2018 Highlights
(unless other noted, all financial amounts in this news release are expressed in U.S. dollars)
- $454.2 million in revenue
- Net income of $41.1 million, or $1.02 per share
- Adjusted Net Income(1) of $38.9 million, or $0.97
per share
- Adjusted EBITDA(1) of $67.1 million
- Year-end closes with $67.0 million of net cash after paying $11.7
million in dividends to the shareholders.
- A quarterly dividend of Cdn$0.095 per common share was declared on February 28, 2019 for shareholders of record at March 20, 2019.
TORONTO, March 11, 2019 /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 2018 year-end financial results. The financial statements and 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 2018 YEAR END CONSOLIDATED PERFORMANCE
For the year ended December 31, 2018, consolidated revenue was $454.2
million compared to $434.2 million in the prior year; an increase of $20.0 million or 4.6%. Net income totaled $41.1 million, or $1.02 per share, compared to $25.4 million, or $0.62 per share, in the year ended December 31, 2017. Adjusted Net
Income(1) totaled $38.9 million, or $0.97 per share.
In the fourth quarter of 2018, Neo generated $109.4 million in revenue, a slight decrease of
0.1% over Q4 2017. Net income totaled $4.4 million, or $0.11 per
share. Adjusted Net Income(1) totaled $7.5 million, or $0.19 per share. Adjusted EBITDA(1) decreased to $13.2 million,
from $15.6 million in Q4 2017.
As of December 31, 2018, Neo reported cash and cash equivalents of $71.0
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 spent in 2018
related to the completion of the Initial Public Offering in December 2017. Neo has approximately $15.3 million available under its credit facilities with $4.0 million drawn from
the revolving line of credit. In addition, Neo paid $11.7 million in dividends to its
shareholders in the year ended December 31, 2018 and re-purchased $3.8
million of stock under its Normal Course Issuer Bid program.
"I am pleased with the progress we made on a number of strategic fronts in 2018 and with Neo's continuing long-term growth
trajectory," said Geoff Bedford, Neo's President and CEO. "Neo has successfully positioned itself
not only as a global supplier of critical functional materials essential to the performance of our customer's products, but also
as a collaborative product development partner with our customers. We continue to see opportunities for our Company driven
by fundamental and long-term trends in hybrid and electric vehicles, auto emissions catalysts, superalloy applications, and many
other sectors.
On December 18, 2018, Neo entered into an arrangement agreement (the "Arrangement Agreement")
with Luxfer Holdings plc ("Luxfer") and 2671219 Ontario Inc. (the "Purchaser"), a wholly-owned subsidiary of Luxfer, pursuant to
which, the Purchaser would acquire the issued and outstanding Common Shares of Neo ("Common Shares") in consideration of
US$5.98 in cash and 0.395 Luxfer shares for each Common Share (the "Luxfer Transaction"). On
March 10, 2019, Luxfer and Neo mutually agreed to terminate the Luxfer Transaction.
SELECTED FINANCIAL RESULTS
|
TABLE 1: Selected Consolidated Results
|
|
Q-over-Q Comparison
|
YTD-over-YTD Comparison
|
|
Q4 2018
|
Q4 2017
|
2018
|
2017
|
|
($000s)
|
|
|
|
|
|
Revenue
|
$109,361
|
$109,452
|
$454,195
|
$434,169
|
|
Operating income(1)
|
$6,224
|
$4,716
|
$42,888
|
$34,825
|
|
EBITDA(2)
|
$11,342
|
$7,679
|
$69,674
|
$54,653
|
|
Adjusted EBITDA(2)
|
$13,235
|
$15,593
|
$67,113
|
$67,896
|
|
Adjusted EBITDA %(2)
|
12.1%
|
14.2%
|
14.8%
|
15.6%
|
|
|
_________________________
|
|
(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.
|
Consolidated revenue in 2018 rose by 4.6% over 2017 and 18.9% over 2016 levels. Adjusted EBITDA for 2018 was
$67.1 million, a 1.2% decrease from the $67.9 million reported in
2017, but an improvement of $19.5 million, or 40.9%, from 2016 levels. Adjusted EBITDA was
adversely affected by $4.2 million of premium costs incurred in early 2018 related to the
implementation of wastewater treatment system in late 2017. Revenue in the fourth quarter of 2018 was $109.4 million, nominally unchanged from the comparable period of 2017. Adjusted EBITDA in the fourth
quarter of 2018 was $2.4 million lower than the fourth quarter of 2017, primarily related to the
impact of timing on Magnequench pass-through pricing agreements and the general slowdown in auto sales.
MAGNEQUENCH SEGMENT RESULTS
Magnequench continues 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, and other motor applications. 2018 volumes decreased by 2.8%
over 2017 volumes, while 2018 revenue increased by 5.3% over 2017 and was higher by 34.2% from 2016 levels. The nominal
decline in volume in the fourth quarter of 2018 was driven largely by the general slowdown in auto markets. Adjusted EBITDA
for 2018 was $50.5 million, a 2.2% increase over 2017 and a 32.4% increase from 2016 levels.
In the fourth quarter of 2018, revenue was $47.2 million, compared to $59.1
million in the prior-year period. Adjusted EBITDA was $9.1 million compared to
$14.7 million in the same period of 2017.
The decrease in fourth quarter revenue and Adjusted EBITDA is primarily attributable to timing related to rare earth price
changes and pass-through pricing agreements that are implemented on a lagged basis. A key feature of Neo's strategic focus
on value-add margins is to pass-through rare earth prices to its customers, albeit on a lagged basis (generally monthly,
quarterly or semi-annually). This delay in implemented selling price changes can cause fluctuations in quarter-to-quarter
results but is effective at maintaining EBITDA in the longer term.
|
TABLE 2: Selected Magnequench Results
|
|
Q-over-Q Comparison
|
YTD-over-YTD Comparison
|
|
Q4 2018
|
Q4 2017
|
2018
|
2017
|
|
Volume (tonnes)
|
1,446
|
1,539
|
6,128
|
6,305
|
|
($000s)
|
|
|
|
|
|
Revenue
|
$47,210
|
$59,131
|
$213,712
|
$202,905
|
|
Operating income(1)
|
$6,670
|
$12,831
|
$41,957
|
$40,986
|
|
EBITDA(2)
|
$8,447
|
$14,555
|
$49,301
|
$48,060
|
|
Adjusted EBITDA(2)
|
$9,051
|
$14,686
|
$50,483
|
$49,407
|
|
|
_________________________
|
|
(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
C&O saw strong continuing growth in its gasoline auto catalyst business, which helped to offset a decline in diesel
catalyst markets. 2018 revenue totaled $161.4 million, compared to $170.9 million in 2017, a decrease of 5.5%. Adjusted EBITDA for the year decreased to $18.5 million from $25.3 million in 2017. Revenue in the fourth quarter of
2018 was $38.2 million, which compares to $36.2 million in same
period of 2017, an increase of 5.5%. Adjusted EBITDA in the fourth quarter of 2018 totaled $4.6
million, compared to $2.4 million in the same period in 2017.
Adjusted EBITDA results for the year were impacted by $4.2 million of premium freight costs that
were incurred in the first half of 2018 as a result of production process upgrades made at Neo's Zibo, China facility in late 2017. In the fourth quarter of 2018, C&O had slower sales and performance
related to a general slowdown in automotive markets. In the separated rare earth market, C&O benefited from volatility
in rare earth prices in 2017, while 2018 generally saw slow declines in pricing through the year, causing compressed margins as
C&O was selling the higher cost inventory on hand.
|
TABLE 3: Selected C&O Results
|
|
Q-over-Q Comparison
|
YTD-over-YTD Comparison
|
|
Q4 2018
|
Q4 2017
|
2018
|
2017
|
|
Volume (tonnes)
|
1,843
|
1,923
|
7,611
|
8,656
|
|
($000s)
|
|
|
|
|
|
Revenue
|
$38,207
|
$36,212
|
$161,422
|
$170,890
|
|
Operating income(1)
|
$3,101
|
$1,005
|
$12,934
|
$16,892
|
|
EBITDA(2)
|
$4,179
|
$2,161
|
$17,388
|
$21,939
|
|
Adjusted EBITDA(2)
|
$4,569
|
$2,359
|
$18,483
|
$25,294
|
|
|
_________________________
|
|
(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
Rare Metals continues to see higher performance and growth trends in tantalum, niobium, and gallium-based products, offset by
lower customer demand for hafnium-based products. Revenue in 2018 was $93.8 million, compared
to $76.0 million in the prior-year period, for an increase of $17.8
million or 23.4%. Adjusted EBITDA grew to $9.8 million in 2018, from $9.1 million in 2017. In the fourth quarter of 2018, revenue was $27.3
million, which compares to $19.7 million in the prior-year period. Adjusted EBITDA was
$1.7 million in 2018, compared to $2.0 million in 2017, due to
changes in selling prices and volumes within the quarter.
Improvement in 2018 can be attributed primarily to strong results continuing at the Silmet facility, due to a combination of
increased volumes, higher selling prices, higher flow-through margins, continued focus on higher margin programs, and continued
operational improvements, particularly since the capacity was re-introduced into the operation during 2017.
|
TABLE 4: Selected Rare Metals Results
|
|
Q-over-Q Comparison
|
YTD-over-YTD Comparison
|
|
Q4 2018
|
Q4 2017
|
2018
|
2017
|
|
Volume (tonnes)
|
227
|
124
|
650
|
448
|
|
($000s)
|
|
|
|
|
|
Revenue
|
$27,309
|
$19,722
|
$93,789
|
$76,009
|
|
Operating income(1)
|
$438
|
$720
|
$4,578
|
$3,935
|
|
EBITDA(2)
|
$1,630
|
$1,904
|
$9,433
|
$9,110
|
|
Adjusted EBITDA(2)
|
$1,702
|
$1,951
|
$9,754
|
$9,123
|
|
|
_________________________
|
|
(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 MONDAY, MARCH 11, 2019 AT 10 AM
EASTERN
Management will host a teleconference call on Monday, March 11, 2019 at 10:00 a.m. (Eastern Time) to discuss the 2018 year-end results. Interested parties may access the
teleconference by calling (647) 427-7450 (local) or (888) 231-8191 (toll-free long distance) or by visiting http://cnw.en.mediaroom.com/events. 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 8089445# until April 11, 2019 or by visiting http://cnw.en.mediaroom.com/events.
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 year ended
December 31, 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 year ended December 31, 2017 and impacted costs of sales by $2,912. The mark-up has not been added back to operating income in the calculation of operating income. For the
year ended December 31, 2017, the $2,912 consists of Magnequench
$868, C&O $2,463 and Rare Metals $(419). All these inventories were sold, and the mark-up was released by the end of 2017; therefore, there is
no impact to operating income in 2018. For a full description, please refer to Neo's MD&A for the year ended December 31, 2018, available on Neo's website www.neomaterials.com and on SEDAR at www.sedar.com.
TABLE 5: CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
($000s)
|
|
December 31,
2018
|
|
December 31,
2017
|
|
ASSETS
|
|
|
|
|
|
Current
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
71,015
|
|
$
|
96,805
|
|
Restricted cash
|
|
1,650
|
|
1,529
|
|
Accounts receivable
|
|
49,544
|
|
46,766
|
|
Inventories
|
|
136,350
|
|
104,534
|
|
Income taxes receivable
|
|
343
|
|
661
|
|
Other current assets
|
|
20,554
|
|
13,955
|
|
Total current assets
|
|
279,456
|
|
264,250
|
|
Property, plant and equipment
|
|
86,963
|
|
88,392
|
|
Intangible assets
|
|
66,721
|
|
72,769
|
|
Goodwill
|
|
99,365
|
|
101,893
|
|
Investments
|
|
8,605
|
|
8,633
|
|
Deferred tax assets
|
|
1,079
|
|
1,406
|
|
Other non-current assets
|
|
834
|
|
1,150
|
|
Total non-current assets
|
|
263,567
|
|
274,243
|
|
Total assets
|
|
$
|
543,023
|
|
$
|
538,493
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
Current
|
|
|
|
|
|
Bank advances and other short-term debt
|
|
$
|
3,970
|
|
$
|
181
|
|
Accounts payable and other accrued charges
|
|
59,877
|
|
72,250
|
|
Income taxes payable
|
|
6,566
|
|
6,319
|
|
Other current liabilities
|
|
777
|
|
2,704
|
|
Total current liabilities
|
|
71,190
|
|
81,454
|
|
Employee benefits
|
|
2,125
|
|
2,437
|
|
Derivative liability
|
|
9,525
|
|
9,842
|
|
Provisions
|
|
4,717
|
|
4,665
|
|
Deferred tax liabilities
|
|
17,730
|
|
20,206
|
|
Other non-current liabilities
|
|
559
|
|
642
|
|
Total non-current liabilities
|
|
34,656
|
|
37,792
|
|
Total liabilities
|
|
105,846
|
|
119,246
|
|
Non-controlling interest
|
|
4,758
|
|
5,831
|
|
Equity attributable to equity holders of Neo Performance Materials
Inc
|
|
432,419
|
|
413,416
|
|
Total equity
|
|
437,177
|
|
419,247
|
|
Total liabilities and equity
|
|
$
|
543,023
|
|
$
|
538,493
|
|
|
____________________________
|
|
See accompanying notes to this table in Neo's Consolidated
Financial Statements for the Year Ended December 31, 2018, available on Neo's website at www.neomaterials.com and on SEDAR at www.sedar.com.
|
TABLE 6: CONSOLIDATED RESULTS OF OPERATIONS
Comparison of the three and twelve months ended December 31, 2018 to the three and twelve
months ended December 31, 2017:
|
($000s)
|
|
Three Months Ended
December 31,
|
|
Year Ended
December 31,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Revenue
|
|
$
|
109,361
|
|
$
|
109,452
|
|
$
|
454,195
|
|
$
|
434,169
|
|
Costs of sales
|
|
|
|
|
|
|
|
|
|
Costs excluding depreciation and amortization
|
|
81,700
|
|
75,144
|
|
324,361
|
|
296,648
|
|
Depreciation and amortization
|
|
2,352
|
|
2,491
|
|
9,741
|
|
10,101
|
|
Gross profit
|
|
25,309
|
|
31,817
|
|
120,093
|
|
127,420
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
13,898
|
|
20,825
|
|
49,948
|
|
63,222
|
|
Share-based compensation
|
|
(222)
|
|
400
|
|
3,436
|
|
6,241
|
|
Depreciation and amortization
|
|
1,716
|
|
1,587
|
|
6,978
|
|
7,418
|
|
Research and development
|
|
3,693
|
|
4,289
|
|
16,843
|
|
15,714
|
|
|
19,085
|
|
27,101
|
|
77,205
|
|
92,595
|
|
Operating income
|
|
6,224
|
|
4,716
|
|
42,888
|
|
34,825
|
|
Other income (loss)
|
|
723
|
|
(962)
|
|
10,660
|
|
1,803
|
|
Finance (cost) income, net
|
|
(945)
|
|
(28)
|
|
649
|
|
152
|
|
Foreign exchange (loss) gain
|
|
(382)
|
|
99
|
|
(565)
|
|
(466)
|
|
Income from operations before income taxes and equity income (loss) of
associates
|
|
5,620
|
|
3,825
|
|
53,632
|
|
36,314
|
|
Income tax expense
|
|
(1,948)
|
|
(5,239)
|
|
(12,465)
|
|
(11,893)
|
|
Income (loss) from operations before equity income (loss) of
associates
|
|
3,672
|
|
(1,414)
|
|
41,167
|
|
24,421
|
|
Equity income (loss) of associates (net of income tax)
|
|
709
|
|
(252)
|
|
(28)
|
|
972
|
|
Net income (loss)
|
|
$
|
4,381
|
|
$
|
(1,666)
|
|
$
|
41,139
|
|
$
|
25,393
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
Equity holders of Neo Performance Materials Inc
|
|
$
|
4,285
|
|
$
|
(1,903)
|
|
$
|
40,795
|
|
$
|
24,620
|
|
Non-controlling interest
|
|
96
|
|
237
|
|
344
|
|
773
|
|
|
$
|
4,381
|
|
$
|
(1,666)
|
|
$
|
41,139
|
|
$
|
25,393
|
|
Earnings per share attributable to equity holders of Neo Performance
Materials Inc.:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.11
|
|
$
|
(0.05)
|
|
$
|
1.02
|
|
$
|
0.62
|
|
Diluted
|
|
$
|
0.11
|
|
$
|
(0.05)
|
|
$
|
1.01
|
|
$
|
0.61
|
|
|
____________________________
|
|
See Management's Discussion and Analysis for the Year Ended December 31,
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
December 31,
|
|
Year Ended
December 31,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Net income (loss)
|
|
$
|
4,381
|
|
$
|
(1,666)
|
|
$
|
41,139
|
|
$
|
25,393
|
|
Add back (deduct):
|
|
|
|
|
|
|
|
|
|
Finance cost (income), net
|
|
945
|
|
28
|
|
(649)
|
|
(152)
|
|
Income tax expense
|
|
1,948
|
|
5,239
|
|
12,465
|
|
11,893
|
|
Depreciation and amortization included in costs of sales
|
|
2,352
|
|
2,491
|
|
9,741
|
|
10,101
|
|
Depreciation and amortization
|
|
1,716
|
|
1,587
|
|
6,978
|
|
7,418
|
|
EBITDA
|
|
11,342
|
|
7,679
|
|
69,674
|
|
54,653
|
|
Adjustments to EBITDA:
|
|
|
|
|
|
|
|
|
|
Equity (income) loss in associates
|
|
(709)
|
|
252
|
|
28
|
|
(972)
|
|
Other (income) loss (1)
|
|
(723)
|
|
962
|
|
(10,660)
|
|
(1,803)
|
|
Foreign exchange loss (gain) (2)
|
|
382
|
|
(99)
|
|
565
|
|
466
|
|
Share and value-based compensation expense (3)
|
|
782
|
|
802
|
|
5,345
|
|
6,643
|
|
Acquired inventory fair value release (4)
|
|
—
|
|
—
|
|
—
|
|
2,912
|
|
Non-recurring transaction cost (5)
|
|
2,161
|
|
5,997
|
|
2,161
|
|
5,997
|
|
Adjusted EBITDA
|
|
$
|
13,235
|
|
$
|
15,593
|
|
$
|
67,113
|
|
$
|
67,896
|
|
Adjusted EBITDA Margins
|
|
12.1%
|
|
14.2%
|
|
14.8%
|
|
15.6%
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
4,760
|
|
4,807
|
|
13,511
|
|
12,279
|
|
Free Cash Flow
|
|
8,475
|
|
10,786
|
|
53,602
|
|
55,617
|
|
Free Cash Flow Conversion (6)
|
|
64.0%
|
|
69.2%
|
|
79.9%
|
|
81.9%
|
|
|
|
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 share and value-based compensation expense in respect of the
Legacy Plan, the LTIP and the long-term value bonus plan, which has similar vesting criteria to the share-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. Value-based compensation expense of $1,004
and $1,909 is included in selling, general, and administration expenses for the three and twelve months ended December
31, 2018, respectively, and $402 is included in selling, general, and administration expenses for both three and twelve
months ended December 31, 2017, respectively. Neo has removed both the share and value-based compensation expense
from EBITDA to provide comparability with historic periods and to treat it consistently with the share-based awards that
they are intended to replace.
|
|
(4)
|
In accordance with IFRS 3 Business Combinations and on completion of the
reorganization (please refer to the MD&A dated March 9, 2018), 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 year ended
December 31, 2017 and had a $2,912 impact on EBITDA. Neo has removed this from EBITDA 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)
|
These costs are related to legal, professional advisory fees and other
transaction costs incurred primarily associated with the Luxfer Acquisition Transaction in the three and twelve months
ended December 31, 2018 and as a result of the IPO by way of Secondary Offering in the three and twelve months ended
December 31, 2017. These charges were included in selling, general, and administration expense.
|
|
(6)
|
Calculated as Free Cash Flow divided by Adjusted EBITDA.
|
TABLE 8: RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME
|
($000s)
|
Three Months Ended
December 31,
|
|
Year Ended
December 31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Net income (loss)
|
$
|
4,381
|
|
$
|
(1,666)
|
|
$
|
41,139
|
|
$
|
25,393
|
|
Adjustments to net income:
|
|
|
|
|
|
|
|
|
Foreign exchange loss (gain) (1)
|
382
|
|
(99)
|
|
565
|
|
466
|
|
Share and value-based compensation expense (2)
|
782
|
|
802
|
|
5,345
|
|
6,643
|
|
Acquired inventory fair value release (3)
|
—
|
|
—
|
|
—
|
|
2,912
|
|
Non-recurring transaction cost (4)
|
2,161
|
|
5,997
|
|
2,161
|
|
5,997
|
|
Non-recurring items included in other income (5)
|
(172)
|
|
—
|
|
(9,763)
|
|
(3,607)
|
|
Tax impact of the above items
|
(37)
|
|
(147)
|
|
(524)
|
|
(868)
|
|
Adjusted net income
|
$
|
7,497
|
|
$
|
4,887
|
|
$
|
38,923
|
|
$
|
36,936
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
Equity holders of Neo Performance Materials Inc
|
7,401
|
|
4,650
|
|
38,579
|
|
36,163
|
|
Non-controlling interest
|
96
|
|
237
|
|
344
|
|
773
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
39,772,272
|
|
39,954,609
|
|
39,852,189
|
|
39,800,816
|
|
Diluted
|
40,172,359
|
|
40,513,959
|
|
40,368,007
|
|
40,286,402
|
|
Adjusted earnings per share (6) attributable to equity
shareholders of Neo Performance Materials Inc.:
|
|
|
Basic
|
$
|
0.19
|
|
$
|
0.12
|
|
$
|
0.97
|
|
$
|
0.91
|
|
Diluted
|
$
|
0.18
|
|
$
|
0.11
|
|
$
|
0.96
|
|
$
|
0.90
|
|
|
|
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 share and value-based compensation expense in respect of the
Legacy Plan, the LTIP and the long-term value bonus plan, which has similar vesting criteria to the share-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. Value-based compensation expense of $1,004
and $1,909 is included in selling, general, and administration expenses for the three and twelve months ended December
31, 2018, respectively, and $402 is included in selling, general, and administration expenses for both three and twelve
months ended December 31, 2017, respectively. Neo has removed both the share and value-based compensation expense
from net income (loss) to provide comparability with historic periods and to treat it consistently with the share-based
awards that they are intended to replace.
|
|
(3)
|
In accordance with IFRS 3 Business Combinations and on completion of the
reorganization (please refer to the MD&A dated March 9, 2018), 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 year ended
December 31, 2017 and had a $2,912 impact on net income (loss). Neo has removed this from net income (loss) 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)
|
These costs are related to legal, professional advisory fees and other
transaction costs incurred primarily associated with the Luxfer Acquisition Transaction in the three and twelve months
ended December 31, 2018 and as a result of the IPO by way of Secondary Offering in the three and twelve months ended
December 31, 2017. These charges were included in selling, general, and administration expense.
|
|
(5)
|
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.
|
|
(6)
|
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/March2019/11/c2846.html