CONCORD, Mass., May 21 /PRNewswire/ -- Starmet Corporation (Nasdaq: STMT) a Concord, Massachusetts based manufacturer of specialized metal products, today announced financial results for the second quarter which ended March 31, 1999. The Company continues to experience a period where its traditional DU penetrator business is declining more rapidly than its other existing businesses are expanding and emerging technologies are being commercialized. The Company is pursuing potential expansion of its titanium powder business; development of its Beralcast(R) investment casting technology for aerospace and defense applications; its Beralcast(R) MGA extrusion capability for potential computer disc drive applications, and its DUCRETE(TM) shielding technology for potential radiation shielding applications. The Company continues to invest heavily in research and development for perfecting processes to recover valuable fluorine compounds from uranium tetrafluoride. All of these have the potential of making significant contributions to the future profitability of the Company. Net sales for the second quarter of fiscal 1999 declined to $5,919,000. $3,310000 or 69% of the decrease from the second quarter of 1998 is attributable to the phase out of the DU penetrator business. The balance of the decrease is mostly attributed to the Uranium Services and Recycle segment. Gross profit in the second quarter decreased by $3,149,000, or 96%, to $116,000, as compared to the second quarter of fiscal 1998. The decrease in gross profit for the quarter is attributable in part to $973,000 of Holding Basin remediation costs expensed in the quarter combined with changes in product mix and timing issues in further reducing fixed costs. Selling, general and administrative expenses decreased by $801,000, or 36%, to $1,427,000 in the second quarter of fiscal 1999, as compared to the second quarter of fiscal 1998. Research and development expenses decreased by $67,000, or 16%, to $342,000 in the second quarter of fiscal 1999, as compared to the second quarter of fiscal 1998. Interest expense increased to $421,000 in the second quarter of fiscal 1999 from $356,000 in the second quarter of fiscal 1998. The Company sustained a net loss of $2,092,000 for the second quarter or a loss of $0.44 per share on average shares outstanding of 4,791,000. This compares with a net income of $272,000, or $0.06 per share on average shares outstanding of 4,787,000 for the same quarter a year earlier. Despite a nearly 50% decline in revenue from the prior year, the Company posted a $2.7 million improvement in cash flow from operations by generating $945,000 in the six months ending March 31, 1999. This is a result of aggressive cost reductions and spending curbs implemented by the Company over the past six months. As in fiscal 1998, the Company continued to realize financial losses and liquidity problems in the six month period ended March 31, 1999. The Company has restructured or amended its debt agreements with its principal lender a number of times in the past year. The Company is currently reviewing a proposal from its Bank to amend and extend the current forbearance agreement into the next calendar year. The new banking agreement is expected to be finalized later this month. Backlog as of March 31, 1999 was $22.1 million as compared to $28.4 million as of December 31, 1998. SECOND QUARTER ENDED SIX MONTHS ENDED March 31, March 31, March 31, March 31, 1998 1999 1998 1999 Sales $10,690,000 $5,919,000 $18,769,000 $13,338,000 Net Income (Loss) $272,000 $(2,092,000) $(1,288,000) $(2,179,000) Basic Earnings (Loss) Per Share $0.06 $(0.44) $(0.27) $(0.45) Weighted Average Number of Shares 4,787,000 4,791,000 4,787,000 4,791,000 Special Note Regarding Forward-looking Statements: Statements contained herein that are not statements of historical fact are "forward-looking statements." Forward-looking statements include statements concerning backlog, the timing of orders, quarterly, annual and long-term sales growth and profitability. Such forward-looking statements are based on a number of assumptions and involve a number of risks and uncertainties, and, accordingly, actual results could differ materially from those projected in the forward-looking statements. Factors that may cause such differences include, but are not limited to: the effects of government regulation; the need for additional financing to fund growth, continued and future acceptance of the Company's products and services; and the presence of competitors with greater technical, marketing and financial resources.  