Nanophase Discusses New Dynamic Initiatives, Provides Update on Progress Toward 2000 Revenue, Performance Goals
BURR RIDGE, Ill., Aug. 7 /PRNewswire/ -- Nanophase Technologies Corporation (Nasdaq: NANX - news), a leader in nanomaterials and nanoengineered products, recently provided investors and analysts with an update of its success in attaining specific performance, operating and growth goals. The company also discussed for the first time two initiatives designed to broaden the potential markets for nano-engineered products, and dramatically reduce production costs.
Joseph Cross, president and CEO, told investors in a recent conference call (available for replay at vcall.com ): ``The company is tightly focused on meeting its business plan goals and objectives for 2000 and positioning business for 2001. Specifically, we are concentrating in five major areas of performance, and in each of these core areas, the second quarter was very positive.''
Cross, and his management team provided updates of the company's progress toward five financial, operating, and growth goals:
1. Tripling revenue from 1999 and 2000 and achieving a positive gross
margin during third quarter;
2. Regularly developing new Nano processes and establishing patents and
trademarks;
3. Reducing manufacturing costs by increasing productivity, output rates,
and yields, while reducing direct and indirect costs throughout the
supply chains;
4. Increasing manufacturing capacity to introduce new products to address
current and targeted market opportunities; and,
5. Positioning the business for 2001.
Cross noted: ``Revenue growth continues as the company's sales exceeded the same period of 1999 by 235% and we surpassed our internal quarterly goal that will lead to tripling revenue this year over last. In the first half of 2000, the company shipped approximately $1.7 million of product, which is 163% above the same period last year and is actually 23% greater than our entire 1999 revenue. Second quarter revenue represented 68% sequential growth over the first quarter of 2000''
Relative to manufacturing, significantly expanded production levels with a major customer contributed to a six-fold increase in product output compared with first quarter 2000. The company currently serves four primary markets -- industrial coatings, healthcare, environmental catalysts, and ceramics, and is actively exploring additional vertical markets.
To the coatings market, second quarter product sales increased 8% percent over first quarter, and the company anticipates further growth as new formulations reach the production stage of development cycles.
Second quarter healthcare product sales had a massive increase of 172% versus first quarter, due primarily to filling the global pipeline with zinc oxide for sunscreen applications. Manufacturers in sunscreen, foot care and other healthcare products use Nanophase's zinc oxide formulation. Its nanocrystalline molecular structure promotes ease of application and greater application effectiveness. Product sales of zinc oxide represented approximately 60% of first quarter revenue, growing to over 80% of second quarter revenue. Zinc oxide sales are expected to represent approximately 40% of third quarter 2000 revenue.
``Nanophase is developing important customers that are allowing us to deliver quarter-to-quarter growth while balancing the significant variability of developing customers,'' reported Dan Bilicki, vice president of sales and marketing.
Product sales to the environmental catalyst market in second quarter increased by 100% over first quarter 2000. This change reflects increased demand by an automobile manufacturer for catalytic converters containing Nanophase ceria dioxide powder to replace palladium and platinum needs amid a surge of pricing for the two metals. Based on orders already in place for third quarter 2000, the company anticipates that it will report sequential quarter sales growth of approximately 680%.
Bilicki reported that second quarter product sales to the ceramic market, including thermal spray applications, declined 97% versus first quarter due to production difficulties experienced by a third party contractor. He added that these issues are being addressed and it is expected that sales will be back on track in third quarter.
A small amount of revenues came from the sale of products to research facilities like universities, the federal government, labs and corporate research departments. Research quantity sales average about $10,000 per month with the majority of the business coming through the company's recently revamped Web site nanophase.com .
The company continued to make progress in controlling costs and enhancing margins through process improvement. Cost of revenue, as a percentage of total revenue, declined approximately 14% between the first and second quarters of 2000, and management anticipates that this positive trend will continue. The company has reduced the manufacturing cost of one product by approximately 30% and is targeting the same reduction for other products.
Revolutionary New Products, Processes on the Horizon
Expanding manufacturing while at the same time reducing process costs is the goal of several key initiatives designed to help the company achieve its second goal, which is to expand the company's technology base and slate of intellectual property by developing new Nano processes and establishing patents and trademarks. Addressing this goal, Cross noted: ``We believe we are on the verge of several important breakthroughs in new products that will not only result in new applications and markets, but also new manufacturing processes that could dramatically cut costs.''
During the past year, the company has added significantly to its intellectual property base. The Japanese patent office granted a basic technology patent covering the method and apparatus for making nano-structured material, which protects the company's technology in this area. The U.S. Trademark and Patent Office granted registration for the NanoGard® trademark for health care products. The company also applied for registration of its NanoShield(TM) designation for various innovative protective coatings under development. Currently, Nanophase owns or licenses over 20 U.S. and international patents covering a variety of manufacturing processes and engineered materials, and additional applications patents are pending.
Nanophase currently has 15 focused customer projects in various stages of development cycles. Business development efforts include several product opportunities that will be addressed when the company has access to additional manufacturing capacity this fall. Nanophase is also pursuing two critical initiatives to revolutionize the company's manufacturing capabilities.
Dr. Gina Kritchevsky, vice president of technology and engineering, explained: ``We continue to make solid progress on two new Nano processes, which we have code-named 'Audrey' and 'Mira.' I believe the new technology will do two very significant things for us: generate new materials and lower manufacturing costs.
``The targets for the Audrey process are to substantially increase the nano-powder production rate and gain flexibility in the precursor materials, both in terms of format and chemistry. We're currently running a prototype version of Audrey. A full-scale development reactor has been designed and the components have been fabricated. We're anxiously waiting setting her up in the new building.
``The second new process, code name Mira, is in the research stage. Mira allows us to control the atmosphere in the reactor and use reactive gases other than oxygen. Mira is intended to allow us to manufacture evaluation- scale samples of materials that are not well suited to our current PVS manufacturing process such as metals, carbides and nitrides. Based upon market demand, we intend to scale one or more of the Mira spin-off processes.''
Not only is Nanophase pursuing new particle manufacturing technologies in-house, noted Kritchevsky, but it is also capitalizing on the high development activity in the nanotechnology field. ``The environment is very competitive, which enables us to have a broad selection of new technologies to evaluate for the potential to license, initiate a joint venture, or even acquire, where appropriate, in alignment with our strategic plans.''
She noted that in research and development, the company is developing new particle coating chemistry and technologies, which will allow Nanophase to better incorporate its particles into polymers or coatings, which, in turn, will provide improved function in properties. A second priority in the R&D group is the exploration of Nano particles for new catalyst applications. The third priority is the continued development of coating formulations to provide connectivity, abrasion resistance, or blocking of selected spectral regions such as ultraviolet or infrared radiation.
``In both the engineering and the R&D area, we continue to expand our intellectual properties portfolio and protection of our materials, as well as applications of these materials,'' concluded Kritchevsky.
Process Initiatives Offer Potential Cost Reduction
In addressing its goal to reduce manufacturing costs by increasing productivity, output rates, and yields, while reducing direct and indirect costs throughout the supply chains, management cited a number of ongoing efforts. Cross noted that the operations and technical groups made major progress on reducing manufacturing costs.
``We are implementing steps with our other major volume products that should achieve reductions in the same area,'' noted Cross. ``We expect to begin realizing those savings the third quarter and realize the full impact during the last two months of the fourth quarter.''
The company cited another process improvement -- manufacturing of ITO (IndiumTin Oxide) powder. Nanophase's ITO powder is formulated and used as a conductive coating material. The company re-engineered its manufacturing process to allow it to make coatings that are over 100 times more conductive, significantly more consistent in their connectivity, and over several months.
Improved connectivity is important because over the next several years, government regulations will require better radiation attenuation, which is achieved by better connectivity. These improved connectivity coatings will also allow Nanophase to access additional markets.
Finally, management noted that the ``Audrey'' process initiative could, in the long run, cut the company's manufacturing costs up to tenfold through a combination of higher output of material and significantly lower operating costs. As noted earlier, the company intends to construct a prototype reactor and being measuring the process results in the near future.
Expanding Capacity to Accommodate Growth
The company addressed its goal of expanding capacity to support additional manufacturing by announcing in the second quarter that it is leasing a 37,000 square foot facility located approximately 20 minutes from the company's current Burr Ridge site.
``We have been increasingly hindered due to the lack of laboratory and manufacturing space limiting our ability to address new customer applications and to add the necessary manufacturing equipment,'' explained Cross. ``As we transition personnel to the new facility from mid to late August through October, this space will allow us to accelerate our product application development efforts and install the pilot manufacturing facility we have been discussing for almost a year. All of these initiatives are vital to support our revenue growth plans during 2001 and 2002, and are highly productive uses of our available cash.''
The new facility is equipped with adequate laboratory space from its previous tenants, which saves the company the normal $200 to $250 per square foot outfit costs. It is located on six acres with adequate expansion potential, and a manufacturing area to allow continued growth without compromising good process flow.
``These four initiatives -- revenue growth and margin expansion, new products, new processes to reduce manufacturing costs, and reinvesting in growth through new assets and additional capacity -- support our fifth and final goal, which is to position the company for 2001,'' concluded Cross. ``This has been a watershed year for Nanophase, and after six months, we see every indication that we are on-track or even ahead of our expectations for positioning the company for rapid growth and profitability. We continue to see almost unlimited possibilities for nanotechnology to revolutionize a wide variety of consumer and industrial applications.''
Nanophase Technologies Corporation provides engineered solutions utilizing nanocrystalline materials for a variety of industrial product applications. Using proprietary technology to produce nanocrystalline materials, the company creates products with unique performance attributes. The company's global customer base includes a number of Fortune 500 companies. Nanophase trades on the Nasdaq NMS under the symbol ``NANX.'' Visit the company's web site at www.nanophase.com .
The words ``expect,'' ``believes,'' ``plans,'' and similar expressions are intended to identify forward looking statements. Statements contained in this news release that are not historical facts are forward looking statements that are made pursuant to the Safe Harbor Provisions for the Private Securities Litigation Reform Act of 1995. These statements reflect the Company's current beliefs, and a number of important factors could cause actual results to differ materially from those expressed in this news release. These important factors include, without limitation: demand for, and acceptance of, the company's nanocrystalline materials; changes in development and distribution relationships; the impact of competitive products and technologies; and other risks indicated in the company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. Except as otherwise required by Federal securities laws, Nanophase undertakes no obligation to update or revise these forward looking statements to reflect new events or uncertainties.
For Additional Information on Nanophase Technologies by fax at no cost, Dial 1-800-PRO-INFO, Code NANX.
SOURCE: Nanophase Technologies Corp. |
