Protective Products of America Announces Financial Results for Fourth Quarter and Full Year 2008



    SUNRISE, FL, April 2 /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 fourth
quarter and full year ended December 31, 2008. Results of operations from its
Delaware-based ceramic manufacturing business were accounted for as
discontinued operations for the periods referenced herein.

    
    Business Highlights

    -   Sales increase of 16% to $85.4 million for 2008
    -   Gross profit increase of 17% for 2008
    -   Streamlined operations to enhance strategic focus on core soft armor
        business
    -   Decreased total indebtedness by 24% to $18.9 million at December 31,
        2008
    -   Enhanced the Board of Directors and leadership team
    -   Recent sale of Delaware assets for cash proceeds of $3.2 million;
        cash used to repay debt
    -   Decrease in operating expense including workforce reductions
    

    Acting Chief Executive Officer Brian L. Stafford stated, "During 2008, we
achieved growth in sales revenue and gross profit despite a more challenging
environment. In order to streamline operations and focus on our highest return
opportunities, we recently sold our ceramic manufacturing business and paid
down debt with proceeds from the sale. Additionally, we expect that the
downsizing of our workforce will result in improved utilization and a more
conservative cost structure for our operations.
    "These actions have facilitated a strategic emphasis on the strongest
areas of future growth and cash flow potential: our core soft armor products,
carriers for ballistic armor, other law enforcement business and military
personnel protection systems. Our international sales initiatives are
progressing well, and we are confident in the opportunities that we see in the
pipeline for 2009."

    Full Year 2008 Financial Results

    Sales for the year ended December 31, 2008 increased 16% to $85.4
million, compared with $73.7 million for the year ended December 31, 2007.
Gross margin increased to 27.4% for 2008, compared with 27.0% for 2007.
    SG&A expenses were $20.8 million or 24% of sales for 2008, compared with
$19.9 million or 27% of sales for 2007.
    For the year ended December 31, 2008, net loss from continuing operations
was $31.1 million or $2.37 per share based on 13.1 million weighted average
common shares outstanding and included a non-cash charge for impairment of
goodwill and intangible assets of $28.3 million. This compares with net loss
from continuing operations of $1.4 million or $0.14 per share based on 10.2
million weighted average common shares outstanding for the year ended December
31, 2007.
    Earnings before interest, taxes, depreciation and amortization ("EBITDA")
loss was $25.7 million for 2008, compared with EBITDA of $1.5 million for
2007. 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 $5.5 million for 2008, compared with $2.6 million for
2007.

    Fourth Quarter 2008 Financial Results

    Sales for the quarter ended December 31, 2008 increased 7% to $20.1
million, compared with $18.8 million for the quarter ended December 31, 2007.
Gross margin increased to 27.1% for fourth quarter 2008, compared with 15.3%
for fourth quarter 2007.
    SG&A expenses were $5.1 million or 26% of sales for fourth quarter 2008,
compared with $7.4 million or 39% of sales for fourth quarter 2007.
    Net loss from continuing operations for fourth quarter 2008 was $1.7
million or $0.13 per share based on 13.8 million weighted average common
shares outstanding. This compares with net loss from continuing operations of
$3.5 million or $0.34 per share for fourth quarter 2007 based on 10.2 million
weighted average common shares outstanding.

    Financial Position

    At December 31, 2008, Protective Products of America had total assets of
$36.4 million, total consolidated debt net of loan discounts of $18.9 million,
and total shareholders' equity of $3.5 million.

    Conference Call and Webcast

    A conference call to discuss fourth quarter and full year 2008 financial
results will be held tomorrow, April 3, 2009, at 8:30 a.m. Eastern Time and
will include comments from Acting Chief Executive Officer Brian L. Stafford,
Chief Financial Officer Jason Williams, and other members of the executive
team.
    Investors and analysts interested in participating in the call are
invited to dial-in using the following numbers:

    
    Dial In Numbers:            604-899-4201 Vancouver
                                403-269-4703 Calgary or International
                                780-429-3832 Edmonton
                                416-883-7132 Toronto
                                613-212-0152 Ottawa
                                514-798-1229 Montreal
    Toll Free Dial In Number:   1-888-205-4499 from Canada and USA

    Participant Pass Code:      33398 followed by the number sign.
    

    Participants will be able to listen to a replay of the conference 60
minutes after the meeting end time. Playback will be available until midnight
April 15. Dial 1-877-245-4531 from Canada or the USA, or dial 403-205-4531
from local Calgary or International. Enter the 6 digit Conference Reference
Number 886293 followed by the pound key.

    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 one of a very few companies 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, 2007 Annual Report
dated March 31, 2008, the Company's Annual Information Form dated March 31,
2008 and the Company's Form 10 Registration Statement filed February 10, 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.


    
                            RESULTS OF OPERATIONS

    The following table presents the 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,
     except per share amounts)                            2008          2007
    -------------------------------------------------------------------------
    Sales                                              $85,366       $73,746
    Cost of sales                                       61,982        53,816
    -------------------------------------------------------------------------
    Gross margin                                        23,384        19,930
    Operating expenses
      Selling, general and administrative               20,833        19,920
      Research and development                           1,528           143
      Impairment of goodwill and intangible assets      28,288             -
    -------------------------------------------------------------------------
    Total operating expenses                            50,649        20,063
    -------------------------------------------------------------------------
    Operating loss                                     (27,265)         (133)
    Interest expense                                     3,031         2,280
    Other income                                          (199)         (223)
    -------------------------------------------------------------------------
    Total other expense                                  2,832         2,057
    -------------------------------------------------------------------------
    Loss from continuing operations before
     income taxes                                      (30,097)       (2,190)
    Income tax provision (benefit)                       1,020          (741)
    -------------------------------------------------------------------------
    Net loss from continuing operations                (31,117)       (1,449)
    (Loss) from discontinued operations                (38,072)       (8,652)
    -------------------------------------------------------------------------
    Net (loss)                                        $(69,189)     $(10,101)

    Basic (loss) per share:
    -------------------------------------------------------------------------
      Continuing operations                              (2.37)        (0.14)
      Discontinued operations                            (2.90)        (0.85)
      Net (loss)                                         (5.27)        (0.99)
    Diluted (loss) per share:
    -------------------------------------------------------------------------
      Continuing operations                              (2.37)        (0.14)
      Discontinued operations                            (2.90)        (0.85)
      Net (loss)                                         (5.27)        (0.99)
    Weighted average common shares outstanding:
    -------------------------------------------------------------------------
      Basic                                         13,133,927    10,216,519
      Diluted(1)                                    13,133,927    10,216,519
    -------------------------------------------------------------------------
    (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.



               THE QUARTER ENDED DECEMBER 31, 2008 COMPARED TO
                     THE QUARTER ENDED DECEMBER 31, 2007

    -------------------------------------------------------------------------
    (thousands of United States dollars)                  2008          2007
    -------------------------------------------------------------------------

    Sales                                              $20,116       $18,780
    Cost of sales                                       14,672        15,903
    -------------------------------------------------------------------------
    Gross margin                                         5,444         2,877
    Selling, general and administrative                  5,146         7,382
    Research and development                               340            81
    -------------------------------------------------------------------------
    Total operating expenses                             5,486         7,463
    -------------------------------------------------------------------------

    Operating loss                                         (42)       (4,583)
    Interest expense                                     1,095           805
    Other income                                          (281)         (145)
    -------------------------------------------------------------------------
    Total other expense                                    814           660
    -------------------------------------------------------------------------

    Loss from continuing operations before
     income taxes                                         (856)       (5,246)
    Income tax provision (benefit)                         810        (1,730)
    -------------------------------------------------------------------------

    Net income (loss) from continuing operations        (1,666)       (3,516)
    Net income (loss) from discontinued operations       1,453          (400)
    -------------------------------------------------------------------------
    Net loss                                             ($213)      ($3,916)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



           RECONCILIATION OF NET LOSS TO EBITDA AND ADJUSTED EBITDA
            FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2008 AND 2007

    -------------------------------------------------------------------------
    (thousands of United States dollars)                  2008          2007
    -------------------------------------------------------------------------

    Net loss                                          ($31,117)      ($1,449)
    Interest expense                                     3,031         2,280
    Income tax provision (benefit)                       1,020          (741)
    Depreciation and amortization                        1,348         1,398
    -------------------------------------------------------------------------
    EBITDA (EBITDA loss)                               (25,718)        1,488
    -------------------------------------------------------------------------

    Impairment of goodwill and intangible assets        28,288             -
    Share based compensation                             1,177         1,077
    Loss on disposal of property, plant
     and equipment                                         333             -
    Domestication - Professional fees                    1,431             -
    -------------------------------------------------------------------------
    Adjusted EBITDA                                      5,511         2,565
    -------------------------------------------------------------------------



                     PROTECTIVE PRODUCTS OF AMERICA, INC.
                         CONSOLIDATED BALANCE SHEETS

                                                   December 31,  December 31,
    (thousands of United States dollars)              2008          2007
    -------------------------------------------------------------------------

    ASSETS
    Current assets
      Cash                                              $1,498        $2,814
      Accounts receivable, net of allowance
       for doubtful accounts of $55 and $144,
       respectively                                      5,853         7,530
      Inventory, net                                     7,062         9,152
      Income taxes receivable                            5,373         5,208
      Prepaid expenses and other current assets            539           989
      Note receivable, current portion                      37            37
      Deferred income taxes                                 31           932
      Current assets of discontinued operations          1,305         8,488
    -------------------------------------------------------------------------
    Total current assets                                21,698        35,150
    Property, plant and equipment, net                   2,513         2,017
    Goodwill                                                 -        25,766
    Intangible assets, net                               9,351        11,041
    Note receivable                                         27            71
    Other assets                                           220           250
    Long term assets of discontinued operations          2,566        32,661
    -------------------------------------------------------------------------
      Total assets                                     $36,375      $106,956
    -------------------------------------------------------------------------
    LIABILITIES
    Current liabilities
      Accounts payable and accrued liabilities          $7,180       $15,498
      Deferred revenue and customer deposits             1,128         2,535
      Line of credit                                     8,124        12,425
      Current portion of long term debt                  4,783         7,968
      Liabilities of discontinued operations             2,134         3,480
    -------------------------------------------------------------------------
    Total current liabilities                           23,349        41,906
      Deferred income taxes                              3,521         3,585
      Long term debt                                     6,000         4,428
    -------------------------------------------------------------------------
      Total liabilities                                $32,870       $49,919

    Commitments and contingencies

    STOCKHOLDERS' EQUITY
    Preferred stock, $0.001 par value,
     10,000,000 shares authorized, 0 issued                  -             -
    Common stock, $0.001 par value, 40,000,000
     shares authorized, 13,762,557 and 10,232,557
     issued and outstanding, respectively                  $14       $42,094
    Additional paid in capital                          60,381         3,056
    Accumulated other comprehensive income               1,467         1,292
    Retained earnings (accumulated deficit)            (57,957)       11,232
    Advances and receivables from stockholder             (400)         (637)
    -------------------------------------------------------------------------
      Total stockholders' equity                         3,505        57,037
    -------------------------------------------------------------------------
      Total liabilities and stockholders' equity       $36,375      $106,956
    -------------------------------------------------------------------------
    

    %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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