Novamerican Steel Inc.
NASDAQ : TONS

Novamerican Steel Inc.

January 09, 2007 12:15 ET

Novamerican Reports 36th Consecutive Profitable Quarter

MONTREAL, QUEBEC--(CCNMatthews - Jan. 9, 2007) -

Attention Business/Financial Editors

Novamerican Steel Inc. (NASDAQ:TONS) announced today its financial results for the fourth quarter and for the fiscal year ended November 25, 2006. (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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November 25, 2006 November 26, 2005 Change
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Net sales $204,588 $219,211 ($14,623)
Gross margin 22.0% 23.0% -1.0%
Net income $11,917 $13,908 ($1,991)
Basic income per share $1.14 $1.37 ($0.23)
Diluted income per share $1.14 $1.35 ($0.21)

Tons sold 206,855 269,494 (62,639)
Tons processed 195,511 271,999 (76,488)
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402,366 541,493 (139,127)
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YEAR ENDED
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November 25, 2006 November 26, 2005 Change
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Net sales $840,798 $834,689 $6,109
Gross margin 22.0% 20.4% 1.6%
Net income $44,298 $36,938 $7,360
Basic income per share $4.26 $3.70 $0.56
Diluted income per share $4.25 $3.58 $0.67

Tons sold 887,085 924,720 (37,635)
Tons processed 862,002 1,008,831 (146,829)
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1,749,087 1,933,551 (184,464)
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FOURTH QUARTER AND YEAR END RESULTS

The Company achieved its 36th consecutive profitable quarter.

Net income for the year ended November 25, 2006 increased by $7.4 million, or 19.9%, to $44.3 million, or $4.26 ($4.25 after dilution) per share, versus $36.9 million, or $3.70 per share ($3.58 after dilution), for the year 2005.

Net income for the fourth quarter decreased by $2.0 million, or 14.3%, to $11.9 million, or $1.14 per share ($1.14 after dilution), versus $13.9 million, or $1.37 per share ($1.35 after dilution), for the same period in 2005.

Sales for the year ended November 25, 2006 increased by $6.1 million, or 0.7%, to $840.8 million from $834.7 million for the same period in 2005.

Sales for the fourth quarter decreased by $14.6 million, or 6.7%, to $204.6 million from $219.2 million for the same period in 2005.

Tons sold and processed for the year ended November 25, 2006 decreased by 184,464 tons, or 9.5%, to 1,749,087 tons from 1,933,551 tons, compared with the same period in 2005.

Tons sold and processed in the fourth quarter of 2006 decreased by 139,127 tons, or 25.7%, to 402,366 tons from 541,493 tons in the fourth quarter of 2005.

The gross margin for the year ended November 25, 2006 increased to 22.0% from 20.4% for the same period in 2005.

The gross margin for the fourth quarter 2006 decreased to 22.0% from 23.0% in the fourth quarter in 2005.

OPERATIONS

Despite the inventory correction that plagued the North American steel industry in late 2006, the Company managed a successful conclusion to its year by achieving good results in its fiscal fourth quarter. The Company was also successful during the fourth quarter in reducing inventory to levels more in balance with year end demand. The Company closed the year with a strong balance sheet and is in a sound financial position for growth opportunities.

OUTLOOK

The decline in steel prices, resulting from weakened demand and an oversupply of steel in the fourth quarter, appears to be over. Import offerings for first and second quarter delivery are limited and the domestic steel mills appear committed to price stability early in 2007.

Management remains cautiously optimistic for a good start to fiscal 2007. The Company's fiscal first quarter appears poised for a slight increase in demand relative to the fourth quarter as warmer weather in the Northeast and inventory replenishment have combined for better than expected shipments early in the new year. Steel consuming industries such as industrial and commercial construction, energy, heavy equipment, railcar and infrastructure spending are forecasting stable demand in 2007 as the year begins.

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 January 9, 2007 at 4:30 pm.
Dial-in number : 1-800-525-6384


Novamerican Steel Inc. and Subsidiaries - Consolidated Financial
Statements

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 Years ended
----------------------------------------------------------------------
November 25, November 26, November 25, November 26,
2006 2005 2006 2005
----------------------------------------------------------------------
$ $ $ $
Net sales 204,588 219,211 840,798 834,689
Cost of sales 159,641 168,822 655,659 664,134
----------------------------------------------------------------------
Gross margin 44,947 50,389 185,139 170,555
----------------------------------------------------------------------

Operating expenses
Plant 10,910 10,865 45,233 43,210
Delivery 5,746 6,656 25,586 23,371
Selling 3,310 3,497 13,886 13,562
Administrative and
general 6,200 7,972 31,034 30,326
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26,166 28,990 115,739 110,469
----------------------------------------------------------------------
Operating income 18,781 21,399 69,400 60,086
----------------------------------------------------------------------
Interest expense 262 489 1,139 3,892
Share in income of a
joint venture (122) (331) (743) (720)
----------------------------------------------------------------------
140 158 396 3,172
----------------------------------------------------------------------
Income before income
taxes 18,641 21,241 69,004 56,914
Income taxes 6,724 7,333 24,706 19,976
----------------------------------------------------------------------
Net income 11,917 13,908 44,298 36,938
----------------------------------------------------------------------
Net income per share
Basic 1.14 1.37 4.26 3.70
----------------------------------------------------------------------
----------------------------------------------------------------------
Diluted 1.14 1.35 4.25 3.58
----------------------------------------------------------------------
----------------------------------------------------------------------
Weighted average
number of shares
outstanding 10,450,000 10,156,226 10,391,891 9,993,337
----------------------------------------------------------------------
----------------------------------------------------------------------

Comprehensive income
Net income 11,917 13,908 44,298 36,938
Changes in
cumulative
translation
adjustment (6,148) 2,659 3,134 3,736
Change in fair
value of interest
rate swap,
net of deferred
income taxes - 135 42 395
----------------------------------------------------------------------
5,769 16,702 47,474 41,069
----------------------------------------------------------------------
----------------------------------------------------------------------

Tons sold 206,855 269,494 887,085 924,720
Tons processed 195,511 271,999 862,002 1,008,831
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402,366 541,493 1,749,087 1,933,551
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----------------------------------------------------------------------



CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in accordance with U.S. GAAP, in thousands of U.S. dollars, except
share data)

Accumulated Total
Other Share-
Common Shares Retained Comprehensive holders'
-------------
Number Amount Earnings Income Equity
----------------------------------------------------------------------
----------------------------------------------------------------------
$ $ $ $
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 44,298 44,298
Changes in
cumulative
translation
adjustment 3,134 3,134
Change in fair
value of interest
rate swap,
net of deferred
income taxes - - - 42 42
----------------------------------------------------------------------
Balance at November
25, 2006 10,450,000 38,904 266,018 23,624 328,546
----------------------------------------------------------------------
----------------------------------------------------------------------




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


Three months ended Years ended
----------------------------------------------------------------------
November 25, November 26, November 25, November 26,
2006 2005 2006 2005
----------------------------------------------------------------------
$ $ $ $
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income 11,917 13,908 44,298 36,938
Adjustments to
reconcile net
income to net cash
from operating
activities
Depreciation and
amortization 2,805 2,571 10,697 9,936
Share in income of
a joint venture (122) (330) (743) (720)
Deferred income
taxes 242 69 (795) (359)
Gain on disposal
of property, plant
and equipment (998) (93) (995) (69)
Changes in working
capital items
Accounts receivable 2,399 (12,404) 14,298 4,339
Income taxes
receivable - 2,038 2,858 (2,666)
Inventories 13,682 7,789 (34,234) 46,181
Prepaid expenses
and other 1,644 663 377 (611)
Accounts payable
and accrued
liabilities (21,175) 20,910 (21,097) (4,744)
Income taxes
payable 281 32 696 (18,648)
----------------------------------------------------------------------
Net cash from
operating
activities 10,675 35,153 15,360 69,577
----------------------------------------------------------------------
CASH FLOWS FROM
INVESTING
ACTIVITIES
Repayment of loan
to a Corporation 40 - 17,621 -
Loan to a
Corporation (37,885) (16,443) (37,885) (16,443)
Acquisition of
minority interest - - - (205)
Distribution from
a joint venture 868 846 1,132 846
Additions to
property, plant
and equipment (15,335) (1,800) (22,581) (5,359)
Proceeds from
disposal of
property, plant
and equipment 10,861 188 10,877 514
Other assets (8) (255) (67) (255)
----------------------------------------------------------------------
Net cash used for
investing
activities (41,459) (17,464) (30,903) (20,902)
----------------------------------------------------------------------
CASH FLOWS FROM
FINANCING
ACTIVITIES
Net increase
(decrease) in bank
indebtedness (141) 2,122 (2,236) (802)
Issue of common
shares - - 4,113 5,182
Advance due to an
employee - (7) - (730)
Proceeds from
long-term debt - (2,223) - -
Repayment of
long-term debt (995) (1,737) (3,670) (16,756)
----------------------------------------------------------------------
Net cash used for
financing
activities (1,136) (1,845) (1,793) (13,106)
----------------------------------------------------------------------
Effect of exchange
rate changes on
cash and cash
equivalents (1,413) 390 547 774
----------------------------------------------------------------------
Net increase
(decrease) in cash
and cash equivalents (33,333) 16,234 (16,789) 36,343
Cash and cash
equivalents,
beginning of
period 64,349 31,571 47,805 11,462
----------------------------------------------------------------------
Cash and cash
equivalents, end
of period 31,016 47,805 31,016 47,805
----------------------------------------------------------------------
----------------------------------------------------------------------

SUPPLEMENTAL
DISCLOSURE OF CASH
FLOW INFORMATION
Interest paid 842 734 2,444 4,053
----------------------------------------------------------------------
----------------------------------------------------------------------
Income taxes paid 7,496 5,630 24,738 40,259
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----------------------------------------------------------------------




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

November 25, November 26,
2006 2005
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$ $
ASSETS
Current assets
Cash and cash equivalents 31,016 47,805
Trade accounts receivable, net 109,609 121,626
Loan receivables 37,670 17,132
Income taxes receivable - 2,778
Inventories 163,060 127,316
Prepaid expenses and other 2,096 2,736
Deferred income taxes 1,957 1,815
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345,408 321,208

Investment in a joint venture 1,748 2,137
Property, plant and equipment 106,309 102,794
Goodwill 12,994 12,994
Deferred income taxes 2,260 1,767
Other assets 328 683
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469,047 441,583
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LIABILITIES
Current liabilities
Current portion of long-term debt 38,642 3,078
Bank indebtedness 513 2,676
Trade accounts payable and accrued
liabilities 79,302 97,750
Trade accounts payable to a company
controlled by a director 677 873
Trade accounts payable to a joint
venture 592 977
Advances due to related parties 192 113
Income taxes payable 1,703 998
Deferred income taxes 290 338
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121,911 106,803
Long-term debt 2,645 41,782
Fair value of interest rate swap - 71
Deferred income taxes 15,945 15,968
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140,501 164,624
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SHAREHOLDERS' EQUITY
Preferred shares, no par value:
Unlimited number of shares authorized;
none issued or outstanding
Common shares, no par value: Unlimited
number of shares authorized; issued
and outstanding shares: 10,450,000 in
2006 and 10,156,226 in 2005 38,904 34,791
Retained earnings 266,018 221,720
Accumulated other comprehensive income 23,624 20,448
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328,546 276,959
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469,047 441,583
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Contact Information

  • Novamerican Steel Inc.
    Lawrence P. Cannon, CA
    Vice President and Chief Financial Officer
    (514) 368-6455
    www.novamerican.com