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SCI Engineered Materials, Inc. Reports First Quarter 2013 Results


May 13, 2013 - Columbus, OH

SCI Engineered Materials, Inc. ("SCI") (OTCQB: SCIA), a global supplier and manufacturer of advanced materials for PVD thin film applications that works closely with end users and OEMs to develop innovative, customized solutions, today reported its financial results for the three months ended March 31, 2013.

Dan Rooney, Chairman, President and Chief Executive Officer, commented, "SCI is in its best position in more than a decade to benefit from recent investments to increase our manufacturing capabilities and strengthen the company's presence in multiple markets. However, an inventory adjustment by a major customer combined with ongoing volatility in the solar market contributed to a decrease in total revenue compared to the same period last year and a loss for the quarter. We are responding to these short-term challenges by tightly controlling operating expenses and maintaining close contact with our customers. Our business strategy is sound and we will continue to utilize our core strengths to pursue attractive long-term growth opportunities."

Total revenue

Total revenue was $1,433,602 for the three months ended March 31, 2013, compared with $1,883,032 for the same period last year. Contract research revenue of $63,732 for the first quarter 2013 was similar to the same period last year.

Backlog was $1.6 million at March 31, 2013 versus $1.8 million at December 31, 2012 and $2.9 million on the same date a year ago. Backlog was impacted by the timing of blanket orders placed by customers and lower backlog related to contract research compared to the same date in 2012.

Gross profit

First quarter 2013 gross profit declined to $173,599 from $315,145 a year ago due to lower revenue and increased pricing pressure. As a result, gross profit margin declined to 12.1% for the first quarter 2013 from 16.7% for the same period last year.

Operating expenses

Operating expenses, which include marketing and sales, general and administrative, and R&D, declined 5.3% to $464,654 for the first quarter 2013. Lower R&D and marketing and sales expenses were partially offset by slightly higher general and administrative expense attributable to higher professional fees compared to a year ago.

Loss Applicable to Common Stock

Loss applicable to common stock was $267,594, or $0.07 per share, for the first quarter 2013 compared with loss applicable to common shares of $195,801, or $0.05 per share, for the same period last year. The year-over-year comparison was primarily impacted by the decline in gross profit versus the same period last year.

EBITDA

First quarter 2013 EBITDA (Earnings before interest, income taxes, depreciation and amortization) was negative $89,953 compared with negative EBITDA of $30,962 for the same period last year. Adjusted EBITDA, which excludes non-cash stock based compensation, was negative $54,518 for the first quarter 2013 versus adjusted EBITDA of $4,134 a year ago.

About SCI Engineered Materials, Inc.

SCI Engineered Materials is a global supplier and manufacturer of advanced materials for PVD thin film applications that works closely with end users and OEMs to develop innovative, customized solutions. 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 SCI being in the best position in more than a decade to benefit from recent investments to increase manufacturing capabilities and strengthen the company's presence in multiple markets, responding to the short-term challenges by tightly controlling operating expenses and maintaining close contact with customers, the business strategy is sound and the company will continue to utilize core strengths as it pursues attractive long-term growth opportunities. 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
March 31, December 31,
2013 2012
------------ ------------
(UNAUDITED)
Current Assets
Cash $ 413,031 $ 630,819
Accounts receivable, less allowance for
doubtful accounts 511,712 453,302
Inventories 681,700 815,075
Prepaid expenses 195,918 209,422
------------ ------------
Total current assets 1,802,361 2,108,618
------------ ------------

Property and Equipment, at cost 7,571,649 7,483,480
Less accumulated depreciation (4,397,444) (4,254,302)
------------ ------------
3,174,205 3,229,178
------------ ------------

Other Assets 65,574 66,764
------------ ------------

TOTAL ASSETS $ 5,042,140 $ 5,404,560
============ ============


LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, December 31,
2013 2012
------------ ------------
(UNAUDITED)
Current Liabilities
Short term debt $ 589,152 $ 537,937
Accounts payable 275,017 260,531
Customer deposits 226,948 313,745
Accrued expenses 198,337 194,218
------------ ------------
Total current liabilities 1,289,454 1,306,431

Long term debt 1,101,113 1,220,435
------------ ------------
Total liabilities 2,390,567 2,526,866

Commitments and contingencies

Total Shareholders' Equity 2,651,573 2,877,694
------------ ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,042,140 $ 5,404,560
============ ============



SCI ENGINEERED MATERIALS, INC.

STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012
(UNAUDITED)


2013 2012
------------ ------------

Product revenue $ 1,369,870 $ 1,814,542
Contract research revenue 63,732 68,490
------------ ------------
1,433,602 1,883,032
------------ ------------

Cost of product revenue 1,205,484 1,513,890
Cost of contract research revenue 54,519 53,997
------------ ------------
1,260,003 1,567,887
------------ ------------

Gross profit 173,599 315,145

General and administrative expense 295,210 280,913

Research and development expense 64,120 96,822

Marketing and sales expense 105,324 112,668
------------ ------------

Loss from operations (291,055) (175,258)
------------ ------------

Other income/(expense)
Interest, net (20,463) (19,690)
Gain on sale of equipment 50,000 -
------------ ------------
29,537 (19,690)
------------ ------------

Loss before provision for income tax (261,518) (194,948)

Income tax expense (benefit) 38 (5,185)
------------ ------------

Net loss (261,556) (189,763)

Dividends on preferred stock 6,038 6,038
------------ ------------

LOSS APPLICABLE TO COMMON STOCK $ (267,594) $ (195,801)
============ ============

Earnings per share - basic and diluted

Loss per common share
Basic $ (0.07) $ (0.05)
============ ============
Diluted $ (0.07) $ (0.05)
============ ============

Weighted average shares outstanding
Basic 3,829,898 3,805,931
============ ============
Diluted 3,829,898 3,805,931
============ ============



SCI ENGINEERED MATERIALS, INC.
STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012
(UNAUDITED)

2013 2012
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (261,556) $ (189,763)
Adjustments to reconcile net loss to net cash
from operating activities:
Depreciation and accretion 150,645 143,524
Amortization 457 772
Stock based compensation 35,435 35,096
Gain on sale of equipment (50,000) -
Inventory reserve 5,437 95
Credit for doubtful accounts (3,294) -
Changes in operating assets and liabilities:
Accounts receivable (55,116) (22,055)
Inventories 127,938 (470,699)
Prepaid expenses 13,504 (54,563)
Other assets 733 6,859
Accounts payable 14,486 205,315
Accrued expenses and customer deposits (84,838) 400,557
------------ ------------
Net cash (used in) provided by operating
activities (106,169) 55,138
------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on sale of equipment 50,000 -
Purchases of property and equipment (7,123) (37,167)
------------ ------------
Net cash provided by (used in) investing
activities 42,877 (37,167)
------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on capital lease
obligations and notes payable (154,496) (127,252)
------------ ------------
Net cash used in financing activities (154,496) (127,252)
------------ ------------

NET DECREASE IN CASH (217,788) (109,281)

CASH - Beginning of period 630,819 798,069
------------ ------------

CASH - End of period $ 413,031 $ 688,788
============ ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest $ 20,683 $ 20,111
Income taxes 38 -

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Property and equipment purchased by capital
lease 86,389 -
Increase in asset retirement obligation 2,160 2,160



SCI ENGINEERED MATERIALS, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
THREE MONTHS ENDED MARCH 31 2013 2012
------------ ------------

Net loss $ (261,556) $ (189,763)
Interest, net 20,463 19,690
Income taxes 38 (5,185)
Depreciation and amortization 151,102 144,296
------------ ------------
EBITDA (89,953) (30,962)
Stock based compensation 35,435 35,096
------------ ------------
Adjusted EBITDA $ (54,518) $ 4,134
============ ============


Contact:
Robert Lentz
(614) 876-2000

MarketWire

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