Alloy Steel International Reports Second Quarter 2011 Results
PERTH, Australia, June 15, 2011 /PRNewswire/ -- Alloy Steel International, Inc. (OTC PK: AYSI) ("Alloy Steel" or "Company"), the manufacturer of Arcoplate and provider of anti-wear and hang-up solutions to the mining and bulk materials industries, based in Perth, Western Australia, today reported results for second quarter ended March 31, 2011 ("Q2 2011").
Financial Results
For Q2 2011, total sales were $5.3 million versus $5.1 million in the quarter ended March 31, 2010 ("Q2 2010"). These sales consist solely of the Company's Arcoplate products. Income before tax Q2 2011 was $1.7 million or $0.10 per common share, compared with income before tax of $1.7 million or $0.10 per common share for Q2 2010. Net income after tax was $1.4 million, or $0.08 per share, for Q2 2011, compared to income after tax of $1.1 million, or $0.06 per common share, for Q2 2010.
Results of Operations
For Q2 2011, sales were 2.6% percent higher than Q2 2010. This slight growth in sales comparing quarters year-on-year, may indicate the effect of the Christmas holiday period on business activity.
The reduction in Gross Margin from 59% to 54% for Q2 2011 versus Q2 2010 is attributed to a change in depreciation estimate, a reduction in the proportion of processed and finished product included in sales resulting in a changed sales mix for Q1 and Q2 2011, as well as foreign exchange movements.
Barry Woodhouse, CFO, stated, "The Company remains optimistic about sales for the remainder of the financial year and sales are usually lower in the December and March quarters. Early indications in the current quarter suggest demand is likely to improve in the coming months."
Excerpts of the financial statements are attached to this report.
-- FINANCIAL TABLES FOLLOW --
NOTES
FORWARD-LOOKING STATEMENTS
This Press Release contains various "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, and the Company intends that such forward-looking statements will be subject to the safe harbors created thereby. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements. Such risks and uncertainties include our projected sales and profitability, growth strategies, anticipated trends in our industry segment, our future financing plans, anticipated needs for working capital and those risks and uncertainties referenced under the headings entitled "Risk Factors" contained in our 2009 Annual Report on Form 10-K. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend" or "project" or the negative of these words or other variations on these words or comparable terminology.
Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. The forward-looking statements contained in this Press Release speak only as of the date hereof and we expressly disclaim any obligation to provide public updates, revisions or amendments to any forward-looking statements made herein to reflect changes in our expectations of future events.
EXCHANGE RATE MOVEMENTS
It is noted that predominantly all operations of Alloy Steel International are conducted by the Australian subsidiary, and therefore, the majority of the amounts reported are initially recorded in Australian dollars by the subsidiary. The value of the Australian dollar compared to the US dollar has been volatile over the reporting period, and therefore the exchange rate movement continues to have a reasonable impact upon the value reported by the Company.
ALLOY STEEL INTERNATIONAL, INC. AND CONTROLLED ENTITIES CONSOLIDATED BALANCE SHEETS March 31, 2011 and September 30, 2010 |
|||
March 2011 (unaudited) |
September 2010 Audited |
||
ASSETS |
|||
Current Assets |
|||
Cash and cash equivalents |
$ 2,229,365 |
$ 3,504,350 |
|
Accounts receivable, less allowance for doubtful accounts |
2,359,742 |
5,597,253 |
|
Inventories |
4,820,190 |
3,287,138 |
|
Prepaid expenses and other current assets |
51,602 |
90,998 |
|
Total Current Assets |
9,460,899 |
12,479,739 |
|
Property and Equipment, net |
8,438,098 |
6,558,410 |
|
Other Assets |
|||
Investments |
- |
75,493 |
|
Deferred tax asset |
295,449 |
332,113 |
|
Other assets |
17,863 |
17,863 |
|
Total other assets |
313,312 |
425,469 |
|
Total Assets |
$ 18,212,309 |
$ 19,463,618 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||
Current Liabilities |
|||
Notes payable, current portion |
$ 177,631 |
$ 217,553 |
|
Royalties payable, related party |
197,958 |
1,148,335 |
|
Current tax payable |
414,114 |
1,981,375 |
|
Accounts payable and other current liabilities |
1,650,117 |
3,434,746 |
|
Total Current Liabilities |
2,439,820 |
6,782,009 |
|
Long-Term Liabilities |
|||
Notes payable, less current portion |
527,724 |
581,492 |
|
Notes payable, officers |
255 |
255 |
|
Employee entitlement provisions |
- |
- |
|
Deferred tax liabilities |
172,543 |
189,026 |
|
Total Long-Term Liabilities |
700,522 |
770,773 |
|
Commitments and Contingencies |
|||
Stockholders' Equity |
|||
Preferred Stock: $0.01 par value; authorized 3,000,000 shares; issued and outstanding – none |
- |
- |
|
Common Stock: $0.01 par value; authorized 50,000,000 shares; 17,350,000 issued and outstanding |
173,500 |
173,500 |
|
Capital in excess of par value |
1,767,512 |
1,767,512 |
|
Retained earnings |
9,965,419 |
7,704,279 |
|
Accumulated other comprehensive income |
3,173,101 |
2,272,956 |
|
Total Alloy Steel International, Inc. Shareholders equity |
15,079,532 |
11,918,247 |
|
Non controlling interest |
(7,565) |
(7,411) |
|
Total Stockholders' Equity |
15,071,967 |
11,910,836 |
|
Total Liabilities and Stockholders' Equity |
$ 18,212,309 |
$ 19,463,618 |
|
ALLOY STEEL INTERNATIONAL, INC. AND CONTROLLED ENTITIES CONSOLIDATED STATEMENTS OF OPERATIONS Quarters Ended March 31, 2011 and 2010 |
|||||
Three Months Ended |
Six Months Ended |
||||
March 31 2011 (unaudited) |
March 31 2010 (unaudited) |
March 31 2011 (unaudited) |
March 31 2010 (unaudited) |
||
Sales |
$ 5,263,001 |
$ 5,128,924 |
$ 10,379,549 |
$ 10,970,952 |
|
Cost of Sales |
2,430,905 |
2,120,156 |
5,445,729 |
4,609,021 |
|
Gross Profit |
2,832,096 |
3,008,768 |
4,933,820 |
6,361,931 |
|
Operating Expenses |
|||||
Selling, general and administrative |
1,241,386 |
1,360,089 |
2,254,161 |
2,486,628 |
|
Profit (Loss) From Operations |
1,590,710 |
1,648,679 |
2,679,659 |
3,875,303 |
|
Other Income (Expense) |
|||||
Interest income |
41,954 |
16,032 |
79,453 |
19,753 |
|
Interest expense |
(18,623) |
(10,619) |
(27,257) |
(20,885) |
|
Insurance recovery |
- |
1,107 |
- |
8,443 |
|
Sundry income |
75,390 |
9,311 |
49,584 |
24,309 |
|
Impairment expense |
- |
8,429 |
- |
12,113 |
|
Realised foreign exchange profit (loss) |
(257,314) |
- |
(241,711) |
- |
|
Unrealised foreign exchange profit (loss) |
220,334 |
- |
145,182 |
- |
|
61,741 |
24,260 |
5,251 |
43,733 |
||
Income (Loss) Before Income Tax (Expense) Benefit |
1,652,451 |
1,672,939 |
2,684,910 |
3,919,036 |
|
Income tax (expense) benefit |
(210,030) |
(563,311) |
(423,924) |
(1,303,385) |
|
Net Income (Loss) |
1,442,421 |
1,109,628 |
2,260,986 |
2,615,651 |
|
Net (income) loss attributable to non-controlling interests |
- |
(40) |
154 |
1,889 |
|
Net Income (Loss) Attributable to Stockholders |
$ 1,442,421 |
$ 1,109,588 |
$ 2,261,140 |
$ 2,617,540 |
|
Basic Income (Loss) and Diluted Income (Loss) per Common Share |
$ 0.083 |
$ 0.064 |
$ 0.130 |
$ 0.151 |
|
Weighted Average Common Shares Used in computing basic and diluted income (loss) per share |
17,350,000 |
17,350,000 |
17,350,000 |
17,350,000 |
|
Alloy Steel International, Inc.
Supplemental Information
Business Overview
Alloy Steel International manufactures and distributes Arcoplate, a wear-resistant continuous fused alloy wear plate produced through a patented process. It has been recognized that wear is the largest single factor leading to production losses in the mining, mineral-processing, and steel manufacturing industries. Consequently, wear solutions are indispensable for these businesses. Without products such as Arcoplate, these industries' increased downtime would significantly affect performance. The wearing of metal parts is generally defined as a gradual decay or breakdown of the metal. This wear of equipment may be due to many causes and accordingly, the selection of wear plate solutions can be a relatively complex process.
In order to minimize the effects of wear, businesses have traditionally employed various wear-combating materials with limited success. Alloy Steel International believes that Arcoplate provides industry with a cost effective solution to most wear-related problems.
Reclassification of costs
An internal review of the Company's accounting system in place for the past fiscal year revealed that certain expenditures directly relating to the manufacture of ArcoPlate were categorized as SG&A expenditures in financial year 2010. These costs now are recognized as cost of goods sold and include logistics, repairs and maintenance and depreciation of the mills. Costs itemized as SG&A in Q2 2010 amounted to $349,884 which now have been re-allocated to Cost of Goods Sold. After this reclassification, the gross profit margin for Q1 2010 decreased from 59% to 50%. There was a corresponding reduction in SG&A for Q2 2010 and, therefore, no change to the Profit from Operations for Q2 2010. The figures reported in this release reflect results and financial position after these reclassification entries.
Gross Profit and Cost of Sales
Cost of goods sold (COGS) was $2.4 million for Q2 2011, compared to COGS of $2.1 million for Q2 2010. Gross profit was $2.8 million for Q2 2011, compared to $3.0 million for Q2 2010.
Alloy Steel's gross profit was 53.8% of sales, and 50.1% of sales, for Q2 2011 and 2010 respectively. The reduction in gross profit is attributed to a change in depreciation estimate and a reduction in the proportion of processed and finished product included in sales resulting in a changed sales mix for Q1 2011, as well as foreign exchange movements.
Operating Expenses
Selling, general and administrative expenses were $1.2 million for Q2 2011, compared to $1.4 million for Q2 2010. These expenditures increased for Q2 2011 compared to Q1 2010 due to increasing administration resources and associated costs.
Income Before Taxes
Net income before income tax was $1.7 million for Q2 2011, compared to income before income tax of $1.7 million for Q2 2010.
Net Income
Net income after tax was $1.4 million, or $0.08 per share, for Q2 2011, compared to income after tax of $1.1 million, or $0.06 per share, for Q2 2010. Less tax has been charged in Q2 2011 as compared to Q2 2010 as the royalty payments are being appropriately matched to the relevant income source.
SOURCE Alloy Steel International, Inc.
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