Brush Engineered Materials Inc. Reports Sales up 21% for the Fourth Quarter and up 9% for 2005; Fourth Quarter Earnings of $0.21 Per Share Meet Expectations.CLEVELAND -- 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 fourth quarter sales of $140.6 million, up $24.6 million or 21% compared to the fourth quarter 2004 sales of $116.0 million. Net income for the fourth quarter was $4.1 million compared to $1.8 million for the prior year. Earnings were $0.21 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. compared to $0.09 for the same quarter of the prior year and in line with our expectations. The strong sales growth in the fourth quarter was driven by continued strength in the magnetic media, 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 and industrial component market segments. The growth was also driven in part by improvement in the telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. infrastructure, computer and automotive markets. The fourth quarter was the twelfth consecutive quarter where sales were higher than the comparable quarter of the prior year. Approximately 15% or $3.7 million of the year-over-year sales increase in the quarter is related to higher precious and base metal prices that the Company has been able to pass on to customers. Reported results for the quarter include the impact of the previously announced costs related to the pre-payment of subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". and the previously announced benefit related to the reversal of a portion of the Company's domestic deferred tax valuation allowance. These items negatively impacted income before taxes by $3.8 million and favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impacted income tax by $5.9 million. As a result, net income for the quarter was favorably impacted by $2.1 million and earnings by $0.11 per share. Earnings in the quarter continued to be negatively impacted by an unfavorable product mix, increased copper prices and higher energy costs. The Company has only been able to pass through to customers a portion of the higher costs. Copper prices increased an additional 19% during the fourth quarter of 2005. This, along with the weaker mix and higher costs of other materials, combined to drive the Company's gross margin down 3.0 points compared to the fourth quarter of the prior year. Sales for 2005 were $541.3 million, up 9% or $45.0 million compared to the prior year's sales of $496.3 million. Metal prices passed on to customers accounted for approximately $10.0 million or 22% of the sales increase. Net income for the year was $17.8 million or $0.92 per share diluted, up $2.3 million compared to the prior year's net income of $15.5 million or $0.85 per share diluted. Earnings for the year were negatively impacted by the weaker mix and higher material costs which, when combined, resulted in the full year gross margin being 2.0 points lower than the prior year, approximately 1.0 point of which was metal prices. BALANCE SHEET The Company continued to strengthen its balance sheet and ended the year with significant financial flexibility. Debt was reduced during the year by $15.3 million improving the debt to debt-plus-equity ratio from 26% to 21%. The prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. of the $30.0 million of high yield subordinated debt will reduce the Company's interest expense by over $4.0 million in 2006. During the fourth quarter the Company amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. its $105.0 million revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility, increasing it to $125.0 million. In addition the Company also increased the capacity of its precious metal consignment The delivery of goods to a carrier to be shipped to a designated person for sale. A Bailment of goods for sale. A consignment is an arrangement resulting from a contract in which one person, the consignor, either ships or entrusts goods to another, the facility from $46.0 million to $70.0 million. This increased capacity in both lines adds the liquidity to support future growth. 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 ), 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 Resources Inc. The Metal Systems Group also includes Brush Resources Inc., our Utah mine and mill, which previously was classified in Other. This reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. better reflects how the operations are now managed. Brush Resources produces beryllium hydroxide Beryllium hydroxide is one of the few amphoteric metal hydroxides, capable of being an acid or a base under different conditions. For example, it dissolves in sodium hydroxide solution to give a colourless solution of sodium beryllate: 2NaOH(aq) + Be(OH)2 , a raw material input for our beryllium businesses and for sale to an external customer. Prior year results have been adjusted to reflect the change. The Metal Systems Group's fourth quarter sales were up 5% to $74.6 million compared to $70.9 million in the fourth quarter of 2004. Sales for the year were $306.3 million, up approximately 2% compared to 2004 sales of $300.7 million. In the fourth quarter, operating results improved by $1.1 million to a loss of $0.1 million from an 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. of $1.2 million in the fourth quarter of the prior year. 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 2005 was $6.3 million, an improvement of 40% or $1.8 million compared to the 2004 operating profit of $4.5 million. Alloy Products' fourth quarter sales were up 13% to $53.0 million from $46.7 million in the prior year. Approximately 22% or $1.4 million of the fourth quarter sales increase was due to the portion of higher copper prices which the Company was able to pass through to customers. Alloy strip sales were up 19% from the fourth quarter of last year driven by stronger demand from the telecommunications handset market segment, particularly in Asia. Alloy bulk products remained strong in the quarter, aided by continued gains from new product/applications. These new products are increasingly replacing other materials in certain oil and gas and heavy equipment applications. Alloy Products' margins continued to be negatively impacted by the inability to pass along all of the higher copper prices and higher energy and other material costs. Sales in 2005 were $208.2 million which compares to $202.9 million in the prior year. Alloy Products announced a worldwide price increase in November 2005. The price increase should have a positive impact on the first quarter 2006 margins. TMI's fourth quarter sales were $12.9 million, up 15% compared to the fourth quarter 2004 sales of $11.2 million. Sales for 2005 were $49.9 million, down 7% from 2004. The improvement in the fourth quarter is due to improving conditions in the telecommunications and computer markets and new product initiatives. It is anticipated that the improving conditions will continue into the first quarter of 2006. Beryllium Products' fourth quarter sales were $8.7 million; a third lower than the $13.0 million reported in the fourth quarter of 2004. Sales for the year were $42.6 million, up 8% or $3.1 million compared to $39.5 million in 2004. The 2005 sales improvement was driven by shipments of materials for the NASA NASA: see National Aeronautics and Space Administration. NASA in full National Aeronautics and Space Administration Independent U.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. program. The fourth quarter sales comparisons were negatively affected by the continuing delays in defense spending and the absence of shipments for the Webb 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; program as that program is now essentially complete. Brush Resources did not have third party shipments of beryllium hydroxide in the fourth quarters of 2005 and 2004. For the year, sales were $5.6 million compared to $4.7 million for 2004. 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 fourth quarter of 2005 were up 46% to $66.1 million, compared to $45.1 million in the fourth quarter of the prior year. Sales for the full year were up 20% to $234.9 million, compared to $195.6 million in 2004. Operating profit for the fourth quarter was $4.8 million, up 11% compared to $4.3 million for the fourth quarter of 2004. Operating profit for 2005 was $19.0 million, compared to an operating profit of $18.5 million for the prior year. Operating profit for the quarter and year was negatively impacted by an unfavorable mix shift driven by a decline in U.S. automotive and telecommunications infrastructure product shipments, plus inventory valuation differences as well as higher new product introduction costs. WAM's fourth quarter sales were up 55% to $60.0 million compared to $38.7 million for the prior year. Sales for 2005 were $209.5 million, up 27% compared to 2004 sales of $165.7 million. Metal prices that were passed through to customers accounted for $2.3 million or 11% of the $21.3 million sales increase in the fourth quarter and $6.1 million or 14% of the $43.8 million increase for the year. The sales growth in the fourth quarter and the year is due in part to the OMC OMC Organisation Mondiale du Commerce (French: WTO) OMC Organización Mundial del Comercio (Spanish: World Trade Organization) OMC Organização Mundial do Comércio Scientific and Thin Film Technology, Inc. acquisitions announced earlier in the year and also to the strength of the demand for WAM's products and new applications in the magnetic data storage, wireless photonics, handset and semiconductor markets. This strength is expected to continue through the first quarter of 2006. WAM has continued to expand its geographic reach in Asia and Europe and recently opened offices in Korea and Japan to expand and better serve its customer base. In early January of 2006 WAM acquired 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, a domestic provider of physical vapor deposition  This article or section is in need of attention from an expert on the subject.Please help recruit one or [ improve this article] yourself. See the talk page for details. and specialty organic materials. CERAC's 2005 sales were approximately $20 million. This is the third acquisition for WAM in the past nine months. WAM continued to strengthen and broaden its product breadth through these acquisitions. Electronic Products' fourth quarter 2005 sales were $6.1 million, down 6% as compared to the same period last year. Sales for 2005 were $25.4 million, down 15% from 2004 sales of $29.9 million. The sales decline throughout the year is due to weak conditions in the U.S. automotive, telecommunications infrastructure and defense markets. OUTLOOK The year 2005 brought significant growth, especially in the fourth quarter. Overall, our global markets continue to present double-digit sales growth opportunities and we remain confident that we'll continue to see considerable progress in 2006. The overall outlook in the Company's major markets improved during the fourth quarter. Good improvement is being experienced in the Company's larger markets, telecommunications infrastructure, consumer electronics and automotive electronics. Shipments to these markets had been weak earlier in 2005, primarily due to customer inventory adjustments in the first half. This softness was offset by the strength and ongoing growth in demand for the Company's materials and new products in the magnetic media, wireless photonic Dealing with light (photons). See photon and photonics. , and industrial components markets. These markets remained strong in the second half as well. Also, helping to offset the weaker markets in 2005 were the shipments of material for NASA's James Webb James Webb or Jim Webb may refer to: Politics
While the Company's sales outlook, including mix, is improving, other factors continue to adversely affect the Company's margins. Operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: in 2005 had been expected to improve compared to the prior year. However, as noted earlier, raw material price increases, especially precious metal and copper, as well as unfavorable mix and higher energy costs combined to drive gross margins down by approximately two percentage points in the year, approximately half of which was metal price. In the fourth quarter, gross margins were down three percentage points compared to the same period of the prior year due to these same factors. The Company has taken actions to help mitigate mit·i·gate v. To moderate in force or intensity. mit  i·ga tion n. the impact that the
higher material and energy costs has had on margins. These include
selling price increases, the implementation of energy and commodity
surcharges and reductions in other costs. These actions favorably
affected margins as the fourth quarter progressed. First quarter 2006
gross margins are currently expected to improve by up to 1.0 to 2.0
percentage points compared to the fourth quarter gross margin.
Additional benefit is expected in subsequent quarters as these actions
become fully implemented.The Company also continues to make good progress with its initiatives to broaden and diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. its revenue base and expand geographically. This, along with the continued development and introduction of new products, as well as the acquisitions made in 2005 and early 2006 should add to our overall growth in 2006. At this time, the Company expects the full year 2006 sales growth to be consistent with the previously announced and expected on-going growth rate of 8% to 12% per year. Given the acquisitions, the growth in 2006 is currently expected to be at the higher end Coordinates: For other places with the same name, see Billinge. Higher End or Billinge Higher End is a district of the Metropolitan Borough of Wigan, in Greater Manchester, England. of that range. Assuming no change in current trends, sales for 2006 are expected to be in the range of $580.0 to $600.0 million. First quarter sales are currently expected to be in the range of $148.0 to $158.0 million, up approximately 13% to 22% compared to the prior year. It was previously announced that as a direct result of the Company's positive earnings momentum and the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. projected earnings outlook, the Company will, in 2006, be recording a quarterly provision for income tax expense based on the appropriate effective tax rate. The effective tax rate for the year is expected to be in the 28% to 30% range. Thus, earnings comparisons to the prior year will be negatively affected by the tax expense. Pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern earnings, however, will not be affected. In addition, since the Company will continue to have sizable siz·a·ble also size·a·ble adj. Of considerable size; fairly large. siz a·ble·ness n. net operating loss carry forwards, the majority of the projected
2006 tax expense will be non-cash.Considering the above, earnings in 2006 are estimated to be in the range of $0.80 to $0.95 per share which includes an additional estimated tax Federal and state tax laws require a quarterly payment of estimated taxes due from corporations, trusts, estates, non-wage employees, and wage employees with income not subject to withholding. expense of approximately $0.24 to $0.28 per share compared to 2005. For the first quarter, the Company expects pretax earnings to improve significantly compared to the prior year. First quarter 2006 EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. , including an $0.08 to $0.10 negative effect of the tax expense discussed above, when compared to prior year, is currently expected to be in the $0.18 to $ 0.23 per share range. CHAIRMAN'S COMMENTS Commenting on the results, Gordon D. Harnett, Chairman 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, "Even though we faced a challenging business environment in 2005, which slowed our growth and negatively affected our margins by a significant amount, in turn hurting our profitability, we made significant progress in a number of important areas. Our marketing efforts and new product development initiatives as well as our geographic expansions, especially in Asia, are adding to our growth opportunity. Our disciplined cost control and Lean Sigma SIGMA - A scientific visual programming environment from NASA. http://fi-www.arc.nasa.gov/fia/projects/sigma/. initiatives should continue to aid margins and our margin expansion efforts. The pre-payment of our subordinated debt will significantly reduce interest expense in future periods. Our strong balance sheet, expanded financial flexibility and strong cash flow gives us the opportunity to grow our business further as strategic opportunities arise. In addition, we closed on three important acquisitions which should add to our growth and profitability in 2006 and beyond." 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 content set forth in this document that are not statements of historical or current facts are forward-looking statements. The Company's actual future performance, including performance in the near term, 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 elsewhere herein: --The global economy; --The condition of the markets the Company serves, whether defined geographically or by segment, with the major market segments being telecommunications and computer, automotive electronic, magnetic and optical data storage, aerospace and defense, industrial components, and appliance A stand-alone hardware device or software environment dedicated to a specific task. See hardware appliance and software appliance. ; --The successful development and introduction of new products and applications; --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 year 2006; --Changes in product mix and the financial condition of key customers; --The Company's success in implementing its strategic plans and the timely and successful completion of any capital projects; --Other financial factors, including cost and availability of materials, interest rates, exchange rates, tax rates, pension costs, energy costs, regulatory compliance cost 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 any new legislation that impacts the Company's obligations; --The uncertainties related to the impact of war and terrorist activities; 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. 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, 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
December 31, 2005
2005 2004
------------- -------------
Fourth Quarter
Net Sales $140,630,000 $116,009,000
Net Income $4,100,000 $1,761,000
Share Earnings - Basic $0.21 $0.09
Average Shares - Basic 19,227,447 19,167,750
Share Earnings - Diluted $0.21 $0.09
Average Shares - Diluted 19,362,852 19,406,473
Year-to-date
Net Sales $541,267,000 $496,276,000
Net Income $17,825,000 $15,516,000
Share Earnings - Basic $0.93 $0.87
Average Shares - Basic 19,219,099 17,865,053
Share Earnings - Diluted $0.92 $0.85
Average Shares - Diluted 19,370,748 18,163,915
Consolidated Statements of Income
(Unaudited)
Fourth Quarter Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
(Dollars in thousands
except share and per
share amounts) 2005 2004 2005 2004
---------------------------------------------- -----------------------
Net sales $140,630 $116,009 $541,267 $496,276
Cost of sales 114,010 90,537 431,024 385,202
----------- ----------- ----------- -----------
Gross margin 26,620 25,472 110,243 111,074
Selling, general
and
administrative
expenses 21,604 20,286 78,457 77,267
Research and
development
expenses 1,317 995 4,990 4,491
Other-net 3,843 (2) 7,287 4,282
----------- ----------- ----------- -----------
Operating profit
(loss) (144) 4,193 19,509 25,034
Interest expense 1,529 1,815 6,372 8,377
----------- ----------- ----------- -----------
Income (loss) before
income taxes (1,673) 2,378 13,137 16,657
Income tax
(benefit)
expense (5,773) 617 (4,688) 1,141
----------- ----------- ----------- -----------
Net income $4,100 $1,761 $17,825 $15,516
=========== =========== =========== ===========
Per share of common
stock: basic $0.21 $0.09 $0.93 $0.87
Weighted average
number of common
shares outstanding 19,227,447 19,167,750 19,219,099 17,865,053
Per share of common
stock: diluted $0.21 $0.09 $0.92 $0.85
Weighted average
number of common
shares outstanding 19,362,852 19,406,473 19,370,748 18,163,915
Consolidated Balance Sheets
(Unaudited)
Dec. 31, Dec. 31,
(Dollars in thousands) 2005 2004
----------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $10,642 $49,643
Accounts receivable 69,938 59,229
Inventories 104,060 95,271
Prepaid expenses 14,417 8,348
Deferred income taxes 1,118 275
--------- ---------
Total current assets 200,175 212,766
Other assets 8,610 14,876
Long-term deferred income taxes 4,109 928
Property, plant and equipment 544,301 540,937
Less allowances for depreciation
and depletion 367,239 363,318
--------- ---------
177,062 177,619
Goodwill 12,746 7,992
--------- ---------
$402,702 $414,181
========= =========
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt $23,634 $11,692
Current portion of long-term debt 636 19,209
Accounts payable 20,872 13,234
Other liabilities and accrued items 38,522 50,452
Unearned revenue 254 7,789
Income taxes 726 1,591
--------- ---------
Total current liabilities 84,644 103,967
Other long-term liabilities 8,202 10,798
Retirement and post-employment benefits 65,290 49,729
Deferred income taxes 172 0
Long-term debt 32,916 41,549
Shareholders' equity 211,478 208,138
--------- ---------
$402,702 $414,181
========= =========
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