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

Opta Minerals Inc.

November 03, 2005 18:29 ET

Opta Minerals Inc. Reports Third Quarter Results for Fiscal 2005

WATERDOWN, ONTARIO--(CCNMatthews - Nov. 3, 2005) - Opta Minerals Inc. (TSX:OPM)(TSX:OPM.WT), a vertically integrated producer, manufacturer, distributor and recycler of silica-free loose abrasives, industrial minerals, specialty sands and related products, today announced results for the quarter ended September 30, 2005. All figures are in Canadian dollars and in accordance with Canadian Generally Accepted Accounting Principles (GAAP), except where otherwise noted.

Highlights:

- Canadian distribution agreement for Chromite renegotiated to include US and Mexico.

- First commercial production of material at Company's new Attica New York facility.

- Continued development and introduction of new products into the marketplace.

- Long term debt restructured to reduce interest and preserve cash in operations.

- New Orleans facility now accessible by truck and repairs to the plant are under way.

Opta Minerals reported 2005 third quarter revenue of $10,231,000, bringing year to date revenue to $31,967,000, a 0.5% increase over the first nine months of 2004. Earnings before income taxes and stock compensation expense for the quarter were $886,000, bringing year to date earnings before income taxes and stock compensation expense to $3,581,000, a decrease of 8.2% over the first nine months of 2004.

"Results from US operations have been significantly impacted by the decline in value of the US dollar and the continued effects of hurricanes Katrina & Rita on operations in New Orleans. Had the foreign exchange rate remained consistent with 2004, year to date earnings before taxes and stock compensation expense would have been $3,802,000, a decrease of 2.5% over the first nine months of 2004. Ongoing efforts throughout the quarter to gain access to our New Orleans facility, assess damages and source materials to conduct repairs has required significant management resources that would have been dedicated to pursuing growth opportunities for the Company. The good news is that we now have access to the site and repairs are underway.

We have however, seen some very positive developments during the quarter as well. First, we have renegotiated our distribution agreement for Chromite sands to include the United States and Mexico. This represents a significant increase in our addressable market for Chromite products that will contribute greatly to the Company's results in the near future. We have invested in approximately $2,623,000 of additional inventory to take advantage of this opportunity. Second, we have begun commercial production of coal slag abrasives and roofing shingle granules at our Attica facility. Produced material is being complemented by other speciality abrasives to provide customers with the broadest choice of abrasive materials of any supplier in the area. We are confident that this operation will contribute strong bottom line results to the Company in 2006.

Bringing new products to market continues to be a very important component of the Company's growth strategy. During the quarter, I am pleased to report that we have begun commercial production and sale of a Nickel based abrasive, ("PowerBlast") and coloured sand for industrial uses, both of which were developed in house. We have also sourced a high quality glass bead which we intend to distribute throughout North America. Glass beads are used in a wide variety of abrasive blasting applications as well as being used as a reflective material in roadway paint.

Finally in September we replaced the loan owing to SunOpta with third party debt financing. The previous SunOpta loan of approximately $10,070,000 was payable over four years. This was repaid during the quarter without penalty by drawing on a new $8,000,000 facility that is payable over 10 years. The Company's operating facility was also extended by $2,500,000 but was not drawn upon for the settlement. Currently, the interest charged by the third party lender is lower than what would be charged by SunOpta. In addition, cash flows over the next four years will be significantly improved as current repayment obligations over that period will be $3,200,000 rather than the $10,070,000 that would be due to SunOpta" said David Kruse, President and Chief Executive Officer.

Net earnings for the third quarter were $546,000 or $0.03 per diluted common share, bringing year to date earnings to $1,762,000 or $0.11 per diluted common share as compared to $2,485,000 or $0.21 per diluted common share in 2004. Year to date results for the nine months ended September 30, 2005 include $454,000 in non deductible expenses relating to stock compensation granted to employees, officers and directors of the Company.

The Company continues to maintain a strong balance sheet, with working capital of $21,970,000 and total assets of $46,782,000. The debt to equity ratio as at September 30, 2005 was 0.24 to 1.00. The Company has cash resources of approximately $3,273,000 and has available credit facilities of a further $12,500,000. It is intended that these resources will be used to generate further shareholder value through strategic acquisitions and investment in the Company's existing operations.

Opta Mineral's President and CEO, David Kruse, plans to host a conference call at 10:00 AM Eastern Standard Time, on Tuesday November 8th , to discuss quarterly 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 (800) 616-9004 or (719) 457-2620 followed by pass code: 4864910#. If you are unable to listen live, the conference call will be archived and can be accessed at the following replay numbers between November 8th and November 12th with the toll free dial-in number (888) 203-1112 or (719) 457-0820 followed by pass code: 4864910#.

Opta Minerals is a vertically integrated producer, manufacturer, distributor and recycler of silica-free loose abrasives, industrial minerals, specialty sands and related products for use primarily in the foundry, steel, marine/bridge cleaning and municipal water filtration industries. The Company has experienced solid growth since July 1995, through a combination of internal growth and successfully integrated strategic acquisitions to become one of the dominant regional suppliers of silica-free loose abrasives in a number of select markets on the east coast of North America. These results were achieved while the Company was an operating group of SunOpta and during a period in which SunOpta dedicated the majority of its resources to building its core organic and natural food business.

The Company currently has production and distribution facilities in Ontario, Quebec, Louisiana, South Carolina, Virginia, Maryland and New York and one of the broadest product lines in the industry. Recognizing that the fragmentation and lack of consolidation among suppliers in its industry has provided it with a strategic growth opportunity, the Company intends to capitalize on this opportunity to become one of the dominant North American suppliers of silica-free loose abrasives while at the same time leveraging this core expertise to expand its breadth of services and product offering in other industrial minerals. In order to achieve this objective, the Company intends to accelerate its revenue and market share growth over the next several years by making a number of additional strategic acquisitions, through geographic expansion and through continued development of new products and services.

FOOTNOTES:

Earnings before income taxes and stock compensation expense as defined below, 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 publicly traded companies.

This news release contains references to earnings before income taxes and stock compensation expense. Opta defines earnings before income taxes and stock compensation as gross profit less selling general and administrative expenses, interest expense, other income and Foreign exchange. This is a non-GAAP earnings measure which is used by Opta to assess the operating performance of its ongoing business.



For the three month period
ended September 30,
2005 2004
$ $

Earnings before income taxes and
stock compensation expense 886 1,246

Stock Compensation Expense 22 -

Provision for Income Taxes 318 408
-----------------------------

Net Earnings for the Period on
a GAAP basis 546 838


Except for historical information contained herein, this news release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially. Factors that might cause a difference include, but are not limited to, those relating to fluctuations in the exchange rate between the U.S. dollar and the Canadian dollar and other currencies, general economic conditions and our ability to execute our growth strategy. Opta will not update these forward-looking statements to reflect events or circumstances after the date hereof. More detailed information about potential factors that could affect Opta's financial results is included in the documents Opta files from time to time with Canadian securities regulatory authorities.



Opta Minerals Inc.
Consolidated Statements of Earnings
For the three months ended September 30, 2005 and 2004
(Expressed in thousands of Canadian dollars,
except per share amounts)
(Unaudited)

2005 2004
$ $

Revenue 10,231 10,545

Cost of goods sold 8,034 8,358
-----------------------

Gross profit 2,197 2,187

Selling, general and administrative expenses 1,273 937
-----------------------

Earnings before the following 924 1,250
-----------------------

Interest expense - net 115 65

Stock compensation expense 22 -

Foreign exchange loss (gain) (77) (61)
-----------------------

Earnings before income taxes 864 1,246

Provision for income taxes 318 408
-----------------------

Net earnings for the period 546 838
-----------------------
-----------------------

Earnings per share for the period
Basic and diluted 0.03 0.07


Opta Minerals Inc.
Consolidated Statements of Earnings
For the nine months ended September 30, 2005 and 2004
(Expressed in thousands of Canadian dollars,
except per share amounts)
(Unaudited)

2005 2004
$ $

Revenue 31,967 31,822

Cost of goods sold 24,422 24,630
-----------------------

Gross profit 7,545 7,192

Selling, general and administrative expenses 3,752 3,054
-----------------------

Earnings before the following 3,793 4,138
-----------------------

Interest expense - net 347 310

Stock compensation expense 454 -

Foreign exchange gain (135) (73)
-----------------------

Earnings before income taxes 3,127 3,901

Provision for income taxes 1,365 1,416
-----------------------

Net earnings for the period 1,762 2,485
-----------------------
-----------------------

Earnings per share for the period
Basic and diluted 0.11 0.21


Opta Minerals Inc.
Consolidated Balance Sheets
As at September 30, 2005 and December 31, 2004
(Expressed in thousands of Canadian dollars,
except per share amounts)
(Unaudited)

September 30, 2005, December 31,
2005 $ 2004 $
------------------------------------

Assets

Current assets
Cash and cash equivalents 3,273 448
Accounts receivable 6,702 5,845
Inventories 14,834 9,073
Prepaid expenses and
other current assets 785 1,177
Income taxes recoverable 304 -
Due from Affiliates 221 -
------------------------------------
26,119 16,543

Property, plant and
equipment - net 12,639 11,464

Goodwill and intangible
assets - net 8,024 7,841
------------------------------------
46,782 35,848
------------------------------------
------------------------------------

Liabilities

Current liabilities
Accounts payable and accrued
liabilities 3,097 3,850
Due to affiliates - 15,704
Current portion of
long-term debt 960 173
Current portion of preference
shares 92 109
------------------------------------
4,149 19,836

Long-term debt 7,208 15

Long-term portion of
preference shares - 28

Future income taxes 544 1,192
------------------------------------
11,901 21,071
------------------------------------

Shareholder's Equity

Capital stock
Authorized: Unlimited number
of common shares and
preference shares without
par value

Issued
16,950,000 (December 31,
2004 - 100) common shares 18,245 -

Contributed surplus 834 -

Retained earnings 17,568 15,806

Currency Translation Adjustment (1,766) (1,029)
------------------------------------
34,881 14,777
------------------------------------
46,782 35,848
------------------------------------
------------------------------------


Opta Minerals Inc.
Segmented Information
For the three months ended September 30, 2005
(Expressed in thousands of Canadian dollars)
(Unaudited)
---------------------------------------------------------------------

September 30, 2005
--------------------------------------

Manufacturing
and St. Bruno de
distribution Guigues quarry
operations operations Total
$ $ $

External revenue by market
Canada 5,210 381 5,591
U.S. 4,490 80 4,570
Other 68 2 70
--------------------------------------

Total revenue from external
customers 9,768 463 10,231
--------------------------------------
--------------------------------------

Segment net earnings (loss)
before interest expense and
income taxes 862 117 979
Interest expense 115
Provision for income taxes 318
--------------------------------------

Net earnings 546
--------------------------------------
--------------------------------------

Total assets as at
September 30, 2005 43,738 3,044 46,782
--------------------------------------
--------------------------------------

Amortization 328 42 370
--------------------------------------
--------------------------------------

Goodwill and intangible assets
as at September 30, 2005 8,024 - 8,024
--------------------------------------
--------------------------------------

Expenditures on property,
plant and equipment 977 - 977
--------------------------------------
--------------------------------------


Opta Minerals Inc.
Segmented Information
For the three months ended September 30, 2004
(Expressed in thousands of Canadian dollars)
(Unaudited)
---------------------------------------------------------------------

September 30, 2004
--------------------------------------

Manufacturing
and St. Bruno de
distribution Guigues quarry
operations operations Total
$ $ $

External revenue by market
Canada 7,802 416 8,218
U.S. 2,216 111 2,327
--------------------------------------

Total revenue from external
customers 10,018 527 10,545
--------------------------------------
--------------------------------------

Segment net earnings before
interest expense and income
taxes 1,248 63 1,311
Interest expense 65
Provision for income taxes 408
--------------------------------------

Net earnings 838
--------------------------------------
--------------------------------------

Total assets as at
September 30, 2004 34,483 3,005 37,488
--------------------------------------
--------------------------------------

Amortization 257 40 297
--------------------------------------
--------------------------------------

Goodwill and intangible
assets as at September
30, 2004 8,107 - 8,107
--------------------------------------
--------------------------------------

Expenditures on property,
plant and equipment 747 11 758
--------------------------------------
--------------------------------------


Opta Minerals Inc.
Segmented Information
For the nine months ended September 30, 2005
(Expressed in thousands of Canadian dollars)
(Unaudited)
---------------------------------------------------------------------

September 30, 2005
--------------------------------------

Manufacturing
and St. Bruno de
distribution Guigues quarry
operations operations Total
$ $ $

External revenue by market
Canada 16,419 1,201 17,620
U.S. 13,987 225 14,212
Other 133 2 135
--------------------------------------

Total revenue from external
customers 30,539 1,428 31,967
--------------------------------------
--------------------------------------

Segment net earnings (loss)
before interest expense and
income taxes 3,305 169 3,474
Interest expense 347
Provision for income taxes 1,365
--------------------------------------

Net earnings 1,762
--------------------------------------
--------------------------------------

Amortization 929 139 1,068
--------------------------------------
--------------------------------------

Expenditures on property,
plant and Equipment 1,939 85 2,024
--------------------------------------
--------------------------------------


Opta Minerals Inc.
Segmented Information
For the nine months ended September 30, 2004
(Expressed in thousands of Canadian dollars)
(Unaudited)

---------------------------------------------------------------------

September 30, 2004
--------------------------------------

Manufacturing
and St. Bruno de
distribution Guigues quarry
operations operations Total
$ $ $

External revenue by market
Canada 17,426 1,409 18,835
U.S. 12,617 243 12,860
Other 127 - 127
--------------------------------------

Total revenue from external
customers 30,170 1,652 31,822
--------------------------------------
--------------------------------------

Segment net earnings before
interest expense and income
taxes 3,882 329 4,211
Interest expense 310
Provision for income taxes 1,416
--------------------------------------

Net earnings 2,485
--------------------------------------
--------------------------------------

Amortization 784 137 921
--------------------------------------
--------------------------------------

Expenditures on property,
plant and equipment 2,180 74 2,254
--------------------------------------
--------------------------------------


Contact Information

  • Opta Minerals Inc.
    David Kruse
    President and Chief Executive Officer
    (905) 689-6661, ext 401 or Toll Free: 1 (888) 689-6661
    (905) 689-0485 (FAX)
    or
    Opta Minerals Inc.
    James Wilson
    Chief Financial Officer and Secretary
    (905) 689-6661, ext 401 or Toll Free: 1 (888) 689-6661
    (905) 689-0485 (FAX)
    investor_relations@optaminerals.com
    www.optaminerals.com