DANYANG, China, May 10, 2012 /PRNewswire-Asia/ -- 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 and superfine and magnet wire, as well as copper clad aluminum ("CCA") wire, today announced financial results for the first quarter ended March 31, 2012.
First Quarter 2012 Financial Highlights
First Quarter and Recent Business Highlights
(1) Lihua defines non-GAAP net income as net income excluding the change in fair value of warrants, gain on extinguishment of warrant liabilities, and other one-time or non-recurring items that are evaluated on an individual basis. Lihua uses non-GAAP net income and other non-GAAP metrics to provide information about its operating trends. |
(2) Adjusted EBITDA is a non-GAAP measurement. Lihua defines Adjusted EBITDA as net income before depreciation and amortization, interest income/expense, income taxes, gain on extinguishment of warrant liabilities, change in fair value of warrants and non-cash share-based compensation expenses. |
"Our first quarter results reflect the strength of our business, the sizeable market opportunity for our products and the success of our efforts to maximize output through innovation and efficiency improvement initiatives. We increased total sales volume nearly 50% over the first quarter of 2011 and grew revenue over 23%, despite ASP pressure caused by a decline in the average price of copper. Our ability to generate such a sizeable increase in sales volume during what is usually a slow quarter due to the Chinese New Year speaks to the significant, unmet demand for our products," said Mr. Jianhua Zhu, Lihua's founder, chairman and CEO. "Market response to our copper rod product, which was re-introduced in the fourth quarter following the doubling of capacity on our dedicated smelter, has been enthusiastic and we expect that copper rod will be an important contributor to our revenue, gross profit and net income growth in 2012. Moreover, we further strengthened our balance sheet with operating cash inflow of $6.7 million, bringing our total cash position at the end of Q1 to approximately $108 million, an increase of nearly $18 million over March 31, 2011, which will be used to accelerate investment in Lihua's longer-term growth initiatives.
"In addition to our strong financial performance, we began the pre-heating process on the two new smelters at our facility on May 3rd. As it normally requires one month of pre-heating before we can commence volume production, we expect to fully ramp production on these smelters in early June, increasing copper anode production capacity to 85,000 - 95,000 tons and total refined copper production capacity to 135,000 - 145,000 tons per year. These ongoing efforts to maximize output are becoming increasingly important as we work to address the needs of China's copper consumers. With this new capacity on line, we are well positioned to capture additional market share in our existing businesses while accelerating the construction and development efforts for our upcoming CCA cable and wire products, which will gain us entry into the large, highly lucrative power transmission cable and wire market. We are poised for continued growth in 2012, and maintain our expectation for gross profit of $93-96 million and non-GAAP net income of $61-64 million for the year, representing an increase of 23-27% and 22-28%, respectively, over 2011."
First Quarter 2012 Financial Results
Sales for the first quarter of 2012 increased 23.5% to $169.1 million, compared with sales of $136.9 million in the first quarter of 2011. The increase in sales resulted from an increase in volume due to continued demand across all of Lihua's product categories and the addition of copper rod sales following the Company's fourth quarter 2011 capacity expansion, partially offset by the decrease in copper prices in the first quarter of 2012 compared with the same period of 2011. Lihua's wire products, copper anode and copper rod accounted for sales of $89.6 million, $63.0 million and $16.5 million, respectively, in the first quarter of 2012. This compares with CCA and copper wire sales of $70.9 million, and copper anode sales of $66.0 million, respectively, in the first quarter of 2011. During the first quarter of 2012, the average selling price of Lihua's products was $8,362 per ton, compared with $9,980 per ton in the same period last year, reflecting a decrease of 16.2% year-over-year.
Gross profit for the first quarter of 2012 was $18.6 million, an increase of 10.2% from gross profit of $16.9 million for the first quarter of 2011. As a percentage of total sales, gross margin declined to 11.0% in the first quarter of 2012 from 12.3% for the same period last year, primarily due to increased sales of copper anode, copper rod and fine copper wire, which carry lower margins than superfine and other wire products, and a narrower average spread between scrap copper and pure copper prices in the first quarter of 2012 compared with the year-ago period.
Selling, general and administrative ("SG&A") expenses for the first quarter of 2012 were $2.8 million, up 32.8%, compared with $2.1 million in the same period of 2011. The increase in SG&A was related to an increase in the Company's sales force compared with the first quarter of 2011, product distribution insurance and other costs directly related to Lihua's increased business volume and scale of operations, as well as continued investment in the Company's research and development efforts.
The Company recorded no interest expense in the first quarter of 2012, compared with interest expense of $21,000 in the first quarter of 2011.
For the three months ended March 31, 2012, provision for income tax expense was $4.3 million, compared with $3.9 million for the three months ended March 31, 2011. The effective tax rate for the first quarter of 2012 was 27.1%, compared to 23.9% for the first quarter of 2011.
Net income for the first quarter of 2012 was $11.5 million, or $0.38 per share, based on 30.1 million weighted average diluted shares outstanding, compared with net income of $12.5 million, or $0.41 per share, based on 30.3 million weighted average diluted shares outstanding during the same period in 2011.
Non-GAAP net income for the first quarter of 2012 was $11.8 million or $0.39 per diluted share, compared with non-GAAP net income of $11.1 million, or $0.37 per diluted share, for the first quarter of 2011. Non-GAAP net income excludes the impact of losses of $0.4 million and a gain of ($1.4 million), related to the change in fair value of warrants, in the first quarters of 2012 and 2011, respectively, and gains on the extinguishment of warrant liabilities of ($73,000) and ($60,000) in the first quarter of 2012 and 2011, respectively.
Adjusted EBITDA for the three months ended March 31, 2012 was $16.7 million, compared with $15.7 million for the same period in the prior year.
Balance Sheet
As of March 31, 2012, Lihua had $108.0 million, or $3.59 per diluted share in cash and cash equivalents, compared with $105.6 million as of December 31, 2011. As of March 31, 2012, Lihua had working capital of $168.6 million and no debt.
Outlook
At the conclusion of the one-month pre-heating period that began on May 3, 2012, the Company expects to ramp production on its two new copper anode smelters in early June 2012, increasing copper anode capacity to 85,000 - 95,000 tons per year. Additional construction on the Company's 30-acre plant site is scheduled for completion in 2013, and will include warehouse and storage facilities, production facilities for the Company's new CCA power transmission cable and wire products, a new R&D center, office space and employee facilities.
The Company has reiterated its full-year 2012 guidance, which calls for gross profit to be between $93-96 million, and non-GAAP net income between $61-64 million, representing year-over-year growth of 23-27% and 22-28%, respectively. The Company expects that 2012 growth will be largely the result of this additional capacity and continued strong demand in China for recycled copper and copper alternative products in end markets that include household appliances, consumer white goods and infrastructure.
Mr. Zhu concluded, "Our first quarter performance and the recent steps we have taken toward opening our new copper anode production facility have set the stage for continued success in 2012 and further into the future. While we faced a few days of delay in the launch of the new facility due to China's Labor Day holidays at the beginning of May, we are pleased to have the pre-heating process underway and are prepared to ramp production in June, allowing us to focus on other strategic growth initiatives including the installation of production equipment, test production, marketing and commercialization of our CCA cable and wire products for power transmission. We believe that this new CCA product could have as significant an impact on our business and end markets as copper anode did upon its introduction. We look forward to its launch, which is currently targeted for the second half of 2013. With our leadership position in the markets we serve, robust cash position and strong product portfolio and pipeline, we are confident in our ability to continue growing Lihua's business in new and existing markets."
Conference Call and Webcast
Management of Lihua International will host a conference call today, May 10, 2012 at 8:00 a.m. Eastern time to discuss the first quarter 2012 financial results.
Individuals interested in participating in the conference may do so by dialing 1-877-941-2069 in the U.S. and Canada, or 1-480-629-9713 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 May 17, 2012. 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. 4534832#. 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.
For Three Months Ended March 31, | |||||
2012 | 2011 | ||||
Net income | $ | 11,475,012 | $ | 12,511,986 | |
Gain on Extinguishment of Warrant Liabilities | -73,291 | -60,724 | |||
Change in fair value of warrants | 430,000 | -1,375,101 | |||
Non-GAAP Net Income | $ | 11,831,721 | 11,076,161 | ||
For Three Months Ended March 31, | ||||
2012 | 2011 | |||
Net income | $ | 11,475,012 | $ | 12,511,986 |
Depreciation and amortization | 657,320 | 622,755 | ||
Share-based compensation expense | 112,875 | 146,281 | ||
Gain on Extinguishment of Warrant Liabilities | -73,291 | -60,724 | ||
Change in fair value of warrants | 430,000 | -1,375,101 | ||
Interest income | -163,136 | -133,105 | ||
Interest expenses | 0 | 21,466 | ||
Provision for income tax | 4,277,346 | 3,923,154 | ||
Adjusted EBITDA | $ | 16,716,126 | $ | 15,656,712 |
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
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March 31, | December 31, | |||||||||||||
2012 | 2011 | |||||||||||||
ASSETS | ||||||||||||||
CURRENT ASSETS | ||||||||||||||
Cash and cash equivalents | $ | 107,994,088 | $ | 105,637,627 | ||||||||||
Accounts receivable, net | 28,279,542 | 31,082,460 | ||||||||||||
Prepayments for raw material purchases | 27,939,318 | 21,882,977 | ||||||||||||
Other receivables, deposits and prepayments | 1,003,611 | 1,882,864 | ||||||||||||
Prepaid land use right - current portion | 405,458 | 405,034 | ||||||||||||
Deferred income tax assets | 21,002 | 200,588 | ||||||||||||
Inventories | 17,579,376 | 15,502,246 | ||||||||||||
Total current assets | 183,222,395 | 176,593,796 | ||||||||||||
OTHER ASSETS | ||||||||||||||
Property, plant and equipment, net | 20,177,224 | 20,565,875 | ||||||||||||
Construction in progress | 24,148,099 | 18,794,910 | ||||||||||||
Deposits for plant and equipment | - | 3,428,082 | ||||||||||||
Prepaid land use right - long-term portion | 18,824,760 | 18,906,280 | ||||||||||||
Intangible assets | - | 170 | ||||||||||||
Total non-current assets | 63,150,083 | 61,695,317 | ||||||||||||
Total assets | $ | 246,372,478 | $ | 238,289,113 | ||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||
CURRENT LIABILITIES | ||||||||||||||
Accounts payable | $ | 5,181,514 | $ | 6,066,261 | ||||||||||
Other payables and accruals | 4,145,588 | 6,370,833 | ||||||||||||
Income taxes payable | 4,144,320 | 4,607,533 | ||||||||||||
Dividend payable | 496,423 | 992,846 | ||||||||||||
Warrant liabilities | 660,000 | 615,000 | ||||||||||||
Total current liabilities | 14,627,845 | 18,652,473 | ||||||||||||
Total liabilities | 14,627,845 | 18,652,473 | ||||||||||||
STOCKHOLDERS' EQUITY | ||||||||||||||
Preferred stock: $0.0001 par value, 10,000,000 shares authorized, none | - | - | ||||||||||||
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 |
3,008 |
3,003 | ||||||||||||
Additional paid-in capital | 78,988,702 | 78,564,128 | ||||||||||||
Treasury stock, at cost, 264,047 and 264,047 shares as of March 31, 2012 | (2,126,597) |
(2,126,597) | ||||||||||||
Statutory reserves | 11,217,579 | 10,418,476 | ||||||||||||
Retained earnings | 127,045,396 | 116,369,487 | ||||||||||||
Accumulated other comprehensive income | 16,616,545 | 16,408,143 | ||||||||||||
Total stockholders' equity | 231,744,633 | 219,636,640 | ||||||||||||
Total liabilities and stockholders' equity | $ | 246,372,478 | $ | 238,289,113 | ||||||||||
LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES
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For the Three Months Ended | ||||||||
2012 | 2011 | |||||||
NET REVENUE | $ | 169,086,267 | $ | 136,931,096 | ||||
Cost of sales | (150,451,275) | (120,023,023) | ||||||
GROSS PROFIT | 18,634,992 | 16,908,073 | ||||||
Selling expenses | (686,006) | (523,036) | ||||||
General and administrative expenses | (2,097,834) | (1,573,312) | ||||||
Income from operations | 15,851,152 | 14,811,725 | ||||||
Other income (expenses): | ||||||||
Interest income | 163,136 | 133,105 | ||||||
Interest expenses | - | (21,466) | ||||||
Gain on extinguishment of warrant liabilities | 73,291 | 60,724 | ||||||
Change in fair value of warrants | (430,000) | 1,375,101 | ||||||
Other income | 94,779 | 75,951 | ||||||
Total other income (expenses) | (98,794) | 1,623,415 | ||||||
Income before income taxes | 15,752,358 | 16,435,140 | ||||||
Provision for income taxes | (4,277,346) | (3,923,154) | ||||||
NET INCOME | $ | 11,475,012 | $ | 12,511,986 | ||||
OTHER COMPREHENSIVE INCOME: | ||||||||
Foreign currency translation adjustments | 208,402 | 1,664,517 | ||||||
COMPREHENSIVE INCOME | $ | 11,683,414 | $ | 14,176,503 | ||||
Net income per share | ||||||||
Basic | $ | 0.39 | $ | 0.42 | ||||
Diluted | $ | 0.38 | $ | 0.41 | ||||
Weighted average number of shares outstanding | ||||||||
Basic | 29,800,624 | 29,858,780 | ||||||
Diluted | 30,080,154 | 30,313,996 | ||||||
LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES
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Three Months Ended March 31, | |||||||||||
2012 | 2011 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
Net income | $ | 11,475,012 | $ | 12,511,986 | |||||||
Adjustments to reconcile net income to cash provided by operating activities: | |||||||||||
Depreciation and amortization | 657,320 | 622,755 | |||||||||
Share-based compensation | 112,875 | 146,281 | |||||||||
Gain on extinguishment of warrant liabilities | (73,291) | (60,724) | |||||||||
Change in fair value of warrants | 430,000 | (1,375,101) | |||||||||
Deferred income tax benefits | 179,426 | (29,355) | |||||||||
(Increase) decrease in assets: | |||||||||||
Accounts receivable | 2,829,666 | (6,284,812) | |||||||||
Bills receivable | - | 531,747 | |||||||||
Prepayments for raw material purchases | (6,020,960) | - | |||||||||
Other receivables, deposits and prepayments | 879,411 | (667,402) | |||||||||
Inventories | (2,056,628) | (6,706,922) | |||||||||
Increase (decrease) in liabilities: | |||||||||||
Accounts payable | (889,271) | 5,073,347 | |||||||||
Other payables and accruals | (371,130) | (1,486,687) | |||||||||
Income taxes payable | (467,079) | (969,219) | |||||||||
Net cash provided by operating activities | 6,685,351 | 1,305,894 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
Purchase of property, plant and equipment | (146,645) | (178,897) | |||||||||
Addition to construction in progress | (3,754,080) | (2,867,317) | |||||||||
Deposits for plant and equipment | - | (29,249) | |||||||||
Net cash used in investing activities | (3,900,725) | (3,075,463) | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
Repurchase of common stock | - | (926,250) | |||||||||
Proceeds from exercise of warrants | - | 1,898,050 | |||||||||
Dividend paid | (496,423) | - | |||||||||
Net cash (used in) provided by financing activities | (496,423) | 971,800 | |||||||||
Foreign currency translation adjustment | 68,258 | 890,414 | |||||||||
INCREASE IN CASH AND CASH EQUIVALENTS | 2,356,461 | 92,645 | |||||||||
CASH AND CASH EQUIVALENTS, at the beginning of the period | 105,637,627 | 90,609,340 | |||||||||
CASH AND CASH EQUIVALENTS, at the end of the period | $ | 107,994,088 | $ | 90,701,985 | |||||||
MAJOR NON-CASH TRANSACTION: | |||||||||||
Share-based compensation to employees and directors | $ | 112,875 | $ | 146,281 | |||||||
Issuance of common stock to settle warrant liabilities | $ | 311,704 | $ | 4,722,948 | |||||||
SUPPLEMENTAL DISCLOSURE INFORMATION | |||||||||||
Cash paid for interest | $ | - | $ | 21,466 | |||||||
Cash paid for income taxes | $ | 4,564,999 | $ | 4,865,045 | |||||||
