EX-99.1 2 e18225ex99-1.txt PRESS RELEASE Exhibit 99.1 Spectrum Control Reports Second Quarter Profit Orders, Shipments and Profitability Increase Sharply Cash Flow Remains Strong FAIRVIEW, Pa., June 17 /PRNewswire-FirstCall/ -- FlashResults Spectrum Control, Inc. (SPEC) (Numbers in Thousands, Except Per Share Data) 2nd quarter ended 2nd quarter ended 5/31/2004 YTD 5/31/2003 YTD Sales $21,484 $38,609 $15,470 $30,716 Net Income $1,528 $2,140 $248 $416 Average Shares 13,176 13,163 12,955 12,961 EPS $0.12 $0.16 $0.02 $0.03 Spectrum Control, Inc. (Nasdaq: SPEC), a leading designer and manufacturer of electronic control products and systems, today reported results for the second quarter ended May 31, 2004. For the second quarter of fiscal 2004, the Company reported net income of $1,528,000 or 12 cents per share on sales of $21,484,000, compared to net income of $248,000 or two cents per share on sales of $15,470,000 for the same period last year. For the first half of fiscal 2004, the Company had net income of $2,140,000 or 16 cents per share on sales of $38,609,000. For the comparable period of 2003, the Company had net income of $416,000 or three cents per share on sales of $30,716,000. Dick Southworth, the Company's President and Chief Executive Officer, commented, "Overall market conditions continue to improve, creating greater demand and opportunities for virtually all of our major product lines. Total customer orders received in the second quarter amounted to $21.9 million, an increase of 46% from a year ago. Compared to the second quarter of last year, customer orders for our signal integrity products increased in the current quarter by $2.2 million or 20%, power integrity products and management system orders grew $2.7 million or nearly 97%, and orders received for frequency control products (excluding the impact of our acquisition of Salisbury Engineering, Inc. earlier this year) increased $1.0 million or 73%. Increased demand from our customers in the telecommunication equipment industry was a significant driver of this growth. With this strong order rate, total shipments in the current quarter grew to $21.5 million, an increase of $4.4 million or 25% from the immediate preceding quarter, and an increase of $6.0 million or 39% 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 approximately $2.5 million during the current quarter, an increase of $2.1 million or more than five times greater than our operating income for the same quarter last year. We believe this greatly improved financial performance reaffirms the effectiveness of our business strategies, as we remain focused on achieving and maintaining dynamic growth and significant shareholder value." Quarter Highlights Integration of 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. During the second quarter of fiscal 2004, we successfully integrated this acquisition into our Frequency Control Products Group with SEI receiving $1.1 million of customer orders, generating $1.3 million of shipments, and being immediately accretive to our overall profitability. Improved Profit Margins During the current quarter, our operating margins continued to improve. In the second quarter of fiscal 2004, gross margin was $6.6 million or 30.5% of sales, compared to $3.5 million or 22.5% of sales for the second 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. 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 $3.7 million during the first half of fiscal 2004, an increase of $789,000 or 27% from the comparable period a year ago. As a result of increased shipments and production requirements during the first six months of fiscal 2004, accounts receivable and inventories increased by $1.7 million and $1.2 million, respectively. Our total cash and cash equivalents at the end of the second quarter were $21.8 million, and our total borrowed funds were only $2.1 million. China Manufacturing Operations The growth of our China manufacturing operations continues as planned. During the second quarter of fiscal 2004, approximately $1.0 million 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. Current Business Outlook Mr. Southworth stated, "Based on our current assessment of sales order backlog and forecasted customer demand, we believe our third quarter sales will be between $21.5 and $22.0 million. This sales expectation represents an increase of approximately 40% from the third quarter of last year. Third quarter earnings are expected to approximate 12 cents per share, compared to our breakeven earnings performance of zero cents per share for the same quarter of 2003. Although our visibility beyond the third quarter is very limited, we believe that we are strategically positioned for long-term growth and greater 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 second quarter results on Thursday, June 17, 2004, at 4:45 p.m., Eastern Time. Internet users will be able to access a simultaneous webcast of the teleconference at http://www.spectrumcontrol.com or http://www.vcall.com . A taped replay of the call will be available through June 18, 2004, at 877-660-6853, access account 1628, conference 107609, 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 http://www.spectrumcontrol.com . Spectrum Control, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) (Dollar Amounts in Thousands) May 31, November 30, 2004 2003 Assets Current assets Cash and cash equivalents $21,837 $24,779 Accounts receivable, net 13,834 11,521 Inventories 14,680 13,110 Prepaid expenses and other current assets 2,315 2,804 Total current assets 52,666 52,214 Property, plant and equipment, net 13,471 12,646 Noncurrent assets Goodwill 20,884 18,019 Other 1,095 492 Total assets $88,116 $83,371 Liabilities and Stockholders' Equity Current liabilities Accounts payable $5,141 $3,147 Accrued liabilities 2,591 2,240 Current portion of long-term debt 285 285 Total current liabilities 8,017 5,672 Long-term debt 1,841 2,106 Deferred income taxes 3,793 3,549 Stockholders' equity 74,465 72,044 Total liabilities and stockholders' equity $88,116 $83,371 Spectrum Control, Inc. and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) (Amounts in Thousands Except Per Share Data) Three Months Ended Six Months Ended May 31, May 31, 2004 2003 2004 2003 Net sales $21,484 $15,470 $38,609 $30,716 Cost of products sold 14,933 11,983 27,658 23,966 Gross margin 6,551 3,487 10,951 6,750 Selling, general and administrative expense 4,100 3,103 7,536 6,223 Income from operations 2,451 384 3,415 527 Other income (expense) Interest expense (28) (28) (57) (57) Other income and expense, net 45 44 97 203 17 16 40 146 Income before provision for income taxes 2,468 400 3,455 673 Provision for income taxes 940 152 1,315 257 Net income $1,528 $248 $2,140 $416 Earnings per common share: Basic $0.12 $0.02 $0.16 $0.03 Diluted $0.12 $0.02 $0.16 $0.03 Average number of common shares outstanding: Basic 13,013 12,934 12,996 12,940 Diluted 13,176 12,955 13,163 12,961 Spectrum Control, Inc. and Subsidiaries Selected Financial Data (Unaudited) Three Months Ended Six Months Ended May 31, May 31, 2004 2003 2004 2003 Selected Financial Data, as a Percentage of Net Sales: Net sales 100.0 % 100.0 % 100.0 % 100.0 % Cost of products sold 69.5 77.5 71.6 78.0 Gross margin 30.5 22.5 28.4 22.0 Selling, general and administrative expense 19.1 20.0 19.5 20.3 Income from operations 11.4 2.5 8.9 1.7 Other income (expense) Interest expense (0.1) (0.2) (0.2) (0.2) Other income and expense, net 0.2 0.3 0.2 0.7 Income before provision for income taxes 11.5 2.6 8.9 2.2 Provision for income taxes 4.4 1.0 3.4 0.8 Net income 7.1 % 1.6 % 5.5 % 1.4 % Selected Operating Segment Data: (Dollar Amounts in Thousands) Signal integrity products: Customer orders received $13,190 $10,984 $23,739 $21,107 Net sales 12,582 10,932 23,217 21,722 Power integrity products and management systems: Customer orders received 5,264 2,673 9,756 6,445 Net sales 5,306 2,795 9,952 5,589 Frequency control products: Customer orders received 3,417 1,354 5,591 3,019 Net sales 3,596 1,743 5,440 3,405 SOURCE Spectrum Control, Inc. -0- 06/17/2004 /CONTACT: Investor Relations, 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 IN: CPR ECP EPM SU: ERN ERP CCA MAV