Globe Specialty Metals Reports Improved Third Quarter Fiscal 2014 Results

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| Source: Globe Specialty Metals
  • Adjusted EBITDA in the third quarter was $29.5 million, up 12% from the prior quarter
  • Net sales in the third quarter were $196.1 million, up 10% from the prior quarter
  • Sales volume in the third quarter was 73,926 MT, up 11% from the prior quarter
  • Adjusted earnings per share on a fully diluted basis were $0.14 in the third quarter, up 8% from the prior quarter
  • Globe repurchased 1,050,673 of its shares at an average price of $18.40, during the third quarter

MIAMI, May 8, 2014 (GLOBE NEWSWIRE) -- Globe Specialty Metals, Inc. (Nasdaq:GSM) (the "Company") today announced results for the third quarter of fiscal 2014 ended March 31, 2014.

Results for the third quarter were improved over the second quarter. Adjusted diluted earnings per share were $0.14, up 8%, and adjusted EBITDA was $29.5 million, up 12%, in the third quarter when compared to the second quarter of fiscal 2014. This was primarily due to improved sales volumes for both silicon metal and silicon-based alloys and modest price improvements for both product segments. These increases were partially offset by increased selling, general and administrative expenses on a normalized basis and severe weather conditions which impacted our North American manufacturing facilities. 

Net sales for the third quarter of fiscal 2014 of $196.1 million and shipments of 73,926 MT were up 10% and 11%, respectively, from the second quarter. These increases from the prior quarter were primarily due to a 15% increase in silicon metal shipments and a 7% increase in silicon-based alloys shipments. Silicon metal and silicon-based alloys prices both increased compared to the prior quarter, but remained under pressure as import competition continued to affect U.S. market prices for silicon metal and certain silicon-based alloys.

The May 3, 2013 lockout of unionized employees at the Becancour plant concluded on December 27, 2013 with the ratification of a new collective bargaining agreement. The plant ramped-up its operations during the current quarter, and as a result certain costs associated with the ramp-up were excluded in our calculation of adjusted EBITDA.

Excluding certain items, detailed in the table below, adjusted EBITDA was $29.5 million in the third quarter, compared to $14.0 million in the prior year and $26.2 million in the second quarter. On a reported basis, EBITDA for the third quarter was $17.1 million, compared to ($32.8) million in the prior year and $25.6 million in the second quarter. 

Reported net income for the third quarter of fiscal 2014 was $2.0 million, compared to $16.3 million in the prior quarter, and a net loss of ($40.0) million in the third quarter of fiscal 2013. Reported Diluted EPS for the third quarter of fiscal 2014 was $0.02 per share, compared to $0.18 per share in the prior quarter and a net loss of $0.53 per share in the third quarter of fiscal 2013.

Adjusted EBITDA was as follows:

  Third Quarter Nine Months 
  FY 2014 FY 2013 FY 2014 FY 2013
Reported EBITDA $17,052 ($32,791) $49,321 $8,196
Transaction and due diligence expenses 52 312 521 2,299
Remeasurement of stock option liability 7,179 534 27,068 20,592
Quebec Silicon lockout costs 1,747 –  6,645 – 
Quebec Silicon curtailment gain –  –  (5,831) – 
Siltech start-up costs 541 –  541 – 
Remeasurement/true-up of equity compensation 200 –  200 – 
Business interruption  2,697 (4,325) 2,697 (4,325)
Bonus payments –  –  3,885 – 
Contract acquisition cost –  –  14,400 – 
Bargain purchase gain –  –  (22,243) – 
Gain on remeasurement of equity investment –  (170) –  (1,877)
Goodwill impairment –  13,130 –  13,130
Impairment of assets –  37,309 –  37,309
Adjusted EBITDA, excluding above items $29,468 $13,999 $77,204 $75,324

Net cash decreased by $61.6 million from the end of the second quarter to ($12.1) million. Cash flow used in operating activities in the third quarter was $23.4 million, capital expenditures totalled $10.0 million, and dividends totalled $5.6 million. Capital expenditures were primarily related to planned maintenance. Net working capital increased $13.0 million in the third quarter as a result of increased sales volumes and margins. Certain Stock Appreciation Rights scheduled to expire were exercised during the quarter. The Rights were granted prior to the Company's 2009 IPO, and the cash value of these Rights totalled $39.0 million. Total debt outstanding increased to $125.0 million in the third quarter, which is an increase of $16.0 million compared to the second quarter and a $25.8 million decrease compared to the third quarter of fiscal 2013.  Total cash was $112.9 million as of March 31, 2014.

Third quarter fiscal 2014 results were negatively impacted by $4.9 million after-tax remeasurement expense for stock option liabilities, $1.2 million after-tax costs related to the lockout and subsequent operations ramp-up at the Becancour plant, $0.4 million after-tax for expenses related to the start-up of Siltech (acquired November 2013), and $1.8 million after-tax due to the impact of business interruptions experienced at our Alloy, WV and Niagara Falls, NY plants.  

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

  Third Quarter Nine Months 
  FY 2014 FY 2013 FY 2014 FY 2013
Reported Diluted EPS  $0.02  (0.53)  0.11  (0.41)
Tax rate adjustment 0.00 (0.01) 0.03 (0.01)
Transaction and due diligence expenses 0.00 0.00 0.00 0.02
Remeasurement of stock option liability 0.07 0.00 0.25 0.19
Quebec Silicon lockout costs 0.02 0.00 0.06 0.00
Quebec Silicon curtailment gain 0.00 0.00 (0.03) 0.00
Siltech start-up costs 0.01 0.00 0.01 0.00
Business interruption  0.02 (0.04) 0.02 (0.04)
Bonus payments 0.00 0.00 0.04 0.00
Contract acquisition cost 0.00 0.00 0.13 0.00
Bargain purchase gain 0.00 0.00 (0.30) 0.00
Gain on remeasurement of equity investment 0.00 0.00 0.00 (0.02)
Deferred financing fees write-off 0.00 0.00 0.03 0.00
Goodwill impairment 0.00 0.17 0.00 0.17
Impairment of assets 0.00 0.41 0.00 0.41
Adjusted diluted EPS, excluding above items $0.14 $0.00 $0.35 $0.31

Globe CEO Jeff Bradley commented, "Volumes and shipments increased sequentially from the prior quarter which drove our quarterly results, despite unusually harsh weather challenges during the winter months. We continue to be on track regarding the start-up of our South African acquisition planned for the fourth calendar quarter of 2014."

Conference Call

Globe will review third quarter fiscal 2014 results during its quarterly conference call on May 9, 2014 at 9:00 AM 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 9, 2014 Earnings 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 Miami.  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 SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
           
  Three Months Ended Nine Months Ended
  March 31,
2014
December 31,
2013
March 31,
2013
March 31,
2014
March 31,
2013
           
Net sales $196,057 178,406 195,845 547,457 576,493
Cost of goods sold 164,926 150,713 181,238 467,919 498,209
Selling, general, and administrative expenses 23,392 26,499 13,330 75,029 60,103
Contract acquisition cost  --   14,400  --   14,400  -- 
Curtailment gain  --   (5,831)  --   (5,831)  -- 
Business interruption insurance recovery  --   --   (4,594)  --  (4,594)
Goodwill impairment  --   --  13,130  --  13,130
Impairment of long-lived assets  --   --   35,387  --  35,387
Operating income (loss)  7,739 (7,375) (42,646) (4,060) (25,742)
Other income (expense):          
Gain on remeasurement of equity investment  --   --  170  --  1,877
Bargain purchase gain  --  22,243  --  22,243  -- 
Interest income 1 4 211 33 599
Interest expense, net of capitalized interest  (1,012) (1,050) (1,806) (6,940) (5,148)
Foreign exchange loss  (1,999) (728) (1,686) (3,008) (2,773)
Other income (expense)  5 (3) (179) 23 (77)
Income (loss) before provision for (benefit from) income taxes 4,734 13,091 (45,936) 8,291 (31,264)
Provision for (benefit from) income taxes  2,717  (3,207)  (5,941)  (3,199)  (1,837)
Net income (loss)  2,017 16,298 (39,995) 11,490 (29,427)
Income attributable to noncontrolling interest, net of tax  (456)  (2,825)  (140)  (3,308)  (1,345)
Net income (loss) attributable to Globe Specialty Metals, Inc. $1,561 13,473 (40,135) 8,182 (30,772)
Weighted average shares outstanding:          
Basic 74,291 75,267 75,302 74,964 75,174
Diluted 74,435 75,388 75,302 75,070 75,174
Earnings (loss) per common share:          
Basic $0.02 0.18 (0.53) 0.11 (0.41)
Diluted 0.02 0.18 (0.53) 0.11 (0.41)
           
EBITDA:          
Net income (loss)  $2,017 16,298 (39,995) 11,490 (29,427)
Provision for (benefit from) income taxes 2,717 (3,207) (5,941) (3,199) (1,837)
Net interest expense  1,011 1,046 1,595 6,907 4,549
Depreciation, depletion, amortization and accretion  11,307  11,463  11,550  34,123  34,911
EBITDA $17,052 25,600 (32,791) 49,321 8,196
 
GLOBE SPECIALTY METALS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
       
  March 31,  December 31,  March 31, 
  2014 2013 2013
Assets
Current assets:      
Cash and cash equivalents $112,922 158,564 161,001
Marketable securities 5,475 150 80
Accounts receivable, net  95,330 70,341 89,400
Inventories 77,167 88,562 117,887
Deferred tax assets 4,173 17,877 13,113
Prepaid expenses and other current assets 22,094 14,015 26,911
Total current assets 317,161 349,509 408,392
Property, plant, and equipment, net  458,144 460,180 430,908
Deferred tax assets 125 125 867
Goodwill 43,343 43,343 45,286
Other intangible assets 477 477 477
Investments in unconsolidated affiliates 5,973 5,973 5,973
Other assets 3,375 4,385 6,982
Total assets $828,598 863,992 898,885
       
Liabilities and Stockholders' Equity
Current liabilities:      
Accounts payable $43,759 40,832 55,697
Short-term debt 15 15 289
Revolving credit agreements  --   9,000  9,000
Accrued expenses and other current liabilities 57,000 81,183 54,875
Total current liabilities 100,774 131,030 119,861
Long-term liabilities:      
Revolving credit agreements 125,000 100,000 141,514
Deferred tax liabilities 44,980 45,541 27,895
Other long-term liabilities 48,568 52,712 67,129
Total liabilities 319,322 329,283 356,399
Stockholders' equity:      
Common stock 8 8 8
Additional paid-in capital 398,139 397,415 397,024
Retained earnings 62,895 66,893 65,591
Accumulated other comprehensive loss (8,917) (6,191) (7,182)
Treasury stock at cost (26,618) (7,287) (4)
Total Globe Specialty Metals, Inc. stockholders' equity 425,507 450,838 455,437
Noncontrolling interest 83,769 83,871 87,049
Total stockholders' equity 509,276 534,709 542,486
Total liabilities and stockholders' equity $828,598 863,992 898,885
 
GLOBE SPECIALTY METALS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
           
  Three Months Ended Nine Months Ended
  March 31,
2014
December 31,
2013
March 31,
2013
March 31,
2014
March 31,
2013
           
Cash flows from operating activities:          
Net income (loss)  $2,017  16,298  (39,995) 11,490 (29,427)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:          
Depreciation, depletion, amortization and accretion  11,307  11,463  11,550 34,123 34,911
Share-based compensation  544  (261)  315 (1,275) (7,712)
Gain on remeasurement of equity investment  --   --   (170)  --  (1,877)
Curtailment gain  --   (5,831)  --  (5,831)  -- 
Bargain purchase gain  --   (22,243)  --  (22,243)  -- 
Goodwill impairment  --   --   13,130  --  13,130
Impairment of long-lived assets  --   --   35,387  --  35,387
Deferred financing fees  44  53  200 3,621 600
Unrealized foreign exchange loss   580  --   913  473 913
Deferred taxes  13,280  (3,405)  (2,570) 3,345 (9,992)
Amortization of customer contract liabilities  (1,927)  (1,636)  (1,930) (5,293) (4,804)
Changes in operating assets and liabilities:          
Accounts receivable, net  (25,367)  6,458  (10,021) (11,706) (2,097)
Inventories  10,952  3,275  24,255 25,227 67
Prepaid expenses and other current assets  (8,089)  5,416  (9,345) 3,926 (5,568)
Accounts payable  1,461  2,277  1,402 3,974 (1,009)
Accrued expenses and other current liabilities  (22,233)  8,772  1,621 (45) 15,442
Other   (6,000)  2,631  2,259 1,430 1,793
Net cash (used in) provided by operating activities  (23,431)  23,267  27,001 41,216 39,757
Cash flows from investing activities:          
Capital expenditures  (9,954)  (10,861)  (18,101) (28,018) (36,305)
Purchase of marketable securities  (3,155)  --   --   (5,841)  -- 
Acquisition of businesses, net of cash acquired  --   (3,800)  (3,676)  (3,800)  (4,520)
Net cash used in investing activities  (13,109)  (14,661)  (21,777) (37,659) (40,825)
Cash flows from financing activities:          
Net payments of short-term debt  --   --   (28)  (269)  (28)
Net borrowings (payments) on revolving credit agreements  16,000  --   (2,147)  (14,250)  10,016
Debt issuance costs  --   --   --   (1,080)  -- 
Dividend payment  (5,559)  (5,178)  (4,706)  (15,915)  (23,500)
Proceeds from stock option exercises  180  --   --   180  1,000
Purchase of treasury shares  (19,331)  (7,283)  --   (26,614)  -- 
Other financing activities  (654)  (630)  (632) (1,917) (1,907)
Net cash used in financing activities  (9,364)  (13,091)  (7,513) (59,865) (14,419)
Effect of exchange rate changes on cash and cash equivalents  262  (35)  (171) (446) (1,522)
Net decrease in cash and cash equivalents  (45,642)  (4,520)  (2,460) (56,754) (17,009)
Cash and cash equivalents at beginning of period  158,564  163,084  163,461 169,676 178,010
Cash and cash equivalents at end of period $112,922  158,564  161,001 112,922 161,001
           
Supplemental disclosures of cash flow information:          
Cash paid for interest, net $924  850  1,982 2,783 4,396
Cash (refunded) paid for income taxes, net (2,446)  (4,136)  1,768 (5,982) 13,419
 
GLOBE SPECIALTY METALS, INC.
AND SUBSIDIARIES
Supplemental Statistics
(Unaudited)
           
  Three Months Ended Nine Months Ended
  March 31,
2014
December 31,
2013
March 31,
2013
March 31,
2014
March 31,
2013
Shipments in metric tons:          
Silicon metal 36,530 31,631 40,310 99,780 116,070
Silicon-based alloys 37,396 34,985 29,072 102,797 85,314
Total shipments* 73,926 66,616 69,382 202,577 201,384
           
Average selling price ($/MT):          
Silicon metal 2,791 $2,766 $2,793 2,754 2,827
Silicon-based alloys 2,001 1,983 2,069 2,000 2,166
Total* 2,391 $2,355 $2,490 2,371 2,547
Average selling price ($/lb.):          
Silicon metal $1.27 $1.25 $1.27 $1.25 $1.28
Silicon-based alloys 0.91 0.90 0.94 0.91 0.98
Total* $1.08 $1.07 $1.13 $1.08 $1.16
           
* Excludes by-products and other
Globe Specialty Metals, Inc.

Joe Ragan, 786-609-6925
Chief Financial Officer
Email:          
Or
Jeff Bradley, 786-609-6908
Chief Executive Officer
Email: