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SMALL BUSINESS
Spectrum Control Reports Third Quarter Profit
FAIRVIEW, Pa., Sept. 24 /PRNewswire-FirstCall/ -- Spectrum Control, Inc. (Nasdaq: SPEC), a leading designer and manufacturer of custom electronic products and systems, today reported results for the third quarter and nine month period ended August 31, 2009.
For the third quarter of fiscal 2009, the Company reported net income of $2.0 million or 16 cents per diluted share on sales of $31.5 million, compared to net income of $2.4 million or 18 cents per diluted share on sales of $33.1 million for the same period last year. For the first nine months of fiscal 2009, the Company had net income of $6.4 million or 50 cents per diluted share on sales of $98.2 million. For the comparable period of 2008, the Company had net income of $6.3 million or 47 cents per diluted share on sales of $96.9 million.
Dick Southworth, the Company's President and Chief Executive Officer, commented, "Despite the global recession's ongoing impact on virtually all of our commercial markets, we continue to generate positive operating results and year-to-date growth in sales and earnings. Our fundamental strategy of serving both the commercial and military markets is serving us well, with our strong military and defense business offsetting the persistent softness for substantially all commercial product applications. Current quarter sales and profitability were slightly below our previous expectations, reflecting changes in the timing of certain customer orders and related shipments. This quarterly impact, however, does not have any affect on our longer term business outlook. We continue to believe that we are strategically positioned for dynamic growth and enhanced shareholder value, as applications for our products in military and defense remain strong and the commercial markets finally begin to rebound."
Financial Highlights
Cash Flow
Our cash flow continues to be strong, with record levels of net cash being generated by operating activities. During the current quarter, net cash provided by operating activities was $5.7 million. With this current quarter cash flow, net operating cash generated for the first nine months of fiscal 2009 grew to a record $13.8 million. Our cash flow continues to benefit from our focused reductions in working capital requirements. With changing business levels and improved turnover rates, accounts receivable and inventories decreased by approximately $3.9 million during the nine month period ended August 31, 2009. During fiscal 2009, this positive cash flow has enabled us to repay $10.0 million of short-term bank debt ( reducing our outstanding line of credit borrowings to zero ), as well as fully funding all of our year-to-date capital expenditures of $2.9 million. Approximately $1.6 million of these capital expenditures were made in our microwave components and systems business to support manufacturing expansion and improvements needed for growing production requirements.
Customer Orders
Total customer orders received in the third quarter of fiscal 2009 amounted to $32.4 million, an increase of $1.3 million or 4% from the same period of last year. With our third quarter performance, aggregate year-to-date customer orders increased to $100.0 million. These customer order levels generated positive book-to-bill ratios of 1.03 to 1.00 for the third quarter of fiscal 2009 and 1.02 to 1.00 for the nine months ended August 31, 2009.
Shipments
Demand for our products in military/defense applications remains strong. Shipments to military/defense customers were $19.2 million or 61% of our total consolidated sales in the current quarter, compared to $15.8 million or 48% for the same period a year ago. For the first nine months of this fiscal year, our consolidated net sales increased by $1.4 million, with sales of our microwave products increasing significantly. In the first nine months of fiscal 2009, excluding the impact of the SatCon Electronics acquisition, sales of our microwave products increased by $3.4 million or 11% from a year ago. This increase was driven by numerous military/defense programs including applications in secure communications, radar systems, and countermeasures for improvised explosive devices.
Financial Position
At August 31, 2009, our ratio of current assets to current liabilities was over 6.00 to 1.00, our stockholders' equity was $110.9 million for a book value of $8.76 per share, and our total borrowed funds were less than $1.0 million. We believe our current financial position provides a solid foundation upon which to build our future growth.
Insurance Recoveries
Earlier in fiscal 2009, one of our manufacturing facilities sustained wind damage to its roof which, in turn, resulted in water damage to certain machinery, equipment, and leasehold improvements. In a separate incident, another of our manufacturing facilities sustained a small fire, destroying certain assets. During the third quarter ended August 31, 2009, all related insurance claims were settled and we received aggregate insurance proceeds of $1.3 million. As a result, we recorded a net gain of $528,000 ($346,000 net of tax) in the current quarter representing the excess of insurance recoveries over the carrying value of the assets destroyed and related costs incurred.
Current Business Outlook
Mr. Southworth added, "As announced earlier this month, we have received a $9.1 million contract for integrated microwave assemblies used in upgrades of fielded RCIED (Radio Controlled Improvised Explosive Devices) Jammer Systems. This contract, which we originally expected to receive earlier in fiscal 2009, was temporarily delayed as a result of a protest filed by a competitor of our customer. With this protest having been denied, product shipments under this contract are now expected to commence in December 2009 and continue through the second quarter of 2011. Based on the timing of these shipments, along with our current assessment of business conditions and overall customer demand, we expect our fiscal 2009 fourth quarter sales to be in the range of $32.5 to $33.5 million with earnings of $0.16 to $0.18 per share. Beyond the fourth quarter of fiscal 2009, we remain very optimistic about the future of our Company, as we continue to develop innovative new products and seek to consummate strategic business acquisitions."
Forward-Looking Information
This press release contains statements that are forward-looking statements within the meaning of the Private Securities Reform Act of 1995. These statements are based on current expectations, estimates and projections about the Company's business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors and risks discussed from time to time in the Company's Securities and Exchange Commission filings and reports. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic and international economic conditions. Such forward-looking statements speak only as of the date on which they are made and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release.
Simultaneous Webcast and Teleconference Replay
Spectrum Control, Inc. will host a teleconference to discuss its third quarter fiscal 2009 results on Thursday, September 24, 2009, at 4:45 p.m., Eastern Time. Internet users will be able to access a simultaneous webcast of the teleconference at www.spectrumcontrol.com or www.vcall.com. A taped replay of the call will be available through September 25, 2009, at 877-660-6853, access account 286, conference 331377, or for 30 days over the Internet at the Company's website.
About Spectrum Control
Spectrum Control, Inc. is a leader in the design, development and manufacture of custom electronic products and systems for the defense, aerospace, communications, and medical industries worldwide. For more information about Spectrum Control and its products, please visit the Company's website at www.spectrumcontrol.com.
Tables follow
Spectrum Control, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(Dollar Amounts in Thousands) August 31, November 30,
2009 2008
---- ----
Assets
Current assets
Cash and cash equivalents $8,019 $5,397
Accounts receivable, net 20,988 24,043
Inventories, net 29,995 30,638
Deferred income taxes 1,684 1,684
Prepaid expenses and other current
assets 2,178 2,307
----- -----
Total current assets 62,864 64,069
Property, plant and equipment, net 25,559 27,250
Other assets
Goodwill 36,811 36,811
Other 5,861 6,654
----- -----
Total assets $131,095 $134,784
======== ========
Liabilities and Stockholders' Equity
Current liabilities
Short-term debt $ - $10,000
Accounts payable 5,040 6,541
Income taxes payable 14 36
Accrued liabilities 4,468 4,415
Current portion of long-term debt 487 487
--- ---
Total current liabilities 10,009 21,479
Long-term debt 455 545
Other liabilities 856 978
Deferred income taxes 8,881 8,491
Stockholders' equity 110,894 103,291
------- -------
Total liabilities and stockholders'
equity $131,095 $134,784
======== ========
Spectrum Control, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
(Amounts in Thousands, Except Per Share Data)
For the For the
Three Months Ended Nine Months Ended
August 31, August 31,
------------------ -----------------
2009 2008 2009 2008
------ ------ ------ ------
Net sales $31,477 $33,124 $98,217 $96,852
Cost of products sold 23,728 24,532 73,262 73,329
------ ------ ------ ------
Gross margin 7,749 8,592 24,955 23,523
Selling, general and
administrative
expense 4,589 4,933 14,920 13,815
------ ------ ------ ------
Income from operations 3,160 3,659 10,035 9,708
Other income (expense):
Interest expense (43) (105) (206) (244)
Other income and
expense, net 2 16 40 272
------ ------ ------ ------
(41) (89) (166) 28
------ ------ ------ ------
Income before provision
for income taxes 3,119 3,570 9,869 9,736
Provision for income
taxes 1,078 1,216 3,454 3,417
------ ------ ------ ------
Net income $2,041 $2,354 $6,415 $6,319
====== ====== ====== ======
Earnings per common
share:
Basic $0.16 $0.18 $0.51 $0.48
====== ====== ====== ======
Diluted $0.16 $0.18 $0.50 $0.47
====== ====== ====== ======
Average number of
common shares
outstanding:
Basic 12,613 12,980 12,585 13,192
====== ====== ====== ======
Diluted 12,844 13,058 12,705 13,352
====== ====== ====== ======
Spectrum Control, Inc. and Subsidiaries
Selected Financial Data
(Unaudited)
For the For the
Three Months Ended Nine Months Ended
August 31, August 31,
------------------ -----------------
2009 2008 2009 2008
------ ----- ----- -----
Selected Financial Data,
as a Percentage of Net
Sales:
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 75.4 74.1 74.6 75.7
------ ------ ------ ------
Gross margin 24.6 25.9 25.4 24.3
Selling, general and
administrative expense 14.6 14.9 15.2 14.3
------ ------ ------ ------
Income from operations 10.0 11.0 10.2 10.0
Other income (expense):
Interest expense (0.1) (0.3) (0.2) (0.3)
Other income and
expense, net - - - 0.3
------ ------ ------ ------
Income before provision for
income taxes 9.9 10.7 10.0 10.0
Provision for income
taxes 3.4 3.6 3.5 3.5
------ ------ ------ ------
Net income 6.5% 7.1% 6.5% 6.5%
====== ====== ====== ======
Selected Operating Segment Data:
( Dollar Amounts in Thousands )
Advanced specialty products:
Customer orders
received $11,141 $11,962 $37,854 $44,301
Net sales 10,305 13,225 31,124 40,040
Microwave components and systems:
Customer orders
received 15,229 11,891 43,530 33,482
Net sales 14,495 11,483 44,737 32,230
Power management systems:
Customer orders
received 2,742 1,641 6,231 7,812
Net sales 2,173 2,341 7,014 7,731
Sensors and controls:
Customer orders
received 3,308 5,577 12,342 19,543
Net sales 4,504 6,075 15,342 16,851
SOURCE Spectrum Control, Inc.