Company suspends report
ALBANY, N.Y. - Integrated Alarm Services Group made a string of announcements last month, including the delay of its financial results for the year ended December 31, 2004 and a pair of acquisitions, ProAlert and Firstline, both valued at less than 30 times RMR.
IASG, which planned to release its financial results on Wednesday, March 16, said the delay was due to not yet achieving compliance with the Sarbanes-Oxley Act of 2002. The federal regulation was passed as a result of rampant accounting inadequacies among public companies and holds key management executives responsible for incomplete financial statements.
Specifically, the company stated it had not yet met standards in section 404 for the delay, which covers management assessment of internal controls. As a result of this rule, the company must describe how management established and maintained protocols for financial reporting.
With so many public companies now required to follow the Sarbanes-Oxley Act, finding an accounting firm with time to audit and sign off on financial filings has become harder to do, observed Matthew Rogers, managing director at USBX Advisory Services, who focuses on the alarm monitoring sector of the industry for the firm.
Ã¢â‚¬Å“When you get down on the list, then you can be late,Ã¢â‚¬Â he said. Ã¢â‚¬Å“But when you add SOA 404 to it - with rapid growth and acquisitions - it becomes impossible (to file on time),Ã¢â‚¬Â he said.
The company did state forecasted 2004 revenue to be nearly $80 million, approximately double from the prior year. Additionally, the company expects its fourth quarter loss to be substantially higher than the $1.5 million it reported last year during the same time, as a result of its $50-million purchase of National Alarm Computer Center.
In a deal with ProAlert, a Tempe, Ariz.-based full-service alarm company, IASG acquired approximately 7,100 alarm contracts for $5.75 million in cash, representing a purchase multiple of 27 times recurring monthly revenue. The accounts generate $212,000 of RMR and 88 percent of the accounts are residential.
Ã¢â‚¬Å“The deal was cut at a price we havenÃ¢â‚¬â„¢t seen since 1998, 1999,Ã¢â‚¬Â remarked Rogers. Ã¢â‚¬Å“HeÃ¢â‚¬â„¢s (company chairman Tim McGinn) been able to continue to buy accounts thatÃ¢â‚¬â„¢s under what most analysts say is the average.Ã¢â‚¬Â
Calls to ProAlertÃ¢â‚¬â„¢s corporate offices were not returned as of press time. At the time of purchase, ProAlert was operating under a corporate restructuring. The company primarily operated in the Arizona market, where 70 percent of its accounts were based. The company also operated in the states of Utah, Texas, Idaho and New Mexico.
Ã¢â‚¬Å“WeÃ¢â‚¬â„¢ve been in the southeastern United States for some time,Ã¢â‚¬Â commented IASG spokesperson Joseph Reinhart. The deal shows the companyÃ¢â‚¬â„¢s Ã¢â‚¬Å“continued westerly focus on business development,Ã¢â‚¬Â he said.
IASG also completed a deal with Orem, Utah-based Firstline Security valued at $4.4 million in cash that represents a purchase multiple of 29.5 time RMR. As a result of the deal, the company added approximately 5,000 residential accounts that generate $150,000 RMR.
The majority of the accounts are located in California, Michigan, New Jersey and New York, according to the company.
Late last year, IASG completed one of its biggest deals to date, acquiring Irvine, Calif.-based third party monitoring firm National Alarm Computer Center from Tyco International for $50 million. The deal included approximately 240,000 alarm contracts, increasing the companyÃ¢â‚¬â„¢s accounts to more than 700,000.
Also in this part of the country, IASG purchased Protection Service Industries in late 2003, gaining almost 60,000 alarm contracts. PSI, which relocated to Riverside, Calif., from Rancho Cucamonga, Calif., late last year, operated in Arizona, California and New Mexico.
IASG plans to transfer ProAlertÃ¢â‚¬â„¢s accounts to the NACC central station by the end of the second quarter and FirstlineÃ¢â‚¬â„¢s former accounts to its Manasquan, N.J. central station.