Alyn reports second quarter results
Irvine, CA (August 16, 1999) - Alyn Corporation (NASDAQ: ALYN) today issued a marketing update and reported its second quarter financial results.
Following the appointment of Arne van Roon as President and CEO in April 1999, the Company made an important change in its business strategy. This new strategy defines the Company as a high tech producer of engineered metal matrix composite materials. All activities associated with the production of finished products, have been eliminated. This allows the Company to focus on its core activity - the development and large-scale production of advanced materials for both high-tech and general production applications in a wide array of industries, including nuclear, automotive, aerospace, heavy equipment, electronics, computers and consumer products. The majority of the Company's current plant and equipment fits well within this strategy, while eliminating the need for additional production capacity and specialized equipment to undertake large and varied customer-specific orders. For customers utilizing casting in the production of their products, the Company will provide ingot material. Other products typically require basic extruded shapes (considered their "raw material" comparable to ingots for casting) which the Company will utilize its significant extrusion capacity to deliver. This change in strategy is being welcomed by potential end-users of Boralyn®, since it allows them to produce their Boralyn-based products themselves or have them produced by their traditional subcontractors. Alyn Corporation has established support systems to assist these clients with the introduction of Boralyn into their manufacturing operations, including a series of MMC seminars for industry clients scheduled to begin in September. These seminars have proven to be in demand and are generally "sold out" through the end of the calendar year.
An exception to the above strategy has been made for the production of products for the nuclear industry, which the Company believes offers a major opportunity for Boralyn. Boralyn is exceptionally placed as a product that absorbs neutron radiation, yet provides the other benefits of Boralyn, including reduced weight and high structural properties. Boralyn offers important advantages over products that have traditionally been used for this purpose at a substantial cost saving for the industry. The Company expects that these advantages will help it to benefit from the nuclear industry's major worldwide commitment for dry storage systems. In the U.S. alone, the nuclear industry expects to spend approximately $2 billion for such systems over the next 10 years. Boralyn has been approved by the NRC and the Company is in the process of successfully completing its first major order for Transnuclear. The Company has now created a dedicated nuclear division headed by Mr. Gene Glasbergen. Mr. Glasbergen brings over 30 years of experience in managerial positions in the nuclear industry to the Company.
Based upon NRC published data and discussions with nuclear industry suppliers, the Company estimates that over the next ten years the U.S. market for dry storage casks alone (i.e., excluding transportation, wet racking and numerous other storage and shielding applications) is 2000 to 4000 casks. The European market is roughly equal to the U.S. market, and the Japanese market is expected to be half that size. Other markets in the world, including the former USSR, are somewhat larger than the Japanese market. While the Company believes Boralyn is the preferred choice over competing materials, it cannot predict what percentage of this market opportunity it will achieve.
An important focus of the Company in the second quarter has been the broad introduction of Boralyn to the automotive industry. Important tests are now underway with many major car manufacturers in Europe, the U.S. and Japan. Highlights of the quarter for this industry are:
- The selection of the Company as an official "Supplier to Scuderia-Ferrari", Ferrari's Formula One racing team, becoming one of 13 such "Suppliers" in the world. This was combined with the conclusion of a cooperation and development agreement with Ferrari, SpA to develop new materials for advanced applications of Boralyn in high performance automobiles. The Company will develop the materials; Ferrari will evaluate the materials and build and test the components.
- The successful demonstration of Boralyn in a number of motor sport applications, including Formula One, GT, rally, NASCAR and NHRA. This has resulted in initial orders for motor sport teams and specialized suppliers. The Company expects these orders to make a substantial contribution to its results during the fourth quarter of 1999 and in 2000.
- The successful testing of Boralyn in a number of high performance production motor cars. The Company expects Boralyn to be used in production motor cars in the year 2000 and expects that this activity will significantly contribute to revenues in 2000.
The Company also believes it is achieving successes in the aerospace industry. Because of the long acceptance time for adopting new materials in commercial aircraft, the Company's strategy is to enter this market by initially supplying standard aircraft-grade extruded aluminum, meeting aerospace specs for quality and timely delivery, thus qualifying the Company as an approved supplier. Once the Company is an approved supplier, the migration to Boralyn can begin. By demonstrating the ability to extrude and deliver difficult shapes "on-time" and "on-spec," the Company has been receiving and shipping larger and more important orders of aircraft-grade aluminum structural components to the commercial aircraft segment of the industry. The Company expects to begin shipping Boralyn products to the aerospace industry in the year 2000.
The use of Boralyn as a computer disk substrate material has found serious interest with some of the world's largest disk producers. The Company is in discussions regarding proposed cooperation arrangements. However, the Company stresses the fact that the introduction times for new substrate materials are extremely long and that no success of such a venture can be assured because of the multitude of technical and commercial challenges involved.
For the quarter ended June 30, 1999, the Company reported a net loss of $3,695,000 or $0.33 per share, on net revenues of $339,000. This compares with a net loss of $3,538,000 or $0.33 per share, on net revenues of $32,000 in the second quarter of 1998.
For the six months ended June 30, 1999, the Company reported a net loss of $6,495, 000 or $0.58 per share, on net revenues of $1,165,000. This compares with a net loss of $6,254,000 or $0.58 per share, on net revenues of $61,000 for the comparable period in 1998.
Sales levels for the second quarter were lower than had been anticipated, reflecting the impact of the manufacturing challenges the Company addressed early in the quarter with its announced restructuring. Since that time, the Company has focused on improving its production planning and manufacturing controls so as to deliver product "on-time" and "on-spec." These efforts have already resulted in successive follow-on orders primarily in aerospace and nuclear applications.
As in the first quarter, a primary contributor to revenues for the second quarter was to have been golf club programs. Due to production delays caused by supply difficulties from outside vendors in one program and design changes in another, the golf programs missed the important Spring and Summer golf sales period and have consequently been delayed. The Company now expects delivery to start in the first quarter of 2000.
The Company recently completed the first step of a new $10.6 million equity financing program authorized by the Board of Directors. The Company placed 200,000 shares of common stock, at $3.00 per share, in a private placement to one of its current institutional investors. The Company is currently in negotiations with a large investment fund to place an additional $10 million in convertible preferred stock in a private placement. The Company believes this funding program will provide sufficient capital to support its growth through the point at which the Company anticipates reaching break-even. The Company's business plan for 2000 anticipates achieving break-even by mid-year. There can be no assurances regarding the terms or completion of the current funding program. In June the Company paid-off the remaining $1.7 million balance of its term loan with Imperial Bank.
Alyn Corporation produces Boralyn, a unique metal matrix composite material that is lighter than aluminum, stronger than titanium and has better wear properties than steel, with principal applications in the nuclear, aerospace, automotive, computer hardware and sporting goods industries.
For additional information, contact Richard L. Little, Alyn Corporation, (949) 225-7360 or email: rlittle@alyn.com
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: The statements in this news release and oral statements which may be made by representatives of the Company relating to plans, strategies, economic performance and trends and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of the Federal Securities Laws. These forward-looking statements are subject to significant risks and uncertainties, including without limitation those identified in the section of the Form 10-Q for the quarter ended March 31, 1999 entitled "Factors That May Affect Future Results and Financial Condition" and in the Company's Annual Report on Form 10-K for the year ended December 31, 1998 as filed with the Securities and Exchange Commission (the "SEC"). Such risks and uncertainties may cause actual results to differ materially and adversely from those discussed in such forward-looking statements. The forward-looking statements within this news release, any oral statements made by representatives of the Company, and Forms 10-Q and 10-K are identified by words such as "believes," "anticipates," "expects," "intends," "may" and other similar expressions. However, these words are not the exclusive means of identifying such statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. The Company disclaims any obligation to publicly release the results of any revisions to these forward-looking statements which may be made to reflect events or circumstances occurring subsequent to this news release or otherwise to revise or update any oral or written forward-looking statement that may be made from time to time by or on behalf of the Company. Readers are urged to carefully review and consider the various disclosures made by the Company in its filings with the SEC, including its Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 and its Annual Report on Form 10-K for the year ended December 31, 1998, that attempt to advise interested parties of certain risks, uncertainties and other factors that may affect the Company's business.