Highlights of the Quarter
(unless otherwise noted, all financial amounts in this news release are expressed in U.S. dollars)
- Comprehensive sales of $5.0 million are 5.6% higher than the prior-year period, with the Copper Alloys division posting its highest sales revenue in five quarters.
- The Company’s adjusted earnings before interest, depreciation, and amortization (“Adjusted EBITDA)1 swung to a positive $127,000, as compared to Adjusted EBITDA of ($114,000) in the prior-year period.
- Copper Alloy division achieved profitability in the quarter as sales rose 11.8%, operating income jumped 154%, and Adjusted EBITDA increased by 58% over the prior-year period.
- Beryllium-aluminum alloy sales are poised to trend higher in both defense and commercial markets.
- Comprehensive loss was $550,000, or $0.01 / share, which compares to a loss of $766,000 in the prior-year period.
FRANKLIN, Ind., Nov. 28, 2019 (GLOBE NEWSWIRE) -- IBC Advanced Alloys Corp. (“IBC” or the “Company”) (TSX-V: IB; OTCQB: IAALF) announces its financial results for its fiscal first quarter of 2020.
The Company generated consolidated sales revenue of $5.0 million, which was 5.6% higher than the prior-year period. IBC recorded a comprehensive loss of $550,000, or $0.01 per share, which compares favorably to a loss of $767,000, or $0.02 per share, in the comparable period of fiscal 2018.
Consolidated gross profit was $495,000 in the quarter, a 6% gain over the prior-year period, while operating losses of $325,000 compared favorably to operating losses of $490,000 in the quarter ended September 30, 2018.
IBC swung to positive Adjusted EBITDA1 of $127,000 in the quarter, as compared to Adjusted EBITDA1 of ($114,000) in the prior-year period.
The Company’s Copper Alloys division swung to profitability in the quarter, posting divisional income of $62,000. That compared to a loss of $26,000 in the prior-year period and to a loss of $582,000 in the quarter ended June 30, 3019. Copper Alloys division sales in the quarter of $3.9 million were 11.8% higher than sales of $3.5 million in fiscal Q1 of 2019. Fiscal Q1 2020 sales represented the division’s highest sales performance of the past five quarters.
Copper Alloys’ operating income1 in the quarter of $149,000 represented a 154% increase over operating income of $59,000 in the prior-year period, and contrasted favorably with an operating loss of $510,000 in the quarter ended June 30, 2019. Adjusted EBITDA1 for the division was $302,000 in the quarter, a 58% increase over Adjusted EBITDA1 of $191,000 in the prior-year period. The division posted a negative Adjusted EBITDA1 of $366,000 in the quarter ended June 30, 2019.
Demand for copper alloy products has continued to rebound since the industry-wide reduction in demand in copper alloy products experienced in calendar Q4 of 2018. Growth for the division has been accelerating in part due to its ability to produce more value-added products, which was made possible by several strategic capital equipment upgrades made in 2019.
The Company’s Engineered Materials (“EMC”) division recorded sales in the quarter of $1.1 million, which compared to sales in the prior-year period of $1.2 million. The change was due largely to lower-than-normal demand for beryllium-aluminum (“BeAl”) products by semiconductor equipment manufacturers, which followed several consecutive record-breaking years of sales to that sector. Demand for BeAl products used in commercial applications is strengthening, as underscored by the Company’s signing in October 2019 of a two-year supply agreement with a leading global manufacturer of semiconductor and electronics assembly equipment.
EMC posted a operating loss of $222,000 which compared favorably with an operating loss on the prior year period of $294,000 and an operating loss of $574,000 in the quarter ended June 30, 2019.
Demand for BeAl products used in defense applications remained steady in calendar year 2019 but is expected to strengthen as rates of production for defense programs such as the F-35 Lightning II aircraft begin to accelerate beyond low rates of initial production. For example, according to Lockheed-Martin, the annual rate of production of the F-35 aircraft is expected to nearly double by 2022 from 2018 production levels. IBC is continuing to pursue additional contracts for high-performance BeAl products in other defense-sector platforms.
EMC continues to recycle BeAl scrap material into useful feedstock for both aerospace and commercial BeAl casting products, which helps to reduce our cost of cost of goods sold and capture higher margins.
“The Board and I were pleased to see the positive progress made in our first fiscal quarter of 2020,” said Mark A. Smith, Chairman of the IBC Board. “Year-over-year sales in our Copper Alloys division were higher by double digits, which helped them move to profitability in the quarter. We were also pleased to see the Company swing to a positive Adjusted EBITDA for the first time in five quarters. Many signs we are seeing in the market are positive, and we look forward to continuing this positive momentum as we continue to grow this company into the global specialty alloy leader I know it can become.”
FISCAL 2019 SEGMENT AND CONSOLIDATED OPERATIONS RESULTS
A summary of the Company’s results for the first fiscal quarter of 2020, 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 | ||||||||||||||||
| September 30, 2019 | September 30, 2018 | ||||||||||||||||
| Copper | Eng. | Corp. | Consol- | Copper | Eng. | Corp. | Consol- | ||||||||||
| Alloys | Mat. | idated | Alloys | Mat. | idated | ||||||||||||
| $000s | $000s | $000s | $000s | $000s | $000s | $000s | $000s | ||||||||||
| Revenue | 3,867 | 1,089 | - | 4,955 | 3,460 | 1,233 | - | 4,693 | |||||||||
| Cost of revenue | |||||||||||||||||
| Materials | 1,945 | 194 | - | 2,138 | 1,988 | 73 | - | 2,061 | |||||||||
| Labor | 597 | 301 | - | 899 | 534 | 367 | - | 901 | |||||||||
| Subcontract | 111 | 78 | - | 189 | 74 | 78 | - | 152 | |||||||||
| Overhead | 556 | 248 | - | 804 | 418 | 416 | - | 834 | |||||||||
| Depreciation | 148 | 204 | - | 352 | 96 | 100 | - | 196 | |||||||||
| Change in finished goods | (3 | ) | 81 | - | 78 | (150 | ) | 232 | - | 82 | |||||||
| 3,354 | 1,107 | - | 4,460 | 2,960 | 1,266 | - | 4,226 | ||||||||||
| Gross (loss) profit | 513 | (18 | ) | - | 495 | 500 | (33 | ) | - | 467 | |||||||
| Gross margin | 13 | % | (2 | %) | 10 | % | 14 | % | (3 | %) | - | 10 | % | ||||
| SG&A expenses | 364 | 204 | 252 | 820 | 440 | 262 | 255 | 957 | |||||||||
| Income (loss) before other items | 149 | (222 | ) | (252 | ) | (325 | ) | 60 | (295 | ) | (255 | ) | (490 | ) | |||
| Total comprehensive income (loss) | 62 | (258 | ) | (355 | ) | (550 | ) | (26 | ) | (301 | ) | (440 | ) | (767 | ) | ||
| Adjusted EBITDA: | |||||||||||||||||
| Add back (deduct): | |||||||||||||||||
| Tax expense | - | - | - | - | - | - | - | - | |||||||||
| Interest expense | 86 | 39 | 158 | 283 | 79 | 8 | 195 | 283 | |||||||||
| Depreciation, amortization, & impairment | 150 | 206 | - | 356 | 97 | 100 | - | 197 | |||||||||
| Stock-based compensation expense (non-cash) | 5 | 3 | 30 | 38 | 41 | 27 | 105 | 173 | |||||||||
| Adjusted EBITDA | 302 | (10 | ) | (166 | ) | 127 | 191 | (165 | ) | (140 | ) | (114 | ) | ||||
NON-IFRS MEASURES
To supplement its consolidated financial statements, which are prepared and presented in accordance with IFRS, IBC uses “operating income (loss)” and “Adjusted EBITDA,” which are non-IFRS financial measures. We believe that operating income (loss) help identify underlying trends in our business that could otherwise be distorted by the effect of certain income or expenses that we include in the loss for the period. We further believe that operating income (loss) provides useful information about core operating results, enhances the overall understanding of our past performance and future prospects, and allows for greater visibility with respect to key metrics used by management in our financial and operational decision-making.
We believe that Adjusted EBITDA is a useful indicator for cash flow generated by our business that is independent of our capital structure. Operating income (loss) and Adjusted EBITDA 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 our operating performance. Operating income (loss) and Adjusted EBITDA 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)
Operating income (loss) represents loss for the period, excluding foreign exchange loss, interest expense, interest income, other income (expense) and income taxes that we do not believe are reflective of our core operating performance during the periods presented. A reconciliation of our first quarter loss to operating income follows:
| Quarter ended ended September 30 | 2019 | 2018 | ||
| $000s | $000s | |||
| Loss for the period | (550 | ) | (766 | ) |
| Foreign exchange (gain) loss | (57 | ) | (4 | ) |
| Interest expense | 283 | 283 | ||
| Loss on disposal of assets | - | - | ||
| Interest income | (0 | ) | (4 | ) |
| Other income | (6 | ) | (2 | ) |
| Income taxes | 6 | 3 | ||
| Operating loss | (325 | ) | (490 | ) |
Adjusted EBITDA
Adjusted EBITDA represents our income (loss) for the period before interest, income taxes, depreciation, amortization and share-based compensation. A reconciliation of our first quarter loss to Adjusted EBITDA follows:
| Quarter ended ended September 30 | 2019 | 2018 | ||
| $000s | $000s | |||
| Loss for the period | (550 | ) | (766 | ) |
| Tax expense | - | - | ||
| Interest expense | 283 | 283 | ||
| Depreciation, amortization, & impairment | 356 | 197 | ||
| Stock-based compensation expense (non-cash) | 38 | 173 | ||
| Adjusted EBITDA | 127 | (113 | ) | |
For more information on IBC and its innovative alloy products, go here.
On Behalf of the Board of Directors:
"Mark A. Smith”
Mark A. Smith, Chairman of the Board
CONTACTS:
Mark A. Smith, Chairman of the Board
Jim Sims, Investor and Public Relations
IBC Advanced Alloys Corp.
+1 (303) 503-6203
Email: jim.sims@ibcadvancedalloys.com
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 sales trends in fiscal 2020, expected demand for the Company’s products and expectations as to additional quantities to be sold under the Lockheed Martin 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, 2019, available at www.sedar.com.
1 IBC reports non-IFRS measures such as "Adjusted EBITDA" and “Operating Income”. Please see information on this and other non-IFRS measures in the "Non-IFRS Measures" section of this news release and in the Company’s MD&A for the quarter.