Neo Material Technologies Reports Third Quarter 2009 Financial Results

- Revenues of US$54.1 million

- Strong EBITDA of US$13.8 million

- Cash and net cash positions of US$51.6 million and US$41.7 million

- Net income and EPS at US$9.1 million or US$0.08 per share

TORONTO, Nov. 12 /CNW/ - Neo Material Technologies Inc. (TSX: NEM) (the "Company" or "Neo") today reported its financial results for the three-month period ending September 30, 2009. Unless otherwise specified, all currency amounts are expressed in U.S. dollars.

For the three-month period ended September 30, 2009, the Company reported revenues of $54.1 million, net income of $9.1 million, and earnings per share ("EPS") of $0.08 (on a basic and fully diluted basis). Operating income plus depreciation and amortization ("EBITDA") for the quarter was $13.8 million. Revenues, net income, EBITDA and EPS for the three-month period ended September 30, 2008 were $71.1 million, $7.8 million, $13.9 million and $0.07 (on a basic and fully diluted basis), respectively. Operating income for the third quarter of 2009 was $11.2 million compared to $10.9 million in the corresponding period in 2008. Cash provided by operating activities was $9.6 million for the third quarter.

Compared to the second quarter, the third quarter demonstrated an accelerated recovery in demand for the Company's specialty products, especially in the Magnequench division, where lower input costs coupled with increased volumes led to gross margin expansion. The Performance Materials division (formerly the AMR Performance Materials division) continued its steady recovery during the quarter. As a result of the strong rebound in share price, the consolidated quarterly results included a mark-to-market non-cash expense of $3.0 million relating to stock based compensation.

On August 31, 2009, the Company completed its acquisition of 100% of all issued and outstanding shares of Recapture Metals Limited ("Recapture"). This acquisition of Recapture provides a solid platform and first step in the Neo's strategy to diversify into other complementary rare elements and specialty materials. Recapture's strong hydrometallurgical skills in both primary production and recycling coupled with Neo's global sales organization, technical skills and presence in Asia uniquely positions the Company in the growing gallium and indium markets. Subsequent to the acquisition, Recapture became part of the Performance Materials division.

For the nine month period ended September 30, 2009, net income, EBITDA and EPS were $9.1 million, $18.7 million and $0.08 (on a basic and fully diluted basis), respectively. This compares to net income, EBITDA and EPS for the nine month period ended September 30, 2008 of $24.0 million, $47.0 million, and $0.23 basic (on a basic and fully diluted basis), respectively. Revenues for the nine months ended September 30, 2009 were $124.7 million compared to $220.0 million in the corresponding period in 2008.

"I am very pleased with the pace of recovery and outlook in our business, particularly at the Magnequench division. With no long term debt and a strong cash position, we are well positioned to take advantage of opportunities that augment our diversification strategy." said Constantine Karayannopoulos, President & CEO.

    
    Magnequench
    $000's (except for   ----------------------------------------------------
     quantity shipped)     Q3       Q4       Q1       Q2       Q3   Trailing
                          2008     2008     2009     2009     2009   Twelve
                                                                     Months
    -------------------------------------------------------------------------
    Quantity Shipped
     (tonnes)             1,178      777      505      878    1,268    3,428
    -------------------------------------------------------------------------
    Revenues             33,830   21,914   13,840   24,411   34,049   94,214
    -------------------------------------------------------------------------
    Operating Income(1)   9,464    4,040    1,340    9,014   16,255   30,649
    -------------------------------------------------------------------------


    Performance Materials
    $000's (except for   ----------------------------------------------------
     quantity shipped)     Q3       Q4       Q1       Q2       Q3   Trailing
                          2008     2008     2009     2009     2009   Twelve
                                                                     Months
    -------------------------------------------------------------------------
    Quantity Shipped
     (tonnes)             1,825    1,726      974      992    1,143    4,835
    -------------------------------------------------------------------------
    Revenues             39,746   28,134   14,951   18,222   21,678   82,985
    -------------------------------------------------------------------------
    Operating Income
     (Loss)(1)            1,869   (2,864)  (3,451)    (184)     (48)  (6,547)
    -------------------------------------------------------------------------


    Consolidated
    $000's (except for   ----------------------------------------------------
     quantity shipped)     Q3       Q4       Q1       Q2       Q3   Trailing
                          2008     2008     2009     2009     2009    Twelve
                                                                      Months
    -------------------------------------------------------------------------
    Inter-segment sales  (2,467)  (3,456)       -     (879)  (1,582)  (5,917)
    -------------------------------------------------------------------------
    Revenues             71,109   46,592    28,791  41,754   54,145  171,282
    -------------------------------------------------------------------------
    Operating Income
     (Loss)              10,924     (968)   (5,178)  4,954   11,197   10,005
    -------------------------------------------------------------------------
    EBITDA               13,851    1,759    (2,637)  7,490   13,805   20,417
    -------------------------------------------------------------------------
    Note: (1) Divisional Operating Income (Loss) presented in the tables
    above excludes stock-based compensation expense.
    

About Neo Material Technologies

Neo Material Technologies is a producer, processor and developer of neodymium-iron-boron magnetic powders, rare earths and zirconium based engineered materials and applications, and other high value niche metals and their compounds through its Magnequench and Performance Materials business divisions. These innovative products are essential in many of today's high technology products. Magnequench's Neo powders are used to produce bonded magnets, generally used in micro motors, precision motors, sensors and other applications requiring high levels of magnetic strength, flexibility, small size and reduced weight. Rare earth and zirconium applications include catalytic converters, computers, television display panels, optical lenses, mobile phones and electronic chips. Products from the newly acquired Recapture Metals Limited are primarily used in the wireless, LED, flat panel, solar and catalyst industries. The Company is headquartered in Toronto, Canada and has approximately 1,400 employees in 19 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 Friday, November 13, 2009 at 10:00 a.m. (Eastern Time) to discuss these results. Interested parties may access the teleconference by calling (416) 646-3097 (local) or (877) 974-0455 (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 4181155 followed by the number sign until December 13, 2009 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 November 13, 2009.

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

                                                   September 30  December 31
                                                        2009         2008
                                                    (Unaudited)
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash                                             $   51,618   $   51,507
    Accounts receivable                                  36,182       18,171
    Inventories                                          40,937       54,415
    Future income tax asset                               2,078          915
    Asset held for sale                                       -        1,526
    Other current assets                                  2,443        2,137
    -------------------------------------------------------------------------
    Total current assets                                133,258      128,671
    -------------------------------------------------------------------------
    Property, plant and equipment                        43,613       36,933
    Patents and other intangible assets                  13,843       16,248
    Pension benefit asset                                 3,967        4,031
    Goodwill                                             50,290       34,987
    Other long-term assets                                6,592        6,389
    -------------------------------------------------------------------------
    Total assets                                     $  251,563   $  227,259
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Bank advances and other short-term debt          $    9,953   $   12,979
    Accounts payable and other accrued charges           29,543       21,994
    -------------------------------------------------------------------------
    Total current liabilities                            39,496       34,973
    -------------------------------------------------------------------------
    Future income tax liability                           1,017          898
    Accrued post-retirement benefits                        477          502
    Other long-term liabilities                           6,850       10,167
    -------------------------------------------------------------------------
    Total liabilities                                    47,840       46,540
    -------------------------------------------------------------------------
    Non-controlling interest                              1,424        1,867
    Shareholders' equity                                202,299      178,852
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity       $  251,563   $  227,259
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    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
                              2009          2008          2009          2008
    -------------------------------------------------------------------------
    Revenues          $     54,145  $     71,109  $    124,690  $    220,049
    Cost of sales
      Costs excluding
       depreciation and
       amortization         30,269        49,958        79,673       147,965
      Depreciation and
       amortization          2,017         2,101         5,894         6,330
    -------------------------------------------------------------------------
    Gross profit            21,859        19,050        39,123        65,754
    Expenses
      Selling, general
       and administrative    5,837         8,080        18,635        22,930
      Stock-based
       compensation          2,984        (2,170)        4,117        (1,042)
      Depreciation and
       amortization            591           826         1,791         2,459
      Research and
        development          1,250         1,390         3,607         3,189
    -------------------------------------------------------------------------
                            10,662         8,126        28,150        27,536
    -------------------------------------------------------------------------
    Operating income
     before the
     undernoted             11,197        10,924        10,973        38,218
    Other income              (166)         (319)         (341)         (470)
    Interest expense,
     long-term debt              -           670             -         3,631
    Interest expense,
     other                     477           452           968         1,598
    Foreign exchange
     (gain) loss              (611)         (147)       (1,095)          399
    -------------------------------------------------------------------------
    Income from
     operations before
     taxes,
     non-controlling
     interest and
     equity income of
     affiliate              11,497        10,268        11,441        33,060
    Income taxes             2,666         2,021         2,799         7,451
    -------------------------------------------------------------------------
    Income from
     operations before
     non-controlling
     interest and
     equity income of
     affiliate               8,831         8,247         8,642        25,609
    Equity income of
     affiliate                 245           270             6           553
    Non-controlling
     interest in
     earnings (loss)
     of subsidiaries            24          (689)          443        (2,146)
    -------------------------------------------------------------------------
    Net income for
     the period       $      9,100  $      7,828  $      9,091  $     24,016
    -------------------------------------------------------------------------
    Net income per
     share, basic     $       0.08  $       0.07  $       0.08  $       0.23
    -------------------------------------------------------------------------
    Net income per
     share, diluted   $       0.08  $       0.07  $       0.08  $       0.23
    -------------------------------------------------------------------------
    Weighted average
     number of shares
     outstanding,
     basic             116,059,610   107,693,986   115,249,786   102,581,693
    -------------------------------------------------------------------------
    Weighted average
     number of share
     outstanding,
     diluted           117,633,357   108,355,862   115,861,083   103,582,325
    -------------------------------------------------------------------------



    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
                              2009          2008          2009          2008
    -------------------------------------------------------------------------
    Operating Activities
    Net income for
     the period       $      9,100  $      7,828  $      9,091  $     24,016
    Add (deduct)
     items not
     affecting cash
      Depreciation and
       amortization          2,608         2,927         7,685         8,789
      Stock-based
       compensation
       expense               2,984        (2,170)        4,117        (1,042)
      Non-controlling
       interest in
       (earnings) loss
       of subsidiaries          (24)          689          (443)        2,146
      Accretion in
       carrying value of
       long-term
       liabilities             187           345           566         1,749
      Future income tax        643            87          (736)         (621)
      Equity income of
       affiliate              (245)         (270)           (6)         (553)
      Accrued benefit
       expense                   6           119            40           173
      Loss on disposal
       of assets                 9             -            61             -
    Net change in
     non-cash working
     capital balances
     related to
     operations             (5,682)       11,578        (1,398)       (3,958)
    -------------------------------------------------------------------------
    Cash provided by
     operating activities    9,586        21,133        18,977        30,699
    -------------------------------------------------------------------------
    Investing activities
      Acquisition of
       property, plant and
       equipment              (617)       (1,882)       (2,894)       (6,524)
      Cash paid on
       acquisition of
       Recapture Metals
       Ltd, net of cash
       acquired             (4,996)            -        (4,996)            -
      Proceeds from
       disposal of
       assets                    -             -         2,032             -
      Other investments          -             -          (204)         (693)
    -------------------------------------------------------------------------
    Cash used in
     investing
     activities             (5,613)       (1,882)       (6,062)       (7,217)
    -------------------------------------------------------------------------
    Financing
     activities
      Repayment of
       long-term debt            -       (20,095)            -       (41,250)
      Decrease in bank
       advances and
       other
       short-term debt      (6,338)      (15,411)      (11,587)      (10,758)
      Repurchase of
       common shares
       for cancellation          -             -        (1,623)            -
      Cash received by
       subsidiary from
       non-controlling
       interest partner          -         7,819             -         7,819
      Redemption of
       Recapture's
       preferred shares     (1,607)            -        (1,607)            -
      Cash received
       from repayment
       of shareholder's
       loan                      -             -             -           150
      Issue of common
       shares                2,014        38,128         2,014        50,448
    -------------------------------------------------------------------------
    Cash (used in)
     provided by
     financing
     activities             (5,931)       10,441       (12,803)        6,409
    -------------------------------------------------------------------------
    Effect of exchange
     rate changes on
     cash                        -           (10)           (1)           (3)
    -------------------------------------------------------------------------
    Cash (used)
     provided during
     the period             (1,958)       29,682           111        29,888
    -------------------------------------------------------------------------
    Cash beginning
     of period              53,576        17,366        51,507        17,160
    -------------------------------------------------------------------------
    Cash end of
     period           $     51,618  $     47,048  $     51,618  $     47,048
    -------------------------------------------------------------------------



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

                             September 30, 2009           December 31, 2008
                                 (Unaudited)                  (Audited)
                            Number        Amount        Number        Amount
    -------------------------------------------------------------------------
    Share Capital
      Authorized
        Unlimited
         common shares
      Issued
        Common Shares
        Balance at
         beginning of
         period        116,176,614       232,325    98,907,217       182,387
          Shares
           issued to
           Recapture
           shareholders  4,499,996        13,581             -             -
          Shares issued
           on warrants
           exercised             -             -    17,501,800        41,148
          Fair value
           assigned to
           warrants
           exercised             -             -             -         4,729
          Shares issued
           on private
           placement             -             -     2,375,297         9,267
          Shares issued
           on exercise
           of stock
           options         899,000         2,014        10,000            33
          Shares
           purchased and
           cancelled
           pursuant to
           normal course
           issuer bid   (1,709,100)       (1,623)   (2,617,700)       (3,075)
          Fair value
           assigned to
           repurchase of
           common shares         -        (1,827)            -        (2,164)
    -------------------------------------------------------------------------
      Balance at end of
       period          119,866,510       244,470   116,176,614       232,325
    -------------------------------------------------------------------------
    Warrants
      Balance at
       beginning of
       period                    -             -    17,653,600         4,770
        Warrants
         exercised               -             -   (17,501,800)       (4,729)
        Warrants
         expired                 -             -      (151,800)          (41)
    -------------------------------------------------------------------------
      Balance at end
       of period                 -             -             -             -
    -------------------------------------------------------------------------
    Contributed Surplus
      Balance at
       beginning of
       period                              5,081                       2,615
        Stock-based
         compensation
         expense                             384                         261
        Transfer to
         contributed
         surplus on
         expiration of
         warrants                              -                          41
        Repurchase of
         common shares
         for
         cancellation                      1,827                       2,164
    -------------------------------------------------------------------------
      Balance at end
       of period                           7,292                       5,081
    -------------------------------------------------------------------------
    Deficit
      Balance at
       beginning of
       period                            (58,258)                    (81,564)
        Net income for
         the period                        9,091                      23,306
    -------------------------------------------------------------------------
      Balance at end
       of period                         (49,167)                    (58,258)
    -------------------------------------------------------------------------
    Accumulated other
     comprehensive
     earnings
      Balance at
       beginning of
       period                                  -                         115
        Unrealized gain
         on interest
         rate swap
         designated as
         cash flow
         hedge                                 -                        (115)
    -------------------------------------------------------------------------
      Balance at end of
       period                                  -                           -
    -------------------------------------------------------------------------
    Shareholders' loan
      Balance at
       beginning of
       period                               (296)                       (446)
        Repayment of
         loan by
         shareholder                           -                         150
    -------------------------------------------------------------------------
      Balance at end
       of period                            (296)                       (296)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Shareholders' equity
     at end of period                    202,299                     178,852
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    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
                              2009          2008          2009          2008
    -------------------------------------------------------------------------
    Net income for
     the period       $      9,100  $      7,828  $      9,091  $     24,016
    Change in
     unrealized loss
     on derivatives
     designated as
     cash flow hedges,
     net of tax                  -           (76)            -          (115)
    -------------------------------------------------------------------------
    Comprehensive
     income for the
     period           $      9,100  $      7,752  $      9,091  $     23,901
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

%SEDAR: 00002061E

SOURCE Neo Material Technologies Inc.

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

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