Argyle Security, Inc. Announces Second Quarter 2008 Financial Results

Second Quarter 2008 Adjusted Pro Forma Financial Highlights vs. Second Quarter 2007 -- Revenues Increased by 66% to $36.5 Million -- Gross Profit Rose by 25% to $7.3 Million -- EBITDA...

Argyle Updates Guidance for 2008

Based on its strong first-half performance and robust market conditions in the corrections industry, Argyle expects full-year 2008 revenues to be at the top end of the previously forecasted range of $128 to $142 million. Argyle now expects EBITDA margins of approximately 7% for the full-year 2008, which is below previous expectations for 9 to 10%, and due to 1) margin erosion in the security electronics business, 2) higher than expected legal and accounting fees and 3) non-cash compensation expense. However, as the previously listed items were primarily concentrated in the first half of the year, Argyle does expect to achieve an EBITDA margin run rate of approximately 9% in the second half of 2008.

Conference Call Information

Argyle Security will host an investor conference call at 10:00 a.m. ET , today, August 14, 2008 to discuss its results. Interested parties should call 888-713-4213 (domestic) or 617-213-4865 (international) at least five minutes before the scheduled start time; the passcode is 89962604. This call may also be accessed via the Internet at:

For those who are unavailable to listen to the live broadcast, a replay will be available through August 28, 2008 and can be accessed by dialing 888-286-8010 (domestic), and 617-801-6888 (international). The pass code is 84546898.

Since Argyle Security acquired ISI Security Group (which is now a part of Argyle Security USA) in July 2007 and FireQuest, Peterson and Com-Tec in January 2008 , the Company does not believe a comparison of the results of operations and cash flows for the three months ended June 30, 2008 versus June 30, 2007 is beneficial to stockholders. In order to assist investors in better understanding the changes in its business between the three months ended June 30, 2007 and June 30, 2008 , Argyle Security has provided adjusted pro forma results as if the acquisitions occurred on January 1, 2008 and January 1, 2007 , respectively. Argyle Security derived the adjusted pro forma results of operations from (i) the unaudited consolidated financial statements of Com-Tec for the three months ended June 30, 2007 , (ii) the unaudited financial statements of Peterson for the three months ended June 30, 2007 , (iii) the unaudited financial statements of FireQuest for the three months ended June 30, 2007 and (iv) the unaudited consolidated financial statements of the Company for the three months ended June 30, 2008 and 2007.

Adjusted pro forma net income is an alternative view of performance used by management, and we believe that investors' understanding of our performance is enhanced by disclosing this performance measure. We report adjusted pro forma net income in order to present the results of our major operations -- the construction, installation, marketing and sale of various electronic security systems for commercial accounts and detention hardware (including security doors and frames, jail furniture, security glazing, and other security-based systems) and electronic control systems for correctional facilities -- prior to considering certain income statement elements, principally amortization of intangible assets. We have defined adjusted pro forma net income as net income before the impact of purchase accounting for acquisitions, acquisition-related costs, discontinued operations and one-time expenses associated with stock appreciation rights. The adjusted pro forma net income measure is not, and should not be viewed as, a substitute for U.S. GAAP net income.

EBITDA (earnings before interest, taxes, depreciation and amortization) is used by management as a performance measure for benchmarking against the Company's peers and competitors. The Company believes EBITDA is useful to investors, because it is frequently used by securities analysts, investors and other interested parties to evaluate companies in the security industry. EBITDA is not a recognized term under GAAP. Argyle and ISI compute EBITDA using the same consistent method from quarter to quarter. Following the attached financial statements is a reconciliation of EBITDA to net loss.