Garda World Security Corporation
TSX : GW

Garda World Security Corporation

September 12, 2007 08:00 ET

Garda Reports Second Quarter Financial Results

Corporation Adjusts For Non-Recurring Events and is on Track to Deliver $30 Million in Integration Synergies

MONTREAL, QUEBEC--(Marketwire - Sept. 12, 2007) - Garda World Security Corporation (TSX:GW) (Garda), one of the most trusted consulting, investigation and security firms in the world, announced today its financial results for the second quarter ended July 31, 2007.

Highlights:

- Sales increased by 93.1%, to reach $318.6 million.

- EBITDA grew by 69.4% from the same period last year, an increase of $9.6 million.

- Gross margins as a percentage of sales increased from 19.1% to 22.0%.

- Shareholders' equity for the quarter was $135.3 million.

- The Corporation is on target to attain identified synergies.

Selected Quarterly Financial Information:



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For the second quarter ended July 31 2007 2006 Change
$ $ %
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Sales 318,557,341 164,985,610 +93.1
Gross profit 69,959,316 31,570,622 +121.6
Net income (loss) for the period (1,479,540) 5,049,424
Basic net income (loss) per share (0.05) 0.18
EBITDA(1) 23,321,227 13,768,078 +69.4
Basic EBITDA(1) per share 0.75 0.48 +56.8
Total assets 957,203,408 367,594,066 +160.4
Shareholders' equity 135,321,102 140,027,752
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(1) EBITDA (earnings before interest, income taxes, depreciation and
amortization) is not an accepted performance measure as per Canadian
GAAP.


"We are pleased with our operational progress as well as sales and gross margin increases as reflected in our second quarter results. This quarter was marked by a number of one-time non-recurring events which impacted our results, from an accounting perspective. In addition we are confident that the actions that management has undertaken will strengthen our ability to execute and accelerate our strategy more efficiently," noted Francois Rodrigue, Senior Vice President and Chief Financial Officer.

"We are confident that the decisive actions we are taking will help us accelerate the level of integration and seamless operations we need to continue our success laying the groundwork for ongoing profitable growth," said Stephan Cretier, President and CEO. "This realignment of our operations presently in progress is intended to fuel our sustained growth, increased profitability and value to our shareholders. The integration of our operations in the cash logistics sector in the U.S. is progressing more rapidly, and we are confident of obtaining the level of synergies that we identified."

One-time Non-recurring Events

The measures include:

- The restructuring of the Midwestern cash logistics operations - Many of the consolidated companies (United Armored Services, Security Armored Express, Security Armored Car, PSI Armored, and American Security) purchased by Garda in 2005 and 2006 were operating under a system of "pay per stop." The company decided to realign those units and operate them like its other North American entities to maximize the routes efficiencies in those regions. The change was put into effect at the beginning of July and is expected to be completed by September 30. Implementing this change has resulted in an initial and temporary labor cost increase in order to minimize impact on client services, which will be quickly offset through operations optimization, resulting in a more scalable and profitable platform. Garda also experienced a certain level of seasonality in terms of total volume of business in the retail sector of the U.S. cash logistics business during the quarter.

- Revision of Garda's book of business in Ontario and realignment of the operations of the former Rentokil Initial Canada - Western operations have significantly improved in the last months. In Ontario, however, as operations and profit margins require refinements, management has launched a customer optimization initiative aimed at eliminating lower margin contracts, including security services for certain government buildings, especially in Ottawa. During this time the company has refrained from making adjustments in the operating cost structure in anticipation of an important new national contract presently in negotiation. The realignment of the Ontario operation is expected to be completed within the next 45 days.

These one-time events total approximately $7.5 million for the second quarter.

On Target to Achieve $30 Million Synergies

The company is on target to achieve its stated goal of realizing $30 million in synergies as planned following the acquisition of AT Systems in the cash logistics business, and is expected to meet its $8 million EBITDA run-rate milestone by October 1 of this year. Management has analysed the organizational structure of the U.S. cash logistics business to achieve conformity with Garda's optimal organizational structure and has identified 207 redundant positions. The elimination of those positions is presently taking place and is expected to be completed within the next 30 days. The next phase of the integration process which includes rerouting and closing redundant facilities is expected to generate substantial synergies. These synergies are expected to be realised gradually over the next six months.

Management's Discussion and Analysis of Financial Position and Results of Operations

Sales

Sales for the quarter ended July 31, 2007 rose to $318,557,341 from $164,985,610 for the corresponding quarter last year, an increase of $153,571,731 or 93%. For the quarter ended July 31, 2007, the increase in sales generated from internal growth represents $3,365,029 or 2%, while the increase in sales added from business acquisitions represents $150,206,702 or 98%. The internal sales growth is principally due to volume increase on existing contracts. Sales for the quarter also include rental revenues of $4,979,859 generated from the lease of the majority of the company's aircrafts to a third party. For the six (6) month period ended July 31, 2007, sales increased to $556,573,468 from $302,626,342 in the same period last year, representing growth of $253,947,126 or 84%.

Sales in the physical security segment rose to $162,632,523 for the quarter ended July 31, 2007 from $133,364,353 in the corresponding quarter last year, an increase of $29,268,170 or 22%. This sales increase of $29,268,170 in the physical security segment is directly attributable to the business acquisitions completed during the last twelve (12) months and new contracts obtained. Sales in the cash logistics segment rose to $155,924,818 from $31,621,257 in the corresponding quarter last year, an increase of $124,303,561 or 393%. This sales increase is attributable to the internal growth and to the acquisition of ATI International in April 2007, PSI Armored in September 2006, American Security in October 2006 and Security Armored Car Services in June 2006.

Sales in Canada rose to $121,204,663 from $105,009,914 in the corresponding quarter last year, while sales in United States and other rose to $197,352,678 from $59,975,696 in the corresponding quarter last year.

Gross Profit

Gross profit rose $38,388,694 or 122% from $31,570,622 for the quarter ended July 31, 2006 to $69,959,316 for the quarter ended July 31, 2007. This increase in gross profit is attributable to the business acquisitions completed during the last twelve (12) months, to the increase in sales generated by the cash logistics segment in Canada, as well as to the increase in sales in the physical security sector. The gross margin as a percentage of sales increased from 19.1% to 22.0% mainly due to higher gross margins on increased sales generated in Canada, to the business acquisitions completed during the last twelve (12) months, and to the rental revenues generated on the aircrafts leased to a third party.

For the six (6) month period ended July 31, 2007, the gross profit rose to $117,517,115 from $60,099,415 for the same period last year, an increase of $57,417,700 or 96%. The gross margin as a percentage of sales increased from 19.9% to 21.1%.

Net income (loss) for the period

Net loss for the quarter ended July 31, 2007 was $1,479,540 (-$0.05 basic per share and -$0.05 diluted per share), compared to a net profit of $5,049,424 ($0.18 basic and $0.17 diluted per share) for the corresponding quarter last year, a decrease of $6,528,964 ($0.23 basic per share).

For the six (6) month period ended July 31, 2007, the net income totaled $4,316,280 ($0.14 basic and $0.13 diluted per share) compared to $9,547,172 ($0.35 basic and $0.33 diluted per share) for the same period last year, a decrease of $5,230,892 or $0.19 per share.

Cash flows from operations

Cash flows from operations rose to $12,512,940 for the quarter ended July 31, 2007, compared with $8,718,908 for the corresponding quarter last year. This increase of $3,794,032 or 44% is mainly attributable to the increase in EBITDA.

Changes in non-cash working capital items used cash of $2,976,573 during the quarter ended July 31, 2007, compared to cash used in the amount of $9,205,299 for the corresponding quarter last year.

Operating activities generated cash of $9,536,367 during the quarter ended July 31, 2007, compared to $17,924,207 for the corresponding quarter last year.

For the six (6) month period ended July 31, 2007, the cash flows from operations totaled $26,185,401 compared to $17,055,493 for the same period last year, an increase of $9,129,908.

Outlook

To grow and achieve its goals moving forward, Garda will continue to unify its employees under one vision and serve its clients as one company. Garda will keep on leveraging its organization-wide capabilities across businesses and geographies, integrate its services toward a common goal to serve its clients better, strengthen its market position, and grow in a balanced way. The firm is moving ahead with one vision, one commitment, and one unified company and has embarked on an era of exciting and sustainable growth in shareholder value.

About Garda

Garda, the fifth largest integrated physical security and cash logistics firm worldwide on an annualized revenue basis, is well known for addressing complex security and investigations issues. As a leading provider in consulting, investigation and security services, Garda is recognized as one of the fastest growing companies with operations across Canada and the United States, Latin America, Europe, the Middle East, Africa, and Asia. With approximately 50,000 dedicated professionals, Garda offers integrated solutions in cash logistics, physical security, consulting and investigations, and enterprise intelligence services. Its team includes specialists and some of the most highly qualified and best-trained experts in the industry. For more information, visit: http://www.gardaglobal.com and http://www.garda-world.com.

FORWARD-LOOKING INFORMATION -- This press release contains forward-looking statements reflecting Garda objectives, estimates, expectations and the impact of acquisitions on Garda's financial performance. These statements are identified by the use of verbs such as "believe", "anticipate", "estimate", and "expect" as well as by the use of future or conditional tenses. By their very nature, these types of statements involve risks and uncertainty. Consequently, reality may differ materially from Garda's projections or expectations.

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