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Globe Specialty Metals Reports Third Quarter Fiscal 2013 Results

  • Sales of $195.8 million for the third quarter increased 13% over the prior year
  • Shipments of 69,382 MT for the third quarter increased 14% over the prior year
  • The Company took an after-tax impairment charge of $43.9 million to write-down several non-core and international assets
  • The net loss for the third quarter was $40.1 million compared to a net income of $11.6 million in the prior year. Diluted loss per share was $0.53 per share compared to diluted income per share of $0.15 per share in the prior year
  • Adjusted diluted earnings per share for the third quarter was $0.00 per share compared to $0.16 per share in the prior year
  • Adjusted EBITDA for the third quarter was $14.0 million compared to $29.4 million in the prior year

NEW YORK, May 6, 2013 (GLOBE NEWSWIRE) -- Globe Specialty Metals, Inc. (Nasdaq:GSM) (the "Company") today announced results for the third quarter of fiscal 2013 ended March 31, 2013.

Net sales for the third quarter of fiscal 2013 of $195.8 million and shipments of 69,382 were up 13% and 14%, respectively, from the prior year and 9% and 12%, respectively, from the second quarter. Growth from the prior year is a result of the Becancour acquisition in June 2012.

Net loss attributable to GSM for the third quarter was $40.1 million, compared to net income of $11.6 million in the prior year. Diluted loss per share for the third quarter was $0.53, compared to a diluted income per share of $0.15 in the prior year. Excluding certain items, detailed in the table below, adjusted diluted earnings per share were $0.00 in the third quarter, compared to $0.16 in the prior year.

EBITDA for the third quarter was a loss of $32.8 million, compared to a gain of $28.4 million in the prior year. Excluding certain items, detailed in the table below, adjusted EBITDA was $14.0 million in the third quarter compared to $29.4 million in the prior year.

Cash and cash equivalents totalled $161.0 million at March 31, 2013, an increase of $20.3 million from the prior year. Cash flow provided by operating activities in the third quarter was $27.0 million, capital expenditures totalled $18.1 million and dividends totalled $4.7 million. Capital expenditures were primarily related to planned maintenance outages in Alloy, West Virginia, Niagara Falls, New York and Mendoza, Argentina and the implementation of SAP. Net working capital declined $10.2 million in the third quarter as a result of reductions in inventory partially offset by an increase in accounts receivable resulting from increased shipments.

Adjusted diluted earnings per share, which excludes the items listed below, were as follows:

FY 2013 FY 2012 Nine Months
Third Quarter Second Quarter Third Quarter FY 2013 FY 2012
Reported Diluted EPS $ (0.53) 0.20 0.15 (0.41) 0.60
Tax rate adjustment (0.01) (0.01) -- (0.01) --
Gain on remeasurement of equity investment -- (0.02) -- (0.02) --
Remeasurement of stock option liability -- (0.03) -- 0.19 --
Business interruption insurance recovery & Bridgeport Fire (0.04) -- -- (0.04) 0.04
Goodwill impairment 0.17 -- -- 0.17 --
Impairment of assets 0.41 -- -- 0.41 --
Transaction and due diligence expenses -- 0.01 0.01 0.02 0.03
Adjusted diluted EPS, excluding above items $ 0.00 0.15 0.16 0.31 0.67

Third quarter fiscal 2013 results were negatively impacted by $43.9 million of after-tax impairment charges and positively impacted by $2.9 million of after-tax business interruption insurance proceeds.

In the third quarter Globe took the following impairment charges to write-down the value of several international and non-core operations which totalled $50.4 million pre-tax and $43.9 million after-tax: 1) $16.9 million pre-tax charge to write-off Nigerian exploratory mining licenses which, based on local instability and security risks, no longer support a viable business opportunity; 2) $20.4 million pre-tax charge to write-down equipment and inventory originally acquired to manufacture solar grade silicon using a production technology which is no longer commercially viable; 3) $7.1 million pre-tax charge to write-down goodwill related to Globe's electrode factory in China which is operating at less than full capacity; and, 4) $6.0 million pre-tax charge to write-down goodwill related to Globe's business in Argentina which is experiencing declining earnings primarily due to reduced steel production in Europe.

Third quarter fiscal 2013 adjusted EBITDA, which excludes the items listed below, was $14.0 million. Adjusted EBITDA was as follows:

FY 2013 FY 2012 Nine Months
Third Quarter Second Quarter Third Quarter FY 2013 FY 2012
Reported EBITDA $ (32,791) 34,232 28,359 8,196 100,362
Gain on sale of business & associated Fx gain -- -- -- -- (473)
Gain on remeasurement of equity investment (170) (1,707) -- (1,877) --
Remeasurement of stock option liability 534 (3,673) -- 20,592 --
Business interruption insurance recovery & Bridgeport Fire (4,325) -- (4,325) 5,000
Goodwill impairment 13,130 -- -- 13,130 --
Impairment of assets 37,309 -- -- 37,309 --
Transaction and due diligence expenses 312 1,336 1,047 2,299 3,573
Adjusted EBITDA, excluding above items $ 13,999 30,188 29,406 75,324 108,462

Adjusted EBITDA in the third quarter declined 52% from the prior year. The decline was partially the result of a reduction in selling prices, as higher priced calendar 2012 silicon metal contracts were replaced by lower-priced 2013 contracts. As expected, total average selling prices declined 4% from the prior year, including a mix shift towards silicon metal as a result of the Becancour acquisition, which served to reduce sales and EBITDA by approximately $11 million.

EBITDA in the third quarter, compared to the prior year, included approximately $8 million of higher production costs including: 1) lower contribution margin from Alden Resources directly related to higher mining costs due to lower coal production; 2) higher production costs at Alloy, West Virginia, Niagara Falls, New York, Beverly, Ohio, and Bridgeport, Alabama primarily related to maintenance outages and production inefficiencies; 3) higher production costs related to a planned maintenance outage in Argentina; and, 4) costs related to adding an additional quartz wash plant at Alabama Sand and Gravel. In total, more than two-thirds of these incremental costs were directly related to planned maintenance outages and, in the case of Alden, intentional reduction in mining to reduce inventory.

Globe CEO Jeff Bradley commented, "Despite the increase in sales and shipments, we are disappointed with our financial results for the third quarter. While we anticipated a reduction in earnings caused by lower average selling prices, we did not anticipate the extent of the cost impact of the maintenance outages and other cost increases. We believe that as the outages are completed in the present quarter, we will begin to realize the benefits from them together with our natural cost advantages from vertical integration."

Conference Call

Globe will review third quarter results during its quarterly conference call on May 7, 2013 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 May 7, 2013 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 foundry 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; ability to acquire or renew permits and approvals; and, other factors identified in the Company's periodic reports filed with the SEC.

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.

Non-GAAP Measures

EBITDA, adjusted EBITDA and adjusted diluted earnings per share are non-GAAP measures.

We have included these measures to provide supplemental measures of our performance which we believe are important because they eliminate 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. Reconciliations of these measures to the comparable GAAP financial measures are provided in the attached financial statements.

GLOBE SPECIALTY METALS, INC.
AND SUBSIDIARY COMPANIES
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
March 31,
2013
December 31,
2012
March 31,
2012
March 31,
2013
March 31,
2012
Net sales $ 195,845 179,940 173,437 576,493 513,846
Cost of goods sold 181,238 148,331 139,408 498,209 396,506
Selling, general, and administrative expenses 13,330 9,053 13,979 60,103 43,096
Research and development -- -- 100 -- 103
Business interruption insurance recovery (4,594) -- -- (4,594) (450)
Goodwill impairment 13,130 -- -- 13,130 --
Impairment of long-lived assets 35,387 -- -- 35,387 --
Gain on sale of business -- -- -- -- (54)
Operating (loss) income (42,646) 22,556 19,950 (25,742) 74,645
Other income (expense):
Gain on remeasurement of equity investment 170 1,707 -- 1,877 --
Interest income 211 217 129 599 145
Interest expense, net of capitalized interest (1,806) (1,826) (1,698) (5,148) (4,545)
Foreign exchange (loss) gain (1,686) (1,632) (191) (2,773) 825
Other (loss) income (179) (13) 48 (77) 408
(Loss) income before (benefit from) provision for income taxes (45,936) 21,009 18,238 (31,264) 71,478
(Benefit from) provision for income taxes (5,941) 5,373 5,972 (1,837) 23,530
Net (loss) income (39,995) 15,636 12,266 (29,427) 47,948
Income attributable to noncontrolling interest, net of tax (140) (568) (653) (1,345) (2,198)
Net (loss) income attributable to Globe Specialty Metals, Inc. $ (40,135) 15,068 11,613 (30,772) 45,750
Weighted average shares outstanding:
Basic 75,302 75,174 75,049 75,174 75,035
Diluted 75,302 75,247 76,617 75,174 76,639
(Loss) earnings per common share:
Basic (0.53) 0.20 0.15 (0.41) 0.61
Diluted (0.53) 0.20 0.15 (0.41) 0.60
EBITDA:
Net (loss) income (39,995) 15,636 12,266 (29,427) 47,948
(Benefit from) provision for income taxes (5,941) 5,373 5,972 (1,837) 23,530
Net interest expense 1,595 1,609 1,569 4,549 4,400
Depreciation, depletion, amortization and accretion 11,550 11,614 8,552 34,911 24,484
EBITDA $ (32,791) 34,232 28,359 8,196 100,362
GLOBE SPECIALTY METALS, INC.
AND SUBSIDIARY COMPANIES
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
March 31, December 31, March 31,
2013 2012 2012
Assets
Current assets:
Cash and cash equivalents $ 161,001 163,461 140,655
Accounts receivable, net 89,400 79,714 72,385
Inventories 117,887 146,605 111,656
Deferred tax assets 13,113 10,860 4,986
Prepaid expenses and other current assets 26,991 18,774 22,822
Total current assets 408,392 419,414 352,504
Property, plant, and equipment, net 430,908 436,189 333,737
Goodwill 45,286 60,269 53,715
Other intangible assets 477 477 477
Investments in unconsolidated affiliates 5,973 5,973 9,036
Deferred tax assets 867 416 304
Other assets 6,982 24,279 26,782
Total assets $ 898,885 947,017 776,555
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 55,697 51,513 39,331
Current portion of long-term debt -- -- 22,222
Short-term debt 289 329 1,403
Revolving credit agreements 9,000 9,000 12,000
Accrued expenses and other current liabilities 54,875 55,912 29,870
Total current liabilities 119,861 116,754 104,826
Long-term liabilities:
Revolving credit agreements 141,514 143,742 39,989
Long-term debt -- -- 27,778
Deferred tax liabilities 27,895 27,748 25,347
Other long-term liabilities 67,129 68,663 27,681
Total liabilities 356,399 356,907 225,621
Stockholders' equity:
Common stock 8 8 8
Additional paid-in capital 397,024 398,648 405,007
Retained earnings 65,591 110,432 111,043
Accumulated other comprehensive loss (7,182) (5,792) (2,347)
Treasury stock at cost (4) (4) (4)
Total Globe Specialty Metals, Inc. stockholders' equity 455,437 503,292 513,707
Noncontrolling interest 87,049 86,818 37,227
Total stockholders' equity 542,486 590,110 550,934
Total liabilities and stockholders' equity $ 898,885 947,017 776,555
GLOBE SPECIALTY METALS, INC.
AND SUBSIDIARY COMPANIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
March 31, 2013 December 31, 2012 March 31, 2012 March 31, 2013 March 31, 2012
Cash flows from operating activities:
Net (loss) income $ (39,995) 15,636 12,266 (29,427) 47,948
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation, depletion, amortization and accretion 11,550 11,614 8,552 34,911 24,484
Share-based compensation 315 680 667 (7,712) 1,814
Gain on remeasurement of equity investment (170) (1,707) -- (1,877) --
Goodwill impairment 13,130 -- -- 13,130 --
Impairment of long-lived assets 35,387 -- -- 35,387 --
Gain on sale of business -- -- -- -- (54)
Amortization of deferred financing fees 200 200 186 600 523
Unrealized foreign exchange loss 913 976 -- 913 --
Deferred taxes (2,570) 1,623 (118) (9,992) 2,775
Amortization of customer contract liabilities (1,930) (1,531) -- (4,804) --
Changes in operating assets and liabilities:
Accounts receivable, net (10,021) 5,105 (11,589) (2,097) (11,036)
Inventories 24,255 (10,660) 7,082 67 (1,496)
Prepaid expenses and other current assets (9,345) 2,487 (1,910) (5,568) (4,798)
Accounts payable 1,402 (7,302) 3,487 (1,009) (5,351)
Accrued expenses and other current liabilities 1,621 (20,281) 6,771 15,442 (1,343)
Other 2,259 (7) (2,363) 1,793 (5,795)
Net cash provided by (used by) operating activities 27,001 (3,167) 23,031 39,757 47,671
Cash flows from investing activities:
Capital expenditures (18,101) (10,179) (11,279) (36,305) (38,325)
Acquisition of businesses, net of cash acquired (3,676) (844) -- (4,520) (73,194)
Net cash used in investing activities (21,777) (11,023) (11,279) (40,825) (111,519)
Cash flows from financing activities:
Net borrowings of long-term debt -- -- -- -- 50,000
Net (payments) borrowings of short-term debt (28) -- 1,018 (28) 309
Net (payments) borrowings on revolving credit agreements (2,147) 9,566 (3,000) 10,016 5,000
Dividend payment (4,706) (14,103) -- (23,500) (15,007)
Proceeds from stock option exercises -- 1,000 -- 1,000 195
Other financing activities (632) (648) (307) (1,907) (2,149)
Net cash (used in) provided by financing activities (7,513) (4,185) (2,289) (14,419) 38,348
Effect of exchange rate changes on cash and cash equivalents (171) (273) (6) (1,522) (53)
Net (decrease) increase in cash and cash equivalents (2,460) (18,648) 9,457 (17,009) (25,553)
Cash and cash equivalents at beginning of period 163,461 182,109 131,198 178,010 166,208
Cash and cash equivalents at end of period $ 161,001 163,461 140,655 161,001 140,655
Supplemental disclosures of cash flow information:
Cash paid for interest, net $ 1,982 1,334 1,181 4,396 3,302
Cash paid for income taxes, net 1,768 9,794 1,335 13,419 21,144
GLOBE SPECIALTY METALS, INC.
AND SUBSIDIARY COMPANIES
Supplemental Statistics
(Unaudited)
Three Months Ended Nine Months Ended
March 31,
2013
December 31,
2012
March 31,
2012
March 31,
2013
March 31,
2012
Shipments in metric tons:
Silicon metal 40,310 35,273 30,210 116,070 84,291
Silicon-based alloys 29,072 26,699 30,618 85,314 82,128
Total shipments* 69,382 61,972 60,828 201,384 166,419
Average selling price ($/MT):
Silicon metal $ 2,793 2,908 2,901 2,827 3,121
Silicon-based alloys 2,069 2,152 2,287 2,166 2,421
Total* $ 2,490 2,582 2,592 2,547 2,776
Average selling price ($/lb.):
Silicon metal $ 1.27 1.32 1.32 1.28 1.42
Silicon-based alloys 0.94 0.98 1.04 0.98 1.10
Total* $ 1.13 1.17 1.18 1.16 1.26
* Excludes by-products and other

CONTACT: Globe Specialty Metals, Inc. Mal Appelbaum, 212-798-8123 Chief Financial Officer Email: mappelbaum@glbsm.com Or Jeff Bradley, 212-798-8122 Chief Executive Officer Email: jbradley@glbsm.comSource:Globe Specialty Metals