COLUMBUS, OH--(Marketwire - August 5, 2009) - SCI Engineered Materials, Inc. (
OTCBB:
SCIA),
a manufacturer of ceramics and metals for advanced applications in the
physical vapor deposition industry, today reported results for the three
months ended June 30, 2009.
Dan Rooney, Chairman, President and Chief Executive Officer, stated, "We
exited the second quarter with increased optimism based on preliminary
indications that SCI's business had bottomed out and conditions in our end
markets have stabilized. While challenges remain among customers serving
the automotive market, we are gaining increased traction in the thin film
solar market. In June 2009 we received an order for $1 million of thin
film solar products to be shipped by year-end. This is the first
significant order SCI has received for these products and it represents an
important step toward establishing our presence in this market. Trial
orders have been shipped and qualifications are currently underway with
several other thin film solar customers which may result in additional
product orders this year. Thin film solar orders received in the second
quarter 2009 exceeded shipments of thin film solar products for the entire
year 2008.
Our financial results during the first half of 2009 have been impacted by
the difficult global economic environment and significant non-cash expenses
that are primarily related to stock based compensation. While the
year-to-date results are below the prior year on a GAAP and
non-GAAP basis, we believe adjusted EBITDA is a useful measure of SCI's
performance. The quarterly non-cash stock based compensation expense for
the remainder of this year is expected to be similar to the amount reported
in the second quarter 2009. These ongoing non-cash expenses will continue
through 2010 and then decline beginning in the first quarter of 2011.
Recent encouraging signs in our business should lead to improved
performance during the second half of 2009."
GAAP to Non-GAAP reconciliation
Reconciliations of the differences between all non-GAAP financial measures
with the most directly comparable GAAP financial measures are included at
the end of this release.
Total revenue
Total revenue was $1,310,053 for the second quarter 2009 compared to
$1,517,513 for the same period last year. Product revenue declined to
$1,055,404 for the second quarter 2009 from $1,517,513 in 2008. This
decrease was attributable to large customers involved in the automobile
market and was partially offset by higher product revenue related to thin
film solar compared to the second quarter 2008. Reflecting SCI's position
in key technologies, contract research revenue was $254,649 for the second
quarter 2009 compared to zero dollars for the same period a year ago.
Contract research revenue, combined with revenue from new markets,
partially offset the decrease in revenue from customers involved in the
automobile market.
Total revenue for the first six months of 2009 and 2008 was similar at
$3,211,588 and $3,231,453, respectively. Contract research revenue
increased to $501,074 for the first six months of 2009 from $40,121 a year
ago reflecting SCI's position in key technologies. The increase in
contract research revenue, combined with revenue from new markets, nearly
offset the decrease in revenue from customers involved in the automobile
market. Product revenue was $2,710,514 for the first six months of 2009
compared to $3,191,332 a year ago. The slight decline in total revenue
compared to the same period in 2008 can be attributed to the current
economic downturn as customers have decreased spending and reduced
inventory levels. Orders from customers in the Company's key markets
increased late in the second quarter 2009.
Backlog was $4.0 million at June 30, 2009 compared to $2.7 million at both
March 31, 2009 and June 30, 2008.
Gross profit
Gross profit was $248,990 for the second quarter 2009 versus $437,847 a
year ago. This year-over-year decline reflected the impact of lower
product revenue for the second quarter 2009, research and development labor
included as cost of contract research revenue, and absorption of certain
fixed costs. As a result, gross profit margin declined to 19% for the
second quarter 2009 from 29% a year ago.
For the first six months of 2009 gross profit was $676,510 compared to
$866,872 the prior year. This 22% decline was primarily due to the same
factors that impacted gross profit for the second quarter 2009, including
$103,000 of research and development labor, compared to the same period
last year. Gross profit margin was 21% versus 27% for the same period in
2008.
Marketing and sales expense
Marketing and sales expense was similar for the second quarter of 2009 and
2008 at $146,358 and $145,762, respectively, despite higher expenses for
trade shows and commissions to outside manufacturing sales representatives
in the second quarter 2009 compared to last year. The Company continues to
implement marketing plans to gain increased penetration in key markets
including thin film solar.
For the first half of 2009, marketing and sales expense increased 16% to
$314,450 from $272,032 for the same period in 2008. This increase was
principally due to non-cash stock based compensation expense, higher trade
show expense and commissions to outside manufacturing sales
representatives.
General and administrative expense
General and administrative expense increased to $288,634 for the second
quarter 2009 from $250,408 for the same period last year, principally due
to non-cash stock based compensation expense, higher insurance premiums and
professional fees. Partially offsetting this increase was a reduction in
compensation as part of SCI's overall cost control program for 2009.
For the first six months of 2009, general and administrative expense was
$703,958 compared to $510,461 last year. Nearly the entire year-over-year
difference was due to $207,000 of non-cash stock based compensation versus
$24,000 a year ago. Additional factors related to the 2009 increase in
general and administrative expense were higher insurance premiums and
professional fees.
Research and development expense
Research and development continues to increase at SCI. Reported expense
declined to $79,247 for the second quarter 2009 from $125,563 for the same
period in 2008. The decrease in expense was a result of approximately
$103,000 of labor assigned to cost of contract research. This was
attributable to an increase in contract research during the second quarter
2009 and a portion of SCI's R&D was required to be recorded as cost of
contract research. SCI is reimbursed for these costs consistent with
its various grants. The Company continues to pursue R&D opportunities to
develop products for its customers and key markets.
For the first half of 2009, research and development expense declined 9% to
$204,577 from $222,719 a year ago due to the same factors that occurred in
the second quarter 2009.
EBITDA
Earnings before interest, income taxes, depreciation and amortization
(EBITDA) was negative $235,698 for the second quarter 2009 compared to
EBITDA of $4,996 for the same period last year. Adjusted EBITDA, excluding
non-cash stock based compensation and financing expense, was negative
$109,398 for the second quarter 2009 versus $20,320 last year.
EBITDA for the first six months of 2009 was negative $406,205 versus EBITDA
of $36,274 last year. Adjusted EBITDA, excluding non-cash stock based
compensation and financing expense, was negative $48,615 for the first half
of 2009 compared to EBITDA of $65,911 in 2008.
Net interest expense
Net interest expense was $26,283 for the second quarter 2009 compared to
$20,050 for the same period last year. The Company acquired additional
equipment during the past 12 months to scale its production capacity and
primarily financed this equipment through capital leases.
For the first six months of 2009, net interest expense increased to $52,377
from $37,822 a year ago. Interest expense for the six months ended June
30, 2009 increased $5,226 while interest income declined $9,329 due to
lower interest rates.
Finance expense
On May 1, 2009 the Board of Directors authorized a one-year extension of
the expiration date of common stock purchase warrants due to expire in May
2009 and November 2009. The expiration dates were extended to May 2010 and
November 2010, respectively, which applied to a total of 160,418 warrants.
The non-cash finance expense associated with this extension was
approximately $76,000 and was recorded in the second quarter 2009.
Loss applicable to common shares
The second quarter 2009 loss applicable to common shares was $374,027, or
$0.10 per share, compared to a loss applicable to common shares of
$108,878, or $0.03 per share, for the same period last year. The
year-over-year increase was primarily due to significantly higher non-cash
stock based compensation expense and non-cash finance expense, which
totaled $126,300 for the second quarter 2009 versus $15,324 for the same
period last year.
The net loss applicable to common shares for the first half of 2009 was
$687,454, or $0.19 per share, compared to a net loss applicable to common
shares of $187,245 or $0.05 per share, last year primarily due to
significantly higher non-cash stock based compensation and non-cash finance
expense, which totaled $357,590 for the first six months of 2009 compared
to $29,637 a year ago.
Grant award
SCI was selected by a customer as a subcontractor for a grant recently
awarded by the Ohio Department of Development. This grant ("Ohio-Based
Manufacturing of Thin-Film Photovoltaics") provides support for the
development of alternate transparent conductive oxides. It is expected
to commence during the third quarter 2009 and completed during 2010. The
amount of the subcontract work to be performed by the Company is $125,000.
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.
Reconciliation of GAAP to Non-GAAP Measures
SCI ENGINEERED MATERIALS, INC.
Reconciliation of GAAP to Non-GAAP Measures
(unaudited)
Three Three
months months Six months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
---------- ---------- ---------- ----------
(Loss) applicable to common
shares $ (374,027) $ (108,878) $ (687,454) $ (187,245)
Interest expense, net 26,283 20,050 52,377 36,622
Income tax expense - - - -
Depreciation and
amortization 112,046 93,824 228,872 186,897
---------- ---------- ---------- ----------
EBITDA (235,698) 4,996 (406,205) 36,274
Stock-based compensation
expense 49,913 15,324 281,203 29,637
Finance Expense 76,387 - 76,387 -
---------- ---------- ---------- ----------
Adjusted EBITDA $ (109,398) $ 20,320 $ (48,615) $ 65,911
========== ========== ========== ==========
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, forecasts, and plans of the
Company and its management, and specifically include statements concerning
preliminary indications that SCI's business is bottoming out, continued
stabilization in SCI's end markets, trial orders and qualification that may
lead to additional thin film solar product order in 2009, expectation that
non-cash stock based compensation expense for the remainder of this year
will be similar to the amount reported in the second quarter 2009, and
recent encouraging signs in SCI's business should lead to improved
performance during the second half of 2009. 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,
2008. 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.
Contact Information: For Additional Information
Contact:
Robert Lentz
(614) 876-2000