Photonic Products Group, Inc. Reports First Quarter 2010 Results

News provided by

May 17, 2010, 10:01 ET

NORTHVALE, N.J., May 17 /PRNewswire-FirstCall/ -- Photonic Products Group, Inc. (OTC Bulletin Board: PHPG) has reported its consolidated financial results for its first quarter, which ended March 31, 2010.

Revenues for the first quarter were $2.8 million, unchanged from the same period last year.

Orders for the first three months were $3.2 million, up 88% compared to $1.6 million in the first three months of 2009. First quarter 2010 bookings were higher than anticipated following a noticeable increase in requests for quotes from our customers commencing in the fourth quarter of last year.

Gross profit for the quarter was $540,000, or 19.2%, up from gross profit of $382,000, or 13.6% in the comparable quarter last year mainly as a result of work force reductions implemented by the Company near the end of last year's first quarter.

The Company had a net loss of $274,000 for the quarter compared with a net loss of $314, 000 in the same period last year, net of a benefit from income taxes in 2009 of $236,000. The Company had a loss per share of $0.02, basic and diluted, in the current quarter. This compares with a loss per share of $0.03, basic and diluted, in the first quarter of 2009.

Net cash provided by operating activities was $480,000 for the first quarter of 2010, up from $357,000 in the first quarter last year. After investing and financing activities, net cash increased by $453,000 and the Company ended the quarter with cash and cash equivalents of $4.5 million.

Joe Rutherford, President and CEO of PPGI commented, "Our first quarter results reflect the positive effect of cost reductions we made last year but we continue to experience the negative impact of last year's recession and the decrease in military spending on the specific products we produce. This has resulted in a lower backlog and decreased shipping levels in the current period, compared to pre-recession quarters. Although our first quarter bookings were ahead of expectations, we are encouraged but cautious.

Our focus will remain on improving operations, expanding our customer base, domestically and internationally, and reducing costs further through process improvements. We will continue to look for opportunities to improve cash flow and reduce debt. This will position us to respond quickly and effectively to an increase in orders from our customers."

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' 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", "targeting" or similar words. Such forward-looking statements, such as our expectation for revenues, new orders, and income, 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 process improvements in its operations, 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 CONDENSED CONSOLIDATED BALANCE SHEETS
	March 31,	December 31,
	2010	2009
	(Unaudited)	(Audited)
Assets
Current assets:
Cash and cash equivalents	$ 4,522,508	$ 4,069,310
Accounts receivable (net of allowance for doubtful accounts of $15,000 in 2010 and 2009)	1,785,770	1,927,672
Inventories, net	2,047,934	2,265,973
Other current assets	128,775	164,081
Total current assets	8,484,987	8,427,036
Plant and equipment:
Plant and equipment, at cost	14,635,278	14,604,728
Less: Accumulated depreciation and amortization	(12,228,667)	(12,016,247)
Total plant and equipment	2,406,611	2,588,481
Precious Metals	157,443	157,443
Deferred Income Taxes	408,000	408,000
Goodwill	311,572	311,572
Intangible Assets, net	653,375	673,016
Other Assets	46,432	45,192
Total Assets	$ 12,468,420	$ 12,610,740

Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of other long term notes	$ 9,000	$ 9,000
Accounts payable and accrued liabilities	1,707,854	1,632,650
Customer advances	204,448	346,429
Total current liabilities	1,921,302	1,988,079

Related Party Convertible Notes Payable	2,500,000	2,500,000
Other Long Term Notes, net of current portion	342,664	344,946
Total liabilities	4,763,966	4,833,025

Commitments	—	—

Shareholders' Equity:
Common stock: $.01 par value; 60,000,000 authorized shares; 11,561,329 shares issued at March 31, 2010 and 11,443,347 issued at December 31, 2009	115,612	114,433
Capital in excess of par value	17,273,900	17,073,871
Accumulated deficit	(9,670,108)	(9,395,639)
	7,719,404	7,792,665
Less - Common stock in treasury, at cost (4,600 shares)	(14,950)	(14,950)
Total shareholders' equity	7,704,454	7,777,715
Total Liabilities and Shareholders' Equity	$ 12,468,420	$ 12,610,740

PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
	Three Months Ended March 31,
	2010	2009

Total revenue	$ 2,808,046	$ 2,815,097

Cost and expenses:
Cost of goods sold	2,267,552	2,433,410
Selling, general and administrative expenses	779,994	907,079
	3,047,546	3,340,489

(Loss) from operations	(239,500)	(525,392)

Other expense:
Interest expense—net	(34,969)	(32,388)
Gain on sale of precious metals	—	7,371
	(34,969)	(25,017)

Net (loss) before income taxes	(274,469)	(550,409)

Income tax benefit	—	236,000

Net (loss)	$ (274,469)		$ (314,409)

Net (loss) per common share — basic and diluted	$ (0.02)	$ (0.03)
Weighted average shares outstanding —basic and diluted	11,458,411	11,260,199

PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	Three Months Ended March 31,
	2010		2009

Cash flows from operating activities:
Net (loss)		$ (274,469)	$ (314,409)

Adjustments to reconcile net (loss) to cash provided by operating activities:
Depreciation and amortization		234,457	252,490
401K common stock contribution		154,535	179,068
Gain on sale of precious metals		—	(7,371)
Deferred income taxes		—	(236,000)
Stock based compensation		38,706	23,595
Changes in operating assets and liabilities:
Accounts receivable		141,902	1,014,530
Inventories, net		218,039	93,150
Other current assets		35,306	(71,069)
Other assets		(1,240)	33,855
Accounts payable and accrued liabilities		75,204	(485,844)
Customer advances		(141,981)	(125,445)
Total adjustments and changes		754,928	670,959
Net cash provided by operating activities		480,459	356,550

Cash flows from investing activities:
Capital expenditures		(32,946)	(37,224)
Purchase of precious metals		—	(53,538)
Purchase of certificates of deposit, net		—	(7,738)
Proceeds from sale of precious metals		—	16,317
Net cash (used in) investing activities		(32,946)	(82,183)

Cash flows from financing activities:
Redemption of restricted stock units		(533)	(986)
Proceeds from exercise of stock options		8,500	—
Principal payments of notes payable-other		(2,282)	(3,923)
Net cash provided by (used in) financing activities		5,685	(4,909)

Net increase in cash and cash equivalents		453,198	269,458

Cash and cash equivalents at beginning of period		4,069,310	2,672,387

Cash and cash equivalents at end of period		$ 4,522,508	$ 2,941,545

Supplemental Disclosure of Cash Flow Information:
Interest paid		$ 3,000	$ 4,000
Income taxes (refund) paid		$ (75,000)	$ 10,000