SCI Engineered Materials, Inc. ("SCI") (OTCQB: SCIA), which
develops and commercializes technologies and manufactures ceramics
and metals for advanced applications in the physical vapor
deposition industry, today reported its financial results for the
three months and twelve months ended December 31, 2012.
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 TWELVE MONTHS ENDED
DEC. 31, 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 Three months ended Twelve months ended
DEC. 31, 2012 and 2011 Dec. 31, 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
========= ========= ========= =========
For Additional Information Contact: Robert Lentz (614)
876-2000
Grafico Azioni SCI Engineered Materials (QB) (USOTC:SCIA)
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