AMR Technologies reports year-end 2005 and fourth quarter financial results20 March 2006
AMR Technologies Inc. (TSX: AMR) ("AMR" or the "Company") today reported its results for the fourth quarter and year ending December 31, 2005. Unless otherwise specified, all currency amounts are expressed as U.S. dollars. Effective August 31, 2005 AMR acquired all of the outstanding shares of Magnequench, Inc. ("MQI") in what constituted a reverse take-over of AMR. In accordance with reverse take-over accounting rules, the 2005 annual results include only the period beginning September 1, 2005 to December 31, 2005 for AMR and the entire twelve-month period for Magnequench.
For the twelve-month period ended December 31, 2005, net loss from continuing operations was $5.5 million on revenues of $98.5 million compared to net income from continuing operations of $7.0 million on sales of $83.6 million for the corresponding period in 2004. The net loss of $5.5 million includes $18.1 million of non-recurring costs. These costs, most of which related to the AMR/MQI transaction, consist of: (i) $1.8 million included in Costs of Sales for a purchase accounting adjustment for inventory; (ii) $2.4 million included in SG&A for deal related costs and an accounts receivable provision relating to a sale of fixed assets from a discontinued business; (iii) $1.0 million included in Restructuring charge for employee severance; (iv) $8.0 million included in Interest expense relating to the extinguishment of MQI's former financing package; and (v) the balance being the recording of a $4.9 million claims settlement. After adjusting for these non-recurring costs, the Company's net income for the 2005 year would have been $12.6 million with adjusted EBITDA of $40.1 million.
For the three-month period, the Company reported a consolidated net loss of $3.3 million, which included non-recurring costs of $7.2 million related to legal settlements, acquisition accounting for inventory and selling, general and administrative expenses ("SG&A"). Excluding the non-recurring costs, net income was $3.9 million or $0.05 per share for the three-month period ended December 31, 2005. Earnings before interest, taxes, depreciation and amortization ("EBITDA") in the quarter was $3.4 million, or $10.6 million after adjusting for non-recurring items. In the quarter ending December 31, 2005, the Company reported net sales of $35.2 million.
Volumes sold at both operating divisions was strong during the fourth quarter with Magnequench posting its second consecutive record quarter in volume sales at 905 tonnes shipped, representing an 18 percent year-over-year increase, while the Performance Materials division posted a strong 1,183 tonnes shipped while running its rare earth production at full capacity by year-end.
"I am pleased to report that we have successfully completed our integration plan within the timeframe we had anticipated," noted Constantine Karayannopoulos, President and Chief Executive Officer of AMR Technologies Inc. "Our progress in the quarter is reflected by strong top line growth and strong cash flow generation allowing us to accelerate the Company's debt repayment significantly ahead of schedule."
Cash flow from operations was $6.1 million in the quarter compared to $2.9 million in the corresponding quarter of 2004. As at the end of the fourth quarter, AMR had $10.8 million of cash and cash equivalents and reduced its senior bank debt by $5.1 million to $44.9 million and other long term debt by $2.4 million. The debt reduction greatly exceeded the scheduled principal payments specified for the period. The Company's goal remains to accelerate repayment of its senior bank debt, leaving the $50 million convertible debenture outstanding as the only significant debt remaining on the Company's balance sheet. As at December 31, 2005, the total number of shares issued and outstanding was 79,070,786.
The Company also reiterated its positive outlook for 2006 as the business climate and economic conditions remain strong in the end markets being served. Total sales for both operating divisions are expected to grow with increased demand due to new applications, recapture of market share by enforcing AMR's patents, internal rare earth sales to the Magnequench division, and increased demand for zirconium mixed oxides in North America.
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Magnequench Division
--------------------
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(US$000's) Q4 2005 Q4 2004 Total 2005 Total 2004
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Revenue 22,553 21,070 80,887 83,612
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Quantity shipped
(tonnes) 905 769 3,208 3,136
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Division operating
income(*) 5,476 7,865 23,416 34,265
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(*)Operating income before corporate expenses
Full year 2005 sales for the Magnequench division were $80.9 million on 3,208 tonnes of neo powder shipped compared to sales of $83.6 million on shipments of 3,136 tonnes in 2004. The decrease in revenues is a reflection of lower average selling prices due to planned annual strategic price reductions in July 2005, targeted price reductions as part of the Company's strategic pricing and new applications incentive programs; and product mix. The Company believes that over the next few quarters these price reductions will result in increased unit volumes that will offset this planned margin compression.
Average price reductions were more modest during 2005 as compared with previous years, with the average list price declining 3.1% from 2004 levels. The full 2005 volume of 3,208 tonnes and in particular the strong fourth quarter volume of 905 tonnes were each all time records and reflect the ongoing recovery from a period of declining volumes which reached a low of 661 tonnes during the first quarter of 2005. The improving trend indicates penetration of new applications as well as successful recovery of market share from competitors previously infringing the Company's patents.
The Magnequench division operating income for the year ended December 31, 2005 was $23.4 million compared to $34.3 million for 2004. Division operating income was down largely due to lower gross profits, which declined by almost 18% on a unit basis. Gross profit was reduced by $4.4 million due to lower average selling prices offset in part by $1.8 million as a result of increased volume. The decline in gross profit also reflects higher neo powder raw material costs plus the impact of increased VAT (value added tax) on finished product exported from China. The VAT on exports negatively impacted the 2005 gross margin by $2.0 million compared to 2004 while $3.3 million of non- recurring deal related and integration costs also adversely impacted division operating income. Excluding the non-recurring merger related expenses, SG&A expenditures would have declined as compared to 2004, in part reflecting savings from the relocation of the administrative functions to Singapore.
The volume outlook for neo powders is expected to follow the quarterly upward trend experienced through 2005. It is expected that this growth will continue to be driven by stronger demand from core market segments, recapture of market share from competitors infringing Magnequench patents and demand growth from new applications. Infringement recapture may plateau early in 2006, but there are potential growth opportunities in China and demand in Europe appears to be strengthening. Margin in 2006 is expected to be affected by the increase in cost of the relevant rare earth elements and the strategic price adjustment mentioned above.
Performance Materials Division
-------------------------------
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(US$000's) Q4 2005 Total 2005
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Revenue 12,670 17,573
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Quantity shipped
(tonnes oxide equivalents) 1,183 1,568
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Division operating income(*) 392 316
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(*)Operating income before corporate expenses
The Performance Materials division is the combined operations of the rare earth and zirconium business units of AMR prior to the AMR/MQI transaction. The consolidated financial statements reflect the operations of the Performance Materials division only since September 1, 2005 and the combined statements for 2004 do not include historical financial results for the division. Sales for the Performance Materials division during the period September 1, 2005 to December 31, 2005 were $17.6 million and the division operating income was $0.3 million. The reported operating income reflects the impact of the $1.8 million cost of sales adjustment relating to inventory revaluation at the time of the merger. The revaluation was consistent with the CICA standard for accounting for business combinations.
Including the period before the AMR/MQI transaction, sales for the Performance Materials division were positively affected by higher selling prices for certain rare earth elements, especially in Asian markets. Rare earth prices are likely to continue its upward trend witnessed in the past few quarters but at a more moderate rate. With an anticipated increase in magnetic powder output, some shortages of rare earth elements are expected in 2006. Total sales for the Performance Materials division are expected to continue to increase, aided by the incremental rare earth sales to the Magnequench division. In addition, mixed oxide sales to the automotive catalyst sector are expected to increase over 2005.
About AMR
AMR is a producer, processor and developer of neo powders, rare earths and zirconium based engineered materials and applications through its Magnequench and Performance Materials business divisions. These innovative products are essential in many of today's high technology products. These include computers, TVs, cell phones, micro motors, precision motors and other applications requiring high levels of magnetic strength, flexibility, small size and weight. With approximately 1,300 employees in 15 locations, across 10 countries, AMR is headquartered in Toronto, Canada and trades under the symbol AMR on the Toronto Stock Exchange.
Forward Looking Statements
From time to time, the Company may publish forward-looking statements relating to such matters as expected financial performance, business prospects, technological developments, and development activities and like matters. These statements involve risk and uncertainties, including but not limited to the risk factors previously described. Actual results could differ materially from those projected as a result of these risks and should not be relied upon as a prediction of future events. AMR Technologies Inc. undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.
Teleconference Call
Management will host a teleconference call on Friday, March 17, 2006 at 2:00 pm (Eastern Time) to discuss these results. Interested parties may access the teleconference by calling (416) 644-3414 (local) or (866) 250-4892 (toll free long distance) or by visiting http://www.newswire.ca/webcast. A recording of the teleconference may be accessed by calling (416) 640-1917 (local) or (877) 289-8525 (toll free long distance), and entering pass code 21179964 followed by the number sign until April 20, 2006 or by visiting http://www.newswire.ca/webcast.
Online Access
A complete set of financial statements, the Management's Discussion and Analysis and Shareholders Message will be available online at www.amr-ltd.com before Friday, March 24, 2006.
Notice of Shareholder Meeting
The Company will hold its Annual and Special Meeting of Shareholders on Wednesday, April 19, 2006 at 10:00 am at The Gallery, TSX Conference Centre, The Exchange Tower, 130 King Street West, Toronto, Ontario.
Financial Results follow
AMR Technologies Inc.
BALANCE SHEETS
(Unaudited - all figures in thousands of United States dollars)
December 31, December 31,
2005 2004
(Consolidated) (Combined)
-------------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents $ 10,755 $ 2,755
Restricted cash 248 -
Accounts receivable, net of allowances of $1,150
(2004 - $nil) 18,447 8,115
Inventories 19,755 6,974
Other current assets 2,090 4,163
Assets of operations held for sale - 253
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Total current assets 51,295 22,260
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Property, plant and equipment 44,340 34,603
Patents and other intangible assets 13,900 8,227
Goodwill 34,987 23,133
Deferred expenses and other assets 9,260 16,549
-------------------------------------------------------------------------
Total assets $ 153,782 $ 104,772
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank advances and other short term debt $ 8,548 $ 1,813
Accounts payable and other accrued charges 25,663 11,700
Restructuring liabilities 975 875
Long-term debt due within one year 13,100 22,427
Liabilities of operations held for sale - 428
-------------------------------------------------------------------------
Total current liabilities 48,286 37,243
-------------------------------------------------------------------------
Long-term debt 74,199 137,997
Future income tax liability 1,904 -
Accrued pension and other post retirement benefits 1,615 1,948
Other long-term liabilities 3,000 -
-------------------------------------------------------------------------
Total liabilities 129,004 177,188
-------------------------------------------------------------------------
Non-controlling interest 2,114 -
Contingencies and commitments - -
Shareholders' equity (deficit) 22,664 (72,416)
-------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 153,782 $ 104,772
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AMR Technologies Inc.
STATEMENTS OF OPERATIONS
(Unaudited -all figures in thousands of United States dollars,
except per share information)
For the three months For the year
ended December 31 ended December 31
2005 2004 2005 2004
(Consolidated) (Combined) (Consolidated) (Combined)
-------------------------------------------------------------------------
Revenues
Net sales $ 35,223 $ 21,070 $ 98,460 $ 83,612
Costs of sales
Costs excluding
depreciation and
amortization 19,378 5,864 41,351 19,654
Depreciation and
amortization 2,304 1,868 8,080 7,469
-------------------------------------------------------------------------
Gross profit 13,541 13,338 49,029 56,489
Expenses
Selling, general
and administrative 6,653 4,058 21,182 17,258
Depreciation and
amortization 1,055 530 2,850 2,036
Research and
development 711 536 2,342 1,958
Restructuring charge 628 349 1,010 972
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9,047 5,473 27,384 22,224
-------------------------------------------------------------------------
Operating income 4,494 7,865 21,645 34,265
-------------------------------------------------------------------------
Other (income) (263) (874) (2,162) (1,497)
Interest expense, net 2,432 4,714 23,791 27,286
Settlement of claims 4,875 - 4,875 -
Foreign exchange (gain)
/loss (29) 20 171 32
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(Loss)/income from
continuing operations
before taxes and
non-controlling
interest (2,521) 4,005 (5,030) 8,444
Income taxes 918 306 871 1,708
Non-controlling
interest in earnings
of subsidiaries 17 - 37 -
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(Loss)/income from
continuing operations
before equity income
of affiliate (3,456) 3,699 (5,938) 6,736
Equity income of
affiliate 133 199 391 307
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(Loss)/income from
continuing operations (3,323) 3,898 (5,547) 7,043
(Loss) from
discontinued
operations,
net of tax - (151) - (1,867)
-------------------------------------------------------------------------
Net (loss)/income
for the period $ (3,323) $ 3,747 $ (5,547) $ 5,176
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-------------------------------------------------------------------------
Net (loss)/income
from continuing
operations per
share, basic and
diluted $ (0.04) $ 0.15 $ (0.13) $ 0.26
Net (loss)/income
per share, basic
and diluted $ (0.04) $ 0.14 $ (0.13) $ 0.19
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AMR Technologies Inc.
STATEMENTS OF CASH FLOWS
(Unaudited - all figures in thousands of United States dollars)
For the three months For the year
ended December 31 ended December 31
2005 2004 2005 2004
(Consolidated) (Combined) (Consolidated) (Combined)
-------------------------------------------------------------------------
Operating Activities
Net (loss)/income
from continuing
operations $ (3,323) $ 3,898 $ (5,547) $ 7,043
Add (deduct) items
not affecting cash
Depreciation and
amortization 3,359 2,398 10,930 9,505
Amortization of
deferred financing
costs 238 327 989 1,243
Stock-based
compensation
expense 409 - 1,526 -
Non-controlling
interest in
earnings of
subsidiaries 17 - 37 -
Accretion of
original issue
discount on debt 303 - 404 5,286
Write-off of deferred
financing costs and
sub-debt issue
discount - - 5,153 1,579
Future income tax (115) - (115) -
Equity income of
affiliate (133) (199) (391) (307)
Net change in non-
cash working capital
balances related to
operations 2,363 (3,574) 6,944 (39,676)
Net change in other
long-term liabilities 3,000 - 3,000 -
-------------------------------------------------------------------------
Cash provided by/
(used in) operating
activities 6,118 2,850 22,930 (15,327)
-------------------------------------------------------------------------
Investing activities
Acquisition of
property, plant and
equipment (521) (334) (812) (1,579)
Cash acquired on
acquisition of AMR
Technologies Inc. - - 2,859 -
Decrease in restricted
cash 982 - 982 -
Proceeds on disposal
of assets - 47 - 50
-------------------------------------------------------------------------
Cash provided by/
(used in) investing
activities 461 (287) 3,029 (1,529)
-------------------------------------------------------------------------
Financing activities
Proceeds from
issuance of
long-term debt - - 100,000 170,000
Repayment of
long-term debt (5,654) (5,119) (164,439) (133,499)
Proceeds from
borrowings on
revolving credit
facility - - - 63,367
Payments on revolving
credit facility - - - (90,253)
Increase/(decrease)
in bank advances
and other (1,840) 974 (6,560) 974
Issuance of common
shares, net of issue
costs 7 - 52,974 -
-------------------------------------------------------------------------
Cash (used in)/
provided by financing
activities (7,487) (4,145) (18,025) 10,589
-------------------------------------------------------------------------
Effect of exchange rate
changes on cash 48 (9) 66 34
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Net change in cash (860) (1,591) 8,000 (6,233)
Cash flows from
discontinued
operations - - - 5,761
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Cash (used)/provided
during the period (860) (1,591) 8,000 (472)
Cash and cash
equivalents,
beginning of period 11,615 4,346 2,755 3,227
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Cash and cash
equivalents,
end of period $ 10,755 $ 2,755 $ 10,755 $ 2,755
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>>
For further information: Information Contact, Michael Doolan, Chief Financial Officer, (416) 367-8588, ext.335, Website: www.amr-ltd.com, e-mail: amrinfo@amr-ltd.com; Ali Mahdavi, Genoa Management, (416) 962-3300, ext. 225, e-mail: amahdavi@genoa.ca; To request a free copy of this organization's annual report, please go to http://www.newswire.ca and click on Tools for Investors.
Source: newswire
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