Opta Minerals Inc.
TSX : OPM

Opta Minerals Inc.

March 05, 2014 08:00 ET

Opta Minerals Inc. Reports Fourth Quarter and Year End Results for Fiscal 2013

WATERDOWN, ONTARIO--(Marketwired - March 5, 2014) - Opta Minerals Inc. (TSX:OPM) today announced results for the three and twelve months ended December 31, 2013. All figures are reported in U.S. dollars and are in accordance with International Financial Reporting Standards (IFRS), except where otherwise noted.

3 months 3 months 12 months 12 months
ended ended ended ended
December 31, December 31, Increase December 31, December 31, Increase
2013 2012 (Decrease) % 2013 2012 (Decrease) %
Revenue $ 32,821 $ 34,125 $ (1,304) -3.8% $ 141,435 $ 126,651 $ 14,784 11.7%
Gross Profit 5,294 6,647 (1,353) -20.4% 23,879 26,760 (2,881) -10.8%
16.1% 19.5% -3.3% 16.9% 21.1% -4.2%
EBITDA1 3,291 3,089 202 6.5% 12,127 14,683 (2,556) -17.4%
EBIT2 1,393 1,943 (550) -28.3% 2,348 9,402 (7,054) -75.0%
Profit (Loss) 962 991 (29) -2.9% (181) 5,273 (5,454) -103.4%
EPS $ 0.05 $ 0.06 $ (0.01) $ (0.01) $ 0.29 $ (0.30)
  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, "Revenues in the fourth quarter decreased over the comparable period in 2012 due to a combination of volume and pricing. General economic conditions in both the Steel and Magnesium segment and Industrial Minerals segment, and weather related slowdowns impacted the quarter's volume output. Revenues for 2013 have increased over the prior year primarily due to the acquisitions of Babco Industrial Corp. (Babco) and WGI Heavy Minerals, Incorporated (WGI) in 2012. Our base business softened from the prior year as a result of slowdowns in both industry segments. The impact was more pronounced in the Steel and Magnesium segment. Demand in the steel industry during the last three quarters continued to track below the prior year. Results this quarter were adversely affected by intangible and property, plant and equipment asset write-downs in certain plant assets.

We anticipate that the steel industry will track slightly better than the past two quarters in the first half of 2014. After a strong focus on integration and cost containment in 2013, we have refocused our efforts on revenue growth opportunities in 2014. With the integration of WGI now complete, we also anticipate lower SGA and reduced one time charges. Working capital is expected to decline over the next six months as there will be limited purchases of inventories required over this time period."

Operational and Financial Highlights:

  • For the three months ended December 31, 2013 Opta Minerals had net profit of $1.0 million as compared to $1.0 million in the comparable quarter in 2012. During the quarter, the Company expensed $0.5 million in property, plant and equipment write-downs in certain plants related to the Industrial Minerals segment.
  • On a year-over-year basis, the Company incurred a net loss of $0.2 million compared to net profit of $5.3 million in 2012. Economic conditions across all sectors affected both revenues and margins during the year. Lower revenues within the Steel and Magnesium segment had a significant impact on the Company's net earnings. The Company has also incurred certain one time costs approximating $1.3 million in severance, various professional fees related to the WGI acquisition, new banking agreements and amendments and implementation of tax planning strategies. In addition, the Company expensed $3.9 million in goodwill and intangible asset write-downs on non-financial assets and $0.5 million in property, plant and equipment write-downs related to the Industrial Minerals segment. The Company realized a gain of $0.6 million in changes to the fair value of expected payments to contingent consideration during the year.
  • Fourth quarter revenue in the Steel and Magnesium segment decreased 2.5% from the comparable quarter in 2012. On a year-over-year basis revenues declined 4.7%. The Steel and Magnesium segment has primarily been impacted by overall lower steel output in North America and Europe compared to the previous year and certain re-pricing in the fourth quarter. The Industrial Minerals segment decreased 5.3% over the comparable quarter in 2012 and increased 37.7% on a year-over-year basis. The decrease in the quarter was primarily due to economic conditions and weather. The increase over the previous year was due to the acquisition of WGI, partially offset by lower revenues in the base industrial minerals business related to generally weak economic conditions in this segment, as well as lower demand in the steel industry. In both segments we have not lost any major customers. The Company is currently focused on a number of opportunities to grow revenue and improve margins.
  • Gross profit decreased quarter over quarter due to lower overall gross profit margins of 16.1% compared to 19.5% in the prior year quarter. For the twelve months ended December 31, 2013 gross profit margins were 16.9% compared to 21.1% in the comparable 2012 period. Gross profit margins have declined due to the acquisition of WGI which has inherently lower margins, reduced steel revenues especially in the last three quarters which have higher inherent margins than the Industrial Minerals group, certain re-pricing in the last quarter, and lower margins in the Industrial Minerals segment compared to the prior year as a result of competitive pressures, and reduced facility utilization.
  • Selling, general and administrative expenses (SGA) as a percent of revenues were 11.9% in the fourth quarter and 13.5% for the twelve months end December 31, 2013. SGA as a percent of revenues were 15.7% and 14.2%, respectively for the comparable periods in 2012. For the twelve months ended December 31, 2013 there were one time costs associated with professional fees for income tax restructuring of $0.2 million and severance costs of $0.8 million. With the integration of WGI completed, the Company expects to reduce SGA in subsequent quarters as synergies have been achieved from the integration of the WGI acquisition. The Company is targeting 10% SGA as a percent of revenues and expects to achieve this due to integration based reductions and growth in revenues.
  • The Company's working capital at December 31, 2013 amounted to $23.3 million and total assets were $130.0 million, as compared to $24.6 million and $135.9 million, respectively, at December 31, 2012.
  • The debt to equity ratio at December 31, 2013 was 1.17 to 1.00, and at December 31, 2012 was 1.28 to 1.00. As at December 31, 2013, the Company is in compliance with the financial covenants of the borrowing agreements.

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 For the twelve
Months Ended Months Ended
December 31 December 31
2013 2012 2013 2012
$ $ $ $
Profit (Loss) for the Period 962 991 (181) 5,273
Finance Expense 697 2,037 3,665 4,213
Income Tax Recovery (266) (1,085) (1,136) (84)
Depreciation and Amortization 1,446 1,541 6,110 5,676
Goodwill and Intangible Asset Write-downs - - 3,862 -
Property, Plant and Equipment Write-downs 450 - 450 -
Fair Value Adjustments to Contingent Consideration 2 (395) (643) (395)
EBITDA1 3,291 3,089 12,127 14,683
Subtract:
Depreciation and Amortization 1,446 1,541 6,110 5,676
Goodwill and Intangible Asset Write-downs - - 3,862 -
Property, Plant and Equipment Write-downs 450 - 450 -
Fair Value Adjustments to Contingent Consideration 2 (395) (643) (395)
EBIT2 1,393 1,943 2,348 9,402

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 belief that the steel industry will continue to track slightly better than in the past two quarters in the first half of 2014 resulting in increased revenues in both the Steel and Magnesium and Industrial Minerals segments, its expectation of lower SGA costs and reduced one time charges, its expectations regarding working capital, its focus on opportunities to grow revenue and improve margins, its targets with respect to SGA as a percent of revenues and expected benefits resulting from the integration of recent acquisitions, 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.

Consolidated Balance Sheets
As At December 31, 2013
(Unaudited)
Expressed in Thousands of US Dollars (except per share amounts and number of shares)

2013 2012
(Restated)
Assets
Current
Cash and cash equivalents $ 4,084 $ 3,966
Trade receivables, other receivables and prepayments 14,676 19,894
Inventories 39,525 32,516
Income tax receivable 544 -
58,829 56,376
Property, Plant and Equipment 28,030 29,770
Intangible Assets 31,071 33,873
Goodwill 10,659 14,726
Deferred Income Tax Assets 1,471 1,148
$ 130,060 $ 135,893
Liabilities
Current
Trade and other payables $ 13,961 $ 14,013
Borrowings 20,721 16,533
Provisions 520 249
Other liabilities 348 612
Income taxes payable - 360
35,550 31,767
Borrowings 37,539 45,351
Derivative Financial Instruments 311 396
Provisions 91 227
Other Liabilities 371 1,274
Deferred Income Tax Liabilities 6,540 8,519
80,402 87,534
Equity Attributable to the Shareholders of the Company
Capital Stock
Authorized without limit as to number -
Preference shares (without par value)
Common shares
Issued -
18,111,247 common shares (December 31, 2012 - 18,084,559) 17,882 17,822
Contributed Surplus 4,358 3,925
Accumulated Other Comprehensive Loss (862) (1,849)
Retained Earnings 28,280 28,461
49,658 48,359
$ 130,060 $ 135,893

Opta Minerals Inc.

Consolidated Statements of Income (Loss)
For the Years Ended December 31, 2013 and 2012
(Unaudited)
Expressed in Thousands of US Dollars (except per share amounts)

2013 2012
Revenue $ 141,435 $ 126,651
Cost of Goods Sold 117,556 99,891
Gross Profit 23,879 26,760
Expenses
Selling, general and administrative 19,024 17,973
Goodwill and intangible asset write-downs 3,862 -
Property, plant and equipment write-downs 450 -
Fair value adjustments to contingent consideration (643) (395)
Other income (1,162) (220)
21,531 17,358
Profit Before Finance Expense and Income Taxes 2,348 9,402
Finance expense 3,665 4,213
Profit (Loss) Before Income Taxes (1,317) 5,189
Income tax recovery (1,136) (84)
Profit (Loss) for the Year Attributable to the Shareholders of the Company $ (181) $ 5,273
Earnings (loss) per share for the year - basic and diluted (0.01) 0.29

Opta Minerals Inc.

Consolidated Statements of Comprehensive Income (Loss)
For the Years Ended December 31, 2013 and 2012
(Unaudited)
Expressed in Thousands of US Dollars

2013 2012
Profit (Loss) for the Year Attributable to the Shareholders of the Company $ (181) $ 5,273
Other Comprehensive Income (Loss), net of income taxes
Items that may be reclassified subsequently to profit or loss
Unrealized gain on translation of foreign operations 924 386
Unrealized gain (loss) on financial derivatives designated as a cash flow hedges 63 (100)
Comprehensive Income Attributable to the Shareholders of the Company $ 806 $ 5,559

Opta Minerals Inc.

Consolidated Statements of Changes in Equity
For the Years Ended December 31, 2013 and 2012
(Unaudited)
Expressed in Thousands of US Dollars (except per share amounts and number of shares)

Number of Shares - Capital Stock Capital Stock Contributed Surplus - Share-based Payments AOCI* - Cash Flow Hedge AOCI* - Foreign Currency Translation Reserve Retained Earnings Total Equity
At January 1, 2013 18,084,559 $ 17,822 $ 3,925 $ (293) $ (1,556) $ 28,461 $ 48,359
Comprehensive Income
Loss for the year - - - - - (181) (181)
Unrealized gain on translation of foreign operations - - - - 924 - 924
Unrealized gain on financial derivatives designated as a cash flow hedges - - - 63 - - 63
Total Comprehensive Income - - - 63 924 (181) 806
Transactions with Shareholders
Employee share purchase plan 18,611 45 - - - - 45
Share options exercised 8,077 15 (15) - - - -
Share-based payment expense - - 448 - - - 448
Total Transactions with Shareholders 26,688 60 433 - - - 493
At December 31, 2013 18,111,247 $ 17,882 $ 4,358 $ (230) $ (632) $ 28,280 $ 49,658
At January 1, 2012, previously reported 18,061,784 $ 17,680 $ 3,429 $ (193) $ (1,942) $ 23,541 $ 42,515
Restatement - 93 (93) - - (353) (353)
At January 1, 2012, restated 18,061,784 17,773 3,336 (193) (1,942) 23,188 42,162
Comprehensive Income
Profit for the year - - - - - 5,273 5,273
Unrealized gain on translation of foreign operations - - - - 386 - 386
Unrealized loss on financial derivative designated as a cash flow hedge - - - (100) - - (100)
Total Comprehensive Income - - - (100) 386 5,273 5,559
Transactions with Shareholders
Employee share purchase plan 14,827 35 - - - - 35
Share options exercised 7,948 14 (14) - - - -
Share-based payment expense - - 603 - - - 603
Total Transactions with Shareholders 22,775 49 589 - - - 638
At December 31, 2012 18,084,559 $ 17,822 $ 3,925 $ (293) $ (1,556) $ 28,461 $ 48,359

Opta Minerals Inc.

Interim Condensed Consolidated Statements of Cash Flows
For the Twelve Months Ended December 31, 2013 and 2012
(Unaudited)
Expressed in Thousands of US Dollars

2013 2012
Cash Provided by (Used in) -
Operating Activities
Profit (loss) for the year $ (181) $ 5,273
Items not affecting cash:
Depreciation of property, plant and equipment 3,655 3,113
Amortization of intangible assets 2,455 2,563
Goodwill and intangible asset write-downs 3,862 -
Property, plant and equipment write-downs 450 -
Share-based payment expense 433 589
Fair value adjustments to contingent consideration (643) (395)
Deferred income taxes (2,502) (2,821)
Gain on disposal of property, plant and equipment (27) (5)
7,502 8,317
Changes in non-cash working capital
Trade and other receivables 4,816 (1,748)
Inventories (7,834) (2,899)
Trade and other payables (135) 759
Provisions 136 (994)
Income taxes payable (receivable) (889) 200
3,596 3,635
Financing Activities
Proceeds from issuance of common shares - net of issuance costs 60 49
Proceeds from borrowings - net of deferred finance charges 5,725 36,848
Repayment of borrowings (5,100) (4,325)
Repayment of finance lease liability (610) (284)
75 32,288
Investing Activities
Acquisition of subsidiaries - net of cash acquired - (30,044)
Additions to property, plant and equipment (3,079) (2,478)
Proceeds on disposal of property, plant and equipment 54 6
Additional contingent consideration paid on acquisitions (489) (62)
Additions to intangible assets (117) (128)
(3,631) (32,706)
Foreign Exchange Gain on Cash Held in Foreign Currency 78 51
Increase in Cash and Cash Equivalents 118 3,268
Cash and Cash Equivalents
Beginning of Year 3,966 698
End of Year $ 4,084 $ 3,966
Additional Cash Flows Information:
Interest paid $ 3,281 $ 3,034
Income taxes paid 2,176 2,396

Opta Minerals Inc.

Interim Segmented Information
For the Twelve Months Ended December 31, 2013 and 2012
(Unaudited)
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.

2013
Steel and Industrial
Magnesium Minerals Corporate Total
External revenue by market
Canada $ 13,380 $ 12,564 - $ 25,944
U.S 47,922 33,193 - 81,115
Europe 12,739 13,267 - 26,006
Other 20 8,350 - 8,370
Total revenue from external customers 74,061 67,374 - 141,435
Segment profit (loss) before corporate expenses, goodwill and intangible asset write-downs, property, plant and equipment write-downs, fair value adjustments to contingent consideration, finance expense and income taxes 12,849 (1,203) - 11,646
Goodwill and intangible asset write-downs - (3,862) - (3,862)
Property, plant and equipment write-downs - (450) - (450)
Fair value adjustments to contingent consideration 514 - 129 643
Corporate expenses - - (5,629) (5,629)
Segment profit (loss) before finance expense and income taxes 13,363 (5,515) (5,500) 2,348
Finance expense - - - (3,665)
Income tax recovery - - - 1,136
Loss for the year - - - (181)
Total assets as at December 31, 2013 64,511 65,549 - 130,060
Total liabilities as at December 31, 2013 14,872 5,769 59,761 80,402
Depreciation of property, plant and equipment 1,569 1,890 196 3,655
Amortization of intangible assets 2,159 138 158 2,455
Goodwill and intangible assets as at December 31, 2013 40,961 651 118 41,730
Expenditures on property, plant and equipment 1,648 1,158 273 3,079

Opta Minerals Inc.

Interim Segmented Information
For the Twelve Months Ended December 31, 2013 and 2012
(Unaudited)
Expressed in Thousands of US Dollars

2012
(Restated)
Steel and Industrial
Magnesium Minerals Corporate Total
External revenue by market
Canada $ 14,936 $ 14,306 - $ 29,242
U.S 48,453 27,347 - 75,800
Europe 14,271 4,883 - 19,154
Other 48 2,407 - 2,455
Total revenue from external customers 77,708 48,943 - 126,651
Segment profit (loss) before corporate expenses, fair value adjustments to contingent consideration, finance expense and income taxes 14,524 1,674 - 16,198
Fair value adjustments to contingent consideration 395 - - 395
Corporate expenses - - (7,191) (7,191)
Segment profit (loss) before finance expense and income taxes 14,919 1,674 (7,191) 9,402
Finance expense - - - (4,213)
Income tax recovery - - - 84
Profit for the year - - - 5,273
Total assets as at December 31, 2012 74,810 58,654 2,429 135,893
Total liabilities as at December 31, 2012 19,524 6,653 61,357 87,534
Depreciation of property, plant and equipment 1,427 1,523 163 3,113
Amortization of intangible assets 2,172 194 197 2,563
Goodwill and intangible assets as at December 31, 2012 43,668 4,647 284 48,599
Expenditures on property, plant and equipment 1,291 881 306 2,478

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

Included in the steel and magnesium segment is revenue from two customers that individually exceed 10% of the Company's revenue.

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