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Gelman posts banner year
By PAUL JUDGE
NEWS STAFF REPORTER
Gelman Sciences Inc, has continued its turnaround performance for the second year in a row, doubling net profit and posting a 15 percent rise in sales for the fiscal year ended July 31.
The record gains result from a strategy championed by William C. Emhiser, the firm’s young president, to concentrate on Gelman’s core business — specialty filters for medical and industrial markets — according to analysts who track the company.
Industry observers credit the 35-year-old Emhiser with channeling the firm’s revenues into expanding the profitable medical devices business and focusing research and development expenditures on innovations to mainstay products.
Gelman Sciences is “making larger profits off the company’s standard filtration products, and shaving the fat from operations,” said L. Howard Nichol, an analyst with the Advest Group in Hartford, Conn.
“We’re concentrating on the business basics,” said Emhiser.
Investors responded coldly, however, as Gelman stock closed down 25 cents per share at $17.625 in trading on the American Stock Exchange Tuesday.
Sales for the year were $71.08 million, an increase of 15 percent over $61.73 million in 1988. Net profit stood at $2.37 million or 98 cents a share, double last year’s $1.17 million or 50 cents a share.
Fourth quarter performance, while strong, did not match Gelman Science’s record for the year. Quarterly sales were $18.50 million, up 7.9 percent from $17.14 million in the same period a year earlier. Gelman’s quarterly net profit of $721,000 was 53 percent higher than $471,000 in the year-ago quarter, while earnings per share rose 45 percent to 29 cents a share from 20 cents a share in 1988.
Gelman Sciences benefited from an accounting change for income taxes beginning in the company’s first quarter ended Oct. 31, 1988, which added $240,000 to net earnings.
The company employs 600 at its headquarters on Wagner Road in Scio Township. Another 200 employees work for Gelman Sciences in Europe, Israel, Australia and Japan.
Analysts were cheered by increases in the company’s profit margins, the percentage of revenue it keeps as profit after expenses have been subtracted out. Gelman’s net profit margin for 1989 stood at 3.3 percent, compared with 1.9 percent in 1988.
Despite improvements, profit margins at the Ann Arbor-based company still lag far behind those of its competitors, Pall Corp. of Glen Cove, N.Y., and Bedford, Mass.-based Millipore Corp., which achieve margins ranging from 12 percent to 19 percent.
Gelman spent $3.1 million during fiscal 1989 to study the extent of groundwater pollution in the vicinity of its plant on Wagner Road, and to defend itself in litigation arising from the contamination of water wells in the area. The expense was partially offset by $2.7 million recovered from insurers.
The firm has yet to make money from two major events of its fiscal year — construction of a new membrane plant in Pensacola, Florida; and a licensing agreement with a South Korean company that wants to manufacture and market waterproof, “breathable” material in Asia using a patented process developed by Gelman Sciences.
Analysts expect the company to improve manufacturing efficiencies when the $6 million Florida plant begins operating, probably a year from now, Gelman executives say.
The licensing agreement with Seoul-based Dong-IL Corp., announced last month, could net $8 million over five years in royalties and equipment sales. But analysts point out that Dong-IL must break into a tough market dominated by industry leader Gore-Tex.
If revenues from the deal with Dong-IL begin to flow, they would be the first returns on the fabric coating process after an eight-year, $8.5 million development campaign that cut into profits.
The company is still negotiating a definitive agreement with Dong-IL, expected by November, according to Emhiser.
In the last 12 months, Gelman Sciences stock has traded in a range that peaked at $19.375 in August and fell to $9.50 a share last November.