Lapolla Industries Reports Third Quarter 2014 Results

HOUSTON — Lapolla Industries, Inc. (“Lapolla”) (OTCQB: LPAD), a Houston-based global supplier and manufacturer of spray polyurethane foam insulation, reflective roof coatings, and equipment designed to reduce energy consumption in the residential, industrial and commercial markets for both new construction and retrofit applications, today announced financial results for the three month period ended September 30, 2014.

Third Quarter Financial Highlights

For the third quarter of 2014, Lapolla generated sales of $17.9 million, as compared to $18.1 million during the same period in 2013. During the third quarter of 2014, Lapolla’s gross profit was $3.3 million, as compared to $3.9 million for the third quarter of 2013. Adjusted EBITDA for the third quarter was a loss of $20,630, as compared to a gain of $689,602 in the same period of 2013.

For the third quarter of 2014, Lapolla reported foam segment sales were $15.4 million as compared to $15.3 million in the same period of 2013. Foam segment profit was $90,515 during the third quarter 2014, as compared to $695,746 for the same quarter in 2013. The third quarter 2014 coatings segment sales were $2.5 million versus $2.8 million for the same period in 2013. Coatings segment profit was $204,884, as compared to $412,992 for the third quarter in 2013.

“During the third quarter of 2014, our revenues roughly held in line with last year and our operating expenses were lower by over 3%,” stated Doug Kramer, CEO and President of Lapolla Industries. “While this past quarter did not show substantial changes from a financial perspective, there were notable shifts in the regulatory landscape in United States and internationally that are promising for Lapolla moving forward. As noted in last quarter’s results, Lapolla is the industry’s first-mover on Next Generation technology, utilizing the latest blowing agent that essentially eliminates ODP and GDP, making our product green and environmentally friendly. This innovation was rewarded in September, when the White House named Lapolla an official private sector partner of the President’s Climate Action Plan, and further announced an Executive Action requiring US government agencies to show preference to low-HFC products. Positive regulatory news has continued since the third quarter’s close with the European Union committing to lowering greenhouse gases to 40% of 1990 levels by 2030, and in late November, the United States, Canada, and Mexico will formally propose an amendment to the Montreal Protocol at a meeting of the UNEP that will further phase down use of HFCs. Notably, Lapolla remains the only firm in the world to deliver this cutting edge technology for wall foam insulation. To maximize this new market opportunity, Lapolla has engaged communications and government relations consultants to assist in accessing new potential customers. Aside from these regulatory considerations, market trends remain strong as SPF insulation continues to move mainstream with consumers, building owners and multi-family facility managers recognizing the environmental and financial benefits Lapolla products provide,” concluded Mr. Kramer.

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, available at www.lapolla.com.

About Lapolla Industries, Inc.

Lapolla Industries, Inc. is a global supplier, and manufacturer of spray polyurethane foam insulation, reflective roof coatings, and equipment, designed to reduce energy consumption in the residential, industrial and commercial markets, for both new construction and retrofit applications. More information is available at www.lapolla.com.

Non-GAAP Financial Measures:

Lapolla Industries utilizes Adjusted EBITDA to assist it in reviewing financial results and for management incentives. Adjusted EBITDA is defined as EBITDA increased by total share based compensation included in net income or loss. Lapolla’s management utilizes Adjusted EBITDA in an effort to provide information that reflects the Company’s economic performance. Lapolla’s management team reviews their monthly financial results on an Adjusted EBITDA basis. Adjusted EBITDA has no impact on reported sales. Adjusted EBITDA is used as a supplemental financial measure by management to describe Lapolla’s operations and economic performance to financial institutions, including the economic results of Lapolla’s operations; and repeatable operating performance that is not distorted by non-recurring items, certain other non-cash items, or market volatility. Adjusted EBITDA is not prepared in accordance with GAAP. Adjusted EBITDA should not be considered as an alternative to net income or loss, income or loss from operations, cash flows from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP.

Forward Looking Statements

Statements made in this press release that are not historical facts constitute “forward-looking statements” pursuant to Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and Private Securities Litigation Reform Act of 1995. Any such forward-looking statements should be considered in context with various disclosures made by Company about its business. All information herein is as of date hereof. Company undertakes no duty to update any forward-looking statement.

LAPOLLA INDUSTRIES, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)

 

September 30, 2014 December 31, 2013
Assets
Current Assets:
Cash

$

$

Trade Receivables, Net 8,865,019 7,694,589
Costs and Estimated Earnings in Excess of Billings on Uncompleted Contract 226,033

Inventories 4,117,012 5,421,935
Prepaid Expenses and Other Current Assets 628,702 1,250,314
Total Current Assets 13,836,766 14,366,838
Property, Plant and Equipment 1,457,539 1,600,679
Other Assets:
Goodwill 4,234,828 4,234,828
Other Intangible Assets, Net 1,177,837 1,165,157
Deposits and Other Non-Current Assets, Net 449,832 686,658
Total Other Assets 5,862,497 6,086,643
Total Assets $ 21,156,802 $ 22,054,160
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts Payable $ 5,994,722 $ 6,694,633
Accrued Expenses and Other Current Liabilities 1,156,979 1,456,895
Current Portion of Long-Term Debt

4,599
Total Current Liabilities 7,151,701 8,156,127
Other Liabilities:
Non-Current Portion of Revolver Loan 5,442,030 4,539,163
Non-Current Portion of Notes Payable – New Enhanced Note 7,027,882 6,683,561
Non-Current Portion of Note Payable – Related Party 1,300,000 1,300,000
Accrued Interest – Note Payable – Related Party 172,300 117,633
Total Other Liabilities 13,942,212 12,640,357
Total Liabilities 21,093,913 20,796,484
Stockholders’ Equity:
Common Stock, $.01 Par Value; 140,000,000 Shares Authorized; 115,423,903 and 114,148,378
Issued and Outstanding for September 30, 2014 and December 31, 2013, respectively. 1,154,239 1,141,484
Additional Paid-In Capital 87,855,480 86,734,757
Accumulated (Deficit) (88,823,919 ) (86,495,654 )
Accumulated Other Comprehensive (Loss) (122,911 ) (122,911 )
Total Stockholders’ Equity 62,889 1,257,676
Total Liabilities and Stockholders’ Equity $ 21,156,802 $ 22,054,160

LAPOLLA INDUSTRIES, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

Three Months Ended September 30, Nine Months Ended September 30,
2014 2013 2014 2013
Sales $ 17,874,308 $ 18,074,101 $ 52,661,376 $ 52,837,387
Cost of Sales 14,588,682 14,136,145 42,437,341 41,416,495
Gross Profit 3,285,626 3,937,956 10,224,035 11,420,892
Operating Expenses:
Selling, General and Administrative 3,341,230 3,396,028 9,774,425 9,873,835
Professional Fees 129,295 192,196 485,243 816,688
Depreciation 42,216 41,786 126,995 131,046
Amortization of Other Intangible Assets 78,653 80,325 212,428 338,776
Consulting Fees 130,309 133,327 365,072 351,656
Total Operating Expenses 3,721,703 3,843,662 10,964,163 11,512,001
Operating Income (Loss) (436,077 ) 94,294 (740,128 ) (91,109 )
Other (Income) Expense:
Interest Expense 306,505 226,808 879,052 783,590
Interest Expense – Related Party 203,877 187,870 604,298 557,585
Interest Expense – Amortization of Discount 46,007

136,512

(Gain) Loss on Derivative Liability

(65,656 )
Other, Net 21,893 (23,206 ) (31,725 ) (41,540 )
Total Other (Income) Expense 578,282 391,472 1,588,137 1,233,979
Net (Loss) $ (1,014,359 ) $ (297,178 ) $ (2,328,265 ) $ (1,325,088 )
Net (Loss) Per Share – Basic and Diluted $ (0.01 ) $ (0.00 ) $ (0.02 ) $ (0.01 )
Weighted Average Shares Outstanding 115,204,510 112,155,974 114,821,758 110,945,316
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustment (Loss) (2,205 )
Total Other Comprehensive (Loss)

$

$

$

$ (2,205 )
Comprehensive (Loss) $ (1,014,359 ) $ (297,178 ) $ (2,328,265 ) $ (1,327,293 )

LAPOLLA INDUSTRIES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Nine Months Ended September 30,
2014 2013
Cash Flows From Operating Activities
Net Loss: $ (2,328,265 ) $ (1,325,088 )
Adjustments to Reconcile Net Loss to Net Cash (Used in) Operating Activities:
Depreciation 300,619 343,538
Amortization of Other Intangible Assets 212,428 338,776
Provision for Losses on Accounts Receivable 603,796 190,654
Share Based Compensation Expense 583,844 1,008,063
Interest Expense – Related Party 604,298 557,585
Interest Expense – Enhanced Notes PIK 207,809

Interest Expense – Amortization of Discount 136,512

Loss on Foreign Currency Exchange 46,391

Gain on Derivative Liability

(65,656 )
Gain on Disposal of Asset (4,052 ) (7,148 )
Changes in Assets and Liabilities:
Trade Receivables (1,821,303 ) (1,179,635 )
Costs and Estimated Earnings in Excess of Billings on Uncompleted Contract (226,033 )

Inventories 1,304,923 (313,396 )
Prepaid Expenses and Other Current Assets 621,612 (4,804 )
Other Intangible Assets (225,108 ) (96,715 )
Deposits and Other Non-Current Assets 236,826 (274,871 )
Accounts Payable (699,221 ) 711,582
Accrued Expenses and Other Current Liabilities (299,916 ) 105,651
Net Cash (Used in) Operating Activities (744,840 ) (11,464 )
Cash Flows From Investing Activities
Acquisitions of Property, Plant and Equipment (206,427 ) (40,401 )
Proceeds from Disposal of Property, Plant and Equipment 53,000 28,786
Net Cash Provided by (Used in) Investing Activities $ (153,427 ) $ (11,615 )
Cash Flows From Financing Activities
Proceeds from Revolver Loan 54,567,575 56,715,217
Principal Repayments to Revolver Loan (53,664,709 ) (56,000,604 )
Principal Repayments to Notes Payable – Enhanced (673,331 )
Principal Repayments on Long Term Debt (4,599 ) (15,998 )
Net Cash Provided by Financing Activities 898,267 25,284
Net Effect of Exchange Rate Changes on Cash

(2,205 )
Net Change in Cash

Cash at Beginning of Period

Cash at End of Period

$

$

Supplemental Disclosure of Cash Flow Information:
Cash Payments for Interest $ 790,575 $ 598,769
Supplemental Schedule of Non Cash Investing and Financing Activities:
Issuance of Restricted Common Stock for Related Party Personal Guaranty on Note Payable $ 329,074 $ 504,863

Reconciliation of EBITDA and Adjusted EBITDA to Net Loss

(Unaudited)

Nine Months Ended September 30,
2014 2013
Net Loss: $ (2,328,265 ) $ (1,325,088 )
Additions / (Deductions):
Interest Expense 879,052 783,590
Interest Expense – Related Party 604,298 557,585
Interest Expense – Amortization of Discount 136,512

Tax Expense (Benefit) 108,131 129,463
Depreciation 300,619 343,538
Amortization of Other Intangible Assets 212,428 338,776
EBITDA $ (87,225 ) $ 827,864
Additions / (Deductions):

Share Based Compensation (1)

583,844 969,676
Adjusted EBITDA $ 496,619 $ 1,797,540

(1) Represents non-cash share based compensation for the periods then ended.