COLUMBUS, OH--(Marketwire - February 17, 2010) - SCI Engineered Materials, Inc. (
OTCBB:
SCIA)
develops, commercializes technologies and manufactures ceramics and metals
for advanced applications in the physical vapor deposition industry. Today,
the Company reported higher total revenue and increased earnings per share
for the three months ended December 31, 2010.
Total revenue increased 8% to $2,573,891 for the fourth quarter 2009,
benefiting from both higher sales revenue and contract research revenue.
Income applicable to common shares increased 77% to $157,013 from $88,787
for the fourth quarter 2008. Net income per common share after dividends on
preferred stock increased to $0.04 from $0.02 for the same period a year
ago.
Dan Rooney, Chairman, President and Chief Executive Officer, commented,
"Our operating results for the fourth quarter 2009 reflect further
improvement in our business. Total revenue and net income were the highest
quarterly amounts of the year. The combination of increased revenue,
especially from solar products, higher gross profit, and gradually
improving conditions in our core markets contributed substantially to the
favorable performance compared to the fourth quarter 2008."
Mr. Rooney continued, "We are specifically pursuing opportunities to
increase our presence in the solar industry's supply chain and participate
in government grants and awards consistent with SCI's long-term growth
strategy. Late in the fourth quarter 2009, we received a large follow-on
order for solar products and were also notified of an award to
commercialize advanced technology. We exited 2009 with record backlog and
look forward to improved performance in 2010."
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 increased 8% to $2,573,891 for the fourth quarter 2009
compared to the same period last year. Both contract research revenue and
solar sales more than tripled compared to the fourth quarter 2008. Fourth
quarter 2009 revenue was adversely impacted by lower prices for a high
value raw material compared to a year ago. Excluding sales attributable to
this material, revenue for the fourth quarter 2009 increased 54% versus the
same period last year. Contract research revenue was $308,233 for the
fourth quarter 2009, an increase of 356% compared to a year ago. This is
directly related to Small Business Innovation Research grants and program
awards.
Lower prices for a high value raw material and the global economic
recession contributed to a 17% decline in total revenue to $8,010,235.
Excluding revenue attributable to the high value raw material, sales
increased 29% for 2009 versus 2008. Following a slow start in 2009, total
revenue increased 49% for the second half of the year versus the first six
months. Strong sales of solar products and higher contract research revenue
were the primary factors. Contract research revenue was approximately $1
million for 2009 compared to $157,032 the prior year. Based on current
government grants and awards, contract research revenue for 2010 is
expected to be similar to the 2009 amount and then decline as those
programs are completed.
The Company's backlog increased throughout the fourth quarter 2009 and was
a record $5.5 million at December 31, 2009 compared to $3.7 million at
September 30, 2009 and $2.9 million on the same date a year ago. This
increase was primarily due to a significant increase in orders from solar
customers plus a grant received from the State of Ohio.
Gross profit
Gross profit increased 11% to $641,070 for the fourth quarter 2009 compared
to a year ago. More favorable product mix was partially offset by
additional contract research labor costs. Gross profit margin increased to
24.9% of total revenue for the fourth quarter 2009 from 24.2% for the same
period last year.
Gross profit for 2009 declined to $1,869,879 from $2,211,477 the prior year
due to the decline in total revenue and additional contract research labor
costs. Gross profit margin for 2009 was more favorable compared to 2008,
increasing to 23.3% from 23.0%, respectively.
Operating expenses
The company's operating expenses include marketing and sales expense,
general and administrative expense, and research and development expense.
Together, these expenses were $465,524 for the fourth quarter 2009, an
increase of 1% over the same period last year. For the fourth quarter 2009,
higher expenses were primarily related to additional non-cash stock based
compensation ($49,914) and Sarbanes-Oxley compliance ($19,000), which were
partially offset by lower company-funded research and development (R&D)
expense ($48,659) for the fourth quarter 2009 versus the same period last
year. During 2009 a portion of R&D compensation was assigned to cost of
contract research rather than R&D, which reduced R&D expense. Excluding the
accounting reclassification, R&D expense would have been $60,000 and $7,000
greater for the fourth quarter 2009 and 2008, respectively.
Operating expenses, as defined above, increased approximately 10% to
$2,199,917 for 2009 versus the prior year. Major factors included an
increase in non-cash stock based compensation expense ($381,030) and
Sarbanes-Oxley compliance ($60,000). Partially offsetting these expense
increases was lower R&D expense attributable to the accounting
reclassification previously noted. Excluding the accounting
reclassification, R&D expense would have been $222,000 and $28,000 greater
for 2009 and 2008, respectively.
EBITDA
Earnings before interest, income taxes, depreciation and amortization
(EBITDA) were $227,134 for the fourth quarter 2009 versus $197,987 a year
ago. Adjusted EBITDA, excluding non-cash stock based compensation and
financing expense, was $277,048 for the fourth quarter 2009 versus $229,462
last year.
EBITDA was negative $31,444 for 2009 versus EBITDA of $552,882 for 2008.
Adjusted EBITDA, excluding non-cash stock based compensation and financing
expense, was $425,974 for 2009 compared to $630,230 for 2008.
Non-cash charges related to stock based compensation expense are expected
to continue at a lower amount than 2009 through 2010 and then decline
further beginning in the first quarter of 2011.
Income tax benefit
The company had an income tax benefit of $59,000 for the fourth quarter and
full-year 2009 that was attributable to recognition of a deferred tax
benefit of $156,000 partially offset by state income tax expense of
$97,000. There was no tax benefit or expense for the fourth quarter or
full-year 2008.
Net income/loss
Net income applicable to common shares for the fourth quarter 2009 was
$157,013, or $0.04 per diluted share, for the fourth quarter 2009 compared
to $88,787 or $0.02 per diluted share for the same period in 2008.
For 2009, the company reported a net loss applicable to common shares of
$521,649, or $(0.15) per share, compared to net income applicable to common
shares of $100,177 or $0.02 per diluted share for 2008.
Research contract and award
During the fourth quarter 2009 the company was notified that it was awarded
a grant in the amount of $775,400 by the Ohio Department of Development's
Third Frontier Photovoltaic Program (OTFPVP) to commercialize advanced
technology for high power density rotatable ceramic sputtering targets.
These targets are used in the manufacture of photovoltaic solar cells. This
technology will enable manufacturers to operate rotatable sputtering
targets at higher power densities than is generally possible with current
technology. This award received final approval in January 2010.
Recent exercise of warrants
On January 8, 2010, 150,000 common stock warrants, originally in the
estates of Dr. Edward R. Funk Sc.D., and Ingeborg V. Funk, founders of the
company, were exercised at a price of $2.50 per share. The company received
cash proceeds of $375,000, which will be used for working capital purposes.
About SCI Engineered Materials, Inc.
SCI Engineered Materials, Inc. develops, commercializes technologies and
manufactures ceramics and metals for advanced applications in the physical
vapor deposition industry such as photonics, 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 Twelve Twelve
Months Ended Months Ended Months Ended Months Ended
December 31, December 31, December 31, December 31,
2009 2008 2009 2008
Net Income (loss) $ 163,121 $ 94,758 $ (497,219) $ 124,550
Preferred stock
dividend accrual (6,108) (5,971) (24,430) (24,373)
Interest expense,
net 23,949 18,749 102,318 78,492
Income tax benefit (59,000) - (59,000) -
Depreciation and
amortization 105,172 90,451 446,887 374,213
------------ ------------ ------------ ------------
EBITDA 227,134 197,987 (31,444) 552,882
Stock based
compensation/
Financing 49,914 31,475 457,418 77,348
------------ ------------ ------------ ------------
Adjusted EBITDA $ 277,048 $ 229,462 $ 425,974 $ 630,230
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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
the company specifically pursuing opportunities to increase its presence in
the solar industry's supply chain and participate in government grants and
awards consistent with the company's long-term growth strategy, and the
company's record backlog and expectations for improved performance in 2010.
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, 2009. 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