EX-99.1 3 e17261ex99_1.txt PRESS RELEASE Exhibit 99.1 Spectrum Control Reports First Quarter Profit Market Conditions Continue to Improve Operating Margins and Profitability Increase FAIRVIEW, Pa., March 18 /PRNewswire-FirstCall/ -- FlashResults Spectrum Control, Inc.(SPEC) (Numbers in Thousands, Except Per Share Data) 1st quarter ended 1st quarter ended 2/29/2004 YTD 2/28/2003 YTD Sales $17,125 $17,125 $15,246 $15,246 Net Income $612 $612 $168 $168 Average Shares 13,150 13,150 12,968 12,968 EPS $0.05 $0.05 $0.01 $0.01 Spectrum Control, Inc. (Nasdaq: SPEC), a leading designer and manufacturer of electronic control products and systems, today reported results for the first quarter ended February 29, 2004. For the first quarter of fiscal 2004, the Company generated net income of $612,000 or five cents per share on sales of $17,125,000, compared to net income of $168,000 or one cent per share on sales of $15,246,000 for the same period last year. Dick Southworth, the Company's President and Chief Executive Officer, commented, "Market conditions, particularly in the telecommunications equipment industry, continue to demonstrate improvement. Total customer orders received in the first quarter amounted to $17.2 million, an increase of $1.7 million or 11% from a year ago, with customer orders up in each of our major business segments. Demand for our power integrity products and management systems was particularly strong. Among other applications, these power products are used in various telecommunication equipment including wireless base stations and telephone switching gear. During the current quarter, certain customers also began to pull-in the delivery dates for previously placed orders. As a result of these positive market factors, our shipments in the current quarter grew to $17.1 million, an increase of $1.9 million or 12% from the comparable quarter last year. This higher shipment volume, combined with improved operating efficiencies and lower manufacturing costs from our ongoing cost reduction programs, significantly enhanced our profitability. Income from operations was approximately $1.0 million during the current quarter, an increase of $821,000 or nearly six times greater than our operating income for the same quarter last year. We believe this solid first quarter financial performance reaffirms the effectiveness of our business strategies, and we look forward to building upon these accomplishments toward achieving our goal of dynamic growth and enhanced shareholder value". Quarter Highlights Strategic Acquisition On February 27, 2004, we acquired all of the outstanding common stock of Salisbury Engineering, Inc. ("SEI"). SEI, based in Delmar, Delaware, designs and manufactures a full line of RF and microwave components and systems used primarily in military and aerospace applications. SEI's current products include microwave synthesizers, multiple channel filter banks and preselectors, and GPS noise amplifiers. These complex systems incorporate advanced technologies and significantly expand our microwave capabilities. In addition, SEI's microwave component offerings (miniature chip filters, lumped element filters, band reject filters, cavity filters, and waveguides) are a natural complement to our existing frequency control product offerings. The aggregate cash purchase price for SEI was approximately $5.6 million, including legal fees and other costs directly related to the acquisition. The purchase price was entirely funded through our available cash reserves. Since the effective time and date of the acquisition was at the close of business on February 27, 2004, no revenues or expenses of the acquired business have been included in our first quarter results of operations. Improved Profit Margins During the current quarter, our operating margins continued to improve. In the first quarter of fiscal 2004, gross margin was $4.4 million or 25.7% of sales, compared to $3.3 million or 21.4% of sales for the first quarter of last year. This improvement primarily reflects decreases in manufacturing overhead costs, from numerous cost reduction programs, and economies of scale realized with additional production and shipment volumes. In addition, our direct labor costs continue to decrease as a result of greater utilization of our low-cost manufacturing centers in Juarez, Mexico and Guangdong, China. China Manufacturing Operations The growth of our China manufacturing operations continues as planned. During the first quarter of fiscal 2004, $654,000 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 a key element of our long-term growth strategy. Strong Cash Flow and Liquidity Our operating cash flow and liquidity remain strong. Despite increased working capital requirements, net cash generated by operating activities amounted to $725,000 during the first three months of fiscal 2004. As a result of increased shipments and production requirements during the first quarter of fiscal 2004, accounts receivable and inventories increased by $842,000 and $232,000, respectively. After expending approximately $5.6 million for the SEI acquisition, our total cash and cash equivalents at the end of the first quarter were $19.4 million, and our total borrowed funds were only $2.3 million. Current Business Outlook Mr. Southworth stated, "We are greatly encouraged by the improved market conditions and strength of our recent order trends. Based on this positive business climate and our current assessment of customer demand, we believe our second quarter sales will be between $19.5 and $20.0 million. This sales expectation, which includes approximately $900,000 of anticipated SEI product shipments, represents an increase of approximately 15% over the first quarter of this year, and 27% from the second quarter of last year. Second quarter earnings are expected to be seven to eight cents per share, an increase of 50% from the first quarter of this year and up about 250% from a year ago. Although our visibility beyond the second quarter is very limited, we believe that we are well-positioned for long-term growth and enhanced profitability in our improving marketplace," 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 first quarter results on Thursday, March 18, 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 March 19, 2004, at 877-660-6853, access account 1628, conference 96659, 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, specialty ceramic capacitors, and our newly developed motor line feed-thru ("MLFT") filters. 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 ) February 29, November 30, 2004 2003 Assets Current assets Cash and cash equivalents $19,443 $24,779 Accounts receivable, net 13,088 11,521 Inventories 13,677 13,110 Prepaid expenses and other current assets 2,787 2,804 Total current assets 48,995 52,214 Property, plant and equipment, net 13,920 12,646 Noncurrent assets Goodwill 20,884 18,019 Other 1,055 492 Total assets $84,854 $83,371 Liabilities and Stockholders' Equity Current liabilities Accounts payable $3,601 $3,147 Accrued liabilities 2,254 2,240 Current portion of long-term debt 285 285 Total current liabilities 6,140 5,672 Long-term debt 2,052 2,106 Deferred income taxes 3,619 3,549 Stockholders' equity 73,043 72,044 Total liabilities and stockholders' equity $84,854 $83,371 Spectrum Control, Inc. and Subsidiaries Condensed Consolidated Statements of Income ( Unaudited ) ( Amounts in Thousands Except Per Share Data ) For the Three Months Ended February 29, February 28, 2004 2003 Net sales $17,125 $15,246 Cost of products sold 12,725 11,983 Gross margin 4,400 3,263 Selling, general and administrative expense 3,436 3,120 Income from operations 964 143 Other income ( expense ) Interest expense (29) (29) Other income and expense, net 52 159 23 130 Income before provision for income taxes 987 273 Provision for income taxes 375 105 Net income $612 $168 Earnings per common share: Basic $0.05 $0.01 Diluted $0.05 $0.01 Average number of common shares outstanding: Basic 12,980 12,947 Diluted 13,150 12,968 Spectrum Control, Inc. and Subsidiaries Selected Financial Data ( Unaudited ) For the Three Months Ended February 29, February 28, 2004 2003 Selected Financial Data, as a Percentage of Net Sales: Net sales 100.0% 100.0% Cost of products sold 74.3 78.6 Gross margin 25.7 21.4 Selling, general and administrative expense 20.1 20.5 Income from operations 5.6 0.9 Other income ( expense ) Interest expense (0.1) (0.2) Other income and expense, net 0.3 1.1 Income before provision for income taxes 5.8 1.8 Provision for income taxes 2.2 0.7 Net income 3.6% 1.1% Selected Operating Segment Data: ( Dollar Amounts in Thousands ) Signal integrity products: Customer orders received $10,549 $10,123 Net sales 10,635 10,790 Power integrity products and management systems: Customer orders received 4,492 3,772 Net sales 4,646 2,794 Frequency control products: Customer orders received 2,174 1,665 Net sales 1,844 1,662 SOURCE Spectrum Control, Inc. -0- 03/18/2004 /CONTACT: 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, China, Mexico IN: CPR ECP EPM SU: ERN MAV CCA