|
| |||||||||||||||
MTI Global Reports 2008 Second Quarter Results MISSISSAUGA, ONTARIO--(MARKET WIRE)--Aug 13, 2008 -- MTI Global Inc. (Toronto:MTI.TO - News) today reported its financial
results for the three month period ended June 30, 2008.
Q2 Highlights: - Sales for the three months ended June 30, 2008 were $18.2 million, an increase of 14.0% from last year's sales of $15.9 million. - Aerospace sales of $6.8 million for the quarter were ahead of prior year's sales for the comparable period due to an increase in sales volume, while Fabricated Products sales decreased significantly due to the automotive sector slowdown. - Silicone sales of $10.6 million for the quarter represent an increase of 21.9% over the same quarter in 2007. - Earnings before interest expense, taxes, depreciation, and amortization (1) ("EBITDA") for the quarter was $(1.4) million. -- The gross margin percentage decreased to 19.5% from 23.2%. The decrease was primarily due to redundant costs in MTI PolyFab and additional freight as a result of outsourcing the majority of Aerospace manufacturing to Mexico, plus additional labour to reduce backlog during the offload to Mexico. -- Total operating expenses were higher than in the same period in 2007 and include restructuring costs attributable to changes in the business operations and financing costs. - The net loss for the quarter was $4.2 million or fifteen cents per share - (1) EBITDA consists of earnings before interest expense, income taxes, depreciation, amortization, debt reclassification charge and non-controlling interest. MTI Global believes EBITDA is a useful measure in the evaluation of performance. EBITDA is not a measure recognized under Generally Accepted Accounting Principles ("GAAP") and does not have a standardized meaning as prescribed by GAAP. Therefore, EBITDA may not be comparable to similar measures presented by other entities. Investors are cautioned that EBITDA should not be construed as an alternative to net loss determined in accordance with GAAP. Bill Neil, MTI Global's President and Chief Executive Officer stated "While we saw an increase in sales compared to the second quarter last year, we were disappointed with the increase in both cost of goods sold and operating expenses resulting in a net loss for the quarter. As we moved our Canadian aerospace operations to our plant in Mexico, we carried higher overhead for that period and developed a backlog of orders resulting in higher material usage and freight costs. I am happy to say we have worked our way through the backlog, and we have identified operational inefficiencies and are taking the necessary steps to improve performance. We are also pleased that our plan to consolidate the three North American Silicone plants into two is on schedule for completion in the third quarter." Mr. Neill concluded "I am optimistic that we will continue to see improving sales through the remainder of the year, and that operational management improvements will allow us to translate sales into better bottom line performance."
Sales:
------
Three months Six months
ended June 30, ended June 30,
2008 2007 2008 2007
----------------------------------------------------------------------------
MTI PolyFab
Aerospace $6,795 $6,059 $13,032 $12,520
Fabricated Products 749 1,159 1,834 2,573
----------------------------------------------------------------------------
Total MTI PolyFab 7,544 7,218 14,866 15,093
Silicone
N.A. Silicone 5,684 4,325 11,529 8,484
Leewood 3,622 3,203 6,708 6,402
Sterne 1,330 1,199 2,532 2,314
----------------------------------------------------------------------------
Total $18,180 $15,945 $35,635 $32,293
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Income (Loss) Before Income Taxes and Non-controlling Interest:
---------------------------------------------------------------
Three months Six months
ended June 30, ended June 30,
2008 2007 2008 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
MTI PolyFab $(455) $(138) $(529) $674
N.A. Silicone (561) 65 (505) 76
Leewood (205) (236) (576) (393)
Sterne 90 138 107 206
Corporate (3,061) (645) (3,595) (1,228)
----------------------------------------------------------------------------
Total $(4,192) $(816) $(5,098) $(665)
----------------------------------------------------------------------------
----------------------------------------------------------------------------Financial Results: Sales for the three months ended June 30, 2008 were $18.2 million, approximately 14.0% ahead of last year's sales of $15.9 million. This includes a decrease of approximately $483,000 due to the impact of currency fluctuations. Aerospace sales of $6.8 million for the quarter were ahead of prior year's sales for the comparable period due to an increase in sales volume, despite the approximately $414,000 impact of the lower U.S. dollar compared to exchange rates in effect last year. Fabricated Products sales of $749,000 were approximately 35.4% less than prior year's sales of $1.2 million for the same period. This was primarily due to a decline in sales to the automotive and sporting goods markets. N.A. Silicone sales of $5.7 million in 2008 increased by $1.4 million or approximately 31.4% compared to sales of $4.3 million for the three months ended June 30, 2007. The increase is due to revenues of $1.4 million generated from the acquisition of the assets of Mold-Ex ("Mold-Ex") in the third quarter of 2007 and strong performance in transit seating. These revenues were offset by $374,000 as a result of the lower U.S. dollar compared to exchange rates in effect in 2007. Leewood sales of $3.6 million for the three months ended June 30, 2008 were ahead of prior year's sales of $3.2 million for the comparable period. This is primarily due to an increase in Aerospace sales and an increase of approximately $224,000 due to the appreciation in the Euro. Sterne sales of $1.3 million for the three months ended June 30, 2008 were $131,000 higher than last year's sales of $1.2 for the comparable period due to increased sales across all revenue sources, including clean room manufacturing, general manufacturing and distribution sales. This includes an increase of approximately $81,000 due to the appreciation in the Euro. On a percentage basis, Aerospace accounted for 37% of total sales, compared to 38% for the same period last year. Silicone sales represented 59% of total sales, compared to 55% for the comparable period last year. Fabricated Products accounted for 4% of total sales, compared to 7% for last year. The gross margin for the three months ended June 30, 2008 was $3.5 million, a decrease of $163,000 or approximately 4.4% over the prior year. The gross margin percentage decreased to 19.5% from 23.2%. The decrease was primarily due to redundant costs in MTI PolyFab and additional freight as a result of outsourcing the majority of Aerospace manufacturing to Mexico, additional labour in MTI Polyfab to reduce backlog during the offload to Mexico, and higher than expected outsourced manufacturing costs in Mexico. Gross margin was also affected by the decrease in the U.S. dollar which decreased margins by approximately $207,000 in MTI PolyFab compared to exchange rates in effect in the prior year. These factors were offset by improved margins at Leewood with the operation of the continuous oven line. Total operating expenses for the three months ended June 30, 2008 of $5.4 million were $1.4 million higher than in the same period in 2007 and include $1.2 million of restructuring costs attributable to changes in the business operations, forbearance arrangements with the bank and the subordinated debt financing. Plant and laboratory expenses of $734,000 were $134,000 higher than in the same period last year. The increase is due to additional operating expenses as a result of the acquisition of Mold-Ex during the third quarter of 2007 and MTI PolyFab costs associated with the Mexican contract manufacturing operation. Sales and marketing expenses of $1.5 million decreased $72,000 from prior year. Administrative expenses of $1.9 million increased $333,000 from the same period last year. The increase is primarily due to the acquisition of Mold-Ex and an increase in professional fees. EBITDA for the quarter was $(1.4) million compared to $120,000 in the same period in the prior year. The decrease in EBITDA was due to decreased gross margin, restructuring charges and increased operation expenses as noted above. The net loss for the quarter was $4.2 million or fifteen cents per share compared to a net loss in prior year of $695,000 or two cents per share. Financial Covenant Update: On June 3, 2008, the Company closed a $7 million Series A subordinated debt financing led by a privately held specialty finance firm (the "Lender"). The credit facility is a term loan facility subordinate to the Bank collateralized with substantially all assets of MTI Polyfab Inc. and N.A. Silicone, with an interest rate of 12.75% per annum with $4.9 million payable in 24 months and $2.1 million payable in 36 months. The Company has the option to extend the repayment of the $4.9 million to 36 months provided it meets certain financial tests as determined within 60 days of the original maturity date. In conjunction with the financing, the Company issued the Lender 3,230,769 special warrants. Each special warrant is convertible into common share purchase warrants, each entitling the holder to purchase one common share of the Company at a price of $0.65 per share for five years from the date of closing. The Company is currently in breach of a covenant with its Bank and with its Lender. The Company did not achieve its June 30, 2008 earnings before interest, taxes, depreciation and amortization covenant. The covenant violation provides the Bank and the Lender with the right to demand repayment of indebtedness. Subsequent to June 30, 2008, subject to final documentation, the Bank and the Lender have agreed to a waiver of the breach. Outlook: At MTI PolyFab, management expected sales growth in Aerospace during fiscal 2008 and the second quarter showed evidence of this trend. Sales for the quarter were above budget and ahead of the previous quarter. Margins were lower than expected as the Company continued to support two manufacturing operations during the quarter and incur incremental labour and freight costs to address backlog. The offload to Mexico resulted in higher than expected material conversion and freight costs, all of which the Company is acting on to address. The Company expects the higher sales volumes to continue as well as an improvement in margin trends for the second half of 2008. The improvement in margins will be driven by the completion of the offload, reduced backlog and actions being taken to improve the effectiveness of manufacturing processes in Mexico. In Fabricated Products, a lower than expected sales volume was offset by higher margins as a result of a change in the business mix. The lower sales reflected a softening in the seasonal sporting goods market and automotive. The Company has reinforced the sales group in Fabricated Products and will seek an expansion in the range of business services being offered to customers. In N.A. Silicone, activity from transit seating foam customers began to increase in the latter half of the second quarter giving some optimism for the balance of 2008. While the Company does not expect this business to recover fully until the second half of 2008, the second quarter continued to show a substantial improvement. Sales of Magnifoam, the principal product at the Richmond, Virginia plant were ahead of expectations. This increase helped overcome sales slippage in the Milton, Florida location due to the downturn in the automotive industry. At the Buchanan, Virginia plant, sales were slightly below target and the slow down in home building in the United States and the resultant lower sales of home appliances has reduced expectations for the near term. A new calander oven line in the Richmond plant went into production during the quarter enabling the division to sell and ship silicone materials with full production to begin as materials are certified. The N.A. Silicone division also continues to experience the pressure of higher raw material prices. The consolidation of the Buchanan and Milton plants is well underway, and the move is expected to improve margins and reduce operating costs in the Silicone Division by the fourth quarter of 2008. At Leewood, management expects continued sales growth in 2008 as it begins to ship in increasing volumes on several of its new programs including Airbus A380 and A400M. The second quarter showed a marginal increase in year over year sales, although a sequential increase was recorded over the first quarter of 2008. Margin improvement is a key goal in 2008. Leewood expects stronger margins from its new business lines and operational savings on its current business although it is facing pressure from higher material input prices. These results are partially dependent on the new continuous oven line that became operational in the second quarter of 2008 and the timing of the qualification of materials. Management expects further improvements through scrap reduction and quality control, as well as more strategic pricing. At Sterne, management expects sales to continue to grow in 2008. The second quarter results support this belief as sales growth was realized from all areas of production including the clean room facility. Margins, however, were dampened slightly by a change in the mix of products. Success will be primarily dependent on Sterne's ability to grow clean room manufacturing sales and to expand its distribution sales for MTI Leewood's products. In summary, based on early indications, the Company remains cautiously optimistic that it will report improving sales throughout 2008. Operations management is integral to translating sales into improved results. In view of the Canadian dollar value against the U.S. dollar, the Company is increasingly confident about a return to profitability with aerospace programs fully moved to Mexico, consolidated operations in N.A. Silicones, and growth in European operations. About MTI Global Inc.: MTI Global Inc. (Toronto:MTI.TO - News) designs, develops and manufactures custom-engineered products using silicone and other cellular materials. The Company serves a variety of specialty markets focused on three main product categories: Silicone, Aerospace and Fabricated Products. MTI's manufacturing divisions develop and produce silicone foam using patented technology. The Company designs and fabricates energy management systems from a variety of flexible, cellular materials. MTI also produces and distributes specialty silicone elastomer products. MTI's primary markets are aerospace and mass transit. Secondary markets include sporting goods, automotive, industrial, institutional, electronics, and the medical market through a 51% interest in MTI Sterne SARL of Cavaillon, France. MTI's head office and Canadian manufacturing operations are located in Mississauga, Ontario, with international manufacturing operations located in Richmond and Buchanan, Virginia; Pensacola, Florida; Bremen, Germany; and a contract manufacturer venture in Ensenada, Mexico. The Company also has sales operations in England and Sweden, and an engineering support centre in Brazil. The Company's website is www.mtiglobalinc.com. Investors, analysts and the media are invited to participate in a conference call to discuss the 2008 Second Quarter results on Thursday August 14, 2008, at 10:50 a.m. (Eastern). To join the conference call, please dial 1-800-588-4490 (Canada and U.S). The conference call can also be accessed via the web at www.newswire.ca. A replay of the conference call will be available for one week by dialing 416-640-1917 (Toronto area only) or 1-877-289-8525 and entering reservation no. 21280181#. Notes to financial statements and additional financial reporting details can be found at www.sedar.ca.The foregoing press release contains forward-looking statements and is subject to important risks and uncertainties. Although MTI Global believes that the expectations reflected in any forward-looking statements are reasonable, the results or events predicted in these statements may differ materially from actual results or events. Forward looking statements are based on estimates and assumptions derived from past experience, historical trends, current conditions and expected future developments. Many factors could cause results or events to differ from current expectations, including the impact of price and product competition, general industry and market conditions and growth rates and reliance on key customers. For additional information with respect to these and other factors, see the reports filed by MTI Global Inc. with the applicable securities regulatory authorities at www.sedar.com. MTI Global Inc. disclaims any intention or obligation to update or revise any forward-looking statements. Financial Statements Follow
----------------------------------------------------------------------------
----------------------------------------------------------------------------
MTI Global Inc.
Unaudited Interim Consolidated Balance Sheets
----------------------------------------------------------------------------
----------------------------------------------------------------------------
As at As at
(In thousands of Canadian dollars) June 30, 2008 December 31, 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $1,509 $1,254
Cash deposited as collateral 706 651
Short-term investment 3,000 -
Accounts receivable 12,423 11,774
Income taxes recoverable 58 20
Inventories 10,887 9,967
Prepaid expenses and deposits 382 424
----------------------------------------------------------------------------
28,965 24,090
Property, plant and equipment 13,215 13,240
Goodwill 10,499 9,930
Intangibles 607 689
Deferred development costs 10,184 10,046
----------------------------------------------------------------------------
$63,470 $57,995
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities
Bank indebtedness $8,909 $7,255
Accounts payable and accrued expenses 8,862 7,389
Subordinated debt 7,000 -
Current portion of long-term debt 613 3,670
----------------------------------------------------------------------------
25,384 18,314
Long-term debt 1,977 1,852
Non-controlling interest 347 264
----------------------------------------------------------------------------
27,708 20,430
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity
Share capital 55,102 55,102
Contributed surplus 1,087 1,022
Warrants 1,389 -
Accumulated other comprehensive loss (2,435) (4,117)
Deficit (19,381) (14,442)
----------------------------------------------------------------------------
35,762 37,565
----------------------------------------------------------------------------
$63,470 $57,995
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
MTI Global Inc.
Unaudited Interim Consolidated Statements of Deficit
----------------------------------------------------------------------------
Six Six
months months
ended June ended June
(In thousands of Canadian dollars) 30, 2008 30, 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Deficit, beginning of period $(14,442) $(6,384)
Cumulative effect of adopting new
accounting standards 212 -
Net loss for the period (5,151) (688)
----------------------------------------------------------------------------
Deficit, end of period $(19,381) $(7,072)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
MTI Global Inc.
Unaudited Interim Consolidated Statements of Operations
----------------------------------------------------------------------------
Three Three Six Six
months months months months
ended ended ended ended
(In thousands of Canadian dollars, June June June June
except per share amounts) 30, 2008 30, 2007 30, 2008 30, 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sales $18,180 $15,945 $35,635 $32,293
Cost of sales 14,638 12,240 28,296 24,576
----------------------------------------------------------------------------
Gross margin 3,542 3,705 7,339 7,717
----------------------------------------------------------------------------
Operating expenses
Plant and laboratory 734 600 1,453 1,144
Sales and marketing 1,449 1,521 2,754 2,645
Administrative 1,917 1,584 3,707 3,257
Restructuring costs 1,179 - 1,327 -
Foreign exchange loss (gain) 79 241 (38) 280
----------------------------------------------------------------------------
5,358 3,946 9,203 7,326
----------------------------------------------------------------------------
Operating income (loss) before the
following items (1,816) (241) (1,864) 391
----------------------------------------------------------------------------
Amortization of property, plant
and equipment 73 133 202 260
Amortization of intangibles 50 - 100 -
Amortization of deferred
development costs 552 334 994 665
----------------------------------------------------------------------------
675 467 1,296 925
----------------------------------------------------------------------------
Loss before other items (2,491) (708) (3,160) (534)
----------------------------------------------------------------------------
Other items
Interest on long-term debt 176 73 295 166
Other interest expense 149 85 276 134
Debt reclassification charge 1,389 - 1,389 -
Interest and other income (13) (50) (22) (169)
----------------------------------------------------------------------------
1,701 108 1,938 131
----------------------------------------------------------------------------
Loss before income taxes
and non-controlling interest (4,192) (816) (5,098) (665)
----------------------------------------------------------------------------
Income taxes
Current income tax expense
(recovery) - (15) - 23
Future income tax recovery - (150) - (78)
----------------------------------------------------------------------------
- (165) - (55)
----------------------------------------------------------------------------
Loss before non-controlling
interest (4,192) (651) (5,098) (610)
Non-controlling interest 45 44 53 78
----------------------------------------------------------------------------
Net loss for the period $(4,237) $(695) $(5,151) $(688)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Loss per share
- Basic and diluted $(0.15) $(0.02) $(0.18) $(0.02)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
MTI Global Inc.
Unaudited Interim Consolidated Statements of Comprehensive Loss
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Three Six Six
months months months months
ended ended ended ended
June June June June
(In thousands of Canadian dollars) 30, 2008 30, 2007 30, 2008 30, 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net loss for the period $(4,237) $(695) $(5,151) $(688)
----------------------------------------------------------------------------
Other comprehensive income (loss)
Net change in cumulative
translation adjustment (290) (1,752) 1,837 (1,821)
Unrecognized gain (loss) on foreign
currency forward contracts (16) 172 (155) 228
----------------------------------------------------------------------------
(306) (1,580) 1,682 (1,593)
----------------------------------------------------------------------------
Comprehensive loss $(4,543) $(2,275) $(3,469) $(2,281)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
MTI Global Inc.
Unaudited Interim Consolidated Statements of Cash Flows
----------------------------------------------------------------------------
Three Three Six Six
months months months months
ended ended ended ended
June June June June
(In thousands of Canadian dollars) 30, 2008 30, 2007 30, 2008 30, 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash flows from operating
activities
Net loss for the period $(4,237) $(695) $(5,151) $(688)
Adjustments for non-cash items
Amortization 1,054 778 2,002 1,563
Future income tax - (150) - (78)
Unrealized foreign exchange loss 235 87 479 273
Stock option expense 37 40 65 79
Cumulative effect of adopting new
accounting standards - - 212 -
Debt reclassification charge 1,389 - 1,389 -
Non-controlling interest 45 44 53 78
----------------------------------------------------------------------------
(1,477) 799 (951) 1,915
Net change in non-cash working
capital balances 1,165 338 (423) (1,877)
----------------------------------------------------------------------------
Cash provided by (used in)
operating activities (312) 442 (1,374) (650)
----------------------------------------------------------------------------
Cash flows from investing
activities
Purchase of property, plant and
equipment (133) (239) (258) (616)
Deferred development costs
capitalized (319) (369) (622) (927)
----------------------------------------------------------------------------
Cash used in investing activities (452) (608) (880) (1,543)
----------------------------------------------------------------------------
Cash flows from financing activities
Repayments of long-term debt (2,733) (253) (3,136) (546)
Proceeds from subordinated debt 7,000 - 7,000 -
Short-term investment (3,000) - (3,000) -
Increase in bank indebtedness 1,018 844 1,655 2,293
Reduction (increase) in cash
deposited as collateral 9 - (55) 44
----------------------------------------------------------------------------
Cash provided by financing
activities 2,294 591 2,464 1,791
----------------------------------------------------------------------------
Foreign exchange on cash and cash
equivalents (21) (17) 45 (40)
----------------------------------------------------------------------------
Net increase (decrease) in cash
during the period 1,509 408 255 (442)
Cash and cash equivalents,
beginning of period - 629 1,254 1,479
----------------------------------------------------------------------------
Cash and cash equivalents, end of
period $1,509 $1,037 $1,509 $1,037
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Supplemental cash flow information
Cash paid for interest $363 $154 $609 $288
Cash paid for income taxes $ 38 $9 $ 38 $15
----------------------------------------------------------------------------
----------------------------------------------------------------------------Contact: Contacts:
MTI Global Inc.
Bill Neill
President & Chief Executive Officer
(905) 564-9700
(905) 564-8886 (FAX)
Email: mti@magnifoam.ca
Website: http://www.mtiglobalinc.com
Fleishman-Hillard Canada
Anne Lachance
Investor Relations
(416) 214-0701
Source: MTI Global Inc.
|  | ||||||||||||||
