Opta Minerals Inc.
TSX : OPM

Opta Minerals Inc.

August 10, 2012 07:30 ET

Opta Minerals Inc. Reports Second Quarter Results for Fiscal 2012

WATERDOWN, ONTARIO--(Marketwire - Aug. 10, 2012) - Opta Minerals Inc. (TSX:OPM), today announced results for the three and six months ended June 30, 2012. 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 ended June 30, 2012 3 months ended June 30, 2011 Increase (Decrease) % 6 months ended June 30, 2012 6 months ended June 30, 2011 Increase (Decrease) %
Revenue $ 31,214 $ 24,787 $ 6,427 25.9 % $ 59,546 $ 46,393 $ 13,153 28.4 %
Gross Profit 6,870 5,467 1,403 25.7 % 13,117 10,654 2,463 23.1 %
22.0 % 22.1 % (0.01 %) 22.0 % 23.0 % (1.0 %)
EBITDA1 2,904 3,092 (188 ) (6.1 %) 7,051 6,552 499 7.6 %
EBIT2 1,524 2,043 (519 ) (25.4 %) 4,375 4,487 (112 ) (2.5 %)
Net Earnings 1,322 1,035 287 27.7 % 2,832 2,458 374 15.2 %
EPS $ 0.07 $ 0.06 $ 0.01 $ 0.15 $ 0.14 $ 0.01
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 second quarter, Opta Minerals experienced solid revenue growth over the comparable period in 2011. Solid earnings in the steel sector were slightly offset by marginal results in the industrial minerals sector. We have continued to manage production to demand while focussing on our cost structure. We remain cautiously optimistic with the direction of the economic environment in our business."

Operational Highlights:

  • Revenue in the Mill and Foundry Products and Services segment increased 42.0% over the comparable quarter in 2011 due largely to the demand for lime blends and chromite and, the acquisition of Babco Industrial Corp. during the first quarter. Revenue in the Abrasive Products Manufacturing and Distribution segment decreased 13.3% over the comparable quarter in 2011 due to a decrease in demand for metallurgical slags.

  • Gross profit increased quarter over quarter. Gross profit as a percentage of revenue has declined slightly as a result of some weakness in the industrial minerals sector and product mix.

  • Selling, general and administrative expenses (SGA) increased to 15.6% of revenue for the second quarter of 2012 from 14.3% for the comparable quarter in 2011. Most of the increase was the result of a bad debt due to the bankruptcy filing of a large American steel producer and customer in the amount of $0.9 million and, costs associated with target acquisitions (see below).

  • Net earnings for the second quarter increased 27.7% over the comparable quarter in 2011. The majority of the increase was due to the recognition of deferred income tax assets from previously unrecognized non-capital loss carry forwards.

  • The foreign exchange loss was $0.5 million for the quarter as compared to a foreign exchange gain of $0.1 million for the same quarter in 2011. The results reflected a year-over-year foreign exchange loss of $0.8 million largely due to the weakness of the Euro.

  • For the three months ended June 30, 2012, cash flow from operating activities before changes in working capital generated $1.6 million versus $2.0 million in the second quarter of 2011. The positive cash flow was used to finance working capital, namely trade receivables.

  • On July 13, 2012, the Company tendered an offer to acquire all of the outstanding shares of WGI Heavy Minerals, Incorporated (WGI), for Cdn $0.60 in cash per share by way of a take-over bid. The offer valued WGI at approximately Cdn $15.5 million on a fully diluted basis. The offer will be funded by bank term debt.

  • The Company's working capital at June 30, 2012 amounted to $15.9 million and total assets were $119.8 million, as compared to $14.7 million and $92.4 million respectively at December 31, 2011.

  • The debt-to-equity ratio at June 30, 2012 was 1.04 to 1.00, versus 0.65 to 1.00 at December 31, 2011. The increased debt-to-equity ratio is largely attributable to the acquisition of Babco Industrial Corp. during the first quarter, financed by bank term debt.

Opta Minerals President and CEO, David Kruse, plans to host a conference call at 2:00PM Eastern Standard Time on Friday, August 10th, 2012 to discuss second quarter 2012 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-(866) 321-6651 or 1-(416) 642-5212; quote confirmation code 5048710. If you are unable to listen live, the conference call will be archived and can be accessed between August 10th, 2012 and August 17th, 2012, with the toll free dial-in number 1-(888) 203-1112 or 1-(647) 436-0148 followed by pass code 5048710.

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, 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-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 six
Months Ended Months Ended
June 30 June 30
2012 2011 2012 2011
$ $ $ $
Net Earnings for the Period 1,322 1,035 2,832 2,458
Finance Expense 763 408 1,419 821
Income Taxes (561 ) 600 124 1,208
Depreciation and Amortization 1,380 1,049 2,676 2,065
EBITDA1 2,904 3,092 7,051 6,552
Subtract:
Depreciation and Amortization 1,380 1,049 2,676 2,065
EBIT2 1,524 2,043 4,375 4,487

Notes

1) The term "EBITDA" refers to earnings before deducting interest expense, provision for 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 asset depreciation. 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 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-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.

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.
Interim Condensed Consolidated Balance Sheets
As At June 30, 2012
(Unaudited)
Expressed in Thousands of US Dollars (except per share amounts and number of shares)
June 30, 2012 December 31, 2011
(Unaudited) (Audited)
Assets
Current
Cash and cash equivalents $ 233 $ 698
Trade and other receivables 17,366 12,515
Inventories 23,392 21,589
Derivative financial instruments 125 -
41,116 34,802
Property, Plant and Equipment 24,408 19,848
Intangible Assets 34,843 27,319
Goodwill 14,135 6,680
Deferred Income Tax Assets 5,305 3,793
$ 119,807 $ 92,442
Liabilities
Current
Trade and other payables 8,628 7,123
Borrowings 14,727 11,026
Derivative financial instrument - 256
Provisions 368 1,015
Other liabilities 653 444
Income taxes payable 784 168
Preference shares 45 46
25,205 20,078
Borrowings 32,339 16,526
Derivative Financial Instrument 571 -
Other Liabilities 1,869 1,481
Deferred Income Tax Liabilities 3,841 3,192
Deferred Income Tax Liability on Intangible Assets 10,659 8,650
74,484 49,927
Equity Attributable to the Shareholders of the Company
Capital Stock
Authorized without limit as to number -
Preference shares (without par value)
common shares
Issued -
18,068,052 common shares (December 31, 2011 - 18,061,784) 17,694 17,680
Contributed Surplus 3,772 3,429
Accumulated Other Comprehensive Loss (2,516 ) (2,135 )
Retained Earnings 26,373 23,541
45,323 42,515
$ 119,807 $ 92,442
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Income
For the Three Months Ended June 30, 2012 and 2011
(Unaudited)
Expressed in Thousands of US Dollars (except per share amounts)
June 30, June 30,
2012 2011
Revenue $ 31,214 $ 24,787
Cost of Goods Sold 24,344 19,320
Gross Profit 6,870 5,467
Expenses
Selling, general and administrative 4,862 3,554
Other expense (income) 484 (130 )
5,346 3,424
Operating Profit 1,524 2,043
Finance expense 763 408
Profit Before Income Taxes 761 1,635
Income taxes (561 ) 600
Profit for the Period Attributable to the Shareholders of the Company $
1,322

$

1,035
Earnings per share for the period -
basic and diluted 0.07 0.06
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Income
For the Six Months Ended June 30, 2012 and 2011
(Unaudited)
Expressed in Thousands of US Dollars (except per share amounts)
June 30, June 30,
2012 2011
Revenue $ 59,546 $ 46,393
Cost of Goods Sold 46,429 35,739
Gross Profit 13,117 10,654
Expenses
Selling, general and administrative 8,480 6,741
Other expense (income) 262 (574)
8,742 6,167
Operating Profit 4,375 4,487
Finance expense 1,419 821
Profit Before Income Taxes 2,956 3,666
Income taxes 124 1,208
Profit for the Period Attributable to the Shareholders of the Company $ 2,832 $ 2,458
Earnings per share for the period -
basic and diluted 0.15 0.14
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Comprehensive Income
For the Three Months Ended June 30, 2012 and 2011
(Unaudited)
Expressed in Thousands of US Dollars
June 30, June 30,
2012 2011
Profit for the Period Attributable to the Shareholders of the Company $ 1,322 $ 1,035
Other Comprehensive Income
Unrealized (loss) gain on translation of foreign operations (348 ) 263
Unrealized (loss) gain on derivative financial instruments (124 ) 81
Other comprehensive (loss) income, net of tax (472 ) 344
Comprehensive Income Attributable to the Shareholders of the Company $ 850 $ 1,379
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Comprehensive Income For the Six Months Ended June 30, 2012 and 2011
(Unaudited)
Expressed in Thousands of US Dollars
June 30, June 30,
2012 2011
Profit for the Period Attributable to the Shareholders of the Company $ 2,832 $ 2,458
Other Comprehensive Income
Unrealized (loss) gain on translation of foreign operations (208 ) 535
Unrealized (loss) gain on derivative financial instruments (173 ) 178
Other comprehensive (loss) income, net of tax (381 ) 713
Comprehensive Income Attributable to the Shareholders of the Company $ 2,451 $ 3,171
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Changes in Equity
For the Six Months Ended June 30, 2012 and 2011
(Unaudited)
Expressed in Thousands of US Dollars (except 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, 2012 18,061,784 $ 17,680 $ 3,429 $ (193 ) $ (1,942 ) $ 23,541 $ 42,515
Comprehensive Income
Profit for the period - - - - - 2,832 2,832
Unrealized loss on translation of foreign operations
-
- - - (208 ) - (208 )
Unrealized loss on financial derivative designated as a cash flow hedge - - - (173 ) - - (173 )
Total Comprehensive Income - - - (173 ) (208 ) 2,832 2,451
Transactions with Shareholders
Employee share purchase plan 6,268 14 - - - - 14
Share-based payment expense - - 343 - - - 343
Total Transactions with
Shareholders 6,268 14 343 - - - 357
At June 30, 2012 18,068,052 17,694 3,772 (366 ) (2,150 ) 26,373 45,323
At January 1, 2011 18,036,974 17,632 2,781 (596 ) (1,844 ) 19,891 37,864
Comprehensive Income
Profit for the period - - - - - 2,458 2,458
Unrealized gain on translation of foreign operations - - - - 535 - 535
Unrealized gain on financial derivative designated as a cash flow hedge - - - 178 - - 178
Total Comprehensive Income - - - 178 535 2,458 3,171
Transactions with Shareholders
Employee share purchase plan 4,807 10 - - - - 10
Share-based payment expense - - 270 - - - 270
Total Transactions with Shareholders 4,807 10 270 - - - 280
At June 30, 2011 18,041,781 $ 17,642 $ 3,051 $ (418 ) $ (1,309 ) $ 22,349 $ 41,315
*AOCI - Accumulated Other Comprehensive Income
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2012 and 2011
(Unaudited)
Expressed in Thousands of US Dollars
June 30, June 30,
2012 2011
Cash Provided by (Used in) -
Operating Activities
Profit for the period $ 2,832 $ 2,458
Items not affecting cash:
Depreciation of property, plant and equipment 1,419 1,061
Amortization of intangible assets 1,257 1,004
Share-based payment expense 343 270
Non-cash finance expense - (9 )
Deferred income taxes (1,554 ) (354 )
Loss on disposal of property, plant and equipment - 4
4,297 4,434
Changes in non-cash working capital
Trade and other receivables (4,369 ) (2,325 )
Inventories (1,446 ) (3,502 )
Trade and other payables 827 951
Provisions (647 ) (484 )
Income taxes payable 610 531
(728 ) (395 )
Financing Activities
Proceeds from issuance of common shares - net of issuance costs 14 10
Proceeds from borrowings, net of deferred financing costs 20,988 4,102
Repayment of finance lease liability (121 ) (55 )
Repayment of borrowings (1,835 ) (1,274 )
19,046 2,783
Investing Activities
Proceeds on disposal of property, plant and equipment - 2
Acquisition of subsidiary (17,530 ) -
Additions to property, plant and equipment (1,217 ) (812 )
Additions to intangible assets (25 ) (66 )
(18,772 ) (876 )
Foreign Exchange (Loss) Gain on Cash Held in Foreign Currency (11 ) 26
(Decrease) increase in Cash and Cash Equivalents (465 ) 1,538
Cash and Cash Equivalents
Beginning of Period 698 495
End of Period $ 233 $ 2,033
Additional Cash Flows Information:
Interest paid $ 1,435 $ 861
Income taxes paid 1,033 1,033
Opta Minerals Inc.
Segmented Information
For the Three Months Ended June 30, 2012 and 2011
(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.
Three Months Ended June 30, 2012
Mill and Foundry Products and Services Abrasive Products Manu-facturing and Distribution Operations Unallocated Total
External revenue by market
Canada $ 6,880 $ 1,613 $ - $ 8,493
US 13,995 4,596 - 18,591
Europe 4,062 14 - 4,076
Other 20 34 - 54
Total revenue from external customers 24,957 6,257 - 31,214
Segment profit before interest expense and income taxes 2,239 (187 ) (528 ) 1,524
Finance expense - - - (763 )
Income taxes - - - 561
Profit for the period - - - 1,322
Depreciation of property, plant and equipment 396 297 38 731
Amortization of intangible assets 601 - 48 649
Expenditures on property, plant and equipment $ 390 $ 153 $ 63 $ 606
Opta Minerals Inc.
Segmented Information
For the Three Months Ended June 30, 2012 and 2011
(Unaudited)
Expressed in Thousands of US Dollars
Three Months Ended June 30, 2011
Mill and Foundry Products and Services Abrasive Products Manu-facturing and Distribution Operations Unallocated Total
External revenue by market
Canada $ 2,496 $ 1,638 $ - $ 4,134
US 10,975 5,549 - 16,524
Europe 4,057 - - 4,057
Other 43 29 - 72
Total revenue from external customers 17,571 7,216 - 24,787
Segment profit before interest expense and income taxes 2,492 (221 ) (228 ) 2,043
Finance expense - - - (408 )
Income taxes - - - (600 )
Profit for the period - - - 1,035
Total assets as at June 30, 2011 57,493 33,654 3,968 95,115
Depreciation of property, plant and equipment 235 283 23 541
Amortization of intangible assets 462 7 39 508
Goodwill and intangible assets as at June 30, 2011 31,438 3,571 427 35,436
Expenditures on property, plant and equipment $ 389 $ 116 $ 6 $ 511
External revenue by market is attributed to countries based on location of the customer.
Included in the mill and foundry products and services segment is revenue from one customer that individually exceeds 10% of the Company's revenue.
Opta Minerals Inc.
Segmented Information
For the Six Months Ended June 30, 2012 and 2011
(Unaudited)
Expressed in Thousands of US Dollars
External revenue by market is attributed to countries based on location of the customer.
Included in the mill and foundry products and services segment is revenue from one customer that individually exceeds 10% of the Company's revenue.
Six Months Ended June 30, 2012
Mill and Foundry Products and Services Abrasive Products Manu-facturing and Distribution Operations Unallocated Total
External revenue by market
Canada $ 11,887 $ 2,878 $ - $ 14,765
US 27,317 9,316 - 36,633
Europe 8,039 14 - 8,053
Other 21 74 - 95
Total revenue from external customers 47,264 12,282 - 59,546
Segment profit before interest expense and income taxes 5,735 (523 ) (837 ) 4,375
Finance expense - - - (1,419 )
Income taxes - - - (124 )
Profit for the period - - - 2,832
Total assets as at June 30, 2012 82,426 33,659 3,722 119,807
Depreciation of property, plant and equipment 756 590 73 1,419
Amortization of intangible assets 1,155 6 96 1,257
Goodwill and intangible assets as at June 30, 2012 45,153 3,552 273 48,978
Expenditures on property, plant and equipment $ 680 $ 418 $ 119 $ 1,217
Opta Minerals Inc.
Segmented Information
For the Six Months Ended June 30, 2012 and 2011
(Unaudited)
Expressed in Thousands of US Dollars
Six Months Ended June 30, 2011
Mill and Foundry Products and Services Abrasive Products Manu-facturing and Distribution Operations Unallocated Total
External revenue by market
Canada $ 4,316 $ 3,089 $ - $ 7,405
US 21,646 9,619 - 31,265
Europe 7,651 - - 7,651
Other 43 29 - 72
Total revenue from external customers 33,656 12,737 - 46,393
Segment profit before interest expense and income taxes 5,277 (836 ) 46 4,487
Finance expense - - - (821 )
Income taxes - - - (1,208 )
Profit for the period - - - 2,458
Depreciation of property, plant and equipment 459 549 53 1,061
Amortization of intangible assets 915 13 76 1,004
Expenditures on property, plant and equipment $ 494 $ 258 $ 60 $ 812

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