Fushi Copperweld Reports Second Quarter 2010 Financial Results
DALIAN, China, Aug. 4 /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 second quarter ended June 30, 2010.
Second Quarter Highlights
-- GAAP Net Income increased significantly to $13.4M, or $0.35 per diluted
share
-- Adjusted Net Income increased 74.5% to $12.4M, or $0.33 per diluted
share
-- US operations realized Net Income of $0.6M; best quarter since second
quarter 2008
-- Expanded presence in Southern China through acquisition of Shanghai
Hongtai
-- Sequential volume as measured in metric tons increased 9.6% as compared
to the first quarter of 2010
-- Gross profit increased 45.6% to $19.6M, or 28.4% of revenue
-- Successfully installed 8,200 metric tons of copper-clad steel (CCS)
capacity in Dalian facility
Revenues for the second quarter of 2010 increased 42.9% to $69.0 million, up from $48.3 million in the prior year quarter. Organic revenue growth excluding the impact of acquisitions during the quarter was 22.0%. The $20.7 million increase in revenues was primarily driven by continued improvement in global demand, higher average selling prices partially due to increased copper prices, and incremental contribution from recent acquisitions.
Gross profit in the second quarter of 2010 increased 45.6% year-over-year to $19.6 million from $13.5 million in the prior year quarter. Consolidated gross margin increased to 28.4% from 27.9% in the prior year period, as a result of improved pricing discipline within the wire industry, an improved product mix and benefits of operational leverage gained at the Company's Fayetteville facility. Gross margin for the Company's Dalian facility increased to 34.3% from 31.0% in the prior year quarter, while gross margin for the Company's Fayetteville, TN facility decreased to 14.6% from 15.5% in the prior year quarter primarily due to higher raw material prices.
Operating expenses in the second quarter increased to $5.5 million, compared to $4.3 million in the prior year quarter. This increase was due to higher G&A costs associated with increased global sales efforts and an increase in costs resulting from the Company's acquisitions of Shanghai Hongtai and Dalian Jinchuan. On a percentage basis, operating expenses decreased 80 basis points to 8.0% of revenues from 8.8% in the second quarter of 2009.
On a GAAP basis, net income for the 2010 second quarter was $13.4 million, or $0.35 per diluted share. This compares with net income of $1.6 million, or $0.06 per diluted share, in the second quarter of 2009. The GAAP results for the second quarter of 2010 included a gain on acquisitions of $1.8 million, interest income of $0.2 million, and other income of $0.1 million.
Excluding all non-cash gains and expenses and one-time, non-recurring losses, adjusted net income was $12.4 million or $0.33 per diluted share in the second quarter of 2010, compared to adjusted net income of $7.1 million or $0.25 per diluted share, in the prior year quarter.
During the three months ended June 30, 2010, the Company generated $2.1 million of cash flow from operations, compared to $5.5 million operating cash flow for the comparable period in 2009. In the six months ended June 30, 2010, the Company generated $10.0 million of cash flow from operations, compared to $4.5 million for same period last year. The Company's cash position at the end of the second quarter was $73.8 million while the Company's long-term debt position was $0.1 million, compared to debt of $32.7 million at December 31, 2009. Accounts receivables at June 30, 2010 were $64.1 million, compared to $57.0 million on March 31, 2010, an increase of 12.5% primarily due to sales growth at the Company's Fayetteville facility and recent acquisitions.
Mr. Joe Longever, co-Chief Executive Officer of Fushi Copperweld, commented, "We are very pleased with our performance in the 2010 second quarter, which speaks to the diversified nature of our business and the benefits of the actions we have taken to enhance our strategic positioning. Revenues in the quarter were driven by strong, emerging business in markets all over the world, which offset a decline in volumes resulting from what we believe to be a temporary slowdown in China's 3G build-out. The increased worldwide demand for our products was reflected in higher volumes at our Fayetteville facility, where we saw continued improvement in profitability as a result of higher utilization levels and the steps we've taken to reduce costs and improve our operational efficiency. The additional CCS capacity we recently added at our Dalian facility also enables us to meet some of this global demand and should play an even larger role in future quarters. Lastly, the integration of our recent acquisitions have progressed as planned, and we look forward to the additional benefits these strategic purchases will bring going forward."
Mr. Longever continued, "We remain confident in our ability to continue to grow our business and enhance our profitability. The demand for global infrastructure investment continues, even if the pace of the global economic recovery may have slowed since the beginning of the year. With so many attributes that differentiate our products, we are confident that we have the best solutions available to address the large market opportunity ahead of us. From an operational standpoint, we have the footprint to deliver our products anywhere in the world quickly and cost effectively, and we will continue to look for ways to better reach and serve our customers. We are very pleased with our progress and prospects."
Outlook
Based on current business trends, the Company expects adjusted fully diluted earnings per share to be between $0.33 and $0.35 for the third quarter of 2010 and to be between $1.25 and $1.29 for the 2010 full-year period, based on an estimated weighted average diluted share count of 38.3 million shares for the third quarter of 2010 and 37.4 million for full-year periods. This expectation is based on the assumption that the effective tax rate at the consolidated level will be 17.5%.
Conference Call
The Company will conduct a conference call to discuss the second quarter 2010 results today, Wednesday, August 4, 2010, at 8:30 am ET. To participate, the conference call may be directly accessed from the U.S. and Canada at 1-866-223-7781 and accessed internationally at 1-416-340-8018. A live webcast of the conference call will also be available at http://bit.ly/FSINevents on the Investor Relations section. A replay of the call will be available at http://bit.ly/FSINevents .
Reconciliation of Non-GAAP Financial Measures
Our net income was materially impacted by certain non-cash expenses and one-time events. To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use EPS as adjusted for the impact of non-cash expense related to stock-based compensation and the change in the fair value of derivative liabilities related to the conversion option in our outstanding Convertible Bonds and certain warrants, and the one-time non-cash gain on acquisition. These Company-defined adjusted measures are being provided because management believes they are useful in analyzing the underlying operating performance of the business. These measures may be inconsistent with similar measures presented by other companies and should only be used in conjunction with our results reported according to accounting principles generally accepted in the United States. A reconciliation of earnings per share as reported and operating income as reported to adjusted non-GAAP earnings per share and adjusted non-GAAP operating income follows.
Q2 2010 Q2 2009
GAAP Net Income 13,439,809 1,562,700
Non-cash expense:
Warrant - change in derivative
liability -- 4,583,809
CB - change of derivative liability -- 688,876
Acquisition gain (1,765,376) --
Stock based compensation 180,592 337,859
Total non-cash expense (1,584,784) 5,610,544
Provision for income tax 572,397 (114,872)
Adjusted to Non-GAAP Net income 12,427,422 7,058,372
GAAP Earnings per share:
Basic 0.36 0.06
Diluted 0.35 0.06
Non-GAAP Earnings per share:
Basic 0.33 0.25
Diluted 0.33 0.25
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," "estimates," or "may" or similar expressions or the negative of such terms. 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 http://www.sec.gov .
For more information, please contact:
Investors
Nathan J. Anderson, VP/Finance
Fushi Copperweld Inc.
Phone: +1-931-433-0482
Email: [email protected]
Web: http://www.fushicopperweld.com
Media
Thomas Horton, Director of Global Marketing
Fushi Copperweld Inc.
Phone: +1-615-428-3333
Email: [email protected]
FUSHI COPPERWELD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2010 AND DECEMBER 31, 2009
June 30, December 31,
2010 2009
Unaudited
ASSETS
CURRENT ASSETS:
Cash $73,787,555 $60,597,849
Accounts receivable, trade, net
of allowance of bad debt of
$1,031,398 and $1,024,684 as
of June 30, 2010 and December
31, 2009, respectively 64,058,653 67,284,600
Inventories 22,547,129 10,875,782
Notes receivables 184,658 122,972
Other receivables and prepaid
expenses 685,255 1,137,566
Advances to suppliers 25,177,421 8,582,346
Deposit in derivative hedge -- 1,000,000
Total current assets 186,440,671 149,601,115
PLANT AND EQUIPMENT, net 130,964,932 117,385,566
OTHER ASSETS:
Advances to suppliers, non-current 711,311 1,356,404
Notes receivables, non-current 429,106 699,106
Intangible assets, net of
accumulated amortization 14,275,013 11,924,056
Deferred loan expense, net -- 2,045,349
Deferred tax assets 15,248,484 11,722,469
Total other assets 30,663,914 27,747,384
Total assets $348,069,517 $294,734,065
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolver line of credit $-- $4,033,783
Accounts payable, trade 7,313,267 4,002,773
Notes payable, current -- 10,000,000
Other payables and accrued
liabilities 5,167,396 3,928,374
Taxes payable 3,907,036 2,599,055
Cross currency hedge payable -- 436,702
Obligation under capital lease,
current 76,557 71,503
Total current liabilities 16,464,256 25,072,190
LONG-TERM LIABILITIES:
Notes payable, non-current -- 25,000,000
Obligation under capital lease,
non-current 110,719 153,626
Fair value of derivative instrument -- 7,532,527
Total long-term liabilities 110,719 32,686,153
Total liabilities 16,574,975 57,758,343
COMMITMENTS AND CONTINGENCIES 5,075,000 --
SHAREHOLDERS' EQUITY:
Preferred stock, $0.001 par value,
5,000,000 shares authorized, none
issued or outstanding as of June
30, 2010 and December 31, 2009 -- --
Common stock, $0.006 par value,
100,000,000 shares authorized,
June 30, 2010: 37,518,595 shares
issued and outstanding December
31, 2009: 29,772,780 shares
issued and outstanding 225,113 178,638
Additional paid in capital 164,829,350 105,540,676
Statutory reserves 19,511,407 16,282,793
Retained earnings 114,865,703 97,283,748
Accumulated other comprehensive
income 26,987,969 17,689,867
Total shareholders' equity 326,419,542 236,975,722
Total liabilities and
shareholders' equity $348,069,517 $294,734,065
FUSHI COPPERWELD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME (LOSS)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
(UNAUDITED)
Three months ended June 30, Six months ended June 30,
2010 2009 2010 2009
REVENUES $69,005,366 $48,301,545 $128,555,208 $83,558,081
COST OF GOODS SOLD 49,415,219 34,848,865 91,143,795 61,166,026
GROSS PROFIT 19,590,147 13,452,680 37,411,413 22,392,055
OPERATING EXPENSES
Selling expenses 1,365,164 1,086,414 2,617,126 2,288,561
General and
administrative
expenses 4,161,196 3,167,361 7,919,070 6,237,603
Total operating
expenses 5,526,360 4,253,775 10,536,196 8,526,164
INCOME FROM
OPERATIONS 14,063,787 9,198,905 26,875,217 13,865,891
OTHER INCOME
(EXPENSE)
Interest income 197,151 83,004 389,941 166,621
Interest expense (5,973) (1,478,203) (514,455) (2,949,071)
Bargain purchase
gain 1,765,376 -- 5,070,389 --
Gain (Loss) on
cross currency
hedge -- (215,964) (753,666) (382,374)
Gain (Loss) on
derivative
instrument
settlement -- -- (6,650,000) --
Gain (Loss) on debt
extinguishment -- -- (2,395,778) --
Change in fair
value of
derivative
liability -
warrants -- (688,876) -- (752,114)
Change in fair
value of
derivative
liability -
conversion option -- (4,583,809) -- (5,122,846)
Other income
(expense), net 122,628 (140,133) (18,444) (246,482)
Total other
income (expense),
net 2,079,182 (7,023,981) (4,872,013) (9,286,266)
INCOME BEFORE INCOME
TAXES 16,142,969 2,174,924 22,003,204 4,579,625
(PROVISION) BENEFIT
FOR INCOME TAXES
Deferred income tax
(provision)
benefit 79,529 738,180 3,526,015 2,364,707
Current income tax
expense (2,782,689) (1,350,404) (4,718,650) (2,280,715)
(Provision)
benefit for
income taxes,
net (2,703,160) (612,224) (1,192,635) 83,992
NET INCOME 13,439,809 1,562,700 20,810,569 4,663,617
OTHER COMPREHENSIVE
INCOME (LOSS)
Foreign currency
translation
adjustment 1,890,314 433,866 1,765,575 39,957
Change in fair
value of
derivative
instrument -- (751,227) 882,527 (3,513,356)
Reclassification of
change in cash
flow hedge to
earnings -- -- 6,650,000 --
COMPREHENSIVE INCOME $15,330,123 $1,245,339 $30,108,671 $1,190,218
EARNINGS PER SHARE:
Basic $0.36 $0.06 $0.58 $0.17
Diluted $0.35 $0.06 $0.57 $0.17
WEIGHTED AVERAGE
SHARES:
Basic 37,343,714 27,827,838 36,016,078 27,696,388
Diluted 37,991,800 28,323,611 36,633,668 28,054,226
FUSHI COPPERWELD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
(UNAUDITED)
2010 2009
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $20,810,569 $4,663,617
Adjustments to reconcile net income
provided by operating activities:
Bad debt expense -- 27,793
Write-off of non-current advances
to suppliers 525,588
Write-off of patent 87,500
Reserve for inventories 56,000 23,272
Inventories write-off -- 179,654
Depreciation 5,822,284 4,612,405
Loss on sale of property and
equipment -- 117,430
Deferred taxes (3,526,015) (2,364,707)
Reserve for notes receivables 250,000 --
Amortization of intangible assets 255,982 238,283
Amortization of loan commission 249,571 544,900
Amortization of stock
compensation expense 373,649 928,727
Loss on cross currency hedge 753,666 382,374
Loss on derivative instrument
settlement 6,650,000
Loss on debt extinguishment 2,395,778 --
Bargain purchase gain (5,070,389) --
Change in fair value of
derivative liability -
conversion option -- 5,122,846
Change in fair value of
derivative liability - warrants -- 752,114
Change in operating assets and
liabilities:
Accounts receivable 6,477,996 (9,906,381)
Inventories (10,215,093) (10,699,400)
Notes receivables (41,241) 63,638
Other receivables and prepayments 460,654 102,867
Advances to suppliers - current (15,826,015) 12,233,042
Accounts payable 318,422 (2,091,085)
Other payables and accrued
liabilities (1,767,349) (2,477,339)
Taxes payable 926,092 2,062,180
Net cash provided by operating
activities 9,967,649 4,516,230
CASH FLOWS FROM INVESTING
ACTIVITIES:
Payment for purchase of
subsidiaries (6,375,000) --
Cash acquired from acquisition of
subsidiaries 901,463 --
Payments on cross currency hedge
payable (1,190,368) (114,580)
Payment for unwind of cross
currency hedge (5,650,000) --
Proceeds from sale of property
and equipment -- 424,444
Purchases of property and
equipment (1,736,395) (3,135,693)
Net of payments on prepayment of
equipment -- (2,473,841)
Net of claimed VAT on purchases
of property and equipment 25,755 --
Net cash used in investing
activities (14,024,545) (5,299,670)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net payments on revolver line of
credit (9,513) (222,709)
Payoff of revolver line of credit (4,024,270) --
Payments on short-term bank loans -- (17,553,600)
Release of restricted cash -- 1,000,000
Payment on capital lease
obligation (37,853) --
Payment of high yield notes
payable (35,600,000) --
Proceeds on issuance of common
stock 56,361,500 1,920,000
Net cash provided by (used in)
financing activities 16,689,864 (14,856,309)
EFFECT OF EXCHANGE RATE ON CASH 556,738 (38,459)
CHANGE IN CASH 13,189,706 (15,678,208)
CASH, beginning of period 60,597,849 65,611,770
CASH, end of period $73,787,555 $49,933,562
Supplemental cash flow disclosures:
Interest paid $1,401,542 $1,988,420
Income tax paid $3,830,567 $1,933,546
SOURCE Fushi Copperweld, Inc.
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