Nanophase Discusses New Dynamic Initiatives, Provides Update on Progress Toward 2000 Revenue,
MONDAY, AUGUST 07, 2000 8:30 AM
BURR RIDGE, Ill., Aug 7, 2000 /PRNewswire via COMTEX/ -- Nanophase Technologies Corporation (Nasdaq:NANX), 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 www.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
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
3. Reducing manufacturing costs by increasing productivity, output rates,
and yields, while reducing direct and indirect costs throughout the
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 www.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(R) 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
"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
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
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
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.
CONTACT: President and CEO, Joseph Cross, 630-734-4722, VP of Sales and
Marketing, Dan Bilicki, 630-734-4751, Marianne Steimle, Manager of Investor
Relations, 630-734-4770, all of Nanophase Technologies Corp.; or General
Information, Tad Gage, 312-640-6745, Analysts, Lisa Fortuna, 312-640-6779,
Media, Tim Grace, 312-640-6240, all of The Financial Relations Board for
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INDUSTRY KEYWORD: CHM