Lihua Achieves 2009 GAAP Net Income of $16.8 Million on $161.5 Million in Revenue and Exceeds Gross Profit and Non-GAAP Net Income Guidance
Full Year Revenue up 223%, Gross Profit up 116%, Non-GAAP Net Income up 119%, Excluding $8.8 Million Non-Cash Charge, and Adjusted EBITDA up 118%
DANYANG, China, March 31 /PRNewswire-Asia/ -- Lihua International, Inc. (Nasdaq: LIWA) ("Lihua" or the "Company"), a leading Chinese developer, designer, manufacturer, marketer and distributor of low cost, high quality alternatives to pure copper superfine and magnet wire, as well as copper rod products, today announced financial results for the fourth quarter and 12 months ended December 31, 2009.
Fourth Quarter Financial Highlights
-- Sales increased 367% year-over-year to $51.3 million.
-- Gross profit increased 178% year-over-year to $10.9 million.
-- Net income increased 275% to $7.3 million, or $0.30 per share, compared
with $1.9 million, or 0.13 per share in the fourth quarter of 2008. Net
income for the fourth quarter of 2009 included a $0.5 million non-cash
charge for the change in fair value of warrants issued to investors in
conjunction with the Company's issuance of convertible Preferred Stock
in October 2008. Excluding the non-cash charge, non-GAAP net income
for the 2009 fourth quarter was $7.7 million, or $0.32 per share.
-- Adjusted EBITDA increased 227% year-over-year to $10.0 million.(1)
-- Strong balance sheet, with $34.6 million in cash and cash equivalents
as of December 31, 2009.
(1) Adjusted EBITDA is a non-GAAP measurement that the Company uses as
a metric to provide information about Lihua's operating trends.
Lihua defines adjusted EBITDA as net income before discontinued
operations, interest expense, income taxes, depreciation and
amortization, non-operating income (expense), and non-cash share-
based compensation expenses.
Full-Year 2009 Financial Highlights
-- Full-year 2009 sales increased 223% to $161.5 million.
-- Full-year 2009 gross profit increased 116%, to $36.2 million, or 22.4%
of sales, compared with $16.8 million, or 33.6% of sales in 2008.
-- Full-year net income improved 43% to $16.8 million, or $0.88 per
diluted share, compared with net income of $11.7 million, or $0.70 per
share in 2008. Net income for 2009 included an $8.8 million non-cash
charge for the change in fair value of warrants issued to investors in
conjunction with the Company's issuance of convertible Preferred Stock
in October 2008. Excluding the non-cash charge, Non-GAAP net income
for the year was $25.6 million, or $1.34 per diluted share.
-- Adjusted EBITDA increased 118.3% to $33.0 million, compared with 2008.
2009 and Recent Business Highlights
-- Began production on four new proprietary high speed manufacturing lines
in September 2009 to increase annual CCA wire and copper wire capacity
from 18,000 tons to 25,500 tons.
-- Began production on two new high-speed copper magnet wire and copper
fine wire production lines in February 2010. Lihua also announced plans
to add four additional production lines by end of first half 2010 to
increase annual production capacity of copper wire to 25,000 tons.
-- Announced plans to add four new high-speed CCA wire production lines in
2010 to increase annual CCA wire production capacity from 7,500 tons to
10,000 tons by the end of 2010.
-- Completed initial public offering on NASDAQ on September 10, 2009 for
net proceeds of $7.9 million.
"In 2009 we more than doubled our annual CCA and copper wire sales and demonstrated clear growth across key operating metrics," said Jianhua Zhu, Chairman and Chief Executive Officer of Lihua. "We believe this growth reflects the continued demand for pure copper alternatives in a broad range of end markets, as well as heightened contribution from our copper recycling facility, which accounted for approximately 75% of our total sales in 2009. Since we launched our copper recycling business in the first quarter of 2009, it has become an integral part of our business and enabled us to capture new market share as we can now compete in the broader market as a preferred, low-cost copper alternative provider.
"In line with our growth strategy, we continue to expand our business operations. In February we launched the first two of our 10 new production lines planned for 2010, which we believe will increase our production capacity by approximately 40%. We expect that the addition of these lines will improve our gross margin profile, as it will enable us to convert a larger portion of our recycled copper rod products into higher margin superfine and copper magnet wire products and increase the production capacity of our higher margin CCA wire business. With these expansion plans in place, we expect to increase our gross profit by approximately 30-35% and our non-GAAP net income by approximately 35-40% in 2010," Mr. Zhu concluded.
Fourth Quarter 2009 Financial Results
Sales for the fourth quarter of 2009 increased 367% to $51.3 million, compared with sales of $11.0 million in the fourth quarter of 2008. The increase in sales was driven by strong market demand for Lihua's CCA and copper wire products, an increase in the average selling price of copper wire and copper rod products based on an increase in the average price of copper, an increase in production capacity and the addition of Lihua's copper recycling business, which commenced operations at the end of the first quarter of 2009.
Gross profit for the fourth quarter of 2009 was $10.9 million, or 21% of sales. This compares with gross profit of $3.9 million, or 36% of sales, for the fourth quarter of 2008. The year-over-year decrease in gross margin was primarily due to the addition of the copper recycling operation to Lihua's product mix, which produces lower margin copper rod. In March of 2009, Lihua commenced production of recycling scrap copper into copper rod with a consistently high purity content, which meets both government and industry standards for pure copper. Due to current drawing and enameling capacity constraints, Lihua can process only a portion of this copper rod into value added fine and super fine copper wire products and sells the remaining copper rod into the market at a lower gross margin. Lihua expects gross margins to increase in future periods as it continues to ramp up the conversion of copper rod products into higher margin super fine and copper magnet wire products. Gross profit dollars per ton increased 4% on a sequential quarter basis to $1,672 in the fourth quarter of 2009 from $1,613 per ton in the third quarter of 2009.
Selling, general and administrative (SG&A) expenses for the fourth quarter of 2009 were $1.7 million, compared with $1.2 million for the same period in 2008. The increase in SG&A for the 2009 period was attributable to increased costs related to product distribution and insurance as a result of expanded business volume, increased expenses associated with being a public company and expenses associated with expansion of the Company's scale of operations.
Interest income for the fourth quarter of 2009 was $36,000, compared with $40,000 for the fourth quarter of 2008. Interest expense for the fourth quarter of 2009 was $54,000, compared with $162,000 for the same period in the prior year. The decrease in interest expense was mainly due to the repayment of short term bank loans, which were used for working capital purposes.
For the three months ended December 31, 2009, the provision for income tax expense was $1.5 million, compared with $382,000 for the three months ended December 31, 2008. The effective tax rate ("EIT") for the 2009 and 2008 periods was 17%.
For the fourth quarter of 2009, Lihua's other comprehensive income including foreign currency translation adjustment gains was $20,635, compared with a loss of $(183,546) in the fourth quarter of 2008. The foreign currency translation adjustment is based on the average exchange rate of the RMB compared with the US dollar in the respective reporting period.
Net income for the fourth quarter of 2009 was $7.3 million, or $0.30 per share based on 24.2 million weighted average shares outstanding. This compares with net income of $1.9 million, or $0.13 per share based on 15.3 million weighted average shares outstanding during the same period in 2008. Excluding a non-cash charge of $455,000 related to the fair value of warrants, non-GAAP net income increased 299% in the fourth quarter of 2009 to $7.7 million, or $0.32 per share, compared with the same period in 2008.
Adjusted EBITDA for the three months ended December 31, 2009 increased by 227% to $10.0 million, compared with the same period in the prior year.
Balance Sheet
As of December 31, 2009, Lihua had $34.6 million in cash and cash equivalents, compared with $26.0 million as of December 31, 2008.
As of December 31, 2009, Lihua had total debt of $2.2 million, which relates to short-term bank loans used for working capital purposes. This compares with $6.1 million as of December 31, 2008.
Outlook
Lihua is targeting 2010 gross profit of $47.1 million to $48.9 million and non-GAAP net income of $34.6 million to $35.8 million, representing year-over-year growth of 30-35% and 35-40%, respectively. The Company expects that 2010 growth will be largely the result of continued strong demand in China for recycled copper and copper alternatives in the household appliance, consumer white goods and infrastructure markets.
In addition to steadily expanding its CCA wire production capacity, Lihua is committed to the growth of its scrap copper recycling business, to meet strong market demand. In order to better meet this expected growth in demand, Lihua plans to add a total of 10 new proprietary high-speed production lines in 2010, which will increase its annual capacity by nearly 40%.
In February, the company completed the first two new copper wire production lines, and anticipates that it will complete the build out of four additional copper wire production lines during the first half of 2010. These six new lines will bring Lihua's annual copper magnet and copper fine wire production capacity to 25,000 tons from approximately 18,000 tons at the end of 2009. Lihua expects to launch the remaining four production lines during the second half of 2010, which will bring its CCA fine and magnet wire capacity to 10,000 tons annually, compared with current annual capacity of 7,500 tons. The Company anticipates funding these capacity increases from existing cash on the balance sheet and operating cash flow generated in 2010.
Conference Call and Webcast
Management of Lihua International will host a conference call today, Wednesday, March 31, 2010 at 8:00 a.m. Eastern time to discuss fourth quarter and full-year 2009 financial results.
Individuals interested in participating in the conference call may do so by dialing 1-877-941-2322 toll free from the U.S. or Canada, or 1-480-629-9715 from outside the U.S. Those interested in listening to the conference call live via the Internet may do so by visiting the Investor Relations section of the Company's Web site at: http://www.lihuaintl.com/Investor_Relations/Events_Presentations.html .
A telephone replay will be available for 48 hours following the conclusion of the call by dialing 1-800-406-7325 from the U.S. or Canada, or 1-303-590-3030 from outside the U.S., and entering access ID number 4272185. A webcast replay will be available for 90 days.
About Non-GAAP Financial Measures
EBITDA Calculation For
Three Months Ended 12 Months Ended
December 31, December 31,
2009 2008 2009 2008
Net income $7,269,849 $1,939,273 $16,779,276 $11,701,879
Depreciation
and amortization 680,493 243,281 1,652,863 812,339
Share-based
compensation
expense 79,537 367,250 331,440 367,250
Change in fair
value of
warrants 455,344 -- 8,831,161 --
Interest
income (35,998) (40,315) (173,807) (68,353)
Interest
expenses 53,730 162,203 335,335 514,950
Provision for
income tax 1,486,220 381,550 5,247,647 1,792,681
EBITDA 9,989,175 3,053,242 33,003,915 15,120,746
The Company uses adjusted EBITDA as a measure of the Company's operating trends. Investors are cautioned that adjusted EBITDA is not a measure of liquidity or of financial performance under Generally Accepted Accounting Principles (GAAP). The adjusted EBITDA numbers presented may not be comparable to similarly titled measures reported by other companies. Adjusted EBITDA, while providing useful information, should not be considered in isolation or as an alternative to net income or cash flows as determined under GAAP. Consistent with Regulation G under the U.S. federal securities laws, the non-GAAP measures in this press release have been reconciled to the nearest GAAP measure, and this reconciliation is located under the heading "Adjusted EBITDA Reconciliation" following the Consolidated Statements of Operations included in this press release.
About Lihua International, Inc.
Lihua International, through its two wholly-owned subsidiaries, Lihua Electron and Lihua Copper, is a leading value-added manufacturer of copper replacement products for China's rapidly growing copper wire and copper replacement product market. Lihua is one of the first vertically integrated companies in China to develop, design, manufacture, market and distribute lower cost, high quality alternatives to pure copper magnet wire and pure copper alternative products. Lihua's products include copper-clad aluminum wire ("CCA") and pure copper products including copper wire and copper rod, which are produced from recycled scrap copper. Lihua's products are sold in China either directly to manufacturers or through distributors in the wire and cable industries and manufacturers in the consumer electronics, white goods, automotive, utility, telecommunications and specialty cable industries. Lihua's corporate and manufacturing headquarters are located in the heart of China's copper industry in Danyang, Jiangsu Province. For more information, visit: http://www.lihuaintl.com .
To be added to the Company's email distribution for future news releases, please send your request tolihua@tpg-ir.com.
Safe Harbor Statement
This press release contains certain statements that may be deemed to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, that address activities, events or developments that the Company expects, projects, believes or anticipates will or may occur in the future, including, without limitation, statements about its business or growth strategy, general industry conditions including availability of copper or recycled scrap copper, future operating results of the Company, capital expenditures, expansion and growth opportunities, bank borrowings, financing activities and other such matters, are forward-looking statements. Although the Company believes that its expectations stated in this press release are based on reasonable assumptions, actual results may differ from those projected in the forward-looking statements.
Please note that information in this press release reflects management views as of the date of issuance.
For more information, please contact:
Lihua International, Inc.
Daphne Huang
EVP of Finance and Director of Investor Relations
Tel: +1-516-717-9939
Email: Daphne_huang@lihuaintl.com
The Piacente Group, Inc.
Investor Relations
Brandi Floberg or Lee Roth
Tel: +1-212-481-2050
Email: lihua@tpg-ir.com
Tables Follow
LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31,
2009 2008
ASSETS
CURRENT ASSETS
Cash and cash equivalents $34,614,838 $26,041,849
Restricted cash 575,000 1,750,000
Notes receivable, net -- 321,892
Accounts receivable, net 10,996,430 5,042,739
Other receivables and current assets 493,006 --
Prepaid land use right - current
portion 172,515 172,353
Deferred income tax assets 98,068 --
Inventories 17,534,254 586,938
Total current assets 64,484,111 33,915,771
OTHER ASSETS
Property, plant and equipment, net 18,424,080 7,440,943
Construction in progress 59,558 6,017,941
Deposits for plant and equipment 28,163 1,077,892
Prepaid land use right - long-term
portion 8,168,039 8,332,732
Intangible assets 2,812 4,214
Deferred income tax assets -- 23,395
Total non-current assets 26,682,652 22,897,117
Total assets $91,166,763 $56,812,888
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short term bank loans $2,196,772 $6,145,202
Accounts payable 4,923,360 1,643,544
Other payables and accruals 681,097 830,744
Income taxes payable 1,584,292 401,436
Total current liabilities 9,385,521 9,020,926
Total liabilities 9,385,521 9,020,926
Series A redeemable convertible
preferred stock: $0.0001 par value:
10,000,000 shares authorized
(liquidation preference of $2.20
per share), none and 6,818,182
shares issued and outstanding -- 13,116,628
SHAREHOLDERS' EQUITY
Series A convertible preferred
stock: $0.0001 par value
(liquidation preference of
$2.20 per share), 10,000,000
shares authorized, none issued
and outstanding -- --
Common stock, $0.0001 par value:
75,000,000 shares authorized,
24,154,083 and 15,000,000
shares issued and outstanding 2,416 1,500
Additional paid-in capital 39,921,717 7,976,976
Statutory reserves 5,400,994 2,603,444
Retained earnings 33,826,885 21,521,937
Accumulated other comprehensive
income 2,629,230 2,571,477
Total shareholders' equity 81,781,242 34,675,334
Total liabilities and
shareholders' equity $91,166,763 $56,812,888
LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Audited) (Unaudited)
For the 12 Months Ended For the 3 Months Ended
Dec. 31, Dec. 31,
(USD) 2009 2008 2009 2008
Sales 161,543,434 50,006,057 51,263,898 10,969,010
Cost of sales (125,310,613) (33,202,344) (40,383,813) (7,053,530)
Gross profit 36,232,821 16,803,713 10,880,085 3,915,480
Selling expenses (1,722,242) (700,029) (480,100) (133,899)
Admin expenses (3,991,801) (1,907,043) (1,171,466) (1,089,069)
SG&A (5,714,043) (2,607,072) (1,651,566) (1,222,968)
Income from
operations 30,518,778 14,196,641 9,228,519 2,692,512
Interest income 173,807 68,353 35,998 40,315
Interest expenses (335,335) (514,950) (53,730) (162,203)
Exchange income
(expense) -- -- 545 --
Merger cost -- (259,225) -- (259,225)
Change in fair
value of warrants (8,831,161) -- (455,344) --
Other income
(expenses) 500,834 3,741 81 9,424
Total other
income (8,491,855) (702,081) (472,450) (371,689)
Income before tax 22,026,923 13,494,560 8,756,069 2,320,823
Income tax (5,247,647) (1,792,681) (1,486,220) (381,550)
Net income 16,779,276 11,701,879 7,269,849 1,939,273
Net income per
share
Basic $0.94 $0.75 $0.30 $0.13
Diluted $0.88 $0.70 $0.29 $0.12
Basic 17,822,890 14,187,945 24,118,183 14,678,571
Diluted 19,128,231 15,327,422 25,423,524 15,818,048
LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS EXPRESSED IN US DOLLAR)
Year Ended December 31,
2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $16,779,276 $11,701,879
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 1,652,863 812,339
Merger expenses -- 259,225
Share-based compensation costs 331,440 367,250
Warrants issued for services -- 90,000
Change in fair value of warrants 8,831,161 --
Deferred income tax benefits (74,621) (23,022)
(Increase) decrease in assets:
Accounts receivable (5,946,526) 701,310
Notes receivable 322,061 470,299
Other receivables and current assets (492,804) 10,259
Inventories (16,939,820) 2,154,764
Increase (decrease) in liabilities:
Accounts payable 2,932,371 (994,285)
Other payables and accruals (150,322) 312,986
Income taxes payable 1,181,995 (25,302)
Net cash provided by operating
activities 8,427,074 15,837,702
CASH FLOWS FROM INVESTING ACTIVITIES
Payment of merger expenses for reverse
acquisition -- (259,225)
Repayment from a related party -- 4,168,699
Purchase of property, plant and
equipment (5,094,444) (4,852,020)
Prepayment for land use right -- (3,750,540)
Net cash used in investing activities (5,094,444) (4,693,086)
CASH FLOWS FROM FINANCING ACTIVITIES
New short-term bank loans 2,196,772 11,950,700
Repayments of short-term bank loans (6,150,962) (10,222,888)
Repayment to related parties -- (2,667,675)
Release of restricted cash related to
Private Placement 1,175,000 --
Proceeds from exercise of warrants 125,650 --
Proceeds from Private Placement, net
of restricted cash held in escrow -- 11,906,538
Proceeds from public offering of
common stock, net of expenses of
$1,336,000 7,864,000 --
Net cash provided by financing
activities 5,210,460 10,966,675
Foreign currency translation
adjustment 29,899 716,909
INCREASE IN CASH AND CASH EQUIVALENTS 8,572,989 22,828,200
CASH AND CASH EQUIVALENTS, at the
beginning of the year 26,041,849 3,213,649
CASH AND CASH EQUIVALENTS, at the end
of the year $34,614,838 $26,041,849
NON-CASH INVESTING AND FINANCING
TRANSACTIONS:
Shares-based compensation to employees
and directors $331,440 $367,250
Warrants issued for services -- 90,000
$331,440 $457,250
SUPPLEMENTAL DISCLOSURE INFORMATION
Cash paid for interest $335,335 $514,950
Cash paid for income taxes $ 4,140,273 $1,841,005