Tuesday, August 21, 2007
LaPolla Industries Reports Second Quarter Earnings
Selects Hein & Associates LLP as Independent Registered Public Accounting Firm
HOUSTON, TX--(MARKET WIRE)--Aug 21, 2007 -- LaPolla Industries, Inc. ("LaPolla") (AMEX:LPA - News), a leading manufacturer of foam and coating products targeting commercial, industrial and residential applications, today announced results for the second quarter and six months ended June 30, 2007.
Sales for the second quarter of 2007 increased to $9.5 million, representing a 26% increase over sales of $7.6 million in the second quarter of 2006 and a 30% increase over sales of $7.3 million reported for the first quarter of 2007. Gross profit increased 38% to $1.8 million for the three months ended June 30, 2007 compared to $1.3 million for the same period last year and to $1.2 million for the first quarter of 2007. Gross margin increased 2 percentage points to 19% for the second quarter of 2007 compared to 17% for the second quarter of 2006 and 2.4 percentage points compared to 16.6% for the first quarter of 2007. Operating loss for the second quarter was $0.6 million compared to $0.4 million for the same period last year and $1.0 million for the first quarter of 2007. Net loss for the three months ended June 30, 2007 was $0.6 million, or $0.01 per share, compared to $0.3 million, or $0.01 per share, for the three months ended June 30, 2006.
Sales increased to $16.8 million for the six months ended June 30, 2007 compared to $13.6 million in the six months ended June 30, 2006. Gross profit increased 40% to $3.0 million for the six months ended June 30, 2007 compared to $2.1 million the same period last year. Gross margin increased 2 percentage points to 18% for the first six months 2007 compared to 17% the first six months of 2006. Operating loss for the first six months of 2007 was $1.6 million compared to $0.9 million for the same period last year. Net loss for the six months ended June 30, 2007 was $1.6 million, or $0.03 per share, compared to $0.6 million, or $0.01 per share, for the same period in 2006.
"LaPolla's second quarter performance begins to demonstrate the financial benefits of our vertical integration strategy with the start of operations at our new polyol blending facility mid-way through the quarter," said Douglas J. Kramer, chief executive officer and president. "Higher foam sales was the primary driver of the company's 30% sequential increase in total sales as we entered previously unaddressed distribution channels for our spray polyurethane foam. In addition, gross margin increased 240 basis points over the first quarter and we expect to continue to lift gross margin through continued volume gains and improved manufacturing efficiencies."
Mr. Kramer continued, "LaPolla's recognized brands, market leadership and established infrastructure position the company to continue to gain share in a market that is projected to grow by at least 30% over the next few years. During the second half of 2007 we will focus on continued execution of our growth strategy, moving the company toward profitability through volume gains and improved cost efficiencies."
Results of Core Business Segments
Coatings sales increased 11% to $5.3 million for the six months ended June 30, 2007 compared to $4.8 million in the same period in 2006 due to an increase in the company's sales force, advertising, marketing and promotion programs. Segment loss was $12,531 for the six months ended June 30, 2007 compared to a segment profit of $59,033 for the same period in 2006. The increase in our coatings segment loss for the six months ended June 30, 2007 was primarily attributable to cost increases for related raw materials.
Foam sales increased 39% to $9.8 million for the six months ended June 30, 2007 compared to $7.1 million for the same period in 2006 also due to an increase in the company's sales force, advertising, marketing and promotion programs. Segment loss was $0.8 million for the six months ended June 30, 2007 compared to $0.2 million in the same period in 2006. The increase in our Foam segment loss in 2007 was primarily attributable to cost increases related to resale foam purchases.
Matters Related to Accountants and Financial Statements
On August 20, the company filed an 8-K concerning the non-reliance on previously issued financial statements in the Form 10-K for the fiscal year ended December 31, 2006 and in the Form 10-Q for the quarterly period ended March 31, 2007. As a result, the company filed the Form 10-K/A for the fiscal year ended December 31, 2006 and Form 10-Q/A for the fiscal quarter ended March 31, 2007 to reflect various restatements and reclassifications for the affected periods, which have rendered the financial statements and related notes reliable.
About LaPolla Industries, Inc.
LaPolla Industries, Inc. is a national manufacturer of foam and coating products targeting commercial, industrial and residential applications in the roofing and perimeter insulation construction industries. Additional information about LaPolla is available on the World Wide Web at www.lapollaindustries.com.
Statements made in this press release that are not historical facts constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21 of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are necessarily estimates reflecting the best judgment of senior management and express the Company's opinions about trends and factors which may impact future operating results. You can identify these and other forward-looking statements by the use of words such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "intends," "potential," "continue," or the negative of such terms, or other comparable terminology. Such statements rely on a number of assumptions concerning future events, many of which are outside of the Company's control, and involve risks and uncertainties that could cause actual results to differ materially from opinions and expectations. Any such forward-looking statements should be considered in context with the various disclosures made by the Company about its businesses including, without limitation, the risk factors described below. Although the Company believes its expectations are based on reasonable assumptions, judgments, and estimates, forward-looking statements involve known and unknown risks, uncertainties, contingencies, and other factors that could cause the Company or the Company's industries' actual results, level of activity, performance or achievement to differ materially from those discussed in or implied by any forward-looking statements made by or on the Company and could cause the financial condition, results of operations, or cash flows to be materially adversely affected. In evaluating these statements, some of the factors that you should consider include the following: financial position and results of operations, cash position and cash requirements, accounting estimates, doubtful accounts, inventories, and warranties; operations, supply chain, quality control, and manufacturing supply, capacity, and new and existing facilities; products, price of products, product lines, and product and sales channel mix; relationship with customers, suppliers and strategic partners; credit facilities; industry trends and responses to these trends; sources of competition; and outcome and effect of current and potential future litigation. All information in this release is as of the date hereof. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.
For further information regarding risks, uncertainties, and other factors associated with LaPolla's business, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of LaPolla's SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q. Copies of LaPolla's press releases and additional information about LaPolla is available on the World Wide Web at www.lapollaindustries.com.
LAPOLLA INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2007 2006
------------ ------------
(Unaudited) (As Restated)
ASSETS
Current Assets:
Cash $ 15,537 $ 382,116
Trade Receivables, Net 5,779,745 3,595,431
Inventories 4,764,667 2,882,236
Prepaid Expenses and Other Current Assets 672,048 537,253
------------ ------------
Total Current Assets 11,231,997 7,397,036
------------ ------------
Property, Plant and Equipment, Net 2,765,541 1,489,639
Other Assets:
Goodwill 1,951,000 1,951,000
Other Intangible Assets, Net 153,857 165,396
Deposits and Other Non-Current Assets 281,197 149,237
------------ ------------
Total Other Assets 2,386,053 2,265,633
------------ ------------
Total Assets $ 16,383,592 $ 11,152,308
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 6,841,376 $ 5,069,478
Accrued Expenses and Other Current
Liabilities 1,404,770 1,091,947
Line of Credit -- 1,007,120
Current Portion of Convertible Term Note 416,071 --
Current Portion of Long-Term Debt 91,930 97,589
Current Portion of Liabilities from
Discontinued Operations -- 232,479
------------ ------------
Total Current Liabilities 8,754,147 7,498,613
------------ ------------
Other Liabilities
Revolving Credit Note, Net 3,846,726 --
Non Current Portion of Convertible Term Note,
Net 970,832 --
Non Current Portion of Long-Term Debt 147,214 202,923
Non Current Portion of Liabilities from
Discontinued Operations 848 103,650
------------ ------------
Total Other Liabilities 4,965,620 306,573
------------ ------------
Total Liabilities 13,719,767 7,805,186
------------ ------------
Stockholders' Equity:
Preferred Stock, $1.00 Par Value; 2,000,000
Shares Authorized, of which Designations:
Series A Convertible, 750,000 Shares Authorized;
62,500 Issued and Outstanding at June 30,
2007 and December 31, 2006; $62,500 aggregate
liquidation preference at June 30, 2007
and December 31, 2006 55,035 55,035
Series D, 25,000 Shares Authorized; 8,176
Issued and Outstanding at June 30, 2007 and
December 31, 2006; $8,176,000 aggregate
liquidation preference at June 30, 2007 and
December 31, 2006 8,176 8,176
Common Stock, $.01 Par Value; 70,000,000
Shares Authorized; 53,635,699 and 53,574,251
Issued and Outstanding at June 30, 2007 and
December 31, 2006, Respectively 536,357 535,743
Additional Paid-In Capital 71,147,789 70,201,151
Accumulated Deficit (69,083,532) (67,452,983)
------------ ------------
Total Stockholders' Equity 2,663,825 3,347,122
------------ ------------
Total Liabilities and Stockholders' Equity $ 16,383,592 $ 11,152,308
============ ============
LAPOLLA INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended June 30, Six Months Ended June 30,
-------------------------- --------------------------
2007 2006 2007 2006
------------ ------------ ------------ ------------
(As Restated) (As Restated)
Sales $ 9,519,871 $ 7,561,627 $ 16,789,193 $ 13,561,562
------------ ------------ ------------ ------------
Cost of Sales 7,726,477 6,267,584 13,813,351 11,430,771
------------ ------------ ------------ ------------
Gross Profit 1,793,394 1,294,043 2,975,842 2,130,791
------------ ------------ ------------ ------------
Operating Expenses:
Selling, General
and Administrative 2,074,246 1,466,686 4,061,749 2,626,159
Professional Fees 104,027 44,774 136,646 114,253
Depreciation and
Amortization 60,886 43,143 126,580 84,364
Consulting Fees 14,729 39,433 40,309 60,436
Interest Expense 165,630 26,147 245,801 41,319
Interest Expense -
Related Party -- 44,877 -- 90,247
Other (Income)
Expense (5,208) -- (4,694) --
------------ ------------ ------------ ------------
Total Operating
Expenses 2,414,310 1,665,060 4,606,391 3,016,778
------------ ------------ ------------ ------------
Operating Loss (620,916) (371,017) (1,630,549) (885,987)
------------ ------------ ------------ ------------
Income From
Discontinued
Operations, Net of
Income Tax
Benefit-Deferred -- 29,000 -- 324,068
------------ ------------ ------------ ------------
Net Loss $ (620,916) $ (342,017) $ (1,630,549) $ (561,919)
------------ ------------ ------------ ------------
Plus: Dividends on
Preferred Stock (203,840) -- (405,550) --
Net Loss Available
to Common
Stockholders $ (824,756) $ (342,017) $ (2,036,099) $ (561,919)
============ ============ ============ ============
Net Loss Per Share
- Basic and
Diluted:
Continuing
Operations $ (0.015) $ (0.006) $ (0.038) $ (0.016)
Discontinued
Operations -- -- -- 0.006
------------ ------------ ------------ ------------
Total $ (0.015) $ (0.006) $ (0.038) $ (0.010)
------------ ------------ ------------ ------------
Weighted Average
Shares Outstanding 53,612,251 53,318,521 53,598,584 53,264,083
------------ ------------ ------------ ------------
LAPOLLA INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
--------------------------
2007 2006
------------ ------------
(As Restated)
Cash Flows From Operating Activities
Net Loss
Continuing Operations $ (1,630,549) $ (885,987)
Discontinued Operations -- 324,069
Adjustments to Reconcile Net Loss to Net Cash
Used in Operating Activities:
Depreciation and Amortization $ 145,633 $ 125,222
Provision for Losses on Trade Receivables (129,315) 23,757
Amortization of Discount on Convertible
Term and Revolving Credit Notes 53,084 --
Share Based Compensation Expense 533,347 350,691
Changes in Assets and Liabilities:
Trade Receivables (2,055,000) (784,900)
Inventories (1,882,431) (1,377,945)
Prepaid Expenses and Other Current Assets (134,794) (263,605)
Deposits and Other Non Current Assets (131,960) 11,517
Accounts Payable 1,771,897 1,528,663
Accrued Expenses and Other Current
Liabilities 83,161 (423,880)
Other Liabilities (435) (1,039)
Net Operating Activities of Discontinued
Operations (9,152) --
------------ ------------
Net Cash Used in Operating Activities (3,386,514) (1,373,437)
------------ ------------
Cash Flows From Investing Activities
Additions to Property, Plant and Equipment $ (1,409,996) $ (218,611)
------------ ------------
Net Cash Used in Investing Activities (1,409,996) (218,611)
------------ ------------
Cash Flows From Financing Activities
Proceeds from Revolving Credit Note 4,000,000 --
Payments on Revolving Credit Note -- --
Proceeds from Line of Credit 1,398,000 3,199,074
Payments on Line of Credit (2,405,120) (721,816)
Proceeds from Loans Payable - Related Party 617,000 590,000
Payments on Loans Payable - Related Party (617,000) --
Proceeds from Convertible Term Note 2,000,000 --
Proceeds from Note Payable - Other -- 800,000
Payments on Note Payable - Other (13,336) (2,493,211)
Principal Repayments on Long Term Debt (223,484) (121,628)
Net Financing Activities of Discontinued
Operations (326,129) (46,603)
------------ ------------
Net Cash Provided by Financing
Activities 4,429,931 1,205,816
------------ ------------
Net Decrease In Cash $ (366,579) $ (386,232)
------------ ------------
Cash at Beginning of Period 382,116 400,621
------------ ------------
Cash at End of Period $ 15,537 $ 14,389
------------ ------------
Supplemental Disclosure of Cash Flow
Information:
Cash Payments for Income Taxes $ -- $ --
Cash Payments for Interest $ 192,715 $ 78,293
Supplemental Schedule of Non Cash Investing and
Financing Activities
Property, Plant and Equipment acquired via
Issuance of Long Term Debt $ 28,000 $ 37,349
Common Stock issued for Director Fees $ 28,440 $ 183,960
Conversion of Loans Payable - Related Party
to Note Payable - Related Party $ -- $ 3,000,000
Contact:
Company Contacts:
Douglas J. Kramer,
CEO
Timothy J. Novak,
CFO
Michael T. Adams,
CGO
(281) 219-4700 (t)
Investor Relations Contacts:
Jody Burfening
Elriz Martinez
Lippert/Heilshorn & Associates
(212) 838-3777 (t)
emartinez@lhai.com
