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Corporate
Profile
OTCBB:
NCNC
Sectors:
Manufacturing
Diversified Machinery Industrial Equipment &
Components Machine Tools & Accessories
Investment Style: Growth
What we do:
New Century Remanufacturing specializes
in rebuilding and retrofitting medium to large
size horizontal and vertical Boring Mills, Lathes
and Machining Centers.
Remanufacturing:
We offer current state of the art facilities
in Santa Fe Springs, California, where we can
completely remanufacture machine tools to original
tolerances and retrofit a variety of controls
and hardware to meet today's demands in manufacturing.
Rebuilding:
New Century Remanufacturing can rebuild Boring
Mills, VTL's, Lathes & Grinders to OEM standards
and update or re-engineer to meet the production
requirements of the modern shop.
Retrofitting:
Complete design assembly and test capabilities
are available for most CNC control retrofit.
We offer "in field" installation as
well as "on floor" re-control of most
CNC machine tools. Our facilities are conveniently
located in the Los Angeles area in Southern
California. We encourage your company to visit
and see our modern, progressive shop. For more
information, please call 1-562-906-8455 or fax
us at 1-562-906-8459.
News Releases
September 1, 2005
Dear Shareholder,
I am writing you today to share important news about New Century Companies,
Inc., and to update you on the Company’s prospects. As for those prospects,
I’ll get right to the point: They are very bright – as bright,
indeed, as they have been at any point in New Century’s 10-year history.
That’s a bold statement, but I will explain it in detail – and,
I believe, to your satisfaction – in the course of this letter. The
horizon isn’t cloud-free, and New Century has significant short-term
challenges ahead of it. But what matters most is that demand for
our products is rising sharply and we have the capacity to meet it. That’s
a powerful formula for growth.
Let me bring you up to date
first on the recent news at New Century, including
financial results and the ongoing execution
of our growth
strategy.
In our latest financials,
for the first half of 2005, New Century reported
a 3 percent gain in revenue year-over-year,
to $2.63 million from $2.56 million in the
first half of 2004. For the second quarter,
ending June 30, 2005, revenue was $1.20 million,
down from $1.56 million in the second quarter
of 2004. More significant, as an indicator
of trends in our core manufacturing business,
was the sharp positive turnaround in gross
margins and operating income/loss. Gross profit
in the first half of 2005 was $758,187, up
from just $26,517 in the first half of 2004.
Operating income in the first half of 2005
was approximately $102,000, compared to an
operating loss of about $710,000 in the first
half of 2004. Second quarter 2005 gross profit
was $372,168, up from $61,210 in the second
quarter of 2004. The latest quarter showed
an operating loss of approximately $58,000,
compared to a loss of approximately $217,000
in the second quarter of 2004.
After charges of approximately
$297,000 in interest, dividend and stock-compensation
expenses, the first half showed a net loss
of approximately $0.02 per fully diluted share,
compared to a net loss of $0.05 per share,
for the first half of 2004. Net loss for the
second quarter of 2005 was $0.03 per fully
diluted share, compared to a loss of $0.03
per share, in the year-earlier quarter.
Margins Improved
Through Cost-Cutting, Pricing Power
Several points need to be made about these numbers. First, the relative weakness
of the second quarter is due to a normal pattern in the machine-tool business.
Order bookings normally slow with the approach of summer, while operating costs
remain steady. Second, the most recent net losses reflect the impact of charges
that we believe to be largely non-recurring (and it should be noted that the
Company reported a profit of $0.02 per share in the first quarter of 2005).
Third, gross margins have been improving not only year-over-year but sequentially
as well. In the second quarter of 2005, gross profit was 31% of revenue, up
from 27% in the prior quarter; gross profit for the entire first half was 29%.
In contrast, gross profit was only 4% in the second quarter of 2004 and negative
in the first quarter of that year. It was just 1% for the first half of 2004.
This
dramatic improvement is due both to internal
and market factors.
Internally, New Century has been widening margins
by cutting labor costs and taking greater advantage
of outsourcing. We will soon see the impact
of the relatively high margins of our new Quilite® module
assembly business. Externally, the past year
has seen a decisive shift in our segment of
the machine-tool market, from soft conditions
favoring buyers to a situation of high demand
and limited supply that has greatly improved
the pricing power of wellpositioned manufacturers
such as New Century. To put it another way,
after several years in which our industry suffered
from too little demand and too much capacity,
the capacity is now rapidly absorbed and the
expanding economy has picked up the slack in
demand.
Economy, Legislation Will
Spur Orders
That brings me to other recent news that further
confirms the favorable trend. After our books
were closed on the first half, New Century
saw a robust upturn
in order volume. During August alone, we reported three major orders – all
for vertical turning centers (VTCs) – totaling $1.06 million in all.
The machines were to be used by major shops producing components for construction,
oil and gas
exploration, and aerospace (as you can see, New Century tools are used in a
wide range of industries).
Several other developments
this summer promise to keep this order surge
going.
One
is the signing in August of the long-awaited
federal transportation
bill, which authorizes spending of $286.5 billion
in the six years ending in 2009. Most of that
money will go toward highway construction,
with the rest earmarked for uses such as rail
corridors and mass transit. New Century stands
to benefit both directly and indirectly from
this spending. Our Quilite business – about
which I will have more to say shortly – should
gain considerably from new highway-related
projects aimed at cutting noise pollution.
Quilite is a lightweight, graffiti-resistant
alternative to concrete, and it is already
growing in popularity as a building-block material
for highway sound walls. Indirectly, New Century’s
machine-tool business should profit from demand
for borers and lathes used to manufacture parts
for construction gear and other transportation-related
equipment.
Another key event, which
also took place in August, was the enactment
of the federal energy bill. Subsidies and other
provisions of this new law are expected to
spur new power-production projects and stimulate
oil and gas exploration. These are two areas
in which New Century has an important stake.
Its tools are used by makers of components
for power generation (such as turbines) and
for oil and gas drilling. For instance, one
of the recent orders I mentioned above is from
a Midwestern company that sells compressor
parts to Dresser-Rand, a major manufacturer
of oil-field equipment.
Less clear at this point
is the impact of the rebuilding effort in the
wake of Hurricane Katrina. As I write this,
within days after this enormous storm, not
much is clear beyond the tragic loss of life
and massive destruction of homes and businesses.
It appears likely, though, that the oil transportation
and refinery infrastructure on the Gulf Coast
has suffered serious damage. Depending on the
severity of the damage and the reconstruction
needs, the resulting demand for New Century
machine tools could be substantial.
Underlying these specific
events is an ongoing expansion that, while
slowing somewhat around mid-year, seems robust
enough to carry on well into 2006, at least.
The softness in the first half of this decade
shows no signs of returning anytime soon. That,
of course, is good news for New Century.
The Quilite Factor
Looking ahead, New Century is following a two-pronged growth strategy. In addition
to building its core machine-tool manufacturing and remanufacturing business,
it has put its ample production capacity to work in a new business line,
the production of products made from Quilite. This year, it entered into
an agreement with Los Angeles-based Quilite International to assemble modules
out of Quilite blocks. We project that this activity could account for roughly
half our revenue in 2006 – of $10 million out of a total $20 million.
Even before then, in 2005, we expect it to add $0.05 cents per share to our
bottom line.
What is Quilite, and why
is it such a potentially big money-maker for
us?
Quilite is a polycarbonate
material that is much lighter than concrete,
up to 10 times faster to install in wall form,
with superior sound blocking and graffiti resistance.
Block for block, it is only slightly more costly
than concrete (though it may soon be cheaper
if concrete continues soaring in price). In
terms of labor, however, it is a hands-down
winner. Quilite block walls require much less
work to
assemble, and hence save worker-hour costs.
Quilite is already being
used in a number of different sound-absorbing
applications, including freeway noise walls
and sound barriers around other noise sources,
from sports stadiums to transformers. So far
this year, Quilite has booked nearly $2 million
in revenue from Quilite sales for a number
of projects. The largest of these was a roadway
sound wall in Las Vegas, which accounted for
$600,000 in revenue. Roughly the same amount
of revenue has been raised in smaller installations.
Upcoming projects using Quilite are planned
in California, Washington state and Canada.
In 2005 alone, Quilite expects to book approximately
$4 million in revenue with gross margins of
about 30%.
Meeting Capital Needs
All this good news on the
operational front will also help New Century
resolve its most pressing financial issue,
its need for capital to fund is continue growth
and to get its balance sheet on a sound footing.
We continue to live with a working capital
deficit -- left over from our major investment
in production capacity just before the 9/11
terror attacks stifled demand in industries,
such as aircraft
production, that are key to New Century’s
machine-tool business. The Company is currently
negotiating terms of a $5 million long-term
senior debt
facility with a private investor group. The prospects for this capital infusion,
and for favorable terms, can only get better as our sales volume and order
backlog grow. I am confident that both our business segments, machine tools
and Quilite, will grow briskly and show consistent operating profits in the
coming quarters. There should be no shortage of investors who understand the
potential payoff of this growth.
And
speaking of investors, I cannot let this
opportunity go by wihout
thanking all of you for your commitment to
New Century and your belief in the Company’s
future. As owners, you have seen ups and downs
in the manufacturing climate and the Company’s
fortunes, and I doubt if it has always been
easy to stay on board through the lean years.
But now, more than ever, the lean years seem
over and New Century is poised to reward your
patience.
Sincerely,
David Duquette
Chief Executive Officer
New Century Companies, Inc.
CEO
Notes Rising Oil Prices Causing Increasing
Demand for Company’s Machine Tools
LOS ANGELES, CA – August
30, 2005 – New Century Companies, Inc.
(OTCBB: NCNC), a leading manufacturer and re-manufacturer
of machine tools, today announced that it has
received two orders, totaling $760,000, for
vertical turning centers (VTCs). Combined with
a VTC order reported last week, the Company’s
recent string of major orders has added $1.06
million in revenue, all of which will be booked
in the third (current) and fourth quarters
of 2005.
The VTC, a type of large
vertically-oriented lathe, is used to produce
a wide range of metal components used in oil
and gas production, defense and aerospace,
construction and other industries. The first
of the two new orders is for a VTC priced at
$410,000, to be used by a Minnesota-based fabricator
to manufacture pipe flanges used in commercial
and industrial construction. The second order
is for a $350,000 VTC that will be used by
a Southern California-based manufacturer of
defense/aerospace components such as missile
shields. (Both customers are unnamed in this
release for competitive reasons).
On August 26, 2005, New
Century announced a $300,000 order for a VTC
that will be used by a major Midwestern U.S.-based
machine shop to make parts for compressors
used in oil and gas extraction. This new customer
produces components for firms including Dresser-Rand
Group Inc. (NYSE: DRC), a leading manufacturer
of oil-field products.
Growth in Machine Tools,
Quilite® Production Noted
“These two major orders,
coming just after a previously announced $300,000
order for another New Century VTC, reflect
a trend of accelerating machine-tool demand,” said
David Duquette, CEO of New Century. “Large
sectors of the economy are fueling this need
for state-of-the-art metal fabrication equipment
such as VTCs. One is energy, where oil and
gas production is booming. Another is construction,
industrial/commercial as well as residential.
A third is defense and aerospace. New Century
tools are used by manufacturers for all of
these sectors, and we expect the surge in orders
to continue as the sectors’ business
activity continues to rise.”
Mr. Duquette continued: “The
sharp rise in demand in New Century’s
traditional core business – new and re-manufactured
machine tools – comes at a time when
the Company is also adding a major new revenue
source in its partnership with Quilite Inc.,
a maker of sound-absorbing blocks. New Century
will shortly begin assembling Quilite® modules
for use in freeway sound walls and similar
construction. As announced previously, we expect
the Quilite operation to add $0.05 cents per
share in net income this year and $10 million
in new revenue, with 30% gross margins, in
2006. With the company already back to profitability
on an operating basis, its outlook is as bright
as it has been at any time in its 10-year history.”
About New Century Companies
New Century Companies, Inc., (OTCBB: NCNC) is one of the leading U.S.-based
makers of machine tools, primarily vertical boring mills and large lathes such
as vertical turning centers. It also assembles sound-wall modules made from
Quilite®, a lightweight, graffiti-resistant alternative to concrete. In
its machine-tool business, the Company specializes in re-manufacturing, starting
with existing major castings and fitting them with state-of-the-art, computer-controlled
equipment. These products generally cost 40% to 60% less to make than new ones.
New Century passes these savings on to its customers, which include such leading
manufacturers as General Electric Co., General Dynamics Corp., Siemens AG and
Goodrich Corp.. New Century machines are used to manufacture jet-engine components,
airplane landing gear parts, power generation equipment, oil and gas production
components and construction materials, to name just a few applications. Quilite® is
used not only in freeway noise walls but in other sound-absorbing structures,
including barriers at sports stadiums and electric transformers. New Century
manufactures its machine tools and Quilite® modules in Santa Fe Springs,
Calif. Visit New Century’s Web site at www.newcenturyinc.com
Contact:
David Duquette
Chief Executive Officer
562-906-8455
New Century Companies, Inc.
Forward-looking statement:
Except for historical information, this press
release contains forward-looking statements,
which reflect the Company's current expectation
regarding future events. These forward-looking
statements involve risks and uncertainties,
which may cause actual results to differ
materially from those statements. Those risks
and uncertainties include, but are not limited
to, changing market conditions and other
risks detailed from time to time in the Company's
ongoing quarterly filings, annual information
form, and annual reports. We undertake no
obligation to publicly update or revise any
forward-looking statements, whether as a
result of new information, future events
or otherwise. In light of these risks, uncertainties
and assumptions, the forward-looking events
in this press release might not occur.
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