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Photonic Products Group, Inc. Reports Record Financial Results for FY 2007

NORTHVALE, N.J., March 31 /PRNewswire-FirstCall/ -- Photonic Products Group, Inc. (PHPG) today reported its consolidated, audited, financial results for its fiscal year which ended December 31, 2007.

Revenues in fiscal year 2007 were a record at $15,100,000 up 8.5% compared with $13,921,000 last year. Order intake for the year was our highest ever at $17,802,000 as was our year-end backlog of $9,672,000, up 34.0% and 38.4% from 2006, respectively.

Pre-tax income for the year was $2,130,000 compared to $793,000 in 2006, up 169%. Net income in 2007 was $1,880,000, after an income tax provision of $250,000. Net income in 2006 was $772,000, after an income tax provision of $21,000.

Gross profit of $5,959,000 was up 31% from $4,544,000 in 2006, as gross profit margin for the year improved to 39.5% from 32.6%. Income from operations increased to $2,397,000, up 161% from last year's $917,000.

Basic and diluted earnings per share, after accounting for the common stock dividend on preferred stock, were $0.19 and $0.13, respectively, in 2007, compared with basic and diluted EPS of $0.07 and $0.06, respectively in 2006.

Net cash flow from operating activities was $3,001,000 for the year, compared with $2,672,000 in 2006. For 2007, cash and cash equivalents increased $1,318,000 to $4,396,000 at year-end, after net cash outlays for debt repayments and redemptions of $1,893,000, and a decrease of $117,000 in customer advances. In 2006, cash and cash equivalents increased by $1,921,000, including net borrowings of $373,000 and an increase of $336,000 in customer advances, to $3,078,000 at year-end.

EBITDA(1) for the year rose to $3,545,000, up from $2,412,000 in 2006 and $1,485,000 in 2005.

The Company reported fourth quarter revenues of $4,042,000 this year, compared with revenues of $3,678,000 in the same period, a year ago. Pre-tax net income was $421,000 vs. $412,000 in the same period last year, the Company's tenth consecutive quarter with positive net income. After-tax net income for the fourth quarter was $251,000 in 2007, after allowing for the significantly increased 2007 income tax provision applied to fourth quarter earnings. This compares with fourth quarter net income of $391,000 in 2006. Basic and diluted earnings per share for the fourth quarter were $0.03, and $0.02, respectively. This compares with basic and diluted income per share of $0.05 and $0.04, respectively, in the fourth quarter of 2006.

Dan Lehrfeld, President and CEO of PPGI commented, "I am pleased to report that we exceeded our financial goals for 2007, setting new records for revenues, new orders, backlog at year-end, net income, and cash flow from operations. We were solidly profitable for the year as a whole, with record net income of 11.9% of sales, up from 5.5% of sales in 2006. Early in the year we launched an initiative to strengthen our balance sheet, and worked at it steadily. We recalled all of our outstanding convertible preferred shares, and our shareholders elected to accept conversion to common shares. We deployed close to $2,000,000 of cash into accelerating repayment of debt, while still ending the year with our cash balance up over $1,300,000 for the year to a record $4,396,000. We continued this initiative in the first quarter of 2008 with the repayment in full of our $1,700,000 senior secured note and all accrued interest. In 2008 we are off to a good start and look forward 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 2007 2006 2005

Net income (loss), as reported $1,880,000 $ 772,000 $ (11,000)

Non-cash, stock-based

compensation 34,000 118,000 21,000

Non-GAAP based net income 1,914,000 890,000 10,000

Income tax provision 250,000 21,000 -

Interest expense, net 261,000 402,000 505,000

Depreciation and Amortization 1,120,000 1,099,000 970,000

EBITDA $3,545,000 $2,412,000 $1,485,000

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 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 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. 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.



December 31,

2007 2006


Current assets:

Cash and cash equivalents $ 4,395,945 $ 3,078,052

Accounts receivable (after allowance

for doubtful accounts of $15,000 in

2007 and 2006) 2,181,859 2,396,486

Inventories 2,931,080 2,336,033

Other current assets 164,065 176,587

Total Current Assets 9,672,949 7,987,158

Plant and equipment:

Plant and equipment at cost 13,690,229 13,459,212

Less: Accumulated depreciation and

amortization (10,189,853) (9,164,031)

Total plant and equipment 3,500,376 4,295,181

Precious Metals 112,851 130,732

Goodwill 1,869,646 1,869,646

Intangible Assets, net of accumulated

amortization 830,144 908,708

Other Assets 91,981 124,835

Total Assets $16,077,947 $15,316,260

Liabilities and Shareholders' Equity

Current Liabilities:

Current portion of notes payable -other $ 14,814 $ 100,079

Accounts payable and accrued liabilities 2,741,966 2,495,398

Customer advances 870,550 987,963

Current obligations under capital leases 47,088 196,350

Related party secured note due within

one year 1,700,000 -

Total Current Liabilities 5,374,418 3,779,790

Related Party Convertible and Secured

Notes Payable 2,500,000 5,200,000

Notes Payable - Other, net of current

portion 490,730 1,052,680

Capital Lease Obligations, Net of

current portion - 47,087

Total Liabilities 8,365,148 10,079,557

Commitments and Contingencies - -

Shareholders' equity:

10% convertible preferred stock,

Series A no par value; no shares issued

and outstanding at December 31, 2007

and 500 shares issued and outstanding

at December 31, 2006 - 500,000

10% convertible preferred stock,

Series B no par value; no shares issued

and outstanding at December 31, 2007

and 2,082 shares issued and outstanding

at December 31, 2006 - 2,082,000

Common stock: $.01 par value; 60,000,000

authorized shares 10,104,719 issued at

December 31, 2007 and 7,882,074 issued

at December 31, 2006 101,046 78,820

Capital in excess of par value 15,320,771 11,926,815

Accumulated deficit (7,694,068) (9,335,982)

7,727,749 5,251,653

Less - Common stock in treasury, at cost

(4,600 shares) (14,950) (14,950)

Total Shareholders' Equity 7,712,799 5,236,703

Total Liabilities & Shareholders'

Equity $16,077,947 $15,316,260



Years Ended December 31,

2007 2006 2005


Net sales $15,099,878 $13,921,127 $13,785,057

Cost and expenses

Cost of goods sold 9,141,049 9,377,313 9,956,125

Selling, general and

administrative expense 3,561,570 3,627,244 3,450,224

Internal research and

development expense - - 20,279

12,702,619 13,004,557 13,426,628

Operating income 2,397,259 916,570 358,429

Other income (expense)

Interest expense, net (261,327) (402,154) (504,509)

Settlement of insurance

claim 300,000 -

(Loss) gain on sale of

precious metals (5,851) - 135,931

Other (21,150) (1,249)

(267,178) (123,304) (369,827)

Income (loss) before income

tax provision and preferred

stock dividends 2,130,081 793,266 (11,398)

Income tax provision 250,000 21,000 -

Net income (loss) 1,880,081 772,266 (11,398)

Preferred stock dividends (238,167) (234,500) (134,000)

Net income (loss) applicable

to common shareholders $ 1,641,914 $ 537,766 $ (145,398)

Net income (loss) per share

- basic $ 0.19 $ 0.07 $ (0.02)

Net income (loss) per share

- diluted $ 0.13 $ 0.06 $ (0.02)

Weighted average shares

outstanding - basic 8,609,822 7,572,637 7,218,244

Weighted average shares

outstanding - diluted 13,777,114 11,915,090 7,218,244



Years Ended December 31,

2007 2006 2005

Cash flows from operating


Net income (loss) $1,880,081 $ 772,266 $ (11,398)

Adjustments to reconcile net

income (loss) to net cash

provided by operating activities:

Depreciation and

amortization 1,119,887 1,099,003 1,025,074

Loss/(gain) on sale of

precious metal 5,851 - (135,931)

401K common stock contribution 166,694 150,501 68,780

Stock option acceleration

expense - - 21,298

Stock option expense 34,074 117,687 -

Change in allowance for

doubtful accounts - - (73,000)

Change in inventory reserve 163,391 102,817 (254,526)

Changes in operating assets

and liabilities:

Accounts receivable 214,627 (130,552) (744,939)

Inventories (758,438) (14,971) 309,720

Other current assets 12,522 (22,864) (66,184)

Other assets 32,854 39,549 28,981

Accounts payable and

accrued liabilities 246,568 222,718 81,740

Customer advances (117,413) 335,699 110,546

Total adjustments 1,120,617 1,899,587 371,659

Net cash provided by

operating activities 3,000,698 2,671,853 360,261

Cash flows from investing


Capital expenditures (246,518) (986,732) (453,615)

Proceeds from sale of

precious metals 12,030 - 314,764

Net cash used in

investing activities (234,488) (986,732) (138,851)

Cash flows from financing


Net proceeds (uses) from

issuance of common stock 445,247 112,830 (19,492)

Proceeds from secured notes

payable 700,000 -

Redemption of Series B

Preferred shares (50,000) - -

Principal payments of notes

payable (647,215) (326,724) (166,515)

Principal payments of

convertible promissory notes (1,000,000)

Principal payments of

capital lease obligations (196,349) (249,738) (272,347)

Net cash provided by

(used in) financing

activities (1,448,317) 236,368 (458,354)

Net increase (decrease) in

cash and cash equivalents 1,317,893 1,921,489 (236,944)

Cash and cash equivalents at

beginning of the year 3,078,052 1,156,563 1,393,507

Cash and cash equivalents at

end of the year $4,395,945 $3,078,052 $1,156,563

SOURCE Photonic Products Group, Inc.
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