February 8, 2011
Globe Specialty Metals Announces Second Quarter Fiscal 2011 Results
New York, February 8, 2011 – Globe Specialty Metals, Inc. (NASDAQ: GSM) (the “Company”) today announces results for the quarter ended December 31, 2010. Key points are as follows:
· | Net sales for the quarter of $155.8 million were up 13% and shipments of 59,171 MT were up 1% from the quarter ended September 30, 2010. Sales and shipments were up 44% and 33%, respectively, from the second quarter of last year. |
· | Net income attributable to GSM for the quarter was $11.7 million, compared to $2.2 million in the quarter ended September 30, 2010 and $18.5 million in the second quarter of last year, which included a $14.0 million after-tax gain on the sale of our Brazilian plant. |
· | Diluted earnings per share were $0.15 for the quarter, compared to $0.03 per share in the quarter ended September 30, 2010 and $0.25 per share in the second quarter of last year, which included a $0.19 gain on the sale of our Brazilian plant. Diluted earnings per share on a comparable basis, as noted in the table below, were $0.13 per share in the second quarter, $0.08 per share in the quarter ended September 30, 2010 and $0.10 per share in the second quarter of last year. |
· | Second quarter EBITDA was $26.7 million, compared to $13.9 million in our first quarter of fiscal 2011 and $36.4 million in the second quarter of last year, which included a $23.4 million gain on the sale of our Brazilian plant. |
· | Cash and cash equivalents totalled $159.3 million at December 31, 2010 and total debt was $50.1 million, which included $15.0 million of bank financing for our Alloy, West Virginia joint venture. |
· | All of our silicon metal and silicon-based alloy furnaces are running at capacity, subject to planned maintenance outages. |
· | Our silicon-based alloy average selling price increased 10% from the quarter ended September 30, 2010, with increases in each of the four individual alloys, as the market continues to improve. Also, our sales mix changed toward higher priced alloys. Silicon-based alloys are largely sold under quarterly or spot agreements. |
· | Our silicon metal average selling price increased by 3% from the quarter ended September 30, 2010 primarily as a result of increasing spot pricing on the small volume of shipments not made under long-term or annual fixed-price contracts. We expect a significant increase in silicon metal average selling price in calendar 2011 as all of our below-market annual and multi-year contracts expired at the end of calendar 2010. Silicon metal is largely sold under annual agreements. |
· | During the quarter ended December 31, 2010 we had a planned maintenance outage of one furnace at our Alloy, West Virginia plant for approximately 55 days for a new shell and lining and an unplanned outage of approximately two weeks at our Bridgeport, Alabama plant. This caused shipments in the quarter to be up only 1% from the immediately preceding quarter, which included several planned outages. In each of the next two quarters we expect to only have one planned outage. Our Niagara Falls, New York plant is now operating at expected production levels and we did not incur any additional start-up related costs in the quarter. |
Diluted earnings per share on a comparable basis were as follows:
| | | FY 2011 | | | FY 2010 | | | Six Months |
| | | Second Quarter | | First Quarter | | | Second Quarter | | | FY 2011 | | FY 2010 |
Reported Diluted EPS | $ | 0.15 | | 0.03 | | $ | 0.25 | | $ | 0.18 | | 0.37 |
| Tax rate adjustment | | - | | 0.02 | | | - | | | 0.02 | | - |
| Gain on sale of business | | - | | - | | | (0.19) | | | - | | (0.19) |
| Niagara Falls and Selma start-up costs | | - | | 0.03 | | | 0.03 | | | 0.03 | | 0.03 |
| Transaction and due diligence expenses | | 0.01 | | - | | | - | | | 0.01 | | - |
| Inventory write-downs | | - | | - | | | 0.01 | | | - | | 0.01 |
| Contract settlements | | (0.03) | | - | | | - | | | (0.03) | | - |
Diluted EPS, excluding above items | $ | 0.13 | | 0.08 | | $ | 0.10 | | $ | 0.21 | | 0.22 |
Second quarter results were positively impacted by a net $3.3 million after-tax benefit from the settlement of long-term contracts which were partially offset by the negative impact of $0.6 million of after-tax transaction and due diligence expenses. The increase in diluted EPS, excluding the above items, from $0.08 per share in the first quarter of fiscal 2011 to $0.13 per share in the second quarter of fiscal 2011 is primarily due to improving average selling prices, particularly silicon-based alloys.
Second quarter EBITDA, excluding the items listed below, was $22.5 million. EBITDA on a comparable basis was as follows:
| | | FY 2011 | | | FY 2010 | | | Six Months |
| | | Second Quarter | | First Quarter | | | Second Quarter | | | FY 2011 | | FY 2010 |
Reported EBITDA | $ | 26,681 | | 13,934 | | $ | 36,437 | | $ | 40,615 | | 56,083 |
| Gain on sale of business | | - | | - | | | (23,368) | | | - | | (22,907) |
| Niagara Falls and Selma start-up costs | | - | | 3,236 | | | 3,892 | | | 3,236 | | 3,892 |
| Transaction and due diligence expenses | | 935 | | - | | | - | | | 935 | | - |
| Inventory write-downs | | - | | - | | | 685 | | | - | | 617 |
| Contract settlements | | (5,125) | | - | | | - | | | (5,125) | | - |
EBITDA, excluding above items | $ | 22,491 | | 17,170 | | $ | 17,646 | | $ | 39,661 | | 37,685 |
Capital expenditures were $9.2 million in the second quarter and largely related to our planned maintenance outages at the Alloy, Niagara Falls and Selma plants. Our planned maintenance schedule and capital expenditure plans for fiscal 2011 are heavily weighted towards the first half of the fiscal year. We expect a decline in capital expenditures in our third and fourth quarters of fiscal 2011.
Globe CEO Jeff Bradley commented, “Calendar 2011 is expected to be a strong year for Globe. Our markets continue to grow, our plants are running well and we successfully sold significant quantities of silicon metal for the year within the range of spot pricing at the time of the sale. We are now fully focused on driving operating excellence and lowering our costs.” Bradley continued, “As we said previously, we expect significant earnings growth in calendar 2011 as our existing low-priced silicon metal contracts expired at the end of 2010. We are also actively engaged in numerous growth opportunities, including potential acquisitions, and intend to continue to grow our business in the same disciplined fashion that has served us so well.”
Conference Call
Globe will review second quarter results during its quarterly conference call tomorrow, February 9, 2011, at 9:00 a.m. Eastern Time. The dial-in number for the call is 877-293-5491. International callers should dial 914-495-8526. Please dial in at least five minutes prior to the call to register. The call may also be accessed via an audio webcast available on the GSM website at http://investor.glbsm.com. Click on the February 9, 2011 Conference Call link to access the call.
About Globe Specialty Metals
Globe Specialty Metals, Inc. is among the world’s largest producers of silicon metal and silicon-based specialty alloys, critical ingredients in a host of industrial and consumer products with growing markets. Customers include major silicone chemical, aluminum and steel manufacturers, auto companies and their suppliers, ductile iron foundries, manufacturers of photovoltaic solar cells and computer chips, and concrete producers. The Company is headquartered in New York City. For further information please visit our web site at www.glbsm.com.
Forward-Looking Statements
This release may contain ''forward-looking statements'' within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as ''anticipates,'' ''intends,'' ''plans,'' ''seeks,'' ''believes,'' ''estimates,'' ''expects'' and similar references to future periods, or by the inclusion of forecasts or projections. Forward-looking statements are based on the current expectations and assumptions of Globe Specialty Metals, Inc. (the "Company") regarding its business, financial condition, the economy and other future conditions.
Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. The Company's actual results may differ materially from those contemplated by the forward-looking statements. The Company cautions you therefore that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions including, among others, changes in metals prices; increases in the cost of raw materials or energy; competition in the metals and fo undry industries; environmental and regulatory risks; ability to identify liabilities associated with acquired properties prior to their acquisition; ability to manage price and operational risks including industrial accidents and natural disasters; ability to manage foreign operations; changes in technology; and ability to acquire or renew permits and approvals.
Any forward-looking statement made by the Company or management in this release speaks only as of the date on which it or they make it. Factors or events that could cause the Company's actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, unless otherwise required to do so under the law or the rules of the NASDAQ Global Market.
EBITDA
EBITDA is a non-GAAP measure.
We have included EBITDA to provide a supplemental measure of our performance which we believe is important because it eliminates items that have less bearing on our current and future operating performance and so highlights trends in our core business that may not otherwise be apparent when relying solely on GAAP financial measures. A reconciliation of EBITDA to net income is provided in the attached financial statements.
GLOBE SPECIALTY METALS, INC. |
AND SUBSIDIARY COMPANIES |
Condensed Consolidated Income Statements |
(In thousands, except per share amounts) |
(Unaudited) |
| | | | | | | | | | | | | | |
| | | | | Three Months Ended | | | Six Months Ended |
| | | | | December 31, 2010 | | September 30, 2010 | | December 31, 2009 | | | December 31, 2010 | | December 31, 2009 |
| | | | | | | | | | | | | | |
Net sales | $ | 155,775 | | 137,352 | | 108,278 | | $ | 293,127 | | 213,736 |
Cost of goods sold | | 123,220 | | 116,881 | | 87,974 | | | 240,101 | | 167,952 |
Selling, general, and administrative expenses | | 12,313 | | 12,211 | | 13,142 | | | 24,524 | | 25,865 |
Research and development | | 13 | | 32 | | 77 | | | 45 | | 115 |
Restructuring charges | | - | | - | | (13) | | | - | | (81) |
Gain on sale of business | | - | | - | | (23,368) | | | - | | (22,907) |
| | Operating income | | 20,229 | | 8,228 | | 30,466 | | | 28,457 | | 42,792 |
Other income (expense): | | | | | | | | | | | |
| Interest income | | 24 | | 35 | | 65 | | | 59 | | 201 |
| Interest expense, net of capitalized interest | | (706) | | (983) | | (1,101) | | | (1,689) | | (2,419) |
| Foreign exchange (loss) gain | | (80) | | (296) | | 871 | | | (376) | | 3,286 |
| Other income | | 322 | | 228 | | 199 | | | 550 | | 192 |
| | Income before provision for income taxes | | 19,789 | | 7,212 | | 30,500 | | | 27,001 | | 44,052 |
Provision for income taxes | | 6,143 | | 4,354 | | 12,568 | | | 10,497 | | 17,951 |
| | Net income | | 13,646 | | 2,858 | | 17,932 | | | 16,504 | | 26,101 |
(Income) losses attributable to noncontrolling interest, net of tax | (1,938) | | (696) | | 602 | | | (2,634) | | 875 |
| | Net income attributable to Globe Specialty Metals, Inc. | $ | 11,708 | | 2,162 | | 18,534 | | $ | 13,870 | | 26,976 |
Weighted average shares outstanding: | | | | | | | | | | | |
| Basic | | 75,115 | | 74,580 | | 74,314 | | | 74,847 | | 72,710 |
| Diluted | | 76,734 | | 76,121 | | 75,154 | | | 76,430 | | 73,844 |
Earnings per common share: | | | | | | | | | | | |
| Basic | $ | 0.16 | | 0.03 | | 0.25 | | $ | 0.19 | | 0.37 |
| Diluted | | 0.15 | | 0.03 | | 0.25 | | | 0.18 | | 0.37 |
| | | | | | | | | | | | | | |
EBITDA: | | | | | | | | | | | |
Net income | $ | 13,646 | | 2,858 | | 17,932 | | $ | 16,504 | | 26,101 |
Provision for income taxes | | 6,143 | | 4,354 | | 12,568 | | | 10,497 | | 17,951 |
Net interest expense | | 682 | | 948 | | 1,036 | | | 1,630 | | 2,218 |
Depreciation and amortization | | 6,210 | | 5,774 | | 4,901 | | | 11,984 | | 9,813 |
| EBITDA | $ | 26,681 | | 13,934 | | 36,437 | | $ | 40,615 | | 56,083 |
GLOBE SPECIALTY METALS, INC. |
AND SUBSIDIARY COMPANIES |
Condensed Consolidated Balance Sheets |
(In thousands) |
(Unaudited) |
| | | | | | | | |
| | | | December 31, | | September 30, | | December 31, |
| | | | 2010 | | 2010 | | 2009 |
Assets |
Current assets: | | | | | | |
| Cash and cash equivalents | $ | 159,314 | | 159,549 | | 252,231 |
| Accounts receivable, net | | 47,585 | | 50,594 | | 36,673 |
| Inventories | | 100,003 | | 94,780 | | 54,508 |
| Prepaid expenses and other current assets | | 22,477 | | 24,054 | | 12,123 |
| | Total current assets | | 329,379 | | 328,977 | | 355,535 |
Property, plant, and equipment, net | | 226,567 | | 224,802 | | 188,803 |
Goodwill | | 52,074 | | 51,988 | | 51,836 |
Other intangible assets | | 477 | | 477 | | 477 |
Investments in unconsolidated affiliates | | 8,642 | | 8,359 | | 8,171 |
Deferred tax assets | | 71 | | 71 | | 49 |
Other assets | | 3,000 | | 3,177 | | 2,284 |
| | Total assets | $ | 620,210 | | 617,851 | | 607,155 |
| | | | | | | | |
Liabilities and Stockholders’ Equity |
Current liabilities: | | | | | | |
| Accounts payable | $ | 46,843 | | 49,823 | | 36,505 |
| Current portion of long-term debt | | 8,450 | | 10,045 | | 9,641 |
| Short-term debt | | 936 | | 6,219 | | 14,013 |
| Revolving credit agreements | | 15,000 | | - | | - |
| Dividend payable | | - | | 11,269 | | - |
| Accrued expenses and other current liabilities | | 26,890 | | 39,273 | | 58,974 |
| | Total current liabilities | | 98,119 | | 116,629 | | 119,133 |
Long-term liabilities: | | | | | | |
| Revolving credit agreements | | 23,000 | | 16,000 | | - |
| Long-term debt | | 2,728 | | 4,814 | | 12,730 |
| Deferred tax liabilities | | 6,645 | | 6,645 | | 14,549 |
| Other long-term liabilities | | 17,787 | | 18,167 | | 14,782 |
| | Total liabilities | | 148,279 | | 162,255 | | 161,194 |
Stockholders’ equity: | | | | | | |
| Common stock | | 8 | | 7 | | 7 |
| Additional paid-in capital | | 397,792 | | 395,312 | | 384,404 |
| Retained earnings | | 41,362 | | 29,654 | | 31,636 |
| Accumulated other comprehensive loss | | (4,010) | | (4,218) | | (3,676) |
| Treasury stock at cost | | (4) | | (4) | | (4) |
| | Total Globe Specialty Metals, Inc. stockholders’ equity | 435,148 | | 420,751 | | 412,367 |
| Noncontrolling interest | | 36,783 | | 34,845 | | 33,594 |
| | Total stockholders’ equity | | 471,931 | | 455,596 | | 445,961 |
| | Total liabilities and stockholders’ equity | $ | 620,210 | | 617,851 | | 607,155 |
GLOBE SPECIALTY METALS, INC. |
AND SUBSIDIARY COMPANIES |
Condensed Consolidated Statements of Cash Flows |
(In thousands) |
(Unaudited) |
| | | | | | | | | | | | | | | |
| | | | | | Three Months Ended | | | Six Months Ended |
| | | | | | December 31, 2010 | | September 30, 2010 | | December 31, 2009 | | | December 31, 2010 | | December 31, 2009 |
Cash flows from operating activities: | | | | | | | | | | | |
| Net income | $ | 13,646 | | 2,858 | | 17,932 | | $ | 16,504 | | 26,101 |
| Adjustments to reconcile net income | | | | | | | | | | | |
| to net cash provided by (used in) operating activities: | | | | | | | | | |
| | Depreciation and amortization | | 6,210 | | 5,774 | | 4,901 | | | 11,984 | | 9,813 |
| | Share-based compensation | | 1,273 | | 1,275 | | 1,476 | | | 2,548 | | 3,231 |
| | Gain on sale of business | | - | | - | | (23,368) | | | - | | (22,907) |
| | Deferred taxes | | - | | - | | (19) | | | - | | (74) |
| | Changes in operating assets and liabilities: | | | | | | | | | | | |
| | | Accounts receivable, net | | 3,283 | | 5,214 | | (2,614) | | | 8,497 | | (17,079) |
| | | Inventories | | (5,118) | | (7,777) | | (6,821) | | | (12,895) | | 2,984 |
| | | Prepaid expenses and other current assets | (505) | | 1,527 | | 5,221 | | | 1,022 | | 9,413 |
| | | Accounts payable | | (1,955) | | 1,368 | | 16,263 | | | (587) | | 21,616 |
| | | Accrued expenses and other current liabilities | (12,444) | | 4,117 | | (19,046) | | | (8,327) | | (17,283) |
| | | Other | | (793) | | 853 | | (2,303) | | | 60 | | 532 |
| | | | Net cash provided by (used in) operating activities | 3,597 | | 15,209 | | (8,378) | | | 18,806 | | 16,347 |
Cash flows from investing activities: | | | | | | | | | | | |
| Capital expenditures | | (9,187) | | (10,124) | | (5,660) | | | (19,311) | | (9,915) |
| Sale of businesses, net of cash disposed | | 2,500 | | - | | 58,445 | | | 2,500 | | 58,445 |
| Working capital adjustments from acquisition of businesses, net | - | | (2,038) | | - | | | (2,038) | | - |
| Other investing activities | | - | | - | | (733) | | | - | | (733) |
| | | | Net cash (used in) provided by investing activities | (6,687) | | (12,162) | | 52,052 | | | (18,849) | | 47,797 |
Cash flows from financing activities: | | | | | | | | | | | |
| Net payments of long-term debt | | (3,681) | | (2,153) | | (11,391) | | | (5,834) | | (16,558) |
| Net (payments) borrowings of short-term debt | (5,280) | | (1,851) | | 6,384 | | | (7,131) | | 7,324 |
| Net borrowings on revolving credit agreements | 22,000 | | - | | - | | | 22,000 | | - |
| Dividend payment | | (11,269) | | - | | - | | | (11,269) | | - |
| Proceeds from stock option exercises | | 1,208 | | 3,683 | | - | | | 4,891 | | - |
| Proceeds from warrants exercised | | - | | - | | 1,287 | | | - | | 1,287 |
| Proceeds from UPOs exercised | | - | | - | | 210 | | | - | | 210 |
| Sale of noncontrolling interest | | - | | - | | 98,462 | | | - | | 98,462 |
| Sale of common stock | | - | | - | | - | | | - | | 36,456 |
| Other financing activities | | - | | - | | (410) | | | - | | (937) |
| | | | Net cash provided by (used in) financing activities | 2,978 | | (321) | | 94,542 | | | 2,657 | | 126,244 |
Effect of exchange rate changes on cash and cash equivalents | (123) | | (206) | | (5) | | | (329) | | (33) |
| | | | Net (decrease) increase in cash and cash equivalents | (235) | | 2,520 | | 138,211 | | | 2,285 | | 190,355 |
Cash and cash equivalents at beginning of period | 159,549 | | 157,029 | | 114,020 | | | 157,029 | | 61,876 |
Cash and cash equivalents at end of period | $ | 159,314 | | 159,549 | | 252,231 | | $ | 159,314 | | 252,231 |
| | | | | | | | | | | | | | | |
Supplemental disclosures of cash flow information: | | | | | | | | | |
| Cash paid for interest, net | $ | 669 | | 615 | | 729 | | $ | 1,284 | | 1,719 |
| Cash paid for income taxes, net | | 3,562 | | 1,159 | | 15,396 | | | 4,721 | | 12,999 |
GLOBE SPECIALTY METALS, INC. |
AND SUBSIDIARY COMPANIES |
Supplemental Statistics |
(Unaudited) |
| | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | Six Months Ended |
| | December 31, 2010 | | September 30, 2010 | | December 31, 2009 | | | December 31, 2010 | | December 31, 2009 |
Shipments in metric tons: | | | | | | | | | | | |
| Silicon metal | | 29,922 | | 29,323 | | 28,759 | | | 59,245 | | 54,721 |
| Silicon-based alloys | | 29,249 | | 29,125 | | 15,749 | | | 58,374 | | 29,859 |
| | Total shipments* | | 59,171 | | 58,448 | | 44,508 | | | 117,619 | | 84,580 |
| | | | | | | | | | | | | | | | | |
Average selling price ($/MT): | | | | | | | | | | | |
| Silicon metal | $ | 2,550 | | 2,481 | | 2,580 | | $ | 2,516 | | 2,624 |
| Silicon-based alloys | | 2,031 | | 1,839 | | 1,926 | | | 1,935 | | 2,006 |
| | Total* | | | $ | 2,294 | | 2,161 | | 2,348 | | $ | 2,228 | | 2,406 |
Average selling price ($/lb.): | | | | | | | | | | | |
| Silicon metal | $ | 1.16 | | 1.13 | | 1.17 | | $ | 1.14 | | 1.19 |
| Silicon-based alloys | | 0.92 | | 0.83 | | 0.87 | | | 0.88 | | 0.91 |
| | Total* | | | $ | 1.04 | | 0.98 | | 1.07 | | $ | 1.01 | | 1.09 |
| | | | | | | | | | | | | | | | | |
* Excludes by-products and other | | | | | | | | | | | |