COLUMBUS, OH--(Marketwire - Nov 6, 2012) - SCI Engineered Materials, Inc. ("SCI") (
Net income applicable to common shares was $84,711 or $0.02 per diluted share for the third quarter 2012, versus a loss of $390,596, or $(0.10) per share, for the same period last year. For the first nine months of 2012, the loss applicable to common shares was $106,523, or $(0.03) per share, compared with a loss of $671,828, or $(0.18) per share, last year.
Dan Rooney, Chairman, President and Chief Executive Officer, said, "We achieved solid profitability in the third quarter based on sound performance in our core business that contributed to substantial improvement in operating results compared with the same period last year. Our results benefited from both increased gross profit related to improved operating efficiencies and lower operating expenses. We are encouraged by our third quarter results, but have limited visibility into next quarter's performance due to uncertain market conditions."
Mr. Rooney continued, "During a period of business turmoil we have maintained product revenue, developed new products and been profitable for the past two quarters. Ongoing concerns related to macroeconomic and specific industry issues continue to impact our customers' businesses and purchasing decisions. While installations of solar modules continue to increase, SCI's revenue from the sale of solar products was below expectations for the quarter as thin film solar companies continue to deal with intense competitive issues. We are responding to the choppy market conditions with increased marketing and sales initiatives to expand our customer base. During the past three years we have developed transparent conductive oxide systems that will give us a competitive edge and purchased additional manufacturing equipment to scale-up our manufacturing capabilities. These investments position SCI to take advantage of the long-term growth in thin film solar and other markets. We believe this will increase SCI's product sales as thin film solar installations gain traction."
Third Quarter 2012 Results
Revenue
Total revenue was $1,982,403 for the third quarter 2012 versus $2,088,418 a year ago. The slight decline was largely due to lower planned contract research revenue. Third quarter 2012 product revenue of $1,926,040 was similar to the same period a year ago due to higher volume and improved product mix offset by lower material cost.
Total revenue for the nine months ended September 30, 2012, decreased 5% to $6,569,162 from $6,883,620 a year ago due to lower planned contract research revenue. Product revenue of $6,387,799 for the first nine months of 2012 was flat compared with last year.
Backlog was $2.2 million at September 30, 2012, compared with $1.7 million at year-end 2011 and $2.3 million on the same date a year ago.
Gross profit
Gross profit increased to $562,176 for the three months ended September 30, 2012 compared with a year ago. This increase was directly attributable to higher volume, improved product mix and lower production costs. As a result, gross profit margin increased to 28.4% of total revenue for the third quarter 2012 from 14.1% a year ago.
For the nine months ended September 30, 2012, gross profit increased 11% to $1,400,352 due to the same factors that contributed to third quarter 2012 gross profit. Gross profit margin increased to 21.3% for the nine months ended September 30, 2012, from 18.3% last year.
Operating expenses
Operating expenses (general and administrative (G&A) expense, research and development expense (R&D) and marketing and sales expense) declined 11% to $449,497 for the third quarter 2012 compared with a year ago. This was due to a 53% decline in internally financed R&D expense that was partially offset by increases of 4% and 6%, respectively, in G&A expense and marketing and sales expenses for the third quarter 2012 versus last year.
Operating expenses for the first nine months of 2012 were $1,448,159 or 14% below the same period last year. This was due to a 54% decline in research and development expense, a 4% increase in general and administrative expense and a 2% decline in marketing and sales expense.
Income (Loss) Applicable to Common Shares
Income applicable to common shares was $84,711 for the three months ended September 30, 2012, or $0.02 per diluted share, compared with a loss of $390,596, or $(0.10) per share, for the third quarter 2011.
For the first nine months of 2012, the loss applicable to common shares was $106,523, or $(0.03) per share, versus a loss of $671,828, or $(0.18) per share, last year.
EBITDA
EBITDA (earnings before interest, income taxes, depreciation and amortization) was $258,257 for the third quarter 2012 compared with $(73,517) for the same period last year. This increase was due to higher gross profit and lower operating expenses versus the third quarter 2011. Adjusted EBITDA, which excludes non-cash stock based compensation, was $289,673 for the third quarter 2012 compared with $(46,461) a year ago.
EBITDA increased to $387,291 for the nine months ended September 30, 2012 from $(80) for the same period in 2011. Adjusted EBITDA was $489,585 for the 2012 year-to-date period compared with $88,269 last year.
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 limited visibility into next quarter's performance due to uncertain market conditions,, ongoing concerns related to macroeconomic and specific industry issues that continue to impact our customers' businesses and purchasing decisions, transparent conductive oxide systems that will give SCI a competitive advantage and SCI being positioned to take advantage of the long-term growth in thin film solar and other markets which we believe will increase product sales as business conditions improve. 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 | |||||||||||
| September 30, | December 31, | ||||||||||
| 2012 | 2011 | ||||||||||
| (UNAUDITED) | |||||||||||
| Current Assets | |||||||||||
| Cash | $ | 591,378 | $ | 798,069 | |||||||
| Accounts receivable: | |||||||||||
| Trade, less allowance for doubtful accounts of $15,000 | 638,237 | 488,031 | |||||||||
| Contract | 19,475 | 23,962 | |||||||||
| Other | 1,873 | 5,610 | |||||||||
| Inventories | 1,444,345 | 1,045,503 | |||||||||
| Prepaid expenses | 83,261 | 65,292 | |||||||||
| Total current assets | 2,778,569 | 2,426,467 | |||||||||
| Property and Equipment, at cost | |||||||||||
| Machinery and equipment | 7,004,741 | 6,135,664 | |||||||||
| Furniture and fixtures | 137,911 | 134,666 | |||||||||
| Leasehold improvements | 317,870 | 317,870 | |||||||||
| Construction in progress | - | 323,326 | |||||||||
| 7,460,522 | 6,911,526 | ||||||||||
| Less accumulated depreciation | (4,105,612 | ) | (3,692,401 | ) | |||||||
| 3,354,910 | 3,219,125 | ||||||||||
| Other Assets | |||||||||||
| Deposits | 15,333 | 18,425 | |||||||||
| Deferred financing fees | 40,902 | 51,779 | |||||||||
| Intangibles | 13,346 | 15,453 | |||||||||
| Total other assets | 69,581 | 85,657 | |||||||||
| TOTAL ASSETS | $ | 6,203,060 | $ | 5,731,249 | |||||||
| The accompanying notes are an integral part of these financial statements. | |||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
| September 30, | December 31, | ||||||||||
| 2012 | 2011 | ||||||||||
| (UNAUDITED) | |||||||||||
| Current Liabilities | |||||||||||
| Capital lease obligations, current portion | $ | 220,645 | $ | 292,488 | |||||||
| Notes payable, current portion | 314,978 | 432,064 | |||||||||
| Accounts payable | 406,767 | 363,790 | |||||||||
| Customer deposits | 652,749 | 255,122 | |||||||||
| Accrued compensation | 94,414 | 56,610 | |||||||||
| Accrued expenses and other | 96,829 | 213,995 | |||||||||
| Total current liabilities | 1,786,382 | 1,614,069 | |||||||||
| Capital lease obligations, net of current portion | 217,851 | 384,697 | |||||||||
| Notes payable, net of current portion | 1,118,165 | 665,706 | |||||||||
| Total liabilities | 3,122,398 | 2,664,472 | |||||||||
| Commitments and contingencies | |||||||||||
| Shareholders' Equity | |||||||||||
| Convertible preferred stock, Series B, 10% cumulative, nonvoting, no par value, $10 stated value, optional redemption at 103%; optional shareholder conversion 2 shares for 1; 24,152 shares issued and outstanding | 411,792 | 393,678 | |||||||||
| Common stock, no par value, authorized 15,000,000 shares; 3,820,898 and 3,802,898 shares issued and outstanding, respectively | 9,790,800 | 9,766,740 | |||||||||
| Additional paid-in capital | 1,739,101 | 1,678,981 | |||||||||
| Accumulated deficit | (8,861,031 | ) | (8,772,622 | ) | |||||||
| 3,080,662 | 3,066,777 | ||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 6,203,060 | $ | 5,731,249 | |||||||
| The accompanying notes are an integral part of these financial statements. | |||||||||||
| SCI ENGINEERED MATERIALS, INC. | |||||||||||||||||
| STATEMENTS OF OPERATIONS | |||||||||||||||||
| FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011 | |||||||||||||||||
| (UNAUDITED) | |||||||||||||||||
| THREE MONTHS ENDED SEPT. 30, | NINE MONTHS ENDED SEPT. 30, | ||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||||||
| Product revenue | $ | 1,926,040 | $ | 1,947,849 | $ | 6,387,799 | $ | 6,389,880 | |||||||||
| Contract research revenue | 56,363 | 140,569 | 181,363 | 493,740 | |||||||||||||
| 1,982,403 | 2,088,418 | 6,569,162 | 6,883,620 | ||||||||||||||
| Cost of product revenue | 1,373,258 | 1,675,287 | 5,021,258 | 5,292,643 | |||||||||||||
| Cost of contract research revenue | 46,969 | 118,225 | 147,552 | 331,704 | |||||||||||||
| 1,420,227 | 1,793,512 | 5,168,810 | 5,624,347 | ||||||||||||||
| Gross profit | 562,176 | 294,906 | 1,400,352 | 1,259,273 | |||||||||||||
| General and administrative expense | 247,470 | 239,027 | 818,939 | 790,261 | |||||||||||||
| Research and development expense | 62,646 | 133,205 | 230,035 | 495,392 | |||||||||||||
| Marketing and sales expense | 139,381 | 131,096 | 399,185 | 407,068 | |||||||||||||
| Income (loss) from operations | 112,679 | (208,422 | ) | (47,807 | ) | (433,448 | ) | ||||||||||
| Other income (expense) | (20,693 | ) | (19,499 | ) | (65,254 | ) | (55,154 | ) | |||||||||
| Income (loss) before provision for income tax | 91,986 | (227,921 | ) | (113,061 | ) | (488,602 | ) | ||||||||||
| Income tax (expense) benefit | (1,237 | ) | (156,637 | ) | 24,652 | (165,112 | ) | ||||||||||
| Net income (loss) | 90,749 | (384,558 | ) | (88,409 | ) | (653,714 | ) | ||||||||||
| Dividends on preferred stock | (6,038 | ) | (6,038 | ) | (18,114 | ) | (18,114 | ) | |||||||||
| INCOME (LOSS) APPLICABLE TO COMMON SHARES | $ | 84,711 | $ | (390,596 | ) | $ | (106,523 | ) | $ | (671,828 | ) | ||||||
| Earnings per share - basic and diluted | |||||||||||||||||
| Income (loss) per common share | |||||||||||||||||
| Basic | $ | 0.02 | $ | (0.10 | ) | $ | (0.03 | ) | $ | (0.18 | ) | ||||||
| Diluted | $ | 0.02 | $ | (0.10 | ) | $ | (0.03 | ) | $ | (0.18 | ) | ||||||
| Weighted average shares outstanding | |||||||||||||||||
| Basic | 3,817,963 | 3,779,768 | 3,812,019 | 3,778,620 | |||||||||||||
| Diluted | 3,827,774 | 3,779,768 | 3,812,019 | 3,778,620 | |||||||||||||
| SCI ENGINEERED MATERIALS, INC. | ||||||||||||
| STATEMENTS OF CASH FLOWS | ||||||||||||
| FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011 | ||||||||||||
| (UNAUDITED) | ||||||||||||
| 2012 | 2011 | |||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
| Net loss | $ | (88,409 | ) | $ | (653,714 | ) | ||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||
| Depreciation and accretion | 433,841 | 391,901 | ||||||||||
| Amortization | 2,107 | 2,316 | ||||||||||
| Stock based compensation | 102,294 | 88,349 | ||||||||||
| Patent impairment | - | 38,726 | ||||||||||
| Loss (gain) on disposal of equipment | 850 | (425 | ) | |||||||||
| Deferred income taxes | - | 156,000 | ||||||||||
| Inventory reserve | 23,095 | 22,369 | ||||||||||
| Credit for doubtful accounts | - | (530 | ) | |||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | (141,982 | ) | 277,419 | |||||||||
| Inventories | (421,937 | ) | (215,383 | ) | ||||||||
| Prepaid expenses | (17,969 | ) | (20,904 | ) | ||||||||
| Other assets | 13,969 | (26,875 | ) | |||||||||
| Accounts payable | 42,977 | 85,777 | ||||||||||
| Accrued expenses and customer deposits | 311,786 | 311,650 | ||||||||||
| Net cash provided by operating activities | 260,622 | 456,676 | ||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
| Proceeds on sale of equipment | - | 425 | ||||||||||
| Purchases of property and equipment | (563,997 | ) | (1,069,537 | ) | ||||||||
| Net cash used in investing activities | (563,997 | ) | (1,069,112 | ) | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
| Proceeds from exercise of common stock options | - | 12,150 | ||||||||||
| Proceeds from notes payable | 911,546 | 642,126 | ||||||||||
| Principal payments on capital lease obligations and notes payable | (814,862 | ) | (350,588 | ) | ||||||||
| Payment of cumulative dividends on preferred stock | - | (24,152 | ) | |||||||||
| Net cash provided by financing activities | 96,684 | 279,536 | ||||||||||
| NET DECREASE IN CASH | (206,691 | ) | (332,900 | ) | ||||||||
| CASH - Beginning of period | 798,069 | 1,511,752 | ||||||||||
| CASH - End of period | $ | 591,378 | $ | 1,178,852 | ||||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||||||
| Cash paid during the period for: | ||||||||||||
| Interest | $ | 65,214 | $ | 57,708 | ||||||||
| Income taxes | 605 | 713 | ||||||||||
| SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES | ||||||||||||
| Property and equipment purchased by capital lease | - | 185,000 | ||||||||||
| Increase in asset retirement obligation | 6,480 | 4,968 | ||||||||||
| The accompanying notes are an integral part of these financial statements. | ||||||||||||
| SCI ENGINEERED MATERIALS, INC. | |||||||||||||||
| RECONCILIATION OF GAAP TO NON-GAAP MEASURES | |||||||||||||||
| THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND SEPTEMBER 30, 2011 | |||||||||||||||
| Three months ended Sept. 30, | Nine months ended Sept. 30, | ||||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||||
| Net income (loss) | $ | 90,749 | $ | (384,558 | ) | $ | (88,409 | ) | $ | (653,714 | ) | ||||
| Interest, net | 19,843 | 19,499 | 64,404 | 55,579 | |||||||||||
| Income taxes | 1,237 | 156,637 | (24,652 | ) | 165,112 | ||||||||||
| Patent impairment | - | - | - | 38,726 | |||||||||||
| Depreciation and amortization | 146,428 | 134,905 | 435,948 | 394,217 | |||||||||||
| EBITDA | 258,257 | (73,517 | ) | 387,291 | (80 | ) | |||||||||
| Stock based compensation | 31,416 | 27,056 | 102,294 | 88,349 | |||||||||||
| Adjusted EBITDA | $ | 289,673 | $ | (46,461 | ) | $ | 489,585 | $ | 88,269 | ||||||
Contact Information:
For Additional Information
Contact:
Robert Lentz
(614) 876-2000