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Constituent Review
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J. Andrew Braswell, Equity Analyst
Newbridge Institutional Research
Data as of 3-30-07 |
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Nano
Materials |
Review
1/19/07- ACO reported results for the quarter ended 12/31/06 before the opening bell. Revenue for the quarter was $155.9M (+16% Y/Y), while net income from continuing ops was $12.0M (+43% Y/Y), or $0.39 per share. Acquisitions and foreign currency translation accounted for $8.0M and $4.3M of the Y/Y sales growth, respectively. Gross margin improved to 26.8% from 25.0% Y/Y, with entire increase due to a 460bps improvement in the Oilfield Services segment gross margin. ACO ended the period with $17.8M in cash. There was no discussion of the nanocomposite business on the conference call.
2/13/07- Declared a regular quarterly dividend of $0.14 per share, payable 3/9/07. The company also announced the retirement of director Robert E. Driscoll III. Following Mr. Driscoll’s retirement, the size of ACO’s board was reduced from ten to nine directors.
3/13/07- In an 8-K filing, disclosed that it has recently increased the funds available under its revolving credit facility. The total amount of the credit facility was increased from $120M to $150M, and the termination date was moved from 10/31/2010 to 4/1/2012.
3/14/07- Announced that its Health & Beauty Solutions, Inc. subsidiary [HBS] has acquired Microsponge® technology from Cardinal Health’s Pharmaceutical Technology and Services segment. According to the agreement, HBS will assume control of the technology and all related assets, including a patent portfolio and existing customer base. Microsponge utilizes biologically inert particles to deliver active ingredients in dermatological products such as lotions and ointments. HBS has been supplying the product line to Cardinal under an exclusive supply agreement since 2003. Financial terms of the transaction were not disclosed.
Commentary
Shares of ACO climbed 7% in Q1, extending their 35% advance from 2006. The strength was fueled in part by the strong earnings release, which ended a string of two consecutive quarterly EPS misses. Nanocomposite business development expenses, which are reported net of segment revenue, declined to $2.5M in 2006 from $3.6M in 2005, with the decrease attributed to lower personnel costs and depreciation. Beginning with the Q1/07 earnings report, the nanocomposite business results will be consolidated within the minerals segment. Though not nanotech per se, the acquisition of the Microsponge technology at least shows that the Specialty Minerals segment continues to increase its focus on advanced materials. With no more news on the anti-viral properties of nano-bentonite first announced in late-2005, we can only conclude that development hit an impasse.
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