SOURCE: SCI Engineered Materials

SCI  Engineered Materials

November 04, 2014 16:10 ET

SCI Engineered Materials, Inc. Reports 2014 Third Quarter and Nine Month Results

COLUMBUS, OH--(Marketwired - Nov 4, 2014) - SCI Engineered Materials, Inc. ("SCI") (OTCQB: SCIA), a global supplier and manufacturer of advanced materials for physical vapor deposition thin film applications that works closely with end users and OEMs to develop innovative, customized solutions, today reported its financial results for the three months and nine months ended September 30, 2014.

Dan Rooney, Chairman, President and Chief Executive Officer, said, "We continue to make progress in our strategic pursuit of growth opportunities in domestic and global markets. In September 2014 we received two substantial orders for Transparent Conductive Oxide (TCO) materials. A majority of these TCO targets will be shipped to Asia in the fourth quarter of 2014 and first quarter of 2015. Additionally, product testing and qualifications continued for other applications during the quarter that are expected to lead to orders."

Mr. Rooney added, "We are focused on maintaining strong operations while also positioning SCI to meet the needs of its customers. Through the first nine months of 2014, we acquired $400,000 of additional equipment in response to customer demand for increased volume of manufactured products. The Company also paid off approximately $300,000 related to capital lease obligations and notes payable; and cash increased 68% to more than $1 million by the end of the quarter. Cash provided by operating activities was approximately $750,000 for the first nine months of 2014 which is the highest amount for a comparable period since 2007." 

Total revenue
Total revenue was $1,744,917 for the third quarter 2014 compared to $1,810,044 a year ago, primarily due to lower cost of a high-priced raw material. 

For the nine months ended September 30, 2014, total revenue increased 48% to $7,435,793 from $5,036,421 for the same period in 2013, led by strong sales of products to photonics customers. 

Gross profit
Gross profit decreased 3% to $402,481 for the third quarter 2014 from $416,836 for the same period in 2013, principally due to slightly lower total revenue and product mix. Third quarter 2014 gross profit margin of 23.1% was similar to the 23.0% for the third quarter last year.

Gross profit for the 2014 year-to-date period increased 59% to $1,569,724 from $988,626 a year ago. This was attributable to the solid increase in total revenue and favorable product mix, which was reflected in the higher gross profit margin of 21.1% compared to 19.6% for the same period a year ago. 

Order backlog was $2.6 million at September 30, 2014 compared to $2.2 million at June 30, 2014, and $3.4 million on the same date in 2013.

Operating expense
Operating expense (marketing and sales, general and administrative, and R&D expenses) decreased 4% to $450,494 for the three months ended September 30, 2014 from $469,179 for the same period last year. 

For the first nine months of 2014, operating expense increased nearly 10% to $1,504,733 from $1,370,655 for the same period last year. There was an increase of $122,000 in general and administrative expense for the third quarter 2014, including approximately $58,000 of non-cash stock based compensation expense. 

Loss Applicable to Common Stock
The loss applicable to common stock was $72,870 for the third quarter 2014 versus a loss of $76,322 a year ago. The loss per common share was $0.02 for both periods.

There was a loss applicable to common shares of $7,140 for the first nine months of 2014 compared to a loss of $407,518 for the same period in 2013. Earnings per share was breakeven for the 2014 year-to-date period versus a loss of $0.11 per common share in 2013.

EBITDA
EBITDA (Earnings before interest, income taxes, depreciation and amortization) for the third quarter 2014 was $65,182 versus $81,754 for the same period last year. The year-over-year difference was more than offset by a decrease in depreciation and amortization of $18,739 for the third quarter 2014 compared to a year ago. Adjusted EBITDA, which also includes non-cash stock based compensation, was $108,655 for the third quarter 2014 versus $113,110 for the three months ended September 30, 2013. Most of the decline in third quarter 2014 depreciation and amortization was offset by higher non-cash stock based compensation.

For the nine months ended September 30, 2014, EBITDA increased to $454,606 from $104,447 a year ago. The primary factor was net income for the 2014 year-to-date period, prior to preferred stock dividends, compared to a net loss for the same period in 2013, partially offset by a $44,755 decrease in depreciation and amortization in 2014 versus the same period last year. Adjusted EBITDA was $583,315 for the first nine months of 2014 versus $205,533 a year ago due to the factors noted above plus approximately $28,000 of additional non-cash stock based compensation. 

Cash Provided by Operating Activities
Cash provided by operating activities increased to $746,403 for the nine months ended September 30, 2014, from $214,727 for the same period last year. The most significant factor contributing to the 2014 year-to-date improvement was net income of $10,974 compared to a net loss of $389,404 for the same period in 2013. The 2014 net income and 2013 net loss amounts are both before $18,144 dividends on preferred stock. 

About SCI Engineered Materials, Inc.
SCI Engineered Materials is a global supplier and manufacturer of advanced materials for PVD thin film applications that works closely with end users and OEMs to develop innovative, customized solutions. Additional information is available at www.sciengineeredmaterials.com.

This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Those statements include, but are not limited to, all statements regarding intent, beliefs, expectations, projections, customer guidance, forecasts, and plans of the Company and its management, and specifically include statements concerning

These forward-looking statements involve numerous risks and uncertainties, including, without limitation, other risks and uncertainties detailed from time to time in the Company's Securities and Exchange Commission filings, including the Company's Annual Report on Form 10-K for the year ended December 31, 2013. One or more of these factors have affected, and could in the future affect, the Company's projections. Therefore, there can be no assurances that the forward-looking statements included in this press release will prove to be accurate. In light of the significant uncertainties in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company, or any other persons, that the objectives and plans of the company will be achieved. All forward-looking statements made in this press release are based on information presently available to the management of the Company. The Company assumes no obligation to update any forward-looking statements.

         
SCI ENGINEERED MATERIALS, INC.
BALANCE SHEETS
    
             
ASSETS            
    September 30,     December 31,  
    2014     2013  
    (UNAUDITED)        
Current Assets                
  Cash   $ 1,046,131     $ 622,727  
  Accounts receivable, less allowance for doubtful accounts     527,352       634,077  
  Inventories     1,192,542       1,709,740  
  Prepaid expenses     68,415       56,298  
    Total current assets     2,834,440       3,022,842  
                 
Property and Equipment, at cost     7,930,056       7,573,929  
  Less accumulated depreciation     (5,086,210 )     (4,781,362 )
      2,843,846       2,792,567  
                 
Other Assets     50,243       55,808  
                 
TOTAL ASSETS   $ 5,728,529     $ 5,871,217  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY                
                 
Current Liabilities                
  Short term debt   $ 469,094     $ 351,689  
  Accounts payable     304,126       456,111  
  Customer deposits     834,629       1,105,655  
  Accrued expenses     217,837       191,487  
    Total current liabilities     1,825,686       2,104,942  
                 
  Long term debt     1,038,411       1,041,526  
    Total liabilities     2,864,097       3,146,468  
                 
Commitments and contingencies                
                 
Total Shareholders' Equity     2,864,432       2,724,749  
                 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 5,728,529     $ 5,871,217  
                 
 
SCI ENGINEERED MATERIALS, INC.
STATEMENT OF OPERATIONS
 
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
(UNAUDITED)
 
    THREE MONTHS ENDED SEPT. 30,     NINE MONTHS ENDED SEPT. 30,  
    2014     2013     2014     2013  
                                 
Revenue   $ 1,744,917     $ 1,810,044     $ 7,435,793     $ 5,036,421  
                                 
Cost of revenue     1,342,436       1,393,208       5,866,069       4,047,795  
                                 
Gross profit     402,481       416,836       1,569,724       988,626  
                                 
Operating expense     450,494       469,179       1,504,733       1,370,655  
                                 
(Loss) income from operations     (48,013 )     (52,343 )     64,991       (382,029 )
                                 
Other expense     (18,819 )     (17,941 )     (52,398 )     (7,375 )
                                 
(Loss) income before provision for income taxes     (66,832 )     (70,284 )     12,593       (389,404 )
                                 
Income tax expense     -       -       (1,619 )     -  
                                 
Net (loss) income     (66,832 )     (70,284 )     10,974       (389,404 )
                                 
Dividends on preferred stock     (6,038 )     (6,038 )     (18,114 )     (18,114 )
                                 
LOSS APPLICABLE TO COMMON SHARES   $ (72,870 )   $ (76,322 )   $ (7,140 )   $ (407,518 )
                                 
Earnings per share - basic and diluted                                
                                 
Loss per common share                                
  Basic   $ (0.02 )   $ (0.02 )   $ (0.00 )   $ (0.11 )
  Diluted   $ (0.02 )   $ (0.02 )   $ (0.00 )   $ (0.11 )
                                 
Weighted average shares outstanding                                
  Basic     3,866,039       3,841,963       3,861,090       3,835,997  
  Diluted     3,866,039       3,841,963       3,861,090       3,835,997  
                                 
                                 
       
SCI ENGINEERED MATERIALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
 
   
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013  
       
             
    2014     2013  
                 
CASH PROVIDED BY (USED IN):                
    Operating activities   $ 746,403     $ 214,727  
    Investing activities     (41,125 )     31,658  
    Financing activities     (281,874 )     (383,080 )
NET INCREASE (DECREASE) IN CASH     423,404       (136,695 )
                 
CASH - Beginning of period     622,727       630,819  
                 
CASH - End of period   $ 1,046,131     $ 494,124  
                 
   
  RECONCILIATION OF GAAP TO NON-GAAP MEASURES  
   
  FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013  
                       
    Three months ended Sept. 30,     Nine months ended Sept. 30,  
                       
    2014     2013     2014   2013  
Net (loss) income   $ (66,832 )   $ (70,284 )   $ 10,974   $ (389,404 )
Interest     16,365       17,650       49,689     56,772  
Income taxes     -       -       1,619     -  
Depreciation and amortization     115,649       134,388       392,324     437,079  
EBITDA     65,182       81,754       454,606     104,447  
                               
Stock based compensation     43,473       31,356       128,709     101,086  
Adjusted EBITDA   $ 108,655     $ 113,110     $ 583,315   $ 205,533  
                               

Contact Information

  • Contact:
    Robert Lentz
    (614) 876-2000