Novamerican Steel Inc.

Novamerican Steel Inc.

March 29, 2005 14:46 ET

Novamerican Reports 29th Consecutive Profitable Quarter


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: NOVAMERICAN STEEL INC.

NASDAQ SYMBOL: TONS

MARCH 29, 2005 - 14:46 ET

Novamerican Reports 29th Consecutive Profitable Quarter

MONTREAL, QUEBEC--(CCNMatthews - March 29, 2005) - Novamerican Steel
Inc. (NASDAQ:TONS) announced today its financial results for the first
quarter ended February 26, 2005. This was the 29th consecutive
profitable quarter for the Company. (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
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February 26, 2005 February 28, 2004 Change
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Net sales $206,357 $147,429 $58,928 40.0%
Gross margin 21.0% 25.6% -4.6% 54.4%
Net income $10,099 $7,036 $3,063 43.5%
Basic income per share $1.03 $0.73 $0.30 41.1%
Diluted income per share $0.98 (a)

Tons sold 205,762 228,907 (23,145)-10.1%
Tons processed 242,926 207,604 35,322 17.0%
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448,688 436,511 12,177 2.8%
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(a) The stock options were antidilutive


FIRST QUARTER RESULTS

Sales for the first quarter of 2005 increased by $58.9 million, or
40.0%, to $206.3 million from $147.4 million for the first quarter of
2004.

Tons sold and processed in the first quarter of 2005 increased by
12,177, or 2.8%, to 448,688 tons from 436,511 in the first quarter of
2004.

The gross margin for the first quarter of 2005 decreased to 21.0% from
25.6% for the first quarter of 2004.

Net income for the first quarter of 2005 increased by $3.1 million, or
43.5% to, $10.1 million, or $1.03 per share (or $0.98 diluted), versus
$7.0 million, or $0.73 per share, for the first quarter of 2004.

OPERATIONS

The first quarter of fiscal 2005, historically the Company's weakest
quarter, was successful despite lower steel prices that occurred due to
the combination of seasonally weak demand and a surge of imports that
arrived in the fourth quarter of 2004. In spite of these conditions,
management believes that the quarterly results indicate the Company's
ability to generate profit when margins are under pressure.

OUTLOOK

Management remains optimistic that the high levels of steel industry
inventories, mostly created by a surge in fourth quarter imports, should
abate sometime in the second quarter. Our business in manufacturing
sectors, such as automotive, construction, transportation and heavy
equipment is continuing to show good demand heading into the second
quarter.

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: Tuesday March 29, 2005 at 3:00 p.m. Please call
514-368-6455 for details.



Novamerican Steel Inc. and Subsidiaries - Consolidated Financial
Statements
(unaudited)

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
---------------------------------------------------------------------
February 26, February 28,
2005 2004
---------------------------------------------------------------------
$ $
Net sales 206,357 147,429
Cost of sales 163,111 109,699
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Gross margin 43,246 37,730
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Operating expenses
Plant 10,765 10,373
Delivery 4,729 4,689
Selling 3,587 3,156
Administrative and general 7,408 7,689
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26,489 25,907
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Operating income 16,757 11,824
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Interest expense 1,150 1,311
Share in income of a joint venture (117) (85)
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1,033 1,226
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Income before income taxes 15,724 10,597
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Income taxes 5,625 3,561
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Net income 10,099 7,036
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Net income per share
Basic 1.03 0.73
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Diluted 0.98 (a)
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Weighted average number of shares
outstanding 9,786,089 9,700,000
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Comprehensive income
Net income 10,099 7,036
Changes in cumulative translation adjustment (4,410) (2,366)
Change in unrealized loss on interest rate
swap, net of deferred income taxes 167 (33)
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5,857 4,637
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Tons sold 205,762 228,907
Tons processed 242,926 207,604
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448,688 436,511
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(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
Common Shares Other Total
--------------- Retained Comprehensive Shareholders'
Number Amount Earnings Income Equity
---------------------------------------------------------------------
$ $ $ $
Balance at
November
27, 2004 9,786,089 29,609 184,782 16,317 230,708
Net income 10,099 10,099
Changes in
cumulative
translation
adjustment (4,410) (4,410)
Change in
unrealized
loss on
interest
rate swap,
net of
deferred
income
taxes - - - 167 167
---------------------------------------------------------------------
Balance at
February
26, 2005 9,786,089 29,609 194,881 12,074 236,564
---------------------------------------------------------------------



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

Three months ended
---------------------------------------------------------------------
February 26, February 28,
2005 2004
---------------------------------------------------------------------
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 10,099 7,036
Adjustments to reconcile net income to
net cash from (used for) operating
activities
Depreciation and amortization 2,335 1,982
Share in income of a joint venture (117) (85)
Deferred income taxes (241) (54)
Loss on disposal of property, plant and
equipment - 467
Changes in working capital items
Accounts receivable (2,738) (14,240)
Income taxes receivable - 595
Inventories (24,282) (18,060)
Prepaid expenses and other 120 (1,011)
Accounts payable and accrued liabilities (7,549) 4,835
Income taxes payable (13,747) 809
---------------------------------------------------------------------
Net cash used for operating activities (36,120) (17,726)
---------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of minority interest (204) (161)
Distribution from a joint venture - 259
Additions to property, plant and equipment (1,633) (2,066)
Proceeds from disposal of property, plant and
equipment 5 2,392
Other assets - (49)
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Net cash from (used for) investing activities (1,832) 375
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in bank indebtedness 25,382 (1,317)
Advance to an employee 420 67
Proceeds from long-term debt 18,558 13,068
Repayment on long-term debt (13,602) (2,703)
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Net cash from financing activities 30,758 9,115
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Effect of exchange rate changes on cash and
cash equivalents (260) (132)
---------------------------------------------------------------------
Net decrease in cash and cash equivalents (7,454) (8,368)
Cash and cash equivalents, beginning of
period 11,462 11,265
---------------------------------------------------------------------
Cash and cash equivalents, end of period 4,008 2,897
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid 654 828
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Income taxes paid 16,951 2,152
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CONSOLIDATED BALANCE SHEETS
(in accordance with U.S. GAAP, in thousands of U.S. dollars)


February 26, February 28, November 27,
2005 2004 2004
---------------------------------------------------------------------
unaudited unaudited audited
$ $ $
ASSETS
Current assets
Cash and cash equivalents 4,008 2,897 11,462
Accounts receivable 125,657 94,386 125,718
Inventories 193,782 109,026 172,850
Prepaid expenses and other 676 2,317 799
Deferred income taxes 1,391 1,513 1,651
---------------------------------------------------------------------
325,514 210,139 312,480
Investment in a joint venture 2,380 3,183 2,263
Property, plant and equipment 104,122 101,461 106,308
Goodwill, net of accumulated
amortization 12,992 12,791 12,789
Other assets 892 1,367 1,040
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445,900 328,941 434,880
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LIABILITIES
Current liabilities
Current portion of long-term
debt 4,221 7,921 4,855
Bank indebtedness 28,642 16,973 3,442
Accounts payable and accrued
liabilities 94,276 78,740 103,964
Income taxes payable 5,706 785 19,988
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132,845 104,419 132,249
Long-term debt 62,090 59,642 56,766
Fair value of interest rate
swap 457 1,873 741
Deferred income taxes 13,944 12,655 14,416
---------------------------------------------------------------------
209,336 178,589 204,172

SHAREHOLDERS' EQUITY
Share capital 29,609 28,404 29,609
Retained earnings 194,881 118,907 184,782
Accumulated other comprehensive
income 12,074 3,041 16,317
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236,564 150,352 230,708
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445,900 328,941 434,880
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-30-

Contact Information

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