COLUMBUS, OH--(Marketwire - November 3, 2009) - SCI Engineered Materials, Inc. (
OTCBB:
SCIA),
a manufacturer of ceramics and metals for advanced applications in the
physical vapor deposition industry, today reported profitable results for
the three months ended September 30, 2009.
Total revenue for the third quarter 2009 was $2,224,756, the highest
quarterly amount this year, versus $4,008,635 for the same period a year
ago. Net income applicable to common shares was $8,792, or $0.00 per
diluted share, for the third quarter 2009 compared to net income of
$198,635, or $0.05 per diluted share, for the same period last year.
Dan Rooney, Chairman, President and Chief Executive Officer, stated, "We
are encouraged by the sequential quarter sales increase and our return to
profitability in the third quarter 2009. These results particularly
benefited from higher thin-film solar sales and contract research revenues,
which increased 330% and 298%, respectively, compared to a year ago. Sales
to photonics customers more than doubled from the second quarter 2009,
although they were approximately 65% below the third quarter 2008. We
continue to implement plans to leverage SCI's product and technical
strengths to diversify our business."
Mr. Rooney added, "We continue to increase our market presence in the
thin-film solar industry and are working to improve our position as an
integral member of the supply chain. Solid orders for SCI's thin-film
solar products were received during the third quarter and we also began to
ship products for the previously announced $1 million thin-film solar
order. During the third quarter we also commenced work on an Ohio
Department of Development grant focused on Ohio-based manufacturing of
thin-film photovoltaic and support for development of alternate transparent
conductive oxides. In September 2009 we participated in the European
Photovoltaic Solar Energy Expo in Hamburg, Germany. This international
exhibition provided us with increased visibility and generated additional
global exposure for SCI's products. We believe these efforts will benefit
SCI's performance as we continue to execute our growth strategy in this
important market."
GAAP to Non-GAAP reconciliation
Reconciliation of the differences between all non-GAAP financial measures
with the most directly comparable GAAP financial measures is included at
the end of this news release.
Total revenue
Total revenue was $2,224,756 for the third quarter 2009, the highest
quarterly amount this year, compared to $4,008,635 for the same quarter in
2008. This decline was attributable to significantly lower sales to
photonics customers, whose end markets include the automotive market,
coupled with a substantial reduction in the price of a high value raw
material compared to a year ago. Product revenue was $2,028,355 for the
third quarter 2009 versus $3,959,286 a year ago. Sales of thin-film
solar products more than tripled for the third quarter 2009 compared to the
third quarter 2008 as a result of additional customers and larger orders.
Contract research revenue increased to $196,401 for the third quarter 2009
from $49,349 last year as work continued on high temperature superconductor
developments and efforts to accelerate commercialization of additional
thin-film solar products. During the third quarter 2009 some of SCI's
Photonics customers began to increase their order rates compared to earlier
this year with orders scheduled for delivery during the remainder of 2009
and into early 2010.
Total revenue for the nine months ended September 30, 2009 was $5,436,344
compared to $7,240,088 last year. Significantly higher sales of thin-film
solar products combined with a significant increase in contract research
revenue partially offset the sharp decline in sales of photonics products
which were 44% below the same period last year. Contract research
revenue increased to $697,475 for the nine months ended September 30, 2009
from $89,470 last year.
Backlog was $3.7 million at September 30, 2009 compared to $2.7 million on
the same date last year and $4.0 million at June 30, 2009.
Gross profit
Gross profit was $552,299 for the third quarter 2009 versus $769,566 a year
ago, despite the 45% decline in total revenue compared to the third quarter
2008. In addition to the year-over-year decline in revenue, gross profit
also reflected higher costs associated with research and development labor
which is included as cost of contract research revenue. Gross profit
margin increased 5.6 percentage points to 24.8% for the third quarter 2009
from 19.2% a year ago due to improved product mix.
For the first nine months of 2009, gross profit was $1,228,809 compared to
$1,636,438 the prior year. Gross profit margin was 22.6% for both
year-to-date periods in 2009 and 2008.
Marketing and sales expense
Marketing and sales expense was $178,107 for the third quarter 2009
compared to $169,524 for the prior year. Most of this increase was
attributable to higher non-cash stock based compensation expense, plus
higher expenses related to trade shows including the European Photovoltaic
Solar Energy Expo in Hamburg, Germany in September 2009. For the first
nine months of 2009, marketing and sales expense was $492,557 versus
$441,556 for the same period in 2008. This 12% increase was principally
due to non-cash stock based compensation expense, higher trade show
expenses in 2009 and commissions to outside manufacturing sales
representatives.
General and administrative expense
General and administrative expense increased to $273,472 for the third
quarter 2009 from $241,101 a year ago. This increase was principally due to
Sarbanes-Oxley expenses, which were partially offset by lower compensation
expense. For the first nine months of 2009, general and administrative
expense was $977,430 compared to $751,562 last year. The largest single
increase was non-cash stock based compensation, which was approximately
$243,000 compared to $36,000 for the same period in 2008. Expenses related
to Sarbanes-Oxley compliance were $42,000 versus $5,000 for the 2008
year-to-date period.
Research and development expense
SCI's research and development (R&D) efforts involve government grants and
awards that currently include programs for the thin-film solar and high
temperature superconductor markets. Reported expense declined to $59,829
for the third quarter 2009 from $133,066 for the same period last year
despite increased research and development. This was due to compensation
that was assigned to cost of contract revenue that was $59,000 for the
third quarter 2009. SCI will continue to pursue profitable R&D
opportunities to develop products for its customers and key markets that
are compatible with its long-term growth strategy. For the 2009
year-to-date period, R&D expense declined 26% to $264,406 from $355,785 the
prior year due to $162,000 of compensation that was assigned to cost of
contract research revenue for the first nine months of 2009.
EBITDA
Earnings before interest, income taxes, depreciation and amortization
(EBITDA) were $147,627 for the third quarter 2009 compared to $317,419 for
the same period last year. Adjusted EBITDA, excluding non-cash stock based
compensation and financing expense, was $197,541 for the third quarter 2009
versus $333,655 a year ago.
EBITDA for the first nine months of 2009 was negative $258,578 versus
EBITDA of $354,895 last year. Adjusted EBITDA, excluding non-cash stock
based compensation and financing expense, was $148,926 for the nine months
of 2009 compared to $400,768 in 2008.
Non-cash charges related to stock based compensation expense are expected
to continue through 2010 and then decline beginning in the first quarter of
2011.
Net interest expense
Net interest expense was $25,992 for the third quarter 2009 compared to
$21,921 a year ago. SCI has acquired additional manufacturing equipment
during the past year to increase production capacity and also add new
product lines. Most of this manufacturing equipment was financed through
capital lease obligations.
For the nine months ended September 30, 2009, net interest expense
increased to $78,369 from $59,743 a year ago, reflecting the acquisition of
additional manufacturing equipment compared to the same period last year.
Net income/loss applicable to common shares
The Company was profitable for the third quarter 2009. Net income
applicable to common shares for the three months ended September 30, 2009
was $8,792, or $0.00 per diluted share, compared to net income of $198,635,
or $0.05 per diluted share, for the same period last year. The
year-over-year results were particularly impacted by significantly lower
sales revenue, specifically to photonics customers, and higher non-cash
stock based compensation expenses.
The net loss applicable to common shares for the first nine months of 2009
was $678,662, or $(0.19) per share, compared to net income applicable to
common shares of $11,390 or $0.00 per share for the same period in 2008.
This was principally due to significantly higher non-cash expenses,
including stock based compensation, which totaled $331,117 for the 2009
year-to-date period versus $45,873 for the same period in 2008 and $76,387
of financing expense in 2009 related to the warrant expiration date
extension versus $0 in 2008.
Research Contract and Award
On August 18, 2009, SCI announced it was awarded a two-year Phase II Small
Business Innovation Research (SBIR) contract concerning "Homogenous
BSCCO-2212 Round Wires for Very High Field Magnet." This contract enables
SCI to continue its efforts to develop High Jc performance in BSCCO-2212,
which is currently the only superconducting material manufactured in round
wire form that works successfully in high magnetic fields over 12 Tesla.
This is a requirement for new generation magnets under development for high
energy physics experiments. During the third quarter of 2009 SCI received
notification from the U.S. Department of Energy of an assistance agreement
in the amount of approximately $750,000.
In July 2009 SCI was selected as a subcontractor for an award recently
granted by the Ohio Department of Development. This award involved
Ohio-based manufacturing of thin-film photovoltaic and provides support for
the development of alternative transparent conductive oxides. Work
commenced during the third quarter 2009 and is expected to be completed
during 2010. The amount of the work to be performed is $125,000 over the
life of the contract.
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.
(unaudited)
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September September September September
30, 2009 30, 2008 30, 2009 30, 2008
---------- ---------- ---------- ----------
Net Income (loss) $ 14,899 $ 233,654 $ (660,340) $ 29,792
Preferred stock dividend
accrual (6,107) (6,119) (18,322) (18,402)
Interest expense, net 25,992 21,921 78,369 59,743
Depreciation and
amortization 112,843 96,863 341,715 283,762
---------- ---------- ---------- ----------
EBITDA 147,627 346,319 (258,578) 354,895
Stock based
compensation/Financing 49,914 16,236 407,504 45,873
---------- ---------- ---------- ----------
Adjusted EBITDA $ 197,541 $ 362,555 $ 148,926 $ 400,768
========== ========== ========== ==========
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
implementation of plans to leverage SCI's product and technical strengths
to diversify the business, increasing and improving SCI's position as an
integral supplier to the thin-film solar supply chain, efforts to benefit
SCI's performance and execution of its growth strategy in the thin-film
solar market. 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