Brush Engineered Materials Inc. Reports Significantly Improved Second Quarter 2004 Earnings Per Share of $0.38; Sales up 26% Compared to Second Quarter 2003.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 net income of $6.6 million or $0.38 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. . The Company broke even in the second quarter of 2003. Sales for the second quarter of 2004 were up 26% to $128.6 million compared to second quarter 2003 sales of $101.8 million. The significant improvement in earnings is due to increased sales volume, improved margins and continued gains in operating efficiency. Gross margin as a percent of sales improved to approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 23% compared to 19% in the second quarter of 2003. The strong quarterly sales were driven by strength in the Company's key end-use markets, including telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. and computer, automotive electronics and data storage, and continued success with the development and introduction of new products. This is the sixth consecutive quarter in which sales were higher than in the prior year's comparable quarter. Metal prices and exchange rates accounted for $5.2 million of the $26.8 million sales improvement. First half 2004 net income was $10.3 million or $0.60 per share diluted. The Company had a net loss of $3.0 million or $0.18 per share diluted in the first half of 2003. Gross margin as a percent of sales improved to 23% versus 18% in the first half of 2003. Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. sales of $254.5 million were 26% higher than 2003 first half sales of $201.3 million. Metal prices and exchange rates accounted for $11.6 million of the $53.2 million sales improvement. First half 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. improved by $16.1 million over the comparable period of 2003. Approximately 39% of the sales growth for the first half of the year flowed through to operating profit after considering metal prices and exchange rates. Subsequent to the end of the second quarter, the Company announced the completion of a common stock offering of approximately 2.1 million newly issued shares. The net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from the offering, after deducting the estimated fees, were approximately $35.0 million. The majority of the proceeds were used to repay outstanding borrowings under the Company's revolving line of credit Revolving line of credit A bank line of credit on which the customer pays a commitment fee and can take and repay funds at will. Normally a revolving LOC involves a firm commitment from the bank for a period of several years. and $5.0 million of the proceeds was used to repay a portion of the Company's long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. 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". . In addition, as part of the public offering, the underwriters have an option to purchase up to an additional 0.3 million shares to cover over-allotments. If exercised, the option could generate up to an additional $5.7 million in net proceeds. 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 second quarter sales of $77.1 million were 27% higher than second quarter 2003 sales of $60.7 million. Year-to-date sales of $153.1 million were 26% higher than the sales of $121.9 million for the prior year. The Metal Systems Group had a second quarter operating profit of $1.8 million compared to 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 $2.8 million for the second quarter of 2003. The operating profit for the first half of 2004 was $5.0 million, an improvement of $11.2 million over the $6.2 million operating loss for the same period last year. Alloy Products' second quarter sales of $54.7 million and first half sales of $107.2 million were each up approximately 30% compared to the same periods last year. Alloy continues to experience strength across its global major end-use markets including computer and telecommunications, automotive electronics, and industrial components. Alloy strip form products sales were up 37% while bulk products increased 15% compared to the first half of 2003. During the first half of 2004, Alloy Products continued to make progress with manufacturing efficiencies and the development and sales of its new beryllium and non-beryllium 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. . Although the Alloy order entry rate remains strong compared to the prior year, visibility is short and sales for the third quarter 2004 will be affected by the normal 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. TMI's second quarter sales of $14.6 million were up 37% over the second quarter of 2003. Sales of $28.3 million for the first half of 2004 were 26% higher than the first half sales of 2003. The growth has been driven by strong demand from the telecommunications and computer market. Sales to the automotive electronics market were stable. TMI's third quarter sales will also be impacted by the seasonal factors. Beryllium Products' second quarter sales of $7.8 million were about flat with 2003 second quarter sales of $7.9 million while first half sales of $17.5 million were slightly above 2003 first half sales of $16.8 million. The outlook for defense and medical applications remains positive. 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 2004 of $51.5 million were 37% above second quarter 2003 sales of $37.7 million. Sales for the first six months of 2004 of $101.4 million were 33% above 2003 first half sales of $76.0 million. Operating profit for the second quarter was $4.8 million, 37% above the second quarter of 2003. Operating profit year-to-date was $10.3 million, 72% above the first half 2003 operating profit of $6.0 million. WAM's 2004 second quarter sales of $43.5 million were 46% above second quarter 2003 sales of $29.8 million. WAM's sales for the first half of $85.6 million were 42% above the same period last year. The strong growth in the second quarter and first half of 2004 is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the strong demand in the data storage and wireless 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. markets. Electronic Products' second quarter sales of $8.0 million and first half sales of $15.8 million were up slightly compared to the second quarter 2003 sales of $7.9 million and first half 2003 sales of $15.7 million. Outlook The Company's end-use markets continue to reflect positive trends and strong growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. . Although the third quarter is usually affected by seasonal factors such as holiday periods 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
domestic maintenance shutdowns, the Company currently expects the third
quarter to grow at rates similar to those experienced the past three
quarters. Third quarter sales are currently expected to be at least 20%
higher than the prior year's third quarter sales of $94.2 million.
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, 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 significant improvement in earnings for the second quarter and first half of 2004. Importantly, we are seeing good earnings leverage from the growth in sales. Our initiatives to lower cost and improve operating efficiencies continue to provide strong year-over-year margin improvement. Our new market and new product initiatives are also adding to the revenue growth. We remain committed to these initiatives and look forward to continued improvement in the second half of 2004." 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 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 market, with the major markets being telecommunications and computer, optical media, automotive electronics, industrial components, aerospace and defense and appliance A stand-alone hardware device or software environment dedicated to a specific task. See hardware appliance and software appliance. . --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 in the third quarter 2004 and for the full year of 2004. --Changes in product mix. --The financial condition of particular customers. --The Company's success in implementing its strategic plans and the timely and successful completion of any capital expansion projects. --Other factors, including, interest rates, exchange rates, tax rates, pension costs, energy costs, raw material 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 any new legislation that impacts the Company's obligations. --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. --Additional risk factors that may affect the Company's results are identified under the caption "Risk Factors" in the S-3 Registration Statement of the Company filed with the Securities and Exchange Commission on April 2, 2004. 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
July 2, 2004
2004 2003
------------- -------------
Second Quarter
Net Sales $128,639,000 $101,805,000
Net Income $6,571,000 $37,000
Share Earnings - Basic $0.39 $0.00
Average Shares - Basic 16,704,568 16,563,098
Share Earnings - Diluted $0.38 $0.00
Average Shares - Diluted 17,127,698 16,639,382
Year-to-date
Net Sales $254,501,000 $201,323,000
Net Income (Loss) $10,324,000 ($2,979,000)
Share Earnings - Basic $0.62 ($0.18)
Average Shares - Basic 16,661,099 16,562,283
Share Earnings - Diluted $0.60 ($0.18)
Average Shares - Diluted 17,107,295 16,562,283
Consolidated Balance Sheets
(Unaudited)
July 2, Dec. 31,
(Dollars in thousands) 2004 2003
----------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $10,325 $5,062
Accounts receivable 67,950 55,102
Inventories 100,030 87,396
Prepaid expenses 5,674 5,454
Deferred income taxes 51 291
--------- ---------
Total current assets 184,030 153,305
Other assets 16,006 18,902
Long-term deferred income taxes 1,393 704
Property, plant and equipment 537,679 535,421
Less allowances for depreciation,
depletion and impairment 355,873 344,575
--------- ---------
181,806 190,846
Goodwill 7,992 7,859
--------- ---------
$391,227 $371,616
========= =========
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt $25,516 $13,387
Accounts payable 16,994 16,038
Other liabilities and accrued items 38,200 37,366
Income taxes 928 1,373
--------- ---------
Total current liabilities 81,638 68,164
Other long-term liabilities 12,219 14,739
Retirement and post-employment benefits 50,439 49,358
Long-term debt 78,581 85,756
Minority interest in subsidiary - 26
Shareholders' equity 168,350 153,573
--------- ---------
$391,227 $371,616
========= =========
See notes to consolidated financial statements.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands Second Quarter Ended First Half Ended
except share and per July 2, June 27, July 2, June 27,
share amounts) 2004 2003 2004 2003
---------------------------------------------- -----------------------
Net sales $128,639 $101,805 $254,501 $201,323
Cost of sales 99,198 82,941 195,483 165,346
----------- ----------- ----------- -----------
Gross margin 29,441 18,864 59,018 35,977
Selling, general and
administrative expenses 19,161 16,611 38,208 33,909
Research and
development expenses 1,098 928 2,366 2,036
Other-net 127 230 3,319 976
----------- ----------- ----------- -----------
Operating profit (loss) 9,055 1,095 15,125 (944)
Interest expense 2,389 834 4,607 1,606
----------- ----------- ----------- -----------
Income (loss) before
income taxes 6,666 261 10,518 (2,550)
Minority interest - (22) - (22)
Income taxes 95 246 194 451
----------- ----------- ----------- -----------
Net income (loss) $6,571 $37 $10,324 $(2,979)
=========== =========== =========== ===========
Per share of common
stock: basic $0.39 $0.00 $0.62 $(0.18)
Weighted average
number of common
shares outstanding 16,704,568 16,563,098 16,661,099 16,562,283
Per share of common
stock: diluted $0.38 $0.00 $0.60 $(0.18)
Weighted average
number of common
shares outstanding 17,127,698 16,639,382 17,107,295 16,562,283
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows
(Unaudited)
First Half Ended
July 2, June 27,
(Dollars in thousands) 2004 2003
----------------------------------------------------------------------
Net income (loss) $10,324 ($2,979)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation, depletion and amortization 12,025 10,021
Amortization of deferred financing costs in
interest expense 722 163
Derivative financial instrument ineffectiveness (1) 58
Decrease (increase) in accounts receivable (13,344) (10,461)
Decrease (increase) in inventory (12,923) 5,754
Decrease (increase) in prepaid and other current
assets 293 1,666
Increase (decrease) in accounts payable and
accrued expenses 4,287 1,870
Increase (decrease) in interest and taxes payable (1,033) 105
Increase (decrease) in deferred income taxes (709) 147
Increase (decrease) in other long-term liabilities (374) 173
Other - net 1,771 653
-------- --------
Net cash provided from operating activities 1,038 7,170
Cash flows from investing activities:
Payments for purchase of property, plant and
equipment (2,959) (3,212)
Payments for mine development (120) (101)
Proceeds from other investments 14 -
Proceeds from sale of property, plant and
equipment 15 8
-------- --------
Net cash used in investing activities (3,050) (3,305)
Cash flows from financing activities:
Proceeds from issuance/(repayment) of short-term
debt 13,557 (4,959)
Proceeds from issuance of long-term debt 24 2,000
Repayment of long-term debt (8,629) (4,034)
Issuance of common stock under stock option plans 2,381 -
-------- --------
Net cash provided from (used in)
financing activities 7,333 (6,993)
Effects of exchange rate changes (58) 78
-------- --------
Net change in cash and cash equivalents 5,263 (3,050)
Cash and cash equivalents at beginning of period 5,062 4,357
-------- --------
Cash and cash equivalents at end of period $10,325 $1,307
======== ========
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 July 2, 2004 and December 31, 2003 and the
results of operations for the three and six month periods ended
July 2, 2004 and June 27, 2003. All of the adjustments were of a
normal and recurring nature. Certain items in the prior year have been
reclassified to conform to the 2004 consolidated financial statement
presentation.
Note B - Inventories
July 2, Dec. 31,
(Dollars in thousands) 2004 2003
-------------------------------------------------------------------
Principally average cost:
Raw materials and supplies $23,655 $24,990
Work in process 74,631 65,212
Finished goods 28,457 20,637
--------- --------
Gross inventories 126,743 110,839
Excess of average cost over LIFO
Inventory value 26,713 23,443
--------- --------
Net inventories $100,030 $87,396
========= ========
Notes to Consolidated Financial Statements
(Unaudited)
Note C - Comprehensive Income (Loss)
The reconciliation between net income (loss) and comprehensive income
(loss) for the three and six month periods ended July 2, 2004 and
June 27, 2003 is as follows:
Second Quarter Ended First Half Ended
July 2, June 27, July 2, June 27,
(Dollars in thousands) 2004 2003 2004 2003
------------------------------ ---------- --------- -------- ---------
Net income (loss) $6,571 $37 $10,324 $(2,979)
Cumulative translation adjustment (356) 3 (131) (70)
Change in the fair value of
derivative financial
instruments 1,424 (3,065) 2,353 (1,900)
---------- --------- -------- ---------
Comprehensive income (loss) $7,639 $(3,025) $12,546 $(4,949)
========== ========= ======== =========
Note D - Segment Reporting
(Dollars in Metal Micro- Total All
thousands) Systems Electronics Segments Other Total
------------------ --------- ------------ --------- ------- ---------
Second Quarter 2004
-------------------
Revenues from
external customers $77,129 $51,510 $128,639 $- $128,639
Intersegment revenues 856 391 1,247 6,185 7,432
Operating profit 1,795 4,804 6,599 2,456 9,055
Second Quarter 2003
-------------------
Revenues from
external customers $60,670 $37,650 $98,320 $3,485 $101,805
Intersegment revenues 817 246 1,063 4,081 5,144
Operating profit
(loss) (2,775) 3,473 698 397 1,095
First Half 2004
----------------
Revenues from
external customers $153,087 $101,414 $254,501 $- $254,501
Intersegment revenues 2,070 687 2,757 11,482 14,239
Operating profit
(loss) 4,971 10,293 15,264 (139) 15,125
First Half 2003
---------------
Revenues from
external customers $121,877 $75,961 $197,838 $3,485 $201,323
Intersegment revenues 1,718 518 2,236 7,654 9,890
Operating profit
(loss) (6,199) 6,010 (189) (755) (944)
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