MTI Global Inc.
TSX : MTI

MTI Global Inc.

November 09, 2005 22:21 ET

MTI Global Reports Financial Results for Q3 Fiscal 2005

MISSISSAUGA, ONTARIO--(CCNMatthews - Nov. 9, 2005) -

Wins First Contract with Airbus Military

MTI Global Inc. (TSX:MTI) today reported financial results for the three months and year to date ended September 30, 2005. The company also reported that it has secured its first contract with Airbus Military.

Airbus Contract

MTI is pleased to announce that it has recently contracted to manufacture thermal and acoustic primary insulation for the front section of the new military A400M aircraft currently under development by Airbus Military of Toulouse, France.

"This significant breakthrough represents the first contract for wide body aircraft the company has won," said Mr. Neill. "The initial order is relatively modest, but we believe this will open the door for MTI Global to compete and win on other Airbus contracts."

Rob Brenninger, MTI's project program manager, noted the competitive nature of the bid. "Large aircraft manufacturers are interested in our unique materials science knowledge. They recognize our global superiority in providing systems for Regional Jets and are interested in seeing that technology extended to larger commercial aircraft. In addition, they also want the lowest price that a lean manufacturing operation can provide. We are fortunate to be able to deliver on both fronts."

Airbus estimates that they will build approximately 380 A400M Military Transport aircraft. The insulation contract won by MTI has a value of approximately $8 million.

Q3 Highlights

- Total sales increased 23% to $46,628,000 in the first nine months of the fiscal year, despite the effects of a lower U.S. dollar and a lower Euro

- Sales for the third quarter, ended September 30, 2005, are up 24% to $15,535,000

- Reported net income for the nine months ended September 30, 2005 of $1,535,000 or 6 cents per share year-to-date ($149,000 or one cent per share in the third quarter)

- Company management expects near-term performance to be in line with the results achieved this year to date

"The third quarter of fiscal 2005 was a solid one for MTI Global," said Bill Neill, MTI President and CEO. "As we noted in our last quarter, the company has momentum that is generating positive results across quarters. We are pleased to report that sales are up in all divisions over the third quarter in 2004, continuing the progressive upward trend we first saw in 2002. As a result, we have recorded our strongest nine month performance in years."

Financial Results

Net income for the nine month period ended September 30, 2005 stood at $1,535,000, which represents an 84% increase over the same period last year, when net income was $835,000. On a quarterly basis, MTI's net income for the three-month period ended September 30, 2005 rose 82% to $149,000, compared with $82,000 in the same period in 2004.

"We're encouraged by the strong financial showing of MTI for the three and nine month period ended September 30, 2005," said Mr. Neill. "Although we saw solid growth in most of our divisions, there is still work to do. In particular, we will focus in the coming months on improving profitability on aerospace sales at MTI Polyfab. The good news is that we were able to reduce the backlog from delays in the first quarter and get back on schedule, which will reduce production costs in the future. "

MTI operates three major business segments, for which quarterly summaries appear below:

MTI Polyfab (Canada)

Sales were strong, but higher production expenses, especially related to both materials and labour costs, resulted in a higher cost of goods sold. Total sales in aerospace were $6,625,000, which is 20% higher than the year before. This figure includes a decrease of $475,000 related to the lower U.S. dollar. The new contract for the Airbus A400M, noted above, should have long-term benefits for the aerospace unit. The Fabricated Products division continues to face challenges in confronting a changing market; however, sales there were $1,562,000 or 2% higher than in 2004.

North American Silicone

We continue to realize higher sales in this division as a result of the Groendyk acquisition. Sales were $5,032,000, which is a 47% improvement over last year's figure of $3,428,000. Specialty Silicones' sales increased 1% in Canadian dollars; however, the impact of a lower U.S. dollar reduced reported sales by approximately $180,000. In U.S. dollars, sales increased $155,000 or 10% due to robust business in transit seating foam and our siltec product.

MTI Leewood

The lower exchange rate of the Euro had an effect on results at Leewood. Although sales of $2,316,000 were $222,000, or 11%, higher than last year, sales for the quarter were also reduced by $210,000 as a result of the fluctuation in the exchange rate. In Euros, the sales figure increase is approximately EUR 270,000 or 20% growth across a range of products.

Acquisition of Sterne

On November 8, 2005, MTI announced that it had signed an agreement to purchase 51% of Sterne SARL of Cavaillon, France, a producer of silicone tubing, invasive and other medical devices and platinum cured silicone in extruded form for the food industry. The transaction carries a purchase price of EUR 49,000 plus transaction costs, as well as including an agreement to lend Sterne EUR 300,000 to complete an upgrade of their facilities. This acquisition gives MTI a foothold in the lucrative and expanding medical devices market. The terms of the acquisition also give MTI the option to eventually purchase the remaining 49% of Sterne within the next six years. Sterne SARL's revenues are estimated at EUR 1.6 million for 2005 and are expected to rise to EUR 2.5 million in 2006 with the addition of new contracts. The transaction is expected to close in November 2005.

Outlook

Work on MTI's cost reduction program continued and yielded results, however, the acquisition of Groendyk and growth in MTI's sales activities have spurred additional, worthwhile expenditures.

"Our company continues to win new business and management believes that our current momentum will continue in the home stretch of the year" added Mr. Neill. "With our backlog in aerospace cleared up and new orders coming in, we have every reason to continue to believe that MTI will meet our budget projections for the year."

MTI has no debt in Canada and has reduced its total debt, due partially to the $11,146,000 raised early in the second quarter of 2005 through a private placement.



Sales

3 Months 9 Months

$000s Sep. 2005 Sep. 2004 Sep. 2005 Sep. 2004
-------------------------------------------------------

Aerospace $6,625 $5,524 $18,137 $17,599
N.A. Silicone 5,032 3,428 15,829 7,816
Leewood 2,316 2,094 7,405 6,941
Fabricated Products 1,562 1,532 5,257 5,703
Total 15,535 12,578 46,628 38,059

Income Before Taxes

3 Months 9 Months

$000s Sep. 2005 Sep. 2004 Sep. 2005 Sep. 2004
-------------------------------------------------------

MTI PolyFab $237 $179 $1,769 $1,848
N.A. Silicone 428 326 1,252 406
Leewood (274) (363) (579) (639)
Total 391 142 2,442 1,615


About the Company

MTI Global Inc., formerly Magnifoam Technology International Inc., 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, medical and electronics markets. MTI's head office and Canadian manufacturing operations are located in Mississauga, Ontario, with international manufacturing operations located in Richmond and Buchanan, Virginia, and Bremen, Germany. The Company also has sales operations in England and Sweden, and an engineering support centre in Brazil.

Investors, analysts and the media are invited to participate in a conference call to discuss the Q3 fiscal 2005 results on Thursday, November 10, 2005, at 11:00 a.m. (ET). To join in the conference call, please dial 416-640-1917 (Toronto area) or 1-877-289-8525 (U.S. and Canada). The Q3 fiscal 2005 conference call can also be accessed at http://www.newswire.ca.

The foregoing press release contains forward-looking statements and is subject to important risks and uncertainties. The results or events predicted in these statements may differ materially from actual results or events. Factors that could cause results or events to differ from current expectations include 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 Ontario Securities Commission. MTI Global Inc. disclaims any intention or obligation to update or revise any forward-looking statements.

Financial Statements Follow



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MTI Global Inc. (Formerly Magnifoam Technology International Inc.)
Interim Consolidated Balance Sheets (Unaudited)

(In thousands of Canadian dollars) As at As at
September 30, December 31,
2005 2004
---------------------------------------------------------------------
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Assets
Current assets
Cash and cash equivalents $ 4,887 $ 505
Cash deposited as collateral 689 689
Accounts receivable 13,050 9,525
Income taxes recoverable 372 275
Inventories 7,489 6,190
Prepaid expenses and deposits 703 503
--------------------------------
27,190 17,687

Property, plant & equipment 12,810 14,208

Goodwill 11,859 12,647

Deferred charges 8,015 7,357
--------------------------------
$ 59,874 $ 51,899
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Liabilities and Shareholders' Equity
Current liabilities
Bank indebtedness $ 1,162 $ 3,969
Accounts payable and accrued expenses 5,716 5,251
Current portion of long-term debt 687 784
--------------------------------
7,565 10,004
--------------------------------

Long-term liabilities
Long-term debt 3,701 4,334
Due to related parties - 350
Future income tax liability 1,091 535
--------------------------------
4,792 5,219
--------------------------------

Commitments and contingencies
Shareholders' equity
Share capital 54,773 43,484
Contributed surplus 732 755
Cumulative translation adjustment (2,937) (958)
Deficit (5,051) (6,605)
--------------------------------
47,517 36,676
--------------------------------

--------------------------------
$ 59,874 $ 51,899
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MTI Global Inc. (Formerly Magnifoam Technology International Inc.)
Interim Consolidated Statement of Deficit (Unaudited)

(In thousands of Canadian dollars)

Nine months ended Nine months ended
September 30, 2005 September 30, 2004
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Deficit, beginning of period $ (6,605) $ (5,662)

Adjustment for stock based
compensation 19 (802)

Net income for the period 1,535 835
----------------------------------------

Deficit, end of period $ (5,051) $ (5,629)
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MTI Global Inc. (Formerly Magnifoam Technology International Inc.)
Interim Consolidated Statements of Operations (Unaudited)

(In thousands of Canadian dollars, except per share amounts)

Three months Nine months Three months Nine months
ended ended ended ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2005 2005 2004 2004
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------------------------------------------------------
Sales $ 15,535 $ 46,628 $ 12,578 $ 38,059
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Cost of Sales 10,180 28,842 7,462 22,211

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Gross Margin 5,355 17,786 5,116 15,848
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Operating
Expenses
Plant and
laboratory 1,677 5,160 1,469 4,468
Sales and
marketing 1,121 3,348 1,056 3,117
Administrative 1,395 4,486 1,476 4,137
------------------------------------------------------
4,193 12,994 4,001 11,722
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Operating
income before
the following
items 1,162 4,792 1,115 4,126

Amortization of
property, plant
and equipment 374 1,137 367 1,111
Amortization of
deferred
charges 290 917 367 1,108
------------------------------------------------------
664 2,054 734 2,219
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Income before
other items 498 2,738 381 1,907

Other Items
Interest on
long-term debt 73 229 89 252
Other interest
expense 22 124 29 84
Interest and
other income (56) (89) (5) (27)
Foreign exchange
(gain) loss 68 32 126 (17)
------------------------------------------------------
107 296 239 292
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Income before
income taxes 391 2,442 142 1,615

Income taxes
Current income
taxes 199 629 60 507
Future income
tax expense 43 278 - 273
------------------------------------------------------
242 907 60 780
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Net income for
the period $ 149 $ 1,535 $ 82 $ 835
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Earnings per share
- Basic $ 0.01 $ 0.06 $ 0.00 $ 0.04
- Diluted $ 0.01 $ 0.06 $ 0.00 $ 0.04
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MTI Global Inc. (Formerly Magnifoam Technology International Inc.)
Interim Consolidated Statements of Cash Flows (Unaudited)

(In thousands of Canadian dollars)

Three months Nine months Three months Nine months
ended ended ended ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2005 2005 2004 2004
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Cash flows
from operating
activities
Net income for
the period $ 149 $ 1,535 $ 82 $ 835
Adjustments for
non-cash items
Amortization 664 2,054 734 2,219
Future income tax (31) 183 - 268
Unrealized
foreign exchange
loss (gain) 83 67 (42) (193)
Stock based
compensation 29 62 16 31
--------------------------------------------------
894 3,901 790 3,160

Net change in
non-cash working
capital balances (1,868) (4,932) 141 363
--------------------------------------------------
Cash provided by
(used in)
operating
activities (974) (1,031) 931 3,523
--------------------------------------------------

Cash flows from
investing
activities
Purchase of
property, plant
and equipment (286) (638) (179) (495)
Deferred charges
capitalized (722) (2,340) (874) (2,260)
Acquisition - - (4,491) (4,491)
--------------------------------------------------
Cash used in
investing
activities (1,008) (2,978) (5,544) (7,246)
--------------------------------------------------

Cash flows from
financing
activities
Advances of
long term debt - 471 - 738
Repayments of
long-term debt (297) (654) (292) (629)
(Decrease)
increase in bank
indebtedness (225) (2,587) 2,910 2,631
Proceeds from
shares held in
trust - - 51 433
Proceeds from
share issuance, net - 11,146 - -
Proceeds from
stock options
exercised - 78 131 328
Cash deposited
as collateral - - - (689)
--------------------------------------------------
Cash provided by
(used in)
financing
activities (522) 8,454 2,800 2,812
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Foreign exchange
on foreign cash
and cash
equivalents (23) (63) (15) (161)
--------------------------------------------------
Net increase
(decrease) of
cash during the
period (2,527) 4,382 (1,828) (1,072)
Cash and cash
equivalents,
beginning of
period 7,414 505 2,454 1,698
--------------------------------------------------
Cash and cash
equivalents, end
of period $ 4,887 $ 4,887 $ 626 $ 626
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Other information
Cash paid for
interest $ 95 $ 353 $ 118 $ 334
Cash paid for
income taxes $ - $ 88 $ 179 $ 208
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Contact Information

  • Magnifoam Technology International
    John Boots
    Chief Financial Officer
    (905) 564-9700
    or
    Fleishman-Hillard Canada
    Anne Lachance
    Investor Relations
    (416) 214-0701