SCI Engineered Materials, Inc. Reports First Quarter 2020 Results   


COLUMBUS, Ohio, May 04, 2020 (GLOBE NEWSWIRE) -- SCI Engineered Materials, Inc. (“SCI”) (SCIA: OTCQB), a global supplier and manufacturer of advanced materials for physical vapor deposition thin film applications who works closely with end users and OEMs to develop innovative, customized solutions, today reported financial results for the three months ended March 31, 2020.

The Company continues to receive orders for its products, although some shipments have been impacted by temporary closure of customer facilities due to the COVID-19 global pandemic. During the second quarter of 2020, and perhaps longer, we may operate below our normal production schedule.

Jeremy Young, President and Chief Executive Officer, stated, “Our first quarter 2020 results were profitable. We continue to value our employees and appreciate their contributions during this difficult period. We are aggressively adapting our business practices to the ongoing effects of the COVID-19 global pandemic, including regular contact via phone and other electronic means with our customers and suppliers, and responding to their changing circumstances.”

Revenue

Total revenue for the three months ended March 31, 2020, decreased approximately 14% to $3,438,795 from $4,015,138 a year ago due to lower volume. International shipments decreased $582,011 for the first quarter 2020 from the same period last year. Order backlog was $5.0 million on March 31, 2020, compared to $5.8 million at year-end 2019.

Gross profit

Gross profit decreased 27% to $509,338 for the first quarter 2020 from $696,302 for the same period a year ago, primarily due to lower revenue and product mix.

Operating expenses

Operating expenses (general and administrative expense, research and development expense and marketing and sales expense), decreased 21% to $421,853 in the first quarter 2020 from $537,288 for the same period in 2019. Each category of expense decreased at least 20% compared to the three months ended March 31, 2019. The largest dollar decrease was general and administrative expense, which was $76,635 below the first quarter 2019 amount due to expenses related to the Company’s executive management transition last year. Research and development expense decreased $21,965 for the first three months of 2020 due to lower compensation expense. Marketing and sales expense decreased $16,835 for the first quarter 2020 versus a year ago as a result of lower travel and compensation expense.

EBITDA*

Earnings before interest, income taxes, depreciation, and amortization (EBITDA) was $201,175 for the first three months of 2020 versus $286,093 a year ago, principally due to this year’s first quarter lower net income.

Income Applicable to Common Stock

For the three months ended March 31, 2020, net income applicable to common stock was $75,478 versus $149,304 for the same period last year. This decrease was due to lower gross profit for the first quarter 2020, which was partially offset by lower operating expenses. Fully diluted income per share was $0.02 for this year’s first quarter compared to $0.03 a year ago.

Cash and Total Debt Outstanding

Cash on hand was $1,818,620 on March 31, 2020, compared to $1,828,397 on December 31, 2019.

Net cash provided by operating activities was $170,612 for the first quarter 2020 compared to net cash used in operating activities of $71,779 for the same period last year. The comparative difference was principally due to decreases in accrued expenses and customer deposits compared to the first quarter 2019.

Total debt outstanding was $199,683 on March 31, 2020, versus $223,835 at year-end 2019, a decrease of 11%.

About SCI Engineered Materials, Inc.

SCI Engineered Materials is a global supplier and manufacturer of advanced materials for PVD thin film applications that works closely with end user and OEMs to develop innovative, customized solutions. Additional information is available at  www.sciengineeredmaterials.com or follow SCI Engineered Materials, Inc. at:

https://www.linkedin.com/company/sci-engineered-materials.-inc

https://www.facebook.com/sciengineeredmaterials/

*A reconciliation of the differences between the GAAP and non-GAAP financial measure of EBITDA as used in this release with the most directly comparable GAAP financial measures is included in the financial schedules that are a part of this release. This non-GAAP financial measure is intended to supplement and should be read together with our financial results. It should not be considered an alternative or substitute for, and should not be considered superior to, our reported financial results. Accordingly, users of this financial information should not place undue reliance on this non-GAAP financial measure.

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, plans of the Company and its management, and disruption of business resulting from the coronavirus COVID-19 global pandemic. 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, 2019. 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. Due to 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
  March 31,  December 31,
   2020    2019 
  (UNAUDITED)  
Current Assets     
  Cash $1,818,620   $1,828,397 
  Accounts receivable, less allowance for doubtful accounts  317,517    348,524 
  Inventories  1,842,884    2,749,038 
  Prepaid expenses  78,799    105,464 
    Total current assets  4,057,820    5,031,423 
      
Property and Equipment, at cost  9,106,836    8,989,157 
  Less accumulated depreciation  (7,109,474)   (7,036,955)
   1,997,362    1,952,202 
      
      
      
  Right of use asset, net  415,774    434,492 
  Other assets  88,030    86,958 
Other Assets  503,804    521,450 
      
TOTAL ASSETS $6,558,986   $7,505,075 
      
      
LIABILITIES AND SHAREHOLDERS' EQUITY 
  
Current Liabilities     
  Finance lease obligations $99,817   $98,524 
  Operating lease obligations  82,720    80,669 
  Accounts payable  129,157    254,004 
  Customer deposits  1,568,862    2,408,837 
  Accrued expenses  146,792    197,061 
    Total current liabilities  2,027,348    3,039,095 
      
  Finance lease obligations, net of current portion  99,866    125,311 
  Operating lease obligations, net of current portion  370,240    391,833 
    Total liabilities  2,497,454    3,556,239 
      
Total Shareholders' Equity  4,061,532    3,948,836 
      
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $6,558,986   $7,505,075 
      



 SCI ENGINEERED MATERIALS, INC.  
         
STATEMENTS OF OPERATIONS  
         
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 
         
(UNAUDITED)  
         
   2020     2019  
         
Revenue $3,438,795    $4,015,038  
         
Cost of revenue  2,929,457     3,318,736  
            
Gross profit  509,338     696,302  
         
General and administrative expense  283,165     359,800  
         
Research and development expense  86,904     108,869  
         
Marketing and sales expense  51,784     68,619  
         
Income from operations  87,485     159,014  
         
Interest expense (income)  4,069     (1,188) 
         
Income before provision for income taxes  83,416     160,202  
         
Income tax expense  1,900     4,860  
         
Net income  81,516     155,342  
         
Dividends on preferred stock  6,038     6,038  
         
INCOME APPLICABLE TO COMMON SHARES $75,478    $149,304  
         
Earnings per share - basic and diluted        
         
Income per common share        
  Basic $0.02    $0.03  
  Diluted $0.02    $0.03  
         
Weighted average shares outstanding        
  Basic  4,385,998     4,295,417  
Diluted  4,394,574     4,350,377  
         



SCI ENGINEERED MATERIALS, INC.
  
         
CONDENSED STATEMENTS OF CASH FLOWS
 
         
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
         
(UNAUDITED)
  
         
     2020   2019   
         
CASH PROVIDED BY (USED IN):     
 Operating activities$170,612  $(71,779)  
 Investing activities (156,237)  (207,451)  
 Financing activities (24,152)  (23,949)  
NET DECREASE IN CASH (9,777)  (303,179)  
         
CASH - Beginning of period 1,828,397   1,802,839   
         
CASH - End of period $1,818,620  $1,499,660   
         
         
         
         
         
         
         
         
         
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
 
         
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
         
(UNAUDITED)
  
         
     2020   2019   
Net income  $81,516  $155,342   
Interest    4,069   (1,188)  
Income taxes   1,900   4,860   
Depreciation and amortization 113,690   127,079   
EBITDA   $201,175  $286,093   
         



Contact:
Robert Lentz                                                  
(614) 439-6006