POMPANO BEACH, Fla., March 16 /PRNewswire-FirstCall/ -- Point Blank Solutions, Inc. ("PBSI", Pink Sheets: PBSO), a leader in the field of protective body armor, announced today its results of operations and financial position as of and for the three months and year ended December 31, 2008.
For the quarter ended December 31, 2008, net sales were $73.6 million, compared to net sales of $63.3 in the quarter ended December 31, 2007, an increase of 16.2%. This increase is primarily related to higher sales to international markets, as sales to this segment were up $13.9 million over the fourth quarter last year. Additionally, sales to the U.S. Military and Federal Government were up 2.0% compared to the 2007 fourth quarter and 446.0% sequentially as production for the Improved Outer Tactical Vests ("IOTVs") and OTV Ballistics and Components resumed. Offsetting this increase were lower sales to the Company's Domestic/Distributor market. Sales to this segment were $5.9 million in the 2008 fourth quarter compared to $10.1 million in the comparable period last year, primarily as a result of lower statewide spending and the delayed transition to new National Institute of Justice ("NIJ") standards.
Gross profit for the 2008 fourth quarter was ($6.0) million, or (8.1)% of net sales, as compared to $14.6 million or 23.0% of net sales for the comparable 2007 period. The decline in gross profit margin as a percentage of net sales is due to lower than planned volume as a result of production delays, constraints on price increases due to the competitive market and higher raw material costs. During the fourth quarter of 2008, the Company recorded an inventory impairment charge of $8.2 million for materials that the Company's internal quality control process determined was not suitable for its intended use in the ordinary course of business. Excluding the impact of this charge, gross profit for the fourth quarter was $2.2 million or approximately 3.0% of net sales.
Total operating costs were $8.6 million or 11.7% of net sales for the three months ended December 31, 2008 as compared to $14.2 million or 22.4% of net sales for the comparable 2007 period. This decline in operating expenses, both on a dollar basis and as a percentage of sales is a result of cost reduction and efficiency initiatives put in place during the second half of 2008. As a result, selling, general and administrative expenses in the 2008 fourth quarter were $7.6 million as compared to $11.9 million in the comparable year-ago period, a decline of 36.1%. This was directly attributable to lower legal and professional fees in the current year quarter and lower salaries due to reductions in incentive compensation and personnel. Additionally, litigation and cost of investigation expenses were approximately $1.0 million in the 2008 fourth quarter as compared to $2.3 million in the period ended December 31, 2007.
The Company reported an operating loss of $14.6 million in the quarter ended December 31, 2008, compared to operating income of $0.4 million in the quarter ended December 31, 2007. The net loss for the 2008 fourth quarter was $9.3 million ($0.19 per share) versus a net loss of $0.2 million ($0.00 per share) in the comparable period last year.
As of December 31, 2008, the Company's backlog stood at approximately $94 million. These contracts are all firm, fixed price contracts with the U.S. military and other customers. The Company anticipates it will complete production on these contracts and recognize sales in both the 2009 first and second quarters.
Larry Ellis, President and CEO of Point Blank Solutions, Inc. commented, "The fourth quarter was our largest sales period of the year, though it did not compensate for the lower production volumes in prior quarters as a result of contract delays. Today, we have significant backlog in place and a number of large solicitations that should be awarded in the second and third quarters. I believe we are well positioned to capture a large percentage of future awards among all of our customer segments."
Ellis continued, "Cost reduction programs began in the second half of last year and are progressing according to plan. Our overhead is down and we continue to take out costs in our effort to operate more efficiently. We fully expect to see a rise in our gross margins given the contract mix moving forward and with the expected contributions from LifeStone Materials. We are also working very closely with our key suppliers to improve our competitive and financial position."
For the twelve month periods ended December 31, 2008 and 2007, respectively:
-- Net sales were $164.9 million compared to net sales of $320.8 million in 2007. This decline was primarily related to lower sales to the U.S. Military and Federal Government due to numerous contract award delays, as well as lower sales to the Domestic/Distributor market as a result of deteriorating economic conditions and the impact to statewide budgets, and the delayed transition to new NIJ standards. This decline was partially offset by higher sales to the international markets, resulting in 2008 net sales of $25.0 million as compared to $0.7 million in the comparable prior year. -- Gross profit was $5.8 million or 3.5% of net sales, compared to $61.5 million or 19.2% of net sales in 2007. Gross profit margin in 2008 was impacted by numerous delays in contract awards, constraints on price increases due to the competitive market, higher raw material costs and under-absorbed overhead costs. Additionally, included in our 2008 gross profit was an $8.2 million inventory impairment charge. Cost of goods sold and gross profit reported in 2007 were also positively impacted by an adjustment to reduce our vest replacement program obligation, resulting in an adjustment of $3.5 million, or a $3.5 million reduction of cost of sales. -- Total operating costs were $13.5 million or 8.2% of net sales versus $49.8 million or 15.5% of net sales in 2007. The decrease of $36.3 million was related to several factors: -- General and administrative expenses in 2008 were $4.5 million lower than 2007, primarily as a result of lower legal and professional fees. Additionally, there was a decrease in salaries of $2.5 million in 2008 compared to 2007 principally due to reductions in incentive compensation and personnel and litigation and cost of investigations were down $2.4 million year over year. -- During 2008, the statute of limitations for the major portion of the 2004 employment tax withholding obligations expired and the charge and related liability originally recorded during 2004, totaling $26.0 million, was reversed during the second quarter of 2008. Operating costs for the year ended December 31, 2007 include a credit to earnings of approximately $0.7 million for the employment tax withholding obligation related to that period. -- The decrease in 2008 operating costs was partially offset by an increase in equity-based compensation of $2.9 million due to a change in the majority of the Board of Directors. -- Operating loss was $7.7 million in 2008 as compared to operating income of $11.7 million in 2007. -- Net loss was $5.4 million or a loss of $0.11 per basic and diluted share versus net income of $6.2 million or earnings per share of $0.12, both basic and diluted in 2007.
Larry Ellis continued, "The demand for body armor over the next two years will be significant; we intend to retain and grow our market leadership position, with a better cost basis. We have a number of new products on the horizon for the Domestic and International markets and continue to look at areas along the value chain to enhance profitability and generate higher returns for our shareholders. Despite our 2008 performance and the obstacles we faced, I believe we are on the right track to post higher sales and profits in the coming year."
Conference Call Information
The Company will be hosting a teleconference and webcast to discuss its 2008 fourth quarter and year end financial results on Tuesday, March 17, 2009 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 866-730-5765 (International: 857-350-1589) and entering the pass code: 87574536. 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), pass code: 67225016.
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.
POINT BLANK SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, (In thousands, except share data) ASSETS 2008 2007 Current assets: Cash $1,707 $213 Restricted cash - 35,200 Accounts receivable, less allowance for doubtful accounts of $279 and $296, respectively 33,620 25,144 Inventories, net 38,700 43,550 Income tax receivables 11,951 20,285 Deferred income taxes 14,829 21,468 Prepaid expenses and other current assets 2,782 3,150 -------- -------- Total current assets 103,589 149,010 -------- -------- Property and equipment, net 10,742 5,967 -------- -------- Other assets: Deferred income taxes 10,931 1,312 Deposits and other assets 113 78 -------- -------- Total other assets 11,044 1,390 Total assets $125,375 $156,367 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Revolving line of credit $39,207 $16,254 Note payable - related party 2,950 - Income taxes payable 285 - Accounts payable 23,310 15,416 Accrued expenses and other current liabilities 4,927 8,384 Reserve for class action settlement 4,172 39,372 Vest replacement program obligation 410 527 Employment tax withholding obligation 8,154 34,176 -------- -------- Total current liabilities 83,415 114,129 -------- -------- Long term liabilities: Unrecognized tax benefits 11,239 11,134 Other liabilities 418 525 -------- -------- Total long term liabilities 11,657 11,659 -------- -------- Total liabilities 95,072 125,788 -------- -------- Commitments and contingencies Minority and non-controlling interests in consolidated subsidiaries 411 406 Contingently redeemable common stock (related party) 19,326 19,326 Stockholders' equity: Common stock, $0.001 par value, 100,000,000 shares authorized, 51,446,585 and 51,044,609 million shares issued and outstanding, respectively 48 48 Additional paid in capital 89,673 84,552 Accumulated deficit (79,155) (73,753) -------- -------- Total stockholders' equity 10,566 10,847 -------- -------- Total liabilities and stockholders' Equity $125,375 $156,367 ======== ======== POINT BLANK SOLUTIONS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, (In thousands, except per share data) 2008 2007 2006 Net sales $164,922 $320,796 $254,105 Cost of goods sold 159,103 259,289 196,154 -------- -------- -------- Gross profit 5,819 61,507 57,951 -------- -------- -------- Selling, general and administrative expenses 32,359 40,921 42,539 Litigation and costs of investigations 7,199 9,647 13,886 Employment tax withholding charge (credit) (26,034) (737) 4,407 -------- -------- -------- Total operating costs 13,524 49,831 60,832 -------- -------- -------- Operating income ( loss) (7,705) 11,676 (2,881) -------- -------- --------Interest expense 1,255 791 1,946 Other (income) expense (411) (110) 127 -------- -------- -------- Total other expense 844 681 2,073 -------- -------- -------- Income (loss) before income tax expense (benefit) (8,549) 10,995 (4,954) -------- -------- -------- Income tax expense (benefit): Current 658 (10,865) (772) Deferred (3,051) 15,501 1,058 -------- -------- -------- Total income tax expense (benefit) (2,393) 4,636 286 -------- -------- -------- Income (loss) before minority and non-controlling interests of subsidiaries (6,156) 6,359 (5,240) Less minority and non-controlling interests of subsidiaries (754) 153 82 -------- -------- -------- Net income (loss) $(5,402) $6,206 $(5,322) -------- -------- -------- Basic and diluted earnings (loss) per common share $(0.11) $0.12 $(0.12) -------- -------- -------- POINT BLANK SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, (In thousands) 2008 2007 2006 CASH FLOWS FROM OPERATING ACTIVITIES Net Income (loss) $(5,402) $6,206 $(5,322) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 1,482 637 643 Amortization of deferred financing costs 118 88 41 Deferred income tax expense (benefit) (3,051) 15,501 1,058 Gain on sale of fixed assets (3) - (94) Minority and non-controlling interests in consolidated subsidiaries (245) 153 82 Equity-based compensation 5,156 3,649 1,615 Changes in assets and liabilities: Increase in restricted cash - - (35,200) Accounts receivable (8,476) 12,943 2,957 Accounts receivable from insurers - - 12,875 Inventories 4,850 (11,340) (5,385) Income tax receivable 8,334 (20,285) - Prepaid expenses and other current assets 250 (912) (784) Deposits and other assets (35) 16 7 Accounts payable 7,526 814 2,229 Accrued expenses and other current liabilities (3,457) (4,528) 4,178 Vest replacement obligation (117) (5,527) (3,658) Income taxes payable 356 (5,905) (636) Unrecognized tax benefits 105 11,134 - Employment tax withholding obligation (26,022) (2,307) 4,407 Other liabilities (107) (327) (632) ------- ------- ------- Net cash provided by (used in) operating activities (18,738) 10 (21,619) ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property and equipment 4 38 572 Purchases of property and equipment (3,758) (4,817) (458) ------- ------- ------- Net cash provided by (used in) investing activities (3,754) (4,779) 114 ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Bank overdraft 368 (3,024) 5,531 Contribution from minority owners 250 - - Loan from minority owners 450 - - Net proceeds from revolving line of credit 22,953 7,829 8,425 Repayment of notes payable - bank - - (15,000) Issuance of contingently redeemable common stock (related party) - - 19,326 Repurchase of common stock - - (3,133) Payment of payroll taxes from option exchange for employees (120) Proceeds from exercise of stock warrants 85 - 5,250 ------- ------- ------- Net cash provided by (used in) financing activities 23,986 4,805 20,399 ------- ------- ------- Net increase (decrease) in cash and cash equivalents 1,494 36 (1,106) Cash and cash equivalents at beginning of year 213 177 1,283 ------- ------- ------- Cash and cash equivalents at end of year $1,707 $213 $177 ======= ======= ======= Supplemental cash flow information: Cash payments for interest $966 $703 $1,905 ------- ------- ------- Cash payments for income taxes $983 $4,224 $- ------- ------- ------- Property and equipment acquired by issuing a notes payable $2,500 $- $- ======= ======= ======= POINT BLANK SOLUTIONS, INC. AND SUBSIDIARIES ADJUSTED EBITDA FOR THE YEARS ENDED DECEMBER 31, (In thousands) 2008 2007 Net Income $(5,402) $6,206 Add back: Depreciation 1,482 637 Interest 1,255 791 Income Taxes (2,393) 4,636 Equity based compensation 5,156 3,649 Litigation and cost of investigations 7,199 9,647 Payroll Tax Withholding Credit (26,034) (737) -------- ------- Adjusted EBITDA $(18,737) $24,829 ======== ======= POINT BLANK SOLUTIONS, INC. AND SUBSIDIARIES ADJUSTED EBITDA FOR THE THREE MONTHS ENDED DECEMBER 31, (In thousands) 2008 2007 Net Loss $(9,278) $(156) Add back: Depreciation 539 170 Interest 581 326 Income Taxes (5,527) 319 Equity based compensation 100 733 Litigation and cost of investigations 979 2,283 Payroll Tax Withholding Credit - - -------- ------- Adjusted EBITDA $(12,606) $3,675 ======== ======= Company Contact: Media Relations/Investor Relations Glenn Wiener 212-786-6013 / ir@pbsinc.com
