Protective Products of America Announces Financial Results for First Quarter 2009



    SUNRISE, FL, May 15 /CNW/ - Protective Products of America, Inc.
(PPA:TSX), a leading manufacturer and distributor of advanced products in
ballistics protection, today announced financial results for the first quarter
ended March 31, 2009. Results of operations from its Delaware-based ceramic
manufacturing business were accounted for as discontinued operations for the
periods referenced herein.

    
    First Quarter Highlights

    -   Sales of $11.5 million with gross margin of 26.5%
    -   SG&A expenses of $4.5 million, down 12.2% from fourth quarter 2008,
        reflecting improved cost structure
    -   Net loss from continuing operations of $2.3 million or a loss of
        $0.17 per share
    -   Sale of assets associated with the ceramic manufacturing business for
        cash proceeds of $3.2 million; cash used to pay down debt
    -   International sales initiatives delivered new contracts in Latin
        America and Asia Pacific
    -   Expanded pipeline in core soft armor business for local law
        enforcement and government agencies
    

    Acting Chief Executive Officer Brian L. Stafford stated, "Delayed
contract awards and stretched sales cycles impacted our revenue for the first
quarter, which declined since year-end and from the year-ago period. However,
we were able to maintain relatively consistent gross margin percentage levels
and achieve substantial cost savings since year-end. Through our previously
announced workforce reduction, we have streamlined our operations to better
balance our cost structure with current revenue streams, and we have stepped
up our efforts to exercise cautious financial discipline and conserve cash.
    "We are seeing opportunity in our core soft armor business at the local
law enforcement level and through government agencies, as well as in certain
commercial sectors," Stafford continued. "To capitalize on this opportunity,
our top priorities are to strengthen and expand our existing long-term
customer relationships, emphasize higher margin portions of our business and
reinforce our brand in key markets. Our execution in these areas should
deliver a broader pipeline and increased bidding activity, and we are
confident that we can create momentum for increased sales in the latter part
of the year."

    First Quarter 2009 Financial Results

    Sales for the quarter ended March 31, 2009 totaled $11.5 million,
compared with $21.9 million for the quarter ended March 31, 2008. Gross margin
was 26.5% for first quarter 2009, compared with 31.2% for first quarter 2008.
    SG&A expenses were $4.5 million or 39% of sales for first quarter 2009,
compared with $5.2 million or 24% of sales for first quarter 2008.
    For the quarter ended March 31, 2009, net loss from continuing operations
was $2.3 million or a loss of $0.17 per share based on 13.8 million weighted
average common shares outstanding. This compares with net earnings from
continuing operations of $706,000 or $0.06 per share based on 11.2 million
weighted average common shares outstanding for the quarter ended March 31,
2008.
    Earnings before interest, taxes, depreciation and amortization ("EBITDA")
was a loss of $1.5 million for first quarter 2009, compared with EBITDA of
$1.6 million for first quarter 2008. EBITDA is a supplemental non-GAAP
financial measure used by management, as well as industry analysts, to
evaluate operations. EBITDA does not have a standardized meaning prescribed by
GAAP and is unlikely to be comparable to similar measures presented by other
entities.
    Adjusted EBITDA, which is EBITDA before non-recurring and certain
non-cash charges, was a loss of $0.3 million for first quarter 2009, compared
with earnings of $2.0 million for first quarter 2008.

    Financial Position

    On January 27, 2009, the Company completed the sale of substantially all
of its Delaware assets for $3.2 million in cash. The Company used $3.0 million
of the proceeds from this sale to reduce indebtedness outstanding under its
line of credit.
    At March 31, 2009, Protective Products of America had total assets of
$30.6 million, total consolidated debt net of loan discounts of $16.0 million,
and total shareholders' equity of $1.0 million.

    Conference Call

    Management will host a conference call to discuss first quarter 2009
results on Friday, May 15, 2009, at 9:00 a.m. Eastern Time.
    Investors and analysts interested in participating in the call are
invited to dial-in using the following numbers:

    
    Canada or International Dial In Number:       1-480-629-9712
    USA Toll Free Dial In Number:                 1-877-941-2068
    

    Participants will be able to dial in and listen to a replay of the
conference 60 minutes after the meeting end time. Playback will be available
through May 29, 2009. Dial 1-800-406-7325 from the US or dial 1-303-590-3030
from Canada or International. Enter the Conference Reference Number 4074410
followed by the number sign.

    About Protective Products of America, Inc.

    Protective Products of America, Inc. ("PPA"), formerly known as Ceramic
Protection Corporation, is headquartered in Sunrise, Florida, with
manufacturing facilities in Sunrise, Florida and Granite Falls, North
Carolina. The Company, together with its subsidiaries, is engaged in the
design, manufacture and marketing of advanced products used to provide
ballistic protection for personnel and vehicles in the military and law
enforcement markets. The Company's product portfolio includes concealable soft
body armor products for law enforcement and the Modular Tactical Vest ("MTV"),
a ballistic system for military personnel.
    Management is of the opinion that the Company is an acknowledged industry
leader in the design and manufacture of high performance and high quality
products used for ballistic protection. Protective Products International
Corp, a wholly owned subsidiary of PPA, is an ISO 9001:2000 certified
manufacturer. Furthermore, PPA is capable of providing customers with an
integrated personnel armoring system of ceramic plates, soft ballistic
material and vests for law enforcement and the military.
www.protectiveproductsofamerica.com

    Safe Harbor Language

    This release may contain forward-looking statements including
expectations of future sales, cash flow, and earnings. These statements are
based on current expectations that involve a number of risks and uncertainties
that could cause actual results to differ from those anticipated. These risks
include, but are not limited to, uncertainties associated with the defense
industry, commodity prices, exchange rate fluctuations, and risks resulting
from potential delays, appeals or changes related to government orders in the
defense sector.
    PPA depends on reliable supplies of high quality source materials used in
the manufacture of armor products, including aramid fabrics and polyethylene
materials, and works actively with key suppliers to ensure that requirements
and demands for these materials are anticipated and properly met. The
foregoing is not exhaustive and other risks are detailed from time to time in
other disclosure filings of PPA. Should one or more of these risks or
uncertainties materialize, or should stated assumptions underlying the forward
looking statements prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated or expected. The
reader is also referred to other uncertainties and risks discussed in detail
in the MD&A section of the Company's December 31, 2008 Annual Report dated
April 6, 2009, the Company's Annual Information Form dated March 31, 2009 and
the Company's Form 10 Registration Statement filed April 10, 2009 and amended
on May 12, 2009. These documents are available on www.SEDAR.com and
www.SEC.gov.
    In light of certain sensitive aspects in regard to customers and
products, PPA may choose not to disclose all information related to the
purchasers of its products, such as government agencies, countries or other
end users. Products manufactured for export in the United States must first be
approved for export by the appropriate U.S. government agencies. Other armor
sales may be made to recognized domestic agencies such as the military and
those involved in local, provincial, or national law enforcement and homeland
security matters.

    
    UNAUDITED RESULTS OF OPERATIONS

    The following table presents the unaudited results of operations from
Protective Products of America, Inc.'s consolidated financial statements
prepared in accordance with U.S. GAAP:


    (thousands of United States dollars,         Three Months Ended March 31,
     except per share amounts)                              2009        2008
    -------------------------------------------------------------------------
                                                                   (restated)
    Sales                                                $11,481     $21,926
    Cost of goods sold                                     8,444      15,093
    -------------------------------------------------------------------------
    Gross margin                                           3,037       6,833
    Operating expense
      Selling, general and administrative                  4,520       5,184
      Research and development                               402         391
    -------------------------------------------------------------------------
        Total operating expenses                           4,922       5,575
    -------------------------------------------------------------------------
    Operating income (loss) from continuing
     operations                                           (1,885)      1,258
      Interest expense                                       603         804
      Other income                                          (175)         13
    -------------------------------------------------------------------------
        Total other expense                                  428         817
    -------------------------------------------------------------------------
    Income (loss) from continuing operations before
     income taxes                                         (2,313)        441
    Income tax provision (benefit)                             -        (292)
    -------------------------------------------------------------------------
    Net income (loss) from continuing operations          (2,313)        733
    Net income (loss) from discontinued operations          (181)     (1,726)
    -------------------------------------------------------------------------
    Net income (loss)                                    ($2,494)      ($933)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic earnings (loss) per share:
    -------------------------------------------------------------------------
      Continuing operations                               ($0.17)      $0.06
      Discontinued operations                             ($0.01)     ($0.15)
    -------------------------------------------------------------------------
        Net income (loss)                                 ($0.18)     ($0.09)

    Diluted earnings (loss) per common share:
    -------------------------------------------------------------------------
      Continuing operations                               ($0.17)      $0.06
      Discontinued operations                             ($0.01)     ($0.15)
    -------------------------------------------------------------------------
        Net income (loss)                                 ($0.18)     ($0.09)

    Weighted average common shares outstanding:
    -------------------------------------------------------------------------
      Basic                                           13,762,557  11,241,128
      Diluted(1)                                      13,762,557  11,241,128

    (1) Basic and fully diluted weighted average common shares outstanding
        used to calculate earnings per share from continuing operations for
        the periods in which we had an operating loss are the same because
        inclusion of additional equivalents would be anti-dilutive.



        RECONCILATION OF NET INCOME (LOSS) FROM CONTINUING OPERATIONS
                  TO EBITDA AND ADJUSTED EBITDA (UNAUDITED)
             FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

    (thousands of United States dollars,         Three Months Ended March 31,
     except per share amounts)                              2009        2008
    -------------------------------------------------------------------------
    Net income (loss) from continuing operations         ($2,313)       $733
    Interest expense                                         603         804
    Income tax provision (benefit)                             -        (292)
    Depreciation and amortization                            185         405
    -------------------------------------------------------------------------
    EBITDA (EBITDA loss)                                  (1,525)      1,650
    -------------------------------------------------------------------------

    Share based compensation                                 551         349
    Domestication - Professional fees                        638           -
    -------------------------------------------------------------------------
    Adjusted EBITDA (Adjusted EBITDA loss)                 ($336)     $1,999
    -------------------------------------------------------------------------

    EBITDA is a supplemental non-GAAP financial measure used by management,
    as well as industry analysts, to evaluate operations. EBITDA does not
    have a standardized meaning prescribed by GAAP and is unlikely to be
    comparable to similar measures presented by other entities.



                     PROTECTIVE PRODUCTS OF AMERICA, INC
                   CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                     MARCH 31, 2009 AND DECEMBER 31, 2008

    (thousands of United States dollars,               March 31, December 31,
     unless otherwise noted)                             2009        2008
    -------------------------------------------------------------------------
    ASSETS
    Current assets
      Cash                                                  $163      $1,498
      Accounts receivable, net of allowance for
       doubtful accounts of $53 and $55, respectively      4,647       5,853
      Inventory, net                                       7,280       7,062
      Prepaid expenses and other current assets              638         539
      Current portion of note receivable                      52          37
      Income taxes receivable                              5,373       5,373
      Deferred income taxes                                   31          31
      Current assets of discontinued operations               62       1,305
    -------------------------------------------------------------------------
    Total current assets                                  18,246      21,698
    Property, plant and equipment, net                     2,668       2,513
    Intangible assets, net                                 9,329       9,351
    Note receivable                                            -          27
    Other assets                                             215         220
    Long term assets of discontinued operations              100       2,566
    -------------------------------------------------------------------------
        Total assets                                     $30,558     $36,375
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current liabilities
      Accounts payable and accrued liabilities            $7,409      $7,180
      Deferred revenue and customer deposits                 292       1,128
      Operating line of credit                             5,095       8,124
      Current portion of long term debt                    4,888       4,783
      Current liabilities of discontinued operations       1,791       2,134
    -------------------------------------------------------------------------
    Total current liabilities                             19,475      23,349
    Deferred income taxes                                  4,097       3,521
    Long term debt                                         6,000       6,000
    -------------------------------------------------------------------------
        Total liabilities                                 29,572      32,870

    Commitments and contingencies                              -           -

    STOCKHOLDERS' EQUITY
    Preferred stock, $0.001 par value, 10,000,000 shares
     authorized, none issued                                   -           -
    Common stock, $0.001 par value, 40,000,000 shares
     authorized, 13,762,557 and 13,762,557 issued and
     outstanding, respectively                                14          14
    Additional paid in capital                            60,932      60,381
    Accumulated other comprehensive income                   891       1,467
    Accumulated deficit                                  (60,451)    (57,957)
    Advances and receivables due from stockholder           (400)       (400)
    -------------------------------------------------------------------------
        Total stockholders' equity                           986       3,505
    -------------------------------------------------------------------------
        Total liabilities and stockholders' equity       $30,558     $36,375
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    %SEDAR: 00001737E




For further information:

For further information: Ms. Brandi Piacente, The Piacente Group, Inc.,
Investor Relations, (212) 481-2050

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PROTECTIVE PRODUCTS OF AMERICA, INC.

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