COEUR D'ALENE, ID, Aug. 10 /CNW/ - WGI Heavy Minerals, Inc. (TSX: WG)
today announced results for the second quarter ended June 30, 2006.
WGI Heavy Minerals is in the process of rebuilding its operations both
domestically and internationally. Changes are occurring across the
organization; the political climate in India is evolving (see Chairman's
Letter to Shareholders dated August 2006) and the Company is focussed on
strengthening its core businesses.
Results of Operations - Comparison of First Half of 2006 with First Half
of 2005
Revenues for the six-month period ended June 30, 2006 increased
12.5 percent to $10.67 million, compared with $9.49 million for same period in
2005 due to higher prices, strong growth across the entire product line at the
Company's Kominex subsidiary and the addition of the IWP business for a full
six months in 2006 compared to 3.5 months in 2005.
Gross operating profit margins decreased to 9.7 percent in the first half
of 2006, compared with 12.9 percent in the first half of 2005.
General and administrative expenses remain unchanged at 29.3 percent of
net sales in the first half of 2006, compared to 29.4 percent in the first
half of 2005. The Company posted a $0.03 million foreign exchange gain in the
first half of 2006 as a result of the strengthening Canadian dollar, as
compared to a $0.04 million foreign exchange loss in the first half of 2005.
The Company expensed development costs with respect to Andhra Pradesh in the
amount of $0.09 million in the first half of 2006 versus the restated
$1.52 million write-down of Andhra Pradesh assets and $0.98 million in Indian
advances written off in the first half of 2005. The Company also booked
$0.73 million of stock-based compensation in the first half of 2006 compared
to $0.40 million in the first half of 2005.
Interest income rose by 34.6 percent from $0.30 million for the first
half of 2005 to $0.40 million in the first half of 2006 due to increasing
interest rates on short-term deposits.
Income tax expense for the first half was $0.98 million and is the result
of profits generated by the Company's subsidiary, Kominex, located in Europe.
As a result, the Company posted a net loss of $2.83 million, or $0.12 per
share, for the first half of 2006, compared with a restated net loss of
$4.31 million, or $0.18 per share, for the first half of 2005.
Result of Operations - Comparison of Second Quarter 2006 with Second
Quarter 2005
Average global garnet prices were up 20% over the second quarter of 2005,
however sales volume was 10% lower than the same period last year resulting in
a net increase in revenues 5.5 percent to $5.54 million, compared with
$5.25 million for the year-ago period.
Gross operating profit margins were down slightly at 12.6 percent, in the
quarter ended June 30, 2006, compared with 13.9 percent in the year-ago
period.
General and administrative expenses increased to 32.3 percent of net
sales in the second quarter of 2006, compared to 29.3 percent in 2005, largely
due to increased professional fees. The Company posted a $10,000 foreign
exchange loss in the second quarter of 2006, which has declined from 2005's
$22,000 foreign exchange loss in the second quarter. The Company incurred
$0.03 million in costs related to Andhra Pradesh compared to the $0.30 million
charge for the write-down Sri Lankan assets and the restated write-down of
Andhra Pradesh assets in the amount of $0.65 million in the second quarter of
2005. The Company posted a $0.60 million stock based compensation charge in
the second quarter as the Company issued 675,000 fully vested options and
250,000 Registered Stock Units compared to a charge of $0.22 million for stock
based compensation in the second quarter of 2005.
Interest income rose by 27.7 percent to $0.20 million for the second
quarter of 2006 compared to $0.16 million for the same period in 2005.
As a result, the Company posted a net loss of $1.67 million, or $0.07 per
share, for the second quarter of 2006, compared with the restated net loss of
$1.90 million, or $0.08 per share, for the second quarter of 2005.
Segment Information
For the second quarter of 2005, revenues for Emerald Creek Garnet Ltd.
("ECG"), decreased 14.6 percent to $1.16 million compared to the same period
previous year in spite of a 2% improvement in pricing. Sales volume was down
nearly 17% quarter-over-quarter. The loss for the period was $0.38 million,
compared to $0.13 million in 2005.
International Waterjet Parts ("IWP") revenue for the second quarter of
2006 as compared with the second quarter of 2005 decreased 9 percent. IWP
reported a loss of $0.02 million for the second quarter of 2006 compared to a
net income of $0.04 million for the second quarter of 2005.
The net sales of the Company's Indian operations increased 21 percent in
the second quarter of 2006, to $1.88 million compared to $1.56 million for the
second quarter of 2005. As a result of higher prices, the Indian operations
posted a profit of $0.38 million for the quarter ended June 30, 2006 compared
to a restated net loss of $0.56 million for the second quarter of 2005.
The Company's European operation - Kominex - generated sales of
$1.73 million, an increase of 16.2 percent from the year-ago period. Kominex's
earnings were flat compared to the second quarter of 2005 at $0.05 million.
Strong Financial Condition
The balance sheet remains strong. The Company ended the second quarter of
2006 with a debt-to-equity ratio of 16.5 percent and cash and short-term
investments of $19.6 million. Cash outflow from operations after changes in
working capital and other assets was $1.58 million for the first half of 2006
down compared to the first half of 2005 in which the Company reported cash
inflow of $0.48 million.
Capital expenditures of $0.77 million for the first half of 2006 included
$0.05 million for mineral properties in India and $0.72 million for property,
plant and equipment ($0.54 million - ECG; $0.16 million - TGI; and $0.02
million - Kominex).
Working capital, including the current portion of long-term debt, was
$23.4 million as at June 30, 2006, compared to $24.8 million at year-end 2005,
translating into current ratios of 6.9 and 5.6, respectively.
Organizational Changes
Greg Emerson, Senior Vice President Corporate Performance and Acting CFO
will assume the job of President North American Division effective
immediately. Greg will continue to act as CFO until a successor is appointed.
As President, Greg will have responsibility for Emerald Creek, IWP, and the
marketing functions based in the Coeur d'Alene offices. Reporting to the CEO,
Greg will now have the operating responsibility for these subsidiaries leaving
the CEO free to concentrate on the Indian operations as well as assist the
Company's German management in the development of Kominex. The Company plans
to have in place a new CFO by September of 2006 following the resignation of
the previous CFO in May 2006. Greg will continue to fill the role of Acting
CFO until a new replacement is found. The CFO position will continue to be
responsible for corporate administration.
WGI Heavy Minerals, Inc. is a fully integrated miner, producer, and
marketer of industrial-grade minerals and replacement parts for ultra-high
waterjet cutting systems. The Company's operations include mining and
processing facilities in Idaho, U.S. (Emerald Creek Garnet), Tamil Nadu, India
(Bengal Bay Garnet) and Ermsleben, Germany and a manufacturing facility in
Washington, U.S. (International Waterjet Parts).
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.
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WGI Heavy Minerals, Incorporated
Financial Information
For the three months For the six months
ended ended
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
As restated As restated
- Note 3 - Note 3
Sales 5,537,457 5,249,184 10,673,863 9,488,803
Operating costs 4,213,035 4,087,165 8,369,039 7,459,565
Depreciation, depletion
and amortization 628,542 432,688 1,268,173 800,047
---------------------------------------------------
695,880 729,331 1,036,651 1,229,191
---------------------------------------------------
Expenses (income)
Depreciation and
amortization 20,874 19,526 37,074 37,803
General and
administrative 1,789,253 1,536,932 3,124,659 2,788,181
Foreign exchange
(gain) loss 9,578 22,004 (30,799) 42,204
Interest and financing 40,244 50,221 92,497 74,956
Interest income (204,605) (160,189) (402,978) (299,492)
Board fees 68,297 48,267 133,816 78,267
Stock based
compensation 597,946 221,240 728,313 396,223
Write-down of Indian
advance - 298,936 - 984,936
Write-down of Andhra
Pradesh assets - 645,414 - 1,520,417
Development costs -
Andhra Pradesh 27,652 - 89,749 -
(Gain)/loss on disposal
of equipment 877 13,521 (1,177) 13,521
---------------------------------------------------
2,350,116 2,695,872 3,771,154 5,637,016
---------------------------------------------------
Loss before taxation
and non-controlling
interest (1,654,236) (1,966,541) (2,734,503) (4,407,825)
---------------------------------------------------
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Provision for income
taxes 20,457 22,729 98,015 24,756
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Loss before the
following: (1,674,693) (1,989,270) (2,832,518) (4,432,581)
Non-controlling
interest share of
income of subsidiary - 91,139 - 121,709
---------------------------------------------------
Loss for the period (1,674,693) (1,898,131) (2,832,518) (4,310,872)
Deficit - Beginning
of period (21,697,582) (20,539,757) (20,539,757) (18,127,016)
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
Deficit - End of
period (23,372,275) (22,437,888) (23,372,275) (22,437,888)
---------------------------------------------------
---------------------------------------------------
Basic and diluted
loss per common
share ($0.07) ($0.08) ($0.12) ($0.18)
---------------------------------------------------
---------------------------------------------------
Weighted average
number of common
shares outstanding 24,034,610 24,344,610 24,083,395 24,344,610
---------------------------------------------------
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Balance Sheet Data June 30, Dec 31,
2006 2005
$ $
Cash and short-term
deposits 19,623 22,597
Working capital 23,352 24,755
Total assets 36,637 40,117
Long-term debt 1,650 1,931
Shareholders' equity 31,455 33,907
All figures stated in U.S. dollars unless noted otherwise.
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