Novamerican Steel Inc.
NASDAQ : TONS

Novamerican Steel Inc.

April 03, 2006 14:55 ET

Novamerican Reports 33rd Consecutive Profitable Quarter

MONTREAL, QUEBEC--(CCNMatthews - April 3, 2006) - Novamerican Steel Inc. (NASDAQ:TONS)

ATTENTION BUSINESS/FINANCIAL EDITORS

Novamerican Steel Inc. announced today its financial results for the first quarter ended February 25, 2006. This was the 33rd 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)



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QUARTER ENDED
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February 25, 2006 February 26, 2005 Change
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Net sales $195,702 $206,357 ($10,655)
Gross margin 21.6% 21.0% 0.6%
Net income $8,843 $10,099 ($1,256)
Basic income per share $0.87 $1.03 ($0.16)
Diluted income per share $0.85 $0.98 ($0.13)

Tons sold 215,868 205,762 10,106
Tons processed 236,438 242,926 (6,488)
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452,306 448,688 3,618
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FIRST QUARTER RESULTS

Sales for the first quarter of 2006 decreased by $10.7 million, or 5.2%, to $195.7 million from $206.4 million for the first quarter of 2005.

Tons sold and processed in the first quarter of 2006 increased by 3,618, or 0.8%, to 452,306 tons from 448,688 in the first quarter of 2005. While tons sold for the three months ended February 25, 2006 increased by 10,106 tons, or 4.9%, tons processed decreased by 6,488 tons, or 2.7%, compared with the same period in 2005.

The gross margin for the first quarter of 2006 increased to 21.6% from 21.0% for the first quarter of 2005.

Net income for the first quarter of 2006 decreased by $1.3 million, or 12.4% to, $8.8 million, or $0.87 per share ($0.85 after dilution), versus $10.1 million, or $1.03 per share ($0.98 after dilution), for the first quarter of 2005.

OPERATIONS

The Company's fiscal first quarter volume in terms of tons sold was strong given the seasonal weakness historically experienced in the winter months. CEO D. Bryan Jones commented, "I am pleased with the tons sold in this year's first quarter. This quarter's results were achieved in a stable pricing environment and reflect an increase in output that can be attributed to our Company's organic growth strategy".

OUTLOOK

Demand continues to be strong from many steel consuming industries such as non-residential construction, energy, mining, heavy equipment, railcar manufacturing and infrastructure spending. Management believes steel prices will rise in the second quarter and continue to be strong through July. There appears to be less likelihood of a softening in North American steel prices this summer as global steel prices continue to rise. Import offers for third quarter delivery are less plentiful and prices of those offers have risen significantly. Lead times at the North American steel mills have been extended and availability is limited through June.

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.



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
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February 25, February 26,
2006 2005
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$ $
Net sales 195,702 206,357
Cost of sales 153,348 163,111
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Gross margin 42,354 43,246
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Operating expenses
Plant 11,762 10,765
Delivery 6,335 4,729
Selling 3,480 3,587
Administrative and general 7,315 7,408
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28,892 26,489
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Operating income 13,462 16,757
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Interest expense 353 1,150
Share in income of joint ventures (189) (117)
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164 1,033
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Income before income taxes 13,298 15,724
Income taxes 4,455 5,625
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Net income 8,843 10,099
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Net income per share
Basic 0.87 1.03
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Diluted 0.85 0.98
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Weighted average number of shares
outstanding 10,217,563 9,786,089
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Comprehensive income
Net income 8,843 10,099
Changes in cumulative translation adjustment 3,940 (4,410)
Change in fair value of interest
rate swap, net of deferred income taxes 30 167
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12,813 5,856
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Tons sold 215,868 205,762
Tons processed 236,438 242,926
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452,306 448,688
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Novamerican Steel Inc. and Subsidiaries - Consolidated Financial
Statements


CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in accordance with U.S. GAAP, in thousands of U.S. dollars, except
share data)
Accumulated
Other Total
Common shares
------------- Retained Comprehensive Shareholders'
Number Amount Earnings Income Equity
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$ $ $ $
Balance at
November
26, 2005 10,156,226 34,791 221,720 20,448 276,959
Options
exercised 293,774 4,113 4,113
Net income 8,843 8,843
Changes in
cumulative
translation
adjustment 3,940 3,940
Change in
fair value
of interest
rate swap,
net of
deferred
income
taxes - - - 30 30
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Balance at
February
25, 2006 10,450,000 38,904 230,563 24,418 293,885
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Novamerican Steel Inc. and Subsidiaries - Consolidated Financial
Statements (Unaudited)

CONSOLIDATED STATEMENT OF CASH FLOWS

(in accordance with U.S. GAAP, in thousands of U.S. dollars)

Three months ended
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February 25, February 26,
2006 2005
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$ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 8,843 10,099
Adjustments to reconcile net income
to net cash from (used for) operating
activities
Depreciation and amortization 2,529 2,335
Share in income of joint ventures (189) (117)
Deferred income taxes (516) (241)
Changes in working capital items
Accounts receivable 10,122 (2,738)
Income taxes receivable 2,361 -
Inventories (15,311) (24,282)
Prepaid expenses and other (1,575) 120
Accounts payable and accrued
liabilities (9,823) (7,549)
Income taxes payable (1,004) (13,747)
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Net cash used for operating
activities (4,563) (36,120)
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CASH FLOWS FROM INVESTING ACTIVITIES
Short term investment 17,305
Acquisition of minority interest - (204)
Distribution from joint ventures 260 -
Additions to property, plant and
equipment (4,881) (1,633)
Proceeds from disposal of property,
plant and equipment - 5
Other assets (36) -
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Net cash from (used for) investing
activities 12,648 (1,832)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in bank
indebtedness (342) 25,382
Issue of common shares 4,113
Advance to an employee - 420
Proceeds from long-term debt - 6,282
Repayment on long-term debt (108) (1,326)
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Net cash from financing activities 3,663 30,758
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Effect of exchange rate changes on
cash and cash equivalents 742 (260)
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Net increase (decrease) in cash and
cash equivalents 12,490 (7,454)
Cash and cash equivalents, beginning
of period 47,805 11,462
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Cash and cash equivalents, end of
period 60,295 4,008
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid 872 654
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Income taxes paid 3,285 16,951
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Novamerican Steel Inc. and Subsidiaries - Consolidated Financial
Statements

CONSOLIDATED BALANCE SHEETS
(in accordance with U.S. GAAP, in thousands of U.S. dollars)

February 25, February 26, November 26,
2006 2005 2005
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unaudited unaudited audited
$ $ $
ASSETS
Current assets
Cash and cash
equivalents 60,295 4,008 47,805
Accounts receivable 114,757 125,657 140,053
Income taxes receivable 347 - 2,778
Inventories 144,557 193,782 127,316
Prepaid expenses
and other 3,051 676 1,441
Deferred income taxes 1,816 1,391 1,815
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324,823 325,514 321,208
Investment in joint
ventures 2,066 2,380 2,137
Property, plant
and equipment 106,482 104,122 102,794
Goodwill 12,994 12,992 12,994
Deferred income taxes 1,875 - 1,767
Other assets 672 892 683
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448,912 445,900 441,583
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LIABILITIES
Current liabilities
Current portion of
long-term debt 3,089 4,221 3,078
Bank indebtedness 2,398 28,642 2,676
Accounts payable and
accrued liabilities 91,780 94,276 99,713
Income taxes payable - 5,706 998
Deferred income taxes 35 - 338
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97,302 132,845 106,803
Long-term debt 41,764 62,090 41,782
Fair value of interest
rate swap 20 457 71
Deferred income taxes 15,941 13,944 15,968
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155,027 209,336 164,624
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SHAREHOLDERS' EQUITY
Share capital 38,904 29,609 34,791
Retained earnings 230,563 194,881 221,720
Accumulated other
comprehensive income 24,418 12,074 20,448
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293,885 236,564 276,959
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448,912 445,900 441,583
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Conference call: Tuesday April 4, 2006 at 9:30 a.m. Please call 514-368-6455 for details.

Contact Information

  • Novamerican Steel Inc.
    Christopher H. Pickwoad, CA
    Chief Financial Officer
    (514) 368-6403
    www.novamerican.com