Globe Specialty Metals Inc. (GSM, Financial) filed Quarterly Report for the period ended 2010-09-30.
Globe Specialty Metals Inc. has a market cap of $1.22 billion; its shares were traded at around $16.39 with a P/E ratio of 44.3 and P/S ratio of 2.6. The dividend yield of Globe Specialty Metals Inc. stocks is 1%.GSM is in the portfolios of Ron Baron of Baron Funds, NWQ Managers of NWQ Investment Management Co, Pioneer Investments, Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates.
Net sales increased $31,894,000, or 30%, from the prior year to $137,352,000 primarily as a result of a 46% increase in metric tons sold, offset by a 13% decline in our average selling price. The increase in metric tons sold resulted in an increase in net sales of $40,447,000 and was related to a 13% increase in silicon metal and a 106% increase in silicon-based alloy metric tons sold. Silicon metal volume sold was higher due to increased demand, which led us to reopen our Niagara Falls, New York facility in November 2009, which contributed approximately 4,400 metric tons, and our Selma, Alabama facility in January 2010, which contributed approximately 4,000 metric tons sold during the first quarter of fiscal year 2011. These increases were offset by the decrease in volume due to the timing of the sale of our Brazilian manufacturing operations on November 5, 2009. Subsequent to this divestiture, remaining Globe Metais sales relate only to the fulfillment of certain retained customer contracts with product purchased from our former Brazilian manufacturing operations at a purchase price equal to our sales price. The increase in silicon-based alloy volume includes the impact of the Core Metals Group Holdings LLC (Core Metals) acquisition, which contributed approximately 10,500 metric tons of ferrosilicon in fiscal year 2011. Additionally, end market demand for ferrosilicon and magnesium ferrosilicon increased in the first quarter of fiscal year 2011 due to the economic recovery, particularly in steel and automotive production. The decline in average selling price resulted in decreased net sales of approximately $13,089,000 and was a result of a 12% decrease in the average selling price of silicon-based alloys and a 7% decrease in the average selling price of silicon metal. The decline in silicon-based alloy pricing was due to the acquisition of Core Metals in the fourth quarter of fiscal year 2010, which resulted in a mix shift towards the production of ferrosilicon, which is our lowest priced alloy and also has the lowest cost of production. The decrease in silicon metal pricing was primarily due to the impact of shipping 49% of our Alloy joint venture output at cost to Dow Corning Corporation (Dow Corning), offset by favorable annual contracts and higher spot pricing in the first quarter of fiscal year 2011. Other revenue increased by $4,536,000 as a result of $4,548,000 of other sales from Core Metals in the first quarter of fiscal year 2011.
The decrease in selling, general and administrative expenses of $512,000, or 4%, was due to a decrease of approximately $1,621,000 at Globe Metais due to the timing of the sale of our Brazilian manufacturing operations, as well as a decrease of $287,000 and $826,000 in bonus and salary expense at GMI and Corporate, respectively, offset by the impact of the acquisition of Core Metals, which increased expense by $755,000, and an increase in audit and other professional fees, including Sarbanes-Oxley Act compliance related expenditures and due diligence costs of $819,000 and $172,000, respectively, at Corporate. Additionally, travel costs increased by approximately $307,000 at Corporate and GMI primarily to support the reopened Niagara Falls and Selma plants, as well as the acquired Core Metals business.
Other (loss) income decreased by $2,476,000 due primarily to a foreign exchange gain of $2,645,000 at Globe Metais in the first quarter of fiscal year 2010. The foreign exchange gain at Globe Metais consisted of foreign exchange gains of $1,829,000, primarily associated with the revaluation of long-term reais denominated tax liabilities, and a gain of $816,000 on our foreign exchange forward contracts. These foreign exchange fluctuations no longer occur following the sale of our Brazilian manufacturing operations on November 5, 2009. The impact of this prior year gain was offset by a year over year increase in income from GMI s Norchem affiliate of $193,000.
Operating income decreased by $767,000 from the prior year quarter to $12,098,000. This decrease was primarily due to lower average selling prices for silicon-based alloys. Cost of goods sold increased by 85%, while volumes increased by only 77%. This caused an increase in the cost per ton sold, which reflects start-up costs of approximately $3,200,000 at our Niagara Falls plant. The addition of Core Metals contributed $755,000 to selling, general and administrative expenses in the first quarter of fiscal year 2011, and the reopening of the Niagara Falls plant resulted in increased travel expenses at GMI.
Operating (loss) income decreased by $2,075,000, or 102%, from the prior year to $(43,000). The decrease was primarily due to the timing of the sale of our Brazilian manufacturing operations, which led to lower sales volumes, as well as the impact of reduced margins on the sale of product purchased from our former Brazilian manufacturing operations. Selling, general and administrative expenses decreased by $1,621,000 primarily due to the timing of the sale of our Brazilian manufacturing operations on November 5, 2009. Results in the first quarter of fiscal year 2010 also included transaction costs, in advance of the sale of the business, of $461,000.
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Globe Specialty Metals Inc. has a market cap of $1.22 billion; its shares were traded at around $16.39 with a P/E ratio of 44.3 and P/S ratio of 2.6. The dividend yield of Globe Specialty Metals Inc. stocks is 1%.GSM is in the portfolios of Ron Baron of Baron Funds, NWQ Managers of NWQ Investment Management Co, Pioneer Investments, Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates.
Highlight of Business Operations:
Income before provision for income taxes totaled $7,212,000 in the quarter ended September 30, 2010, and included start-up costs described above of approximately $3,200,000. This compares to income before provision for income taxes in the preceding quarter ended June 30, 2010 of $7,959,000, which included a pre-tax loss of $3,192,000 from the sale of our Brazilian manufacturing operations, a $1,625,000 pre-tax gain from a retroactive power price adjustment, pre-tax transaction costs of $140,000 and pre-tax start-up costs of $3,105,000.Net sales increased $31,894,000, or 30%, from the prior year to $137,352,000 primarily as a result of a 46% increase in metric tons sold, offset by a 13% decline in our average selling price. The increase in metric tons sold resulted in an increase in net sales of $40,447,000 and was related to a 13% increase in silicon metal and a 106% increase in silicon-based alloy metric tons sold. Silicon metal volume sold was higher due to increased demand, which led us to reopen our Niagara Falls, New York facility in November 2009, which contributed approximately 4,400 metric tons, and our Selma, Alabama facility in January 2010, which contributed approximately 4,000 metric tons sold during the first quarter of fiscal year 2011. These increases were offset by the decrease in volume due to the timing of the sale of our Brazilian manufacturing operations on November 5, 2009. Subsequent to this divestiture, remaining Globe Metais sales relate only to the fulfillment of certain retained customer contracts with product purchased from our former Brazilian manufacturing operations at a purchase price equal to our sales price. The increase in silicon-based alloy volume includes the impact of the Core Metals Group Holdings LLC (Core Metals) acquisition, which contributed approximately 10,500 metric tons of ferrosilicon in fiscal year 2011. Additionally, end market demand for ferrosilicon and magnesium ferrosilicon increased in the first quarter of fiscal year 2011 due to the economic recovery, particularly in steel and automotive production. The decline in average selling price resulted in decreased net sales of approximately $13,089,000 and was a result of a 12% decrease in the average selling price of silicon-based alloys and a 7% decrease in the average selling price of silicon metal. The decline in silicon-based alloy pricing was due to the acquisition of Core Metals in the fourth quarter of fiscal year 2010, which resulted in a mix shift towards the production of ferrosilicon, which is our lowest priced alloy and also has the lowest cost of production. The decrease in silicon metal pricing was primarily due to the impact of shipping 49% of our Alloy joint venture output at cost to Dow Corning Corporation (Dow Corning), offset by favorable annual contracts and higher spot pricing in the first quarter of fiscal year 2011. Other revenue increased by $4,536,000 as a result of $4,548,000 of other sales from Core Metals in the first quarter of fiscal year 2011.
The decrease in selling, general and administrative expenses of $512,000, or 4%, was due to a decrease of approximately $1,621,000 at Globe Metais due to the timing of the sale of our Brazilian manufacturing operations, as well as a decrease of $287,000 and $826,000 in bonus and salary expense at GMI and Corporate, respectively, offset by the impact of the acquisition of Core Metals, which increased expense by $755,000, and an increase in audit and other professional fees, including Sarbanes-Oxley Act compliance related expenditures and due diligence costs of $819,000 and $172,000, respectively, at Corporate. Additionally, travel costs increased by approximately $307,000 at Corporate and GMI primarily to support the reopened Niagara Falls and Selma plants, as well as the acquired Core Metals business.
Other (loss) income decreased by $2,476,000 due primarily to a foreign exchange gain of $2,645,000 at Globe Metais in the first quarter of fiscal year 2010. The foreign exchange gain at Globe Metais consisted of foreign exchange gains of $1,829,000, primarily associated with the revaluation of long-term reais denominated tax liabilities, and a gain of $816,000 on our foreign exchange forward contracts. These foreign exchange fluctuations no longer occur following the sale of our Brazilian manufacturing operations on November 5, 2009. The impact of this prior year gain was offset by a year over year increase in income from GMI s Norchem affiliate of $193,000.
Operating income decreased by $767,000 from the prior year quarter to $12,098,000. This decrease was primarily due to lower average selling prices for silicon-based alloys. Cost of goods sold increased by 85%, while volumes increased by only 77%. This caused an increase in the cost per ton sold, which reflects start-up costs of approximately $3,200,000 at our Niagara Falls plant. The addition of Core Metals contributed $755,000 to selling, general and administrative expenses in the first quarter of fiscal year 2011, and the reopening of the Niagara Falls plant resulted in increased travel expenses at GMI.
Operating (loss) income decreased by $2,075,000, or 102%, from the prior year to $(43,000). The decrease was primarily due to the timing of the sale of our Brazilian manufacturing operations, which led to lower sales volumes, as well as the impact of reduced margins on the sale of product purchased from our former Brazilian manufacturing operations. Selling, general and administrative expenses decreased by $1,621,000 primarily due to the timing of the sale of our Brazilian manufacturing operations on November 5, 2009. Results in the first quarter of fiscal year 2010 also included transaction costs, in advance of the sale of the business, of $461,000.
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