WGI Heavy Minerals Announces First Quarter 2009 Results



    COEUR D'ALENE, ID, May 13 /CNW/ - WGI Heavy Minerals, Incorporated
("WGI") (TSX: WG) today announced results for the quarter ended March 31,
2009. All dollar amounts are in U.S. dollars unless otherwise indicated.
Results have been filed and may be viewed at www.sedar.com.

    Results of Operations

    Sales for the quarter declined by a less than expected 11% despite some
markets having declined by more than 20%. WGI improved gross margins by 5%
through cost reductions, led by WGI - Idaho, the international sales and
marketing arm, International Waterjet Parts ("IWP") and Kominex. As part of
the Company's efforts to be fiscally responsible, total expenses in 2009 were
reduced 22% over the same three-month period in 2008. Careful cash flow
management has ensured that cash from operations remains positive at $0.40
million, while the change in cash before the payment of the special
distribution (paid in January) remained positive at $0.06 million for the
quarter. We are not out of the woods yet as the world economy remains
uncertain. We continue to evaluate other business opportunities and look for
ways to expand on those segments of our business that are profitable.

    Summary of Quarterly Results

    Financially, the Company's balance sheet remains strong after completion
of the $19.22 million special distribution in the first quarter of 2009. The
net cash inflow for the first quarter 2009, before accounting for the special
distribution, was $0.06 million, the result of a reduction in accounts
receivables and increased accounts payable mainly due to the extension of
credit to the Company in the first quarter of 2009 by VVM under the supply
agreement signed in 2008.
    Revenues for the three-month period ended March 31, 2009 declined 11%
from $6.8 million in 2008 to $6.1 million for the same period in 2009.
Approximately 60% of the decline was the result of a 13% devaluation of the
Euro against the U.S. dollar resulting in an unfavourable currency exchange.
The remainder of the decline was due to lower sales volumes, some of which
were planned due to the shutdown of Emerald Creek Garnet ("ECG").
    Product sales from ECG were at very low levels due to lack of supply when
the mine shut down operations during the first quarter to avoid a repeat of
the high costs and low efficiencies realized in 2008 when ECG attempted to
mine garnet during severe winter weather. Demand for garnet also began to
soften in some regions, such as Korea and South America, as a worldwide
slowdown in business activity began to impact abrasives markets.
    Compared to the first quarter of 2008, overall garnet revenues were off
4%, revenues from other abrasives fell 20% and revenues from waterjet parts
dropped 18%. Prices for the abrasives business improved 14%, but this was not
sufficient to overcome a 16% decline in sales volume.
    Gross profit margins increased to 22.4% in the first quarter of 2009
compared with 17.2% in the first quarter of 2008. This was mainly due to
increased pricing and improved efficiencies at operational levels.
    Operating general and administrative expenses decreased 4%, made up of
decreases in professional fees and travel expenditures. Board fees have also
declined over the same period a year ago by 70% to $0.05 million for 2009 from
$0.18 million for 2008. Interest income has declined due to the payout of the
$19.22 million special distribution in early 2009 and lower interest rates.
Stock based compensation has also decreased 91% as no new stock based
compensation was issued in 2009.
    Income tax expenses have increased due to profits earned in the first
quarter of 2009 by the Company's European subsidiary, Kominex.
    The Company posted a net loss of $0.14 million, or $(0.01) per share,
less than expected for the first quarter of 2009, compared with a net loss of
$0.68 million, or ($0.03) per share, for the first quarter of 2008.

    Liquidity and Capital Resources

    The Company currently has $9.02 million dollars in cash reserves after
the payment of the special distribution, in early January 2009, sufficient
reserves to meet the Company's planned capital expenditures and fund current
operations.
    Cash flows from operations increased by $0.4 million due to a reduction
in accounts receivable and increased accounts payable, the result of credit
being extended to the company by VVM through the supply agreement signed in
2008. This compares to cash outflows before discontinued operations of $0.25
million the first quarter of 2008 with a net loss of $0.7 million.
    Working capital, including the current portion of long-term debt, was
$12.74 million at the end of the first quarter of 2009 compared with $12.83
million at the end of 2008. This translates into current ratios of 3.89 for
the first quarter of 2009 compared to 1.54 for 2008.

    Outlook

    The Company intends to grow its abrasives markets through its
relationships with suppliers and customers while developing additional sources
of supply. WGI is working hard to manage our distribution agreements with VVM
and other suppliers. The Company continues to closely manage its costs in a
difficult economy while providing high quality customer service. We have
identified several garnet properties outside India and are reviewing
opportunities before us, placing more emphasis on properties under our
control.
    "We are cautiously optimistic going forward as we approach the 2nd half
of 2009," said Greg Emerson, Chief Executive Officer. "We are hearing from
customers who were silent for the past six months and we look forward to
moving the new supply coming from our supply agreement with VVM later in the
year while keeping costs under control and preserving our cash balance in
these uncertain times."

    About WGI

    WGI Heavy Minerals, Inc. is a marketer of industrial grade minerals
sourced primarily out of India, producer of industrial-grade garnet out of
Idaho and Germany and manufacturer of replacement parts for ultra-high
pressure waterjet machine tool systems around the world. The Company's shares
are listed on the Toronto Stock Exchange under the symbol WG.

    This press release contains forward-looking statements concerning the
business, operations, and financial performance and condition of WGI Heavy
Minerals, Incorporated. A number of the matters discussed and statements made
in the press release contain forward-looking statements reflecting current
expectations regarding future assets. When used in this press release, the
words "believe", "anticipate", "intend", "estimate", "expect", "project", and
similar expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain such words. These
forward-looking statements are based on current expectations and are naturally
subject to risks, uncertainties, and changes in circumstances beyond
management's control that may cause actual results to differ materially from
those expressed or implied by such forward-looking statements. Factors that
may cause such differences include but are not limited to: exploration and
development risks; risks related to permits and title to property; risks
related to foreign countries and regulatory requirements; operating hazards;
foreign currency fluctuations; competition; fluctuations in the market price
of mineral commodities and transportation costs; uncertainty as to
calculations of mineral deposit estimates; uninsured risks; and dependence
upon key management personnel and executives. Actual results may differ
materially from those expressed here. You should not place undue reliance on
such forward-looking statements. The Company is under no obligation to update
or alter such forward-looking statements, whether as a result of new
information, future events, or otherwise.

    (expressed in U.S. dollars unless otherwise noted)



    
                       WGI Heavy Minerals, Incorporated
                            Financial Information
                 (in thousands, except for per share amounts)

    Consolidated Balance Sheet                 Mar. 31, 2009   Dec. 31, 2008
                                                           $               $
    Assets
    Cash and short term deposits                       9,018          28,201
    Other current assets                               8,136           8,250
                                              --------------- ---------------
    Total current assets                              17,154          36,451
                                              --------------- ---------------

    Property, plant and equipment                      3,533           3,758
    Goodwill and intangible assets                       528             543
    Other assets                                           -               -
                                              --------------- ---------------
    Total assets                                      21,215          40,752
                                              --------------- ---------------
                                              --------------- ---------------

    Liabilities & equity
    Current liabilities                                4,409           4,373
    Cash distribution payable                              -          19,245
    Long term debt                                       413             488
    Liabilities of discontinued operations                 -               -
                                              --------------- ---------------
    Total liabilities                                  4,822          24,106
                                              --------------- ---------------

    Capital stock                                     38,456          38,456
    Stock-based compensation                           2,224           2,215
    Deficit                                          (24,327)        (24,186)

    Foreign currency translation account                  40             161
                                              --------------- ---------------
    Total equity                                      16,393          16,646
                                              --------------- ---------------
    Total liabilities & equity                        21,215          40,752
                                              --------------- ---------------
                                              --------------- ---------------

    Consolidated Statements of
     Operations and Deficit                    Mar. 31, 2009   Mar. 31, 2008
                                                           $               $
    Sales                                              6,067           6,786
    Operating costs                                    4,557           5,412
    Depreciation, depletion and amortization             152             208
                                              --------------- ---------------
    Gross profit                                       1,358           1,166
                                              --------------- ---------------

    Gross margin %                                     22.4%           17.2%

    Expenses
    G&A                                                1,378           1,685
    Interest income                                      (37)           (144)
    Interest expense                                      21              21
    Stock-based compensation                               9              97
    Development costs                                      2               4
    Other expenses (income)                               45             165
                                              --------------- ---------------
    Total                                              1,418           1,828
                                              --------------- ---------------

    Loss before taxes                                    (60)          (662)
    Provision for taxes                                   81             56
                                              --------------- ---------------
    Loss from operations for the period                 (141)          (718)
                                              --------------- ---------------
                                              --------------- ---------------

    Basic and diluted loss per common share         $  (0.01)      $  (0.03)


    (expressed in U.S. dollars unless otherwise noted)



                       WGI Heavy Minerals, Incorporated
                            Financial Information
                 (in thousands, except for per share amounts)

    Consolidated Statements
     of Cash Flows                                     Three           Three
                                                months ended    months ended
                                               Mar. 31, 2009   Mar. 31, 2008
                                                           $               $
    Cash flows from operating activities                 398            (246)
    Cash flows from operating
     activities of discontinued operations                 -              59
    Cash flows from investing                             (9)           (157)
    Cash flows from financing                           (319)           (552)
    Payment of cash distribution                     (19,245)              -
    Effect of exchange rate changes
     on cash and cash equivalents                         (7)            (77)
                                              --------------- ---------------
    Decrease in cash and cash equivalents            (19,182)           (973)
    Beginning cash and short-term deposits            28,200          16,773
                                              --------------- ---------------
    Ending cash and short-term deposits                9,018          15,800
                                              --------------- ---------------
                                              --------------- ---------------


    (expressed in U.S. dollars unless otherwise noted)
    




For further information:

For further information: Priscilla Reynolds, CFO, 810 Sherman Ave.,
Coeur d'Alene, ID, 83814, U.S.A., Phone (208) 770-2210, E-mail
Priscilla@wgiheavyminerals.com, www.wgiheavyminerals.com

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WGI Heavy Minerals, Incorporated

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