Spectrum Control Reports First Quarter Profit

Revenue Up 9% and Earnings Per Share Up 32% from a Year Ago

Mar 28, 2011, 09:00 ET from Spectrum Control, Inc.

FAIRVIEW, Pa., March 28, 2011 /PRNewswire/ -- Spectrum Control, Inc. (Nasdaq: SPEC), a leading designer and manufacturer of custom electronic products and systems, today reported results for the first quarter ended February 28, 2011.

For the first quarter of fiscal 2011, the Company reported net income of $3.3 million or 25 cents per diluted share on sales of $41.2 million, compared to net income of $2.4 million or 19 cents per diluted share on sales of $37.9 million for the same period last year.

Dick Southworth, the Company's President and Chief Executive Officer, commented, "Compared to a year ago, our 2011 first quarter revenue grew 9%, principally driven by the successful integration of our recent business acquisitions. Demand for our products in various commercial applications continues to increase, reflecting improved general economic conditions and the impact from several of our new product offerings and capabilities. In the first quarter of fiscal 2011, our total sales into commercial markets amounted to $16.0 million, up $1.3 million or 9% from the same quarter of 2010. These positive factors helped to offset a military/defense market which continues to be somewhat tentative, as many of our military/defense customers proceed cautiously during this period of defense spending scrutiny and reassessed priorities. With our overall increase in shipments, and our ability to leverage our operating costs and manufacturing capacity over greater sales volume, our profitability improved significantly. Our net income grew to $3.3 million in the current period, up 36% from a year ago, and our earnings per share increased by 32%."

First Quarter Highlights

Increased Revenue

Late last year, 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. Since the acquisition, we have successfully integrated the acquired operations with our existing Sensors and Controls Business. In the first quarter of fiscal 2011, total sales for our sensors and controls amounted to $6.4 million, up $1.9 million from the same period a year ago, with sales of Summit products generating $1.2 million of this increase. Excluding the impact of Summit, sales of our sensors and controls increased nearly 17% in the current period compared to the comparable period last year. Shipments for our sensors and control products were particularly strong for applications in medical equipment, instrumentation, and industrial controls during the current quarter.

Sales of our advanced specialty products were $12.0 million in the current quarter, up 2% from the first quarter of fiscal 2010. This increase primarily reflects the impact of our new product offerings in specialty connectors and antennas. Our advanced specialty products are used in numerous industries including military/defense, medical equipment and instrumentation, industrial controls, and communication equipment.

In June 2010, we acquired substantially all of the assets and assumed certain liabilities of Sage Laboratories, Inc. ("Sage Labs"). Sage Labs, based in Hudson, New Hampshire, designs and manufactures custom microwave products including filters, diplexers, multiplexers, hybrids, and digital frequency discriminators. This acquired business is now reported within our Microwave Components and Systems Business. In the current quarter, total sales of our Microwave Components and Systems Business were $19.8 million, compared to $17.8 million in the first quarter of fiscal 2010. Excluding the impact of our current period Sage Labs' product sales of $2.9 million, sales of our microwave products were down approximately 5% from the same quarter of last year, reflecting the continued cautiousness prevalent throughout the military/defense industry.

Sales of our power management systems were $3.0 million in the current quarter, compared to a record-setting first quarter last year of $3.9 million. Demand remains strong for these products, particularly in applications for data storage and networking systems.

Improved Operating Margins

In the first quarter of fiscal 2011, our gross margin was $10.1 million or 25% of sales, compared to $8.9 million or 23% of sales for the same quarter last year. Income from operations amounted to $4.9 million in the current quarter, up 31% from the comparable period a year ago. This improved operating performance principally reflects the economies of scale generated with additional sales and production volumes.

Current Business Outlook

Mr. Southworth added, "Regarding our military/defense business, we believe that the current market uncertainty may persist for several more months, before improving in the second half of fiscal 2011 when overall defense spending priorities and programs are clarified. Based on these current market conditions, we presently anticipate fiscal 2011 second quarter sales of $42.0 to $44.0 million, with earnings of 26 to 29 cents per share. If these operating results are achieved, we would once again have meaningful growth from the comparable period of a year ago, with sales up 6% to 11% and earnings per share up 4% to 12%. Beyond the second quarter of this year, we remain very optimistic about our business outlook as market conditions improve, 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.

Cancellation of Teleconference

The Spectrum Control, Inc. first quarter teleconference, previously scheduled for March 31, 2011, at 4:45 PM EDT, has been canceled.

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 )

February 28,

November 30,

2011

2010

Assets

Current assets

  Cash and cash equivalents

$        3,746

$          2,754

  Accounts receivable, net

28,595

25,892

  Inventories, net

39,270

39,549

  Deferred income taxes

1,681

1,681

  Prepaid expenses and other current assets

2,673

1,143

       Total current assets

75,965

71,019

Property, plant and equipment, net

28,611

29,210

Noncurrent assets

  Goodwill

45,867

45,867

  Other

11,010

11,526

       Total assets

$    161,453

$      157,622

Liabilities and Stockholders' Equity

Current liabilities

  Short-term debt

$        3,000

$          1,000

  Accounts payable

6,820

7,527

  Accrued liabilities

6,046

7,326

  Current portion of long-term debt

75

70

       Total current liabilities

15,941

15,923

Long-term debt

335

410

Other liabilities

386

433

Deferred income taxes

11,273

11,129

Stockholders' equity

133,518

129,727

       Total liabilities and stockholders' equity

$    161,453

$      157,622

Spectrum Control, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

( Unaudited )

( Amounts in Thousands, Except Per Share Data )

For the Three Months Ended

February 28,

2011

2010

Net sales

$ 41,209

$ 37,870

Cost of products sold

31,062

28,991

Gross margin

10,147

8,879

Selling, general and

 administrative expense

5,276

5,159

Income from operations

4,871

3,720

Other income ( expense )

     Interest expense

(41)

(47)

     Other income and expense, net

(13)

34

(54)

(13)

Income before provision  

  for income taxes

4,817

3,707

Provision for income taxes

1,532

1,299

Net income

$   3,285

$   2,408

Earnings per common share :

     Basic

$     0.25

$     0.19

     Diluted

$     0.25

$     0.19

Average number of common

  shares outstanding :

     Basic

13,123

12,695

     Diluted

13,332

12,964

Spectrum Control, Inc. and Subsidiaries

Selected Financial Data

( Unaudited )

For the Three Months Ended

February 28,

Selected Financial Data,

2011

2010

 as a Percentage of Net Sales :

       Net sales

100.0%

100.0%

       Cost of products sold

75.4

76.6

       Gross margin

24.6

23.4

       Selling, general and

         administrative expense

12.8

13.6

       Income from operations

11.8

9.8

       Other income ( expense )

            Interest expense

(0.1)

(0.1)

           Other income and expense, net

-

0.1

       Income before provision for

         income taxes

11.7

9.8

       Provision for income taxes

3.7

3.4

       Net income

8.0%

6.4%

Selected Operating Segment Data :

( Dollar Amounts in Thousands )

       Advanced specialty products :

Customer orders received

$ 12,854

$ 12,173

Net sales

11,959

11,673

       Microwave components and systems :

Customer orders received

14,981

16,085

Net sales

19,769

17,832

       Power management systems :

Customer orders received

3,753

2,520

Net sales

3,048

3,872

       Sensors and controls :

Customer orders received

5,222

4,512

Net sales

6,433

4,493

SOURCE Spectrum Control, Inc.



RELATED LINKS

http://www.spectrumcontrol.com