TO ALL
I got this on email. Looks a little better
Here's hopen'
JimB
-----------------------------------------
MAGNIFOAM TECHNOLOGY INTERNATIONAL INC. PROGRESS REPORT
December 1998
From the President
Fellow Shareholders,
The integration of our manufacturing subsidiaries, QSi, MTI and PolyFab and
the creation of our unified sales and marketing team is generating positive
results. We have recorded positive earnings before interest, taxes and
amortization (EBITA) for two consecutive quarters and revenues are
increasing. We expect revenues to continue to increase in the second half
of our fiscal year.
One of our stated fiscal 1999 objectives is to focus our sales and marketing
efforts on six major market sectors. In particular, we look to increase our
market share in the aerospace and mass transit sectors. In the last few
months we have done just that. Having secured new orders from customers in
both sectors, we continue to work with existing customers to develop new
applications, particularly in the aerospace market.
In the mass transit market we have solidified orders for Magnifoam™ silicone
foam from customers who will use the foam in seating and insulation systems.
As you will read in this report, we have worked with customers to develop
new applications where the qualities of silicone foam, including low
flammability, low toxicity, comfort and durability, were all important
factors.
We have committed to building relationships and pursuing agreements with
agents and distributors in key geographic markets to generate new business.
This past summer we announced the first such agreement with Royersford
Spring Co., a leading manufacturer of coil spring and board seat/back
assemblies primarily for mass transit customers. I am pleased to report
that as a result of this relationship, our seating foam has been specified
for use by a major Southern California transit authority. Magnifoam™
silicone foam will be combined with Royersford's suspension system in this
transit authority's seat assemblies. We will continue to seek out similar
agreements with distributors in North America and Europe.
Earlier this month we announced a new contract secured by PolyFab to supply
Bombardier Aerospace with thermal-acoustic cabin insulation for two
Bombardier business jet programs. This new contract is an expansion of
PolyFab's existing relationship with Bombardier.
In addition to these sales initiatives, we have made important
accomplishments in improving operating efficiency and quality standards. I
am pleased to report that both PolyFab and MTI are now registered to ISO
9002 quality standards. This achievement is particularly important as it
demonstrates a dedication to quality systems and practices every day, at all
stages of the manufacturing process.
To date, the efforts of QSi, our resin manufacturing subsidiary, have been
focused on supplying consistent quality silicone resins to MTI. Now that
QSi resin is fully integrated into the MTI foam manufacturing process, QSi's
focus has shifted to generating third party sales. We expect results of
these sales efforts to commence in fiscal 2000.
Looking ahead to the second half of fiscal 1999, we remain on track to
achieve our goal of profitability by year end.
Thomas R. Ambeau
President and CEO
Magnifoam Technology International Inc.
Important Notice to Shareholders
Convertible Preferred Shares
Magnifoam's convertible preferred shares will expire on January 10, 1999.
Each preferred share is convertible into common shares on a 1 for 1 basis at
$1.40 (USD). These shares trade over-the-counter on the Canadian Dealing
Network (MTII.pr.a).
Listing Change
In September 1998, Magnifoam Technology International Inc.'s common shares
began trading on The Toronto Stock Exchange under the symbol MTG.
Progress by Sector
Highlights
* Ongoing relationship with Bombardier results in new contract to
supply thermal-acoustic insulation systems for aircraft interior completion
programs.
* New orders for Magnifoam™ silicone foam from mass transit sector
customers.
* Exclusive marketing and sales agreement finalized with Royersford
Spring Co. for mass transit sector. First contract will combine Magnifoam™
and Royersford's seating suspension systems in seat assemblies for a
California transit authority.
* Two consecutive quarters of positive EBITA.
In this report we will concentrate on recent activities in the mass transit
and aerospace sectors, Magnifoam's two largest and fastest growing markets.
Mass Transit
In the last few months, MTI, Magnifoam's silicone foam manufacturing
subsidiary, has received in excess of $1 million in new firm orders and
options from customers in the mass transit market segment. As a result of
months, and sometimes years of testing and prototyping, these new orders
represent a growing market acceptance of the superior performance qualities
of Magnifoam™ silicone foam.
An additional 20 car set option exercised by the Long Island Rail Road
(LIRR) brings the total number of car sets which MTI will supply to 134.
This new order is an extension of LIRR's initial order. LIRR is North
America's busiest rail road, carrying an average of 265,000 passengers
daily.
MTI has also received an extension to orders in connection with a major seat
replacement program initiated by Chicago METRA in December 1997. The
project is part of a capital program to improve the METRA system and is
expected to continue through 2006.
Following two years of an extensive design and testing program, Magnifoam™
silicone foam will be installed in the City of Calgary's transit system.
Calgary Transit has chosen Magnifoam™ for their Siemens built fleet of light
rail vehicles. Calgary Transit is a new customer and MTI's first major
Canadian rail project.
A fourth seating order comes, in part, as a result of an exclusive sales and
marketing agreement with U.S. based Royersford Spring Co. signed in August
1998. Royersford represents Magnifoam™ silicone foam products and markets
them in combination with its coil spring board seat and back assemblies
providing customers with complete seating systems. In combination with
Royersford's suspension system, Magnifoam™ silicone foam has been specified
for use by a transit authority in Southern California. Specific details of
this program have yet to be announced, but are expected to be confirmed in
the next few months.
Two other customers have completed testing and have approved Magnifoam™ for
new applications. Both have placed initial orders.
Magnifoam's silicone technology will be incorporated in the form of a
thermal/acoustic insulator and sold to rail car manufacturers. MTI's foam
will be utilized in the corrugated bellows that enclose the passageway
between two rail cars. This unique application was developed in Germany in
1997.
A major Canadian bus manufacturer will use Magnifoam™ to address various
heat management issues in their heating, ventilation and air conditioning
(HVAC) systems. The program is ongoing with the initial shipment made in
November 1998.
In the last few months, Magnifoam has broadened its product offering in the
mass transit sector and expanded its customer base. Magnifoam remains
committed to working with new and existing customers to develop new
applications for its unique silicone technology.
Aerospace
The Aerospace Industries Association of Canada recently reported that it
anticipates the Canadian aerospace industry will generate $15.3 billion in
sales in 1998 making Canada's aerospace industry fifth largest in the world.
The business and regional aircraft market segment continues to increase as
companies such as Bombardier Aerospace secure orders to build new planes.
PolyFab's ongoing relationship with Bombardier Aerospace has allowed the
company to develop custom insulation solutions which provide passengers with
a smoother, quieter in-flight environment.
Recently MTII announced a new contract from Bombardier Aerospace to supply
custom thermal-acoustic cabin insulation for the interior completion
programs of the Global Express® long-range business jet and the widebody
Challenger 604® business aircraft. The Challenger is one of Bombardier's
most popular aircraft and the new Global Express is quickly gaining
popularity. Bombardier currently has 80 firm orders for the Global Express®
and recently announced that it was the only aircraft in its category
certified to the very latest FAA standards.
This contract is valued at approximately $4 million over the next two years
and is an illustration of the strong partnership PolyFab has with
Bombardier.
MTI also received an order recently in connection with a Delta Air Lines
commercial aircraft refurbishment program. The order is part of an expanded
refurbishment program and shipments from MTI are ongoing. MTI will supply
Delta subcontractors in the US and the UK with Magnifoam™ silicone foam,
which will be incorporated into the flooring insulation system in Delta's
commercial aircraft.
Ask Magnifoam
Q: Have you been contacted by any of the regulatory authorities, the
FAA or Transport Canada, about your product?
A: Magnifoam is pleased to cooperate and offer expertise and
information to assist the FAA and Transport Canada with developing new
standards and tests for the industry.
Q: Have you had inquiries from major aviation companies to buy your
product as a result of questions regarding the recent Swissair disaster and
FAA decision recommending the replacement of aircraft insulation systems?
A: Magnifoam partners with its customers and potential customers to
develop products that meet or exceed specification and standards for safety.
Safety is of primary concern and product improvements are made in the
interest of the safest travel environment for passengers. It would be
premature to speculate on any specific impact on sales at this time.
Magnifoam Technology International Inc. (TSE: MTG)
42 Commerce Park Dr., Barrie, Ontario
Canada L4N 8W8
Tel: 705-725-0900
Fax: 705-725-9055
Email: mti@magnifoam.ca
Website: www.magnifoam.ca |
