Nexxus Lighting Reports First Quarter 2011 Results

CHARLOTTE, N.C., May 13, 2011 /PRNewswire/ -- Nexxus Lighting, Inc. (NASDAQ Capital Market: NEXS) today reported its first quarter 2011 results.  Highlights include:

• Revenue for the quarter increased 9% over Q4 and Q1 2010 to $1.6 million

• Lumificient posted 27% growth in revenue to $1.2 million compared to Q1 2010

• Array™ LED replacement light bulbs generated sales of $0.4 million

• Gross margins increased to 31% compared to 20% for Q4 2010 and 25% for FY 2010

• Launch of Array for Lowe's® Home Improvement stores on schedule

• Expansion of our patent portfolio to 33 patents issued and 34 patents pending, including issuance of core patent on Selective Heat Sink Technology™

• Cash position strengthened to $5.5 million

First Quarter 2011 Performance

Revenue

Total revenue for the three months ended March 31, 2011 increased 9%, or approximately $129,000, to approximately $1,554,000 as compared to approximately $1,424,000 for the three months ended March 31, 2010.  Sales of Lumificient products in the first quarter of 2011 and 2010 were approximately $1,175,000 and $923,000, respectively.  This increase reflects growth in national sign programs and other commercial applications.  

Sales of our Array LED lamps were approximately $379,000 in the first quarter of 2011 compared to approximately $501,000 in the first quarter of 2010.  The decline reflects, in part, the timing of larger projects.  Looking forward, we are modifying our market strategy to target larger direct sale opportunities, including major Energy Service Companies ("ESCOs"), and expanding into the consumer-retail channel.  In March 2011 we began offering our Array lamps through Lowes.com.  We also announced that the lamps will be offered in approximately 1,100 Lowe's stores across the United States beginning in June 2011.  Lowe's will offer seventeen different Array products, including our PAR 38, R30, R16, MR16 and GU10 lamps that have qualified for the Energy Star rating.

"Our performance in the first quarter is a solid start to what I believe can be a break-out year for Nexxus," stated Mike Bauer, President and Chief Executive Officer.  "Our repositioning of the Lumificient business produced strong growth and our Array commercial business continued its market penetration.  We also recognize the significant opportunity that the Lowe's business represents to the Company and we have focused resources to properly execute and serve this important new customer and channel.  However, due to the dedicated production demands for Lowe's, we experienced slight delays in shipments and an extension of lead-times for some of our commercial orders in the quarter.  Those delays were temporary and have been mitigated.  With capacity expanded and the Lowe's build-out largely complete, we do not expect this disruption to continue.  I am very proud of our team and the operational execution demonstrated in order to expand production and meet our deadlines."

Gross Profit

Gross profit for the quarter ended March 31, 2011 was approximately $489,000, or 31% of revenue, as compared to approximately $507,000, or 36% of revenue, for the comparable period of 2010.  Gross margins increased to 31% for the quarter compared to 20% and 25%, respectively, for the quarter and year ending December 31, 2010.  Direct gross margin for the first quarter of 2011, which is revenue less material cost, remained consistent at approximately 47% in each of the quarters ended March 31, 2011 and 2010.  

In the first quarter of 2011, distribution costs, which include some light assembly, increased to approximately $243,000, or 16% of revenue, as compared to approximately $168,000, or 12% of revenue, in the first quarter of 2010.  Depreciation expense included in production costs was approximately $63,000, or 4% of revenue, in the first quarter of 2011 as compared to approximately $51,000 in the first quarter of 2010, an increase of approximately $12,000, or 24%.  The increase in distribution costs also includes higher freight expenses of approximately $32,000 and an increase in the inventory reserve of approximately $17,000 over the comparable period of 2010.  

Operating Expenses  

Selling, general and administrative (SG&A) expenses were approximately $1,602,000 for the quarter ended March 31, 2011 as compared to approximately $1,640,000 for the same period in 2010, a decrease of approximately $37,000, or 2%. This decrease is primarily the result of lower selling expense related to tradeshows of approximately $30,000 for the quarter ended March 31, 2011 as compared to the same period in 2010.  Travel expenses also decreased by approximately $15,000 in the first quarter of 2011, as compared to the same period of 2010.  

Research and development costs were approximately $194,000 during the three months ended March 31, 2011 as compared to approximately $250,000 during the same period in 2010.  This decrease of approximately $56,000 was primarily due to lower payroll expenses of approximately $35,000 and lower project-related costs of approximately $21,000 in the first quarter of 2011 as compared to the same period of 2010.

"The first quarter was not only a good start for the year, but a turning point in our Company's history," remarked Gary Langford, Chief Financial Officer.  "We believe the selection of the Array line for sale by Lowe's Home Improvement stores validates our product and technology.  As a result, we are now in a stronger financial and strategic position to pursue the growth of LED lighting."

"We continue to benefit from the adoption and strengthening market demand for LED lighting.  As we advance through 2011, we expect more opportunities to open to us, driven by the clear economics of our Array lamps," added Mr. Bauer.

Net Loss

Net loss for the three months ended March 31, 2011 and 2010 was approximately $1,329,000 and $2,466,000, respectively, including a gain from discontinued operations related to our divested legacy commercial and pool lighting businesses of approximately $5,000 in 2011 and a loss of approximately $482,000 in 2010.  Basic and diluted loss per common share was $0.08 and $0.15 for the three months ended March 31, 2011 and 2010, respectively. Basic and diluted loss per common share from continuing operations was $0.08 and $0.12 for the three months ended March 31, 2011 and 2010, respectively. Basic and diluted loss per common share from discontinued operations was $0.00 and $0.03 for the three months ended March 31, 2011 and 2010, respectively.  

Lowe's Sales Update

As previously announced, the Array line of LED products is currently available on Lowes.com and, beginning in June 2011, will be available in 1,100 Lowe's stores across the United States.  We are on schedule to meet this roll-out plan.  Production of the Array lamps for the roll-out is largely complete.  The initial purchase orders have been received and we have started staging, packaging and shipping product.

Cash and Recent Activities

As of March 31, 2011, we had cash and cash equivalents of $5,485,000 and long term debt of $2,258,000, net of an unamortized debt discount of approximately $190,000.  Our long term debt consists of promissory notes issued in exchange for our preferred stock in December 2009.  These notes have a principal amount of $2.4 million, bear interest at 1% per annum, mature three years from the date of issuance and are convertible into shares of common stock at a fixed conversion price of $5.33.

On October 28, 2010, we sold substantially all of the assets of our legacy commercial and pool lighting businesses for a purchase price of approximately $2.3 million, with approximately $1.3 million accounting for the purchase of inventory. Of the total consideration, we received $1.0 million in cash in connection with closing, which included $750,000 of non-refundable deposits previously paid by the buyer. Subject to the terms of the purchase agreement and a secured promissory note, the buyer was obligated to pay the remaining approximately $1.3 million over the seven month period ending May 28, 2011 as the buyer sold the purchased inventory.  As of March 4, 2011, the $1.3 million balance of the purchase price was paid in full.  

Nexxus Lighting, Inc.    Life's Brighter!™

For more information, please visit the new Nexxus Lighting web site at www.nexxuslighting.com

Certain of the above statements contained in this press release are forward-looking statements that involve a number of risks and uncertainties. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Reference is made to Nexxus Lighting's filings under the Securities Exchange Act for factors that could cause actual results to differ materially. Nexxus Lighting undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.  Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those indicated in the forward-looking statements as a result of various factors. Readers are cautioned not to place undue reliance on these forward-looking statements.

SOURCE Nexxus Lighting, Inc.