EX-99.1 3 e16557ex99_1.txt PRESS RELEASE Exhibit 99.1 Spectrum Control Reports Fourth Quarter and Annual Profit Increase in Customer Orders and Shipments; Improved Operating Margins FAIRVIEW, Pa., Jan. 8 /PRNewswire-FirstCall/ -- FlashResults Spectrum Control, Inc. (SPEC) (Numbers in Thousands, Except Per Share Data) 4th quarter ended 4th quarter ended 11/30/2003 YTD 11/30/2002 YTD Sales $16,915 $62,985 $15,703 $57,213 Net Income $409 $854 $158 $(737) Average Shares 13,090 13,004 12,979 13,063 EPS $0.03 $0.07 $0.01 $(0.06) Spectrum Control, Inc. (Nasdaq: SPEC), a leading designer and manufacturer of electronic control products and systems, today reported results for the fourth quarter and fiscal year ended November 30, 2003. For the fourth quarter of fiscal 2003, the Company reported net income of $409,000 or three cents per share on sales of $16,915,000, compared to net income of $158,000 or one cent per share on sales of $15,703,000 for the same period last year. For the fiscal year 2003, the Company generated net income of $854,000 or seven cents per share on sales of $62,985,000. In fiscal year 2002, the Company had a net loss of $737,000 or six cents per share on sales of $57,213,000. Dick Southworth, the Company's President and Chief Executive Officer, commented, "Customer order rates, which began to improve late in the third quarter of this year, continued to increase throughout the current quarter. Customer orders received in the fourth quarter amounted to $17.3 million, up $2.9 million or nearly 20% from the same period last year. Demand for our signal and power integrity products was particularly strong. These products are used in numerous applications and industries, including wireless telecommunications equipment. With our improved customer order rate, shipments in the current quarter grew to $16.9 million, an increase of $1.6 million or 10% from the immediate preceding quarter, and an increase of $1.2 million or 8% from a year ago. This higher shipment level, combined with our ongoing cost reduction programs, enhanced our profitability by improving efficiencies and enabling us to leverage our fixed manufacturing costs. Income from operations was $675,000 during the current quarter, more than double the operating profit from the comparable period of last year. While achieving this improved financial performance, we also continued to invest in our future with new product development and the ongoing establishment of our new manufacturing operations in China. We are encouraged by our strong fourth quarter performance, and we remain committed to achieving long-term dynamic growth and enhanced shareholder value." Quarter Highlights Improved Profit Margins Throughout the current quarter, our operating margins continued to improve. In the fourth quarter of fiscal 2003, gross margin was $4.1 million or 24.5% of sales, compared to $3.5 million or 22.1% of sales for the fourth quarter of last year. For the fiscal year ended November 30, 2003, gross margin was $13.9 million or 22.1% of sales, versus $9.9 million or 17.3% of sales for fiscal 2002. This improvement has been primarily driven by our ongoing cost reduction programs, greater utilization of our low-cost manufacturing capabilities in Mexico and China, reduced manufacturing overhead, and increased operating efficiencies. Initial Sales of New MLFT Products We continue to invest in the development and introduction of new products. During the fourth quarter of 2003, we shipped our first MLFT (Motor Line Feed- Thru Technology) products. These high performance, patent pending, EMI filters have been designed to eliminate the need for multiple component assemblies incorporating capacitors, inductive coils, leads and printed circuit boards, thereby providing customers the needed filtering and mechanical interface at a reduced overall cost. Initial applications for these filters include DC motors used in various automotive applications. The development and introduction of innovative new products, like our MLFT filters, is a key element of our long-term growth strategy. China Manufacturing Operations The establishment of our China manufacturing operations continues as planned. During the fourth quarter, approximately $500,000 of products were manufactured and shipped from our modern 16,000 square foot facility, located in the Guangdong province of southern China. In addition to supplying product to our China customers, we expect this operation to ultimately enable us to participate in new Asian markets and become a low-cost manufacturing center capable of effectively competing in highly cost competitive industries, such as automotive. The continued growth of our China manufacturing operations is also a key element of our long-term growth strategy. Strong Cash Flow Our operating cash flow remains strong. Net cash generated by operating activities was $766,000 during the fourth quarter and $6.0 million for the fiscal year ended November 30, 2003. This positive cash flow reflects our profitable operating performance, as well as improved inventory turnover rates and related inventory reductions. During the fiscal year 2003, as a result of numerous inventory control procedures, aggregate inventories decreased by $1.4 million. Excellent Financial Position Our liquidity and overall financial position remain very strong. At November 30, 2003, our cash and short-term investments totaled $24.8 million, up $4.8 million from the end of last fiscal year. At the end of the current quarter, our current assets were more than nine times current liabilities, our stockholders' equity was $72.0 million, and our total borrowed funds were only $2.4 million. Current Business Outlook Mr. Southworth stated, "We are very encouraged by the growth and vitality of our recent order trends. However, customers continue to place orders only to satisfy their immediate requirements, which severely restricts our visibility to long-term product demand. In addition, for the last three years, the telecom equipment market has continuously demonstrated its volatility and unpredictability. Accordingly, our business forecasting capability remains limited and prudently cautious. Currently, we believe our first quarter 2004 sales and profitability will approximate our fourth quarter performance. With our strong liquidity, improving profit margins, and commitment to new product development, we believe that we are strategically positioned for long-term growth and enhanced profitability," he concluded. 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 will host a teleconference to discuss its fourth quarter and fiscal year results on Thursday, January 8, 2004, at 4:45 p.m., Eastern Time. Internet users will be able to access a simultaneous webcast of the teleconference at www.spectrumcontrol.com . A taped replay of the call will be available through January 9, 2004, at 877-660-6853, access account 1628, conference 85709, or for 30 days over the Internet at the Company's website. Business Segment Description Our operations are currently conducted in three reportable segments: signal integrity products; power integrity products and management systems; and frequency control products. Our Signal Integrity Products Group designs and manufactures a broad range of low pass electromagnetic interference ("EMI") filters, surface mount EMI filters, filtered arrays, filtered connectors, gaskets, and specialty ceramic capacitors. Our Power Integrity Products and Management Systems Group designs and manufactures numerous power integrity products (power line filters, power entry modules, multisection filters, power terminal blocks, and custom power filter assemblies) and power management systems (power distribution units, remote power management systems, fuse interface panels, breaker interface panels, and custom power distribution systems). Our Frequency Control Products Group designs and manufactures ceramic resonators and bandpass filters, ceramic patch antennas, duplexers, lumped element filters, cavity filters, waveguide filters, and related products and systems. About Spectrum Control Spectrum Control, Inc. designs and manufactures a wide range of components and systems used to condition, regulate, transmit, receive, or govern electronic performance. Although Spectrum Control products are used in many industries worldwide, the Company's largest markets are telecommunications equipment and military/aerospace. For more information about Spectrum Control and its products, please visit the Company's website at www.spectrumcontrol.com . Spectrum Control, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) (Dollar Amounts in Thousands) November 30, November 30, 2003 2002 Assets Current assets Cash and cash equivalents $24,779 $19,934 Accounts receivable, net 11,521 10,035 Inventories 13,110 14,494 Prepaid expenses and other current assets 2,804 3,316 Total current assets 52,214 47,779 Property, plant and equipment, net 12,646 15,543 Noncurrent assets Goodwill 18,019 18,019 Other 492 483 Total assets $83,371 $81,824 Liabilities and Stockholders' Equity Current liabilities Accounts payable $3,147 $3,033 Accrued liabilities 2,240 1,860 Current portion of long-term debt 285 285 Total current liabilities 5,672 5,178 Long-term debt 2,106 2,391 Deferred income taxes 3,549 3,580 Stockholders' equity 72,044 70,675 Total liabilities and stockholders' equity $83,371 $81,824 Spectrum Control, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) (Amounts in Thousands Except Per Share Data) For the Quarter For the Year Ended Ended November 30, November 30, 2003 2002 2003 2002 Net sales $16,915 $15,703 $62,985 $57,213 Cost of products sold 12,771 12,232 49,086 47,291 Gross margin 4,144 3,471 13,899 9,922 Selling, general and administrative expense 3,469 3,167 12,669 12,176 Income (loss) from operations 675 304 1,230 (2,254) Other income (expense) Interest expense (47) (24) (136) (140) Other income and expense, net 68 (45) 319 1,191 21 (69) 183 1,051 Income (loss) before provision for income taxes 696 235 1,413 (1,203) Provision for income taxes (benefit) 287 77 559 (466) Net income (loss) $409 $158 $854 $(737) Earnings (loss) per common share: Basic $0.03 $0.01 $0.07 $(0.06) Diluted $0.03 $0.01 $0.07 $(0.06) Average number of common shares outstanding: Basic 12,940 12,950 12,937 13,063 Diluted 13,090 12,979 13,004 13,063 Spectrum Control, Inc. and Subsidiaries Selected Financial Data (Unaudited) For the Quarter Ended For the Year Ended November 30, November 30, 2003 2002 2003 2002 Selected Financial Data, as a Percentage of Net Sales: Net sales 100.0 % 100.0 % 100.0 % 100.0 % Cost of products sold 75.5 77.9 77.9 82.7 Gross margin 24.5 22.1 22.1 17.3 Selling, general and administrative expense 20.5 20.2 20.1 21.3 Income (loss) from operations 4.0 1.9 2.0 (4.0) Other income (expense) Interest expense (0.3) (0.1) (0.2) (0.2) Other income and expense, net 0.4 (0.3) 0.5 2.1 Income (loss) before provision for income taxes 4.1 1.5 2.3 (2.1) Provision for income taxes (benefit) 1.7 0.5 0.9 (0.8) Net income (loss) 2.4 % 1.0 % 1.4 % (1.3)% Selected Operating Segment Data: (Dollar Amounts in Thousands) Signal integrity products: Customer orders received $10,711 $9,725 $41,540 $42,110 Net sales 10,272 10,031 42,362 41,230 Power integrity products and management systems: Customer orders received 4,755 2,833 14,533 10,929 Net sales 4,552 3,542 13,442 11,845 Frequency control products: Customer orders received 1,852 1,904 7,397 3,934 Net sales 2,091 2,130 7,181 4,138 SOURCE Spectrum Control, Inc. -0- 01/08/2004 /CONTACT: Corporate Headquarters, +1-814-474-2207, or fax, +1-814-474-2208, or Investors, John P. Freeman, Senior Vice President and Chief Financial Officer of Spectrum Control, Inc., +1-814-474-4310/ /Web site: http:// www.spectrumcontrol.com/ (SPEC) CO: Spectrum Control, Inc. ST: Pennsylvania IN: CPR FIN SU: ERN CCA MAV