August 19, 2011 at 16:16 PM EDT
Lapolla Reports Record Second Quarter 2011 Results
Delivers 30.1% Sales Growth and Profitability Across Business Segments

HOUSTON, Aug. 19, 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 second quarter of 2011.

Douglas J. Kramer, CEO and President of Lapolla, commented, "Lapolla's second quarter 2011 results reflect an increase of 30.1% in sales compared to the prior year's second 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 stabilizing and in some cases reversing, while market softness persists.  We continued to invest in our business infrastructure to support our aggressive growth both domestically and internationally. As we enter the third quarter, we continue to experience sustained growing demand for our products," concluded Mr. Kramer.

Overall Results

Sales increased $5,006,398, or 30.1%, from the second quarter of 2011 compared to the second quarter of 2010.  Foam sales increased $2,894,564, or 20.0%, and coatings sales increased $2,111,834, or 96.1%, quarter over quarter, due to continued market penetration and higher consumer demand attributed to cosconscious residential and commercial building owners transitioning from traditional fiberglass insulation and roofing systems to energy efficient SPF and acrylic coatings. High and increasingly volatile energy prices continue to heighten the public's interest for green building materials and sustainable energy solutions. Cost of sales increased $5,232,219, or 42.3%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010. Cost of sales increased $3,246,374, or 30.2%, for our foams, and $1,985,845, or 122.6%, for our coatings, quarter over quarter, due primarily to increases of $2,894,564, or 20.0%, and $2,111,834, or 96.1%, in our foam and coatings sales, respectively. We had a 47.1% increase in freight costs, along with an approximate 6.9% increase in material costs, in the second quarter of 2011 compared to the second 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. Our gross profit decreased $225,821, or 5.3%, for the second quarter of 2011 compared to the second quarter of 2010, due to the 47.1% increase in freight costs and 6.9% increase in material costs, offset by our 30.1% in sales growth. Gross margin percentage decreased 7%, quarter over quarter, due to higher freight and material costs, offset by approximately 4.9% in sales pricing changes, improved manufacturing efficiencies, and increased purchasing power with key vendor alliances. Net loss was $668,871 in the second quarter of 2011 compared to net income of $542,882, due primarily to increases of $1,121,740, or 37.1%, in SG&A, $125,000 or 250%, in bad debts, $148,745, or 220.8%, in professional fees, offset by decreases of $103,054, or 43.7% in interest expense, and $265,328, or 100%, in interest expense – amortization of discount.  Net loss per share was $0.01 for the quarter ended June 30, 2011 compared to net income per share of $0.00 for the quarter ended June 30, 2010.

Results of Business Segments

Foam sales increased $2,894,564, or 20.0%, in the second quarter of 2011 compared to the second 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 $199,080, or 23.4%, in the second quarter of 2011 compared to the second quarter of 2010. Foam cost of sales increased $3,246,374, or 30.2%, quarter over quarter, due to increases of $2,894,564, or 20.0%, in sales, $256,875, or 34.6%, in freight, and approximately 9.3% in material costs, partially offset by manufacturing efficiencies and purchasing power with key vendor alliances. Foam gross profit decreased $351,810, or 9.5%, and gross margin percentage decreased 6.3%, from the second quarter of 2011 compared to the second quarter of 2010, due primarily to higher freight and material costs. Foam segment profit decreased $577,062, or 44.5%, in the second quarter of 2011 compared to the second 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 8.4% increase in sales volumes from higher sales prices and 91.6% increase in sales volumes from market share gains.

Coatings sales increased $2,111,834, or 96.1%, in the second quarter of 2011 compared to the second 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 $1,985,845, or 122.6%, quarter over quarter, due to increases of $2,111,834, or 96.1%, in sales, $145,516, or 130.2%, in freight, and approximately 5.4% in material costs, partially offset by manufacturing efficiencies. Coatings gross profit increased $125,989, or 21.7%, due to higher sales volumes, and gross margin percentage decreased 10%, 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 second quarter of 2011 compared to the second quarter of 2010.  Coatings segment profit decreased $160,360, or 74.3%, in the second quarter of 2011 compared to the second quarter of 2010, primarily due to higher freight and material costs, offset by an approximate 0.3% increase in sales volumes from higher sales prices and 99.7% increase in sales volumes from market share gains.

Total segment profits decreased $737,422, or 48.7%, due primarily to a gross margin percentage decrease of 7%, from increases of $402,391, or 47.1%, in freight and 6.9% in material costs, offset by increases of approximately $249,637, or 8.7%, in sales prices and 91.3% in market share, in the second quarter of 2011 compared to the second 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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