Protective Products of America Announces Financial Results for Second Quarter 2009



    SUNRISE, FL, Aug. 14 /CNW/ - Protective Products of America, Inc.
(PPA:TSX), a leading manufacturer and distributor of advanced products in
ballistics protection, today announced financial results for its second
quarter and six months ended June 30, 2009. Results of operations from its
Delaware-based ceramic manufacturing business were accounted for as
discontinued operations for the periods referenced herein.

    
    Second Quarter and Recent Highlights

    -   Reported total sales of $6.5 million and gross margin of 32.3%.
    -   Reduced total SG&A expenses by 51% year-over-year to $2.6 million,
        primarily due to the implementation of work force reductions to align
        cost structure with current revenue streams.
    -   Net loss from continuing operations of $2.2 million or a loss of
        $0.16 per share.
    -   Appointed R. Patrick Caldwell as Chief Executive Officer and a member
        of the Board of Directors.
    -   Engaged investment banking firm Farlie Turner & Co., LLC, to advance
        financing strategy.
    

    "The decrease in revenues for the quarter continues to reflect delayed
contract awards and stretched sales cycles, and was not unexpected given the
current economic climate," said R. Patrick Caldwell, Chief Executive Officer.
"Despite softness in our program business, we increased our gross margin to
32.3% reflecting a higher mix of domestic and international business, and
reduced operating expenses to $3.0 million reflecting our commitment to
bringing our cost structure in-line with current revenue streams. This
improvement is largely attributable to the work force reduction and other cost
saving initiatives that were announced early in the second quarter.
    "We have been notified by the U.S. Army that we were not a recipient of
the Improved Outer Tactical Vest (IOTV) Program contract. While this was not
the outcome we had hoped for, we remain confident that the strategies we are
implementing to diversify our sales mix will position us to increase market
share in higher margin areas of the business. We have made notable progress
with other near-term military contracts as well as government agency domestic
and international programs, which we believe could generate considerable
revenue in the coming quarters.
    "As we move through the second half of the year, we are beginning to see
signs of an improved sales environment supported by our expanded sales force
and aggressive marketing efforts. We are further escalating our presence in
the ballistics market through several key strategic distribution partnerships
with multinational security providers. We believe these relationships will
bolster our ability to capture additional sales at the local law enforcement
level, with government agencies, and in certain commercial sectors where we
continue to see opportunity," Mr. Caldwell concluded.

    Second Quarter 2009 Financial Results

    Total sales for the quarter ended June 30, 2009 were $6.5 million,
compared with $26.8 million for the quarter ended June 30, 2008. Gross margin
was 32.3% for the second quarter of 2009, compared with 26.9% for the second
quarter of 2008, and 26.5% in the first quarter of 2009.
    Total SG&A expenses were $2.6 million for the second quarter of 2009,
compared with $5.3 million for the second quarter of 2008.
    For the quarter ended June 30, 2009, net loss from continuing operations
was $2.2 million, which included a foreign currency loss of $0.7 million, or a
loss of $0.16 per share based on 13.8 million weighted average common shares
outstanding. This compares with net income from continuing operations of $0.3
million, which included a foreign exchange loss of $0.2 million, or $0.02 per
share based on 13.8 million weighted average common shares outstanding for the
quarter ended June 30, 2008.
    Earnings before interest, taxes, depreciation and amortization ("EBITDA")
was a loss of $1.4 million for second quarter 2009, compared with EBITDA of
$1.3 million for second 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.

    Financial Position

    As of June 30, 2009, Protective Products of America had total assets of
$29.7 million, total consolidated debt net of loan discounts of $17.1 million,
 and shareholders' deficiency of $501,000.

    Subsequent Event

    On August 3, 2009, PPA reported that the U.S. Army had requested an
extension of the proposal acceptance period for the Improved Outer Tactical
Vest (IOTV) Program until August 15, 2009. On August 13, 2009, PPA received
notice from the U.S. Army that it had not been selected as an awardee in the
IOTV contract.

    Conference Call

    Management will host a conference call to discuss second quarter 2009
financial results on Friday, August 14, 2009, at 9:00 a.m. Eastern.
    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
    US 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. The audio replay will be
available through August 28, 2009. To access the replay, dial 1-800-406-7325
from the US, or dial 1-303-590-3030 from Canada or internationally, and enter
the conference reference number 4136869 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. Visit
www.protectiveproductsofamerica.com for more company information.
    Management is of the opinion that the Company is a 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 soft ballistic material, vests and plates for law enforcement and
the military.

    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. The reader is also referred to the Company's interim reports for
the three-month periods ending March 31, 2009 and June 30, 2009 as filed on
www.SEDAR.com.
    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      Three Months Ended        Six Months Ended
     States dollars,               June 30,                  June 30,
     except per share data)   2009         2008         2009         2008
    -------------------------------------------------------------------------
                                         (restated)                (restated)
    Sales                      $6,489      $26,756      $17,970      $48,682
    Cost of goods sold          4,394       19,566       12,839       34,659
    -------------------------------------------------------------------------
        Gross margin            2,095        7,190        5,131       14,023
    Operating expense
      Selling, general and
       administrative           2,604        5,279        7,123       10,463
      Research and development    384          446          785          838
    -------------------------------------------------------------------------
      Total operating expenses  2,988        5,725        7,908       11,301
    -------------------------------------------------------------------------
        Operating income (loss)
         from continuing
         operations              (893)       1,465       (2,777)       2,722
    Interest expense              545          607        1,148        1,410
    Other expense (income)        743          519          568          532
    -------------------------------------------------------------------------
      Total other expense       1,288        1,126        1,716        1,942
    -------------------------------------------------------------------------
        Income (loss) from
         continuing operations
         before income taxes   (2,181)         339       (4,493)         780
    Income tax provision
     (benefit)                      -           60            -         (232)
    -------------------------------------------------------------------------
      Net income (loss) from
       continuing operations   (2,181)         279       (4,493)       1,012
      Net income (loss) from
       discontinued operations      3      (31,600)        (179)     (33,326)
    -------------------------------------------------------------------------
      Net income (loss)       ($2,178)    ($31,321)     ($4,672)    ($32,314)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic earnings (loss) per
     share:
      Continuing operations    ($0.16)       $0.02       ($0.33)       $0.08
      Discontinued operations   $0.00       ($2.30)      ($0.01)      ($2.66)
    -------------------------------------------------------------------------
      Net income (loss)        ($0.16)      ($2.28)      ($0.34)      ($2.58)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Diluted earnings (loss)
     per common share:
      Continuing operations    ($0.16)       $0.02       ($0.33)       $0.08
      Discontinued operations   $0.00       ($2.30)      ($0.01)      ($2.66)
    -------------------------------------------------------------------------
      Net income (loss)        ($0.16)      ($2.28)      ($0.34)      ($2.58)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average common
     shares outstanding:
    -------------------------------------------------------------------------
      Basic                13,762,557   13,762,557   13,762,557   12,501,843
      Diluted              13,762,557   13,762,557   13,762,557   12,501,843



             RECONCILATION OF NET LOSS FROM CONTINUING OPERATIONS
                        TO EBITDA AND ADJUSTED EBITDA
           FOR THE THREE AND SIX MONTHS ENDED JUNE, 2009 AND 2008


    (thousands of United      Three Months Ended        Six Months Ended
     States dollars,               June 30,                  June 30,
     except per share data)   2009         2008         2009         2008
    -------------------------------------------------------------------------

    Net income (loss)          (2,181)         279       (4,493)       1,012
    Interest expense              545          607        1,148        1,410
    Income tax provision
     (benefit)                      -           60            -         (232)
    Depreciation and
     amortization                 235          342          421          747
    -------------------------------------------------------------------------
    EBITDA (EBITDA loss)       (1,401)       1,288       (2,924)       2,937
    -------------------------------------------------------------------------

    Share based compensation      291          376          842          720
    -------------------------------------------------------------------------
    Adjusted EBITDA            (1,110)       1,664       (2,082)       3,657
    -------------------------------------------------------------------------

    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
               JUNE 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008

                                                      June 30,   December 31,
    (thousands of United States dollars)                2009         2008
    -------------------------------------------------------------------------

    ASSETS
    Current assets
      Cash                                                 $757       $1,498
      Accounts receivable, net of allowance for
       doubtful accounts of $40 and $55, respectively     3,251        5,853
      Inventory, net                                      7,929        7,062
      Prepaid expenses and other current assets             596          539
      Current portion of note receivable                      -           37
      Income taxes receivable                             5,016        5,373
      Deferred income taxes                                  31           31
      Current assets of discontinued operations              59        1,305
    -------------------------------------------------------------------------
        Total current assets                             17,639       21,698
    Property, plant and equipment, net                    2,414        2,513
    Intangible assets, net                                9,307        9,351
    Note receivable                                           -           27
    Other assets                                            217          220
    Long term assets of discontinued operations             100        2,566
    -------------------------------------------------------------------------
    Total Assets                                        $29,677      $36,375
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current liabilities
      Accounts payable and accrued liabilities           $5,907       $7,180
      Deferred revenue and customer deposits              1,601        1,128
      Operating line of credit                            5,868        8,124
      Current portion of long term debt                   5,125        4,783
      Current liabilities of discontinued operations      1,490        2,134
    -------------------------------------------------------------------------
        Total current liabilities                        19,991       23,349
    Deferred income taxes                                 4,097        3,521
    Long term debt                                        6,090        6,000
    -------------------------------------------------------------------------
        Total liabilities                                30,178       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                         61,223       60,381
      Accumulated other comprehensive income                891        1,467
      Accumulated deficit                               (62,629)     (57,957)
      Receivables from stockholder                            -         (400)
    -------------------------------------------------------------------------
        Total stockholders' equity                        ($501)      $3,505
    -------------------------------------------------------------------------
        Total liabilities and stockholders' equity      $29,677      $36,375
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    %SEDAR: 00001737E




For further information:

For further information: Kristen McNally, The Piacente Group, Inc.,
Investor Relations, (212) 481-2050, figi@tpg-ir.com

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PROTECTIVE PRODUCTS OF AMERICA, INC.

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