One Penn Plaza

250 West 34th Street, Suite 2514

New York, NY 10119

(212) 798-8100

(Address, including zip code, and telephone number, including

area code, of registrant’s principal executive offices)

 

Alan Kestenbaum, Executive Chairman
One Penn Plaza
250 West 34th Street, Suite 2514
New York, NY 10119
(212) 798-8100

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Approximate date of commencement of proposed sale to the public:   As soon as practicable after the effective date of this registration statement.

 

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

(Do not check if a smaller reporting company)

 

 

 

PROSPECTUS SUMMARY

	•	Leading Market Positions.   We hold leading market shares in a majority of our products. We believe that once Niagara reaches full production, we will achieve sales volumes of approximately 186,400 MT of silicon metal annually, which we believe will represent approximately 13% of Western World market share and 44% of North American market share. We estimate that we have approximately 20% Western World market share for magnesium ferrosilicon, including 50% market share in the Americas and are one of only six suppliers of calcium silicon in the Western World (with estimated 18% market share). As a result of our market leadership and breadth of products, we possess critical insight into market demand allowing for more efficient use of our resources and operating capacity.
	•	Low Cost Producer.   We have been recognized by CRU as the lowest average operating cost silicon metal producer in the Western World. Currently, CRU lists our four silicon metal operating facilities as being among CRU’s seven most cost efficient silicon metal facilities in the Western World, with our Beverly, Ohio facility ranked as the lowest cost producer. We believe that our low cost position is a result of many strategic initiatives including our control over raw materials (which include owned sources), the implementation of best-practices across all production facilities, aggressive management of labor and overhead costs and our proximity to customers which results in lower freight costs. We continually search for ways to lower our production costs. For example, we recently entered into an agreement with Recycled Energy Development, LLC (RED), a company that develops power related recycling projects, to construct and operate an innovative energy recovery installation at our West Virginia facility that will recycle hot exhaust from our furnaces and convert it into electricity through a thermal process, reducing our effective cost per megawatt hour.
	•	Long-Term Power Contracts.   We believe that we have a cost advantage in our long-term power supply contracts which provide a significant portion of our power needs. These power supply contracts result in stable, favorably priced, long-term commitments of power at reasonable rates.

	•	Stable Raw Material Supply Through Captive Mines and Forest Reserves.   We have two mining operations, located at Billingsley, Alabama and in the state of Para, Brazil, for which we currently possess long-term lease mining rights. These mines supply our plants with the majority of our requirements for quartzite, the principal raw material used in the manufacturing of our products. We believe that these mines, taken together with additional leasing opportunities in the vicinity, would cover our needs well into the future. In Brazil, we own a forest reserve which supplies our Brazilian operations with the wood necessary for woodchips and a majority of our charcoal. We have also obtained a captive supply of electrodes, an important input in our manufacturing process, through the formation of Yongvey. We obtain other raw materials from a variety of sources.
	•	Efficient and Environmentally Friendly By-Product Usage.   We utilize or sell most of the by-products of our manufacturing process, which reduces cost and environmental impact from our operations. We have developed markets for the by-products generated by our production processes and have transformed our manufacturing operations so that little solid waste disposal is required. By-products not recycled in the manufacturing process are generally either sold to our 50%-owned affiliate, Norchem, Inc., or other companies, which process the material for use in a variety of other applications. Silica fume (also known as microsilica) is used as a concrete additive, refractory material and oil well conditioner. Fines, the fine material resulting from crushing, and dross, which results from the purification process during smelting, are typically recycled into our production process or are sold to customers who utilize these products in other manufacturing processes, including steel production.
	•	Diverse Products and Markets.   We sell our diverse product mix to a broad range of industries and to companies in over 40 countries. We believe that our end-market diversification provides us with a variety of growth opportunities. We also believe our diversification should help insulate us from economic downturns focused in any individual industry or geographic region.
	•	Experienced, Highly Qualified Management Team.   We have assembled a highly qualified management team with approximately 100 years of combined experience in the metals business among our top four executives. In particular, Alan Kestenbaum, our Executive Chairman, Jeff Bradley, our Chief Executive Officer, Arden Sims, our Chief Operating Officer and Daniel Krofcheck, our Chief Financial Officer, have over 20, 25, 35 and 19 years of experience, respectively, in the metals industries. We believe that our management team has the operational and technical skill to continue to operate our business at world class levels of efficiency and to consistently produce silicon metal and silicon-based alloys.

	•	Focus on Core Businesses.   We seek to leverage our technical expertise and high product quality to improve profitability and increase market share. As part of this strategy, we seek to sell our silicon metals and silicon-based alloys to end-markets where we may achieve the highest profitability. Also, we intend to invest in areas that allow us to expand our capacity or improve cost efficiencies in those core markets. We seek to evaluate our core business strategy and may divest certain non-core and lower margin businesses to improve our financial and operational results.
	•	Maintain Low Cost Position While Controlling Inputs.   We intend to maintain our position as one of the most cost-efficient producers of silicon metal in the world. We intend to achieve this objective by continuing to improve production efficiency from our existing furnaces while, at the same time, controlling raw material costs from both our captive sources and via competitive long-term supply contracts. We also believe we will be able to spread fixed costs over the resulting increased production volume to further reduce costs per MT of silicon metal and silicon-based alloy sold.
	•	Continue Pursuing Strategic Acquisition Opportunities.   We intend to build on our history of successful acquisitions by continuing to identify and evaluate acquisition opportunities for the purpose of increasing our capacity, increasing our access to raw materials and other inputs and acquiring further refined products for our customers. We intend to continue to evaluate opportunities globally that will complement and diversify our current business offerings and strategy. In particular, we will consider acquisitions or investments that will enable us to leverage our expertise in silicon metal and silicon-

		based alloy products to grow in these markets as well as enable us to enter new markets or sell new products. Our overall metallurgical expertise and skills in lean production technologies position us well for future growth. Consistent with this strategy, we continually evaluate potential acquisition opportunities, some of which could be material.

	•	Leverage Flexible Manufacturing and Expand Other Lines of Business .  Our size and geographic diversity enable us to produce specific metals in the most appropriate facility/region. Besides our principal silicon metal products, we have the capability to produce silicon-based alloys, such as ferrosilicon and silicomanganese, using the same facilities. We intend to continue to allocate our furnace capacity to the products that we believe will improve profitability, taking into account the costs of switching between products.
	•	Leverage Synergies Among Units.   We currently operate four of the seven lowest cost silicon metal manufacturing facilities in the Western World. We seek to leverage each of our facilities’ best practices and apply them across our system in order to maintain our leadership position as a low cost producer.
	•	Pursue Attractive Near-term Growth Opportunities.   We plan to take advantage of a number of attractive near term growth opportunities including the reopening of our Niagara Falls facility, and the development at the Niagara facility of capacity specifically for our Solsil operations. This increased production should allow us to take advantage of the strong market conditions for our products and should also increase the manufacturing flexibility across our system. We have negotiated a favorable power supply contract with the State of New York which will provide additional low cost production.

Issuer		Globe Specialty Metals, Inc.
Common stock offered by Globe Specialty Metals, Inc		shares
Common stock offered by the selling stockholders		shares
Over-allotment option		shares
Common stock to be outstanding after the offering		shares
Use of Proceeds		We expect to use the net proceeds received by us for general corporate purposes, including, without limitation, to expand our core businesses, to invest in new businesses, products and technologies, both through acquisitions and capital programs, and to fund our ongoing operating and working capital requirements. See “Use of Proceeds” on page 25 for a more detailed description of our intended use of the proceeds from this offering.
		We will not receive any proceeds from sales by the selling stockholders.
Risk Factors		Please read “Risk Factors” beginning on page 10 of this prospectus for a discussion of factors you should carefully consider before deciding to purchase shares of our common stock.
Proposed NASDAQ Global Market symbol

	•	1,360,000 shares of common stock issuable upon the exercise of stock options outstanding as of March 31, 2008 at a weighted-average exercise price of $8.50 per share;
	•	19,046,910 shares of common stock issuable upon the exercise of warrants outstanding as of March 31, 2008 at a weighted-average exercise price of $5.00 per share;
	•	1,607,542 unit purchase options which represent the right to purchase at an exercise price of $7.50 per unit purchase option, one share of common stock and two warrants, or an aggregate of 1,607,542 shares of common stock and warrants to purchase 3,215,084 shares of common stock at an exercise price of $5.00 per share; and
	•	3,640,000 shares of common stock reserved for future awards under our stock plan.

		Successor													Predecessor
		Nine Months				Nine Months									Period from
		Ended				Ended				Year Ended					July 1 to
		March 31,				March 31,				June 30,					November 12,				Year Ended June 30,
		2008				2007				2007					2006				2006				2005
		(Unaudited)
Income statement data:
Net sales		$	316,751				121,250				221,928				$	73,173				173,008				132,223
Cost of sales			251,077				102,831				184,122					66,683				147,682				103,566
Selling, general and administrative			34,604				9,955				18,541					7,409				14,261				9,180
Research and development			407				53				120					—				—				—
Operating income (loss)			30,663				8,411				19,145					(919	)			11,065				19,477
Interest and other income (expense)			(5,103	)			1,846				504					(7,579	)			(6,010	)			(5,291	)
Income (loss) before income taxes, deferred interest subject to redemption and minority interest			25,560				10,257				19,649					(8,498	)			5,055				14,186
Provision for (benefit from) income taxes			7,343				3,106				7,047					(2,800	)			1,914				4,968
Net income (loss) before deferred interest subject to redemption and minority interest			18,217				7,151				12,602					(5,698	)			3,141				9,218
Deferred interest subject to redemption			—				(768	)			(768	)				—				—				—
Minority interest			26				—				—					—				—				—
Net income (loss) attributable to common stock		$	18,243				6,383				11,834				$	(5,698	)			3,141				9,218
Net income (loss) per common share — basic		$	0.32				0.15				0.25				$	(2,947.26	)			2,067.04				9,218.06
Net income (loss) per common share — diluted		$	0.26				0.13				0.24				$	(2,947.26	)			2,067.04				9,218.06
Cash dividends declared per common share		$	—				—				0.07				$	—				—				—
Other financial data:
EBITDA(1)		$	45,144				13,676				29,667				$	(2,670	)			16,199				22,807
Adjusted EBITDA(1)			42,335				11,402				25,818					(2,670	)			16,199				22,807
Capital expenditures			13,098				5,765				8,629					2,273				4,884				3,841
Silicon metal and related alloys:
Shipments (MT)(2)			154,355				71,259				127,586					48,470				126,465				102,074
Average selling price per MT(2)		$	1,909				1,589				1,619				$	1,453				1,306				1,254

		Successor									Predecessor
		March 31,				June 30,					June 30,				June 30,
Balance Sheet Data:		2008				2007					2006				2005
		(Unaudited)
		(Dollars in thousands)
Cash and cash equivalents		$	74,752				67,741				$	—				—
Working capital(3)			65,563				36,690					22,217				17,053
Total assets			508,749				389,762					140,572				99,660
Total debt including current portion			93,953				75,877					50,431				54,055
Long-term liabilities			89,674				82,280					49,650				55,561
Total stockholders’ equity			323,531				222,621					58,425				20,309

(1)		We have included EBITDA and adjusted EBITDA in this prospectus to provide investors with a supplemental measure of our operating performance. We believe EBITDA is an important supplemental measure of operating performance because it eliminates items that have less bearing on our operating performance and so highlights trends in our core business that may not otherwise be apparent when relying solely on generally accepted accounting principles in the United States of America (U.S. GAAP) financial measures. We also believe that securities analysts, investors and other interested parties frequently use EBITDA in the evaluation of issuers, many of which present EBITDA when reporting their results.
		EBITDA and adjusted EBITDA are not presentations made in accordance with U.S. GAAP. As discussed above, we believe that the presentation of EBITDA and adjusted EBITDA in this prospectus is appropriate. However, when evaluating our results, you should not consider EBITDA and adjusted EBITDA in isolation of, or as a substitute for, measures of our financial performance as determined in accordance with U.S. GAAP, such as net income (loss). EBITDA and adjusted EBITDA have material limitations as performance measures because they exclude items that are necessary elements of our costs and operations. Because other companies may calculate EBITDA and adjusted EBITDA differently than we do, EBITDA may not be, and adjusted EBITDA as presented in this prospectus is not, comparable to similarly-titled measures reported by other companies.
		EBITDA represents net income (loss) before net interest expense, the provision for income taxes, and depreciation and amortization expense. Adjusted EBITDA represents EBITDA as further adjusted by amortization of customer contract liability.
(2)		Shipments and average selling price per MT do not include shipments and sales of by-products.
(3)		Working capital is defined as trade accounts receivable and inventory less accounts payable and is derived from our consolidated financial statements.

		Successor													Predecessor
		Nine Months				Nine Months									Period from
		Ended				Ended				Year Ended					July 1 to
		March 31,				March 31,				June 30,					November 12,				Year Ended June 30,
		2008				2007				2007					2006				2006				2005
		(Unaudited)
		(Dollars in thousands)
Adjusted EBITDA
reconciliation:
Net income (loss) attributable to common stock		$	18,243				6,383				11,834				$	(5,698	)			3,141				9,218
Provision for (benefit from) income taxes			7,343				3,106				7,047					(2,800	)			1,914				4,968
Net interest expense (income)(a)			5,303				(1,502	)			145					3,066				5,677				5,099
Depreciation and amortization(b)			14,255				5,689				10,641					2,762				5,467				3,522
EBITDA(c)			45,144				13,676				29,667					(2,670	)			16,199				22,807
Amortization of customer contract liability(d)			(2,809	)			(2,274	)			(3,849	)				—				—				—
Adjusted EBITDA(c)		$	42,335				11,402				25,818				$	(2,670	)			16,199				22,807

(a)		Net interest expense excludes interest income earned on common shares subject to redemption of $768 for the nine months ended March 31, 2007 and year ended June 30, 2007.
(b)		Amortization expense during the year ended June 30, 2006 excludes amortization of deferred financing fees of $564.
(c)		EBITDA and adjusted EBITDA include non-cash share-based compensation expense of $6,617, $176 and $512 for the nine months ended March 31, 2008 and 2007, and the year ended June 30, 2007, respectively.
(d)		Certain noncancelable executory customer contracts were purchased as part of the GMI and Globe Metais acquisitions priced below market rates. The balance is being amortized over the contractual term of the individual contracts and included in net sales.

 

An investment in our common stock involves a high degree of risk. You should consider and read carefully all of the risks and uncertainties described below, together with all of the other information contained in this prospectus, including the consolidated financial statements and the related notes appearing at the end of this prospectus before deciding to invest in our common stock. If any of the following events actually occur, our business, business prospects, financial condition, results of operations or cash flows could be materially affected. In any such case, the trading price of our common stock could decline, and you could lose all or part of your investment. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks described below.

 

Risks Associated with our Business and Industry

 

The metals industry, including silicon-based metals, is cyclical and has been subject in the past to swings in market price and demand which could lead to volatility in our revenues.

 

Our business has historically been subject to fluctuations in the price of our products and market demand for them, caused by general and regional economic cycles, raw material and energy price fluctuations, competition and other factors. Historically, GMI has been particularly affected by recessionary conditions in the end-markets for its products. In April 2003, GMI sought protection under Chapter 11 of the United States Bankruptcy Code following its inability to restructure or refinance its indebtedness in light of the confluence of several negative economic and other factors, including an influx of low-priced, dumped imports, which caused it to default on then-outstanding indebtedness. A recurrence of such economic factors could have a material adverse effect on our business prospects, condition (financial or otherwise) and results of operations.

 

The world silicon metals industry has enjoyed favorable market conditions enabling many silicon metals producers to operate profitably. There can be no assurance, however, that national and international metals markets will sustain their current state; any decline could have a material adverse effect on our business prospects, condition (financial or otherwise), and results of operations. In addition, our business is directly related to the production levels of our customers, whose businesses are dependent on highly cyclical markets, such as the automotive, residential and non-residential construction, consumer durables, polysilicon, and chemical markets. Also, many of our products are internationally traded products with prices that are significantly affected by worldwide supply and demand. Consequently, our financial performance will fluctuate with the general economic cycle, which could have a material adverse effect on our business prospects, condition (financial or otherwise) and results of operations.

 

Our business is particularly sensitive to increases in energy costs which could materially increase our cost of production.

 

Electricity is one of our largest production cost components, comprising 26% of cost of sales in the nine month period ended March 31, 2008. The level of power consumption of our electric production furnaces is highly dependent on which products are being produced and typically fall in the following ranges: (i) silicon-based alloys require between 3.5 and 8 megawatt hours to produce one MT of product and (ii) silicon metal requires approximately 11 megawatt hours to produce one MT of product. Accordingly, consistent access to low cost, reliable sources of electricity is essential to our business.

 

Electrical power to our U.S. facilities is supplied mostly by AEP, Alabama Power and Brookfield Power through dedicated lines. Our West Virginia facility obtains approximately 45% of its power needs under a 15-year fixed-price contract with a nearby hydroelectric facility. This facility is over 70 years old and any breakdown could result in the West Virginia facility having to pay much higher rates for electric power from third parties. Our energy supply for our facilities located in Argentina are supplied through the Edemsa hydroelectric facilities located in Mendoza, Argentina. Our energy needs for our facility in Brazil comes from the Tucurui hydroelectric plant, the fifth largest in the world, situated only a few kilometers away from our manufacturing facility. While some of our power needs are supplied under long-term contracts, we also

purchase power under contracts which terminate within one year. Because energy constitutes such a high percentage of our production costs, we are particularly vulnerable to cost fluctuations in the energy industry. Accordingly, the termination or non-renewal of any of our energy contracts, or an increase in the price of energy could materially adversely affect our future earnings, if any, and may prevent us from effectively competing in our markets.

 

Losses caused by disruptions in the supply of power would reduce our profitability.

 

Our operations are heavily dependent upon a reliable supply of electrical power. We may incur losses due to a temporary or prolonged interruption of the supply of electrical power to our facilities, which can be caused by unusually high demand, blackouts, equipment failure, natural disasters or other catastrophic events, including failure of the hydroelectric facilities that currently provide power under contract to our West Virginia, Argentina and Brazil facilities. Large amounts of electricity are used to produce silicon metal and silicon-based alloys, and any interruption or reduction in the supply of electrical power would adversely affect production levels and result in reduced profitability. Our insurance might mitigate some of the losses resulting from catastrophic events. However, deductibles and overall coverage under those policies may not be sufficient to cover any or all losses, and such policies do not cover all events. Certain of our insurance policies will not cover any losses that may be incurred if our suppliers are unable to provide power during periods of unusually high demand.

 

Investments in Argentina’s and Brazil’s electricity generation and transmission systems have been lower than the increase in demand in recent years. If this trend is not reversed, there could be electricity supply shortages as the result of inadequate generation and transmission capacity. Given the heavy dependence on electricity of our manufacturing operations, any electricity shortages could adversely affect our financial results.

 

Government regulations of electricity in Argentina give priority access of hydroelectric power to residential users and subject violators of these restrictions to significant penalties. This preference is particularly acute during Argentina’s winter months due to a lack of natural gas. We have previously successfully petitioned the government to exempt us from these restrictions given the demands of our business for continuous supply of electric power. If we are unsuccessful in our petitions or in any action we take to ensure a stable supply of electricity, our production levels may be adversely affected and our profitability reduced.

 

Any decrease in the availability, or increase in the cost, of raw materials or transportation could materially increase our costs.

 

Principal components in the production of silicon metal and silicon-based foundry alloys include metallurgical-grade coal, charcoal, carbon electrodes, quartzite, wood chips, steel scrap, and other metals, such as magnesium. While we have certain long-term contracts, we buy other raw materials on a spot basis. We are dependent on certain suppliers of these products, their labor union relationships, mining and lumbering regulations and output and general local economic conditions in order to obtain raw materials in a cost efficient and timely manner. An increase in costs of raw materials or transportation, or the decrease in their production or deliverability in a timely fashion, or other disruptions in production, could result in increased costs to us and lower productivity levels. Although there are alternative sources for these raw materials, there can be no assurance that we would be able to obtain adequate supplies of such materials on terms as favorable as our current arrangements or at all. Any increases in the price or shortfall in the production and delivery of raw materials, could materially adversely affect our business prospects, condition (financial or otherwise) or results of operation.

 

Cost increases in raw material inputs may not be passed on to our customers with fixed contracts, which could negatively impact our profitability.

 

The availability and prices of raw material inputs may be influenced by supply and demand, changes in world politics, unstable governments in exporting nations and inflation. The market prices of our products and

raw material inputs are subject to change and although we currently believe we may be able to pass a significant amount of increased input costs on to our customers, there is no assurance that this will continue. Additionally, there is no assurance that we will be able to obtain lower prices from our suppliers should our sale prices decrease.

 

Our U.S.-based businesses benefit from U.S. antidumping duties and laws that protect U.S. companies by taxing imports from foreign companies. If these laws change, foreign companies will be able to compete more effectively with us. Conversely, our foreign operations are adversely affected by these U.S. duties and laws.

 

Currently, foreign suppliers who export merchandise to the United States at unfairly low prices risk being found to be “dumping” their products in the U.S. A finding of dumping and resulting injury to the U.S. industry can lead to the imposition of special “antidumping” duties on the imported merchandise. We have, in the past, filed petitions and other trade complaints with the U.S. Department of Commerce and the U.S. International Trade Commission. These complaints sometimes result in investigations of foreign manufacturers and the imposition of trade relief. As a result of such actions, antidumping orders are currently in place covering silicon metal imports from China and Russia. These orders are benefiting our U.S. operations by constraining supply and increasing U.S. market prices and sales of domestic silicon metal. While we have had degrees of success with these actions, we rely on “policy” based rules that are subject to constant change in interpretation as political, economic and social conditions change and as political priorities in the U.S. shift. In addition, the antidumping rules apply differently based on the countries from which the goods originate and other factors. Rates of duty can change as a result of “administrative reviews” and “new shipper reviews” of antidumping orders. These orders can also be revoked as a result of periodic “sunset reviews,” which determine whether the orders will continue to apply to imports from particular countries. A sunset review of the order covering imports from China will be initiated in 2011. Thus, there is no assurance that the current orders will remain in effect and continue to be enforced from year to year, that the goods and countries now covered by antidumping orders will continue to be covered, or that duties will continue to be assessed at the same rates, changes in any of which could adversely affect our business and profitability. Finally, at times, in filing trade actions, we find ourselves acting against the interests of our customers. There can be no assurance that our customers will continue to desire to do business with us if they become unhappy with our having filed a trade action. Antidumping rules may, conversely, also adversely impact our foreign operations.

 

The European Union, like the U.S., can provide antidumping relief from imports sold at unfairly low prices. Our Brazilian facility is our primary source to supply most of our European demand. The European Union responded to claims of dumping by Chinese silicon metal suppliers in 1997 by imposing a 49% duty. Our Brazilian facility would be adversely affected if these duties were revoked or if antidumping measures were imposed against imports from Brazil.

 

We may be unable to successfully integrate and develop our prior and future acquisitions.

 

We acquired four private companies between November 2006 and February 2008, and entered into a business combination in May 2008. We expect to acquire additional companies in the future. Integration of our prior and future acquisitions with our existing business is a complex, time-consuming and costly process requiring the employment of additional personnel, including key management and accounting personnel. Additionally, the integration of these acquisitions with our existing business may require significant financial resources that would otherwise be available for the ongoing development or expansion of existing operations. Unanticipated problems, delays, costs or liabilities may also be encountered in the development of these acquisitions. Failure to successfully and fully integrate and develop these businesses and operations may have a material adverse effect on our business, financial condition, results of operations and cash flows. The difficulties of combining the acquired operations include, among other things:

 

 

 

In addition, we may not realize all of the anticipated benefits from any prior and future acquisitions, such as increased earnings, cost savings and revenue enhancements, for various reasons, including difficulties integrating operations and personnel, higher and unexpected acquisition and operating costs, unknown liabilities, inaccurate reserve estimates and fluctuations in markets. If these benefits do not meet the expectations of financial or industry analysts, the market price of our shares may decline.

 

We are subject to the risk of union disputes and work stoppages at our facilities, which could have a material adverse effect on our business.

 

Hourly workers at our Alabama and West Virginia facilities are covered by collective bargaining agreements with the Industrial Division of the Communications Workers of America, under a contract running through July 2010 and with The United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union under a contract running through April 24, 2011. Union employees in Brazil are working under a contract running through October 31, 2008 and in Argentina are working under a contract running through April 2009. Our operations in Poland are not unionized. New labor contracts will have to be negotiated to replace expiring contracts from time to time. We may be unable to satisfactorily renegotiate those labor contracts on terms acceptable to us or without a strike or work stoppage. In addition, existing labor contracts may not prevent a strike or work stoppage, and any such work stoppage could have a material adverse effect on our business.

 

We are dependent on key personnel.

 

Our operations depend to a significant degree on the continued employment of our core senior management team. In particular, we are dependent on the skills, knowledge and experience of Alan Kestenbaum, our Executive Chairman, Jeff Bradley, our Chief Executive Officer, Daniel Krofcheck, our Chief Financial Officer, and Arden Sims, our Chief Operating Officer. If these employees are unable to continue in their respective roles, or if we are unable to attract and retain other skilled employees, our results of operations and financial condition could be adversely affected. We currently have employment agreements with Alan Kestenbaum, Jeff Bradley, Daniel Krofcheck and Arden Sims. Although these agreements contain non-compete provisions, no assurance can be given that such provisions will be enforceable by us. Additionally, we are substantially dependent upon key personnel in our financial and information technology staff who enable us to meet our regulatory and contractual financial reporting obligations, including reporting requirements under our credit facilities.

 

Metals manufacturing is an inherently dangerous activity.

 

Metals manufacturing generally, and smelting, in particular, is inherently dangerous and subject to fire, explosion and sudden major equipment failure. This can and has resulted in accidents resulting in the serious injury or death of production personnel and prolonged production shutdowns. Despite the fact that we attempt to take appropriate maintenance and safety measures to safeguard our workers, comply with safety regulations and avoid malfunctions, we have experienced fatal accidents and equipment malfunctions in our manufacturing facilities in recent years. There can be no assurance that we will not experience fatal accidents or equipment malfunctions again, which could materially affect our business and operations.

Unexpected equipment failures may lead to production curtailments or shutdowns.

 

Many of our business activities are characterized by substantial investments in complex production facilities and manufacturing equipment. Because of the complex nature of our production facilities, any interruption in manufacturing resulting from fire, explosion, industrial accidents, natural disaster, equipment failures or otherwise could cause significant losses in operational capacity and could materially and adversely affect our business and operations.

 

We depend on proprietary manufacturing processes and software. There is no assurance that these processes will yield the cost savings that we anticipate or that our proprietary technology will not be challenged.

 

We rely on proprietary technologies and technical capabilities in order to compete effectively and produce high quality silicon metals and silicon based alloys. Some of these proprietary technologies that we rely on are:

 

 

In addition, there is no assurance that:

 

 

There can be no assurances that patent or other intellectual property infringement claims will not be asserted against us by a competitor or others, that any of our intellectual property will be enforceable or that it will be able to prevent others from developing and marketing competitive products or methods. An infringement action against us may require the diversion of substantial funds from our operations and may require management to expend efforts that might otherwise be devoted to operations. A successful challenge to the validity of any of our proprietary intellectual property may subject us to a significant award of damages or it may be enjoined from using our proprietary intellectual property and could have a material adverse effect on our operations.

 

We also rely on trade secrets, know-how and continuing technological advancement to maintain our competitive position. No assurance can be given that we will be able to effectively protect our rights to unpatented trade secrets and know-how.

 

We are subject to environmental, health and safety regulations, including laws that impose substantial costs and the risk of material liabilities.

 

We are subject to extensive foreign, federal, national, state and local environmental, health and safety laws and regulations governing, among other things, the generation, discharge, emission, storage, handling, transportation, use, treatment and disposal of hazardous substances; land use, reclamation and remediation; and the health and safety of our employees. We are also required to obtain permits from governmental authorities for certain operations. We cannot assure you that we have been or will be at all times in complete compliance with such laws, regulations and permits. If we violate or fail to comply with these laws, regulations or permits, we could be subject to penalties, fines, restrictions on operations or other sanctions. Under these laws, regulations and permits, we could also be held liable for any and all consequences arising out of human exposure to hazardous substances or environmental damage we may cause or that relates to our operations or properties.

Under certain environmental laws, we could be required to remediate or be held responsible for all of the costs relating to any contamination at our or our predecessors’ past or present facilities and at third party waste disposal sites. We could also be held liable under these environmental laws for sending or arranging for hazardous substances to be sent to third party disposal or treatment facilities if such facilities are found to be contaminated. Under these laws we could be held liable even if we did not know of, or were not responsible for, such contamination, or even if we never owned or operated the contaminated disposal or treatment facility.

 

There are a variety of laws and regulations in place or being considered at the federal, regional, state and local levels of government that restrict or are reasonably likely to restrict the emission of carbon dioxide and other greenhouse gases. These legislative and regulatory developments may cause us to incur material costs if we are required to reduce or offset greenhouse gas emissions and may result in a material increase in our energy costs due to additional regulation of power generators.

 

Environmental laws are complex, change frequently and are likely to become more stringent in the future. Therefore, we cannot assure you that our costs of complying with current and future environmental laws, and our liabilities arising from past or future releases of, or exposure to, hazardous substances will not adversely affect our business, results of operations or financial condition.

 

We operate in a highly competitive industry.

 

The silicon-based alloy and silicon metal markets are capital intensive and competitive. Our primary competitors are Elkem AS, owned by Orkla ASA, a large Norwegian public company, FerroAtlantica and various producers in China. Our competitors may have greater financial resources, as well as other strategic advantages to maintain, improve and possibly expand their facilities; and as a result, they may be better positioned to adapt to changes in the industry or the global economy. The advantages that our competitors have over us could have a material adverse effect on our business. In addition, there can be no assurance that new entrants will not increase competition in our industry, which could materially adversely affect our business. An increase in the use of substitutes for certain of our products also could have a material adverse effect on our financial condition and operations.

 

We have been operating at near the maximum capacity of our currently operating facilities. Because the cost of increasing capacity may be prohibitively expensive, we may have difficulty increasing our production and profits.

 

Currently, our operating facilities are able to manufacture collectively approximately 156,400 MT of silicon metal and 72,800 MT of silicon-based alloys on an annual basis. We recently announced that GMI will reopen its idle silicon metal production facility in Niagara Falls, New York which will increase our silicon metal capacity by approximately 30,000 MT. Bringing this facility back into production is expected to take approximately six to nine months and our management estimates that capital expenditures and other restart costs may exceed $18 million. After we reopen this plant, once it is operating at full capacity, our ability to increase production and revenues may be dependent on expanding existing facilities or opening new ones. Increasing capacity is difficult because:

 

 

We may not have sufficient funds to expand existing facilities or open new ones and may be required to incur significant debt to do so, which could have a material adverse effect on our business.

We expect to have substantial capital requirements, and we may be unable to obtain needed financing on satisfactory terms.

 

We expect to make substantial capital expenditures. Our capital requirements will depend on numerous factors, including costs associated with the reopening and expansion of our previously idle silicon metal production facility in Niagara Falls, New York. We cannot predict accurately the timing and amount of our capital requirements. For the nine month period ended March 31, 2008, capital spending was approximately $13.1 million. We intend to finance our capital expenditures through cash flow from operations, net proceeds from this offering and additional debt and/or equity financing. A decrease in expected revenues or adverse change in market conditions could make obtaining this financing economically unattractive or impossible. As a result, we may lack the capital necessary to complete potential acquisitions or capitalize on other business opportunities.

 

Some of our subsidiaries are subject to restrictive covenants under credit facilities. These covenants could significantly affect the way in which we conduct our business. Our failure to comply with these covenants could lead to an acceleration of our debt.

 

Credit facilities maintained by some of our subsidiaries contain covenants that, among other things, restrict our ability to sell assets; incur, repay or refinance indebtedness; create liens; make investments; engage in mergers or acquisitions; pay dividends; repurchase stock; or make capital expenditures. These credit facilities also require compliance with specified financial covenants, including minimum interest coverage and maximum leverage ratios. These subsidiaries cannot borrow under their credit facilities if the additional borrowings would cause them to breach the financial covenants. Further, a significant portion of GMI’s and Globe Metais’ assets are pledged to secure indebtedness.

 

Our ability to continue to comply with applicable covenants may be affected by events beyond our control. The breach of any of the covenants contained in a credit facility, unless waived, would be a default under the facility. This would permit the lenders to terminate their commitments to extend credit under, and accelerate the maturity of, the facility. The acceleration of debt could have a material adverse effect on our financial condition and liquidity. If we were unable to repay our debt to the lenders and holders or otherwise obtain a waiver from the lenders and holders, the lenders and holders could proceed against the collateral securing the credit facility and exercise all other rights available to them. We cannot assure you that we will have sufficient funds to make these accelerated payments or that we will be able to obtain any such waiver on acceptable terms or at all.

 

Certain of our subsidiaries are restricted from making distributions to us which limits our ability to pay dividends.

 

Substantially all of our assets are held by and our revenues are generated by our subsidiaries. Our subsidiaries borrow funds in order to finance our operations. The terms of certain of those financings place restrictions on distributions of funds to us. If these limitations prevent distributions to us or our subsidiaries do not generate positive cash flows, we will be limited in our ability to pay dividends and may be unable to transfer funds between subsidiaries if required to support our subsidiaries.

 

Our insurance costs may increase and we may experience additional exclusions and limitations on coverage in the future.

 

We have maintained various forms of insurance, including insurance covering claims related to our properties and risks associated with our operations. Our existing property and liability insurance coverages contain exclusions and limitations on coverage. From time-to-time, in connection with renewals of insurance, we have experienced additional exclusions and limitations on coverage, larger self-insured retentions and deductibles and significantly higher premiums. As a result, in the future our insurance coverage may not cover claims to the extent that it has in the past and the costs that we incur to procure insurance may increase significantly, either of which could have an adverse effect on our results of operations.

Solsil may never operate profitably or generate substantial revenues.

 

We acquired an approximate 81% interest in Solsil in February 2008 and although we expect to expand its operations through the construction of new facilities, its financial prospects are uncertain. Solsil’s continued growth, including the construction of new facilities, will require a commitment of significant financial resources that we may determine are not available given the expansion of other existing operations. In addition, Solsil’s continued growth requires a commitment of personnel, including key positions in management, that may not be available to us when needed. Unanticipated problems, construction delays, cost overruns, environmental and/or governmental regulation, limited power availability or unexpected liabilities may also be encountered. Some of the other challenges we may encounter include:

 

 

Failure to successfully address these and other challenges may hinder or prevent our ability to achieve our objectives in a timely manner.

 

U.S. and world economic and political conditions, including acts or threats of terrorism and/or war, could adversely affect our business.

 

National and international political developments, instability and uncertainties could result in continued economic weakness in the United States and in international markets. These uncertainties include ongoing military activity in Afghanistan and Iraq, threatened hostilities with other countries, political unrest and instability around the world and continuing threats of terrorist attacks. Any actual armed hostilities, and any future terrorist attacks in the United States or abroad, could also have an adverse impact on the U.S. economy, global financial markets and our business. The effects may include, among other things, a decrease in demand in the automotive, residential and non-residential construction, consumer durables and chemical markets. Depending upon the severity, scope and duration of these effects, the impact on our financial position, results of operations and cash flows could be material.

 

We have operations and assets in the U.S., Argentina, Brazil, China and Poland, and may have operations and assets in other countries in the future. Our international operations and assets may be subject to various economic, social and governmental risks.

 

Our international operations and sales will expose us to risks that could negatively impact our future sales or profitability. Our operations may not develop in the same way or at the same rate as might be expected in a country with an economy similar to the United States. The additional risks that we may be exposed to in these cases include but are not limited to:

 

 

 

Our competitive strength as a low-cost silicon metal producer is partly tied to the value of the U.S. dollar compared to other currencies. Should the value of the U.S. dollar rise significantly in comparison to other currencies, we may lose this competitive strength.

 

Exchange controls and restrictions on transfers abroad and capital inflow restrictions have limited and can be expected to continue to limit the availability of international credit. In 2001 and 2002, Argentina imposed exchange controls and transfer restrictions substantially limiting the ability of companies to retain foreign currency or make payments abroad. These restrictions have been substantially eased, including those requiring the Central Bank’s prior authorization for the transfer of funds abroad in order to pay dividends. However, Argentina may re-impose exchange control or transfer restrictions in the future, among other things, in response to capital flight or a significant depreciation of the Peso. In addition, the government adopted various rules and regulations in June 2005 that established new controls on capital inflows, requiring, among other things, that 30% of all capital inflows (subject to certain exceptions) be deposited for one year in a non-assignable non-interest bearing account in Argentina. Additional controls could have a negative effect on the economy and Globe Metales’ business if imposed in an economic environment where access to local capital is substantially constrained. Moreover, in such event, restrictions on the transfers of funds abroad may impede our ability to receive dividend payments as a holder of Globe Metales’ shares.

 

Risks Related to the Offering

 

An active trading market for our common stock may not develop in the United States, and you may not be able to resell your shares at or above the initial public offering price.

 

Prior to this offering, there had been no public market for shares of our common stock in the United States. Our common stock has been listed on the AIM market, under the symbol “GLBM” since October 2005. However, historically there has been a limited volume of trading in our common stock on the AIM market, which has limited the liquidity of our common stock on that market. We cannot predict whether or how investor interest in our common stock on the AIM market might translate to the market price of our common stock or the development of an active trading market in the United States or how liquid that market might become.

 

The initial public offering price for our common stock was determined through negotiations with the underwriters based on a number of factors, including the historic trading prices of our common stock on the AIM market, that might not be indicative of prices that will prevail in the trading market for our common stock in the United States. An active trading market for our shares in the United States may never develop or be sustained following this offering. If an active market for our common stock does not develop, it may be difficult to sell shares you purchase in this offering without depressing the market price for the shares, or at all.

 

Our stock price may be volatile, and purchasers of our common stock could incur substantial losses.

 

Our stock price may be volatile. The stock market in general has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their common stock at or above the initial public offering price. The market price for our common stock may be influenced by many factors, including:

 

 

 

A substantial portion of our total outstanding shares may be sold into the market at any time. This could cause the market price of our common stock to drop significantly, even if our business is doing well.

 

All of the shares being sold in this offering will be freely tradable without restrictions or further registration under the federal securities laws, unless purchased by our “affiliates” as that term is defined in Rule 144 under the Securities Act. In addition, approximately           shares of our common stock that were sold in a foreign offering in 2005 and listed on the AIM market and           shares of our common stock underlying outstanding warrants and unit purchase options are concurrently being registered under the federal securities laws and also will be freely tradable following completion of this offering, subject to the lock-up agreements described in “Underwriting.” The remaining          shares of common stock outstanding upon the closing of this offering are restricted securities as defined under Rule 144 of the Securities Act. Restricted securities may be sold in the U.S. public market only if registered or if they qualify for an exemption from registration, including by reason of Rule 144 or 701 under the Securities Act. Approximately           restricted shares will be eligible for sale in the public market beginning in           2009, subject to limitations under Rule 144. In addition, approximately           restricted shares held by our directors and executive officers will be eligible for sale in the public market beginning in           2009, subject in certain circumstances to the volume, manner of sale and other limitations under Rule 144. Additionally, we intend to register all shares of our common stock that we may issue under our employee benefit plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to the lock-up agreements described in “Underwriting.” Sales of a substantial number of shares of our common stock, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.

 

The concentration of our capital stock ownership among our largest stockholders, and their affiliates, will limit your ability to influence corporate matters.

 

After our offering, we anticipate that our four largest stockholders, including our Executive Chairman, together will own approximately     % of our outstanding common stock. Additionally, these four stockholders hold warrants to purchase           shares of our common stock, which if fully exercised would result in these stockholders together owning     % of our outstanding common stock after our offering. Consequently, these stockholders have significant influence over all matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions. This concentration of ownership will limit your ability to influence corporate matters, and as a result, actions may be taken that you may not view as beneficial.

 

If you purchase shares of our common stock in this offering, you will suffer immediate and substantial dilution of your investment.

 

The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock. Therefore, if you purchase shares of our common stock in this offering, your interest will be diluted immediately to the extent of the difference between the initial public offering

price per share of our common stock and the net tangible book value per share of our common stock after this offering. See “Dilution.”

 

Material weaknesses in internal control over financial reporting may adversely affect our ability to comply with financial reporting regulations and to publish accurate financial statements.

 

We are aware of the existence of material weaknesses in the designs and operations of our internal control over financial reporting that could adversely affect our ability to record, process, summarize and report financial data consistent with our assertions in the financial statements. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or be detected on a timely basis. These material weaknesses in internal control over financial reporting relate to deficiencies in:

 

 

 

 

We are addressing our material weaknesses and making the appropriate changes to remedy concerns over our internal control and to reduce the possibility of a misstatement in, or delay in the production of, our financial statements. We have been, and intend to continue, expanding our accounting and information technology staff with persons with additional skills and experience and improving our information technology general controls and entity-level controls. We intend to engage qualified outside professionals to provide support and guidance in areas where we cannot economically maintain the required skills and experience internally. We also intend to implement formal written policies, processes and procedures and other documentation to address our deficiencies related to the application of U.S. GAAP, our entity-level controls and our information systems and related controls.

 

We intend to continue to address deficiencies in entity-levels controls, to expand our accounting and information technology staff and information technology systems and engage outside professionals if and as we believe necessary; however, because of inherent limitations, our internal control over financial reporting may not prevent or detect misstatements, errors or omissions even after we improve them. Any projections of any evaluation of effectiveness of internal control to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with our policies or procedures may deteriorate. We cannot be certain in future periods that other control deficiencies that may constitute one or more material weaknesses or significant deficiencies in our internal control over financial reporting will not be identified. If we fail to maintain the adequacy of our internal controls, including any failure to implement or difficulty in implementing required new or improved controls, our business and results of operations could be harmed, the results of operations we report could be subject to adjustments, we could incur further remediation costs, we could fail to be able to provide reasonable assurance as to our financial results or the effectiveness of our internal controls or meet our reporting obligations to the Securities and Exchange Commission (SEC) and third parties (including lenders under our

 

We have not yet completed our evaluation of our internal control over financial reporting in compliance with Section 404 of the Sarbanes-Oxley Act.

 

We will be required to comply with the internal control evaluation and certification requirements of Section 404 of the Sarbanes-Oxley Act (Section 404). We have not yet completed our evaluation of our internal control over financial reporting. We plan to continue evaluating and improving our existing internal control environment so that we could eventually certify that our system of internal control is effective. During the course of our evaluation, we have identified and may identify more areas requiring improvement and may be required to design enhanced processes and controls to address issues identified through this review. We may experience higher than anticipated operating expenses as well as outside auditing, consulting and other professional fees during the implementation of these changes and thereafter. Further, we will need to hire additional qualified personnel in order for us to complete our evaluation and remedy our deficiencies, as well as to maintain effective internal control over financial reporting. If we are unable to implement these changes effectively or efficiently, it could harm our operations, financial reporting or financial results and could result in our conclusion that our internal control over financial reporting is not effective.

 

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.

 

As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended and the rules adopted under the Securities Exchange Act. The requirements of the Securities Exchange Act and these rules will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources. The Securities Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and financial condition. As a result, management’s attention may be diverted from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations. We will need to hire more staff and improve our information technology systems to comply with these requirements, which will increase our costs. Our failure to prepare and disclose this information in a timely manner could subject us to penalties under federal securities laws, expose us to lawsuits and restrict our ability to access capital markets.

 

These rules and regulations could also make it more difficult for us to attract and retain qualified independent members of our board of directors. Additionally, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance. We may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.

 

We have broad discretion in the use of our net proceeds from this offering and may not use them effectively.

 

Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our operating results or enhance the value of our common stock. Our stockholders may not agree with the manner in which our management chooses to allocate and spend the net proceeds. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business and cause the price of our common stock to decline. Pending their use, we may invest our net proceeds from this offering in a manner that does not produce income or that loses value.

 

We may not pay any cash dividends in the foreseeable future.

 

Although we paid a one-time special dividend in December 2006, we may retain our future earnings, if any, to fund the development and growth of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock may be your sole source of gain for the foreseeable future.

Provisions of our certificate of incorporation and by-laws could discourage potential acquisition proposals and could deter or prevent a change in control.

 

Some provisions in our certificate of incorporation and by-laws, as well as Delaware statutes, may have the effect of delaying, deferring or preventing a change in control. These provisions, including those providing for the possible issuance of shares of our preferred stock and the right of the board of directors to amend the bylaws, may make it more difficult for other persons, without the approval of our board of directors, to make a tender offer or otherwise acquire a substantial number of shares of our common stock or to launch other takeover attempts that a stockholder might consider to be in his or her best interest. These provisions could limit the price that some investors might be willing to pay in the future for shares of our common stock.

 

This prospectus contains forward-looking statements. The forward-looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” These statements involve known and unknown risks, uncertainties, and other factors which may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Forward-looking statements include statements about:

 

 

In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. We discuss many of these risks in this prospectus in greater detail under the heading “Risk Factors” beginning on page 10. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our estimates and assumptions only as of the date of this prospectus. You should read this prospectus and the documents that we have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.

 

Except as required by law, we assume no obligation to update any forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.

 

Although we paid a one-time special dividend in December 2006, at the present time, we intend to retain all of our available earnings generated by operations for the development and growth of the business. The decision to pay dividends is at the discretion of our board of directors and depends on our financial condition, results of operations, capital requirements and other factors that our board of directors deems relevant.

 

We estimate that our net proceeds from the sale of     shares of common stock in this offering will be approximately $      million after deducting estimated offering expenses of $      and underwriting discounts and commissions and assuming an initial public offering price of $      per share. If the over-allotment option is exercised in full, we estimate that our net proceeds will be approximately $      million. We will not receive any proceeds from the sale of shares by the selling stockholders.

 

We currently intend to use the net proceeds of this offering for general corporate purposes, including, without limitation, to expand our core businesses, to invest in new businesses, products and technologies, both through acquisitions and capital programs, and to fund our ongoing operating and working capital requirements.

 

The amounts that we actually expend for these purposes may vary significantly depending on a number of factors, including future revenue growth, if any, and the amount of cash that we generate from operations and our then current working capital needs. As a result, management will retain broad discretion over the allocation of the net proceeds from this offering. A portion of the net proceeds may also be used to acquire products, technologies or businesses that are complementary to our current and future business and product lines. We have no current agreements or commitments for material acquisitions of any businesses, products or technologies. Pending use of the net proceeds of this offering, we intend to invest the net proceeds in interest-bearing, investment-grade securities.

 

A $1.00 increase (decrease) in the assumed public offering price of $      per share of common stock would increase (decrease) our expected net proceeds by approximately $     , assuming the number of shares offered by us, as set forth on the cover page of this prospectus remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

The following table presents the following information:

 

 

This table should be read with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and notes to those financial statements appearing elsewhere in this prospectus.

 

 

The information above is based on the number of shares of common stock outstanding as of March 31, 2008. It does not include:

 

 

If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock after this offering. We calculate net tangible book value per share of by dividing the net tangible book value (tangible assets less total liabilities) by the number of outstanding shares of common stock.

 

Our pro forma net tangible book value at March 31, 2008 was $     , or $      per share of common stock, based on           shares of common stock outstanding upon the closing of this offering. After giving effect to the sale of      shares of common stock by us in this offering at an assumed initial public offering price of $      per share, less the estimated underwriting discounts and commissions and the estimated offering expenses payable by us, our pro forma as adjusted net tangible book value at March 31, 2008, would be $      million, or $      per share. This represents an immediate increase in the pro forma net tangible book value of $      per share to existing stockholders and an immediate dilution of $      per share to new investors purchasing shares in this offering. The following table illustrates this per share dilution:

 

 

The following table shows, at March 31, 2008, on a pro forma basis as described above, the difference between the number of shares of common stock purchased from us, the total consideration paid to us and the average price paid per share by existing stockholders and by new investors purchasing common stock in this offering:

 

 

Assuming the underwriters’ over-allotment option is exercised in full, sales by us in this offering will reduce the percentage of shares held by existing stockholders to     % and will increase the number of shares held by new investors to          , or     %. This information is based on shares outstanding as of March 31, 2008. It excludes:

 

 

To the extent these options or warrants are exercised, there will be further dilution to the new investors.

 

Each $1.00 increase (decrease) in the assumed public offering price per share of common stock would increase (decrease) the pro forma deficit in net tangible book value by $      per share (assuming no exercise of the underwriters’ option to purchase additional shares) and the dilution to investors in this offering by $      per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus remains the same.

 

The following tables and related notes present our unaudited pro forma consolidated statements for the fiscal year ended June 30, 2007 and the nine months ended March 31, 2008. The unaudited pro forma consolidated financial data for the fiscal year ended June 30, 2007 has been derived from the following: (1) our audited consolidated financial statements and accompanying notes, which are included elsewhere in this prospectus; (2) the separate audited financial statements and accompanying notes of GMI, for the period from July 1, 2006 to November 12, 2006, and Solsil for the fiscal year ended June 30, 2007, which are included elsewhere in this prospectus; and (3) the separate unaudited financial statements of Stein Ferroaleaciones, S.A. (Stein Ferroaleaciones), UltraCore Polska Sp.z.o.o, and Ultra Core Corporation (the three companies that we acquired in November 2006 and previously known as the Stein Group, referred to herein together as (SG)), for the period from July 1, 2006 to November 20, 2006, and Camargo Correa Metais S.A. (Camargo) for the period from July 1, 2006 to January 31, 2007, which are not included in this prospectus. The unaudited pro forma consolidated financial data for the nine months ended March 31, 2008 has been derived from the following: (1) our unaudited consolidated financial statements and accompanying notes, which are included elsewhere in this prospectus; and (2) the unaudited financial statements of Solsil for the period from July 1, 2007 to February 29, 2008, which are not included in this prospectus. The unaudited pro forma consolidated financial data has been prepared for illustrative purposes only and does not purport to represent what our results of operations would actually have been had the transactions described below in fact occurred as of the dates specified. In addition, the unaudited pro forma consolidated financial data does not purport to project our results of operations for any future period.

 

On November 12, 2006, we acquired 100% of the outstanding stock of GMI. The results of GMI are included in the consolidated financial statements from that date. The aggregate purchase price of GMI was $134,064, comprised of 8.6 million shares of our common stock valued at $47,961, cash of $33,220, direct costs associated with the GMI acquisition of $3,348, and assumed debt of $49,535. The value of the common stock issued was determined based on the average market price of our common stock over the two-day period before and after the terms of the acquisition were agreed to and announced. On November 20, 2006, we acquired 100% of the outstanding stock of the SG. The aggregate purchase price of the SG was $39,136, comprised of cash of $34,476, direct costs associated with the acquisition of $881, and assumed debt of $3,779. The results of the SG are included in the consolidated financial statements from that date. On January 31, 2007, we acquired 100% of the outstanding stock of Camargo. The aggregate purchase price of Camargo was $56,512, comprised of cash of $38,635, direct costs associated with the acquisition of $1,084, debt assumed of $14,393, and contingent consideration of $2,400. The results of Camargo are included in the consolidated financial statements from that date. On February 29, 2008, we acquired approximately 81% of the outstanding stock of Solsil. The aggregate purchase price of Solsil was $75,453, comprised of 5.6 million shares of our common stock valued at $72,092, direct costs associated with the acquisition of $361, and assumed liabilities of $3,000. The results of Solsil are included in our consolidated financial statements from that date.

 

The unaudited pro forma consolidated statements of operations for the fiscal year ended June 30, 2007 and the nine months ended March 31, 2008 give pro forma effect to the following events as if they were consummated on July 1, 2006:

 

 

The GMI, SG, Camargo and Solsil acquisitions have been accounted for using the purchase method of accounting. Under the purchase method of accounting, the aggregate purchase price for each acquisition (including transaction fees and expenses) has been allocated to the tangible assets, identifiable intangible assets and liabilities, based upon their respective fair values. The allocation of the purchase price, useful lives assigned to the assets and other adjustments made to the unaudited pro forma consolidated financial data are based upon available information and certain preliminary assumptions that we believe are reasonable under the circumstances. We have not finalized the purchase price allocation to the specific assets and liabilities of Solsil. The final amounts allocated and the related useful lives could differ from those reflected in the unaudited pro forma consolidated financial data and the effects could be material.

 

The following table reflects the preliminary purchase price allocation associated with each acquisition:

 

 

The goodwill amount has been assigned to the silicon metal and silicon-based specialty alloys operating segment, which is our only business segment. The allocation of the purchase price of the GMI, SG and Camargo acquisitions to assets acquired and liabilities assumed was finalized during the nine months ended March 31, 2008. A $128 increase in goodwill associated with the SG acquisition resulted from the finalization of the purchase price allocation to trade names classified within other intangible assets. The fair value of net assets acquired relating to the Camargo acquisition exceeded the purchase price. As such, the excess cost was allocated as a pro rata reduction to property, plant, and equipment and purchased intangible assets. In finalizing the purchase price allocation for the Camargo acquisition, we recorded a $476 increase in inventory, a $2,971 increase in property, plant, and equipment, a $973 increase in intangible assets, a $66 increase in accrued liabilities, and a net $4,354 decrease in deferred tax assets.

 

The unaudited pro forma consolidated financial data should be read in conjunction with (1) our audited and unaudited consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are included elsewhere in this prospectus; and (2) the separate audited financial statements and accompanying notes of GMI and Solsil, which are included elsewhere in this prospectus.

 

See accompanying notes to the unaudited pro forma consolidated statement of operations.

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Fiscal Year Ended June 30, 2007

 

(a) To eliminate the intercompany sales and the related cost of sales from GMI to Solsil, from Solsil to GMI, and from Stein Ferroaleaciones to Ultra Core Company and UltraCore Polska Sp.z.o.o.

 

(b) To reflect a full year of GMI and Camargo customer contract amortization, which increases net sales by $1.4 million and $0.9 million, respectively.

 

(c) To reflect a full year of depreciation and amortization expense for acquired property, plant, and equipment and intangible assets based on the purchase accounting fair market valuations for the GMI, SG, Camargo and Solsil acquisitions. The overall impact of depreciation and amortization adjustments increase cost of sales by $4.1 million and selling, general and administrative expenses by $0.4 million.

 

(d) To reflect the incremental fair value adjustment for inventory of $0.1 million.

 

(e) To eliminate interest income attributable to stockholders who elected to redeem their shares at the time of the GMI acquisition of $0.8 million.

 

(f) To reduce interest income by $2.9 million to reflect the acquisitions of GMI, SG, and Camargo as if they had occurred on July 1, 2006.

 

(g) To eliminate GMI financing cost amortization, which was written off as part of purchase accounting. This adjustment reduced interest expense by $0.2 million.

 

(h) To reflect the tax impact of pro forma adjustments for the GMI, SG, Camargo and Solsil acquisitions based on the applicable statutory rates for the respective acquisition and to reflect a tax benefit from operating losses generated by Solsil, which we believe we will be able to utilize.

 

(i) To reflect a full year of minority interest related to Solsil results.

 

(j) To adjust the basic and diluted shares outstanding to assume that the shares issued for the acquisitions of GMI and Solsil as well as those redeemed by redeeming shareholders had occurred on July 1, 2006.

 

 

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended March 31, 2008

 

(a) To eliminate the intercompany sales and the related cost of sales from GMI to Solsil and from Solsil to GMI for the period from July 1, 2007 through the acquisition of Solsil on February 29, 2008.

 

(b) To reflect a full year of amortization for the Solsil intangible asset unpatented technology, established in purchase accounting, which had an incremental impact to cost of sales of $0.4 million.

 

(c) To reflect the tax impact of pro forma adjustments based on the applicable statutory rates.

 

(d) To reflect a full year of minority interest related to Solsil results.

 

(e) To adjust the basic and diluted shares outstanding to assume that the shares for the acquisition of Solsil were issued on July 1, 2006.

 

The following tables summarize certain selected consolidated financial data, which should be read in conjunction with our consolidated financial statements and the notes thereto and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. The selected consolidated financial data presented below for the fiscal years ended June 30, 2007, 2006, 2005 and 2004 are derived from our audited consolidated financial statements and for the one-year period ended June 30, 2003 from unaudited financial statements. The selected consolidated financial data presented below for the nine month periods ended March 31, 2008 and March 31, 2007 are derived from our unaudited consolidated financial statements and for the period from July 1, 2006 to November 12, 2006 from audited financial statements. Successor entity refers to Globe Specialty Metals, Inc. (GSM), formerly known as International Metal Enterprises, Inc. (IME). IME, which was a special purpose acquisition vehicle, acquired Globe Metallurgical, Inc. (GMI), the Predecessor, on November 12, 2006 and IME changed its name to Globe Specialty Metals, Inc. The operations of GSM were insignificant compared with our subsequent acquisitions. Therefore, GSM concluded that GMI is the Predecessor because it was the first and largest acquisition, some of the founding investors in GSM were also investors in GMI, and GMI is the entity that has the most influence on the group of entities that were acquired by GSM during the year ended June 30, 2007. Prior to its acquisition, GMI was in bankruptcy from April 2003 until May 11, 2004. Predecessor of the predecessor entity refers to GMI prior to its emergence from bankruptcy on May 11, 2004.