NORTHVALE, N.J., March 31 /PRNewswire-FirstCall/ -- Photonic Products Group, Inc. (BULLETIN BOARD: PHPG) today reported its consolidated financial results for the year ended December 31, 2008.
The Company reported record fourth quarter sales of $4.3 million, up 7% from the fourth quarter of 2007. Sales for the year were $16.3 million, also an all-time high, and 8% above 2007 annual sales of $15.1 million. Both the Company's Laser Optic and MRC business units achieved record sales levels for the year.
Bookings for 2008 were $13.0 million, a decrease of 27% from $17.8 million a year earlier. Year-end backlog was $6.1 million down from $9.4 million at the end of 2007.
In the fourth quarter, net income applicable to common shareholders was $144,000, including a deferred tax benefit of $102,000 for 2008 while net income applicable to common shareholders was $246,000 after a tax expense of $170,000 in 2007. Quarterly earnings per share were $0.01 basic and diluted and $0.03 basic and $0.02 diluted in 2008 and 2007, respectively.
For the year, net income applicable to shareholders was $1.1 million, down 41.6% from $1.6 million in 2007 and represented 6.7% and 10.9% of sales, respectively. Earnings per share were $0.10 basic and $0.08 diluted for 2008 compared with $0.19 basic and $0.13 diluted earnings per share in 2007. The 2008 results include the positive impact of a deferred tax benefit of $408,000, while the 2007 results reflect a tax expense of $250,000. The 2007 results also reflect the payment of common stock dividends of $238,000. The Company's Convertible Preferred Series A and B shares were redeemed in 2007 and no stock dividends were paid in 2008.
Gross profit margins ("GPM") declined for both the quarter-over-quarter and year-over-year periods. Fourth quarter 2008 GPM was $1.0 million or 23.8% of sales, down from $1.4 million or 33.8% of sales in 2007. For fiscal 2008, GPM of $4.8 million or 29.5% of sales decreased from $6.0 million or 39.5% of sales in the previous year.
Net cash flow from operating activities was $548,000 for the year, down from $3.0 million in 2007. Cash flows were impacted by working capital increases on higher accounts receivable balances due to higher fourth quarter sales, reduced liabilities for accounts payable and accruals mainly from accrued interest paid on the settlement of subordinated convertible debt, as well as, net repayments of customer advances during the year.
EBITDA(1) for the year was $2.1 million versus $3.5 million in 2007.
During the year, the Company continued its program of debt reduction by using excess cash to accelerate repayment of $2,177,000 of principal and accrued interest on a $1.7 million subordinated convertible note. In March 2009, the Company negotiated a two year extension of $2.5 million in subordinated convertible notes which were set to mature on April 1, 2009. These initiatives have been undertaken to strengthen the Company's balance sheet and positively affect the Company's financial results and flexibility.
Although overall profitability decreased in 2008, PPGI ended the year in a positive cash position.
Joe Rutherford, President and CEO of PPGI commented, "The Company has been impacted by the current economic downturn with a noticeable decrease in orders during the last half of 2008 and in the first quarter of 2009. As a result, management focused on reducing costs throughout its operations including a 24% reduction in employee headcount in the first quarter of 2009. We believe we have struck a balance in our need to reduce costs while maintaining our core competencies to respond to our current and future customer needs. The MRC operations struggled during the first half of 2008, which affected our ability to satisfy customer requirements and which negatively impacted our overall profitability for the year. However, as a result of management changes and process improvements, the MRC operations improved significantly in the fourth quarter of 2008."
(1) Note Regarding Use of Certain Non-GAAP Financial Measures:
The Company defines EBITDA as earnings before non-cash, stock-based compensation, net interest, income taxes, depreciation, and amortization. EBITDA is presented herein because it is a measure of PPGI's ability to internally fund capital expenditures and service debt. EBITDA should not be considered as an alternative to cash flow as an indicator of PPGI's financial performance, or of the Company's liquidity. The reader is referred to the Supplemental Financial Data set forth below for a reconciliation of net income to EBITDA.
At December 31, Reconciliation of EBITDA to Net Income 2008 2007 2006 Net income (loss), as reported $1,098 $1,880 $772 Non-cash, stock-based compensation 88 34 118 Non-GAAP based net income 1,186 1,914 890 Net Income tax (benefit) provision (303) 250 21 Interest expense, net 170 261 402 Depreciation and Amortization 1,060 1,120 1,099 EBITDA $2,113 $3,545 $2,412
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 world-wide.
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", "probably", "targeting" or similar words. Such forward-looking statements, such as our expectation for revenues, new orders, and improved results 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 resolve operational issues at the Company's MRC business unit, inability to develop new business, inability to retain key employees or hire new employees, and other factors discussed from time to time in the Company's 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 CONSOLIDATED BALANCE SHEETS December 31, 2008 2007 Assets Current assets: Cash and cash equivalents $2,672,087 $4,395,945 Certificates of deposit 800,000 - Accounts receivable (after allowance for doubtful accounts of $15,000 in 2008 and 2007) 2,810,602 2,181,859 Inventories, net 2,732,336 2,931,080 Other current assets 188,084 164,065 Total Current Assets 9,203,109 9,672,949 Plant and equipment: Plant and equipment at cost 14,445,027 13,690,229 Less: Accumulated depreciation and amortization (11,139,771) (10,189,853) Total plant and equipment 3,305,256 3,500,376 Precious Metals 112,851 112,851 Deferred Income Taxes 408,000 - Goodwill 1,869,646 1,869,646 Intangible Assets, net of accumulated amortization 751,580 830,144 Other Assets 81,707 91,981 Total Assets $15,732,149 $16,077,947 Liabilities and Shareholders' Equity Current Liabilities: Current portion of notes payable - other $136,892 $14,814 Accounts payable and accrued liabilities 2,160,665 2,741,966 Customer advances 456,754 870,550 Current obligations under capital leases - 47,088 Related party secured note due within one year - 1,700,000 Total Current Liabilities 2,754,311 5,374,418 Related Party Convertible Notes Payable 2,500,000 2,500,000 Notes Payable - Other, net of current portion 353,663 490,730 Total Liabilities 5,607,974 8,365,148 Commitments and Contingencies - - Shareholders' equity: Common stock: $.01 par value; 60,000,000 authorized shares 11,230,678 issued at December 31, 2008 and 10,104,719 issued at December 31, 2007 112,306 101,046 Capital in excess of par value 16,622,466 15,320,771 Accumulated deficit (6,595,647) (7,694,068) 10,139,125 7,727,749 Less - Common stock in treasury, at cost (4,600 shares) (14,950) (14,950) Total Shareholders' Equity 10,124,175 7,712,799 Total Liabilities and Shareholders' Equity $15,732,149 $16,077,947 PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Years Ended December 31, 2008 2007 2006 Revenues Net sales $16,301,209 $15,099,878 $13,921,127 Cost and expenses Cost of goods sold 11,486,620 9,141,049 9,377,313 Selling, general and administrative expense 3,857,805 3,561,570 3,627,244 15,344,425 12,702,619 13,004,557 Operating income 956,784 2,397,259 916,570 Other income (expense) Interest expense, net (170,476) (261,327) (402,154) Gain on sale of fixed asset 9,113 - - Loss on sale of precious metals - (5,851) - Settlement of insurance claim - - 300,000 Other expense - - (21,150) (161,363) (267,178) (123,304) Income before income tax provision and preferred stock dividends 795,421 2,130,081 793,266 Income tax benefit (provision) 303,000 (250,000) (21,000) Net income 1,098,421 1,880,081 772,266 Preferred stock dividends - (238,167) (234,500) Net income applicable to common shareholders $1,098,421 $1,641,914 $537,766 Net income per share - basic $0.10 $0.19 $0.07 Net income per share - diluted $0.08 $0.13 $0.06 Weighted average shares outstanding - basic 10,902,061 8,609,822 7,572,637 Weighted average shares outstanding - diluted 15,619,304 13,777,114 11,915,090 PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2008 2007 2006 Cash flows from operating activities: $1,098,421 $1,880,081 $772,266 Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,059,741 1,119,887 1,099,003 Deferred income taxes (408,000) - - 401K common stock contribution 160,180 166,694 150,501 Gain on sale of fixed asset (9,113) - - Loss on sale of precious metal - 5,851 - Stock-based compensation expense 88,417 34,074 117,687 Change in inventory reserve 302,511 163,391 102,817 Changes in operating assets and liabilities: Accounts receivable (628,743) 214,627 (130,552) Inventories (103,767) (758,438) (14,971) Other current assets (24,019) 12,522 (22,864) Other assets 7,865 32,854 39,549 Accounts payable and accrued liabilities (581,301) 246,568 222,718 Customer advances (413,796) (117,413) 335,699 Total adjustments (550,025) 1,120,617 1,899,587 Net cash provided by operating activities 548,396 3,000,698 2,671,853 Cash flows from investing activities: Purchase of certificates of deposit, net (800,000) - - Capital expenditures (784,534) (246,518) (986,732) Proceeds from sale of fixed assets 10,000 - - Proceeds from sale of precious metals - 12,030 - Net cash used in Investing activities (1,574,534) (234,488) (986,732) Cash flows from financing activities: Net proceeds from issuance of common stock 1,064,357 445,247 112,830 Proceeds from secured notes payable - - 700,000 Redemption of Series B Preferred shares - (50,000) - Principal payments of notes payable (14,989) (647,215) (326,724) Principal payments of convertible promissory notes (1,700,000) (1,000,000) - Principal payments of capital lease obligations (47,088) (196,349) (249,738) Net cash (used in) provided by financing activities (697,720) (1,448,317) 236,368 Net (decrease) increase in cash and cash equivalents (1,723,859) 1,317,893 1,921,489 Cash and cash equivalents at beginning of the year 4,395,945 3,078,052 1,156,563 Cash and cash equivalents at end of the year $2,672,087 $4,395,945 $3,078,052
Photonic Products Group, Inc.
CONTACT: William Foote of PPGI, +1-201-767-1910, wfoote@ppgrpinc.com
