EXHIBIT 99.1
Brush Engineered Materials Inc. Reports Sales Up 19% for the Fourth
Quarter and Up 8% for 2003
CLEVELAND, OHIO -- January 28, 2004 -- Brush Engineered Materials Inc.
(NYSE-BW) today reported fourth quarter 2003 sales of $105.6 million, up $16.6
million or 19% compared to fourth quarter 2002 sales of $89 million. The growth
in the fourth quarter was driven by continued strength in Asia, particularly
China and Taiwan, and a significant improvement in the domestic economy. Metal
prices, currency and a favorable product mix also contributed to the sales
increase in the fourth quarter, with metal prices and currency accounting for
approximately $4.4 million, or 5% of the total revenue for the quarter. The
Company is experiencing a significant increase in sales to the
telecommunications and computer markets and growth in most of its other markets
as well.
The Company had previously announced a $6.0 million charge related to
the completion of a five year $147.5 million debt refinancing. This fourth
quarter 2002 charge included deferred costs from an interest rate swap and other
deferred financing costs associated with the retirement of debt and lease
obligations. Including the $6.0 million charge, the Company had a net loss of
$7.2 million or $0.43 per share diluted in the fourth quarter of 2003 compared
to a net loss of $26.8 million or $1.62 per share in the fourth quarter of 2002.
The charge increased the net loss for the fourth quarter 2003 from $1.2 million
to $7.2 million. Results for the fourth quarter 2002 were affected by a
restructuring and impairment charge of $5.1 million for certain operating assets
and $19.9 million for deferred taxes offset in part by a $2 million reduction in
legal reserves. Absent these charges, fourth quarter 2003 pre-tax results
improved by $7.2 million compared to the fourth quarter of 2002.
Sales for 2003 of $401 million were 8% higher than 2002 sales of $372.8
million. For the year the Company reported a net loss of $13.2 million or $0.80
per share diluted which included the above referenced $6.0 million charge. For
the year 2002 the Company reported a net loss of $35.6 million or $2.15 per
share diluted which included the $23 million of charges discussed
above. Before the charges, pre-tax results for the year improved by $16.1
million compared to the prior year.
The Company's diluted net loss per share comparison to the prior year
is affected by its accounting for income taxes. In the fourth quarter of 2002,
in accordance with SFAS No. 109, "Accounting for Income Taxes", the Company
recorded a $19.9 million charge as part of income tax expense in 2002 to
establish a valuation allowance for substantially all of its net deferred tax
assets in recognition of uncertainty regarding full realization. The Company
intends to maintain a valuation allowance on the net deferred tax assets until a
realization event occurs to support reversal of all or a portion of the
allowance. Therefore, the Company's fourth quarter 2003 and year-to-date 2003
results include a tax benefit of $0.1 million and tax provision of $0.6 million,
respectively, for certain foreign, state and local taxes but do not include a
federal tax benefit. In 2002 the tax expense for the fourth quarter and year was
$15.3 million and $9.7 million, respectively, due to establishing a valuation
allowance on deferred tax assets required under SFAS No. 109.
Balance Sheet
In the fourth quarter of 2003 the Company completed a five-year, $147.5
million debt refinancing, the proceeds of which were used to retire existing
debt and purchase $51.8 million of leased assets, thereby terminating an
existing off-balance sheet lease obligation. As a result of the refinancing the
Company's assets and balance sheet debt increased by the amount of the purchase.
Total debt plus off-balance sheet equipment and precious metal lease
obligations decreased by approximately $2.5 million in the fourth quarter of
2003 and $24.8 million for the year.
BUSINESS SEGMENT REPORTING
Metal Systems Group
The Metal Systems Group consists of Alloy Products, Technical
Materials, Inc. (TMI) and Beryllium Products.
The Metal Systems Group's fourth quarter sales of $63.5 million were
23% higher than fourth quarter 2002 sales of $51.5 million. The fourth quarter
operating loss was $2.4 million
versus a $14.1 million loss in the fourth quarter of 2002. The Metal Systems
Groups 2003 sales of $239.4 million were up 5% over 2002 sales of $227.9
million. The operating loss for 2003 was $16.6 million versus an operating loss
of $37.7 million for 2002.
Alloy Products fourth quarter sales of $42.9 million were 24% higher
than fourth quarter 2002 sales. Alloy Products 2003 sales were $162.3 million up
7% over 2002 sales of $151.9 million. Continued strong sales in Asia coupled
with the pickup in the domestic economy have helped fuel the fourth quarter
double digit growth. In addition, 20% of the fourth quarter sales growth has
come from new products and applications. The stronger order entry experienced in
the fourth quarter is continuing into the first quarter of 2004. Alloy Products
also continued to improve operating efficiencies through its lean manufacturing
initiative.
TMI's fourth quarter sales of $10.2 million were 7% higher than fourth
quarter 2002 sales of $9.5 million. Sales in 2003 of $41.9 million were down 5%
from 2002. TMI's growth in the fourth quarter was due to improvements in the
computer and semiconductor markets. This strength has continued into the first
quarter of 2004.
Beryllium Products fourth quarter sales of $10.2 million were up 43%
over fourth quarter 2002 sales of $7.1 million. Sales for 2003 of $35.2 million
were 11% higher than 2002 sales of $31.6 million. Beryllium Products continues
to experience strong demand in aerospace and defense product applications. In
addition demand for an application for acoustic speakers has recently increased.
It is anticipated that the strong order entry will continue through the first
quarter of 2004.
Microelectronics Group
The Microelectronics Group includes Williams Advanced Materials Inc.
(WAM) and Electronic Products.
Microelectronics Group sales for the fourth quarter of 2003 of $42.0
million were 14% higher than fourth quarter 2002 sales of $36.9 million. Sales
for 2003 of $157.3 million were up 13% over 2002 sales. Operating profit for the
fourth quarter was $2.8 million versus the fourth quarter of 2002 operating loss
of $1.2 million. The fourth quarter 2002 operating loss was due to a
severance and asset impairment charge in the amount of $2 million related to the
Electronics Products business. The 2003 operating profit was $12.6 million
versus $3.8 million for 2002.
WAM's fourth quarter sales of $35.7 million were 23% higher than fourth
quarter sales of 2002. Sales in 2003 of $127.8 million were up 17% over 2002
sales of $109.1 million. Metal prices were responsible for 8% of the sales
increase for the fourth quarter and 6% for 2003.
WAM continues to experience strong growth from the wireless
telecommunications handset, digital versatile disc, semiconductor and
performance film markets. This strength is continuing into the first quarter of
2004.
Electronic Products' 2003 fourth quarter sales of $6.3 million were
down 20% from the fourth quarter of 2002. Sales in 2003 of $29.5 million were
down 2% over 2002. The decline was driven by lower demand and from defense
oriented applications.
OUTLOOK
The Company noted that the strengthening that occurred in its end-use
markets during the most recent quarter has continued into early 2004 as well.
Externally the Company is seeing evidence in its end-use markets that the U.S.
economy is growing and the strength noted earlier in Asia is continuing.
Internally, programs to lower cost, improve margins and reduce working capital
continue to yield benefits. While the current order entry rate is encouraging it
is difficult to determine whether the current trend will continue throughout
2004. At this time, the Company expects that the first quarter 2004 sales will
be 15% to 20% greater than the prior year first quarter sales of $99.5 million.
CHAIRMAN'S COMMENTS
Commenting on the results, Gordon D. Harnett, Chairman, President and
Chief Executive Officer, stated "I am pleased with the progress we made on
several fronts during 2003. First, our significant sales growth, especially in
the fourth quarter was driven in part by our new products, strong growth in Asia
and a rebound in the domestic economy; second, our cost reduction and lean
manufacturing initiatives implemented in 2002 have continued to provide benefit
and financial leverage; and, finally, the recent refinancing announced in
December will provide lower overall financing costs, improve cash flow and
provide more flexibility and liquidity for future growth. We look forward to
continued improvement in 2004."
FORWARD-LOOKING STATEMENTS
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 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:
o The condition of the markets which the Company serves, whether
defined geographically or by segment, with the major market
segments being telecommunications and computer, optical media,
automotive electronics, industrial components, aerospace and
defense and appliance.
o Actual sales in the first quarter 2004.
o Changes in product mix and the financial condition of
particular customers.
o The Company's success in implementing its strategic plans and
the timely and successful completion of any capital expansion
projects.
o Other financial factors, including tax rates, interest rates,
exchange rates, pension costs, energy costs and the cost and
availability of insurance.
o Changes in government regulatory requirements and the
enactment of new legislation that impacts the Company's
obligations.
o The conclusion of pending litigation matters in accordance
with the Company's expectation that there will be no material
adverse effects.
Brush Engineered Materials Inc. is headquartered in Cleveland, Ohio.
The Company, through its wholly-owned subsidiaries, supplies worldwide markets
with beryllium products, alloy products, electronic products, precious metal
products, and engineered material systems.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Investors:
- ----------
Michael C. Hasychak
216/383-6823
Media:
- ------
Patrick S. Carpenter
216/383-6835
http://www.beminc.com
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOURTH QUARTER ENDED YEAR ENDED
(Dollars in thousands except DEC. 31 DEC. 31 DEC. 31 DEC. 31
share and per share amounts) 2003 2002 2003 2002
- -------------------------------------------------------------------------------------------------------------------
Net sales $ 105,567 $ 89,017 $ 401,046 $ 372,829
Cost of sales 82,876 78,459 328,008 324,932
------------ ------------ ------------ ------------
Gross Margin 22,691 10,558 73,038 47,897
Selling, general and administrative
expenses 20,626 15,160 68,834 61,293
Research and development
expenses 1,196 1,087 4,230 4,265
Other-net 6,720 5,164 9,314 5,184
------------ ------------ ------------ ------------
Operating Loss (5,851) (10,853) (9,340) (22,845)
Interest expense 1,422 734 3,355 3,010
------------ ------------ ------------ ------------
Loss before income taxes (7,273) (11,587) (12,695) (25,855)
Minority Interest (21) -- (45) --
Income taxes (65) 15,228 576 9,749
------------ ------------ ------------ ------------
Net Loss $ (7,187) $ (26,815) $ (13,226) $ (35,604)
============ ============ ============ ============
Per Share of Common Stock: Basic $ (0.43) $ (1.62) $ (0.80) $ (2.15)
Weighted average number
of common shares outstanding 16,563,652 16,558,417 16,562,846 16,557,388
Per Share of Common Stock: Diluted $ (0.43) $ (1.62) $ (0.80) $ (2.15)
Weighted average number
of common shares outstanding 16,563,652 16,558,417 16,562,846 16,557,388
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
DEC. 31, DEC. 31,
(Dollars in thousands) 2003 2002
- ---------------------------------------------------------------------------
Assets
Current Assets
Cash and cash equivalents $ 5,062 $ 4,357
Accounts receivable 55,102 47,543
Inventories 87,396 94,324
Prepaid expenses 5,454 9,766
Deferred income taxes 291 244
-------- --------
Total Current Assets 153,305 156,234
Other assets 26,761 25,629
Long-term deferred income taxes 704 472
Property, Plant and Equipment 535,421 476,283
Less allowances for depreciation,
depletion and impairment 344,575 323,739
-------- --------
190,846 152,544
-------- --------
$371,616 $334,879
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Liabilities and Shareholders' Equity
Current Liabilities
Short-term debt $ 11,958 $ 27,235
Accounts payable 16,038 15,129
Other liabilities and accrued items 37,366 30,439
Income taxes 1,373 786
-------- --------
Total Current Liabilities 66,735 73,589
Other Long-Term Liabilities 14,739 17,459
Retirement and Post-employment Benefits 49,358 48,518
Long-term Debt 87,185 36,219
Minority interest in subsidiary 26 --
Shareholders' Equity 153,573 159,094
-------- --------
$371,616 $334,879
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