Neo Material Technologies reports record first quarter 2011 financial results

    <<
    -   Revenues of US$132.8 million
    -   EBITDA of US$43.4 million
    -   Net income attributable to equity holders of NEM of US$31.9 million
        or US$0.27 per share
    -   Net cash position of US$55.0 million
    >>

TORONTO, May 12 /CNW/ - Neo Material Technologies Inc. (TSX: NEM) (the "Company") today reported its financial results for the three-month period ended March 31, 2011. Unless otherwise specified, all currency amounts are expressed in U.S. dollars. The Company notes that its financial results are reported under International Financial Reporting Standards ("IFRS") for the first time this quarter. While the conversion did not have a significant impact on the Company's results, certain components, as well as first quarter 2010 comparatives, have been reclassified and adjusted within the financial statements to reflect the conversion. These reclassifications and adjustments are described in the notes to the 1Q11 financial statements.

For the three-month period ended March 31, 2011, revenues were $132.8 million compared to $101.9 million in the previous quarter, and $65.1 million in the corresponding period in 2010. The Company reported net income attributable to equity holders of NEM of $31.9 million, operating income plus depreciation and amortization ("EBITDA") of $43.4 million and earnings per share ("EPS") of $0.27, and $0.26 on a basic and fully diluted basis, respectively. This compares to first quarter 2010 net income attributable to equity holders of NEM of $12.4 million, EBITDA of $18.9 million and EPS of $0.10 (on a basic and fully diluted basis). Operating income was $40.7 million compared to $16.0 million in the corresponding period in 2010. Due to higher inventory costs and working capital requirements, cash used in operating activities during the first quarter of 2011 totaled $17.5 million.

During the three-month period ended March 31, 2011, the Company incurred a $4.6 million charge associated with stock based compensation. This charge was the result of a 19 percent increase in the Company's common shares price from Cdn$7.84 to Cdn$9.33, between December 31, 2010 and March 31, 2011. As such, the Company's market capitalization during the same period increased by approximately $193.2 million to $1.2 billion. Excluding the impact of this non-operating expense, net income attributable to equity holders of NEM, EBITDA and EPS were $36.0 million, $48.0 million and $0.30 (on a basic and fully diluted basis), respectively.

As at March 31, 2011, the Company had a net cash balance of $55.0 million.

"I am extremely pleased with the Company's overall performance during a traditionally slow first quarter. We continue to see robust demand and growth during the quarter, resulting in record results at both divisions," noted Constantine Karayannopoulos, President & CEO. "Based on what our customers are telling us and our current visibility, we maintain a positive view and outlook for our business."

    <<
    Magnequench        ------------------------------------------------------
                                                                    Trailing
    $000's (except for     Q1       Q2       Q3       Q4       Q1    Twelve
     quantity shipped)    2010     2010     2010     2010     2011   Months
    -------------------------------------------------------------------------
    Quantity Shipped
     (tonnes)             1,492    1,537    1,578    1,545    1,725    6,385
    -------------------------------------------------------------------------
    Revenues             38,092   42,301   45,007   47,184   55,135  189,627
    -------------------------------------------------------------------------
    Operating Income(1)  16,334   16,092   15,123   14,727   16,795   62,737
    -------------------------------------------------------------------------


    Performance
    Materials          ------------------------------------------------------
                                                                    Trailing
    $000's (except for     Q1       Q2       Q3       Q4       Q1    Twelve
     quantity shipped)    2010     2010     2010     2010     2011   Months
    -------------------------------------------------------------------------
    Quantity Shipped
     (tonnes)             1,419    1,612    1,422    1,358    1,555    5,947
    -------------------------------------------------------------------------
    Revenues             30,227   43,392   49,606   60,777   83,571  237,346
    -------------------------------------------------------------------------
    Operating Income(1)   2,548    5,187    9,775   14,478   33,518   62,958
    -------------------------------------------------------------------------


    Consolidated       ------------------------------------------------------
                                                                    Trailing
    $000's (except for     Q1       Q2       Q3       Q4       Q1    Twelve
     quantity shipped)    2010     2010     2010     2010     2011   Months
    -------------------------------------------------------------------------
    Inter-segment sales  (3,228)  (6,483)  (3,269)  (6,052)  (5,908) (21,712)
    -------------------------------------------------------------------------
    Revenues             65,091   79,210   91,344  101,909  132,798  405,261
    -------------------------------------------------------------------------
    Operating Income     15,966   19,236   19,133   18,305   40,651   97,325
    -------------------------------------------------------------------------
    EBITDA               18,904   22,179   22,006   21,393   43,378  108,956
    -------------------------------------------------------------------------
    Net Income
     attributable to
     equity holders
     of NEM              12,381   15,882   15,191   15,348   31,875   78,296
    -------------------------------------------------------------------------
    EPS (basic)            0.10     0.13     0.13     0.13     0.27     0.66
    -------------------------------------------------------------------------


    Impact of Stock-based
    Compensation(2)    ------------------------------------------------------
                                                                    Trailing
    $000's (except for     Q1       Q2       Q3       Q4       Q1    Twelve
     quantity shipped)    2010     2010     2010     2010     2011   Months
    -------------------------------------------------------------------------
    Stock-based
     Compensation
     Expense (Income)       124     (246)   3,700    7,932    4,625   16,011
    -------------------------------------------------------------------------
    Adjusted Operating
     Income              16,090   18,990   22,833   26,237   45,276  113,336
    -------------------------------------------------------------------------
    Adjusted EBITDA      19,028   21,933   25,706   29,325   48,003  124,967
    -------------------------------------------------------------------------
    Adjusted Net Income
     attributable to
     equity holders of
     NEM                 12,466   15,623   18,494   22,570   36,045   92,732
    -------------------------------------------------------------------------
    Adjusted EPS
     (basic)               0.10     0.13     0.15     0.19     0.30     0.77
    -------------------------------------------------------------------------
    Note:
    (1) Divisional Operating Income 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.
    (3) All 2010 comparative numbers (excluding quantities shipped and
        revenues) presented in the tables above have been restated for IFRS
        purposes.
    >>

Teleconference Call

Management will host a teleconference call on May 12, 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 (800) 642-1687 (toll free long distance), and entering pass code 63872989 followed by the number sign until June 13, 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 May 13, 2011.

Notice of Shareholder Meeting

The Company will hold its Annual General Meeting of Shareholders on Monday, June 13, 2011 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 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)

                                         March 31   December 31    January 1
                                           2011         2010          2010
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents             $ 70,813     $ 86,769     $ 57,308
    Accounts receivable                     74,831       52,035       36,195
    Inventories                            116,740       88,679       48,914
    Other current assets                    17,236        6,474        7,886
    -------------------------------------------------------------------------
    Total current assets                   279,620      233,957      150,303
    -------------------------------------------------------------------------
    Property, plant and equipment           46,198       46,127       44,470
    Patents and other intangible assets     14,320       15,155       13,118
    Deferred tax asset                      15,017        9,193        5,019
    Goodwill                                48,198       48,198       44,481
    Investments accounted for using
     the equity method                       7,235        6,975        5,697
    Other long-term assets                   4,059        5,418        1,152
    -------------------------------------------------------------------------
    Total non-current assets               135,027      131,066      113,937
    -------------------------------------------------------------------------
    Total assets                          $414,647     $365,023     $264,240
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Bank advances and other short-term
     debt                                 $ 15,072     $ 10,171     $  6,977
    Accounts payable and other accrued
     charges                                58,020       53,329       33,229
    Income taxes payable                    15,275        8,576        2,296
    Long-term debt due within one year         282          265            -
    -------------------------------------------------------------------------
    Total current liabilities               88,649       72,341       42,502
    -------------------------------------------------------------------------
    Long-term debt                             499          519            -
    Deferred tax liability                  11,456       10,655        4,533
    Employee benefit liabilities             1,979        1,968        1,563
    Derivative liability                     5,065        5,794            -
    Other long-term liabilities              2,701        3,034        4,446
    -------------------------------------------------------------------------
    Total liabilities                      110,349       94,311       53,044
    -------------------------------------------------------------------------
    Non-controlling interest                 4,369        3,445        1,666
    Shareholders' equity                   299,929      267,267      209,530
    Commitments
    -------------------------------------------------------------------------
    Total liabilities and
     shareholders' equity                 $414,647     $365,023     $264,240
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    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
                                                              March 31
                                                           2011         2010
    -------------------------------------------------------------------------
    Revenues                                           $132,798     $ 65,091
    Costs of sales
      Costs excluding depreciation and
       amortization                                      72,519       36,890
      Depreciation and amortization                       1,861        2,133
    -------------------------------------------------------------------------
    Gross profit                                         58,418       26,068
    Expenses
      Selling, general and administrative                 9,405        7,050
      Stock-based compensation                            4,625          124
      Depreciation and amortization                         866          805
      Research and development                            2,871        2,123
    -------------------------------------------------------------------------
                                                         17,767       10,102
    -------------------------------------------------------------------------
    Operating income before the undernoted               40,651       15,966
    Other income                                            (10)         (39)
    Interest expense, long-term debt                          3            -
    Interest expense, other                                 236          289
    Interest income                                        (753)         (65)
    Foreign exchange loss                                   444          143
    -------------------------------------------------------------------------
    Income from operations before taxes,
     non-controlling interest and equity income
     of associates                                       40,731       15,638
    Income taxes expense                                  8,192        3,325
    -------------------------------------------------------------------------
    Income from operations before
     non-controlling interest and equity income
     of associates                                       32,539       12,313
    Equity income of associates                             260          338
    -------------------------------------------------------------------------
    Net income                                         $ 32,799     $ 12,651
    -------------------------------------------------------------------------
    Attributable to:
    Equity holders of Neo Material Technologies Inc.     31,875       12,381
    Non-controlling interest in earnings of
     subsidiaries                                           924          270
    -------------------------------------------------------------------------
                                                         32,799       12,651
    -------------------------------------------------------------------------
    Earnings per share data attributable to equity
     holders of Neo Material Technologies Inc.
    -------------------------------------------------------------------------
    Earnings per share, basic                          $   0.27     $   0.10
    -------------------------------------------------------------------------
    Earnings per share, diluted                        $   0.26     $   0.10
    -------------------------------------------------------------------------
    Weighted average number of shares
     outstanding, basic                             120,022,092  120,075,502
    -------------------------------------------------------------------------
    Weighted average number of shares
     outstanding, diluted                           121,711,311  122,074,758
    -------------------------------------------------------------------------



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

                                                         Three months ended
                                                              March 31
                                                           2011         2010
    -------------------------------------------------------------------------
    Net income for the period                          $ 32,799     $ 12,651
    Currency translation adjustment                         143            -
    Change in fair value of available-
     for-sale securities, net of tax of $204             (1,193)           -
    -------------------------------------------------------------------------
    Comprehensive income for the period                $ 31,749     $ 12,651
    -------------------------------------------------------------------------
    Attributable to non-controlling interest           $    924     $    270
    -------------------------------------------------------------------------
    Attributable to equity holders of
     Neo Material Technologies Inc.                    $ 30,825     $ 12,381
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

                                                         Three months ended
                                                              March 31
                                                           2011         2010
    -------------------------------------------------------------------------
    Operating Activities
    Net income for the period                          $ 32,799     $ 12,651
    Add (deduct) items not affecting cash
      Depreciation and amortization                       2,727        2,938
      Stock-based compensation expense                    4,625          124
      Accretion in carrying value of long-term debt         101          185
      Deferred tax                                       (5,023)       1,994
      Equity income of associates                          (260)        (338)
      Accrued benefit expense, net of cash
       contributions                                         11           15
      Loss on disposal of property, plant and equipment     192           38
      Interest expense                                     (514)         224
      Income tax expense                                  2,657        4,854
      Other                                               2,090            -
    Net change in other long-term liabilities              (729)           -
    Income taxes paid                                    (5,847)      (1,134)
    Net change in non-cash working capital balances
     related to operations                              (50,378)     (15,589)
    -------------------------------------------------------------------------
    Cash (used in) provided by operating activities     (17,549)       5,962
    -------------------------------------------------------------------------
    Investing activities
      Acquisition of property, plant and equipment       (2,966)        (748)
      Proceeds from disposal of property, plant and
       equipment                                              -           51
      Other investments                                       -          (13)
    -------------------------------------------------------------------------
    Cash used in investing activities                    (2,966)        (710)
    -------------------------------------------------------------------------
    Financing activities
      Repayment of long-term debt                           (64)           -
      Interest paid                                        (216)        (283)
      Increase in bank advances and other short-term
       debt                                               4,901        4,785
      Repurchase of common shares for cancellation         (699)           -
      Issue of common shares                                637            -
    -------------------------------------------------------------------------
    Cash provided by financing activities                 4,559        4,502
    -------------------------------------------------------------------------
    Cash (used) provided during the period              (15,956)       9,754
    -------------------------------------------------------------------------
    Cash and cash equivalents, beginning of period       86,769       57,308
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period           $ 70,813     $ 67,062
    -------------------------------------------------------------------------



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

                                   March 31, 2011            March 31, 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              270,600          951            -            -
        Shares purchased
         for cancellation
         pursuant to normal
         course issuer bid    (90,000)        (184)           -            -
    -------------------------------------------------------------------------
      Balance at end of
       the period         119,971,348      245,679  120,075,502      244,879
    -------------------------------------------------------------------------
    Contributed Surplus
      Balance at beginning
       of the period                         5,099                     7,240
        Stock-based
         compensation
         expense                               117                       104
        Modification of
         stock-based
         compensation plan                   1,782                         -
        Exercise of stock
         options                              (314)                        -
        Repurchase of
         common shares
         for cancellation                     (515)                        -
    -------------------------------------------------------------------------
      Balance at end
       of the period                         6,169                     7,344
    -------------------------------------------------------------------------
    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   31,875                    12,381
    -------------------------------------------------------------------------
      Balance at end
       of the period                        48,384                   (29,912)
    -------------------------------------------------------------------------
    Accumulated Other
     Comprehensive Income:
      Balance at beginning
       of the period                           970                         -
        Change in fair value
         of available-for-sale
         securities, net of tax             (1,193)                        -
        Actuarial loss                           -                         -
        Currency translation
         adjustment                            143                         -
    -------------------------------------------------------------------------
      Balance at end of the period             (80)                        -
    -------------------------------------------------------------------------
    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                                299,929                   222,015
    -------------------------------------------------------------------------
    Non-controlling interest
      Balance at beginning
       of the period                         3,445                     1,666
      Non-controlling interest
       in earnings of
       subsidiaries for the
       period                                  924                       270
    -------------------------------------------------------------------------
      Balance at end
       of the period                         4,369                     1,936
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total equity for
     the period                            304,298                   223,951
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

SOURCE Neo Material Technologies Inc.

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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