EX-99.1 2 e19077ex99-1.txt PRESS RELEASE Exhibit 99.1 Spectrum Control Reports Third Quarter Profit Orders, Shipments and Profitability Increase Significantly from a Year Ago Cash Flow and Liquidity Remain Strong FAIRVIEW, Pa., Sept. 16 /PRNewswire-FirstCall/ -- FlashResults Spectrum Control, Inc. (SPEC) (Numbers in Thousands, Except Per Share Data) 3rd quarter ended 3rd quarter ended 8/31/2004 YTD 8/31/2003 YTD Sales $20,180 $58,789 $15,354 $46,070 Net Income $997 $3,137 $29 $445 Average Shares 13,177 13,168 13,004 12,975 EPS $0.08 $0.24 $0.00 $0.03 Spectrum Control, Inc. (Nasdaq: SPEC), a leading designer and manufacturer of electronic control products and systems, today reported results for the third quarter ended August 31, 2004. For the third quarter of fiscal 2004, the Company reported net income of $997,000 or eight cents per share on sales of $20,180,000, compared to net income of $29,000 or zero cents per share on sales of $15,354,000 for the same period last year. For the first nine months of fiscal 2004, the Company had net income of $3,137,000 or 24 cents per share on sales of $58,789,000. For the comparable period of 2003, the Company had net income of $445,000 or three cents per share on sales of $46,070,000. Dick Southworth, the Company's President and Chief Executive Officer commented, "Compared to last year, our overall operating performance continues to significantly improve. Total customer orders received in the third quarter amounted to $20.0 million, an increase of $4.4 million or 29% from a year ago. Demand for our signal integrity products was particularly strong, with customer orders received in the current quarter of $13.4 million, an increase of $3.7 million or 38% from the comparable quarter of 2003. Our signal integrity products are used in numerous applications and industries including telecommunications, military, aerospace, automotive, and medical. Total shipments in the current quarter grew to $20.2 million, an increase of $4.8 million or 31% from a year ago. The higher shipment level, combined with our continuous implementation of cost reduction programs, enhanced our profitability by improving efficiencies and enabling us to leverage our fixed manufacturing costs. Income from operations was $1.6 million during the current quarter, compared to a virtual breakeven level for the same quarter last year. We expect to build upon our improved financial performance, as we strive to achieve and maintain dynamic growth and significant shareholder value." Quarter Highlights Positive Impact 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 radio frequency 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 global positioning system amplifiers. These complex systems incorporate advance 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 cash reserves. We have successfully integrated this acquisition into our Frequency Control Products Group, with SEI being accretive to our overall profitability while generating $1.1 million of shipments in the third quarter of fiscal 2004 and total year-to-date shipments of $2.4 million. Improved Profit Margins In the third quarter of fiscal 2004, gross margin was $5.6 million or 27.6% of sales, compared to $3.0 million or 19.6% of sales for the third 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. Total manufacturing overhead expense was $6.9 million or 34.0% of sales in the third quarter of fiscal 2004, versus $6.3 million or 41.3% of sales for the comparable period of 2003. 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 $6.1 million during the first nine months of fiscal 2004, an increase of $821,000 or 15.6% from the comparable period a year ago. As a result of increased shipments and production requirements during the first nine months of fiscal 2004, accounts receivable and inventories increased by $1.1 million and $1.0 million, respectively, excluding the impact of our SEI acquisition. Our total cash and cash equivalents at the end of the third quarter were $23.3 million, and our total borrowed funds were only $2.1 million. Current Business Outlook Mr. Southworth stated, "Our third quarter sales and earnings were below our previous expectations of $22.0 million and 12 cents per share, respectively. This shortfall reflects a softening of demand experienced throughout the passive components industry. Although we believe this market softening is temporary, and market conditions will improve in the fourth quarter and beyond, the third quarter softening illustrates the short-term volatility and unpredictability of our major markets. Accordingly, we are not in a position to provide any specific guidance regarding our fourth quarter sales and profitability expectations. However as we have demonstrated in each quarter of the current fiscal year, we expect our fourth quarter 2004 sales and profitability to significantly exceed the comparable period performance of 2003. On a long-term basis, we firmly believe that we are strategically positioned for strong annual sales 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, Inc. will host a teleconference to discuss its third quarter results on Thursday, September 16, 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 September 17, 2004 at 877-660-6853, access account 1628, conference 117588, 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 manufacturers a broad range of low pass electromagnetic interference ("EMI") filters, surface mount EMI filters, filtered arrays, filtered connectors, gaskets, specialty ceramic capacitors, and our recently developed motor line feed-thru ("MLFT") filters. Our Power Integrity Products and Management Systems Group designs and manufacturers 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, synthesizers, multiple channel filter banks, and related products and systems. About Spectrum Control Spectrum Control, Inc. designs and manufacturers 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) August 31, November 30, 2004 2003 Assets Current assets Cash and cash equivalents $23,348 $24,779 Accounts receivable, net 13,241 11,521 Inventories 14,421 13,110 Prepaid expenses and other current assets 2,154 2,804 Total current assets 53,164 52,214 Property, plant and equipment, net 13,532 12,646 Noncurrent assets Goodwill 20,884 18,019 Other 879 492 Total assets $88,459 $83,371 Liabilities and Stockholders' Equity Current liabilities Accounts payable $3,751 $3,147 Accrued liabilities 3,139 2,240 Current portion of long-term debt 285 285 Total current liabilities 7,175 5,672 Long-term debt 1,831 2,106 Deferred income taxes 3,906 3,549 Stockholders' equity 75,547 72,044 Total liabilities and stockholders' equity $88,459 $83,371 Spectrum Control, Inc. and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) (Amounts in Thousands Except Per Share Data) Three Months Ended Nine Months Ended August 31, August 31, 2004 2003 2004 2003 Net sales 20,180 $15,354 $58,789 $46,070 Cost of products sold 14,604 12,349 42,262 36,315 Gross margin 5,576 3,005 16,527 9,755 Selling, general and administrative expense 3,984 2,977 11,520 9,200 Income from operations 1,592 28 5,007 555 Other income (expense) Interest expense (29) (32) (86) (89) Other income and expense, net 49 48 146 251 20 16 60 162 Income before provision for income taxes 1,612 44 5,067 717 Provision for income taxes 615 15 1,930 272 Net income $997 $29 $3,137 $445 Earnings per common share: Basic $0.08 $- $0.24 $0.03 Diluted $0.08 $- $0.24 $0.03 Average number of common shares outstanding: Basic 13,026 12,929 13,006 12,936 Diluted 13,177 13,004 13,168 12,975 Spectrum Control, Inc. and Subsidiaries Selected Financial Data (Unaudited) Three Months Ended Nine Months Ended August 31, August 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 72.4 80.4 71.9 78.8 Gross margin 27.6 19.6 28.1 21.2 Selling, general and administrative expense 19.7 19.4 19.6 20.0 Income from operations 7.9 0.2 8.5 1.2 Other income (expense) Interest expense (0.1) (0.2) (0.1) (0.2) Other income and expense, net 0.2 0.3 0.2 0.5 Income before provision for income taxes 8.0 0.3 8.6 1.5 Provision for income taxes 3.0 0.1 3.3 0.6 Net income 5.0% 0.2% 5.3% 0.9% Selected Operating Segment Data: (Dollar Amounts in Thousands) Signal integrity products: Customer orders received $13,451 $9,722 $37,190 $30,829 Net sales 12,854 10,369 36,071 32,091 Power integrity products and management systems: Customer orders received 3,665 3,333 13,421 9,778 Net sales 3,949 3,301 13,901 8,890 Frequency control products: Customer orders received 2,919 2,526 8,480 5,545 Net sales 3,377 1,684 8,817 5,089 SOURCE Spectrum Control, Inc. -0- 09/16/2004 /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 IN: CPR ECP EPM SU: ERN CCA MAV