CLEVELAND, Jul 28, 2004 (BUSINESS WIRE) -- Brush Engineered Materials Inc. (NYSE:BW) today reported second quarter net income of $6.6 million or $0.38 per share, diluted. The Company broke even in the second quarter of 2003. Sales for the second quarter of 2004 were up 26% to $128.6 million compared to second quarter 2003 sales of $101.8 million. The significant improvement in earnings is due to increased sales volume, improved margins and continued gains in operating efficiency. Gross margin as a percent of sales improved to approximately 23% compared to 19% in the second quarter of 2003.
The strong quarterly sales were driven by strength in the Company's key end-use markets, including telecommunications and computer, automotive electronics and data storage, and continued success with the development and introduction of new products. This is the sixth consecutive quarter in which sales were higher than in the prior year's comparable quarter. Metal prices and exchange rates accounted for $5.2 million of the $26.8 million sales improvement.
First half 2004 net income was $10.3 million or $0.60 per share diluted. The Company had a net loss of $3.0 million or $0.18 per share diluted in the first half of 2003. Gross margin as a percent of sales improved to 23% versus 18% in the first half of 2003. Year-to-date sales of $254.5 million were 26% higher than 2003 first half sales of $201.3 million. Metal prices and exchange rates accounted for $11.6 million of the $53.2 million sales improvement. First half operating profit improved by $16.1 million over the comparable period of 2003. Approximately 39% of the sales growth for the first half of the year flowed through to operating profit after considering metal prices and exchange rates.
Subsequent to the end of the second quarter, the Company announced the completion of a common stock offering of approximately 2.1 million newly issued shares. The net proceeds from the offering, after deducting the estimated fees, were approximately $35.0 million. The majority of the proceeds were used to repay outstanding borrowings under the Company's revolving line of credit and $5.0 million of the proceeds was used to repay a portion of the Company's long-term subordinated debt. In addition, as part of the public offering, the underwriters have an option to purchase up to an additional 0.3 million shares to cover over-allotments. If exercised, the option could generate up to an additional $5.7 million in net proceeds.
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 second quarter sales of $77.1 million were 27% higher than second quarter 2003 sales of $60.7 million. Year-to-date sales of $153.1 million were 26% higher than the sales of $121.9 million for the prior year.
The Metal Systems Group had a second quarter operating profit of $1.8 million compared to an operating loss of $2.8 million for the second quarter of 2003. The operating profit for the first half of 2004 was $5.0 million, an improvement of $11.2 million over the $6.2 million operating loss for the same period last year.
Alloy Products' second quarter sales of $54.7 million and first half sales of $107.2 million were each up approximately 30% compared to the same periods last year. Alloy continues to experience strength across its global major end-use markets including computer and telecommunications, automotive electronics, and industrial components. Alloy strip form products sales were up 37% while bulk products increased 15% compared to the first half of 2003. During the first half of 2004, Alloy Products continued to make progress with manufacturing efficiencies and the development and sales of its new beryllium and non-beryllium alloys. Although the Alloy order entry rate remains strong compared to the prior year, visibility is short and sales for the third quarter 2004 will be affected by the normal domestic and European seasonal factors.
TMI's second quarter sales of $14.6 million were up 37% over the second quarter of 2003. Sales of $28.3 million for the first half of 2004 were 26% higher than the first half sales of 2003. The growth has been driven by strong demand from the telecommunications and computer market. Sales to the automotive electronics market were stable. TMI's third quarter sales will also be impacted by the seasonal factors.
Beryllium Products' second quarter sales of $7.8 million were about flat with 2003 second quarter sales of $7.9 million while first half sales of $17.5 million were slightly above 2003 first half sales of $16.8 million. The outlook for defense and medical applications remains positive.
Microelectronics Group
The Microelectronics Group includes Williams Advanced Materials Inc. (WAM) and Electronic Products.
The Microelectronics Group's sales for the second quarter of 2004 of $51.5 million were 37% above second quarter 2003 sales of $37.7 million. Sales for the first six months of 2004 of $101.4 million were 33% above 2003 first half sales of $76.0 million. Operating profit for the second quarter was $4.8 million, 37% above the second quarter of 2003. Operating profit year-to-date was $10.3 million, 72% above the first half 2003 operating profit of $6.0 million.
WAM's 2004 second quarter sales of $43.5 million were 46% above second quarter 2003 sales of $29.8 million. WAM's sales for the first half of $85.6 million were 42% above the same period last year. The strong growth in the second quarter and first half of 2004 is attributable to the strong demand in the data storage and wireless handset markets.
Electronic Products' second quarter sales of $8.0 million and first half sales of $15.8 million were up slightly compared to the second quarter 2003 sales of $7.9 million and first half 2003 sales of $15.7 million.
Outlook
The Company's end-use markets continue to reflect positive trends and strong growth rates. Although the third quarter is usually affected by seasonal factors such as holiday periods in Europe and domestic maintenance shutdowns, the Company currently expects the third quarter to grow at rates similar to those experienced the past three quarters. Third quarter sales are currently expected to be at least 20% higher than the prior year's third quarter sales of $94.2 million.
Chairman's Comments
Commenting on the results, Gordon D. Harnett, Chairman, President and CEO, stated, "I am pleased to report the significant improvement in earnings for the second quarter and first half of 2004. Importantly, we are seeing good earnings leverage from the growth in sales. Our initiatives to lower cost and improve operating efficiencies continue to provide strong year-over-year margin improvement. Our new market and new product initiatives are also adding to the revenue growth. We remain committed to these initiatives and look forward to continued improvement in the second half of 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, including performance in the near term, 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 market, with the major markets
being telecommunications and computer, optical media,
automotive electronics, industrial components, aerospace and
defense and appliance.
-- Actual sales, operating rates and margins in the third quarter
2004 and for the full year of 2004.
-- Changes in product mix.
-- 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 factors, including, interest rates, exchange rates, tax
rates, pension costs, energy costs, raw material costs and the
cost and availability of insurance.
-- Changes in government regulatory requirements and the
enactment of any 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.
-- Additional risk factors that may affect the Company's results
are identified under the caption "Risk Factors" in the S-3
Registration Statement of the Company filed with the
Securities and Exchange Commission on April 2, 2004.
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
July 2, 2004
2004 2003
------------- -------------
Second Quarter
Net Sales $128,639,000 $101,805,000
Net Income $6,571,000 $37,000
Share Earnings - Basic $0.39 $0.00
Average Shares - Basic 16,704,568 16,563,098
Share Earnings - Diluted $0.38 $0.00
Average Shares - Diluted 17,127,698 16,639,382
Year-to-date
Net Sales $254,501,000 $201,323,000
Net Income (Loss) $10,324,000 ($2,979,000)
Share Earnings - Basic $0.62 ($0.18)
Average Shares - Basic 16,661,099 16,562,283
Share Earnings - Diluted $0.60 ($0.18)
Average Shares - Diluted 17,107,295 16,562,283
Consolidated Balance Sheets
(Unaudited)
July 2, Dec. 31,
(Dollars in thousands) 2004 2003
----------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $10,325 $5,062
Accounts receivable 67,950 55,102
Inventories 100,030 87,396
Prepaid expenses 5,674 5,454
Deferred income taxes 51 291
--------- ---------
Total current assets 184,030 153,305
Other assets 16,006 18,902
Long-term deferred income taxes 1,393 704
Property, plant and equipment 537,679 535,421
Less allowances for depreciation,
depletion and impairment 355,873 344,575
--------- ---------
181,806 190,846
Goodwill 7,992 7,859
--------- ---------
$391,227 $371,616
========= =========
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt $25,516 $13,387
Accounts payable 16,994 16,038
Other liabilities and accrued items 38,200 37,366
Income taxes 928 1,373
--------- ---------
Total current liabilities 81,638 68,164
Other long-term liabilities 12,219 14,739
Retirement and post-employment benefits 50,439 49,358
Long-term debt 78,581 85,756
Minority interest in subsidiary - 26
Shareholders' equity 168,350 153,573
--------- ---------
$391,227 $371,616
========= =========
See notes to consolidated financial statements.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands Second Quarter Ended First Half Ended
except share and per July 2, June 27, July 2, June 27,
share amounts) 2004 2003 2004 2003
---------------------------------------------- -----------------------
Net sales $128,639 $101,805 $254,501 $201,323
Cost of sales 99,198 82,941 195,483 165,346
----------- ----------- ----------- -----------
Gross margin 29,441 18,864 59,018 35,977
Selling, general and
administrative expenses 19,161 16,611 38,208 33,909
Research and
development expenses 1,098 928 2,366 2,036
Other-net 127 230 3,319 976
----------- ----------- ----------- -----------
Operating profit (loss) 9,055 1,095 15,125 (944)
Interest expense 2,389 834 4,607 1,606
----------- ----------- ----------- -----------
Income (loss) before
income taxes 6,666 261 10,518 (2,550)
Minority interest - (22) - (22)
Income taxes 95 246 194 451
----------- ----------- ----------- -----------
Net income (loss) $6,571 $37 $10,324 $(2,979)
=========== =========== =========== ===========
Per share of common
stock: basic $0.39 $0.00 $0.62 $(0.18)
Weighted average
number of common
shares outstanding 16,704,568 16,563,098 16,661,099 16,562,283
Per share of common
stock: diluted $0.38 $0.00 $0.60 $(0.18)
Weighted average
number of common
shares outstanding 17,127,698 16,639,382 17,107,295 16,562,283
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows
(Unaudited)
First Half Ended
July 2, June 27,
(Dollars in thousands) 2004 2003
----------------------------------------------------------------------
Net income (loss) $10,324 ($2,979)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation, depletion and amortization 12,025 10,021
Amortization of deferred financing costs in
interest expense 722 163
Derivative financial instrument ineffectiveness (1) 58
Decrease (increase) in accounts receivable (13,344) (10,461)
Decrease (increase) in inventory (12,923) 5,754
Decrease (increase) in prepaid and other current
assets 293 1,666
Increase (decrease) in accounts payable and
accrued expenses 4,287 1,870
Increase (decrease) in interest and taxes payable (1,033) 105
Increase (decrease) in deferred income taxes (709) 147
Increase (decrease) in other long-term liabilities (374) 173
Other - net 1,771 653
-------- --------
Net cash provided from operating activities 1,038 7,170
Cash flows from investing activities:
Payments for purchase of property, plant and
equipment (2,959) (3,212)
Payments for mine development (120) (101)
Proceeds from other investments 14 -
Proceeds from sale of property, plant and
equipment 15 8
-------- --------
Net cash used in investing activities (3,050) (3,305)
Cash flows from financing activities:
Proceeds from issuance/(repayment) of short-term
debt 13,557 (4,959)
Proceeds from issuance of long-term debt 24 2,000
Repayment of long-term debt (8,629) (4,034)
Issuance of common stock under stock option plans 2,381 -
-------- --------
Net cash provided from (used in)
financing activities 7,333 (6,993)
Effects of exchange rate changes (58) 78
-------- --------
Net change in cash and cash equivalents 5,263 (3,050)
Cash and cash equivalents at beginning of period 5,062 4,357
-------- --------
Cash and cash equivalents at end of period $10,325 $1,307
======== ========
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 July 2, 2004 and December 31, 2003 and the
results of operations for the three and six month periods ended
July 2, 2004 and June 27, 2003. All of the adjustments were of a
normal and recurring nature. Certain items in the prior year have been
reclassified to conform to the 2004 consolidated financial statement
presentation.
Note B - Inventories
July 2, Dec. 31,
(Dollars in thousands) 2004 2003
-------------------------------------------------------------------
Principally average cost:
Raw materials and supplies $23,655 $24,990
Work in process 74,631 65,212
Finished goods 28,457 20,637
--------- --------
Gross inventories 126,743 110,839
Excess of average cost over LIFO
Inventory value 26,713 23,443
--------- --------
Net inventories $100,030 $87,396
========= ========
Notes to Consolidated Financial Statements
(Unaudited)
Note C - Comprehensive Income (Loss)
The reconciliation between net income (loss) and comprehensive income
(loss) for the three and six month periods ended July 2, 2004 and
June 27, 2003 is as follows:
Second Quarter Ended First Half Ended
July 2, June 27, July 2, June 27,
(Dollars in thousands) 2004 2003 2004 2003
------------------------------ ---------- --------- -------- ---------
Net income (loss) $6,571 $37 $10,324 $(2,979)
Cumulative translation adjustment (356) 3 (131) (70)
Change in the fair value of
derivative financial
instruments 1,424 (3,065) 2,353 (1,900)
---------- --------- -------- ---------
Comprehensive income (loss) $7,639 $(3,025) $12,546 $(4,949)
========== ========= ======== =========
Note D - Segment Reporting
(Dollars in Metal Micro- Total All
thousands) Systems Electronics Segments Other Total
------------------ --------- ------------ --------- ------- ---------
Second Quarter 2004
-------------------
Revenues from
external customers $77,129 $51,510 $128,639 $- $128,639
Intersegment revenues 856 391 1,247 6,185 7,432
Operating profit 1,795 4,804 6,599 2,456 9,055
Second Quarter 2003
-------------------
Revenues from
external customers $60,670 $37,650 $98,320 $3,485 $101,805
Intersegment revenues 817 246 1,063 4,081 5,144
Operating profit
(loss) (2,775) 3,473 698 397 1,095
First Half 2004
----------------
Revenues from
external customers $153,087 $101,414 $254,501 $- $254,501
Intersegment revenues 2,070 687 2,757 11,482 14,239
Operating profit
(loss) 4,971 10,293 15,264 (139) 15,125
First Half 2003
---------------
Revenues from
external customers $121,877 $75,961 $197,838 $3,485 $201,323
Intersegment revenues 1,718 518 2,236 7,654 9,890
Operating profit
(loss) (6,199) 6,010 (189) (755) (944)
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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