Q3 2018 Highlights
(unless other noted, all financial amounts in this news release are expressed in U.S. dollars)
- $114.2 million in revenue
- Net income of $8.8 million, or $0.22 per share
- Adjusted Net Income(1) of $8.7 million, or $0.22 per
share
- Adjusted EBITDA(1) of $16.7 million
- Revenue, net income, operating income, EBITDA(1) and Adjusted EBITDA(1) are all higher year-to-date
over the comparable nine-month period of 2017
- Quarter-end closes with $69.3 million cash on hand after paying a $2.9
million dividend. In the nine months ended September 30, 2018, Neo paid $8.9 million in dividends to its shareholders.
- A quarterly dividend of Cdn$0.095 per common share was declared on November 13, 2018 for shareholders of record at December 20, 2018.
TORONTO, Nov. 14, 2018 /CNW/ - Neo Performance Materials Inc.
("Neo", the "Company") (TSX:NEO), a global leader in the innovation and manufacturing of rare earth and rare
metal-based functional materials, today released third quarter 2018 financial results. The financial statements and the
management's discussion and analysis ("MD&A") of these results can be viewed on Neo's web site at www.neomaterials.com and on SEDAR at www.sedar.com.
HIGHLIGHTS OF Q3 2018 CONSOLIDATED PERFORMANCE
In the third quarter of 2018, Neo generated $114.2 million in revenue, a slight decrease of 1.9%
over Q3 2017. Net income totaled $8.8 million, or $0.22 per
share. Adjusted Net Income(1) totaled $8.7 million, or $0.22 per share. Adjusted EBITDA(1) decreased 0.8% to $16.7
million, from $16.9 million in Q3 2017.
For the nine months ended September 30, 2018, consolidated revenue was $344.8 million, compared to $324.7 million for the same period in the prior year;
an increase of $20.1 million or 6.2%. Net income totaled $36.8
million, or $0.92 per share, compared to $27.1 million, or
$0.67 per share, in the comparable period of 2017. Adjusted Net Income totaled $31.4 million, or $0.78 per share. Adjusted EBITDA increased 3.0% to
$53.9 million, from $52.3 million in the nine months ended
September 30, 2017. Revenue and Adjusted EBITDA were $434.2
million and $67.9 million, respectively, for the full year ended December 31, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Neo reports non-IFRS measures such as "Adjusted Net
Income", "Adjusted Earnings per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin" and "EBITDA". Please see information
on this and other non-IFRS measures in the "Non-IFRS Measures" section of this new release and in the MD&A, available
on Neo's website at www.neomaterials.com and on SEDAR at www.sedar.com.
|
As of September 30, 2018, Neo reported cash and cash equivalents of $69.3
million, compared to $96.8 million as at December 31,
2017. The change in cash resulted from an increase in working capital associated with higher raw material inventory
purchases, higher inventory in the auto-catalyst supply chain, increased inventory costs, and by certain cash costs related to
the completion of the Initial Public Offering in December 2017. Neo has approximately $27.1
million available under its credit facilities with nominal amounts drawn. In addition, Neo paid $8.9 million in dividends to its shareholders in the nine months ended September 30,
2018.
"Growth trends in multiple sectors continued to drive demand across Neo's product portfolio," said Geoff Bedford, Neo's President and CEO. "Through the first nine months of 2018, we saw year-over-year
growth in both our Magnequench and Rare Metals segments. In our Chemicals and Oxides segment we saw a return to prior-year run
rate levels and an end to expedited freight cost in our auto-catalyst business. This helped to partially mitigate lower volumes
and margins in our rare earth separation business in the quarter."
SELECTED FINANCIAL RESULTS
|
TABLE 1: Selected Consolidated Results
|
|
Q-over-Q Comparison
|
YTD-over-YTD Comparison
|
|
Q3 2018
|
Q3 2017
|
Q3 2018
|
Q3 2017
|
|
Volume (tonnes)
|
3,649
|
3,956
|
10,644
|
11,596
|
|
($000s)
|
|
|
|
|
|
Revenue
|
$114,216
|
$116,421
|
$344,834
|
$324,717
|
|
Operating income(1)
|
$10,890
|
$11,423
|
$36,664
|
$30,109
|
|
EBITDA(2)
|
$16,677
|
$16,829
|
$58,332
|
$46,974
|
|
Adjusted EBITDA(2)
|
$16,732
|
$16,865
|
$53,878
|
$52,303
|
|
Adjusted EBITDA %(2)
|
14.6%
|
14.5%
|
15.6%
|
16.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
In accordance with IFRS 3 - Business Combinations and on completion of
the reorganization in September 2016, Neo recorded the acquisition of its inventory at fair value. See details in
Acquisition of Inventory at Fair Value section of this news release and in the MD&A.
|
|
|
|
(2)
|
Neo reports non-IFRS measures such as "Adjusted Net Income", "Adjusted
Earnings per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin" and "EBITDA". Please see information on this and other
non-IFRS measures in the "Non-IFRS Measures" section of this news release and in the MD&A.
|
MAGNEQUENCH SEGMENT RESULTS
Magnequench continued to see growth in many of its end market applications, including traction motors for hybrid and electric
vehicles and micro-motors for vehicles, factory automation, appliances and other motor applications. In the three-month and
nine-month periods of 2018, revenue, operating income, EBITDA and Adjusted EBITDA were all higher in the Magnequench segment than
in the corresponding periods of 2017, while volumes were marginally lower. In the three and nine months ended September 30, 2018, Adjusted EBITDA is up 23.9% and 19.3%, respectively, compared to the prior year, as
Magnequench continues to positively grow earnings through its highly engineered value-add products that meet exacting
specifications and drive efficiency in customer applications.
|
TABLE 2: Selected Magnequench Results
|
|
Q-over-Q Comparison
|
YTD-over-YTD Comparison
|
|
Q3 2018
|
Q3 2017
|
Q3 2018
|
Q3 2017
|
|
Volume (tonnes)
|
1,601
|
1,681
|
4,682
|
4,766
|
|
($000s)
|
|
|
|
|
|
Revenue
|
$54,539
|
$54,053
|
$166,502
|
$143,774
|
|
Operating income(1)
|
$10,514
|
$8,385
|
$35,287
|
$28,155
|
|
EBITDA(2)
|
$12,265
|
$10,074
|
$40,854
|
$33,505
|
|
Adjusted EBITDA(2)
|
$12,549
|
$10,126
|
$41,432
|
$34,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
In accordance with IFRS 3 - Business Combinations and on completion of
the reorganization in September 2016, Neo recorded the acquisition of its inventory at fair value. See details in
Acquisition of Inventory at Fair Value section of this news release and in the MD&A.
|
|
|
|
(2)
|
Neo reports non-IFRS measures such as "Adjusted Net Income", "Adjusted
Earnings per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin" and "EBITDA". Please see information on this and other
non-IFRS measures in the "Non-IFRS Measures" section of this news release and in the MD&A.
|
CHEMICALS AND OXIDES ("C&O") SEGMENT RESULTS
Auto-catalyst production and profitability showed strong improvement in the third quarter compared to earlier in the year, and
premium freight charges the Company was bearing as a result of production process upgrades in late 2017 substantially ended in
the second quarter of the year, totaling $4.2 million year to date. Strong growth was seen
for Neo's three-way vehicle catalyst products, which helped to offset a general market slowdown in demand for diesel catalyst
products. The rare earth separation business recorded weaker results this quarter compared to the prior year and the first
half of 2018 mainly due to the impact of certain spot purchases and the timing of product mix and production campaigns.
|
TABLE 3: Selected C&O Results
|
|
Q-over-Q Comparison
|
YTD-over-YTD Comparison
|
|
Q3 2018
|
Q3 2017
|
Q3 2018
|
Q3 2017
|
|
Volume (tonnes)
|
1,985
|
2,265
|
5,768
|
6,733
|
|
($000s)
|
|
|
|
|
|
Revenue
|
$41,361
|
$50,246
|
$123,215
|
$134,678
|
|
Operating income(1)
|
$3,908
|
$6,689
|
$9,833
|
$15,887
|
|
EBITDA(2)
|
$4,995
|
$8,572
|
$13,209
|
$19,778
|
|
Adjusted EBITDA(2)
|
$5,214
|
$8,256
|
$13,914
|
$22,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
In accordance with IFRS 3 - Business Combinations and on completion of
the reorganization in September 2016, Neo recorded the acquisition of its inventory at fair value. See details in
Acquisition of Inventory at Fair Value section of this news release and in the MD&A.
|
|
|
|
(2)
|
Neo reports non-IFRS measures such as "Adjusted Net Income", "Adjusted
Earnings per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin" and "EBITDA". Please see information on this and other
non-IFRS measures in the "Non-IFRS Measures" section of this news release and in the MD&A.
|
RARE METALS SEGMENT RESULTS
The Rare Metals segment continued to see higher performance and growth trends in the tantalum, niobium and gallium
segments. These gains were offset somewhat by lower customer demand for the segment's hafnium-based products. Volume
and revenue increased by 46.1% and 33.2%, respectively, in the third quarter of 2018 as compared to Q3 of 2017, driven largely by
the segment's higher production capacity in the Silmet facility and because of higher product pricing. For the nine-month
period of 2018, volume, revenue, operating income, EBITDA and Adjusted EBITDA were all higher than in the corresponding period of
2017.
|
TABLE 4: Selected Rare Metals Results
|
|
Q-over-Q Comparison
|
YTD-over-YTD Comparison
|
|
Q3 2018
|
Q3 2017
|
Q3 2018
|
Q3 2017
|
|
Volume (tonnes)
|
149
|
102
|
423
|
324
|
|
($000s)
|
|
|
|
|
|
Revenue
|
$22,388
|
$16,807
|
$66,480
|
$56,287
|
|
Operating income(1)
|
$501
|
$527
|
$4,140
|
$3,215
|
|
EBITDA(2)
|
$1,710
|
$2,053
|
$7,803
|
$7,206
|
|
Adjusted EBITDA(2)
|
$1,784
|
$1,996
|
$8,052
|
$7,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
In accordance with IFRS 3 - Business Combinations and on completion of
the reorganization in September 2016, Neo recorded the acquisition of its inventory at fair value. See details in
Acquisition of Inventory at Fair Value section of this news release and in the MD&A.
|
|
|
|
(2)
|
Neo reports non-IFRS measures such as "Adjusted Net Income", "Adjusted
Earnings per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin" and "EBITDA". Please see information on this and other
non-IFRS measures in the "Non-IFRS Measures" section of this news release and in the MD&A.
|
CONFERENCE CALL ON WEDNESDAY, NOVEMBER 14, 2018 AT 10 AM
EASTERN
Management will host a teleconference call on Wednesday, November 14, 2018 at 10:00 a.m. (Eastern Time) to discuss the third quarter 2018 results. Interested parties may access the
teleconference by calling (647) 427-7450 (local) or (888) 231-8191 (toll-free long distance) or by visiting https://www.newswire.ca/webcasts. A recording of the
teleconference may be accessed by calling (416) 849-0833 (local) or (855) 859-2056 (toll-free long distance), and entering pass
code 6339408# until December 12, 2018 or by visiting https://www.newswire.ca/webcasts.
NON-IFRS MEASURES
This news release refers to certain non-IFRS financial measures such as "Adjusted Net Income", "EBITDA", "Adjusted EBITDA",
and "Adjusted EBITDA Margin". These measures are not recognized measures under IFRS, do not have a standardized meaning
prescribed by IFRS, and may not be comparable to similar measures presented by other companies. Rather, these measures are
provided as additional information to complement IFRS financial measures by providing further understanding of Neo's results of
operations from management's perspective. Neo's definitions of non-IFRS measures used in this news release may not be the same as
the definitions for such measures used by other companies in their reporting. Non-IFRS measures have limitations as
analytical tools and should not be considered in isolation nor as a substitute for analysis of Neo's financial information
reported under IFRS. Neo uses non-IFRS financial measures to provide investors with supplemental measures of its base-line
operating performance and to eliminate items that have less bearing on operating performance or operating conditions and thus
highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures.
Neo believes that securities analysts, investors and other interested parties frequently use non-IFRS financial measures in the
evaluation of issuers. Neo's management also uses non-IFRS financial measures in order to facilitate operating performance
comparisons from period to period. For the operating segments, Neo also uses "OIBDA" and "Adjusted OIBDA", which reconciles
to operating income. Neo uses Adjusted OIBDA and Adjusted EBITDA interchangeably as the use of adjustments in each measure
provides the same calculated outcome of operating performance. For definitions of how Neo defines such financial measures, please
see the "Non-IFRS Financial Measures" section of Neo's management's discussion and analysis filing for the nine months ended
September 30, 2018, available on Neo's web site at www.neomaterials.com and on SEDAR at www.sedar.com.
ACQUISITION OF INVENTORY AT FAIR VALUE
In accordance with IFRS 3 - Business Combinations, and on completion of the Reorganization, Neo recorded the acquisition of
its inventory at fair value, which included a mark-up for profit of $27,062. A portion of this
inventory was sold in the three and nine months ended September 30, 2017 and impacted costs of
sales by $(531) and $2,912, respectively. The mark-up has not been
added back to operating income in the calculation of operating income. For the three months ended September 30, 2017, the $(531) consists of Magnequench nil, C&O $(418) and Rare Metals $(113). For the nine months ended September 30, 2017, the $2,912 consists of Magnequench $868, C&O $2,463 and Rare Metals $(419). There
is no impact to operating income in 2018. For a full description, please refer to Neo's MD&A for the nine months ended
September 30, 2018, available on Neo's website www.neomaterials.com and on SEDAR at www.sedar.com.
TABLE 5: CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
($000s)
|
|
September
30, 2018
|
|
|
December
31, 2017
|
|
ASSETS
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
69,336
|
|
$
|
96,805
|
|
Restricted cash
|
|
1,695
|
|
|
1,529
|
|
Accounts receivable
|
|
53,932
|
|
|
46,766
|
|
Inventories
|
|
133,596
|
|
|
104,534
|
|
Income taxes receivable
|
|
494
|
|
|
661
|
|
Other current assets
|
|
24,237
|
|
|
13,955
|
|
Total current assets
|
|
283,290
|
|
|
264,250
|
|
Property, plant and equipment
|
|
85,407
|
|
|
88,392
|
|
Intangible assets
|
|
67,709
|
|
|
72,769
|
|
Goodwill
|
|
99,295
|
|
|
101,893
|
|
Investments
|
|
7,896
|
|
|
8,633
|
|
Deferred tax assets
|
|
1,595
|
|
|
1,406
|
|
Other non-current assets
|
|
687
|
|
|
1,150
|
|
Total non-current assets
|
|
262,589
|
|
|
274,243
|
|
Total assets
|
$
|
545,879
|
|
$
|
538,493
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Bank advances and other short-term debt
|
$
|
12
|
|
$
|
181
|
|
Accounts payable and other accrued charges
|
|
63,541
|
|
|
72,250
|
|
Income taxes payable
|
|
7,591
|
|
|
6,319
|
|
Other current liabilities
|
|
2,147
|
|
|
2,704
|
|
Total current liabilities
|
|
73,291
|
|
|
81,454
|
|
Employee benefits
|
|
2,199
|
|
|
2,437
|
|
Derivative liability
|
|
8,555
|
|
|
9,842
|
|
Provisions
|
|
4,706
|
|
|
4,665
|
|
Deferred tax liabilities
|
|
18,569
|
|
|
20,206
|
|
Other non-current liabilities
|
|
994
|
|
|
642
|
|
Total non-current liabilities
|
|
35,023
|
|
|
37,792
|
|
Total liabilities
|
|
108,314
|
|
|
119,246
|
|
Non-controlling interest
|
|
4,742
|
|
|
5,831
|
|
Equity attributable to equity holders of Neo Performance Materials
Inc
|
|
432,823
|
|
|
413,416
|
|
Total equity
|
|
437,565
|
|
|
419,247
|
|
Total liabilities and equity
|
$
|
545,879
|
|
$
|
538,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to this table in Neo's Interim Condensed
Consolidated Financial Statements for the Nine Months Ended September 30, 2018, available on Neo's website at
www.neomaterials.com and
on SEDAR at www.sedar.com.
|
TABLE 6: CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
Comparison of the three and nine months ended September 30, 2018 to the three and nine
months ended September 30, 2017:
|
($000s)
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Revenue
|
$
|
114,216
|
|
$
|
116,421
|
|
$
|
344,834
|
|
$
|
324,717
|
|
Costs of sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs excluding depreciation and amortization
|
|
82,607
|
|
|
79,511
|
|
|
242,661
|
|
|
221,504
|
|
Depreciation and amortization
|
|
2,404
|
|
|
2,678
|
|
|
7,389
|
|
|
7,610
|
|
Gross profit
|
|
29,205
|
|
|
34,232
|
|
|
94,784
|
|
|
95,603
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
10,991
|
|
|
15,271
|
|
|
36,050
|
|
|
42,397
|
|
Stock-based compensation
|
|
1,478
|
|
|
860
|
|
|
3,658
|
|
|
5,841
|
|
Depreciation and amortization
|
|
1,658
|
|
|
2,435
|
|
|
5,262
|
|
|
5,831
|
|
Research and development
|
|
4,188
|
|
|
4,243
|
|
|
13,150
|
|
|
11,425
|
|
|
18,315
|
|
|
22,809
|
|
|
58,120
|
|
|
65,494
|
|
Operating income
|
|
10,890
|
|
|
11,423
|
|
|
36,664
|
|
|
30,109
|
|
Other income (loss)
|
|
1,859
|
|
|
(284)
|
|
|
9,937
|
|
|
2,765
|
|
Finance income, net
|
|
128
|
|
|
155
|
|
|
1,594
|
|
|
180
|
|
Foreign exchange loss
|
|
(249)
|
|
|
(42)
|
|
|
(183)
|
|
|
(565)
|
|
Income from operations before income taxes and equity income (loss) of
associates
|
|
12,628
|
|
|
11,252
|
|
|
48,012
|
|
|
32,489
|
|
Income tax expense
|
|
(3,975)
|
|
|
(2,587)
|
|
|
(10,517)
|
|
|
(6,654)
|
|
Income from operations before equity income (loss) of
associates
|
|
8,653
|
|
|
8,665
|
|
|
37,495
|
|
|
25,835
|
|
Equity income (loss) of associates (net of income tax)
|
|
115
|
|
|
619
|
|
|
(737)
|
|
|
1,224
|
|
Net income
|
$
|
8,768
|
|
$
|
9,284
|
|
$
|
36,758
|
|
$
|
27,059
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of Neo Performance Materials Inc
|
$
|
8,669
|
|
$
|
9,051
|
|
$
|
36,510
|
|
$
|
26,523
|
|
Non-controlling interest
|
|
99
|
|
|
233
|
|
|
248
|
|
|
536
|
|
$
|
8,768
|
|
$
|
9,284
|
|
$
|
36,758
|
|
$
|
27,059
|
|
Earnings per share attributable to equity holders of Neo Performance
Materials Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.22
|
|
$
|
0.23
|
|
$
|
0.92
|
|
$
|
0.67
|
|
Diluted
|
$
|
0.21
|
|
$
|
0.22
|
|
$
|
0.90
|
|
$
|
0.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Management's Discussion and Analysis for the Nine Months Ended
September 30, 2018, available on Neo's website at www.neomaterials.com and on SEDAR at www.sedar.com.
|
TABLE 7: RECONCILIATION OF NET INCOME TO EBITDA, ADJUSTED EBITDA AND FREE CASH FLOW
|
($000s)
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Net income
|
$
|
8,768
|
|
$
|
9,284
|
|
$
|
36,758
|
|
$
|
27,059
|
|
Add back (deduct):
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income, net
|
|
(128)
|
|
|
(155)
|
|
|
(1,594)
|
|
|
(180)
|
|
Income tax expense
|
|
3,975
|
|
|
2,587
|
|
|
10,517
|
|
|
6,654
|
|
Depreciation and amortization included in costs of sales
|
|
2,404
|
|
|
2,678
|
|
|
7,389
|
|
|
7,610
|
|
Depreciation and amortization
|
|
1,658
|
|
|
2,435
|
|
|
5,262
|
|
|
5,831
|
|
EBITDA
|
|
16,677
|
|
|
16,829
|
|
|
58,332
|
|
|
46,974
|
|
Adjustments to EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity (income) loss in associates
|
|
(115)
|
|
|
(619)
|
|
|
737
|
|
|
(1,224)
|
|
Other (income) loss (1)
|
|
(1,859)
|
|
|
284
|
|
|
(9,937)
|
|
|
(2,765)
|
|
Foreign exchange loss (2)
|
|
249
|
|
|
42
|
|
|
183
|
|
|
565
|
|
Stock and value-based compensation expense (3)
|
|
1,780
|
|
|
860
|
|
|
4,563
|
|
|
5,841
|
|
Acquired inventory fair value release (4)
|
|
—
|
|
|
(531)
|
|
|
—
|
|
|
2,912
|
|
Adjusted EBITDA
|
$
|
16,732
|
|
$
|
16,865
|
|
$
|
53,878
|
|
$
|
52,303
|
|
Adjusted EBITDA Margins
|
|
14.6%
|
|
|
14.5%
|
|
|
15.6%
|
|
|
16.1%
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
2,517
|
|
|
3,169
|
|
|
8,751
|
|
|
7,472
|
|
Free Cash Flow
|
|
14,215
|
|
|
13,696
|
|
|
45,127
|
|
|
44,831
|
|
Free Cash Flow Conversion (5)
|
|
85.0%
|
|
|
81.2%
|
|
|
83.8%
|
|
|
85.7%
|
|
|
|
Notes:
|
|
|
|
|
(1)
|
Represents other income (expenses) resulting from non-operational related
activities. Other income primarily relating to costs and insurance recoveries as a result of the fire at the Silmet
facility and other costs that are non–recurring and have less bearing on Neo's operating performance. These costs
and recoveries are not indicative of Neo's ongoing activities.
|
|
|
|
(2)
|
Represents unrealized and realized foreign exchange losses (gains) that
include non-cash adjustments in translating foreign denominated monetary assets and liabilities.
|
|
|
|
(3)
|
Represents stock and value-based compensation expense in respect of the
Legacy Plan adopted upon the completion of the reorganization (please refer to the MD&A dated March 9, 2018), the
LTIP which replaces the Legacy Plan after IPO, and the long-term value bonus plan, which has similar vesting criteria to
the stock-based plan and is settled in cash for non-executives and non-North Americans where implementation of a share
settlement plan would have been prohibitively expensive in terms of administration and compliance. The value-based
compensation expense of $302 and $905 are included in selling, general, and administration expenses for the three and
nine months ended September 30, 2018, respectively, and $nil for both three and nine months ended September 30, 2017,
respectively. Neo has removed both the stock and value-based compensation expense from EBITDA to provide
comparability with historic periods and to treat it consistently with the stock-based awards that they are intended to
replace.
|
|
|
|
(4)
|
In accordance with IFRS 3 Business Combinations and on completion of the
reorganization, Neo recorded the acquisition of its inventory at fair value, which included a mark-up for profit of
$27,062. A portion of this inventory was sold in the three and nine months ended September 30, 2017 and had a $(531) and
$2,912 impact, respectively, on net income. Neo has removed this from net income to provide a measure of operating
performance without the non-cash, non-operational accounting change to the inventory and to provide comparability with
historic periods.
|
|
|
|
(5)
|
Calculated as Free Cash Flow divided by Adjusted EBITDA.
|
TABLE 8: RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME
|
($000s)
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Net income
|
$
|
8,768
|
|
$
|
9,284
|
|
$
|
36,758
|
|
$
|
27,059
|
|
Adjustments to net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange (gain) loss (1)
|
|
249
|
|
|
42
|
|
|
183
|
|
|
565
|
|
Stock and value-based compensation expense (2)
|
|
1,780
|
|
|
860
|
|
|
4,563
|
|
|
5,841
|
|
Acquired inventory fair value release (3)
|
|
—
|
|
|
(531)
|
|
|
—
|
|
|
2,912
|
|
Non-recurring items included in other income (4)
|
|
(1,726)
|
|
|
—
|
|
|
(9,591)
|
|
|
(3,607)
|
|
Tax impact of the above items
|
|
(402)
|
|
|
(499)
|
|
|
(487)
|
|
|
(721)
|
|
Adjusted net income
|
$
|
8,669
|
|
$
|
9,156
|
|
$
|
31,426
|
|
$
|
32,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of Neo Performance Materials Inc
|
|
8,570
|
|
|
8,854
|
|
|
31,178
|
|
|
31,444
|
|
Non-controlling interest
|
|
99
|
|
|
302
|
|
|
248
|
|
|
605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
39,815,098
|
|
|
39,810,336
|
|
|
39,879,120
|
|
|
39,748,984
|
|
Diluted
|
|
40,371,620
|
|
|
40,305,960
|
|
|
40,440,416
|
|
|
40,199,728
|
|
Adjusted earnings per share (5) attributable to equity
shareholders of Neo Performance Materials Inc.:
|
|
|
|
|
Basic
|
$
|
0.22
|
|
$
|
0.22
|
|
$
|
0.78
|
|
$
|
0.79
|
|
Diluted
|
$
|
0.21
|
|
$
|
0.22
|
|
$
|
0.77
|
|
$
|
0.78
|
|
|
|
Notes:
|
|
|
|
|
(1)
|
Represents unrealized and realized foreign exchange losses (gains) that
include non-cash adjustments in translating foreign denominated monetary assets and liabilities.
|
|
|
|
(2)
|
Represents stock and value-based compensation expense in respect of the
Legacy Plan adopted upon the completion of the reorganization (please refer to the MD&A dated March 9, 2018), the
LTIP which replaces the Legacy Plan after IPO, and the long-term value bonus plan, which has similar vesting criteria to
the stock-based plan and is settled in cash for non-executives and non-North Americans where implementation of a share
settlement plan would have been prohibitively expensive in terms of administration and compliance. The value-based
compensation expense of $302 and $905 are included in selling, general, and administration expenses for the three and
nine months ended September 30, 2018, respectively, and $nil for both three and nine months ended September 30, 2017,
respectively. Neo has removed both the stock and value-based compensation expense from net income to provide
comparability with historic periods and to treat it consistently with the stock-based awards that they are intended to
replace.
|
|
|
|
(3)
|
In accordance with IFRS 3 Business Combinations and on completion of the
reorganization, Neo recorded the acquisition of its inventory at fair value, which included a mark-up for profit of
$27,062. A portion of this inventory was sold in the three and nine months ended September 30, 2017 and had a
$(531) and $2,912 impact, respectively, on net income. Neo has removed this from net income to provide a measure of
operating performance without the non-cash, non-operational accounting change to the inventory and to provide
comparability with historic periods.
|
|
|
|
(4)
|
Represents insurance proceeds on claims associated with the 2015 fire at
the Silmet facility and other non-recurring transactions. Neo has removed these from net income to provide
comparability with historic periods.
|
|
|
|
(5)
|
Neo reports non-IFRS measures such as "Adjusted Net Income", "Adjusted
Earnings per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin" and "EBITDA". Please see information on this and other
non-IFRS measures in the "Non-IFRS Measures" section of this new release and in the MD&A, available on Neo's website
www.neomaterials.com and on
SEDAR at www.sedar.com.
|
About Neo Performance Materials
Neo Performance Materials is a global leader in the innovation and manufacturing of rare earth and rare metal-based functional
materials, which are essential inputs to high technology, high growth, future-facing industries. The business of Neo is organized
along three segments: Magnequench, Chemicals & Oxides and Rare Metals. Neo is headquartered in Toronto, Ontario, Canada; with corporate offices in Greenwood Village,
Colorado, US; and Beijing, China. Neo operates globally with sales and production across
10 countries, being Japan, China, Thailand, Estonia, Singapore, Germany, United Kingdom, Canada,
United States, and South Korea. For more information, please
visit www.neomaterials.com.
Cautionary Statements Regarding Forward Looking Statements
This news release contains "forward-looking information" within the meaning of applicable securities laws in Canada. Forward-looking information may relate to future events or future performance of Neo. All statements
in this release, other than statements of historical facts, with respect to Neo's objectives and goals, as well as statements
with respect to its beliefs, plans, objectives, expectations, anticipations, estimates, and intentions, are forward-looking
information. Specific forward-looking statements in this discussion include, but are not limited to: expectations regarding
certain of Neo's future results and information, including, among other things, revenue, expenses, sales growth, capital
expenditures, and operations; statements with respect to expected use of cash balances; continuation of prudent management of
working capital; source of funds for ongoing business requirements and capital investments; expectations regarding sufficiency of
the allowance for uncollectible accounts and inventory provisions; analysis regarding sensitivity of the business to changes in
exchange rates; impact of recently adopted accounting pronouncements; risk factors relating to intellectual property protection
and intellectual property litigation; and, expectations concerning any remediation efforts to Neo's design of its internal
controls over financial reporting and disclosure controls and procedures. Often, but not always, forward-looking information can
be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "continues",
"forecasts", "projects", "predicts", "intends", "anticipates" or "believes", or variations of, or the negatives of, such words
and phrases, or state that certain actions, events or results "may", "could", "would", "should", "might" or "will" be taken,
occur or be achieved. This information involves known and unknown risks, uncertainties and other factors that may cause actual
results or events to differ materially from those anticipated in such forward-looking information. Neo believes the expectations
reflected in such forward-looking information are reasonable but no assurance can be given that these expectations will prove to
be correct and such forward-looking information included in this discussion and analysis should not be unduly relied upon. For
more information on Neo, investors should review Neo's continuous disclosure filings that are available under Neo's profile at
www.sedar.com.
SOURCE Neo Performance Materials, Inc.
View original content: http://www.newswire.ca/en/releases/archive/November2018/14/c1787.html