NORTHVALE, N.J., April 2 /PRNewswire-FirstCall/ -- Photonic Products Group, Inc. (OTC Bulletin Board: PHPG) today reported its consolidated, audited, financial results for its fiscal year which ended December 31, 2006. Revenues in fiscal year 2006 were $13,921,000, up slightly compared with $13,785,000 last year. Pre-tax income for the year was $793,000, compared to a loss of ($11,000) in 2005. Income in 2006 included a $300,000 insurance recovery, the policy maximum, under the Company's employee dishonesty coverage. This "one-time" component of income was largely offset by non-recurring expenses during the year for investigation of the same employee matter and related remediation of certain of the Company's internal controls. Net income in 2005 included a profit of $134,000 from the sale of non-productive production assets. Net income in 2006 was $772,000, after an income tax provision of $21,000, and was a net loss of ($11,000) in 2005. Gross profit margin for the year improved to 32.6% from 27.8% in 2005, and gross profit in dollar terms was up 19%. Income from operations increased to $917,000, up 156% from last year's $358,000. Both basic and diluted EPS, on net income after accounting for the common stock dividend on preferred stock, were $0.07 and $0.06 in 2006, respectively, compared with a net loss (both basic and diluted) of $(0.02) per share in 2005. Net cash flow from operating activities was $2,672,000 for the year, compared with $360,000 in 2005. The Company's cash balance at the end of the year was $3,078,000, including a net increase of $336,000 in customer advances, compared with $1,157,000 at the end of 2005. EBITDA(1) for the year rose to $2,412,000, up from $1,485,000 in 2005 and $303,000 in 2004. The Company reported revenues for its fourth quarter of $3,677,000, compared with revenues of $3,863,000 in the same period a year ago. Net income for the fourth quarter was $391,000 in 2006, compared with $342,000 in 2005, the Company's sixth successive quarter with positive net income. Basic earnings per share for the fourth quarter were positive at $0.05, while fully diluted earnings per share were $0.04. This compares with basic and diluted income per share of $0.05 and $0.03, respectively, in the fourth quarter of 2005. Dan Lehrfeld, President and CEO of PPGI commented, "We finished our best year to date with strongly positive results in our fourth quarter. Revenues for the year were up a bit to a new record, and our gross and net margins were up significantly. Our customers are our first priority, but continual improvement of productivity and efficiency in operations has been our second point of focus. We have been profitable for the past six fiscal quarters, and 2006 marked our return to profitability for the year as a whole. EBITDA(1) reached 17% of sales, also a new record. Our order intake for the year was $13.3 million and it lagged 2005's record levels by 13% on weak fourth quarter bookings. But it was our second highest annual order intake ever, as was our ending backlog of $7.0 million. Quarterly ups and downs are typical, especially in our largest market sector, defense/aerospace. Cash flow from operations was strongly positive, and also a record. We ended the year with a large cash position and have been steadily paying-off the high interest debt components on our balance sheet. We also deployed nearly a million dollars into internal capital investments. The Company dealt rapidly and thoroughly with the internal control issue surrounding the misappropriation of funds matter we uncovered and reported on early in 2006. No financial restatements were necessary, and I am pleased to report our internal controls have been restored." Mr. Lehrfeld added, "In optical terms, we narrowed our field of view and sharpened our focus in 2006. Specifically, we concentrated on current operations and targeted a firmly profitable year, increased margins, and increased cash flow, while pursuing further revenue growth through organic means alone. I look forward in 2007 to our again delivering positive financial results, and continued growth." (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 2006 2005 2004 Net income (loss), as reported $ 772,000 $ (11,000) $ (673,000) Non-cash, stock-based compensation 118,000 21,000 - Non-GAAP based Net income (loss) 890,000 10,000 (673,000) Income tax provision (benefit) 21,000 - (96,000) Interest expense 402,000 505,000 359,000 Depreciation and Amortization 1,099,000 970,000 713,000 EBITDA $2,412,000 $1,485,000 $ 303,000 Photonic Products Group, Inc. develops, manufactures, and markets products and services for use in diverse Photonics industry sectors via its expanding 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 2004 preliminary financial information contained in this news release are subject to finalization in connection with the preparation of the Company's Form 10K for the year ended 2004. 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", "will", "plan", "targeting" or similar words. Such forward-looking statements, such as our expectation for continued growth in sales, income, and EBITDA, our expectation that these metrics will rise as the year progresses, and our expectation that the year will be profitable, 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 implement its growth strategies or to integrate its new operations, inability to make acquisitions, inability to realize synergies from its acquisitions, inability to raise capital, inability to retain key employees, and other factors discussed from time to time in the Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for 2006. 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, 2006 2005 Assets Current assets: Cash and cash equivalents $3,078,052 $1,156,563 Accounts receivable (after allowance for doubtful accounts of $15,000 in 2006 and 2005) 2,396,486 2,265,934 Inventories 2,336,033 2,423,879 Other current assets 176,587 153,723 Total Current Assets 7,987,158 6,000,099 Plant and equipment: Plant and equipment at cost 13,459,212 12,472,480 Less: Accumulated depreciation and amortization (9,164,031) (8,143,592) Total plant and equipment 4,295,181 4,328,888 Precious Metals 130,732 130,732 Goodwill 1,869,646 1,869,646 Intangible Assets, net of accumulated amortization 908,708 987,272 Other Assets 124,835 164,384 Total Assets $15,316,260 $13,481,021 Liabilities and Shareholders' Equity Current Liabilities: Current portion of notes payable -Other $100,079 $260,697 Accounts payable and accrued liabilities 2,495,398 2,426,692 Customer advances 987,963 652,264 Current obligations under capital leases 196,350 248,550 Total Current Liabilities 3,779,790 3,588,203 Related Party Convertible and Secured Notes Payable 5,200,000 5,200,000 Notes Payable - Other, net of current portion 1,052,680 518,786 Capital Lease Obligations, Net of Current Obligation 47,087 244,625 Total Liabilities 10,079,557 9,551,614 Commitments - - Shareholders' equity: 10% convertible preferred stock, Series A no par value; 500 shares issued and outstanding 500,000 500,000 10% convertible preferred stock, Series B no par value; 2,082 shares issued and outstanding at December 31, 2006 and 2,100 issued and outstanding at December 31, 2005 2,082,000 2,100,000 Common stock: $.01 par value; 60,000,000 authorized shares 7,882,074 issued at December 31, 2005 and 7,287,398 issued at December 31, 2005 78,820 72,862 Capital in excess of par value 11,926,815 11,145,243 Accumulated deficit (9,335,982) (9,873,748) 5,251,653 3,944,357 Less - Common stock in treasury, at cost (4,600 shares) (14,950) (14,950) Total Shareholders' Equity 5,236,703 3,929,407 Total Liabilities & Shareholders' Equity $15,316,260 $13,481,021 PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31, 2006 2005 2004 Revenues Net sales $13,921,127 $13,785,057 $ 9,221,857 Cost and Expenses Cost of goods sold 9,377,313 9,956,125 6,618,506 Selling, general and administrative expense 3,627,244 3,450,224 2,916,056 Internal research and development expense - 20,279 97,685 13,004,557 13,426,628 9,632,247 Operating profit (loss) 916,570 358,429 (410,390) Other income (expense) Interest expense, net (402,154) (504,509) (358,940) Settlement of insurance claim 300,000 - - Gain on sale of precious metals - 135,931 - Other (21,150) (1,249) 49 (123,304) (369,827) (358,891) Income (loss) before income tax provision (benefit) and preferred stock dividends 793,266 (11,398) (769,281) Income tax provision (benefit) 21,000 - (96,344) Net income (loss) 772,266 (11,398) (672,937) Preferred stock dividends (234,500) (134,000) (164,820) Net income (loss) applicable to common shareholders $ 537,766 $ (145,398) $ (837,757) Net income (loss) per share - basic $ 0.07 $ (0.02) $ (0.15) Net income (loss) per share - diluted $ 0.06 $ (0.02) $ (0.15) Weighted average shares outstanding - basic 7,572,637 7,218,244 5,710,354 Weighted average shares outstanding - diluted 11,915,090 7,218,244 5,710,354 PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2006 2005 2004 Cash flows from operating activities: Net income (loss) $ 772,266 $ (11,398) $ (672,937) Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation and amortization 1,099,003 1,025,074 713,080 Gain on sale of precious metal - (135,931) - 401K common stock contribution 150,501 68,780 12,945 Stock option acceleration expense - 21,298 - Share-based compensation 117,687 - - Change in allowance for doubtful accounts - (73,000) - Inventory reserve 102,817 (254,526) 372,106 Changes in assets and liabilities: Accounts receivable (130,552) (744,939) (10,756) Inventories (14,971) 309,720 (486,535) Unbilled contract costs - - 191,767 Other current assets (22,864) (66,184) (10,599) Other assets 39,549 28,981 28,133 Accounts payable and accrued liabilities 222,718 81,740 599,590 Customer advances 335,699 110,546 (105,291) Total adjustments 1,899,587 371,659 1,304,440 Net cash provided by operating activities 2,671,853 360,261 631,503 Cash flows from investing activities: Capital expenditures (986,732) (453,615) (1,013,569) Proceeds from sale of precious metals - 314,764 - Cash used for business acquisition, net - - (732,000) Net cash used in investing activities (986,732) (138,851) (1,745,569) Cash flows from financing activities: Net proceeds (uses) from issuance of common stock 112,830 (19,492) 1,172,984 Proceeds from secured notes payable 700,000 - - Proceeds from senior convertible debentures - - 1,000,000 Principal payments of notes payable (326,724) (166,515) (847,907) Principal payments of bank debt Principal payments of capital lease obligations (249,738) (272,347) (99,664) Net cash provided by (used in) financing activities 236,368 (458,354) 1,225,413 Net increase (decrease) in cash and cash equivalents 1,921,489 (236,944) 111,347 Cash and cash equivalents at beginning of the year 1,156,563 1,393,507 1,282,160 Cash and cash equivalents at end of the year $3,078,052 $1,156,563 $1,393,507
SOURCE Photonic Products Group, Inc.