Brush Engineered Materials Inc. Reports Sales Up 39% and an EPS of $0.35 for the Second Quarter of 2006; Company Raises the Outlook for the Year.CLEVELAND Cleveland, former county, England Cleveland, former county, NE England, created under the Local Government Act of 1972 (effective 1974). It was composed of the county boroughs of Hartlepool and Teeside and parts of the former counties of Durham and -- 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 second quarter sales of $187.1 million, up $52.4 million or 39% compared to the second quarter of 2005. Net income for the second quarter was $7.0 million and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of was $0.35, up 26% compared to net income of $5.5 million and earnings per share of $0.29 for the second quarter of 2005. Sales and earnings were at the high end of the increased expectations for the quarter that were announced on July July: see month. 11, 2006. The strong sales growth in the second quarter continued to be driven by a combination of increased demand from the Company's major markets, especially from the consumer electronics related markets, added sales from acquisitions made subsequent to the first quarter of the prior year and higher metal prices. Demand in the quarter was strong in the magnetic data storage, telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. and computer, and industrial component market segments. The growth was also driven in part by solid performance from new product applications in the magnetic data storage, wireless photonics photonics, the science and technology based on and concerned with the controlled flow of photons, or light particles. It is the optical equivalent of electronics, and the two technologies coexist in such innovations as optoelectronic integrated circuits. , handset The part of the telephone that contains the speaker and the microphone. On a desktop phone, the part you hold in your hand is the handset. On a cellphone, the entire phone is the handset. See multihandset cordless and headset. , semiconductor, oil and gas, heavy equipment and aerospace markets. The 2005 and 2006 acquisitions resulted in an additional $8.2 million of sales in the quarter. Approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 45% or $23.0 million of the year-over-year sales increase in the quarter was related to higher precious and base metal prices. Sales growth net of metal prices was approximately 22%. The second quarter was a record sales quarter and the fourteenth consecutive quarter where sales were higher than the comparable quarter of the prior year. Gross margin was 21.3% in the quarter, an improvement of approximately 1.0 point compared to the first quarter 2006 gross margin, and an improvement of approximately 2.0 points compared to the fourth quarter of 2005. The improvement in gross margin is driven by the higher sales volume, profit contribution from the recent acquisitions and operating efficiencies. While gross margin improved, earnings during the quarter continued to be negatively impacted compared to the prior year by higher base metal prices, primarily copper. While the portion of sales of our copper-based materials that include a copper price pass through continued to increase during the quarter, the Company was unable to pass through approximately $2.4 million of the higher copper costs during the quarter. This negatively impacted gross margin percent by 1.3 points. Income before income taxes was $10.2 million, up $4.4 million or approximately 76% compared to the same period of last year. A 31.5% tax rate was applied to the second quarter income before income taxes versus 4.3% in the second quarter of 2005. The major difference between the two rates is that in 2005 the domestic federal tax expense was offset by the reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its of a portion of the Company's deferred tax asset valuation allowance. Therefore, the second quarter 2006 earnings per share improvement of $0.06 per share is negatively affected by approximately $0.08 per share due to the prior year having the lower effective rate. For the first six months of the year sales were $354.8 million, up 34% compared to the same period of the prior year. Sales growth net of metal prices was approximately 22%. The first half net income was $12.2 million or $0.62 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. per share, up $2.4 million compared to net income of $9.8 million or $0.51 diluted per share for the first half of 2005. A 31.7% tax rate was applied to the first six months' income before income taxes versus 7.2% for the same period last year negatively affecting earnings per share by approximately $0.13 due to the prior year lower effective rate. On a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta basis, year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. earnings are $17.9 million compared to $10.6 million in the prior year, an increase of 69%. BUSINESS SEGMENT REPORTING Business segment reporting Reporting the results of the separate divisions or subsidiaries of a business. 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. The Microelectronics Group's sales for the second quarter of 2006 were $90.4 million, 61% above second quarter 2005 sales of $56.1 million. Sales for the first six months of 2006 were $171.9 million, 61% above 2005 first half sales of $107.0 million. 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 second quarter was $9.1 million, 90% above the second quarter of 2005. Operating profit year to date was $17.9 million, up $9.4 million or more than double the first half 2005 operating profit of $8.5 million. WAM's 2006 second quarter sales were $82.9 million, 66% above second quarter 2005 sales of $49.8 million. WAM's sales for the first half were $158.3 million, 68% above the same period last year. Approximately 45% of the growth in the second quarter and 33% of the growth year to date is due to higher precious metal prices which are passed through to customers. The remainder of sales growth in the second quarter and the first half of 2006 is due to continued strong demand and new product applications in magnetic data storage, wireless handset, photonics and semiconductor markets as well as added sales from acquisitions. Subsequent to the first quarter of 2005, WAM acquired OMC OMC Organisation Mondiale du Commerce (French: WTO) OMC Organización Mundial del Comercio (Spanish: World Trade Organization) OMC Organização Mundial do Comércio Scientific Holdings Limited, Thin Film Technology, Inc. and CERAC CERAC Cercle des Amis du Cameroun (Circle of Friends of Cameroon) CERAC Centro de Recursos para el Análisis de Conflictos (Conflict Analysis Resource Center; Columbia) , incorporated. These three acquisitions added $8.2 million or 25% of WAM's sales growth in the second quarter and $17.0 million or 26% of the growth in the first half of 2006 versus the same periods last year. WAM continues to make progress on expanding its geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. reach 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). and Asia.Electronic Products' second quarter sales were $7.5 million and first half sales were $13.6 million, up 19% and 5%, respectively, as compared to the second quarter and first half of 2005. 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 ), 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 and Brush brush a bushy tail in dogs. brush Cytology A disposible with synthetic 'whiskers', used to scrape cells from mucosal surfaces. See Endocervical brush. Resources Inc. The Metal Systems Group's second quarter sales were $96.7 million, 23% higher than second quarter 2005 sales of $78.5 million. Year-to-date sales of $182.9 million were 16% higher than sales of $158.0 million for the prior year. The Metal Systems Group had a second quarter operating profit of $2.6 million, down 26% from the second quarter of 2005. The operating profit for the first half of 2006 was $4.6 million versus $6.1 million for the first half of 2005. Operating profit for the second quarter and the first half as compared to the same periods last year was negatively affected by higher base metal costs and SG&A expenses. Alloy Products' 2006 second quarter sales of $69.0 million and first half sales of $129.3 million were up 35% and 25%, respectively, as compared to second quarter sales of $51.1 million and first half sales of $103.7 million for 2005. A portion of the increase in Alloy Products' sales was due to higher copper prices while Alloy's margins were reduced, as all of the higher cost could not be passed through. However, Alloy continues to make progress to increase the portion of its sales that include the metal price pass through. Over 40% of the Alloy Products' sales growth in the first half was from strong demand in Asia. Strip form products sales grew 27% in the second quarter and 19% for the first six months of the year compared to the prior year particularly due to strong demand from the telecommunications handset market segment and automotive electronics. Bulk form product sales were up 46% in the second quarter and 35% year-to-date 2006. Alloy bulk products continues to benefit from the acceptance of its new products, particularly, ToughMet(R), which grew 56% in the second quarter and 50% in the first half of the year. Key ToughMet applications include instrumentation instrumentation, in music: see orchestra and orchestration. instrumentation In technology, the development and use of precise measuring, analysis, and control equipment. housing for oil and gas product applications and bushings and bearings in heavy equipment and aircraft. Although order entry has been strong, sales to the automotive, telecommunications and computer markets are expected to be affected by the normal third quarter domestic and European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. seasonal factors which in turn will be partially offset by new product growth. TMI's second quarter sales of $18.0 million were up 44% compared to the second quarter of 2005. Sales of $35.9 million for the first half of 2006 were up 42% compared to the first half of 2005. The stronger sales growth in the second quarter and the first half has been fueled by strong demand from computer and telecommunications and the automotive electronics markets. New product growth, including disk drive arms for computers and energy and medical product applications, has contributed to TMI's strong growth throughout the first half of the year. Beryllium Products' second quarter sales were $9.7 million and first half sales were $17.7 million, down 17% and 32%, respectively, compared to the same periods of last year. The decline in sales during the second quarter and first half were a result of the absence of sales of optical mirror materials for NASA's James Webb Space Telescope This article or section documents a scheduled or expected spaceflight. Details may change as the launch date approaches or more information becomes available. . These materials were delivered under a material supply contract that was substantially completed in the second quarter of 2005. Sales attributed to the Telescope telescope, traditionally, a system of lenses, mirrors, or both, used to gather light from a distant object and form an image of it. Traditional optical telescopes, which are the subject of this article, also are used to magnify objects on earth and in astronomy; project were $2.6 million lower in the second quarter 2006 and $8.6 million lower in the first half of 2006 as compared to the same periods of 2005. Beryllium Products' sales in its other product lines were up 9% in the second quarter and 3% for the first six months versus the same periods in 2005. It is anticipated that sales related to defense will pick up in the second half of this year. Brush Resources supplies material input to businesses in the Metal Systems Segment as well as to one external customer. There were no external sales in the first half of 2006 versus $3.2 million in the second quarter of 2005. It is anticipated that there will be external sales during the second half totaling slightly less than the 2005 external annual sales. OUTLOOK Most of our markets have been stronger than expected through the first two quarters of the year and we continue to make good progress with our new products and our efforts to penetrate new markets, both domestically and internationally. We are also making good progress with our initiatives to improve margins and our acquisitions are adding to the growth in profits. These positive factors are expected to continue throughout the third quarter and will help to cushion Cushion In the context of project financing, the extra amount of net cash flow remaining after expected debt service. cushion See call protection. the effect of the normal seasonal factors that usually result in lower revenues in the third and fourth quarters of the year relative to the first and second quarters. At this time, we expect sales for the third quarter to be in the range of $170.0 to $180.0 million, up approximately 25% to 33% compared to the same quarter of the prior year. Earnings are expected to be in the range of $0.23 to $0.28 per share. While we are seeing some overall seasonal softening softening /sof·ten·ing/ (sof´en-ing) malacia. softening a change of consistency, with loss of firmness or hardness. of demand in certain segments of our markets and our markets are subject to unpredictable short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. effects on demand due to inventory swings, we are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about the balance of the year. Assuming no change in the factors noted above and no significant change in overall market conditions, whether driven by macro economic conditions or the uncertainties caused by the conflict in the Mideast, we are raising our outlook for the year. At this time, we expect sales for the year to be in the range of $690.0 to $710.0 million, up approximately 28% to 31%. Earnings for the year are now expected to be in the range of $1.09 to $1.17 compared to the previous estimate of $0.95 to $1.10 per share. CHAIRMAN'S COMMENTS Commenting on the results, Dick Hipple, Chairman, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , stated, "I am pleased to report the record sales quarter and the substantial improvement in earnings for the second quarter. We continue to be encouraged with the acceptance of our new products in the marketplace, international growth and opportunity, progress on operational improvements and our success with niche niche: see ecology. niche Smallest unit of a habitat that is occupied by an organism. A habitat niche is the physical space occupied by the organism; an ecological niche is the role the organism plays in the community of organisms found in the acquisitions. We look forward to the continued progress for the remainder of the year." CONFERENCE CALL Brush Engineered Materials will conduct a teleconference in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with today's release. The teleconference begins at 2:00 p.m. Eastern Time, July 27, 2006. The conference call will be available via webcast through the Company's website at www.beminc.com or through www.InvestorCalendar.com. By phone please dial (877) 407-0782, callers outside the U.S. can dial (201) 689-8567. 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. Portions of the narrative set forth in this document that are not statements of historical or current facts are forward-looking statements. Our 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, in addition to those mentioned herein: --The global and domestic economies; --The condition of the markets which we serve, 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, magnetic and optical data storage, aerospace and defense, automotive electronics, industrial components and appliance A stand-alone hardware device or software environment dedicated to a specific task. See hardware appliance and software appliance. ; --Changes in product mix and the financial condition of customers; --Actual sales, operating rates Operating rate The percentage of total production capacity of a company, industry, or country that is being used. operating rate The portion of capacity at which a business operates. and margins for the remainder of 2006; --Our success in developing and introducing new products and applications; --Our success in integrating newly acquired businesses; --Our success in implementing our strategic plans and the timely and successful completion of any capital projects; --The availability of adequate lines of credit and the associated interest rates; --Other financial factors, including cost and availability of materials, tax rates, exchange rates, pension and other employee benefit costs, energy costs, regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. compliance costs, and the cost and availability of insurance; --The uncertainties related to the impact of war and terrorist activities; --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 our 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 our expectation that there will be no material adverse effects. Brush Engineered Materials Inc., commemorating com·mem·o·rate tr.v. com·mem·o·rat·ed, com·mem·o·rat·ing, com·mem·o·rates 1. To honor the memory of with a ceremony. See Synonyms at observe. 2. To serve as a memorial to. its 75th year in 2006, 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, through its wholly-owned subsidiaries, supplies worldwide markets with beryllium products, alloy products, electronic products, precious metal products, and engineered material systems.
Brush Engineered Materials Inc.
Digest of Earnings
June 30, 2006
2006 2005
------------- -------------
Second Quarter
Net Sales $187,078,000 $134,651,000
Net Income $ 6,968,000 $ 5,530,000
Share Earnings - Basic $ 0.36 $ 0.29
Average Shares - Basic 19,593,000 19,224,000
Share Earnings - Diluted $ 0.35 $ 0.29
Average Shares - Diluted 19,865,000 19,352,000
Year-to-date
Net Sales $354,801,000 $265,023,000
Net Income $ 12,195,000 $ 9,817,000
Share Earnings - Basic $ 0.63 $ 0.51
Average Shares - Basic 19,428,000 19,211,000
Share Earnings - Diluted $ 0.62 $ 0.51
Average Shares - Diluted 19,680,000 19,374,000
Consolidated Balance Sheets
(Unaudited)
June 30, Dec. 31,
(Dollars in thousands) 2006 2005
----------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $ 12,591 $ 10,642
Accounts receivable 87,586 69,938
Inventories 131,904 104,060
Prepaid expenses 18,500 14,417
Deferred income taxes 1,137 1,118
--------- ---------
Total current assets 251,718 200,175
Other assets 18,256 8,252
Related-party notes receivable 98 358
Long-term deferred income taxes - 4,109
Property, plant and equipment 556,224 540,420
Less allowances for depreciation,
depletion and impairment 377,005 363,358
--------- ---------
179,219 177,062
Goodwill 15,369 12,746
--------- ---------
$464,660 $402,702
========= =========
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt $ 24,798 $ 23,634
Current portion of long-term debt 632 636
Accounts payable 23,546 20,872
Other liabilities and accrued items 45,208 38,522
Unearned revenue 1,174 254
Income taxes 755 726
--------- ---------
Total current liabilities 96,113 84,644
Other long-term liabilities 7,761 8,202
Retirement and post-employment benefits 68,023 65,290
Deferred income taxes 1,296 172
Long-term debt 53,882 32,916
Shareholders' equity 237,585 211,478
--------- ---------
$464,660 $402,702
========= =========
See notes to consolidated financial statements.
Consolidated Statements of Income
(Unaudited)
(Dollars in
thousands except
share and per Second Quarter Ended First Half Ended
share June 30, July 1, June 30, July 1,
amounts) 2006 2005 2006 2005
----------------------------------------------------------------------
Net sales $ 187,078 $ 134,651 $ 354,801 $ 265,023
Cost of sales 147,259 105,545 280,839 207,340
------------ ------------ ------------ ------------
Gross margin 39,819 29,106 73,962 57,683
Selling, general
and
administrative
expense 27,194 18,933 51,103 37,634
Research and
development
expense 954 1,295 2,035 2,536
Other-net 377 1,453 702 3,664
------------ ------------ ------------ ------------
Operating profit 11,294 7,425 20,122 13,849
Interest
expense 1,125 1,646 2,267 3,268
------------ ------------ ------------ ------------
Income before
income taxes 10,169 5,779 17,855 10,581
Income taxes 3,201 249 5,660 764
------------ ------------ ------------ ------------
Net income $ 6,968 $ 5,530 $ 12,195 $ 9,817
============ ============ ============ ============
Per share of
common stock:
basic $ 0.36 $ 0.29 $ 0.63 $ 0.51
Weighted average
number of common
shares
outstanding 19,593,000 19,224,000 19,428,000 19,211,000
Per share of
common stock:
diluted $ 0.35 $ 0.29 $ 0.62 $ 0.51
Weighted average
number of common
shares
outstanding 19,865,000 19,352,000 19,680,000 19,374,000
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows
(Unaudited)
First Half Ended
June 30, July 1,
(Dollars in thousands) 2006 2005
----------------------------------------------------------------------
Net income $ 12,195 $ 9,817
Adjustments to reconcile
net income to net cash
provided from
(used in) operating activities:
Depreciation, depletion and
amortization 11,818 10,680
Amortization of deferred
financing costs in
interest expense 301 579
Derivative financial instrument
ineffectiveness (426) (94)
Stock-based compensation expense 255 -
Decrease (increase) in accounts
receivable (13,443) (8,785)
Decrease (increase) in inventory (22,190) (7,541)
Decrease (increase) in prepaid
and other current assets (2,972) 1,359
Decrease (increase) in deferred
income taxes 4,383 -
Increase (decrease) in accounts
payable and accrued expenses 4,761 (7,894)
Increase (decrease) in unearned
revenue 920 (7,789)
Increase (decrease) in interest
and taxes payable 773 (1,969)
Increase (decrease) in other
long-term liabilities 2,162 1,348
Other - net 6,579 984
----------------- ----------------
Net cash provided from
(used in) operating
activities 5,116 (9,305)
Cash flows from investing
activities:
Payments for purchase of
property, plant and
equipment (5,978) (4,860)
Payments for mine development (46) -
Purchase of equipment previously
held under operating lease - (448)
Payments for purchase of
business net of cash
received (25,694) (3,982)
Proceeds from sale of property,
plant and equipment - 45
Other investments - net 33 (11)
----------------- ----------------
Net cash used in investing
activities (31,685) (9,256)
Cash flows from financing
activities:
Proceeds from issuance/
(repayment) of short-
term debt 864 (673)
Proceeds from issuance of
long-term debt 26,000 -
Repayment of long-term debt (5,033) (18,607)
Issuance of common stock under
stock option plans 6,960 364
----------------- ----------------
Net cash provided from
(used in) financing
activities 28,791 (18,916)
Effects of exchange rate changes (273) (960)
----------------- ----------------
Net change in cash and
cash equivalents 1,949 (38,437)
Cash and cash equivalents
at beginning of period 10,642 49,643
----------------- ----------------
Cash and cash equivalents
at end of period $ 12,591 $ 11,206
================= ================
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 June 30, 2006 and December 31, 2005 and the
results of operations for the second quarter and first half ended
June 30, 2006 and July 1, 2005. All of the adjustments were of a
normal and recurring nature.
Note B - Inventories
June 30, Dec. 31,
(Dollars in thousands) 2006 2005
----------------------------------------------------------------------
Principally average cost:
Raw materials and supplies $ 28,539 $ 24,050
Work in process 109,179 88,480
Finished goods 45,412 30,553
--------- ---------
Gross inventories 183,130 143,083
Excess of average cost over LIFO inventory value 51,226 39,023
--------- ---------
Net inventories $131,904 $104,060
========= =========
Note C - Pensions and Other Post-retirement Benefits
Pension Benefits Other Benefits
--------------------- ---------------------
Second Quarter Ended Second Quarter Ended
June 30, July 1, June 30, July 1,
(Dollars in thousands) 2006 2005 2006 2005
---------- -------- ------------ -------
Components of net
periodic benefit
cost
Service cost $ 1,254 $ 1,206 $ 74 $ 64
Interest cost 1,743 1,398 475 493
Expected return on plan
assets (2,079) (2,205) - -
Amortization of prior
service cost (178) (484) (9) (15)
Amortization of net
loss/(gain) 516 425 - (90)
---------- -------- ------------ -------
Net periodic benefit cost $ 1,256 $ 340 $ 540 $ 452
========== ======== ============ =======
Pension Benefits Other Benefits
--------------------- ---------------------
First Half Ended First Half Ended
June 30, July 1, June 30, July 1,
(Dollars in thousands) 2006 2005 2006 2005
---------- -------- ------------ -------
Components of net
periodic benefit
cost
Service cost $ 2,507 $ 2,374 $ 148 $ 150
Interest cost 3,485 3,231 951 1,122
Expected return on plan
assets (4,157) (4,377) - -
Amortization of prior
service cost (356) (337) (18) (43)
Amortization of net
loss/(gain) 1,033 642 - -
---------- -------- ------------ -------
Net periodic benefit cost $ 2,512 $ 1,533 $ 1,081 $1,229
========== ======== ============ =======
The Company amended its domestic defined benefit pension plan
effective in the second quarter 2005. The amendment revised the
pension benefit payout formula for the majority of the plan
participants and various other aspects of the plan as well. The
amendment was deemed to be a significant event and therefore the plan
assets, liabilities and net periodic cost were remeasured in
accordance with Statement No. 87, "Employers' Accounting for
Pensions". As part of the remeasurement process, management reviewed
the key valuation assumptions and made adjustments as warranted.
As a result of the remeasurement, the prior service cost asset of
$5.0 million, previously recorded in other assets on the consolidated
balance sheet, was charged off against other comprehensive income, a
component of shareholders' equity. The minimum pension liability,
which is included in retirement and post-employment benefits on the
consolidated balance sheet, increased $6.1 million as a result of the
remeasurement, primarily due to the lower discount rate and the change
in asset values. The increase to the minimum pension liability was
also charged against other comprehensive income.
Notes to Consolidated Financial Statements
(Unaudited)
Note D - Comprehensive Income (Loss)
The reconciliation between net income and comprehensive income (loss)
for the second quarter and first half ended June 30, 2006 and
July 1, 2005 is as follows:
Second Quarter Ended First Half Ended
June 30, July 1, June 30, July 1,
(Dollars in thousands) 2006 2005 2006 2005
----------------------------------------------------------------------
Net income $ 6,968 $ 5,530 $12,195 $ 9,817
Cumulative translation
adjustment 383 (123) 490 (997)
Change in the fair value of
derivative
financial instruments 4,319 2,389 5,765 5,649
Minimum pension liability - (11,138) - (11,138)
--------- ----------- -------- ---------
Comprehensive income (loss) $ 11,670 $ (3,342) $18,450 $ 3,331
========= =========== ======== =========
The $11.1 million charge to comprehensive loss in the second quarter
2005 for the minimum pension liability resulted from the remeasurement
of the domestic defined benefit pension plan as described in Note C to
the Consolidated Financial Statements.
Note E - Segment Reporting
(Dollars in Metal Micro- Total All
thousands) Systems Electronics Segments Other Total
----------------------------------------------------------------------
Second Quarter 2006
--------------------
Revenues from
external
customers $ 96,684 $ 90,394 $187,078 $ - $187,078
Intersegment
revenues 1,102 737 1,839 - 1,839
Operating profit
(loss) 2,562 9,144 11,706 (412) 11,294
Second Quarter 2005
--------------------
Revenues from
external
customers $ 78,503 $ 56,148 $134,651 $ - $134,651
Intersegment
revenues 630 543 1,173 - 1,173
Operating profit
(loss) 3,490 4,766 8,256 (831) 7,425
First Half 2006
--------------------
Revenues from
external
customers $182,893 $ 171,908 $354,801 $ - $354,801
Intersegment
revenues 2,040 1,368 3,408 - 3,408
Operating profit
(loss) 4,600 17,887 22,487 (2,365) 20,122
First Half 2005
--------------------
Revenues from
external
customers $157,984 $ 107,039 $265,023 $ - $265,023
Intersegment
revenues 1,221 773 1,994 - 1,994
Operating profit
(loss) 6,108 8,462 14,570 (721) 13,849
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