COEUR D'ALENE, ID, May 13 /CNW/ - WGI Heavy Minerals, Incorporated ("WGI") (TSX: WG) today announced results for the quarter ended March 31, 2009. All dollar amounts are in U.S. dollars unless otherwise indicated. Results have been filed and may be viewed at www.sedar.com.
Results of Operations
Sales for the quarter declined by a less than expected 11% despite some markets having declined by more than 20%. WGI improved gross margins by 5% through cost reductions, led by WGI - Idaho, the international sales and marketing arm, International Waterjet Parts ("IWP") and Kominex. As part of the Company's efforts to be fiscally responsible, total expenses in 2009 were reduced 22% over the same three-month period in 2008. Careful cash flow management has ensured that cash from operations remains positive at $0.40 million, while the change in cash before the payment of the special distribution (paid in January) remained positive at $0.06 million for the quarter. We are not out of the woods yet as the world economy remains uncertain. We continue to evaluate other business opportunities and look for ways to expand on those segments of our business that are profitable.
Summary of Quarterly Results
Financially, the Company's balance sheet remains strong after completion of the $19.22 million special distribution in the first quarter of 2009. The net cash inflow for the first quarter 2009, before accounting for the special distribution, was $0.06 million, the result of a reduction in accounts receivables and increased accounts payable mainly due to the extension of credit to the Company in the first quarter of 2009 by VVM under the supply agreement signed in 2008.
Revenues for the three-month period ended March 31, 2009 declined 11% from $6.8 million in 2008 to $6.1 million for the same period in 2009. Approximately 60% of the decline was the result of a 13% devaluation of the Euro against the U.S. dollar resulting in an unfavourable currency exchange. The remainder of the decline was due to lower sales volumes, some of which were planned due to the shutdown of Emerald Creek Garnet ("ECG").
Product sales from ECG were at very low levels due to lack of supply when the mine shut down operations during the first quarter to avoid a repeat of the high costs and low efficiencies realized in 2008 when ECG attempted to mine garnet during severe winter weather. Demand for garnet also began to soften in some regions, such as Korea and South America, as a worldwide slowdown in business activity began to impact abrasives markets.
Compared to the first quarter of 2008, overall garnet revenues were off 4%, revenues from other abrasives fell 20% and revenues from waterjet parts dropped 18%. Prices for the abrasives business improved 14%, but this was not sufficient to overcome a 16% decline in sales volume.
Gross profit margins increased to 22.4% in the first quarter of 2009 compared with 17.2% in the first quarter of 2008. This was mainly due to increased pricing and improved efficiencies at operational levels.
Operating general and administrative expenses decreased 4%, made up of decreases in professional fees and travel expenditures. Board fees have also declined over the same period a year ago by 70% to $0.05 million for 2009 from $0.18 million for 2008. Interest income has declined due to the payout of the $19.22 million special distribution in early 2009 and lower interest rates. Stock based compensation has also decreased 91% as no new stock based compensation was issued in 2009.
Income tax expenses have increased due to profits earned in the first quarter of 2009 by the Company's European subsidiary, Kominex.
The Company posted a net loss of $0.14 million, or $(0.01) per share, less than expected for the first quarter of 2009, compared with a net loss of $0.68 million, or ($0.03) per share, for the first quarter of 2008.
Liquidity and Capital Resources
The Company currently has $9.02 million dollars in cash reserves after the payment of the special distribution, in early January 2009, sufficient reserves to meet the Company's planned capital expenditures and fund current operations.
Cash flows from operations increased by $0.4 million due to a reduction in accounts receivable and increased accounts payable, the result of credit being extended to the company by VVM through the supply agreement signed in 2008. This compares to cash outflows before discontinued operations of $0.25 million the first quarter of 2008 with a net loss of $0.7 million.
Working capital, including the current portion of long-term debt, was $12.74 million at the end of the first quarter of 2009 compared with $12.83 million at the end of 2008. This translates into current ratios of 3.89 for the first quarter of 2009 compared to 1.54 for 2008.
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 our distribution agreements with VVM and other suppliers. The Company continues to closely manage its costs in a difficult economy while providing high quality customer service. We have identified several garnet properties outside India and are reviewing opportunities before us, placing more emphasis on properties under our control.
"We are cautiously optimistic going forward as we approach the 2nd half of 2009," said Greg Emerson, Chief Executive Officer. "We are hearing from customers who were silent for the past six months and we look forward to moving the new supply coming from our supply agreement with VVM later in the year while keeping costs under control and preserving our cash balance in these uncertain times."
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.
(expressed in U.S. dollars unless otherwise noted)
WGI Heavy Minerals, Incorporated
Financial Information
(in thousands, except for per share amounts)
Consolidated Balance Sheet Mar. 31, 2009 Dec. 31, 2008
$ $
Assets
Cash and short term deposits 9,018 28,201
Other current assets 8,136 8,250
--------------- ---------------
Total current assets 17,154 36,451
--------------- ---------------
Property, plant and equipment 3,533 3,758
Goodwill and intangible assets 528 543
Other assets - -
--------------- ---------------
Total assets 21,215 40,752
--------------- ---------------
--------------- ---------------
Liabilities & equity
Current liabilities 4,409 4,373
Cash distribution payable - 19,245
Long term debt 413 488
Liabilities of discontinued operations - -
--------------- ---------------
Total liabilities 4,822 24,106
--------------- ---------------
Capital stock 38,456 38,456
Stock-based compensation 2,224 2,215
Deficit (24,327) (24,186)
Foreign currency translation account 40 161
--------------- ---------------
Total equity 16,393 16,646
--------------- ---------------
Total liabilities & equity 21,215 40,752
--------------- ---------------
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Consolidated Statements of
Operations and Deficit Mar. 31, 2009 Mar. 31, 2008
$ $
Sales 6,067 6,786
Operating costs 4,557 5,412
Depreciation, depletion and amortization 152 208
--------------- ---------------
Gross profit 1,358 1,166
--------------- ---------------
Gross margin % 22.4% 17.2%
Expenses
G&A 1,378 1,685
Interest income (37) (144)
Interest expense 21 21
Stock-based compensation 9 97
Development costs 2 4
Other expenses (income) 45 165
--------------- ---------------
Total 1,418 1,828
--------------- ---------------
Loss before taxes (60) (662)
Provision for taxes 81 56
--------------- ---------------
Loss from operations for the period (141) (718)
--------------- ---------------
--------------- ---------------
Basic and diluted loss per common share $ (0.01) $ (0.03)
(expressed in U.S. dollars unless otherwise noted)
WGI Heavy Minerals, Incorporated
Financial Information
(in thousands, except for per share amounts)
Consolidated Statements
of Cash Flows Three Three
months ended months ended
Mar. 31, 2009 Mar. 31, 2008
$ $
Cash flows from operating activities 398 (246)
Cash flows from operating
activities of discontinued operations - 59
Cash flows from investing (9) (157)
Cash flows from financing (319) (552)
Payment of cash distribution (19,245) -
Effect of exchange rate changes
on cash and cash equivalents (7) (77)
--------------- ---------------
Decrease in cash and cash equivalents (19,182) (973)
Beginning cash and short-term deposits 28,200 16,773
--------------- ---------------
Ending cash and short-term deposits 9,018 15,800
--------------- ---------------
--------------- ---------------
(expressed in U.S. dollars unless otherwise noted)