IBC Advanced Alloys Reports Fiscal Q4 and Year-End 2018 Financial Results
Notice to the Reader: This news release contains corrections to the following typographical errors contained in the original news release and in IBC’s Management Discussion and Analysis (“MDA”): operating profit for Q3 2018 was $345,000 ($0.01 per share), instead of $240,000 ($0.01 per share); operating loss in Q3 2017 was $336,000 ($0.01 per share), instead of $2.2 million ($0.07 per share). No other changes have been made, and a corrected MD&A has been filed on SEDAR.
Highlights
(unless other noted, all financial amounts in this news release are expressed in U.S. dollars)
- Higher Operating Profits(1) in the Quarter: In the quarter, IBC achieved an operating profit(1) of $345,000 ($0.01 per share) on total revenue of $5.2 million, as compared to a loss in the year-ago period of $336,000 ($0.01 per share) on revenue of $4.2 million.
- 2018 Loss Narrowed by 87% over 2017. IBC cut its comprehensive losses by 87% in fiscal 2018 to $702,000 ($0.02 per share), compared a comparative year comprehensive loss of $5.4 million ($0.18 per share).
- Sales Higher Both Q/Q and Y/Y: Consolidated sales in the quarter rose to $5.2 million, a 24.8% increase over sales of $4.2 million in the comparable quarter of fiscal 2017, with Engineered Materials division sales up 5.5% and Copper Alloys division sales 31.5% higher. In fiscal year 2018, IBC’s consolidated sales rose 23.4% to $19.4 million, compared to sales in 2017 of $15.7 million, with Engineered Materials sales jumping 39.4% and Copper Alloy sales rising 18.3%.
- Gross Margin Up Strongly: The Company’s consolidated gross margin increased in the quarter to 23.0%, from a gross margin of 6.0% in the comparable prior year period. Gross margin in fiscal year 2018 increased to 16.0% from a gross margin of 2.0% in 2017.
- Process Discovered To Recover Beryllium-Rich Metal from Waste Stream: The Company has successfully developed and plans to implement in the second half of calendar 2018 a new process to recover high-value beryllium-rich metal from a scrap metal waste stream previously considered lost material and thought to have no value.
- Strong Year-End Cash Position: The Company closed FY 2018 with $4.5 million in cash and cash equivalents, compared to $100,000 in cash and cash equivalents at the end of fiscal year 2017.
FRANKLIN, Ind., Nov. 02, 2018 (GLOBE NEWSWIRE) — IBC Advanced Alloys Corp. (“IBC” or the “Company”) (TSX-V: IB; OTCQB: IAALF) announces its financial results for its fiscal fourth quarter and year ended June 30, 2018. The Company will host a conference call and investor webcast on Friday, November 2, 2018, at 12 noon Eastern, the details of which are shown below.
In the quarter, IBC posted stronger year-over-year (“Y/Y”) results, including increased sales, higher gross profit, and expanded gross margins. The Company’s improved performance was driven by stronger order bookings and improved productivity enabled by previous capital equipment upgrades. For fiscal year 2018, the Company narrowed its comprehensive loss (net of tax) to $702,000, or $0.02 per share, from a comprehensive loss of $5.4 million, of $0.18 per share, for fiscal year 2017.
“I am pleased to report that IBC posted another good quarter and again achieved operating profitability(1),” said Major General Duncan Heinz (USMC, ret.), IBC’s President and CEO. “This illustrates the gains we are starting to see from deployment of new capital equipment and the resulting expansion of our production capabilities. It also shows the continuing success of the IBC team’s relentless efforts to improve margins and keep costs in check.”
“Sales were up in the quarter, and for the year, across both the Copper Alloys and Engineered Materials divisions,” said the General. “Order bookings look strong, although we anticipate some seasonality in the next quarter or two that may impact these trends. Our continuing focus is to deliver high-quality products on-time and on-spec to our customers, while we seek to capitalize on opportunities in existing and new markets.”
The General added: “While it is unfortunate that we did not release our annual financial results prior to the October 29 deadline, I want investors and others to know that we are taking steps to ensure that future filings are made in accord with prescribed filing deadlines.”
IBC CONFERENCE CALL AND INVESTOR WEBCAST
Major General Heinz will host an investor update webcast and conference call on Friday, November 2, 2018, at 12 noon Eastern to discuss the Company’s fiscal 2018 annual financial results. To register for the webinar and conference call, and receive instructions on how to call in or connect via the internet to the webinar, please go here: https://attendee.gotowebinar.com/register/2740914657263327491
FISCAL Q4 AND FULL-YEAR 2018 OPERATIONAL AND FINANCIAL RESULTS
The release of IBC’s Annual Financial Results were delayed beyond the filing deadline of October 29, 2018 because the Company did not finalize in a timely manner with its independent auditors certain accounting issues associated with Debenture and Convertible Debenture Units recently issued by the Company in connection with its short form prospectus offering that closed in June 2018. These accounting issues were resolved and are reflected in the Company’s Annual Financial Statements filed on SEDAR at www.sedar.ca and available on the Company’s website at www.ibcadvancedalloys.com.
In the quarter, IBC expanded its operating profit(1) to $345,000, or $0.01 per share, on total quarterly revenue of $5.2 million. That compares to an operating profit(1) of $62,000 in fiscal Q3 of 2018, and a loss of $336,000 ($0.01 per share) on revenue of $4.2 million in the prior year period.
For the full year 2018, the Company cut its comprehensive losses, net of tax, to $702,000 ($0.02 per share), an 87% improvement over a loss in fiscal year 2017 of $5.4 million ($0.18 per share).
The Company was able to book a $978,000 increase in inventory value for fiscal year 2018 as a result of its successful demonstration in Q4-2018 of a process to extract and recover high-value beryllium-rich metal from a scrap metal waste stream collected from IBC’s melting process. For accounting purposes, this waste stream previously had no value and was considered lost material. IBC’s success in designing a process to recover beryllium-rich metal from this waste stream for reuse in IBC’s production process resulted in the adjustment to IBC’s inventory value noted above and in a corresponding adjustment to cost of goods sold. Further value is expected to be achieved over the next fiscal year as material is converted for use in production. The reduction in cost of sales will be based on recovery yields and, thereafter, any of this waste stream generated during production operations will be processed in the normal course of business and any resulting savings will be applied to the Company’s cost of sales accordingly.
In fiscal Q4 of 2018, sales increased to $5.2 million, a 24.8% increase over sales of $4.2 million in the comparable quarter of fiscal 2017, with Copper Alloys division sales 31.5% higher and Engineered Materials division sales up 5.5%. For fiscal year 2018, IBC’s consolidated sales rose 23.4% to $19.4 million, over comparable prior year period sales of $15.7 million. In 2018, Copper Alloy sales rose 18.3% and Engineered Materials sales jumped 39.4%.
IBC’s consolidated gross margin increased sharply in the quarter to 23.0%, as compared to a consolidated gross margin of 6.0% in the comparable prior year period. For the year, consolidated gross margin grew sharply to 14.0% from a gross margin of 2.0% in the comparable prior year period.
In the fourth quarter, the Company announced that it had been awarded a new three-year contract from Lockheed Martin valued at a minimum of $7.8 million to manufacture beryllium-aluminum azimuth gimbal housings, a key component for the F-35 Lightning II’s Electro-Optical Targeting System (EOTS). Additional quantities on this contract are expected for spares in the last two years.
Also in the quarter, the Company announced on June 6, 2018 the successful closing of its previously announced short form prospectus offering, filed on March 21, 2018 in the provinces of British Columbia, Alberta and Ontario, of debenture units and convertible debenture units of the Company to fund an expansion of its production capacity and for other purposes. The offering raised gross aggregate proceeds to the Company of approximately C$4.1 million.
SELECTED ANNUAL INFORMATION
| ($000 except $ per share) | 2016 | 2017 | 2018 | |||
| Revenue ($000) | 16,374 | 15,715 | 19,399 | |||
| Profit / Loss ($000)(2) | (3,930) | (5,362)* | (702) | |||
| Profit / Loss per share, basic and diluted ($ per share) | (0.33) | (0.18) | (0.02) | |||
| Total Assets | 17,302 | 14,897 | 20,295 | |||
| Long-term Financial Liabilities | 283 | 213 | 1,769 |
2 NOTE: A charge of approximately $1.395 million was taken by the Company in fiscal 2017 as a result of an arbitration award against the Company in the Houlihan case, which is described in the Company’s MD&A. The Company is vigorously contesting that award. If this one-time charge is factored out, the Company’s loss in fiscal 2017 would have been approximately $3.967 million, instead of $5.362 million.
EVENTS SUBSEQUENT TO JUNE 30, 2018
In the first quarter of fiscal year 2019, as reported in the Company’s MD&A filing, IBC achieved these milestones:
- On August 9, 2018, the Company announced that it secured a renewal of its existing line of credit of approximately $3 million and term loan facility with a maximum of approximately $1.2 million with BMO Harris Bank. The renewal allowed the Company to immediately deploy recently raised funds to purchase and install new capital equipment and supply inventory, which the Company believes will help it expand production capacity, reduce costs, and provide a hedge against supply uncertainty as demand increases for various materials.
- On September 5, 2018, the Company announced that it was awarded a contract from a major global manufacturer of commercial satellite systems for a First Article Qualification of Beralcast® 363 beryllium-aluminum alloy cast components and subsequent serial production units for satellites. The Company will produce first article demonstration components related to satellite platforms. Assuming the initial components meet performance qualifications, the Company will then produce components for integration into satellites for first launch. Multiple units manufactured by the Company may be used in a single satellite.
- On October 8, 2018, the Company jointly announced with NioCorp Developments Ltd. (TSX: NB; OTCQX: NIOBF; and FSE: BR3) the successful production of aluminum-scandium master alloy. The master alloy was produced at the Ames Laboratory, a U.S. government-owned, contractor-operated national laboratory of the U.S. Department of Energy (DOE), located in Ames Iowa.
- As of October 17, 2018, convertible note holders elected to convert notes totaling C$195,000 with the result that 629,032 shares were issued.
FISCAL Q4-2018 SEGMENT AND CONSOLIDATED OPERATIONS RESULTS
A summary of the Company’s results, on a consolidated and segment-by-segment basis, of operations to loss before other items (“operating income (loss)”)(1) follows:
| Three Months Ended | Three Months Ended | ||||||||||||||||
| June 30, 2018 | June 30, 2017 | ||||||||||||||||
| Copper | Eng. | Corp. | Consol- | Copper | Eng. | Corp. | Consol- | ||||||||||
| Alloys | Mat. | idated | Alloys | Mat. | idated | ||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||
| Sales | 4,084 | 1,140 | – | 5,224 | 3,105 | 1,081 | – | 4,186 | |||||||||
| Cost of sales | |||||||||||||||||
| Materials | 2,040 | (526) | – | 1,514 | 1,556 | 452 | – | 2,008 | |||||||||
| Labor | 535 | 328 | – | 863 | 497 | 290 | – | 787 | |||||||||
| Subcontract | 26 | 51 | – | 77 | 118 | 29 | – | 147 | |||||||||
| Overhead | 522 | 361 | – | 883 | 522 | 262 | – | 784 | |||||||||
| Depreciation | 92 | 102 | – | 194 | 34 | 79 | – | 113 | |||||||||
| Change in | |||||||||||||||||
| finished goods | 118 | 387 | – | 505 | (11) | 113 | – | 102 | |||||||||
| 3,333 | 703 | – | 4,036 | 2,716 | 1,225 | – | 3,941 | ||||||||||
| Gross profit (loss) | 751 | 437 | – | 1,188 | 389 | (144) | – | 245 | |||||||||
| SG&A expenses | 471 | 279 | 93 | 843 | 338 | 286 | (43) | 581 | |||||||||
| Operating income (loss) | 280 | 158 | (93) | 345 | 51 | (430) | 43 | (336) | |||||||||
| Gross margin | 18% | 38% | – | 23% | 13% | (13%) | – | 6% | |||||||||
FISCAL YEAR 2018 SEGMENT AND CONSOLIDATED RESULTS
A summary of IBC’s results of operations to loss before other items (“operating income (loss)”) (1) for fiscal year 2018 follows:
| Year Ended | Year Ended | ||||||||||||||||
| June 30, 2018 | June 30, 2018 | ||||||||||||||||
| Copper | Eng. | Corp. | Consol- | Copper | Eng. | Corp. | Consol- | ||||||||||
| Alloys | Mat. | idated | Alloys | Mat. | idated | ||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||
| Sales | 14,040 | 5,359 | – | 19,399 | 11,872 | 3,843 | – | 15,715 | |||||||||
| Cost of sales | |||||||||||||||||
| Materials | 6,923 | 313 | – | 7,236 | 6,066 | 1,116 | – | 7,182 | |||||||||
| Labor | 2,169 | 1,251 | – | 3,420 | 2,146 | 1,140 | – | 3,286 | |||||||||
| Subcontract | 287 | 183 | – | 470 | 556 | 191 | – | 747 | |||||||||
| Overhead | 2,126 | 1,599 | – | 3,725 | 1,868 | 1,395 | – | 3,263 | |||||||||
| Depreciation | 373 | 401 | – | 774 | 418 | 329 | – | 747 | |||||||||
| Change in | |||||||||||||||||
| finished goods | 111 | 594 | – | 705 | (163) | 386 | – | 223 | |||||||||
| 11,989 | 4,341 | – | 16,330 | 10,891 | 4,557 | – | 15,448 | ||||||||||
| Gross profit (loss) | 2,051 | 1,018 | – | 3,069 | 981 | (714) | – | 267 | |||||||||
| SG&A expenses | 1,808 | 993 | 637 | 3,438 | 1,567 | 977 | 1,097 | 3,641 | |||||||||
| Operating income (loss) | 243 | 25 | (637) | (369) | (586) | (1,691) | (1,097) | (3,374) | |||||||||
| Gross margin | 15% | 19% | 0.0% | 16% | 8.3% | (19%) | – | 2$% | |||||||||
NON-IFRS MEASURES
To supplement its consolidated financial statements, which are prepared and presented in accordance with IFRS, IBC uses “operating income (loss)” and “operating profit,” which are non-IFRS financial measures. IBC believes that operating income and operating profit help identify underlying trends in its business that could otherwise be distorted by the effect of certain income or expenses that IBC includes in loss for the period. IBC recently achieved operating profitability for the first time in years and further believes that operating income (loss) and operating profit provide useful information about core operating results, enhances the overall understanding of its past performance and future prospects and allows for greater visibility with respect to key metrics used by management in its financial and operational decision-making. Operating income (loss) and operating profit should not be considered in isolation or construed as an alternative to loss for the period or any other measure of performance or as an indicator of IBC’s operating performance. Operating income (loss) and operating profit presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data.
Operating income (loss) represents loss for the period, excluding foreign exchange loss, interest expense, loss on disposal of assets, interest income, other income (expense), arbitration award liability and income taxes that IBC does not believe are reflective of the core operating performance during the periods presented.
Operating income (loss)
A reconciliation of annual loss to operating income follows:
| Year Ended June 30 | 2018 | 2017 | ||
| $ | $ | |||
| Loss for the period | (682) | (5,362) | ||
| Foreign exchange loss | 52 | 54 | ||
| Interest expense | 286 | 194 | ||
| Loss on disposal of assets | – | 294 | ||
| Interest income | (2) | (1) | ||
| Other income (expense) | (14) | 27 | ||
| Arbitration award liability | – | 1,395 | ||
| Income taxes | 11 | 25 | ||
| Operating loss | (349) | (3,374) |
A reconciliation of fourth quarter loss to operating income follows:
| Quarter Ended June 30 | 2018 | 2017 | ||
| $ | $ | |||
| Loss for the period | 240 | (2,210) | ||
| Foreign exchange loss | 3 | 65 | ||
| Interest expense | 110 | 52 | ||
| Loss on disposal of assets | – | 294 | ||
| Interest income | (1) | – | ||
| Other income (expense) | (6) | 38 | ||
| Arbitration award liability | – | 1,395 | ||
| Income taxes | (1) | 24 | ||
| Operating loss | 345 | (342) |
On Behalf of the Board of Directors:
“Duncan Heinz”
Duncan Heinz, President, CEO and Director
_____
1 IBC reports non-IFRS measures such as “operating operating income (loss)” and “operating profit.” Please see information on these and other non-IFRS measures in the “Non-IFRS Measures” section of this new release and in the Company’s Management Discussion and Analysis (“MD&A”), available on IBC’s website at www.ibcadvancedalloys.com and on SEDAR at www.sedar.com.
CONTACTS:
Duncan Heinz, President, CEO and Director
Jim Sims, Investor and Public Relations
IBC Advanced Alloys Corp.
+1 (303) 503-6203
Email: [email protected]
Website: www.ibcadvancedalloys.com
@IBCAdvanced $IB $IAALF
ABOUT IBC ADVANCED ALLOYS CORP.
IBC is a leading beryllium and copper advanced alloys company serving a variety of industries such as defense, aerospace, automotive, telecommunications, precision manufacturing, and others. IBC’s Copper Division manufactures and distributes a variety of copper alloys as castings and forgings, including beryllium copper, chrome copper, and aluminum bronze. IBC’s Engineered Materials Division makes the Beralcast® family of alloys, which can be precision cast and are used in an increasing number of defense, aerospace, and other systems, including the F-35 Joint Strike Fighter. IBC’s has production facilities in Indiana, Massachusetts, Pennsylvania, and Missouri. The Company’s common shares are traded on the TSX Venture Exchange under the symbol “IB” and the OTCQB under the symbol “IAALF”.
CAUTIONARY STATEMENTS
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. This disclosure contains a forward-looking statements. Forward-looking statements normally contain words like ‘believe’, ‘expect’, ‘anticipate’, ‘plan’, ‘intend’, ‘continue’, ‘estimate’, ‘may’, ‘will’, ‘should’, ‘ongoing’ and similar expressions, and within this news release include any statements (express or implied) respecting anticipated seasonality in the next quarter or two that may impact sales trends, expectations as to further value and savings of waste stream inventory, expectations as to additional quantities to be sold under the Lockheed Martin contract, beliefs as to expanding production capacity as a result of the purchase of new capital equipment and inventory and the success and timing of the production of components under the commercial satellite systems contract. Although IBC believes that the expectations reflected in these forward-looking statement are reasonable, forward-looking statements, by their very nature, are subject to inherent risks and uncertainties and are based on assumptions, both general and specific, which give rise to the possibility that actual results or events could differ materially from our expectations expressed in or implied by such forward-looking statement. The forward looking statements made by the Company in this press release are based on its experience, perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. As a result, we cannot guarantee that any forward-looking statement will materialize and we caution you against relying on any of these forward-looking statements. IBC makes no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made, except as required by applicable law. Additional information identifying risks and uncertainties is contained in IBC’s filings, including its Annual Information Form for the fiscal year ended June 30, 2018, available at www.sedar.com.
