CLEVELAND, Oct 23, 2003 (BUSINESS WIRE) -- Brush Engineered Materials Inc. (NYSE:BW) today reported a net loss of $3.1 million on sales of $94.2 million for the third quarter of 2003 versus a net loss of $2.9 million on sales of $93.5 million for the third quarter of 2002. Diluted earnings per share was a loss of $0.18 for the third quarter of 2003, unchanged from 2002.
The third quarter was positively affected by improved margins and lower overhead costs. Gross margin improved by $2.4 million in the quarter compared to the prior year. As a percent of sales, gross margin grew 2.4% in the quarter compared to the prior year. The loss before income taxes for the quarter improved by 39% or $1.8 million compared to the third quarter of 2002. However, the third quarter 2002 pre-tax loss included a $2.0 million benefit resulting from a favorable court ruling which enabled the Company to increase the recovery portion on insured legal claims that were previously subject to apportionment. Absent this benefit, the pre-tax improvement for the quarter would have been $3.8 million or 57%.
For the first nine months of 2003 the Company reported a net loss of $6.0 million or $0.36 per share diluted on sales of $295.5 million versus a net loss of $8.8 million or $0.53 per share diluted on sales of $283.8 million. The loss before income taxes year to date improved by 62% or $8.8 million over the same period last year.
The Company's diluted net loss per share comparison to the prior year is affected by its accounting for income taxes. In the fourth quarter of 2002, in accordance with SFAS No. 109, "Accounting for Income Taxes", the Company recorded a $19.9 million charge as part of income tax expense in 2002 to establish a valuation allowance for substantially all of its net deferred tax assets in recognition of uncertainty regarding full realization. The Company intends to maintain a valuation allowance on the net deferred tax assets until a realization event occurs to support reversal of all or a portion of the reserve. Therefore, the Company's third quarter and year-to-date results include a tax provision of $0.2 million and $0.6 million, respectively, for certain foreign, state and local taxes but do not include a federal tax provision. In the third quarter and first nine months of 2002 a tax benefit of $1.8 million and $5.5 million, respectively, was recorded which reduced the net loss in those periods.
Debt
The Balance Sheet debt at the end of the third quarter was reduced by $5.5 million and $12.0 million, respectively, from the end of the second quarter 2003 and December 31, 2002. As reported earlier, the Company is continuing to examine several refinancing alternatives. At this time the Company anticipates concluding on the assessment of the alternatives prior to December 31, 2003.
Business Segment Reporting
Metal Systems Group
The Metal Systems Group consists of Alloy Products, Technical Materials, Inc. (TMI) and Beryllium Products.
The Metal Systems Group's third quarter sales of $54.1 million were down 5% from third quarter 2002 sales of $57.0 million. Year-to-date sales of $176.0 million were about flat with sales of $176.4 million for the first nine months of 2002.
The third quarter 2003 operating loss for the Metal Systems Group of $8.0 million improved by $2.0 million over the $10.0 million operating loss for the third quarter of 2002. The operating loss for the first nine months of 2003 of $14.2 million improved by $9.3 million over the same period last year.
Alloy Products' 2003 third quarter sales of $36.8 million were down 3% from third quarter 2002 sales. Year-to-date sales of $119.3 million were up 2% over the same period last year. Weakness in the domestic market for Alloy Products was offset by strength from the computer and appliance markets, especially in Southeast Asia. In addition, there continues to be signs of strengthening in the oil and gas and aerospace market sectors. Alloy Products is also experiencing a favorable product mix with an increase in sales of its higher beryllium-containing alloys.
TMI's third quarter sales of $9.1 million and year-to-date sales of $31.7 million were down 16% and 9%, respectively, over the same periods last year. While markets remained soft during the third quarter, recently, TMI is experiencing some strength in the automotive electronics, computer and semiconductor markets. It is anticipated that this recent trend will continue through the fourth quarter of 2003.
Beryllium Products' third quarter sales of $8.2 million are flat with third quarter 2002 sales. The flat sales in the third quarter are due primarily to short-term defense program delays. Sales for the first nine months of 2003 were $25.0 million, up approximately 2% above the same period last year. Beryllium Products has been experiencing an increased demand for its AlBeMet(R) materials and recently announced that its beryllium materials have been chosen for the mirrors on NASA's James Webb Space Telescope. The Webb Telescope mirrors will add approximately $15 million of sales over the next three years.
Microelectronics Group
The Microelectronics Group includes Williams Advanced Materials Inc. (WAM) and Electronic Products.
The Microelectronics Group's sales for the third quarter of 2003 of $39.4 million were up 15% over the third quarter of 2002. Sales for the first nine months of 2003 of $115.3 million were up 13% over the first nine months of 2002. Operating profit for the third quarter was $3.8 million, up $2.5 million over the third quarter of 2002. Operating profit for the first nine months of $9.8 million was up $4.8 million over the first nine months of 2002.
WAM's third quarter 2003 sales of $31.9 million were up 18% above third quarter 2002 sales of $27.1 million. Year-to-date sales of $92.1 million were up 15% above the same period last year. It is anticipated that WAM's broad market and product diversity will continue to provide stable revenue through the remainder of 2003. As a leading worldwide supplier to the digital versatile disc market, the seasonal holiday volume buildup should favorably impact fourth quarter 2003 revenue. In addition, WAM has experienced recent strength from the wireless telecommunications handset market for its thin film and traditional electronic packaging products.
Electronic Products' 2003 third quarter sales of $7.5 million and year-to-date sales of $23.2 million were up 4% as compared to both periods last year.
Outlook
The Company noted that while there are indications of a strengthening in the end-use markets it serves, forecasting future sales levels remains a challenge due to short lead times and mixed domestic economic conditions. Order entry in September and thus far in October has been encouraging but the lack of visibility across the Company's major markets makes it difficult to identify if this strength will continue through the remainder of the quarter. At this time, it is expected that fourth quarter 2003 sales will be 3 to 8% greater than the prior year fourth quarter sales of $89 million.
Chairman's Comments
Commenting on the results, Gordon D. Harnett, Chairman, President and Chief Executive Officer, stated, "We continued to make improvements during the quarter in our manufacturing operations through our Lean Six Sigma manufacturing efforts. We remain focused on several initiatives aimed at sales growth, broadening product breadth and diversifying our end-use markets as keys to improving profitability."
Forward-looking Statements
Portions of the content set forth in this document that are not statements of historical or current facts are forward-looking statements. The Company's actual future performance may materially differ from that contemplated by the forward-looking statements as a result of a variety of factors. These factors include, in addition to those mentioned elsewhere herein:
-- The condition of the markets which the Company serves, whether
defined geographically or by segment, with the major market
segments being telecommunications and computer, optical media,
automotive electronics, industrial components, aerospace and
defense and appliance.
-- Actual sales in the fourth quarter 2003.
-- Changes in product mix and the financial condition of
particular customers.
-- The Company's success in implementing its strategic plans and
the timely and successful completion of any capital expansion
projects.
-- The availability of adequate lines of credit and the
associated cost and interest rates.
-- Other financial factors, including tax rates, exchange rates,
pension costs, energy costs and the cost and availability of
insurance.
-- Changes in government regulatory requirements and the
enactment of new legislation that impacts the Company's
obligations.
-- The conclusion of pending litigation matters in accordance
with the Company's expectation that there will be no material
adverse effects.
Brush Engineered Materials Inc. is headquartered in Cleveland, Ohio. The Company, through its wholly-owned subsidiaries, supplies worldwide markets with beryllium products, alloy products, electronic products, precious metal products, and engineered material systems.
Brush Engineered Materials Inc.
Digest of Earnings
September 26, 2003
2003 2002
------------- -------------
Third Quarter 2003
Net Sales $94,156,000 $93,481,000
Net Loss ($3,060,000) ($2,906,000)
Share Earnings - Basic ($0.18) ($0.18)
Average Shares - Basic 16,563,098 16,558,417
Share Earnings - Diluted ($0.18) ($0.18)
Average Shares - Diluted 16,563,098 16,558,417
Year-to-date
Net Sales $295,479,000 $283,812,000
Net Loss ($6,039,000) ($8,788,000)
Share Earnings - Basic ($0.36) ($0.53)
Average Shares - Basic 16,562,559 16,557,026
Share Earnings - Diluted ($0.36) ($0.53)
Average Shares - Diluted 16,562,559 16,557,026
Consolidated Balance Sheets
(Unaudited)
Sept. 26, Dec. 31,
(Dollars in thousands) 2003 2002
----------------------------------------------------------------------
Assets
Current Assets
Cash and cash equivalents $4,804 $4,357
Accounts receivable 56,922 47,543
Inventories 88,034 94,324
Prepaid expenses 4,626 9,766
Deferred income taxes 757 244
--------- ---------
Total Current Assets 155,143 156,234
Other assets 25,576 25,629
Long-term deferred income taxes 242 472
Property, Plant and Equipment 482,053 476,283
Less allowances for depreciation,
depletion and impairment 339,568 323,739
--------- ---------
142,485 152,544
--------- ---------
$323,446 $334,879
========= =========
Liabilities and Shareholders' Equity
Current Liabilities
Short-term debt $39,262 $27,235
Accounts payable 15,770 15,129
Other liabilities and accrued items 35,250 30,439
Income taxes 1,046 786
--------- ---------
Total Current Liabilities 91,328 73,589
Other Long-Term Liabilities 15,831 17,459
Retirement and Post-employment Benefits 50,506 48,518
Long-term Debt 12,185 36,219
Minority interest in subsidiary 48 -
Shareholders' Equity 153,548 159,094
--------- ---------
$323,446 $334,879
========= =========
See notes to consolidated financial statements.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands Third Quarter Ended Nine Months Ended
except share and per Sept. 26, Sept. 27, Sept. 26, Sept. 27,
share amounts) 2003 2002 2003 2002
----------------------------------------------------------------------
Net sales $94,156 $93,481 $295,479 $283,812
Cost of sales 79,786 81,466 245,132 246,473
----------- ----------- ----------- -----------
Gross Margin 14,370 12,015 50,347 37,339
Selling, general
and administrative
expenses 14,299 13,986 48,208 46,134
Research and
development
expenses 998 1,003 3,034 3,177
Other-net 1,455 952 2,594 20
----------- ----------- ----------- -----------
Operating Loss (2,382) (3,926) (3,489) (11,992)
Interest expense 490 776 1,933 2,275
----------- ----------- ----------- -----------
Loss before income
taxes (2,872) (4,702) (5,422) (14,267)
Minority Interest (2) - (24) -
Income taxes 190 (1,796) 641 (5,479)
----------- ----------- ----------- -----------
Net Loss $(3,060) $(2,906) $(6,039) $(8,788)
=========== =========== =========== ===========
Per Share of Common
Stock: Basic $(0.18) $(0.18) $(0.36) $(0.53)
Weighted average
number of common shares
outstanding 16,563,098 16,558,417 16,562,559 16,557,026
Per Share of Common
Stock: Diluted $(0.18) $(0.18) $(0.36) $(0.53)
Weighted average
number of common shares
outstanding 16,563,098 16,558,417 16,562,559 16,557,026
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
Sept. 26, Sept. 27,
(Dollars in thousands) 2003 2002
----------------------------------------------------------------------
Net Loss ($6,039) ($8,788)
Adjustments to Reconcile Net Loss to Net Cash
Provided From Operating Activities:
Depreciation, depletion and amortization 15,562 15,484
Decrease (Increase) in accounts receivable (8,919) (3,936)
Decrease (Increase) in inventory 7,142 17,131
Decrease (Increase) in prepaid and other current
assets 5,169 1,434
Increase (Decrease) in accounts payable and
accrued expenses 3,292 (2,070)
Increase (Decrease) in interest and taxes payable 230 (2,503)
Increase (Decrease) in deferred income taxes 73 (283)
Increase (Decrease) in other long-term
liabilities 140 (5,667)
Other - net 1,421 1,008
-------- --------
Net Cash Provided From Operating
Activities 18,071 11,810
Cash Flows from Investing Activities:
Payments for purchase of property, plant and
equipment (4,760) (3,899)
Payments for mine development (137) (58)
Proceeds from sale of property, plant and
equipment 34 140
-------- --------
Net Cash (Used in) Investing
Activities (4,863) (3,817)
Cash Flows from Financing Activities:
Repayment of short-term debt (10,729) (10,633)
Proceeds from issuance of long-term debt 2,000 12,000
Repayment of long-term debt (4,034) (13,000)
-------- --------
Net Cash (Used in) Financing
Activities (12,763) (11,633)
Effects of Exchange Rate Changes 2 (159)
-------- --------
Net Change in Cash and Cash
Equivalents 447 (3,799)
Cash and Cash Equivalents at Beginning
of Period 4,357 7,014
-------- --------
Cash and Cash Equivalents at End of
Period $4,804 $3,215
======== ========
See notes to consolidated financial statements.
Notes to Consolidated Financial Statements
(Unaudited)
Note A - Accounting Policies
In management's opinion, the accompanying consolidated financial
statements contain all adjustments necessary to present fairly the
financial position as of September 26, 2003 and December 31, 2002 and
the results of operations for the three and nine month periods ended
September 26, 2003 and September 27, 2002. All of the adjustments were
of a normal and recurring nature.
Note B - Inventories
Sept. 26, Dec. 31,
(Dollars in thousands) 2003 2002
---------------------------------------------------------------------
Principally average cost:
Raw materials and supplies $25,088 $22,572
In process 64,525 65,809
Finished goods 23,655 29,522
-------- --------
Gross inventories 113,268 117,903
Excess of average cost over LIFO
Inventory value 25,234 23,579
-------- --------
Net inventories $88,034 $94,324
======== ========
Notes to Consolidated Financial Statements
(Unaudited)
Note C - Comprehensive Loss
The reconciliation between Net Loss and Comprehensive Loss for the
three and nine month periods ended September 26, 2003 and September
27, 2002 is as follows:
Third Quarter Ended Nine Months Ended
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
(Dollars in
thousands) 2003 2002 2003 2002
------------------------------------------------------------
Net Loss $(3,060) $(2,906) $(6,039) $(8,788)
Cumulative
Translation
Adjustment 344 (118) 274 627
Change in the Fair Value
of Derivative
Financial
Instruments 2,031 (1,790) 131 (4,957)
--------- ------------ --------- ---------
Comprehensive
Loss $(685) $(4,814) $(5,634) $(13,118)
========= ============ ========= =========
Note D - Segment Reporting
Metal Micro- Total All
(Dollars in Systems Electronics Segments Other Total
thousands)
----------------------------------------------------------------------
Third Quarter 2003
------------------
Revenues from
external
customers $54,074 $39,355 $93,429 $727 $94,156
Intersegment
revenues 572 233 805 3,071 3,876
Profit (loss)
before interest
and taxes (8,036) 3,804 (4,232) 1,850 (2,382)
Third Quarter 2002
------------------
Revenues from
external
customers $56,966 $34,269 $91,235 $2,246 $93,481
Intersegment
revenues 894 444 1,338 3,275 4,613
Profit (loss)
before interest
and taxes (9,975) 1,290 (8,685) 4,759 (3,926)
First Nine
Months 2003
-------------
Revenues from
external
customers $175,951 $115,316 $291,267 $4,212 $295,479
Intersegment
revenues 2,290 751 3,041 10,725 13,766
Profit (loss)
before interest
and taxes (14,235) 9,814 (4,421) 932 (3,489)
First Nine
Months 2002
------------
Revenues from
external
customers $176,420 $102,295 $278,715 $5,097 $283,812
Intersegment
revenues 2,261 1,401 3,662 9,907 13,569
Profit (loss)
before interest
and taxes (23,574) 4,959 (18,615) 6,623 (11,992)
SOURCE: Brush Engineered Materials Inc.
Brush Engineered Materials Inc.
Investors: Michael C. Hasychak, 216-383-6823
Media: Patrick S. Carpenter, 216-383-6835
http://www.beminc.com
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