SCI Engineered Materials, Inc. Reports Second Quarter 2008 Results

COLUMBUS, Ohio, Aug. 5 /PRNewswire-FirstCall/ -- SCI Engineered Materials,
Inc. (OTC Bulletin Board: SCCI), a manufacturer of ceramics and metals for
advanced applications such as photonics, solar, thin film batteries, and
semiconductors for select growth markets in the physical vapor deposition
industry, today announced its financial results for the three months ended
June 30, 2008.
Dan Rooney, Chairman, President and Chief Executive Officer, stated, "Our
second quarter results reflect increased expenses as we continue to
aggressively pursue opportunities in the Semiconductor and Thin Film Solar
markets, and a decline in gross profit due to lower revenues attributable to a
high value raw material. Although our total revenues were not what we had
hoped for, bookings strengthened significantly during the second quarter.
Backlog increased 80% to $2.7 million at June 30, 2008 compared to March 31,
2008, positioning us for improved performance during the second half of this
year."
Mr. Rooney continued, "We are receiving positive feedback from customers
in the Thin Film Solar and Semiconductor industries concerning prototype and
development products manufactured for them. The next milestone will be market
orders for those products, which are anticipated to be received beginning
later this year. The Company will be an exhibitor at the upcoming 23rd
European Photovoltaic Solar Energy Conference and Exhibition in Valencia,
SpainSeptember 1-5, 2008. We continue to implement our marketing strategy in
Asia, Europe and North America to increase the Company's industry visibility
and to respond to growing market opportunities."
Second Quarter 2008 Results
Revenues were $1,517,513 for the second quarter 2008 compared to
$3,403,742 for the same period last year. The year-over-year decline was due
to lower costs for a high value raw material compared to the second quarter
2007 coupled with lower sales to a large customer as previously disclosed.
This customer began placing additional orders late in the second quarter 2008.
Backlog was $2.7 million at June 30, 2008 compared to $1.5 million at March
31, 2008 and $2.0 million at June 30, 2007.
Gross profit margin increased to 28.9% of total revenues for the second
quarter 2008 from 15.1% a year ago. Favorable product mix in the second
quarter 2008 significantly mitigated the gross profit impact of the decline in
revenues compared to the second quarter last year. Gross profit was $437,847
for the three months ended June 30, 2008 versus $513,168 for the same period
in 2007.
Specific emphasis continues to be directed toward market opportunities in
the Semiconductor industry and the rapidly growing Thin Film Solar industry.
As a result, expenses for the second quarter 2008 were impacted by higher
costs associated with increasing the Company's presence in these new markets
and developing new products. Research and development expense increased 53%
to $125,563 for the second quarter 2008 from $81,873 a year ago. This was
attributable to increased staff versus a year ago and expanded efforts
regarding new applications. Marketing and sales expense rose 32% to $145,762
from $110,449 for the second quarter 2007 due to increased staff and travel,
especially for Thin Film Solar. General and administrative expense increased
14% to $250,408 for the second quarter 2008 from $219,716 last year as a
result of increased staff and professional fees.
Earnings before interest, income taxes, depreciation and amortization
("EBITDA") were $11,138 for the three months ended June 30, 2008 compared to
$181,962 the prior year. The year-over-year decline is attributable to lower
revenues as described above and increased expenses related to development of
new applications and market opportunities. Adjusted EBITDA, including non-
cash stock based compensation expense, was $26,462 for the three months ended
June 30, 2008 versus $196,274 for the same period in 2007.
Net interest expense was $20,050 for the second quarter 2008 compared to
net interest expense of $3,780 for the same period in 2007. This increase was
principally due to the acquisition of approximately $1.5 million of equipment
through leases and purchases during the twelve months ended June 30, 2008.
The net loss applicable to common shares was $108,878, or $0.03 per share,
for the second quarter 2008 compared to net income applicable to common shares
of $95,379, or $0.02 per diluted share, for the same period in 2007.
Six Month 2008 Results
Revenues declined to $3,231,453 for the first half of 2008 from $5,857,751
for the comparable period last year. This decrease was due to lower costs for
a high value raw material used in certain products coupled with lower sales to
a large customer. As previously noted, this customer placed additional orders
late in the second quarter 2008.
Gross profit margin increased to 26.8% for the first half of 2008 from
16.6% a year ago due to improved product mix. Gross profit declined only 11%
to $866,872 for the first half of 2008 from $971,748 for the same period in
2007 despite a 45% decrease in revenues. Results for the first half of 2007
included a substantial amount of products with a high value raw material,
which has lower gross profit margins than the Company's other products.
The Company continues to pursue opportunities in select applications
within the Thin Film Solar and Semiconductor industries. Research and
development expense increased 54% to $222,719 for the first half of 2008 from
$145,037 the prior year reflecting the Company's development of new products.
Marketing and sales expense rose to $272,032 for the first six months of 2008
from $207,851 for the same period in 2007. This 31% year-over-year increase
was due to increased staff and travel, especially related to the Thin Film
Solar industry. General and administrative expense increased 12% to $510,461
for the first half of 2008 from $456,312 in 2007. This increase was primarily
due to additional staff and professional fees.
Earnings before interest, income taxes, depreciation and amortization
("EBITDA") were $49,759 for the six months ended June 30, 2008 compared to
$305,642 in 2007. Adjusted EBITDA, including non-cash stock based
compensation expense, was $79,396 for the first half of 2008 versus $334,268
the prior year.
Net interest expense was $37,822 for the first six months of 2008 versus
net interest income of $2,872 for the comparable period last year. This
change is due to the acquisition of additional production equipment during the
past year through leases and purchases.
The net loss applicable to common shares was $187,245, or $0.05 per share,
for the first six months of 2008, versus net income applicable to common
shares of $156,695, or $0.04 per diluted share, a year ago.
About SCI Engineered Materials, Inc.
SCI Engineered Materials, Inc. manufactures ceramics and metals for
advanced applications such as photonics including solar, thin film batteries,
and semiconductors. SCI Engineered Materials is a global materials supplier
with clients in more than 40 countries. Additional information is available at
http://www.sciengineeredmaterials.com
This press release contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which are intended to
be covered by the safe harbors created thereby. Those statements include, but
are not limited to, all statements regarding intent, beliefs, expectations,
projections, forecasts, and plans of the Company and its management, and
specifically include statements concerning positive feedback regarding
prototype and development products manufactured for customers in the Thin Film
Solar and Semiconductor industries, and the next milestone of market orders
for those products, which are anticipated to be received later this year
(paragraph three). These forward-looking statements involve numerous risks
and uncertainties, including, without limitation, other risks and
uncertainties detailed from time to time in the Company's Securities and
Exchange Commission filings, including the Company's Annual Report on Form 10-
KSB for the year ended December 31, 2007. One or more of these factors have
affected, and could in the future affect, the Company's projections.
Therefore, there can be no assurances that the forward-looking statements
included in this press release will prove to be accurate. In light of the
significant uncertainties in the forward-looking statements included herein,
the inclusion of such information should not be regarded as a representation
by the Company, or any other persons, that the objectives and plans of the
company will be achieved. All forward-looking statements made in this press
release are based on information presently available to the management of the
Company. The Company assumes no obligation to update any forward-looking
statements.

SCI ENGINEERED MATERIALS, INC.
Reconciliation of GAAP to Non-GAAP Measures
(unaudited)

Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007

Net loss (income) $(102,736) $101,675 $(174,962) $169,287
Interest expense (income), net 20,050 3,780 37,822 (2,872)
Provision for income taxes - - - -
Depreciation/Amortization 93,824 76,507 186,899 139,227
EBITDA 11,138 181,962 49,759 305,642
Stock based compensation expense 15,324 14,312 29,637 28,626
Adjusted EBITDA $26,462 $196,274 $79,396 $334,268

SOURCE SCI Engineered Materials, Inc.

Robert Lentz, +1-614-876-2000, for SCI Engineered Materials, Inc.