CLEVELAND, Apr 29, 2004 (BUSINESS WIRE) -- Brush Engineered Materials Inc. (NYSE:BW) today reported first quarter net income of $3.8 million or $0.22 per share diluted versus a net loss of $3.0 million or $0.18 per share for the first quarter of 2003. Sales were up 26.0% to $125.9 million compared to the first quarter 2003 sales of $99.5 million.
The significant improvement in earnings is due to increased sales volume, improved product mix and continued improvement in margins and operating efficiencies. Gross margin as a percent of sales improved to 23.5% compared to 17.2% in the first quarter of 2003. Net income was negatively affected by $1.2 million due to a non-cash mark-to-market valuation of a stock based compensation plan and a non-cash unrealized loss related to the fair value of an interest rate swap.
First quarter 2004 was the fifth consecutive quarter where sales were higher than the comparable quarter of the prior year. The increase, approximately $26.4 million, was driven by strength across almost all of the Company's key end-use markets, including telecommunications and computer, automotive and optical media. In addition to continued strength in Asia and Europe, the domestic economy showed signs of a stronger recovery. Metal prices and exchange rates accounted for approximately $6.4 million of the $26.4 million increase in sales for the quarter.
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 first quarter sales of $76.0 million were 24.1% higher than first quarter 2003 sales of $61.2 million. The first quarter operating profit was $3.2 million compared to the first quarter 2003 operating loss of $3.4 million.
Alloy Products first quarter sales of $52.5 million were up 30.0% over 2003 first quarter sales of $40.5 million. Alloy is experiencing global strength across its major markets including telecommunications and computer, automotive and industrial components. In addition to the continued strong demand in Asia, which was up 32.0%, first quarter sales in Europe were up 44.0% and North American sales were up 24.0% versus the first quarter of 2003. New products including ToughMet(R), a non-beryllium based copper-nickel-tin alloy system for heavy equipment applications, also contributed to the growth in sales. During the first quarter, Alloy Products continued to make progress with its operating improvement programs and achieved a record high in manufacturing productivity.
TMI first quarter sales of $13.8 million were 16.0% higher than the first quarter 2003 sales of $11.9 million. The sales increase is primarily due to the increased demand from telecommunications and computer product applications.
Beryllium Products sales in the first quarter of $9.7 million were approximately 10.0% above first quarter 2003 sales of $8.8 million. Beryllium Products continues to experience strong demand from the defense market. In addition, record shipments were achieved in the first quarter in the Electrofusion Products business due to strong commercial demand. Also the first shipments for the James Webb Space Telescope application were made in the first quarter.
Microelectronics Group:
The Microelectronics Group includes Williams Advanced Materials Inc. (WAM) and Electronic Products.
The Microelectronics Group first quarter 2004 sales of $49.9 million were 30.0% above the first quarter 2003 sales of $38.3 million. Operating profit of $5.5 million was more than double the first quarter 2003 operating profit of $2.5 million.
WAM's first quarter sales of $42.1 million were 37.8% higher than first quarter 2003 sales of $30.5 million. The increase in sales was driven by strong demand from the optical media, performance film, wireless telecommunications handset and semiconductor markets.
Electronic Products first quarter 2004 sales of $7.8 million were about flat with the first quarter of 2003. Sales to the telecommunications and computer market remained steady through the first quarter of 2004 with some strength from the electronics packaging sector.
Outlook
The strengthening that occurred in the Company's key end-use markets during the fourth quarter of 2003 and the first quarter of 2004 is currently expected to continue into the second quarter. Orders received in the first quarter exceeded orders billed in the quarter by approximately $12.0 million. Lead times are short and changes in order rates can quickly translate to higher or lower sales. Assuming the stronger markets continue throughout the second quarter, the Company's revenues would be favorably affected and sales would be up approximately 15.0-25.0% compared to the second quarter of 2003 sales of $101.8 million.
The second quarter earnings may be favorably affected by higher factory operating rates. The mark-to-market valuations that negatively affected the first quarter results could favorably or unfavorably affect the second quarter's results depending upon interest rates and the Company's stock price.
Chairman's Comments
Commenting on the results, Gordon D. Harnett, President, Chairman and CEO, stated, "I am very pleased to report the significant improvement in sales and earnings for the first quarter of 2004. Our long-term strategic initiatives including operational improvements, overhead reduction, expanded geographic marketing and sales and the introduction of new products have returned us to profitability. We will remain disciplined in the continued implementation of our strategy and look forward to continued improvement throughout 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 second
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
April 2, 2004
2004 2003
------------- ------------
First Quarter
Net Sales $125,862,000 $99,518,000
Net Income (Loss) $3,754,000 ($3,016,000)
Share Earnings - Basic $0.23 ($0.18)
Average Shares - Basic 16,618,565 16,561,430
Share Earnings - Diluted $0.22 ($0.18)
Average Shares - Diluted 16,969,433 16,561,430
Consolidated Balance Sheets
(Unaudited)
Apr. 2, Dec. 31,
(Dollars in thousands) 2004 2003
----------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $5,338 $5,062
Accounts receivable 67,117 55,102
Inventories 95,085 87,396
Prepaid expenses 6,208 5,454
Deferred income taxes 133 291
--------- ---------
Total current assets 173,881 153,305
Other assets 25,835 26,761
Long-term deferred income taxes 883 704
Property, plant and equipment 536,440 535,421
Less allowances for depreciation,
depletion and impairment 349,534 344,575
--------- ---------
186,906 190,846
--------- ---------
$387,505 $371,616
========= =========
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt $23,808 $13,387
Accounts payable 20,350 16,038
Other liabilities and accrued items 34,184 37,366
Income taxes 812 1,373
--------- ---------
Total current liabilities 79,154 68,164
Other long-term liabilities 13,991 14,739
Retirement and post-employment benefits 49,794 49,358
Long-term debt 84,292 85,756
Minority interest in subsidiary - 26
Shareholders' equity 160,274 153,573
--------- ---------
$387,505 $371,616
========= =========
See notes to consolidated financial statements.
Consolidated Statements of Income
(Unaudited)
First Quarter Ended
(Dollars in thousands except share and per April 2, March 28,
share amounts) 2004 2003
----------------------------------------------------------------------
Net sales $125,862 $99,518
Cost of sales 96,285 82,405
----------- -----------
Gross margin 29,577 17,113
Selling, general and administrative
expenses 19,048 17,298
Research and development expenses 1,268 1,108
Other-net 3,190 746
----------- -----------
Operating profit (loss) 6,071 (2,039)
Interest expense 2,218 772
----------- -----------
Income (loss) before income taxes 3,853 (2,811)
Income taxes 99 205
----------- -----------
Net income (loss) $3,754 $(3,016)
=========== ===========
Per share of common stock: basic $0.23 $(0.18)
Weighted average number
of common shares outstanding 16,618,565 16,561,430
Per share of common stock: diluted $0.22 $(0.18)
Weighted average number
of common shares outstanding 16,969,433 16,561,430
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
April 2, March 28,
(Dollars in thousands) 2004 2003
----------------------------------------------------------------------
Net income (loss) $3,754 ($3,016)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation, depletion and amortization 5,396 5,101
Amortization of deferred financing costs in
interest expense 362 83
Derivative financial instrument ineffectiveness 482 16
Decrease (increase) in accounts receivable (12,121) (11,640)
Decrease (increase) in inventory (7,684) (454)
Decrease (increase) in prepaid and other current
assets (290) 910
Increase (decrease) in accounts payable and
accrued expenses 2,437 7,476
Increase (decrease) in interest and taxes payable (1,147) 282
Increase (decrease) in deferred income taxes (178) (52)
Increase (decrease) in other long-term
liabilities (950) (333)
Other - net 800 1,445
-------- --------
Net cash used in operating activities (9,139) (182)
Cash flows from investing activities:
Payments for purchase of property, plant and
equipment (1,356) (1,587)
Payments for mine development (90) (101)
Proceeds from (payments for) other investments 39 (1)
Proceeds from sale of property, plant and
equipment 15 9
-------- --------
Net cash used in investing activities (1,392) (1,680)
Cash flows from financing activities:
Proceeds from issuance/(repayment) of short-term
debt 8,983 842
Proceeds from issuance of long-term debt 24 -
Repayment of long-term debt (60) (34)
Issuance of common stock under stock option plans 1,883 -
-------- --------
Net cash provided from financing activities 10,830 808
Effects of exchange rate changes (23) 84
-------- --------
Net change in cash and cash equivalents 276 (970)
Cash and cash equivalents
at beginning of period 5,062 4,357
-------- --------
Cash and cash equivalents at end of period $5,338 $3,387
======== ========
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 April 2, 2004 and December 31, 2003 and the
results of operations for the three month periods ended April 2, 2004
and March 28, 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
Apr. 2, Dec. 31,
(Dollars in thousands) 2004 2003
-------------------------------------------------------------------
Principally average cost:
Raw materials and supplies $24,470 $24,990
Work in process 69,078 65,212
Finished goods 25,572 20,637
-------- --------
Gross inventories 119,120 110,839
Excess of average cost over LIFO
Inventory value 24,035 23,443
-------- --------
Net inventories $95,085 $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 month periods ended April 2, 2004 and March 28,
2003 is as follows:
First Quarter Ended
(Dollars in Apr. 2, Mar. 28,
thousands) 2004 2003
------------------------------------------
Net income (loss) $3,754 $(3,016)
Cumulative
translation
adjustment 225 (74)
Change in the fair
value of derivative
financial
instruments 928 1,164
-------- ------------
Comprehensive
income (loss) $4,907 $(1,926)
======== ============
Note D - Segment Reporting
Metal Micro- Total All
(Dollars in Systems Electronics Segments Other Total
thousands)
----------------------------------------------------------------------
First Quarter 2004
-------------------
Revenues from
external customers $75,958 $49,904 $125,862 $- $125,862
Intersegment
revenues 1,214 296 1,510 5,297 6,807
Operating profit
(loss) 3,176 5,489 8,665 (2,594) 6,071
First Quarter 2003
-------------------
Revenues from
external customers $61,207 $38,311 $99,518 $- $99,518
Intersegment
revenues 901 272 1,173 3,573 4,746
Operating profit
(loss) (3,424) 2,537 (887) (1,152) (2,039)
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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