Neo Material Technologies reports record second quarter 2010 financial
results

    
    -   Revenues of US$79.2 million
    -   EBITDA of US$22.5 million
    -   Net Income of US$16.0 million or US$0.13 per share
    -   Net cash position of US$55.3 million, after Buss & Buss acquisition,
        debt reduction and share buyback
    

TORONTO, Aug. 12 /CNW/ - Neo Material Technologies Inc. (TSX: NEM) (the "Company") today reported its financial results for the three-month and six-month periods ended June 30, 2010. Unless otherwise specified, all currency amounts are expressed in U.S. dollars.

Revenues and earnings continued to increase for the fifth consecutive quarter, with earnings at a record level in the three-month period ended June 30, 2010. Revenues were $79.2 million compared to $65.1 million in the previous quarter, and $41.8 million in the corresponding period in 2009. This improvement in revenues is an indication of the Company's steady improvement from 2009's economic recession and is testament to the integral part that the Company's products play in the global economic recovery. The Company also reported net income of $16.0 million, earnings per share ("EPS") of $0.13 (on a basic and fully diluted basis) and operating income plus depreciation and amortization ("EBITDA") of $22.5 million. This compares to second quarter 2009 net income of $4.8 million, earnings per share of $0.04 (on a basic and fully diluted basis) and EBITDA of $7.8 million. Operating income increased by 270 percent to a record $19.6 million compared to $5.3 million in the corresponding period in 2009. Cash provided by operating activities during the second quarter of 2010 was $10.4 million.

For the six-month period ended June 30, 2010, net income and EBITDA were $28.8 million and $41.5 million, respectively and EPS was $0.24 on a basic and fully diluted basis. This compares to net income, EBITDA and EPS for the six-month period ended June 30, 2009 of $1.7 million, $6.6 million, and $0.01 on a basic and fully diluted basis), respectively. Revenues for the six months ended June 30, 2010 were $144.3 million compared to revenues of $70.5 million in the corresponding period in 2009.

At June 30, 2010, the Company had a cash balance of $66.3 million and long-term debt of $844,000. During the quarter, the Company completed the control acquisition of Buss & Buss Spezialmetalle GmbH, paid down debt and acquired 253,700 common shares under a normal course issuer bid. Also during the quarter, the Company completed a strategic acquisition of a 19.5% stake in Atlantic Metals and Alloys, LLC, a privately held, Connecticut based specialty materials trading company.

"We are very pleased to report yet another record quarter for Neo - a period during which we achieved healthy growth in revenues and earnings," noted Constantine Karayannopoulos, President and CEO. "While we have enjoyed a very strong first half this year, we are also cautiously optimistic for the next few quarters, although we do not expect the rate of growth over 2009 to continue at the same exceptionally strong pace demonstrated in recent quarters. Notwithstanding the recent announcement regarding Chinese rare earth export quotas, our businesses continue to demonstrate strength while we continue to add capabilities to our rare metals platform as we build a stronger, and more diversified, Neo Materials for the future."

    
    Magnequench        ------------------------------------------------------
    $000's (except for                                               Trailing
    quantity shipped)      Q2      Q3       Q4       Q1       Q2      Twelve
                          2009    2009     2009     2010     2010     Months
    -------------------------------------------------------------------------
    Quantity Shipped
     (tonnes)               878    1,268    1,293    1,492    1,537    5,590
    -------------------------------------------------------------------------
    Revenues             24,411   34,049   32,941   38,092   42,301  147,383
    -------------------------------------------------------------------------
    Operating Income(1)   9,014   16,255   15,132   16,327   16,086   63,800
    -------------------------------------------------------------------------


    Performance
    Materials          ------------------------------------------------------
    $000's (except for    Q2       Q3                                Trailing
    quantity shipped)    2009     2009      Q4       Q1       Q2      Twelve
                       Restated Restated   2009     2010     2010     Months
    -------------------------------------------------------------------------
    Quantity Shipped
     (tonnes)               992    1,144    1,954    1,419    1,612    6,129
    -------------------------------------------------------------------------
    Revenues             18,222   21,678   31,611   30,227   43,392  126,908
    -------------------------------------------------------------------------
    Operating
     Income(1)(2)           170      151    1,279    2,644    5,622    9,696
    -------------------------------------------------------------------------



    Consolidated       ------------------------------------------------------
    $000's (except for    Q2       Q3                                Trailing
    quantity shipped)    2009     2009      Q4       Q1       Q2      Twelve
                       Restated Restated   2009     2010     2010     Months
    -------------------------------------------------------------------------
    Inter-segment sales    (879)  (1,582)  (1,756)  (3,228)  (6,483) (13,049)
    -------------------------------------------------------------------------
    Revenues             41,754   54,145   62,796   65,091   79,210  261,242
    -------------------------------------------------------------------------
    Operating Income(2)   5,308   11,396   11,637   16,105   19,556   58,694
    -------------------------------------------------------------------------
    EBITDA(2)             7,844   14,004   14,577   19,001   22,457   70,039
    -------------------------------------------------------------------------

    Note:
    (1) Divisional Operating Income presented in the tables above excludes
        stock-based compensation expense.
    (2) Operating Income for the quarters ending June 30, 2009, and September
        30, 2009 have 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
        $0.3 million and $0.2 million as at June 30, and September 30, 2009,
        respectively, and an equivalent increase to operating income and
        EBITDA in each of those periods.
    

Teleconference Call

Management will host a teleconference call on August 12, 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 90501962 followed by number sign until September 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 August 13, 2010.

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 rare 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. The Company's rare metals products are primarily used in the wireless, LED, flat panel, turbine, solar and catalyst industries. Neo 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)

                                                      June 30    December 31
                                                        2010        2009
    -------------------------------------------------------------------------
                                                    (Unaudited)   (Audited)
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash                                              $  66,284    $  57,308
    Accounts receivable                                  42,791       36,195
    Inventories                                          69,153       48,914
    Future income tax asset                               1,915        2,536
    Other current assets                                  8,433        7,886
    -------------------------------------------------------------------------
    Total current assets                                188,576      152,839
    -------------------------------------------------------------------------
    Property, plant and equipment                        46,621       44,755
    Patents and other intangible assets                  11,703       13,118
    Pension benefit asset                                 3,700        3,780
    Goodwill                                             48,721       44,481
    Other long-term assets                                9,640        6,849
    -------------------------------------------------------------------------
    Total assets                                      $ 308,961    $ 265,822
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Bank advances and other short-term debt           $  10,155    $   6,977
    Accounts payable and other accrued charges           39,901       34,397
    Long-term debt due within one year                      244            -
    -------------------------------------------------------------------------
    Total current liabilities                            50,300       41,374
    -------------------------------------------------------------------------
    Long-term debt                                          600            -
    Future income tax liability                           7,291        4,533
    Accrued postretirement benefits                         485          493
    Other long-term liabilities                           8,850        4,446
    -------------------------------------------------------------------------
    Total liabilities                                    67,526       50,846
    -------------------------------------------------------------------------
    Non-controlling interest                              2,438        1,666
    Commitments
    Shareholders' equity                                238,997      213,310
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity        $ 308,961    $ 265,822
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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


                              Three months ended         Six months ended
                                   June 30                   June 30
                              2010         2009         2010         2009
                                         Restated                  Restated
    -------------------------------------------------------------------------
    Revenues                $  79,210    $  41,754    $ 144,301    $  70,545
    Cost of sales
      Costs excluding
       depreciation and
       amortization            46,621       25,283       83,511       47,691
      Depreciation and
       amortization             2,099        1,948        4,190        3,877
    -------------------------------------------------------------------------
    Gross profit               30,490       14,523       56,600       18,977
    Expenses
      Selling, general and
       administrative           7,287        6,416       14,288       12,798
      Stock-based
       compensation              (139)         953          (63)       1,133
      Depreciation and
       amortization               802          588        1,607        1,200
      Research and development  2,984        1,258        5,107        2,357
    -------------------------------------------------------------------------
                               10,934        9,215       20,939       17,488
    -------------------------------------------------------------------------
    Operating income before
     the undernoted            19,556        5,308       35,661        1,489
    Other (income) expense        (50)          24          (89)        (175)
    Interest expense,
     long-term debt                 7            -            7            -
    Interest expense, other       224          202          448          491
    Foreign exchange gain        (386)        (358)        (243)        (484)
    -------------------------------------------------------------------------
    Income from operations
     before taxes,
     non-controlling interest
     and equity income of
     affiliate                 19,761        5,440       35,538        1,657
    Income taxes                3,772          661        6,776          133
    -------------------------------------------------------------------------
    Income from operations
     before non-controlling
     interest and equity
     income of affiliate       15,989        4,779       28,762        1,524
    Equity income (loss) of
     affiliate                    534          (33)         872         (239)
    Non-controlling interest
     in (earnings) loss of
     subsidiaries                (502)          47         (772)         419
    -------------------------------------------------------------------------
    Net income for the
     period and
     comprehensive income   $  16,021    $   4,793    $  28,862    $   1,704
    -------------------------------------------------------------------------
    Net income per share,
     basic                  $    0.13    $    0.04    $    0.24    $    0.01
    -------------------------------------------------------------------------
    Net income per share,
     diluted                $    0.13    $    0.04    $    0.24    $    0.01
    -------------------------------------------------------------------------
    Weighted average number
     of shares
     outstanding, basic   120,179,584  114,467,514  120,127,830  114,838,163
    -------------------------------------------------------------------------
    Weighted average
     number of shares
     outstanding, diluted 121,648,526  114,483,219  121,667,554  114,845,128
    -------------------------------------------------------------------------



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

                              Three months ended         Six months ended
                                   June 30                   June 30
                              2010         2009         2010         2009
                                         Restated                  Restated
    -------------------------------------------------------------------------
    Operating Activities
    Net income for the
     period                 $  16,021    $   4,793    $  28,862    $   1,704
    Add (deduct) items not
     affecting cash
      Depreciation and
       amortization             2,901        2,536        5,797        5,077
      Stock-based
       compensation
       (recovery)
       expense                   (139)         953          (63)       1,133
      Non-controlling
       interest in earnings
       (loss) of
       subsidiaries               502          (47)         772         (419)
      Accretion in carrying
       value of debt              128          189          313          379
      Future income tax         1,706         (826)       3,379       (1,379)
      Equity (income) loss
       of affiliate              (534)          33         (872)         239
      Accrued benefit expense      17           23           72           34
      Loss on disposal of
       fixed assets                41           61           79           52
    Net change in non-cash
     working capital balances
     related to operations    (10,203)      (2,022)     (22,220)       2,570
    -------------------------------------------------------------------------
    Cash provided by
     operating activities      10,440        5,693       16,119        9,390
    -------------------------------------------------------------------------
    Investing activities
      Acquisition of
       property, plant and
       equipment               (1,369)      (1,285)      (2,117)      (2,277)
      Cash paid on acquisition
       of Buss & Buss net of
       cash acquired           (5,235)           -       (5,235)           -
      Proceeds from disposal        -           19           51        2,032
      Other investments          (725)           -         (738)        (204)
    -------------------------------------------------------------------------
    Cash used in investing
     activities                (7,329)      (1,266)      (8,039)        (449)
    -------------------------------------------------------------------------
    Financing activities
      Repayment of long-term
       debt                       (76)           -          (76)           -
      (Decrease) increase in
       bank advances and other
       short-term debt         (2,901)          48        1,884       (5,249)
      Repurchase of common
       shares for cancellation (1,033)           -       (1,033)      (1,623)
      Issue of common shares      121            -          121            -
    -------------------------------------------------------------------------
    Cash (used in) provided
     by financing activities   (3,889)          48          896       (6,872)
    -------------------------------------------------------------------------
    Effect of exchange rate
     changes on cash                -            -            -            -
    -------------------------------------------------------------------------
    Cash (used) provided
     during the period           (778)       4,475        8,976        2,069
    -------------------------------------------------------------------------
    Cash beginning of period   67,062       49,101       57,308       51,507
    -------------------------------------------------------------------------
    Cash end of period      $  66,284    $  53,576    $  66,284    $  53,576
    -------------------------------------------------------------------------



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

                               June 30, 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               75,733          121    1,107,992        2,423
        Shares issued on
         acquisition of a
         19.5% stake in
         Atlantic Metals,
         net of issue costs   180,838          688            -            -
        Shares purchased
         for cancellation
         pursuant to normal
         course issuer bid   (253,700)        (518)  (1,709,100)      (1,623)
        Fair value assigned
         to repurchase of
         common shares              -            -            -       (1,827)
    -------------------------------------------------------------------------
      Balance at end of
       period             120,078,373      245,170  120,075,502      244,879
    -------------------------------------------------------------------------
    Contributed Surplus
      Balance at beginning
       of period                                          7,301        5,081
        Stock-based
         compensation
         expense                                            149          393
        Repurchase of
         common shares
         for cancellation                                  (421)       1,827
    -------------------------------------------------------------------------
      Balance at end
       of period                                          7,029        7,301
    -------------------------------------------------------------------------
    Deficit
      Balance at beginning
       of period                                        (38,574)     (58,258)
        Net income for
         the period                                      28,862       19,684
        Other equity                                     (3,194)           -
    -------------------------------------------------------------------------
      Balance at end of period                          (12,906)     (38,574)
    -------------------------------------------------------------------------
    Shareholders' loan
      Balance at beginning
       of period                                           (296)        (296)
    -------------------------------------------------------------------------
      Balance at end of period                             (296)        (296)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Shareholders' equity at
     end of period                                      238,997      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; Ali Mahdavi, Investor Relations, (416) 962-3300, ext. 225, e-mail: amahdavi@neomaterials.com, Website: www.neomaterials.com, e-mail: info@neomaterials.com

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