Point Blank Solutions Reports 2008 Third Quarter Results

POMPANO BEACH, Fla., Nov. 17 /PRNewswire-FirstCall/ -- Point Blank Solutions, Inc. ("PBSI", Pink Sheets: PBSO.PK), a leader in the field of protective body armor, announced today its results of operations and financial position as of and for the three and nine months ended September 30, 2008.

For the quarter ended September 30, 2008, net sales were $30.3 million, compared to net sales of $71.8 in the quarter ended September 30, 2007. The decline in net sales is primarily due to lower military and federal government sales resulting from a delay in issuing the Improved Outer Tactical Vests ("IOTVs") contract award, and in the production of and shipments against that contract. Offsetting this decline were higher sales in the Company's Domestic/Distributor market, as sales increased to $9.4 million, or an increase of 18.3% compared to the comparable 2007 period. Additionally, International sales were $10.0 million for the current year quarter as compared to $50,000 in the prior year three month period ended September 30, 2007.

Gross profit for the 2008 third quarter was $3.4 million, or 11.1% of net sales, as compared to $11.5 million or 16.0% of net sales for the comparable 2007 period. The decline in gross profit margin as a percentage of net sales is due to lower volume as a result of delays in contract awards, constraints on price increases due to the competitive market, higher raw materials and under absorbed overhead costs resulting from lower than anticipated production levels.

Total operating costs were $12.5 million or 41.2% of net sales for the three months ended September 30, 2008 as compared to $11.7 million or 16.2% of net sales for the comparable 2007 period. Operating costs for the current year quarter included a non-cash charge of $2.9 million for equity-based compensation as a result of the change in the majority of the Company's Board of Directors in August 2008 and the resulting vesting of stock options. Additionally, litigation and cost of investigations expenses were $2.5 million for the three months ended September 30, 2008 compared to $2.2 million in the comparable 2007 period. Offsetting these increases were lower general and administrative expenses due mainly to lower legal and professional fees in the current year quarter compared to the prior year quarter and lower salaries due to reductions in incentive compensation and personnel.

The Company reported an operating loss of $9.2 million in the quarter ended September 30, 2008, compared to an operating loss of $0.2 million in the quarter ended September 30, 2007. The net loss for the 2008 three month period was $5.8 million ($0.12 per share) versus a net loss of $0.3 million ($0.01 per share) in the comparable period last year.

Larry Ellis, President and CEO of Point Blank Solutions, Inc. commented, "The third quarter continued to be challenging due to delays in shipments, material shortages and contract modifications by the U.S. Army on the IOTV Bridge award. We expect the fourth quarter to be higher in terms of volume and sales and our backlog now stands at over $130 million. We have production schedules in place that will carry us through the end of the first quarter and are looking at our cost structure to improve our bottom-line performance."

For the nine months ended September 30, 2008: -- Net sales were $91.3 million compared to net sales of $257.5 million in the comparable prior year period. -- Gross profit was $11.8 million or 12.9% of net sales, compared to $47.0 million or 18.2% of net sales for the same period in 2007. -- Total operating costs were $4.9 million or 5.4% of net sales versus $35.7 million or 13.8% of net sales in the prior year period. -- Operating income was $6.9 million as compared to $11.3 million in the comparable period during 2007. -- Net income for the nine months ended September 30, 2008 period was $3.9 million ($0.08 per basic and diluted share) versus $6.4 million ($0.12 per basic and diluted share) in the comparable prior year period. Conference Call Information

The Company will be hosting a teleconference and webcast to discuss its 2008 third quarter financial results on Tuesday, November 18, 2008 at 11:00 a.m. Eastern Time. Parties can listen on the webcast on the Point Blank Solutions website at http://www.pointblanksolutionsinc.com/ and by clicking on "Investor Relations" or participate on the teleconference by dialing 866-362-4832 (International: 617-597-5364) and entering the pass code: 54426081. Additionally, a replay of the webcast will be available on the Company's website in the "Investor Relations" section or via teleconference within 24-hours after the completion of the call. The domestic replay number is 888-286-8010 (International: 617-801-6888) and entering pass code: 83698780.

ABOUT POINT BLANK SOLUTIONS, INC.

Point Blank Solutions, Inc. is a leader in the design and production of technologically advanced body armor systems for the U.S. Military, Government and law enforcement agencies, as well as select international markets. The Company is also recognized as the largest producer of soft body armor in the U.S. With state-of-the-art manufacturing and laboratory testing facilities, strategic technology and marketing alliances, and an ongoing commitment to drive innovation, Point Blank Solutions believes that it can deliver the most advanced body armor solutions, quicker and better than anyone in the industry. The Company maintains facilities in Deerfield Beach, FL, Oakland Park, FL, Pompano Beach, FL, Jacksboro, TN and Washington, DC. To learn more about Point Blank Solutions, Inc. visit our website at http://www.pointblanksolutionsinc.com/.

NON-GAAP FINANCIAL DISCLOSURE

This press release contains information regarding Adjusted EBITDA. Adjusted EBITDA is computed as net income, plus the sum of interest expense, depreciation and amortization, income taxes, equity based compensation, litigation and cost of investigations and employment tax withholding charge (credit). This measure is a non-GAAP financial measure, defined as numerical measures of financial performance that exclude or include amounts so as to be different than the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles, or GAAP, in our statements of operations, balance sheets or statements of cash flows. Pursuant to the requirements of Regulation G, we have provided a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure.

Although Adjusted EBITDA represents a non-GAAP financial measure, we consider this measure to be a key operating metric of our business. We use this measure in our planning and budgeting processes and to monitor and evaluate our financial and operating results. We also believe that Adjusted EBITDA is useful to investors because it provides an analysis of financial and operating results using the same measures that we use in evaluating the Company. We expect that such measure provides investors and other stakeholders with the means to evaluate our financial and operating results against other companies within our industry. Our calculation of Adjusted EBITDA may not be consistent with the calculation of this measure by other companies in our industry. Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to net earnings (loss) as an indicator of our operating performance or cash flows from operating activities, as a measure of liquidity or any other measure of performance derived in accordance with GAAP.

SAFE HARBOR STATEMENT

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: THE STATEMENTS WHICH ARE NOT HISTORICAL FACTS CONTAINED IN THIS PRESS RELEASE ARE FORWARD-LOOKING STATEMENTS, WHICH ARE BASED LARGELY ON THE COMPANY'S EXPECTATIONS AND ARE SUBJECT TO VARIOUS BUSINESS RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND THE COMPANY'S CONTROL. WORDS SUCH AS "EXPECTS," "ANTICIPATES," "TARGETS," "GOALS," "PROJECTS," "INTENDS," "PLANS," "BELIEVES," "SEEKS," "ESTIMATES," VARIATIONS OF SUCH WORDS, AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE ONLY PREDICTIONS THAT SPEAK AS OF THE DATE HEREOF AND ARE SUBJECT TO RISKS, UNCERTAINTIES AND ASSUMPTIONS THAT ARE DIFFICULT TO PREDICT. THEREFORE, ACTUAL RESULTS MAY DIFFER MATERIALLY AND ADVERSELY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, (1) CHANGES IN THE COMPANY'S INTERNAL CONTROL STRUCTURE OVER FINANCIAL REPORTING, (2) UNCERTAINTY OF FUTURE FINANCIAL RESULTS, (3) ADDITIONAL FINANCING REQUIREMENTS, (4) DEVELOPMENT OF NEW PRODUCTS, (5) GOVERNMENT APPROVAL AND CONTRACTING PROCESSES, (6) THE IMPACT OF COMPETITIVE PRODUCTS OR PRICING, (7) TECHNOLOGICAL CHANGES, (8) THE EFFECT OF POLITICAL AND ECONOMIC CONDITIONS, (9) THE OUTCOME AND IMPACT OF LITIGATION TO WHICH THE COMPANY IS A PARTY AND THE SECURITIES AND EXCHANGE COMMISSION AND OTHER INVESTIGATIONS REGARDING THE COMPANY, (10) TURNOVER IN THE COMPANY'S SENIOR MANAGEMENT AND (11) OTHER UNCERTAINTIES DETAILED IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING, WITHOUT LIMITATION, THOSE UNCERTAINTIES AND RISKS DISCUSSED IN DETAIL IN "RISK FACTORS," IN THE COMPANY'S PERIODIC REPORTS ON FORMS 10-K AND 10-Q. THE COMPANY UNDERTAKES NO OBLIGATION TO REVISE OR UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS TO REFLECT ANY CHANGE IN THE EXPECTATIONS OF OUR MANAGEMENT WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS, OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENTS ARE BASED.

Company Contact: Media Relations/Investor Relations Glenn Wiener 1-212-786-6013 / [e-mail] BLANK SOLUTIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) September 30, December 31, 2008 2007 ---- ---- ASSETS (Unaudited) Current assets: Cash and cash equivalents $273 $213 Restricted cash 35,200 35,200 Accounts receivable, less allowance for doubtful accounts of $353 and $296, respectively 14,785 25,144 Inventories, net 49,306 43,550 Income tax receivables 12,072 20,285 Deferred income taxes 17,829 21,468 Prepaid expenses and other current assets 2,862 3,150 ----- ----- Total current assets 132,327 149,010 ------- ------- Property and equipment, net 11,076 5,967 ------ ----- Other assets: Deferred income taxes 1,803 1,312 Deposits and other assets 115 78 --- -- Total other assets 1,918 1,390 ----- ----- Total assets $145,321 $156,367 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Revolving line of credit $17,506 $16,254 Note payable 2,700 - Accounts payable 17,656 15,416 Accrued expenses and other current liabilities 8,811 8,384 Reserve for class action settlement 39,372 39,372 Vest replacement program obligation 417 527 Employment tax withholding obligation 8,154 34,176 ----- ------ Total current liabilities 94,616 114,129 ------ ------- Long term liabilities: Unrecognized tax benefits 11,060 11,134 Other liabilities 421 525 --- --- Total long term liabilities 11,481 11,659 ------ ------ Total liabilities 106,097 125,788 ------- ------- Commitments and contingencies - - Minority and non-controlling interests in consolidated subsidiaries 92 406 Contingently redeemable common stock (related party) 19,326 19,326 Stockholders' equity: Common stock, $0.001 par value, 100,000,000 shares authorized, 48,339,503 and 48,016,836 shares issued and outstanding, respectively 48 48 Additional paid in capital 89,635 84,552 Accumulated deficit (69,877) (73,753) ------- ------- Total stockholders' equity 19,806 10,847 ------ ------ Total liabilities and stockholders' equity $145,321 $156,367 ======== ======== POINT BLANK SOLUTIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands, except per share data) For the Three Months For the Nine Months Ended Ended --------------------- -------------------- Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2008 2007 2008 2007 ---------- --------- ---------- ---------- Net sales $30,327 $71,843 $91,314 $257,469 Cost of goods sold 26,973 60,367 79,508 210,515 ------ ------ ----- ------ Gross profit 3,354 11,476 11,806 46,954 ------ ------ ----- ------ Selling, general and administrative expenses 9,936 9,467 24,716 29,042 Litigation and cost of investigations 2,531 2,203 6,220 7,364 Employment tax withholding charge (credit) 37 - (26,034) (737) ------ ------ ----- ------ Total operating costs 12,504 11,670 4,902 35,669 ------ ------ ----- ------ Operating income (loss) (9,150) (194) 6,904 11,285 Interest expense 281 185 674 465 Other (income) expense (1) 30 (216) 16 ------ ------ ----- ------ Total other expense 280 215 458 481 ------ ------ ----- ------ Income (loss) before income tax expense (benefit) (9,430) (409) 6,446 10,804 Income tax expense (benefit) (3,359) (180) 3,134 4,317 ------ ------ ----- ------ Income (loss) before minority and non-controlling interests of subsidiaries (6,071) (229) 3,312 6,487 Less minority and non-controlling interests of subsidiaries (302) 28 (564) 125 ------ ------ ----- ------ Net income (loss) $(5,769) $(257) $3,876 $6,362 ======= ===== ====== ====== Basic and diluted earnings (loss) per common share $(0.12) $(0.01) $0.08 $0.12 ====== ====== ===== ===== POINT BLANK SOLUTIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) For the Nine Months Ended September 30, 2008 2007 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $3,876 $6,362 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 943 467 Amortization of deferred financing costs 88 49 Deferred income tax expense 3,148 1,382 Gain on sale of fixed assets (3) - Minority and non-controlling interests in consolidated subsidiaries (564) 125 Equity based compensation 5,056 2,916 Changes in assets and liabilities: Accounts receivable 10,359 11,852 Inventories (5,756) (6,549) Income tax receivable 8,213 - Prepaid expenses and other current assets 200 (1,086) Deposits and other assets (37) 15 Accounts payable 2,666 (821) Accrued expenses and other current liabilities 426 (4,537) Vest replacement program obligation (110) (1,972) Income taxes payable - (1,255) Unrecognized tax benefits (74) - Employment tax withholding obligation (26,022) (737) Other liabilities (104) (298) ----- ------ Net cash provided by operating activities 2,305 5,913 ----- ------ CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property and equipment 4 - Purchases of property and equipment (3,553) (3,677) ----- ------ Net cash used in investing activities (3,549) (3,677) ----- ------ CASH FLOWS FROM FINANCING ACTIVITIES Bank overdraft (426) (1,226) Contribution from minority owners 250 - Loan to minority owners 200 - Net proceeds from revolving line of credit 1,252 7,842 Repayment on note payable - bank - (8,425) Deferred financing costs - (343) Net proceeds from exercise of stock warrants 28 - ----- ------ Net cash provided by (used in) financing activities 1,304 (2,152) ----- ------ Net increase in cash and cash equivalents 60 84 Cash and cash equivalents at beginning of year 213 177 --- --- Cash and cash equivalents at end of period $273 $261 ----- ------ Supplemental cash flow information: Property and equipment acquired by issuing a note payable $2,500 $- ====== == POINT BLANK SOLUTIONS, INC. AND SUBSIDIARIES ADJUSTED EBITDA FOR THE THREE MONTHS ENDED SEPTEMBER 30, (In thousands) 2008 2007 ---- ---- Net Loss $(5,769) $(257) Add back: Depreciation and amortization 378 167 Interest 280 185 Income Taxes (3,359) (180) Equity based compensation 3,341 1,212 Litigation and cost of investigations 2,531 2,203 Payroll Tax Withholding Credit 37 - ------ ------ Adjusted EBITDA $(2,561) $3,330 ======= ====== POINT BLANK SOLUTIONS, INC. AND SUBSIDIARIES ADJUSTED EBITDA FOR THE NINE MONTHS ENDED SEPTEMBER 30, (In thousands) 2008 2007 ---- ---- Net Income $3,876 $6,362 Add back: Depreciation and amortization 943 467 Interest 674 465 Income Taxes 3,134 4,317 Equity based compensation 5,056 2,916 Litigation and cost of investigations 6,220 7,364 Payroll Tax Withholding Credit (26,034) (737) ------- ------ Adjusted EBITDA $(6,131) $21,154 ======= =======