COLUMBUS, OH--(Marketwire - Mar 19, 2013) - SCI Engineered Materials, Inc. ("SCI") (
Dan Rooney, Chairman, President and Chief Executive Officer, said, "Our 2012 financial results improved over the prior year principally due to better product mix and higher gross profit attributable to increased operating efficiencies. Throughout 2012 we continued to pay close attention to our operating expenses which were 12% below the prior year. These factors more than offset the impact of a $379,217 decrease in contract research revenue in 2012 versus 2011. Net cash provided by operating activities increased to $437,271 for the full-year 2012 from $3,215 of net cash used in operating activities in 2011. Our fourth quarter 2012 results were also impacted by lower contract research revenue which was $66,840 below the prior year; however, our performance improved versus the same period in 2011 principally due to lower operating expenses."
For the full-year 2012, total revenue decreased 4% to $8,757,149 from $9,152,704 the prior year, which was attributable to the decline in contract research revenue. The loss applicable to common stock for 2012 and 2011 was $350,124 or $0.09 per share, and $914,758 or $0.24 per share, respectively. For the fourth quarter 2012, total revenue decreased 4% to $2,187,987 from $2,269,084 for the same period last year also due to lower contract research revenue. The loss applicable to common stock of $243,601 for the fourth quarter 2012 was similar to the same period in 2011. The loss applicable to common stock was $0.06 per common share for both periods.
Mr. Rooney added, "Product revenue for the first quarter 2013 is anticipated to be less than the same period in 2012 due to a periodic inventory adjustment by one of our large customers. We continue to adapt to challenging market conditions while we also remain focused on pursuing attractive long-term growth initiatives. Recently, we received indications from customers that they will be placing new orders later this year."
Total revenue
Total revenue was $8,757,149 for the full-year 2012 or $395,555 below the prior year primarily due to a $379,217 decrease in contract research revenue. Product revenue for the year ended December 31, 2012, was similar to 2011 despite a decline in the average price of a high priced raw material compared with the same period of the prior year and the loss of a large customer who ceased operations in 2011. Total revenue for the fourth quarter 2012 was $2,187,987 compared with $2,269,084 for the same period last year. The $81,097 decrease in total revenue was principally due to lower contract research revenue that was $66,840 below the same period a year ago. Fourth quarter 2012 product revenue was stable compared with the prior year despite a decline in average price of a high priced raw material.
The Company's backlog was $1.8 million at December 31, 2012, versus $1.7 million on the same date in 2011. There was approximately $0.1 million of backlog related to contract research revenue at December 31, 2012 compared with $0.3 million at the prior year-end.
Gross profit
Gross profit increased 8% to $1,657,162 for the full-year 2012 versus 2011 due to improved product mix and production efficiencies that contributed to lower production costs. As a result, gross profit margin increased to 18.9% for the full-year 2012 from 16.8% the prior year. For the fourth quarter 2012, gross profit was $256,810 compared with $274,419 for the same period in 2011. This decrease was primarily due to a $35,000 non-cash inventory adjustment recorded in the fourth quarter 2012, which was partially offset by the improved performance. Gross profit margin decreased to 11.7% for the fourth quarter 2012 from 12.1% for the same period in 2011 due to the inventory adjustment.
Operating expenses
Operating expenses, which include marketing and sales, general and administrative, and R&D, for the full-year 2012 decreased 12% to $1,921,641 from $2,175,367 the prior year primarily due to lower planned internal research and development expense and ongoing cost-control measures which were partially offset by higher non-cash stock compensation expense. Fourth quarter 2012 operating expenses decreased 2% to $443,482 for the fourth quarter 2012 from the fourth quarter 2011. This decrease was principally due to lower internally financed research and development expense.
Income Tax Expense/Benefit
There was a $27,348 income tax benefit for the full-year 2012 versus income tax expense of $165,899 in the prior year. The 2011 amount included a non-cash charge of $156,000 related to a deferred tax asset valuation allowance. For the fourth quarter 2012, the income tax benefit was $2,696 compared with income tax expense of $787 for the same period of the prior year.
Loss Applicable to Common Stock
The loss applicable to common stock was $350,124 or $0.09 per share for the twelve months ended December 31, 2012, versus a loss of $914,758 or $0.24 per share for the same period in 2011. This improvement was primarily due to higher gross profit, lower operating expense and an income tax benefit compared with income tax expense for the prior year, partially offset by higher non-cash stock compensation expense compared with the prior year. The loss applicable to common stock of $243,601 for the fourth quarter 2012 was similar to the same period in 2011. The fourth quarter loss applicable to common stock was $0.06 per share for both periods.
EBITDA
Earnings before interest, income taxes, depreciation and amortization (EBITDA) were $319,899 for the full-year 2012 versus negative $66,436 for the prior year. Adjusted EBITDA, which excludes non-cash stock based compensation, were $456,788 compared with $48,970 a year ago. For the fourth quarter 2012, EBITDA were negative $67,392 versus negative $66,356 for the same period a year ago. Adjusted EBITDA were negative $32,797 for the fourth quarter 2012 compared with negative $39,299 for the fourth quarter 2011.
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 product revenue anticipated to be less for the first quarter 2013 than the same period in 2012 due to a periodic inventory adjustment by one the Company's large customers, continuing to adapt to challenging market conditions while we also remain focused on pursuing attractive long-term growth initiatives, and recently receiving indications from customers that they will be placing new orders later this year. 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, 2012. 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 | ||||||||||
| December 31, | December 31, | |||||||||
| 2012 | 2011 | |||||||||
| Cash | $ | 630,819 | $ | 798,069 | ||||||
| Accounts receivable, less allowance for doubtful accounts | 453,302 | 517,603 | ||||||||
| Inventories | 815,075 | 1,045,503 | ||||||||
| Prepaid expenses | 209,422 | 65,292 | ||||||||
| Total current assets | 2,108,618 | 2,426,467 | ||||||||
| Property and Equipment, at cost | 7,483,480 | 6,911,526 | ||||||||
| Less accumulated depreciation | (4,254,302 | ) | (3,692,401 | ) | ||||||
| 3,229,178 | 3,219,125 | |||||||||
| Other assets | 66,764 | 85,657 | ||||||||
| TOTAL ASSETS | $ | 5,404,560 | $ | 5,731,249 | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||
| December 31, | December 31, | |||||||||
| 2012 | 2011 | |||||||||
| Short term debt | $ | 529,481 | $ | 681,974 | ||||||
| Accounts payable | 260,531 | 363,790 | ||||||||
| Customer deposits | 313,745 | 255,122 | ||||||||
| Accrued expenses | 194,218 | 270,605 | ||||||||
| Total current liabilities | 1,297,975 | 1,571,491 | ||||||||
| Long term debt | 1,228,891 | 1,092,981 | ||||||||
| Total liabilities | 2,526,866 | 2,664,472 | ||||||||
| Commitments and contingencies | ||||||||||
| Shareholders' equity | 2,877,694 | 3,066,777 | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 5,404,560 | $ | 5,731,249 | ||||||
| SCI ENGINEERED MATERIALS, INC. | |||||||||||||||||
| STATEMENTS OF OPERATIONS | |||||||||||||||||
| THREE MONTHS AND TWELVE MONTHS ENDED DECEMBER 31, 2012 AND 2011 | |||||||||||||||||
| THREE MONTHS ENDED DEC. 31, | TWELVE MONTHS ENDED DEC. 31, | ||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||||||
| Product revenue | $ | 2,142,981 | $ | 2,157,238 | $ | 8,530,780 | $ | 8,547,118 | |||||||||
| Contract research revenue | 45,006 | 111,846 | 226,369 | 605,586 | |||||||||||||
| Total revenue | 2,187,987 | 2,269,084 | 8,757,149 | 9,152,704 | |||||||||||||
| Cost of product revenue | 1,892,549 | 1,894,612 | 6,913,807 | 7,187,255 | |||||||||||||
| Cost of contract research revenue | 38,628 | 100,053 | 186,180 | 431,757 | |||||||||||||
| Total cost of revenue | 1,931,177 | 1,994,665 | 7,099,987 | 7,619,012 | |||||||||||||
| Gross profit | 256,810 | 274,419 | 1,657,162 | 1,533,692 | |||||||||||||
| General and administrative expense | 290,258 | 252,604 | 1,109,197 | 1,042,865 | |||||||||||||
| Research and development expense | 79,781 | 125,922 | 309,816 | 619,940 | |||||||||||||
| Marketing and sales expense | 103,443 | 105,494 | 502,628 | 512,562 | |||||||||||||
| Loss from operations | (216,672 | ) | (209,601 | ) | (264,479 | ) | (641,675 | ) | |||||||||
| Other expense | (23,587 | ) | (26,504 | ) | (88,841 | ) | (83,032 | ) | |||||||||
| Loss before income taxes | (240,259 | ) | (236,105 | ) | (353,320 | ) | (724,707 | ) | |||||||||
| Income tax benefit (expense) | 2,696 | (787 | ) | 27,348 | (165,899 | ) | |||||||||||
| Net loss | (237,563 | ) | (236,892 | ) | (325,972 | ) | (890,606 | ) | |||||||||
| Dividends on preferred stock | (6,038 | ) | (6,038 | ) | (24,152 | ) | (24,152 | ) | |||||||||
| LOSS APPLICABLE TO COMMON STOCK | $ | (243,601 | ) | $ | (242,930 | ) | $ | (350,124 | ) | $ | (914,758 | ) | |||||
| Earnings per share - basic and diluted | |||||||||||||||||
| Loss per common share | |||||||||||||||||
| Basic | $ | (0.06 | ) | $ | (0.06 | ) | $ | (0.09 | ) | $ | (0.24 | ) | |||||
| Diluted | $ | (0.06 | ) | $ | (0.06 | ) | $ | (0.09 | ) | $ | (0.24 | ) | |||||
| Weighted average shares outstanding | |||||||||||||||||
| Basic | 3,823,963 | 3,790,963 | 3,814,996 | 3,781,717 | |||||||||||||
| Diluted | 3,823,963 | 3,790,963 | 3,814,996 | 3,781,717 | |||||||||||||
| SCI ENGINEERED MATERIALS, INC. | ||||||||||||
| STATEMENTS OF CASH FLOWS | ||||||||||||
| FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 | ||||||||||||
| 2012 | 2011 | |||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
| Net loss | $ | (325,972 | ) | $ | (890,606 | ) | ||||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||||
| Depreciation and accretion | 585,085 | 534,996 | ||||||||||
| Amortization | 2,564 | 3,088 | ||||||||||
| Stock based compensation | 136,889 | 115,406 | ||||||||||
| Patent impairment | - | 38,726 | ||||||||||
| Gain on sale of equipment | 1,441 | (259 | ) | |||||||||
| Deferred income taxes | - | 156,000 | ||||||||||
| Inventory reserve | 42,365 | 7,635 | ||||||||||
| Change in allowance for doubtful accounts | 30,000 | (530 | ) | |||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | 34,301 | 164,944 | ||||||||||
| Inventories | 188,063 | 291,288 | ||||||||||
| Prepaid expenses | (144,130 | ) | (13,922 | ) | ||||||||
| Other assets | 16,329 | (48,575 | ) | |||||||||
| Accounts payable | (103,260 | ) | (209,950 | ) | ||||||||
| Accrued expenses and customer deposits | (26,404 | ) | (151,456 | ) | ||||||||
| Net cash provided by (used in) operating activities | 437,271 | (3,215 | ) | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
| Proceeds on sale of equipment | - | 425 | ||||||||||
| Purchases of property and equipment | (587,939 | ) | (1,095,289 | ) | ||||||||
| Net cash used in investing activities | (587,939 | ) | (1,094,864 | ) | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
| Proceeds from exercise of common stock options | - | 41,350 | ||||||||||
| Proceeds from notes payable | 933,729 | 846,747 | ||||||||||
| Principal payments on capital lease obligations and notes payable | (950,311 | ) | (479,549 | ) | ||||||||
| Payment of accumulated dividends on preferred stock | - | (24,152 | ) | |||||||||
| Net cash (used in) provided by financing activities | (16,582 | ) | 384,396 | |||||||||
| NET DECREASE IN CASH | (167,250 | ) | (713,683 | ) | ||||||||
| CASH - Beginning of period | 798,069 | 1,511,752 | ||||||||||
| CASH - End of period | $ | 630,819 | $ | 798,069 | ||||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||||||
| Cash paid during the year for: | ||||||||||||
| Interest | $ | 86,693 | $ | 84,198 | ||||||||
| Income taxes | 455 | 713 | ||||||||||
| SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES | ||||||||||||
| Property and equipment purchased by capital lease | - | 185,000 | ||||||||||
| Increase in asset retirement obligation | 8,640 | 6,624 | ||||||||||
| SCI ENGINEERED MATERIALS, INC. | ||||||||||||||||
| THREE AND TWELVE MONTHS ENDED DEC. 31, 2012 and 2011 | Three months ended Dec. 31, | Twelve months ended Dec. 31, | ||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| RECONCILIATION OF GAAP TO NON-GAAP MEASURES | ||||||||||||||||
| Net loss | $ | (237,563 | ) | $ | (236,892 | ) | $ | (325,972 | ) | $ | (890,606 | ) | ||||
| Interest, net | 21,166 | 25,882 | 85,570 | 81,461 | ||||||||||||
| Income taxes | (2,696 | ) | 787 | (27,348 | ) | 165,899 | ||||||||||
| Patent impairment | - | - | - | 38,726 | ||||||||||||
| Depreciation and amortization | 151,701 | 143,867 | 587,649 | 538,084 | ||||||||||||
| EBITDA | (67,392 | ) | (66,356 | ) | 319,899 | (66,436 | ) | |||||||||
| Stock based compensation | 34,595 | 27,057 | 136,889 | 115,406 | ||||||||||||
| Adjusted EBITDA | $ | (32,797 | ) | $ | (39,299 | ) | $ | 456,788 | $ | 48,970 | ||||||
Contact Information:
For Additional Information
Contact:
Robert Lentz
(614) 876-2000