MTI Global Inc.
TSX : MTI

MTI Global Inc.

February 28, 2007 22:58 ET

MTI Global Reports Financial Results for Q4 And Fiscal 2006 Year End

MISSISSAUGA, ONTARIO--(CCNMatthews - Feb. 28, 2007) - MTI Global Inc. (TSX:MTI) today reported financial results for the three months and year ended December 31, 2006.

Highlights

- Reported three month sales of $15.3 million and twelve months sales of $61.6 million

- Reported three month net loss of $828,000 and twelve month net loss of $1.2 million

- 23 staff reductions to reduce salary costs

- Currency impact for the twelve months is a reduction in sales of $4.2 million

- North American Silicone overall sales were affected by delays in mass transit sales

- Strong sales growth of 50% in European Silicone

- Aerospace facility received AS 9100 certification

"2006 was a challenging year for MTI," said Bill Neill, MTI President and CEO. "Despite winning a number of very significant contracts in aerospace and mass transit, the effect of the declining U.S. dollar and delays in the execution of major contracts expected in 2006 led the Company to a loss.

"As a consequence, and to improve profitability and re-align our resources, we have taken measures to reduce costs through staff reductions," said Neill. "A restructuring expense of $488,000 will be offset by anticipated annual savings of $1.2 million. Cuts were experienced in all the Company's divisions and are expected to contribute to a profitable year in 2007."



Sales
3 Months Ended 3 Months Ended Year Ended Year Ended
December 31 December 31 December 31 December 31
$000s 2006 2005 2006 2005
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MTI Polyfab
Aerospace $ 5,311 $ 6,160 $ 22,672 $ 24,297
Fabricated Products 1,041 1,441 5,308 6,698
Silicone:
N.A. Silicone 4,980 4,330 18,714 20,159
European Silicone 3,981 2,520 14,895 9,925
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Total $ 15,313 $ 14,451 $ 61,589 $ 61,079
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Income Before Taxes

3 Months Ended 3 Months Ended Year Ended Year Ended
December 31 December 31 December 31 December 31
$000s 2006 2005 2006 2005
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MTI PolyFab $ (170) $ 633 $ 933 $ 4,074
N.A. Silicone (28) (107) 949 1,145
European Silicone (627) (229) (1,062) (808)
Corporate Expenses (358) (522) (2,160) (2,194)
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Total $ (1,183) $ (225) $ (1,340) $ 2,217
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Year End Results

Total sales for the year ended December 31, 2006 were $61.6 million compared with $61.1 million for the twelve months ended December 31, 2005. Currency changes reduced sales by approximately $4.2 million.

Total sales at MTI PolyFab were $28.0 million compared with $31.0 million in 2005. The lower U.S. dollar reduced sales by approximately $2.2 million compared with the exchange rate in effect in 2005. Aerospace's sales of $22.7 million for the twelve months ended December 31, 2006 were $1.6 million or 6.7% less than 2005.

Fabricated Products' sales were $5.3 million, a decrease of $1.4 million or 21% compared to sales of $6.7 million in 2005. The decrease is the result of reduced business in the automotive sector. We have now placed new sales resources against industrial sales - our base competence. A sales increase is predicted for latter half of 2007.

North American Silicone sales for the twelve months ended December 31, 2006 were $18.7 million representing a decrease of $1.4 million or 7.2% over 2005 sales of $20.2 million. The lower U.S. dollar decreased sales by approximately $1.27 million compared to exchange rates in effect in 2005. The results were impacted by a significant decline in MF1 sales for mass transit seating, which were partially offset by other increases in silicone sales.

European Silicone sales were $14.9 million in 2006 representing an increase of $5.0 million or 50% compared with 2005 sales of $9.9 million. This includes a net contribution of approximately $3.0 million due to the acquisition of Sterne in November 2005. The results were impacted by a decrease of $680,000 in reported sales due to the lower average exchange rate for the Euro in 2006 compared to 2005. In Euros, Leewood's sales grew 31% as a result of increases in sales, which included a large increase in sales of MagniQ (solid silicones). The Company won a significant amount of business in this area and is installing a new efficient line to improve margins from this market.

Of total 2006 sales, North American Silicone sales accounted for 30% and European Silicone 24%; while Aerospace accounted for 37%; and Fabricated Products 9%.

Operating expenses of $19.4 million in fiscal 2006 were $2.0 million or 11% higher than in 2005. The acquisition of Sterne in 2005 accounted for $1.2 million of this increase. Plant and laboratory expenses of $7.8 million compares to $6.8 million in 2005 due to the Sterne acquisition and new programs at MTI PolyFab. Sales and marketing expenses of $5.2 million increased 13% over $4.6 million in 2005. Again the Sterne acquisition and new programs at MTI PolyFab accounted for the increase. Administrative expenses of $6.3 million were 5.0% higher than in 2005, including $170,000 for stock options expensed.

The Company recorded a restructuring expense of $488,000 in the fourth quarter of 2006. The expense resulted primarily from termination and other costs associated with staff reductions and reorganization. 23 staff positions were eliminated in the fourth quarter.

Net loss for 2006 was $1.2 million compared with net income of $2.2 million in 2005. In addition to the restructuring expense, the net loss is the result of lower sales in MTI PolyFab, lower sales resulting from delays in the North American transit seating market, and lower margins in European Silicone operations.

As at December 31, 2006, the Company had working capital of $14.2 million compared with $18.5 million at December 31, 2005.

Three Month Results

Revenues for the three months ended December 31, 2006 were $15.3 million representing an increase of $862,000 or 6.0% for the comparable period ended December 31, 2005.

Aerospace sales were $5.3 million, representing a decrease of $849,000 or 14% for the comparable period ended December 31, 2005. Sales in the quarter were reduced by approximately $540,000 due to the lower U.S. dollar and were also impacted by reduced orders from customers, which the company believes is primarily timing of order placement.

Fabricated Products' sales of $1.0 million for the three months ended December 31, 2006 were $400,000 or 28% less than for the same period in 2005. As in prior quarters, it includes products discontinued by automotive customers.

North American Silicone sales were $5.0 million, 15% more than last year's sales of $4.3 million for the comparable period. This increase was primarily due to a large sale for a military application that will continue through 2007. This more than offsets decreases in transit seating foam sales.

European Silicone sales were $4.0 million, an increase of $1.5 million over the comparable period. Sales at Leewood increased by 45% in the quarter. However, much of the increase was in lower margin business. Sales at Sterne increased approximately $600,000. Sterne was acquired on November 5, 2005, therefore last year's fourth quarter results include only two months of operations.

Operating expenses in the fourth quarter of 2006 were $4.8 million, $394,000 or 9.0% higher than the same quarter last year. This increase is primarily due to the acquisition of Sterne and a write off of fixed assets at Leewood of $51,000.

MTI PolyFab's loss before taxes of $170,000 compared to last year's profit of $633,000. This loss includes the restructuring charge of $298,000 in the quarter. North American Silicone's loss of $28,000 was an improvement on last year's loss of $107,000. The quarter's results also included a restructuring charge of $28,000 and termination expenses of $68,000. In Europe the loss of $627,000 is $398,000 higher than last year's loss of $229,000. This loss includes a restructuring charge of $162,000. Last year's result included a gain of $264,000 owing to the recognition of the final sale of the Sweden manufacturing business. In addition, Sterne posted income before tax of $120,000.

Net loss for the three months ended December 31, 2006 was $828,000 ($0.03 per share), compared with a net loss of $157,000 ($0.01 per share) for the same period last year.

Outlook

"Looking at 2007, we expect improvements across all of our business lines," stated Neill. "We expect sales growth in Aerospace as the Company begins to make shipments on a number of its new programs, the Boeing 787 Dreamliner, Airbus A400M, the Chinese ARJ regional jet, and increases for the Eclipse VLJ (very light jet) which started in 2006. In Fabricated Products we have added to the sales force, after previous decreases, and it is expected that this will create an increase in sales in the latter half of 2007.

"N.A. Silicone was encouraged from its sale to the military in late 2006 and expects continued orders of this kind in 2007. In the general industrial products area, sales activity and projects remain at a high level and sales growth will be dependant on converting these sales efforts into sales orders," said Neill. "Both Leewood and Sterne were able to show excellent sales growth in 2006. We expect this to continue with double digit sales growth in 2007."

"Our challenges continue to be currency fluctuations as well as cost containment, especially materials," said Neill. "To offset the impact, we believe that our diversified manufacturing and geographic base is an appropriate strategy to manage currency risk. We are continuing to look for cost savings and manufacturing efficiencies. While the year was impacted by aircraft and train seating delays, these orders will add to the future profitability of the Company."

About the Company

MTI Global 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, electronics, and the medical market through a 51% interest in 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; Bremen, Germany; and a joint venture in Baja, Mexico. 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 Q4 fiscal 2006 results on March 2, 2007, at 11:00 a.m. (ET). To join in the conference call, please dial 1-800-732-9303 (U.S. and Canada). The Q4 fiscal 2006 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. 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



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MTI Global Inc.
Consolidated Balance Sheets
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As at As at
December 31, December 31,
(In thousands of Canadian dollars) 2006 2005
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Assets
Current assets
Cash and cash equivalents $ 1,479 $ 4,116
Cash deposited as collateral 689 689
Accounts receivable 11,482 12,318
Income taxes recoverable 435 713
Inventories 8,880 7,217
Prepaid expenses and deposits 522 507
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23,487 25,560

Property, plant and equipment 14,503 13,271

Goodwill 12,329 11,790

Deferred charges 10,231 8,141
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$ 60,550 $ 58,762
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Liabilities and Shareholders' Equity
Current liabilities
Bank indebtedness $ 1,446 $ 1,278
Accounts payable and accrued expenses 6,937 5,081
Current portion of long-term debt 883 680
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9,266 7,039

Long -term debt 2,960 3,580
Future income tax liabilities 102 498
Non-controlling interest 198 103
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12,526 11,220
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Shareholders ' equity
Share capital 55,102 55,067
Contributed surplus 929 774
Cumulative translation account (1,623) (3,091)
Deficit (6,384) (5,208)
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48,024 47,542
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$ 60,550 $ 58,762
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MTI Global Inc.
Consolidated Statements of Deficit
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Year ended
Year ended December 31,
(In thousands of Canadian dollars) December 31, 2006 2005
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Deficit, beginning of year $ (5,208) $ (6,605)

Adjustment for stock options expired - 19

Net income (loss) for the year (1,176) 1,378
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Deficit, end of year $ (6,384) $ (5,208)
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MTI Global Inc.
Consolidated Statements of Operations
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Year ended
(In thousands of Canadian dollars, Year ended December 31,
except per share amounts) December 31, 2006 2005
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Sales $ 61,589 $ 61,079

Cost of sales 39,854 38,485
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Gross margin 21,735 22,594
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Operating expenses
Plant and laboratory 7,828 6,774
Sales and marketing 5,206 4,615
Administrative 6,316 6,014
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19,350 17,403
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Operating income before the following items 2,385 5,191

Amortization of property, plant and equipment 1,701 1,547
Amortization of deferred charges 1,251 1,245
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2,952 2,792
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Income (loss) before other items (567) 2,399

Other items

Restructuring costs 488 -
Gain on sale of division - (264)
Interest on long-term debt 235 295
Other interest expense 138 151
Interest and other income (178) (116)
Foreign exchange loss 90 116
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773 182
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Income (loss) before income taxes and
non-controlling interest (1,340) 2,217
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Income taxes
Current income tax expense 154 432
Future income tax expense (recovery) (396) 396
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(242) 828
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Income (loss) before non-controlling interest (1,098) 1,389

Non-controlling interest 78 11

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Net income (loss) for the year $ (1,176) $ 1,378

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Earnings (loss) per share
- Basic $ (0.04) $ 0.05
- Diluted $ (0.04) $ 0.05
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MTI Global Inc.
Consolidated Statements of Cash Flows
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Year ended
Year ended December 31,
(In thousands of Canadian dollars) December 31, 2006 2005
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Cash flows from operating activities
Net income (loss) for the year $ (1,176) $ 1,378
Adjustments for non-cash items

Amortization 2,952 2,792
Gain on sale of division - (264)
Future income tax (396) -
Unrealized foreign exchange gain (117) (2)
Stock compensation expense 170 104
Non-controlling interest 78 11
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1,511 4,019

Net change in non-cash working
capital balances 1,747 (4,754)
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Cash flows from (used in)
operating activities 3,258 (735)
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Cash flows from investing activities
Purchase of property, plant and equipment (2,371) (1,033)
Deferred charges capitalized (2,918) (2,916)
Acquisition - (251)
Proceeds on sale of division - 264
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Cash flows used in investing activities (5,289) (3,936)
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Cash flows from financing activities
Advances of long-term debt - 471
Repayments of long-term debt (692) (742)
Increase (decrease) in bank indebtedness 19 (2,607)
Proceeds from share issuance, net - 11,146
Proceeds from stock options exercised 20 78
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Cash flows from (used in)
financing activities (653) 8,346
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Foreign exchange translation on cash and
cash equivalents 47 (64)
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Net increase (decrease) in cash during
the year (2,637) 3,611
Cash and cash equivalents, beginning of year 4,116 505
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Cash and cash equivalents, end of year $ 1,479 $ 4,116
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Supplemental cash flow information
Cash paid for interest $ 373 $ 446
Cash paid for income taxes $ 254 $ 14
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Contact Information

  • MTI Global Inc.
    John Boots
    Chief Financial Officer
    (905) 564-9700
    (905) 564-8886 (FAX)
    Email: mti@magnifoam.ca
    Website: www.magnifoam.com
    or
    Fleishman-Hillard Canada
    Anne Lachance
    Investor Relations
    (416) 214-0701