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2014

Lihua International Reports First Quarter 2013 Financial Results

First Quarter Revenue Increases 29.1% Year-over-Year to $218.2 Million

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DANYANG, China, May 10, 2013 /PRNewswire/ -- Lihua International, Inc. (NASDAQ: LIWA) ("Lihua" or the "Company"), a leading Chinese developer, designer, and manufacturer of low cost, high quality alternatives to pure copper products, including refined copper products, copper wire and copper clad aluminum ("CCA") wire, today announced financial results for the first quarter ended March 31, 2013.

First Quarter 2013 Financial Highlights (USD in Millions, except per-share data):


Three Months Ended March 31,




2013


2012


% Change

Revenue

$ 218.2


$ 169.1


+29.1%

Gross Profit

$ 21.1


$ 18.6


+13.0%

Net Income

$ 13.3


$ 11.5


+16.0%

Earnings Per Share (Diluted)

$ 0.44


$ 0.38


+18.4%

Non-GAAP Net Income

$ 13.4


$ 11.8


+13.4%

Non-GAAP Earnings Per Share (Diluted)

$ 0.45


$ 0.39


+15.4%

Adjusted EBITDA

$ 19.1


$ 16.7


+14.2%

As of March 31, 2013, Lihua had a strong balance sheet with $168.9 million in cash and cash equivalents, or $5.64 per diluted share, compared with $144.3 million, or $4.82 per diluted share, as of December 31, 2012.  Cash flow from operations for the first quarter was $24.7 million, compared with cash flow from operations of $6.7 million in the first quarter of 2012.

First Quarter 2013 and Recent Business Highlights

  • In January 2013, completed construction of and launched production on the Company's third dedicated copper anode smelter. This smelter produced over 1,200 tons of copper anode in March 2013, and is expected to reach designed annual capacity of 25,000 -- 30,000 tons in the second quarter. 
  • Also in January 2013, began construction of its fourth copper anode smelter. The Company expects to complete construction of this smelter by the end of the second quarter, bringing annual scrap copper refinery capacity to 150,000 -- 170,000 tons from 125,000 -- 140,000 tons.
  • Completed construction of all production, warehousing and storage facilities on 30-acre campus; construction of the remaining facilities will be completed this fiscal year.
  • Continued pre-commercial marketing activities for CCA cable and wire product.

"In the first quarter of 2013, we achieved record quarterly shipments of copper anode as a result of our ongoing capacity expansion efforts, which helped offset the typical seasonal weakness due to the Chinese Spring Festival," said Mr. Jianhua Zhu, Lihua's founder, chairman and CEO. "Although margins continued to be impacted by product mix and ASP pressure, we increased net income 16% over the first quarter of 2012 based on continued strong demand from our customers."

"Construction of our fourth dedicated copper anode smelter is on track to be completed by the end of the second quarter and is expected to commence volume production shortly thereafter. We are making substantive progress toward the commercial launch of our new CCA cable and wire product for the power transmission market. In the first quarter, we began discussions with several potential customers for the new product, and their initial reactions have been very positive. We are confident that these investments will further strengthen our leadership position in the markets we serve and contribute to sustainable growth in our business over the long-term. Our strong balance sheet, with $169 million in cash as of March 31, gives us the financial resources necessary to fund these exciting initiatives, which we believe will help Lihua build incremental shareholder value over time," concluded Mr. Zhu.

First Quarter 2013 Financial Results

Sales for the first quarter of 2013 increased 29.1% to $218.2 million, compared with sales of $169.1 million in the first quarter of 2012. The increase in revenue was primarily driven by additional production and sales of copper anode and copper rod as a result of the Company's capacity expansion. Lihua's CCA and copper wire products, copper anode and copper rod accounted for sales of $87.0 million, $114.0 million and $17.3 million, respectively in the first quarter of 2013. This compares with CCA and copper wire sales of $89.6 million, copper anode sales of $63.0 million and cooper rod sales of $16.5 million in the first quarter of 2012. During the first quarter of 2013, the average selling price of Lihua's products was $8,133 per ton, compared with $8,362 per ton in the same period last year.

Gross profit for the first quarter of 2013 was $21.1 million, an increase of 13.0% from gross profit of $18.6 million for the first quarter of 2012. As a percentage of total sales, gross margin declined to 9.6% in the first quarter of 2013 from 11.0% for the same period last year. The decrease was primarily due to a shift in product mix as we increased the production and sales of lower margin refined copper products, and the narrowing spread between scrap copper cost and copper prices in the first quarter of 2013.

Selling, general and administrative ("SG&A") expenses for the first quarter of 2013 were $3.1 million, compared with $2.8 million in the same period of 2012.  

The Company recorded no interest expense in the first quarter of 2013, compared with interest expense of $143,779 in the first quarter of 2012.

For the three months ended March 31, 2013, provision for income tax expense was $4.7 million, compared with $4.3 million for the three months ended March 31, 2012. The effective tax rate for the first quarter of 2013 was 26.2%, compared to 27.2% for the first quarter of 2012.

Net income for the first quarter of 2013 was $13.3 million, or $0.44 per share, based on 30.0 million weighted average diluted shares outstanding, compared with net income of $11.5 million, or $0.38 per share, based on 30.1 million weighted average diluted shares outstanding during the same period in 2012.

Non-GAAP net income for the first quarter of 2013 was $13.4 million, or $0.45 per diluted share, compared with non-GAAP net income of $11.8 million, or $0.39 per diluted share, for the first quarter of 2012. Non-GAAP net income excludes the net impact of warrant-related non-cash charges of $0.1 million and $0.4 million in the first quarters of 2013 and 2012, respectively.

Adjusted EBITDA for the three months ended March 31, 2013 was $19.1 million, compared with $16.7 million for the same period in the prior year.

Balance Sheet

As of March 31, 2013, Lihua had $168.9 million, or $5.64 per diluted share, in cash and cash equivalents, compared with $144.3 million, or $4.82 per diluted share, as of December 31, 2012. As of March 31, 2013, Lihua had working capital of $227.6 million and no debt.

Outlook

The Company began construction of a fourth copper anode smelter in January 2013 and expects to complete construction by the end of the second quarter of 2013.  Once complete, Lihua's aggregate scrap copper refinery capacity will increase to 150,000 – 170,000 tons per year.  The Company has completed construction of all factory buildings and warehouse and storage facilities on its 30-acre plant site. The remainder of the site, which includes a new R&D center, office space and employee facilities, will be completed this fiscal year.

The Company expects full-year 2013 gross profit in the range of $95 - 98 million, and non-GAAP net income in the range of $62 - 65 million, representing year-over-year growth of 6.1 – 9.4% and 6.9 – 12.1%, respectively. The Company expects the growth in 2013 will be largely the result of copper anode capacity expansion.

Conference Call and Webcast

Management of Lihua International will host a conference call today, May 10, 2013 at 8:00 a.m. Eastern time to discuss the first quarter 2013 financial results. Individuals interested in participating in the conference may do so by dialing 1-877-941-1427 in the U.S. and Canada, or 1-480-629-9664 internationally.

Those interested in listening to the conference call live via the Internet may do so by visiting the Investor Relations section of the Company's Web site at: http://www.lihuaintl.com/Investor_Relations/Events_Presentations.html.

For those unable to participate, an audio replay of the call will be available beginning approximately one hour after the conclusion of the live call through March 29, 2013. The audio replay can be accessed by dialing 1-800-406-7325 from the U.S or Canada, or 1-303-590-3030 internationally, and entering access ID No. 4618350#. Following the live webcast, an online archive will be available for 90 days.

About Non-GAAP Financial Measures

The Company uses non-GAAP net income and other non-GAAP metrics such as Adjusted EBITDA to provide information about its operating trends. Investors are cautioned that non-GAAP net income and Adjusted EBITDA are not measures of liquidity or of financial performance under Generally Accepted Accounting Principles ("GAAP").

The Company defines non-GAAP net income as net income excluding the change in fair value of warrants and other one-time or non-recurring items that are evaluated on an individual basis. The Company defines Adjusted EBITDA as net income before depreciation and amortization, interest income/expense, income taxes, change in fair value of warrants and non-cash share-based compensation expenses. The non-GAAP net income and Adjusted EBITDA numbers presented may not be comparable to similarly titled measures reported by other companies. Non-GAAP net income and Adjusted EBITDA, while providing useful information, should not be considered in isolation or as an alternative to net income or cash flows as determined under GAAP. Consistent with Regulation G under the U.S. federal securities laws, the non-GAAP measures in this press release have been reconciled to the nearest GAAP measure, and this reconciliation is located under the headings "Non-GAAP Net Income Calculation" and "Adjusted EBITDA Calculation" below.

Non-GAAP Net Income Calculation






For Three Months Ended March 31,



2013


2012

Net income

$

13,311,187

$

11,475,012

  Gain on Extinguishment of Warrant Liabilities


-


-73,291

  Change in fair value of warrants


108,000


430,000

Non-GAAP Net Income

$

13,419,187

$

11,831,721






 

Adjusted EBITDA Calculation






For Three Months Ended March 31,



2013


2012

Net income

$

13,311,187

$

11,475,012

  Depreciation and amortization


1,044,563


657,320

  Share-based compensation expense


81,464


112,875

  Gain on Extinguishment of Warrant Liabilities


-


-73,291

    Change in fair value of warrants


108,000


430,000

    Interest income


-170,751


-163,136

    Interest expenses


-


-

  Provision for income tax


4,714,688


4,277,346

Adjusted EBITDA

$

19,089,151

$

16,716,126






About Lihua International, Inc.

Lihua, through its two wholly owned subsidiaries, Lihua Electron and Lihua Copper, is a leading value-added manufacturer of copper replacement products for China's rapidly growing copper wire and copper replacement product market. Lihua is one of the first vertically integrated companies in China to develop, design and manufacture lower cost, high quality alternatives to pure copper magnet wire and pure copper alternative products. Lihua's products include CCA and refined copper products. Current product offerings include CCA and pure copper wire, copper rod and copper anode. Except for CCA wire, all other products are produced from recycled scrap copper. Lihua's products are sold in China either directly to manufacturers or through distributors in the wire and cable industries and manufacturers in a wide variety of industries including the consumer electronics, white goods, automotive, utility, telecommunications and specialty cable industries. Lihua's corporate and manufacturing headquarters are located in the heart of China's copper industry in Danyang, Jiangsu Province. For more information, visit: http://www.lihuaintl.com.

To be added to the Company's email distribution for future news releases, please send your request to lihua@tpg-ir.com.

Safe Harbor Statement

This press release contains certain statements that may be deemed to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, that address activities, events or developments that the Company expects, projects, believes or anticipates will or may occur in the future, including, without limitation, statements about its business or growth strategy, general industry conditions including availability of copper or recycled scrap copper, future operating results of the Company, capital expenditures, expansion and growth opportunities, bank borrowings, financing activities and other such matters, are forward-looking statements. Although the Company believes that its expectations stated in this press release are based on reasonable assumptions, actual results may differ from those projected in the forward-looking statements.

Please note that information in this press release reflects management views as of the date of issuance.

Contact:

The Piacente Group, Inc.
Investor Relations
Brandi Floberg or Lee Roth
(212) 481-2050
lihua@tpg-ir.com
 


LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES





CONDENSED CONSOLIDATED BALANCE SHEETS





(AMOUNTS EXPRESSED IN US DOLLARS)












March 31,


December 31,



2013


2012

ASSETS










CURRENT ASSETS





     Cash and cash equivalents


$168,932,279


$144,300,290

      Accounts receivable, net


42,024,583


45,284,923

      Prepayments for raw material purchases


14,255,297


19,569,239

     Other receivables, deposits and prepayments


193,302


559,955

      Prepaid land use right – current portion


407,101


406,026

      Deferred income tax assets


24,919


24,948

      Inventories


21,531,298


17,844,405

            Total current assets


247,368,779


227,989,786

OTHER ASSETS





      Property, plant and equipment, net


46,419,651


47,197,115

      Construction in progress


614,143


175,006

      Prepaid land use right -- long-term portion


18,494,015


18,546,658

      Intangible assets


2,863


3,332

            Total non-current assets


65,530,672


65,922,111

                Total assets


$312,899,451


$293,911,897






LIABILITIES AND STOCKHOLDERS' EQUITY





CURRENT LIABILITIES





      Accounts payable


9,573,476


3,891,110

      Other payables and accruals


5,017,519


4,937,404

      Income taxes payable 


4,759,903


5,797,188

      Warrant liabilities


462,000


354,000

      Total current liabilities


19,812,898


14,979,702

           Total liabilities


19,812,898


14,979,702






STOCKHOLDERS' EQUITY





      Preferred stock: $0.0001 par value, 10,000,000 shares authorized,           
      none issued and outstanding         






-


-


      Common stock, $0.0001 par value: 75,000,000 shares authorized, 
      30,084,883 shares issued and 29,820,836 shares outstanding as of 
      March 31, 2013 (December 31, 2012: 30,084,883 shares issued and
      29,820,836 shares outstanding), respectively
















3,008


3,008


      Additional paid-in capital 


79,339,385


79,257,921

      Treasury stock, at cost, 264,047 shares and 264,047 as of March
      31,  2013 and December 31, 2012, respectively






(2,126,597)


(2,126,597)


      Statutory reserves    


15,540,605


14,566,846

      Retained earnings     


182,500,548


170,163,120

      Accumulated other comprehensive income  


17,829,604


17,067,897

      Total stockholders' equity  


293,086,553


278,932,195

         Total liabilities and stockholders' equity


$312,899,451


$293,911,897

 

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(AMOUNTS EXPRESSED IN US DOLLARS)



For the Three Months Ended


March 31,






2013


2012





NET REVENUE

$ 218,229,539


$ 169,086,267





Cost of sales

(197,174,187)


(150,451,275)

GROSS PROFIT

21,055,352


18,634,992





Selling expenses

(680,680)


(686,006)

General and administrative expenses

(2,405,784)


(2,097,834)

Income from operations

17,968,888


15,851,152





Other income (expenses):




Interest income

170,751


163,136

Gain on extinguishment of warrant liabilities

-


73,291

Change in fair value of warrants

(108,000)


(430,000)

Other income (expenses)

(5,764)


94,779

Total other income (expenses)

56,987


(98,794)





Income before income taxes

18,025,875


15,752,358

Provision for income taxes

(4,714,688)


(4,277,346)





NET INCOME

$ 13,311,187


$ 11,475,012





OTHER COMPREHENSIVE INCOME:




Foreign currency translation adjustments 

761,707


208,402





COMPREHENSIVE INCOME

$ 14,072,894


$ 11,683,414





Net income per share




  Basic

$ 0.45


$ 0.39

  Diluted

$ 0.44


$ 0.38





Weighted average number of shares outstanding




  Basic

29,820,836


29,800,624

  Diluted

29,952,867


30,080,154

 

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(AMOUNTS EXPRESSED IN US DOLLARS)




Three Months Ended March 31,






2013


2012





CASH FLOWS FROM OPERATING ACTIVITIES




    Net income

$ 13,311,387


$ 11,475,012

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




       Depreciation and amortization

1,044,563


657,320

       Share-based compensation

81,464


112,875

       (Gain) on extinguishment of warrant liabilities

-


(73,291)

       Change in fair value of warrants

108,000


430,000

       Deferred income tax benefits

95


179,426

    (Increase) decrease in assets:




       Accounts receivable

3,375,085


2,829,666

       Prepayments for raw material purchases

5,352,699


(6,020,960)

       Other receivables, deposits and prepayments

372,431


879,411

       Inventories

(3,634,076)


(2,056,628)

    Increase (decrease) in liabilities:




       Accounts payable

5,663,389


(889,271)

       Other payables and accruals

44,734


(371,130)

       Income taxes payable

(1,051,026)


(467,079)

       Net cash provided by operating activities

24,668,545


6,685,351

CASH FLOWS FROM INVESTING ACTIVITIES




    Purchase of property, plant and equipment and construction in progress

(457,225)


(146,645)

    Deposits for plant and equipment

-


(3,754,080)

      Net cash used in investing activities

(457,225)


(3,900,725)

CASH FLOWS FROM FINANCING ACTIVITIES




    Dividend paid

-


(496,423)

      Net cash used in financing activities

-


(496,423)

Foreign currency translation adjustment

420,669


68,258

INCREASE IN CASH AND CASH EQUIVALENTS

24,631,989


2,356,461

CASH AND CASH EQUIVALENTS, at the beginning of the period

144,300,290


105,637,627

CASH AND CASH EQUIVALENTS, at the end of the period

$ 168,932,279


$ 107,994,088

MAJOR NON-CASH TRANSACTION:




     Share-based compensation to employees and directors

$ 81,464


$ 112,875

     Issuance of common stock to settle warrant liabilities

-


311,704

SUPPLEMENTAL DISCLOSURE INFORMATION




     Cash paid for income taxes

$ 5,765,619


$ 4,564,999

SOURCE Lihua International, Inc.



RELATED LINKS
http://www.lihuaintl.com

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