Lapolla Reports Record Third Quarter 2011 Results

HOUSTON, Nov. 21, 2011 /PRNewswire/ -- Lapolla Industries, Inc. ("Lapolla") (OTC BB: LPAD), a Houston based manufacturer and supplier of spray foam insulation, cool roof coatings and equipment designed to reduce energy consumption in the residential and commercial markets, for both new construction and retrofit applications, today announced results for the third quarter of 2011.

Douglas J. Kramer, CEO and President of Lapolla, commented, "Lapolla's third quarter 2011 results reflect an increase of 27.3% in sales compared to the prior year's third quarter.  We continued to experience commodity cost challenges during the quarter from volatile oil prices and global allocation of certain coating materials, resulting in higher freight and materials costs across both of our segments, and a reduction in our gross profit for the period.  From all indications, it appears the short term spike in materials pricing is reversing, while market softness persists.  We continued to invest in our business infrastructure to support our aggressive growth both domestically and internationally. As we progress through the fourth quarter, we continue to experience sustained growing demand for our products." concluded Mr. Kramer.

Overall Results

Sales increased $5,316,612, or 27.3%, in the third quarter of 2011 compared to the third quarter of 2010.  Our AirTight Division, a turn-key SPF startup equipment and training operation, provided additional market penetration, resulting in approximately $2.8 Million and $3.0 Million in sales for the third quarter of 2011 and 2010, respectively. Cost of sales increased $5,782,836, or 39.0%, for the three months ended September 30, 2011 compared to the three months ended September 30, 2010. We had a 53.1% increase in freight costs, along with an approximate 11.1% increase in material costs, in the third quarter of 2011 compared to the third quarter of 2010. Freight and material costs increased in 2011 due primarily to surging oil prices which justified higher trip rates and fuel surcharges, as well as from global allocation of certain coating raw materials requiring us to deploy spot market buying at higher prices to meet demand.  Gross profit decreased $466,224, or 10.1%, for the third quarter of 2011 compared to the third quarter of 2010, due to the 53.1% increase in freight costs and 6.8% increase in material costs, offset by our 27.3% in sales growth. Gross margin percentage decreased 7.0%, quarter over quarter, due to higher freight and material costs, offset by approximately 9.2% in sales pricing changes, improved manufacturing efficiencies, and increased purchasing power with key vendor alliances. Total operating expenses increased $954,753, or 27.6%, in the third quarter of 2011 compared to the third quarter of 2010, due to increases of $773,557 in SG&A, $34,646 in professional fees, $3,467 in depreciation, and $189,365 in consulting fees, offset by a decrease of $46,282 in amortization of other intangible assets.  Total other income (expense) decreased $169,949, or 74.7%, from the third quarter of 2011 compared to the third quarter of 2010, due to decreases of $36,501 for interest expense, $183,179 for interest expense - amortization of discount, $8,039 in the gain on derivative liability related to outstanding warrants, and $41,693 in other, net.  Net loss was $319,591 in the third quarter of 2011 compared to net income of $931,437, due primarily to increases of $773,557, or 24.4%, in SG&A, $34,646, or 104.5%, in professional fees, $189,364, or 1,612.6%, in consulting fees, offset by decreases of $46,282, or 28.4%, in amortization of other intangible assets, $36,501, or 19.4%, in interest expense, $183,179, or 100%, in interest expense – amortization of discount, $41,693, or 43.8%, in gain on derivative liability, and $20,903, or 42.9%, in other, net. Net loss per share was $0.01 for the quarter ended September 30, 2011 compared to net income per share of $0.01 for the quarter ended September 30, 2010.

Results of Business Segments

Foam sales increased $3,465,090, or 20.3%, in the third quarter of 2011 compared to the third quarter of 2010, due to energy conscious building owners and consumers continuing to seek relief from costly energy prices, as spray polyurethane foam (SPF) gains market share away from traditional insulation systems such as fiberglass. Foam equipment sales increased $307,398, or 35.5%, in the third quarter of 2011 compared to the third quarter of 2010. Foam cost of sales increased $4,195,000, or 32.5%, quarter over quarter, due to increases of $3,465,090, or 20.3%, in sales, $362,443, or 45.9%, in freight, and approximately 11.8% in material costs, partially offset by manufacturing efficiencies and purchasing power with key vendor alliances. Foam gross profit decreased $729,910, or 17.5%, and gross margin percentage decreased 7.7%, from the third quarter of 2011 compared to the third quarter of 2010, due primarily to higher freight and material costs. Foam segment profit decreased $880,433, or 53.7%, in the third quarter of 2011 compared to the third quarter of 2010, primarily due to increased freight and spikes in material costs from higher than normal fuel and petroleum based commodity prices, offset by an approximate 7.8% increase in sales volumes from higher sales prices and 92.2% increase in sales volumes from market share gains.

Coatings sales increased $1,851,521, or 78.4%, in the third quarter of 2011 compared to the third quarter of 2010, due to energy saving acrylic coatings regaining traction from pent up demand in the roofing and construction markets. Coatings cost of sales increased $1,587,835, or 83.0%, quarter over quarter, due to increases of $1,851,521, or 78.4%, in sales, $118,716, or 101.6%, in freight, and approximately 10.6% in material costs, partially offset by manufacturing efficiencies. Coatings gross profit increased $263,686, or 58.7%, due to higher sales volumes, and gross margin percentage decreased 2.1%, due to higher freight costs from higher than normal fuel prices and global allocation of certain coating raw materials requiring us to deploy spot market buying at higher costs to meet demand, from the third quarter of 2011 compared to the third quarter of 2010.  Coatings segment profit increased $59,424, or 49.1%, in the third quarter of 2011 compared to the third quarter of 2010, primarily due to an approximate 9.8% increase in sales volumes from higher sales prices and 90.2% increase in sales volumes from market share gains, offset by higher freight and material costs.

Total segment profits decreased $822,009, or 46.7%, due primarily to a gross margin percentage decrease of 7.0%, from increases of $481,159, or 53.1%, in freight and 11.1% in material costs, offset by increases of approximately $451,926, or 8.5%, in sales prices and $4,864,685, or 91.5%, in market share gains, in the third quarter of 2011 compared to the third quarter of 2010.

About Lapolla Industries, Inc.

Lapolla Industries, Inc. is a manufacturer of spray foam insulation and cool roof coating products targeting commercial, industrial and residential applications in the roofing and insulation construction industries. Additional information about Lapolla is available at www.Lapolla.com.

Forward Looking Statements

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, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, 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. 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. 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 Contacts:
Douglas J. Kramer, CEO
Michael T. Adams, CGO
Charles A. Zajaczkowski, CFO
(281) 219-4700

SOURCE Lapolla Industries, Inc.

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