Business context and reporting period
United States Antimony Corporation (USAC) filed this Form 10-K for the fiscal year ended December 31, 2013. It produces and sells antimony products and precious metals from U.S. and Mexican operations, and zeolite from its Idaho division. The filing reports annual results; it does not provide a clear standalone fourth-quarter financial summary.
Financial performance and liquidity
- Revenue: $11.02 million, down 8.5% from $12.04 million in 2012.
- Profitability: Gross loss was $41,000, compared with gross profit of $1.03 million in 2012. Net loss was $1.64 million versus a $559,000 net loss in 2012; loss per share was $0.03. Gross margin was approximately -0.4% versus 8.6%, and net margin was approximately -14.9% versus -4.6%.
- Divisions: Antimony gross loss was $493,000, compared with gross profit of $673,000 in 2012. Zeolite gross profit rose to $452,000 from $362,000, despite lower sales volume and revenue.
- Cash flow: Operations provided $235,000, down from $526,000. Capital expenditures used $2.73 million; financing provided $1.52 million. Cash and cash equivalents fell to $20,000 from $1.00 million.
- Liquidity: Current assets were $1.91 million and current liabilities $2.48 million, leaving negative working capital of $569,000, versus positive working capital of $1.48 million a year earlier. Current assets included $247,000 in certificates of deposit; $75,500 of restricted cash was separately reported.
- Debt and obligations: Long-term debt, including its current portion, was $1.13 million; bank notes payable were $139,000. The balance sheet also included $178,000 due to a receivables factor and $258,000 in asset retirement and reclamation obligations. Total liabilities were $3.89 million.
Material changes versus 2012
- Antimony volume sold rose 12.5% to 1.58 million pounds, but average sales price fell 15.1% to $5.30 per pound. Management attributed the resulting revenue and gross-profit decline to lower market prices and elevated Mexican start-up costs.
- Mexican antimony production increased approximately 84% to 684,000 pounds. The company said plant construction, testing, permitting and other start-up activity increased costs; the Puerto Blanco mill operated at less than 10% of capacity.
- Zeolite sales volume declined to 11,182 tons from 12,189 tons, and average selling price fell to $196.96 per ton from $216.73. Lower production and raw-material costs supported higher gross profit.
- Capital investment expanded property, plant and equipment to $12.40 million from $9.51 million. Current liabilities rose and cash declined as the company funded its Mexican build-out.
Outlook, risks and unusual items
- Management expected significantly higher Mexican production in 2014. It forecast completion of a natural-gas pipeline to the Madero smelter by March 2014, at an estimated total cost of $1.7 million, and projected fuel-cost savings of approximately 75% versus propane. About $1.44 million had been spent by year-end.
- Management planned to complete a 400–500 metric-ton-per-day flotation mill by the end of 2014, with estimated installation costs of $400,000–$500,000. It also anticipated restarting Los Juarez mining, milling and smelting by early second quarter 2014. These are forward-looking expectations, not reported outcomes.
- Key operating risks include volatile antimony prices, dependence on external raw-material sources, execution and ramp-up of Mexican operations, and customer concentration: the three largest customers accounted for 64.8% of revenue. USAC reported no SEC-defined proven or probable reserves for its properties.
- Environmental obligations included $100,000 accrued for the Montana antimony site and $7,500 for zeolite reclamation; the balance-sheet total for reclamation and asset retirement obligations was $257,580. The company said excess potential environmental losses could not be reasonably estimated and reported no environmental liability insurance.
- USAC reported material weaknesses in financial-reporting controls, including inadequate control documentation and monitoring, lack of segregation of duties, and weaknesses in management oversight and accounting-principle application. Management and the auditor concluded internal control over financial reporting was ineffective. The auditor nevertheless issued an unqualified opinion on the financial statements and an adverse opinion on internal controls.
- The 2013 net loss included a $229,451 deferred-tax expense associated with valuation allowances, $150,000 of director stock compensation, and $688,738 of depreciation and amortization. Common stock was also issued for cash, and year-end preferred-stock liquidation preference and undeclared dividends totaled approximately $5.76 million.
Important facts for investors to verify
- Whether Mexican production, the Los Juarez restart, mill installation and pipeline completion met management’s stated timing, cost and savings expectations.
- Whether cash generation and available financing can address negative working capital, debt maturities and planned capital spending.
- How antimony prices, raw-material sourcing and the ramp-up of owned Mexican supply affect unit costs and antimony margins.
- Whether management remediated the disclosed material weaknesses, and whether subsequent filings report improved controls.
- The status and financial effect of environmental obligations, customer concentration, property purchase commitments and potential dilution from outstanding warrants and convertible preferred stock.