Neo Material Technologies reports third quarter 2007 financial results



    
    -   Sales increase to US$63.1 million
    -   EBITDA at US$15.3 million
    -   Net income and EPS at US$5.7 million and US$0.06
    -   Adjusted Net income and EPS of $8.0 million and US$0.09
    -   Magnequench & AMR volumes at 1,097 and 1,882 tonnes respectively
    

    TORONTO, Nov. 12 /CNW/ - Neo Material Technologies Inc. (TSX: NEM) (the
"Company") today reported its financial results for the three-month and
nine-month period ending September 30, 2007. Unless otherwise specified, all
currency amounts are expressed as U.S. dollars.
    For the three-month period ended September 30, 2007, the Company reported
sales of $63.1 million and net income of $5.7 million or $0.06 per share on a
basic and fully diluted basis. Earnings before interest, taxes, depreciation
and amortization ("EBITDA") during the quarter were $15.3 million. This
compares to third quarter 2006 sales of $41.2 million and net income, EBITDA
and diluted earnings per share of $7.5 million, $14.5 million and $0.09,
respectively. The year over year decline in net income was due to the
write-off of the balance of debt issue costs of $2.3 million relating to the
August 2005 financing. Adjusted net income is the sum of net income and the
write-off of the balance of debt issue costs. An increase of over 10% in the
effective tax rate as compared to the third quarter of 2006 also impacted net
earnings in this quarter.
    For the nine-month period ended September 30, 2007, the Company reported
sales of $174.6 million and net income of $19.7 million, or $0.23 per share on
a fully diluted basis. EBITDA during the nine-month period amounted to
$44.3 million. This compares to 2006 nine-month sales of $117.8 million and
net income, EBITDA and diluted earnings per share of $19.2 million, $41.5
million and $0.23, respectively.
    For both the quarter and year to date, operating income as a percentage
of sales declined from 2006 levels primarily as a result of higher input
costs, particularly for raw materials. However, on a dollar margin per
kilogram basis, the impact was offset by increased selling prices and as a
result of higher volumes, total gross margin increased.
    At September 30, 2007, the Company had $9.0 million in cash and cash
equivalents. Long-term debt was $44.3 million as at September 30, 2007,
compared to $57.8 million at June 30, 2007.
    On August 2, 2007, the Company completed a public offering of its common
shares resulting in the issuance of 17,600,000 common shares of the Company at
a purchase price of Cdn$4.60 per common share for gross proceeds to the
Company of approximately $77.0 million. The Company used the net proceeds
along with a portion of the new debt facility for the early retirement of its
$50.0 million convertible debenture at a negotiated total repurchase price of
$95.0 million. The debenture was put in place August 2005 as part of the
merger transaction between AMR Technologies Inc. and Magnequench Inc. The
debenture carried a 10% coupon and was convertible at Cdn$2.50 per share,
representing, at current exchange rates, an issuance of approximately
21,000,000 shares. The Company's ability to eliminate the conversion of
21,000,000 shares, and $5.0 million in annual interest expense through the
issuance of 17,600,000 shares, and the use of a new debt facility bearing
interest at a rate below 10 %, made this an accretive transaction for
shareholders.
    Volumes at both divisions remained strong. Magnequench shipped
1,097 tonnes, a 3% year-over-year increase, while AMR Performance Materials
shipped 1,882 tonnes, representing a 21% increase compared to the tonnage
shipped in the same three-month period in 2006.

    
    Magnequench
    $000's (except    Q3        Q4        Q1        Q2        Q3    Trailing
    for quantity     2006      2006      2007      2007      2007    Twelve
    shipped)                                                         Months
                  -----------------------------------------------------------
    Quantity
     Shipped
     - tonnes        1,064       962     1,032     1,152     1,097     4,243
    -------------------------------------------------------------------------
    Revenues        25,191    25,481    26,495    29,738    31,963   113,677
    -------------------------------------------------------------------------
    Operating
     Income         11,427    12,932    10,821    11,977    12,566    48,296
    -------------------------------------------------------------------------


    AMR Performance
     Materials
    $000's (except    Q3        Q4        Q1        Q2        Q3    Trailing
    for quantity     2006      2006      2007      2007      2007    Twelve
    shipped)                                                         Months
                  -----------------------------------------------------------
    Quantity
     Shipped
     - tonnes        1,550     1,747     1,704     2,308     1,882     7,641
    -------------------------------------------------------------------------
    Revenues        17,463    20,537    24,232    32,909    34,445   112,123
    -------------------------------------------------------------------------
    Operating
     Income          2,662     1,252     1,960     3,669     4,094    10,975
    -------------------------------------------------------------------------
    

    "I am very pleased with our accomplishments in the third quarter. The
Hitachi agreement and the early repayment of our convertible debt have put us
in an ideal position to grow our business over the long term." noted
Constantine Karayannopoulos, President & CEO of Neo Material Technologies Inc.
"We continue to see strong and increasing demand for our products in both
divisions, as a result of the continuing growth in electronics, automotive and
environmental technologies."

    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 through its Magnequench and AMR
Performance Materials business divisions. These innovative products are
essential in many of today's high technology products. Magnequench's neo
powders are used to produce bonded magnets, generally used in micro motors,
precision motors, sensors and other applications requiring high levels of
magnetic strength, flexibility, small size and reduced weight. Rare earth and
zirconium applications include catalytic converters, computers, television
display panels, optical lenses, mobile phones and electronic chips. The
Company is headquartered in Toronto, Canada and has approximately
1,300 employees in 16 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 Tuesday, November 13, 2007
at 10:00 a.m. (Eastern Time) to discuss these results. Interested parties may
access the teleconference by calling (416) 644-3427 (local) or (800) 594-3615
(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
21252425 (followed by the number sign) until December 13, 2007 or by visiting
http://www.newswire.ca/webcast.

    Online Access

    A complete set of financial statements, the Management's Discussion and
Analysis and Shareholders Message will be available online at
www.neomaterials.com before Wednesday, November 14, 2007.

    
                           Financial Results follow

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

                                                         September  December
                                                             30        31
                                                            2007      2006
                                                        (Unaudited)
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents                             $  9,011  $  9,524
    Restricted cash                                              -       269
    Accounts receivable                                     29,662    21,304
    Inventories                                             64,737    38,461
    Loan receivable                                              -     4,378
    Future income tax asset                                    256       372
    Other current assets                                     2,842     2,594
    -------------------------------------------------------------------------
    Total current assets                                   106,508    76,902
    -------------------------------------------------------------------------
    Property, plant and equipment                           50,463    43,187
    Patents and other intangible assets                     20,904     9,432
    Pension benefit asset                                    4,246     4,038
    Goodwill                                                37,620    34,987
    Deferred expenses and other assets                       3,771     6,497
    -------------------------------------------------------------------------
    Total assets                                          $223,512  $175,043
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Bank advances and other short-term debt               $ 20,068  $ 18,080
    Accounts payable and other accrued charges              41,151    25,329
    Restructuring liabilities                                    -       105
    Long-term debt due within one year                      17,500    12,500
    -------------------------------------------------------------------------
    Total current liabilities                               78,719    56,014
    -------------------------------------------------------------------------
    Long-term debt                                          26,821    57,021
    Future income tax liability                              1,299     1,558
    Accrued postretirement benefits                            889     4,841
    Other long-term liabilities                              9,385     2,750
    -------------------------------------------------------------------------
    Total liabilities                                      117,113   122,184
    -------------------------------------------------------------------------
    Non-controlling interest                                 7,835     1,556
    Contingencies and commitments
    Shareholders' equity                                    98,564    51,303
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity            $223,512  $175,043
    -------------------------------------------------------------------------


    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   Nine months ended
                                         September 30        September 30
                                        2007      2006      2007      2006
    -------------------------------------------------------------------------
    Revenues                          $ 63,094  $ 41,237  $174,604  $117,849
    Costs of sales
      Costs excluding depreciation
       and amortization                 38,052    20,288   106,841    57,570
      Depreciation and amortization      1,903     1,765     4,860     6,316
    -------------------------------------------------------------------------
    Gross profit                        23,139    19,184    62,903    53,963
    Expenses
      Selling, general and
       administrative                    7,957     5,757    20,738    17,974
      Depreciation and amortization        804       847     2,412     2,845
      Research and development           1,054       714     2,574     1,933
    -------------------------------------------------------------------------
                                         9,815     7,318    25,724    22,752
    -------------------------------------------------------------------------
    Operating income before the
     undernoted                         13,324    11,866    37,179    31,211
    Other expense (income)                   7      (179)     (168)   (1,292)
    Interest expense, long-term debt     3,844     2,657     8,784     8,185
    Interest expense, other                400       180     1,000       415
    Foreign exchange (gain) loss          (663)      194      (890)      186
    -------------------------------------------------------------------------
    Income from operations before taxes,
     non-controlling interest and
     equity income of affiliate          9,736     9,014    28,453    23,717
    Income taxes                         2,695     1,461     7,622     4,549
    -------------------------------------------------------------------------
    Income from operations before
     non-controlling interest and
     equity income of affiliate          7,041     7,553    20,831    19,168
    Equity income of affiliate             182       166       584       414
    Non-controlling interest in
     earnings of subsidiaries           (1,564)     (179)   (1,758)     (358)
    -------------------------------------------------------------------------
    Net income for the period         $  5,659  $  7,540  $ 19,657  $ 19,224
    -------------------------------------------------------------------------
    Deficit, beginning of period       (52,973)  (83,117)  (67,009)  (94,801)
    Cumulative impact of adopting new
     accounting requirements for
     financial instruments                   -         -        38         -
    Early retirement of convertible
     debenture                         (42,804)        -   (42,804)
    -------------------------------------------------------------------------
    Deficit, end of period             (90,118)  (75,577)  (90,118)  (75,577)
    -------------------------------------------------------------------------
    Net income per share, basic       $   0.06  $   0.10  $   0.24  $   0.24
    -------------------------------------------------------------------------
    Net income per share, diluted     $   0.06  $   0.09  $   0.23  $   0.23
    -------------------------------------------------------------------------


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

                                      Three months ended   Nine months ended
                                         September 30        September 30
                                        2007      2006      2007      2006
    -------------------------------------------------------------------------
    Operating Activities
    Net income for the period         $  5,659  $  7,540  $ 19,657  $ 19,224
    Add (deduct) items not
     affecting cash
      Depreciation and amortization      2,707     2,612     7,272     9,161
      Amortization of deferred
       financing costs                     147       249       147       729
      Stock-based compensation expense   1,362       198     2,330       590
      Write-off of deferred financing
       costs                             2,322         -     2,322         -
      Non-controlling interest in
       earnings of subsidiaries          1,564       179     1,758       358
      Accretion in carrying value
       of debt                             206       331     1,193       965
      Future income tax                    128      (214)     (143)     (391)
      Equity income of affiliate          (182)     (166)     (584)     (414)
      Accrued benefit expense               30        69       142       209
      Loss on disposal                       -       (65)        9       (18)
    Restructuring payment                    -      (157)      (77)     (682)
    Net change in non-cash working
     capital balances related to
     operations                        (10,838)   (8,692)  (31,038)  (17,403)
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                          3,105     1,884     2,988    12,328
    -------------------------------------------------------------------------
    Investing activities
      Acquisition of property, plant
       and equipment                      (960)   (1,382)   (2,756)   (3,058)
      Acquisition of intangible asset   (4,925)        -    (4,925)        -
      Joint venture investment            (150)        -      (150)        -
      Cash acquired on consolidation
       of variable interest entity           -         -       308         -
      Loan to third party                    -         -         -    (4,375)
      Proceeds from disposal of assets       -        38         -        58
      Decrease (increase) in
       restricted cash                       -       188       269       248
    -------------------------------------------------------------------------
    Cash used in investing activities   (6,035)   (1,156)   (7,254)   (7,127)
    -------------------------------------------------------------------------
    Financing activities
      Proceeds from issuance of
       long-term debt                   50,000         -    50,000         -
      Debt issue costs                  (1,451)        -    (1,451)        -
      Repayment of long-term debt      (64,747)   (4,251)  (74,757)  (15,859)
      Premium paid on early
       retirement of debt              (50,993)        -   (50,993)        -
      (Decrease) increase in bank
       advances and other
       short-term debt                  (7,055)    4,603     1,988     9,281
      Issue of common shares            77,078         -    79,093         7
    -------------------------------------------------------------------------
    Cash provided by (used in)
     financing activities                2,832       352     3,880    (6,571)
    -------------------------------------------------------------------------
    Effect of exchange rate changes
     on cash                               (24)      (20)     (127)      (15)
    -------------------------------------------------------------------------
    Cash (used) provided during
     the period                           (122)    1,060      (513)   (1,385)
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     beginning of period                 9,133     8,310     9,524    10,755
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                    $  9,011  $  9,370  $  9,011  $  9,370
    -------------------------------------------------------------------------


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

                                      Three months ended   Nine months ended
                                          September 30        September 30
                                         2007      2006      2007      2006
    -------------------------------------------------------------------------
    Net income for the period         $  5,659  $  7,540  $ 19,657  $ 19,224
    Change in unrealized gain on
     derivatives designated as cash
     flow hedges                            87         -        87         -
    -------------------------------------------------------------------------
    Comprehensive income for
     the period                       $  5,746  $  7,540  $ 19,744  $ 19,224
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





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@genoa.ca

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