COEUR D'ALENE, ID, Nov. 10 /CNW/ - WGI Heavy Minerals, Inc. (TSX: WG)
today announced results for the third quarter ended September 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 and the Company is
focussed on strengthening its core businesses.
Results of Operations - Comparison of Nine Months of 2006 with
Nine Months of 2005
Revenues for the nine-month period ended September 30, 2006 increased
15.7 percent to $16.47 million, compared with $14.24 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 9.5 months in 2006 compared to 6.5 months in 2005.
Gross operating profit margins decreased to 14.2 percent in the nine
months of 2006, compared with 17.1 percent in the nine months of 2005.
General and administrative expenses fell to 28.2 percent of net sales in
the nine months of 2006, compared to 29.9 percent in the nine months of 2005.
The Company posted a negligible foreign exchange gain in the nine months of
2006 as compared to a $0.02 million foreign exchange loss in the nine months
of 2005. The Company expensed development costs with respect to Andhra Pradesh
in the amount of $0.13 million in the nine months of 2006 versus the restated
$1.84 million write-down of Andhra Pradesh assets and $0.98 million in Indian
advances written off in the nine months of 2005. The Company also booked
$0.82 million of stock-based compensation in the nine months of 2006 compared
to $0.49 million in the nine months of 2005.
Interest income rose by 29 percent from $0.48 million for the nine months
of 2005 to $0.62 million in the nine months of 2006 due to increasing interest
rates on short-term deposits.
Income tax expense for the nine months was $0.13 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 $3.23 million, or $0.13 per
share, for the nine months of 2006, compared with a restated net loss of
$4.93 million, or $0.20 per share, for the nine months of 2005.
Result of Operations - Comparison of Third Quarter 2006 with
Third Quarter 2005
Average global garnet prices were up 17.4 percent over the third quarter
of 2005, sales volume was 4 percent higher than the same period last year
resulting in a net increase in revenues of 22 percent to $5.80 million,
compared with $4.75 million for the year-ago period.
Gross operating profit margins were down slightly at 22.4 percent, in the
quarter ended September 30, 2006, compared with 25.4 percent in the year-ago
period.
General and administrative expenses decreased to 26.1 percent of net
sales in the third quarter of 2006, compared to 31.0 percent in 2005, largely
due to costs remaining nearly flat while revenue increased. The Company posted
a $35,172 foreign exchange loss in the third quarter of 2006, which has
declined from 2005's $22,540 foreign exchange gain in the third quarter. The
Company incurred $0.04 million in costs related to Andhra Pradesh compared to
the restated write-down of Andhra Pradesh assets in the amount of
$0.32 million in the third quarter of 2005. The Company posted a $0.09 million
stock based compensation charge in the third quarter.
Interest income rose by 19.9 percent to $0.22 million for the third
quarter of 2006 compared to $0.18 million for the same period in 2005.
As a result, the Company posted a net loss of $0.40 million, or $0.02 per
share, for the third quarter of 2006, compared with the restated net loss of
$0.62 million, or $0.03 per share, for the third quarter of 2005.
Segment Information
For the third quarter of 2005, revenues for Emerald Creek Garnet Ltd.
("ECG"), were even at $1.17 million compared to the same period previous year
in spite of a 9% improvement in pricing. Sales volume was down 7%
quarter-over-quarter. The loss for the period was $0.12 million, compared to
$0.16 million income in 2005.
International Waterjet Parts ("IWP") revenue for the third quarter of
2006 as compared with the third quarter of 2005 increased 40 percent. IWP
reported a net income of $0.03 million for the third quarter of 2006 compared
to $0.05 million for the third quarter of 2005.
The net sales of the Company's Indian operations sold by WGI increased
30 percent in the third quarter of 2006, to $2.04 million compared to
$1.57 million for the third quarter of 2005. As a result of higher prices and
2 percent increase in volume, the Indian operations posted a profit of
$0.13 million for the quarter ended September 30, 2006 compared to a restated
net loss of $0.07 million for the third quarter of 2005.
The Company's European operation - Kominex - generated sales of
$1.83 million, an increase of 24 percent from the year-ago period. Kominex's
earnings increased 120 percent to $0.12 million compared to the third quarter
of 2005 at $0.05 million.
Strong Financial Condition
The balance sheet remains strong. The Company ended the third quarter of
2006 with a debt-to-equity ratio of 17.5 percent and cash and short-term
investments of $18.9 million. Cash outflow from operations after changes in
working capital and other assets was $1.67 million for the nine months of 2006
down compared to the nine months of 2005 in which the Company reported cash
inflow of $0.19 million.
Capital expenditures of $1.00 million for the nine months of 2006
included $0.05 million for mineral properties and $0.95 million for property,
plant and equipment ($0.60 million - ECG; $0.20 million - TGI; $0.07 million -
IWP; and $0.08 million - Kominex).
Working capital, including the current portion of long-term debt, was
$23.1 million as at September 30, 2006, compared to $24.8 million at year-end
2005, translating into current ratios of 6.35 and 5.59, respectively.
In November 2005 the company received approval from the Toronto Stock
Exchange to repurchase 2,239,711 of its common shares pursuant to a Normal
Course Issuer Bid. During 2006 the company has repurchased 770,000 shares for
$0.64 million.
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 ended For the nine months ended
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
2006 2005 2006 2005
As restated - As restated -
Note 3 Note 3
Sales 5,800,004 4,748,105 16,473,867 14,236,908
Operating costs 3,951,446 3,181,783 12,320,485 10,641,348
Depreciation,
depletion and
amortization 547,559 361,946 1,815,732 1,161,993
------------------------------------------------------
1,300,999 1,204,376 2,337,650 2,433,567
------------------------------------------------------
Expenses (income)
Depreciation and
amortization 20,556 26,784 57,630 64,587
General and
administrative 1,513,077 1,471,267 4,637,736 4,259,448
Foreign exchange
(gain) loss 35,172 (22,540) 4,373 19,664
Interest and
financing 42,822 45,228 135,319 120,184
Interest income (220,393) (183,676) (623,371) (483,168)
Board fees 136,834 53,183 270,650 131,450
Stock based
compensation 90,925 92,131 819,238 488,354
Write-down of
Indian advance - 100 - 985,036
Write-down of Andhra
Pradesh assets (note 3) - 319,132 - 1,839,549
Development costs -
Andhra Pradesh
(note 3) 44,821 - 134,570 -
(Gain)/loss on
disposal of
equipment 11 754 (1,165) 14,275
------------------------------------------------------
1,663,825 1,802,872 5,434,980 7,439,379
------------------------------------------------------
Loss before
taxation and
non-controlling
interest (362,826) (597,987) (3,097,330) (5,005,812)
------------------------------------------------------
Provision for
income taxes
Current 35,873 17,152 109,115 26,427
Future 810 19,904 25,582 35,385
------------------------------------------------------
36,683 37,056 134,697 61,812
------------------------------------------------------
Loss before the
following: (399,509) (635,043) (3,232,027) (5,067,624)
Non-controlling
interest share of
income of
subsidiary - 17,283 - 138,992
------------------------------------------------------
Loss for the period (399,509) (617,760) (3,232,027) (4,928,632)
Deficit -
Beginning of
period (23,372,275) (22,437,888) (20,539,757) (18,127,016)
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
Deficit - End of
period (23,771,784) (23,055,648) (23,771,784) (23,055,648)
------------------------------------------------------
------------------------------------------------------
Basic and diluted
loss per common
share (note 4) ($0.02) ($0.03) ($0.13) ($0.20)
------------------------------------------------------
------------------------------------------------------
Basic and diluted
loss per common
share (Canadian
dollars) ($0.02) ($0.03) ($0.15) ($0.25)
------------------------------------------------------
------------------------------------------------------
Weighted average
number of
common shares
outstanding 23,849,610 24,344,610 24,004,610 24,344,610
------------------------------------------------------
------------------------------------------------------
Balance Sheet Data September 30, Dec 31,
2006 2005
(000's) $ $
Cash and short-term
deposits 18,948 22,597
Working capital 23,128 24,755
Total assets 36,482 40,117
Long-term debt 1,651 1,931
Shareholders' equity 31,455 33,907
All figures stated in U.S. dollars unless noted otherwise.
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