EX-99.1 2 sc3651ex991.txt EXHIBIT 99.1 Exhibit 99.1 SPECTRUM CONTROL REPORTS THIRD QUARTER PROFIT REVENUES INCREASE 28% FROM A YEAR AGO OPERATING MARGINS IMPROVE FAIRVIEW, Pa., Sept. 27 -- FlashResults Spectrum Control, Inc. (SPEC) (Numbers in Thousands, Except Per Share Data) 3rd quarter ended 3rd quarter ended ----------------------- ----------------------- 8/31/2005 YTD 8/31/2004 YTD ---------- ---------- ---------- ---------- Sales $ 25,901 $ 72,925 $ 20,180 $ 58,789 Net Income $ 1,558 $ 3,487 $ 997 $ 3,137 Average Shares 13,159 13,158 13,177 13,168 EPS $ 0.12 $ 0.27 $ 0.08 $ 0.24 Spectrum Control, Inc. (Nasdaq: SPEC), a leading designer and manufacturer of electronic control products and systems, today reported results for the third quarter and nine months ended August 31, 2005. For the third quarter of fiscal 2005, the Company reported net income of $1,558,000 or 12 cents per share on sales of $25,901,000 compared to net income of $997,000 or eight cents per share on sales of $20,180,000 for the same period last year. For the first nine months of fiscal 2005, the Company had net income of $3,487,000 or 27 cents per share on sales of $72,925,000. For the comparable period of 2004, the Company had net income of $3,137,000 or 24 cents per share on sales of $58,789,000. "The third quarter of fiscal 2005 was our most profitable quarter in over four years," commented Dick Southworth, the Company's President and Chief Executive Officer. "Sales in the current quarter were up 28.3% compared to the same period last year, and are now up 24.0% on a year-to-date basis. In addition to the positive impact of our recent business acquisitions (Amplifonix, Inc. in February 2005 and the Components Business Unit of REMEC, Inc. in October 2004), third quarter sales of RF and microwave components and systems grew by approximately $600,000 from a year ago. Demand for these products in military/aerospace applications remains particularly strong. Sales of our power management systems increased in the third quarter of 2005 by $459,000 compared to the same quarter last year. These advanced systems are primarily used in infrastructure equipment for telecommunications, computer networks, and certain military applications. The sales growth of our RF and Microwave Components and Systems and our Power Management Systems, along with the success of our recent business acquisitions, reaffirms our strategic plan of product expansion and market diversification. Accordingly we are very confident that we can build upon our third quarter accomplishments and performance." Quarter Highlights -- Third quarter net income was up nearly 18.0% sequentially from the current year second quarter. -- Gross margin for the third quarter of 2005 was 28.3% of sales compared to 25.3% of sales for the second quarter this year. This significant improvement in gross margin percentage primarily reflects greater operating efficiencies and the ongoing integration of our recent acquisitions. In addition, our material costs continue to decrease as we expand our worldwide sourcing of raw materials. -- Total customer orders received in the third quarter of 2005 amounted to $25.0 million, up $5.0 million or 25.0% from a year ago. -- The Company remains very liquid, having generated $4.4 million of net operating cash flow during the first nine months of fiscal 2005. Cash and cash equivalents were $9.2 million at August 31, 2005, an increase of $2.5 million since the second quarter ended May 31, 2005. Business Segment Discussion Our operations are currently conducted in three reportable segments: signal and power integrity components; RF and microwave components and systems; and power management systems. Our Signal and Power Integrity Components Business designs and manufactures a broad range of products including low pass electromagnetic interference ("EMI") filters, filter plates, filtered connectors, specialty ceramics capacitors, power entry modules, power line filters, and our recently developed motor line feed thru ("MLFT") filters. Sales of signal and power integrity components were $14.2 million in the third quarter of fiscal 2005 compared to $15.5 million in the same quarter last year. For the first nine months of fiscal 2005, sales of these products amounted to $40.1 million versus $47.4 million for the comparable period of fiscal 2004. The decreases in shipments principally reflect poor market conditions throughout the passive electronic components industry. However, sales for these products in the current third quarter were up $636,000 from the second quarter of this year, our second consecutive quarter of sequential sales growth. In addition, our operating margins for this business, as a percentage of sales, continue to be strong. Our RF and Microwave Components and Systems Business (formerly known as our Frequency Control Products Group) designs and manufactures ceramic resonators and bandpass filters, ceramic patch antennas, duplexers, lumped element filters, cavity filters, waveguides, amplifiers, frequency mixers, oscillators, synthesizers, multiple channel filter banks, and related products and integrated assemblies. Sales for this business were $10.0 million in the current quarter, up $6.6 million or 195% from the same period last year. Of this $6.6 million increase, $600,000 was organic growth with the balance attributable to the contribution from recent acquisitions. For the first nine months of 2005, sales were $27.7 million, up $18.9 million or 214.0% from the comparable 2004 period. Of this year-to-date growth, $16.0 million reflects the impact of our recent acquisitions and $2.9 million is from organic growth. While RF and microwave components and systems are used in numerous industries and applications, sales in fiscal 2005 have been particularly strong throughout the military/aerospace sector. Our Power Management Systems Business designs and manufactures circuit breaker panels, custom power outlet strips, and our Smart Start power management systems. Sales of these products were $1.7 million in the third quarter of 2005, an increase of $459,000 or 36.9% from a year ago. For the first nine months of fiscal 2005, sales were $5.2 million, up $2.6 million or 103.0% from the same period last year. In addition to this sales growth, operating margins for these products continue to improve from greater manufacturing efficiencies and economies of scale. These advanced systems are used in various infrastructure equipment including wireless base stations, optical networks, IT hubs, data centers, and certain military applications. Since the introduction of these products a few years ago, we have begun to gain customer recognition and market share. Mr. Southworth stated, "We are very pleased with the results being achieved in our RF and Microwave Components and Systems business, as well as our Power Management Systems. The success of these businesses validates our belief that the Company's strong customer relationships, manufacturing expertise, and proven product leadership form a solid platform from which we can satisfy diverse customer needs for control products and systems. Going forward, we're confident that we can continue to grow these businesses and enhance their profitability." Current Business Outlook Mr. Southworth continued, "We are all saddened by the devastation caused to the Gulf States by Hurricane Katrina, and our Company is doing everything within its power to alleviate the tremendous burden this has created for our employees in the area. The Hurricane did not have any impact on the Company's financial position or results of operations during the third quarter. However, we are currently unable to determine the extent of property and business losses to our New Orleans ceramic manufacturing plant or to what extent such losses may, or may not, be recoverable through the Company's comprehensive insurance program. In connection with the Company's requirements for ceramic capacitors, we have strategic safety stock in place to meet several weeks of production needs as well as established relationships with several qualified outside vendors to meet a substantial majority of our ongoing ceramic capacitor requirements. On a longer-term basis, we are reestablishing our own internal ceramic capabilities. We have had contact with more than 80% of the employees at our New Orleans location, many of whom are part of the team whose sole focus is to get our ceramic capacitor production back on-line in the quickest and most efficient manner possible." Mr. Southworth concluded, "At this time, we are unable to estimate the financial impact that Hurricane Katrina may have on the Company's financial position and future operating performance. Accordingly, we are unable to provide any specific guidance for the Company's fourth quarter expected earnings. Currently, we anticipate our fourth quarter revenues to equal or slightly exceed our third quarter performance. Our long-term strategy remains unchanged. We will continue to leverage our business infrastructure, diversify our end markets, and provide an increasing array of value-added products and solutions to our customers. With this strategy, we believe our Company is well-positioned for dynamic growth and enhanced shareholder value." 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 Tuesday, September 27, 2005, 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 28, 2005 at 877-660-6853, access account 286, conference 169638, or for 30 days over the Internet at the Company's website. 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, 2005 2004 ------------ ------------ Assets Current assets Cash and cash equivalents $ 9,203 $ 17,535 Accounts receivable, net 17,043 15,484 Inventories 17,196 15,372 Prepaid expenses and other current assets 2,664 2,471 Total current assets 46,106 50,862 Property, plant and equipment, net 17,748 15,966 Noncurrent assets Goodwill 26,802 22,019 Other 3,829 2,502 Total assets $ 94,485 $ 91,349 Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 4,524 $ 4,238 Accrued liabilities 3,026 3,943 Current portion of long-term debt 390 390 Total current liabilities 7,940 8,571 Long-term debt 1,336 1,716 Deferred income taxes 4,917 4,220 Stockholders' equity 80,292 76,842 Total liabilities and stockholders' equity $ 94,485 $ 91,349 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, -------------------- -------------------- 2005 2004 2005 2004 -------- -------- -------- -------- Net sales $ 25,901 $ 20,180 $ 72,925 $ 58,789 Cost of products sold 18,583 14,604 54,142 42,262 Gross margin 7,318 5,576 18,783 16,527 Selling, general and administrative expense 4,781 3,984 13,180 11,520 Income from operations 2,537 1,592 5,603 5,007 Other income ( expense ) Interest expense (38) (29) (114) (86) Other income and expense, net 38 49 220 146 -- 20 106 60 Income before provision for income taxes 2,537 1,612 5,709 5,067 Provision for income taxes 979 615 2,222 1,930 Net income $ 1,558 $ 997 $ 3,487 $ 3,137 Earnings per common share: Basic $ 0.12 $ 0.08 $ 0.27 $ 0.24 Diluted $ 0.12 $ 0.08 $ 0.27 $ 0.24 Average number of common shares outstanding : Basic 13,062 13,026 13,052 13,006 Diluted 13,159 13,177 13,158 13,168 Spectrum Control, Inc. and Subsidiaries Selected Financial Data ( Unaudited ) Three Months Ended Nine Months Ended August 31, August 31, -------------------- -------------------- 2005 2004 2005 2004 -------- -------- -------- -------- Selected Financial Data, as a Percentage of Net Sales: Net sales 100.0% 100.0% 100.0% 100.0% Cost of products sold 71.7 72.4 74.2 71.9 Gross margin 28.3 27.6 25.8 28.1 Selling, general and administrative expense 18.5 19.7 18.1 19.6 Income from operations 9.8 7.9 7.7 8.5 Other income ( expense ) Interest expense (0.1) (0.1) (0.2) (0.1) Other income and expense, net 0.1 0.2 0.3 0.2 Income before provision for income taxes 9.8 8.0 7.8 8.6 Provision for income taxes 3.8 3.0 3.0 3.3 Net income 6.0% 5.0% 4.8% 5.3% Selected Operating Segment Data: ( Dollar Amounts in Thousands ) Signal and power integrity components: Customer orders received $ 12,273 $ 16,214 $ 36,948 $ 48,331 Net sales 14,225 15,560 40,055 47,414 RF and microwave components and systems: Customer orders received 11,217 2,919 31,137 8,510 Net sales 9,974 3,377 27,676 8,817 Power management systems : Customer orders received 1,510 897 5,812 2,888 Net sales 1,702 1,243 5,194 2,558