SOURCE: SCI Engineered Materials, Inc.

SCI Engineered Materials, Inc.

August 03, 2015 16:24 ET

SCI Engineered Materials, Inc. Reports Second Quarter 2015 Results

COLUMBUS, OH--(Marketwired - Aug 3, 2015) -  SCI Engineered Materials, Inc. ("SCI") (OTCQX: 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 six months ended June 30, 2015.

Dan Rooney, President and Chief Executive Officer, stated, "Our second quarter results reflect solid improvement in performance compared to a year ago, which benefited from favorable sales mix, increased product diversity and resulted in a 28.6% gross profit margin -- the highest quarterly amount in nearly three years. Income applicable to common shares increased 82% versus a year ago and included a 26% increase in R&D expense for the quarter as we continue to pursue our commitment to develop additional innovative products."

Mr. Rooney continued, "We entered the second quarter with expectations of substantial follow-on orders for thin film solar products; however, a temporary slowdown in our customers' order patterns occurred. These customers continue to increase their manufacturing capacity and we anticipate receiving orders from them later this year. Additionally, there are several new customers currently conducting extensive product testing and qualifications activities."

Mr. Rooney added, "We recently increased our focus on the display market with the addition of an experienced product development engineer to our research team. This further strengthens our plans to develop zinc oxide-based materials as low cost alternatives in the fabrication of transparent electrodes and metal oxide thin film transistors for display applications. Last fall we entered into a sponsored research agreement with Kent State University, recognized globally for its expertise in liquid crystal display, to further strengthen our focus on commercialization of new products. Recent results of this research increase our confidence that there are opportunities to penetrate this fast growing market."

Total revenue

Total revenue was $2,228,686 for the second quarter 2015 compared to $3,098,376 for the same period last year. For the first half of 2015, total revenue was $4,956,493 versus $5,690,876 a year ago. The year-over-year revenue differences for both periods compared to a year ago are principally due to further decreases in the cost of a high value raw material and to a lesser extent lower volume. On a sequential basis, total revenue for the third quarter 2015 is anticipated to be below the second quarter and is expected to increase sequentially in the fourth quarter of this year. 

Order backlog was $1.9 million at June 30, 2015 compared to $2.2 million at June 30, 2014.

Gross profit

Gross profit increased 10% to $636,687 for the second quarter 2015 from $580,470 last year and increased 12% to $1,306,092 for the first six months of 2015 from $1,167,243 last year. Gross profit margin benefited for both periods in 2015 versus the prior year from increased sales of thin film solar products, a substantial decrease in the cost of a high priced low margin raw material and overall product mix. Gross profit margin increased to 28.6% for the second quarter 2015 from 18.7% a year ago and increased to 26.4% for the first half of 2015 from 20.5% for the same period last year. 

Operating expense

Operating expense (including selling and administrative expense, marketing and sales expense and research and development expense) was $533,727 for the second quarter 2015 compared to $511,802 for the second quarter 2014. This 4% increase was principally due to additional sponsored research and development initiatives focused on new products, including transparent conductive oxide systems and transparent electronic applications, higher professional fees and non-cash stock based compensation expense. 

For the first half of 2015, operating expense increased 3% to $1,084,378 from $1,054,239 for the same period in 2014. The 20% increase in research and development expense, higher travel expenses and non-cash stock based compensation were the principal factors contributing to this year-over-year comparison.

Income Applicable to Common Shares

Income applicable to common shares increased 82% to $81,050, or $0.02 per diluted share, for the second quarter 2015, from $44,496, or $0.01 per diluted share, for the same period last year. This improvement was attributable to favorable product mix and higher gross profit. For the first six months of 2015, income applicable to common stock more than doubled to $177,528, or $0.04 per diluted share, compared to $65,730, or $0.02 per diluted share, a year ago.

EBITDA

EBITDA (earnings before interest, income taxes, depreciation and amortization) for the three months ended June 30, 2015, increased to $216,386 from $209,068 the prior year. Adjusted EBITDA, which excludes non-cash stock based compensation, increased 7% to $268,919 for the second quarter 2015 from $250,831. 

EBITDA increased 15% to $448,067 for the first six months of 2015 from $389,425 for the same period last year. Adjusted EBITDA was $553,190 for the six months ended June 30, 2015, compared to $474,661 for the same period in 2014. 

Cash and Total Debt Outstanding

Cash provided by operating activities increased 31% to $670,806 for the first six months of 2015 compared to $511,792 for the same period in 2014. There was a cash balance of $1,410,121 at June 30, 2015, versus $1,011,956 at December 31, 2014, an increase of 39%.

Total debt outstanding decreased 16% to $1,174,000 at June 30, 2015 compared to $1,394,000 at year-end 2014.

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 customers continuing to increase their manufacturing capacity, anticipating receiving orders from customer later this year, plans to develop zinc oxide-based materials as low cost alternatives in the fabrication of transparent electrodes and metal oxide thin film transistors for display applications, confidence there are opportunities to penetrate the display market and on a sequential basis, total revenue for the third quarter 2015 is anticipated to be below the second quarter 2015 and is expected to increase sequentially in the fourth quarter of this year. 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, 2014. 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,  
    2015     2014  
    (UNAUDITED)        
Current Assets                
  Cash   $ 1,410,121     $ 1,011,956  
  Accounts receivable, less allowance for doubtful accounts     449,059       468,352  
  Inventories     790,736       1,678,609  
  Prepaid expenses     155,929       89,467  
    Total current assets     2,805,845       3,248,384  
                 
Property and Equipment, at cost     7,972,346       7,946,579  
  Less accumulated depreciation     (5,423,980 )     (5,205,675 )
      2,548,366       2,740,904  
Other Assets     70,417       47,426  
                 
TOTAL ASSETS   $ 5,424,628     $ 6,036,714  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY          
           
Current Liabilities                
  Short term debt   $ 403,944     $ 444,105  
  Accounts payable     473,035       424,539  
  Customer deposits     526,319       1,281,573  
  Accrued expenses     221,774       208,518  
    Total current liabilities     1,625,072       2,358,735  
                 
  Long term debt     770,220       949,759  
    Total liabilities     2,395,292       3,308,494  
                 
Commitments and contingencies                
                 
Total Shareholders' Equity     3,029,336       2,728,220  
                 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 5,424,628     $ 6,036,714  
                 
                 
SCI ENGINEERED MATERIALS, INC.  
STATEMENTS OF OPERATIONS  
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014  
(UNAUDITED)  
   
    THREE MONTHS ENDED
 JUNE 30,
    SIX MONTHS ENDED JUNE 30,  
    2015     2014     2015     2014  
                                 
Revenue   $ 2,228,686     $ 3,098,376     $ 4,956,493     $ 5,690,876  
                                 
Cost of revenue     1,591,999       2,517,906       3,650,401       4,523,633  
                                 
Gross profit     636,687       580,470       1,306,092       1,167,243  
                                 
SG & A expense     442,506       439,600       895,514       896,431  
                                 
Research & Development expense     91,221       72,202       188,864       157,808  
                                 
Income from operations     102,960       68,668       221,714       113,004  
                                 
Other expense     (14,835 )     (17,097 )     (31,073 )     (33,579 )
                                 
Income before provision for income taxes     88,125       51,571       190,641       79,425  
                                 
Income tax expense     (1,037 )     (1,037 )     (1,037 )     (1,619 )
                                 
Net income     87,088       50,534       189,604       77,806  
                                 
Dividends on preferred stock     (6,038 )     (6,038 )     (12,076 )     (12,076 )
                                 
INCOME APPLICABLE TO COMMON SHARES   $ 81,050     $ 44,496     $ 177,528     $ 65,730  
                                 
Earnings per share - basic and diluted                                
                                 
Income per common share                                
  Basic   $ 0.02     $ 0.01     $ 0.04     $ 0.02  
  Diluted   $ 0.02     $ 0.01     $ 0.04     $ 0.02  
                                 
Weighted average shares outstanding                                 
  Basic     3,978,728       3,861,222       3,959,601       3,858,575  
  Diluted     4,030,435       3,861,222       3,987,178       3,858,575  
 
 
SCI ENGINEERED MATERIALS, INC.
 
    FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014   
                     
        2015     2014      
                             
CASH PROVIDED BY (USED IN):                            
  Operating activities         $ 670,806     $ 511,792        
  Investing activities           (28,788 )     (18,085 )      
  Financing activities           (243,853 )     (172,009 )      
NET INCREASE IN CASH           398,165       321,698        
                             
CASH - Beginning of period           1,011,956       622,727        
                             
CASH - End of period         $ 1,410,121     $ 944,425        
       
     
    RECONCILIATION OF GAAP TO NON-GAAP MEASURES
                     
    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014
                     
    Three months ended June 30,     Six months ended June 30,
                     
    2015   2014     2015     2014
Net income   $ 87,088   $ 50,534     $ 189,604     $ 77,806
Interest, net     14,630     17,346       30,579       33,324
Income taxes     1,037     1,037       1,037       1,619
Depreciation and amortization     113,631     140,151       226,847       276,676
EBITDA     216,386     209,068       448,067       389,425
                             
Stock based compensation     52,532     41,763       105,123       85,236
Adjusted EBITDA   $ 268,919   $ 250,831     $ 553,190     $ 474,661

Contact Information

  • Contact:
    Robert Lentz
    (614) 876-2000