Opta Minerals Inc.
TSX : OPM
TSX : OPM.WT

Opta Minerals Inc.

August 13, 2014 08:00 ET

Opta Minerals Inc. Reports Second Quarter Results for Fiscal 2014

WATERDOWN, ONTARIO--(Marketwired - Aug. 13, 2014) - Opta Minerals Inc. (TSX:OPM), today announced results for the three and six months ended June 30, 2014. 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 6 months 6 months
ended ended ended ended
June 30, June 30, Increase June 30, June 30, Increase
2014 2013 (Decrease) % 2014 2013 (Decrease) %
(restated) (restated)
Revenue $ 35,299 $ 37,462 $ (2,163 ) -5.8 % $ 69,788 $ 73,687 $ (3,899 ) -5.3 %
Gross Profit 6,511 5,587 924 16.5 % 11,408 12,842 (1,434 ) -11.2 %
18.4 % 14.9 % 3.5 % 16.3 % 17.4 % -1.1 %
EBITDA1 3,151 2,085 1,066 51.1 % 5,421 5,557 (136 ) -2.4 %
EBIT2 1,552 585 967 165.3 % 2,331 2,587 (256 ) -9.9 %
Income (Loss) 727 (552 ) 1,279 -231.7 % 473 218 255 117.0 %
EPS $ 0.04 $ (0.03 ) $ 0.07 $ 0.03 $ 0.01 $ 0.02

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 "We are extremely pleased with our operating results this quarter, a significant improvement from the first quarter and from the comparative period in 2013. Volumes and revenue have increased over the first quarter of 2014 in both the Industrials Minerals and Steel and Magnesium segments. Gross profit, EBIT, net income, EPS and EBITDA are all higher with SGA down over the previous year's second quarter demonstrating improved economic conditions as well as cost reductions primarily related to the integration of WGI. Interest expense has been reduced with overall lower net borrowings. We expect revenues in future quarters to improve further with recently awarded new business commencing in the third quarter. We have dramatically reduced inventory levels from the December 31, 2013 year end which has had a positive impact on our investment in working capital and cash flow. The key priorities for the balance of the year continue to be revenue growth and cash generation.

The Company announced on June 19, 2014 that the Board of Directors is conducting a review of strategic alternatives available to the Company with a view to enhancing value for all shareholders. This process is continuing."

Operational and Financial Highlights:

  • Second quarter revenue in the Steel and Magnesium segment increased 5.9% from the comparable quarter in 2013. On a year to date basis revenues have increased 2.2% over the comparable period in 2013. The Steel and Magnesium segment has benefited from increased volumes in the current quarter offset by certain prior year repricing. The Industrial Minerals segment decreased 17.0% over the comparable quarter in 2013 and 13.3% on a year to date basis as compared to the previous year. However, revenues have increased over the first quarter of 2014. The decrease in the quarter and year to date compared to the prior year was a combination of adverse weather early in the year and competitive conditions. The Company is currently focused on a number of opportunities to grow revenue and improve margins.
  • Gross profit increased quarter over quarter due to higher overall gross profit margins of 18.4% compared to 14.9% in the prior year quarter. Margins improved in the second quarter from both the first quarter and the same period last year, an encouraging trend. Gross profit year to date, however, remains below the same period a year ago due to lower volume within the Industrial segment and certain repricing.
  • Selling, general and administrative expenses (SGA) as a percent of revenues were 12.0% compared to 14.0% in the prior years second quarter. SGA as a percent of revenues were 12.3% compared to 14.5% on a year over year basis. With the integration of WGI completed, the Company has reduced SGA as synergies have been achieved from this acquisition. The Company is targeting 10% SGA as a percent of revenues and expects to achieve this primarily by a growth in revenues with limited increases in SGA.
  • The Company's working capital at June 30, 2014 amounted to $23.2 million and total assets were $125.8 million, as compared to $23.3 million and $130.1 million, respectively, at December 31, 2013. While overall working capital is approximately the same as at December 31, 2013, the mix has changed with the June 30, 2014 working capital reflecting higher trade and other receivables, lower trade and other payables offset by significantly lower inventories. This shift generates improved cash flow with more available liquid assets in working capital.
  • The debt to equity ratio at June 30, 2014 was 1.10 to 1.00, and at December 31, 2013 was 1.17 to 1.00.

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 six
Months Ended Months Ended
June 30 June 30
2014 2013 2014 2013
$ $ $ $
(restated ) (restated )
Income (Loss) for the Period 727 (552 ) 473 218
Finance Expense 847 1,154 1,748 2,114
Income Tax Expense (Recovery) (22 ) (17 ) 110 255
Depreciation and Amortization 1,505 1,500 2,984 3,044
Fair Value Adjustments to Contingent Consideration 94 - 106 (74 )
EBITDA1 3,151 2,085 5,421 5,557
Subtract:
Depreciation and Amortization 1,505 1,500 2,984 3,044
Fair Value Adjustments to Contingent Consideration 94 - 106 (74 )
EBIT2 1,552 585 2,331 2,587

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 focus on opportunities to grow revenue and improve margins, its targets with respect to SGA as a percent of revenues, its focus on reducing costs everywhere in the business to improve profitability and the Company's continuing review of strategic alternatives with a view to enhancing value for all shareholders, 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 June 30, 2014
(Unaudited)
Expressed in Thousands of US Dollars (except per share amounts and number of shares)
June 30, December 31,
2014 2013
Assets
Current
Cash and cash equivalents $ 3,008 $ 4,084
Trade receivables, other receivables and prepayments 20,543 14,676
Inventories 32,708 39,525
Income taxes receivable 416 544
56,675 58,829
Property, Plant and Equipment 27,089 28,030
Intangible Assets 29,912 31,071
Goodwill 10,674 10,659
Deferred Income Tax Assets 1,481 1,471
$ 125,831 $ 130,060
Liabilities
Current
Trade and other payables $ 12,035 $ 13,961
Borrowings 20,485 20,721
Provisions 601 520
Other liabilities 369 348
33,490 35,550
Borrowings 35,078 37,539
Derivative Financial Instruments 358 311
Provisions 121 91
Other Liabilities 195 371
Deferred Income Tax Liabilities 6,127 6,540
75,369 80,402
Equity Attributable to the Shareholders of the Company
Capital Stock
Authorized without limit as to number -
Preference shares (without par value)
Common shares
Issued -
18,118,612 common shares (December 31, 2013 - 18,111,247) 17,894 17,882
Contributed Surplus 4,564 4,358
Accumulated Other Comprehensive Loss (749 ) (862 )
Retained Earnings 28,753 28,280
50,462 49,658
$ 125,831 $ 130,060
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Income (Loss)
For the Three Months Ended June 30, 2014 and 2013
(Unaudited)
Expressed in Thousands of US Dollars (except per share amounts)
June 30, June 30,
2014 2013
(Restated )
Revenue $ 35,299 $ 37,462
Cost of Goods Sold 28,788 31,875
Gross Profit 6,511 5,587
Expenses
Selling, general and administrative 4,249 5,242
Fair value adjustments to contingent consideration 94 -
Other expenses (income) 616 (240 )
4,959 5,002
Income Before Finance Expense and Income Taxes 1,552 585
Finance expense 847 1,154
Income (Loss) Before Income Taxes 705 (569 )
Income tax recovery 22 17
Income (loss) for the Period Attributable to the Shareholders of the Company $ 727 $ (552 )
Earnings (loss) per share for the period - basic and diluted $ 0.04 $ (0.03 )
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Income
For the Six Months Ended June 30, 2014 and 2013
(Unaudited)
Expressed in Thousands of US Dollars (except per share amounts)
June 30, June 30,
2014 2013
(Restated )
Revenue $ 69,788 $ 73,687
Cost of Goods Sold 58,380 60,845
Gross Profit 11,408 12,842
Expenses
Selling, general and administrative 8,606 10,683
Fair value adjustments to contingent consideration 106 (74 )
Other expenses (income) 365 (354 )
9,077 10,255
Income Before Finance Expense and Income Taxes 2,331 2,587
Finance expense 1,748 2,114
Income Before Income Taxes 583 473
Income tax expense 110 255
Income for the Period Attributable to the Shareholders of the Company $ 473 $ 218
Earnings per share for the period - basic and diluted $ 0.03 $ 0.01
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Comprehensive Income (Loss)
For the Three Months Ended June 30, 2014 and 2013
(Unaudited)
Expressed in Thousands of US Dollars
June 30, June 30,
2014 2013
(Restated )
Income (Loss) for the Period Attributable to the Shareholders of the Company $ 727 $ (552 )
Other Comprehensive Income, net of income taxes
Items that may be reclassified subsequently to profit or loss
Unrealized gain on translation of foreign operations 53 607
Unrealized gain on derivative financial instruments designated as cash flow hedges 24 445
Other comprehensive income, net of income taxes 77 1,052
Comprehensive Income Attributable to the Shareholders of the Company $ 804 $ 500
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Comprehensive Income
For the Six Months Ended June 30, 2014 and 2013
(Unaudited)
Expressed in Thousands of US Dollars
June 30, June 30,
2014 2013
(Restated )
Income for the Period Attributable to the Shareholders of the Company $ 473 $ 218
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 147 263
Unrealized gain (loss) on derivative financial instruments designated as cash flow hedges
(34
)
221
Other comprehensive income, net of income taxes 113 484
Comprehensive Income Attributable to the Shareholders of the Company $ 586 $ 702
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Changes in Equity
For the Six Months Ended June 30, 2014 and 2013
(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, 2014 18,111,247 $ 17,882 $ 4,358 $ (230 ) $ (632 ) $ 28,280 $ 49,658
Comprehensive Income (Loss)
Income for the period - - - - - 473 473
Unrealized gain on translation of foreign operations
-

-

-

-

147

-

147
Unrealized loss on derivative financial instruments designated as cash flow hedges

-


-


-


(34
)

-


-


(34
)
Total Comprehensive Income (Loss) - - - (34 ) 147 473 586
Transactions with Shareholders
Employee share purchase plan 7,365 12 - - - - 12
Share-based payment expense - - 206 - - - 206
Total Transactions with Shareholders 7,365 12 206 - - - 218
At June 30, 2014 18,118,612 $ 17,894 $ 4,564 $ (264 ) $ (485 ) $ 28,753 $ 50,462
At January 1, 2013 18,084,559 $ 17,822 $ 3,925 $ (293 ) $ (1,556 ) $ 28,461 $ 48,359
Comprehensive Income - restated
Income for the period - - - - - 218 218
Unrealized gain on translation of foreign operations
-

-

-

-

263

-

263
Unrealized gain on derivative financial instruments designated as cash flow hedges

-


-


-


221


-


-


221
Total Comprehensive Income - - - 221 263 218 702
Transactions with Shareholders
Employee share purchase plan 8,946 26 - - - - 26
Share options exercised 8,077 15 (15 ) - - - -
Share-based payment expense - - 205 - - - 205
Total Transactions with Shareholders 17,023 41 190 - - - 231
At June 30, 2013 18,101,582 $ 17,863 $ 4,115 $ (72 ) $ (1,293 ) $ 28,679 $ 49,292
* AOCI - Accumulated Other Comprehensive Income
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2014 and 2013
(Unaudited)
Expressed in Thousands of US Dollars (except per share amounts and number of shares)
June 30, June 30,
2014 2013
(Restated )
Cash Provided by (Used in) -
Operating Activities
Income for the period $ 473 $ 218
Items not affecting cash:
Depreciation of property, plant and equipment 1,867 1,778
Amortization of intangible assets 1,117 1,266
Share-based payment expense 206 190
Loss (gain) on disposal of property, plant and equipment 4 (5 )
Fair value adjustments to contingent consideration 106 (74 )
Deferred income taxes (427 ) (462 )
3,346 2,911
Changes in non-cash working capital
Trade receivables, other receivables and prepayments (5,799 ) (3,718 )
Inventories 6,941 (3,375 )
Trade and other payables (1,849 ) 2,853
Provisions 108 14
Income taxes receivable 115 (660 )
2,862 (1,975 )
Financing Activities
Proceeds from issuance of common shares - net of issuance costs 12 41
Proceeds from borrowings - net of deferred finance charges - 7,318
Repayment of borrowings - net of deferred finance charges (2,534 ) (2,582 )
Repayment of finance lease liabilities (159 ) (437 )
(2,681 ) 4,340
Investing Activities
Additions to property, plant and equipment (961 ) (2,030 )
Proceeds on disposal of property, plant and equipment 12 9
Additions to intangible assets (37 ) (99 )
Acquisition of subsidiaries - (175 )
Additional contingent consideration paid on acquisitions (260 ) (296 )
(1,246 ) (2,591 )
Effect of Foreign Exchange Loss on Cash and Cash Equivalents (11 ) (22 )
Net Decrease in Cash and Cash Equivalents (1,076 ) (248 )
Cash and Cash Equivalents
Beginning of Period 4,084 3,966
End of Period $ 3,008 $ 3,718
Opta Minerals Inc.
Interim Segmented Information
For the Three Months Ended June 30, 2014 and 2013
(Unaudited)
Expressed in Thousands of US Dollars
Three Months Ended June 30, 2014
Steel and Industrial
Magnesium Minerals Corporate Total
External revenue by market
Canada $ 3,384 $ 3,176 $ - $ 6,560
US 12,582 7,227 - 19,809
Europe 3,552 3,012 - 6,564
Other 2 2,364 - 2,366
Total revenue from external customers 19,520 15,779 - 35,299
Segment income before corporate expenses, fair value adjustments to contingent consideration, finance expense and income taxes 2,984 1,229 - 4,213
Fair value adjustments to contingent consideration (94 ) - - (94 )
Corporate expenses - - (2,567 ) (2,567 )
Segment income (loss) before finance expense and income taxes 2,890 1,229 (2,567 ) 1,552
Finance expense - - - (847 )
Income tax recovery - - - 22
Income for the period - - - 727
Depreciation of property, plant and equipment 459 447 40 946
Amortization of intangible assets 540 1 18 559
Expenditures on property, plant and equipment $ 663 $ 61 $ 5 $ 729
Opta Minerals Inc.
Interim Segmented Information
For the Six Months Ended June 30, 2014 and 2013
(Unaudited)
Expressed in Thousands of US Dollars
Six Months Ended June 30, 2014
Steel and Industrial
Magnesium Minerals Corporate Total
External revenue by market
Canada $ 7,089 $ 5,369 $ - $ 12,458
US 24,909 14,832 - 39,741
Europe 6,943 6,323 - 13,266
Other 2 4,321 - 4,323
Total revenue from external customers 38,943 30,845 - 69,788
Segment income before corporate expenses, fair value adjustments to contingent consideration, finance expense and income taxes
5,486

704

-

6,190
Fair value adjustments to contingent consideration (106 ) - - (106 )
Corporate expenses - - (3,753 ) (3,753 )
Segment income (loss) before finance expense and income taxes 5,380 704 (3,753 ) 2,331
Finance expense - - - (1,748 )
Income tax expense - - - (110 )
Income for the period - - - 473
Total assets as at June 30, 2014 68,997 53,121 3,713 125,831
Depreciation of property, plant and equipment 884 902 81 1,867
Amortization of intangible assets 1,078 1 38 1,117
Goodwill and intangible assets as at June 30, 2014 39,823 646 117 40,586
Expenditures on property, plant and equipment $ 828 $ 127 $ 6 $ 961
Opta Minerals Inc.
Interim Segmented Information
For the Three Months Ended June 30, 2014 and 2013
(Unaudited)
Expressed in Thousands of US Dollars
Three Months Ended June 30, 2013
(Restated )
Steel and Industrial
Magnesium Minerals Corporate Total
External revenue by market
Canada $ 3,242 $ 3,559 $ - $ 6,801
US 11,431 9,723 - 21,154
Europe 3,768 3,526 - 7,294
Other - 2,213 - 2,213
Total revenue from external customers 18,441 19,021 - 37,462
Segment income (loss) before corporate expenses, finance expense and income taxes 3,301 (1,208 ) - 2,093
Corporate expenses - - (1,508 ) (1,508 )
Segment income (loss) before finance expense and income taxes 3,301 (1,208 ) (1,508 ) 585
Finance expense - - - (1,154 )
Income tax recovery - - - 17
Loss for the period - - - (552 )
Depreciation of property, plant and equipment 367 471 51 889
Amortization of intangible assets 519 46 46 611
Expenditures on property, plant and equipment $ 962 $ 328 $ 31 $ 1,321
Opta Minerals Inc.
Interim Segmented Information
For the Six Months Ended June 30, 2014 and 2013
(Unaudited)
Expressed in Thousands of US Dollars
Six Months Ended June 30, 2013
(Restated )
Steel and Industrial
Magnesium Minerals Corporate Total
External revenue by market
Canada $ 6,681 $ 6,774 $ - $ 13,455
US 23,793 17,508 - 41,301
Europe 7,619 6,880 - 14,499
Other - 4,432 - 4,432
Total revenue from external customers 38,093 35,594 - 73,687
Segment income (loss) before corporate expenses, fair value adjustments to contingent consideration, finance expense and income taxes
6,787

(1,240
)
-

5,547
Fair value adjustments to contingent consideration 74 - - 74
Corporate expenses - - (3,034 ) (3,034 )
Segment income (loss) before finance expense and income taxes 6,861 (1,240 ) (3,034 ) 2,587
Finance expense - - - (2,114 )
Income tax expense - - - (255 )
Income for the period - - - 218
Total assets as at June 30, 2013 71,324 64,632 3,749 139,705
Depreciation of property, plant and equipment 730 947 101 1,778
Amortization of intangible assets 1,078 93 95 1,266
Goodwill and intangible assets as at June 30, 2013 41,666 4,709 174 46,549
Expenditures on property, plant and equipment $ 1,126 $ 745 $ 159 $ 2,030

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