Novamerican Steel Inc. Reports Record Second Quarter Sales and Earnings
21 June 2000
Novamerican Steel Inc. Reports Record Second Quarter Sales and Earnings
MONTREA - Novamerican Steel Inc. announced today its financial results for the second quarter ended May 27, 2000. Highlights for the second quarter 2000 include significant increases in sales and net income compared to second quarter 1999. (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
--------------------------------
May 27, 2000 May 29, 1999 Change
--------------------------------
Net sales $129,941 $108,554 19.7%
Gross margin 21.4% 21.4% 0.0%
Net income $4,220 $3,459 22.0%
Net income per share $0.44 $0.36 22.2%
Tons sold 207,533 197,386 5.1%
Tons processed 120,186 75,980 58.2%
------------ ------------
327,719 273,366 19.9%
============ ============
SIX MONTHS ENDED
--------------------------------
May 27, 2000 May 29, 1999 Change
--------------------------------
Net sales $245,799 $204,621 20.1%
Gross margin 21.5% 21.3% 0.9%
Net income $7,239 $5,780 25.2%
Net income per share $0.75 $0.60 25.0%
Tons sold 398,857 365,863 9.0%
Tons processed 252,353 118,338 113.2%
------------ ------------
651,210 484,201 34.5%
============ ============
SECOND QUARTER RESULTS
Net income for the second quarter increased by $0.7 million, to $4.2 million, or $0.44 per share, from $3.5 million, or $0.36 per share for the same period in 1999.
Net income for the six months ended May 27, 2000 increased by $1.4 million, to $7.2 million, or $0.75 per share, from $5.8 million, or $0.60 per share for the first six months of 1999.
Sales for the second quarter increased by $21.3 million, or 19.6%, to $129.9 million from $108.6 million for the same period in 1999.
Sales for the six months ended May 27, 2000 increased by $41.2 million, or 20.1%, to $245.8 million from $204.6 million for the same period in 1999.
The gross profit margin for the second quarter remained unchanged at 21.4% from same quarter of 1999.
The gross margin for the six months ended May 27, 2000 increased to 21.5% from 21.3% for the same period in 1999.
Tons sold and processed in the second quarter of 2000 increased by 54,353 tons, or 19.9% to 327,719 tons from 273,366 in the second quarter 1999. Tons processed in the second quarter of 2000 increased by 44,206 tons or 58.2% to 120,186 tons from 75,980 in the second quarter 1999 due mainly to the inclusion of Nova Steel Processing Centre ("NSPC") for the full six months in 2000 compared with four months in 1999.
Tons sold and processed for the six months ended May 27, 2000 increased by 167,009 tons, or 34.5% to 651,210 tons from 484,201 for the same period in 1999. Tons processed for the six months ended May 27, 2000 increased by 134,015 tons or 113.2% to 252,353 tons from 118,338 for the same period in 1999.
Novamerican Steel Inc. - 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 Six months ended
------------------ -------------------
May 27, May 29, May 27, May 29,
2000 1999 2000 1999
-------- --------- --------- ---------
$ $ $ $
Net sales 129,941 108,554 245,799 204,621
Cost of sales 102,146 85,353 192,922 161,101
-------- --------- --------- ---------
Gross margin 27,795 23,201 52,877 43,520
-------- --------- --------- ---------
Operating expenses
Plant 7,902 6,537 15,622 12,034
Delivery 3,988 3,539 7,669 6,757
Selling 3,037 2,728 6,171 5,269
Administrative and general 4,481 3,924 8,766 7,194
-------- --------- --------- ---------
19,408 16,728 38,228 31,254
-------- --------- --------- ---------
Operating income 8,387 6,473 14,649 12,267
-------- --------- --------- ---------
Interest expense 1,651 1,403 2,864 2,739
Unrealized loss (gain) on
foreign exchange contracts (5) (383) 12 384
Share in income of a
joint venture (225) (228) (379) (344)
-------- --------- --------- ---------
1,421 792 2,497 2,779
-------- --------- --------- ---------
Income before income taxes
and minority interest 6,966 5,681 12,152 9,488
Income taxes 2,715 2,146 4,738 3,578
-------- --------- --------- ---------
Income before minority
interest 4,251 3,535 7,414 5,910
Minority interest (31) (76) (175) (130)
-------- --------- --------- ---------
Net income 4,220 3,459 7,239 5,780
======== ========= ========= =========
Net income per share $0.44 $0.36 $0.75 $0.60
======== ========= ========= =========
Weighted average number
of shares outstanding 9,700,000 9,700,000 9,700,000 9,700,000
========= ========= ========= =========
Comprehensive income
Net income 4,220 3,459 7,239 5,780
Other comprehensive
income (1,788) 1,471 (968) (3,215)
-------- --------- --------- ---------
2,432 4,930 6,269 2,565
======== ========= ========= =========
Tons sold 207,533 197,386 398,857 365,863
Tons processed 120,186 75,980 252,353 118,338
-------- --------- --------- ---------
327,719 273,366 651,210 484,201
======== ========= ========= =========
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in accordance with U.S. GAAP, in thousands of U.S. dollars,
except share data)
Common Shares
------------- Retained
Number Amount Earnings
------ ------ --------
$ $
Balance at November 27, 1999 9,700,000 28,404 57,645
Net income 7,239
Changes in cumulative translation
adjustment - - -
--------- ------ --------
Balance at May 27, 2000 9,700,000 28,404 64,884
========= ====== ========
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in accordance with U.S. GAAP, in thousands of U.S. dollars,
except share data)
Accumulated
Other Total
Comprehensive Shareholders'
Income Equity
------------- -------------
Balance at November 27, 1999 $ (3,637) $ 82,412
Net income - 7,239
Changes in cumulative translation
adjustment (968) (968)
------------- -------------
Balance at May 27, 2000 (4,605) 88,683
============= =============
CONSOLIDATED STATEMENT OF CASH FLOWS
(in accordance with U.S. GAAP, in thousands of U.S. dollars)
Three months Six months
ended ended
--------------- ---------------
May 27, May 29, May 27, May 29,
2000 1999 2000 1999
------- ------- ------- -------
$ $ $ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 4,220 3,459 7,239 5,779
Adjustments to reconcile net
income to net cash from
(used for) operating activities
Depreciation and amortization 1,358 1,011 2,603 1,894
Share in income of a
joint venture (225) (228) (379) (3,440)
Deferred income taxes 229 11 383 73
Minority interest 31 76 175 130
Gain on disposal of property
and equipment (13) (2) (14) (27)
Unrealized loss (gain) on foreign
exchange contracts (5) (383) 12 384
Changes in working capital
Accounts receivable (8,914) (2,615) (9,803) (5,682)
Inventories (4,698) 7,291 (27,033) 9,594
Prepaid expenses and other 115 458 (78) 16
Accounts payable and accrued
liabilities (5,244) 575 979 (7,092)
Income taxes payable (173) 1,084 (2,464) 785
------- ------- ------- -------
Net cash from (used for)
operating activities (13,319) 10,737 (28,381) 2,414
------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Distribution from a joint venture 169 121 357 283
Additions to property
and equipment (9,692) (1,884) (12,651) (4,624)
Proceeds from disposal of
property and equipment 4 - 14 27
Other (174) 221 (183) 584
------- ------- ------- -------
Net cash used for investing
activities (9,694) (1,542) (12,463) (3,730)
------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Variation in bank indebtedness 20,794 (4,717) 29,901 (3,366)
Proceeds from long-term debt 2,478 2,058 9,070 8,446
Repayment on long-term debt (953) (4,507) (2,840) (4,843)
------- ------- ------- -------
Net cash from (used for)
financing activities 22,318 (7,166) 36,130 237
------- ------- ------- -------
Effect of exchange rate changes
on cash and cash equivalents (64) 41 5 42
------- ------- ------- -------
Net increase (decrease) in
cash and cash equivalents (757) 2,070 (4,709) 2,059
Cash and cash equivalents,
beginning of period 2,032 212 5,984 223
------- ------- ------- -------
Cash and cash equivalents,
end of period 1,275 2,282 1,275 2,282
======= ======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid 1,651 1,602 2,902 2,616
======= ======= ======= =======
Income taxes paid 2,722 1,472 6,960 3,457
======= ======= ======= =======
CONSOLIDATED BALANCE SHEETS
(in accordance with U.S. GAAP, in thousands of U.S. dollars)
May 27, May 29,
2000 1999
------- -------
$ $
ASSETS
Current assets
Cash and cash equivalents 1,275 2,282
Accounts receivable 79,551 63,886
Inventories 95,241 62,720
Income taxes recoverable 83 -
Prepaid expenses and other 673 624
------- -------
176,823 129,512
Investment in a joint venture 2,939 2,840
Property and equipment 61,938 51,021
Goodwill, net of accumulated amortization 11,509 11,828
Other assets 989 527
------- -------
254,198 195,728
======= =======
LIABILITIES
Current liabilities
Current portion of long-term debt 2,259 1,327
Bank indebtedness 29,656 5,821
Accounts payable and accrued liabilities 69,559 50,973
Income taxes payable - 422
Deferred income taxes 772 1,689
------- -------
102,246 60,232
Long-term debt 55,403 55,329
Deferred income taxes 5,095 4,157
Minority interest 2,772 2,337
------- -------
165,516 122,055
------- -------
SHAREHOLDERS' EQUITY
Share capital 28,404 28,404
Retained earnings 64,883 49,095
Accumulated other comprehensive income (4,605) (3,826)
------- -------
88,682 73,673
------- -------
254,198 195,728
======= =======
OPERATIONS
Strong demand, combined with higher prices and a diversified product mix resulted in higher sales volumes for the second quarter throughout the Company's operations.
NEW AND PLANNED FACILITIES
As previously announced, on February 2, 2000, the Company signed a joint venture agreement with Bethlehem Steel to form BethNova Tube, LLC and to build a new state-of-the-art tube manufacturing facility to produce steel tubes for use in hydroforming automobile and truck parts. Management expects construction of this facility in Jeffersonville, Indiana to begin in the third quarter of 2000. Tube production is planned to start at the end of the first quarter of 2001.
Construction of the Philadelphia tube mill and processing facility is near completion. Management expects to commence commercial operations in September of 2000.
Expansions continue at the American Steel facilities of Albany and Auburn and are expected to be completed by the third quarter of 2000.
At NSPC, the Company's most recent startup, the second slitter will be commissioned in July 2000. Management expects this equipment to process in excess of 100,000 tons during its first twelve months. In the meantime, NSPC continues to perform at levels above forecast.
OUTLOOK
Management believes that during the third quarter volumes will remain at current levels. Due to supply opportunities, inventories are at high levels. Management expects that these levels will be reduced by the end of the fourth quarter.
COMPANY DESCRIPTION
Novamerican Steel Inc., based in Montreal, Canada with twelve operating locations in Canada and nine 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.