Opta Minerals Inc.
TSX : OPM

Opta Minerals Inc.

November 12, 2014 08:00 ET

Opta Minerals Inc. Reports Third Quarter Results for Fiscal 2014

WATERDOWN, ONTARIO--(Marketwired - Nov. 12, 2014) - Opta Minerals Inc. (TSX:OPM) today announced results for the three and nine months ended September 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 ended 3 months ended 9 months ended 9 months ended
September 30,
2014
September 30,
2013
Increase
(Decrease)
% September 30,
2014
September 30,
2013
Increase
(Decrease)
%
(restated) (restated)
Revenue $ 35,879 $ 34,927 $ 952 2.7 % $ 105,667 $ 108,614 $ (2,947 ) -2.7 %
Gross Profit 5,275 5,743 (468 ) -8.1 % 16,683 18,585 (1,902 ) -10.2 %
14.7 % 16.4 % -1.7 % 15.8 % 17.1 % -1.3 %
EBITDA(1) 2,242 3,217 (975 ) -30.3 % 7,663 8,774 (1,111 ) -12.7 %
EBIT(2) 432 (1,639 ) 2,071 -126.4 % 2,763 948 1,815 191.5 %
Income (Loss) 519 (1,370 ) 1,889 -137.9 % 992 (1,152 ) 2,144 -186.1 %
EPS $ 0.03 $ (0.08 ) $ 0.11 $ 0.05 $ (0.06 ) $ 0.11
(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 pleased with new business growth which has driven higher revenues in the third quarter compared to the second quarter and the comparable quarter of the previous year. New customer growth has come from both groups with a primary new account within the Steel and Magnesium segment. We have a number of other internal growth initiatives that are being pursued in both segments. Offsetting new business, economic conditions and a fierce competitive environment have prevented the Industrial Minerals segment from growing revenues and profits. We are working on new ways to compete in these tough markets and reassessing all aspects of the Industrial Minerals business. To this end post quarter the company has reduced headcount and certain other expenses in both Infrastructure and the corporate head office. These reductions were unfortunate but necessary and will reduce costs by approximately $1 million annually. We continue to reduce inventory levels from the December 31, 2013 year end balances which is freeing up cash flow for new growth initiatives. Key priorities remain the same to focus on revenue growth and cash generation.

"The Company continues to look at strategic alternatives for the business as announced on June 19, 2014."

Operational and Financial Highlights:

  • Third quarter revenue in the Steel and Magnesium segment increased 17.1% from the comparable quarter in 2013. On a year to date basis revenues have increased 7.1% over the comparable period in 2013. The Steel and Magnesium segment has benefited from new business in the quarter and generally higher volumes from existing customers. The Industrial Minerals segment decreased 13.3% over the comparable quarter and on a year to date basis as compared to the previous year. The decrease is primarily due to economic and competitive activity in the markets we serve.
  • Gross profit and gross margin percentage are below the same quarter of the prior year. Margins are lower in the Steel group due to certain repricing that occurred in the fourth quarter of 2013. Industrial Minerals segment margins are being impacted by lower volumes, product mix and competitive pressure.
  • Selling, general and administrative expenses (SGA) as a percent of revenues were 11.5% compared to 12.7% in the prior years third quarter and 12.0% in the second quarter. 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. SGA for the quarter and year to date includes certain one time expenses related to the review of strategic options for the Company, settlement of a lawsuit and a higher than usual bad debt related to a customer bankruptcy for a total in the quarter and year to date of $264 and $326, respectively.
  • Results include foreign exchange losses of $416 in the current quarter and $781 year to date compared to foreign exchange gains of $341 and $695 in the prior comparable quarter and year to date, respectively. Excluding these foreign exchange gains and losses, EBITDA is positive on a year to date basis compared to the previous year as a result of growth in the Steel business and acquisition based integration synergies.
  • During the quarter the company also had a write-down of assets related to the closure of a facility for $180K. In the third quarter of 2013 the Industrial Minerals segment wrote down goodwill and certain intangibles of $3.9 million.
  • The Company's working capital at September 30, 2014 is $22.7 million and total assets were $124.8 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 September 30, 2014 working capital reflecting higher trade and other receivables, 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 September 30, 2014 was 1.04 to 1.00, compared to 1.17 to 1.00 at December 31, 2013. Ratios are improving as debt continues to fall.

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 Months Ended For the nine Months Ended
September 30 September 30
2014 2013 2014 2013
$ $ $ $
(restated) (restated)
Loss for the Period 519 (1,370 ) 992 (1,152 )
Finance Expense 1,035 854 2,783 2,968
Income Tax Recovery (1,122 ) (1,123 ) (1,012 ) (868 )
Depreciation and Amortization 1,515 1,565 4,499 4,609
Goodwill and Intangible Asset Write-downs - 3,862 - 3,862
Property, Plant and Equipment Write-downs 180 - 180 -
Fair Value Adjustments to Contingent Consideration 115 (571 ) 221 (645 )
EBITDA(1) 2,242 3,217 7,663 8,774
Subtract:
Depreciation and Amortization 1,515 1,565 4,499 4,609
Goodwill and Intangible Asset Write-downs - 3,862 - 3,862
Property, Plant and Equipment Write-downs 180 - 180 -
Fair Value Adjustments to Contingent Consideration 115 (571 ) 221 (645 )
EBIT(2) 432 (1,639 ) 2,763 948

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: internal growth initiatives that are being pursued by the Company; the Company's focus on revenue growth and cash generation; 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 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 September 30, 2014
(Unaudited)
Expressed in Thousands of US Dollars (except per share amounts and number of shares)
September 30, December 31,
2014 2013
(Restated)
Assets
Current
Cash and cash equivalents $ 3,907 $ 4,084
Trade receivables, other receivables and prepayments 21,978 14,676
Inventories 32,027 39,525
Income taxes receivable 968 544
58,880 58,829
Property, Plant and Equipment 26,060 28,030
Intangible Assets 28,302 31,071
Goodwill 10,330 10,659
Deferred Income Tax Assets 1,272 1,471
$ 124,844 $ 130,060
Liabilities
Current
Trade and other payables $ 14,905 $ 13,961
Borrowings 20,175 20,721
Provisions 603 520
Other liabilities 522 348
36,205 35,550
Borrowings 32,546 37,539
Derivative Financial Instruments 296 311
Provisions 151 91
Other Liabilities 142 371
Deferred Income Tax Liabilities 5,004 6,540
74,344 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 -
18,122,387 common shares (December 31, 2013 - 18,111,247) 17,900 17,882
Contributed Surplus 4,638 4,358
Accumulated Other Comprehensive Loss (1,310 ) (862 )
Retained Earnings 29,272 28,280
50,500 49,658
$ 124,844 $ 130,060
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Income (Loss)
For the Three Months Ended September 30, 2014 and 2013
(Unaudited)
Expressed in Thousands of US Dollars (except per share amounts)
September 30, September 30,
2014 2013
(Restated)
Revenue $ 35,879 $ 34,927
Cost of Goods Sold 30,604 29,184
Gross Profit 5,275 5,743
Expenses
Selling, general and administrative 4,132 4,432
Goodwill and intangible asset write-downs - 3,862
Property, plant and equipment write-downs 180 -
Fair value adjustments to contingent consideration 115 (571 )
Other expenses (income) 416 (341 )
4,843 7,382
Income (Loss) Before Finance Expense and Income Taxes 432 (1,639 )
Finance expense 1,035 854
Loss Before Income Taxes (603 ) (2,493 )
Income tax recovery (1,122 ) (1,123 )
Income (Loss) for the Period Attributable to the Shareholders of the Company $ 519 $ (1,370 )
Income (Loss) per share for the period - basic and diluted $ 0.03 $ (0.08 )
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Income (Loss)
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
Expressed in Thousands of US Dollars (except per share amounts)
September 30, September 30,
2014 2013
(Restated)
Revenue $ 105,667 $ 108,614
Cost of Goods Sold 88,984 90,029
Gross Profit 16,683 18,585
Expenses
Selling, general and administrative 12,738 15,115
Goodwill and intangible asset write-downs - 3,862
Property, plant and equipment write-downs 180 -
Fair value adjustments to contingent consideration 221 (645 )
Other expenses (income) 781 (695 )
13,920 17,637
Income Before Finance Expense and Income Taxes 2,763 948
Finance expense 2,783 2,968
Loss Before Income Taxes (20 ) (2,020 )
Income tax recovery (1,012 ) (868 )
Income (Loss) for the Period Attributable to the Shareholders of the Company $ 992 $ (1,152 )
Income (Loss) per share for the period - basic and diluted $ 0.05 $ (0.06 )
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Comprehensive Income (Loss)
For the Three Months Ended September 30, 2014 and 2013
(Unaudited)
Expressed in Thousands of US Dollars
September 30, September 30,
2014 2013
(Restated)
Income (Loss) for the Period Attributable to the Shareholders of the Company $ 519 $ (1,370 )
Other Comprehensive Income (Loss), net of income taxes
Items that may be reclassified subsequently to profit or loss
Unrealized gain (loss) on translation of foreign operations (607 ) 194
Unrealized gain (loss) on derivative financial instruments designated as cash flow hedges 46 (67 )
Other comprehensive income (loss), net of income taxes (561 ) 127
Comprehensive Loss Attributable to the Shareholders of the Company $ (42 ) $ (1,243 )
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Comprehensive Income (Loss)
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
Expressed in Thousands of US Dollars
September 30, September 30,
2014 2013
(Restated )
Income (Loss) for the Period Attributable to the Shareholders of the Company $ 992 $ (1,152 )
Other Comprehensive Income (Loss), net of income taxes
Items that may be reclassified subsequently to profit or loss
Unrealized gain (loss) on translation of foreign operations (460 ) 457
Unrealized gain on derivative financial instruments designated as cash flow hedges 12 154
Other comprehensive income (loss), net of income taxes (448 ) 611
Comprehensive Income (Loss) Attributable to the Shareholders of the Company $ 544 $ (541 )
Opta Minerals Inc.
Interim Condensed Consolidated Statements of Changes in Equity
For the Nine Months Ended September 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 - - - - - 992 992
Unrealized loss on translation of foreign operations - - - - (460 ) - (460 )
Unrealized gain on derivative financial instruments designated as cash flow hedges - - - 12 - - 12
Total Comprehensive Income (Loss) - - - 12 (460 ) 992 544
Transactions with Shareholders
Employee share purchase plan 11,140 18 - - - - 18
Share-based payment expense - - 280 - - - 280
Total Transactions with Shareholders 11,140 18 280 - - - 298
At September 30, 2014 18,122,387 $ 17,900 $ 4,638 $ (218 ) $ (1,092 ) $ 29,272 $ 50,500
At January 1, 2013 18,084,559 $ 17,822 $ 3,925 $ (293 ) $ (1,556 ) $ 28,461 $ 48,359
Comprehensive Income (Loss)-restated
Loss for the period - - - - - (1,152 ) (1,152 )
Unrealized gain on translation of foreign operations - - - - 457 - 457
Unrealized gain on derivative financial instruments designated as cash flow hedges - - - 154 - - 154
Total Comprehensive Income (Loss) - - - 154 457 (1,152 ) (541 )
Transactions with Shareholders
Employee share purchase plan 13,347 36 - - - - 36
Share options exercised 8,077 15 (15 ) - - - -
Share-based payment expense - - 319 - - - 319
Total Transactions with Shareholders 21,424 51 304 - - - 355
At September 30, 2013 18,105,983 $ 17,873 $ 4,229 $ (139 ) $ (1,099 ) $ 27,309 $ 48,173

*AOCI - Accumulated Other Comprehensive Income (Loss)

Opta Minerals Inc.
Interim Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
Expressed in Thousands of US Dollars
September 30, September 30,
2014 2013
(Restated)
Cash Provided by (Used in) -
Operating Activities
Income (loss) for the period $ 992 $ (1,152 )
Items not affecting cash:
Depreciation of property, plant and equipment 2,827 2,722
Amortization of intangible assets 1,672 1,887
Goodwill and intangible asset write-downs - 3,862
Property, plant and equipment write-downs 180 -
Share-based payment expense 280 304
Loss (gain) on disposal of property, plant and equipment 51 (8 )
Fair value adjustments to contingent consideration 221 (645 )
Deferred income taxes (1,220 ) (2,310 )
5,003 4,660
Changes in non-cash working capital
Trade receivables, other receivables and prepayments (7,631 ) 2,610
Inventories 7,112 (7,099 )
Trade and other payables 1,445 1,977
Provisions 140 40
Income taxes receivable (437 ) (587 )
5,632 1,601
Financing Activities
Proceeds from issuance of common shares - net of issuance costs 18 51
Proceeds from borrowings - 5,464
Repayment of borrowings - net of deferred finance charges (3,379 ) (3,847 )
Repayment of finance lease liabilities (247 ) (528 )
(3,608 ) 1,140
Investing Activities
Additions to property, plant and equipment (1,804 ) (2,691 )
Proceeds on disposal of property, plant and equipment 25 15
Additions to intangible assets (56 ) (111 )
Acquisition of subsidiaries - (415 )
Additional contingent consideration paid on acquisitions (260 ) (296 )
(2,095 ) (3,498 )
Effect of Foreign Exchange Gain (Loss) on Cash and Cash Equivalents (106 ) 19
Net Decrease in Cash and Cash Equivalents (177 ) (738 )
Cash and Cash Equivalents
Beginning of Period 4,084 3,966
End of Period $ 3,907 $ 3,228
Opta Minerals Inc.
Interim Segmented Information
For the Three Months Ended September 30, 2014 and 2013
(Unaudited)
Expressed in Thousands of US Dollars
Three Months Ended September 30, 2014
Steel and Industrial
Magnesium Minerals Corporate Total
External revenue by market
Canada $ 3,733 $ 3,032 $ - $ 6,765
US 14,885 6,818 - 21,703
Europe 2,911 2,637 - 5,548
Other 23 1,840 - 1,863
Total revenue from external customers 21,552 14,327 - 35,879
Segment income (loss) before corporate expenses, property, plant and equipment write-downs, fair value adjustments to contingent consideration, finance expense and income taxes 2,948 (974 ) - 1,974
Property, plant and equipment write-downs - (180 ) - (180 )
Fair value adjustments to contingent consideration (115) - - (115 )
Corporate expenses - - (1,247 ) (1,247 )
Segment income (loss) before finance expense and income taxes 2,833 (1,154 ) (1,247 ) 432
Finance expense - - - (1,035 )
Income tax recovery - - - 1,122
Income for the period - - - 519
Depreciation of property, plant and equipment 488 430 42 960
Amortization of intangible assets 535 - 20 555
Expenditures on property, plant and equipment $ 627 $ 145 $ 71 $ 843
Opta Minerals Inc.
Interim Segmented Information
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
Expressed in Thousands of US Dollars
Nine Months Ended September 30, 2014
Steel and Industrial
Magnesium Minerals Corporate Total
External revenue by market
Canada $ 10,822 $ 8,401 $ - $ 19,223
US 39,794 21,650 - 61,444
Europe 9,854 8,960 - 18,814
Other 25 6,161 - 6,186
Total revenue from external customers 60,495 45,172 - 105,667
Segment income (loss) before corporate expenses, property, plant and equipment write-downs, fair value adjustments to contingent consideration, finance expense and income taxes 8,434 (270 ) - 8,164
Property, plant and equipment write-downs - (180 ) - (180 )
Fair value adjustments to contingent consideration (221) - - (221 )
Corporate expenses - - (5,000 ) (5,000 )
Segment income (loss) before finance expense and income taxes 8,213 (450 ) (5,000 ) 2,763
Finance expense - - - (2,783 )
Income tax recovery - - - 1,012
Income for the period - - - 992
Total assets as at September 30, 2014 69,544 50,877 4,423 124,844
Depreciation of property, plant and equipment 1,372 1,332 123 2,827
Amortization of intangible assets 1,613 1 58 1,672
Goodwill and intangible assets as at September 30, 2014 37,903 617 112 38,632
Expenditures on property, plant and equipment $ 1,455 $ 272 $ 77 $ 1,804
Opta Minerals Inc.
Interim Segmented Information
For the Three Months Ended September 30, 2014 and 2013
(Unaudited)
Expressed in Thousands of US Dollars
Three Months Ended September 30, 2013
(Restated)
Steel and Industrial
Magnesium Minerals Corporate Total
External revenue by market
Canada $ 3,163 $ 3,485 $ - $ 6,648
US 12,192 8,044 - 20,236
Europe 3,039 3,660 - 6,699
Other 12 1,332 - 1,344
Total revenue from external customers 18,406 16,521 - 34,927
Segment income (loss) before corporate expenses, goodwill and intangible asset write-downs, fair value adjustments to contingent consideration, finance expense and income taxes 3,553 (337 ) - 3,216
Goodwill and intangible asset write-downs - (3,862 ) - (3,862 )
Fair value adjustments to contingent consideration 571 - - 571
Corporate expenses - - (1,564 ) (1,564 )
Segment income (loss) before finance expense and income taxes 4,124 (4,199 ) (1,564 ) (1,639 )
Finance expense - - - (854 )
Income tax recovery - - - 1,123
Loss for the period - - - (1,370 )
Depreciation of property, plant and equipment 421 473 50 944
Amortization of intangible assets 535 45 41 621
Expenditures on property, plant and equipment $ 263 $ 332 $ 66 $ 661
Opta Minerals Inc.
Interim Segmented Information
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
Expressed in Thousands of US Dollars
Nine Months Ended September 30, 2013
(Restated)
Steel and Industrial
Magnesium Minerals Corporate Total
External revenue by market
Canada $ 9,844 $ 10,259 $ - $ 20,103
US 35,985 25,552 - 61,537
Europe 10,658 10,540 - 21,198
Other 12 5,764 - 5,776
Total revenue from external customers 56,499 52,115 - 108,614
Segment income (loss) before corporate expenses, goodwill and intangible asset write-downs, fair value adjustments to contingent consideration, finance expense and income taxes 10,340 (1,577 ) - 8,763
Goodwill and intangible asset write-downs - (3,862 ) - (3,862 )
Fair value adjustments to contingent consideration 645 - - 645
Corporate expenses - - (4,598 ) (4,598 )
Segment income (loss) before finance expense and income taxes 10,985 (5,439 ) (4,598 ) 948
Finance expense - - - (2,968 )
Income tax recovery - - - 868
Loss for the period - - - (1,152 )
Total assets as at September 30, 2013 67,327 62,197 4,346 133,870
Depreciation of property, plant and equipment 1,151 1,420 151 2,722
Amortization of intangible assets 1,613 138 136 1,887
Goodwill and intangible assets as at September 30, 2013 41,874 1,058 139 43,071
Expenditures on property, plant and equipment $ 1,389 $ 1,077 $ 225 $ 2,691

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