United States Antimony Corporation (NYSE MKT: UAMY) — FY 2012 Form 10-K
Reporting period: Fiscal year ended December 31, 2012. This is an annual report, not a standalone fourth-quarter filing. The company produces antimony and precious-metal products and mines and sells zeolite, with operations in the United States and Mexico.
Financial performance and position
| Metric | FY 2012 | FY 2011 |
|---|---|---|
| Revenue | $12.04 million | $13.12 million |
| Gross profit / margin | $1.03 million / 8.6% | $1.67 million / 12.8% |
| Operating income (loss) | $(319,000) | $892,000 |
| Net income (loss) | $(559,000) | $637,000 |
| Cash flow from operations | $526,000 | $417,000 in audited cash-flow statement |
| Cash and cash equivalents | $1.00 million | $5,000 |
| Current assets / current liabilities | $3.10 million / $1.80 million | $2.96 million / $1.74 million |
| Total debt | $1.51 million | $238,000 |
Working capital was $1.30 million, versus $1.22 million in 2011; the current ratio was approximately 1.72. Investing activities used $3.51 million, mainly for capital spending, while financing provided $3.98 million, primarily from common-stock and warrant sales. Property, plant and equipment, net, grew to $10.58 million. The company reported a basic and diluted loss of $0.01 per share; common shares outstanding at year-end were 61.9 million.
Material changes versus 2011
- Revenue declined 8.2%, principally because antimony sales revenue fell 16% as average antimony prices declined. Antimony volume was nearly flat; antimony gross profit fell to $673,000 from $1.56 million.
- Zeolite revenue rose to $2.64 million from $2.04 million, and gross profit increased to $362,000 from $118,000. Sales volume was similar; higher prices reflected product additives and price increases, while additives and other inputs also raised costs.
- Overall gross margin contracted, and operating results swung from profit to loss. Management attributed elevated 2012 production costs in part to start-up, construction and testing at Mexican facilities.
- Capital investment accelerated: the company spent $5.00 million on property, plant and equipment in 2012. Common-stock issuance generated $4.62 million net, and reported total debt increased substantially, including debt associated with the Soyatal mine purchase.
Outlook, risks and unusual items
- Management expected company-wide production in 2013 to be approximately double 2012, with Mexican mine, mill and smelter operations supplying a greater share of raw materials. The filing says the Mexico operations were entering production and still in a shakedown phase; these are forward-looking expectations, not results.
- Planned projects included a natural-gas pipeline for the Madero smelter, estimated at about $1.2 million and expected to reduce fuel costs by approximately 75%, and a larger flotation mill. The filing gives inconsistent timing/capacity descriptions for the mill: 400–500 metric tons per day, with completion stated as both by late 2013 and starting in 2014.
- Antimony prices are volatile and materially affect revenue and profitability; the company said raw materials represented about 50% of cost of revenues. It remained partly dependent on outside suppliers, and China supplied an estimated 92% of world antimony demand.
- Three customers represented 58.1% of total revenue in 2012. Management said replacement sales might be possible in prevailing conditions, but acknowledged losing all three could affect profitability.
- The company claims no SEC-defined proven or probable reserves for antimony or zeolite. Environmental obligations totaled $249,540, including reclamation and asset-retirement estimates; possible losses above accruals could not be reasonably estimated. The company had no environmental liability insurance.
- Management and the auditor concluded internal control over financial reporting was ineffective at year-end because of material weaknesses, including inadequate control documentation and monitoring, deficient segregation of duties and management-oversight controls, and weaknesses in accounting-policy and non-routine transaction controls. The auditor issued an adverse opinion on internal control, but an unqualified opinion on the financial statements.
- The filing disclosed unresolved SEC staff comments relating to the 2011 Form 10-K and all 2012 quarterly reports. It also disclosed a $5.69 million preferred-stock liquidation preference, including undeclared dividends.
- No dividends had been paid on common stock in the prior five years, and management did not anticipate common dividends in the foreseeable future.
Most important facts for investors to verify
- Whether Mexican production ramped as projected, and whether actual output, recoveries and costs support the 2013 production and margin expectations.
- Actual project costs, completion dates and realized savings from the Madero gas pipeline and the planned flotation mill; clarify the filing’s inconsistent mill schedule and capacity.
- Liquidity and debt-service capacity as capital spending continues, including the Soyatal mine payment schedule and the source of planned project funding.
- Exposure to antimony prices, supplier availability and customer concentration, and the company’s progress toward sourcing more feed from its own Mexican properties.
- Remediation of the disclosed material weaknesses and resolution of SEC staff comments; also reconcile the MD&A’s stated 2011 operating cash flow of $564,041 with the audited cash-flow statement’s $417,452.
- Support for mineral-resource expectations: the filing explicitly reports no SEC-defined proven or probable reserves.