SPECTRUM CONTROL, INC. 
By FAIRVIEW, Pa., Jan. 10, 2011 /PRNewswire/ -- Spectrum Control, Inc. (Nasdaq: SPEC), a leading designer and manufacturer of custom electronic products and systems, today reported results for the fourth quarter and fiscal year ended November 30, 2010.
For the fourth quarter of fiscal 2010, the Company reported net income of $3.3 million or 25 cents per diluted share on sales of $42.7 million, compared to net income of $2.1 million or 17 cents per diluted share on sales of $34.1 million for the same period last year.
For the fiscal year 2010, the Company had net income of $12.8 million or $1.00 per share ( 98 cents diluted ) on sales of $163.9 million. In fiscal year 2009, the Company had net income of $8.6 million or 68 cents per share ( 67 cents diluted ) on sales of $132.3 million.
Dick Southworth, the Company's President and Chief Executive Officer, commented, "We are very proud of our fiscal year 2010 performance. Compared to a year ago, our 2010 annual revenue grew 24%, and our net income and earnings per share each increased by approximately 50%. Fiscal year 2010 customer orders totaled $162.0 million, an increase of $29.8 million or 23% from fiscal year 2009. This current year performance reflects the continued success of our strategic plan to supplement ongoing organic growth with targeted business acquisitions. During 2010, we consummated and integrated three business acquisitions, each bringing new technologies and product capabilities to our Company. Throughout fiscal 2011, we hope to build upon this success."
Financial Highlights
Strategic Acquisition
On October 29, 2010, we acquired all of the outstanding common stock of Summit Instruments, Inc. ("Summit" ). Based in Akron, Ohio, Summit designs and manufactures custom inertia sensors, accelerometers, inertial measurement systems, and related products and assemblies. These complex products complement and expand our existing sensors and control product offerings of precision position sensors and advanced thermal products. Currently, approximately 80% of Summit's revenues are generated from military/defense applications, including missile defense systems. Summit products are also used in numerous commercial applications, such as wind turbines and test and measurement equipment. During the fourth quarter of fiscal 2010, we successfully integrated the acquired operations with our existing Sensors and Controls Business, with Summit generating over $700,000 of product sales which were immediately accretive to our consolidated earnings.
Consolidation of Operations
During the fourth quarter of fiscal 2010, certain of our microwave operations were moved into a new state-of-the-art leased facility in Marlborough, Massachusetts. Our new facility, with approximately 43,000 square feet of manufacturing space, reflects the consolidation of two operations assumed in connection with our acquisitions of Micro Networks Corporation in November 2009 and SatCon Electronics, Inc. in September 2008. Although this consolidation had a negative impact on our fourth quarter performance, with approximately $1.0 million of microwave shipments being delayed along with certain temporary inefficiencies and direct moving expenses of approximately $450,000, we believe the long-term benefits of this consolidation will be significant. We currently anticipate that this consolidation will be substantially completed by the end of the first quarter of fiscal 2011. Upon completion, we expect our operating efficiencies to improve, our manufacturing capacity to increase, and our overall manufacturing costs to decrease.
Increased Borrowing Capability
During the current quarter, the domestic line of credit agreement with our primary lending institution was amended, increasing the aggregate amount of the revolving line of credit to $50.0 million. Borrowings under the four-year agreement will bear interest at rates below the prevailing prime rate. Currently, we have $48.0 million of borrowing capacity under the amended agreement. We believe this increased borrowing capacity will help us more quickly and effectively respond to future business acquisition opportunities.
Record Annual Operating Cash Flow
During the fourth quarter of fiscal 2010, net cash provided by operating activities was $4.2 million. For the fiscal year 2010, net operating cash flow was a record $19.5 million, reflecting our growing profitability as well as improved accounts receivable and inventory turnover rates. For the fiscal year ended November 30, 2010, our positive operating cash flow and existing cash balances enabled us to reduce our outstanding short-term bank borrowings to $1.0 million, support the aggregate cash purchase price of $13.4 million for our three current year business acquisitions, and fund capital expenditures of $6.4 million. At November 30, 2010, our total stockholders' equity was $129.7 million, reflecting a book value of $9.89 per share. We believe that our strong cash flow and financial position provide a solid foundation for our anticipated future growth.
Current Business Outlook
Mr. Southworth added, "Current market conditions, particularly for military/defense related products, are somewhat tentative. Speculation regarding future military/defense funding, and its impact on individual programs, is causing certain customers to delay or push-out orders and delivery dates. This condition is prevalent throughout our industry. Based upon the nature and diversification of our military/defense business, however, we firmly believe that these market conditions will only temporarily impact our business. Based on these current market conditions, and the expected completion of our Massachusetts facility consolidation during the next few months, we presently anticipate our fiscal 2011 first quarter sales to be $42.0 to $43.0 million with earnings of 27 to 28 cents per share. If these operating results are achieved, we would once again have significant growth from the comparable period of a year ago, with sales up 11% to 14% and earnings per share up 42% to 47%. On a longer-term basis, we remain very optimistic about the future of our Company as overall market conditions improve, principal applications for our military/defense products continue to be strong, and we continuously develop new and innovative solutions for our customers."
Forward-Looking Information
This press release contains statements that are forward-looking statements within the meaning of the Private Securities Reform Act of 1995. These statements are based on current expectations, estimates and projections about the Company's business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors and risks discussed from time to time in the Company's Securities and Exchange Commission filings and reports. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic and international economic conditions. Such forward-looking statements speak only as of the date on which they are made and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release.
Simultaneous Webcast and Teleconference Replay
Spectrum Control, Inc. will host a teleconference to discuss its fourth quarter and fiscal year 2010 results on Monday, January 10, 2011, at 4:45 p.m., Eastern Time. Internet users will be able to access a simultaneous webcast of the teleconference at www.spectrumcontrol.com or www.vcall.com. A taped replay of the call will be available through January 17, 2011, at 877-660-6853, access account 286, conference 364032, or for 30 days over the Internet at the Company's website.
About Spectrum Control
Spectrum Control, Inc. is a leader in the design, development and manufacture of custom electronic products and systems for the defense, aerospace, communications, and medical industries worldwide. For more information about Spectrum Control and its products, please visit the Company's website at www.spectrumcontrol.com.
Tables follow
Spectrum Control, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
( Unaudited )
( Dollar Amounts in Thousands ) November 30, November 30,
2010 2009
---- ----
Assets
Current assets
Cash and cash equivalents $2,754 $6,090
Accounts receivable, net 25,892 22,623
Inventories, net 39,549 34,223
Deferred income taxes 1,681 1,425
Prepaid expenses and other current
assets 1,143 2,434
----- -----
Total current assets 71,019 66,795
Property, plant and equipment, net 29,210 26,383
Noncurrent assets
Goodwill 45,867 44,995
Other 11,526 5,556
------ -----
Total assets $157,622 $143,729
======== ========
Liabilities and Stockholders' Equity
Current liabilities
Short-term debt $1,000 $7,000
Accounts payable 7,527 7,124
Accrued liabilities 7,326 5,366
Current portion of long-term debt 70 65
--- ---
Total current liabilities 15,923 19,555
Long-term debt 410 480
Other liabilities 433 728
Deferred income taxes 11,129 9,542
Stockholders' equity 129,727 113,424
------- -------
Total liabilities and stockholders'
equity $157,622 $143,729
======== ========
Spectrum Control, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
( Unaudited )
(Amounts in Thousands, Except Per Share Data)
For the Three Months
Ended
November 30,
------------
2010 2009
---- ----
Net sales $42,722 $34,089
Cost of products sold 31,282 24,684
------ ------
Gross margin 11,440 9,405
Selling, general and
administrative expense 6,091 5,836
----- -----
Income from operations 5,349 3,569
Other income ( expense
):
Interest expense 23 16
Other income and
expense, net ( 75) ( 66)
---- ----
( 52) ( 50)
---- ----
Income before
provision for
income taxes 5,297 3,519
Provision for income
taxes 2,029 1,374
----- -----
Net income $3,268 $2,145
====== ======
Earnings per common
share:
Basic $0.25 $0.17
===== =====
Diluted $0.25 $0.17
===== =====
Average number of
common shares
outstanding:
Basic 13,038 12,660
Diluted 13,284 12,840
For the Year Ended
November 30,
------------
2010 2009
---- ----
Net sales $163,936 $132,306
Cost of products sold 119,809 97,946
------- ------
Gross margin 44,127 34,360
Selling, general and
administrative expense 23,693 20,756
------ ------
Income from operations 20,434 13,604
Other income ( expense
):
Interest expense ( 100) ( 190)
Other income and
expense, net ( 30) ( 26)
---- ----
( 130) ( 216)
----- -----
Income before
provision for
income taxes 20,304 13,388
Provision for income
taxes 7,461 4,828
----- -----
Net income $12,843 $8,560
======= ======
Earnings per common
share:
Basic $1.00 $0.68
===== =====
Diluted $0.98 $0.67
===== =====
Average number of
common shares
outstanding:
Basic 12,849 12,604
Diluted 13,138 12,739
Spectrum Control, Inc. and Subsidiaries
Selected Financial Data
( Unaudited )
For the Three Months
Ended
November 30,
------------
Selected Financial Data, 2010 2009
---- ----
as a Percentage of Net Sales:
Net sales 100.0% 100.0%
Cost of products sold 73.2 72.4
---- ----
Gross margin 26.8 27.6
Selling, general and
administrative expense 14.3 17.1
---- ----
Income from operations 12.5 10.5
Other income ( expense ):
Interest expense 0.1 -
Other income and expense, net (0.2) (0.2)
---- ----
Income before provision for
income taxes 12.4 10.3
Provision for income taxes 4.8 4.0
--- ---
Net income 7.6% 6.3%
=== ===
Selected Operating Segment
Data:
( Dollar Amounts in Thousands )
Advanced specialty products:
Customer orders received $12,229 $11,216
Net sales 13,623 10,877
Microwave components and
systems:
Customer orders received 17,370 12,973
Net sales 20,436 15,332
Power management systems:
Customer orders received 3,209 4,591
Net sales 2,627 3,254
Sensors and controls:
Customer orders received 5,941 3,447
Net sales 6,036 4,626
For the Year Ended
November 30,
------------
Selected Financial Data, 2010 2009
---- ----
as a Percentage of Net Sales:
Net sales 100.0% 100.0%
Cost of products sold 73.1 74.0
---- ----
Gross margin 26.9 26.0
Selling, general and
administrative expense 14.4 15.7
---- ----
Income from operations 12.5 10.3
Other income ( expense ):
Interest expense (0.1) (0.2)
Other income and expense, net - -
--- ---
Income before provision for
income taxes 12.4 10.1
Provision for income taxes 4.6 3.6
--- ---
Net income 7.8% 6.5%
=== ===
Selected Operating Segment
Data:
( Dollar Amounts in Thousands )
Advanced specialty products:
Customer orders received $51,758 $49,070
Net sales 51,155 42,001
Microwave components and
systems:
Customer orders received 76,266 56,503
Net sales 79,935 60,069
Power management systems:
Customer orders received 11,084 10,822
Net sales 12,069 10,268
Sensors and controls:
Customer orders received 22,879 15,789
Net sales 20,777 19,968
SOURCE Spectrum Control, Inc.
