United States Antimony Corporation — Q1 2013 10-Q
Reporting period: Three months ended March 31, 2013; unaudited consolidated results. The company operates antimony and zeolite businesses, with significant operations and expansion projects in Mexico.
Key financial results
| Metric | Q1 2013 | Q1 2012 / comparison |
|---|---|---|
| Revenue | $2.967 million | $3.054 million; down 2.8% |
| Gross profit (loss) | $(62,134); margin (2.1%) | $163,410; margin 5.4% |
| Operating loss | $(388,637) | $(160,817) |
| Net loss | $(408,825); $(0.01) per share | $(116,233); reported per-share loss nil |
| Cash from operations | $(104,389) | $(113,465) |
| Cash and cash equivalents | $393,294 at March 31 | $1,000,811 at December 31, 2012 |
| Long-term debt | $1.459 million total; $469,154 current | $1.505 million total at December 31, 2012 |
Cash used in investing was $456,876, primarily for property, plant and equipment; financing cash outflow was $46,252 for debt principal payments. Cash declined $607,517 during the quarter. Current assets were $2.538 million and current liabilities $2.009 million, leaving working capital of $528,843. The company reported no outstanding borrowings under its $202,000 credit line. It also had $304,730 due to its factor; receivables are factored with recourse and accounted for as secured financing.
Changes and operating performance
- Antimony revenue rose to $2.417 million from $2.355 million, while zeolite revenue fell to $549,551 from $698,607. Total revenue declined despite higher antimony sales volume.
- Antimony metal sold increased about 18% to 408,352 pounds, but average selling price fell 10.6% to $5.65 per pound. Antimony segment gross loss was $142,062 versus gross profit of $113,008 a year earlier.
- Zeolite volume declined to 2,533 tons from 3,466, while average price increased to $216.96 per ton from $201.56. Its gross profit increased to $79,928 from $50,402.
- Management attributed the weaker result to lower antimony prices, elevated costs from processing higher-cost inventory, Mexico start-up and non-production costs, and reduced zeolite sales volume. Consolidated gross margin moved from positive to negative.
Outlook, risks and notable items
- Management expects Mexico production to increase after installation of an additional transformer in March, but said start-up costs would remain substantial through 2013 as production ramps up and a 500-ton-per-day plant is installed. Precious-metals processing began in early May; additional equipment for Los Juarez concentrate was expected to be operating by June 30, 2013.
- A natural-gas pipeline for the Mexico smelter was estimated to cost $1 million; about $600,000 had been paid. Completion was expected in three to six months. Management estimated quarterly fuel expense could fall from about $208,000 for propane to $40,000–$45,000 using natural gas.
- The company estimated about $1 million of construction and improvement commitments over the next 12 months and approximately $420,000 of land and debt payments due in the next nine months. Management believed cash and future operating cash flow would be adequate, but the quarter ended with $393,294 in cash and a net loss.
- Customer concentration is significant: three customers generated 66.5% of Q1 revenue, versus 61.7% in Q1 2012. Management warned that losing a key customer could adversely affect the business.
- Antimony pricing is a material market risk: raw materials represented about 50% of cost of goods sold, while many production costs are fixed. Management estimated a $2-per-pound decline in selling price could reduce gross profit by about $1 per pound.
- Disclosure controls were deemed ineffective because of a material weakness in segregation of duties. Management described CFO review procedures and a formal capitalization policy as mitigation; no material changes in internal control were reported since year-end.
- The filing reported no legal proceedings and no material U.S. mine-safety events requiring disclosure. It cautioned that quarterly results are not necessarily indicative of full-year results; no formal earnings guidance was provided.
Important facts for investors to verify
- Whether Mexico expansion, precious-metals recovery and the natural-gas pipeline meet the stated timing, cost and production expectations.
- Whether operating cash flow and available financing can cover capital commitments, near-term debt payments and ongoing losses.
- Antimony price trends, inventory costs and the extent to which improved production can restore segment margins.
- Customer concentration and the company’s ability to retain major accounts while increasing sales.
- Progress in addressing the disclosed segregation-of-duties material weakness.