MTI Global Inc.
TSX : MTI

MTI Global Inc.

May 13, 2009 18:01 ET

MTI Global Reports 2009 First Quarter Results

34% year-over-year sales growth reported in Polyfab division

MISSISSAUGA, ONTARIO--(Marketwire - May 13, 2009) - MTI Global Inc. (TSX:MTI) today reported its financial results for the three-month period ended March 31, 2009.

Q1 Highlights

- Sales grew to $13.5 million in Q1 2009 up from $13.0 million for the same period last year

- Polyfab sales delivered a 34% increase compared to Q1 2008

- Reported net loss of $4.8 million ($0.17 per share) compared to $0.9 million ($0.03 per share) in Q1 2008

-- Loss from discontinued operations held for sale for the quarter was $3.8 million or $0.14 per share

-- Loss from continuing operations for the quarter was $1.0 million or $0.03 per share which includes a long-lived asset impairment charge at Milton of $0.4 million

- Subsequent to quarter-end:

-- Closed asset purchase agreement to sell the majority of the assets of Leewood and N.A. Silicone's Richmond, Virginia plant

-- Proceeds from the sale were used primarily to reduce debt obligations from approximately $18.6 million to approximately $10.2 million

"We are delighted that MTI reported a year-over-year sales increase, and the results demonstrate that the main driver of future growth and profitability will be our Polyfab division," said President and Chief Executive Officer Bill Neill. "The first quarter saw MTI Global begin its strategy to exit from the silicone business through the sale of Leewood and Richmond operations."



Three Month Results:

Sales

Three months ended Three months ended
March 31, 2009 March 31, 2008
-----------------------------------------------------------
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Polyfab
Aerospace $9,243 $6,237
Fabricated Products 600 1,085
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Total Polyfab 9,843 7,322

Silicone
N.A. Silicone 2,200 4,270
Leewood 94 173
Sterne 1,375 1,202
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Total $13,512 $12,967
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Sales for the three months ended March 31, 2009 were $13.5 million, approximately 4.2% ahead of last year's sales of $13.0 million. This includes an increase of approximately $2.3 million, due to the impact of currency fluctuations.

Aerospace sales of $9.2 million for the quarter were $48.2% ahead of prior year's sales for the comparable period due to an increase in sales volume and approximately $1.7 million due to the higher U.S. dollar compared to exchange rates in effect last year.

Fabricated Products sales of $0.6 million were approximately 44.7% less than prior year's sales of $1.1 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 $2.2 million decreased by $2.1 million or approximately 48.5% compared to sales of $4.3 million for the three months ended March 31, 2008. The decrease is primarily due to the continued decline in the North American automotive market and was offset by $0.4 million as a result of the higher U.S. dollar compared to exchange rates in effect in 2008.

Leewood sales of $0.09 million for the three months ended March 31, 2009 were behind last year's sales of $0.17 million for the comparable period due to a decrease in volume.

Sterne sales of $1.4 million for the three months ended March 31, 2009 were $0.2 million higher than last year's sales of $1.2 million 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 $0.1 million due to the increase in the Euro.



Income (loss) Before Non-controlling Interest

Three months ended Three months ended
March 31, 2009 March 31, 2008
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Polyfab $1,255 $(74)
N.A. Silicone (974) (24)
Leewood 24 78
Sterne 33 9
Corporate (1,277) (534)
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Total $(939) $(545)
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MTI Polyfab's income before non-controlling interest for the three months ended March 31, 2009 of $1.3 million was $1.3 million ahead of last year's income. The increase in the U.S. dollar contributed approximately $0.2 million to the increase in income. The remaining improvement is due to reduced costs associated with the outsourcing of its Aerospace manufacturing to Mexico, elimination of redundant costs associated with maintaining operations in Canada, and elimination of additional labour charges to reduce backlog. These costs were largely eliminated in the fourth quarter of 2008.

The $0.97 million loss before non-controlling interest in N.A. Silicone for the quarter represents an increase of $0.95 million from prior year primarily due to lower sales as a result of the continued decline in the North American automotive market and a long-lived asset impairment charge of $0.4 million.

Leewood posted an income before non-controlling interest for the three months ended March 31, 2009 of $0.02 million compared to income in prior year of $0.08 million. The decrease is due to a reduction in sales volume.

Sterne posted income before non-controlling interest for the quarter of $0.03 million compared to income in prior year of $0.01 million. The increase is a result of an increase in sales and an increase in gross margin due to a change in product mix.

Loss from Continuing Operations

The loss from continuing operations for the quarter was $1.0 million or $0.03 per share compared to a loss in prior year of $0.6 million or $0.02 per share.

Loss from Discontinued Operations Held for Sale

The loss from discontinued operations held for sale for the quarter was $3.8 million or $0.14 per share compared to a loss in prior year of $0.4 million or $0.01 per share.

Net Loss

The net loss for the quarter was $4.8 million or $0.17 per share compared to a loss in prior year of $0.9 million or $0.03 per share.

Financial Covenant Update:

The Company is in breach of financial and general covenants under the credit facilities with its principal Canadian bank (the "Bank") and it mezzanine lender (the "Lender). In particular, the Company did not achieve its December 31, 2008 earnings before interest, taxes and depreciation, fixed charge coverage and funded debt to earnings before interest, taxes and depreciation covenants or its March 31, 2009 fixed charge coverage covenant. Furthermore, the Company is in breach of certain general covenants it was obligated to satisfy pursuant to waiver agreements entered into by the Company with its Bank and Lender based on its June 30, 2008 and subsequent interim monthly results. The covenant violation provides the Bank and Lender with the right to demand repayment of its indebtedness. Subsequent to March 31, 2009, the Company is in continuing discussions with the Bank and the Lender to obtain a waiver of the breaches including amended covenants.

Outlook:

Based on the sale of the majority of its Leewood and Richmond, Virginia silicone assets, operational changes completed to date, and preliminary indications in the aerospace market, the Company remains cautiously optimistic that it will report improving results through the balance of 2009. In view of the Canadian dollar value against the U.S. dollar, the Company is increasingly confident about achieving improved results with most of its aerospace programs relocated to Mexico and the sale of the majority of the assets of Leewood and N.A. Silicone's Richmond, Virginia plant. In addition, the Company is making satisfactory progress on the disposition of the remaining silicone assets, although the current economic climate is slowing the process. The Company has engaged an investment bank to assist in these transactions.

The results for the first quarter of 2009 were better than prior year but below expectations. Revenues and gross margin improved primarily through increased volume in Aerospace at Polyfab and favorable exchange rates compared to prior year. However, the Company continued to incur lower than expected revenues at N.A. Silicone due to the continued decline in the North American automotive market.

At Polyfab, management realized on expected sales growth in Aerospace during the first quarter. Sales for the quarter were ahead of target and ahead of the prior year. Margins were also higher than prior year as the Company reduced costs associated with the outsourcing of most of its Aerospace manufacturing to Mexico, redundant costs associated with maintaining operations in Canada, and additional labour charges to reduce backlog. The Company expects the strong sales volumes and gross margins to continue through the balance of 2009 although there will be some changes in the mix of products. Despite recent pullbacks in the broader aerospace market, the Company remains well positioned to capitalize on opportunities in the regional jet, the resurgent turboprop markets, and the retrofit market.

In Fabricated Products, the Company perceives potential opportunities to leverage our capabilities into the aerospace market as we seek an expansion in the range of business services being offered to customers.

In N.A. Silicone, results deteriorated as a direct result of the downturn in the automotive industry. N.A. Silicone operates primarily in the automotive sector with unique reinforced silicone hose and sunroof sealing products. As such it is subject to the impact of the current downturn in auto manufacturing. The N.A. Silicone division also continues to experience the pressure of higher raw material prices and has yet to fully realize on synergies from the plant consolidation that occurred in 2008.

At Sterne, management expects sales to continue to grow through 2009. Success will be primarily dependent on Sterne's ability to grow clean room manufacturing sales and to expand its distribution sales for Leewood's products.

About MTI Global:

MTI Global Inc. (TSX:MTI) designs, develops and manufactures custom-engineered products using silicone and other cellular materials. The Company serves a variety of specialty markets focused on two main areas: Silicone and MTI Polyfab, comprising, Aerospace and Fabricated Products. The Company designs and fabricates energy management systems from a variety of flexible, cellular materials. MTI Global also produces and distributes specialty silicone elastomer products. MTI Global'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 Global's head office and Canadian manufacturing operations are located in Mississauga, Ontario, with international manufacturing operations located in Milton, Florida and a contract manufacturer venture in Ensenada, Mexico. The Company also maintains engineering support centres in Brazil and Toulouse, France. The Company's website is www.mtiglobalinc.com.

Investors, analysts and the media are invited to participate in a conference call to discuss the 2009 First Quarter results on Thursday, May 14, 2009, at 11 a.m. (Eastern). To join the conference call, please dial 1-800-590-1508 (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. 21306059#.

The foregoing press release contains forward-looking information within the meaning of applicable securities laws, including statements relating to future growth and profitability, improved results through the balance of 2009, capitalization by Polyfab and Fabricated Products on certain opportunities in the aerospace market and increased sales at Sterne. In particular, the Outlook section of this press release includes certain future-oriented financial information which is intended to provide readers with an indication as to management's plans, expectations and objectives for the balance of 2009., However, readers are cautioned that it may not be appropriate for any other purpose. Terms and phrases such as "continued", "expects", "improving results" and "increasingly confident", or words or phrases of a similar nature are intended to identify forward-looking statements and information. These statements and information are derived from MTI Global's current expectations and assumptions regarding past experience, historical trends and current conditions including existing business prospects and opportunities, reduction and elimination of costs at Polyfab, proposed expansion in range of services offered by Fabricated Products, expected synergies from plant consolidations by N.A. Silicone, ability of Sterne to grow clean room manufacturing sales and distribution sales for Leewood products. Although MTI Global believes that the expectations and assumptions reflected in any forward-looking information are reasonable, the results or events predicted in these statements may differ materially from actual results or events, many risks, uncertainties and other factors could cause results or events to differ from current expectations, including the impact of price and product competition, general industry and market conditions, inability to successfully plan and execute business improvement strategies, restrictions and covenants contained in credit agreements and existence of defaults under such covenants, fluctuations in currency, exchange and interest rates and commodity prices, reliance on key customers and ability of Sterne to grow as well as the other factors described elsewhere in this press release and in MTI Global's filings with applicable securities regulatory authorities, including its most recently filed Annual Information Form, which are available at www.sedar.com Consequently, these factors should be considered carefully and readers should not place undue reliance on MTI Global's forward-looking information. MTI Global disclaims any intention or obligation to update or revise any forward-looking information, except as required by applicable law.



Financial Statements Follow

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MTI Global Inc.
Unaudited Interim Consolidated Balance Sheets
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As at As at
March 31, December 31,
2009 2008
(In thousands of Canadian dollars) $ $
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Restated
ASSETS
Current
Cash and cash equivalents 2,587 1,704
Restricted cash 735 750
Short-term investment - 109
Accounts receivable 11,715 12,269
Income taxes recoverable 115 111
Inventories 7,197 7,073
Prepaid expenses and deposits 326 413
Assets of discontinued operations held for sale 9,321 12,446
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31,996 34,875

Property, plant and equipment, net 5,120 5,194
Goodwill 6,729 6,729
Intangibles, net 159 604
Deferred development costs, net 7,473 7,985
Long-term asset held for sale 633 611
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52,110 55,998
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LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Bank indebtedness 8,771 8,288
Accounts payable and accrued expenses 9,867 10,010
Subordinated debt 7,000 7,000
Current portion of long-term debt 866 556
Liabilities of discontinued operations held
for sale 487 865
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26,991 26,719
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Long-term debt 2,008 2,059
Non-controlling interest 418 393
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29,417 29,171
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Commitments and contingencies

Shareholders' equity
Share capital 55,102 55,102
Contributed surplus 1,166 1,143
Warrants 1,474 1,474
Accumulated other comprehensive loss 2,046 1,400
Deficit (37,095) (32,292)
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22,693 26,827
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52,110 55,998
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MTI Global Inc.
Unaudited Interim Consolidated Statements of Deficit
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Three months ended Three months ended
March 31, 2009 March 31, 2008
(In thousands of Canadian dollars) $ $
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Deficit, beginning of period (32,292) (14,442)
Cumulative effect of adopting new
accounting standards - 212
Net loss for the period (4,803) (914)
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Deficit, end of period (37,095) (15,144)
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MTI Global Inc.
Unaudited Interim Consolidated Statements of Operations
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(In thousands of Canadian dollars, Three months ended Three months ended
except per share amounts) March 31, 2009 March 31, 2008
$ $
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Restated

Sales 13,512 12,967

Cost of sales 9,671 10,166

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Gross margin 3,841 2,801
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Operating expenses
Plant and laboratory 720 598
Sales and marketing 1,132 854
Administrative 1,332 1,262
Restructuring costs 706 148
Foreign exchange gain (236) (111)
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3,654 2,751
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Operating income before the following items 187 50
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Amortization of property, plant and equipment 17 111
Amortization of intangibles 62 50
Amortization of deferred development costs 342 284
Long-lived asset impairment 403 -
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824 445
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Loss before other items (637) (395)
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Other items
Interest on long-term debt 3 61
Interest on subordinated debt 220 -
Other interest expense 79 98
Interest and other income - (9)
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302 150
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Loss before non-controlling interest (939) (545)
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Non-controlling interest 28 8
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Loss from continuing operations (967) (553)
Loss from discontinued operations
held for sale (3,836) (361)
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Net loss (4,803) (914)
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Basic and diluted loss per share
Continuing operations (0.03) (0.02)
Discontinued operations held for sale (0.14) (0.01)
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(0.17) (0.03)
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MTI Global Inc.
Unaudited Interim Consolidated Statements of Comprehensive Income (Loss)
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Three months ended Three months ended
March 31, 2009 March 31, 2008
(In thousands of Canadian dollars) $ $
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Net loss for the period (4,803) (914)
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Other comprehensive income
Net change in cumulative
translation adjustment 646 2,127
Unrealized loss on foreign exchange
forward contracts - (139)
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646 1,988
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Comprehensive income (loss) (4,157) 1,074
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MTI Global Inc.
Unaudited Interim Consolidated Statements of Cash Flows
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Three months ended Three months ended
March 31, 2009 March 31, 2008
(In thousands of Canadian dollars) $ $
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Restated

Operating activities
Loss from continuing operations (967) (553)
Add items not involving cash
Amortization 570 625
Unrealized foreign exchange loss 81 244
Long-lived asset impairment 403 -
Stock option expense 23 28
Non-controlling interest 28 8
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270 352

Cumulative effect of adopting new
accounting standards - 55
Net change in non-cash working
capital balances 59 (1,437)
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Cash provided by (used in)
operating activities 329 (1,030)
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Investing activities
Purchase of property, plant and equipment (51) (119)
Deferred development costs capitalized (45) (171)
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Cash used in investing activities (96) (290)
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Financing activities
Repayments of long-term debt - (151)
Decrease in bank indebtedness (60) (278)
Decrease in short-term investment 109 -
Decrease (increase) in restricted cash 15 (64)
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Cash provided by (used in) financing activities 64 (493)
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Foreign exchange on cash and cash equivalents 81 11
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Net increase (decrease) in cash
during the period from
continuing operations 378 (1,802)

Net increase in cash during the
period from discontinued operations
held for sale 505 548

Cash and cash equivalents, beginning
of period 1,704 1,254
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Cash and cash equivalents, end of period 2,587 -
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Supplemental cash flow information
Interest paid 379 246
Income taxes paid - -
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Contact Information

  • MTI Global Inc.
    Bill Neill
    Chief Executive Officer
    (905) 564-9700
    or
    Fleishman-Hillard Canada
    Alison Ford
    Investor Relations
    (416) 214-0701