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Press release from Marketwire

Opta Minerals Inc. Reports First Quarter Results for Fiscal 2013

Wednesday, May 08, 2013

Opta Minerals Inc. Reports First Quarter Results for Fiscal 2013

07:30 EDT Wednesday, May 08, 2013

WATERDOWN, ONTARIO--(Marketwired - May 8, 2013) - Opta Minerals Inc. (TSX:OPM), today announced results for the three months ended March 31, 2013. All figures are reported in U.S. dollars and are in accordance with International Financial Reporting Standards (IFRS), except where otherwise noted.

Financial Highlights (presented in $000s USD except per share amounts):

3 months 3 months
ended ended
March 31, March 31, Increase
2013 2012 (Decrease) %
Revenue $ 36,225 $ 28,332 $ 7,893 27.9 %
Gross Profit 7,255 6,247 1,008 16.1 %
20.0 % 22.0 % (2.0 % )
EBIT2 2,173 2,851 (678 ) (23.8 % )
Net Earnings 935 1,510 (575 ) (38.1 % )
EPS 0.05 0.08 (0.03 )
EBITDA1 3,717 4,147 (430 ) (10.4 % )
1) EBITDA is a non-IFRS measure; refer to Footnotes.
2) EBIT is a non-IFRS measure; refer to Footnotes.

David Kruse, President and CEO of Opta Minerals, noted "During the first quarter, Opta Minerals experienced strong revenue growth over the comparable period in 2012, largely the result of acquisitions in our two business segments last year. Earnings in the steel sector were marginally improved by results in the industrial minerals sector. As a result of the economic environment, we experienced softer results in our core business segments. However, we are cautiously optimistic this will rebound over the course of the year. We will continue to focus our efforts on completing the European integration of the newest acquisition (WGI Heavy Minerals, Incorporated (WGI)), improving profitability at certain locations, improving our working capital, generating cash flow, and paying down debt."

Operational Highlights:

  • Net earnings for the first quarter decreased 38.1% over the comparable quarter in 2012. The decrease was primarily attributable to the erosion of margins, a softer economic environment than the same quarter last year, professional fees associated with completing the requirements of the Company's credit agreement and tax restructurings, and severance costs related to WGI integration.

  • Revenue in the Steel and Magnesium segment (formerly Mill and Foundry Products and Services) increased 2.0% over the comparable quarter in 2012 due largely to the acquisition of Babco Industrial Corp. mid-February 2012. Revenue in the Industrial Minerals segment (formerly Abrasive Products Manufacturing and Distribution) increased 82.7% over the comparable quarter in 2012 due to garnet sales from the acquisition of WGI.

  • Gross profit increased quarter over quarter largely as a result of revenue growth related to prior year acquisitions. However, gross profit as a percentage of revenue has declined due to weakness in the industrial minerals segment related to, competitive pressures, economic conditions and weather related events and, product mix as a result of acquisitions.

  • Selling, general and administrative expenses (SGA) increased to 14.3% of revenue for the first quarter of 2013 from 12.8% for the comparable quarter in 2012. Included in SGA in the first quarter of 2013 were one time costs associated with professional fees for income tax restructuring and severance costs amounting to $0.2 million and $0.1 million, respectively. The Company expects to reduce SGA during 2013 as synergies are achieved from the integration of the WGI acquisition.

  • The foreign exchange gain was $0.1 million for the quarter as compared to a foreign exchange gain of $0.2 million for the same quarter in 2012. The results reflect movement between the three currencies we principally do business in; the U.S. dollar, the Canadian dollar and the Euro. The foreign exchange results are included in other income in the interim condensed consolidated statements of income.

  • Finance expense increased quarter over quarter largely as a result of professional fees associated with completing the requirements of the credit agreement to finance the prior year acquisitions. These professional fees amounted to $0.2 million for the quarter ended March 31, 2013.

  • For the three months ended March 31, 2013, cash flow from operating activities before changes in working capital generated $2.2 million versus $2.7 million in the first quarter of 2012. The positive cash flow was used to repay debt and finance working capital and capital expenditures.

  • The Company's working capital, excluding the reclassification of long-term borrowings, is $25.0 million at March 31, 2013 and December 31, 2012. Long-term borrowings of $42.9 million have been reclassified to current borrowings as a result of an event of default of certain financial covenants stipulated under the Company's credit agreement. Subsequent to March 31, 2013, the Company obtained a waiver in respect of these financial covenant ratios and has reset certain financial covenant ratios for the second and third quarters. Total assets were $145.6 million as compared to $142.8 million at December 31, 2012.

  • The debt to equity ratio at March 31, 2013 was 1.27 to 1.00, versus 1.27 to 1.00 at December 31, 2012.

Opta Minerals is a vertically integrated provider of custom process solutions and industrial mineral products used primarily in the steel, foundry, loose abrasive cleaning, water-jet cutting and municipal water filtration industries. The Company has production and distribution facilities in Ontario, Quebec, Saskatchewan, Louisiana, South Carolina, Virginia, Maryland, Indiana, Michigan, New York, Texas, Florida, Ohio, Idaho, France, Slovakia and Germany. Opta has one of the broadest product lines in the industry.

FOOTNOTES:

Earnings before income taxes and interest ("EBIT"); and earnings before interest, income taxes, depreciation and amortization ("EBITDA") as defined below, are both non-IFRS earnings measures that do not have standardized measures prescribed by IFRS, and therefore may not be comparable to similar measures presented by other publicly traded companies.

For the three
Months Ended
March 31
2013 2012
$ $
Net Earnings for the Period 935 1,510
Finance Expense 886 656
Income Taxes 352 685
Depreciation and Amortization 1,544 1,296
EBITDA 1 3,717 4,147
Subtract:
Depreciation and Amortization 1,544 1,296
EBIT 2 2,173 2,851

Notes

1) The term "EBITDA" refers to earnings before deducting finance expense, income taxes, depreciation and amortization. The Company believes that EBITDA is useful supplemental information as it provides an indication of the results generated by the Company's main business activities prior to taking into consideration how those activities are financed and taxed and also prior to taking into consideration non-cash asset depreciation and amortization. EBITDA is not a recognized measure under International Finance Reporting Standards (IFRS), and accordingly, investors are cautioned that EBITDA should not be construed as an alternative to net earnings or loss determined in accordance with IFRS as an indicator of the financial performance of the Company or as a measure of the Company's liquidity and cash flows. The Company's method of calculating EBITDA may differ from other issuers and accordingly, EBITDA may not be comparable to similar measures presented by other issuers.

2) The term "EBIT" refers to earnings before income taxes and finance expense. The Company believes that EBIT is useful supplemental information as it provides an indication of the results generated by the Company's main business activities prior to taking into consideration how those activities are financed or taxed. EBIT is a non-IFRS earnings measure that does not have standardized measures prescribed by IFRS, and therefore may not be comparable to similar measures presented by other publicly traded companies.

Certain statements in this release constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements in this press release include, without limitation, statements relating to the Company's intention to continue to focus on completing the European integration of the newest acquired business, improving profitability at certain locations, improving working capital, generating cash flow and paying down debt, as well as other statements which reflect the current expectations of management of the Company regarding the Company's future growth, results of operations, performance, business prospects and opportunities. Wherever possible, words such as "may", 'would", "could", "should", "will", "anticipate", "believe", "plan", "expect", "intend", "estimate", "aim", "endeavour", "seek", "predict", "potential" and similar expressions have been used to identify these forward-looking statements. These statements reflect management's current beliefs with respect to future events and are based on information currently available to management of the Company.
Forward-looking statements involve significant risks, uncertainties and assumptions. Many factors could cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, without limitation: the impact of general economic conditions; the impact of specific industry conditions; the inability of the Company to successfully integrate recently acquired businesses or to achieve the anticipated benefits from such acquisitions; the risk of unexpected costs or liabilities relating to acquisitions; currency fluctuations and exchange rate risks; risks associated with foreign operations; governmental and environmental regulation; competition from other industry participants; cancellations of or the failure to renew purchase orders; production and delivery issues; quality, pricing and availability of raw materials; mining risks; and the other risks identified in the Company's Annual Information Form and other public filings (copies of which may be obtained at www.sedar.com). Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance or achievements may vary materially from those expressed or implied by this press release. These factors should be considered carefully and reader should not place undue reliance on the forward-looking statements. Although any forward-looking statements contained in this press release are based upon what management currently believes to be reasonable assumptions, the Company cannot assure readers that actual results, performance or achievements will be consistent with these forward-looking statements, and management's assumptions may prove to be incorrect. These forward-looking statements are made as of the date of this press release and, other than as required by law, the Company does not intend, and does not assume any obligation, to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

Opta Minerals Inc.
Interim Condensed Consolidated Balance Sheets
As At March 31, 2013
(Unaudited)
Expressed in Thousands of US Dollars (except per share amounts and number of shares)
March 31, December 31,
2013 2012
(Unaudited) (Unaudited)
Assets
Current
Cash and cash equivalents $ 3,710 $ 3,966
Trade and other receivables 21,845 19,894
Inventories 35,422 32,516
60,977 56,376
Property, Plant and Equipment 29,233 29,770
Intangible Assets 33,374 34,462
Goodwill 14,149 14,311
Deferred Income Tax Assets 7,886 7,846
$ 145,619 $ 142,765
Liabilities
Current
Trade and other payables 15,726 13,598
Borrowings 62,249 16,533
Provisions 239 249
Other liabilities 628 612
Income taxes payable 39 360
78,881 31,352
Borrowings 356 45,351
Derivative Financial Instruments 699 396
Provisions 227 227
Other Liabilities 1,172 1,274
Deferred Income Tax Liabilities 4,445 4,468
Deferred Income Tax Liability on Intangible Assets 10,625 10,985
96,405 94,053
Equity Attributable to the Shareholders of the Company
Capital Stock
Authorized without limit as to number -
Preference shares (without par value)
common shares
Issued -
18,096,675 common shares (December 31, 2012 - 18,084,559) 17,756 17,729
Contributed Surplus 4,126 4,018
Accumulated Other Comprehensive Loss (2,417 ) (1,849 )
Retained Earnings 29,749 28,814
49,214 48,712
$ 145,619 $ 142,765
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Income
For the Three Months Ended March 31, 2013 and 2012
(Unaudited)
Expressed in Thousands of US Dollars (except per share amounts)
March 31, March 31,
2013 2012
Revenue $ 36,225 $ 28,332
Cost of Goods Sold 28,970 22,085
7,255 6,247
Expenses
Selling, general and administrative 5,196 3,618
Other income (114 ) (222 )
5,082 3,396
Profit Before Finance Expense and Income Taxes 2,173 2,851
Finance expense 886 656
Profit Before Income Taxes 1,287 2,195
Income taxes 352 685
Profit for the Period Attributable to the Shareholders of the Company $ 935 $ 1,510
Earnings per share for the period -
basic and diluted 0.05 0.08
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Comprehensive Income
For the Three Months Ended March 31, 2013 and 2012
(Unaudited)
Expressed in Thousands of US Dollars
March 31, March 31,
2013 2012
Profit for the Period Attributable to the Shareholders of the Company $ 935 $ 1,510
Other Comprehensive Income, net of tax
Items that may be reclassified subsequently to profit
Unrealized (loss) gain on translation of foreign operations (344 ) 140
Unrealized loss on derivative financial instruments (224 ) (49 )
Comprehensive Income Attributable to the Shareholders of the Company $ 367 $ 1,601
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Changes in Equity
For the Three Months Ended March 31, 2013 and 2012
(Unaudited)
Expressed in Thousands of US Dollars
AOCI* -
Contributed Foreign
Number of Surplus - AOCI* - Currency
Shares - Capital Share-based Cash Flow Translation Retained Total
Capital Stock Stock Payments Hedge Reserve Earnings Equity
At January 1, 2013 18,084,559 $ 17,729 $ 4,018 $ (293 ) $ (1,556 ) $ 28,814 $ 48,712
Comprehensive Income
Profit for the period - - - - - 935 935
Unrealized loss on translation of foreign operations - - - - (344 ) - (344 )
Unrealized loss on financial derivative designated as a cash flow hedge - - - (224 ) - - (224 )
Total Comprehensive Income - - - (224 ) (344 ) 935 367
Transactions with Shareholders
Employee share purchase plan 4,039 12 - - - - 12
Stock options exercised 8,077 15 - - - - 15
Share-based payment expense - - 108 - - - 108
Total Transactions with Shareholders 12,116 27 108 - - - 135
At March 31, 2013 18,096,675 17,756 4,126 (517 ) (1,900 ) 29,749 49,214
At January 1, 2012 18,061,784 17,680 3,429 (193 ) (1,942 ) 23,541 42,515
Comprehensive Income
Profit for the period - - - - - 1,510 1,510
Unrealized gain on translation of foreign operations - - - - 140 - 140
Unrealized gain on financial derivative designated as a cash flow hedge - - - (49 ) - - (49 )
Total Comprehensive Income - - - (49 ) 140 1,510 1,601
Transactions with Shareholders
Employee share purchase plan 2,858 6 - - - - 6
Share-based payment expense - - 201 - - - 201
Total Transactions with Shareholders 2,858 6 201 - - - 207
At March 31, 2012 18,064,642 $ 17,686 $ 3,630 $ (242 ) $ (1,802 ) $ 25,051 $ 44,323
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2013 and 2012
(Unaudited)
Expressed in Thousands of US Dollars
March 31, March 31,
2013 2012
Cash Provided by (Used in) -
Operating Activities
Profit for the period $ 935 $ 1,510
Items not affecting cash:
Depreciation of property, plant and equipment 889 688
Amortization of intangible assets 655 608
Share-based payment expense 108 201
Non-cash finance expense (74 ) -
Gain on disposal of property, plant and equipment (5 ) -
Deferred income taxes (308 ) (331 )
2,200 2,676
Changes in non-cash working capital
Trade and other receivables (2,235 ) (2,547 )
Inventories (3,285 ) (1,046 )
Trade and other payables 2,312 1,314
Provisions (10 ) (685 )
Income taxes payable (321 ) 364
(1,339 ) 76
Financing Activities
Proceeds from issuance of common shares - net of issuance costs 27 6
Proceeds from borrowings 3,560 20,682
Repayment of finance lease liability (361 ) (48 )
Repayment of borrowings (1,300 ) (1,836 )
1,926 18,804
Investing Activities
Acquisition of subsidiary - (17,530 )
Additions to property, plant and equipment (709 ) (611 )
Proceeds on disposal of property, plant and equipment 9 -
Additions to intangible assets (99 ) (25 )
(799 ) (18,166 )
Foreign Exchange Gain (Loss) on Cash Held in Foreign Currency (44 ) 17
Increase (Decrease) in Cash and Cash Equivalents (256 ) 731
Cash and Cash Equivalents
Beginning of Period 3,966 698
End of Period $ 3,710 $ 1,429
Additional Cash Flows Information:
Interest paid $ 730 $ 664
Income taxes paid 965 684
Opta Minerals Inc.
Segmented Information
For the Three Months Ended March 31, 2013 and 2012
Expressed in Thousands of US Dollars
Intersegment revenues are recorded at transaction prices, which approximate cost. The Company's assets, operations and employees are located in Canada, the United States and Europe.
Three Months Ended March 31, 2013
Steel and Industrial
Magnesium Minerals Corporate Total
External revenue by market
Canada $ 3,439 $ 3,215 $ - $ 6,654
U.S 12,362 7,785 - 20,147
Europe 3,851 3,354 - 7,205
Other - 2,219 - 2,219
Total revenue from external customers 19,652 16,573 - 36,225
Segment profit before corporate expenses, finance expense and income taxes 3,587 112 - 3,699
Corporate expenses - - (1,526 ) (1,526 )
Segment profit before finance expense and income taxes 3,587 112 (1,526 ) 2,173
Finance expense - - - (886 )
Income taxes - - - (352 )
Profit for the period - - - 935
Total assets as at March 31, 2013 77,987 63,718 3,914 145,619
Depreciation of property, plant and equipment 363 476 50 889
Amortization of intangible assets 559 47 49 655
Goodwill and intangible assets as at March 31, 2013 43,119 4,176 228 47,523
Expenditures on property, plant and equipment $ 164 $ 417 $ 128 $ 709

External revenue by market is attributed to countries based on location of the customer.

Included in the Steel and Magnesium segment (formerly Mill and Foundry Products and Services) is revenue from two customers that individually exceeds 10% of the Company's revenue.

The Company evaluates the performance of its operating segments primarily based on income before corporate expenses, finance expense and income taxes.

Opta Minerals Inc.
Segmented Information
For the Three Months Ended March 31, 2013 and 2012
Expressed in Thousands of US Dollars
Three Months Ended March 31, 2012
Steel and Industrial
Magnesium Minerals Corporate Total
External revenue by market
Canada $ 2,984 $ 3,288 $ - $ 6,272
U.S 12,300 5,742 - 18,042
Europe 3,977 - - 3,977
Other 1 40 - 41
Total revenue from external customers 19,262 9,070 - 28,332
Segment profit before corporate expenses, finance expense and income taxes 4,077 608 - 4,685
Corporate expenses - - (1,834 ) (1,834 )
Segment profit before finance expense and income taxes 4,077 608 (1,834 ) 2,851
Finance expense - - - (656 )
Income taxes - - - (685 )
Profit for the period - - - 1,510
Total assets as at March 31, 2012 77,004 38,493 5,196 120,693
Depreciation of property, plant and equipment 330 323 35 688
Amortization of intangible assets 507 53 48 608
Goodwill and intangible assets as at March 31, 2012 46,293 4,157 330 50,780
Expenditures on property, plant and equipment $ 293 $ 262 $ 56 $ 611

FOR FURTHER INFORMATION PLEASE CONTACT:

Contact Information:
Opta Minerals Inc.
David Kruse
President and Chief Executive Officer
905-689-7361, ext 405


Opta Minerals Inc.
Peter Fryters
Chief Financial Officer and Treasurer
905-689-7361, ext 405
investor_relations@optaminerals.com
www.optaminerals.com

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