-- Revenues Increased 147% to $32 Million in 3Q07 --
-- Net Income Increased to $8.2 Million, or 25.7% of Revenue --
DALIAN, China, Nov. 14 /Xinhua-PRNewswire-FirstCall/ -- Fushi International, Inc. (Nasdaq: FSIN), the leading global manufacturer of bimetallic wire used in a variety of telecommunication, power transmission and other electrical products, today announced financial results for the third quarter of 2007.
Q3 Highlights
-- Revenues increased 147% from last year to a record $32.0 million
-- Gross margin improved to 32.9% from last year 30.9%
-- GAAP net income increased 472.8% from last year to a record $8.2
million
-- Fully diluted EPS of $0.33 (year-on-year increase of 423.5%)
Key Financial Metrics:
(All numbers in USD millions, except per-share amounts)
Q3 2007 Q3 2006 % Change
Revenue 32.0 13.0 147.1
Gross Profit 10.5 4.0 163.3
Operating Income 8.7 3.1 184.3
Net Income 8.2 1.4 473.8
EPS - Diluted 0.33 0.06 423.5
Revenues for the third quarter of 2007 increased 147% to $32.0 million, from $13.0 million in the prior year’s quarter. Revenues in the quarter were driven by a higher average selling price and higher sales volume, higher copper prices, strong market demand, and new and expanded product applications. The average selling price improvement year-over-year resulted primarily from the increase of raw materials, particularly copper prices. Coaxial cable accounted for approximately 59.5% of sales; magnet wire for about 19.1% of sales; and braided wire for about 16% of sales. Flat wire, which the Company began shipping this quarter, accounted for 5.3% of total sales.
Gross profit increased by 163.3% year-over-year to $10.5 million. Gross margin of 32.8% was up from last year’s 30.9%, due to improved product mix and gains from the fluctuation of copper prices. However, margins were down sequentially from 37.0% in the second quarter as current inventory costs increased as a result of higher raw material costs.
Operating expenses in the third quarter increased 94% to $1.8 million compared to $0.9 million in the prior year period. This increase was primarily a result of higher general and administrative expenses associated with the compliance of Sarbanes-Oxley. On a percentage basis, operating expenses decreased to 5.6% from 7.2%, as the company implemented cost-containment measures. Also included in the general and administrative expenses for the third quarter of 2007 was share-based compensation expense of $241,921, which was equivalent to 0.8% of net revenues.
Net income in the third quarter increased 473.8% to $8.2 million, or 25.7% of revenue, up from $1.4 million, or 11% of revenue last year. The higher net income was due to higher revenues and gross margins year-over-year, lower operating expenses, and a one-time charge incurred in last year’s third quarter of $1.5 million associated with the issuance of registration rights penalty shares. Diluted earnings per share in the third quarter of 2007 was $0.33, versus $0.06 in the prior year period. The weighted average share count used to calculate diluted EPS was 25.5 million.
During the quarter, the company announced that it had acquired Copperweld Bimetallics, LLC a leading global manufacturer of bimetallic wire. The transaction was valued at USD$22.5 million, including $14.5 million in cash and the assumption of $8.0 million in debt. Subsequently, Copperweld’s CEO Chris Finley was appointed to the role of Fushi’s Chief Operating Officer, and James Todd, Copperweld’s CFO was named Fushi’s Controller.
Mr. Li Fu, Chairman and Chief Executive Officer of Fushi International commented, "We are pleased to report another quarter of continued growth in our business. More importantly, we believe that the combination of Fushi’s and Copperweld’s businesses position us as a domestic and international market leader in the bimetallic industry. We are well on our way to executing our strategic plan through technological innovation, manufacturing expertise, domestic and international marketing and branding and strong management."
Mr. Fu continued, "In the last few months, we have broadened our product line, significantly increased our production capacity, rounded out our management team, strengthened our market position and improved our balance sheet with a $39 million private placement. We believe these steps provide us with the competitive advantages we need to further strengthen ourselves as the dominant player in our markets."
Financial Expectations
For the full year 2007, the Company anticipates diluted earnings per share of approximately $0.86-$0.96, based on an estimated weighted diluted share count of 25.0 million shares. Fourth quarter results are expected to be impacted by roughly $0.16 in one-off transaction costs. For 2008, the Company expects fully diluted earnings per share of $1.50-$1.60, based on an estimated weighted diluted share count of 28.8 million shares.
Mr. Fu concluded, "We are excited about the integration of Copperweld and the benefits we expect from that integration. We remain confident that we have put in place a foundation for continued growth and financial flexibility. We believe that the combined company has significant potential, and that we have established ourselves as the leader in the world-wide bimetallic market. We have a lot of work to do in the coming quarters to integrate the companies, ramp up production and leverage our strategic position to increase market share and revenues, and return to strong sustainable margins."
Conference Call
The Company will conduct a conference call to discuss the third quarter 2007 results today, Wednesday, November 14, 2007 before the market open at 8:30 am ET. Listeners may access the call by dialing 913-312-1411. A live webcast of the conference call will also be available at http://www.viavid.net . A replay of the call will be available from November 14, 2007 to December 14, 2007. Listeners may access the replay by dialing # 719-457-0820; passcode: 8453545.
About Fushi International
Fushi International, through its wholly owned subsidiary, Fushi International (Dalian), manufactures bimetallic composite wire products, principally copper clad aluminum wires ("CCA"). CCA, the company’s core product, combines the conductivity and corrosion resistance of copper with the light weight and relatively low cost of aluminum. It is a cost-effective substitute for single 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. For more information on Fushi, visit the website: http://www.fushiinternational.com/ .
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 http://www.sec.gov .
FUSHI INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND
OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
(UNAUDITED)
Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
REVENUES $32,014,592 $12,956,092 $79,238,417 $45,881,256
COST OF GOODS SOLD 21,481,175 8,955,882 51,367,707 28,477,095
GROSS PROFIT 10,533,417 4,000,210 27,870,710 17,404,161
OPERATING EXPENSE
Selling expenses 189,625 152,045 558,735 401,294
General and administrative
expenses 1,609,612 775,459 5,079,188 2,262,160
Total operating
expense 1,799,237 927,504 5,637,923 2,663,454
INCOME FROM OPERATIONS 8,734,180 3,072,706 22,232,787 14,740,707
OTHER INCOME (EXPENSE)
Interest income 565,383 30,344 1,074,837 42,775
Interest expense (1,361,261) (318,608) (4,309,376) (832,172)
Gain on derivative
instrument 286,245 -- 1,088,768 --
Other income 14,077 236,002 188,693 556,724
Other expense (5,298) (119,302) (84,992) (258,152)
Registration rights
penalty -- (1,466,250) -- (1,466,250)
Total other expense (500,854) (1,637,814) (2,042,070) (1,957,075)
INCOME BEFORE INCOME
TAXES 8,233,326 1,434,892 20,190,717 12,783,632
PROVISION FOR INCOME
TAXES -- -- -- 396,553
NET INCOME 8,233,326 1,434,892 20,190,717 12,387,079
OTHER COMPREHENSIVE
INCOME
Foreign currency
translation
adjustment 2,250,423 629,327 5,266,973 1,107,923
Change in fair value
of derivative
instrument (3,738,571) -- (4,610,090) --
COMPREHENSIVE INCOME $6,745,178 $2,064,219 $20,847,600 $13,495,002
BASIC
Earnings per share $0.37 $0.07 $0.94 $0.62
Weighted average
number of shares 22,263,618 19,932,129 21,422,610 19,907,105
DILUTED
Earnings per share $0.33 $0.06 $0.85 $0.55
Weighted average
number of shares 25,454,871 22,761,228 24,335,426 22,612,369
FUSHI INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2007 AND DECEMBER 31, 2006
A S S E T S
September 30, December 31,
2007 2006
(Unaudited)
CURRENT ASSETS:
Cash $ 46,032,832 $ 20,493,551
Accounts receivable, trade 12,869,254 7,042,408
Inventories 12,988,190 7,403,116
Notes receivables 106,720 --
Other receivables and prepaid expenses 1,834,819 497,380
Advances to suppliers 9,246,772 3,390,917
Cross currency hedge receivable 286,245 --
Total current assets 83,364,832 38,827,372
PLANT AND EQUIPMENT, net 55,896,662 47,256,475
OTHER ASSETS:
Prepayment on land use right 4,196,583 --
Investment deposit 3,000,000 --
Advances to suppliers, noncurrent 31,012,693 4,559,357
Intangible asset, net of accumulated
amortization 5,564,471 5,518,931
Deferred loan expense 3,123,496 --
Total other assets 46,897,243 10,078,288
Total assets $ 186,158,737 $ 96,162,135
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 $ 1,038,447 $ 1,055,684
Liquidated damage payable -- 1,466,250
Other payables and accrued liabilities 898,780 321,276
Customer deposits 349,557 531,065
Taxes payable 840,863 982,345
Short term bank loans 11,872,600 12,504,135
Current portion of long term bank loans 10,672,000 --
Loan from shareholder -- 3,911,256
Total current liabilities 25,672,247 20,772,011
LONG TERM LIABILITIES:
Long term bank loans, net of current
portion -- 10,256,000
Notes Payable 60,000,000 --
Fair value of derivative instrument 4,610,090 --
Total liabilities 90,282,337 31,028,011
SHAREHOLDERS’ EQUITY:
Preferred stock,$0.001 par value,
5,000,000 shares authorized,
no outstanding as
of September 30, 2007 and December
31, 2006. -- --
Common stock, $0.006 par value,
100,000,000 shares
authorized, 22,382,223 and
20,046,162 shares issued and
outstanding as of September
30, 2007 and December 31, 2006,
respectively. 134,294 120,277
Additional paid in capital 40,811,997 29,364,955
Deferred stock option compensation (1,566,383) --
Statutory reserves 7,184,454 4,452,467
Retained earnings 45,955,432 28,496,702
Accumulated other comprehensive income 3,356,606 2,699,723
Total shareholders’ equity 95,876,400 65,134,124
Total liabilities and shareholders’
equity $ 186,158,737 $ 96,162,135
FUSHI INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 and 2006
(UNAUDITED)
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 20,190,717 $ 12,387,079
Adjustments to reconcile net income to
cash provided by (used in) operating
activities:
Depreciation 2,029,646 1,545,520
Amortization of intangibles 174,627 167,062
Amortization of loan commission 491,178 --
Amortization of stock option
compensation 887,080 --
Gain on derivative instrument (1,088,768) --
Changes in operating assets and
liabilities:
Accounts receivable (5,426,757) (1,323,834)
Inventories (5,175,451) (1,879,011)
Other receivables and prepayments (1,306,764) (3,300,663)
Due from related parties -- 3,352,072
Notes receivables (104,512) --
Advance to suppliers (5,600,003) --
Accounts payable (58,813) (783,559)
Other payables and accrued
liabilities 570,231 (481,156)
Customer deposits (198,848) 423,141
Taxes payable (177,576) (3,158,993)
Liquidated damage payable -- 1,466,250
Net cash provided by operating
activities 5,205,987 8,413,908
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for Investment deposit (3,000,000) --
Proceeds from derivative instrument 802,523 --
Advance for purchase of land use right (4,109,757) --
Purchase of property and equipment (8,613,889) (9,286,833)
Advances for purchase of equipment (25,724,917) --
Net cash used in investing
activities (40,646,040) (9,286,833)
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan from shareholder -- 4,450,000
Repayment to shareholders (3,985,698) --
Proceeds from bank loans 11,546,600 18,259,578
Payments on bank loans (12,507,240) (13,747,800)
Net proceeds from convertible notes 56,400,000 --
Proceeds from exercise of stock
warrants 7,541,346 15,800
Net cash provided by financing
activities 58,995,008 8,977,578
EFFECT OF EXCHANGE RATE ON CASH 1,984,326 680,276
INCREASE IN CASH 25,539,281 8,784,929
CASH, beginning of period 20,493,551 6,163,670
CASH, end of period $ 46,032,832 $ 14,948,599
For more information, please contact:
Nathan Anderson
Director of Investor Relations
Fushi International, Inc.
Email: Nathan.anderson@fushiinternational.com
Bill Zima & Ashley Ammon MacFarlane
Integrated Corporate Relations
Tel: +1-203-682-8200
