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CCME --- will be nice once they get some real analysts on these calls =S
LPIH -- They filed last year on 5/15. Does that mean that we should be looking for the 10Q tomorrow or Monday?
Congrats, Fernando! Thank you for all of your contributions to this board.
CCME -- Do we know that new buses have not been added to their network recently? I doubt they will issue PRs if their current bus partners simply add more buses to the existing network. I seem to remember the number of buses increasing last year in Q3/Q4 without PRs given at each incremental increase.
GS China Economics piece out today. Here are the bullet points
Assessing risks posed by potential property price
corrections and government over-borrowing in China
--Rapid increases in property prices and the acceleration in infrastructure investment with local government guarantees in the past 18 months have raised risk to household and government balance sheets in China.
--We believe the risks of a meaningful price decline on the economy are mitigated by 1) low leverage used in property purchases; 2) conservative borrowing relative to income growth and accumulated savings from the past; and 3) better affordability when the actual income level is considered.
--In our view, despite local governments’ reliance on land sales for revenue, the sustainability of the fiscal position of the government in aggregate terms is still solid if we consider: 1) the large pool of assets on the government’s balance sheet; and 2) the rapid increase in fiscal revenue and government savings.
--The challenge for the Chinese government in the face of rapid urbanization remains how to choose timely and effective countercyclical policy measures to keep a stable pace of growth, as well as intervention measures to prevent long-term risks.
Anyone else manage to grab a few more of these yesterday?
I should also point out that if you're going to use 29.25MM fd shares you should also consider the fact that they currently have around $75MM in net cash on their balance sheet.
GS general market thoughts:
This is their daily market commentary, but I thought I would post it given it includes comments on China.
"
In the last couple of days the market selloff has become more anti-cyclical and more indiscriminate...
With fiscal concerns in the euro-area periphery centre stage, weakness was chiefly focused on related assets.
But, the macro data, our primary lodestar, has been extremely encouraging in many parts of the world.
So the collateral damage wrought by the less focussed selloff creates opportunities and entry points for core positions where the fundamental arguments are still sound.
In equities, Russian and Chinese equities, where we have top trade recommendations ...
... and US Consumer and German equities look interesting from this perspective.
We have been stopped out of our short Dec-10 3mth Eonia trade recommendation.
ECB meeting and UK General Election in focus today.
1. Overnight Markets and Data
Markets have continued to trade weakly overnight, with US markets closing down about half a percent, but above its intra-day lows. Equity volatility also moved up across the term structure, and credit continued to widen. US treasuries continue to remain well supported, and at around 3.5%, the 10Y are now at our 6 month forecast.
Europe continues to be in the eye of the storm, with the Eur weakening to 1.29 yesterday and seeing further pressure this morning, and major equity indices also continue to be hit after a weak session in Asia. The market volatility also took us out of our short positions at the front-end of Eurozone forward curve. We introduced a short Dec-10 3mth EONIA recommendation reflecting our view of an early removal of “stealth easing” relative to market pricing at that time. The recent market turbulence has pushed the front end of the curve in the opposite direction and our trade recommendation has been stopped out with a potential loss of 25bps.
Today’s ECB meeting will be a key market focus, but as Erik Nielsen pointed out yesterday, despite all the market rumours to the contrary, we do not expect any changes in polices – no rate cut, no change in repos, and no announcement on purchases of sovereign securities. But we do expect that recognising the huge uncertainties in the market Trichet is unlikely to categorically rule out anything. The Czech central bank also meets today, where we expect no change in the policy rate. In an otherwise light day for macro data, US jobless claims will be important to watch, especially for any signs of further moderation (as consensus expects) after the recent stall.
Polls have opened in the UK General Election. The polls close at 10pm UK time (5pm EST), and the first exit poll is published immediately after the voting booths close. There is a great deal of market focus on the results given the very close opinion poll, and Ben Broadbent’s note from yesterday summarizes the main things to watch for. On the markets side we are exposed via our short EURGBP tactical recommendation, which has made steady gains.
2. An Orderly Selloff No More
In the last couple of days the market selloff has become somewhat more indiscriminate. Hitherto, with fiscal concerns in the euro-area periphery centre stage, weakness was chiefly focused on related assets. Sovereign bond spreads in the euro-area periphery widened, the trade-weighted EUR was under pressure and in equities, euro-area financials along with Spanish equities bore the brunt of the selloff.
In the US equities had held up well, supported by continued evidence of domestic economic strength – personal consumer spending data released on Monday showed solid gains for March and we expect another firm labour market report at the end of the week (even though at +175k we are somewhat below consensus of +200k for payrolls) – and consumer-facing equities there hovered not far off their highs. And in Asia too, regional equities were mainly swinging to the tune of strong cyclical data on the one hand – strong China PMI and accelerating Korean exports most recently – and tightening policy on the other.
Even within Europe, there were clear pockets of strength as we pointed out in a daily last week (“German equities shine in lagging Euro-area markets”, April 27, 2010). Parts of the equity universe, that were more clearly leveraged into the strength of the global industrial cycle – indices such as the Swedish OMX and German DAX, for example – had been largely unimpaired until the last couple of days.
But as concerns about the severity of the required Greek fiscal adjustment have grown, and as these concerns have spread, the nature of the market selloff has changed qualitatively. The consequent damage has been much less focused and has taken on a broader anti-cyclical tilt. In the last couple of days a diverse range of assets, arguably at arms’ length from the debt problems in the euro-area periphery, have been hard hit. Within Europe, DAX is down c. 3.5% and the MDAX and the OMX are down about 5.5% in the last couple of days. Elsewhere, our UK Cyclical Growth basket is down 2.5%, oil is down 6$ and back below 80$/bbl, and Russian equities (one of our Top Trade recommendations) are down 8%. Copper is also down significantly although China tightening concerns may be weighing here too, and in Asia, a number of cyclical FX crosses weakened against the Yen, although there has been comparatively greater pressure on the European EM periphery like HUF, CZK and PLN.
3. Collateral damage also provides opportunities
From the perspective of our macro trading stance, two points are relevant here. First, we continue to view the Greek fiscal problems, and the required adjustments, as very distinct to those of Portugal, Spain and the others (and an order of magnitude less severe). Of course, these fears can spread in the market without sufficiently fine distinctions and these risks are always hard to handicap, but this is not our baseline expectation. Second, the macro data, our primary lodestar, has been extremely encouraging in all parts of the world. Our Global Leading Indicator summarizes the health of the global industrial cycle, and the momentum here has been accelerating for the last couple of months.
So the collateral damage wrought by the less focused selloff of the past few days may well create attractive opportunities and entry points for core positions where the fundamental arguments are still sound. As Dominic Wilson highlighted yesterday in the Global Market Views, the risk is that one is too early here, but the risk-reward here is better now than for several weeks. Below we highlight a few areas of the equity market where we think this is true.
US Consumer Growth: We are once again recommending long positions in our US Wavefront Consumer Growth Basket. As discussed in Tradewinds yesterday, Consumer cyclicals look to still have significantly more upside left relative to the still improving macro data, and the sharp US market selloff – owing to global worries – made this dislocation even more evident. Despite fewer proximate counterweights to the data strength here, this position was also hit by the selloff over the past couple of days. We may very well get some quick resolution here, with a significant set of data points upcoming: weekly UI claims and same-store retail sales, and, on Friday, the April employment situation report.
Russian equities: The manufacturing PMI here moved up to 52.1 in April from 50.2 in March. This is the highest point since May 2008. With inflation staying extremely benign, our economists believe that this will allow for a further 50bp in rate cuts. So the macro backdrop here continues to be extremely supportive, and we continue to like our recommended exposure via the Top Trade here.
German equities: The case for German equities rests on the twin considerations of strong leverage into a global industrial cycle largely unimpaired by current economic worries, coupled with the (Greece-induced) easier financial conditions. Indeed, from peak levels only about six months ago the trade-weighted euro has depreciated by more than 10% and 10year bond yields at around 2.8% are back to the lows reminiscent of March 2009. This should constitute a significant boost to corporates that restructured when the euro was much stronger, and it is noticeable that even in this most recent downdraft both the DAX and the MDAX have outperformed their euro-area analogues.
Further afield, China-linked assets such as copper and H-Shares have also been hit in the crosswinds, but here fears of continued China tightening may be as relevant as the Euro-area fiscal problems. Our commodities team recently re-iterated their bullish view on copper, viewing the current dip as a buying opportunity. And we continue to recommend Chinese equities via our recently initiated top trade: the momentum of growth continues to be solid in line with the latest PMI, and while the ongoing tightening cycle is clearly a headwind here, as Mike Buchanan points out in the latest Asian Economics Analyst, this is still a “friendly tightening” aimed at policy normalisation rather than the more nasty variety that seeks to drive growth below trend to fight entrenched inflation."
That's correct. It sounds like they are moving towards selling more copper wire where the margins may not be as high as CCA, but the return on invested capital is higher since it has a faster production time.
@abh3vt RE: LIWA --
Regarding point 1, please listen to LIWA's cc from yesterday. They are not exposed to the price of copper since they purchase the copper and quote their final sales prices to their customers at the time orders are placed, thereby passing the commodity price risk to the customer. They talked about this issue during the Q&A as well as adding how several of their customers do their own hedging in the futures market.
A decent contrarian indicator:
Andrew26 starts posting here again. Don't take it the wrong way mate, but the last time you were this active on the board with bearish posts was in early Feb. =)
LIWA -- solid numbers and guidance. CC starts in 20 mins
Individuals interested in participating in the conference call may do so by dialing 1-877-941-4778 toll free from the U.S. or Canada, or 1-480-629-9763 from outside the U.S. Those interested in listening to the conference call live via the Internet may do so by visiting the Investor Relations section of the Company's Web site at: http://www.lihuaintl.com/Investor_Relations/Events_Presentations.html .
An uptick on the SSE today.
Obviously to soon to tell if there are sustainable bids coming in but certainly better than another red day (or green in China).
Intrinsic value of the common is probably better calculated by using the price implied by the warrants given the relative liquidity of the common versus the warrants.
I agree ... poor wording on their part but they were undoubtedly just referring to the earnings PR, although I do appreciate being able to go through the statements for a few hours before the call.
I think they probably just wanted to give people a chance to really go through the filing prior to the call
The main difference is that I'm using a f/d share count of 26M for 2009 which included the outstanding warrants, as well.
Adam Re:CCLWF -
Your point is spot on. People have certainly adopted more of a wait and see attitude given the new measures of the past few weeks.
That said, asking prices don't seem to be dropping much yet based upon cursory glances at the ads in local real estate offices. I live in Shenzhen, so the market here (particularly at the very high end) got bid up quite a bit although more middle class apartments didn't see as dramatic a rise but certainly a rise nonetheless. As the investors and speculators cool to the market I do expect prices here in the mid range to fall 10-15% from their highs, but I also expect the market to catch a bid around that point since there is quite a large population of natural home buyers in this area and not a great deal of new mid to low end residential construction going on within the city limits. As previous posters have also pointed out, incomes are certainly on the rise as well and that should help to offer support.
While I don't have any first hand knowledge of the situation in 2nd and 3rd tier cities, my sense is that their situation is more or less similar.
There's no question, the market for luxury properties in Beijing, Shanghai, and here will get hit, but I don't think the impact will be as great on the middle and low end of the market. Places like Hainan which also saw quite an investor frenzy in the past 6 months or so will also probably take a hit.
Q1 CC on May 5:
DANYANG, China, May 3 /PRNewswire-Asia/ -- Lihua International, Inc., (Nasdaq:LIWA - News) ("Lihua" or the "Company"), a leading Chinese developer, designer, manufacturer, marketer and distributor of low cost, high quality alternatives to pure copper superfine and magnet wire, as well as copper rod products, today announced that it will report financial results for the first quarter ended March 31, 2010 on Wednesday, May 5, 2010, before the start of trading in the U.S.
The Company will host a conference call to discuss the results on Wednesday, May 5, 2010 at 8:00 a.m. Eastern time. Interested parties may access the conference call by dialing 1-877-941-4778 in the U.S. and Canada, or 1-480-629-9763 internationally.
For those unable to participate, an audio replay of the call will be available beginning approximately one hour after the conclusion of the live call through May 12, 2010. The audio replay can be accessed by dialing 1-800-406-7325 from the U.S or Canada, or 1-303-590-3030 internationally, and entering access ID No. 4292292.
The call will be also be available as a live, listen-only webcast under the "Events and Presentations" page on the "Investor Relations" section of the Company's website at http://www.lihuaintl.com/Investor_Relations/Events_Presentations.html . Following the live webcast, an online archive will be available for 90 days.
About Lihua International, Inc.
Lihua International, through its two wholly-owned subsidiaries, Lihua Electron and Lihua Copper, is a leading value-added manufacturer of copper replacement products for China's rapidly growing magnet and fine wire market. Lihua is one of the first vertically integrated companies in China to develop, design, manufacture, market and distribute lower cost, high quality, alternatives to pure copper magnet wire. Lihua's products include copper-clad aluminum wire ("CCA") and recycled scrap copper wire and are sold in China either directly to manufacturers or through distributors in the wire and cable industries and manufacturers in the consumer electronics, white goods, automotive, utility, telecommunications and specialty cable industries. Lihua's corporate and manufacturing headquarters are located in the heart of China's copper industry in Danyang, Jiangsu Province. Additional company information can be found at http://www.lihuaintl.com .
To be added to the Company's email distribution for future news releases, please send your request to lihua@tpg-ir.com .
For more information, please contact:
The Piacente Group, Inc.
Investor Relations
Brandi Floberg or Lee Roth
Tel: +1-212-481-2050 +1-212-481-2050
Email: lihua@tpg-ir.com
No, that's fall in sales volumes. As a homeowner here, I can vouch for that
Hi Adam,
Thank you for sharing your thoughts and research with the community on this board. I am wondering what your current thoughts are on LPIH. I notice that it no longer appears on your radar and did not make your top stock list in the recent CGS board vote.
It seems that the current pps given their guidance as well as a near-term uplist still make this an attractive pick. Please share your thoughts and thank you again for maintaining this board.
-Ken
Shorting of CCME can at least still be potentially explained by Starr delta hedging their warrants which are only 17% from the call back price
No question.
I also received a call from Lee Roth at TPG who confirmed the gross margin numbers that I backed out of the 10K.
Thanks for that, I see on page 30 they show the income statement with line items breaking out the wire sales from the copper rod sales.
It looks as though the gross margins are around 28% on the aggregated wire sales and ~10% for the copper rod.
Hi Chad, no worries regarding the posts. I thought it was a shame that there wasn't more activity on this board.
I'm also curious as to the margin breakdowns and have sent an email to Lihua's internal IR. I'll post here when I receive a response.
Ken
LIWA prospectus and 10K
Prospectus from April 2010 financing: http://www.sec.gov/Archives/edgar/data/1399521/000114420410019251/v180562_424b5.htm
2009 10K: http://www.sec.gov/Archives/edgar/data/1399521/000114420410016785/v178648_10k.htm
LIWA 2009 results and 2010 guidance:
DANYANG, China, March 31 /PRNewswire-Asia/ -- Lihua International, Inc. (Nasdaq:LIWA - News) ("Lihua" or the "Company"), a leading Chinese developer, designer, manufacturer, marketer and distributor of low cost, high quality alternatives to pure copper superfine and magnet wire, as well as copper rod products, today announced financial results for the fourth quarter and 12 months ended December 31, 2009.
Fourth Quarter Financial Highlights
-- Sales increased 367% year-over-year to $51.3 million.
-- Gross profit increased 178% year-over-year to $10.9 million.
-- Net income increased 275% to $7.3 million, or $0.30 per share, compared
with $1.9 million, or 0.13 per share in the fourth quarter of 2008. Net
income for the fourth quarter of 2009 included a $0.5 million non-cash
charge for the change in fair value of warrants issued to investors in
conjunction with the Company's issuance of convertible Preferred Stock
in October 2008. Excluding the non-cash charge, non-GAAP net income
for the 2009 fourth quarter was $7.7 million, or $0.32 per share.
-- Adjusted EBITDA increased 227% year-over-year to $10.0 million.(1)
-- Strong balance sheet, with $34.6 million in cash and cash equivalents
as of December 31, 2009.
(1) Adjusted EBITDA is a non-GAAP measurement that the Company uses as
a metric to provide information about Lihua's operating trends.
Lihua defines adjusted EBITDA as net income before discontinued
operations, interest expense, income taxes, depreciation and
amortization, non-operating income (expense), and non-cash share-
based compensation expenses.
Full-Year 2009 Financial Highlights
-- Full-year 2009 sales increased 223% to $161.5 million.
-- Full-year 2009 gross profit increased 116%, to $36.2 million, or 22.4%
of sales, compared with $16.8 million, or 33.6% of sales in 2008.
-- Full-year net income improved 43% to $16.8 million, or $0.88 per
diluted share, compared with net income of $11.7 million, or $0.70 per
share in 2008. Net income for 2009 included an $8.8 million non-cash
charge for the change in fair value of warrants issued to investors in
conjunction with the Company's issuance of convertible Preferred Stock
in October 2008. Excluding the non-cash charge, Non-GAAP net income
for the year was $25.6 million, or $1.34 per diluted share.
-- Adjusted EBITDA increased 118.3% to $33.0 million, compared with 2008.
2009 and Recent Business Highlights
-- Began production on four new proprietary high speed manufacturing lines
in September 2009 to increase annual CCA wire and copper wire capacity
from 18,000 tons to 25,500 tons.
-- Began production on two new high-speed copper magnet wire and copper
fine wire production lines in February 2010. Lihua also announced plans
to add four additional production lines by end of first half 2010 to
increase annual production capacity of copper wire to 25,000 tons.
-- Announced plans to add four new high-speed CCA wire production lines in
2010 to increase annual CCA wire production capacity from 7,500 tons to
10,000 tons by the end of 2010.
-- Completed initial public offering on NASDAQ on September 10, 2009 for
net proceeds of $7.9 million.
"In 2009 we more than doubled our annual CCA and copper wire sales and demonstrated clear growth across key operating metrics," said Jianhua Zhu, Chairman and Chief Executive Officer of Lihua. "We believe this growth reflects the continued demand for pure copper alternatives in a broad range of end markets, as well as heightened contribution from our copper recycling facility, which accounted for approximately 75% of our total sales in 2009. Since we launched our copper recycling business in the first quarter of 2009, it has become an integral part of our business and enabled us to capture new market share as we can now compete in the broader market as a preferred, low-cost copper alternative provider.
"In line with our growth strategy, we continue to expand our business operations. In February we launched the first two of our 10 new production lines planned for 2010, which we believe will increase our production capacity by approximately 40%. We expect that the addition of these lines will improve our gross margin profile, as it will enable us to convert a larger portion of our recycled copper rod products into higher margin superfine and copper magnet wire products and increase the production capacity of our higher margin CCA wire business. With these expansion plans in place, we expect to increase our gross profit by approximately 30-35% and our non-GAAP net income by approximately 35-40% in 2010," Mr. Zhu concluded.
Fourth Quarter 2009 Financial Results
Sales for the fourth quarter of 2009 increased 367% to $51.3 million, compared with sales of $11.0 million in the fourth quarter of 2008. The increase in sales was driven by strong market demand for Lihua's CCA and copper wire products, an increase in the average selling price of copper wire and copper rod products based on an increase in the average price of copper, an increase in production capacity and the addition of Lihua's copper recycling business, which commenced operations at the end of the first quarter of 2009.
Gross profit for the fourth quarter of 2009 was $10.9 million, or 21% of sales. This compares with gross profit of $3.9 million, or 36% of sales, for the fourth quarter of 2008. The year-over-year decrease in gross margin was primarily due to the addition of the copper recycling operation to Lihua's product mix, which produces lower margin copper rod. In March of 2009, Lihua commenced production of recycling scrap copper into copper rod with a consistently high purity content, which meets both government and industry standards for pure copper. Due to current drawing and enameling capacity constraints, Lihua can process only a portion of this copper rod into value added fine and super fine copper wire products and sells the remaining copper rod into the market at a lower gross margin. Lihua expects gross margins to increase in future periods as it continues to ramp up the conversion of copper rod products into higher margin super fine and copper magnet wire products. Gross profit dollars per ton increased 4% on a sequential quarter basis to $1,672 in the fourth quarter of 2009 from $1,613 per ton in the third quarter of 2009.
Selling, general and administrative (SG&A) expenses for the fourth quarter of 2009 were $1.7 million, compared with $1.2 million for the same period in 2008. The increase in SG&A for the 2009 period was attributable to increased costs related to product distribution and insurance as a result of expanded business volume, increased expenses associated with being a public company and expenses associated with expansion of the Company's scale of operations.
Interest income for the fourth quarter of 2009 was $36,000, compared with $40,000 for the fourth quarter of 2008. Interest expense for the fourth quarter of 2009 was $54,000, compared with $162,000 for the same period in the prior year. The decrease in interest expense was mainly due to the repayment of short term bank loans, which were used for working capital purposes.
For the three months ended December 31, 2009, the provision for income tax expense was $1.5 million, compared with $382,000 for the three months ended December 31, 2008. The effective tax rate ("EIT") for the 2009 and 2008 periods was 17%.
For the fourth quarter of 2009, Lihua's other comprehensive income including foreign currency translation adjustment gains was $20,635, compared with a loss of $(183,546) in the fourth quarter of 2008. The foreign currency translation adjustment is based on the average exchange rate of the RMB compared with the US dollar in the respective reporting period.
Net income for the fourth quarter of 2009 was $7.3 million, or $0.30 per share based on 24.2 million weighted average shares outstanding. This compares with net income of $1.9 million, or $0.13 per share based on 15.3 million weighted average shares outstanding during the same period in 2008. Excluding a non-cash charge of $455,000 related to the fair value of warrants, non-GAAP net income increased 299% in the fourth quarter of 2009 to $7.7 million, or $0.32 per share, compared with the same period in 2008.
Adjusted EBITDA for the three months ended December 31, 2009 increased by 227% to $10.0 million, compared with the same period in the prior year.
Balance Sheet
As of December 31, 2009, Lihua had $34.6 million in cash and cash equivalents, compared with $26.0 million as of December 31, 2008.
As of December 31, 2009, Lihua had total debt of $2.2 million, which relates to short-term bank loans used for working capital purposes. This compares with $6.1 million as of December 31, 2008.
Outlook
Lihua is targeting 2010 gross profit of $47.1 million to $48.9 million and non-GAAP net income of $34.6 million to $35.8 million, representing year-over-year growth of 30-35% and 35-40%, respectively. The Company expects that 2010 growth will be largely the result of continued strong demand in China for recycled copper and copper alternatives in the household appliance, consumer white goods and infrastructure markets.
In addition to steadily expanding its CCA wire production capacity, Lihua is committed to the growth of its scrap copper recycling business, to meet strong market demand. In order to better meet this expected growth in demand, Lihua plans to add a total of 10 new proprietary high-speed production lines in 2010, which will increase its annual capacity by nearly 40%.
In February, the company completed the first two new copper wire production lines, and anticipates that it will complete the build out of four additional copper wire production lines during the first half of 2010. These six new lines will bring Lihua's annual copper magnet and copper fine wire production capacity to 25,000 tons from approximately 18,000 tons at the end of 2009. Lihua expects to launch the remaining four production lines during the second half of 2010, which will bring its CCA fine and magnet wire capacity to 10,000 tons annually, compared with current annual capacity of 7,500 tons. The Company anticipates funding these capacity increases from existing cash on the balance sheet and operating cash flow generated in 2010.
Conference Call and Webcast
Management of Lihua International will host a conference call today, Wednesday, March 31, 2010 at 8:00 a.m. Eastern time to discuss fourth quarter and full-year 2009 financial results.
Individuals interested in participating in the conference call may do so by dialing 1-877-941-2322 begin_of_the_skype_highlighting 1-877-941-2322 end_of_the_skype_highlighting begin_of_the_skype_highlighting 1-877-941-2322 end_of_the_skype_highlighting toll free from the U.S. or Canada, or 1-480-629-9715 begin_of_the_skype_highlighting 1-480-629-9715 end_of_the_skype_highlighting from outside the U.S. Those interested in listening to the conference call live via the Internet may do so by visiting the Investor Relations section of the Company's Web site at: http://www.lihuaintl.com/Investor_Relations/Events_Presentations.html .
A telephone replay will be available for 48 hours following the conclusion of the call by dialing 1-800-406-7325 begin_of_the_skype_highlighting 1-800-406-7325 end_of_the_skype_highlighting from the U.S. or Canada, or 1-303-590-3030 begin_of_the_skype_highlighting 1-303-590-3030 end_of_the_skype_highlighting from outside the U.S., and entering access ID number 4272185. A webcast replay will be available for 90 days.
About Non-GAAP Financial Measures
EBITDA Calculation For
Three Months Ended 12 Months Ended
December 31, December 31,
2009 2008 2009 2008
Net income $7,269,849 $1,939,273 $16,779,276 $11,701,879
Depreciation
and amortization 680,493 243,281 1,652,863 812,339
Share-based
compensation
expense 79,537 367,250 331,440 367,250
Change in fair
value of
warrants 455,344 -- 8,831,161 --
Interest
income (35,998) (40,315) (173,807) (68,353)
Interest
expenses 53,730 162,203 335,335 514,950
Provision for
income tax 1,486,220 381,550 5,247,647 1,792,681
EBITDA 9,989,175 3,053,242 33,003,915 15,120,746
The Company uses adjusted EBITDA as a measure of the Company's operating trends. Investors are cautioned that adjusted EBITDA is not a measure of liquidity or of financial performance under Generally Accepted Accounting Principles (GAAP). The adjusted EBITDA numbers presented may not be comparable to similarly titled measures reported by other companies. Adjusted EBITDA, while providing useful information, should not be considered in isolation or as an alternative to net income or cash flows as determined under GAAP. Consistent with Regulation G under the U.S. federal securities laws, the non-GAAP measures in this press release have been reconciled to the nearest GAAP measure, and this reconciliation is located under the heading "Adjusted EBITDA Reconciliation" following the Consolidated Statements of Operations included in this press release.
About Lihua International, Inc.
Lihua International, through its two wholly-owned subsidiaries, Lihua Electron and Lihua Copper, is a leading value-added manufacturer of copper replacement products for China's rapidly growing copper wire and copper replacement product market. Lihua is one of the first vertically integrated companies in China to develop, design, manufacture, market and distribute lower cost, high quality alternatives to pure copper magnet wire and pure copper alternative products. Lihua's products include copper-clad aluminum wire ("CCA") and pure copper products including copper wire and copper rod, which are produced from recycled scrap copper. Lihua's products are sold in China either directly to manufacturers or through distributors in the wire and cable industries and manufacturers in the consumer electronics, white goods, automotive, utility, telecommunications and specialty cable industries. Lihua's corporate and manufacturing headquarters are located in the heart of China's copper industry in Danyang, Jiangsu Province. For more information, visit: http://www.lihuaintl.com .
To be added to the Company's email distribution for future news releases, please send your request tolihua@tpg-ir.com.
Safe Harbor Statement
This press release contains certain statements that may be deemed to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, that address activities, events or developments that the Company expects, projects, believes or anticipates will or may occur in the future, including, without limitation, statements about its business or growth strategy, general industry conditions including availability of copper or recycled scrap copper, future operating results of the Company, capital expenditures, expansion and growth opportunities, bank borrowings, financing activities and other such matters, are forward-looking statements. Although the Company believes that its expectations stated in this press release are based on reasonable assumptions, actual results may differ from those projected in the forward-looking statements.
Please note that information in this press release reflects management views as of the date of issuance.
For more information, please contact:
Lihua International, Inc.
Daphne Huang
EVP of Finance and Director of Investor Relations
Tel: +1-516-717-9939 begin_of_the_skype_highlighting +1-516-717-9939 end_of_the_skype_highlighting
Email: Daphne_huang@lihuaintl.com
The Piacente Group, Inc.
Investor Relations
Brandi Floberg or Lee Roth
Tel: +1-212-481-2050 begin_of_the_skype_highlighting +1-212-481-2050 end_of_the_skype_highlighting
Email: lihua@tpg-ir.com
Tables Follow
LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31,
2009 2008
ASSETS
CURRENT ASSETS
Cash and cash equivalents $34,614,838 $26,041,849
Restricted cash 575,000 1,750,000
Notes receivable, net -- 321,892
Accounts receivable, net 10,996,430 5,042,739
Other receivables and current assets 493,006 --
Prepaid land use right - current
portion 172,515 172,353
Deferred income tax assets 98,068 --
Inventories 17,534,254 586,938
Total current assets 64,484,111 33,915,771
OTHER ASSETS
Property, plant and equipment, net 18,424,080 7,440,943
Construction in progress 59,558 6,017,941
Deposits for plant and equipment 28,163 1,077,892
Prepaid land use right - long-term
portion 8,168,039 8,332,732
Intangible assets 2,812 4,214
Deferred income tax assets -- 23,395
Total non-current assets 26,682,652 22,897,117
Total assets $91,166,763 $56,812,888
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short term bank loans $2,196,772 $6,145,202
Accounts payable 4,923,360 1,643,544
Other payables and accruals 681,097 830,744
Income taxes payable 1,584,292 401,436
Total current liabilities 9,385,521 9,020,926
Total liabilities 9,385,521 9,020,926
Series A redeemable convertible
preferred stock: $0.0001 par value:
10,000,000 shares authorized
(liquidation preference of $2.20
per share), none and 6,818,182
shares issued and outstanding -- 13,116,628
SHAREHOLDERS' EQUITY
Series A convertible preferred
stock: $0.0001 par value
(liquidation preference of
$2.20 per share), 10,000,000
shares authorized, none issued
and outstanding -- --
Common stock, $0.0001 par value:
75,000,000 shares authorized,
24,154,083 and 15,000,000
shares issued and outstanding 2,416 1,500
Additional paid-in capital 39,921,717 7,976,976
Statutory reserves 5,400,994 2,603,444
Retained earnings 33,826,885 21,521,937
Accumulated other comprehensive
income 2,629,230 2,571,477
Total shareholders' equity 81,781,242 34,675,334
Total liabilities and
shareholders' equity $91,166,763 $56,812,888
LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Audited) (Unaudited)
For the 12 Months Ended For the 3 Months Ended
Dec. 31, Dec. 31,
(USD) 2009 2008 2009 2008
Sales 161,543,434 50,006,057 51,263,898 10,969,010
Cost of sales (125,310,613) (33,202,344) (40,383,813) (7,053,530)
Gross profit 36,232,821 16,803,713 10,880,085 3,915,480
Selling expenses (1,722,242) (700,029) (480,100) (133,899)
Admin expenses (3,991,801) (1,907,043) (1,171,466) (1,089,069)
SG&A (5,714,043) (2,607,072) (1,651,566) (1,222,968)
Income from
operations 30,518,778 14,196,641 9,228,519 2,692,512
Interest income 173,807 68,353 35,998 40,315
Interest expenses (335,335) (514,950) (53,730) (162,203)
Exchange income
(expense) -- -- 545 --
Merger cost -- (259,225) -- (259,225)
Change in fair
value of warrants (8,831,161) -- (455,344) --
Other income
(expenses) 500,834 3,741 81 9,424
Total other
income (8,491,855) (702,081) (472,450) (371,689)
Income before tax 22,026,923 13,494,560 8,756,069 2,320,823
Income tax (5,247,647) (1,792,681) (1,486,220) (381,550)
Net income 16,779,276 11,701,879 7,269,849 1,939,273
Net income per
share
Basic $0.94 $0.75 $0.30 $0.13
Diluted $0.88 $0.70 $0.29 $0.12
Basic 17,822,890 14,187,945 24,118,183 14,678,571
Diluted 19,128,231 15,327,422 25,423,524 15,818,048
LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS EXPRESSED IN US DOLLAR)
Year Ended December 31,
2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $16,779,276 $11,701,879
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 1,652,863 812,339
Merger expenses -- 259,225
Share-based compensation costs 331,440 367,250
Warrants issued for services -- 90,000
Change in fair value of warrants 8,831,161 --
Deferred income tax benefits (74,621) (23,022)
(Increase) decrease in assets:
Accounts receivable (5,946,526) 701,310
Notes receivable 322,061 470,299
Other receivables and current assets (492,804) 10,259
Inventories (16,939,820) 2,154,764
Increase (decrease) in liabilities:
Accounts payable 2,932,371 (994,285)
Other payables and accruals (150,322) 312,986
Income taxes payable 1,181,995 (25,302)
Net cash provided by operating
activities 8,427,074 15,837,702
CASH FLOWS FROM INVESTING ACTIVITIES
Payment of merger expenses for reverse
acquisition -- (259,225)
Repayment from a related party -- 4,168,699
Purchase of property, plant and
equipment (5,094,444) (4,852,020)
Prepayment for land use right -- (3,750,540)
Net cash used in investing activities (5,094,444) (4,693,086)
CASH FLOWS FROM FINANCING ACTIVITIES
New short-term bank loans 2,196,772 11,950,700
Repayments of short-term bank loans (6,150,962) (10,222,888)
Repayment to related parties -- (2,667,675)
Release of restricted cash related to
Private Placement 1,175,000 --
Proceeds from exercise of warrants 125,650 --
Proceeds from Private Placement, net
of restricted cash held in escrow -- 11,906,538
Proceeds from public offering of
common stock, net of expenses of
$1,336,000 7,864,000 --
Net cash provided by financing
activities 5,210,460 10,966,675
Foreign currency translation
adjustment 29,899 716,909
INCREASE IN CASH AND CASH EQUIVALENTS 8,572,989 22,828,200
CASH AND CASH EQUIVALENTS, at the
beginning of the year 26,041,849 3,213,649
CASH AND CASH EQUIVALENTS, at the end
of the year $34,614,838 $26,041,849
NON-CASH INVESTING AND FINANCING
TRANSACTIONS:
Shares-based compensation to employees
and directors $331,440 $367,250
Warrants issued for services -- 90,000
$331,440 $457,250
SUPPLEMENTAL DISCLOSURE INFORMATION
Cash paid for interest $335,335 $514,950
Cash paid for income taxes $ 4,140,273 $1,841,005
LIWA latest investor presentation
http://www.lihuaintl.com/PDF/pdfurl/Lihua%20PPT%20-%20April%202010%20-%20FINAL.pdf
LIWA website:
http://www.lihuaintl.com/
LIWA - New presentation posted on their website.
http://www.lihuaintl.com/PDF/pdfurl/Lihua%20PPT%20-%20April%202010%20-%20FINAL.pdf
I really like the balance sheet after their most recent fund raise with ~$60MM net cash. Check out page 15 where they show their capacity expansion in 2011.
CNAM -- "indicating a very high probability that the option will be exercised"
You can only make that assumption if the option is deep in the money, though, since both N(d) terms certainly will not be close to 1 in this case.
Think of it this way: The June $10 strike NEP call traded at $0.35 yesterday. That option is deeper out of the money and has a much shorter time to expiration. There is little chance that the CNAM warrant could be priced for less.
We don't need to use closed form estimates of options prices, though, we can use options calculators:
http://www.intrepid.com/robertl/option-pricer4.html?q=~robertl/option-pricer4.html
Using the following parameters:
So = $6.9 (price at time of deal announcement)
X = $7.5
r = 2.5%
div = 0
T = 5 years
Implied Vol = 60% (CNAM historical vol is > 80% and most US listed CN stocks trade at imp vols north of 60%)
I get a price of $3.5 for an American exercise option. Granted, warrants result in dilution while options do not so the pricing will be a bit different, but this gets us much closer to the actual fair value. At $0.27 these warrants would be a back-up-the-truck and mortgage the house/wife/kids buy.
CNAM -- I agree. With 5 years to expiration they are certainly worth more than $1.5, although a call back price would definitely effect this. That call back price would probably be set well north of $7.5, though, which wouldn't effect the current ootm price of the warrants to a huge extent.
LIWA --
I just posted this on Geoinvesting's LIWA message board in response to its removal from their 'Geobargain-on-the-radar' list:
[--"Before this event LIWA was on track to only achieve 2010 EPS growth of around 5.0%"
Liwa's non-GAAP net income for 2009 was approximately $25.5MM with 26MM shares FD OS at the end of the year (eps ~ $1). Prior to the recent financing, the company guided for approximately $36MM in net income (this did not include the effect of the recent financing). Therefore, before the recent financing event, Lihua was on track to achieve approximately 38% non-Gaap eps growth ($1 -> $1.38) not 5%. There was also $1.25 in net cash on their balance sheet prior to the financing. With the latest financing, that net cash number rises to $2.16
This still appears to be a solid candidate for the Geobargain-on-the-radar list considering they should still achieve $1.2 in eps this year and $1.87 in 2011 (a figure that seems quite reasonable given the added capacity that will come online).]
Maj, if you're reading this, I'm not trying to be confrontational and love your site. Just want to make sure that the correct figures are out there.
From a new GS piece on A-shares:
"After today’s weak performance, the A-share market has effectively
returned to its February lows and its -11.4% ytd return is the worst
performing market within the region.
While we envisage further policy headwinds stemming from the
rates/inflation nexus, we believe April 19’s unexpectedly large market selloff may provide strategic entry opportunities for investors to accumulate positions.
We reiterate our end-2010 index target of 4,300 for CSI300 (35.4% potential upside) and see strong fundamental support at 2,900, which equates to around 16X forward P/E and translates into 8.7% potential downside from current levels."
Due to further curbs in the property markets:
http://www.bloomberg.com/apps/news?pid=20601080&sid=aCogQBQnAc2E
SGZH - The silver lining is that they now have $2 cash per share at least
Lol, with the one-way bet on the RMB these days I would have thought that the govt would be trying to raise the gates a bit to keep hot money out.
Definitely glad to hear that the cash is now denominated in local currency.
We receive governmental subsidies from time to time to offset this risk.
Not sure how that's up for contention. I am fairly certain that they receive these subsidies at year end.
the mine has gone from a 35% recovery rate to 80%
The mine became fully operational mid Q3 and was fully operational in Q4. You are correct that the coal price increases will help, but the fact that the mine is closed during CNY will offset that.
Regarding point #4: They only raised 30M with Starr, the rest came from warrants and already-cash-on-hand... But yes they should start spending some of it! Dead cash-on-hand isn't fun. The money is in YUAN, so we would benefit from an increase in the currency.
Do we know definitively that the money they raised from Starr and the warrant conversion has been converted to RMB? I'm obviously hoping so, but I'm not sure of the exact mechanics that they have to go through with SAFE.