Neo Material Technologies reports third quarter 2011 financial results

  • Revenues of US$248 million
  • EBITDA of US$112 million
  • Net Income of US$79 million or US$0.66 per share
  • Cash position of US$316 million

TORONTO, Nov. 10, 2011 /CNW/ - Neo Material Technologies Inc. (TSX: NEM) (the "Company") today reported its financial results for the three-month and nine-month periods ended September 30, 2011. Unless otherwise specified, all currency amounts are expressed in U.S. dollars.

Revenues continued to increase for the tenth consecutive quarter, reaching record levels in the three-month period ended September 30, 2011. Revenues were $248 million compared to $216 million during the previous quarter, and $91 million during the corresponding period in 2010. The continued increase in revenues was primarily driven by higher average selling prices at both operating divisions during a period of peak pricing. The Company also reported record net income attributable to equity holders of NEM ("Net Income") of $79 million, earnings per share ("EPS") of $0.66 and $0.57 on a basic and fully diluted basis, respectively, and operating income plus depreciation and amortization ("EBITDA") of $112 million. This compares to third quarter 2010 Net Income of $15 million, EPS of $0.13 (on a basic and fully diluted basis) and EBITDA of $22 million. Operating income also increased to a record $109 million compared to $19 million in the corresponding period in 2010.

For the nine-month period ended September 30, 2011, Net Income was $163 million, EPS was $1.36 and $1.28 on a basic and fully diluted basis, respectively, and EBITDA was $240 million.  This compares to Net Income of $43 million, EPS of $0.36 on a basic and fully diluted basis, and EBITDA of $63 million for the nine months ended September 30, 2010.  Revenues for the nine-month period in 2011 were $597 million compared to revenues of $236 million in the corresponding period in 2010.

At September 30, 2011, the Company had a cash balance of $316 million and long-term debt amounted to $197 million. During the third quarter, the Company announced the commencement of a normal course issuer bid, resulting in the repurchase of 2,541,200 common shares for cancellation as at the end of the reported period and the use of $22 million which would have otherwise been reflected in the Company's cash balance at quarter-end.  Subsequent to September 30, 2011, the Company repurchased for cancellation 1,171,000 of its outstanding common shares for a total consideration of $8.2 million.

"While we continued to benefit from a premium pricing environment during the third quarter, we maintained our focus towards identifying unique and sustainable growth opportunities which will serve Neo well in the long-run." noted Constantine Karayannopoulos, President & CEO. "We are seeing selling prices and volumes moderate off recent peak levels. Our overall business, however, remains solid while our balance sheet continues to strengthen providing us with flexibility to capitalize on strategic opportunities."


Magnequench            
$000's (except for quantity shipped) Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Trailing
Twelve
Months
Quantity Shipped (tonnes) 1,578 1,545 1,725 1,671 1,256 6,197
Revenues 45,007 47,184 55,135 66,265 111,176 279,760
Operating Income(1) 15,123 14,727 16,795 18,632 49,650 99,804

Performance Materials  
         
$000's (except for quantity shipped) Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Trailing
Twelve
Months
Quantity Shipped (tonnes) 1,422 1,358 1,555 1,770 1,176 5,859
Revenues 49,606 60,777 83,571 164,888 152,204 461,440
Operating Income(1) 9,775 14,478 33,518 70,906 58,118 177,020

Consolidated            
$000's (except for quantity shipped) Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Trailing
Twelve
Months
Inter-segment sales (3,269) (6,052) (5,908) (15,010) (15,541) (42,511)
Revenues 91,344 101,909 132,798 216,143 247,839 698,689
Operating Income 19,133 18,305 40,651 81,984 109,252 250,192
EBITDA 22,006 21,393 43,378 84,520 111,776 261,067
Net Income attributed to equity
holders of NEM
15,191 15,348 31,875 52,247 78,952 178,422
EPS (basic) 0.13 0.13 0.27 0.44 0.66 1.50

Impact of Stock-based Compensation(2)
           
$000's (except for quantity shipped) Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Trailing
Twelve
Months
Stock-based Compensation
Expense (Income)
3,700 7,932 4,625 3,400 (5,223) 10,734
Adjusted Operating Income 22,833 26,237 45,276 85,384 104,029 260,926
Adjusted EBITDA 25,706 29,325 48,003 87,920 106,553 271,801
Adjusted Net Income attributed
to equity holders of NEM
18,494 22,570 36,045 55,156 74,195 187,966
Adjusted EPS (basic) 0.15 0.19 0.30 0.46 0.62 1.57
  Note:
(1)   Divisional Operating Income (Loss) presented in the tables above excludes stock-based
compensation expense.
(2)  The table above contains non-IFRS financial measures. Management believes these items
are useful supplemental measures of the Company's operating performance and will
assist readers in comparing operating results from period to period. These measures do
not have any standardized meanings prescribed by IFRS and may not be comparable to
similar measures presented by other companies. Readers should be cautioned, however,
that these non-IFRS financial measures should not be considered as alternatives to
financial measures calculated in accordance with IFRS.

Teleconference Call

Management will host a teleconference call on November 10, 2011 at 10:00 am (Eastern Time) to discuss these results.  Interested parties may access the teleconference by calling (647) 427-7450 (local) or (888) 231-8191 (toll free long distance) or by visiting http://www.newswire.ca/webcast.  A recording of the teleconference may be accessed by calling (416) 849-0833 (local) or (855) 859-2056 (toll free long distance), and entering pass code 25345129# until December 10, 2011 or by visiting http://www.newswire.ca/webcast.

Online Access

The financial statements and the Management's Discussion and Analysis will be posted to SEDAR (www.sedar.com) and available online at www.neomaterials.com on or before November 11, 2011.

About Neo Material Technologies

Neo Material Technologies Inc. is a producer, processor and developer of neodymium-iron-boron magnetic powders, rare earths and zirconium based engineered materials and applications, and other rare metals and their compounds through its Magnequench and Performance Materials divisions. These innovative products are essential in many of today's high technology products.  Magnequench's Neo Powders are used to produce bonded magnets, generally used in micro motors, precision motors, sensors and other applications requiring high levels of magnetic strength, flexibility, small size and reduced weight. Rare earth and zirconium applications include catalytic converters, computers, television display panels, optical lenses, mobile phones and electronic chips. The Company's rare metals products are primarily used in the wireless, LED, flat panel, turbine, solar and catalyst industries. The Company is headquartered in Toronto, Canada.

Forward Looking Statements

From time to time, the Company may publish forward-looking statements relating to such matters as expected financial performance, business prospects, technological developments, and development activities and like matters.  These statements involve risk and uncertainties, including but not limited to the risk factors previously described.  Actual results could differ materially from those projected as a result of these risks and should not be relied upon as a prediction of future events. Neo Material Technologies Inc. undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.

 

Financial Results follow



NEO MATERIAL TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited - all figures in thousands of United States dollars)

          September 30
2011
        December 31
2010
ASSETS                        
Current                        
Cash and cash equivalents         $ 316,323         $ 86,769
Accounts receivable             85,273                52,035
Inventories                 242,020             88,679
Loans receivable              11,740                      -
Other current assets                       13,284                       6,474
Total current assets            668,640              233,957
Property, plant and equipment             52,688                       46,127
Patents and other intangible assets                       13,577                       15,155
Deferred tax asset             23,950                       9,193
Goodwill              58,031                       48,198
Investments in associates            10,372             6,975
Other long-term assets                       3,873                       5,418
Total non-current assets                       162,491           131,066
Total assets         $   831,131         $ 365,023
                         
LIABILITIES AND SHAREHOLDERS' EQUITY                        
Current                        
Bank advances and other short-term debt         $  31,062         $ 10,171
Accounts payable and other accrued charges                       79,463               53,329
Income taxes payable                       34,489             8,576
Contingent consideration                       18,629                       -
Long-term debt due within one year                       244               265
Total current liabilities               163,887             72,341
Long-term debt              197,105                519
Deferred tax liability            13,807                       10,655
Employee benefit liabilities                  2,007                 1,968
Derivative liability                  6,152             5,794
Other long-term liabilities                 2,095                  3,034
Total liabilities             385,053                 94,311
Non-controlling interest            13,890                  3,445
Shareholders' equity           432,188            267,267
Commitments                        
Subsequent event                        
Total liabilities and shareholders' equity         $   831,131         $  365,023




NEO MATERIAL TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - all figures in thousands of United States dollars, except per share information)

          Three months ended
September 30
    Nine months ended
September 30
          2011     2010     2011     2010
Revenues         $        247,839     $       91,344     $        596,780     $ 235,645
Costs of sales                                    
  Costs excluding depreciation and
Amortization
                119,562             54,571       303,179       138,082
  Depreciation and amortization                       1,654                   2,151       5,166       6,425
Gross profit                       126,623                   34,622       288,435       91,138
Expenses                                    
  Selling, general and administrative                       13,585                   8,376       35,437       23,098
  Share-based compensation                       (5,223)                   3,700       2,802       3,578
  Depreciation and amortization                       870                   722       2,621       2,329
  Research and development                       8,139                   2,691       15,688       7,798
                        17,371                   15,489       56,548       36,803
Operating income before the undernoted                     109,252                   19,133       231,887       54,335
Other expense (income)                       4,441                   34       17,479       (55)
Interest expense, long-term debt                       4,035                   4       5,310       11
Interest expense, other                       1,375                   239       2,109       769
Interest income                       (101)       (206)       (881)       (288)
Foreign exchange gain                       (2,637)                   (325)       (2,542)       (568)
Income from operations before taxes and equity
income of associates
          102,139             19,387       210,412       54,466
Income taxes expense                     22,443                   3,771       42,797       10,687
Income from operations before equity income of
associates
          79,696             15,616       167,615       43,779
Equity income of associates                       1,950                   199       3,397       1,071
Net income         $        81,646     $        15,815     $ 171,012     $ 44,850
Attributable to:                                    
Equity holders of Neo Material Technologies, Inc.           78,952       15,191       163,074       43,454
Non-controlling interest in earnings of subsidiaries                       2,694                   624       7,938       1,396
          $ 81,646     15,815     171,012     $ 44,850
Earnings per share data attributable to equity
holders of Neo Material Technologies, Inc. 
                                   
Earnings per share, basic         $        0.66     $        0.13     $   1.36     $     0.36
Earnings per share, diluted         $        0.57     $        0.13     $   1.28     $    0.36
Weighted average number of shares outstanding,
basic
          119,388,845       119,356,047       119,792,105       119,863,493
Weighted average number of shares outstanding,
diluted
          138,473,812       120,743,965       129,439,754       121,464,312



NEO MATERIAL TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited - all figures in thousands of United States dollars)

          Three months ended
September 30
    Nine months ended
September 30
          2011     2010     2011     2010
                                     
Net income for the period         $ 81,646     $ 15,815     $ 171,012     $ 44,850
Change in fair value of available-for-sale
securities, net of tax expense of $108 and
tax recovery of $238 for three and nine
months ended September 30, 2011,
respectively
          658       -       (1,425)       -
Currency translation adjustment           1,909       -       3,205       -
Comprehensive income for the period         $ 84,213     $ 15,815     $ 172,792     $ 44,850
Attributable to:                                    
Non-controlling interest           2,694       624       7,938        1,396
Equity holders of Neo Material
Technologies, Inc.
          81,519       15,191       164,854       43,454
          $ 84,213     $ 15,815     $ 172,792     $ 44,850



NEO MATERIAL TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - all figures in thousands of United States dollars)

          Three months ended
September 30
    Nine months ended
September 30
            2011     2010     2011     2010
Operating activities                                    
Net income for the period         $ 81,646     $ 15,815     $ 171,012     $ 44,850
Add (deduct) items not affecting cash                                    
  Depreciation and amortization           2,524       2,873       7,787       8,754
  Share-based compensation expense           (5,223)       3,700       2,802       3,578
  Accretion in carrying value of long-term debt           1,149       119       1,656       432
  Deferred tax           1,216       (88)       (17,828)       3,431
  Equity income of associates           (1,950)       (199)       (3,397)       (1,071)
  Impairment of available-for-sale investments           888       -       888       -
  Accrued benefit expense, net of cash contributions           14       58       39       46
  Loss on disposal of property, plant and equipment           119       110       429       189
  Interest expense, net of interest income           5,309       37       6,538       492
  Current income taxes expense           21,227       3,859       60,625       7,256
  Contingent consideration           3,500       -       16,500       -
  Other           190       27       2,119       (86)
Net change in other long-term liabilities              910       (171)       358       (171)
Income taxes paid             (15,740)       (1,540)       (33,071)       (3,147)
Net change in non-cash working capital balances related to
operations
          (23,248)       (17,893)       (173,659)       (41,260)
Cash provided by operating activities           72,531       6,707       42,798       23,293
Investing activities                                    
  Acquisition of property, plant and equipment           (7,011)       (2,316)       (12,042)       (4,433)
  Acquisition of intangible assets           (931)       -       (931)       -
  Loans to third parties           (11,740)       -       (11,740)       -
  Cash paid on acquisition of Gallium Compounds, LLC           (6,500)       -       (6,500)       -
  Cash paid on acquisition of Buss & Buss net of cash
acquired
          -       521       -       (4,714)
  Proceeds from disposal of property, plant and equipment           22       -       146       51
  Investment by non-controlling interest           350       -       350       -
  Other investments           11       12       (1,008)       (726)
Cash used in investing activities           (25,799)       (1,783)       (31,725)       (9,822)
Financing activities                                    
  Proceeds from convertible debentures, net of issuance costs           -       -       220,775       -
  Repayment of long-term debt           (46)       (46)       (190)       (122)
  Interest paid           (484)       (164)       (1,061)       (631)
  Increase in bank advances and other short-term debt           (3,918)       (3)       20,891       1,881
  Repurchase of common shares for cancellation           (21,881)       (3,554)       (22,580)       (4,587)
  Issue of common shares           -       42       646       163
Cash (used in) provided by financing activities           (26,329)       (3,725)       218,481       (3,296)
Cash provided during the period           20,403       1,199       229,554       10,175
Cash and cash equivalents, beginning of period           295,920       66,284       86,769       57,308
Cash and cash equivalents, end of period         $ 316,323     $ 67,483     $ $316,323     $ 67,483



NEO MATERIAL TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited - all figures in thousands of United States dollars)

          Nine months ended September 30
          2011     2010
          Number     Amount     Number     Amount
Share capital                                    
  Authorized                                    
    Unlimited common shares                                    
  Issued                                    
  Common shares                                    
  Balance at beginning of the period           119,790,748     $ 244,912       120,075,502     $ 244,879
    Shares issued on exercise of stock options           275,600       960       104,066       168
    Shares issued on acquisition of 19.5% stake in
Atlantic Metals, net of issuance costs
          -       -       180,838       688
    Shares purchased for cancellation pursuant to normal
course issuer bid
          (2,631,200)       (5,388)       (1,271,990)       (2,596)
  Balance at end of the period           117,435,148       240,484       119,088,416       243,139
Contributed surplus                                    
  Balance at beginning of the period                   5,099               7,240
    Share-based compensation expense                   1,291               183
    Modification of share-based compensation plan                   1,782               -
    Exercise of stock options                   (314)               (5)
    Repurchase of common shares for cancellation                   (7,858)               (1,991)
  Balance at end of the period                   -               5,427
Retained earnings (deficit)                                    
  Balance at beginning of the period                   16,509               (42,293)
    Net income attributable to the equity holders
of Neo Material Technologies Inc. for the period
                  163,074               43,454
    Repurchase of common shares for cancellation                   (9,334)               -
  Balance at end of the period                   170,249               1,161
Equity component of convertible debentures                                    
  Balance at beginning of the period                   -               -
    Issuance of convertible debentures                   25,389               -
    Tax effect on convertible debentures                   (6,461)               -
  Balance at end of the period                   18,928               -
Accumulated other comprehensive income:                                    
  Balance at beginning of the period                   970               -
    Change in fair value of available-for-sale
securities, net of tax recovery of $238
                  (1,425)               -
    Currency translation adjustment                   3,205               -
  Balance at end of the period                   2,750               -
Shareholders' loan                                    
  Balance at beginning of the period                   (223)               (296)
  Repayment of loan by shareholder                   -               -
  Balance at end of the period                   (223)               (296)
Total shareholders' equity for the period                 $ 432,188             $ 249,431
Non-controlling interest                                    
  Balance at beginning of the period                   3,445               1,666
  Investment by non-controlling interest                   2,507               -
  Non-controlling interest in earnings of
subsidiaries for the period
                  7,938               1,396
  Balance at end of the period                   13,890               3,062
Total equity for the period                 $ 446,078             $ 252,493


 

 

 

 

 

SOURCE Neo Material Technologies Inc.

For further information:

Michael Doolan                     Ali Mahdavi
Chief Financial Officer                     Investor Relations
(416) 367-8588, ext.335                     (416) 962-3300, ext. 225
Website: www.neomaterials.com                     e-mail: amahdavi@neomaterials.com
e-mail: info@neomaterials.com      

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Neo Material Technologies Inc.

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