SUPVA Super Vision International (MM)

Super Vision International, Inc. (NASDAQ:SUPVA), a world leader in the design and manufacture of LED lighting systems and fiber optic lighting products for applications in the commercial, architectural, signage, swimming pool and retail lighting markets today announced financial results for the second quarter ended June 30, 2005. Revenues for the quarter were up 16% to $3.2 million, compared to $2.8 million in the second quarter of 2004. Total revenues for the six months ended June 30, 2005 were approximately $6,087,000 as compared to approximately $5,879,000 for the six months ended June 30, 2004, an increase of approximately $208,000 or 4%. An increase in revenue for the quarter was realized across all markets with the Pool & Spa Division up 28% for the period driven by a strong demand for Super Vision's LED pool and spa lighting products, International sales were up 12% mainly due to sustained increase in sales in the Asian market where the Company has had significant success with several large customers in sign lighting applications. In addition the Company added another full time employee to its sales office in Hong Kong to capitalize on the strong growth potential of the China/Asian markets. The Commercial lighting segment was up 2% for the period and the orders backlog for commercial lighting continued to grow. "The second quarter came in on plan and we are well positioned for the 2nd half of the year. We began shipping orders for our new SaVi Architectural LED products in the 2nd Quarter and the quotation activity and demand is growing according to our internal forecast," stated Mike Bauer, Vice President of Sales & Marketing. "We also made several strategic changes to strengthen our Commercial sales agency network with rep changes in New York City, northern New Jersey and in the south central part of the U.S. (Arkansas, Mississippi, N. Louisiana and Memphis, Tennessee). We also added resources to grow our sign lighting and national account business. These changes should impact sales in the late 3rd and 4th Quarter of this year." Gross margin for the second quarter of 2004 was 46%, compared to 38% in the same quarter a year ago. Increased gross margin in the second quarter was attributable to a recovery of costs resulting from two out-of-court legal settlements totaling $240,000 relating to charges to cost of sales in prior years to replace damaged and faulty parts on fiber optic light sources. Excluding this recovery of costs, the gross margin improved to 39% for the quarter ended June 30, 2005 compared to 38% for the quarter ended June 30, 2004. Dan Regalado, the Company's Chief Financial and Operating Officer stated, "We are glad to see improvement in our gross margin. Excluding the $240,000 recovery of costs, the increase in gross margin primarily resulted from our improved vendor pricing negotiations especially on LED products and continued cost improvement in production overhead." Gross margin for the six months ended June 30, 2005 was approximately $2,637,000 or 43% as compared to approximately $2,308,000 or 39% for the six months ended June 30, 2004. Without this recovery of costs, 2005 year-to-date gross margins remain the same at 39% as compared to 2004 year-to-date- gross margins. Selling, General and Administrative expenses (SG&A) for the quarter increased by approximately $181,000 or 18% to approximately $1,196,000 from $1,015,000 in the same period in 2004. For the six months ended June 30, 2005, SG&A increased by approximately $334,000 or 16% compared to same period in 2004. Increases in SG&A primarily resulted from increased wages and benefits primarily related to health insurance costs, prior years' sales and use tax resulting from a recent sales tax audit, increased consulting costs related to Sarbanes-Oxley 404 implementation and increased sales promotion, training and marketing expenses. "For the most part, these increases were not a surprise to us as we have anticipated incurring these expenses and have allocated them in our internal budget. Budgeted SG&A for the six months ending June 30, 2005 improved despite increased actual expenses. While we anticipate that most of these expenses will be higher than comparative period numbers we will continue to implement improvements in our cost structure," concluded Dan Regalado. R&D expenses for the quarter increased by approximately $42,000 or 38% to $151,000 from $110,000 in the same period in 2004. For the six months ended June 30, 2005, R&D expenses increased by approximately $27,000 to $259,000 from $232,000 in the same period in 2004. Management attributes this increase in research and development expenses due to its expanded product development initiatives to compete with the ever changing market for LED and fiber optic lighting technology. Brett Kingstone, the Company's President and CEO commented, "I believe that the Company's long-term success will depend, in large measure, on its new product design and development efforts and thus we expect to see further increases in R&D expenses in the future as a result of anticipated new product development and other related R&D activities." Operating income for the quarter ended June 30, 2005 was approximately $141,100 compared to net operating loss of $78,100 in the same quarter of 2004. For the six months ended June 30, 2005, operating income was approximately $23,700 compared to $27,100 in the same period in 2004. Net income for the quarter ended June 30, 2005 was $106,500 or $0.04 per basic and diluted common share, compared to net loss of $135,800 or $0.05 per basic and diluted common share in the second quarter of 2004. The net loss for the six months ended June 30, 2005 was approximately $75,600, or $0.03 per basic and diluted common share, compared to a net loss of approximately $90,200, or $0.04 per basic and diluted common share, for the six months ended June 30, 2004. EBITDA, which is Earnings Before Interest, Taxes, Depreciation and Amortization, is a non-GAAP measure which management uses as part of its performance appraisal in reviewing the Company's ongoing operational business trends related to its financial condition and results of operations. For the quarter ended June 30, 2005, EBITDA was approximately $339,000 compared to approximately $116,100 in the quarter ending June 30, 2004. Year-to-date EBITDA was approximately $388,500 compared to approximately $419,300 in the same period of 2004. The Company had cash and marketable securities of approximately $2.2 million at June 30, 2005 with a current ratio of 2.8 to 1. The Company's only debt is its capital lease obligation for its operating facility with an outstanding balance of $2.6 million at June 30, 2005. Super Vision's fiber optic lighting and LED lighting systems are used in the architectural, lighting, landscape, sign and swimming pool industries. Super Vision's SideGlow(R) cable is manufactured as a replacement for neon and Super Vision's EndGlow(R) cable is manufactured for conventional down-lighting and underwater/hazardous area lighting. Super Vision is owned in part by Cooper Industries (NYSE:CBE) and Hayward Industries, major manufacturers of lighting and pool products respectively. For more information, please visit the Super Vision web site at http://www.svision.com. -0- *T Super Vision International, Inc. Condensed Consolidated Statements of Operations - unaudited Three Months Six Months Ended June 30, Ended June 30, 2005 2004 2005 2004 ----------- ----------- ----------- ----------- Revenues $ 3,202,751 $ 2,770,577 $ 6,086,507 $ 5,878,735 Cost of sales 1,720,840 1,724,240 3,449,211 3,571,153 ----------- ----------- ----------- ----------- Gross margin 1,481,911 1,046,337 2,637,296 2,307,582 Operating expenses: Selling, general and administrative 1,195,566 1,014,903 2,360,732 2,027,006 Research and development 151,279 109,558 258,881 232,066 (Gain) Loss on disposal of fixed assets (6,000) -- (6,000) 21,451 ----------- ----------- ----------- ----------- Total operating expenses 1,340,845 1,124,461 2,613,613 2,280,523 ----------- ----------- ----------- ----------- Operating Income (Loss) 141,066 (78,124) 23,683 27,059 Non-Operating Income (Expense): Interest income 13,214 6,309 23,107 12,442 Interest expense (93,238) (98,105) (187,624) (197,961) Other income 45,469 34,116 65,191 68,232 ----------- ----------- ----------- ----------- Total non- operating expense (34,555) (57,680) (99,326) (117,287) ----------- ----------- ----------- ----------- Net Income (Loss) $ 106,511 $ (135,804) $ (75,643) $ (90,228) =========== =========== =========== =========== Net Income (Loss) Per Common Share: Basic and diluted $ 0.04 $ (0.05) $ (0.03) $ (0.04) =========== =========== =========== =========== Weighted average shares outstanding: Basic 2,542,078 2,541,649 2,542,078 2,541,117 =========== =========== =========== =========== Diluted 2,587,037 2,541,649 2,542,078 2,541,117 =========== =========== =========== =========== Selected Consolidated Balance Sheet Data Unaudited Audited As of June 30, December 31, 2005 2004 ---------- ----------- Cash and Investments $2,205,515 $1,926,042 Current Assets $7,007,143 $6,313,826 Total Assets $9,998,473 $9,463,793 Current Liabilities $2,514,163 $1,794,366 Total Liabilities $4,923,826 $4,313,034 Total Shareholders Equity $5,074,647 $5,150,759 Reconciliation of Non-GAAP Financial Measure The following table reconciles GAAP to non-GAAP financial measures: --------------------------------------------------------- (Unaudited) Three Months Ended June 30, ------------------------------------------- 2004 2003 Change % ------------------------------------------- Net Income (Loss) $106,511 $(135,804) $242,315 178% Plus: Interest 93,238 98,105 (4,867) -5% Depreciation 128,420 145,469 (17,049) -12% Amortization 10,791 8,305 2,486 30% Taxes - - - - ------------------------------------------- EBITDA $338,960 $116,075 $(222,885) 192% =========================================== % of Revenues 11% 4% ====================== (Unaudited) Six Months Ended June 30, ------------------------------------------- 2004 2003 Change % ------------------------------------------- Net Income (Loss) $(75,643) $(90,228) $14,585 16% Plus: Interest 187,624 197,961 (10,337) -5% Depreciation 255,070 287,485 (32,415) -11% Amortization 21,402 24,058 (2,656) -11% Taxes - - - - ------------------------------------------- EBITDA $388,453 $419,276 $(30,823) -7% =========================================== % of Revenues 6% 7% ======================= *T