BEIJING, November 10, 2012 /PRNewswire-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 third quarter ended September 30, 2012.
Third Quarter 2012 Results
Joe Longever, co-Chief Executive Officer of Fushi Copperweld, commented, "Our performance for the 2012 third quarter was in-line with our expectations, as we continued to execute on our strategic objectives in a challenging macroeconomic environment. Following on previous trends, sales to the telecom market in China remained soft, but we have seen signs that volumes in this market may be nearing a sustainable level, as sales improved over second quarter 2012 levels. Sales in our utility and transportation product lines in North America benefited from stronger domestic and international demand, which, combined with stronger pricing, resulted in a significant improvement in profitability at our Fayetteville facility. While we saw higher sales volumes at Dalian, results there were also affected by lower raw material pricing, which resulted in lower average sales prices and profitability. In Europe, the ramp-up of operations at our new facility in Liege continued, and while the ramp of this business has been slower than expected given the economic issues facing that market, we continue to make progress and further expand our presence through our sales and innovation center in Milan. Looking ahead, as we approach the end of the calendar year we remain excited about the many growth prospects for our business, and believe we are well positioned for the eventual economic recovery."
Revenues in the third quarter of 2012 were $72.6 million, a decrease of 2.3% compared to $74.3 million in the prior year quarter. The decrease was primarily due to lower unit selling prices as a result of decrease of raw material price in the third quarter of 2012 compared to that of 2011. The PRC segment experienced a decrease of 8.3% in revenues in the third quarter of 2012, which was primarily due to lower unit selling prices as a result of a decrease in the unit price of raw materials, particularly copper. The US segment experienced an increase of 26.2% in revenues in the third quarter of 2012 compared to the same period of 2011. The increase was primarily due to an 18.5% increase in quantities sold, which was partially contributed by operations in Liege, Belgium.
Gross profit decreased 5.0% to $18.9 million from $19.9 million in the third quarter of 2011. As a percentage of revenues, gross margin decreased to 26.1% in the third quarter of 2012 from 26.8% in the same period in 2011. The decrease of gross margin was mainly due to lower average gross margin at our Liege tubing facility, which started sales in the first quarter of 2012.
Operating expenses in the third quarter of 2012 increased to $7.7 million, compared to $6.2 million in the prior year's quarter, primarily as a result of approximately $0.6 million in advisory fees related to the going private offer and definitive merger agreement, compared to $0.3 million in the prior year period. As previously announced on June 28, 2012, the Company has entered into an Agreement and Plan of Merger with entities affiliated with its Chairman and Co-Chief Executive Officer, Mr. Li Fu, and Abax Global Capital (Hong Kong) Limited at a price of $9.50 per share in cash. The Company continues to expect the transaction to close in the fourth quarter of 2012.
Operating expenses in the third quarter of 2012 also included the Company's continued investment in its global business development efforts of $0.4 million and incremental costs of approximately $0.5 million related to the start-up of operations at its new facility in Liege, Belgium. As a percentage of revenue, operating expenses increased to 10.6% from 8.3% in the third quarter of 2011.
The Company's effective income tax rate in the third quarter of 2012 was 33.0% compared to 31.6% in the year ago period. The Company expects its effective tax rate for the 2012 full year period to be 35% due to more losses generated from loss-making entities in US as a result of higher go-private expenses incurred in 2012.
Net income in the third quarter was $7.7 million, or $0.20 per diluted share, compared to net income of $8.9 million, or $0.23 per diluted share, for the 2011 third quarter.
Fully diluted shares in the third quarter of 2012 were 38.4 million, an increase of 0.3% compared to 38.3 million in the year ago period.
As of September 30, 2012, the Company's cash position was $217.7 million, an increase of 8.6% from $200.5 million as of December 31, 2011. Accounts receivable at September 30, 2012 was $70.0 million, compared to $64.0 million at December 31, 2011. Long-term debt totaled $7.8 million as of September 30, 2012, compared to $8.3 million at December 31, 2011.
Outlook
Based on its third quarter performance and current business trends, Fushi Copperweld currently expects 2012 fully diluted earnings per share to be between $0.66 and $0.76, reflecting an estimated weighted average diluted share count of 38.4 million shares and an effective tax rate of 35%. This revised guidance is primarily the result of higher than previously expected costs related to closing the Plan of Merger, specifically the acceleration of related activities following the recommendation from the Company's Board of Directors to accept the offer and the upcoming special shareholder meeting regarding the offer, taking place on December 11, 2012.
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 +1.615.377.4183
E-mail: ir@fushicopperweld.com
Web: www.fushicopperweld.com
FUSHI COPPERWELD, INC. AND SUBSIDIARIES | ||||||||
September 30, | December 31, | |||||||
2012 | 2011 | |||||||
USD | USD | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | 217,651,755 | 200,451,902 | ||||||
Accounts receivable, net of allowance for doubtful accounts | 69,960,402 | 63,978,861 | ||||||
Inventories | 20,326,083 | 10,695,123 | ||||||
Advances to suppliers | 6,434,273 | 6,793,904 | ||||||
Prepaid expenses and other current assets | 2,120,305 | 1,332,204 | ||||||
Total current assets | 316,492,818 | 283,251,994 | ||||||
Property, plant and equipment, net | 107,924,367 | 117,405,523 | ||||||
Intangible assets, net | 301,912 | 431,441 | ||||||
Land use rights | 13,037,820 | 13,321,796 | ||||||
Deposits for land use rights | 10,105,229 | 10,090,621 | ||||||
Goodwill | 1,814,691 | 1,812,068 | ||||||
Other non-current assets | 448,615 | 491,380 | ||||||
Total assets | 450,125,452 | 426,804,823 | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term bank loan | 2,828,320 | - | ||||||
Current portion of long-term loan | 650,000 | 650,000 | ||||||
Accounts payable | 5,738,739 | 3,802,155 | ||||||
Amounts due to a related party | - | 2,000,000 | ||||||
Accrued expenses and other current liabilities | 15,344,231 | 15,880,176 | ||||||
Total current liabilities | 24,561,290 | 22,332,331 | ||||||
Long-term loans | 7,121,200 | 7,632,100 | ||||||
Deferred income tax liabilities | 633,954 | 672,943 | ||||||
Total liabilities | 32,316,444 | 30,637,374 | ||||||
Shareholders' equity: | ||||||||
Common stock, $0.006 par value, 100,000,000 shares authorized; 38,402,560 and 38,240,438 shares issued and outstanding as of September 30, 2012 and December 31, 2011, respectively | 230,417 | 229,444 | ||||||
Additional paid-in capital | 170,526,773 | 169,335,522 | ||||||
Retained earnings | 192,455,545 | 172,507,890 | ||||||
Accumulated other comprehensive income | 54,596,273 | 54,094,593 | ||||||
Total shareholders' equity | 417,809,008 | 396,167,449 | ||||||
Commitments and contingencies | ||||||||
Total liabilities and shareholders' equity | 450,125,452 | 426,804,823 | ||||||
FUSHI COPPERWELD, INC. AND SUBSIDIARIES | ||||||||||||||||
Three-month | Nine-month | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
USD | USD | USD | USD | |||||||||||||
Revenues | 72,607,142 | 74,279,340 | 212,056,802 | 219,158,766 | ||||||||||||
Cost of revenues | 53,660,052 | 54,353,890 | 156,912,140 | 161,047,950 | ||||||||||||
Gross profit | 18,947,090 | 19,925,450 | 55,144,662 | 58,110,816 | ||||||||||||
Operating expense | ||||||||||||||||
Selling expenses | 1,836,636 | 1,127,259 | 5,267,629 | 3,519,065 | ||||||||||||
General and administrative expenses | 5,855,039 | 5,061,337 | 19,454,307 | 15,035,656 | ||||||||||||
Total operating expenses | 7,691,675 | 6,188,596 | 24,721,936 | 18,554,721 | ||||||||||||
Income from operations | 11,255,415 | 13,736,854 | 30,422,726 | 39,556,095 | ||||||||||||
Other income (expense): | ||||||||||||||||
Interest income | 237,563 | 222,852 | 710,972 | 663,776 | ||||||||||||
Interest expense | (70,687) | (116,378) | (309,183) | (340,282) | ||||||||||||
Foreign currency exchange gain (losses), net | 62,449 | (757,407) | 82,116 | (1,677,122) | ||||||||||||
Total other income (expense) | 229,325 | (650,933) | 483,905 | (1,353,628) | ||||||||||||
Income before income taxes | 11,484,740 | 13,085,921 | 30,906,631 | 38,202,467 | ||||||||||||
Income tax expense | 3,784,597 | 4,137,255 | 10,958,976 | 11,793,472 | ||||||||||||
Net income | 7,700,143 | 8,948,666 | 19,947,655 | 26,408,995 | ||||||||||||
Other comprehensive income: | ||||||||||||||||
Foreign currency translation adjustment, net of nil income taxes | 4,237,345 | 5,322,885 | 501,680 | 12,854,266 | ||||||||||||
Comprehensive income | 11,937,488 | 14,271,551 | 20,449,335 | 39,263,261 | ||||||||||||
Earnings per share: | ||||||||||||||||
Basic and diluted | 0.20 | 0.23 | 0.52 | 0.69 | ||||||||||||
FUSHI COPPERWELD, INC. AND SUBSIDIARIES | ||||||||
Nine-Month Period Ended September 30, | ||||||||
2012 | 2011 | |||||||
USD | USD | |||||||
Cash flows from operating activities: | ||||||||
Net cash provided by operating activities | 16,289,145 | 40,676,212 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property, plant and equipment | (423,623) | (1,160,718) | ||||||
Net cash used in investing activities | (423,623) | (1,160,718) | ||||||
Cash flows from financing activities: | ||||||||
Proceeds from bank loans | 15,768,600 | - | ||||||
Payment for acquisition of Jinchuan | - | (4,819,107) | ||||||
Repayment of interest-free advance provided by Mr. Li Fu | (2,000,000) | - | ||||||
Repayment of bank loans | (13,435,700) | (487,500) | ||||||
Proceeds from issuance of common stock and warrants | 573,210 | 628,495 | ||||||
Net cash provided by (used in) financing activities | 906,110 | (4,678,112) | ||||||
Effect of foreign currency exchange rate changes on cash | 428,221 | 5,786,556 | ||||||
Net increase in cash | 17,199,853 | 40,623,938 | ||||||
Cash at beginning of period | 200,451,902 | 123,000,338 | ||||||
Cash at end of period | 217,651,755 | 163,624,276 | ||||||
Supplemental disclosure of cash flow information: | ||||||||
Interest paid | 309,183 | 340,282 | ||||||
Income taxes paid | 15,257,995 | 7,665,233 | ||||||
