Neo Material Technologies reports first quarter 2010 financial results

    
    -   Revenues of US$65.1 million
    -   EBITDA of US$19.0 million
    -   Net Income of US$12.8 million or US$0.11 per share
    -   Net cash position of US$55.3 million
    

TORONTO, May 13 /CNW/ - Neo Material Technologies Inc. (TSX: NEM) (the "Company") today reported its financial results for the three-month period ended March 31, 2010. Unless otherwise specified, all currency amounts are expressed in U.S. dollars.

For the three-month period ended March 31, 2010, revenues increased by 126% to $65.1 million compared to $28.8 million for the three-month period ending March 31, 2009. The significant increase in revenues was driven by increased demand for the Company's specialty materials, particularly evident in the growth of the base business, and new applications supplied by the Magnequench division. The Company also reported net income of $12.8 million, earnings per share ("EPS") of $0.11 (on a basic and fully diluted basis) and operating income plus depreciation and amortization ("EBITDA") of $19.0 million. This compares to a first quarter 2009 net loss of $3.1 million, loss per share of $0.03 (on a basic and fully diluted basis) and EBITDA of negative $1.3 million. Operating income was a record $16.1 million compared to an operating loss of $3.8 million in the corresponding period in 2009. Cash provided by operating activities was $5.7 million.

At March 31, 2010, the Company had cash of $67.1 million and long-term debt remained at nil.

"I am extremely pleased with the Company's growth during a traditionally slow first quarter. Both divisions enjoyed robust demand resulting in a record performance for the quarter," noted Constantine Karayannopoulos, President & CEO. "We expect this healthy demand for our products to continue in the foreseeable future."

Subsequent to quarter-end, the Performance Materials division completed a strategic investment by acquiring a 19.5% stake in Atlantic Metals and Alloys, LLC ("Atlantic"). Atlantic is a privately held, Connecticut based supplier of specialty materials with a track record of growth and profitability. This modest investment will complement the Performance Material division's rare metals business with Atlantic's trading capabilities as well as its ability to source additional indium and rhenium feedstocks for the division. The Company has the option after 24 months to acquire a majority stake in Atlantic at its sole discretion.

    
    Magnequench
    $000's (except for  -----------------------------------------------------
    quantity shipped)                                                Trailing
                           Q1       Q2       Q3       Q4       Q1     Twelve
                          2009     2009     2009     2009     2010    Months
    -------------------------------------------------------------------------
    Quantity Shipped
     (tonnes)               505      878    1,268    1,293    1,492    4,931
    -------------------------------------------------------------------------
    Revenues             13,840   24,411   34,049   32,941   38,092  129,493
    -------------------------------------------------------------------------
    Operating Income(1)   1,340    9,014   16,255   15,132   16,327   56,728
    -------------------------------------------------------------------------


    Performance Materials
    $000's (except for  -----------------------------------------------------
    quantity shipped)      Q1       Q2       Q3       Q4       Q1    Trailing
                          2009     2009     2009     2009     2010    Twelve
                       Restated Restated Restated                     Months
    -------------------------------------------------------------------------
    Quantity Shipped
     (tonnes)               974      992    1,144    1,954    1,419    5,509
    -------------------------------------------------------------------------
    Revenues             14,951   18,222   21,678   31,611   30,227  101,738
    -------------------------------------------------------------------------
    Operating (Loss)
     Income(1)(2)        (2,092)     170      151    1,279    2,644    4,244
    -------------------------------------------------------------------------


    Consolidated $000's
    (except for        ------------------------------------------------------
     quantity shipped)     Q1       Q2       Q3       Q4       Q1    Trailing
                          2009     2009     2009     2009     2010    Twelve
                       Restated Restated Restated                     Months
    -------------------------------------------------------------------------
    Inter-segment sales       -     (879)  (1,582)  (1,756)  (3,228)  (7,445)
    -------------------------------------------------------------------------
    Revenues             28,791   41,754   54,145   62,796   65,091  223,786
    -------------------------------------------------------------------------
    Operating (Loss)
     Income(2)           (3,819)   5,308   11,396   11,637   16,105   44,446
    -------------------------------------------------------------------------
    EBITDA (2)           (1,278)   7,844   14,004   14,577   19,001   55,426
    -------------------------------------------------------------------------

    Note:
    (1) Divisional Operating Income (Loss) presented in the tables above
        excludes stock-based compensation expense.
    (2) Operating Income (Loss) for the quarters ending March 31, 2009, June
        30, 2009 and September 30, 2009 has been restated as a result of
        adjustments to the currency conversion of items sold from Inventory
        and accordingly, the costs of sales and inventory balances have also
        been restated. The net effect of the restatements was an increase to
        inventory of $1.4 million, $0.3 million and $0.2 million as at March
        31, June 30, and September 30, 2009, respectively, and an equivalent
        increase to operating income and EBITDA in each of those periods. The
        only effect on earnings per share was to reduce the March 31, 2009
        loss per share from $0.04 to $0.03.
    

Teleconference Call

Management will host a teleconference call on May 13, 2010 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 (800) 642-1687 (toll free long distance), and entering pass code 72706120 followed by the number sign until June 13, 2010 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 May 14, 2010

Notice of Shareholder Meeting

The Company will hold its Annual General and Special Meeting of Shareholders on Thursday, June 17, 2010 at 4:00 pm at The Gallery, TSX Conference Centre, The Exchange Tower, 130 King Street West, Toronto, Ontario.

About Neo Material Technologies

Neo Material Technologies is a producer, processor and developer of neodymium-iron-boron magnetic powders, rare earths and zirconium based engineered materials and applications, and other high value niche metals and their compounds through its Magnequench and 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. Products from the newly acquired Recapture Metals Limited are primarily used in the wireless, LED, flat panel, 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.
    CONSOLIDATED BALANCE SHEETS
    (All figures in thousands of United States dollars)

                                                      March 31   December 31
                                                        2010         2009
    -------------------------------------------------------------------------
                                                    (Unaudited)   (Audited)
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash                                              $  67,062    $  57,308
    Accounts receivable                                  37,178       36,195
    Inventories                                          62,257       48,914
    Future income tax asset                               2,126        2,536
    Other current assets                                  9,362        7,886
    -------------------------------------------------------------------------
    Total current assets                                177,985      152,839
    -------------------------------------------------------------------------
    Property, plant and equipment                        43,226       44,755
    Patents and other intangible assets                  12,410       13,118
    Pension benefit asset                                 3,720        3,780
    Goodwill                                             44,481       44,481
    Other long-term assets                                7,442        6,849
    -------------------------------------------------------------------------
    Total assets                                      $ 289,264    $ 265,822
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Bank advances and other short-term debt           $  11,762    $   6,977
    Accounts payable and other accrued charges           38,909       34,397
    -------------------------------------------------------------------------
    Total current liabilities                            50,671       41,374
    -------------------------------------------------------------------------
    Future income tax liability                           5,796        4,533
    Accrued postretirement benefits                         488          493
    Other long-term liabilities                           4,110        4,446
    -------------------------------------------------------------------------
    Total liabilities                                    61,065       50,846
    -------------------------------------------------------------------------
    Non-controlling interest                              1,936        1,666
    Contingencies and commitments
    Subsequent event
    Shareholders' equity                                226,263      213,310
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity        $ 289,264    $ 265,822
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes


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


                                                        Three months ended
                                                             March 31
                                                        2010         2009
                                                                   Restated
    -------------------------------------------------------------------------
    Revenues                                          $  65,091    $  28,791
    Costs of sales
      Costs excluding depreciation and amortization      36,890       22,408
      Depreciation and amortization                       2,091        1,929
    -------------------------------------------------------------------------
    Gross profit                                         26,110        4,454
    Expenses
      Selling, general and administrative                 7,001        6,382
      Stock-based compensation                               76          180
      Depreciation and amortization                         805          612
      Research and development                            2,123        1,099
    -------------------------------------------------------------------------
                                                         10,005        8,273
    -------------------------------------------------------------------------
    Operating income (loss) before the undernoted        16,105       (3,819)
    Other income                                            (39)        (199)
    Interest expense, long-term debt                          -          225
    Interest expense, other                                 224           64
    Foreign exchange loss (gain)                            143         (126)
    -------------------------------------------------------------------------
    Income (loss) from operations before taxes,
     non-controlling interest and equity income of
     affiliate                                           15,777       (3,783)
    Income tax expense (recovery)                         3,004         (528)
    -------------------------------------------------------------------------
    Income (loss) from operations before
     non-controlling interest and equity income of
     affiliate                                           12,773       (3,255)
    Equity income (loss) of affiliate                       338         (206)
    Non-controlling interest in (earnings) loss of
     subsidiaries                                          (270)         372
    -------------------------------------------------------------------------
    Net income (loss) for the period                  $  12,841    $  (3,089)
    -------------------------------------------------------------------------
    Change in unrealized loss on derivatives
     designated as cash flow hedges, net of tax               -            -
    -------------------------------------------------------------------------
    Comprehensive income (loss) for the period        $  12,841    $  (3,089)
    -------------------------------------------------------------------------
    Net income (loss) per share, basic                $    0.11    $   (0.03)
    -------------------------------------------------------------------------
    Net income (loss) per share, diluted              $    0.11    $   (0.03)
    -------------------------------------------------------------------------
    Weighted average number of shares outstanding,
     basic                                          120,075,502  115,212,930
    -------------------------------------------------------------------------
    Weighted average number of shares outstanding,
     diluted                                        121,755,981  115,212,930
    -------------------------------------------------------------------------

    See accompanying notes


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

                                                       Three months ended
                                                             March 31
                                                        2010         2009
                                                                   Restated
    -------------------------------------------------------------------------
    Operating Activities
    Net income (loss) for the period                  $  12,841    $  (3,089)
    Add (deduct) items not affecting cash
      Depreciation and amortization                       2,896        2,541
      Stock-based compensation                               76          180
      Non-controlling interest in earnings (loss) of
       subsidiaries                                         270         (372)
      Accretion in carrying value of debt                   185          190
      Future income tax                                   1,673         (553)
      Equity income (loss) of affiliate                    (338)         206
      Accrued benefit expense                                55           11
      Loss (gain) on disposal                                38           (9)
    Net change in non-cash working capital balances
     related to operations                              (12,017)       4,592
    -------------------------------------------------------------------------
    Cash provided by operating activities                 5,679        3,697
    -------------------------------------------------------------------------
    Investing activities
      Acquisition of property, plant and equipment         (748)        (992)
      Proceeds from disposal                                 51        2,013
      Other investments                                     (13)        (204)
    -------------------------------------------------------------------------
    Cash (used in) provided by investing activities        (710)         817
    -------------------------------------------------------------------------
    Financing activities
      Increase (decrease) in bank advances and other
       short-term debt                                    4,785       (5,297)
      Repurchase of common shares for cancellation            -       (1,623)
    -------------------------------------------------------------------------
    Cash provided by (used in) financing activities       4,785       (6,920)
    -------------------------------------------------------------------------
    Cash provided (used) during the period                9,754       (2,406)
    -------------------------------------------------------------------------
    Cash beginning of period                             57,308       51,507
    -------------------------------------------------------------------------
    Cash end of period                                $  67,062    $  49,101
    -------------------------------------------------------------------------

    See accompanying notes



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

                              March 31, 2010            December 31, 2009
                                (Unaudited)                 (Audited)
                             Number       Amount       Number       Amount
    -------------------------------------------------------------------------
    Share Capital
      Authorized
        Unlimited common
         shares
      Issued
      Common Shares
      Balance at beginning
       of period          120,075,502      244,879  116,176,614      232,325
        Shares issued to
         Recapture Metals
         Limited
         shareholders               -            -    4,499,996       13,581
        Shares issued on
         exercise of stock
         options                    -            -    1,107,992        2,423
        Shares purchased
         and cancelled
         pursuant to
         normal course
         issuer bid                 -            -   (1,709,100)      (1,623)
        Fair value
         assigned to
         repurchase of
         common shares              -            -            -       (1,827)
    -------------------------------------------------------------------------
      Balance at end of
       period             120,075,502      244,879  120,075,502      244,879
    -------------------------------------------------------------------------
    Contributed Surplus
      Balance at beginning
       of period                             7,301                     5,081
        Stock-based
         compensation
         expense                               112                       393
        Repurchase of
         common shares
         for cancellation                        -                     1,827
    -------------------------------------------------------------------------
      Balance at end
       of period                             7,413                     7,301
    -------------------------------------------------------------------------
    Deficit
      Balance at beginning
       of period                           (38,574)                  (58,258)
        Net income for
         the period                         12,841                    19,684
    -------------------------------------------------------------------------
      Balance at end of period             (25,733)                  (38,574)
    -------------------------------------------------------------------------
    Shareholders' loan
      Balance at beginning
       of period                              (296)                     (296)
    -------------------------------------------------------------------------
      Balance at end of period                (296)                     (296)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Shareholders' equity at
     end of period                         226,263                   213,310
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

%SEDAR: 00002061E

SOURCE Neo Material Technologies Inc.

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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