Neo Material Technologies Inc. reports year-end 2006 and fourth quarter financial results



    
    2006 Highlights
    -  Sales increase to US$162.6 million
    -  EBITDA at US$56.1 million
    -  EBITDA per share at US$0.71
    -  Net income increases to US$27.8 million
    -  EPS at US$0.35 (CDN$0.40 @ exchange rate of 1.135)
    

    TORONTO, March 8 /CNW/ - Neo Material Technologies Inc. (TSX: NEM) (the
"Company") today reported its financial results for the three-month and
twelve-month periods ended December 31, 2006. Unless otherwise specified, all
currency amounts are expressed in US dollars. For comparative purposes, it
should be noted that the 2005 annual results include only the period beginning
September 1, 2005 to December 31, 2005 for AMR and the entire twelve-month
period for Magnequench as a result of the reverse takeover in August 2005.
    For the twelve-month period ended December 31, 2006, the Company reported
increased sales to $162.6 million and net income of $27.8 million, or $0.35
and $0.33 per share on a basic and diluted basis, respectively. Earnings
before interest, taxes, depreciation and amortization ("EBITDA") during the
twelve-month period amounted to $56.1 million. This compares to previously
reported full year 2005 sales of $98.5 million and net loss of $5.5 million or
$0.13 per share, and EBITDA of $30.1 million.
    For the three-month period, sales increased to $44.7 million with net
income of $8.6 million, or $0.11 per share on a basic and diluted basis.
EBITDA during the three-month period was $14.5 million. This compares to sales
of $35.2 million and net loss of $3.3 million, or $0.04 per share and EBITDA
amounting to $3.8 million during the corresponding three-month period in 2005.
    At December 31, 2006, the Company had $9.5 million in cash and cash
equivalents. Long-term debt was $69.5 million as at December 31, 2006,
compared to $72.4 million at the end of the third quarter and $87.3 million at
the beginning of the year.
    Throughout fiscal 2006 and the fourth quarter, both business segments
continued to demonstrate strength with increasing demand in all end markets.
During the fourth quarter, Magnequench sales volumes remained strong at 962
tonnes, a 6.3 percent year-over-year increase and AMR Performance Materials
shipped a record 1,747 tonnes, a 47.7 percent year-over-year increase. Growth
from "New Applications" at the Magnequench division continued to be strong
with shipments increasing while the "Base Business" followed the anticipated
seasonal pattern with lower demand in the fourth quarter.
    The Company was successful in implementing price increases across both
divisions during the fourth quarter to partially offset the impact of higher
raw material costs and the implementation of a 10 percent export tax imposed
by the Chinese government. The combination of higher selling prices and
strategic purchasing of raw materials throughout the year contributed to
strong profit margins.
    During the fourth quarter, the AMR Performance Materials division
commenced selling rare earth products produced by Dingnan Jiahua Advanced
Material Resources Co. ("DAMR"), with whom the Company has entered into an
exclusive distribution agreement, technical agreement and management services
agreement. Subject to the approval from the appropriate Chinese regulatory
bodies, the Company has the option to acquire a majority position in the DAMR
facility. Included in the fourth quarter sales figures was $3.6 million of
product originating from DAMR upon which minimal margins were realized in the
quarter due to the sale of lower grade material and the higher costs
associated with the start-up of the facility. Management expects the selling
and cooperation arrangements entered into with DAMR to be accretive to
earnings by the third quarter of fiscal 2007.


    
    Magnequench
    $000's (except for quantity shipped)
                              -----------------------------------------------
                                                                    Trailing
                                Q4      Q1      Q2      Q3      Q4   Twelve
                               2005    2006    2006    2006    2006  Months
    -------------------------------------------------------------------------
    Quantity Shipped - tonnes    905     935     949   1,064     962   3,910
    -------------------------------------------------------------------------
    Revenue                   22,553  23,076  23,192  25,191  25,481  96,940
    -------------------------------------------------------------------------
    Operating Income           6,691   9,370  10,674  11,427  12,932  44,403
    -------------------------------------------------------------------------


    AMR Performance Materials
    $000's (except for quantity shipped)
                              -----------------------------------------------
                                                                    Trailing
                                Q4      Q1      Q2      Q3      Q4   Twelve
                               2005    2006    2006    2006    2006  Months
    -------------------------------------------------------------------------
    Quantity Shipped - tonnes  1,183   1,495   1,509   1,550   1,747   6,301
    -------------------------------------------------------------------------
    Revenue                   12,670  15,574  16,279  17,463  20,537  69,853
    -------------------------------------------------------------------------
    Operating Income            (596)  1,674   2,190   2,662   1,252   7,778
    -------------------------------------------------------------------------


    "Fiscal 2006 tested the 2005 combination of AMR and Magnequench and our
abilities to manage the combined companies effectively," noted Constantine
Karayannopoulos, President and CEO of Neo Material Technologies Inc. "Given
current market trends, our success with new applications and the continued
strengthening of our balance sheet, there is a good basis for optimism about
the future of the Company."
    As at December 31, 2006, the total number of shares outstanding was
79,152,453.

                                                       ----------------------
                                                        Twelve months ended
                                                             December 31
    Selected Financial Information                     ----------------------
    US$000's - except per share amounts                   2006       2005(1)
    -------------------------------------------------------------------------
    Revenue                                              162,584      98,460
    -------------------------------------------------------------------------
    Operating Income                                      43,339      21,640
    -------------------------------------------------------------------------
    Net Income (loss)                                     27,792      (5,547)
    -------------------------------------------------------------------------
    Cash provided  By Operating Activities                18,478      22,930
    -------------------------------------------------------------------------
    Net Income (loss) per Common Share - basic              0.35       (0.13)
    -------------------------------------------------------------------------
    Net Income (loss) per Common Share - diluted            0.33       (0.13)
    -------------------------------------------------------------------------
    (1) These figures include the entire twelve-month period ended
        December 31, 2005 of Magnequench's results and only four months for
        AMR.


                                                       ----------------------
                                                         Three months ended
                                                             December 31
    Selected Financial Information                     ----------------------
    US$000's - except per share amounts                   2006       2005
    -------------------------------------------------------------------------
    Revenue                                               44,735      35,223
    -------------------------------------------------------------------------
    Operating Income                                      12,128       4,618
    -------------------------------------------------------------------------
    Net Income (loss)                                      8,568      (3,323)
    -------------------------------------------------------------------------
    Cash provided  By Operating Activities                 5,866       5,911
    -------------------------------------------------------------------------
    Net Income (loss) per Common Share - basic              0.11       (0.04)
    -------------------------------------------------------------------------
    Net Income (loss) per Common Share - diluted            0.11       (0.04)
    -------------------------------------------------------------------------
    

    About Neo Materials
    Neo Material Technologies is a producer, processor and developer of
neodymium-iron-boron magnetic powders, rare earths and zirconium based
engineered materials and applications through its Magnequench and AMR
Performance Materials business 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 is headquartered in Toronto, Canada and has approximately 1,300
employees in 15 locations, across 10 countries.

    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.

    Teleconference Call
    Management will host a teleconference call on Friday, March 9, 2007 at
10:00 a.m. (Eastern Time) to discuss these results. Interested parties may
access the teleconference by calling (800) 594-3790 (toll free long distance)
or by visiting http://www.newswire.ca/webcast. A recording of the
teleconference may be accessed by calling (416) 640-1917 (local) or (877)
289-8525 (toll free long distance), and entering pass code 21221646 followed
by the number sign until April 9, 2007 or by visiting
http://www.newswire.ca/webcast.

    Online Access
    A complete set of financial statements and the Management's Discussion
and Analysis will be available online at www.neomaterials.com before Tuesday,
March 13, 2007.

    Notice of Shareholder Meeting
    The Company will hold its Annual and Special Meeting of Shareholders on
Wednesday, April 18, 2007 at 4:00 pm at The Gallery, TSX Conference Centre,
The Exchange Tower, 130 King Street West, Toronto, Ontario.


    
                           Financial Results follow

    NEO MATERIAL TECHNOLOGIES INC.
    CONSOLIDATED BALANCE SHEETS
    (Audited - all figures in thousands of United States dollars)

                                                     December 31 December 31
                                                            2006        2005
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents                          $   9,524   $  10,755
    Restricted cash                                          269         248
    Accounts receivable                                   21,307      18,447
    Inventories                                           38,461      19,755
    Loan receivable                                        4,375           -
    Future income tax asset                                  372          81
    Other current assets                                   2,594       2,009
    -------------------------------------------------------------------------
    Total current assets                                  76,902      51,295
    -------------------------------------------------------------------------
    Property, plant and equipment                         43,187      45,711
    Patents and other intangible assets                    9,432      13,900
    Pension benefit asset                                  4,038       3,153
    Goodwill                                              34,987      34,987
    Deferred expenses and other assets                     6,497       7,889
    -------------------------------------------------------------------------
    Total assets                                       $ 175,043   $ 156,935
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Bank advances and other short-term debt            $  18,080   $   8,548
    Accounts payable and other accrued charges            25,329      25,663
    Restructuring liabilities                                105         975
    Long-term debt due within one year                    12,500      13,100
    -------------------------------------------------------------------------
    Total current liabilities                             56,014      48,286
    -------------------------------------------------------------------------
    Long-term debt                                        57,021      74,199
    Future income tax liability                            1,558       1,904
    Accrued other post retirement benefits                 4,841       4,768
    Other long-term liabilities                            2,750       3,000
    -------------------------------------------------------------------------
    Total liabilities                                    122,184     132,157
    -------------------------------------------------------------------------
    Non-controlling interest                               1,556       2,114
    Contingencies and commitments
    Shareholders' equity                                  51,303      22,664
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity         $ 175,043   $ 156,935
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    NEO MATERIAL TECHNOLOGIES INC.
    CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
    (All figures in thousands of United States dollars,
     except per share information)

                                 Three months ended           Year ended
                                    December 31               December 31
                                  2006        2005        2006        2005
                                    (unaudited)              (audited)
    -------------------------------------------------------------------------
    Revenues
      Net sales                $  44,735   $  35,223   $ 162,584   $  98,460
    Costs of sales
      Costs excluding
       depreciation and
       amortization               23,788      19,466      81,358      41,770
      Depreciation and
       amortization                1,333       2,304       7,649       8,080
    -------------------------------------------------------------------------
    Gross profit                  19,614      13,453      73,577      48,610
    Expenses
      Selling, general and
       administrative              6,048       6,144      24,022      21,173
      Depreciation and
       amortization                  758       1,055       3,603       2,850
      Research and development       680         626       2,613       1,937
      Restructuring charge             -       1,010           -       1,010
    -------------------------------------------------------------------------
                                   7,486       8,835      30,238      26,970
    -------------------------------------------------------------------------
    Operating income before
     the undernoted               12,128       4,618      43,339      21,640
    Other income                    (611)       (541)     (1,903)     (2,172)
    Interest expense,
     long-term debt                2,686       2,862      10,871      23,787
    Interest expense
     (income), other                 136         (28)        551           9
    Settlement of claims               -       4,875           -       4,875
    Foreign exchange
     loss (gain)                     223         (29)        409         171
    -------------------------------------------------------------------------
    Income (loss) from
     operations before taxes,
     non-controlling interest
     and equity income of
     affiliate                     9,694      (2,521)     33,411      (5,030)
    Income taxes                   1,060         918       5,609         871
    -------------------------------------------------------------------------
    Income (loss) from
     operations before equity
     income of affiliate           8,634      (3,439)     27,802      (5,901)
    Equity income of affiliate       140         133         554         391
    Non-controlling interest
     in earnings of
     subsidiaries                   (206)        (17)       (564)        (37)
    -------------------------------------------------------------------------
    Net income (loss)
     for the period            $   8,568   $  (3,323)  $  27,792   $  (5,547)
    -------------------------------------------------------------------------
    Deficit, beginning
     of period                   (75,577)    (91,478)    (94,801)    (89,254)
    -------------------------------------------------------------------------
    Deficit, end of period       (67,009)    (94,801)    (67,009)    (94,801)
    -------------------------------------------------------------------------
    Net income (loss) per
     share, basic              $    0.11   $   (0.04)  $    0.35   $   (0.13)
    -------------------------------------------------------------------------
    Net income (loss) per
     share, diluted            $    0.11   $   (0.04)  $    0.33   $   (0.13)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    NEO MATERIAL TECHNOLOGIES INC.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (All figures in thousands of United States dollars)

                                 Three months ended           Year ended
                                    December 31               December 31
                                  2006        2005        2006        2005
                                    (unaudited)              (audited)
    -------------------------------------------------------------------------
    Operating Activities
    Net income (loss) for
     the period                $   8,568   $  (3,323)  $  27,792   $  (5,547)
    Add (deduct) items not
     affecting cash
      Depreciation and
       amortization                2,091       3,359      11,252      10,930
      Amortization of deferred
       financing costs               249         237         978         989
      Stock-based compensation
       expense                       246         409         836       1,526
      Non-controlling interest
       in earnings of
       subsidiaries                  206          17         564          37
      Accretion of original
       issue discount on debt        357         303       1,322         404
      Future income tax             (379)       (115)       (638)       (115)
      Equity income of
       affiliate                    (140)       (133)       (554)       (391)
      Accrued benefit expense         56          55         263         335
      Loss on disposal
       of assets                      23           -         289           -
      Write-off of deferred
       financing costs and
       sub-debt issue discount         -           -           -       5,153
      Settlement claim expense         -       3,000           -       3,000
    Restructuring payment           (188)          -        (870)          -
    Net change in non-cash
     working capital balances
     related to operations        (5,223)      2,102     (22,756)      6,609
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                    5,866       5,911      18,478      22,930
    -------------------------------------------------------------------------
    Investing activities
      Acquisition of property,
       plant and equipment        (1,985)       (558)     (5,327)       (817)
      Loan receivable                  -           -      (4,375)          -
      Acquisition of additional
       ownership interest           (614)          -        (614)          -
      Proceeds from disposal
       of assets                      28           -          86           5
      (Increase) decrease in
       restricted cash              (269)        982         (21)        982
      Cash acquired on
       acquisition of AMR
       Technologies Inc.               -           -           -       2,859
      Acquisition                      -        (987)          -        (987)
    -------------------------------------------------------------------------
    Cash (used in) provided
     by investing activities      (2,840)       (563)    (10,251)      2,042
    -------------------------------------------------------------------------
    Financing activities
      Repayment of long-
       term debt                  (3,241)     (5,654)    (19,100)   (164,439)
      Proceeds from issuance
       of long-term debt               -           -           -     100,000
      Increase (decrease) in
       bank advances and other       251        (621)      9,532      (5,573)
      Issue of common shares         102           7         109      52,974
    -------------------------------------------------------------------------
    Cash used in financing
     activities                   (2,888)     (6,268)     (9,459)    (17,038)
    -------------------------------------------------------------------------
    Effect of exchange rate
     changes on cash                  16          60           1          66
    -------------------------------------------------------------------------
    Cash (used) provided
     during the period               154        (860)     (1,231)      8,000
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     beginning of period           9,370      11,615      10,755       2,755
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period             $   9,524   $  10,755   $   9,524   $  10,755
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    




For further information:

For further information: Michael Doolan, Chief Financial Officer, (416)
367-8588, ext.335, Website: www.neomaterials.com, e-mail:
info@neomaterials.com; Ali Mahdavi, Genoa Management, (416) 962-3300, ext.
225, e-mail: amahdavi@genoa.ca

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