MAGNIFOAM TECHNOLOGY INTERNATIONAL INC.
TSX : MTI

MAGNIFOAM TECHNOLOGY INTERNATIONAL INC.

November 08, 2006 18:25 ET

MTI Global Reports Fiscal 2006 Third Quarter Loss and Nine Months Results

Continued achievements towards greater diversification of business lines

MISSISSAUGA, ONTARIO--(CCNMatthews - Nov. 8, 2006) - MTI Global Inc. (TSX:MTI) today reported financial results for the three months and year to date period ended September 30, 2006.

Fiscal 2006 Q3 Highlights:

- MTI reports third quarter net loss of $463,000, or two cents per share

- North American Silicone awarded $1 million contract from the US Military and $1.4 million contract from a lighting industry customer

- MTI Polyfab begins the installation of 'burn through' rig at Mississauga
plant - the only one of its kind in Canada and one of only four in the world

- MTI Leewood achieves 34% sales increase in Euros in Q3

- Off-load to MTI de Baja, Mexico, is progressing faster than expected - Embraer shipset production in progress

- MTI Polyfab achieves Qualified Processors List (QPL) for thermal acoustic blanket fabrication for Boeing Commercial Airplanes (BCA)

- MTI Polyfab achieves AS9100 Certification to service aerospace customers

"The third quarter this year, while not stellar from the point of view of sales and profits, was in fact, quite productive as a number of very important milestones were achieved," said Bill Neill, President and Chief Executive Officer. "I'm also pleased to report that we have achieved great progress towards two of our key stated goals - to further diversify our business and move MTI Leewood towards profitability."

At Leewood, the new continuous oven line allows for new products and more efficient production, for example: sheet and rolled silicones, both solid and sponge can be produced more efficiently, and this opens access to a new market place for MTI in industrial silicones. At Sterne, the benefits of the acquisition in November 2005 continue. Bringing MTI together with Sterne has given their customer base greater confidence in their capability. Sterne made a significant contribution to overall MTI European Silicone sales accounting for $940,000 of the increase. This also represents a substantial year over year gain for Sterne.

At MTI Polyfab, the addition of new OEM customers and a new 'burn through' testing rig has established new revenue streams for the division. The new rig is one of only four in the world able to test materials against new burn through standards. We will not only test our own materials and those of our customers, but we plan to offer testing to third parties as a revenue generating ancillary service. The new system is expected to be commercially available in the fourth quarter.

At MTI de Baja, the plant is up and operational. While program operational costs will continue to be higher during the ramp up period - including start-up costs, training and qualification - margins are expected to begin improving in the fourth quarter.

North American Silicone was awarded a $1 million contract from the US Military. Delivery began in September and will be completed in December although management expects further orders from the same source in 2007. A further $1.4 million contract was obtained in the industrial lighting industry. As part of its diversification strategy, MTI Groendyk has recently engaged in a more aggressive marketing and sales campaign, including additional sales personnel to pursue new products and markets. MTI's intent is to minimize the impact of frequent project delays in mass transit seating order deliveries.

Boeing QPL Certification:

Achieving QPL certification for Boeing is a significant milestone. This approval is not only mandatory for the new Dreamliner Program, but also pre-qualifies MTI Aerospace division as a potential supplier for thermal acoustic insulation work on all commercial and military Boeing Programs.

The first delivery of the MTI PolyFab thermal insulation system on the Boeing 787 will be in December 2006. The first flight of the 787 is scheduled for 2007. Boeing has received orders for a total of 436 airplanes from 33 different customers located in five continents of the world, making this the most successful launch of a new commercial airplane in Boeing's history.



Sales:
------
Three months ended Nine months ended
September 30, September 30,
------------------- ------------------
$000s 2006 2005 2006 2005
---------------------------------------------------------------------
MTI PolyFab:
Aerospace 5,554 6,625 17,361 18,137
Fabricated Products 1,028 1,562 4,267 5,257
---------------------------------------------------------------------
6,582 8,187 21,628 23,394
---------------------------------------------------------------------
Silicone:
N.A. Silicone 4,407 5,032 13,734 15,829
European Silicone 3,860 2,316 10,914 7,405
---------------------------------------------------------------------
8,267 7,348 24,648 23,234
---------------------------------------------------------------------
14,849 15,535 46,276 46,628
---------------------------------------------------------------------
---------------------------------------------------------------------

Income (loss) before income taxes and non-controlling interest:
---------------------------------------------------------------

Three months ended Nine months ended
September 30, September 30,
------------------- ------------------
$000s 2006 2005 2006 2005
---------------------------------------------------------------------
MTI PolyFab (519) 237 (699) 1,769
N.A. Silicone 219 428 977 1,252
European Silicone (315) (274) (435) (579)
---------------------------------------------------------------------
(615) 391 (157) 2,442
---------------------------------------------------------------------
---------------------------------------------------------------------


Three Months Results:

Sales for the three months ended September 30, 2006 were $14.8 million compared to $15.5 million for the same period last year. This represents a decrease of $686,000 or 4.4% for the comparable period last year. The results include a decrease in sales of approximately $850,000 due to the higher exchange rate for the U.S. Dollar and Euro as well as an increase in sales of approximately $940,000 or 6.1% due to the acquisition of Sterne SARL in November 2005.

Aerospace sales of $5.6 million were $1.1 million or 16% lower than the comparable three months last year. This included a decrease of approximately $460,000 due to the decrease in the U.S. Dollar. Sales on a constant Dollar basis, decreased by $611,000 or 9.2% . Sales for the three month period in fiscal 2005 were higher due to additional production in the quarter following the certification of new materials that had previously delayed production. In July 2006, sales were lower than the previous months as a result of the usual customer vacation shutdowns.

Fabricated Products sales for the three month period were $1.0 million, a decrease of $534,000 or 34% compared with the same period last year. This is primarily due to reductions in sales to the automotive industry.

North American Silicone sales for the three month period were $4.4 million compared with $5.0 million for the same period last year, representing decrease of $625,000 or 12%. The effects of the lower U.S. Dollar decreased reported sales by approximately $310,000 compared with the exchange rate in 2005. In U.S. Dollars, sales decreased by approximately U.S. $260,000 or 6.2%, primarily due to decreased transit seat sales resulting from delays in existing projects. Timing delays also affected Gore product sales during the quarter although revenues remain comparable on a year to date basis compared with last year.

European Silicone sales for the third quarter in fiscal 2006 were $3.9 million, a $1.5 million or 67% increase over the same period last year. This includes an increase of approximately $940,000 or 41% due to the acquisition of Sterne SARL in November 2005. Sales for the quarter were negatively affected by approximately $80,000 due to the Euro exchange rate in effect in 2005. In Euros, Leewood sales nonetheless increased by 34% compared with the same period last year; however, the margin percentage was lower due to a higher proportion of lower margin commodity type products.

Net loss for the third quarter of fiscal 2006 was $463,000, or two cents per share, compared with net income of $149,000, or one cent per share, for the same period last year.

Nine Months Results:

In fiscal 2006, sales for the nine months ended September 30, 2006 were $46.3 million, a decrease of $352,000 or 0.8% compared with sales of $46.6 million for the same period last year. Sales for the nine month period include a decrease of approximately $3.7 million, or 7.8%, attributable to the lower U.S. Dollar and Euro compared with last year. The sales figure includes an increase in sales of approximately $2.6 million or 5.6% due to the acquisition of Sterne in November 2005.

Aerospace sales for the nine months were $17.4 million, a decrease of $776,000 or 4.3% compared with sales of $18.1 million for the same nine-month period in fiscal 2005. The decrease is mainly attributable to a reduction of approximately $1.7 million or 9.3% due to the lower U.S. Dollar exchange rate.

Fabricated Products sales for the nine months were $4.3 million, representing a decrease of $990,000 or 19% compared with sales of $5.3 million for the same nine-month period in fiscal 2005. The decrease in sales revenue is primarily due to decreased business in the automotive sector.

North American Silicone sales of $13.7 million were $2.1 million or 13% less than the comparable period last year. The decrease was partially due to the lower U.S. Dollar which decreased reported sales revenue by approximately $1.1 million compared with the same period last year. Lower sales of MF1™ as a result of delays in transit projects also contributed to the lower revenue.

European Silicone sales of $10.9 million were $3.5 million or 47% higher than the same period last year. This includes an increase in sales of $2.6 million resulting from the contribution of Sterne SARL which was acquired in November 2005, and a decrease in reported sales of approximately $850,000 due to the lower Euro. For the nine-month period, sales in Euros at Leewood have increased 27%.

For the nine months ended September 30, 2006, MTI reported a net loss of $348,000 or one cent per share, compared with net income of $1.5 million, or six cents per share, for the same period last year.

Outlook:

Mr. Bill Neill added, "While the third quarter of fiscal 2006 was disappointing from the perspective of sales and bottom line, we are optimistic about the future having recently achieved a number of significant milestones that are expected to bear fruit starting in the fourth quarter and in 2007.

"The currency impact of the U.S. Dollar and the euro continue to significantly affect our bottom line. However, we believe Baja now up and running, continuing to pursue our diversification strategy aggressively, and our Lean Manufacturing program, will allow MTI to turn the corner and improve sales and profitability in Q4 and beyond."

In addition, cost containment strategies are in full force. All areas of operations are being reviewed for cost savings opportunities. Management believes that the company has come through its worst period. Sales for the fourth quarter are trending well and more favourable bottom line results are expected.

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 Q3 fiscal 2006 results on Thursday, November 9, 2006, at 11:00 a.m. (ET). To join the conference call, please dial 1-800-240-8621 (Canada and U.S). The Q3 fiscal 2006 conference call can also be accessed at http://www.newswire.ca. A replay of the conference call will be available for one week by dialing 416-640-1917 (Toronto area) or 1-877-289-8525 (Canada and U.S.) and entering reservation no. 21209153#

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.
Interim Consolidated Balance Sheets
(In thousands of Canadian dollars)
(Unaudited)
As at As at
September 30, December 31,
2006 2005
$ $
------------------------------------------------------------------------

ASSETS
Current
Cash and cash equivalents 3,563 4,116
Cash deposited as collateral 689 689
Accounts receivable 11,326 12,318
Income taxes recoverable 328 713
Inventories 7,759 7,217
Prepaid expenses and deposits 800 507
------------------------------------------------------------------------
24,465 25,560
------------------------------------------------------------------------
Property, plant and equipment 13,324 13,271
Goodwill 11,909 11,790
Deferred charges 9,556 8,141
------------------------------------------------------------------------
59,254 58,762
------------------------------------------------------------------------
------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness 1,371 1,278
Accounts payable and accrued expenses 6,279 5,081
Current portion of long-term debt 869 680
------------------------------------------------------------------------
8,519 7,039
------------------------------------------------------------------------
Long-term debt 2,834 3,580
Future income tax liabilities 600 498
Non-controlling interest 136 103
------------------------------------------------------------------------
12,089 11,220
------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity
Share capital 55,102 55,067
Contributed surplus 886 774
Cumulative translation account (3,267) (3,091)
Deficit (5,556) (5,208)
------------------------------------------------------------------------
47,165 47,542
------------------------------------------------------------------------
59,254 58,762
------------------------------------------------------------------------
------------------------------------------------------------------------


MTI Global Inc.
Interim Consolidated Statements of Deficit
(In thousands of Canadian dollars)
(Unaudited)

Nine months Nine months
ended ended
September 30, September 30,
2006 2005
$ $
------------------------------------------------------------------------

Deficit, beginning of period (5,208) (6,605)
Adjustment for stock-based compensation -- 19
Net loss for the period (348) 1,535
------------------------------------------------------------------------
Deficit, end of period (5,556) (5,051)
------------------------------------------------------------------------
------------------------------------------------------------------------

MTI Global Inc.
Interim Consolidated Statements of Operations
(In thousands of Canadian dollars, except per share amounts)
(Unaudited)

Three months Nine months Three months Nine months
ended ended ended ended
September 30 September 30, September 30, September 30,
2006 2006 2005 2005
$ $ $ $
---------------------------------------------------------------------------

Sales 14,849 46,276 15,535 46,628
Cost of sales 9,796 29,381 10,180 28,842
---------------------------------------------------------------------------
Gross margin 5,053 16,895 5,355 17,786
---------------------------------------------------------------------------

Operating expenses
Plant and laboratory 1,926 5,899 1,677 5,160
Sales and marketing 1,261 3,874 1,121 3,348
Administrative 1,636 4,773 1,395 4,486
---------------------------------------------------------------------------
4,823 14,546 4,193 12,994
---------------------------------------------------------------------------
Operating income before
the following items 230 2,349 1,162 4,792
Amortization of property,
plant and equipment 449 1,297 374 1,137
Amortization of deferred
charges 322 928 290 917
---------------------------------------------------------------------------
771 2,225 664 2,054
---------------------------------------------------------------------------
Income (loss) before
other items (541) 124 498 2,738
Interest on long-term
debt 58 178 73 229
Other interest expense 40 113 22 124
Interest and other income (20) (155) (56) (89)
Foreign exchange loss
(gain) (4) 145 68 32
---------------------------------------------------------------------------
74 281 107 296
---------------------------------------------------------------------------
Income (loss) before
income taxes and
non-controlling interest (615) (157) 391 2,442
Current income tax 22 59 199 629
Future income tax (154) 102 43 278
---------------------------------------------------------------------------
(132) 161 242 907
---------------------------------------------------------------------------

Income (loss) before
non-controlling
interest (483) (318) 149 1,535
Non-controlling interest (20) 30 -- --
---------------------------------------------------------------------------
Net income (loss) for the
period (463) (348) 149 1,535
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Earnings (loss) per share
- Basic (0.02) (0.01) 0.01 0.06
- Diluted (0.02) (0.01) 0.01 0.06
---------------------------------------------------------------------------
---------------------------------------------------------------------------


MTI Global Inc.
Interim Consolidated Statements of Cash Flows
(In thousands of Canadian dollars, except per share amounts)
(Unaudited)

Three months Nine months Three months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2006 2006 2005 2005
$ $ $ $
---------------------------------------------------------------------------

OPERATING ACTIVITIES
Net income (loss) for the
period (463) (348) 149 1,535
Adjustments for non-cash
items
Amortization 771 2,225 664 2,054
Future income tax expense (154) 102 (31) 183
Unrealized foreign
exchange loss (gain) (71) 17 83 67
Stock option expense 42 127 29 62
Non-controlling interest (20) 30 -- --
---------------------------------------------------------------------------
105 2,153 894 3,901
Net change in non-cash
Working capital balances 2,010 1,632 (1,868) (4,932)
---------------------------------------------------------------------------
Cash provided by (used
in) operating
activities 2,115 3,785 (974) (1,031)
---------------------------------------------------------------------------

INVESTING ACTIVITIES
Purchase of property,
plant and equipment (803) (1,443) (286) (638)
Deferred charges
capitalized (793) (2,281) (722) (2,340)
---------------------------------------------------------------------------
Cash used in investing
activities (1,596) (3,724) (1,008) (2,978)
---------------------------------------------------------------------------

FINANCING ACTIVITIES
Advances of long-term
debt -- -- -- 471
Repayments of long-term
debt (260) (573) (297) (654)
Increase (decrease) in
bank indebtedness (18) 61 (225) (2,587)
Proceeds from share
issuance, net -- -- -- 11,146
Proceeds from stock
options exercised -- 20 -- 78
---------------------------------------------------------------------------
Cash provided by (used
in) financing activities (278) (492) (522) 8,454
---------------------------------------------------------------------------
Foreign exchange on cash
and cash equivalents (91) (122) (23) (63)
---------------------------------------------------------------------------

Net increase (decrease)
of cash during
the period 150 (553) (2,527) 4,382
Cash and cash
equivalents, beginning
of period 3,413 4,116 7,414 505
---------------------------------------------------------------------------
Cash and cash
equivalents, end of
period 3,563 3,563 4,887 4,887
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Supplemental cash flow
information
Cash paid for interest 98 291 95 353
Cash paid for income
taxes -- 155 -- 88
---------------------------------------------------------------------------
---------------------------------------------------------------------------



Contact Information

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