Globe Specialty Metals Inc. (GSM, Financial) filed Quarterly Report for the period ended 2010-05-17.
Globe Specialty Metals Inc. has a market cap of $895.56 million; its shares were traded at around $12.05 with a P/E ratio of 41.55 and P/S ratio of 2.1. GSM is in the portfolios of Ron Baron of Baron Funds.
Net sales increased $36,340,000 from the prior year to $112,486,000 primarily as a result of a 69% increase in tons sold offset by an 11% decline in our average selling price. The increase in tons sold, which represents sales of $49,039,000, resulted from a 65% increase in silicon metal volume and a 75% increase in silicon-based alloy volume. The increase in tons sold of silicon metal was due to additional volume of approximately 5,800 tons produced by the Niagara Falls plant, which reopened in November 2009, driven by demand from our silicones and aluminum end markets. The increase in tons sold of silicon-based alloys was due to higher customer demand from increased steel production driven by higher automobile production and construction spending. Silica fume and other revenue increased by $774,000 as a result of an increase in production levels and sales of by-products.
The $36,241,000, or 58%, increase in cost of goods sold was a result of a 69% increase in tons sold, which contributed $43,105,000 to cost of goods sold, offset by a 7% decline in our cost per ton sold. This decrease was the result of several factors, including our overall cost reduction programs, the curtailment of Solsil production, which lowered cost of goods sold by $773,000 and tons sold by only 33, and a mix shift within silicon-based alloys, which lowered cost of goods sold by approximately $1,800,000. These cost decreases were partially offset by lower capacity utilization during the quarter and start-up costs of approximately $3,000,000, primarily at our Niagara Falls and Selma plants.
The decrease in selling, general and administrative expenses of $492,000 was primarily due to the timing of the sale of our Brazilian manufacturing operations, which resulted in a $1,700,000 expense reduction, offset by an increase of $537,000 in wages, benefits and bonuses at GMI, and transaction costs of $521,000 associated with the acquisition of Core Metals.
Net interest expense decreased by $357,000 due the timing of the sale of our Brazilian manufacturing operations on November 5, 2009, which resulted in a reduction in interest expense of $588,000, offset by higher interest expense of $292,000 at GMI due primarily to an increase in our interest rate swap liability in the third quarter of fiscal year 2010.
Other income decreased by $845,000 due primarily to a one-time gain from the settlement of litigation at GMI of $1,002,000 and an $851,000 gain at Globe Metais on our foreign exchange forward contracts, both of which occurred in the third fiscal quarter of 2009. We did not have any foreign exchange forward contracts in the third fiscal quarter of 2010. These two prior year gains were offset by year-over-year increases in income from GMI s Norchem affiliate of $404,000, hydropower dividends at Globe Metales of $398,000 due to the timing of the annual dividend, and a year-over-year decrease in losses of $257,000 from the revaluation of real denominated assets and liabilities.
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Globe Specialty Metals Inc. has a market cap of $895.56 million; its shares were traded at around $12.05 with a P/E ratio of 41.55 and P/S ratio of 2.1. GSM is in the portfolios of Ron Baron of Baron Funds.
Highlight of Business Operations:
Income before provision for income taxes totaled approximately $2,796,000 in the quarter and included start-up costs described above of approximately $3,000,000. This compares to income before provision for income taxes in the preceding quarter ended December 31, 2009 of approximately $30,500,000, which included a pre-tax gain of approximately $23,368,000 from the sale of our Brazilian manufacturing operations, and a $952,000 pre-tax profit in the same quarter in the prior year.Net sales increased $36,340,000 from the prior year to $112,486,000 primarily as a result of a 69% increase in tons sold offset by an 11% decline in our average selling price. The increase in tons sold, which represents sales of $49,039,000, resulted from a 65% increase in silicon metal volume and a 75% increase in silicon-based alloy volume. The increase in tons sold of silicon metal was due to additional volume of approximately 5,800 tons produced by the Niagara Falls plant, which reopened in November 2009, driven by demand from our silicones and aluminum end markets. The increase in tons sold of silicon-based alloys was due to higher customer demand from increased steel production driven by higher automobile production and construction spending. Silica fume and other revenue increased by $774,000 as a result of an increase in production levels and sales of by-products.
The $36,241,000, or 58%, increase in cost of goods sold was a result of a 69% increase in tons sold, which contributed $43,105,000 to cost of goods sold, offset by a 7% decline in our cost per ton sold. This decrease was the result of several factors, including our overall cost reduction programs, the curtailment of Solsil production, which lowered cost of goods sold by $773,000 and tons sold by only 33, and a mix shift within silicon-based alloys, which lowered cost of goods sold by approximately $1,800,000. These cost decreases were partially offset by lower capacity utilization during the quarter and start-up costs of approximately $3,000,000, primarily at our Niagara Falls and Selma plants.
The decrease in selling, general and administrative expenses of $492,000 was primarily due to the timing of the sale of our Brazilian manufacturing operations, which resulted in a $1,700,000 expense reduction, offset by an increase of $537,000 in wages, benefits and bonuses at GMI, and transaction costs of $521,000 associated with the acquisition of Core Metals.
Net interest expense decreased by $357,000 due the timing of the sale of our Brazilian manufacturing operations on November 5, 2009, which resulted in a reduction in interest expense of $588,000, offset by higher interest expense of $292,000 at GMI due primarily to an increase in our interest rate swap liability in the third quarter of fiscal year 2010.
Other income decreased by $845,000 due primarily to a one-time gain from the settlement of litigation at GMI of $1,002,000 and an $851,000 gain at Globe Metais on our foreign exchange forward contracts, both of which occurred in the third fiscal quarter of 2009. We did not have any foreign exchange forward contracts in the third fiscal quarter of 2010. These two prior year gains were offset by year-over-year increases in income from GMI s Norchem affiliate of $404,000, hydropower dividends at Globe Metales of $398,000 due to the timing of the annual dividend, and a year-over-year decrease in losses of $257,000 from the revaluation of real denominated assets and liabilities.
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