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| 8-K - FORM 8-K - Fushi Copperweld, Inc. | v239239_8k.htm |
Fushi Copperweld Announces 2011 Third Quarter Results
BEIJING, November 3, 2011 /PRNewswire-Asia-FirstCall/ -- Fushi Copperweld, Inc. (Nasdaq: FSIN), the leading global manufacturer and innovator of copper-clad bimetallic wire used in a variety of telecommunication, utility, transportation and other electrical applications, today announced financial results for the third quarter ended September 30, 2011.
Third Quarter Highlights
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Net income of $8.9 million, or $0.23 per diluted share, compared to $12.9 million, or $0.34 per diluted share, in the third quarter of 2010;
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Revenues of $74.3 million, up 11.7% from $66.5 million in the third quarter of 2010;
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Net cash generated from operations of $19.9 million, compared to $20.1 million net cash generated from operations in the third quarter of 2010;
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Established operational hub in continental Europe; and
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Cash position at quarter end remains strong at $163.6 million.
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Revenues for the third quarter of 2011 increased 11.7% to $74.3 million, up from $66.5 million in the prior year quarter, primarily driven by higher average selling prices.
Gross profit in the third quarter was $19.9 million compared to $19.7 million a year ago. Gross margin decreased to 26.8% from 29.6% in the prior year period. Gross margin for the Company’s Dalian cladding facility was 33.5% compared to 36.1% in the prior year period, while gross margin for the Company's Fayetteville, TN facility was 6.0% in the third quarter of 2011, compared to 12.5% in the third quarter of 2010. Gross margin in the period was impacted by higher raw material prices and lower fixed price absorption as a result of a decline in sales volumes. The Company’s results for the third quarter of 2011 also reflect the impact of continued supply constraints for its CCS clad lines in Dalian.
Operating expenses in the third quarter of 2011 increased to $6.2 million, compared to $4.6 million in the prior year's quarter, primarily as a result of the Company’s continued investment in its international growth strategy, increased expenses including higher audit and professional service fees, and advisor fees related to the ongoing privatization proposal. On a percentage basis, operating expenses increased to 8.3% of revenues from 6.9% in the third quarter of 2010.
Other expense increased to $0.8 million during the 2011 third quarter from $0.2 million in the year ago period. The increase in other expense is primarily related to the impact of fluctuations in foreign exchange rates on the revaluation of receivables denominated in USD to RMB, which increased other expense by $0.6 million, or $0.02 per diluted share after-tax.
The Company’s effective income tax rate for the third quarter of 2011 was 31.6% compared with an effective income tax rate of 13.8% in the year ago period. The higher tax rate is primarily due to the change in income tax rate from 12.5% in 2010 to 25.0% in 2011 for the Company's subsidiary, Fushi International (Dalian) Bimetallic Cable Co. Ltd., as a result of the expiration of the subsidiary’s tax holiday. The Company expects its effective income tax rate for the 2011 full-year to be approximately 31.0%.
Net income for the third quarter was $8.9 million, or $0.23 per diluted share, compared to net income of $12.9 million, or $0.34 per diluted share, in the third quarter of 2010.
Fully diluted share count increased 0.8% in the third quarter of 2011 to 38.3 million from 38.0 million a year ago.
During the three months ended September 30, 2011, the Company generated net cash from operations of $19.9 million, compared $20.1 million net cash generated from operations in the comparable period in 2010. In the nine months ended September 30, 2011, net cash generated from operations was $40.7 million, compared to $23.2 million in the year ago period.
As of September 30, 2011, the Company’s cash position was $163.6 million, an increase of 33.0% from $123.0 million as of December 31, 2010. Accounts receivable at September 30, 2011 were $73.9 million, compared to $65.8 million at December 31, 2010. Long-term debt was $5.2 million as of September 30, 2011, compared to $5.7 million at December 31, 2010.
As previously announced, during the quarter the Company entered an agreement with the receivers of Leaf Business Holdings Belgium regarding the lease with an option to purchase a 45,000 square-meter copper tubing manufacturing and distribution center that establishes an operational hub for Fushi Copperweld in continental Europe. The Company will begin stocking the facility with copper-clad aluminum and copper-clad steel product for sale in continental Europe in the 2011 fourth quarter, and expects initial sales to commence in the first quarter of 2012.
The Company continues to expect this transaction to be dilutive to 2011 earnings by approximately $815,000, or approximately $0.02 per share, and to become slightly accretive in 2012.
Joe Longever, co-Chief Executive Officer of Fushi Copperweld, commented, “While we began the quarter with strong sales momentum across most of the markets we serve, the volatility in commodity prices in the latter part of the quarter and the uncertain economic environment reduced order rates, particularly in the U.S. market. In addition, the planned ramp-up of production on our CCS line at Dalian continues to be delayed by supply constraints, and we remain focused on finding a solution to this issue. Despite these challenges, CCA volumes in China were in line with our expectations and we continued to generate strong cash flows and make strategic investments that will benefit Fushi Copperweld over the long-term. A primary example is our recent expansion into Belgium, which enhances our access to the European market.”
Mr. Longever continued, “As we enter the fourth quarter, market conditions remain challenging and current economic trends are difficult to predict. Global economic uncertainty continues to affect our customers’ purchasing decisions, with many deciding to either postpone their purchases or purchase in smaller allotments, and progress in addressing our CCS production issue remains slower than anticipated. Despite these factors, we continue to see opportunities for our copper-clad products in the marketplace and remain committed to investing in our global sales, marketing, and new business initiatives to ensure we are well positioned to leverage a recovery of demand.”
Outlook
Based on third quarter performance, current business trends and the expected dilution related to the Company’s new facility in Belgium as described above, Fushi Copperweld has revised its annual guidance for fully diluted earnings per share to a range of $0.88 to $0.98. This guidance is based on an estimated weighted average diluted share count of 38.4 million shares, and an effective income tax rate of 31.0%.
Conference Call
The Company will conduct a conference call to discuss the third quarter 2011 results today, Thursday, November 3, 2011, at 8:30 am ET. To participate, the conference call may be directly accessed from the U.S. and Canada at 1-866-225-2055 and accessed internationally at 1-416-340-8410. A live webcast of the conference call will also be available at www.fushicopperweld.com on the Investor Relations section. A replay of the call will be available atwww.fushicopperweld.com.
About Fushi Copperweld
Fushi Copperweld Inc., through its wholly owned subsidiaries, Fushi International (Dalian) Bimetallic Cable Co. Ltd., and Copperweld Bimetallics LLC, is the leading manufacturer and innovator of copper-clad bimetallic engineered conductor products for electrical, telecommunications, transportation, utilities and industrial applications. With extensive design and production capabilities, and a long-standing dedication to customer service, Fushi Copperweld is the preferred choice for bimetallic products worldwide.
Safe Harbor Statement
This press release may include certain statements that are not descriptions of historical facts, but are forward-looking statements. Forward-looking statements can be identified by the use of forward-looking terminology such as “will” “believes”, “expects” or similar expressions. These forward-looking statements may also include statements about our proposed discussions related to our business or growth strategy, which is subject to change. Such information is based upon expectations of our management that were reasonable when made but may prove to be incorrect. All of such assumptions are inherently subject to uncertainties and contingencies beyond our control and upon assumptions with respect to future business decisions, which are subject to change. We do not undertake to update the forward-looking statements contained in this press release. For a description of the risks and uncertainties that may cause actual results to differ from the forward-looking statements contained in this press release, see our most recent Annual Report filed with the Securities and Exchange Commission (SEC) on Form 10-K, and our subsequent SEC filings. Copies of filings made with the SEC are available through the SEC's electronic data gathering analysis retrieval system (EDGAR) at www.sec.gov.
For more information, please contact:
Investors
JolinQiao/Investor Relations Officer — Fushi Copperweld Inc.
Phone +1.931.433.0482 — E-mail: IR@fushicopperweld.com
Web: www.fushicopperweld.com
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September 30,
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December 31,
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2011
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2010
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USD
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USD
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ASSETS
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Current assets:
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Cash
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163,624,276 | 123,000,338 | ||||||
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Accounts receivable, net of allowance for doubtful accounts
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73,913,870 | 65,765,722 | ||||||
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Inventories
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18,899,317 | 16,143,922 | ||||||
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Advances to suppliers
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8,586,217 | 15,022,976 | ||||||
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Prepaid expenses and other current assets
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1,042,982 | 743,206 | ||||||
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Total current assets
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266,066,662 | 220,676,164 | ||||||
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Property, plant and equipment, net
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119,064,234 | 124,177,512 | ||||||
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Intangible assets, net
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468,518 | 577,587 | ||||||
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Land use rights, net
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13,246,167 | 13,089,733 | ||||||
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Deposits for land use rights
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9,957,883 | 9,623,181 | ||||||
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Goodwill
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1,788,231 | 1,669,789 | ||||||
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Other non-current assets
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518,477 | 443,397 | ||||||
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Total assets
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411,110,172 | 370,257,363 | ||||||
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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Current liabilities:
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Current portion of long-term bank loan
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650,000 | 650,000 | ||||||
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Accounts payable
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5,361,105 | 3,241,428 | ||||||
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Accrued expenses and other current liabilities
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14,128,367 | 15,542,111 | ||||||
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Total current liabilities
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20,139,472 | 19,433,539 | ||||||
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Long-term bank loan
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5,200,000 | 5,687,500 | ||||||
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Deferred income tax liabilities
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673,470 | 669,540 | ||||||
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Other non-current liabilities
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- | 65,057 | ||||||
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Total liabilities
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26,012,942 | 25,855,636 | ||||||
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Shareholders’ equity:
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Common stock, $0.006 par value, 100,000,000 shares authorized; 38,204,138 and 38,099,138 shares issued and outstanding as of September 30, 2011 and December 31, 2010, respectively
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229,226 | 228,596 | ||||||
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Additional paid-in capital
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169,028,404 | 167,596,792 | ||||||
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Retained earnings
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166,871,835 | 140,462,840 | ||||||
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Accumulated other comprehensive income
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48,967,765 | 36,113,499 | ||||||
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Total shareholders’ equity
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385,097,230 | 344,401,727 | ||||||
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Commitments and contingencies
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- | - | ||||||
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Total liabilities and shareholders’ equity
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411,110,172 | 370,257,363 | ||||||
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Three-Month Period Ended September 30,
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Nine-Month Period Ended September 30,
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2011
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2010
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2011
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2010
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USD
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USD
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USD
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USD
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Revenues
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74,279,340 | 66,507,433 | 219,158,766 | 195,062,641 | ||||||||||||
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Cost of revenues
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54,353,890 | 46,842,955 | 161,047,950 | 137,986,750 | ||||||||||||
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Gross profit
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19,925,450 | 19,664,478 | 58,110,816 | 57,075,891 | ||||||||||||
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Selling expenses
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1,127,259 | 1,457,154 | 3,519,065 | 4,074,280 | ||||||||||||
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General and administrative expenses
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5,061,337 | 3,117,062 | 15,035,656 | 10,923,878 | ||||||||||||
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Total operating expenses
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6,188,596 | 4,574,216 | 18,554,721 | 14,998,158 | ||||||||||||
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Income from operations
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13,736,854 | 15,090,262 | 39,556,095 | 42,077,733 | ||||||||||||
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Interest income
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222,852 | 200,295 | 663,776 | 590,236 | ||||||||||||
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Interest expense
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(116,378 | ) | (120,176 | ) | (340,282 | ) | (697,367 | ) | ||||||||
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Gain on cross-currency interest swap derivative
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- | - | - | 128,861 | ||||||||||||
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Loss on extinguishment of HY notes
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- | - | - | (2,395,778 | ) | |||||||||||
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Other expense, net
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(757,407 | ) | (176,001 | ) | (1,677,122 | ) | (194,445 | ) | ||||||||
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Total other expense, net
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(650,933 | ) | (95,882 | ) | (1,353,628 | ) | (2,568,493 | ) | ||||||||
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Income before income taxes
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13,085,921 | 14,994,380 | 38,202,467 | 39,509,240 | ||||||||||||
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Income tax expense
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4,137,255 | 2,072,009 | 11,793,472 | 5,197,187 | ||||||||||||
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Net income
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8,948,666 | 12,922,371 | 26,408,995 | 34,312,053 | ||||||||||||
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Other comprehensive income:
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Foreign currency translation adjustment, net of nil income taxes
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5,322,885 | 4,433,165 | 12,854,266 | 6,198,740 | ||||||||||||
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Comprehensive income
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14,271,551 | 17,355,536 | 39,263,261 | 40,510,793 | ||||||||||||
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Earnings per share:
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Basic
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0.23 | 0.34 | 0.69 | 0.94 | ||||||||||||
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Diluted
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0.23 | 0.34 | 0.69 | 0.93 | ||||||||||||
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Nine-Month Period Ended September 30,
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2011
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2010
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USD
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USD
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Cash flows from operating activities:
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Net cash provided by operating activities
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40,676,212 | 23,215,333 | ||||||
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Cash flows from investing activities:
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Payment for acquisitions of Jinchuan and Hongtai
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- | (6,375,000 | ) | |||||
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Cash acquired from acquisitions of Jinchuan and Hongtai
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- | 901,442 | ||||||
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Purchases of property and equipment
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(1,160,718 | ) | (1,869,029 | ) | ||||
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Net cash used in investing activities
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(1,160,718 | ) | (7,342,587 | ) | ||||
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Cash flows from financing activities:
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Proceeds from interest-free loans provided by Mr. Li Fu
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- | 15,000,000 | ||||||
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Payment for acquisition of Jinchuan
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(4,819,107 | ) | - | |||||
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Repayment of revolving line of credit
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- | (4,033,783 | ) | |||||
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Proceeds from long-term bank loans
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- | 6,500,000 | ||||||
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Repayment of long-term bank loans
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(487,500 | ) | - | |||||
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Repayment of notes payable
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- | (35,600,000 | ) | |||||
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Proceeds from issuance of common stock
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- | 59,800,050 | ||||||
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Proceeds from exercise of warrants and stock options
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628,495 | 1,207,824 | ||||||
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Transaction costs paid in connection with issuance of common stock
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- | (3,438,550 | ) | |||||
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Net cash (used in) provided by financing activities
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(4,678,112 | ) | 39,435,541 | |||||
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Effect of foreign currency exchange rate changes on cash
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5,786,556 | 1,960,862 | ||||||
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Net increase in cash
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40,623,938 | 57,269,149 | ||||||
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Cash at beginning of period
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123,000,338 | 60,597,849 | ||||||
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Cash at end of period
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163,624,276 | 117,866,998 | ||||||
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Supplemental disclosure of cash flow information:
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Interest paid
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340,282 | 1,425,833 | ||||||
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Income taxes paid
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7,665,233 | 6,161,271 | ||||||
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Non-cash investing and financing activities
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Accrual for the acquisition of Jinchuan
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- | 4,819,107 | ||||||
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Issuance of common stock in connection with the acquisition of Hongtai
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- | 2,600,000 | ||||||
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Payable for purchase of property and equipment
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554,538 | 314,294 | ||||||