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NEXXUS LIGHTING REPORTS SECOND QUARTER 2010 RESULTS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FOR IMMEDIATE RELEASE
Nexxus Lighting Reports Second Quarter 2010 Results
Revenue Sales of our Array LED lamps were approximately $430,000 in the second quarter of 2010 compared to approximately $197,000 in the second quarter of 2009. Sales of our legacy commercial products were approximately $409,000 in the second quarter of 2010, a 31% decrease from approximately $594,000 for the same quarter in 2009. Sales of Lumificient products in the second quarter of 2010 and 2009 were approximately $897,000 and $838,000, respectively. Overall, revenue from sales of commercial lighting products increased by approximately $107,000, or 7%, from approximately $1,629,000 in the second quarter of 2009 to approximately $1,736,000 in the second quarter of 2010. This increase primarily relates to increased sales of our new Array LED lamps. Revenue from sales of pool and spa lighting products was approximately $2,000,000 in the second quarter of 2010, as compared to approximately $976,000 for the same period of 2009, an increase of approximately $1,024,000, or 105%. This revenue growth reflects an increase in market share as we expanded our pool and spa lighting product offering, including adding Melody Blanco, a white-light-only LED product. In addition, by the beginning of 2010, we completed moving production to additional domestic contract manufacturers allowing us to respond more timely to increased demand. In the second quarter of 2009, we had a larger backlog of orders that we were unable to ship until the third quarter of 2009. With the improvements made in operations and shipments, we did not experience the build up of backlog in 2010, which translated to higher sales in the period. Sales of LED products continue to represent a growing percentage of our business, accounting for 84% and 74% of our revenue, while sales of fiber optic lighting products accounted for 9% and 20% of our revenue for the quarters ended June 30, 2010 and 2009, respectively. “We are pleased with the Company’s overall sales growth in a challenging economy, as reflected in the fourth consecutive quarterly sales increase,” stated Mike Bauer, the Company’s President and Chief Executive Officer. “While sales of our Array products were up significantly year over year, they were roughly flat with the first quarter and below our target. We believe these sales levels reflect the current economic environment as well as the timing of integral LED lamp standards and the resulting delay and timing of utility incentive programs, which are tied to the effective date of these new standards. With the continued development and launch of best in class products, including our new PAR 38, we feel the Company is well positioned as these macro-economic elements begin to improve.” Gross Profit In the second quarter of 2010, production costs increased to approximately $942,000, or 25% of revenue, as compared to approximately $678,000, or 26% of revenue, in the second quarter of 2009. The increase of approximately $264,000 in production costs includes increases of approximately $63,000 in freight costs on the higher volume and approximately $60,000 in warranty expense primarily related to our pool and spa lighting products. We also continued to write-down legacy inventories in the second quarter of 2010 as reflected by the increase of approximately $209,000 in expenses for obsolete inventory, scrap and inventory reserves. Offsetting these costs were savings of approximately $92,000 in lower expense related to the release of capitalized labor, overhead and freight costs. We continue to review our operations for opportunities to reduce costs, especially those related to our legacy commercial and pool and spa businesses. Our analysis may lead to the determination to sell, close, eliminate, rationalize or reduce operations and divisions and/or alter our sales, manufacturing and/or distribution structure. Should we decide to pursue any such changes, we may incur additional charges and losses in connection with such changes in the future, and such charges and losses may be material.
Operating Expenses Selling, general and administrative (SG&A) expenses were approximately $2,431,000 for the quarter ended June 30, 2010 as compared to approximately $2,048,000 for the same period in 2009, an increase of approximately $383,000, or 19%. This increase is primarily the result of higher expense dedicated to the sales and marketing of our Array and Lumificient product offerings and increased commission expense as the result of higher pool product sales. Research and development costs were approximately $299,000 during the three months ended June 30, 2010 as compared to approximately $130,000 during the same period in 2009. This increase of approximately $169,000 was primarily due to higher employee costs and project-related costs in the second quarter of 2010, as compared to the same period of 2009, as we increased our investment in resources to expand the Array product offering. Net Loss Net loss for the three months ended June 30, 2010 and 2009 was approximately $1,884,000 and $1,557,000, respectively. After including the effects of the dividends related to the preferred stock and warrants issued in November 2008, net loss attributable to common stockholders was approximately $1,884,000 and $1,880,000 for the three months ended June 30, 2010 and 2009, respectively. Basic and diluted loss per common share attributable to common stockholders was $0.12 and $0.22 for the three months ended June 30, 2010 and 2009, respectively.
Year to Date 2010 Performance Revenue Total revenue for the six months ended June 30, 2010 was approximately $6,898,000 as compared to approximately $5,642,000 for the six months ended June 30, 2009, an increase of approximately $1,256,000, or 22%. Sales of our Array LED lamps were approximately $932,000 in the first six months of 2010 compared to approximately $290,000 in the same period of 2009. Sales of our legacy commercial products were approximately $897,000 in the first six months of 2010, a 38% decrease from approximately $1,444,000 for the same period in 2009. Sales of Lumificient products in the first six months of 2010 and 2009 were approximately $1,820,000 and $1,915,000, respectively. Overall, revenue from sales of commercial lighting products remained flat at approximately $3,648,000 in the first six months of 2010 and 2009. Sales of our new Array LED lamps offset the decline in sales of our legacy commercial and Lumificient products which primarily resulted from significant decreases in commercial construction and much lower new signage activity across the US. Revenue from sales of pool and spa lighting products was approximately $3,250,000 in the first half of 2010, as compared to approximately $1,993,000 for the same period of 2009, an increase of approximately $1,256,000, or 63%. This increase reflects a slight rebound in the pool market and higher penetration into this market in 2010. Sales of LED products continued to represent a growing percentage of our business, accounting for 84% and 74% of our revenue, while sales of fiber optic lighting products accounted for 10% and 21% of our revenue for the six months ended June 30, 2010 and 2009, respectively. The balance of the revenue mix consisted primarily of sales of water feature products. We expect sales of our fiber optic lighting products will continue to decline and believe that sales of our LED lighting products will increase as a percentage of our total revenue and drive our growth in the future. Gross Profit Gross profit for the six months ended June 30, 2010 was approximately $1,584,000, or 23% of revenue, as compared to approximately $1,705,000, or 30% of revenue, for the comparable period of 2009. Direct gross margin for the first half of 2010, which is revenue less material cost, decreased to approximately 47% as compared to 52% in the same period of 2009. The decline in direct gross margins reflects a shift in sales away from historically higher margin legacy commercial products, a higher percentage of pool product sales, and margin erosion in the first quarter due to an increase in material costs for certain pool lighting products and the liquidation of certain legacy commercial products at lower prices. Production costs increased to approximately $1,684,000, or 24% of revenue, in the first half of 2010 as compared to approximately $1,239,000, or 22% of revenue, in the first half of 2009. The increase of approximately $445,000 in production costs includes increases of approximately $133,000 in warranty expense primarily related to our pool lighting products and approximately $93,000 in freight costs in the six months ended June 30, 2010 as compared to the same period in 2009. The increase also reflects an increase of approximately $290,000 in expenses for obsolete inventory, scrap and inventory reserves in the first half of 2010. Operating Expenses Selling, general and administrative (SG&A) expenses were approximately $4,719,000 for the six months ended June 30, 2010 as compared to approximately $4,400,000 for the same period in 2009, an increase of approximately $318,000, or 7%. This increase is primarily the result of higher expense dedicated to the sales of our Array and Lumificient product offerings and increased commission expense due to higher Array and pool product sales. In the first quarter of 2010, we recognized bad debt expense relating to a dispute with a customer. We shipped Array product to the customer in the fourth quarter of 2009 and the first quarter of 2010. A portion of the product has been installed in a hotel. The balance of the product shipped to the customer has not been installed, including excess product relating to the hotel project and product purchased for a university project. The customer is claiming a right to return all unused product without charge. Although we dispute the customer’s claim, and have filed a lawsuit to collect the unpaid balance, as a result of the uncertainty over the collection of the receivable of approximately $300,000, we have increased our allowance for doubtful accounts by approximately $85,000 with respect to the disputed receivable and we have deducted commission expense that we previously recognized upon shipment of the unused product. Research and development costs were approximately $588,000 during the six months ended June 30, 2010 as compared to approximately $238,000 during the same period in 2009. This increase of approximately $350,000 was primarily due to higher employee costs and project-related costs in the first half of 2010, as compared to the same period of 2009, as we increased our investment in resources to expand the Array product offering. Net Loss Net loss for the six months ended June 30, 2010 and 2009 was approximately $4,350,000 and $2,959,000, respectively. After including the effects of the dividends related to the preferred stock and warrants issued in November 2008, net loss attributable to common stockholders was approximately $4,350,000 and $3,566,000 for the six months ended June 30, 2010 and 2009, respectively. Basic and diluted loss per common share attributable to common stockholders was $0.27 and $0.43 for the six months ended June 30, 2010 and 2009, respectively. Research and Development Update As of August 1, 2010, we are pleased to announce that we have 54 issued and 43 pending patents. Of these patents, we have 23 issued and 37 pending patents related to our Array brand of LED light bulbs. For the Array products, these figures compare to 19 issued and 27 pending patents as reported in our Annual Report for 2009. Cash As of June 30, 2010, the Company had cash and cash equivalents of $7,753,000 and long term debt of $2,203,000, net of unamortized debt discounts of approximately $269,000. Nexxus Lighting, Inc. Consolidated Balance Sheets
Nexxus Lighting, Inc. Consolidated Statements of Operations (Unaudited)
Nexxus Lighting, Inc. Consolidated Statements of Cash Flows (Unaudited)
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