-- 3Q08 Revenues Increased 99.4% to $63.8 Million --
-- 3Q08 Net Income Increased 9.9% to $9.05 Million --
-- Reports Diluted Earnings Per Share of $0.31 --
DALIAN, China, Nov. 13 /Xinhua-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, automotive and other electrical applications, today announced financial results for the third quarter ended September 30, 2008.
Revenues for the third quarter of 2008 increased 99.4% to $63.8 million, from revenue of $32.0 million in the prior year's quarter, primarily due to both an increase in sales volume from the Dalian facility and the contribution from the acquisition of Copperweld in October 2007.
Gross profit in the third quarter increased 60.4% year over year to $16.9 million. Gross margin decreased to 26.5%, primarily attributable to lower margins contributed by the Fayetteville and Telford facilities acquired from Copperweld, as well as a decline in gross margin in Dalian.
Operating expenses in the third quarter increased 183.5% to $4.6 million, compared with $1.6 million in the prior year's quarter. This increase was due to a larger sales force and general and administrative expenses in Dalian associated with the increase in sales at that location, as well as the acquisition of Copperweld. On a percentage basis, operating expenses decreased sequentially to 7.3% from 7.6% in the second quarter 2008.
Net income for the 2008 third quarter was $9.0 million, or $0.31 per diluted share. This compares with $8.2 million or $0.33 per diluted share in the third quarter of 2007.
Mr. Li Fu, Chairman and Chief Executive Officer of Fushi Copperweld, commented, "We are pleased with our results for the third quarter, which reflect an ongoing integration of Fushi and Copperweld, as well as our continued ramp in production. The third quarter also reflects our ability to continue to grow in an indisputably challenging environment. During the third quarter, our capacity was limited by the Chinese government's support of the Beijing Olympic Games, which required that businesses cap use of the electrical grid, thereby limiting production. Additionally, copper prices were still on the rise until late in the third quarter, which kept our margins under some pressure. And lastly, as the global economy began to slow we have seen some impact on demand. Still, our revenue growth was strong, and we have maintained a solid capital position that we believe will allow us to weather the current market conditions better than many of our competitors. We plan to continue to take 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, and we believe our strong balance sheet provides us with the opportunity to do that."
Mr. Fu continued, "While we are excited about the long term health of our industry, and about Fushi Copperweld specifically, we believe that the short term will bring about some additional challenges for our industry. First, the global economic situation has not yet stabilized, which could impact demand for the near term. And secondly, after the close of the quarter, we saw copper prices drop significantly. Lower copper prices can also have a negative impact on our top line, but we believe this is offset somewhat by our lower working capital needs, allowing us to maintain a strong financial position. Another ancillary outcome of the current environment is that companies in our industry with weaker balance sheets may have a difficult time surviving this environment, leaving a larger market share to those of us with strong balance sheets who are able to weather the storm. Our plan is to continue to stay in close contact with our customers and with the industry, and continue to identify new ways to increase revenues and improve our margins, especially during these challenging times."
Financial Expectations
For the full year 2008, the company now expects fully diluted earnings per share between $1.03 and $1.13 based on an estimated weighted average diluted share count of 28.8 million shares. This diluted EPS estimate excludes a charge of $2.35 million, or $0.08 per diluted share associated with a litigation accrual. This adjustment to guidance reflects falling copper prices, general market uncertainty, and macroeconomic trends. It also accounts for our new organic growth initiatives to diversify and increase sales and cost control measures in response to deteriorating macro conditions. 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 it will continue to benefit from the infrastructure buildout in China and 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 be generated in Asia.
Conference Call
The Company will conduct a conference call to discuss the third quarter 2008 results today, Thursday, November 13, 2008, at 8:30 am ET. Listeners may access the call by dialing 1-480-629-9039. 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 November 13, 2008 to December 14, 2008. Listeners may access the replay by dialing # 303-590-3030; passcode: 3942239.
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 cladded bi-metallic engineered conductor products used in the electrical, telecommunications, automotive, utilities and industrial industries. With extensive design and production capabilities and a long-standing dedication to customer service, Fushi-Copperweld, Inc. is the preferred choice bi-metallic products world-wide. For more information, visit: 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 .
(financial tables below)
FUSHI COPPERWELD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
Three months ended Nine months ended
September 30, September 30,
2008 2007 2008 2007
Unaudited Unaudited Unaudited Unaudited
REVENUES $63,823,927 $32,014,592$180,369,083 $79,238,417
COST OF GOODS SOLD 46,931,400 21,481,175 131,996,263 51,367,707
GROSS PROFIT 16,892,527 10,533,417 48,372,820 27,870,710
OPERATING EXPENSE
Selling expenses 1,223,087 189,625 3,274,048 558,735
General and
administrative
expenses 3,418,704 1,447,530 11,335,948 4,588,010
Total operating
expense 4,641,791 1,637,155 14,609,996 5,146,745
INCOME FROM OPERATIONS 12,250,736 8,896,262 33,762,824 22,723,965
OTHER INCOME (EXPENSE)
Interest income 176,830 565,383 529,651 1,074,837
Interest expense (1,800,738) (1,523,343) (7,386,274) (4,800,554)
Gain on derivative
instrument (32,482) 286,245 322,708 1,088,768
Other income (65,305) 14,077 (30,600) 188,693
Other expense (6,348) (5,298) (149,055) (84,992)
Total other expense,
net (1,728,043) (662,936) (6,713,571) (2,533,248)
INCOME BEFORE INCOME
TAXES 10,522,693 8,233,326 27,049,253 20,190,717
Deferred income tax
benefit (106,390) 0 (1,295,285) 0
Current income tax
expense 1,582,133 0 4,446,247 0
Total income tax expense 1,475,743 -- 3,150,961 --
NET INCOME 9,046,950 8,233,326 23,898,292 20,190,717
OTHER COMPREHENSIVE INCOME
Unrealized gain or
(loss) on marketable
securities -- -- 22,301 --
Foreign currency
translation
adjustment 1,899,163 2,250,423 14,062,515 5,266,973
Change in fair value of
derivative
instrument 3,940,908 (3,738,571) 3,209,403 (4,610,090)
COMPREHENSIVE INCOME $14,887,021 $6,745,178 $41,192,511 $20,847,600
EARNINGS PER SHARE:
BASIC $0.33 $0.37 $0.88 $0.94
DILUTED $0.31 $0.33 $0.83 $0.85
WEIGHTED AVERAGE NUMBER
OF SHARES:
BASIC 27,387,302 22,263,618 27,263,638 21,422,610
DILUTED 28,446,786 25,454,871 28,601,237 24,335,426
FUSHI COPPERWELD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2008 AND DECEMBER 31, 2007
A S S E T S
September 30, December 31,
2008 2007
Unaudited
CURRENT ASSETS:
Cash $ 50,043,410 $ 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
$498,205 and $135,418 as of September
30,2008 and December 31, 2007 50,018,459 23,611,186
Inventories 20,444,709 12,308,295
Notes receivables 370,149 816,905
Other receivables and prepaid expenses 496,762 997,979
Advances to suppliers 25,046,960 2,341,839
Cross currency hedge receivable 55,322 706,170
Deposit in derivative hedge 1,000,000 --
Total current assets 148,475,771 124,674,831
PLANT AND EQUIPMENT, net 107,816,898 87,228,600
OTHER ASSETS:
Advances to suppliers, noncurrent 17,946,939 18,204,775
Prepaid land use right -- 4,559,760
Intangible asset, net of accumulated
amortization 12,617,273 5,832,721
Deferred loan expense, net 3,612,387 3,115,930
Deferred tax assets 4,147,286 2,852,000
Total other assets 38,323,885 34,565,186
Total assets $ 294,616,554 $ 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 $ 5,685,839 $ 3,028,823
Revolver line 9,410,373 7,168,524
Short term bank loans 17,673,600 5,703,360
Current portion of long term debts -- 10,968,000
Current portion of notes payable 5,000,000 --
Other payables and accrued liabilities 3,118,409 5,791,597
Customer deposits 570,990 --
Taxes payable 2,083,687 1,005,259
Total current liabilities 43,542,897 33,665,563
LONG TERM LIABILITIES:
Notes payable, noncurrent 40,000,000 60,000,000
Fair value of derivative instrument 5,305,993 8,515,396
Total liabilities 88,848,890 102,180,959
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,
September 30, 2008: 27,503,885 shares
issued and 27,403,885 outstanding
December 31, 2007: 25,311,304 shares
issued and 25,211,304
outstanding 164,424 151,268
Restricted common stock in escrow 600 600
Additional paid in capital 90,741,609 77,665,064
Statutory reserves 8,321,726 8,321,726
Retained earnings 78,031,362 54,133,070
Accumulated other comprehensive income 21,310,149 4,015,930
Total shareholders' equity 198,569,869 144,287,658
Total liabilities and shareholders'
equity $ 294,616,554 $ 246,468,617
FUSHI COPPERWELD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
2008 2007
Unaudited Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 23,898,292 20,190,717
Adjustments to reconcile net income to cash --
provided by (used in) operating activities: --
Bad debt expenses 355,293
Reserve for obsolete inventory 401,646
Depreciation 4,728,235 2,029,646
Amortization of intangibles 256,722 174,627
Amortization of loan commission 2,525,756 491,178
Interest penalty 710,544
Amortization of stock option compensation 1,437,557 887,080
Gain on derivative instrument (322,708) (1,088,768)
Investment loss on marketable securities 16,158
Change in operating assets and liabilities: --
Accounts receivable (24,965,036) (5,426,757)
Inventories (7,885,132) (5,175,451)
Other receivables and prepayments (395,449) (1,306,764)
Notes receivables 487,946 (104,512)
Advance to suppliers (22,061,823) (5,600,003)
Deferred tax assets (1,295,286)
Accounts payable 2,521,359 (58,813)
Other payables and accrued liabilities (2,737,772) 570,231
Customer deposits 528,731 (198,848)
Taxes payable 960,752 (177,576)
Net cash (used in) provided by
operating activities (20,834,215) 5,205,987
CASH FLOWS FROM INVESTING ACTIVITIES:
Marketable securities 2,983,842
Payment for Investment deposit (3,000,000)
Proceeds from derivative instrument 973,556 802,523
Purchase of land use right (1,687,468)
Advance for purchase of land use right -- (4,109,757)
Purchase of property and equipment (15,540,210) (8,613,889)
Advances for purchase of equipment (3,148,802) (25,724,917)
Net cash used in investing activities (16,419,082) (40,646,040)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments to shareholders -- (3,985,698)
Net borrowings for Revolver line 2,279,289
Proceeds from bank loans 16,908,000 11,546,600
Payments on bank loans (17,268,032) (12,507,240)
Net proceeds from convertible notes -- 56,400,000
Proceeds from exercise of stock warrants 139,394 7,541,346
Net cash provided by financing activities 2,058,651 58,995,008
EFFECT OF EXCHANGE RATE ON CASH 5,323,298 1,984,326
INCREASE IN CASH (29,871,348) 25,539,281
CASH, beginning of period 79,914,758 20,493,551
CASH, end of period 50,043,410 $ 46,032,832
For more information, please contact:
Nathan Anderson
Director IR & Corporate Development
Tel: +1-931-433-0482
Email: ir@fushicopperweld.com
Bill Zima & Ashley Ammon
ICR, Inc.
Tel: +1-203-682-8200
