Neo Material Technologies reports first quarter 2009 results



    TORONTO, May 8 /CNW/ - Neo Material Technologies Inc. ("Neo" or the
"Company") (TSX: NEM) today reported its financial results for the three-month
period ending March 31, 2009. Unless otherwise specified, all currency amounts
are expressed in U.S. dollars.
    The Company is not immune to the global economic recession and its
overall results in the first quarter of 2009 were significantly lower than the
comparable period in 2008. Despite these results, the Company continued to
generate positive cash flow from operations. For the three-month period ended
March 31, 2009, revenues decreased sharply to $28.8 million with a resulting
net loss of $4.4 million, or $0.04 per share on a basic and fully diluted
basis. Operating income plus depreciation and amortization ("EBITDA") during
the quarter was negative $2.6 million. Revenues, net income, EBITDA and
earnings per share (on a basic and fully diluted basis) for the three-month
period ended March 31, 2008 were $65.5 million, $8.3 million, $16.4 million
and $0.08, respectively. Operating loss for the first quarter of 2009 was $5.2
million compared to operating income of $13.5 million in the corresponding
period in 2008. Overall results suffered due to significantly lower product
demand and weak rare earth product pricing, both of which impacted sales
levels and sales margins.
    Included in the first quarter results were $1.1 million of expenses
related exclusively to the analysis and response to the Pala Partial Offer.
The Company continues to incur additional expenses related to the Pala Partial
Offer in the second quarter of 2009.
    "We are seeing signs of a recovery of demand in important end markets
such as consumer electronics during the second quarter which we expect will
lead to stronger corporate performance for the balance of the year," noted
Constantine Karayannopoulos, President & CEO. "During the downturn in the
worldwide economy, we have continued to invest in new product development and
have announced important corporate developments in both Asia and South
America. We are well positioned, due to our excellent customer relationships,
unique technology portfolio, and strong financial position to benefit from the
anticipated recovery in world demand and to resume long term revenue and
profit growth of Neo."
    The Company had no long-term debt and a significant cash position of
$49.1 million at March 31, 2009. Also during this period, the Company repaid
$5.3 million of short-term debt and the Company's net cash position increased
to $41.4 million from $38.5 million at December 31, 2008.

    
    Magnequench
    $000's (except for  -----------------------------------------------------
     quantity shipped)     Q1       Q2       Q3       Q4       Q1   Trailing
                          2008     2008     2008     2008     2009   Twelve
                                                                     Months
    -------------------------------------------------------------------------
    Quantity Shipped
     (tonnes)             1,242    1,404    1,178      777      505    3,864
    -------------------------------------------------------------------------
    Revenues             35,562   40,867   33,830   21,914   13,840  110,451
    -------------------------------------------------------------------------
    Operating Income     10,806   11,422   10,102    4,167    1,323   27,014
    -------------------------------------------------------------------------


    AMR Performance
     Materials
    $000's (except for  -----------------------------------------------------
     quantity shipped)     Q1       Q2       Q3       Q4       Q1   Trailing
                          2008     2008     2008     2008     2009   Twelve
                                                                     Months
    -------------------------------------------------------------------------
    Quantity Shipped
     (tonnes)             2,156    2,271    1,825    1,726      974    6,796
    -------------------------------------------------------------------------
    Revenues             37,885   48,502   39,746   28,134   14,951  131,333
    -------------------------------------------------------------------------
    Operating Income/
     (Loss)               4,710    6,040    2,223   (2,507)  (3,452)   2,304
    -------------------------------------------------------------------------


    Consolidated
    $000's (except for  -----------------------------------------------------
     quantity shipped)     Q1       Q2       Q3       Q4       Q1   Trailing
                          2008     2008     2008     2008     2009   Twelve
                                                                     Months
    -------------------------------------------------------------------------
    Inter-segment sales  (7,959)  (5,917)  (2,467)  (3,456)       -  (11,840)
    -------------------------------------------------------------------------
    Revenues             65,488   83,452   71,109   46,592   28,791  229,944
    -------------------------------------------------------------------------
    Operating Income/
     (Loss)              13,504   13,790   10,924     (968)  (5,178)  18,568
    -------------------------------------------------------------------------
    EBITDA(1)            16,418   16,738   13,851    1,759   (2,637)  29,711
    -------------------------------------------------------------------------

    Note: (1) The Company currently calculates EBITDA as operating income,
    plus depreciation and amortization. Formerly, the Company calculated
    EBITDA as earnings before interest, taxes, depreciation and amortization.
    

    About Neo Material Technologies

    Neo Material Technologies is a producer, processor and developer of
neodymium-iron-boron magnetic powders ("Neo 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 in the production of bonded magnets for 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 Monday, May 11, 2009 at
10:00 am (Eastern Time) to discuss these results. Interested parties may
access the teleconference by calling 416-644-3416 (local) or 800-731-5774
(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
21305340 followed by the number sign until June 11, 2009 or by visiting
http://www.newswire.ca/webcast.

    Online Access

    The financial statements and the Management's Discussion and Analysis
will be available on the Company's website at www.neomaterials.com and on
SEDAR at www.sedar.com on or before May 11, 2009.

    
                           Financial Results follow


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

                                                      March 31   December 31
                                                        2009         2008
                                                    (Unaudited)   (Audited)
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash                                            $    49,101  $    51,507
    Accounts receivable                                  18,531       18,171
    Inventories                                          43,063       54,415
    Future income tax asset                               1,427          915
    Asset held for sale                                       -        1,526
    Other current assets                                  2,212        2,137
    -------------------------------------------------------------------------
    Total current assets                                114,334      128,671
    -------------------------------------------------------------------------
    Property, plant and equipment                        35,998       36,933
    Patents and other intangible assets                  15,358       16,248
    Pension benefit asset                                 4,007        4,031
    Goodwill                                             34,987       34,987
    Other long-term assets                                6,342        6,389
    -------------------------------------------------------------------------
    Total assets                                    $   211,026  $   227,259
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Bank advances and other short-term debt         $     7,682  $    12,979
    Accounts payable and other accrued charges           19,991       21,994
    -------------------------------------------------------------------------
    Total current liabilities                            27,673       34,973
    -------------------------------------------------------------------------
    Future income tax liability                             857          898
    Accrued postretirement benefits                         489          502
    Other long-term liabilities                           7,601       10,167
    -------------------------------------------------------------------------
    Total liabilities                                    36,620       46,540
    -------------------------------------------------------------------------
    Non-controlling interest                              1,495        1,867
    Shareholders' equity                                172,911      178,852
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity      $   211,026  $   227,259
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

                                                 Three months ended March 31
                                                           2009         2008
    -------------------------------------------------------------------------
    Revenues                                        $    28,791  $    65,488
    Costs of sales
      Costs excluding depreciation and amortization      23,767       41,305
      Depreciation and amortization                       1,929        2,088
    -------------------------------------------------------------------------
    Gross profit                                          3,095       22,095
    Expenses
      Selling, general and administrative                 6,382        7,210
      Stock-based compensation                              180         (434)
      Depreciation and amortization                         612          826
      Research and development                            1,099          989
    -------------------------------------------------------------------------
                                                          8,273        8,591
    -------------------------------------------------------------------------
    Operating (loss) income before the undernoted        (5,178)      13,504
    Other income                                           (199)        (159)
    Interest expense, long-term debt                        225        1,460
    Interest expense, other                                  64          395
    Foreign exchange (gain) loss                           (126)         125
    -------------------------------------------------------------------------
    (Loss) income from operations before taxes,
     non-controlling interest and equity income
     of affiliate                                        (5,142)      11,683
    Income taxes (recovery) expense                        (528)       2,925
    -------------------------------------------------------------------------
    (Loss) income from operations before
     non-controlling interest and equity
     income of affiliate                                 (4,614)       8,758
    Equity (loss) income of affiliate                      (206)          56
    Non-controlling interest in earnings
     of subsidiaries                                        372         (537)
    -------------------------------------------------------------------------
    Net (loss) income for the period                $    (4,448) $     8,277
    -------------------------------------------------------------------------
    Deficit, beginning of period                        (58,258)     (81,564)
    -------------------------------------------------------------------------
    Deficit, end of period                              (62,706)     (73,287)
    -------------------------------------------------------------------------
    Net (loss) income per share, basic              $     (0.04) $      0.08
    -------------------------------------------------------------------------
    Net (loss) income per share, diluted            $     (0.04) $      0.08
    -------------------------------------------------------------------------
    Weighted average number of shares outstanding,
     basic                                          115,212,930   98,911,022
    -------------------------------------------------------------------------
    Weighted average number of shares outstanding,
     diluted                                        115,212,930  107,243,510
    -------------------------------------------------------------------------


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

                                                 Three months ended March 31
                                                           2009         2008
    -------------------------------------------------------------------------
    Operating Activities
    Net (loss) income for the period                $    (4,448) $     8,277
    Add (deduct) items not affecting cash
      Depreciation and amortization                       2,541        2,914
      Stock-based compensation                              180         (434)
      Non-controlling interest in earnings
       of subsidiaries                                     (372)         537
      Accretion in carrying value of debt                   190          530
      Future income tax                                    (553)        (474)
      Equity income of affiliate                            206          (56)
      Accrued benefit expense                                11           30
      Gain on disposal                                       (9)           -
    Net change in non-cash working capital
     balances related to operations                       5,950       (9,334)
    -------------------------------------------------------------------------
    Cash provided by operating activities                 3,696        1,990
    -------------------------------------------------------------------------
    Investing activities
      Acquisition of property, plant and equipment         (992)      (1,616)
      Proceeds from disposal                              2,013            -
      Other investments                                    (204)        (693)
    -------------------------------------------------------------------------
    Cash provided by (used in) investing activities         817       (2,309)
    -------------------------------------------------------------------------
    Financing activities
      Repayment of long-term debt                             -       (4,375)
      (Decrease) increase in bank advances and
       other short-term debt                             (5,297)       4,939
      Repurchase of common shares for cancellation       (1,623)           -
      Issue of common shares                                  -           17
    -------------------------------------------------------------------------
    Cash (used in) provided by financing activities      (6,920)         581
    -------------------------------------------------------------------------
    Effect of exchange rate changes on cash                   1           18
    -------------------------------------------------------------------------
    Cash (used in) provided during the period            (2,406)         280
    -------------------------------------------------------------------------
    Cash beginning of period                             51,507       17,160
    -------------------------------------------------------------------------
    Cash end of period                              $    49,101  $    17,440
    -------------------------------------------------------------------------


    NEO MATERIAL TECHNOLOGIES INC.
    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
    (All figures in thousands of United States dollars)

                               March 31, 2009           December 31, 2008
                                 (Unaudited)                (Audited)
                             Number       Amount       Number       Amount
    -------------------------------------------------------------------------
    Share Capital
      Authorized
        Unlimited common
         shares
      Issued
        Common Shares
        Balance at
         beginning of
         period           116,176,614      232,325   98,907,217      182,387
          Shares issued
           on warrants
           exercised                -            -   17,501,800       41,148
          Fair value
           assigned to
           warrants
           exercised                -            -            -        4,729
          Shares issued
           on private
           placement                -            -    2,375,297        9,267
          Shares issued
           on exercise
           of stock
           options                  -            -       10,000           33
          Shares purchased
           and cancelled
           pursuant to
           normal course
           issuer bid      (1,709,100)      (1,623)  (2,617,700)      (3,075)
          Fair value
           assigned to
           repurchase of
           common shares            -       (1,827)           -       (2,164)
    -------------------------------------------------------------------------
        Balance at end
         of period        114,467,514      228,875  116,176,614      232,325
    -------------------------------------------------------------------------
      Warrants
        Balance at
         beginning of
         period                     -            -   17,653,600        4,770
          Warrants
           exercised                -            -  (17,501,800)      (4,729)
          Warrants expired          -            -     (151,800)         (41)
    -------------------------------------------------------------------------
        Balance at end
         of period                  -            -            -            -
    -------------------------------------------------------------------------
      Contributed Surplus
        Balance at
         beginning of
         period                              5,081                     2,615
          Stock-based
           compensation expense                130                       261
          Transfer to contributed
           surplus on expiration
           of warrants                           -                        41
          Repurchase of common
           shares for cancellation           1,827                     2,164
    -------------------------------------------------------------------------
        Balance at end of period             7,038                     5,081
    -------------------------------------------------------------------------
      Deficit
        Balance at beginning
         of period                         (58,258)                  (81,564)
          Net (loss) income for
           the period                       (4,448)                   23,306
    -------------------------------------------------------------------------
        Balance at end of period           (62,706)                  (58,258)
    -------------------------------------------------------------------------
      Accumulated other
       comprehensive earnings (loss)
        Balance at beginning of period           -                       115
          Unrealized gain on interest
           rate swap designated as
           cash flow hedge                       -                      (115)
    -------------------------------------------------------------------------
        Balance at end of period                 -                         -
    -------------------------------------------------------------------------
      Shareholders' loan
        Balance at beginning of period        (296)                     (446)
          Repayment of loan by
           shareholder                           -                       150
    -------------------------------------------------------------------------
        Balance at end of period              (296)                     (296)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Shareholders' equity at end
     of period                             172,911                   178,852
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

                                                          Three months ended
                                                                March 31
                                                           2009         2008
    -------------------------------------------------------------------------
    Net (loss) income for the period                $    (4,448) $     8,277
    Change in unrealized loss on derivatives
     designated as cash flow hedges, net of tax               -           83
    -------------------------------------------------------------------------
    Comprehensive (loss) income for the period      $    (4,448) $     8,360
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    %SEDAR: 00002061E




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, Investor Relations, (416) 962-3300, ext.
225, e-mail: amahdavi@neomaterials.com

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