PHPG 1,05 x 1.10 May finally be time for turnaround??
PPGI Releases Annual President's Letter
Oct 12, 2006 1:48:00 PM
NORTHVALE, N.J., Oct. 12 /PRNewswire-FirstCall/ -- Photonic Products Group, Inc. (OTC Bulletin Board: PHPG) today released the CEO's Letter from its 2005 Annual Report.
To Our Shareholders, Customers, and Employees
In 2005 we achieved most of our priority goals for the year. Each of your Company' three businesses, INRAD, Laser Optics, and MRC Optics, attained record revenues and record new orders on strong demand from our customers. We continued to improve our bottom line and EBITDA. We had not expected to be profitable for the year, but we came close. For 2005, EBITDA grew to 11% of sales. Building, integrating and strengthening our second acquisition, MRC Optics required a larger cash deployment than originally anticipated. Consequently we held-off on making additional acquisitions and missed achieving our target of expanding the Group further in 2005. Our cash position rebounded in the second half, and we ended the year with our cash balance at over $1.1 million and on an upward trajectory.
Highlights for the year included:
-- achieving a new revenue record of $13.8 million, up 49% from 2004
-- bringing in record new orders, totaling $15.3 million, up 36% from 2004
-- posting positive basic and fully diluted earnings per share in the third and fourth quarters of $0.04 and $0.05, and $0.03 and $0.03, respectively
-- reducing our net loss for the year to near break-even at $11,000, down
from a loss of $673,000 in 2004
-- increasing EBITDA to $1,485,000, up from $303,000 in 2004
Unexpected Events in 2006
In the mid-spring of 2006 we discovered that our former CFO had been expensing unauthorized personal transactions through the Company's accounts. He was suspended and subsequently fired. A detailed and comprehensive investigation undertaken by an independent forensic accountant under the auspices of the Audit Committee of the Board of Directors revealed that these transactions had persisted over a period of many years, and totaled approximately $860,000. On June 26 the Company disclosed these matters and the status of its investigation in an 8K filing.
The investigation was completed in July. It concluded that he acted alone and no other employees were involved. On September 29 we filed an amended Form 10-K for 2005. In it, we noted the amounts of unauthorized expenses incurred by the Company in each prior year. The Company's previously stated financial results for prior periods were confirmed to be valid. We also identified the deficiencies in internal controls we found to have existed until this discovery. We enumerated the remedies we have put in place this year, or are putting in place, to correct the noted deficiencies, and the process by which we intend to further strengthen and improve internal controls in future.
The Company filed a claim to recover a portion of these losses under its employee dishonesty insurance policy. This claim was settled and the Company has recovered $300,000 from our insurance carrier, which is the policy limit. The Company is considering pursuing other remedies.
I want to thank a remarkable group of investigators, attorneys, and employees who have been dealing with these matters in a highly professional manner without losing focus on the day to day demands of our businesses. No customer has been negatively affected or even inconvenienced by this matter thanks to the extra-ordinary efforts put forward by our team. Our new CFO, Bill Foote, has come up to speed rapidly thanks to extra-ordinary efforts on his part. I believe our Finance and Accounting functions are now in good hands. I also want to thank our shareholders for their emails in support of our open and honest communication in our public filings addressing this matter, and for their words both encouraging and acknowledging our efforts to speedily put this matter behind us and move forward.
Priorities For 2006
Our main objectives for 2006 as we entered the year were to achieve consolidated results from our current businesses that would again result in increased revenue, positive net income, positive cash flow, and increased EBITDA. Our expectation was that we would see these metrics rise as we moved through the year. Our present expectation is to realize improved net income, positive cash flow, and increased EBITDA, but on revenues that will likely not exceed those in 2005. Our focus on improving operational efficiencies and driving cost reductions should get us there.
We put our M&A program on hold in late 2005 to focus on managing the Company to improve our cash position and profitability. We have maintained this focus in 2006. We look forward to continuing to build value for all of our stakeholders in the future.
Daniel Lehrfeld
President and CEO
October 5, 2006
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' 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 level of sales, our expectation for continued improved profitability, and improved EBITDA, and business expansion 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, 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.
SOURCE Photonic Products Group, Inc.
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Daniel Lehrfeld
President and CEO of Photonic Products Group
Inc.
+1-201-767-1910
fax: +1-201-767-9644
dlehrfeld@ppgrpinc.com |
