Fushi Copperweld Announces 2011 Fourth Quarter and Full Year Results

BEIJING, March 8, 2012 /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 fourth quarter and full year periods ended December 31, 2011.

Fourth Quarter 2011 Results

  • Revenues were $68.2 million compared to $69.9 million in the year ago period;
  • Gross profit was $16.8 million, or 24.7% of revenues compared to $22.2 million, or 31.8% of revenues, in the year ago period;
  • Income from operating activities was $9.4 million, or 13.8% of revenues compared to $16.0 million, or 22.8% of revenues, in the year ago period;
  • Net cash generated by operating activities of $31.4 million, compared to $28.2 million net cash generated by operating activities in the fourth quarter of 2010; and
  • Cash position at quarter end remains strong at $200.5 million.

Joe Longever, co-Chief Executive Officer of Fushi Copperweld, commented, "The fourth quarter saw a continuation of the challenging market conditions that affected our business in the third quarter. Reacting to macroeconomic factors, some of our customers continued to reduce or delay their orders, which decreased sales volumes, particularly in the U.S., and, combined with the effects of changes in raw material prices, reduced our margins. Despite the difficult environment, we continued to make solid progress in the execution of our global strategy. The ramp-up of our new facility in Belgium is proceeding as planned. We expect to be in a position to generate sales of tubing, CCA and CCS products from this facility in early-2012 as anticipated, and we have received strong feedback from current and potential customers in the market about our enhanced regional presence."

Revenues in the fourth quarter of 2011 were $68.2 million, a slight decrease from $69.9 million in the prior year quarter, as softer sales volumes more than offset higher average selling prices.

Gross profit in the fourth quarter was $16.8 million compared to $22.2 million last year. Gross margin decreased to 24.7% from 31.8% in the same period last year. Gross margin for the Company's Dalian cladding facility was 30.9% compared to 38.3% in the prior year period, while gross margin for the Company's Fayetteville, TN facility was -0.1% in the fourth quarter of 2011, compared to 11.5% in the fourth quarter of 2010.

Operating expenses in the fourth quarter of 2011 increased to $7.4 million compared to $6.2 million in the prior year's quarter, primarily as a result of the Company's continued investment in its future growth strategy and increased expenses including higher audit and professional service fees, and advisor fees related to the going private transaction. Operating expenses for the quarter also included incremental costs of approximately $0.9 million from the start up of the Company's Belgium facility. The Company has restarted the copper tubing production and begun the process of stocking CCA and CCS product inventory at this facility. Although the Company expects its Belgium operations to exit 2012 at a profitable run-rate, its contributions will be slightly dilutive to earnings in 2012. As a percentage of revenue, operating expenses increased to 10.9% from 8.9% in the fourth quarter of 2010.

The Company's effective income tax rate in the fourth quarter of 2011 was 39.4% compared to 115.7% a year ago. As previously announced, the Company's results for the 2010 fourth quarter included a non-cash adjustment of $15.4 million, or $0.40 per diluted share, relating to the adjustment of the beginning-of-the-period balance of a valuation allowance of U.S. Entities (Parent and Copperweld Bimetallics, LLC).

Net income in the fourth quarter was $5.6 million, or $0.15 per diluted share, compared to a net loss of $2.4 million, or $0.06 per diluted share, for the 2010 fourth quarter.

The number of fully diluted shares increased slightly in the fourth quarter of 2011 to 38.3 million from 38.1 million a year ago.

During the three months ended December 31, 2011, the Company generated net cash from operations of $31.4 million, compared $28.2 million in the comparable period in 2010.

Full Year 2011 Results

For the 2011 full-year period, revenues increased 8.5% to $287.4 million from $265.0 million in the year ago period. Metric tons shipped in fiscal year 2011 decreased 2.9% to 37,492 metric tons compared to 38,607 metric tons in 2010.

Gross profit in 2011 was $75.0 million, or 26.1% of revenue, compared to $79.3 million, or 29.9% of revenue, in fiscal year 2010.

Operating expenses in 2011 were $26.0 million, compared to $21.2 million in fiscal year 2010. On a percentage basis, operating expenses increased to 9.0% of revenues from 8.0% for fiscal year 2010. The increase is primarily due to the higher audit and professional service fees, advisor fees related to the going private transaction and approximately $0.9 million in expenses during the start-up period of the Company's Belgium facility. Operating income for 2011 was $49.0 million, or 17.0% of revenues, compared to $58.0 million, or 21.9% of revenues, in 2010.

The Company's effective income tax rate for 2011 was 32.5% compared to 42.1% in 2010 and somewhat higher than its previous expectation of 31.0%. The decrease in effective income tax rate in 2011 compared to 2010 was primarily due to the effect of the adjustment of valuation allowance in 2010 as mentioned above.

Net income for the 2011 full-year period was $32.0 million, or $0.84 per diluted share. This compares to net income of $31.9 million, or $0.86 per diluted share, in 2010.

In the year ended December 31, 2011, net cash generated from operations was $72.0 million, compared to $51.4 million in the year ago period.

As of December 31, 2011, the Company's cash position was $200.5 million, an increase of 63.0% from $123.0 million as of December 31, 2010. Accounts receivable at December 31, 2011 were $64.0 million, compared to $65.8 million at December 31, 2010. Long-term debt totaled $7.6 million as of December 31, 2011, compared to $5.7 million at December 31, 2010.

Mr. Longever concluded, "Looking ahead to 2012, macroeconomic conditions remain uncertain and we expect this will continue to weigh on our customers' purchasing decisions, creating headwinds for our business across the markets we serve. Nevertheless, we remain confident in the long-term demand drivers for our products, and expect to see incremental sales in Europe as we ramp up our new capacity and broaden our sales network there. We continue to operate from a solid financial position, and remain committed to utilizing our strong cash flows and balance sheet to take advantage of opportunities in the current marketplace and position ourselves for success when the cycle turns upward."

Outlook

Based on fourth quarter performance and current business conditions, Fushi Copperweld currently expects 2012 fully diluted earnings per share of between $0.76 and $0.86 based on an estimated weighted average diluted share count of 38.3 million shares, and an effective tax rate of 31.5%. The first fiscal quarter is typically the Company's weakest quarter due to the timing of the Chinese New Year, during which the Company's operating facilities in China are closed for two weeks. The Company expects profitability in subsequent quarters to improve over the first quarter due to higher revenues with the absence of the Chinese New Year and increased traction from business development and certification efforts.

Conference Call

The Company will conduct a conference call to discuss the fourth quarter and full year 2011 results today, Thursday, March 8, 2012, at 4:30 pm ET. To participate, the conference call may be directly accessed from the U.S. and Canada at 1-866-226-1793 and accessed internationally at 1-416-340-2218. A live webcast of the conference call will also be available at http://bit.ly/eventFSIN. A replay of the call will be available at www.fushicopperweld.com on the Investor Relations section.

About Fushi Copperweld

Fushi Copperweld Inc., principally 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          

Jolin Qiao, Investor Relations Officer
Fushi Copperweld Inc.
Phone +1.931.433.0482
E-mail: ir@fushicopperweld.com
Web:  www.fushicopperweld.com

 

FUSHI COPPERWELD, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2011 AND 2010

 

 

 

 

 

 

 

 

 

 

 

Three-Month Period Ended
December 31,

 

Twelve-Month Period Ended 
December 31,

 

 

2011

 

2010

 

2011

 

2010

 

 

USD

 

USD

 

USD

 

USD

 

 

 

 

 

 

 

 

 

Revenues

 

68,230,485

 

69,909,759

 

287,389,251

 

264,972,400

Cost of revenues

 

51,385,191

 

47,698,109

 

212,433,141

 

185,684,859

Gross profit

 

16,845,294

 

22,211,650

 

74,956,110

 

79,287,541

Operating expense:

 

 

 

 

 

 

 

 

Selling expenses

 

1,540,078

 

1,719,285

 

5,059,143

 

5,793,565

General and administrative expenses

 

5,863,288

 

4,527,254

 

20,898,944

 

15,451,132

Total operating expense

 

7,403,366

 

6,246,539

 

25,958,087

 

21,244,697

Income from operations

 

9,441,928

 

15,965,111

 

48,998,023

 

58,042,844

Other income (expense):

 

 

 

 

 

 

 

 

Interest income

 

231,570

 

221,172

 

895,346

 

811,408

Interest expense

 

(108,812)

 

(206,226)

 

(449,094)

 

(903,593)

Gain on cross-currency interest swap derivative

 

-

 

-

 

-

 

128,861

Loss on extinguishment of HY Notes

 

-

 

-

 

-

 

(2,395,778)

Foreign currency exchange losses, net

 

(258,436)

 

(428,620)

 

(1,935,558)

 

(623,065)

Total other expense

 

(135,678)

 

(413,674)

 

(1,489,306)

 

(2,982,167)

Income before income taxes

 

9,306,250

 

15,551,437

 

47,508,717

 

55,060,677

Income tax expense

 

(3,670,195)

 

(17,995,723)

 

(15,463,667)

 

(23,192,910)

Net income

 

5,636,055

 

(2,444,286)

 

32,045,050

 

31,867,767

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Foreign currency translation adjustment, net of nil income taxes

 

5,126,828

 

4,692,365

 

17,981,094

 

10,891,105

Comprehensive income

 

10,762,883

 

2,248,079

 

50,026,144

 

42,758,872

Earnings per share:

 

 

 

 

 

 

 

 

Basic

 

0.15

 

(0.06)

 

0.84

 

0.86

Diluted

 

0.15

 

(0.06)

 

0.84

 

0.85

 

FUSHI COPPERWELD, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of December 31, 2011 and 2010

 

 

 

Dec-31

 

2011

 

2010

 

USD

 

USD

ASSETS

 

 

 

Current assets:

 

 

 

Cash

200,451,902

 

123,000,338

Accounts receivable, net of allowance for doubtful accounts

63,978,861

 

65,765,722

Inventories

10,695,123

 

16,143,922

Advances to suppliers

6,793,904

 

15,022,976

Prepaid expenses and other current assets

1,332,204

 

743,206

Total current assets

283,251,994

 

220,676,164

Property, plant and equipment, net

117,405,523

 

124,177,512

Intangible assets, net

431,441

 

577,587

Land use rights

13,321,796

 

13,089,733

Deposits for land use right

10,090,621

 

9,623,181

Goodwill

1,812,068

 

1,669,789

Other non-current assets

491,380

 

443,397

Total assets

426,804,823

 

370,257,363

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

Current liabilities:

 

 

 

Current portion of long-term loan

650,000

 

650,000

Accounts payable

3,802,155

 

3,241,428

Amounts due to a related party

2,000,000

 

-

Accrued expenses and other current liabilities

15,880,176

 

15,542,111

Total current liabilities

22,332,331

 

19,433,539

Long-term loans

7,632,100

 

5,687,500

Deferred income tax liabilities

672,943

 

669,540

Other non-current liabilities

-

 

65,057

Total liabilities

30,637,374

 

25,855,636

Shareholders' equity:

 

 

 

Common stock, $0.006 par value, 100,000,000 shares authorized; 38,240,438 and 38,099,138 shares issued
            and outstanding as of December 31, 2011 and 2010, respectively

229,444

 

228,596

Additional paid-in capital

169,335,522

 

167,596,792

Retained earnings

172,507,890

 

140,462,840

Accumulated other comprehensive income

54,094,593

 

36,113,499

Total shareholders' equity

396,167,449

 

344,401,727

Commitments and contingencies

 

 

 

Total liabilities and shareholders' equity

426,804,823

 

370,257,363

 

FUSHI COPPERWELD, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2011 and 2010

 

 

 

 

 

Year Ended December 31,

 

 

2011

 

2010

 

 

USD

 

USD

Cash flows from operating activities:

 

 

 

 

Net income

 

32,045,050

 

31,867,767

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Provision for (reversal of) bad debt allowance

 

26,176

 

(485,781)

Write-down of  inventories

 

41,489

 

276,898

Depreciation and amortization

 

13,783,833

 

12,446,645

Loss (gain) on disposal of long-lived assets

 

(13,910)

 

294,595

Amortization of debt issuance cost

 

-

 

255,673

Deferred income tax expenses (benefit)

 

(51,937)

 

14,283,528

Share-based compensation expense

 

838,031

 

933,865

Unrealized foreign currency exchange loss (gain), net

 

1,882,544

 

692,704

Shareholder's contribution

 

278,505

 

-

Unrealized loss (gain) on cross-currency interest swap derivative

 

-

 

(882,527)

Loss on extinguishment of HY Notes

 

-

 

2,395,778

Change in operating assets and liabilities, net of effect of acquisitions of Jinchuan and Hongtai:

 

 

 

 

Accounts receivable

 

4,583,079

 

7,839,294

Inventories

 

5,687,935

 

(3,862,514)

Advances to suppliers

 

8,724,797

 

(5,378,045)

Prepaid expenses and other current assets

 

(609,296)

 

422,085

Accounts payable

 

514,363

 

(4,022,618)

Accrued expenses and other current liabilities

 

4,317,133

 

(5,695,936)

Net cash provided by operating activities

 

72,047,792

 

51,381,411

Cash flows from investing activities:

 

 

 

 

Payments for acquisitions of Jinchuan and Hongtai

 

-

 

(6,375,000)

Cash acquired from acquisition of Jinchuan and Hongtai

 

-

 

901,442

Proceeds from disposal of equipment

 

15,999

 

255,260

Purchase of land use rights

 

-

 

(9,480,129)

Purchase of property, plant and equipment

 

(1,418,716)

 

(2,679,246)

Net cash used in investing activities

 

(1,402,717)

 

(17,377,673)

Cash flows from financing activities:

 

 

 

 

Contingent consideration paid for acquisition of Jinchuan

 

(4,819,107)

 

-

Proceeds from interest-free loans provided by Mr. Li Fu

 

2,000,000

 

23,000,000

Repayment of interest-free loans provided by Mr. Li Fu

 

-

(23,000,000)

Repayment of borrowings from revolving line of credit

 

-

 

(4,033,783)

Proceeds from long-term loans

 

2,691,800

 

6,500,000

Repayment of long-term bank loans

 

(650,000)

 

(162,500)

Repayment of notes payable

 

-

 

(35,600,000)

Proceeds from issuance of common stock and warrants

 

623,042

 

62,010,759

Transaction costs paid in connection with issuance of common stock

 

-

 

(3,438,550)

Net cash provided by (used in) financing activities

 

(154,265)

 

25,275,926

 

 

 

 

 

Effect of foreign currency exchange rate changes on cash

 

6,960,754

 

3,122,825

Net increase (decrease) in cash

 

77,451,564

 

62,402,489

Cash at beginning of year

 

123,000,338

 

60,597,849

Cash at end of year

 

200,451,902

 

123,000,338

 

 

 

 

 

SOURCE Fushi Copperweld, Inc.



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http://www.fushicopperweld.com
http://bit.ly/eventFSIN

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