CLEVELAND, Jan 28, 2004 (BUSINESS WIRE) -- Brush Engineered Materials Inc. (NYSE:BW) today reported fourth quarter 2003 sales of $105.6 million, up $16.6 million or 19% compared to fourth quarter 2002 sales of $89.0 million. The growth in the fourth quarter was driven by continued strength in Asia, particularly China and Taiwan, and a significant improvement in the domestic economy. Metal prices, currency and a favorable product mix also contributed to the sales increase in the fourth quarter, with metal prices and currency accounting for approximately $4.4 million, or 5% of the total revenue for the quarter. The Company is experiencing a significant increase in sales to the telecommunications and computer markets and growth in most of its other markets as well.
The Company had previously announced a $6.0 million charge related to the completion of a five year $147.5 million debt refinancing. This fourth quarter 2003 charge included deferred costs from an interest rate swap and other deferred financing costs associated with the retirement of debt and lease obligations. Including the $6.0 million charge, the Company had a net loss of $7.2 million or $0.43 per share diluted in the fourth quarter of 2003 compared to a net loss of $26.8 million or $1.62 per share in the fourth quarter of 2002. The charge increased the net loss for the fourth quarter 2003 from $1.2 million to $7.2 million. Results for the fourth quarter 2002 were affected by a restructuring and impairment charge of $5.1 million for certain operating assets and $19.9 million for deferred taxes offset in part by a $2 million reduction in legal reserves. Absent these charges, fourth quarter 2003 pre-tax results improved by $7.2 million compared to the fourth quarter of 2002.
Sales for 2003 of $401.0 million were 8% higher than 2002 sales of $372.8 million. For the year the Company reported a net loss of $13.2 million or $0.80 per share diluted which included the above referenced $6.0 million charge. For the year 2002 the Company reported a net loss of $35.6 million or $2.15 per share diluted which included the net $23 million of items discussed above. Before the charges, pre-tax results for the year improved by $16.1 million compared to the prior 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 allowance. Therefore, the Company's fourth quarter 2003 and year-to-date 2003 results include a tax benefit of $0.1 million and tax provision of $0.6 million, respectively, for certain foreign, state and local taxes but do not include a federal tax benefit. In 2002 the tax expense for the fourth quarter and year was $15.3 million and $9.7 million, respectively, due to establishing a valuation allowance on deferred tax assets required under SFAS No. 109.
Balance Sheet
In the fourth quarter of 2003 the Company completed a five-year, $147.5 million debt refinancing, the proceeds of which were used to retire existing debt and purchase $51.8 million of leased assets, thereby terminating an existing off-balance sheet lease obligation. As a result of the refinancing the Company's assets and balance sheet debt increased by the amount of the purchase.
Total debt plus off-balance sheet equipment and precious metal lease obligations decreased by approximately $2.5 million in the fourth quarter of 2003 and $24.8 million for the year.
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 fourth quarter sales of $63.5 million were 23% higher than fourth quarter 2002 sales of $51.5 million. The fourth quarter operating loss was $2.4 million versus a $14.1 million loss in the fourth quarter of 2002. The Metal Systems Groups 2003 sales of $239.4 million were up 5% over 2002 sales of $227.9 million. The operating loss for 2003 was $16.6 million versus an operating loss of $37.7 million for 2002.
Alloy Products fourth quarter sales of $43.0 million were 24% higher than fourth quarter 2002 sales. Alloy Products 2003 sales were $162.3 million, up 7% over 2002 sales of $151.9 million. Continued strong sales in Asia coupled with the pickup in the domestic economy have helped fuel the fourth quarter double digit growth. In addition, 20% of the fourth quarter sales growth has come from new products and applications. The stronger order entry experienced in the fourth quarter is continuing into the first quarter of 2004. Alloy Products also continued to improve operating efficiencies through its lean manufacturing initiative.
TMI's fourth quarter sales of $10.3 million were 7% higher than fourth quarter 2002 sales of $9.5 million. Sales in 2003 of $41.9 million were down 5% from 2002. TMI's growth in the fourth quarter was due to improvements in the computer and semiconductor markets. This strength has continued into the first quarter of 2004.
Beryllium Products fourth quarter sales of $10.2 million were up 43% over fourth quarter 2002 sales of $7.1 million. Sales for 2003 of $35.2 million were 11% higher than 2002 sales of $31.6 million. Beryllium Products continues to experience strong demand in aerospace and defense product applications. In addition demand for an application for acoustic speakers has recently increased. It is anticipated that the strong order entry will continue through the first quarter of 2004.
Microelectronics Group
The Microelectronics Group includes Williams Advanced Materials Inc. (WAM) and Electronic Products.
Microelectronics Group sales for the fourth quarter of 2003 of $42.0 million were 14% higher than fourth quarter 2002 sales of $36.9 million. Sales for 2003 of $157.3 million were up 13% over 2002 sales. Operating profit for the fourth quarter was $2.8 million versus the fourth quarter of 2002 operating loss of $1.2 million. The fourth quarter 2002 operating loss was due to a severance and asset impairment charge in the amount of $2 million related to the Electronics Products business. The 2003 operating profit was $12.6 million versus $3.8 million for 2002.
WAM's fourth quarter sales of $35.7 million were 23% higher than fourth quarter sales of 2002. Sales in 2003 of $127.8 million were up 17% over 2002 sales of $109.1 million. Metal prices were responsible for 8% of the sales increase for the fourth quarter and 6% for 2003.
WAM continues to experience strong growth from the wireless telecommunications handset, digital versatile disc, semiconductor and performance film markets. This strength is continuing into the first quarter of 2004.
Electronic Products' 2003 fourth quarter sales of $6.3 million were down 20% from the fourth quarter of 2002. Sales in 2003 of $29.5 million were down 2% over 2002. The decline was driven by lower demand from defense oriented applications.
Outlook
The Company noted that the strengthening that occurred in its end-use markets during the most recent quarter has continued into early 2004 as well. Externally the Company is seeing evidence in its end-use markets that the U.S. economy is growing and the strength noted earlier in Asia is continuing. Internally, programs to lower cost, improve margins and reduce working capital continue to yield benefits. While the current order entry rate is encouraging it is difficult to determine whether the current trend will continue throughout 2004. At this time, the Company expects that the first quarter 2004 sales will be 15% to 20% greater than the prior year first quarter sales of $99.5 million.
Chairman's Comments
Commenting on the results, Gordon D. Harnett, Chairman, President and Chief Executive Officer, stated "I am pleased with the progress we made on several fronts during 2003. First, our significant sales growth, especially in the fourth quarter, was driven in part by our new products, strong growth in Asia and a rebound in the domestic economy; second, our cost reduction and lean manufacturing initiatives implemented in 2002 have continued to provide benefit and financial leverage; and, finally, the recent refinancing announced in December will provide lower overall financing costs, improve cash flow and provide more flexibility and liquidity for future growth. We look forward to continued improvement in 2004."
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 first quarter 2004.
-- 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.
-- Other financial factors, including tax rates, interest 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.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands Fourth Quarter Ended Year Ended
except share and per Dec. 31 Dec. 31 Dec. 31 Dec. 31
share amounts) 2003 2002 2003 2002
----------------------------------------------------------------------
Net sales $105,567 $89,017 $401,046 $372,829
Cost of sales 82,876 78,459 328,008 324,932
-------- -------- -------- --------
Gross Margin 22,691 10,558 73,038 47,897
Selling, general and
administrative
expenses 20,626 15,160 68,834 61,293
Research and
development
expenses 1,196 1,087 4,230 4,265
Other-net 6,720 5,164 9,314 5,184
-------- -------- -------- --------
Operating Loss (5,851) (10,853) (9,340) (22,845)
Interest expense 1,422 734 3,355 3,010
-------- -------- -------- --------
Loss before income taxes (7,273) (11,587) (12,695) (25,855)
Minority Interest (21) - (45) -
Income taxes (65) 15,228 576 9,749
-------- -------- -------- --------
Net Loss $(7,187) $(26,815) $(13,226) $(35,604)
======== ======== ======== ========
Per Share of Common Stock:
Basic $(0.43) $(1.62) $(0.80) $(2.15)
Weighted average number
of common shares
outstanding 16,563,652 16,558,417 16,562,846 16,557,388
Per Share of Common Stock:
Diluted $(0.43) $(1.62) $(0.80) $(2.15)
Weighted average number
of common shares
outstanding 16,563,652 16,558,417 16,562,846 16,557,388
Consolidated Balance Sheets
(Unaudited)
Dec. 31, Dec. 31,
(Dollars in thousands) 2003 2002
----------------------------------------------------------------------
Assets
Current Assets
Cash and cash equivalents $5,062 $4,357
Accounts receivable 55,102 47,543
Inventories 87,396 94,324
Prepaid expenses 5,454 9,766
Deferred income taxes 291 244
--------- ---------
Total Current Assets 153,305 156,234
Other assets 26,761 25,629
Long-term deferred income taxes 704 472
Property, Plant and Equipment 535,421 476,283
Less allowances for depreciation,
depletion and impairment 344,575 323,739
--------- ---------
190,846 152,544
--------- ---------
$371,616 $334,879
========= =========
Liabilities and Shareholders' Equity
Current Liabilities
Short-term debt $11,958 $27,235
Accounts payable 16,038 15,129
Other liabilities and accrued items 37,366 30,439
Income taxes 1,373 786
--------- ---------
Total Current Liabilities 66,735 73,589
Other Long-Term Liabilities 14,739 17,459
Retirement and Post-employment Benefits 49,358 48,518
Long-term Debt 87,185 36,219
Minority interest in subsidiary 26 -
Shareholders' Equity 153,573 159,094
--------- ---------
$371,616 $334,879
========= =========
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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