Photonic Products Group, Inc. Announces Third Quarter Results
NORTHVALE, N.J., Nov. 17 /PRNewswire-FirstCall/ – Photonic Products Group, Inc. (OTC Bulletin Board: PHPG) has reported its consolidated financial results for its third quarter and nine months ended September 30, 2009.
Revenue for the third quarter was $2.7 million and $8.1 million for the nine months ended September 30, 2009, down 29.9% and 32.4%, respectively, from the same periods last year.
The Company booked $1.5 million in new orders in the three months ended September 30, 2009, down 39.7% from the comparable period, last year. For the nine months ended September 30, 2009 and 2008, orders were $6.3 million and $11.3 million, respectively, down 44.2% on a year-over-year basis. The Company continues to feel the effects of the economic recession through reduced bookings from its OEM customer base. Anticipated orders in the defense-related sector have not materialized, or have been pushed out into future periods. Our commercial market has been even more severely affected.
Gross profit for the third quarter of 2009 was $607,000 or 22.8% of sales, compared to $1.1 million, or 28.0%, in 2008. For the nine months ended September 30, 2009, gross profit was $1.4 million, or 17.4 %, compared with $3.8 million, or 31.6 % in the nine month period of 2008.
During the quarter, the Company experienced further declines in sales and profitability and a continuing weakness in economic and industry conditions. As a result, the Company completed a goodwill impairment analysis as of September 30, 2009 using a two-step approach, as required under U.S. GAAP, and determined that goodwill related to its Florida reporting unit was impaired and recorded a $1.6 million charge against the full carrying value of the reporting unit’s goodwill.
The Company had a net loss of $2.1 million for the quarter and $2.8 million for the nine months of 2009. Excluding the goodwill impairment charge of $1.6 million, the 2009 net loss would have been $564,000 for the quarter and $1.2 million for the nine month period. Net income for the three and nine months ended September 30, 2008 was $169,000 and $954,000, respectively.
Basic and diluted net loss per common share for the third quarter of 2009 was $(0.19) compared to last year’s third quarter basic and diluted net income per common share of $0.02 and $0.01, respectively. For the nine months ended September 30, 2009, basic and diluted net loss per common share was $(0.25) which compares with basic and diluted net income per common share of $0.09 and $0.07 in the same period last year.
The economic uncertainty and its negative impact on our sales and profitability also resulted in management re-assessing the likelihood that the benefit of the Company’s deferred tax assets would be realized in future periods. As a result, we recorded an increase in our valuation allowance and a corresponding deferred tax provision of $392,000 in the third quarter.
Cash flow from operations was $451,000 for nine months of fiscal 2009 compared to $879,000 in the same period of 2008. The Company’s cash position was $3.8 million at September 30, 2009, down slightly from $3.9 million as of September 30, 2008 but up from $3.5 million (including short-term investments) at December 31, 2008.
Joe Rutherford, President and CEO of PPGI commented, “Bookings and sales levels continue to reflect the negative economic environment in which we are operating and have significantly impacted our financial results. Despite this, I am encouraged by the improvement in profit margins in the third quarter over the earlier periods of this year. This reflects the considerable cost cuts we made in the first quarter of the year, and our ongoing commitment to manage our business efficiently, at the lower sales levels. At the same time, we have increased sales and marketing activity on strengthening relationships with current and prospective customers and increasing our efforts to develop new products. In addition, the cost cutting measures we have implemented have taken hold and we are continuously evaluating our cost structure for additional opportunities for savings. We are also pleased that our management of working capital has resulted in positive cash flow over the year, despite lower sales.”
Founded in 1973, Photonic Products Group, Inc. develops, manufactures, and markets products and services for use in diverse Photonics industry sectors via its portfolio of distinctly branded businesses. INRAD specializes in crystal-based optical components and devices, laser accessories and instruments. Laser Optics specializes in precision custom optical components, assemblies, and optical coatings. MRC Optics’ business specializes in precision diamond turned optics, metal optics, and opto-mechanical and electro-optical assemblies. PPGI’s customers include leading corporations in the Defense and Aerospace, Laser Systems, and Process Control and Metrology sectors of the Photonics Industry, as well as the U.S. Government. Its products are also used by researchers at National Laboratories and Universities worldwide.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this press release that are not purely historical are forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. These statements may be identified by their use of forward-looking terminology such as “believes”, “expects”, “should”, “will”, “plan”, “anticipate”, “targeting” or similar words. Such forward-looking statements, such as our expectation for revenues, new orders, and income, involve risks and uncertainties that could cause actual results to differ materially from those projected. Risks and uncertainties that could cause actual results to differ materially from such forward looking statements are, but are not limited to, uncertainties in market demand for the company’s products or the products of its customers, future actions by competitors, inability to deliver product on time, inability to realize improved results from cost cutting measures, inability to raise capital if needed, inability to retain key employees or hire new employees, and other factors discussed in the Company’s Form 10-k for the year ended December 31, 2008 and from time to time in the Company’s other filings with the Securities and Exchange Commission. The forward looking statements made in this news release are made as of the date hereof and Photonic Products Group, Inc. does not assume any obligation to update publicly any forward looking statement.
PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2009 2008
---- ----
(Unaudited) (Audited)
Assets
-------
Current assets:
Cash and cash equivalents $3,753,759 $2,672,087
Certificates of deposit - 800,000
Accounts receivable (net of allowance
for doubtful accounts of $15,000
in 2009 and 2008) 1,716,993 2,810,602
Inventories, net 2,440,196 2,732,336
Other current assets 186,778 188,084
--------- ---------
Total current assets 8,097,726 9,203,109
--------- ---------
Plant and equipment:
Plant and equipment, at cost 14,584,207 14,445,027
Less: Accumulated
depreciation and
amortization (11,834,559) (11,139,771)
----------- -----------
Total plant and equipment 2,749,648 3,305,256
--------- ---------
Precious Metals 157,443 112,851
Deferred Income Taxes 408,000 408,000
Goodwill 311,572 1,869,646
Intangible Assets, net 692,657 751,580
Other Assets 47,601 81,707
------ ------
$12,464,647 $15,732,149
Total Assets =========== ===========
Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities:
Current portion of other long term notes $9,000 $136,892
Accounts payable and accrued
liabilities 1,735,910 2,160,665
Customer advances 115,667 456,754
------- -------
Total current liabilities 1,860,577 2,754,311
--------- ---------
Related Party Convertible Notes Payable 2,500,000 2,500,000
Other Long Term Notes, net of
current portion 347,167 353,663
------- -------
Total liabilities 4,707,744 5,607,974
--------- ---------
Commitments and Contingencies - -
Shareholders' Equity:
Common stock: $.01 par value; 60,000,000
Authorized shares; 11,414,984 shares
issued at September 30, 2009 and
11,230,678 issued at December 31, 2008 114,149 112,306
Capital in excess of par value 17,027,088 16,622,466
Accumulated deficit (9,369,384) (6,595,647)
---------- ----------
7,771,853 10,139,125
Less - Common stock in treasury, at cost
(4,600 shares respectively) (14,950) (14,950)
------- -------
Total Shareholders' Equity 7,756,903 10,124,175
--------- ----------
Total Liabilities and Shareholders' Equity $12,464,647 $15,732,149
=========== ===========
PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- ------------
2009 2008 2009 2008
---- ---- ---- ----
Total revenue $2,664,963 3,802,935 $8,100,497 $11,974,595
Cost and expenses:
Cost of goods sold 2,058,433 2,737,511 6,693,182 8,188,376
Selling, general and
administrative
expenses 746,511 949,125 2,533,442 2,913,853
Goodwill impairment
charge 1,558,074 - 1,558,074 -
--------- --------- ---------- ----------
4,363,018 3,686,636 10,784,698 11,102,229
--------- --------- ---------- ----------
(Loss) income from
operations (1,698,055) 116,299 (2,684,201) 872,366
Other expense:
Interest expense-net (32,275) (33,179) (96,907) (143,142)
Gain on sale of
precious metals - - 7,371 -
Gain on sale of fixed
assets - - - 9,113
--------- --------- ---------- -----
(32,275) (33,179) (89,536) (134,029)
--------- --------- ---------- --------
Net (loss) income before
income taxes (1,730,330) 83,120 (2,773,737) 738,337
Deferred tax provision
(benefit) 392,000 (86,000) - (216,000)
Net (loss) income $(2,122,330) $169,120 $(2,773,737) $954,337
=========== ======== =========== ========
Net (loss) income per
common share-basic $(0.19) $0.02 $(0.25) $0.09
====== ===== ====== =====
Net (loss) income per
common share-diluted $(0.19) $0.01 $(0.25) $0.07
====== ===== ====== =====
Weighted average shares
outstanding-basic 11,404,247 11,209,576 11,311,574 10,824,457
========== ========== ========== ==========
Weighted average shares
outstanding-diluted 11,404,247 15,461,922 11,311,574 15,691,982
========== ========== ========== ==========
PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
-------------------------------
2009 2008
---- ----
Cash flows from operating activities:
Net (loss) income $(2,773,737) $954,337
----------- --------
Adjustments to reconcile net (loss)
income to cash provided by operating
activities:
Depreciation and amortization 753,711 802,088
Common stock contribution
to retirement plan 179,068 160,181
Goodwill impairment charge 1,558,074 -
Gain on sale of fixed assets - (9,113)
Gain on sale of precious metals (7,371) -
Deferred income taxes - (306,000)
Stock based compensation 86,433 56,569
Changes in operating assets
and liabilities:
Accounts receivable 1,093,609 232,617
Inventories, net 292,140 (295,668)
Other current assets 1,306 (44,686)
Other assets 34,106 38,221
Accounts payable and accrued
liabilities (424,755) (721,355)
Customer advances (341,087) 11,674
-------- ------
Total adjustments and changes 3,225,234 (75,472)
--------- -------
Net cash provided by operating
activities 451,497 878,865
------- -------
Cash flows from investing activities:
Capital expenditures (139,180) (726,127)
Purchase of precious metals (53,538) -
Proceeds from redemption of
certificates of deposit 800,000 -
Proceeds from sale of fixed assets - 10,000
Proceeds from sale of precious metals 16,317 -
------ ------
Net cash provided by (used in)
investing activities 623,599 (716,127)
------- --------
Cash flows from financing activities:
Redemption of restricted stock units (1,861) -
Proceeds from exercise of stock options 75,325 258,255
Proceeds from exercise of warrants 67,500 807,587
Principal payment of convertible note
payable - (1,700,000)
Principal payments of other notes
payable (134,388) (11,155)
Principal payments of capital lease
obligations - (47,088)
------- -------
Net cash provided by (used in)
financing activities 6,576 (692,401)
----- --------
Net increase (decrease) in cash and
cash equivalents 1,081,672 (529,663)
Cash and cash equivalents at beginning
of period 2,672,087 4,395,945
Cash and cash equivalents at end of
period $3,753,759 $3,866,282
========== ==========
Supplemental Disclosure of Cash Flow
Information:
Interest paid $15,056 $488,550
======= ========
Income taxes paid $25,000 $360,000
======= ========
SOURCE Photonic Products Group, Inc.