Brush Engineered Materials Inc. Reports Improved Third Quarter Results On Lower Revenue.Business Editors CLEVELAND--(BUSINESS WIRE)--Oct. 24, 2002 Brush Engineered Materials Brush Engineered Materials Inc. is a multinational company specializing in high performance engineered materials emphasizing the qualities of strength, reliability, miniaturization and weight savings, thermal dissipation, electrical conductivity and reflectivity. Inc. (NYSE NYSE See: New York Stock Exchange :BW) today reported significantly lower losses on weaker sales in the third quarter 2002 as compared to the third quarter of 2001. Third quarter 2002 sales declined 12% to $93.5 million from $106.2 million in the third quarter of 2001. Sales in the quarter continued to be adversely affected by the overall economic environment and the prolonged pro·long tr.v. pro·longed, pro·long·ing, pro·longs 1. To lengthen in duration; protract. 2. To lengthen in extent. weak demand from computer and telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. , the Company's largest market. The Company reduced its third quarter 2002 net loss by 62% to $2.9 million from a net loss of $7.8 million in the same quarter of 2001. Earnings per share diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. was a loss of $0.18 compared to a loss of $0.47 in the third quarter of 2001. The improvement versus the third quarter of 2001 was driven by improved margins and lower costs. Operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: continued to improve due to the Company's lean manufacturing Lean manufacturing is the production of goods using less of everything compared to mass production: less human effort, less manufacturing space, less investment in tools, and less engineering time to develop a new product. and Six Sigma Not to be confused with Sigma 6. Six Sigma is a set of practices originally developed by Motorola to systematically improve processes by eliminating defects.[1] A defect is defined as nonconformity of a product or service to its specifications. initiatives. The lower costs resulted from a number of overhead reduction actions taken since the third quarter of 2001. As a result of a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. court ruling, the Company was able to increase the recovery portion on insured legal claims that were previously subject to apportionment The process by which legislative seats are distributed among units entitled to representation; determination of the number of representatives that a state, county, or other subdivision may send to a legislative body. The U.S. . This, plus other favorable developments, resulted in a reduction in legal exposure and a $0.07 per share benefit to net income in the quarter. Sales for the nine months were $283.8 million, down 25% compared to the first nine months of 2001 sales of $380.2 million. The net loss for the first nine months of 2002 was $8.8 million, or $0.53 per share diluted compared to a net loss of $0.3 million or $0.02 per share diluted for the same period last year. The Company's cash flow remained positive in the quarter. Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses was $6.2 million in the quarter bringing the total cash provided by operating activity to $11.8 million for the first nine months of 2002. Balance sheet debt decreased $5.3 million in the third quarter and is down 14% or $10.6 million for the year to date. The Company's balance sheet debt has decreased in each of the five most recent quarters. BUSINESS SEGMENT REPORTING Business segment reporting Reporting the results of the separate divisions or subsidiaries of a business. Metal Systems Group The Metal Systems Group consists of Alloy alloy (ăl`oi, əloi`) [O. Fr.,=combine], substance with metallic properties that consists of a metal fused with one or more metals or nonmetals. Products, Technical Materials, Inc. (TMI TMI Too Much Information TMI Three Mile Island TMI TRMM Microwave Imager TMI Transactions on Medical Imaging TMI Texas Military Institute TMI Teen Missions International TMI Tauber Manufacturing Institute ) and Beryllium beryllium (bərĭl`ēəm) [from beryl ], metallic chemical element; symbol Be; at. no. 4; at. wt. 9.01218; m.p. about 1,278°C;; b.p. 2,970°C; (estimated); sp. gr. 1.85 at 20°C;; valence +2. Products. The Metal Systems Group's third quarter 2002 sales were $57.0 million, down 8% from 2001 third quarter sales of $61.8 million. Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. sales were $176.4 million, down 28% from sales of $243.8 million for the same period last year. The third quarter operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. for the Metal Systems Group was $10.0 million versus a loss of $9.4 million for the third quarter of 2001. The year-to-date operating loss was $23.6 million versus a loss of $4.4 million for the same period last year. Alloy Products' third quarter sales of $37.8 million and year-to-date sales of $117.1 million were down 20% and 36%, respectively, versus the same periods last year. Alloy third quarter sales were negatively affected in part by customer manufacturing maintenance shutdowns and the continued weakness in the computer and telecommunications markets both domestically and in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). . Although the
automotive electronics and appliance A stand-alone hardware device or software environment dedicated to a specific task. See hardware appliance and software appliance. markets remain steady, it is
anticipated that fourth quarter sales in Alloy Products may be flat to
down as compared to the third quarter due to the continued weakness in
the computer and telecommunications markets, expected inventory
adjustments in automotive, weakness in Europe and slower growth in Asia.Alloy Products is broadening broad·en tr. & intr.v. broad·ened, broad·en·ing, broad·ens To make or become broad or broader. broad its market focus to include utilizing strip form materials in nontraditional Adj. 1. nontraditional - not conforming to or in accord with tradition; "nontraditional designs"; "nontraditional practices" untraditional traditional - consisting of or derived from tradition; "traditional history"; "traditional morality" markets such as oil and gas, while developing several new alloys This is a list of alloys for which an article exists in Wikipedia (or is proposed but not yet written). They are grouped by base metal, in order of increasing atomic number. Within these headings they are in no particular order. for the electronics sector. In addition, Alloy is also expanding its bulk form products market applications with non-beryllium spinodal alloys that are used in bearings and other industrial components. TMI's third quarter sales of $10.9 million were up 29% over 2001 third quarter sales of $8.4 million while year-to-date sales of $34.8 million were down 16% from the same period last year. Order rates have slowed and sales may be flat to down in the fourth quarter of 2002 as compared to third quarter sales. Beryllium Products' third quarter 2002 sales of $8.3 million and year-to-date sales of $24.5 million were up 41% and 19% respectively over the same periods last year. Beryllium Products has been experiencing strong growth in all segments of defense throughout 2002. This strength should continue through the fourth quarter and into 2003. Microelectronics microelectronics, branch of electronic technology devoted to the design and development of extremely small electronic devices that consume very little electric power. Group The Microelectronics Group includes Williams Advanced Materials Advanced Materials is a leading peer-reviewed materials science journal published every two weeks. Advanced Materials includes Communications, Reviews, and Feature Articles from the cutting edge of materials science, including topics in chemistry, physics, Inc. (WAM WAM - Intermediate language for compiled Prolog, used by the Warren Abstract Machine. "An Abstract Prolog Instruction Set", D.H.D. Warren, TR 309, SRI 1983. ) and Electronic Products. (Electronic Products includes Zentrix Zentrix is a 3D-CG Chinese animated TV series directed by Tony Tong and Felix Ip under the Hong Kong based company Imagi Animation Studios. The original story was written by Tony Tang, Benny Chow, Felix Ip and Francis Kao. Technologies Inc. and Brush Ceramic This article is about ceramic materials. For the fine art, see Ceramic art. The word ceramic is derived from the Greek word κεραμικός (keramikos). Products Inc.) The Microelectronics Groups' sales for the third quarter of $34.3 million were down 18% from third quarter 2001 sales of $41.7 million. Year-to-date 2002 sales of $102.3 million were down 22% from the same period last year. Third quarter operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. for the Microelectronics Group of $1.3 million was up $1.1 million versus $0.2 million for the third quarter of 2001. Year-to-date operating profit of $5.0 million was up approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 40% over the same period last year. WAM's third quarter 2002 sales of $27.1 million were down 20% from the third quarter of 2001. However, third quarter value added Value Added The enhancement a company gives its product or service before offering the product to customers. Notes: This can either increase the products price or value. sales (sales less the cost of metal) were down only 2% from 2001 value added sales. Year-to-date 2002 sales were $80.1 million, down 21% versus $101.9 million for the same period in 2001. Value added 2002 year-to-date sales were down approximately 4% from 2001. WAM's value added sales, although slightly down from last year, should remain steady for the remainder of the year supported by continued strength in optical media and magnetic storage product applications. Electronic Products' third quarter 2002 sales of $7.2 million were down 8% from 2001 third quarter sales of $7.8 million. Year-to-date sales of $22.2 million were down 23% from 2001 year-to-date sales of $28.9 million. Sales continue to be affected by the depressed wireless infrastructure market. The fourth quarter order entry rate level appears to be about equal to the third quarter. This weakness is expected to continue into 2003. Company Issues Related to the Economic Environment The Company is currently addressing three issues that have surfaced due to the difficult conditions in both the economic environment and the U.S. equity markets. First, the decline in the U.S. equity markets has affected the value of the Company's pension assets during 2002. Accounting regulations require the recognition of an additional liability when the market value of pension plan assets is less than the accumulated benefit obligation Accumulated Benefit Obligation (ABO) An approximate measure of the liability of a pension plan in the event of a termination at the date the calculation is performed. Related: Projected benefit obligation. at the end of a plan year. As a result, the Company may be required to record a significant non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. to equity in the fourth quarter of 2002. The extent of any charge will be determined based upon actual year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. pension valuations. Second, the Company has a $22.7 million net deferred tax asset. While the nature of this asset is such that it does not expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. for a number of years, if current economic conditions continue, a significant portion or all of this may be considered to be impaired See assistive technology. under certain accounting guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. . Therefore, it is possible that a non-cash charge may be taken in the future. The charge would not affect the Company's pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta earnings or cash flow. The charge would also not affect the Company's ability to utilize the deferred tax assets in future periods. Finally, if an impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge for the net deferred tax assets is deemed necessary in the future, a default may occur under certain bank covenants. The Company's current sales and related earnings outlook for the fourth quarter may also adversely affect performance versus certain covenants. Thus, the Company has initiated discussions with its lenders to resolve any issues that may surface in the event that these circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or do lead to a default. Outlook The demand for the Company's products in the computer and telecommunications markets seemed to have bottomed in fourth quarter of 2001 and recovered slightly during the first half of 2002. During the third quarter, additional softness began to appear. The Company continues to see no distinct signs of economic recovery, especially in the computer and telecommunications segments of its markets. Demand is sluggish, lead times are short and limited visibility remains. Forecasting revenue and thus earnings in this volatile With regard to computer memory, it means "temporary" and not "highly changeable," which is the usual meaning of the word. See volatile memory. 1. (programming) volatile - volatile variable. 2. (storage) volatile - See non-volatile storage. economic environment is difficult, especially when attempting to forecast out more than a quarter. Order entry following the seasonal summer shutdowns in the Company's business has been weaker than previously expected. Assuming no further weakness, it is currently expected that fourth quarter 2002 sales will be down 5% to 10% from the third quarter 2002. Chairman's Comments Chairman, President and Chief Executive Officer, Gordon Gordon, river in W Tasmania, Australia, 125 mi (200 km) long. Flowing from mountains to the W coast, its main tributaries are the Franklin and Denison from the N, and Serpentine and Olga to the S. D. Harnett stated, "while the economic environment remains volatile, I'm I'm Contraction of I am. Our Living Language Speakers of some scattered varieties of American English sometimes use I'm instead of I've or I have in present perfect constructions, as in encouraged by the fact that we're we're Contraction of we are. we're we are realizing tangible Possessing a physical form that can be touched or felt. Tangible refers to that which can be seen, weighed, measured, or apprehended by the senses. A tangible object is something that is real and substantial. An automobile is an example of tangible Personal Property. benefits from the aggressive operating improvements our businesses have been putting in place over the past year. These are very visible in the quarter's results. We're confident that once the economic environment begins to improve, our leaner lean 1 v. leaned, lean·ing, leans v.intr. 1. To bend or slant away from the vertical. 2. structure, coupled with our lean manufacturing and Six Sigma strategies will deliver greater value going forward." "Given the continued uncertain and volatile economic environment, we will continue to execute our manufacturing initiatives, reduce working capital intensity, further reduce costs where appropriate, focus our marketing efforts to grow sales in new markets, simplify our distribution system and consider other strategies to improve performance." Forward-looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Any forward-looking statements in this announcement, including those in the Outlook Section, are based on current expectations. The Company's actual future performance may materially differ from that contemplated by the forward-looking statements as a result of a variety of factors. These factors include: the global and domestic economy, the condition of the markets which the Company serves, whether defined geographically ge·o·graph·ic also ge·o·graph·i·cal adj. 1. Of or relating to geography. 2. Concerning the topography of a specific region. ge or by segment, with the major market segments being telecommunications and computer, optical media, automotive electronics, industrial components, aerospace and defense, and appliance; changes in product mix and the financial condition of particular customers; the Company's success in implementing its strategic plans and the timely and successful completion of pending capital expansion projects; the availability of adequate lines of credit and the associated interest rates; other financial factors, including tax rates, exchange rates, pension costs, energy costs and the cost and availability of insurance; changes in government regulatory requirements Regulatory requirements are part of the process of drug discovery and drug development. Regulatory requirements describe what is necessary for a new drug to be approved for marketing in any particular country. and the enactment of new legislation that impacts the Company's obligations; and, the conclusion of pending litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. matters in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with the Company's expectation that there will be no material adverse effects and other matters referred to in the Company's Securities and Exchange Commission filings. Brush Engineered Materials Inc., is headquartered in Cleveland, Ohio "Cleveland" redirects here. For the Cleveland metropolitan area, see . For other uses, see Cleveland (disambiguation). Cleveland is a city in the U.S. state of Ohio and the county seat of Cuyahoga County, the most populous county in the state. . The Company and its subsidiaries supply worldwide markets with beryllium products, alloy products, electronic products, precious metal products, and engineered material systems.
Brush Engineered Materials Inc.
Digest of Earnings
September 27, 2002
2002 2001
-------------- --------------
Third Quarter 2002
Net Sales $ 93,481,000 $ 106,194,000
Net (Loss) Income ($2,906,000) ($7,767,000)
Share Earnings - Basic ($0.18) ($0.47)
Average Shares - Basic 16,558,417 16,548,410
Share Earnings - Diluted ($0.18) ($0.47)
Average Shares - Diluted 16,558,417 16,548,410
Year-to-date
Net Sales $ 283,812,000 $ 380,174,000
Net (Loss) Income ($8,788,000) ($286,000)
Share Earnings - Basic ($0.53) ($0.02)
Average Shares - Basic 16,557,026 16,508,784
Share Earnings - Diluted ($0.53) ($0.02)
Average Shares - Diluted 16,557,026 16,508,784
Consolidated Balance Sheets
(Unaudited)
Sept. 27, Dec. 31,
(Dollars in thousands) 2002 2001
----------------------------------------------------------------------
Assets
Current Assets
Cash and cash equivalents $ 3,215 $ 7,014
Accounts receivable 59,412 54,616
Inventories 93,242 109,110
Prepaid expenses 5,656 9,910
Deferred income taxes 43,432 38,672
---------- ----------
Total Current Assets 204,957 219,322
Other Assets 30,616 33,224
Property, Plant and Equipment 474,452 469,663
Less allowances for depreciation,
depletion and impairment 314,110 298,367
---------- ----------
160,342 171,296
---------- ----------
$395,915 $423,842
---------- ----------
---------- ----------
Liabilities and Shareholders' Equity
Current Liabilities
Short-term debt $ 17,958 $ 27,582
Accounts payable 15,107 13,869
Other liabilities and accrued
items 33,618 34,211
Dividends payable 0 0
Income taxes 3,541 3,917
---------- ----------
Total Current Liabilities 70,224 79,578
Other Long-Term Liabilities 19,579 22,921
Retirement and Post-employment Benefits 39,150 39,552
Long-term Debt 46,219 47,251
Deferred Income Taxes 20,750 20,189
Shareholders' Equity 199,993 214,350
---------- ----------
$395,915 $423,842
---------- ----------
---------- ----------
See notes to consolidated financial statements.
Consolidated Statements of Income
(Unaudited)
Third Quarter Ended Nine Months Ended
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
(Dollars in thousands
except share and
per share amounts) 2002 2001 2002 2001
----------------------------------------------------------------------
Net sales $ 93,481 $ 106,194 $ 283,812 $ 380,174
Cost of sales 81,466 98,941 246,473 315,311
------------ ------------ ------------ ------------
Gross Margin 12,015 7,253 37,339 64,863
Selling, general
and administrative
expenses 13,986 17,700 46,134 57,977
Research and
development
expenses 1,003 1,416 3,177 4,975
Other-net 952 (1,128) 20 (103)
------------ ------------ ------------ ------------
Operating Profit (Loss) (3,926) (10,735) (11,992) 2,014
Interest expense 776 679 2,275 2,507
------------ ------------ ------------ ------------
Income (Loss) before
income taxes (4,702) (11,414) (14,267) (493)
Income taxes (1,796) (3,647) (5,479) (207)
------------ ------------ ------------ ------------
Net Income (Loss) $ (2,906) $ (7,767) $ (8,788) $ (286)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Per Share of Common
Stock: Basic $ (0.18) $ (0.47) $ (0.53) $ (0.02)
Weighted average
number of
common shares
outstanding 16,558,417 16,548,410 16,557,026 16,508,784
Per Share of Common
Stock: Diluted $ (0.18) $ (0.47) $ (0.53) $ (0.02)
Weighted average
number of common
shares outstanding 16,558,417 16,548,410 16,557,026 16,508,784
Cash dividends
per common share $ - $ - $ - $ 0.24
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
Sept. 27, Sept. 28,
(Dollars in thousands) 2002 2001
----------------------------------------------------------------------
Net (Loss) Income ($8,788) ($ 286)
Adjustments to Reconcile Net Income to Net Cash
Provided From Operating Activities:
Depreciation, depletion and amortization 15,484 16,713
Decrease (Increase) in accounts receivable (3,936) 20,857
Decrease (Increase) in inventory 17,131 (3,333)
Decrease (Increase) in prepaid and other
current assets 1,434 (1,724)
Increase (Decrease) in accounts payable
and accrued expenses (2,070) (17,954)
Increase (Decrease) in interest and taxes payable (2,503) (628)
Increase (Decrease) in deferred income taxes (283) (156)
Increase (Decrease) in other
long-term liabilities (5,667) 2,985
Other - net 1,008 478
-------- --------
Net Cash Provided From (Used in)
Operating Activities 11,810 16,952
Cash Flows from Investing Activities:
Payments for purchase of property,
plant and equipment (3,899) (20,651)
Payments for mine development (58) (282)
Proceeds from sale of property,
plant and equipment 140 --
-------- --------
Net Cash Provided From (Used in)
Investing Activities (3,817) (20,933)
Cash Flows from Financing Activities:
Proceeds from issuance/ (repayment of)
short-term debt (10,633) 7,349
Proceeds from issuance of long-term debt 12,000 27,417
Repayment of long-term debt (13,000) (26,500)
Issuance of Common Stock under stock option plans -- 1,753
Purchase of Common Stock for treasury -- --
Payments of dividends -- (5,967)
-------- --------
Net Cash Provided From (Used in)
Financing Activities (11,633) 4,052
Effects of Exchange Rate Changes (159) 89
-------- --------
Net Change in Cash and Cash Equivalents (3,799) 160
Cash and Cash Equivalents at Beginning of Period 7,014 4,314
-------- --------
Cash and Cash Equivalents at End of Period 3,215 4,474
-------- --------
-------- --------
See notes to consolidated financial statements.
Notes to Consolidated Financial Statements
(Unaudited)
Note A - Accounting Policies
In management's opinion, the accompanying consolidated financial
statements contain all adjustments necessary to present fairly the
financial position as of September 27, 2002 and December 31, 2001 and
the results of operations for the three and nine month periods ended
September 27, 2002 and September 28, 2001. All of the adjustments were
of a normal and recurring nature.
Note B - Inventories
Sept. 27, Dec. 31,
(Dollars in thousands) 2002 2001
----------------------------------------------------------------------
Principally average cost:
Raw materials and supplies $ 17,277 $ 17,510
In process 68,491 75,458
Finished goods 34,213 41,789
-------- --------
Gross inventories 119,981 134,757
Excess of average cost over LIFO
Inventory value 26,739 25,647
-------- --------
Net inventories $ 93,242 $109,110
-------- --------
-------- --------
Notes to Consolidated Financial Statements
(Unaudited)
Note D - Segment Reporting
(Dollars in Metal Micro- Total All
thousands) Systems Electronics Segments Other Total
--------- --------- --------- ---------- --------
Third Quarter 2002
------------------
Revenues from
external customers $ 56,966 $ 34,269 $ 91,235 $ 2,246 $ 93,481
Intersegment revenues 894 444 1,338 3,275 4,613
Profit (loss) before
interest and taxes (9,975) 1,290 (8,685) 4,759 (3,926)
Third Quarter 2001
------------------
Revenues from
external customers $ 61,778 $ 41,656 $103,434 $ 2,760 $106,194
Intersegment revenues 578 542 1,120 1,311 2,431
Profit (loss) before
interest and taxes (9,393) 208 (9,185) (1,550) (10,735)
First Nine Months 2002
----------------------
Revenues from
external customers $176,420 $102,295 $278,715 $ 5,097 $283,812
Intersegment revenues 2,261 1,401 3,662 9,907 13,569
Profit (loss) before
interest and taxes (23,574) 4,959 (18,615) 6,623 (11,992)
First Nine Months 2001
----------------------
Revenues from
external customers $243,809 $130,851 $374,660 $ 5,514 $380,174
Intersegment revenues 2,516 1,843 4,359 11,697 16,056
Profit (loss) before
interest and taxes (4,445) 3,548 (897) 2,911 2,014
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