COLUMBUS, OH--(Marketwire - Apr 13, 2012) - SCI Engineered Materials, Inc. ("SCI") (
Dan Rooney, Chairman, President and Chief Executive Officer, stated, "Total revenue increased sequentially and year-over-year for the three months ended December 31, 2011 despite difficult market conditions. Our core business continues to grow in response to customer demand and new products. SCI's sales to the solar industry are benefiting from the conversion of product qualifications into orders, introduction of new products and geographic diversification. During the past year we continued to scale our manufacturing capabilities to meet the expected needs of our solar customers. Synchronizing the benefits of these investments with anticipated product orders is challenging due to issues impacting execution of our customers' growth plans. We are positioned to meet their needs as market conditions improve. Our products are focused on evolving thin film solar technologies that are being gradually adopted to meet long-term global energy demand."
Mr. Rooney added, "Industry forecasts continue to project strong global growth in solar over the next several decades. Preliminary estimates for 2011 indicate that solar installations increased by approximately 35 percent compared with 2010. While the long-term outlook for solar is encouraging, selling price pressure is expected to continue throughout this year. This situation has resulted in customers adjusting their near-term sales outlook. This factor has also negatively impacted the market value of public companies serving the solar industry. However, our competitive advantages, expanding product portfolio and growing customer base are expected to contribute to a much higher long-term valuation for SCI as these issues are resolved. In 2012 we are continuing to strengthen our core business and are encouraged by the addition of new solar customers since year-end 2011."
For the fourth quarter 2011, total revenue increased 9% on a sequential basis to $2,269,084 due to higher product revenue. The company reported a loss applicable to common shares of $242,930, or $(0.06) per share, for the fourth quarter 2011 versus a loss of $58,837, or $(0.02) per share, for the same period in 2010.
Full-Year 2011 Results
For the twelve months ended December 31, 2011, total revenue increased approximately 3% to $9,152,704 from $8,916,122 last year led by a 6% increase in product revenue which was partially offset by a planned decline in contract research revenue. Gross profit declined to $1,533,692 for 2011 from $2,273,984 the prior year primarily due to product mix and further scale-up expenses related to Transparent Conductive Oxide products for the solar market. Operating expenses for 2011 were $2,175,367 which was slightly below a year ago despite higher R&D expense related to development of innovative TCO systems to further align SCI's activities with customer needs. The company had a net loss of $914,758, or $(0.24) per share, compared with a net loss of $7,229, or $0.00 per share, a year ago.
Fourth Quarter 2011 Results
Total revenue
Total revenue increased 35% to $2,269,084 for the fourth quarter 2011 compared with $1,680,965 for the same period in 2010. Product revenue increased 45% to $2,157,238 for the fourth quarter 2011 from $1,489,928 a year ago. Contract research revenue was $111,846 for the fourth quarter 2011 versus $191,037 for the fourth quarter 2010 due to the planned completion of government programs during 2011.
At December 31, 2011, the company's backlog was $1.7 million compared to $3.1 million on the same date in 2010. The decline in the company's backlog was due to approximately $700,000 attributable to a customer who, as previously reported, discontinued production in the first quarter 2011 plus approximately $600,000 due to a planned reduction in grants and awards to be completed in future periods.
Gross profit
Gross profit was $274,419 for the fourth quarter 2011 compared with $414,190 for the fourth quarter 2010. The 34% decline was due to change in product mix and additional scale-up costs particularly related to solar products.
Operating expenses
Operating expenses, which include marketing and sales, general and administrative, and R&D, declined 6% to $484,020 for the fourth quarter 2011 versus $516,671 a year ago due to lower general and administrative and marketing and sales expense.
Loss Applicable to Common Shares
The loss was $242,930, or $(0.06) per share, for the fourth quarter 2011 versus a loss of $58,837, or $(0.02) per share, for the same period last year.
EBITDA
Earnings before interest, income taxes, depreciation and amortization (EBITDA) were negative $72,394 for the fourth quarter 2011 compared with EBITDA of $16,584 the prior year. Adjusted EBITDA, which excludes non-cash stock based compensation, was negative $45,337 versus EBITDA of $66,497 for the fourth quarter 2010.
About SCI Engineered Materials, Inc.
SCI Engineered Materials, Inc. manufactures ceramics and metals for advanced applications such as photonics, thin film solar, thin film batteries, and semiconductors. SCI Engineered Materials is a global materials supplier with clients in more than 40 countries. Additional information is available at http://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 the core business continuing to grow in response to customer demand and new products, sales to the solar industry benefiting from the conversion of product qualifications into orders, introduction of new products and geographic diversification, scaling manufacturing capabilities to meet expected needs of solar customers, synchronizing the benefits of investments in the business with anticipated product orders, positioned to meet customers' needs as market conditions improve, gradual adoption of evolving thin film solar technologies to meet long-term global energy demand, selling price pressure is expected to continue throughout this year, customers adjusting their near-term sales outlook, factors negatively impacting the market value of public companies serving the solar industry including SCI, the company's competitive advantages, expanding product portfolio and growing customer base are expected to contribute to a much higher long-term valuation as these issues are resolved, and continuing to strengthen the company's core business in 2012, and being encouraged by the addition of new solar customers since year-end 2011. 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, 2011. 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 | |||||||||
| December 31, | December 31, | ||||||||
| 2011 | 2010 | ||||||||
| Cash | $ | 798,069 | $ | 1,511,752 | |||||
| Accounts receivable, less allowance for doubtful accounts | 517,603 | 682,017 | |||||||
| Inventories | 1,045,503 | 1,344,426 | |||||||
| Deferred income taxes | - | 156,000 | |||||||
| Prepaid expenses | 65,292 | 51,369 | |||||||
| Total current assets | 2,426,467 | 3,745,564 | |||||||
| Property and Equipment, at cost | 6,911,526 | 5,717,611 | |||||||
| Less accumulated depreciation | (3,692,401 | ) | (3,250,237 | ) | |||||
| 3,219,125 | 2,467,374 | ||||||||
| Other assets | 85,657 | 78,897 | |||||||
| TOTAL ASSETS | $ | 5,731,249 | $ | 6,291,835 | |||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||
| December 31, | December 31, | ||||||||
| 2011 | 2010 | ||||||||
| Short term debt | $ | 724,552 | $ | 464,072 | |||||
| Accounts payable | 363,790 | 573,741 | |||||||
| Customer deposits | 255,122 | 366,153 | |||||||
| Accrued expenses | 270,605 | 304,405 | |||||||
| Total current liabilities | 1,614,069 | 1,708,371 | |||||||
| Long term debt | 1,050,403 | 758,685 | |||||||
| Total liabilities | 2,664,472 | 2,467,056 | |||||||
| Commitments and contingencies | |||||||||
| Shareholders' equity | 3,066,777 | 3,824,779 | |||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 5,731,249 | $ | 6,291,835 | |||||
| SCI ENGINEERED MATERIALS, INC. | |||||||||||||||||
| STATEMENTS OF OPERATIONS | |||||||||||||||||
| YEARS ENDED DECEMBER 31, 2011 AND 2010 | |||||||||||||||||
| THREE MONTHS ENDED DEC. 31, | TWELVE MONTHS ENDED DEC. 31, | ||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||||
| Product revenue | $ | 2,157,238 | $ | 1,489,928 | $ | 8,547,118 | $ | 8,038,774 | |||||||||
| Contract research revenue | 111,846 | 191,037 | 605,586 | 877,348 | |||||||||||||
| Total revenue | 2,269,084 | 1,680,965 | 9,152,704 | 8,916,122 | |||||||||||||
| Cost of product revenue | 1,894,612 | 1,131,434 | 7,187,255 | 6,002,686 | |||||||||||||
| Cost of contract research revenue | 100,053 | 135,341 | 431,757 | 639,452 | |||||||||||||
| Total cost of revenue | 1,994,665 | 1,266,775 | 7,619,012 | 6,642,138 | |||||||||||||
| Gross profit | 274,419 | 414,190 | 1,533,692 | 2,273,984 | |||||||||||||
| General and administrative expense | 252,604 | 266,590 | 1,042,865 | 1,128,644 | |||||||||||||
| Research and development expense | 125,922 | 122,847 | 619,940 | 442,214 | |||||||||||||
| Marketing and sales expense | 105,494 | 127,234 | 512,562 | 623,231 | |||||||||||||
| (Loss) income from operations | (209,601 | ) | (102,481 | ) | (641,675 | ) | 79,895 | ||||||||||
| Interest income | 607 | 1,079 | 2,736 | 5,273 | |||||||||||||
| Interest expense | (26,490 | ) | (19,088 | ) | (84,198 | ) | (85,643 | ) | |||||||||
| Gain on disposal of equipment | (166 | ) | - | 259 | 10,251 | ||||||||||||
| Miscellaneous, net | (455 | ) | (458 | ) | (1,829 | ) | (1,830 | ) | |||||||||
| Other income (expense) | (26,504 | ) | (18,467 | ) | (83,032 | ) | (71,949 | ) | |||||||||
| (Loss) income before income taxes | (236,105 | ) | (120,948 | ) | (724,707 | ) | 7,946 | ||||||||||
| Income tax expense (benefit) | 787 | (68,197 | ) | 165,899 | (9,133 | ) | |||||||||||
| Net (loss) income | (236,892 | ) | (52,751 | ) | (890,606 | ) | 17,079 | ||||||||||
| Dividends on preferred stock | (6,038 | ) | (6,086 | ) | (24,152 | ) | (24,308 | ) | |||||||||
| LOSS APPLICABLE TO COMMON SHARES | $ | (242,930 | ) | $ | (58,837 | ) | $ | (914,758 | ) | $ | (7,229 | ) | |||||
| Earnings per share - basic and diluted | |||||||||||||||||
| Loss per common share | |||||||||||||||||
| Basic | $ | (0.06 | ) | $ | (0.02 | ) | $ | (0.24 | ) | $ | (0.00 | ) | |||||
| Diluted | $ | (0.06 | ) | $ | (0.02 | ) | $ | (0.24 | ) | $ | (0.00 | ) | |||||
| Weighted average shares outstanding | |||||||||||||||||
| Basic | 3,790,963 | 3,773,581 | 3,781,717 | 3,750,376 | |||||||||||||
| Diluted | 3,790,963 | 3,773,581 | 3,781,717 | 3,750,376 | |||||||||||||
| SCI ENGINEERED MATERIALS, INC. | ||||||||||||
| STATEMENTS OF CASH FLOWS | ||||||||||||
| YEARS ENDED DECEMBER 31, 2011 AND 2010 | ||||||||||||
| 2011 | 2010 | |||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
| Net (loss) income | $ | (890,606 | ) | $ | 17,079 | |||||||
| Adjustments to reconcile net (loss) income to net cash from operating activities: | ||||||||||||
| Depreciation and accretion | 534,996 | 488,003 | ||||||||||
| Amortization | 3,088 | 3,088 | ||||||||||
| Stock based compensation | 115,406 | 203,403 | ||||||||||
| Patent impairment | 38,726 | - | ||||||||||
| Gain on sale of equipment | (259 | ) | (10,251 | ) | ||||||||
| Deferred income taxes | 156,000 | - | ||||||||||
| Inventory reserve | 7,635 | 403 | ||||||||||
| Credit for doubtful accounts | (530 | ) | - | |||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | 164,944 | (111,905 | ) | |||||||||
| Inventories | 291,288 | (313,052 | ) | |||||||||
| Prepaid expenses | (13,922 | ) | 926,167 | |||||||||
| Other assets | (48,575 | ) | (18,718 | ) | ||||||||
| Accounts payable | (209,950 | ) | 310,273 | |||||||||
| Accrued expenses and customer deposits | (151,456 | ) | (933,678 | ) | ||||||||
| Net cash provided by operating activities | (3,215 | ) | 560,812 | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
| Proceeds on sale of equipment | 425 | 10,500 | ||||||||||
| Purchases of property and equipment | (1,095,289 | ) | (225,209 | ) | ||||||||
| Net cash used in investing activities | (1,094,864 | ) | (214,709 | ) | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
| Proceeds from exercise of common stock options | 41,350 | 19,175 | ||||||||||
| Proceeds from exercise of common stock warrants | - | 490,799 | ||||||||||
| Proceeds from notes payable | 846,747 | - | ||||||||||
| Payment of accumulated dividends on preferred stock | (24,152 | ) | - | |||||||||
| Principal payments on capital lease obligations and notes payable | (479,549 | ) | (451,541 | ) | ||||||||
| Net cash provided by financing activities | 384,396 | 58,433 | ||||||||||
| NET (DECREASE) INCREASE IN CASH | (713,683 | ) | 404,536 | |||||||||
| CASH - Beginning of period | 1,511,752 | 1,107,216 | ||||||||||
| CASH - End of period | $ | 798,069 | $ | 1,511,752 | ||||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||||||
| Cash paid during the year for: | ||||||||||||
| Interest | $ | 84,198 | $ | 85,643 | ||||||||
| Income taxes | 713 | 2,400 | ||||||||||
| SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES | ||||||||||||
| Property and equipment purchased by capital lease | 185,000 | 192,665 | ||||||||||
| Increase in asset retirement obligation | 6,624 | 6,624 | ||||||||||
| SCI ENGINEERED MATERIALS, INC. | ||||||||||||||||
| THREE MONTHS AND YEARS ENDED DECEMBER 31, 2011 | ||||||||||||||||
| Three months ended Dec. 31, |
Years ended Dec. 31, |
|||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| RECONCILIATION OF GAAP TO NON-GAAP MEASURES | ||||||||||||||||
| Net (loss) income | $ | (236,892 | ) | $ | (52,751 | ) | $ | (890,606 | ) | $ | 17,079 | |||||
| Dividends on preferred stock | (6,038 | ) | (5,816 | ) | (24,152 | ) | (24,038 | ) | ||||||||
| Interest, net | 25,882 | 18,009 | 81,462 | 80,370 | ||||||||||||
| Income taxes | 787 | (68,197 | ) | 165,899 | (9,133 | ) | ||||||||||
| Patent impairment | - | - | 38,726 | - | ||||||||||||
| Depreciation and amortization | 143,867 | 125,339 | 538,084 | 491,091 | ||||||||||||
| EBITDA | (72,394 | ) | 16,584 | (90,587 | ) | 555,369 | ||||||||||
| Stock based compensation | 27,057 | 49,913 | 115,406 | 203,403 | ||||||||||||
| Adjusted EBITDA | $ | (45,337 | ) | $ | 66,497 | $ | 24,819 | $ | 758,773 | |||||||
Contact Information:
For Additional Information
Contact:
Robert Lentz
(614) 876-2000