cash stock-based compensation, interest, taxes, depreciation and amortization. Adjusted EBITDA is a non-GAAP measurement presented to provide further information about the Company's operating trends.

For the six-month period ended June 30, 2009, the Company reported revenue of $45.0 million, compared to revenue of $39.6 million for the six-month period ended June 30, 2008. The increase in revenue was primarily attributable to $8.3 million in additional revenue from our construction management division, offset by a reduction of $2.4 million from our facilities management division.

Gross profit for the six months ended June 30, 2009 was $5.4 million, or 12.0%, compared to gross profit of $5.5 million, or 13.9%, for the six months ended June 30, 2008.

Net loss for the six months ended June 30, 2009 was ($17.8) million, or ($1.40) per share, compared to a net loss of ($8.3) million, or ($0.69) per share, for the six months ended June 30, 2008. Adjusted EBITDA loss for the six months ended June 30, 2009 was approximately ($1.1) million, compared to adjusted EBITDA loss of ($3.5) million for the six months ended June 30. 2008.

Backlog totaled $42.7 million as of June 30, 2009, compared to $45.5 million as of March 31, 2009.

Commenting on the results, Chief Executive Officer Thomas P. Rosato stated, "Our business was largely affected in the second quarter by the weak economic environment and we continue to see restrained spending on capital infrastructure projects. Management has taken steps to reduce our operating expenses and continues to implement changes in its strategic direction aimed at achieving profitability and positive cash flow. In addition, management continues to explore various strategic alternatives, including business combinations, private placements of debt or equity securities and sales of a division or some or all of our assets or a sale of the entire company. Although we have been able to fund our operations to date, there is no assurance that cash flow from our operations or our capital raising efforts will be able to attract the additional capital or other funds needed to sustain our current operations. In order to preserve our limited financial resources, we may determine to voluntarily delist our securities from trading on Nasdaq and deregister our securities under the Exchange Act and cease our reporting obligations with the SEC under the Exchange Act. Despite these setbacks, we introduced new services with our Strategic Energy Management Solutions (SEMS), which is designed to lower customer costs and increase data center efficiency to address the current economy's conservative spending and focus on energy conservation. We are beginning to gain traction with this new offering that expands on our current energy and green solutions business segment services."

Chief Financial Officer Timothy C. Dec said, "During the quarter and sequentially quarter-over-quarter, we experienced a $15.0 million, or 50%, decline in revenue, reported negative adjusted EBITDA of $1.4 million for the second quarter of 2009, and experienced delays in a few customers' ability to meet their contractual payment obligations to us. During the first six months of the year our cash balance has declined $7.2 million. These factors, among others, have adversely impacted our liquidity and may impact our ability to sustain our current operations. We plan to continue to evaluate our current cost structure to further align our expenses with our anticipated revenue stream."

Quarterly Conference Call Details

The Company will conduct its regularly scheduled financial announcement conference call on Thursday, August 13, 2009, at 8:30 a.m. EDT. Investors may listen to the conference call via telephone at: 877-941-4774 (U.S./Canada) or 480-629-9760 (international) or via live audio web cast on the investor relations section of the Company's website at www.thefigi.com.

An audio replay of the conference call will also be available approximately two hours after the conclusion of the call and will be available until Thursday, August 27, 2009. The audio replay can be accessed by dialing 800-406-7325 (U.S./Canada) or 303-590-3030 (international) and entering conference call ID 4133228, or via an archived webcast available on the investor relations section of the Company's website at www.thefigi.com.

About Non-GAAP Financial Measures

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.

About Fortress International Group, Inc.

Fortress International Group, Inc. is leading mission-critical facilities into a new era of maximum uptime and efficiency. By combining the knowledge and experience of Total Site Solutions and Rubicon Professional Services, two experts in critical facilities infrastructure, Fortress provides consulting and engineering, construction management and 24/7/365 site services for the world's most technology dependent organizations. Serving as a trusted advisor, Fortress delivers the strategic guidance and pre-planning that makes every stage of the critical facility lifecycle more efficient. For those who own, lease or manage mission-critical facilities, Fortress provides innovative end-to-end capital management, energy, IT strategy, procurement, design, construction, implementation and operations solutions that optimize performance and reduce cost.

Fortress International Group, Inc. is headquartered in Maryland, with offices throughout the U.S. For more information, visit: www.FortressInternationalGroup.com or call 888-321-4877.

Fortress International Group, Inc. -- setting a new standard for the optimized critical facility.

Forward Looking Statements

This press release may contain "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 or positively affect the Company's future results include: the Company's reliance on a significant portion of its revenues from a limited number of customers; risks relating to our ability to continue as a going concern; the uncertainty whether the Company can raise substantial additional funds to continue its operations; risks associated with our effort to meet our working capital requirements and scheduled maturities of indebtedness absent restructuring; 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 relating to our ability to implement a reduction in our expenses; risks relating our ability to continue to implement our business plan; risks relating to our liquidity; risks relating to our ability to meet all of the terms and conditions of our debt obligations; 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.

financial tables to follow


                    FORTRESS INTERNATIONAL GROUP, INC.
                        CONSOLIDATED BALANCE SHEETS


                                                       (Unaudited)
                                                --------------------------
                                                  June 30,    December 31,
                                                    2009          2008
                                                ------------  ------------
Current Assets
    Cash and cash equivalents                   $  5,267,230  $ 12,448,157
    Contract and other receivables, net           12,595,012    21,288,660
    Costs and estimated earnings in excess of
     billings on uncompleted contracts             2,300,648     3,742,530
    Prepaid expenses and other current assets      1,002,438       539,124
                                                ------------  ------------
Total current assets                              21,165,328    38,018,471
Property and equipment, net                          710,925       824,487
Goodwill                                           4,474,563     4,811,000
Other intangible assets, net                         211,134    13,559,234
Other assets                                         268,470       225,853
                                                ------------  ------------
Total assets                                    $ 26,830,420  $ 57,439,045
                                                ============  ============
Liabilities and Stockholders' Equity
Current Liabilities
    Notes payable, current portion              $    603,131  $  1,688,845
    Convertible note, current portion              1,666,666             -
    Accounts payable and accrued expenses         14,089,665    24,394,990
    Billings in excess of costs and estimated
     earnings on uncompleted contracts             3,812,514     6,047,765
                                                ------------  ------------
Total current liabilities                         20,171,976    32,131,600
Notes payable, less current portion                  247,492       311,709
Convertible notes, less current portion            2,333,334     4,000,000
Other liabilities                                     56,626       137,198
                                                ------------  ------------
Total liabilities                                 22,809,428    36,580,507
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; 12,870,626 and
     12,797,296 issued; 12,695,046 and
     12,621,716 outstanding at June 30, 2009
     and December 31, 2008, respectively               1,283         1,279
    Additional paid-in capital                    62,208,954    61,262,218
    Treasury stock, 175,580 shares at cost at
     June 30, 2009 and December 31, 2008            (869,381)     (869,381)
    Accumulated deficit                          (57,319,864)  (39,535,578)
                                                ------------  ------------
Total stockholders' equity                         4,020,992    20,858,538
                                                ------------  ------------
Total liabilities and stockholders' equity      $ 26,830,420  $ 57,439,045
                                                ============  ============





                    FORTRESS INTERNATIONAL GROUP, INC.
                  CONSOLIDATED STATEMENTS OF OPERATIONS


                            (Unaudited)                 (Unaudited)

                    For the Three Months Ended  For the Six Months Ended
                    --------------------------  --------------------------
                      June 30,      June 30,      June 30,      June 30,
                        2009          2008          2009          2008
                    ------------  ------------  ------------  ------------
Results of
 Operations:
  Revenue           $ 14,939,422  $ 20,149,876  $ 45,010,750  $ 39,581,956
  Cost of revenue     13,158,890    18,038,179    39,562,081    34,059,068
                    ------------  ------------  ------------  ------------
  Gross profit         1,780,532     2,111,697     5,448,669     5,522,888
  Operating
   expenses:
    Selling,
     general and
     administrative    4,637,908     5,657,424     8,491,569    10,428,454
    Depreciation
     and
     amortization        105,039       123,217       208,459       238,456
    Amortization
     of
     intangibles         690,855       619,436     1,382,960     1,401,498
    Impairment
     loss on
     goodwill and
     other
     intangibles      13,062,140     1,217,000    13,062,140     1,217,000
                    ------------  ------------  ------------  ------------
  Total operating
   costs              18,495,942     7,617,077    23,145,128    13,285,408
  Operating loss     (16,715,410)   (5,505,380)  (17,696,459)   (7,762,520)
  Interest income
   (expense), net        (52,271)     (101,938)      (87,819)     (145,008)
                    ------------  ------------  ------------  ------------
  Loss from
   operations
   before income
   taxes             (16,767,681)   (5,607,318)  (17,784,278)   (7,907,528)
  Income tax
   expense                     -       387,000             -       387,000
                    ------------  ------------  ------------  ------------

  Net loss          $(16,767,681) $ (5,994,318) $(17,784,278) $ (8,294,528)
                    ============  ============  ============  ============
Per Common Share
 (Basic and
 Diluted):
  Basic and diluted
   net loss         $      (1.32) $      (0.50) $      (1.40) $      (0.69)
  Weighted average
   common shares
   outstanding-
   basic and
   diluted            12,678,381    12,093,895    12,660,049    12,083,483





                    FORTRESS INTERNATIONAL GROUP, INC.
                      ADJUSTED EBITDA RECONCILIATION


                    For the Three Months Ended   For the Six Months Ended
                            June 30,                     June 30,

                    --------------------------  --------------------------
                        2009          2008          2009          2008
                    ------------  ------------  ------------  ------------
                    (unaudited)   (unaudited)   (unaudited)   (unaudited)

Net loss            $(16,767,681) $ (5,994,318) $(17,784,278) $ (8,294,528)
Interest (income)
 expense, net             52,271       101,938        87,819       145,008
Taxes                          -       387,000             -       387,000
Depreciation and
 amortization            105,039       123,217       208,459       238,456
Amortization of
 intangibles             690,855       816,102     1,382,960     1,673,412
                    ------------  ------------  ------------  ------------
EBITDA               (15,919,516)   (4,566,061)  (16,105,040)   (5,850,652)
Stock and
 warrant-based
 compensation            463,051       654,671       946,740     1,012,413
Impairment loss on
 goodwill and other
 intangibles          13,062,140     1,217,000    13,062,140     1,217,000
Provision for bad
 debts                 1,000,000        34,795     1,025,000        89,795
                    ------------  ------------  ------------  ------------

Adjusted EBITDA     $ (1,394,325) $ (2,659,595) $ (1,071,160) $ (3,531,444)
                    ============  ============  ============  ============

Contact Information

  • Company Contact:
    Timothy C. Dec
    Chief Financial Officer
    Fortress International Group, Inc.
    Phone: (410) 423-7438

    Investor Relations:
    Kristen McNally
    The Piacente Group, Inc.
    Phone: (212) 481-2050
    figi@tpg-ir.com