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Fushi Copperweld Announces 2011 Fourth Quarter and Full Year Results

March 8, 2012

BEIJING, March 8, 2012 /PRNewswire-Asia-FirstCall/ — Fushi Copperweld, Inc. (Nasdaq: FSIN), the leading global manufacturer and innovator of copper-clad bimetallic wire used in a variety of telecommunication, utility, transportation and other electrical applications, today announced financial results for the fourth quarter and full year periods ended December 31, 2011.

Fourth Quarter 2011 Results

  • Revenues were $68.2 million compared to $69.9 million in the year ago period;
  • Gross profit was $16.8 million, or 24.7% of revenues compared to $22.2 million, or 31.8% of revenues, in the year ago period;
  • Income from operating activities was $9.4 million, or 13.8% of revenues compared to $16.0 million, or 22.8% of revenues, in the year ago period;
  • Net cash generated by operating activities of $31.4 million, compared to $28.2 million net cash generated by operating activities in the fourth quarter of 2010; and
  • Cash position at quarter end remains strong at $200.5 million.

Joe Longever, co-Chief Executive Officer of Fushi Copperweld, commented, “The fourth quarter saw a continuation of the challenging market conditions that affected our business in the third quarter. Reacting to macroeconomic factors, some of our customers continued to reduce or delay their orders, which decreased sales volumes, particularly in the U.S., and, combined with the effects of changes in raw material prices, reduced our margins. Despite the difficult environment, we continued to make solid progress in the execution of our global strategy. The ramp-up of our new facility in Belgium is proceeding as planned. We expect to be in a position to generate sales of tubing, CCA and CCS products from this facility in early-2012 as anticipated, and we have received strong feedback from current and potential customers in the market about our enhanced regional presence.”

Revenues in the fourth quarter of 2011 were $68.2 million, a slight decrease from $69.9 million in the prior year quarter, as softer sales volumes more than offset higher average selling prices.

Gross profit in the fourth quarter was $16.8 million compared to $22.2 million last year. Gross margin decreased to 24.7% from 31.8% in the same period last year. Gross margin for the Company’s Dalian cladding facility was 30.9% compared to 38.3% in the prior year period, while gross margin for the Company’s Fayetteville, TN facility was -0.1% in the fourth quarter of 2011, compared to 11.5% in the fourth quarter of 2010.

Operating expenses in the fourth quarter of 2011 increased to $7.4 million compared to $6.2 million in the prior year’s quarter, primarily as a result of the Company’s continued investment in its future growth strategy and increased expenses including higher audit and professional service fees, and advisor fees related to the going private transaction. Operating expenses for the quarter also included incremental costs of approximately $0.9 million from the start up of the Company’s Belgium facility. The Company has restarted the copper tubing production and begun the process of stocking CCA and CCS product inventory at this facility. Although the Company expects its Belgium operations to exit 2012 at a profitable run-rate, its contributions will be slightly dilutive to earnings in 2012. As a percentage of revenue, operating expenses increased to 10.9% from 8.9% in the fourth quarter of 2010.

The Company’s effective income tax rate in the fourth quarter of 2011 was 39.4% compared to 115.7% a year ago. As previously announced, the Company’s results for the 2010 fourth quarter included a non-cash adjustment of $15.4 million, or $0.40 per diluted share, relating to the adjustment of the beginning-of-the-period balance of a valuation allowance of U.S. Entities (Parent and Copperweld Bimetallics, LLC).

Net income in the fourth quarter was $5.6 million, or $0.15 per diluted share, compared to a net loss of $2.4 million, or $0.06 per diluted share, for the 2010 fourth quarter.

The number of fully diluted shares increased slightly in the fourth quarter of 2011 to 38.3 million from 38.1 million a year ago.

During the three months ended December 31, 2011, the Company generated net cash from operations of $31.4 million, compared $28.2 million in the comparable period in 2010.

Full Year 2011 Results

For the 2011 full-year period, revenues increased 8.5% to $287.4 million from $265.0 million in the year ago period. Metric tons shipped in fiscal year 2011 decreased 2.9% to 37,492 metric tons compared to 38,607 metric tons in 2010.

Gross profit in 2011 was $75.0 million, or 26.1% of revenue, compared to $79.3 million, or 29.9% of revenue, in fiscal year 2010.

Operating expenses in 2011 were $26.0 million, compared to $21.2 million in fiscal year 2010. On a percentage basis, operating expenses increased to 9.0% of revenues from 8.0% for fiscal year 2010. The increase is primarily due to the higher audit and professional service fees, advisor fees related to the going private transaction and approximately $0.9 million in expenses during the start-up period of the Company’s Belgium facility. Operating income for 2011 was $49.0 million, or 17.0% of revenues, compared to $58.0 million, or 21.9% of revenues, in 2010.

The Company’s effective income tax rate for 2011 was 32.5% compared to 42.1% in 2010 and somewhat higher than its previous expectation of 31.0%. The decrease in effective income tax rate in 2011 compared to 2010 was primarily due to the effect of the adjustment of valuation allowance in 2010 as mentioned above.

Net income for the 2011 full-year period was $32.0 million, or $0.84 per diluted share. This compares to net income of $31.9 million, or $0.86 per diluted share, in 2010.

In the year ended December 31, 2011, net cash generated from operations was $72.0 million, compared to $51.4 million in the year ago period.

As of December 31, 2011, the Company’s cash position was $200.5 million, an increase of 63.0% from $123.0 million as of December 31, 2010. Accounts receivable at December 31, 2011 were $64.0 million, compared to $65.8 million at December 31, 2010. Long-term debt totaled $7.6 million as of December 31, 2011, compared to $5.7 million at December 31, 2010.

Mr. Longever concluded, “Looking ahead to 2012, macroeconomic conditions remain uncertain and we expect this will continue to weigh on our customers’ purchasing decisions, creating headwinds for our business across the markets we serve. Nevertheless, we remain confident in the long-term demand drivers for our products, and expect to see incremental sales in Europe as we ramp up our new capacity and broaden our sales network there. We continue to operate from a solid financial position, and remain committed to utilizing our strong cash flows and balance sheet to take advantage of opportunities in the current marketplace and position ourselves for success when the cycle turns upward.”

Outlook

Based on fourth quarter performance and current business conditions, Fushi Copperweld currently expects 2012 fully diluted earnings per share of between $0.76 and $0.86 based on an estimated weighted average diluted share count of 38.3 million shares, and an effective tax rate of 31.5%. The first fiscal quarter is typically the Company’s weakest quarter due to the timing of the Chinese New Year, during which the Company’s operating facilities in China are closed for two weeks. The Company expects profitability in subsequent quarters to improve over the first quarter due to higher revenues with the absence of the Chinese New Year and increased traction from business development and certification efforts.

Conference Call

The Company will conduct a conference call to discuss the fourth quarter and full year 2011 results today, Thursday, March 8, 2012, at 4:30 pm ET. To participate, the conference call may be directly accessed from the U.S. and Canada at 1-866-226-1793 and accessed internationally at 1-416-340-2218. A live webcast of the conference call will also be available at http://bit.ly/eventFSIN. A replay of the call will be available at www.fushicopperweld.com on the Investor Relations section.

About Fushi Copperweld

Fushi Copperweld Inc., principally through its wholly owned subsidiaries, Fushi International (Dalian) Bimetallic Cable Co. Ltd., and Copperweld Bimetallics LLC, is the leading manufacturer and innovator of copper-clad bimetallic engineered conductor products for electrical, telecommunications, transportation, utilities and industrial applications. With extensive design and production capabilities, and a long-standing dedication to customer service, Fushi Copperweld is the preferred choice for bimetallic products worldwide.

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 www.sec.gov.

For more information, please contact:

Investors

Jolin Qiao, Investor Relations Officer
Fushi Copperweld Inc.
Phone +1.931.433.0482
E-mail: ir@fushicopperweld.com
Web: www.fushicopperweld.com

                                                                    FUSHI COPPERWELD, INC. AND SUBSIDIARIES
                                                                           CONSOLIDATED STATEMENTS OF
                                                                              COMPREHENSIVE INCOME
                                                        FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2011 AND 2010

                                       Three-Month Period Ended                   Twelve-Month Period Ended
                                             December 31,                               December 31,
                                             ------------                               ------------
                                                              2011                                        2010                      2011             2010
                                                              ----                                        ----                      ----             ----
                                                  USD                                        USD                         USD              USD

    Revenues                                            68,230,485                                  69,909,759               287,389,251      264,972,400
    Cost of revenues                                    51,385,191                                  47,698,109               212,433,141      185,684,859
    Gross profit                                        16,845,294                                  22,211,650                74,956,110       79,287,541
                                                        ----------                                  ----------                ----------       ----------
    Operating expense:
    Selling expenses                                     1,540,078                                   1,719,285                 5,059,143        5,793,565
    General and administrative
     expenses                                            5,863,288                                   4,527,254                20,898,944       15,451,132
    Total operating expense                              7,403,366                                   6,246,539                25,958,087       21,244,697
                                                         ---------                                   ---------                ----------       ----------
    Income from operations                               9,441,928                                  15,965,111                48,998,023       58,042,844
                                                         ---------                                  ----------                ----------       ----------
    Other income (expense):
    Interest income                                        231,570                                     221,172                   895,346          811,408
    Interest expense                                      (108,812)                                   (206,226)                 (449,094)        (903,593)
    Gain on cross-currency interest
     swap derivative                                             -                                           -                         -          128,861
    Loss on extinguishment of HY Notes                           -                                           -                         -       (2,395,778)
    Foreign currency exchange losses,
     net                                                  (258,436)                                   (428,620)               (1,935,558)        (623,065)
    Total other expense                                   (135,678)                                   (413,674)               (1,489,306)      (2,982,167)
                                                          --------                                    --------                ----------       ----------
    Income before income taxes                           9,306,250                                  15,551,437                47,508,717       55,060,677
    Income tax expense                                  (3,670,195)                                (17,995,723)              (15,463,667)     (23,192,910)
                                                                                                                             -----------      -----------
    Net income                                           5,636,055                                  (2,444,286)               32,045,050       31,867,767
                                                         ---------                                  ----------                ----------       ----------

    Other comprehensive income:
    Foreign currency translation
     adjustment, net of nil income
     taxes                                               5,126,828                                   4,692,365                17,981,094       10,891,105
    Comprehensive income                                10,762,883                                   2,248,079                50,026,144       42,758,872
                                                        ==========                                   =========                ==========       ==========
    Earnings per share:
    Basic                                                     0.15                                       (0.06)                     0.84             0.86
                                                              ====                                       =====                      ====             ====
    Diluted                                                   0.15                                       (0.06)                     0.84             0.85
                                                              ====                                       =====                      ====             ====

                          FUSHI COPPERWELD, INC. AND SUBSIDIARIES
                                CONSOLIDATED BALANCE SHEETS
                              As of December 31, 2011 and 2010

                                                                         Dec-31
                                                                         ------
                                                                        2011           2010
                                                                        ----           ----
                                                                     USD            USD
    ASSETS
    Current assets:
    Cash                                                         200,451,902    123,000,338
    Accounts receivable, net of allowance
     for doubtful accounts                                        63,978,861     65,765,722
    Inventories                                                   10,695,123     16,143,922
    Advances to suppliers                                          6,793,904     15,022,976
    Prepaid expenses and other current
     assets                                                        1,332,204        743,206
    Total current assets                                         283,251,994    220,676,164
                                                                 -----------    -----------
    Property, plant and equipment, net                           117,405,523    124,177,512
    Intangible assets, net                                           431,441        577,587
    Land use rights                                               13,321,796     13,089,733
    Deposits for land use right                                   10,090,621      9,623,181
    Goodwill                                                       1,812,068      1,669,789
    Other non-current assets                                         491,380        443,397
    Total assets                                                 426,804,823    370,257,363
                                                                 ===========    ===========

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities:
    Current portion of long-term loan                                650,000        650,000
    Accounts payable                                               3,802,155      3,241,428
    Amounts due to a related party                                 2,000,000              -
    Accrued expenses and other current
     liabilities                                                  15,880,176     15,542,111
    Total current liabilities                                     22,332,331     19,433,539
                                                                  ----------     ----------
    Long-term loans                                                7,632,100      5,687,500
    Deferred income tax liabilities                                  672,943        669,540
    Other non-current liabilities                                          -         65,057
    Total liabilities                                             30,637,374     25,855,636
                                                                  ----------     ----------
    Shareholders' equity:
    Common stock, $0.006 par value,
     100,000,000 shares authorized;
     38,240,438 and 38,099,138 shares
     issued                                                          229,444        228,596
                and outstanding as of December 31, 2011
                 and 2010, respectively
    Additional paid-in capital                                   169,335,522    167,596,792
    Retained earnings                                            172,507,890    140,462,840
    Accumulated other comprehensive income                        54,094,593     36,113,499
    Total shareholders' equity                                   396,167,449    344,401,727
                                                                 -----------    -----------
    Commitments and contingencies
    Total liabilities and shareholders'
     equity                                                      426,804,823    370,257,363
                                                                 ===========    ===========

                       FUSHI COPPERWELD, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                    For the Years Ended December 31, 2011 and 2010

                                                         Year Ended December 31,
                                                         -----------------------
                                                                 2011                    2010
                                                                 ----                    ----
                                                             USD                     USD
    Cash flows from
     operating
     activities:
    Net income                                             32,045,050              31,867,767
    Adjustments to
     reconcile net
     income to net cash
     provided by
     operating
     activities:
    Provision for
     (reversal of) bad
     debt allowance                                            26,176                (485,781)
    Write-down of
     inventories                                               41,489                 276,898
    Depreciation and
     amortization                                          13,783,833              12,446,645
    Loss (gain) on
     disposal of long-
     lived assets                                             (13,910)                294,595
    Amortization of
     debt issuance cost                                             -                 255,673
    Deferred income tax
     expenses (benefit)                                       (51,937)             14,283,528
    Share-based
     compensation
     expense                                                  838,031                 933,865
    Unrealized foreign
     currency exchange
     loss (gain), net                                       1,882,544                 692,704
    Shareholder's
     contribution                                             278,505                       -
    Unrealized loss
     (gain) on cross-
     currency interest
     swap derivative                                                -                (882,527)
    Loss on
     extinguishment of
     HY Notes                                                       -               2,395,778
    Change in operating
     assets and
     liabilities, net
     of effect of
     acquisitions of
     Jinchuan and
     Hongtai:
    Accounts receivable                                     4,583,079               7,839,294
    Inventories                                             5,687,935              (3,862,514)
    Advances to
     suppliers                                              8,724,797              (5,378,045)
    Prepaid expenses
     and other current
     assets                                                  (609,296)                422,085
    Accounts payable                                          514,363              (4,022,618)
    Accrued expenses
     and other current
     liabilities                                            4,317,133              (5,695,936)
    Net cash provided
     by operating
     activities                                            72,047,792              51,381,411
                                                           ----------              ----------
    Cash flows from
     investing
     activities:
    Payments for
     acquisitions of
     Jinchuan and
     Hongtai                                                        -              (6,375,000)
    Cash acquired from
     acquisition of
     Jinchuan and
     Hongtai                                                        -                 901,442
    Proceeds from
     disposal of
     equipment                                                 15,999                 255,260
    Purchase of land
     use rights                                                     -              (9,480,129)
    Purchase of
     property, plant
     and equipment                                         (1,418,716)             (2,679,246)
    Net cash used in
     investing
     activities                                            (1,402,717)            (17,377,673)
                                                           ----------             -----------
    Cash flows from
     financing
     activities:
    Contingent
     consideration paid
     for acquisition of
     Jinchuan                                              (4,819,107)                      -
    Proceeds from
     interest-free
     loans provided by
     Mr. Li Fu                                              2,000,000              23,000,000
    Repayment of
     interest-free
     loans provided by
     Mr. Li Fu                                                               -   (23,000,000)
    Repayment of
     borrowings from
     revolving line of
     credit                                                         -              (4,033,783)
    Proceeds from long-
     term loans                                             2,691,800               6,500,000
    Repayment of long-
     term bank loans                                         (650,000)               (162,500)
    Repayment of notes
     payable                                                        -             (35,600,000)
    Proceeds from
     issuance of common
     stock and warrants                                       623,042              62,010,759
    Transaction costs
     paid in connection
     with issuance of
     common stock                                                   -              (3,438,550)
    Net cash provided
     by (used in)
     financing
     activities                                              (154,265)             25,275,926
                                                             --------              ----------

    Effect of foreign
     currency exchange
     rate changes on
     cash                                                   6,960,754               3,122,825
    Net increase
     (decrease) in cash                                    77,451,564              62,402,489
                                                           ----------              ----------
    Cash at beginning
     of year                                              123,000,338              60,597,849
    Cash at end of year                                   200,451,902             123,000,338
                                                          ===========             ===========

SOURCE Fushi Copperweld, Inc.


Source: PR Newswire