SOURCE: SCI Engineered Materials

SCI Engineered Materials

August 07, 2012 16:18 ET

SCI Engineered Materials, Inc. Reports Second Quarter and Six Month 2012 Results

COLUMBUS, OH--(Marketwire - Aug 7, 2012) -  SCI Engineered Materials, Inc. ("SCI") (OTCQB: SCIA) (OTCBB: SCIA) develops and commercializes technologies and manufactures ceramics and metals for advanced applications in the physical vapor deposition industry, reported its financial results today for the three and six month periods ended June 30, 2012.

Dan Rooney, Chairman, President and Chief Executive Officer, commented, "We are encouraged by the solid growth in product revenue and improved operating performance. Our core business continues to perform well and we are benefiting from previous investments in sales and marketing and increased manufacturing capabilities to serve complementary markets. There have been recent indications in the solar market that conditions may improve during the second half of this year compared with the first six months of 2012. Two developments are expected to specifically benefit SCI later this year. First, there has been increased product interest from several domestic and international solar customers and in early July 2012 we received increased orders for solar products that are scheduled to ship during the third quarter 2012. Second, we are beginning to benefit from the introduction of new product earlier this year. We continue to work closely with all of our customers and are positioned to meet their current and future product requirements."

Second Quarter 2012 Results

Revenue

Product revenue increased 24% for the second quarter 2012, especially for photonic and thin film battery customers. Contract research revenue declined $91,324 as planned to $56,511 for the second quarter 2012 due to completion of two government grants and awards during the past twelve months. Total revenue increased 19% to $2,703,728 for the second quarter 2012 compared with $2,277,568 a year ago.

Product revenue increased slightly to $4,461,759 for the first six months of 2012 compared with the same period last year despite the loss of a major customer in 2011. Contract research revenue declined as anticipated to $125,001 for the first half of 2012 from $353,171 last year. Total revenue for the first six months of 2012 was $4,586,760 versus $4,795,202 in 2011.

Backlog was $2.2 million at June 30, 2012, compared with $1.7 million at year-end 2011 and $2.7 million on the same date a year ago. Contract research backlog declined $0.4 million during the past year as government grants and awards were completed.

Gross profit

Gross profit increased 25% to $523,032 for the second quarter 2012 compared with a year ago which was attributable to higher sales and increased volume. Gross profit increased to 19.3% of revenue for the second quarter from 18.3% for the same period last year due to higher sales and a more favorable product mix compared with a year ago.

For the six months ended June 30, 2012, gross profit declined 13% to $838,177 from $964,367 the prior year. This decrease was attributable to the loss of a large customer in the first half of 2011, product mix and higher depreciation expense. As a result, gross profit declined to 18.3% of revenue for the first half of 2012 from 20.1% a year ago.

Operating expenses

We continue to control our costs as reflected by the 14% decline in operating expenses for the second quarter versus a year ago. Operating expenses (general and administrative (G&A) expense, research and development expense (R&D) and marketing and sales expense) were $508,259 for the second quarter 2012 versus $592,803 last year. This decrease was due to lower internally financed R&D expenses partially offset by higher external professional accounting fees and expenses related to an international trade show that occurred earlier last year. Results for the second quarter 2012 included non-cash expense of $35,526 compared with $67,513 of non-cash expense for the same period last year.

Operating expenses for the first half of 2012 declined 16% to $998,662 versus a year ago due to lower R&D expenses related to development of innovative transparent conductive oxide systems, other R&D activities and lower marketing and sales expense. G&A expenses included higher professional fees and non-cash stock based compensation expense partially offset by lower G&A expenses in other areas. There was $69,855 of non-cash expense for the first six months of 2012 compared with $97,550 last year.

Income (Loss) Applicable to Common Shares

Income applicable to common shares was $4,568 for the second quarter 2012, or $0.00 per diluted share, compared with a loss of $204,488, or $(0.05) per share, last year.

For the six months ended June 30, 2012, the loss applicable to common shares was $191,233, or $(0.05) per share, versus a loss of $281,232, or $(0.07) per share, a year ago.

EBITDA

EBITDA (earnings before interest, income taxes, depreciation and amortization) was $159,997 for the second quarter 2012 versus EBITDA of $(4,010) for the same period last year. This was primarily attributable to increases in product revenue and gross profit. Adjusted EBITDA, which excludes non-cash stock based compensation, was $195,778 for the second quarter compared with $25,918 for the same period a year ago.

EBITDA was $129,035 for the six months ended June 30, 2012 compared with $73,437 last year. Adjusted EBITDA was $199,913 for the first half of 2012 compared with $134,730 in 2011.

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 adapting to changes in solar customers' growth plans, scaling the company's production capabilities, positioned to be more efficient and profitable as market conditions improve, outlook for the solar industry remains attractive long term, encouraged by sequential quarter and year-over-year improvement in backlog, and the recent introduction of new product based on prior research and development activities are anticipated to benefit future performance. 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            
    June 30,     December 31,  
    2012     2011  
    (UNAUDITED)        
Current Assets                
  Cash   $ 529,049     $ 798,069  
  Accounts receivable, less allowance for doubtful accounts     569,675       517,603  
  Inventories     1,247,964       1,045,503  
  Prepaid expenses     110,241       65,292  
    Total current assets     2,456,929       2,426,467  
                 
Property and Equipment, at cost     7,460,929       6,911,526  
  Less accumulated depreciation     (3,976,056 )     (3,692,401 )
      3,484,873       3,219,125  
                 
Other assets     72,461       85,657  
                 
TOTAL ASSETS   $ 6,014,263     $ 5,731,249  
                 
                 
LIABILITIES AND SHAREHOLDERS' EQUITY                
      June 30,       December 31,  
      2012       2011  
      (UNAUDITED)          
Current Liabilities                
  Short term debt   $ 654,720     $ 724,552  
  Accounts payable     571,388       363,790  
  Customer deposits     343,669       255,122  
  Accrued expenses     160,481       270,605  
    Total current liabilities     1,730,258       1,614,069  
                 
  Long term debt     1,325,507       1,050,403  
    Total liabilities     3,055,765       2,664,472  
                 
  Commitments and contingencies                
                 
  Total Shareholders' Equity     2,958,498       3,066,777  
                 
  TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 6,014,263     $ 5,731,249  
                 
   
SCI ENGINEERED MATERIALS, INC.  
STATEMENTS OF OPERATIONS  
   
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2012 AND 2011  
  (UNAUDITED)      
   
  THREE MONTHS ENDED JUNE 30,   SIX MONTHS ENDED JUNE 30,  
  2012   2011   2012   2011  
                         
Product revenue $ 2,647,217   $ 2,129,733   $ 4,461,759   $ 4,442,031  
Contract research revenue   56,511     147,835     125,001     353,171  
    2,703,728     2,277,568     4,586,760     4,795,202  
                         
Cost of product revenue   2,134,110     1,772,357     3,648,000     3,617,356  
Cost of contract research revenue   46,586     88,382     100,583     213,479  
    2,180,696     1,860,739     3,748,583     3,830,835  
                         
Gross profit   523,032     416,829     838,177     964,367  
                         
General and administrative expense   290,556     275,340     571,469     551,234  
                         
Research and development expense   70,567     197,548     167,389     362,187  
                         
Marketing and sales expense   147,136     119,915     259,804     275,972  
                         
Income (loss) from operations   14,773     (175,974 )   (160,485 )   (225,026 )
                         
Other income (expense)                        
  Interest - net   (24,871 )   (18,239 )   (44,561 )   (36,080 )
  Gain on disposal of equipment   -     -     -     425  
    (24,871 )   (18,239 )   (44,561 )   (35,655 )
                         
Loss before provision for income tax   (10,098 )   (194,213 )   (205,046 )   (260,681 )
                         
Income tax benefit (expense)   20,704     (4,237 )   25,889     (8,475 )
                         
Net income (loss)   10,606     (198,450 )   (179,157 )   (269,156 )
                         
Dividends on preferred stock   (6,038 )   (6,038 )   (12,076 )   (12,076 )
                         
INCOME (LOSS) APPLICABLE TO COMMON SHARES $ 4,568   $ (204,488 ) $ (191,233 ) $ (281,232 )
                         
Earnings per share - basic and diluted                        
                         
Income (loss) per common share                        
  Basic $ 0.00   $ (0.05 ) $ (0.05 ) $ (0.07 )
  Diluted $ 0.00   $ (0.05 ) $ (0.05 ) $ (0.07 )
                         
Weighted average shares outstanding                        
  Basic   3,811,997     3,778,898     3,808,964     3,778,036  
  Diluted   3,821,528     3,778,898     3,808,964     3,778,036  
                           
   
SCI ENGINEERED MATERIALS, INC.  
STATEMENTS OF CASH FLOWS  
   
FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011  
                                                         (UNAUDITED)            
    2012     2011  
CASH FLOWS FROM OPERATING ACTIVITIES                
Net loss   $ (179,157 )   $ (269,156 )
Adjustments to reconcile net loss to net cash provided by operating activities:                
  Depreciation and accretion     287,975       257,768  
  Amortization     1,545       1,544  
  Stock based compensation     70,878       61,293  
  Patent impairment     -       38,726  
  Gain on sale of equipment     -       (425 )
  Inventory reserve     9,095       18,000  
  Credit for doubtful accounts     -       (530 )
  Changes in operating assets and liabilities:                
    Accounts receivable     (52,072 )     177,965  
    Inventories     (211,556 )     (190,959 )
    Prepaid expenses     (44,949 )     (186,586 )
    Other assets     11,651       (28,125 )
    Accounts payable     207,598       297,830  
    Accrued expenses and customer deposits     (25,896 )     341,964  
      Net cash provided by operating activities     75,112       519,309  
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
  Proceeds on sale of equipment     -       425  
  Purchases of property and equipment     (549,403 )     (820,440 )
  Net cash used in investing activities     (549,403 )     (820,015 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
  Proceeds from exercise of common stock options     -       4,650  
  Proceeds from notes payable     911,546       300,000  
  Principal payments on capital lease obligations and notes payable     (706,275 )     (230,931 )
  Payment of cumulative dividends on preferred stock     -       (24,152 )
    Net cash provided by financing activities     205,271       49,567  
                 
NET DECREASE IN CASH     (269,020 )     (251,139 )
                 
CASH - Beginning of period     798,069       1,511,752  
                 
CASH - End of period   $ 529,049     $ 1,260,613  
                 
SUPPLEMENTAL DISCLOSURES OF CASH                
FLOW INFORMATION                
  Cash paid during the year for:                
    Interest   $ 40,464     $ 37,666  
    Income taxes     605       713  
                 
SUPPLEMENTAL DISCLOSURES OF NONCASH                
INVESTING AND FINANCING ACTIVITIES                
  Property and equipment purchased by capital lease     -       185,000  
  Increase in asset retirement obligation     4,320       3,312  
                   
                     
SCI ENGINEERED MATERIALS, INC.                    
RECONCILIATION OF GAAP TO NON-GAAP MEASURES  
THREE AND SIX MONTHS ENDED JUNE 30, 2012 AND JUNE 30, 2011           
               
  Three months ended June 30,     Six months ended June 30,  
  2012     2011     2012     2011  
                               
Net income (loss) $ 10,606     $ (198,450 )   $ (179,157 )   $ (269,156 )
Interest, net   24,871       18,239       44,561       36,080  
Income taxes   (20,704 )     4,237       (25,889 )     8,475  
Patent impairment   -       38,726       -       38,726  
Depreciation and amortization   145,224       133,238       289,520       259,312  
EBITDA   159,997       (4,010 )     129,035       73,437  
Stock based compensation   35,781       29,928       70,878       61,293  
Adjusted EBITDA $ 195,778     $ 25,918     $ 199,913     $ 134,730  
                               

Contact Information

  • For Additional Information
    Contact:
    Robert Lentz
    (614) 876-2000