-- 2Q08 Revenues Increased 140% to $62.5 Million --
-- 2Q08 Net Income Increased 4% to $7.3 Million, after giving effect to a settlement expense totaling $2.1 million --
-- Earnings per diluted share of $0.25, after giving effect to a settlement expense of $0.07 per diluted share --
DALIAN, China, Aug. 12 /Xinhua-PRNewswire-FirstCall/ -- Fushi Copperweld, Inc. (Nasdaq: FSIN), the leading global manufacturer of bimetallic wire used in a variety of telecommunication, utility, automotive and other electrical applications, today announced financial results for the second quarter of 2008.
Revenues for the second quarter of 2008 increased 139.7% to $62.5 million, from revenue of $26.1 million in the prior year’s quarter, primarily due to both an increase of 3301.8 tons in sales volume from our Dalian facility and the acquisition of Copperweld.
Gross profit in the second quarter increased 72.6% year over year to $16.7 million. Gross margin decreased to 26.8%, due to a combination of lower margins contributed by the Fayetteville and Telford facilities, an increase in the price of raw materials, and an increasingly competitive telecom market which led to some pricing pressure in that segment of the business.
Operating expenses in the second quarter increased 133.9% to $4.8 million, compared with $2.0 million in the prior year’s quarter. This increase was due to a larger sales force and general and administrative expenses. On a percentage basis, operating expenses decreased to 7.6% from 7.8% in the year ago quarter, and were down sequentially from 10.8% in the first quarter 2008.
Adjusted net income increased 34.9% to $9.4 million, or $0.33 per diluted share. This compares with $7.0 million, or $0.28 per diluted share in the second quarter of 2007. The company realized an accrual during the quarter of $2.1 million before taxes, or $0.07 per diluted share, associated with pending litigation. Giving effect to this charge, net income for the 2008 second quarter was $7.3 million, or $0.25 per diluted share.
Mr. Li Fu, Chairman and Chief Executive Officer of Fushi Copperweld, commented, "We are pleased with our results for the second quarter, which reflect an ongoing integration of Fushi and Copperweld, as well as our continued ramp in production. We continue to see strong demand for all of our product lines, and are beginning to realize opportunities to broaden our target markets, not only geographically but also in terms of market segments, which we believe will increase our revenues over the long term while mitigating the risk associated with a narrower focus. We have significantly bolstered our sales efforts through the hires of several seasoned sales executives with substantial experience not only in the bimetallic market, but importantly in the end markets we plan to serve. We believe that we have taken the appropriate steps to ensure our position as a dominant player in the bimetallic industry through domestic and international sales, marketing and manufacturing expertise, branding and technological innovation."
Mr. Fu continued, "While we have historically been focused on capturing revenue from the telecommunications market, we believe there are substantial new opportunities in other underpenetrated market segments. We expect that telecommunications will remain a strong contributor for us, and expect this segment to continue to grow sequentially, but look for other market segments to begin to increase as a percentage of sales. We have already seen this trend beginning, and expect that it will continue on a larger scale going forward. We are excited about the revenue opportunities this presents to us, and look for this evolution to strengthen our foothold in the bimetallic market worldwide"
The accrual of $2.1 million charged to earnings during the quarter was related to a two year old complaint against Fushi that claimed an alleged breach of engagement. In October 2007, Fushi had signed an escrow agreement with the complainant, and funded that escrow agreement with $1 million restricted cash and 100,000 shares of common stock. On August 5, 2008, Fushi received a verdict from the US District Court that the complainant is entitled to recover from Fushi a total of $7.2 million. The company is in the process of appealing the case, Still, until a favorable outcome can be reached in the courts, Fushi will record an expense quarterly of $112,500 per quarter for the next 14 quarters
Financial Expectations
For the full year 2008, the company now expects adjusted fully diluted earnings per share between $1.40 and $1.45 based on an estimated weighted average diluted share count of 28.8 million shares. This adjustment to guidance is a function of macroeconomic trends in the United States relating to the slowing housing market, which feeds telecom demand. Additionally in China, the company is seeing some telecom capital spending being pushed out due to restructuring of the industry as well as a short term strain on the electrical grid associated with the Olympics and countrywide coal shortages, which is adversely affecting utility revenues in the short term. Taking into account the accrual and ongoing quarterly expenses of $112,500 associated with the aforementioned litigation settlement, management expects fully diluted earnings per share of $1.33-$1.38 for the full year 2008. Management continues to anticipate that 2008 will be a year of executing the integration of Fushi Copperweld, and looks to 2009 as the year in which the company can begin to realize the full range of benefits of the combined company, as a result of equipment relocation and additional product lines ramping up.
Going forward, the Company expects that overall, sales growth will continue to be increasingly broadly based as it supplies the growing demand in the Chinese industrial sector. Given the Company’s facilities in Dalian, PRC; Fayetteville, TN, USA; and Telford, UK, it is geographically diversified and in a strong position to gain global market share. That said, it expects that the majority of net sales will continue to transpire in Asia.
Mr. Fu concluded, "We are excited about the traction we’re gaining in our combined Fushi Copperweld businesses, and we are anticipating that our increased production capacities, combined with our strong branding presence in global markets will allow us to generate significant new sources of revenue. Looking ahead to the third quarter, we recognize the external factors that can affect our business from time to time, and we are well prepared to manage through them. We are building our business for the long term benefit of our shareholders, and believe in the long term potential of our strategy. We expect the coming quarters will be a time for strengthening our foundation to capture the benefits in 2009 of our efforts this year on behalf of our shareholders."
Conference Call
The Company will conduct a conference call to discuss the second quarter 2008 results today, Tuesday, August 12, 2008, at 8:30 am ET. Listeners may access the call by dialing 1-913-312-0636. A live webcast of the conference call will also be available at http://www.fushicopperweld.com , under the Calendar of Events link located on the Investor Relations section or at http://www.viavid.net . A replay of the call will be available from August 12, 2008 to September 12, 2008. Listeners may access the replay by dialing # 719-457-0820; passcode: 3600374.
About Fushi Copperweld
Fushi Copperweld, Inc. through its wholly owned subsidiaries, Fushi International (Dalian) Bimetallic Cable Co, Ltd., and Copperweld Bimetallics, LLC, manufactures bimetallic composite wire products, principally copper-clad aluminum wires ("CCA") and copper-clad steel (“CCS”). CCA and CCS wire offers greater value than solid copper wire in a wide variety of applications such as coaxial cable for cable television (CATV), signal transmission lines for telecommunication networks, distribution lines for electricity, electrical transformers, wire components for electronic instruments and devices, utilities, appliances, automotive, building wire, and other industrial wire. For more information on Fushi Copperweld, visit the Company’s website: http://www.fushicopperweld.com/ .
Safe Harbor Statement
This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. 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-Q, 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 .
FUSHI COPPERWELD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2008 AND DECEMBER 31, 2007
A S S E T S
June 30, December 31,
2008 2007
Unaudited
CURRENT ASSETS:
Cash $66,861,079 $79,914,758
Marketable Securities -- 2,977,699
Restricted cash 1,000,000 1,000,000
Accounts receivable, trade, net of
allowance of bad debt $517,453 and
$135,418 as of June 30, 2008 and
December 31, 2007 43,896,897 23,611,186
Inventories 25,846,519 12,308,295
Notes receivables 533,220 816,905
Other receivables and prepaid
expenses 592,207 997,979
Advances to suppliers 5,489,653 2,341,839
Cross currency hedge receivable 322,983 706,170
Total current assets 144,542,558 124,674,831
PLANT AND EQUIPMENT, net 105,470,718 87,228,600
OTHER ASSETS:
Advances to suppliers, noncurrent 19,016,466 18,204,775
Prepaid land use right -- 4,559,760
Intangible asset, net of
accumulated amortization 12,589,160 5,832,721
Deferred loan expense, net 3,862,624 3,115,930
Deferred tax assets 4,040,895 2,852,000
Total other assets 39,509,145 34,565,186
Total assets $289,522,421 $246,468,617
L I A B I L I T I E S A N D
S H A R E H O L D E R S’ E Q U I T Y
CURRENT LIABILITIES:
Accounts payable, trade $10,465,124 $3,028,823
Notes payable, current 60,022 --
Revolver line 8,894,855 7,168,524
Short term bank loans 17,494,800 5,703,360
Current portion of long term debts -- 10,968,000
Other payables and accrued
liabilities 4,612,821 5,791,597
Customer deposits 658,517 --
Taxes payable 2,871,605 1,005,259
Total current liabilities 45,057,744 33,665,563
LONG TERM LIABILITIES:
Notes payable, noncurrent 45,000,000 60,000,000
Fair value of derivative instrument 9,246,901 8,515,396
Total liabilities 99,304,645 102,180,959
COMMITMENTS AND CONTINGENCIES 7,197,794 --
SHAREHOLDERS’ EQUITY:
Preferred stock,$0.001 par value,
5,000,000 shares authorized,
none issued or outstanding -- --
Common stock,$0.006 par value,
100,000,000 shares authorized,
June 30, 2008: 27,459,012
shares issued and 27,359,012
outstanding December 31, 2007:
25,311,304 shares issued and
25,211,304 outstanding 164,154 151,268
Restricted common stock in escrow 600 600
Additional paid in capital 90,079,011 77,665,064
Statutory reserves 8,321,726 8,321,726
Retained earnings 68,984,413 54,133,070
Accumulated other comprehensive
income 15,470,078 4,015,930
Total shareholders’ equity 183,019,982 144,287,658
Total liabilities and
shareholders’ equity $289,522,421 $246,468,617
FUSHI COPPERWELD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND
OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(UNAUDITED)
Three months ended Six months ended
June 30, June 30,
2008 2007 2008 2007
REVENUES $62,536,129 $26,085,908 $116,545,156 $47,223,825
COST OF GOODS SOLD 45,789,522 16,433,794 85,064,862 29,886,532
GROSS PROFIT 16,746,607 9,652,114 31,480,294 17,337,293
OPERATING EXPENSE
Selling expenses 1,258,050 193,916 2,050,961 369,110
General and
administrative
expenses 3,521,466 1,849,067 7,917,245 3,140,480
Total operating
expense 4,779,516 2,042,983 9,968,206 3,509,590
INCOME FROM
OPERATIONS 11,967,091 7,609,131 21,512,088 13,827,703
OTHER INCOME
(EXPENSE)
Interest income 192,458 318,244 352,821 509,454
Interest expense (3,805,067) (1,845,550) (5,585,536) (3,277,211)
Gain on
derivative
instrument 186,022 802,523 355,190 802,523
Other income (6,868) 112,506 34,705 174,616
Other expense (46,007) (14,195) (142,707) (79,694)
Total other
expense, net (3,479,462) (626,472) (4,985,527) (1,870,312)
INCOME BEFORE
INCOME TAXES 8,487,629 6,982,659 16,526,561 11,957,391
PROVISION OF INCOME
TAXES 1,206,783 -- 1,675,218 --
NET INCOME 7,280,846 6,982,659 14,851,343 11,957,391
OTHER COMPREHENSIVE
INCOME
Unrealized gain
on marketable
securities -- -- 22,301 --
Foreign currency
translation
adjustment 4,308,352 2,113,689 12,163,352 3,016,550
Change in fair
value of
derivative
instrument 4,377,975 (872,519) (731,505) (871,519)
COMPREHENSIVE
INCOME $15,967,173 $8,223,829 $26,305,491 $14,102,422
EARNINGS PER SHARE:
Basic $0.27 $0.32 $0.55 $0.57
Diluted $0.25 $0.28 $0.51 $0.49
WEIGHTED AVERAGE
NUMBER OF SHARES
Basic 27,354,215 21,487,056 27,201,127 21,116,447
Diluted 28,732,109 25,192,643 28,690,851 24,667,346
For more information, please contact:
Nathan Anderson
Director IR & Corporate Development
Tel: +1-931-433-0482
Email: ir@fushicopperweld.com
Bill Zima & Ashley Ammon MacFarlane
ICR, Inc.
Tel: +1-203-682-8200
