di4
15 years ago
Photonic Products Group, Inc. Reports First Quarter 2009 Results
May 19, 2009 2:21:00 PM
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View Additional ProfilesNORTHVALE, N.J., May 19 /PRNewswire-FirstCall/ -- Photonic Products Group, Inc. (OTC Bulletin Board: PHPG) has reported its consolidated financial results for its first quarter, which ended March 31, 2009.
Revenues for the first quarter were $2.8 million, down 32% from the same period last year.
Orders for the first three months were $1.6 million compared to $6.9 million in the first three months of 2008 with lower order activity in the first quarter of 2009 being primarily attributable to the effect of the current economic slowdown and its impact on our customers' business activity and demand for our products.
Gross profit for the quarter was $382,000, or 13.6%, down from a gross profit of $1.5 million, or 36.0% in last year's first quarter.
The Company reported a net loss of $(314,000) for the quarter just ended compared with net income of $491,000 for the same period last year. This quarter's results included a benefit from income taxes of $236,000, reflecting the Company's recognition of a deferred tax asset, net of its current tax provision. Last year's results reflected a benefit from income taxes of $52,000, net of current tax expense. (Loss)/earnings per share were $(0.03) diluted and basic in the current quarter. This compares with $0.05 basic and $0.03 diluted in the first quarter of 2008.
First quarter 2009 results showed net cash provided by operating activities of $357,000, compared to net cash used by operating activities of $223,000, in the first quarter of last year. The Company ended the quarter with cash, cash equivalents and short-term investments of $3,750,000.
Joe Rutherford, President and CEO of PPGI commented, "Our first quarter results are disappointing but not unexpected given the current economic conditions in the markets we serve. We have responded with cost cutting measures throughout both our operations in Northvale and our MRC operations in Sarasota. We have reduced our workforce levels to right size our operations to better align them with the current economic realities. Our mission remains to exceed our customer's expectations and to be responsive to those needs in the future."
Founded in 1973, Photonic Products Group, Inc. develops, manufactures, and markets products and services for use in diverse Photonics industry sectors via its portfolio of distinctly branded businesses. INRAD specializes in crystal-based optical components and devices, laser accessories and instruments. Laser Optics specializes in precision custom optical components, assemblies, and optical coatings. MRC Optics' business specializes in precision diamond turned optics, metal optics, and opto-mechanical and electro-optical assemblies. PPGI's customers include leading corporations in the Defense and Aerospace, Laser Systems, and Process Control and Metrology sectors of the Photonics Industry, as well as the U.S. Government. Its products are also used by researchers at National Laboratories and Universities world-wide. www.ppgrpinc.com
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this press release that are not purely historical are forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. These statements may be identified by their use of forward-looking terminology such as "believes", "expects", "should", "will", "plan", "anticipate", "targeting" or similar words. Such forward-looking statements, such as our expectation for revenues, new orders, and income, involve risks and uncertainties that could cause actual results to differ materially from those projected. Risks and uncertainties that could cause actual results to differ materially from such forward looking statements are, but are not limited to, uncertainties in market demand for the company's products or the products of its customers, future actions by competitors, inability to deliver product on time, inability to implement its growth strategies or to integrate new operations, inability to realize synergies from its acquisitions, inability to raise capital, inability to retain key employees or hire new employees, and other factors discussed from time to time in the Company's filings with the Securities and Exchange Commission. The forward looking statements made in this news release are made as of the date hereof and Photonic Products Group, Inc. does not assume any obligation to update publicly any forward looking statement.
PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2009 2008
------ ------
(Unaudited) (Audited)
Assets
------
Current assets:
Cash and cash equivalents $2,941,545 $2,672,087
Certificates of deposit 807,738 800,000
Accounts receivable (net of allowance
for doubtful accounts of $15,000 in
2009 and 2008) 1,796,072 2,810,602
Inventories, net 2,639,186 2,732,336
Other current assets 259,153 188,084
Total current assets 8,443,694 9,203,109
Plant and equipment:
Plant and equipment, at cost 14,482,251 14,445,027
Less: Accumulated depreciation and
amortization (11,372,620) (11,139,771)
Total plant and equipment 3,109,631 3,305,526
Precious Metals 157,443 112,851
Deferred Income Taxes 644,000 408,000
Goodwill 1,869,646 1,869,646
Intangible Assets, net 731,939 751,580
Other Assets 47,852 81,707
$15,004,205 $15,732,149
Total Assets
Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities:
Current portion of notes
payable - other $135,165 $136,892
Accounts payable and accrued
liabilities 1,674,821 2,160,665
Customer advances 331,309 456,754
Total current liabilities 2,141,295 2,754,311
Related Party Convertible Notes
Payable 2,500,000 2,500,000
Other Long Term Notes 351,467 353,663
Total liabilities 4,992,762 5,607,974
Commitments and Contingencies - -
Shareholders' Equity:
Common stock: $.01 par value;
60,000,000 authorized shares;
11,302,466 shares issued at
March 31, 2009 and 11,230,678
issued at December 31, 2008 113,023 112,306
Capital in excess of par value 16,823,426 16,622,466
Accumulated deficit (6,910,056) (6,595,647)
10,026,393 10,139,125
Less - Common stock in treasury, at
cost (4,600 shares respectively) (14,950) (14,950)
Total Shareholders' Equity 10,011,443 10,124,175
Total Liabilities and
Shareholders' Equity $15,004,205 $15,732,149
PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
2009 2008
------ ------
Total Revenue $2,815,097 $4,164,248
Cost and Expenses:
Cost of goods sold 2,433,410 2,662,655
Selling, general and
administrative expenses 907,079 986,813
3,340,489 3,649,468
Operating (loss) income (525,392) 514,780
Other income (expense):
Interest expense-net (32,388) (75,580)
Gain on sale of precious metals 7,371 -
(25,017) (75,580)
Net (loss) income before income
taxes (550,409) 439,200
Benefit from income taxes 236,000 52,000
Net (loss) income $(314,409) $491,200
Net (loss) income per common share
- basic $(0.03) $0.05
Net (loss) income per common share
- diluted $(0.03) $0.03
Weighted average common shares
outstanding-basic 11,260,199 10,535,075
Weighted average common shares
outstanding-diluted 11,260,199 15,862,817
PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
2009 2008
Cash flows from operating activities:
Net (loss) income $(314,409) $491,200
Adjustments to reconcile net (loss)
income to cash provided by (used in)
operating activities:
Depreciation and amortization 252,490 270,188
401(K) common stock contribution 179,068 160,181
Gain on sale of precious metals (7,371) -
Deferred income taxes (236,000) (102,000)
Stock based compensation 23,595 18,573
Changes in operating assets and
liabilities:
Accounts receivable 1,014,530 (184,226)
Inventories, net 93,150 (363,989)
Other current assets (71,069) (32,326)
Other assets 33,855 36,721
Accounts payable and accrued
liabilities (485,844) (217,335)
Customer advances (125,445) (300,011)
Total adjustments 670,959 (714,224)
Net cash provided by (used in)
operating activities 356,550 (223,024)
Cash flows from investing activities:
Capital expenditures (37,224) (186,363)
Purchase of precious metals (53,538) -
Purchase of certificate of
deposit, net (7,738) -
Proceeds from sale of precious
metals 16,317 -
Net cash (used in) investing
activities (82,183) (186,363)
Cash flows from financing activities:
Redemption of restricted stock units (986) -
Proceeds from issuance of common
stock - 139,580
Exercise of warrants - 591,587
Principal payment of convertible
note payable - (1,700,000)
Principal payments of other notes
payable (3,923) (3,699)
Principal payments of capital
lease obligations - (22,006)
Net cash used in financing
activities (4,909) (994,538)
Net increase (decrease) in cash
and cash equivalents 269,458 (1,403,925)
Cash and cash equivalents at
beginning of period 2,672,087 4,395,945
Cash and cash equivalents at end
of period $2,941,545 $2,992,020
Supplemental Disclosure of Cash
Flow Information:
Interest paid $3,596 $482,860
Income taxes paid $50,000 $10,000
SOURCE Photonic Products Group, Inc.
----------------------------------------------
Photonic Products Group
Inc.
+1-201-767-1910
or fax
+1-201-767-9644
jrutherford@ppgrpinc.com
SteveSchiets
16 years ago
Photonic Products Group, Inc. Reports Record Profits for Q3 and Nine Months
Monday November 12, 7:55 am ET
NORTHVALE, N.J., Nov. 12 /PRNewswire-FirstCall/ -- Photonic Products Group, Inc. (OTC Bulletin Board: PHPG - News) has reported its consolidated financial results for its third quarter and first nine months, which ended September 30, 2007.
ADVERTISEMENT
Revenues for the third quarter were $3,838,000, and revenues for the first nine months were $11,057,000, up 25.9% and up 7.9%, respectively, from the same periods last year.
The Company reported record net income before provision for income taxes and preferred stock dividends of $837,400 for the quarter and $1,708,800 for the first nine months, compared with profits of $173,000 and $381,500 for the same periods last year. Net income applicable to common shareholders, which is after the stock dividend on Company's preferred stock, was also a record at $797,400 and $1,395,500 for the three months and nine months ended September 30, 2007, respectively. This compares to $173,000 and $147,000 for the three months and nine months ended September 30, 2006
Gross profit margin in the third quarter was 47.3%, improved from 29.0% in the third quarter of 2006. Year to date gross profit margin was 41.5%, up significantly from 31.2% in the same period last year.
Cash flow from operations through the first nine months was $1,632,400, which compares with cash flow from operations of $1,026,600 in the first nine months of 2006. Net cash flow from all activities for the nine months ended September 30 was $644,300 after an accelerated repayment of $1,196,500 of principal and accrued interest on a $1,000,000 subordinated convertible note maturing on March 31, 2008. This compares with a net cash flow of $494,900 last year in the same period.
Orders for the nine months increased by 27.9% to $13,525,000 compared to the first nine months of 2006. The backlog at the end of the third quarter was $9,413,000 up 20.0% from a backlog of $7,843,000 at the same point in 2006. By comparison, product backlog was $6,969,000 on December 31, 2006.
Net basic and diluted earnings per common share (EPS) for the third quarter were $0.09 and $0.06, respectively. These record results compare favorably with net basic EPS and diluted EPS of $0.02 per common share for the same period last year. For the first nine months, basic and diluted EPS were $0.17 and $0.12. Both basic and diluted EPS for the same period last year were $0.02.
Dan Lehrfeld, President and CEO of PPGI commented, "We are on track for another year of record revenues, net income, and earnings per share. Net income for the third quarter and first nine months were up four-fold and both set new records, exceeding our highest full-year results and extending our string of positive quarters to nine. Our gross profit margin of 47.3% in the third quarter was boosted by improved labor productivity, a higher proportion of shipped products incorporating material provided by customers at no cost, and a lower ratio of non-labor costs to revenues. This exceptional third quarter raised gross profit margin for the nine months ended September 30, 2007 to 41.5%. Our backlog is strong, also a new record, and I expect revenues in the fourth quarter to trend higher than this quarter."
Mr. Lehrfeld continued, "Our cash flow from operations year-to-date is up more than 60% from last year, and it continues to finance our increased working capital needs while increasing our cash balances. In line with our continuing assessment of all of our options for expansion and growth in shareholder value, this year, we have been steadily and pro-actively focused on reducing our indebtedness and strengthening our balance sheet. Through September, we have realized an approximately $1,443,000 decrease in outstanding notes and capital lease principal and accrued interest balances through both scheduled and accelerated payments. We have also moved to eliminate our outstanding issues of preferred stock. In April, we called our 10% coupon, $500,000 principal, Series A convertible preferred stock. The holder elected to convert, resulting in the issuance of 500,000 common shares of the Company. In October, certain shareholders representing 1,560 shares, or 75%, of the total of 2,082 shares of our 10% coupon, Series B convertible preferred stock with a liquidation preference of $2,082,000, decided to voluntarily convert their shares into common stock. These shareholders included two major investors, two outside Directors, and myself. Subsequently, our Board authorized and the Company issued a recall for the remaining balance of the Series B shares, effective November 29, 2007."
Founded in 1973, Photonic Products Group, Inc. develops, manufactures, and markets products and services for use in diverse Photonics industry sectors via its portfolio of distinctly branded businesses. INRAD specializes in crystal-based optical components and devices, laser accessories and instruments. Laser Optics specializes in precision custom optical components, assemblies, and optical coatings. MRC Optics' business specializes in precision diamond turned optics, metal optics, and opto-mechanical and electro-optical assemblies. PPGI's customers include leading corporations in the Defense and Aerospace, Laser Systems, and Process Control and Metrology sectors of the Photonics Industry, as well as the U.S. Government. Its products are also used by researchers at National Laboratories and Universities world-wide.
THE MICROCAPITALI$T
19 years ago
PHPG .90 ...there is a LOT going on here and several strong hints came in the last PR earn report as to how business and programs were going...incl new products referenced last spring that deal with nanotech........given the order flow, book to bill ratio, backlog and other info in the PR I am expecting a strong qtrly release...and when demand develops for this stock it moves:
This is a very imoportant chart. Most important is that long 18 mo or so base...nothing up or down...flatline...then the company started releasing some positive news, incl the Northrup news...the new stream caused the rise and the spike and we came back down and retraced about 70%...KEY is we did not pierce prior range or baseline....stock held and as chart reflects we are now beginning to edge back up again.....these 'extended flatline'/breakout' chart formations are the most lucrative in my experience...they almost always return significant gains...meaning multiples....2x-5x++...:
CHART
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=phpg&sid=0&o_symb=phpg&f....
PPGI Reports Higher Sales and New Orders for Q2 and First Half; Raises $1.35M Via PIPE
Monday August 16, 12:06 pm ET
LAST PR
NORTHVALE, N.J., Aug. 16 /PRNewswire-FirstCall/ -- Photonic Products Group, Inc. (OTC Bulletin Board: PHPG - News) reported financial results for its second quarter and first half, which ended June 30, 2004.
The Company reported total revenues for the second quarter of $1,917,000, up 67%, and $3,723,000 for the first half, up 59%, respectively, from the same periods last year.
Product bookings for the second quarter were $2,400,000, up 33% compared the same period last year. Product bookings for the first half of 2004 were $5,429,000, up 86% from the same period a year ago.
Product backlog at June 30, 2004 was $3,890,000 as compared with $1,890,000 on June 30, 2003, up 106%. The backlog was up 14% from that at the end of the first quarter.
Cash flow from operations for the first half of 2004 was positive at $123,000 as compared with a negative operating cash flow of $423,000 for the first half of 2003.
Income from operations was a loss of $190,000 for the second quarter and a loss of $604,000 for the first half, as compared with losses of $368,000 and $698,000 for the same periods in 2003.
Net income was a loss of $265,000 for the second quarter and a loss of $755,000 through June 30, as compared with losses of $438,000 and $796,000 for the same periods in 2003.
Net income per share was a loss of $0.08 for the quarter, as compared with a loss of $0.09 per share in the second quarter of 2003. Net income was a loss of $0.17 per share for the first half of 2004, compared with a loss of $0.16 per share for the first half of 2003. EPS includes an adjustment to net income of $165,000 in 2004 and $54,000 in 2003 for the common stock dividends paid on Company preferred stock in each year.
Dan Lehrfeld, President and CEO of PPGI commented, "Our gross profit margin recovered during the second quarter, with the integration of legacy Laser Optics operations to our facility in Northvale, NJ. Order intake remained strong for both INRAD and Laser Optics, and our backlog is up once again. I anticipate continued sales growth in the third quarter. Cash flow from operations is improving, but the first half results were also favorably skewed by large cash advances from two OEM customers. We both have been and will be deploying more cash this year than last year into our growth strategies."
THE MICROCAPITALI$T
20 years ago
PHPG 1.87....there are several parts to this piece and it will take a couple of minutes to go thru it but I think it is worthwhile to do so. As more pieces of this puzzle come together and more people are introduced to PHPG the company's radar image should gradually rise. And the price should follow. I think they will be back on Nasdaq (or the Amex) soon and if this all plays out like I think it might we could see double digits within a year.
First this:
http://biz.yahoo.com/prnews/040603/nyth129_1.html
Then this:
NORTHVALE, NJ, April 8 – Photonic Products Group, Inc. (OTC Bulletin Board: PHPG) announced today that its INRAD business unit has been awarded a follow-on production contract from ATK Missile Systems’ Clearwater, FL facility for over 1900 ultra violet (UV) waveband optical filter elements for their upgraded AN/AAR-47 Missile Warning Systems. ATK Missile Systems, a division of Alliant Techsystems, is the developer and prime contractor for production of this enhanced performance system for protection of low and slow-flying aircraft from a variety of missile sources. The dollar value of the contract was not disclosed.
The enhanced performance AN/AAR-47 system detects missile launches, as well as laser-guided and laser-aided threats. It employs four sensors per aircraft, each containing several optical components. While primarily deployed on military aircraft, the AN/AAR-47 system is as well capable of providing protection for commercial aircraft. In low-rate production since 2002, this next production release will provide systems for U.S. Navy, U.S. Air Force, and U.S. allies’ aircraft.
The subject ultra-violet filters are specialty optical components made from high purity and high uniformity single-crystals of a proprietary material which absorbs all wavelengths except those in the UV region of the electro-magnetic spectrum. This synthetic crystal material was developed by INRAD expressly for such applications, has the highest temperature stability and mechanical stability of any alternative material, and is patented for this end-use. These filters are a key optical component of airborne electro-optical missile warning systems. INRAD has been the sole provider of these elements for the present generation of system for slow-flying aircraft, and had previously produced many thousands for the prior generation of systems. INRAD as well provides proprietary UV filters for systems that protect high-speed aircraft.
Dan Lehrfeld, President and CEO of Photonic Products Group commented, "We are pleased to have been a critical component supplier on ATK’s team since the inception of their system upgrade concept. Our component technology has contributed, at least in part, to making their new AN/AAR-47 system more robust. Missile warning systems remain a high funding priority in the Congress, in the DOD, and increasingly in the Department of Homeland Security. We are proud to be a critical component supplier of choice for this expanding class of defense electro-optical systems.”
Then these:
http://biz.yahoo.com/prnews/040513/nyth125_1.html
http://biz.yahoo.com/prnews/040426/nym219_1.html
Then these-note the sub-headline-and refer above to PGPH release of 4/8/04
ATK Awarded $14.5 Million Contract for Additional Production of the AN/AAR-47 Missile Warning System
Similar Systems Available for Commercial Aircraft Protection
MINNEAPOLIS, June 3 /PRNewswire-FirstCall/ -- ATK (NYSE: ATK) has received
a $14.5 million production contract from the Naval Air Systems Command,
Patuxent River, Md., for additional AN/AAR-47 Missile Warning Systems and
sensor upgrade kits. The contract represents additional production options to
ATK's existing sensor upgrade contract first awarded in 1998. The kits and
systems will be delivered to the U.S. Navy, U.S. Air Force, and U.S. allies
for integration into various aircraft.
"The AN/AAR-47 system is a battle-proven missile warning system that
quickly can become an aircrew's best friend in combat," said Dave Wise,
president of ATK Missile Systems. "ATK sensors are ideally suited for
identifying the distinctive plume of surface-to air missiles. While primarily
deployed on military aircraft, the AN/AAR-47 system is equally capable of
providing protection for America's commercial aircraft fleet."
ATK Missile Systems, Woodland Hills, Calif., will conduct work under the
contract at its facility in Clearwater, Fla.
The AN/AAR-47 system is an electro-optical missile warning system for low,
slow-flying aircraft. It detects missile launches, from a variety of missile
sources, as well as laser-guided and laser-aided threats. The system
immediately provides a signal to dispense appropriate countermeasures and
displays identified threats to the pilot in the cockpit. The improved sensor
technology awarded under this contract greatly increases the probability of
detection while significantly reducing the false alarm rate.
ATK is a $2.4 billion advanced weapon and space systems company employing
13,200 people in 21 states. News and information can be found on the Internet
at http://www.atk.com .
For more info:
http://home.businesswire.com/portal/site/altavista/index.jsp?ndmViewId=news_view&newsId=20040609...
http://www.spacedaily.com/news/missiles-04i.html
From BBC article last fall-
New methods
The most alarming new development is the threat from surface-to-air missiles (SAMs). A failed attempt was made in June 2002 to use them in Saudi Arabia to bring down a US military aircraft.
Al-Qaeda operatives tried again in Kenya in November 2002 and narrowly missed shooting down an Israeli airliner with over 200 passengers on board.
In February 2003 there was a full-scale alert at London's Heathrow Airport following a warning passed to the intelligence services that terrorists were looking to shoot down an airliner as it came in to land.
There have also been a number of SAM attacks on aircraft in Chechnya and Iraq.
Reuters article 6-4-04
Friday June 4, 8:27 AM
U.S. seeks help in tracking small missiles
By Jim Wolf
WASHINGTON (Reuters) - The United States will seek international help in tracking shoulder-launched surface-to-air missiles that guerrillas have used to shoot down commercial and military aircraft, the U.S. official in charge of aviation security said on Thursday.
"It should be a very aggressive subject of discussion with our international partners," said Asa Hutchinson, the Department of Homeland Security's undersecretary for border and transportation security.
"They have to be engaged in accounting for that and tracking the movement of those," he told the Reuters Air and Defense Summit in Washington.
Last year, the U.S. State Department estimated that more than 40 aircraft had been struck over the years by so-called man-portable air defense systems, or MANPADS. Such shoulder-launched missiles have caused at least 24 crashes and more than 600 deaths worldwide, the department said.
Note this article from the Guardian on 5-27-04:
http://www.guardian.co.uk/life/feature/story/0,13026,1225012,00.html
And keep in mind the recent release from PHPG ref DIRCM technology and contract award from Northrup Grumman which in part states:
NORTHVALE, N.J., June 3 /PRNewswire-FirstCall/ -- Photonic Products Group, Inc. (OTC Bulletin Board: PHPG - News) announced today that its INRAD business unit has been awarded a production contract for a optical filter component from Northrop Grumman's Defensive Systems Division, based in Rolling Meadows, IL. This production contract is for over 350 ultra violet (UV) waveband optical filter elements for the AN/AAR-54(V) Missile Warning System and the AN/AAQ-24(V) Nemesis DIRCM Self-Protection Suite. The contract also includes two production options of similar quantities. The dollar value of the contract was not disclosed.
All of the above is part of a puzzle that is taking shape rather quickly in my opinion. The ramifications are obvious.
THE MICROCAPITALI$T
20 years ago
PHPG - Here's a related article....
WASHINGTON - The United States will seek international help in tracking shoulder-launched surface-to-air missiles that have increasingly fallen into terrorist hands and now represent a significant threat to commercial aircraft, a Department of Homeland Security official said Thursday.
The push to enlist foreign governments in a global effort to better secure and account for a worldwide inventory of the missiles, estimated to be between 500,000 to 750,000, comes on the same day that the Government Accounting Office, the investigative arm of Congress, issued a report saying that the Pentagon is doing a poor job tracking the U.S. version of the shoulder-launched missile, called the “Stinger,” which it sells to a variety of foreign governments. The GAO report says the Pentagon’s shoddy accounting and tracking system makes it difficult to keep the weapons out of the hands of terrorists.
The new security challenges in Iraq have added to the global stockpile of MANPADS available on the black and gray markets, the GAO said.
“According to intelligence sources, thousands of MANPADS may have been provided to Iraqi security forces or were stolen during hostilities in Iraq immediately following the collapse of the Saddam Hussein regime in 2003,” notes the report.
The control and accountability of shoulder-launched missiles “should be a very aggressive subject of discussion with our international partners,” Asa Hutchinson, DHS undersecretary for border and transportation security, said Thursday while speaking at a Reuters Air and Defense Summit in Washington. “They have to be engaged in accounting for that and tracking the movement of those,” Hutchinson said.
Reason for such high concern: Some 30 countries make the light but lethal weapons and about 1 percent of the worldwide total, or 7,500, are beyond any kind of formal government control, the GAO report said.
“The proliferation of man-portable air defense systems (MANPADS) has been of growing concern to the United States and other governments,” said the GAO said.
Terrorists are attracted to the weapons as a way to bring down commercial airliners because the weapons are deadly, portable, easy to use, easy to hide and cost from less than $1,000 each to $100,000.
Last year, the State Department estimated that more than 40 aircraft had been struck over the years by MANPADS, causing at least 24 crashes and more than 600 deaths worldwide.
But it was the first attack outside a conflict area — an unsuccessful attempt on an Israeli charter jet taking off from Mombasa, Kenya in 2002 — that raised the government’s concern about the risk posed by the missiles.
U.S. studying MANPAD defense
Hutchinson said no decisions had been made on whether the government might ultimately require U.S. airlines to carry countermeasures that might be developed. Such defenses could involve installing antennas to detect any incoming missile — a prelude to triggering infrared decoys to foil the heat-seeking weapon.
Earlier this year DHS announced it was funding a program to study the feasibility of retrofitting the U.S. commercial airline fleet with missile countermeasures. But critics have said such a move would be prohibitively expensive.
“I think there’s an awareness you can’t overburden an industry with costs,” Hutchinson said. “So who pays for it would be an issue down the road.”
“There is no way [the airline industry] could afford that,” said Francis Tusa, editor of Defense Analysis, a London-based newsletter. Tusa estimates it could cost $10 billion for U.S. airlines to equip the 6,000 or so planes they have flying.
The technology development efforts under way were important even if future defenses were deployed only selectively, Hutchinson said. “It might be such that you cannot do it in a comprehensive fashion but it might be on higher-risk routes,” he said. “It might be in the areas of more vulnerable airports.” Much hinged on what the countermeasures turned out to be and their costs, he said. “Historically, the biggest threat from MANPADS and the use of them has been overseas, and I believe that that remains,” he said.
Pentagon keeps paper records on sales
Countries that buy Stinger missiles must allow the Defense Department to inspect them. But, the GAO report says the Pentagon’s Stinger records are “neither complete nor reliable. As a result, [the Department of Defense] cannot account for each Stinger sold abroad.”
The Pentagon has no master database that maintains sales and shipping records of Stinger missiles, the report said. In addition, most of the records that do exist are merely paper copies, a significant portion of which have been misfiled or destroyed.
The DoD “lacks reliable control records” because there is simply no requirement to keep such sales records, the GAO notes. “Without complete and accurate Stinger shipping records [military officials] have no reliable control records against which to compare Stinger inventories,” the report says.
But the Pentagon has heard this before. In September 1994, the GAO said that the Pentagon’s oversight and record-keeping of the weapons was poor. Investigators recommended changes then.
In the report released Thursday, the GAO said that the defense secretary should standardize requirements for keeping Stinger records, create an electronic database to consolidate records of the systems and establish standard procedures for inspecting them.
The Pentagon, in response to the report, said it has a “high level of confidence” that the missiles sold to other nations do not pose a terrorist threat because many different organizations review each proposed transfer. The Pentagon also said that official procedures for counting and inspecting the missiles would be in place at year’s end.
In 2003, the State Department reached agreements with other countries to better control the weapons, but such agreements are voluntary and nonbinding, the report said. In that same year the DoD ordered reinstated a 1982 policy requiring its inspectors to conduct annual inventory checks of 100 percent of the Stinger missiles sold overseas. That 1982 policy—the year the U.S. first started selling Stingers abroad—was reduced to only five percent in 1998. The Pentagon said at the time that the 100 percent requirement duplicated the 100 percent inspections conducted by the recipient countries, which were done twice a year.
The GAO recommended that the secretary of state work with other countries to figure out ways to monitor how well they are reducing the supply of the weapons and assess whether such efforts dry up the flow to illicit arms markets.
The State Department agreed with the report’s recommendations and said that it is working with other countries.
The department has also worked with foreign governments to destroy more than 8,155 excess shoulder-fired missiles and tighten security where they are stored. By March, commitments from nine countries — including Bosnia and Herzegovina, Cambodia, Liberia, Nicaragua and Serbia to destroy nearly 10,000 excess missiles, the report said.
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