COEUR D'ALENE, ID', Nov. 10 /CNW/ -- WGI Heavy Minerals, Incorporated ("WGI") (TSX: WG) today announced results for the quarter and nine months ended September 30, 2009. All dollar amounts are in U.S. dollars unless otherwise indicated. Results have been filed and may be viewed at www.sedar.com.
WGI is pleased to report net earnings for the third quarter of $0.62 million, EPS $0.025 and first nine month net earnings of $0.76 million, $0.03 EPS. "Net income from operations, before non-recurring items improved $0.32 million over the third quarter of 2008," said Greg Emerson, President and CEO, "From our employees in the field and mills, to our sales and support people, the hard work of the WGI team has resulted in positive growth over the last three quarters during very uncertain times."
2009 Consolidated Third Quarter and Nine-Month Highlights
- Consolidated revenues in the third quarter were $8.04 million, up 11%
over second quarter 2009 revenues of $7.02 million and up 8% over
2008's third quarter results of $7.46 million. Revenues for the first
nine months were $21.1 million, essentially flat when compared to the
same period in 2008
- Consolidated gross margin improved nearly ten percentage points over
2008's third quarter. Similarly, gross margins improved nearly eight
points to 26.4% for the nine months of 2009
- General and administrative expenses for the quarter were held to $1.5
million quarter over quarter and were higher compared to the same
period year over year of $0.89 million due to $0.5 million of 2008
costs being attributed to the sale of the operations in India.
General and administrative expenses for the nine months were $4.4
million and were reduced from the nine months of 2008 by 6%
- Income from operations before extraordinary items for the first nine
months of 2009 was $0.76 million compared to a loss of $1.2 million
for the same period in 2008
- Net income for the quarter was $0.62 million, EPS $0.025 compared to
a net income of $10.7 million in the third quarter of 2008, EPS
$0.45. In the third quarter of 2008 $9.87 million of net income was
due to the sale of the operations in India. Net income for the first
nine months of 2009 was $0.76 million, EPS $0.03 compared to a net
income of $9.3 million for the same period in 2008, EPS $0.39
- Cash and cash equivalents increased for the quarter by $0.57 million
primarily due to cash from operations and non-cash working capital
increasing by $0.53 million
Overview
Despite the poor economic conditions, WGI's operations have returned positive results for the third quarter by improving production flows, managing expenses and responding to customer needs. TGI, our supply partner in India, has increased production of garnet by bringing on capacity in Andhra Pradesh. This capacity is associated with TGI's production of ilmenite. During the quarter the Company recognized its second brokered ilmenite sale of the year, after being absent from this market since 2004. The Company's mining and processing facilities at Emerald Creek Garnet ("ECG") in Idaho, U.S.A. has increased its productivity and lowered costs through more efficient processes despite the lowest sales levels of its range of products seen in the Company's eighteen years of operations.
International Waterjet Parts ("IWP") business is starting to recover at a slow pace. IWP's business is tied to the waterjet cutting market. As waterjet cutting is closely tied to the automotive and aeronautical industry, it was one of the industries most quickly hit with the economic downturn. Although IWP incurred losses in the first half of the year, it recorded a profit for the third quarter of 2009 and is cash flow positive in the quarter, and on a cumulative basis.
The greatest impact to profitability in the third quarter was from the sale of garnet, specifically sales of Bengal Bay Garnet from TGI in India and sold into the world garnet markets by both WGI and Kominex. Garnet markets remain slow going into the fourth quarter although there is more interest picking up for orders to ship in the first half of 2010. Work continues with existing distributors. In addition the Company is actively seeking new opportunities to expand sales in a stagnant market. During the quarter new distribution warehouses were established in Spain and Hamburg, Germany and the Company is looking to increase distribution warehouses in the US in the fourth quarter of 2009.
Increased garnet supply now available to WGI requires new customers, which take several months to develop in normal market conditions. This must be done in a soft market when people are hesitant to take on new supplies unless they are low cost. Work is being done on the supply chain to ensure that costs are reduced and these savings passed onto customers while generating a return for shareholders. The financial results so far prove that the Company is succeeding in these goals.
Outlook
The Company intends to grow its abrasives markets through its relationships with suppliers and customers while developing additional sources of supply. WGI is working hard to manage distribution agreements with TGI and other suppliers. The Company continues to manage its costs in a difficult economy while providing a full spectrum of products, high quality and excellent customer service.
Market conditions remain uncertain going into the fourth quarter of 2009. Prices are still under pressure due to increased supply. Demand for increased credit and increasing logistics costs are also at the center of discussions by Company management. Over the last several years the Company has been supplying customers with long lead times due to the shortage in supply compared to demand. Those market conditions have now changed. New supplies are entering the market place while demand and prices are softening. This change in business is not limited to any one geographic location or business segment; it is global. Price competition will be sharp until such time that demand moves back into balance with supply.
With that said, markets do appear to be stabilizing and we anticipate that the commodity markets, specifically garnet will improve in 2010 although that turnaround will be slow. We are also seeing more activity pick up in the waterjet side of the business, but again the recovery will be slow.
Revenue for the fourth quarter is expected to remain inline with those reported in the fourth quarter of 2008. The Company continues to manage costs and operate our current business units at a profit while meeting commitments to suppliers and government agencies. Reinvestment in mining operations continues at ECG as the Company looks to further efficiencies to improve the recovery of garnet in low-grade areas in 2010. Modifications continue at IWP and Kominex to streamline operations. Management continues to control fixed costs to ensure they stay in line with revenue from its operations enabling the Company to reinvest in its growth.
The Company anticipates utilizing cash in the fourth quarter to fund certain obligations under supply agreements and in the increase of working capital associated with increased sales and volumes. These obligations along with minimal capital expenditures for replacement equipment are anticipated to lower the Company's cash balance by as much as $3.0 million in the fourth quarter.
The Company hired a full time geologist in North America to work with the existing management team to identify mineral deposits and evaluate those deposits through drilling programs and other means deemed necessary to understand the geological characteristics and economics of those deposits. To date this work has been concentrated in areas around existing ECG mining. The Company has also retained a qualified person to prepare the necessary reports once economical deposits are confirmed. Today this project continues and the Company hopes to be able to report on its efforts in 2010.
Appointment of Director
The Company also announced today an addition to its Board of Directors. Mr. Vic Alboini has accepted the Board's invitation to join the Company as a member of its Board. Mr. Alboini is the President and CEO of Jaguar Financial Corporation. Mr. Alboini is a mergers and acquisition investment banker specializing in the small to mid capitalization market. "We are pleased to have Vic on the board. As the President of one of our significant shareholders, he offers experience and a perspective that will be helpful to us. We look forward to working with Vic as we focus on our strategic and business initiatives, all in our ongoing commitment to increasing shareholder value" commented Gordon Fear, WGI's Chairman.
Management's Discussion and Analysis
The Company's unaudited consolidated financial statement and the management's discussion and analysis for the nine months ended September 30, 2009 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.
About WGI
WGI Heavy Minerals, Inc. is a marketer of industrial grade minerals sourced primarily out of India, producer of industrial-grade garnet out of Idaho and Germany and manufacturer of replacement parts for ultra-high pressure waterjet machine tool systems around the world. 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, 2009 Dec. 31, 2008
--------------------------------
Assets
Cash and Short term deposits 8,915 28,201
Other Current Assets 11,216 8,250
--------------------------------
Total Current Assets 20,131 36,450
--------------------------------
Property, plant and equipment 3,759 3,758
Goodwill and Intangible Assets 502 543
Other Assets - -
--------------------------------
Total Assets 24,393 40,752
--------------------------------
--------------------------------
Liabilities & Equity
Current Liabilities 6,291 23,618
Long-term debt 399 488
Liabilities of discontinued operations - -
--------------------------------
Total Liabilities 6,690 24,106
--------------------------------
Capital stock 38,476 38,456
Stock-based compensation 2,252 2,215
Deficit (23,426) (24,186)
Foreign currency translation account 400 161
--------------------------------
Total Equity 17,702 16,646
--------------------------------
Total Liabilities & Equity 24,393 40,752
--------------------------------
--------------------------------
Consolidated Statements of Operations and Deficit
For the three months For the nine months
ended ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2009 2008 2009 2008
----------------------- ----------------------
Sales $ 8,038 $ 7,462 $ 21,129 $ 21,061
Operating Costs 5,648 5,898 15,092 16,419
Depreciation, depletion,
and amortization 158 224 466 661
----------------------- ----------------------
Gross Profit 2,233 1,341 5,571 3,980
----------------------- ----------------------
Gross Margin % 27.8% 18.0% 26.4% 18.9%
Expenses
G&A 1,518 966 4,582 5,032
Interest Income (30) (85) (82) (313)
Interest Expense 12 20 50 63
Stock based compensation 2 40 37 213
Development costs 74 4 85 10
Other Expenses (Income) (38) 32 (90) (1)
----------------------- ----------------------
Total 1,538 977 4,582 5,005
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Loss before taxes 695 365 990 (1,025)
Net Provision for taxes 78 65 230 195
----------------------- ----------------------
Income from operations 617 300 760 (1,220)
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Extraordinary item - 526 - 544
Sales of discontinued
operations, net of related
taxes - 10,142 - 10,142
Realized currency
translation loss - (121) - (121)
Net gain from discontinued
operations - (156) - (60)
----------------------- ----------------------
$ 617 $ 10,690 $ 760 $ 9,285
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----------------------- ----------------------
Basic earning per common
share $ 0.03 $ 0.45 $ 0.03 $ 0.39
Diluted earnings per
common share $ 0.02 $ 0.43 $ 0.03 $ 0.38
Consolidated Statements of Cash Flows
For the three months For the nine months
ended ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2009 2008 2009 2008
----------------------- ----------------------
Cash flows from operating
activities $ 536 $ 665 $ 520 $ 119
Cash flows from operating
activities of discontinued
operations $ - $ (156) $ - $ (60)
Cash flows from investing $ (104) $ 14,232 $ (339) $ 13,250
Cash flows from financing $ 75 $ (45) $ (391) $ (168)
Payment of cash
distribution $ - $(19,245) $ -
Effect of exchange rate
changes on Cash &
Cash Eq. $ 65 $ (83) $ 169 $ (250)
----------------------- ----------------------
----------------------- ----------------------
Inc./(dec.) in Cash and
ST Inv $ 572 $ 14,613 $(19,286) $ 12,891
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Beginning Cash & ST
Investments $ 8,343 $ 15,051 $ 28,201 $ 16,773
Ending Cash & ST
Investments $ 8,915 $ 29,664 $ 8,915 $ 29,664
Expressed in U.S. dollars unless otherwise stated.
