In c7234, transmitted at 09:00e today, an error occurred in the fifth paragraph of the "Outlook" section. "January 2, 2008" should have read "January 2, 2009". Corrected copy follows: WGI Heavy Minerals announces third quarter 2008 results and updates timing of distribution
COEUR D'ALENE, ID, Nov. 11 /CNW/ - WGI Heavy Minerals, Incorporated (TSX: WG) today announced results for the third quarter and first nine months ended Sept. 30, 2008. All dollar amounts are in United States dollars unless otherwise indicated. Results have been filed and may be viewed at www.sedar.com.
Third Quarter Results
Revenues for the three-month period ended September 30, 2008 increased to $7.46 million from $6.68 million in the same period of 2007, due to growth across other abrasives lines, waterjet revenues from International Waterjet Parts ("IWP") and 3% growth in garnet sales. Garnet volumes decreased by 13% due to lack of supply as a result of inclement weather in India, however prices increased by 18%, resulting in an increase in garnet sales of 3%.
Gross profit margins decreased to 18% in the third quarter of 2008 from 21% in the same period a year ago. Contributing to this decrease was a rise in fuel costs and limited production out of India and Emerald Creek Garnet ("ECG").
Operating general and administrative expenses increased 5% year-over-year due to increased marketing and sales expenses. Non-operating general and administrative expenses decreased 168% over the same 2007 three-month period due to the reclassification of expenses related to the sale of Transworld Garnet India Pvt. Limited ("TGI"), reduced overhead due to the change in the CEO and reduced travel expenditures. The Company also recognized a gain of $0.51 million on the write-off and subsequent receipt of insurance proceeds on a warehouse that was damaged by heavy snow in early 2008.
Interest income decreased 62% to $0.09 million from $0.23 million in the three month period ended September 30, 2008, due to lower interest rates on short-term deposits and smaller bank deposits.
Income tax expense in the quarter was $0.07 million as a result of profits generated by the Kominex, the Company's European subsidiary.
The Company recognized a loss of $0.46 million on the sale of its investment in TGI, including expenses incurred in the second quarter of 2008 and recorded a gain on the recovery of ECB loans in the amount of $10.60 million, netting the Company $10.14 million, net of related taxes, for the quarter ended September 30, 2008. The Company also recognized a $0.12 million foreign currency loss as a result of the sale.
The Company posted a net profit of $10.69 million, or $0.45 earnings per share ($0.43 fully diluted), in the third quarter of 2008, compared with a net loss of $0.32 million, or $0.01 loss per share, in the same period of 2007.
Results for the Nine-Month Period Ended September 30, 2008
WGI increased revenues for the nine-month period ended September 30, 2008 by 5% to $21.06 million, from $20.14 million in the same period in 2007. This gain was mainly due to higher prices and growth across most product lines, led by 53% revenue growth in other abrasives and 16% revenue growth in waterjet parts. The higher prices and growth were offset by a 7% decrease in garnet revenues.
Gross profit margins decreased slightly to 19% in the first nine months of 2008, from 21% for the same period in 2007, despite price increases made in garnet and other abrasives businesses during the period. While gross profit margins increased across most product lines during 2008, this was not enough to offset higher garnet costs due to production constraints.
Operating general and administrative expenses increased 12% year-over-year due to increased sales and marketing expenses. WGI incurred non-operating general and administrative expenses of $0.34 million as a result of the Company's contested 2007 Annual General Meeting of Shareholders held in June, in addition to professional fees relating to a special cash disbursement to be paid in December 2008. In addition, the Company recognized a $0.54 million gain on disposal of equipment in the nine month period ended September 30, 2008.
The Company recognized a loss of $0.46 million on the sale of its investment in TGI, including expenses incurred in the second quarter of 2008, and recorded a gain on the recovery of ECB loans in the amount of $10.60 million, netting the Company $10.14 million, net of related taxes, for the nine-month period ended September 30, 2008. WGI also recognized a $0.12 million foreign currency loss as a result of the sale.
The Company posted net income of $9.28 million, or $0.39 earnings per share ($0.38 fully diluted), for the nine-month period ended September 30, 2008, compared with a net loss of $0.66 million, or a loss of $0.03 per share, for the same period a year ago.
"With the sale of TGI behind us, our efforts are focused on reducing overhead and to continue to achieve profitability from an operating standpoint," said President and CEO, Greg Emerson. "Year-to-date, WGI increased net income from WGI's operating entities in the first three quarters of 2008 by 20% to $1.04 million, from $0.88 million in 2007," Mr. Emerson said. We remain committed to creating value for shareholder, with our current emphasis on reducing overhead costs and growing WGI's operating companies organically. Management is continuing to pursue strategies and investments in our remaining businesses that will build shareholder value."
Outlook
WGI is targeting a levelling off of sales for the remainder of 2008 and expects to realize improved garnet availability out of India in the first quarter of 2009 when VV Mineral makes production modifications to meet the agreed upon annual supply tonnage of 60,000 MT.
The Company is continuing to make production improvements at its Emerald Creek Garnet facility, through some reinvestment in the facility and improved operating methods. However, the Company has struggled to meet monthly production forecasts due to aging equipment, lean garnet grades and declining garnet resources. ECG continues to explore for additional resources in the area.
The Company is continuing to make production improvements at IWP to support its expanding waterjet parts sales. Sales from Kominex's product lines are expected to grow since capacity for these products has increased with the installation of new equipment earlier in the year.
WGI's garnet and waterjet parts businesses have a relatively small market share in an expanding global market. The opportunity for the Company is significant. Accordingly, management is currently evaluating several emerging opportunities, including new garnet deposits, waterjet technology innovations, lean manufacturing concepts, and potential acquisitions. However the current worldwide financial crisis may have an impact on revenues and profitability if sustained for any length of time.
On October 24, 2008 WGI's board of directors approved a special cash distribution to shareholders in the amount of US$0.80 per share. This special distribution represents a return to the shareholders of approximately US$19.2 million (based on the number of shares currently outstanding). As a result of delays in resolving the advance tax ruling and year-end logistics with paying the distribution, the board has now set the record date for the distribution as January 2, 2009. The special cash distribution will be paid to shareholders in January 2009.
The portion of the special distribution that will be paid as a return of capital is subject to the approval by shareholders of a resolution authorizing the reduction of the stated capital of the Company's common shares at a meeting to be held on December 11, 2008, the receipt of a final advance tax ruling from the Canada Revenue Agency as to the acceptable amount that may be returned to shareholders and the discretion of the Board of Directors. The balance of the special cash distribution, if any, will be distributed as a taxable dividend.
Management's Discussion and Analysis
The Company's unaudited consolidated financial statement and management's discussion and analysis for the nine months ended Sept. 30, 2008 are available on the Company's website at www.wgiheavyminerals.com. Additional information related to the Company is also available on the SEDAR website at www.sedar.com.
WGI Heavy Minerals, Incorporated is a marketer of industrial grade minerals sourced primarily out of India, producer of industrial-grade garnet out of Idaho and Germany and a U.S. manufacturer of replacement parts for ultra-high waterjet cutting systems. The Company's shares are listed on the Toronto Stock Exchange under the symbol WG.
This press release contains forward-looking statements concerning the business, operations, and financial performance and condition of WGI Heavy Minerals, Incorporated. A number of the matters discussed and statements made in the press release contain forward-looking statements reflecting current expectations regarding future assets. When used in this press release, the words "believe ", "anticipate", "intend", "estimate", "expect", "project", and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. These forward-looking statements are based on current expectations and are naturally subject to risks, uncertainties, and changes in circumstances beyond management's control that may cause actual results to differ materially from those expressed or implied by such forward-looking statements. Factors that may cause such differences include but are not limited to: exploration and development risks; risks related to permits and title to property; risks related to foreign countries and regulatory requirements; operating hazards; foreign currency fluctuations; competition; fluctuations in the market price of mineral commodities and transportation costs; uncertainty as to calculations of mineral deposit estimates; uninsured risks; and dependence upon key management personnel and executives. Actual results may differ materially from those expressed here. You should not place undue reliance on such forward-looking statements. The Company is under no obligation to update or alter such forward-looking statements, whether as a result of new information, future events, or otherwise.
WGI Heavy Minerals, Incorporated
Financial Information
(in thousands, except for per share amounts)
-------------------------------------------------------------------------
Consolidated Balance Sheet Sept. 30, Dec. 31,
2008 2007
Assets
Cash and Short term deposits 29,664 16,921
Other Current Assets 7,957 7,410
Assets of discontinued operations - 1,182
------------------------
Total Current Assets 37,621 25,513
------------------------
Property, plant and equipment 5,335 4,389
Goodwill and Intangible Assets 1,892 1,971
Other Assets - -
Non-Current assets of discontinued operations - 3,635
------------------------
Total Assets 44,848 35,508
------------------------
------------------------
Liabilities & Equity
Current Liabilities 4,474 3,879
Current Liabilities of discontinued operations - 743
Long-term debt 714 594
------------------------
Total Liabilities 5,188 5,216
------------------------
Capital stock 53,579 53,388
Stock-based compensation 2,542 2,497
Deficit (16,685) (25,969)
Foreign currency translation account 224 376
------------------------
Total Equity 39,660 30,292
------------------------
Total Liabilities & Equity 44,848 35,508
------------------------
------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated Statements of For the For the
Operations and Deficit three months ended nine months ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2008 2007 2008 2007
Sales 7,462 6,682 21,060 20,135
Operating Costs 5,898 5,137 16,419 15,416
Depreciation, depletion,
and amortization 200 175 593 505
-------------------- --------------------
Gross Margin 1,364 1,370 4,048 4,214
-------------------- --------------------
Gross Margin % 18.3% 20.5% 19.2% 20.9%
Expenses
Operating G&A 1,168 1,118 3,319 2,977
Corporate G&A (179) 442 1,781 1,262
Interest Income (85) (227) (313) (654)
Interest Expense 20 15 63 82
Stock based compensation 40 113 213 334
Development costs 4 (6) 10 123
Other Expenses (Income) (494) (7) (544) (1)
-------------------- --------------------
Total 474 1,448 4,529 4,125
-------------------- --------------------
Earnings (loss) from
operations before taxation 890 (78) (481) 89
Provision for income taxes 66 130 195 330
-------------------- --------------------
Earnings (loss) from
operations for the period 824 (208) (676) (241)
Sale of discontinued
operations, net of related
taxes 10,142 - 10,142 -
Realized currency
translation loss (121) (121)
Loss from discontinued
operations (156) (113) (60) (414)
-------------------- --------------------
Earnings (loss) for the
period 10,689 (321) 9,285 (655)
-------------------- --------------------
-------------------- --------------------
Fully diluted earnings
(loss) per common share $0.43 ($0.01) $0.38 ($0.03)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated Statements For the For the
of Cash Flows three months ended nine months ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2008 2007 2008 2007
--------- --------- --------- ---------
Cash flows from operating
activities $ 509 $ (145) $ 59 $ 1,258
Cash flows from investing $ 14,232 $ (131) $ 13,250 $ (1,091)
Cash flows from financing $ (45) $ (188) $ (168) $ (327)
Effect of exchange rate
changes on Cash & Cash Eq. $ (83) $ 128 $ (250) $ 116
-------------------- --------------------
-------------------- --------------------
Inc./(Dec.) in Cash
and ST Inv $ 14,613 $ (336) $ 12,891 $ (44)
-------------------- --------------------
Beginning Cash
& ST Investments $ 15,051 $ 18,613 $ 16,773 $ 18,321
-------------------- --------------------
Ending Cash & ST Investments $ 29,664 $ 18,277 $ 29,664 $ 18,277
-------------------- --------------------
-------------------- --------------------
-------------------------------------------------------------------------
All figures stated in U.S. dollars unless noted otherwise.