WGI Heavy Minerals Announces First Quarter Earnings and 2010 AGM Results
COEUR D'AIENE, ID, May 11 /CNW/ - WGI Heavy Minerals, Incorporated ("WGI") (TSX: WG) today reported first-quarter earnings of $0.006 per share ($0.14 million), compared to a loss of ($0.006) per share ($0.14 million) in the same period last year. In addition at the Annual General Meeting held on April 30th in Toronto, the Company's nominees to the Board of Directors received overwhelming support. At the meeting the Shareholder's Rights Plan was defeated by 53.4% of the vote.
Overview
The first quarter of 2010 has shown noticeable improvement over 2009 as revenues increased 37% over the same quarter in 2009 and 9% over the fourth quarter of 2009. WGI continues to improve its market position as total abrasive volumes are up 27% over the last quarter of 2009 and 53% over the same period year over year. WGI gross margins remained steady at 23.5% compared with the first quarter of 2009. Abrasive pricing remains under pressure in the first quarter declining 7% year over year, although pricing for the Company's unique Emerald Creek Garnet remains strong. Offsetting the decline in abrasive margin has been a lift in consumable waterjet parts revenues and margins in 2010.
In 2009 new customers and sales channels were identified. As a result, the Company has started to gain market share in 2010 and plans to continue down that path as the economy strengthens. The Company will continue to expand its reach through the addition of salespersons both in the USA and Germany.
Improvements in operating efficiency through lean manufacturing techniques allowed Emerald Creek Garnet ("ECG") to operate over the winter months and generate positive cash flow from operations in the first quarter of 2010. Improving waterjet parts sales have positively impacted the bottom line for the Company. ECG is permitting areas previously identified in 2006 and 2007 as possible resource targets as well as looking at exploration areas. The Company's waterjet operations are rejuvenated and the Company is looking to strengthen its position within the market by adding new product lines and partnering with other waterjet companies in the industry to strengthen its bottom line.
Total expenses for the first quarter of 2010 increased by 17% over the same three-month period in 2009. Total expenses were 21% of revenues down from 25% of revenues in the first quarter of 2009. Increased marketing, travel and personnel costs account for the majority of the increase. Garnet exploration costs account for $0.06 million or 25% of the total expense increase. Careful cost containment has ensured that cash from operations before changes in non-cash working capital remains positive at $0.3 million. The Company continues to balance controlling costs and cash while ensuring preparedness for a recovery in the market.
2010 Results of Operations
Financially, the Company's balance sheet remains strong, with net cash, cash equivalents and marketable securities in the amount of $6.8 million. The net cash outflow for the first quarter 2010 was $0.6 million, the result of positive cash flow from operations before working capital movement, higher receivables offset by lower inventory and capital investment.
WGI's revenues in the first quarter of the year climbed 37% above the results for the first quarter of 2009 as markets began to recover from the recessionary levels of last year. There were improvements across all business segments with gains ranging from +12% in waterjet parts to +42% in mineral products and services. Mineral prices fell 7% compared to the quarter ended March 31, 2009 due to competitive conditions during the last 12 months as markets shifted sharply from relative balance in supply and demand at the end of 2008 to a sizable oversupply during 2009 and into the current period. The Company was able to offset these declines with a 53% improvement in sales volume. Major gains were logged during the quarter by Emerald Creek, which operated solely from inventories in 2009 due to a winter shutdown, and by Bengal Bay Garnet. Currency exchange was favourable for the first quarter adding 3% to revenue performance. Results by segment are discussed in more detail in the MD&A.
Gross profit margins remained flat at 23.5% in the first quarter of 2010 compared with 23.8% in the first quarter of 2009. This was mainly due to decreased pricing for Bengal Bay Garnet offset by increased volumes. Strong pricing of Emerald Creek Garnet and the efficiency of the operations and the favourable mix of waterjet part sales also contributed to the offset.
Operating general and administrative expenses increased 17%, made up primarily of increases in selling and marketing expenses ($0.08 million), increased exploration costs ($0.06 million) and increased foreign exchange and office costs of $0.06 million. Interest income has declined due to the payout of the $19.22 million special distribution in early 2009 and the overall dramatic reduction in interest rates.
The Company posted a net income of $0.14 million, or $0.006 per share compared with a net loss of $0.14 million, or ($0.006) per share, for the first quarter of 2009.
Outlook
WGI expects to grow its garnet and waterjet business in 2010. The Company is starting to see signs of economic recovery in all aspects of its business, although pricing still remains under pressure. Sales are expected to increase over 2009 primarily through increased volumes of abrasive products, specifically garnet and corundum sales and through improving waterjet consumable sales. Logistic costs, as well as pricing competition, are expected to keep gross margins down in 2010.
2010 will be a year of continuous operational improvements in addition to the identification of new heavy mineral resources. Marketing efforts will continue to expand as the Company competes in abrasive markets that are currently over supplied. Waterjet manufacturing will be strengthened through outsourcing in 2010, while the Company continues to market waterjet consumables along with its waterjet garnet.
The Company continues to strive to keep selling, general and administrative costs in line with revenues. These costs as a percentage of revenues sales general and administrative expenses are expected to decline in 2010 as they have in the first quarter of 2010.
Net income after tax and the related earnings per share are expected to increase in 2010 compared to 2009.
Annual General Meeting Results
The Company's Annual General Meeting held on April 30, 2010 was well attended with 66.58% of WGI's 23,617,610 outstanding shares being represented at the meeting, including shareholders representing 30.2% of the shares attending in person, The Chairman, CEO and senior management gave a brief presentation to those present after the formal portion of the meeting was concluded. The investor presentation can be found on the Company's website www.wgiheavvminerals.com.
Among the proxies submitted, support for the Company's Board of Directors was approximately 94%. As a result of the shareholder vote, the Company's Board of Directors consists of Gordon Fear, Chairman, Robert Ackerman, Vic Alboini, Michael Burns, and Gregory Emerson, CEO.
While 46.6% of the total 15,558.859 shares voted approved of the Shareholder's Rights Plan established by the Board of Directors on October 15, 2009, the required shareholder approval of the Rights Plan was defeated by 53.4% of the vote. As a result of the vote held at the meeting, the Shareholders Rights Plan of the Company is no longer in force.
About WGI
The principal business of WGI Heavy Minerals, Incorporated is the processing and sale of industrial abrasive minerals and the manufacturing and sale of ultra-high pressure waterjet cutting machine replacement parts. The Company, through its subsidiaries, markets and sells abrasive products and services and waterjet replacement parts globally.
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 March 31, 2010 Dec. 31, 2009
----------------------------------
Assets
Cash and Short term deposits $ 6,792 $ 7,398
Other Current Assets 11,372 11,045
----------------------------------
Total Current Assets 18,164 18,442
----------------------------------
Property, plant and equipment 3,637 3,686
Goodwill and Intangible Assets 472 487
Other Assets - -
----------------------------------
Total Assets $ 22,274 $ 22,616
----------------------------------
----------------------------------
Liabilities & Equity
Current Liabilities $ 4,733 $ 4,899
Long-term debt 215 292
Liabilities of discontinued operations - -
----------------------------------
Total Liabilities 4,948 5,191
----------------------------------
Capital stock 38,360 38,360
Stock-based compensation 2,035 2,021
Deficit (23,157) (23,297)
Foreign currency translation account 87 341
----------------------------------
Total Equity 17,325 17,425
----------------------------------
Total Liabilities & Equity $ 22,274 $ 22,616
----------------------------------
----------------------------------
Consolidated Statements of Operations
and Deficit
For the three month period ended
March 31, 2010 March 31, 2009
----------------------------------
Sales $ 8,337 $ 6,067
Operating Costs 6,205 4,471
Depreciation, depletion, and
amortization 171 152
----------------------------------
Gross Profit 1,961 1,444
----------------------------------
Gross Margin % 23.5% 23.8%
Expenses
G&A 1,671 1,517
Interest Income (17) (37)
Interest Expense 13 21
Stock based compensation 15 9
Exploration costs 64 2
Other Expenses (Income) 5 (7)
----------------------------------
Total 1,751 1,505
----------------------------------
Income/(Loss) from continuing
operations 210 (61)
Write down of goodwill and customer
list - -
Write down of Emerald Creek assets - -
----------------------------------
lncome/(Loss) before taxes 210 (61)
----------------------------------
Net Provision for taxes 70 81
----------------------------------
Net Income $ 140 $ (142)
----------------------------------
----------------------------------
Basic earning per common share $ 0.006 $ (0.006)
Diluted earnings per common share $ 0.006 $ (0.006)
Consolidated Statements of Cash Flows For the three months ended
$(000's) March 31, 2010 March 31, 2009
----------------------------------
Cash flows from operating activities $ (155) $ 397
Cash flows from investing (234) (9)
Cash flows from financing (85) (319)
Payment of cash distribution - (19,245)
Effect of exchange rate changes on
Cash & Cash Eq. (132) (7)
----------------------------------
Inc./(dec.) in Cash and Securities $ (606) $ (19,183)
----------------------------------
Beginning Cash & Securities $ 7,398 $ 28,201
----------------------------------
Ending Cash & Securities $ 6,792 $ 9,018
----------------------------------
----------------------------------
Expressed in U.S. dollars unless otherwise stated.
For further information: Greg Emerson, Ed Kok, 810 Sherman Ave., Coeur d'Alêne, ID, 83814, U.S.A., (208) 666-6000, Fax (208) 666-4000, www.wgiheavyminerals.com; Greg Emerson, President & CEO, (208) 770-2202, E-mail [email protected]; Ed Kok, General Counsel, Investor Relations, (208) 770-2202, E-Mail [email protected]
Share this article