Opta Minerals Inc.
TSX : OPM

Opta Minerals Inc.

November 09, 2009 20:14 ET

Opta Minerals Inc. Reports Third Quarter Results for Fiscal 2009

WATERDOWN, ONTARIO--(Marketwire - Nov. 9, 2009) - Opta Minerals Inc. (TSX:OPM), today announced results for the three and nine months ended September 30, 2009. All figures are reported in U.S. dollars and in accordance with Canadian Generally Accepted Accounting Principles (GAAP), except where otherwise noted.

For the three months ended September 30, 2009, the net loss was ($6.4 million) or ($0.36) per diluted common share, versus net earnings of $1.7 million or $0.09 per diluted common share for the third quarter in 2008. Year to date, the net loss for the nine months ended September 30, 2009 was ($6.8 million) or ($0.38) per dilutive common share, versus net earnings of $4.7 million or $0.26 per diluted common share during 2008. These results include a non-cash goodwill impairment charge in the amount of $7.2 million for both the three and nine month periods ended September 30, 2009. Earnings before income taxes, goodwill impairment and non-controlling interest were $1.0 million for the three months ended September 30, 2009, versus $2.3 million for the comparative period in 2008. This highlights the fact that the operating activities have returned to profitability through market improvements related to steel production and the benefit of the cost saving measures put into place over the past four quarters.

Consistent with the first half of the fiscal year, revenues and gross profit for the three months ended September 30, 2009 have declined in comparison to 2008. Revenues have decreased 43% to $16.7 million from $29.4 million in 2008. Gross profit for the quarter decreased by 34% to $4.2 million or 25.0% of revenue, versus $6.4 million or 21.6% of revenue in 2008. The improvement in gross profit as a percentage of revenue over the previous period is a result of the benefit of our previously implemented cost saving measures.

David Kruse, President and CEO of Opta Minerals, noted "During the third quarter, Opta Minerals began to see some initial signs of recovery in our related industries. As a result, we have begun to increase production at some of our facilities. A significant highlight during the third quarter is the earnings before income taxes, goodwill impairment and non-controlling interest in the amount of $1.0 million for the three months ended September 30, 2009. There remains continued uncertainty surrounding steel and abrasive-consuming industries, such as automotive, construction, infrastructure and shipyard activity, which makes it very difficult to forecast beyond a very short horizon. Provided that there are no further unexpected economic deteriorations, we expect to see continued gradual improvement throughout the next 6 months. Market conditions are improving in the steel sector, although a full recovery remains slow and progressive.

During the fourth quarter of 2008 and the first nine months of 2009, we implemented cost-saving measures to realign operations with current customer demand. Included in these measures was a workforce reduction, as well as, an adjustment to the cost sharing of employee health benefits. In addition to previously announced restructuring efforts, further cost-saving measures have been implemented during the past quarter and, in total, all restructuring efforts to date are expected to reduce annual operating costs by approximately $6.0 million compared to the beginning of 2008. During the year we discontinued operations in Attica, New York and sold assets from the operation in exchange for a release of the Company's obligations under an existing lease and service agreement. We consolidated the operations in Quebec into one facility and, during the third quarter, sold one of the warehouses owned by the Company and commenced negotiating a lease termination agreement for another.

Opta Minerals has generated significant cash flow from working capital reductions in the last nine months, including a substantial reduction in inventory. We expect continued positive cash flow from operating activities over the balance of 2009."

For the three months ended September 30, 2009, cash flow from operating activities generated $3.3 million, versus a use of $1.5 million in the third quarter of 2008. The strong cash flow from operating activities has resulted in a decrease in bank indebtedness in the amount of $2.8 million and payments on long-term debt in the amount of $1.4 million. On a

year to date basis, cash flows from operations generated $7.6 million versus $0.3 million for the nine months ended September 30, 2008.

Selling, general and administrative expenses decreased $0.5 million during the third quarter, from $2.8 million or 9.5% of revenues for the third quarter of 2008 to $2.3 million or 14.0% of revenues in the third quarter of 2009. Most of the decrease related to reduced professional fees and employee costs resulting from cost reduction measures put in place by management during the past nine months. Year to date, selling, general and administrative expenses have decreased $1.5 million from $8.5 million incurred in the first nine months of 2008 to $7.0 million for the nine months ended September 30, 2009. Taking into account the $0.4 million increase in selling, general and administrative expenses incurred at MCP, which was acquired during the third quarter of 2008, total year over year savings are $1.9 million.

During the third quarter, the Company recorded a goodwill impairment charge in the amount of $7.2 million which is net of a reversal of the contingent consideration accrual previously recorded in Other Long-term Liabilities in the amount of $1.1 million. The Company performed its annual impairment test of goodwill on September 30, 2009. During the third quarter, management determined that there were external market conditions and other circumstances that suggested the carrying value of the goodwill of certain operating units may exceed their fair value. The external market conditions included a decrease in operating results as compared to the prior year and a lower than previously anticipated future operating income growth due to the slow recovery in the global economy.

EBITDA for the quarter decreased 35%, from $3.8 million in 2008 to $2.5 million for the three months ended September 30, 2009. This result reflects the impact of a dramatic slowdown in the steel industry that began in the fourth quarter of 2008. Year to date, the economic slowdown has resulted in a decrease in EBITDA from $11.1 million for the nine months ended September 30, 2008 to $4.2 million in 2009. Included in EBITDA for the nine months ended September 30, 2009 are non-recurring other income and expense items totaling $0.3 million. This amount is substantially comprised of $0.4 million in restructuring severance costs, $0.1 million in lease termination costs related to the consolidation of the operations in Quebec offset by a gain on sale of fixed assets in our Attica facility in the amount of $0.2 million.

The Company's working capital at September 30, 2009 stood at $11.5 million and total assets were $88.5 million. The debt-to-equity ratio at September 30, 2009 was 0.76 to 1.00.

Opta Minerals also announces the resignation of James Wilson as Chief Financial Officer and Secretary effective November 2, 2009. Mr. Wilson will be available to the Company to assist with transitional matters and David Ascott, Corporate Controller, will assume the responsibilities in the interim period until a new Chief Financial Officer is hired. The Company has initiated a search for a new CFO.

Opta Minerals President and CEO, David Kruse, plans to host a conference call at 10:00AM Eastern Standard Time on Tuesday November 10th, 2009 to discuss third quarter 2009 results and recent corporate developments. After opening remarks, there will be a question and answer period. This conference call can be accessed with the toll free dial-in number 1-(800) 820-0231 or 1-(416) 640-5926; quote confirmation code 2354788. If you are unable to listen live, the conference call will be archived and can be accessed between November 10, 2009 and November 17, 2009, with the toll free dial-in number 1-(888) 203-1112 or (647) 436-0148 followed by pass code 2354788.

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, Louisiana, South Carolina, Virginia, Maryland, Indiana, Michigan, New York, Texas, Florida, France and Slovakia. 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-GAAP earnings measures that do not have standardized measures prescribed by GAAP, and therefore may not be comparable to similar measures presented by other publicly traded companies.

  For the threeFor the nine
  Months EndedMonths Ended
  September 30September 30
  2009200820092008
  $$$$
Net (Loss) Earnings for the Period(6,416) 1,673 (6,821) 4,702
Interest Expense 431 501 1,248 1,561
Provision for (recovery of) Income Taxes 290 642 (248) 1,833
Depreciation and Amortization 964 1,002 2,802 2,986
Goodwill Impairment 7,198 - 7,198 -
EBITDA12,4673,8184,17911,082
Add (subtract):        
Depreciation and Amortization(964) (1,002) (2,802) (2,986) 
Goodwill Impairment (7,198) - (7,198) -
Earnings before income taxes and interest2(5,695)2,816(5,821)8,096

Notes

  1. The term "EBITDA" refers to earnings before deducting interest expense, provision for income taxes, depreciation and amortization including charges for goodwill impairment. 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 asset depreciation. EBITDA is not a recognized measure under Canadian GAAP, and accordingly, investors are cautioned that EBITDA should not be construed as an alternative to net earnings or loss determined in accordance with Canadian GAAP 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 interest 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-GAAP earnings measure that does not have standardized measures prescribed by GAAP, and therefore may not be comparable to similar measures presented by other publicly traded companies.

This press release may contain ''forward-looking 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, cancellations of or the failure to renew purchase orders; production and delivery issues; quality, pricing and availability of raw materials; compliance with environmental regulations; exchange rate fluctuations as well as the other risks identified in the ''Risk Factors'' section of 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.         
Consolidated Statements of Earnings (Loss)          
For the three month periods ended September 30, 2009 and 2008          
(Expressed in thousands of U.S. dollars, except per share amounts)          
 
    2009  2008  
 
Revenue$16,745$ 29,440  
Cost of Goods Sold  12,564  23,068  
Gross Profit  4,181  6,372  
 
Selling, General and Administrative Expenses  2,347  2,822  
Earnings Before Undernoted Items, Goodwill Impairment and         
 Non-controlling Interest  1,834  3,550  
 
Interest expense on long-term debt   299  366  
Interest expense   132  135  
Amortization of intangible assets   469  441  
Stock compensation expense   72  91  
Other (income) expense   21  59  
Foreign exchange (gain) loss   (166)  143  
    827  1,235  
Earnings Before Income Taxes, Goodwill Impairment and Non-         
 controlling Interest  1,007  2,315  
Provision for income taxes   290  642  
Earnings Before Goodwill Impairment and Non-controlling Interest  717  1,673  
Goodwill Impairment   7,198  -  
Earnings (Loss) Before Non-controlling Interest  (6,481)  1,673  
 
Non-controlling interest share of net loss   (65)  -  
Net Earnings (Loss)  (6,416)  1,673  
 
Earnings (loss) per share for the period          
- Basic and diluted $(0.36)$ 0.09  

Opta Minerals Inc.
         
Consolidated Statements of Earnings (Loss)          
For the nine month periods ended September 30, 2009 and 2008          
(Expressed in thousands of U.S. dollars, except per share amounts)          
 
    2009  2008  
 
Revenue$45,810$ 76,058  
Cost of Goods Sold  36,213  57,533  
Gross Profit  9,597  18,525  
 
Selling, General and Administrative Expenses  7,039  8,554  
Earnings Before Undernoted Items, Goodwill Impairment and         
 Non-controlling Interest  2,558  9,971  
 
Interest expense on long-term debt   854  1,135  
Interest expense   394  426  
Amortization of intangible assets   1,367  1,306  
Stock compensation expense   210  204  
Other (income) expense   305  59  
Foreign exchange (gain) loss   (431)  306  
    2,699  3,436  
Earnings (Loss) Before Income Taxes, Goodwill Impairment and         
 Non-controlling Interest  (141)  6,535  
Provision for (recovery of) income taxes   (248)  1,833  
Earnings Before Goodwill Impairment and Non-controlling Interest  107  4,702  
Goodwill Impairment   7,198  -  
Earnings (Loss) Before Non-controlling Interest  (7,091)  4,702  
 
Non-controlling interest share of net loss   (270)  -  
Net Earnings (Loss)  (6,821)  4,702  
 
Earnings (loss) per share for the year          
- Basic and diluted $(0.38)$ 0.26  

Opta Minerals Inc.
           
Consolidated Balance Sheets            
(Expressed in thousands of U.S. dollars)            
    September 30,  December 31,    September 30,
    2009  2008   2008
Assets           
Current           
 Cash and cash equivalents $1,161$ 1,377 $ 3,661
 Accounts receivable   9,462  9,133   15,429
 Inventories   17,239  22,223   23,994
 Prepaid expenses and other current assets   1,310  1,793   1,048
 Assets held for sale   -  664   768
 Income taxes recoverable   210  362   -
    29,382  35,552   44,900
Due From Affiliates  -  -   1,022
Property, Plant and Equipment  17,717  16,664   17,321
Intangible and Other Assets  32,382  32,464   33,182
Goodwill  6,019  14,160   12,024
Future Income Taxes  3,034  2,406   1,619
  $88,534$ 101,246 $ 110,068
Liabilities           
Current           
 Bank indebtedness   5,517  7,797   11,204
 Accounts payable and accrued liabilities   7,869  7,788   10,211
 Income taxes payable   -  -   534
 Current portion of long-term debt   4,452  4,097   4,071
 Current portion of preference shares   43  38   44
    17,881  19,720   26,064
Long-term Debt  19,101  20,594   23,132
Other Long-term Liabilities  1,503  3,095   1,110
Future Income Taxes  2,697  2,849   2,934
Future Income Taxes on Intangible Assets  9,406  9,695   9,781
    50,588  55,953   63,021
Shareholders' Equity           
Capital Stock           
  Authorized unlimited number of common shares and preference shares without par value      
 Issued -            
 18,018,770 (December 31, 2008 - 18,003,459; September 30, 2008 – 17,996,391)            
  common shares   17,606  17,587   17,572
Contributed Surplus  1,875  1,665   1,568
Accumulated Other Comprehensive Income  3,894  4,379   4,021
Retained Earnings  14,841  21,662   23,886
    38,216  45,293   47,047
Non-controlling Interest  (270)  -   -
  $88,534$ 101,246 110,068

Opta Minerals Inc.
         
Consolidated Statements of Cash Flows          
For the three month periods ended September 30, 2009 and 2008          
(Expressed in thousands of U.S. dollars)          
    2009  2008  
 
Cash Provided By (Used in) -         
 Operating Activities         
  Net earnings (loss) for the period $(6,416)$ 1,673  
   Items not affecting cash          
   Amortization of property, plant and equipment   495  561  
   Amortization of intangible assets   469  441  
   Goodwill impairment   7,198  -  
   Non-controlling interest   (65)  -  
   Other expenses   (41)  -  
   Stock compensation expense   72  91  
   Future income taxes   (516)  27  
   Unrealized foreign exchange loss on long-term debt   -  (34)  
   Realized foreign exchange gain on foreign operations   (157)  (217)  
   Net loss on disposal of property, plant and equipment   80  39  
    1,119  2,581  
   Changes in non-cash working capital          
   Accounts receivable   (504)  (1,233)  
   Inventories   1,300  (2,169)  
   Prepaid expenses and other current assets   599  337  
   Accounts payable and accrued liabilities   235  (1,424)  
   Income taxes recoverable   551  449  
    3,300  (1,459)  
 Financing Activities         
  Proceeds from issuance of common shares - net of issuance costs   5  14  
  (Decrease) increase in bank indebtedness   (2,835)  3,822  
  Proceeds from long-term debt   31  2,023  
  Repayment of long-term debt   (1,450)  (736)  
    (4,249)  5,123  
 Investing Activities         
  Acquisition of property, plant and equipment   (417)  (282)  
  Proceeds on disposal of property, plant and equipment   651  36  
  Acquisition of company, net of bank indebtedness assumed   -  (2,417)  
    234  (2,663)  
 
Foreign Exchange Gain (Loss) on Cash Held in Foreign Currency  4  (172)  
Increase (Decrease) in Cash and Cash Equivalents  (711)  829  
 
Cash and Cash Equivalents         
 Beginning of Period  1,872  2,832  
 End of Period$1,161$ 3,661  
 
Additional Cash Flows Information:         
 Interest paid $416$ 454  
 Income taxes paid   235  249  

Opta Minerals Inc.
         
Consolidated Statements of Cash Flows          
For the nine month periods ended September 30, 2009 and 2008          
(Expressed in thousands of U.S. dollars)          
    2009  2008  
 
Cash Provided By (Used in) -         
 Operating Activities         
  Net earnings (loss) for the period $(6,821)$ 4,702  
   Items not affecting cash          
   Amortization of property, plant and equipment   1,435  1,680  
   Amortization of intangible assets   1,367  1,306  
   Goodwill impairment   7,198  -  
   Non-controlling interest   (270)  -  
   Other expenses   (96)  -  
   Stock compensation expense   210  204  
   Future income taxes   (1,131)  (380)  
   Unrealized foreign exchange loss on long-term debt   -  110  
   Realized foreign exchange gain on foreign operations   (618)  (292)  
   Net loss on disposal of property, plant and equipment   80  35  
    1,354  7,365  
   Changes in non-cash working capital          
   Accounts receivable   39  (4,118)  
   Inventories   5,907  (4,418)  
   Prepaid expenses and other current assets   540  913  
   Accounts payable and accrued liabilities   (437)  (89)  
   Income taxes recoverable   183  696  
    7,586  349  
 Financing Activities         
  Proceeds from issuance of common shares - net of issuance costs   19  44  
  (Decrease) increase in bank indebtedness   (3,141)  5,859  
  Proceeds from long-term debt   795  5,098  
  Repayment of long-term debt   (4,139)  (7,037)  
    (6,466)  3,964  
 Investing Activities         
  Acquisition of property, plant and equipment   (1,997)  (597)  
  Proceeds on disposal of property, plant and equipment   651  54  
  Additional consideration paid on acquisitions   -  (11)  
  Acquisition of company, net of bank indebtedness assumed   -  (2,417)  
    (1,346)  (2,971)  
 
Foreign Exchange Gain (Loss) on Cash Held in Foreign Currency  10  (17)  
Increase (Decrease) in Cash and Cash Equivalents  (216)  1,325  
 
Cash and Cash Equivalents         
 Beginning of Period  1,377  2,336  
 End of Period$1,161$ 3,661  
 
Additional Cash Flows Information:         
 Interest paid $1,352$ 1,666  
 Income taxes paid   662  1,617  

Opta Minerals Inc.
               
Segmented Information                
For the three months ended September 30, 2009            
(Expressed in thousands of U.S. dollars)                
      Three Month Period Ended September 30, 2009
      Abrasive       
      Products Manu-       
Mill and Foundryfacturing and       
  Products andDistribution       
  ServicesOperations Unallocated  Total
 
External revenue by market                
Canada $2,021$1,776$-$3,797
U.S   6,432  3,886  -  10,318
Europe   2,535  -  -  2,535
Other   -  95  -  95
Total revenue from external customers   10,988  5,757  -  16,745
 
Segment earnings loss before interest                
 expense, income taxes and                
 non-controlling interest   (2,700)  (2,982)  (78)  (5,760)
Interest expense on long-term debt               (299)
Interest expense               (132)
Provision for recovery of income taxes               (290)
Non-controlling interest share of net loss   65  -  -  65
Net loss for the period               (6,416)
Total assets as at September 30, 2009   62,148  25,289  1,097  88,534
Amortization of property, plant and                
 equipment   266  210  19  495
Amortization of intangible assets   464  5  -  469
Goodwill and intangible assets                
 as at September 30, 2009   34,792  3,609  -  38,401
 Goodwill impairment   4,101  3,097  -  7,198
Expenditures on property, plant                
 and equipment $28$357$32$417

Opta Minerals Inc.
               
Segmented Information                
For the nine months ended September 30, 2009            
(Expressed in thousands of U.S. dollars)              
      Nine Month Period Ended September 30, 2009
      Abrasive       
      Products Manu-       
  Mill and Foundryfacturing and       
  Products andDistribution       
  ServicesOperations Unallocated  Total
 
External revenue by market                
Canada $5,873$4,092$-$9,965
U.S   17,461  11,679  -  29,140
Europe   6,406  -  -  6,406
Other   148  151  -  299
Total revenue from external customers   29,888  15,922  -  45,810
 
Segment loss before interest                
 expense, income taxes and                
 non-controlling interest   (2,947)  (2,933)  (211)  (6,091)
Interest expense on long-term debt               (854)
Interest expense               (394)
Recovery of income taxes               248
Non-controlling interest share of net                
 loss   270  -  -  270
Net loss for the period               (6,821)
Amortization of property, plant and                
 equipment   775  609  51  1,435
Amortization of intangible assets   1,349  18  -  1,367
Goodwill impairment   4,101  3,097  -  7,198
Expenditures on property, plant                
 and equipment $180$1,751$66$1,997

Opta Minerals Inc.
               
Segmented Information                
For the three months ended September 30, 2008            
(Expressed in thousands of U.S. dollars)              
        Three Months Ended September 30, 2008
        Abrasive        
      Products Manu-        
  Mill and Foundry facturing and        
  Products and   Distribution        
    Services   Operations   Unallocated   Total
 
External revenue by market                
Canada $ 3,179 $ 1,293 $ -$ 4,472
U.S   14,582   4,963   -  19,545
Europe   5,353   5   -  5,358
Other   49   16   -  65
Total revenue from external customers   23,163   6,277   -  29,440
 
Segment earnings (loss) before interest                
  expense and income taxes   2,225   1,389       (798)  2,816
Interest expense on long-term debt               (366)
Interest expense               (135)
Provision for income taxes               (642)
Net earnings for the period               1,673
Total assets as at December 31, 2008   70,806   27,198   3,242  101,246
Amortization of property, plant and                
  equipment   270   257   34  561
Amortization of intangible assets   429   12   -  441
Goodwill and intangible assets                
  as at December 31, 2008   39,859   6,765   -  46,624
Expenditures on property, plant                
 and equipment $ 92 $ 185 $ 5$ 282

Opta Minerals Inc.
               
Segmented Information                
For the nine months ended September 30, 2008            
(Expressed in thousands of U.S. dollars)              
        Nine Months Ended September 30, 2008
        Abrasive        
      Products Manu-        
  Mill and Foundry facturing and        
  Products and   Distribution        
    Services   Operations   Unallocated   Total
 
External revenue by market                
Canada $ 10,606 $ 4,170 $ - $ 14,776
U.S   37,688   13,461   -   51,149
Europe   10,015   5   -   10,020
Other   79   34   -   113
Total revenue from external customers   58,388   17,670   -   76,058
 
Segment earnings (loss) before interest                
 expense and income taxes   7,904   2,777   (2,585)   8,096
Interest expense on long-term debt               (1,135)
Interest expense               (426)
Provision for income taxes               (1,833)
Net earnings for the period               4,702
Amortization of property, plant and                
 equipment   814   764   102   1,680
Amortization of intangible assets   1,269   37   -   1,306
Expenditures on property, plant                
 and equipment $ 103 $ 433 $ 61 $ 597

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