COLUMBUS, OH--(Marketwire - February 28, 2011) - SCI Engineered Materials, Inc. ("SCI") (
OTCBB:
SCIA) develops and commercializes technologies and manufactures ceramics
and metals for advanced applications in the physical vapor deposition
industry.
Total revenue was $1,680,964 for the fourth quarter 2010 compared to
$2,573,891 for the same period last year. The loss applicable to common
shares was $(58,837) versus income applicable to common shares of $157,013
a year ago.
For the twelve months ended December 31, 2010, total revenue increased
approximately 11% to $8,916,122 due to a 15% increase in product revenue
which benefited from higher volume including growing demand for solar
products. The loss applicable to common shares was $(7,229) compared to a
loss of $(521,649) the prior year.
Dan Rooney, Chairman, President and Chief Executive Officer, said "Our
plans for 2011 are focused on increased bookings from core customers,
growth from new customers and higher product sales. During this past year
we have been involved in solar product trials with several customers whose
facilities are located in the United States, Europe and Asia. We are
working diligently to convert a number of these trials into production
orders during this year as we seek to establish SCI as a meaningful
supplier of zinc oxide-based transparent conductive oxide ("TCO") targets
for the solar industry."
Mr. Rooney added, "SCI's growth in 2010 was funded from a combination of
improved cash flow and external sources. We generated approximately
$561,000 in cash from operations, invested over $225,000 in new equipment,
leased an additional $193,000 of production equipment and paid $452,000 of
principal toward outstanding loans and leases. Cash at year-end 2010 was
$1.5 million compared to $1.1 million on the same date in 2009, an increase
of approximately 37%.
During 2010 we also pursued additional capital in the form of direct loans
from two State of Ohio agencies to enable us to accelerate time to market
for our new solar products and to scale the business to meet anticipated
demand. We closed on both of those loans, which total $2.1 million,
earlier this month. In addition, SCI will invest $900,000 in these growth
initiatives. These funds are integral to the implementation of our
long-term strategy."
Fourth Quarter 2010 Results
Total revenue
Total revenue was $1,680,964 for the fourth quarter 2010 compared to
$2,573,891 for the same period in 2009. This year-over-year decrease was
attributable to lower product revenue, primarily due to the decline in
price of a high value raw material and lower contract revenue resulting
from scheduled completion of certain government grants.
Changes in the purchasing practices of some customers to shorter term
blanket orders and the factors noted above impacted backlog. As a result,
backlog was $3.1 million at December 31, 2010 versus the record $5.5
million on the same date in 2009.
Gross profit
Gross profit margin was 24.6% for the fourth quarter 2010 and was similar
to the same period last year. In addition to the reduction in fourth
quarter 2010 total revenue, gross profit was also impacted by $71,000 of
scale-up costs related to new products. Gross profit was $414,189 for the
fourth quarter 2010 versus $641,070 a year ago.
Operating expenses
The company continues to invest in developing new products for the solar
industry including transparent conductive oxide systems. These efforts
include accelerating time to market for those products which involve
internally generated R&D expenditures plus government grants and awards.
As a result, R&D expense increased 146% to $122,846 for the three months
ended December 31, 2010, from $51,352 for the same period last year.
Operating expenses, which include marketing and sales, general and
administrative, and R&D, were $516,679 for the fourth quarter 2010 versus
$467,758 a year ago. Excluding R&D expense, operating expenses were
$393,824 or 5% below the fourth quarter 2009.
Interest expense, net
Interest expense, net declined 25% to $18,009 for the fourth quarter 2010
primarily due to the reduction in debt. During the past year a greater
portion of principal was paid on SCI's outstanding loans and capital leases
resulting in lower interest expense for the fourth quarter 2010 compared to
same quarter last year.
Income tax benefit
Income tax benefit was $68,197 for the three months ended December 31, 2010
versus $59,862 for the same period last year.
Income (loss) applicable to common shares
The loss applicable to common shares was $(58,837) or $(0.02) per share for
the fourth quarter 2010 compared to income applicable to common shares of
$157,013 or $0.04 per diluted share a year ago.
Fiscal 2010 Results
Total revenue
Total revenue increased 11% to $8,916,122 for the twelve months ended
December 31, 2010 compared to $8,010,235 the prior year due to higher
product volume based on increased customer demand. Product revenue was 15%
higher for 2010 compared to 2009, with $8,038,774 and $7,004,527,
respectively. Contract research revenue declined approximately 13% to
$877,348 for 2010 from $1,005,708 a year ago due to the completion of a
government grant in the fourth quarter 2010.
Gross profit
Gross profit increased approximately 22% to $2,273,984 for 2010 from
$1,869,879 a year ago due to higher product volume and product mix. Gross
profit for 2010 was impacted by approximately $71,000 of scale-up expenses
late in the year. Gross profit margin increased to 25.5% for the twelve
months ended December 31, 2010 from 23.3% the prior year.
Operating expenses
SCI's investment in R&D to develop new products increased R&D expense
approximately 41% in 2010 to $442,214 from $314,386 a year ago. These
efforts are focused on developing new products for the solar industry
including transparent conductive oxide systems which involved a number of
customer trials at year-end 2010. The company's R&D programs involve
activities beyond the scope of its current federal and state grants and
awards.
The company's operating expenses, which include marketing and sales,
general and administrative, and R&D, were $2,194,089 for 2010 which was
similar to operating expenses for 2009. Excluding R&D expense, operating
expenses declined approximately 7% to $1,751,875 for 2010 due to lower
non-cash compensation of $149,000 and lower Sarbanes-Oxley compliance
expense of $58,000 compared to the fourth quarter 2009.
Interest expense, net
Interest expense, net declined 21% to $80,370 for 2010 from $102,318 the
prior year. This decline benefited from the payment of $452,000 of
principal toward loans and leases during 2010 plus more principal and less
interest being applied to outstanding capital leases.
Income tax benefit
For the twelve months ended December 31, 2010, the income tax benefit was
$(9,133) compared to $(59,000) for 2009. A deferred tax benefit of
$156,000 and a current expense of $97,000 were recorded in 2009.
Income (loss) applicable to common shares
The loss applicable to common shares was ($7,229) or $0.00 per share for
2010 versus a loss of $(521,649) or $(0.15) per share for 2009. The
improvement was due to increased revenue and gross profit compared to the
prior year and operating expenses which were similar for both years
attributable to lower non-cash stock compensation expense in 2010 compared
to 2009.
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, forecasts, and plans of the
Company and its management, and specifically include statements concerning
plans for 2011 focused on increased bookings from core customers, growth
from new customers and higher product sales, efforts to convert a number of
product trials into orders during 2011, and SCI will invest $900,000 in
growth initiatives. 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.
SCI ENGINEERED MATERIALS, INC.
STATEMENTS OF OPERATIONS
THREE MONTHS AND TWELVE MONTHS ENDED DECEMBER 31, 2010 AND 2009
THREE MONTHS ENDED TWELVE MONTHS ENDED
DEC. 31, DEC. 31,
2010 2009 2010 2009
---------- ---------- ---------- ----------
PRODUCT REVENUE $1,489,927 $2,265,658 $8,038,774 $7,004,527
CONTRACT RESEARCH REVENUE 191,037 308,233 877,348 1,005,708
---------- ---------- ---------- ----------
1,680,964 2,573,891 8,916,122 8,010,235
---------- ---------- ---------- ----------
COST OF PRODUCT REVENUE 1,131,434 1,660,456 6,002,686 5,311,459
COST OF CONTRACT RESEARCH 135,341 272,365 639,452 828,897
---------- ---------- ---------- ----------
1,266,775 1,932,821 6,642,138 6,140,356
---------- ---------- ---------- ----------
GROSS PROFIT 414,189 641,070 2,273,984 1,869,879
GENERAL AND ADMINISTRATIVE
EXPENSE 266,590 261,104 1,128,644 1,237,672
RESEARCH AND DEVELOPMENT
EXPENSE 122,846 51,352 442,214 314,386
MARKETING AND SALES EXPENSE 127,234 155,302 623,231 647,859
---------- ---------- ---------- ----------
INCOME (LOSS) FROM
OPERATIONS (102,481) 173,312 79,895 (330,038)
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE)
Interest expense - net (18,009) (23,949) (80,370) (102,318)
Gain (loss) on disposal
of equipment - (45,646) 10,251 (45,646)
Financing expense - - - (76,387)
Miscellaneous, net (458) (458) (1,830) (1,830)
---------- ---------- ---------- ----------
(18,467) (70,053) (71,949) (226,181)
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME
TAXES (120,948) 103,259 7,946 (556,219)
INCOME TAX BENEFIT (68,197) (59,862) (9,133) (59,000)
---------- ---------- ---------- ----------
NET INCOME (LOSS) (52,751) 163,121 17,079 (497,219)
DIVIDENDS ON PREFERRED
STOCK (6,086) (6,108) (24,308) (24,430)
---------- ---------- ---------- ----------
INCOME (LOSS) APPLICABLE TO
COMMON SHARES $ (58,837) $ 157,013 $ (7,229) $ (521,649)
========== ========== ========== ==========
EARNINGS PER SHARE - BASIC
AND DILUTED
INCOME (LOSS) APPLICABLE TO
COMMON SHARES
PER COMMON SHARE
Basic $ (0.02) $ 0.04 $ 0.00 $ (0.15)
========== ========== ========== ==========
Diluted $ (0.02) $ 0.04 $ 0.00 $ (0.15)
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic 3,773,581 3,565,257 3,750,376 3,562,960
========== ========== ========== ==========
Diluted 3,773,581 3,744,528 3,750,376 3,562,960
========== ========== ========== ==========
SCI ENGINEERED MATERIALS, INC.
BALANCE SHEETS
ASSETS
December 31, December 31,
2010 2009
----------- -----------
(UNAUDITED)
CURRENT ASSETS
Cash $ 1,511,752 $ 1,107,216
Accounts receivable 682,017 570,112
Inventories 1,344,426 1,031,777
Deferred income taxes 156,000 156,000
Prepaid expenses 51,369 977,536
----------- -----------
Total current assets 3,745,564 3,842,641
----------- -----------
PROPERTY AND EQUIPMENT, AT COST 5,717,611 5,399,326
Less accumulated depreciation (3,250,237) (2,868,198)
----------- -----------
2,467,374 2,531,128
----------- -----------
OTHER ASSETS 78,897 63,267
----------- -----------
TOTAL ASSETS $ 6,291,835 $ 6,437,036
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31, December 31,
2010 2009
----------- -----------
(UNAUDITED)
CURRENT LIABILITIES
Short term debt $ 464,072 $ 425,664
Accounts payable 573,741 263,468
Customer deposits 366,153 1,319,455
Accrued expenses 304,405 278,157
----------- -----------
Total current liabilities 1,708,371 2,286,744
Long term debt 758,685 1,055,969
----------- -----------
Total liabilities 2,467,056 3,342,713
COMMITMENTS AND CONTINGENCIES - -
TOTAL SHAREHOLDERS' EQUITY 3,824,779 3,094,323
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,291,835 $ 6,437,036
=========== ===========
SCI ENGINEERED MATERIALS, INC.
STATEMENTS OF CASH FLOWS
TWELVE MONTHS ENDED DECEMBER 31, 2010 AND 2009
2010 2009
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 17,079 $ (497,219)
Adjustments to reconcile net income (loss) to
net cash from operating activities:
Depreciation and accretion 488,003 443,800
Amortization 3,088 3,088
Stock based compensation 203,403 381,030
Financing expense related to warrant
expiration date extension - 76,387
Gain on sale of equipment (10,251) 45,646
Deferred income taxes - (156,000)
Inventory reserve 403 554
Credit for doubtful accounts - (8,947)
Changes in operating assets and liabilities:
Accounts receivable (111,905) 15,991
Inventories (313,052) 232,102
Prepaid expenses 926,167 (934,973)
Other assets (18,718) (3,099)
Accounts payable 310,273 14,159
Accrued expenses and customer deposits (933,678) 649,246
----------- -----------
Net cash provided by (used in) operating
activities 560,812 261,765
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on sale of equipment 10,500 -
Purchases of property and equipment (225,209) (168,132)
----------- -----------
Net cash used in investing activities (214,709) (168,132)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of common stock options 19,175 21,206
Net proceeds from exercise of common stock
warrants 490,799 -
Payments related to Preferred Series B dividend - (24,430)
Principal payments on capital lease obligations
and note payable (451,541) (382,243)
----------- -----------
Net cash provided by (used in) financing
activities 58,433 (385,467)
----------- -----------
NET INCREASE (DECREASE) IN CASH 404,536 (291,834)
CASH - Beginning of period 1,107,216 1,399,050
----------- -----------
CASH - End of period $ 1,511,752 $ 1,107,216
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the periods for:
Interest, net $ 85,643 $ 108,712
Income taxes 2,400 2,450
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING
ACTIVITIES
Property and equipment purchased by capital
lease 192,665 555,700
Increase in asset retirement obligation 6,624 6,624
Financing expense related to warrant extension - 76,387
Contact Information: For Additional Information
Contact:
Robert Lentz
(614) 876-2000