Neo Material Technologies reports record second quarter 2007 financial results



    
    -   Sales increase to US$61.5 million
    -   EBITDA at US$15.7 million
    -   Net income and EPS at US$7.6 million and US$0.09 per share (fully
        diluted)
    -   Volume sales reach record levels at both divisions
    

    TORONTO, Aug. 9 /CNW/ - Neo Material Technologies Inc. (TSX: NEM) (the
"Company") today reported its financial results for the three-month and
six-month periods ending June 30, 2007. Unless otherwise specified, all
currency amounts are expressed as U.S. dollars.
    For the three-month period ended June 30, 2007, the Company reported
increased sales of $61.5 million and net income of $7.6 million, or $0.09 per
share on a fully diluted basis. Earnings before interest, taxes, depreciation
and amortization ("EBITDA") during the quarter were $15.7 million. This
compares to second quarter 2006 sales of $38.7 million and net income, EBITDA
and diluted earnings per share of $6.4 million, $14.4 million and $0.08 per
share, respectively.
    For the six-month period ended June 30, 2007, the Company reported
increased sales of $111.5 million and net income of $14.0 million, or
$0.16 per share on a fully diluted basis. EBITDA during the first half of the
year amounted to $29.0 million. This compares to 2006 six-month sales of
$76.6 million and net income, EBITDA and earnings per share of $11.7 million,
$27.1 million and $0.15 per share, respectively.
    At June 30, 2007, the Company had $9.1 million in cash and cash
equivalents. Long -term debt was $57.8 million as at June 30, 2007, compared
to $64.1 million at March 31, 2007.
    Subsequent to quarter-end, the Company completed a public offering of
common shares resulting in the issuance of a total of 17.6 million common
shares of the Company at a purchase price of Cdn$4.60 per common share for
total gross proceeds to the Company of approximately $77.0 million. The
Company also repaid its existing senior debt facility and established a new
senior debt facility of $50.0 million and a $7.5 million revolving credit
facility. The Company used the proceeds from the offering along with a portion
of a new senior debt facility to repay its subordinated convertible
debentures.
    Volumes shipped at both divisions remained strong and reached new record
levels. Magnequench shipped 1,152 tonnes, a 21.4 % year-over-year increase,
while AMR Performance Materials shipped 2,308 tonnes, a 52.9 % increase
compared to the tonnage shipped in the same three-month period in 2006.
Compared to the first quarter of 2007, Magnequench and AMR volumes have
increased by 11.6 % and 35.4 %, respectively.

    
    Magnequench
    $000's (except for quantity shipped)
                       ------------------------------------------------------
                                                                     Trailing
                           Q2       Q3       Q4       Q1       Q2     Twelve
                          2006     2006     2006     2007     2007    Months
    -------------------------------------------------------------------------
    Quantity Shipped
     - tonnes               949    1,064      962    1,032    1,152    4,210
    -------------------------------------------------------------------------
    Revenues             23,192   25,191   25,481   26,495   29,738  106,905
    -------------------------------------------------------------------------
    Operating Income     10,674   11,427   12,932   10,877   11,977   47,213
    -------------------------------------------------------------------------


    AMR Performance Materials
    $000's (except for quantity shipped)
                       ------------------------------------------------------
                                                                     Trailing
                           Q2       Q3       Q4       Q1       Q2     Twelve
                          2006     2006     2006     2007     2007    Months
    -------------------------------------------------------------------------
    Quantity Shipped
     - tonnes             1,509    1,550    1,747    1,704    2,308    7,309
    -------------------------------------------------------------------------
    Revenues             16,279   17,463   20,537   24,232   32,909   95,141
    -------------------------------------------------------------------------
    Operating Income      2,190    2,662    1,252    2,017    3,669    9,600
    -------------------------------------------------------------------------
    

    "Our second quarter is a testament to the strong demand in our end
markets and the increasing requirements of manufacturers to meet various
environmental challenges driving the need for cleaner and lighter products
without compromising high performance," noted Constantine Karayannopoulos,
President & CEO. "With the completion of the recent equity offering and a new
capital structure, our balance sheet now allows us to review and consider
strategic growth opportunities which complement our existing business and
further accelerate our growth."
    Based on the current business climate and market demand for its products,
management continues to have a positive outlook for the remainder of 2007.

    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 15 locations, across 10 countries.

    Forward Looking Statements

    From time to time, the Company may publish forward-looking statements
relating to such matters as expected financial performance, business
prospects, technological developments, and development activities and like
matters. These statements involve risk and uncertainties, including but not
limited to the risk factors previously described. Actual results could differ
materially from those projected as a result of these risks and should not be
relied upon as a prediction of future events. Neo Material Technologies Inc.
undertakes no obligation to update any forward-looking statement to reflect
events or circumstances after the date on which such statement is made, or to
reflect the occurrence of unanticipated events.

    Teleconference Call

    Management will host a teleconference call on Tuesday, August 14, 2007 at
4:00 p.m. (Eastern Time) to discuss these results. Interested parties may
access the teleconference by calling (416) 915-5649 (local) or (800) 796-7558
(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
21242766, followed by the number sign until September 14, 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 Tuesday, August 14, 2007.

    
                           Financial Results follow


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

                                                        June 30   December 31
                                                          2007        2006
                                                      (Unaudited)
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents                          $   9,133   $   9,524
    Restricted cash                                            -         269
    Accounts receivable                                   28,030      21,304
    Inventories                                           63,645      38,461
    Loan receivable                                            -       4,378
    Future income tax asset                                  470         372
    Other current assets                                   4,605       2,594
    -------------------------------------------------------------------------
    Total current assets                                 105,883      76,902
    -------------------------------------------------------------------------
    Property, plant and equipment                         51,431      43,187
    Patents and other intangible assets                    8,490       9,432
    Pension benefit asset                                  4,235       4,038
    Goodwill                                              37,620      34,987
    Deferred expenses and other assets                     3,438       6,497
    -------------------------------------------------------------------------
    Total assets                                       $ 211,097   $ 175,043
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Bank advances and other short-term debt            $  27,123   $  18,080
    Accounts payable and other accrued charges            48,444      25,329
    Restructuring liabilities                                  -         105
    Long-term debt due within one year                    12,500      12,500
    -------------------------------------------------------------------------
    Total current liabilities                             88,067      56,014
    -------------------------------------------------------------------------
    Long-term debt                                        45,345      57,021
    Future income tax liability                            1,385       1,558
    Accrued postretirement benefits                          889       4,841
    Other long-term liabilities                            2,500       2,750
    -------------------------------------------------------------------------
    Total liabilities                                    138,186     122,184
    -------------------------------------------------------------------------
    Non-controlling interest                               6,271       1,556
    Contingencies and commitments
    Subsequent event
    Shareholders' equity                                  66,640      51,303
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity         $ 211,097   $ 175,043
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

                                 Three months ended       Six months ended
                                       June 30                 June 30
                                  2007        2006        2007        2006
    -------------------------------------------------------------------------
    Revenues                   $  61,534   $  38,717   $ 111,510   $  76,612
    Costs of sales
      Costs excluding
       depreciation and
       amortization               38,068      18,562      68,789      37,282
      Depreciation and
       amortization                1,587       2,286       2,957       4,551
    -------------------------------------------------------------------------
    Gross profit                  21,879      17,869      39,764      34,779
    Expenses
      Selling, general and
       administrative              7,174       5,773      12,781      12,217
      Depreciation and
       amortization                  807         963       1,608       1,998
      Research and development       811         632       1,520       1,219
    -------------------------------------------------------------------------
                                   8,792       7,368      15,909      15,434
    -------------------------------------------------------------------------
    Operating income before
     the undernoted               13,087      10,501      23,855      19,345
    Other expense (income)            86        (597)       (175)     (1,113)
    Interest expense, long-term
     debt                          2,563       2,780       4,940       5,527
    Interest expense, other          345         114         600         236
    Foreign exchange (gain) loss    (280)          4        (227)         (8)
    -------------------------------------------------------------------------
    Income from operations
     before taxes,
     non-controlling interest
     and equity income of
     affiliate                    10,373       8,200      18,717      14,703
    Income taxes                   2,830       1,818       4,927       3,088
    -------------------------------------------------------------------------
    Income from operations
     before non-controlling
     interest and equity income
     of affiliate                  7,543       6,382      13,790      11,615
    Equity income of affiliate       194         135         402         248
    Non-controlling interest in
     earnings of subsidiaries       (169)       (122)       (194)       (179)
    -------------------------------------------------------------------------
    Net income and
     comprehensive income for
     the period                $   7,568   $   6,395   $  13,998   $  11,684
    -------------------------------------------------------------------------
    Deficit, beginning of
     period                      (60,541)    (89,512)    (67,009)    (94,801)
    -------------------------------------------------------------------------
    Cumulative impact of
     adopting new accounting
     requirements for
     financial instruments             -           -          38           -
    -------------------------------------------------------------------------
    Deficit, end of period       (52,973)    (83,117)    (52,973)    (83,117)
    -------------------------------------------------------------------------
    Net income per share,
     basic                     $    0.10   $    0.08   $    0.18   $    0.15
    -------------------------------------------------------------------------
    Net income per share,
     diluted                   $    0.09   $    0.08   $    0.16   $    0.15
    -------------------------------------------------------------------------


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

                                 Three months ended       Six months ended
                                       June 30                 June 30
                                  2007        2006        2007        2006
    -------------------------------------------------------------------------
    Operating Activities
    Net income for the period  $   7,568   $   6,395   $  13,998   $  11,684
    Add (deduct) items not
     affecting cash
      Depreciation and
       amortization                2,394       3,249       4,565       6,549
      Amortization of deferred
       financing costs                 -         241           -         480
      Stock-based compensation
       expense                       579         185         968         392
      Non-controlling interest
       in earnings of
       subsidiaries                  169         122         194         179
      Accretion in carrying
       value of debt                 587         331         987         634
      Future income tax             (292)        (87)       (271)       (177)
      Equity income of affiliate    (194)       (135)       (402)       (248)
      Accrued benefit expense         56          69         112         140
      Loss on disposal                 9          11           9          47
    Restructuring payment            (20)       (212)        (77)       (525)
    Net change in non-cash
     working capital balances
     related to operations       (10,163)     (1,009)    (20,200)     (8,711)
    -------------------------------------------------------------------------
    Cash provided by (used in)
     operating activities            693       9,160        (117)     10,444
    -------------------------------------------------------------------------
    Investing activities
      Acquisition of property,
       plant and equipment          (665)     (1,298)     (1,796)     (1,676)
      Cash acquired on
       consolidation of VIE          308           -         308           -
      Loan to third party              -      (4,375)          -      (4,375)
      Proceeds from disposal
       of assets                       -          20           -          20
      Decrease (increase) in
       restricted cash               271          (1)        269          60
    -------------------------------------------------------------------------
    Cash used in investing
     activities                      (86)     (5,654)     (1,219)     (5,971)
    -------------------------------------------------------------------------
    Financing activities
      Repayment of long-term
       debt                       (6,885)     (8,366)    (10,010)    (11,608)
      Increase in bank advances
       and other short-term debt   5,926       2,458       9,043       4,678
      Issue of common shares       1,806           7       2,015           7
    -------------------------------------------------------------------------
    Cash provided by (used in)
     financing activities            847      (5,901)      1,048      (6,923)
    -------------------------------------------------------------------------
    Effect of exchange rate
     changes on cash                 (71)          9        (103)          5
    -------------------------------------------------------------------------
    Cash provided (used)
     during the period             1,383      (2,386)       (391)     (2,445)
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     beginning of period           7,750      10,696       9,524      10,755
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period             $   9,133   $   8,310   $   9,133   $   8,310
    -------------------------------------------------------------------------
    





For further information:

For further information: Information Contact: Michael Doolan, Chief
Financial Officer, (416) 367-8588, ext.335, Website: www.neomaterials.com,
e-mail: info@neomaterials.com; Ali Mahdavi, Genoa Management, (416) 962-3300,
ext. 225, e-mail: amahdavi@genoa.ca

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