Novamerican Steel Inc.

Novamerican Steel Inc.

January 06, 2005 11:15 ET

Novamerican Reports 28th Consecutive Profitable Quarter and Record Annual Profit


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: NOVAMERICAN STEEL INC.

NASDAQ SYMBOL: TONS

JANUARY 6, 2005 - 11:15 ET

Novamerican Reports 28th Consecutive Profitable
Quarter and Record Annual Profit

MONTREAL, QUEBEC--(CCNMatthews - Jan. 6, 2005) - Novamerican Steel Inc.
(NASDAQ:TONS) announced today its financial results for the fourth
quarter ended November 27, 2004. This was the 28th consecutive
profitable quarter for the Company. It also reported a record annual
profit for fiscal 2004. (All amounts are in U.S. dollars).



SUMMARY OF FINANCIAL HIGHLIGHTS
(in thousands of U.S. dollars, except per share and tons data)

QUARTER ENDED
-------------------------------------------------
November 27, November 29,
2004 2003 Change
-----------------------------------------------

Net sales $215,165 $140,833 $74,332 52.8%
Gross margin 30.5% 24.0% 6.5% 54.4%
Net income $23,689 $7,474 $16,215 217.0%
Basic income per share $2.44 $0.77 $1.67 216.9%
Diluted income per share $2.37 (a)

Tons sold 212,082 238,013 (25,931) -10.9%
Tons processed 254,274 216,281 37,993 17.6%
-----------------------------------------------
466,356 454,294 12,062 2.7%
-----------------------------------------------
-----------------------------------------------

YEAR ENDED
-------------------------------------------------
November 27, November 29,
2004 2003 Change
-----------------------------------------------

Net sales $768,627 $507,067 $261,560 51.6%
Gross margin 29.3% 21.0% 8.3% 42.6%
Net income $72,911 $13,082 $59,829 457.4%
Basic income per share $7.51 $1.35 $6.16 456.3%
Diluted income per share $7.35 (a)

Tons sold 914,294 870,250 44,044 5.1%
Tons processed 900,606 794,011 106,595 13.4%
-----------------------------------------------
1,814,900 1,664,261 150,639 9.1%
-----------------------------------------------
-----------------------------------------------

(a) The stock options were antidilutive.


FOURTH QUARTER RESULTS

Sales for the fourth quarter increased by $74.3 million, or 52.8%, to
$215.2 million from $140.8 million for the fourth quarter in 2003.

Sales for the year ended November 27, 2004 increased by $261.6 million,
or 51.6%, to $768.6 million from $507.1 million for the same period in
2003.

Tons sold and processed in the fourth quarter of 2004 increased by
12,062, or 2.7%, to 466,356 tons from 454,294 in the fourth quarter of
2003.

Tons sold and processed for the year ended November 27, 2004 increased
by 150,639 tons, or 9.1%, to 1,814,900 tons from 1,664,261 tons for the
same period in 2003.

The gross margin for the fourth quarter 2004 increased to 30.5% from
24.0% for the fourth quarter in 2003.

The gross margin for the year ended November 27, 2004 increased to 29.3%
from 21.0% in 2003.

Net income for the fourth quarter increased by $16.2 million, or 217.0%
to, $23.7 million, or $2.44 per share (or $2.37 diluted), versus $7.5
million, or $0.77 per share, for the same period in 2003.

Net income for the year ended November 27, 2004 increased by $59.8
million, or 457.4%, to $72.9 million, or $7.51 per share (or $7.35
diluted), versus $13.1 million, or $1.35 per share for the year 2003.

OPERATIONS

The year 2004 results reflect strong performances from all the company's
operations. The significant increase in net income reflects the
positive effect of higher steel prices, a substantial increase in tons
processed and inventory gains.

The move into the Company's new manufacturing facility in Montreal was
substantially completed in December. Management expects productivity
gains and cost savings to be realized with the move, beginning in the
second quarter of 2005.

OUTLOOK

Reports of continued strong demand in many manufacturing industries
should bode well for steel demand and steel prices in 2005. With North
American steel prices now more in line with European and Asian steel
prices, management anticipates price stability through the first
quarter. There are few import offers for the first quarter, and those
that are available are priced at domestic levels.

The decline in the value of the U.S. dollar in 2004 appears to have had
a positive effect on the U.S. manufacturing sector, which should lead to
higher capital spending in 2005.

Despite cautious forecasts from the automotive industry, the Company's
automotive order backlog in the first quarter is up considerably from
the same period in 2004.

COMPANY DESCRIPTION

Novamerican Steel Inc., based in Montreal, Canada with twelve operating
locations in Canada and eleven operating locations in the United States,
processes and distributes carbon steel, stainless steel and aluminum
products, including carbon steel tubing for structural and automotive
markets.

FORWARD-LOOKING (SAFE HARBOUR) STATEMENTS

Except for historical information contained herein, the matters set
forth in this press release are forward-looking statements that involve
risks and uncertainties including, but not limited to, product demand,
competition, regulatory approvals, the effect of economic conditions and
technological difficulties and other risks detailed in the Company's
filings with the U.S. Securities and Exchange Commission.

Conference call: Thursday January 6, 2005 at 3:00 p.m. Please call
514-368-6455 for details.



Novamerican Steel Inc. - Consolidated Financial Statements
-----------------------------------------------------------

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
---------------------------------------------------------------------
(in accordance with U.S. GAAP, in thousands of U.S. dollars, except
per share and tons data)


Three months ended Year ended
---------------------------------------------------------------------
November 27, November 29, November 27, November 29,
2004 2003 2004 2003
---------------------------------------------------------------------
$ $ $ $
Net sales 215,165 140,833 768,627 507,067
Cost of sales 149,545 106,992 543,503 400,825
---------------------------------------------------------------------
Gross margin 65,620 33,841 225,124 106,242
---------------------------------------------------------------------

Operating
expenses
Plant 10,634 9,204 40,780 34,000
Delivery 4,738 4,666 19,478 17,394
Selling 3,607 2,853 13,321 11,410
Administrative
and general 9,801 4,770 33,548 20,424
---------------------------------------------------------------------
28,780 21,493 107,127 83,228
---------------------------------------------------------------------
Operating
income 36,840 12,348 117,997 23,014
---------------------------------------------------------------------

Interest
expense 1,280 1,332 4,976 5,144
Share in income
of joint
ventures (21) (75) (312) (545)
---------------------------------------------------------------------
1,258 1,257 4,664 4,599
---------------------------------------------------------------------
Income before
income taxes 35,582 11,091 113,333 18,415
Income taxes 11,893 3,617 40,422 5,333
---------------------------------------------------------------------
Net income 23,689 7,474 72,911 13,082
---------------------------------------------------------------------
---------------------------------------------------------------------

Net income
per share
Basic $2.44 $0.77 $7.51 $1.35
---------------------------------------------------------------------
---------------------------------------------------------------------
Diluted 2.37 (a) 7.35 (a)
---------------------------------------------------------------------
---------------------------------------------------------------------

Weighted average
number of
shares
outstanding 9,707,270 9,700,000 9,707,270 9,700,000
---------------------------------------------------------------------
---------------------------------------------------------------------

Comprehensive
income
Net income 23,689 7,474 72,911 13,082
Changes in
cumulative
translation
adjustment 11,453 4,748 10,344 12,477
Changes in fair
value of
interest rate
swaps, net of
deferred taxes 158 84 533 289
---------------------------------------------------------------------
35,300 12,306 83,788 25,848
---------------------------------------------------------------------
---------------------------------------------------------------------

Tons sold 212,082 238,013 914,294 870,250
Tons processed 254,274 216,281 900,606 794,011
---------------------------------------------------------------------
466,356 454,294 1,814,900 1,664,261
---------------------------------------------------------------------
---------------------------------------------------------------------

(a) The stock options were antidilutive


CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
---------------------------------------------------------------------

(in accordance with U.S. GAAP, in thousands of U.S. dollars, except
share data)
Accumulated
Other Total
Common Shares Retained Comprehensive Shareholders'
Number Amount Earnings Income Equity
---------------------------------------------------------------------
$ $ $ $
Balance at
November 30,
2003 9,700,000 28,404 111,871 5,440 145,715
Options
exercised 86,089 1,205 1,205
Net income 72,911 72,911
Changes in
cumulative
translation
adjustment 10,344 10,344
Changes in
fair value
on interest
rate swaps,
net of
deferred
taxes - - - 533 533
---------------------------------------------------------------------
Balance at
November 27,
2004 9,786,089 29,609 184,782 16,317 230,708
---------------------------------------------------------------------
---------------------------------------------------------------------


CONSOLIDATED STATEMENT OF CASH FLOWS
---------------------------------------------------------------------
(in accordance with U.S. GAAP, in thousands of U.S. dollars)

Three months ended Year ended
---------------------------------------------------------------------
November 27, November 29, November 27, November 29,
2004 2003 2004 2003
---------------------------------------------------------------------
$ $ $ $
CASH FLOWS
FROM OPERATING
ACTIVITIES
Net income 23,689 7,474 72,911 13,082
Adjustments to
reconcile net
income to net
cash from
(used for)
operating
activities
Depreciation
and
amortization 2,233 1,894 8,680 6,962
Share in income
of joint
ventures (21) (75) (312) (545)
Deferred
income taxes 454 2,414 695 2,208
Loss on disposal
of property,
plant and
equipment 145 340 731 351
Changes in
working capital
items
Accounts
receivable (4,283) (9,658) (36,584) (5,895)
Income taxes
receivable - 858 595 (595)
Inventories (24,579) (3,381) (71,339) 3,276
Prepaid
expenses
and other 571 147 530 (479)
Accounts payable
and accrued
liabilities 5,482 12,511 23,461 3,516
Income taxes
payable 4,613 687 18,424 (3,221)
---------------------------------------------------------------------
Net cash from
operating
activities 8,304 13,211 17,793 18,660
---------------------------------------------------------------------

CASH FLOWS FROM
INVESTING ACTIVITIES
Issue of common
shares 1,205 - 1,205 -
Acquisition of
remaining interest
in joint venture - 0 - (4,100)
Acquisition of
minority interest - 0 (161) (2,278)
Investment in a
joint venture - (0) - 8,640
Distribution from
a joint venture 23 - 1,405 -
Additions to
property, plant
and equipment (2,860) (15,208) (9,056) (25,140)
Proceeds from
disposal of
property, plant
and equipment 1,061 5,933 3,456 6,068
Other assets (1) (177) (176) (181)
---------------------------------------------------------------------
Net cash used for
investing
activities (572) (9,452) (3,327) (16,991)
---------------------------------------------------------------------

CASH FLOWS FROM
FINANCING ACTIVITIES
Net increase
(decrease) in
bank indebtedness 1,032 7,174 (15,564) 13,323
Advance due to
an employee (2,732) 1,528 (2,732) 1,528
Proceeds from
long-term debt (2,987) 26 21,011 1,872
Repayment on
long-term debt (4,325) (6,587) (17,658) (16,134)
---------------------------------------------------------------------
Net cash from
(used for)
financing
activities (9,012) 2,141 (14,943) 589
---------------------------------------------------------------------

Effect of exchange
rate changes on
cash and cash
equivalents 805 822 674 1,417
---------------------------------------------------------------------
Net increase
(decrease) in cash
and cash
equivalents (475) 6,722 197 3,675
Cash and cash
equivalents,
beginning of
period 11,937 4,543 11,265 7,590
---------------------------------------------------------------------
Cash and cash
equivalents, end
of period 11,462 11,265 11,462 11,265
---------------------------------------------------------------------
---------------------------------------------------------------------

SUPPLEMENTAL
DISCLOSURE OF
CASH FLOW
INFORMATION
Interest paid 1,431 1,309 4,339 4,821
---------------------------------------------------------------------
---------------------------------------------------------------------
Income
taxes paid 7,314 740 22,337 7,335
---------------------------------------------------------------------
---------------------------------------------------------------------


CONSOLIDATED BALANCE SHEETS
---------------------------------------------------------------------
(in accordance with U.S. GAAP, in thousands of U.S. dollars)

November 27, November 30,
2004 2003
---------------------------------------------------------------------
$ $
ASSETS
Current assets
Cash and cash equivalents 11,462 11,265
Accounts receivable 125,718 81,991
Income taxes receivable - 595
Inventories 172,850 92,876
Prepaid expenses and other 799 1,325
Deferred income taxes 1,650 1,656
312,480 189,710
Investment in joint ventures 2,263 3,356
Property, plant and equipment 106,308 105,510
Goodwill, net of accumulated
amortization 12,789 12,629
Other assets 1,040 1,452
434,880 312,656

LIABILITIES
Current liabilities
Current portion of long-term debt 4,855 7,109
Bank indebtedness 3,442 18,863
Accounts payable and accrued
liabilities 103,964 75,631
Income taxes payable 19,988 -
Deferred income taxes - -
132,249 101,603
Long-term debt 56,766 50,553
Fair value of interest rate swaps 741 1,812
Deferred income taxes 14,416 12,973
204,172 166,941

SHAREHOLDERS' EQUITY
Share capital 29,609 28,404
Retained earnings 184,782 111,871
Accumulated other comprehensive income 16,317 5,440
---------------------------------------------------------------------
230,707 145,715
---------------------------------------------------------------------
434,880 312,656
---------------------------------------------------------------------
---------------------------------------------------------------------


-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Novamerican Steel Inc.
    Christopher H. Pickwoad, CA
    Chief Financial Officer
    (514) 368-6403
    www.novamerican.com