Q1 Highlights:
- Sales grew to $17.5 million in Q1 2008 from $16.3 million for the same period last year, an increase of 6.8%. North American Silicone sales increased by $1.7 million due primarily to the acquisition of Mold-Ex which occurred in the third quarter of 2007.
- Earnings before interest expense, taxes and depreciation(1) ("EBITDA") increased to $0.3 million in Q1 2008, up from a negative EBITDA of $1.6 million in the fourth quarter of 2007.
- Reported net loss of $914,000 (or $0.03 per share) declined from a net income of $7,000 (or $0.00 per share) for the same period last year.
- An amended forbearance agreement was entered into with the Company's principal Canadian bank (the "Bank").
- MTI Global signed a non-binding letter of intent to raise $7.0 million of mezzanine financing by the end of May 2008 to repay the term bank loan and for other corporate initiatives.
- Subsequent to quarter end the following restructuring initiatives were announced:
-- The Buchanan, Virginia plant will be closed and the operations will be moved to the two remaining U.S. silicone operations facilities in Milton, Florida and Richmond, Virginia during the second half of 2008.
-- The Polyfab Aerospace plant in Mississauga, Ontario will be closed and the transfer of production to Mexico completed by the end of May 2008.
Bill Neill, MTI Global's President and Chief Executive Officer stated "The results for the first quarter 2008 were largely in line with our expectations. Results at Polyfab in Canada were improved by further off loads of Aerospace programs to Mexico. However Polyfab continued to incur significant costs as overhead and inventory were carried in both Mexico and in Canada. Sales in North American Silicone were boosted by increased orders for transit seating but were negatively impacted by the slowdown in the auto sector and appliance sales for new homes. European Silicone showed growth compared to the fourth quarter of 2007, exceeding last year's results although sales at Sterne were below expectations."
"In summary, based on early indications, MTI Global is cautiously optimistic that it will report an improvement in sales and profitability through 2008. Production management is key to translating sales into better results, but with the Canadian dollar at current levels the Company is not optimistic about a return to profitability until aerospace programs are fully moved to Mexico. The change in the Canadian dollar has had a significant impact on the operations of the Company over the last three years", continued Mr. Neill.
(1) EBITDA consists of earnings before interest expense, income taxes, depreciation, amortization, non-controlling interest and goodwill impairment charges. 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.
Sales: ------ 3 Months Ended March 31 3 Months Ended March 31 $000s 2008 2007 ---------------------------------------------------------------------------- MTI Polyfab: Aerospace $6,237 $6,461 Fabricated Products 1,085 1,414 Silicone: North American Silicones 5,845 4,160 Leewood 3,086 3,198 Sterne 1,202 1,115 ---------------------------------------------------------------------------- Total $17,455 $16,348 ---------------------------------------------------------------------------- Income (loss) Before Income Taxes and Non-controlling Interest: --------------------------------------------------------------- 3 Months Ended March 31 3 Months Ended March 31 $000s 2008 2007 ---------------------------------------------------------------------------- MTI Polyfab $(74) $812 North American Silicones 56 10 Leewood (371) (157) Sterne 17 68 Corporate expenses (534) (582) ---------------------------------------------------------------------------- Total $(906) $151 ----------------------------------------------------------------------------
Financial Results:
Sales for the three months ended March 31, 2008 were $17.5 million, approximately 6.8% ahead of last year's sales of $16.3 million. This includes a decrease of approximately $1.9 million, due to the impact of currency fluctuations.
Aerospace sales of $6.2 million for the quarter were behind prior year's sales for the comparable period. Sales were reduced by approximately $0.8 million due to the lower U.S. dollar compared to exchange rates in effect last year.
Fabricated Products sales of $1.1 million were approximately 23.3% less than prior year's sales of $1.4 million for the same period. This was primarily due to an anticipated decline in sales to the automotive market.
North American Silicone sales of $5.8 million in 2008 increased by $1.7 million or approximately 40.5% compared to sales of $4.2 million for the three months ended March 31, 2007. Revenues of $1.6 million were generated from the acquisition of Mold-Ex in the third quarter of 2007. These revenues were offset by $1.0 million as a result of the lower U.S. dollar compared to exchange rates in effect in 2007.
Leewood sales of $3.1 million for the three months ended March 31, 2008 were marginally behind last year's sales of $3.2 million for the comparable period. This includes a decrease of approximately $63,000 due to currency fluctuation.
Sterne sales of $1.2 million for the three months ended March 31, 2008 were $87,000 higher than last year's sales of $1.1 million for the comparable period due to increased sales across all revenue sources, including clean room manufacturing, general manufacturing and distribution sales. This includes a decrease of approximately $25,000 due to currency fluctuation.
On a percentage basis, Aerospace accounted for 36% of total sales, compared with 39% for the same period last year. Silicone sales represented 58% of total sales compared to 52% for the comparable period last year. Fabricated Products accounted for 6% of total sales compared with 9% for last year.
The gross margin for the three months ended March 31, 2008 was $3.8 million, a decrease of $0.2 million or approximately 5.4% over the prior year. The gross margin percentage decreased to 21.8% from 24.5%. The decrease was primarily due to redundant costs in MTI Polyfab from outsourcing the majority of Aerospace manufacturing to Mexico and the decrease in the U.S. dollar. These factors were partially offset by the acquisition of Mold-Ex.
Total operating expenses for the three months ended March 31, 2008 of $3.8 million were $0.5 million higher than in the same period in 2007. Plant and laboratory expenses have increased due to the acquisition of Mold-Ex and MTI Polyfab costs increased with the Mexican contract manufacturing operation. Restructuring costs of $148,000 relate to changes in the business operations and forbearance arrangements with the bank.
EBITDA for the quarter was $0.3 million compared to the same period in prior year of $1.1 million. The decrease is primarily due to a decrease in gross margin and an increase in operating expenses as noted above. Sequentially, EBITDA has increased from the fourth quarter of 2007 from a negative EBITDA of $1.6 million to $0.3 million. This increase is a result of an increase in sales and gross margin and a reduction in restructuring costs recorded in the three months ended December 31, 2007.
The net loss for the quarter was $914,000 or $0.03 per share compared to a net income in the same period in prior year of $7,000 or $0.00 per share.
Financial Covenant Update:
As previously disclosed, MTI Global is subject to an amended forbearance agreement with its Bank dated February 22, 2008 pursuant to which the Company has until May 31, 2008 to amend its credit facilities with the Bank. The agreement also commits the Company to raise sufficient capital to repay the term loan then outstanding and meet its other liquidity needs. Pursuant to the amended forbearance agreement, the Company did not achieve its March 31, 2008 earnings before interest, taxes and depreciation covenant and a general covenant. The Bank has agreed to a continued forbearance of the defaults while the Company proceeds to satisfy the terms of the amended forbearance agreement.
The Company is proceeding through a process to meet the requirements of the amended forbearance agreement. As part of this process the company has signed a non-binding agreement with a private capital source for $7.0 million of mezzanine financing subject to the completion of due diligence and documentation. These funds will be utilized to repay the term bank loan, for restructing, and for other corporate initiatives.
Outlook:
At MTI Polyfab, Aerospace sales for the quarter were above budget and ahead of the previous quarter by almost $1.0 million. Margins were lower than expected as the company continued to support two manufacturing operations during the quarter. Subsequent to quarter end PolyFab's Aerospace plant in Mississauga was largely discontinued. Aerospace volumes are expected to grow as a number of programs increase their production rates although delays on the Boeing 787 have lowered expectations on that program for 2008. In Fabricated Products, a lower sales volume than expected 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. 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.
The Company expects North American Silicones to recover through the second half of 2008 - the first quarter showed a substantial sales improvement. Sales of Magnifoam, the principal product at the Richmond, Virginia plant were ahead of expectations. Subsequent to quarter end the Company announced it would shift production from the Buchanan, Virginia plant to its facility in Milton, Florida. This consolidation is expected to occur in the second half of fiscal 2008 and will further improve margins.
At Leewood, management expects double-digit sales growth in 2008 as the company begins to ship in increasing volumes on several of its new programs including Airbus A380 and A400M. The company expects stronger margins from the new business lines and operational savings on current business.
At Sterne, management expects sales to continue to grow at double-digit levels in 2008.
About MTI Global Inc.
MTI Global Inc. (TSX: MTI | news | PowerRating | PR Charts ) 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 First Quarter results on Thursday May 15, 2008, at 11:00 a.m. (Eastern). To join the conference call, please dial 1-800-588-4942 (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. 21271550#.
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 (In thousands of As at As at Canadian dollars) March 31, 2008 December 31, 2007 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Assets Current assets Cash and cash equivalents $ - $1,254 Cash deposited as collateral 715 651 Accounts receivable 13,724 11,774 Income taxes recoverable 9 20 Inventories 11,080 9,967 Prepaid expenses and deposits 399 424 ---------------------------------------------------------------------------- 25,927 24,090 Property, plant and equipment 13,650 13,240 Goodwill 10,572 9,930 Intangibles 662 689 Deferred development costs 10,485 10,046 ---------------------------------------------------------------------------- $61,296 $57,995 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current liabilities Bank indebtedness $7,892 $7,255 Accounts payable and accrued expenses 8,872 7,389 Current portion of long-term debt 3,341 3,670 ---------------------------------------------------------------------------- 20,105 18,314 Long-term debt 2,006 1,852 Non-controlling interest 306 264 ---------------------------------------------------------------------------- 22,417 20,430 ---------------------------------------------------------------------------- Commitments and contingencies Shareholders' equity Share capital 55,102 55,102 Contributed surplus 1,050 1,022 Accumulated other comprehensive loss (2,129) (4,117) Deficit (15,144) (14,442) ---------------------------------------------------------------------------- 38,879 37,565 ---------------------------------------------------------------------------- $61,296 $57,995 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- MTI Global Inc. Unaudited Interim Consolidated Statement of Deficit (In thousands of Three months ended Three months ended Canadian dollars) March 31, 2008 December 31, 2007 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Deficit, beginning of period $(14,442) $(6,384) Cumulative effect of adopting new accounting standards 212 - Net income for the period (914) 7 ---------------------------------------------------------------------------- Deficit, end of period $(15,144) $(6,377) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- MTI Global Inc. Unaudited Interim Consolidated Statements of Operations (In thousands of Canadian dollars, Three months ended Three months ended except per share amounts) March 31, 2008 March 31, 2007 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Sales $17,455 $16,348 Cost of sales 13,658 12,336 ---------------------------------------------------------------------------- Gross margin 3,797 4,012 ---------------------------------------------------------------------------- Operating expenses Plant and laboratory 719 377 Sales and marketing 1,305 1,291 Administrative 1,790 1,673 Restructuring costs 148 - Foreign exchange loss (gain) (117) 39 ---------------------------------------------------------------------------- 3,845 3,380 ----------------------------------------------------------------------------Operating income before the following items (48) 632 Amortization of property, plant and equipment 129 127 Amortization of intangibles 50 - Amortization of development costs 442 331 ---------------------------------------------------------------------------- 621 458 ---------------------------------------------------------------------------- Operating income (loss) before other items (669) 174 ---------------------------------------------------------------------------- Other Items Interest on long-term debt 119 93 Other interest expense 127 49 Interest and other income (9) (119) ---------------------------------------------------------------------------- 237 23 ---------------------------------------------------------------------------- Income (loss) before income taxes and non-controlling interest (906) 151 ---------------------------------------------------------------------------- Income taxes Current income tax expense - 38 Future income tax expense - 72 ---------------------------------------------------------------------------- - 110 ---------------------------------------------------------------------------- Income (loss) before non-controlling interest (906) 41 Non-controlling interest 8 34 ---------------------------------------------------------------------------- Net income (loss) for the period $(914) $7 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Income (loss) per share - Basic and diluted $(0.03) $0.00 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- MTI Global Inc. Unaudited Interim Consolidated Statement of Comprehensive Income (Loss) (In thousands of Three months ended Three months ended Canadian dollars) March 31, 2008 December 31, 2007 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Net income (loss) for the period $(914) $7 Other comprehensive income (loss) Net change in cumulative translation adjustment 2,127 (69) Unrecognized gain on foreign currency forward contracts (139) 56 ---------------------------------------------------------------------------- 1,988 (13) ---------------------------------------------------------------------------- Comprehensive income (loss) $1,074 $(6) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- MTI Global Inc. Unaudited Interim Consolidated Statements of Cash Flows (In thousands of Three months ended Three months ended Canadian dollars) March 31, 2008 December 31, 2007 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Cash flows from operating activities Net income (loss) for the period $(914) $ 7 Adjustments for non-cash items Amortization 948 785 Future income tax - 72 Unrealized foreign exchange loss 244 186 Stock option expense 28 39 Cumulative effect of adopting new accounting standards 212 - Non-controlling interest 8 34 ---------------------------------------------------------------------------- 526 1,123 Net change in non-cash working capital balances (1,588) (783) ---------------------------------------------------------------------------- Cash provided by (used in) operating activities (1,062) 340 ---------------------------------------------------------------------------- Cash flows from investing activities Purchase of property, plant and equipment (125) (377) Deferred development costs capitalized (303) (558) ---------------------------------------------------------------------------- Cash used in investing activities (428) (935) ---------------------------------------------------------------------------- Cash flows from financing activities Repayments of long-term debt (403) (293) Increase in bank indebtedness 637 17 Reduction (increase) in cash deposited as collateral (64) 44 ---------------------------------------------------------------------------- Cash provided by (used in) financing activities 170 (232) ---------------------------------------------------------------------------- Foreign exchange on cash and cash equivalents 66 (23) ---------------------------------------------------------------------------- Net decrease in cash during the period (1,254) (850) Cash and cash equivalents, beginning of period 1,254 1,479 ---------------------------------------------------------------------------- Cash and cash equivalents, end of period $ - $629 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Supplemental cash flow information Cash paid for interest $246 $134 Cash paid for income taxes $ - $ 6 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Contacts: MTI Global Inc. Bill Neill President & Chief Executive Officer (905) 564-9700 Website: www.mtiglobalinc.com Fleishman-Hillard Canada Anne Lachance Investor Relations (416) 214-0701
SOURCE: MTI Global Inc.
http://www.mtiglobalinc.com
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