Photonic Products prioritizes debt reduction

17 May 2011

Precision optical component manufacturer negotiates two-year extension to loan notes and focuses on cost reduction.

Photonics Products Group (PPG), the manufacturer of crystal-based components and precision optics based in Northvale, New Jersey, has reported revenue of $3.2 million in its opening quarter of fiscal 2011.

The company, which comprises the INRAD, Laser Optics and MRC Optics brands, registered a marginal net income on that sales figure, improving markedly on the opening quarter of 2010, during which it had posted a net loss of $0.27 million on sales of $2.8 million.

And although the result for the latest quarter represented a sequential decline in revenues from $3.6 million in the closing quarter of fiscal 2010, CEO Joe Rutherford declared himself happy with the progress being made:

“After very positive results in the fourth quarter of 2010, I am pleased to see the trend continue in the first quarter of 2011,” he said. “We showed a much-improved financial result from the first quarter of 2010.”

Rutherford added that the company’s focus will be on improving its debt position and balance sheet as a priority, in what is likely to be a challenging year for the company. In fiscal 2010, PPG made 63% of its revenues from defense and aerospace applications. But with pressure on the US defense budget, there is widespread anticipation of cuts to military spending in the region of 15% for the federal budget in fiscal year 2012.

Loan extension
One key move already made by the company is the extension of $2.5 million that PPG owes in loan notes. Those notes, which accrue interest at 6% and had been due for repayment to the Bahamas-based company Clarex Ltd & Welland Ltd and an affiliate on April 1, 2011, were extended by two years. Clarex is PPG’s majority shareholder, and owns 56.7% of the firm's common stock. The company’s other major owner is the investment firm NSB Advisors.

Rutherford highlighted the loan extension and payment of $338,000 in accrued interest as evidence of the company’s financial focus right now, saying: “We have targeted debt reduction and balance sheet improvement as priorities for 2011.” PPG currently lists just over $4 million in cash and equivalents on its balance sheet.

“For the balance of 2011, we will continue to focus our efforts on improving operations, reducing costs and expanding efforts to develop new markets and customers, both domestically and internationally,” added the CEO. PPG’s key accounts are relatively concentrated on a handful of contracts currently, with five customers representing more than half of its revenues in 2010.

“Our first quarter results give me added confidence that we will benefit from the improving economy,” Rutherford concluded.