WGI Heavy Minerals Announces Q3 08 Results

Third Quarter Results

Revenues for the three-month period ended September 30, 2008 increased to $7.46 million from $6.68 million in the same period of 2007, due to growth across other abrasives lines, waterjet revenues from International Waterjet Parts and 3% growth in garnet sales. Garnet volumes decreased by 13% due to lack of supply as a result of inclement weather in India, however prices increased by 18%, resulting in an increase in garnet sales of 3%.

Gross profit margins decreased to 18% in the third quarter of 2008 from 21% in the same period a year ago. Contributing to this decrease was a rise in fuel costs and limited production out of India and Emerald Creek Garnet.

Operating general and administrative expenses increased 5% year-over-year due to increased marketing and sales expenses. Non-operating general and administrative expenses decreased 168% over the same 2007 three-month period due to the reclassification of expenses related to the sale of Transworld Garnet India Pvt. Limited ("TGI"), reduced overhead due to the change in the CEO and reduced travel expenditures. The Company also recognized a gain of $0.51 million on the write-off and subsequent receipt of insurance proceeds on a warehouse that was damaged by heavy snow in early 2008.

Interest income decreased 62% to $0.09 million from $0.23 million in the three month period ended September 30, 2008, due to lower interest rates on short-term deposits and smaller bank deposits.

Income tax expense in the quarter was $0.07 million as a result of profits generated by the Kominex, the Company's European subsidiary.

The Company recognized a loss of $0.46 million on the sale of its investment in TGI, including expenses incurred in the second quarter of 2008 and recorded a gain on the recovery of ECB loans in the amount of $10.60 million, netting the Company $10.14 million, net of related taxes, for the quarter ended September 30, 2008. The Company also recognized a $0.12 million foreign currency loss as a result of the sale.

The Company posted a net profit of $10.69 million, or $0.45 earnings per share ($0.43 fully diluted), in the third quarter of 2008, compared with a net loss of $0.32 million, or $0.01 loss per share, in the same period of 2007.

Results for the Nine-Month Period Ended September 30, 2008

WGI increased revenues for the nine-month period ended September 30, 2008 by 5% to $21.06 million, from $20.14 million in the same period in 2007. This gain was mainly due to higher prices and growth across most product lines, led by 53% revenue growth in other abrasives and 16% revenue growth in waterjet parts. The higher prices and growth were offset by a 7% decrease in garnet revenues.

Gross profit margins decreased slightly to 19% in the first nine months of 2008, from 21% for the same period in 2007, despite price increases made in garnet and other abrasives businesses during the period. While gross profit margins increased across most product lines during 2008, this was not enough to offset higher garnet costs due to production constraints.

Operating general and administrative expenses increased 12% year-over-year due to increased sales and marketing expenses. WGI incurred non-operating general and administrative expenses of $0.34 million as a result of the Company's contested 2007 Annual General Meeting of Shareholders held in June, in addition to professional fees relating to a special cash disbursement to be paid in December 2008. In addition, the Company recognized a $0.54 million gain on disposal of equipment in the nine month period ended September 30, 2008.

The Company recognized a loss of $0.46 million on the sale of its investment in TGI, including expenses incurred in the second quarter of 2008, and recorded a gain on the recovery of ECB loans in the amount of $10.60 million, netting the Company $10.14 million, net of related taxes, for the nine-month period ended September 30, 2008. WGI also recognized a $0.12 million foreign currency loss as a result of the sale.

The Company posted net income of $9.28 million, or $0.39 earnings per share ($0.38 fully diluted), for the nine-month period ended September 30, 2008, compared with a net loss of $0.66 million, or a loss of $0.03 per share, for the same period a year ago.

"With the sale of TGI behind us, our efforts are focused on reducing overhead and to continue to achieve profitability from an operating standpoint," said President and CEO, Greg Emerson. "Year-to-date, WGI increased net income from WGI's operating entities in the first three quarters of 2008 by 20% to $1.04 million, from $0.88 million in 2007," Mr. Emerson said. We remain committed to creating value for shareholder, with our current emphasis on reducing overhead costs and growing WGI's operating companies organically. Management is continuing to pursue strategies and investments in our remaining businesses that will build shareholder value." -- www.cnxmarketlink.com