SOURCE: Tarpon Industries, Inc.

August 16, 2005 09:54 ET

Tarpon Industries Announces Second Quarter Financial Results for Fiscal 2005

Revenues Increase 26 Percent as Company Continues Roll Out of Acquisition Strategy

MARYSVILLE, MI -- (MARKET WIRE) -- August 16, 2005 -- Tarpon Industries, Inc. (AMEX: TPO), a manufacturer and distributor of structural and mechanical steel tubing and engineered steel storage rack systems, today announced financial results for the second quarter ended June 30, 2005.

"I am pleased to report that Tarpon is continuing to grow according to plan despite an unprecedented industry-wide decline in steel prices during the second quarter," said Tarpon Chairman and CEO J. Peter Farquhar. "As we focus on building for the future, our growth strategy has increased revenue by 26 percent on a quarter-to-quarter basis and, in less then 12 months we have completed three acquisitions and have signed a letter of intent to acquire yet another company. We feel very positive about future revenue growth as we continue to improve both organically and through potential acquisitions."

For the second quarter ended June 30, 2005, on an unaudited consolidated basis, Tarpon reported net revenues of approximately $15.1 million, a 26 percent increase when compared to revenue of $12.0 million from the comparable period for 2004. The company reported a net loss of $1.47 million or net loss per common share of ($0.32), versus a net loss of approximately $0.2 million, or a net loss per common share of ($0.17) for the comparable second quarter of 2004.

Revenue for the six-month period ended June 30, 2005 increased 142 percent to $29.1 million, compared to revenue of approximately $12.0 million for the comparable period last year. The net loss for the period was approximately $3.08 million or ($0.82) per share versus a net loss of approximately $0.38 million, or ($0.31) per share for the comparable period in 2004.

Operating expenses for the second quarter of 2005 increased due in part to SG&A expenses and industry factors, including: 1) an industry-wide decline in steel prices of approximately 26 percent since the beginning of the year; 2) approximately $1.3 million in public company expenses and costs associated with compliance initiatives, 3) more than $80,000 in consolidation costs to divest non-performing, legacy business segments, and 4) increased SG&A required to support an aggressive growth strategy.

"Since our IPO earlier this year, we have made significant strides in folding three acquisitions under the Tarpon umbrella. As such, we have had to spend considerable manpower and financial resources to streamline operations from all three acquisitions. These expenditures were undertaken to improve processes and build a solid infrastructure from which to pursue our acquisition strategy for the coming quarters. We anticipate reaping the benefits of these efforts throughout the second half of 2005 and into fiscal 2006."

Farquhar continued, "As we continue to consolidate, the Company will benefit from economies that come from a roll-up strategy -- those of improved purchasing power, leveraging of administrative staff, sales forces, distribution channels, and an increased ability to expand geographic reach into new markets.

About Tarpon Industries, Inc.

Tarpon Industries, Inc., through its wholly owned subsidiaries within the United States and Canada, manufactures and sells structural and mechanical steel tubing and engineered steel storage rack systems. Through an aggressive acquisition-driven business model, the Company's mission is to become a larger and more significant manufacturer and distributor of structural and mechanical steel tubing, engineered steel storage rack systems and related products. For more information, please visit Tarpon's website at http://www.tarponind.com.


                    CONSOLIDATED BALANCE SHEETS

                                                   June 30,    December 31,
                                                     2005           2004
                                                 (unaudited)
                                                -----------    -----------

ASSETS:
CURRENT ASSETS:
Cash and cash equivalents                       $   807,853    $   257,786
Accounts receivable (less allowance for
 doubtful accounts for 2005 of $133,723
 and for 2004 of
 $335,884)                                        6,753,210      8,327,708
Inventories                                       7,703,672      7,604,384
Prepaid expenses                                    412,172        569,040
Prepaid initial public offering expenses                  -      2,076,468
Deposits                                             94,447        265,116
Deferred tax asset                                   57,473         52,552
Capitalized acquisition costs                        13,660        131,428
                                                -----------    -----------
  Total current assets                           15,842,487     19,284,482

Property plant and equipment - net               10,669,149        635,051
Deferred financing costs                             74,042         71,812
Deferred tax asset                                  189,929              -
Goodwill                                          3,689,218      1,279,810
Intangible assets, net of amortization            1,542,562        436,638
                                                -----------    -----------
TOTAL ASSETS                                    $32,007,387    $21,707,793
                                                ===========    ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
 (DEFICIT):
CURRENT LIABILITIES:
Short-term debt                                 $10,265,056    $11,467,706
Accounts payable - trade                          6,303,730      8,345,395
Accrued expenses                                  1,324,942        781,222
Success fees                                        222,222        233,333
Income taxes payable                                 37,072        135,712
Current maturities on long-term debt              3,741,741        405,107
                                                -----------    -----------
  Total current liabilities                      21,894,763     21,368,475

Long-term debt less current maturities            1,509,437      1,314,218
Other long-term liabilities                          13,079         64,286
Long-term success fees, less current
 maturities                                          66,667              -

SHAREHOLDERS' EQUITY (DEFICIT):
Common shares; no par value, authorized,
 20,000,000 shares at June 30, 2005 and
 10,000,000 shares at December 31, 2004;
 issued and outstanding, 4,640,130 shares
 at June 30, 2005 and 1,229,732 shares at
 December 31, 2004                               14,804,225      2,130,952
Accumulated deficit                              (6,488,888)    (3,411,380)
Foreign currency translation                        208,104        241,242
                                                -----------    -----------
  Total shareholders' equity (deficit)            8,523,441     (1,039,186)
                                                -----------    -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
 (DEFICIT)                                      $32,007,387    $21,707,793
                                                ===========    ===========


                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (unaudited)

                         Three Months Ended           Six Months Ended
                              June 30,                    June 30,
                         2005          2004          2005           2004
                     -------------------------    ------------------------
REVENUES:
Sales, net of
 customer discounts  $15,086,908   $11,992,602   $29,105,264   $11,992,602

Cost of goods sold    14,192,483    10,490,443    27,426,915    10,490,443
                     -----------   -----------   -----------   -----------

       Gross profit      894,425     1,502,159     1,678,349     1,502,159

Selling, general
 and administrative
 expenses              2,121,866     1,107,867     4,480,482     1,269,161
                     -----------   -----------   -----------   -----------

OPERATING (LOSS)
 INCOME               (1,227,441)      394,292    (2,802,133)      232,998

OTHER (INCOME)
 EXPENSE:
Miscellaneous
 (income) expense         27,989       (21,426)       41,352       (21,426)
Interest expense         186,818       330,733       458,148       334,515
Financing costs           14,776       137,051        29,691       137,051
Interest and dividend
 income                      (44)         (592)       (4,849)         (592)
Foreign exchange          71,114        48,441       (53,346)       48,441
                     -----------   -----------   -----------   -----------
       Total other
       (income)
        expense          300,653       494,207       470,996       497,989
                     -----------   -----------   -----------   -----------

LOSS BEFORE INCOME
 TAXES                (1,528,094)      (99,915)   (3,273,129)     (264,991)
PROVISION FOR INCOME
 TAXES                   (60,295)      113,021      (195,621)      113,021
                     -----------   -----------   -----------   -----------

NET LOSS             $(1,467,799)    $(212,936)  $(3,077,508)    $(378,012)
                     ============  ===========   ===========   ===========

NET LOSS PER COMMON
 SHARE - BASIC AND
 DILUTED                  $(0.32)       $(0.17)       $(0.82)       $(0.31)
                     ============  ===========   ===========   ===========
WEIGHTED AVERAGE
 NUMBER OF COMMON
 SHARES OUTSTANDING    4,640,130     1,229,732     3,740,386     1,224,842
                     ============  ===========   ===========   ===========
Forward-Looking Statements

Certain statements made by Tarpon in this news release and other periodic oral and written statements, including filings with the Securities and Exchange Commission, are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, as well as statements which address operating performance, events or developments that we believe or expect to occur in the future, including those that discuss strategies, goals, outlook or other non-historical matters, or which relate to future sales or earnings expectations, cost savings, awarded sales, volume growth, earnings or a general belief in our expectations of future operating results, are forward-looking statements. The forward-looking statements are made on the basis of management's assumptions and estimations. As a result, there can be no guarantee or assurance that these assumptions and expectations will in fact occur. The forward-looking statements are subject to risks and uncertainties that may cause actual results to materially differ from those contained in the statements. Some, but not all of the risks, include our ability to obtain future sales, our ability to successfully integrate acquisitions, changes in worldwide economic and political conditions, including adverse effects from terrorism or related hostilities including increased costs, reduced production or other factors, costs related to legal and administrative matters, our ability to realize cost savings expected, inefficiencies related to production that are greater than anticipated, changes in technology and technological risks, foreign currency fluctuations, increased fuel costs, increased steel costs as it relates to our selling price, work stoppages and strikes at our facilities and that of our customers, the presence of downturns in customer markets where the Company's goods and services are sold, financial and business downturns of our customers or vendors, and other factors, uncertainties, challenges, and risks detailed in Tarpon's public filings with the Securities and Exchange Commission. Tarpon does not intend or undertake any obligation to update any forward-looking statements.

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