Opta Minerals Inc.
TSX : OPM

Opta Minerals Inc.

November 10, 2010 16:39 ET

Opta Minerals Inc. Reports Third Quarter Results for Fiscal 2010

WATERDOWN, ONTARIO--(Marketwire - Nov. 10, 2010) - Opta Minerals Inc. (TSX:OPM) today announced results for the three and nine months ended September 30, 2010. 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, 2010, the net earnings were $1.7 million, or $0.10 per diluted common share, versus a net loss of $6.4 million, or $0.36 per diluted common share, for the third quarter in 2009. Year to date, the net earnings for the nine months ended September 30, 2010 were $3.5 million, or $0.20 per diluted common share, versus a net loss of $6.8 million, or $0.38 per diluted common share, during 2009. The prior period included a non-cash goodwill impairment charge in the amount of $7.2 million. Excluding the impact of this charge, earnings before goodwill impairment and non-controlling interest increased $1.0 million for the three months ended September 30, 2010, and $3.4 million for the nine months ended September 30, 2010, compared with the same periods in the prior year. Operating activities continue to be profitable owing to a strengthening of the global economy, an increase in steel production and the benefits of our cost-saving measures put in place during fiscal 2009.

Revenue for the three months ended September 30, 2010 increased 22% to $20.4 million from $16.7 million in 2009. Gross profit for the quarter increased to $5.2 million, or 25.4% of revenue, versus $4.2 million, or 25.0% of revenue in 2009. Revenue for the nine months ended September 30, 2010 increased 29.9% to $59.5 million from $45.8 million in 2009. Gross profit for the nine months ended September 30, 2010 increased to $15.2 million, or 25.5% of revenue, versus $9.6 million, or 20.9% of revenue, in 2009. The improvement in gross profit as a percentage of revenue over the previous period is a result of increased production, strengthening revenue and cost-saving measures.

David Kruse, President and CEO of Opta Minerals, noted, "During the third quarter, Opta Minerals continued to see a steady but modest increase in demand in our related industries. We have continued to increase production and monitor our cost structure. We are pleased, although cautious of the continued direction of the economic environment."

For the three months ended September 30, 2010, cash flow from operating activities before changes in working capital generated $2.9 million, versus $1.1 million in the third quarter of 2009. The strong cash flow was used to finance working capital and payments on short and long-term debt in the amount of $2.5 million. Year to date, cash flows from operating activities before changes in working capital generated $5.8 million, versus $1.4 million in 2009. The cash flow was used to finance working capital, repay short and long-term debt in the amount of $2.9 million and invest in property, plant and equipment in the amount of $1.2 million.

Selling, general and administrative expenses declined from 14.0% of revenue for the third quarter of 2009 to 13.8% of revenue in the third quarter of 2010. Year to date, selling, general and administrative expenses declined from 15.4% of revenue for 2009 to 13.3% of revenue in 2010. Most of the decrease was a result of the cost-reduction initiatives put in place by management during the past few years, offset by the strengthening Canadian dollar against the U.S. dollar, which affected the reported value of corporate costs, which are largely denominated in Canadian dollars.

EBITDA for the quarter increased from $2.5 million in 2009 to $4.0 million for the three months ended September 30, 2010. The year-over-year increase in EBITDA for the nine month ended September 30 was $5.4 million, or 129%, to $9.6 million in 2010. Opta Minerals remains focused on working capital management while maintaining production requirements to meet customer demands.

The Company's working capital at September 30, 2010 amounted to $13.2 million and total assets were $91.2 million, compared with $11.5 million and $88.5 million, respectively, for the same period in 2009. The debt-to-equity ratio at September 30, 2010 was 0.60 to 1.00, versus 0.76 to 1.00 at September 30, 2009.

Opta Minerals President and CEO, David Kruse, plans to host a conference call at 10:00AM Eastern Standard Time on Friday, November 12, 2010 to discuss third quarter 2010 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 3714355. If you are unable to listen live, the conference call will be archived and can be accessed between November 12, 2010 and November 19, 2010, with the toll free dial-in number 1-(888) 203-1112 or 1-(647) 436-0148 followed by pass code 3714355.

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.

NOTES:

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 Three     For the Nine  
    Months Ended     Months Ended  
    September 30     September 30  
    2010     2009     2010     2009  
(thousands of U.S. dollars)   $     $     $     $  
   
Net Earnings (Loss) for the Period   1,677     (6,416 )   3,517     (6,821 )
Interest expense   606     431     1,490     1,248  
Provision for (recovery of) income taxes   682     290     1,489     (248 )
Depreciation and amortization   1,044     964     3,065     2,802  
Goodwill impairment   -     7,198     -     7,198  
                         
EBITDA1   4,009     2,467     9,561     4,179  
Add (subtract):                        
Depreciation and amortization   (1,044 )   (964 )   (3,065 )   (2,802 )
Goodwill impairment   -     (7,198 )   -     (7,198 )
                         
Earnings (loss) before income taxes and interest2   2,965     (5,695 )   6,496     (5,821 )
                         
 
 
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 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 that of 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, 2010 and 2009                
Expressed in Thousands of U.S. Dollars (except per share amounts)                
                 
      2010       2009  
   
Revenue   $ 20,421     $ 16,745  
   
Cost of Goods Sold     15,230       12,564  
Gross Profit     5,191       4,181  
   
Selling, General and Administrative Expenses     2,812       2,347  
Earnings Before Undernoted Items, Income Taxes, Goodwill Impairmentand Non-controlling Interest     2,379       1,834  
   
Interest expense on long-term debt     498       299  
Interest expense     108       132  
Amortization of intangible assets     455       469  
Stock compensation expense     95       72  
Other (income) expense     -       21  
Foreign exchange gain     (1,136 )     (166 )
      20       827  
Earnings Before Income Taxes, Goodwill Impairment and Non-controlling Interest     2,359       1,007  
   
Provision for (recovery of) income taxes     682       290  
Net Earnings Before Goodwill Impairment and Non-Controlling Interest     1,677       717  
   
Goodwill impairment     -       7,198  
Net Earnings (Loss) Before Non-controlling Interest     1,677       (6,481 )
   
Non-controlling interest share of net loss     -       (65 )
Net Earnings (Loss) Attributable to Opta Minerals Inc.   $ 1,677     $ (6,416 )
   
Earnings per share for the period                
- Basic and diluted   $ 0.10     $ (0.36 )
                 
                 
                 
Opta Minerals Inc.                
Consolidated Statements of Earnings (Loss)                
For the Nine Month Periods Ended September 30, 2010 and 2009                
Expressed in Thousands of U.S. Dollars (except per share amounts)                
   
      2010       2009  
   
Revenue   $ 59,492     $ 45,810  
   
Cost of Goods Sold     44,320       36,213  
Gross Profit     15,172       9,597  
   
Selling, General and Administrative Expenses     7,907       7,039  
Earnings Before Undernoted Items, Income Taxes, Goodwill Impairmentand Non-controlling Interest     7,265       2,558  
   
Interest expense on long-term debt     1,200       854  
Interest expense     290       394  
Amortization of intangible assets     1,375       1,367  
Stock compensation expense     218       210  
Other (income) expense     -       305  
Foreign exchange gain     (824 )     (431 )
      2,259       2,699  
Earnings (Loss) Before Income Taxes, Goodwill Impairment andNon-controlling Interest     5,006       (141 )
   
Provision for (recovery of) income taxes     1,489       (248 )
Net Earnings Before Goodwill Impairment and Non-controllingInterest     3,517       107  
   
Goodwill impairment     -       7,198  
Net Earnings (Loss) Before Non-controlling Interest     3,517       (7,091 )
   
Net loss attributable to non-controlling interest     -       (270 )
Net Earnings (Loss) Attributable to Opta Minerals Inc.   $ 3,517     $ (6,821 )
   
Earnings (loss) per share for the period                
- Basic and diluted   $ 0.20     $ (0.38 )
   
   
   
Opta Minerals Inc.  
Consolidated Balance Sheets  
Expressed in Thousands of U.S. Dollars  
   
    September 30,   December 31,   September 30,  
    2010   2009   2009  
        (audited)      
                     
Assets                    
                     
Current                    
                     
  Cash and cash equivalents   $ 909   $ 781   $ 1,161  
  Accounts receivable     12,527     9,422     9,462  
  Inventories     20,118     17,181     17,239  
  Prepaid expenses and other current assets     847     628     1,310  
  Income taxes recoverable     -     584     210  
      34,401     28,596     29,382  
Property, Plant and Equipment     17,378     17,796     17,717  
Intangible and Other Assets     29,602     31,691     32,382  
Goodwill     6,496     6,019     6,019  
Future Income Taxes     3,292     2,779     3,034  
    $ 91,169   $ 86,881   $ 88,534  
                     
Liabilities                    
                     
Current                    
                     
  Bank indebtedness   $ 2,980   $ 3,355   $ 5,517  
  Accounts payable and accrued liabilities     12,733     8,544     7,869  
  Income taxes payable     929     -     -  
  Current portion of long-term debt     4,544     4,495     4,452  
  Current portion of preference shares     45     44     43  
      21,231     16,438     17,881  
Long-term Debt     16,735     18,912     19,101  
Other Long-term Liabilities     1,095     1,387     1,503  
Future Income Taxes     3,011     2,674     2,697  
Future Income Taxes on Intangible Assets     8,701     9,213     9,406  
      50,773     48,624     50,588  
                     
Shareholders' Equity                    
                     
Capital Stock                    
                     
  Authorized unlimited number of common shares and preference shares without par value                    
  Issued -                    
  18,033,519 (December 31, 2009 - 18,023,193; September 30, 2009 – 18,018,770) common shares     17,626     17,612     17,606  
                     
Contributed Surplus     2,168     1,950     1,875  
                     
Accumulated Other Comprehensive Income     1,892     3,502     3,894  
                     
Retained Earnings     18,710     15,193     14,841  
      40,396     38,257     38,216  
Non-controlling Interest     -     -     (270 )
    $ 91,169   $ 86,881   $ 88,534  
                 
                 
                 
Opta Minerals Inc.                
Consolidated Statements of Cash Flows                
For the Three Month Periods Ended September 30, 2010 and 2009                
Expressed in Thousands of U.S. Dollars                
   
      2010       2009  
   
Cash Provided By (Used in) -                
                 
  Operating Activities                
                 
    Net earnings (loss) for the period   $ 1,677     $ (6,481 )
    Items not affecting cash:                
    Amortization of property, plant and equipment     589       495  
    Amortization of intangible assets     455       469  
    Goodwill impairment     -       7,198  
    Other (income) expenses     -       (41 )
    Stock compensation expense     95       72  
    Future income taxes expense (recovery)     224       (516 )
    Realized foreign exchange gain on foreign operations     (172 )     (157 )
    Net loss on disposal of property, plant and equipment     -       80  
      2,868       1,119  
    Changes in non-cash working capital:                
    Accounts receivable     (632 )     (504 )
    Inventories     (2,552 )     1,300  
    Prepaid expenses and other current assets     (69 )     599  
    Accounts payable and accrued liabilities     2,589       235  
    Income taxes recoverable / payable     398       551  
      2,602       3,300  
  Financing Activities                
                 
    Proceeds from issuance of common shares - net of issuance costs     4       5  
    Decrease in bank indebtedness     (1,580 )     (2,835 )
    Proceeds from long-term debt     -       31  
    Repayment of long-term debt     (872 )     (1,450 )
      (2,448 )     (4,249 )
  Investing Activity                
                 
    Acquisition of property, plant and equipment     (350 )     (417 )
    Proceeds on disposal of property, plant and equipment     -       651  
      (350 )     234  
                 
Foreign Exchange (Loss) Gain on Cash Held in Foreign Currency     (6 )     4  
Decrease in Cash and Cash Equivalents     (202 )     (711 )
                 
Cash and Cash Equivalents                
  Beginning of Period     1,111       1,872  
  End of Period   $ 909     $ 1,161  
                 
Additional Cash Flows Information:                
                 
  Interest paid   $ 591     $ 416  
  Income taxes paid     -       235  
 
 
 
Opta Minerals Inc.
Consolidated Statements of Cash Flows
For the Nine Month Periods Ended September 30, 2010 and 2009
Expressed in Thousands of U.S. Dollars
 
      2010     2009
 
Cash Provided By (Used in) -            
             
  Operating Activities            
             
    Net earnings (loss) for the period   $ 3,517   $ (7,091)
    Items not affecting cash:            
    Amortization of property, plant and equipment     1,690     1,435
    Amortization of intangible assets     1,375     1,367
    Goodwill impairment     -     7,198
    Other (income) expenses     -     (96)
    Stock compensation expense     218     210
    Future income taxes recovery     (761)     (1,131)
    Realized foreign exchange gain on foreign operations     (275)     (618)
    Net loss on disposal of property, plant and equipment     -     80
      5,764     1,354
    Changes in non-cash working capital:            
    Accounts receivable     (3,297)     39
    Inventories     (3,060)     5,907
    Prepaid expenses and other current assets     (219)     540
    Accounts payable and accrued liabilities     3,566     (437)
    Income taxes recoverable / payable     1,492     183
      4,246     7,586
  Financing Activities            
             
    Proceeds from issuance of common shares - net of issuance costs     14     19
    Decrease in bank indebtedness     (443)     (3,141)
    Proceeds from long-term debt     -     795
    Repayment of long-term debt     (2,488)     (4,139)
      (2,917)     (6,466)
  Investing Activity            
             
    Acquisition of property, plant and equipment     (1,158)     (1,997)
    Proceeds on disposal of property, plant and equipment     -     651
      (1,158)     (1,346)
             
Foreign Exchange (Loss) Gain on Cash Held in Foreign Currency     (43)     10
Increase (Decrease) in Cash and Cash Equivalents     128     (216)
             
Cash and Cash Equivalents            
  Beginning of Period     781     1,377
  End of Period   $ 909   $ 1,161
             
Additional Cash Flows Information:            
             
  Interest paid   $ 1,531   $ 1,352
  Income taxes paid     609     662
   
   
   
Opta Minerals Inc.  
Segmented Information  
For the Three Months Ended September 30, 2010  
Expressed in Thousands of U.S. Dollars  
                           
    Three Month Period Ended September 30, 2010  
    Mill and Foundry Products and Services   Abrasive Products Manufacturing and Distribution Operations     Unallocated     Total  
   
External revenue by market                          
Canada   $ 2,763   $ 1,595   $ -   $ 4,358  
U.S     7,758     5,652     -     13,410  
Europe     2,559     -     -     2,559  
Other     19     75     -     94  
Total revenue from external customers   $ 13,099   $ 7,322     -   $ 20,421  
   
Segment earnings (loss) before interest expense and income taxes     2,084     370     511     2,965  
Interest expense on long-term debt                       (498 )
Interest expense                       (108 )
Provision for income taxes                       (682 )
Net earnings for the period                       1,677  
Total assets as at September 30, 2010     55,533     34,164     1,472     91,169  
Amortization of property, plant and equipment     273     279     37     589  
Amortization of intangible assets     449     6     -     455  
Goodwill and intangible assets as at September 30, 2010     32,510     3,588     -     36,098  
Expenditures on property, plant and equipment   $ 141   $ 165   $ 44   $ 350  
   
   
   
Opta Minerals Inc.  
Segmented Information  
For the Nine Months Ended September 30, 2010  
Expressed in Thousands of U.S. Dollars  
                             
    Nine Month Period Ended September 30, 2010  
    Mill and Foundry Products and Services   Abrasive Products Manufacturing and Distribution Operations   Unallocated       Total  
   
External revenue by market                            
Canada   $ 7,320   $ 4,560   $ -     $ 11,880  
U.S     23,450     15,760     -       39,210  
Europe     8,213     11     -       8,224  
   
Other     36     142     -       178  
Total revenue from external customers     39,019     20,473     -       59,492  
   
Segment earnings (loss) before interest expense and income taxes     5,881     927     (312 )     6,496  
Interest expense on long-term debt                         (1,200 )
Interest expense                         (290 )
Provision for income taxes                       (1,489 )
Net earnings for the period                         3,517  
Amortization of property, plant and equipment     848     753     89       1,690  
Amortization of intangible assets     1,357     18     -       1,375  
Expenditures on property, plant and equipment   $ 199   $ 654   $ 305     $ 1,158  
   
   
   
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  
    Mill and Foundry Products and Services     Abrasive Products Manufacturing and Distribution Operations     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  
      Mill and Foundry Products and Services       Abrasive Products Manufacturing and Distribution Operations       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  

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