Brush Engineered Materials Inc. Reports Sales up 29% for the First 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 first quarter 2006 sales of $167.7 million. Sales were up $37.3 million or 29% compared to sales of $130.4 million in the first quarter of 2005. Net income for the first quarter was $5.2 million, and 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 $0.27, up 21% compared to net income of $4.3 million and earnings per share diluted of $0.22 for the same quarter of 2005. The strong sales growth in the first quarter was driven by a combination of increased demand from the Company's major markets, added sales from acquisitions made subsequent to the first quarter of the prior year and higher metal prices. Demand in the quarter was especially 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. Acquisitions added $8.7 million of sales in the quarter. Approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. one fourth of the year-over-year sales increase in the quarter is related to higher precious and base metal prices. The first quarter was the thirteenth consecutive quarter where sales were higher than the comparable quarter of the prior year. Gross margin as a percent of sales improved by 1.5 points in the quarter compared to the Company's fourth quarter 2005 gross margin. While gross margin improved as a percent of sales compared to the fourth quarter, gross margin as a percent of sales and thus earnings in the current quarter continued to be negatively impacted compared to the prior year by higher precious and base metal prices, primarily copper. The Company has only been able to pass through to customers a portion of the higher costs. Copper prices increased an additional 15% during the first quarter of 2006 after increasing 42% in 2005. Precious metal and base metal costs passed through in sales without any margin benefit, coupled with the portion of costs that could not be passed through, combined to lower the first quarter 2006 gross margin as a percent of sales by 1.6 points compared to the first quarter of 2005. As was previously announced, the Company expected to record a higher provision for income tax in 2006 which negatively affects the quarterly earnings comparisons to the prior year. This was due to a change in the accounting treatment of the Company's deferred tax asset allowance. Since the Company continues to have significant net operating loss carryforwards Net operating loss carryforwards Application of losses to offset earnings in future years. , most of the additional tax provision will be non-cash expense Noun 1. non-cash expense - an expense (such as depreciation) that is not paid for in cash disbursal, disbursement, expense - amounts paid for goods and services that may be currently tax deductible (as opposed to capital expenditures) . A 32% effective tax rate was applied to the current quarter's income before income taxes. This compares to an 11% effective tax rate for the first quarter of 2005. The major difference between the two rates is that the domestic federal tax expense was offset in 2005 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 allowance. Therefore, the first quarter 2006 earnings per share comparison to the prior year is negatively affected by approximately $0.05 per share due to the prior year having a lower effective tax 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, earnings were $7.7 million in the quarter compared to $4.8 million in the first quarter of 2005, an increase of 60%. 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 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 first quarter sales of $86.2 million were 8% higher than first quarter 2005 sales of $79.5 million. The first 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. was $2.0 million versus $2.6 million for the same quarter a year ago. Margins were negatively impacted during the current quarter compared to the prior quarter by higher copper prices and unfavorable exchange rates caused by a stronger U.S. dollar. In addition, the first quarter of the prior year included approximately $6 million of non-repeat higher margin sales of materials for NASA's James Webb James Webb or Jim Webb may refer to: Politics
Alloy Products' first quarter sales of $60.4 million were 15% above first quarter 2005 sales of $52.6 million. Strip form product sales were up 12% and bulk form were up 25% over the respective 2005 quarter. Alloy experienced strong sales growth in all core markets including the telecommunications handset market segment, automotive electronics, oil and gas, aerospace, heavy equipment and engineered products for power generation. Alloy bulk products continues to benefit from the acceptance of its new products, particularly ToughMet(R). Key new applications include instrumentation instrumentation, in music: see orchestra and orchestration. instrumentation In technology, the development and use of precise measuring, analysis, and control equipment. housings for oil and gas products and bushings and bearings in heavy equipment and aerospace products. Although lead times are short, Alloy's order entry, overall, remains strong for the second quarter of 2006. TMI's first quarter sales of $17.9 million were $5.2 million or 41% higher than first quarter 2005 sales of $12.7 million. The sales increase was primarily due to strong demand in the telecommunications and computer and automotive electronics markets. New product growth including materials for disk drive arms and energy and medical product applications contributed to the strong growth during the first quarter. The strong conditions and related order entry strength has continued thus far during the second quarter. Beryllium Products' first quarter sales of $7.9 million were down 44% compared to sales of $14.2 million for the same period of last year. First quarter 2005 included $6.1 million of sales of materials for NASA's James Webb Telescope. The supply contract for this material was substantially completed in 2005. Sales for the first quarter of 2006 therefore did not include any significant amount of James Webb Telescope materials. Excluding this from the comparisons, Beryllium Products' sales are down 4% from the first quarter of 2005. It is expected that Beryllium Products' sales will improve during the second quarter. Brush Resources did not have sales to external customers in the first quarter of 2006 or 2005. 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 first quarter 2006 sales of $81.5 million were up $30.6 million or 60% compared to the first quarter 2005 sales of $50.9 million. Operating profit of $8.7 million was up $5.0 million compared to the first quarter 2005 operating profit of $3.7 million. WAM's first quarter sales of $75.4 million were $31.2 million or 71% higher than first quarter 2005 sales of $44.2 million. The increase in sales was driven by continued strong core demand and new product applications in the magnetic data storage, wireless photonics, handset and semiconductor markets. 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 have added to WAM's product breadth Breadth The percentage of assets or stocks advancing relative to those unchanged or declining. Also the number of independent forecasts available per year. A stock picker forecasting returns to 100 stocks every quarter exhibits a breadth of 400, assuming each forecast is and accounted for approximately $8.7 million or 28% of the sales growth during the first three months of 2006. Precious metal price increases passed on to customers during the first quarter were approximately 20% of the sales growth. WAM is continuing to expand 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 and is in
the process of opening facilities in the Czech Republic Czech Republic, Czech Česká Republika (2005 est. pop. 10,241,000), republic, 29,677 sq mi (78,864 sq km), central Europe. It is bordered by Slovakia on the east, Austria on the south, Germany on the west, and Poland on the north. and China. We
expect order entry to remain strong in the second quarter of 2006.Electronic Products' first quarter 2006 sales of $6.1 million were down 9% from first quarter 2005 sales of $6.7 million. The sales decline was due to softness in the sectors of the telecommunications and computer market that this business serves. OUTLOOK Most of our markets were stronger than expected during the first quarter of the year and we continued to make good progress with our new products and our initiatives to penetrate new markets. We also made progress in the first quarter with our initiatives to improve margins. Our acquisitions delivered the expected results as well. These positive factors have continued thus far in the second quarter. We believe these conditions will continue throughout the quarter and therefore expect results for the quarter to be similar to those of the first quarter. At this time, sales for the second quarter are expected to be in the range of $160 to $170 million, up approximately 20% to 25% compared to the same quarter of the prior year. Earnings are expected to be in the range of $0.25 to $0.30 per share. While our markets are subject to inventory swings and macro economic factors could yield a softer second half compared to the first half, based on the first quarter and the outlook for the second quarter, we are raising the outlook for the year. Earnings are now expected to be in the range of $0.95 to $1.10 per share, up $0.15 per share compared to the previous estimate provided. CHAIRMAN'S COMMENTS Commenting on the results, 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, 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, "I am pleased with the continued growth in revenue and net income that was generated during the first quarter of 2006. Our new product and new market initiatives, our efforts to broaden our product and market breadth market breadth See breadth of market. , our geographic expansions, our 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. programs and our recent acquisitions are resulting in growth in revenue and earnings and are adding significantly to shareholder value. As previously announced I will be retiring and thus stepping down as Chairman and CEO upon conclusion of the Company's annual meeting of shareholders on May 2. I have enjoyed my tenure tenure, in education tenure, in education, a guarantee of the permanence of a college or university teacher's position, awarded upon successful completion of a probationary period, usually seven years. , as well as my association with the employees of Brush, and have appreciated the support of our shareholders. I am confident that 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 leaving the Company with a high quality management team, one that's committed to succeed. I look forward to the Company's continuing progress." 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 year 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. 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
March 31, 2006
2006 2005
------------- --------------
First Quarter
Net Sales $167,723,000 $130,372,000
Net Income $5,227,000 $4,286,000
Share Earnings - Basic $0.27 $0.22
Share Earnings - Diluted $0.27 $0.22
Consolidated Balance Sheets
(Unaudited)
Mar. 31, Dec. 31,
(Dollars in thousands) 2006 2005
----------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $5,946 $10,642
Accounts receivable 85,962 69,938
Inventories 121,158 104,060
Prepaid expenses 16,752 14,417
Deferred income taxes 1,177 1,118
--------- ---------
Total current assets 230,995 200,175
Other assets 18,118 8,252
Related-party notes receivable 358 358
Long-term deferred income taxes 1,259 4,109
Property, plant and equipment 551,110 540,420
Less allowances for depreciation,
depletion and impairment 372,998 363,358
--------- ---------
178,112 177,062
Goodwill 19,097 12,746
--------- ---------
$447,939 $402,702
========= =========
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt $27,301 $23,634
Current portion of long-term debt 632 636
Accounts payable 23,767 20,872
Other liabilities and accrued items 41,284 38,522
Unearned revenue 1,380 254
Income taxes 981 726
--------- ---------
Total current liabilities 95,345 84,644
Other long-term liabilities 7,879 8,202
Retirement and post-employment benefits 66,574 65,290
Deferred income taxes 152 172
Long-term debt 58,882 32,916
Shareholders' equity 219,107 211,478
--------- ---------
$447,939 $402,702
========= =========
See notes to consolidated financial statements.
Consolidated Statements of Income
(Unaudited)
First Quarter Ended
(Dollars in thousands except share and per share Mar. 31, April 1,
amounts) 2006 2005
----------------------------------------------------------------------
Net sales $167,723 $130,372
Cost of sales 133,580 101,795
--------- ----------
Gross margin 34,143 28,577
Selling, general and administrative expense 23,908 18,701
Research and development expense 1,081 1,241
Other-net 325 2,211
--------- ----------
Operating profit 8,829 6,424
Interest expense 1,143 1,622
--------- ----------
Income before income taxes 7,686 4,802
Income taxes 2,459 516
--------- ----------
Net income $5,227 $4,286
========= ==========
Per share of common stock: basic $0.27 $0.22
Per share of common stock: diluted $0.27 $0.22
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows
(Unaudited)
First Quarter Ended
Mar. 31, April 1,
(Dollars in thousands) 2006 2005
----------------------------------------------------------------------
Net income $5,227 $4,286
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation, depletion and amortization 5,627 5,343
Amortization of deferred financing costs in
interest expense 139 304
Derivative financial instrument ineffectiveness (248) (510)
Stock option expense 98 -
Decrease (increase) in accounts receivable (12,462) (7,059)
Decrease (increase) in inventory (11,919) (5,024)
Decrease (increase) in prepaid and other current
assets (3,336) 941
Decrease (increase) in deferred income taxes 1,967 -
Increase (decrease) in accounts payable and
accrued expenses 2,141 (11,413)
Increase (decrease) in unearned revenue 1,126 (5,252)
Increase (decrease) in interest and taxes
payable 1,065 (1,600)
Increase (decrease) in other long-term
liabilities 1,156 949
Other - net 2,612 826
--------- ---------
Net cash used in operating
activities (6,807) (18,209)
Cash flows from investing activities:
Payments for purchase of property, plant and
equipment (2,081) (2,179)
Payments for mine development (13) -
Purchase of equipment previously held under
operating lease - (448)
Payments for purchase of business net of cash
received (25,694) -
Proceeds from sale of property, plant and
equipment - 25
Other investments - net - (16)
--------- ---------
Net cash used in investing
activities (27,788) (2,618)
Cash flows from financing activities:
Proceeds from issuance/(repayment) of short-term
debt 3,599 (717)
Proceeds from issuance of long-term debt 26,000 -
Repayment of long-term debt (33) (18,607)
Issuance of common stock under stock option
plans 558 249
--------- ---------
Net cash provided from (used
in) financing activities 30,124 (19,075)
Effects of exchange rate changes (225) (64)
--------- ---------
Net change in
cash and cash
equivalents (4,696) (39,966)
Cash and cash equivalents
at beginning of period 10,642 49,643
--------- ---------
Cash and cash
equivalents at
end of period $5,946 $9,677
========= =========
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 March 31, 2006 and December 31, 2005 and the
results of operations for the three month periods ended March 31, 2006
and April 1, 2005. All of the adjustments were of a normal and
recurring nature. Certain items in the prior year have been
reclassified to conform to the 2006 consolidated financial statement
presentation.
Note B - Acquisition
In January 2006, WAM acquired the stock of CERAC, incorporated for
$26.2 million, including advisor fees. CERAC provides physical vapor
deposition and specialty inorganic materials for the precision optics,
semiconductor and other industries. CERAC employs approximately 120
people at its Milwaukee, Wisconsin facility. Their sales were
approximately $20 million in 2005. The purchase price included $3.8
million to be held in escrow pending resolution of various matters as
detailed in the purchase agreement. Preliminary goodwill assigned to
the transaction totaled $6.3 million. CERAC's results of operations
are included in the Company's financial statements since the
acquisition date.
Note C - Inventories
Mar. 31, Dec. 31,
(Dollars in thousands) 2006 2005
---------------------------------------------------------------------
Principally average cost:
Raw materials and supplies $26,866 $24,050
Work in process 95,801 88,480
Finished goods 40,971 30,553
--------- ---------
Gross inventories 163,638 143,083
Excess of average cost over LIFO inventory
value 42,480 39,023
--------- ---------
Net inventories $121,158 $104,060
========= =========
Notes to Consolidated Financial Statements
(Unaudited)
Note D - Comprehensive Income
The reconciliation between net income and comprehensive income for the
three month periods ended March 31, 2006 and April 1, 2005 is as
follows:
First Quarter Ended
Mar. 31, Apr. 1,
(Dollars in
thousands) 2006 2005
------------------------------------------
Net income $5,227 $4,286
Cumulative translation
adjustment 106 (874)
Change in the fair
value of derivative
financial
instruments 1,446 3,261
---------- ----------
Comprehensive income $6,779 $6,673
========== ==========
Note E - Segment Reporting
(Dollars in Metal Micro- Total All
thousands) Systems Electronics Segments Other Total
----------------------------------------------------------------------
First Quarter 2006
------------------
Revenues from
external customers $86,209 $81,514 $167,723 $- $167,723
Intersegment
revenues 938 631 1,569 - 1,569
Operating profit
(loss) 2,038 8,743 10,781 (1,952) 8,829
First Quarter 2005
------------------
Revenues from
external customers $79,481 $50,891 $130,372 $- $130,372
Intersegment
revenues 591 230 821 - 821
Operating profit 2,618 3,696 6,314 110 6,424
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