COLUMBUS, OH--(Marketwire - Aug 8, 2011) - SCI Engineered Materials, Inc. ("SCI") (
Total revenue for the first six months of 2011 was $4,795,202 which was similar to the same period in 2010. Lower gross profit attributable to product mix and manufacturing scale-up costs plus an 80% increase in internally financed research and development expense contributed to the $(281,232) loss applicable to common shares or $(0.07) per share for the first half of 2011 versus $109,115 of income applicable to common shares or $0.03 per share a year ago.
For the second quarter 2011, total revenue was $2,277,568 compared to $2,560,664 for the second quarter of last year. Lower gross profit, due to a decline in total revenue and change in product mix versus a year ago, was the primary factor contributing to the $(204,488) loss applicable to common shares or $(0.05) per share for the three months ended June 30, 2011 versus income of $8,759 applicable to common shares or $0.00 per share for the same quarter in 2010.
Dan Rooney, Chairman, President and Chief Executive Officer, said, "Our core business is performing well in this challenging global economic environment. The second quarter shortfall in total revenue compared to a year ago was due to an anticipated decline in contract research revenue and a customer who closed their manufacturing facility in the first quarter of this year. Approximately one-half of the revenue attributable to this customer was offset with additional business. We continue to invest in new products that we believe offer long-term competitive advantage for solar manufacturers. Our internally financed investment in R&D was 34% higher than a year ago and was the only category of operating expenses that increased compared to the second quarter 2010. Comprehensive product trials are part of a long sales cycle for these products. The conversion rate of product trials into production orders is increasing. During the second quarter we shipped a production order to Asia and also received approval from another solar customer. There was a strong pipeline of product trials at the end of the second quarter which we expect will contribute to further progress later this year."
Mr. Rooney added, "We anticipate that our financial performance will begin to improve during the final three months of 2011. Based on solar customers' guidance concerning their needs, revenues are expected to benefit from additional orders which should contribute to higher gross profit, higher margins and profitability for the fourth quarter 2011. In order to meet this growing demand we have ordered approximately $1 million of equipment during the first half of this year to scale-up our manufacturing capacity. We maintain a strong balance sheet and have financial flexibility to manage future growth."
Six Month and Second Quarter 2011 Results
Total revenue
Total revenue was $4,795,202 for the first six months of 2011 and similar to the same period in 2010. Product revenue increased 2% due to customer demand and higher cost of a high value raw material. Contract research revenue declined 21% to $353,171 for the first half of 2011 versus the prior year as a result of the completion of two programs since the second quarter of last year.
Total revenue declined 11% to $2,277,568 for the second quarter 2011 from $2,560,664 for the same period a year ago. Product revenue declined 10% to $2,129,733 versus the second quarter 2010 due to a customer who closed their manufacturing facility in the first quarter 2011; however, approximately 50% of the impact was offset with additional business. Contract research revenue was $147,835 for the second quarter 2011 or 28% below the same period a year ago. This was principally due to the completion of government programs since June 30, 2010.
Changes by some customers in their purchasing practices to shorter-term blanket orders significantly impacts backlog. Contract research revenue backlog declined $1.0 million as of June 30, 2011. As a result, backlog was $2.7 million at June 30, 2011 compared to $3.7 million on the same date last year.
Gross profit
For the six months ended June 30, 2011, gross profit was $964,367 or 20% of total revenue versus $1,343,850 or 28% of total revenues a year ago. The lower amount was primarily due to change in product mix and further scale-up costs related to solar products.
Second quarter 2011 gross profit was $416,829 compared to $666,148 for the second quarter 2010. Gross profit margin was 18% and 26%, respectively, for the second quarters of 2011 and 2010. The year-over-year decline was attributable to lower product revenue, product mix and additional scale-up costs related to solar products.
Operating expenses
Operating expenses, which include marketing and sales, general and administrative, and R&D, were $1,189,393 for the six months ended June 30, 2011, versus $1,107,202 for the same period last year. With the exception of R&D, which increased 80% compared to a year ago, the other two categories declined compared to last year. General and administrative expense was below the first half of 2010 principally due to less non-cash stock based compensation expense, while marketing and sales expense declined as a result of less commission to outside sales representatives compared to last year.
For the second quarter 2011, operating expenses were $592,803 for the second quarter 2011 or 4% below the second quarter 2010. Operating expenses were 16% below the same period last year excluding R&D expense which involves specific customer needs and expenses related to trial orders. These activities are beyond the scope of federal and state grants and awards the company has been awarded. Lower first half 2011 marketing and sales and general and administrative expenses were due to the same factors that occurred during the first six months of 2011 and 2010.
EBITDA
Earnings before interest, income taxes, depreciation and amortization (EBITDA) were $61,361 for the six months ended June 30, 2011, compared to $476,287 the prior year. Adjusted EBITDA, which excludes non-cash stock based compensation expense, was $122,654 compared to $579,863 in 2010.
EBITDA for the second quarter 2011 was $(10,048) versus $173,686 for the same period last year. Adjusted EBITDA was $19,880 for the second quarter 2011 compared to $223,600 last year.
Income (loss) applicable to common shares
The net loss applicable per common shares was $(281,232) or $(0.07) per share for the first half of 2011 versus income applicable to common shares of $109,115 or $0.03 per share for the same period last year.
The loss applicable to common shares for the second quarter 2011 was $(204,488) or $(0.05) per share compared to income applicable to common shares of $8,759 or $0.00 per diluted share for the second 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 investments in new products that the company believes offer long-term competitive advantage for solar manufacturers, a strong pipeline of product trials at the end of the second quarter which the company expects will contribute to further progress later this year, based on solar customers' guidance revenues are expected to benefit from additional orders which should contribute to higher gross profit, higher margins and profitability for the fourth quarter 2011, and the company purchased additional equipment during the first half of 2011 to scale-up its manufacturing capacity to meet growing demand. 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, 2010. 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 | ||||||||
| June 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
| (UNAUDITED) | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | 1,260,613 | $ | 1,511,752 | ||||
| Accounts receivable, less allowance for doubtful accounts | 504,582 | 682,017 | ||||||
| Inventories | 1,517,385 | 1,344,426 | ||||||
| Deferred income taxes | 156,000 | 156,000 | ||||||
| Prepaid expenses | 237,955 | 51,369 | ||||||
| Total current assets | 3,676,535 | 3,745,564 | ||||||
| PROPERTY AND EQUIPMENT, AT COST | 6,686,007 | 5,717,611 | ||||||
| Less accumulated depreciation | (3,467,648 | ) | (3,250,237 | ) | ||||
| 3,218,359 | 2,467,374 | |||||||
| OTHER ASSETS | 66,753 | 78,897 | ||||||
| TOTAL ASSETS | $ | 6,961,647 | $ | 6,291,835 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| June 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
| (UNAUDITED) | ||||||||
| CURRENT LIABILITIES | ||||||||
| Short term debt | $ | 471,037 | $ | 464,072 | ||||
| Accounts payable | 871,571 | 573,741 | ||||||
| Customer deposits | 750,915 | 366,153 | ||||||
| Accrued expenses | 264,921 | 304,405 | ||||||
| Total current liabilities | 2,358,444 | 1,708,371 | ||||||
| Long term debt | 1,005,789 | 758,685 | ||||||
| Total liabilities | 3,364,233 | 2,467,056 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| TOTAL SHAREHOLDERS' EQUITY | 3,597,414 | 3,824,779 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 6,961,647 | $ | 6,291,835 | ||||
| SCI ENGINEERED MATERIALS, INC. | ||||||||||||||||
| STATEMENTS OF OPERATIONS | ||||||||||||||||
| FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010 | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| THREE MONTHS ENDED JUNE 30, | SIX MONTHS ENDED JUNE 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| PRODUCT REVENUE | $ | 2,129,733 | $ | 2,354,405 | $ | 4,442,031 | $ | 4,357,005 | ||||||||
| CONTRACT RESEARCH REVENUE | 147,835 | 206,259 | 353,171 | 444,772 | ||||||||||||
| 2,277,568 | 2,560,664 | 4,795,202 | 4,801,777 | |||||||||||||
| COST OF PRODUCT REVENUE | 1,772,357 | 1,735,227 | 3,617,356 | 3,124,408 | ||||||||||||
| COST OF CONTRACT RESEARCH REVENUE | 88,382 | 159,289 | 213,479 | 333,519 | ||||||||||||
| 1,860,739 | 1,894,516 | 3,830,835 | 3,457,927 | |||||||||||||
| GROSS PROFIT | 416,829 | 666,148 | 964,367 | 1,343,850 | ||||||||||||
| GENERAL AND ADMINISTRATIVE EXPENSE | 275,340 | 314,981 | 551,234 | 596,211 | ||||||||||||
| RESEARCH AND DEVELOPMENT EXPENSE | 197,548 | 147,505 | 362,187 | 200,761 | ||||||||||||
| MARKETING AND SALES EXPENSE | 119,915 | 155,908 | 275,972 | 310,230 | ||||||||||||
| (LOSS) INCOME FROM OPERATIONS | (175,974 | ) | 47,754 | (225,026 | ) | 236,648 | ||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Interest - net | (18,239 | ) | (21,502 | ) | (36,080 | ) | (42,268 | ) | ||||||||
| Gain on disposal of equipment | - | 10,251 | 425 | 10,251 | ||||||||||||
| (18,239 | ) | (11,251 | ) | (35,655 | ) | (32,017 | ) | |||||||||
| (LOSS) INCOME BEFORE PROVISION FOR INCOME TAX | (194,213 | ) | 36,503 | (260,681 | ) | 204,631 | ||||||||||
| INCOME TAX EXPENSE | (4,237 | ) | (21,670 | ) | (8,475 | ) | (83,367 | ) | ||||||||
| NET (LOSS) INCOME | (198,450 | ) | 14,833 | (269,156 | ) | 121,264 | ||||||||||
| DIVIDENDS ON PREFERRED STOCK | (6,038 | ) | (6,074 | ) | (12,076 | ) | (12,149 | ) | ||||||||
| (LOSS) INCOME APPLICABLE TO COMMON SHARES | $ | (204,488 | ) | $ | 8,759 | $ | (281,232 | ) | $ | 109,115 | ||||||
| EARNINGS PER SHARE - BASIC AND DILUTED | ||||||||||||||||
| (LOSS) INCOME APPLICABLE PER COMMON SHARE | ||||||||||||||||
| Basic | $ | (0.05 | ) | $ | 0.00 | $ | (0.07 | ) | $ | 0.03 | ||||||
| Diluted | $ | (0.05 | ) | $ | 0.00 | $ | (0.07 | ) | $ | 0.03 | ||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING | ||||||||||||||||
| Basic | 3,778,898 | 3,742,039 | 3,778,036 | 3,727,074 | ||||||||||||
| Diluted | 3,778,898 | 3,882,826 | 3,778,036 | 3,873,231 | ||||||||||||
| SCI ENGINEERED MATERIALS, INC. | |||||||||||
| STATEMENTS OF CASH FLOWS | |||||||||||
| FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010 | |||||||||||
| (UNAUDITED) | |||||||||||
| 2011 | 2010 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
| Net (loss) income | $ | (269,156 | ) | $ | 121,264 | ||||||
| Adjustments to reconcile net (loss) income to net cash from operating activities: | |||||||||||
| Depreciation and accretion | 257,768 | 239,993 | |||||||||
| Amortization | 1,544 | 1,544 | |||||||||
| Stock based compensation | 61,293 | 103,577 | |||||||||
| Patent impairment | 38,726 | - | |||||||||
| Gain on sale of equipment | (425 | ) | (10,251 | ) | |||||||
| Deferred income taxes | - | 72,000 | |||||||||
| Inventory reserve | 18,000 | 11,591 | |||||||||
| Credit for doubtful accounts | (530 | ) | - | ||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | 177,965 | (184,361 | ) | ||||||||
| Inventories | (190,959 | ) | (390,433 | ) | |||||||
| Prepaid expenses | (186,586 | ) | 655,076 | ||||||||
| Other assets | (28,125 | ) | 6,255 | ||||||||
| Accounts payable | 297,830 | 122,829 | |||||||||
| Accrued expenses and customer deposits | 341,964 | (399,213 | ) | ||||||||
| Net cash provided by operating activities | 519,309 | 349,871 | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
| Proceeds on sale of equipment | 425 | 10,500 | |||||||||
| Purchases of property and equipment | (820,440 | ) | (153,742 | ) | |||||||
| Net cash used in investing activities | (820,015 | ) | (143,242 | ) | |||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
| Proceeds from exercise of common stock options | 4,650 | 15,145 | |||||||||
| Net proceeds from exercise of common stock warrants | - | 490,799 | |||||||||
| Proceeds from note payable | 300,000 | - | |||||||||
| Principal payments on capital lease obligations and note payable | (230,931 | ) | (225,621 | ) | |||||||
| Payment of cumulative dividends o preferred stock | (24,152 | ) | - | ||||||||
| Net cash provided by financing activities | 49,567 | 280,323 | |||||||||
| NET (DECREASE) INCREASE IN CASH | (251,139 | ) | 486,952 | ||||||||
| CASH - Beginning of period | 1,511,752 | 1,107,216 | |||||||||
| CASH - End of period | $ | 1,260,613 | $ | 1,594,168 | |||||||
| SUPPLEMENTAL DISCLOSURES OF CASH | |||||||||||
| FLOW INFORMATION | |||||||||||
| Cash paid during the year for: | |||||||||||
| Interest | $ | 37,666 | $ | 44,931 | |||||||
| Income taxes | 713 | 1,650 | |||||||||
| SUPPLEMENTAL DISCLOSURES OF NONCASH | |||||||||||
| INVESTING AND FINANCING ACTIVITIES | |||||||||||
| Property and equipment purchased by capital lease | 185,000 | 192,665 | |||||||||
| Increase in asset retirement obligation | 3,312 | 3,312 | |||||||||
| SCI ENGINEERED MATERIALS, INC. | |||||||||||||||
| THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND JUNE 30, 2010 | |||||||||||||||
| Three months ended June 30, |
Six months ended June 30, |
||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||
| RECONCILIATION OF GAAP TO NON-GAAP MEASURES | |||||||||||||||
| Net (loss) income | $ | (198,450 | ) | $ | 14,833 | $ | (269,156 | ) | $ | 121,264 | |||||
| Dividends on preferred stock | (6,038 | ) | (6,074 | ) | (12,076 | ) | (12,149 | ) | |||||||
| Interest, net | 18,239 | 21,502 | 36,080 | 42,268 | |||||||||||
| Income taxes | 4,237 | 21,670 | 8,475 | 83,367 | |||||||||||
| Patent impairment | 38,726 | - | 38,726 | - | |||||||||||
| Depreciation and amortization | 133,238 | 121,755 | 259,312 | 241,537 | |||||||||||
| EBITDA | (10,048 | ) | 173,686 | 61,361 | 476,287 | ||||||||||
| Stock based compensation | 29,928 | 49,914 | 61,293 | 103,577 | |||||||||||
| Adjusted EBITDA | $ | 19,880 | $ | 223,600 | $ | 122,654 | $ | 579,863 | |||||||
Contact Information:
For Additional Information
Contact:
Robert Lentz
(614) 876-2000