Globe Specialty Metals Inc. (GSM, Financial) filed Quarterly Report for the period ended 2009-12-31.
Globe Specialty Metals Inc. has a market cap of $722.39 million; its shares were traded at around $9.72 with and P/S ratio of 1.69. GSM is in the portfolios of RS Investment Management, Chuck Royce of ROYCE & ASSOCIATES.
Income before taxes totaled approximately $30,500,000 in the quarter, but included a gain on sale of Brazil of approximately $23,400,000 and start-up costs described above of approximately $3,900,000. This compares to income before taxes in the preceding quarter ended September 30, 2009 of approximately $13,600,000 and a loss of approximately $65,600,000, including an impairment charge of approximately $69,600,000, in the same quarter in the prior year. The quarter ended December 31, 2009 also included approximately a $700,000 charge for impairment of certain furnaces at our Yonvey electrode plant.
Net sales decreased $11,029,000 from the prior year to $108,278,000 primarily as a result of an 8% decline in our average selling price while tons sold held nearly constant. The decrease in average selling price, which represents sales of $8,532,000, resulted from a 24% decline in silicon-based alloy average pricing, offset by a 2% increase in silicon metal pricing. This large decline in silicon-based alloy pricing was due to lower customer demand from reduced steel production driven by lower automobile production and construction spending, price reductions to retain volume in the increasingly competitive alloy market and a mix shift towards ferrosilicon, which is our lowest priced alloy. The slight increase in tons sold resulted in increased net sales of $582,000. Silica fume and other revenue decreased by $3,079,000 as a result of a decline in production levels and sales of by-products.
The decrease in selling, general and administrative expenses of $6,526,000 was primarily due to the write-off of $2,527,000 of deferred offering costs in the second quarter of fiscal year 2009, caused by a more than 90 day delay in our initial public offering, a decrease in bonus and accruals at Corporate of $1,550,000, the timing of the sale of our Brazilian plant, which resulted in a $1,100,000 expense reduction, a $500,000 decrease in bonuses at GMI, a decrease of approximately $592,000 at Yonvey due to lower audit related professional fees and aggressive cost control efforts, and a $314,000 reduction in audit and audit related support fees at Corporate. These decreases were offset by an increase in share-based compensation expense of $683,000.
Gain on sale of Globe Metais recorded in the second quarter of fiscal year 2010 was approximately $23,368,000 and was net of transaction expense of $2,238,000. The gain was associated with the sale of our Brazilian operations on November 5, 2009 for net cash proceeds of approximately $65,600,000, which represented a purchase price of $75,000,000 less income taxes and transaction expenses.
Other income (loss) increased by $2,525,000 due to a year-over-year foreign exchange gain of $2,988,000 driven by currency hedges on the Brazilian real, offset by a decrease of $218,000 of other income related to royalties on the lease of certain property at GMI. Globe Metais had a year-over-year gain of $3,706,000 primarily due to a gain associated with the revaluation of long-term real denominated tax assets. Corporate had a year-over-year loss of $664,000 related to real denominated liabilities.
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Globe Specialty Metals Inc. has a market cap of $722.39 million; its shares were traded at around $9.72 with and P/S ratio of 1.69. GSM is in the portfolios of RS Investment Management, Chuck Royce of ROYCE & ASSOCIATES.
Highlight of Business Operations:
Net sales for the quarter ended December 31, 2009 increased approximately $2,800,000, or 3%, from the preceding quarter ended September 30, 2009, despite a decline in sales of approximately $2,200,000 from Brazil as a result of the sale of Globe Metais to Dow Corning and a decline of approximately $2,500,000 in sales as a result of the Alloy joint venture, which is approximately the difference between providing material at cost under the joint venture agreement and the price material could have been sold at current market prices. The average selling price of silicon metal decreased by 3% in the quarter primarily as a result of the Alloy joint venture, which provided Dow Corning with 49% of the Alloy plants output at cost. The average price of silicon-based alloys decreased by 8% in the quarter as a result of a higher concentration of lower-price ferrosilicon sales and lower calcium silicon prices. Tons shipped during the quarter increased 11% as customer demand continues to accelerate. Net sales were only approximately $11,000,000 below the same quarter in the prior year primarily due to a decline in sales of approximately $7,800,000 from Brazil.Income before taxes totaled approximately $30,500,000 in the quarter, but included a gain on sale of Brazil of approximately $23,400,000 and start-up costs described above of approximately $3,900,000. This compares to income before taxes in the preceding quarter ended September 30, 2009 of approximately $13,600,000 and a loss of approximately $65,600,000, including an impairment charge of approximately $69,600,000, in the same quarter in the prior year. The quarter ended December 31, 2009 also included approximately a $700,000 charge for impairment of certain furnaces at our Yonvey electrode plant.
Net sales decreased $11,029,000 from the prior year to $108,278,000 primarily as a result of an 8% decline in our average selling price while tons sold held nearly constant. The decrease in average selling price, which represents sales of $8,532,000, resulted from a 24% decline in silicon-based alloy average pricing, offset by a 2% increase in silicon metal pricing. This large decline in silicon-based alloy pricing was due to lower customer demand from reduced steel production driven by lower automobile production and construction spending, price reductions to retain volume in the increasingly competitive alloy market and a mix shift towards ferrosilicon, which is our lowest priced alloy. The slight increase in tons sold resulted in increased net sales of $582,000. Silica fume and other revenue decreased by $3,079,000 as a result of a decline in production levels and sales of by-products.
The decrease in selling, general and administrative expenses of $6,526,000 was primarily due to the write-off of $2,527,000 of deferred offering costs in the second quarter of fiscal year 2009, caused by a more than 90 day delay in our initial public offering, a decrease in bonus and accruals at Corporate of $1,550,000, the timing of the sale of our Brazilian plant, which resulted in a $1,100,000 expense reduction, a $500,000 decrease in bonuses at GMI, a decrease of approximately $592,000 at Yonvey due to lower audit related professional fees and aggressive cost control efforts, and a $314,000 reduction in audit and audit related support fees at Corporate. These decreases were offset by an increase in share-based compensation expense of $683,000.
Gain on sale of Globe Metais recorded in the second quarter of fiscal year 2010 was approximately $23,368,000 and was net of transaction expense of $2,238,000. The gain was associated with the sale of our Brazilian operations on November 5, 2009 for net cash proceeds of approximately $65,600,000, which represented a purchase price of $75,000,000 less income taxes and transaction expenses.
Other income (loss) increased by $2,525,000 due to a year-over-year foreign exchange gain of $2,988,000 driven by currency hedges on the Brazilian real, offset by a decrease of $218,000 of other income related to royalties on the lease of certain property at GMI. Globe Metais had a year-over-year gain of $3,706,000 primarily due to a gain associated with the revaluation of long-term real denominated tax assets. Corporate had a year-over-year loss of $664,000 related to real denominated liabilities.
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