GLOBE SPECIALTY METALS INC - FORM 8-K - EX-99.1

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8-K - GLOBE SPECIALTY METALS INC	form8k3q2010.htm
EX-99.2 - GLOBE SPECIALTY METALS INC	presentation3q2010.htm

Globe Specialty Metals Announces Third Quarter Fiscal 2010 Results

New York, May 11, 2010 – Globe Specialty Metals, Inc. (NASDAQ: GSM) (the “Company”) today announces results for the quarter and nine months ended March 31, 2010. Key points are as follows:

·	Net sales for the third quarter ended March 31, 2010 were up 4%, to $112.5 million, and shipments increased 7% to 47,684 MT, from our second quarter ended December 31, 2009.

Net income attributable to GSM for the third quarter was $0.5 million, compared to $18.5 million in our second quarter, which included a $14.0 million after-tax gain on the sale of our Brazilian operations. Diluted earnings per share was $0.01 in the third quarter, compared to $0.25 per share in our second quarter, which included a $0.19 per diluted share gain on the sale of our Brazilian operations.

Increased demand for silicon metal and silicon-based alloys caused us to run all our furnaces. We reopened our Selma, Alabama plant in January 2010 after idling it for eight months. It is now running at full capacity, but has not yet reached its normalized cost of production. We reopened our Niagara Falls plant in November 2009 after it had been closed for more than five years and, due to certain start-up issues, the plant is currently operating at approximately 75% of capacity and at a higher than normalized cost of production. We have made significant improvements in employee training and maintenance and expect Niagara Falls to achieve full capacity by the end of our fourth fiscal quarter. Our other plants are running near full capacity and at normalized production costs.

On April 1, 2010 we acquired Core Metals Group, one of North America’s largest producers and marketers of high-purity ferrosilicon and other specialty steel ingredients. Globe paid $37 million in cash and borrowed $15 million on its revolver to fund the acquisition. Core’s main asset is a 40,000 MT ferrosilicon plant in Bridgeport, Alabama, which is operating at full capacity. In April, we sold Core’s ancillary Canadian business for $3.0 million in cash.

The Company posted third quarter net income attributable to GSM of $0.5 million, or $0.01 a diluted share, compared to $18.5 million, or $0.25 per diluted share, in our second quarter of 2010 and $0.9 million, or $0.01 a diluted share, in the third quarter of last year. Diluted earnings per share on a comparable basis were as follows:

	FY 2010					FY 2009
	Third Quarter		Second Quarter			Third Quarter
Reported Diluted EPS	$	0.01		0.25			0.01
Gain on sale of Brazil		-		(0.19	)		-
Niagara Falls and Selma startup costs		0.02		0.03			-
Restructuring charges		-		-			0.01
Transaction expenses		0.01		-			-
Inventory write-downs and fixed asset impairment		-		0.01			0.02
Diluted EPS, excluding above items	$	0.04		0.10			0.04

Third quarter results were negatively impacted by $1.9 million of after-tax start-up costs for the Niagara Falls, NY and Selma, AL plants and $0.3 million of after-tax transaction expenses related to the Core Metals acquisition. The decline in diluted EPS excluding the above items from $0.10 per share in our second quarter to $0.04 per share in our third quarter is primarily due to lower gross margin on material purchased from our former Brazilian plant, a lower average selling price and higher costs of production at our newly re-opened facilities.

Shipments in the third quarter increased 7% from the preceding quarter as a result of stronger demand from our end markets. Our average selling price declined by 4% from the preceding quarter, with an 8% decline in silicon metal partially offset by a 4% increase in silicon-based alloys. The decline in the silicon metal average price was a result of a full quarter’s shipments under the joint venture at our Alloy plant and the run-off of volume under certain 2009 annual contracts that were priced above current market. The increase in the average selling price of silicon-based alloys is primarily related to rising ferrosilicon prices and our focus on higher-margin specialty grades.

Third quarter EBITDA was $8.8 million, compared to $36.4 million in our second quarter and $7.1 million in the third quarter of last year. EBITDA on a comparable basis was as follows:

	FY 2010					FY 2009
	Third Quarter		Second Quarter			Third Quarter
Reported EBITDA	$	8,844		36,437			7,109
Goodwill and intangible asset impairment		-		-			144
Gain on sale of Brazil		-		(23,368	)		-
Niagara Falls and Selma startup costs		2,975		3,892			-
Restructuring charges		-		-			1,387
Transaction expenses		521		-			-
Inventory write-downs and fixed asset impairment		-		685			1,600
EBITDA, excluding above items	$	12,340		17,646			10,240

For the nine months ended March 31, 2010, the Company posted net income attributable to GSM shareholders of $27.5 million, or $0.37 a diluted share, compared to a net loss of $43.6 million, or $0.68 per diluted share, in the comparable period of the prior year. Last year’s results included an after-tax impairment charge of $65.3 million. EBITDA for the nine months ended March 31, 2010 was $64.9 million, compared to a loss of $19.6 million in the comparable period of the prior year.

We expect sales volumes to increase in our fiscal fourth quarter from the Core Metals acquisition and increased output as we operate all our furnaces at full capacity, including reaching full capacity at Niagara Falls by the end of that quarter. As demand continues to improve, the spot price for silicon metal and silicon-based alloys has risen, a trend which we anticipate to continue. However, we expect our average selling price of silicon metal to decline modestly in our fiscal fourth quarter as we ship a higher volume of material under a long-term below-market priced contract, which expires on December 31, 2010.

Capital expenditures were $6.5 million in the third quarter. We expect a modest increase in capital expenditures in our fourth quarter for planned furnace outages.

Cash and cash equivalents totalled $219.8 million at March 31, 2010, including $15 million drawn on our revolver in anticipation of closing the Core Metals acquisition. We funded the acquisition on April 1, 2010 with approximately $52 million of cash and subsequently sold Core’s ancillary Canadian business for $3.0 million of cash. Working capital increased by $22.1 million from the second quarter as we reopened Selma and Niagara Falls and purchased certain raw material inventory in anticipation of expanding our silicon-based alloy offerings. We do not expect any further increases in working capital in our fiscal fourth quarter other than from the acquisition of Core Metals.

Globe CEO Jeff Bradley commented, “Customer demand and spot prices continue to rise and all of our end markets are growing. Our key near-term challenge is to increase our production levels to meet strong demand while lowering our production costs. We are making good progress on these goals with major advances at Niagara Falls and with April production levels at all other plants running near full capacity.” Bradley continued “We expect our earnings to increase in the coming quarters on higher production levels and spot pricing, and the Core acquisition, with the most meaningful increase coming at the beginning of calendar 2011 when our existing long-term low-priced contracts expire. We expect calendar 2010 to be a very solid year and calendar 2011 to be a record year of earnings.”

Conference Call

Globe will review third quarter results during its quarterly conference call tomorrow, May 12, 2010, at 9:00 a.m. Eastern Daylight 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 12, 2010 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; 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 (loss) is provided in the attached financial statements.

Source: Globe Specialty Metals, Inc.

CONTACTS: 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.com

GLOBE SPECIALTY METALS, INC.
AND SUBSIDIARY COMPANIES
Condensed Consolidated Balance Sheets
(In thousands)

	March 31,			December 31,			June 30,
	2010			2009			2009
	(Unaudited)			(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	219,787			252,231			61,876
Accounts receivable, net of allowance for doubtful accounts		45,325			36,673			24,094
Inventories		62,983			54,508			67,394
Prepaid expenses and other current assets		21,826			12,123			24,675
Total current assets		349,921			355,535			178,039
Property, plant, and equipment, net		189,404			188,803			217,507
Goodwill		51,837			51,836			51,828
Other intangible assets		476			477			1,231
Investments in unconsolidated affiliates		8,288			8,171			7,928
Deferred tax assets		49			49			1,598
Other assets		2,290			2,284			15,149
Total assets	$	602,265			607,155			473,280

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	36,592			36,505			21,341
Current portion of long-term debt		8,571			9,641			16,561
Short-term debt		35,859			14,013			6,688
Accrued expenses and other current liabilities		29,805			58,974			46,725
Total current liabilities		110,827			119,133			91,315
Long-term liabilities:
Long-term debt		10,609			12,730			36,364
Deferred tax liabilities		15,032			14,549			18,890
Other long-term liabilities		14,658			14,782			15,359
Total liabilities		151,126			161,194			161,928
Stockholders’ equity:
Common stock		7			7			7
Additional paid-in capital		389,019			384,404			303,364
Retained earnings		32,152			31,636			4,660
Accumulated other comprehensive loss		(3,671	)		(3,676	)		(3,644	)
Treasury stock at cost		(4	)		(4	)		(4	)
Total Globe Specialty Metals, Inc. stockholders’ equity		417,503			412,367			304,383
Noncontrolling interest		33,636			33,594			6,969
Total stockholders’ equity		451,139			445,961			311,352
Total liabilities and stockholders’ equity	$	602,265			607,155			473,280

GLOBE SPECIALTY METALS, INC.
AND SUBSIDIARY COMPANIES
Condensed Consolidated Statement of Operations
(In thousands, except per share amounts)
(Unaudited)
	Three Months Ended										Nine Months Ended
		March 31, 2010			December 31, 2009			March 31, 2009			March 31, 2010			March 31, 2009
Net sales		$	112,486			108,278			76,146			326,222			344,610
Cost of goods sold			99,135			87,974			62,894			267,087			261,989
Selling, general, and administrative expenses			10,008			13,142			10,500			35,873			44,200
Research and development			36			77			246			151			1,122
Restructuring charges			-			(13	)		1,387			(81	)		1,387
Gain on sale of business			-			(23,368	)		-			(22,907	)		-
Goodwill and intangible asset impairment			-			-			144			-			69,704
Operating income (loss)			3,307			30,466			975			46,099			(33,792	)
Other income (expense):
Interest income			4			65			77			205			630
Interest expense, net of capitalized interest			(997	)		(1,101	)		(1,427	)		(3,416	)		(5,596	)
Foreign exchange (loss) gain			(64	)		871			465			3,222			(2,961	)
Other income			546			199			862			738			2,368
Income (loss) before provision for income taxes			2,796			30,500			952			46,848			(39,351	)
Provision for income taxes			1,751			12,568			916			19,702			7,290
Net income (loss)			1,045			17,932			36			27,146			(46,641	)
(Income) losses attributable to noncontrolling interest, net of tax			(529	)		602			901			346			3,022
Net income (loss) attributable to Globe Specialty Metals, Inc.		$	516			18,534			937			27,492			(43,619	)
Weighted average shares outstanding:
Basic			74,320			74,314			63,930			73,239			63,820
Diluted			75,570			75,154			66,896			74,411			63,820
Earnings (loss) per common share:
Basic		$	0.01			0.25			0.01			0.38			(0.68	)
Diluted			0.01			0.25			0.01			0.37			(0.68	)

EBITDA:
Net income (loss)		$	1,045			17,932			36			27,146			(46,641	)
Provision for income taxes			1,751			12,568			916			19,702			7,290
Net interest expense			993			1,036			1,350			3,211			4,966
Depreciation and amortization			5,055			4,901			4,807			14,868			14,740
EBITDA		$	8,844			36,437			7,109			64,927			(19,645	)

GLOBE SPECIALTY METALS, INC.
AND SUBSIDIARY COMPANIES

Condensed Consolidated Statement of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended										Nine Months Ended
		March 31, 2010			December 31, 2009			March 31, 2009			March 31, 2010			March 31, 2009

Cash flows from operating activities:
Net income (loss)		$	1,045			17,932			36			27,146			(46,641	)
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating activities:
Depreciation and amortization			5,055			4,901			4,807			14,868			14,740
Share-based compensation			1,260			1,476			1,508			4,491			4,704
Gain on sale of business			-			(23,368	)		-			(22,907	)		-
Goodwill and intangible asset impairment			-			-			144			-			69,704
Deferred taxes			-			(19	)		471			(74	)		(4,077	)
Changes in operating assets and liabilities:
Accounts receivable, net			(8,709	)		(2,614	)		9,605			(25,788	)		22,666
Inventories			(8,526	)		(6,821	)		(3,281	)		(5,542	)		(15,428	)
Prepaid expenses and other current assets			(3,015	)		5,221			1,121			6,398			(1,761	)
Accounts payable			953			16,263			(12,712	)		22,569			(21,158	)
Accrued expenses and other current liabilities			(3,133	)		(19,507	)		17,961			(20,416	)		16,914
Other			(28,933	)		(1,842	)		(12,204	)		(28,401	)		(8,024	)
Net cash (used in) provided by operating activities			(44,003	)		(8,378	)		7,456			(27,656	)		31,639
Cash flows from investing activities:
Capital expenditures			(6,517	)		(5,660	)		(11,753	)		(16,432	)		(46,507	)
Sale of business, net of cash disposed			-			58,445			0			58,445			-
Held-to-maturity treasury securities			-			-			0			-			2,987
Other investing activities			-			(733	)		(75	)		(733	)		265
Net cash (used in) provided by investing activities			(6,517	)		52,052			(11,828	)		41,280			(43,255	)
Cash flows from financing activities:
Proceeds from warrants exercised			-			1,287			-			1,287			833
Proceeds from UPOs exercised			-			210			-			210			-
Net payments of long-term debt			(3,192	)		(11,391	)		(6,152	)		(19,750	)		(10,856	)
Net borrowings (payments) of short-term debt			21,846			6,384			(3,447	)		29,170			(6,900	)
Sale of common stock			-			-			-			36,456			-
Change in restricted cash			-			-			3,580			-			-
Sale of noncontrolling interest			-			98,462			-			98,329			-
Other financing activities			(583	)		(410	)		35			(1,387	)		(475	)
Net cash provided by (used in) financing activities			18,071			94,542			(5,984	)		144,315			(17,398	)
Effect of exchange rate changes on cash and cash equivalents			5			(5	)		57			(28	)		42
Net (decrease) increase in cash and cash equivalents			(32,444	)		138,211			(10,299	)		157,911			(28,972	)
Cash and cash equivalents at beginning of period			252,231			114,020			55,321			61,876			73,994
Cash and cash equivalents at end of period		$	219,787			252,231			45,022			219,787			45,022

Supplemental disclosures of cash flow information:
Cash paid for interest		$	479			729			1,452			2,198			5,737
Cash paid for income taxes, net of refunds			46,808			6,001			1,213			50,412			9,242

GLOBE SPECIALTY METALS, INC.
AND SUBSIDIARY COMPANIES
Supplemental Statistics
(Unaudited)

	Three Months Ended						Nine Months Ended
	March 31, 2010		December 31, 2009		March 31, 2009		March 31, 2010		March 31, 2009
Shipments in metric tons:
Silicon metal		30,681		28,759		18,564		85,402		80,373
Silicon-based alloys		17,003		15,749		9,729		46,862		47,460
Total shipments^		47,684		44,508		28,293		132,264		127,833

Average selling price ($/MT):
Silicon metal	$	2,380		2,580		2,563		2,536		2,556
Silicon-based alloys		2,011		1,926		2,472		2,008		2,458
Total^	$	2,248	$	2,348	$	2,532		2,349		2,520

Average selling price ($/lb.):
Silicon metal	$	1.08		1.17		1.16		1.15		1.16
Silicon-based alloys		0.91		0.87		1.12		0.91		1.11
Total^	$	1.02		1.07		1.15		1.07		1.14

^ Excludes by-products

GLOBE SPECIALTY METALS INC - FORM 8-K - EX-99.1 - May 12, 2010

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