Business context and reporting period
United States Antimony Corporation filed this unaudited Form 10-Q for the three months ended March 31, 2012, comparing results with the first quarter of 2011. The company operates antimony and zeolite businesses. Management cautions that quarterly results are not necessarily indicative of full-year results.
Key financial metrics
| Metric | Q1 2012 | Q1 2011 or prior date |
|---|---|---|
| Revenue | $3.054 million | $2.838 million |
| Gross profit and margin | $163,410; 5.4% | $346,520; 12.2% |
| Operating income (loss) | $(160,817) | $103,566 |
| Net income (loss) | $(116,233) | $45,363 |
| Operating cash flow | $(113,465) | $391,506 |
| Investing cash flow | $(807,355) | $(100,265) |
| Financing cash flow | $2.329 million | $803,074 |
| Cash and cash equivalents | $1.414 million | $5,427 at Dec. 31, 2011 |
| Working capital | $2.622 million | $1.222 million at Dec. 31, 2011 |
| Total debt | $502,269 | $237,849 at Dec. 31, 2011 |
Total assets were $11.141 million and total liabilities were $2.027 million at March 31, 2012. The company reported no outstanding borrowings on its $202,000 credit line. It pledged certificates of deposit as collateral; certificates of deposit totaled $242,800 on the balance sheet. No separate operating margin percentage is reported.
Material changes versus the prior comparable period
- Revenue rose approximately 7.6%, but gross profit fell approximately 52.8% and the company moved from net income to a net loss.
- Antimony product revenue increased to $2.202 million from $2.114 million. Sales volume was 343,952 pounds of contained antimony at an average $6.40 per pound, versus 321,361 pounds at $6.58.
- Zeolite revenue grew to $698,607 from $392,607, with average selling price increasing to $201.56 per ton from $143.83. The zeolite segment recorded gross profit of $46,897 versus a $2,379 loss.
- Precious-metals sales declined to $180,138 from $331,200. Antimony segment gross profit declined to $116,513 from $348,899, including $654,145 of Mexico costs without reported revenue from intermediate-stage production.
- Operating cash flow turned negative as inventory and other assets absorbed cash. Capital expenditures were $848,495, substantially above $148,591 in Q1 2011, largely reflecting Mexico investment.
- Financing cash flow included $2.462 million of net common-stock proceeds. The company reported issuing 1,302,500 shares during the quarter; shares outstanding were 60,804,010 at May 10, 2012.
Outlook, commentary, risks, contingencies, and unusual items
- Management attributed the year-over-year earnings decline to inventory buildup ahead of the Puerto Blanco mill start-up and Madero smelter expansion, $81,782 of non-operating costs at Puerto Blanco and Los Juarez, funding-related fees, lower precious-metals production, and lower antimony prices. Management stated that future inventory reductions could provide liquidity.
- No numerical earnings or revenue guidance is provided. The filing includes forward-looking-statement cautions.
- Approximately 86% of antimony revenue came from three customers, creating significant customer-concentration risk. Antimony sales and most raw-material purchases are exposed to world-market prices; management estimated that a $2-per-pound decrease in sales price could reduce gross profit by $1 per pound.
- Management reported ineffective disclosure controls due to material weaknesses, including inadequate segregation of duties and material financial-statement adjustments identified during the year-end audit. Three independent directors were appointed to an audit committee, and management described planned independent transaction reviews and use of outside experts.
- The filing reports $19,640 accrued for settled MSHA claims. It states there were no legal proceedings; the mine-safety table lists $2,473 in proposed assessments and no fatalities or pending legal action.
- Equipment-backed debt and a $260,240 note for Corral Blanco land contributed to the debt increase. The credit facility carries a 3.15% rate on amounts drawn and was undrawn at quarter-end.
Important facts for investors to verify
- Reconcile the MD&A working-capital table, which lists current liabilities of $1,595,433, with the balance sheet’s $1,536,270; the difference is not explained in the filing text.
- Reconcile inventory values: the balance sheet reports $1,461,149 at March 31, while the MD&A attributes the earnings decline to an inventory build “to $1,488,911.”
- Assess execution, costs, and funding needs for the Puerto Blanco mill, Madero smelter expansion, and other Mexico projects, alongside the substantial capital spending and inventory buildup.
- Monitor customer concentration, antimony price sensitivity, cash generation, and the ability to reduce inventory to support liquidity.
- Review remediation of the disclosed internal-control weaknesses. The controls discussion also contains an apparent date inconsistency, referring to an evaluation as of March 31, 2011 while discussing effectiveness as of March 31, 2012.