omniture

Fushi Copperweld Reports Second Quarter 2010 Financial Results

2010-08-04 15:25 1915
    DALIAN, China, Aug. 4 /PRNewswire-Asia/ -- 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: ir@fushicopperweld.com 
     Web:   http://www.fushicopperweld.com 

    Media
     Thomas Horton, Director of Global Marketing 
     Fushi Copperweld Inc.
     Phone: +1-615-428-3333 
     Email: media@fushicopperweld.com 


                     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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