UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
DC 20549





Form 10-Q





QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d)


OF
THE SECURITIES EXCHANGE ACT OF 1934





For
the quarterly period ended March 31, 2010





Commission
File Number 001-34420





Globe
Specialty Metals, Inc.


(Exact
name of registrant as specified in its charter)





Delaware
            20-2055624(State
      or other jurisdiction of
              incorporation
      or organization)
            (I.R.S.
      Employer
              Identification
      No.)





One
Penn Plaza


250 West
34th Street, Suite 4125


New
York, NY 10119


(Address
of principal executive offices, including zip code)





(212) 798-8122


(Registrant’s
telephone number, including area code)





Securities
registered pursuant to Section 12(b) of the Act:





Title of Each Class
            Name of Each Exchange on Which
      RegisteredCommon
      stock, $0.0001 par value
            The
      NASDAQ Global Select Market





Securities
registered pursuant to Section 12(g) of the Act:


None





Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.  Yes R     No £





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such
files).  Yes £     No £





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):





Large
      accelerated filer £
            Accelerated
      filer £
            Non-accelerated
      filer R
            Smaller
      reporting company  £(Do
      not check if a smaller reporting
company)





Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act).  Yes £     No R





As of
May 14, 2010, the registrant had 74,323,268 shares of common stock
outstanding.










Globe
      Specialty Metals, Inc.
              
              
              
              PART I
            Page
              No.Item 1.
            Financial
      Statements
            3Item 2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            17Item 3.
            Quantitative
      and Qualitative Disclosures About Market
      Risk
            27Item 4.
            Controls
      and
      Procedures
            27PART IIItem 1.
            Legal
      Proceedings
            28Item 1A.
            Risk
      Factors
            28Item 6.
            Exhibits
            28SIGNATURES
            29EX-31.1EX-31.2EX-32.1





2


PART I




Item 1.Financial
Statements





GLOBE
      SPECIALTY METALS, INC. AND SUBSIDIARY COMPANIES
                Condensed
      Consolidated Balance SheetsMarch
      31, 2010 and June 30, 2009(In
      thousands, except share and per share amounts)(Unaudited)March
      31,
                2010
              
              
              June
      30,
                2009ASSETSCurrent
      assets:Cash and cash equivalents
              
              $
              219,787
              
              
              
              61,876Accounts receivable, net of allowance for doubtful accounts of $1,327 and
      $1,390 at March 31, 2010 and June 30, 2009, respectively
              
              
              45,325
              
              
              
              24,094Inventories
              
              
              62,983
              
              
              
              67,394Prepaid expenses and other current assets
              
              
              21,826
              
              
              
              24,675Total
      current assets
              
              
              349,921
              
              
              
              178,039Property,
      plant, and equipment, net of accumulated depreciation and
      amortization
              
              
              189,404
              
              
              
              217,507Goodwill
              
              
              51,837
              
              
              
              51,828Other
      intangible assets
              
              
              477
              
              
              
              1,231Investments
      in unconsolidated affiliates
              
              
              8,288
              
              
              
              7,928Deferred
      tax assets
              
              
              49
              
              
              
              1,598Other
      assets
              
              
              2,290
              
              
              
              15,149Total
      assets
              
              $
              602,266
              
              
              
              473,280LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts payable
              
              $
              36,592
              
              
              
              21,341Current portion of long-term debt
              
              
              8,571
              
              
              
              16,561Short-term debt
              
              
              35,859
              
              
              
              6,688Accrued expenses and other current liabilities
              
              
              29,806
              
              
              
              46,725Total
      current liabilities
              
              
              110,828
              
              
              
              91,315Long-term
      liabilities:Long-term debt
              
              
              10,609
              
              
              
              36,364Deferred tax liabilities
              
              
              15,032
              
              
              
              18,890Other long-term liabilities
              
              
              14,658
              
              
              
              15,359Total
      liabilities
              
              
              151,127
              
              
              
              161,928Commitments
      and contingencies (note 13)Stockholders’
      equity:Common stock, $0.0001 par value. Authorized, 150,000,000 shares; issued,
      74,323,268and 66,944,254
      shares atMarch
      31, 2010 and June 30, 2009, respectively
              
              
              7
              
              
              
              7Additional paid-in capital
              
              
              389,019
              
              
              
              303,364Retained earnings
              
              
              32,152
              
              
              
              4,660Accumulated other comprehensive loss
              
              
              (3,671
              )
              
              
              (3,644
              )Treasury stock at cost, 1,000 shares at March 31, 2010 and June 30,
      2009
              
              
              (4
              )
              
              
              (4
              )Total
      Globe Specialty Metals, Inc. stockholders’ equity
              
              
              417,503
              
              
              
              304,383Noncontrolling interest
              
              
              33,636
              
              
              
              6,969Total
      stockholders’ equity
              
              
              451,139
              
              
              
              311,352Total
      liabilities and stockholders’ equity
              
              $
              602,266
              
              
              
              473,280See
      accompanying notes to condensed consolidated financial
      statements.


3





GLOBE
      SPECIALTY METALS, INC. AND SUBSIDIARY COMPANIESCondensed
      Consolidated Statements of OperationsThree
      and nine months ended March 31, 2010 and 2009(In
      thousands, except per share amounts)(Unaudited)Three
      Months Ended
            
            
            Nine
      Months EndedMarch
      31,
            
            
            March
      31,2010
            
            
            2009
            
            
            2010
            
            
            2009Net
      sales
            
            $
            112,486
            
            
            
            76,146
            
            
            $
            326,222
            
            
            
            344,610Cost
      of goods sold
            
            
            99,135
            
            
            
            62,894
            
            
            
            267,087
            
            
            
            261,989Selling,
      general, and administrative expenses
            
            
            10,008
            
            
            
            10,500
            
            
            
            35,873
            
            
            
            44,200Research
      and development
            
            
            36
            
            
            
            246
            
            
            
            151
            
            
            
            1,122Restructuring
      charges
            
            
            -
            
            
            
            1,387
            
            
            
            (81
            )
            
            
            1,387Gain
      on sale of business
            
            
            -
            
            
            
            -
            
            
            
            (22,907
            )
            
            
            -Goodwill
      and intangible asset impairment
            
            
            -
            
            
            
            144
            
            
            
            -
            
            
            
            69,704Operating income
    (loss)
            
            
            3,307
            
            
            
            975
            
            
            
            46,099
            
            
            
            (33,792
            )Other
      income (expense):Interest income
            
            
            4
            
            
            
            77
            
            
            
            205
            
            
            
            630Interest expense, net of capitalized interest
            
            
            (997
            )
            
            
            (1,427
            )
            
            
            (3,416
            )
            
            
            (5,596
            )Foreign exchange
      (loss) gain
            
            
            (64
            )
            
            
            465
            
            
            
            3,222
            
            
            
            (2,961
            )Other
    income
            
            
            546
            
            
            
            862
            
            
            
            738
            
            
            
            2,368Income
      (loss) before provision for income taxes
            
            
            2,796
            
            
            
            952
            
            
            
            46,848
            
            
            
            (39,351
            )Provision
      for income taxes
            
            
            1,751
            
            
            
            916
            
            
            
            19,702
            
            
            
            7,290Net
      income (loss)
            
            
            1,045
            
            
            
            36
            
            
            
            27,146
            
            
            
            (46,641
            )(Income)
      losses attributable to noncontrolling interest, net of tax
            
            
            (529
            )
            
            
            901
            
            
            
            346
            
            
            
            3,022Net
      income (loss) attributable to Globe Specialty Metals, Inc.
            
            $
            516
            
            
            
            937
            
            
            $
            27,492
            
            
            
            (43,619
            )Weighted
      average shares outstanding:Basic
            
            
            74,320
            
            
            
            63,930
            
            
            
            73,239
            
            
            
            63,820Diluted
            
            
            75,570
            
            
            
            66,896
            
            
            
            74,411
            
            
            
            63,820Earnings
      (loss) per common share:Basic
            
            $
            0.01
            
            
            
            0.01
            
            
            $
            0.38
            
            
            
            (0.68
            )Diluted
            
            
            0.01
            
            
            
            0.01
            
            
            
            0.37
            
            
            
            (0.68
            )See
      accompanying notes to condensed consolidated financial
      statements.








4




GLOBE
      SPECIALTY METALS, INC. AND SUBSIDIARY COMPANIESCondensed
      Consolidated Statement of Changes in Stockholders’ EquityNine
      months ended March 31, 2010(In
      thousands)(Unaudited)Globe
      Specialty Metals, Inc. Stockholders’ EquityAccumulatedAdditional
            
            
            
            
            
            Other
            
            
            Treasury
            
            
            
            
            
            
            
            
            TotalCommon
      Stock
            
            
            Paid-In
            
            
            Retained
            
            
            Comprehensive
            
            
            Stock
            
            
            Noncontrolling
            
            
            Comprehensive
            
            
            Stockholders’Shares
            
            
            Amount
            
            
            Capital
            
            
            Earnings
            
            
            (Loss)
      Income
            
            
            at
      Cost
            
            
            Interest
            
            
            (Loss)
      Income
            
            
            EquityBalance
      at June 30, 2009
            
            
            66,944
            
            
            $
            7
            
            
            
            303,364
            
            
            
            4,660
            
            
            
            (3,644
            )
            
            
            (4
            )
            
            
            6,969
            
            
            
            
            
            
            311,352Warrants
      exercised
            
            
            257
            
            
            
            —
            
            
            
            1,287
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            
            
            
            1,287UPOs
      exercised
            
            
            1,519
            
            
            
            —
            
            
            
            210
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            
            
            
            210Share-based
      compensation
            
            
            3
            
            
            
            —
            
            
            
            4,491
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            
            
            
            4,491Stock
      issuance
            
            
            5,600
            
            
            
            —
            
            
            
            34,768
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            
            
            
            34,768Sale
      of noncontrolling interest
            
            
            —
            
            
            
            —
            
            
            
            44,899
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            27,012
            
            
            
            
            
            
            71,911Realized
      gain on available-for-sale securities
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (10
            )
            
            
            —
            
            
            
            —
            
            
            
            
            
            
            (10
            )Comprehensive
      (loss) income:Foreign
      currency translation adjustment
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (19
            )
            
            
            —
            
            
            
            1
            
            
            
            (18
            )
            
            
            (18
            )Unrealized gain on available-for-sale securities(net
      of provision for income taxes of $1)
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            2
            
            
            
            —
            
            
            
            —
            
            
            
            2
            
            
            
            2Net
      income
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            27,492
            
            
            
            —
            
            
            
            —
            
            
            
            (346
            )
            
            
            27,146
            
            
            
            27,146Total
      comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            27,130
            
            
            
            27,130Balance
      at March 31, 2010
            
            
            74,323
            
            
            $
            7
            
            
            
            389,019
            
            
            
            32,152
            
            
            
            (3,671
            )
            
            
            (4
            )
            
            
            33,636
            
            
            
            27,130
            
            
            
            451,139See
      accompanying notes to condensed consolidated financial
      statements.




5


GLOBE
      SPECIALTY METALS, INC. AND SUBSIDIARY COMPANIESCondensed
      Consolidated Statements of Cash FlowsNine
      months ended March 31, 2010 and 2009(In
      thousands)(Unaudited)Nine
      Months EndedMarch
      31,2010
              
              
              2009Cash
      flows from operating activities:Net income (loss)
              
              $
              27,146
              
              
              
              (46,641
              )Adjustments to reconcile net income (loss) to net cash (used in) provided
      by operating activities:Depreciation and
      amortization
              
              
              14,868
              
              
              
              14,740Share-based
      compensation
              
              
              4,491
              
              
              
              4,704Gain on
      sale of business
              
              
              (22,907
              )
              
              
              -Goodwill and intangible asset
      impairment
              
              
              -
              
              
              
              69,704Deferred taxes
              
              
              (74
              )
              
              
              (4,077
              )Changes
      in operating assets and liabilities:Accounts receivable,
      net
              
              
              (25,788
              )
              
              
              22,666Inventories
              
              
              (5,542
              )
              
              
              (15,428
              )Prepaid expenses and
      other current assets
              
              
              (9
              )
              
              
              (1,761
              )Accounts
      payable
              
              
              22,569
              
              
              
              (21,158
              )Accrued expenses and
      other current liabilities
              
              
              (14,009
              )
              
              
              16,914Other
              
              
              (28,401
              )
              
              
              (8,024
              )Net
      cash (used in) provided by operating activities
              
              
              (27,656
              )
              
              
              31,639Cash
      flows from investing activities:Capital expenditures
              
              
              (16,432
              )
              
              
              (46,507
              )Sale of business, net of cash disposed of $16,555
              
              
              58,445
              
              
              
              -Held-to-maturity treasury securities
              
              
              -
              
              
              
              2,987Other investing activities
              
              
              (733
              )
              
              
              265Net
      cash provided by (used in) investing activities
              
              
              41,280
              
              
              
              (43,255
              )Cash
      flows from financing activities:Sale of noncontrolling interest
              
              
              98,329
              
              
              
              -Proceeds from warrants exercised
              
              
              1,287
              
              
              
              833Proceeds from UPOs exercised
              
              
              210
              
              
              
              -Net payments of long-term debt
              
              
              (19,750
              )
              
              
              (10,856
              )Net borrowings (payments) of short-term debt
              
              
              29,170
              
              
              
              (6,900
              )Sale of common stock
              
              
              36,456
              
              
              
              -Solsil, Inc. common share issuance
              
              
              -
              
              
              
              1,570Other financing activities
              
              
              (1,387
              )
              
              
              (2,045
              )Net
      cash provided by (used in) financing activities
              
              
              144,315
              
              
              
              (17,398
              )Effect
      of exchange rate changes on cash and cash equivalents
              
              
              (28
              )
              
              
              42Net
      increase (decrease) in cash and cash equivalents
              
              
              157,911
              
              
              
              (28,972
              )Cash
      and cash equivalents at beginning of period
              
              
              61,876
              
              
              
              73,994Cash
      and cash equivalents at end of period
              
              $
              219,787
              
              
              
              45,022Supplemental
      disclosures of cash flow information:Cash paid for interest
              
              $
              2,198
              
              
              
              5,737Cash paid for income taxes, net of refunds totaling $2,729 and $0,
      respectively
              
              
              50,412
              
              
              
              9,242See
      accompanying notes to condensed consolidated financial
      statements.
  6
  GLOBE
      SPECIALTY METALS, INC. AND SUBSIDIARY COMPANIESNotes
      to Condensed Consolidated Financial StatementsMarch
      31, 2010 and 2009(Dollars
      in thousands, except per share data)(Unaudited)  (1)  Organization
and Business Operations





Globe
Specialty Metals, Inc. and subsidiary companies (the Company, we, or our) is
among the world’s largest producers of silicon metal and silicon-based alloys,
important ingredients in a variety of industrial and consumer products. The
Company’s customers include major silicone chemical, aluminum and steel
manufacturers, auto companies and their suppliers, ductile iron foundries,
manufacturers of photovoltaic solar cells and computer chips, and concrete
producers.





(2)  Summary
of Significant Accounting Policies





a. Basis
of Presentation





In the
opinion of the Company’s management, the accompanying condensed consolidated
financial statements include all adjustments necessary for a fair presentation
in accordance with accounting principles generally accepted in the United States
of America (U.S. GAAP) of the results for the interim periods presented and
such adjustments are of a normal, recurring nature. The accompanying condensed
consolidated financial statements should be read in conjunction with the
Company’s Annual Report on Form 10-K for the fiscal year ended
June 30, 2009. There have been no material changes to the Company’s
significant accounting policies during the nine months ended March 31, 2010,
except as discussed below under Recently Implemented Accounting
Pronouncements.





b. Reclassifications





Certain
reclassifications have been made to prior year amounts to conform to current
year presentation, including the reclassification of $1,019 and $4,275 from
selling, general, and administrative expenses to cost of goods sold for the
three and nine months ended March 31, 2009, respectively, as, during the
first quarter of fiscal year 2010, the Company reevaluated certain expenses and
deemed these to be production costs. In addition, the Company reclassified $461
in transaction costs associated with the Dow Corning transactions (see note 3)
incurred during the first quarter of fiscal year 2010 from selling, general, and
administrative expenses to gain on sale of business.





The
Company’s condensed consolidated statement of cash flows for the six months
ended December 31, 2009 reflected the proceeds from the Company’s sale of a 49%
membership interest in WVA Manufacturing, LLC (WVA LLC) (see note 3) as a cash
flow from investing activities. To conform the cash flow presentation to the
balance sheet presentation, the Company revised its presentation to reflect the
$100,000 proceeds from the sale of this noncontrolling interest, net of
transaction costs of $1,538, as a cash flow from financing
activities.





c. Use
of Estimates





The
preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect amounts reported in the
condensed consolidated financial statements and related notes. Significant
estimates and assumptions in these condensed consolidated financial statements
include the valuation of inventories; the carrying amount of property, plant,
and equipment; goodwill and long-lived asset impairment tests; estimates of fair
value of investments; provision for income taxes and deferred tax valuation
allowances; valuation of derivative instruments; the determination of the
discount rate and the rate of return on plan assets for pension expense; and the
determination of the fair value of share-based compensation involving
assumptions about forfeiture rates, stock volatility, discount rates, and
expected time to exercise. During interim periods, provision for income taxes is
recognized using an estimated annual effective tax rate. Due to the inherent
uncertainty involved in making estimates, actual results could differ from these
estimates.





d. Revenue
Recognition





Revenue
is recognized in accordance with the U.S. Securities and Exchange
Commission (SEC) Staff Accounting Bulletin No. 104
(SAB 104) when a firm sales agreement is in place, delivery has
occurred and title and risks of ownership have passed to the customer, the sales
price is fixed or determinable, and collectability is reasonably assured.
Shipping and other transportation costs charged to buyers are recorded in both
net sales and cost of goods sold. Sales taxes collected from customers and
remitted to governmental authorities are accounted for on a net basis and,
therefore, are excluded from net sales. When the Company provides a combination
of products and services to customers, the arrangement is evaluated under
Financial Accounting Standards Board (FASB) ASC Subtopic 605-25, Revenue Recognition — Multiple
Element Arrangements(ASC 605.25). ASC 605.25 addresses certain aspects of accounting by a
vendor for arrangements under which the vendor will perform multiple
revenue-generating activities. If the Company
cannot objectively determine the fair value of any undelivered elements under an
arrangement, the Company defers revenue until all elements are delivered and
services have been performed, or until fair value can objectively be determined
for any remaining undelivered elements.





e. Recently
Implemented Accounting Pronouncements





In June
2009, the FASB issued SFAS No. 168, The FASB Accounting Standards
Codificationtm
and the Hierarchy of Generally
Accepted Accounting Principles.This statement
identifies the sources of accounting principles used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with U.S. GAAP (the GAAP hierarchy). This statement establishes
the FASB Accounting Standards
Codificationtm(the Codification/ASC)
as the source of authoritative accounting principles recognized by the FASB to
be applied by nongovernmental entities in the preparation of financial
statements in conformity with U.S. GAAP, except for SEC rules and
interpretive releases, which are also authoritative U.S. GAAP for SEC
registrants. The Codification standard (FASB ASC Subtopic 105-10 on generally
accepted accounting principles) was adopted on July 1, 2009. This change
had no effect on the Company’s financial position or results of
operations.





In
December 2007, the FASB issued ASC Subtopic 805-10, Business Combinations. This
statement establishes principles and requirements for how the acquirer
(i) recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquired entity, (ii) recognizes and measures the goodwill acquired in the
business combination or a gain from a bargain purchase, and
(iii) determines what information to disclose to enable users of the
financial statements to evaluate the nature and financial effects of the
business combination. This accounting standard was adopted on July 1, 2009.
This statement will be applied prospectively to the Company’s business
combinations for which the acquisition date is on or after July 1,
2009.





In
December 2007, the FASB issued ASC Subtopic 810-10, Consolidation — Consolidation of Entities Controlled
by Contract(ASC 810.10) and ASC Subtopic 815-40, Derivatives and
Hedging — Contracts in Entity’s Own Equity(ASC 815.40). The
Company adopted ASC 810.10 and ASC 815.40 on July 1, 2009. The objective of
these statements is to improve the relevance, comparability, and transparency of
the financial information that a reporting entity provides in its financial
statements by establishing accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. In accordance with ASC 810.10 and ASC 815.40, the Company has
provided the enhanced disclosures required by ASC 810.10 and ASC 815.40 in the
condensed consolidated balance sheets and condensed consolidated statement of
changes in stockholders’ equity for all periods presented. See note 14
(Stockholders’ Equity) for additional information.





In
September 2006, the FASB issued ASC Subtopic 820-10, Fair Value Measurements and Disclosures(ASC 820).
The Company partially adopted ASC 820 on July 1, 2008. This adoption did
not have a material impact to the Company’s consolidated results of operations
or financial condition. The Company fully adopted ASC 820 on July 1, 2009.
ASC 820 defines fair value, establishes a framework for the measurement of fair
value, and enhances disclosures about fair value measurements. The statement
does not require any new fair value measures. The Company carries its derivative
agreements at fair value, determined using observable market based inputs. See
note 17 (Fair Value Measures) for additional information.





In
September 2009, the FASB issued an amendment to ASC Subtopic 740-10, Income Taxes(ASC 740). The Company
adopted this amendment on September 30, 2009. This amendment to ASC 740
adds implementation guidance for all entities about applying the accounting
requirements for uncertain tax matters. The implementation guidance is presented
in examples and is not intended to change practice for those already applying
the requirements. The implementation of this additional guidance had no effect
on the Company’s financial position or results of operations.





f. Accounting
Pronouncements to be Implemented





In June
2009, the FASB issued an amendment to ASC Subtopic 860-10, Transfers and Servicing(ASC 860). The
objective of this amendment is to improve the relevance, representational
faithfulness, and comparability of the information that a reporting entity
provides in its financial statements about a transfer of financial assets; the
effects of a transfer on its financial position, financial performance, and cash
flows; and a transferor’s continuing involvement, if any, in transferred
financial assets. This amendment improves financial reporting by eliminating
(1) the exceptions for qualifying special-purpose entities from the
consolidation guidance and (2) the exception that permitted sale accounting
for certain mortgage securitizations when a transferor has not surrendered
control over the transferred financial assets. This amendment is effective for
the Company on July 1, 2010. The Company is currently assessing the
potential effect of the amendment of ASC 860 on its financial position and
results of operations.





7


In June
2009, the FASB issued an amendment to ASC Subtopic 810-10, Consolidation — Variable
Interest Entities(ASC 810). The objective of this amendment is to
improve financial reporting by enterprises involved with variable interest
entities by eliminating the quantitative-based risks and rewards calculation and
requiring an enterprise to perform an analysis to determine whether the
enterprise’s variable interest or interests give it a controlling interest in a
variable interest entity. In addition, the amendment requires an ongoing
reassessment of whether an enterprise is the primary beneficiary of a variable
interest entity. This amendment is effective for the Company on July 1,
2010. The Company is not currently involved with variable interest entities and,
therefore, does not currently expect any impact from the amendment to ASC 810 on
its financial position and results of operations.





In
December 2008, the FASB issued an amendment to ASC Subtopic 715-10, Compensation — Retirement
Benefits(ASC 715). This amendment provides guidance on an employer’s
disclosures about plan assets of a defined benefit pension or other
postretirement plan. The amendment requires employers of public entities to
disclose more information about how investment allocation decisions are made,
more information about major categories of plan assets, including concentrations
of risk and fair-value measurements, and the fair-value techniques and inputs
used to measure plan assets. The disclosure requirements of the amendment to ASC
715 are effective for fiscal years ending after December 15, 2009. This
amendment to ASC 715 has no impact on the Company’s financial position and
results of operations.





In
October 2009, the FASB issued an amendment to ASC Subtopic 820-10, Fair Value Measurements and Disclosures(ASC 820).
This amendment requires reporting entities to make new disclosures about
recurring or nonrecurring fair value measurements including significant
transfers into and out of Level 1 and Level 2 fair value measurements and
information about purchases, sales, issuances, and settlements on a gross basis
in the reconciliation of Level 3 fair value measurements. The amendment also
clarifies existing fair value measurement disclosure guidance about the level of
disaggregation, inputs, and valuation techniques. The disclosure requirements of
the amendment to ASC 820, except for the detailed Level 3 roll forward
disclosures, is effective for annual and interim reporting periods beginning
after December 15, 2009. The new disclosures about purchases, sales, issuances,
and settlements in the roll forward activity for Level 3 fair value measurements
are effective for interim and annual reporting periods beginning after December
15, 2010. This amendment to ASC 820 has no impact on the Company’s financial
position and results of operations.





(3)  Dow
Corning Transactions





On
November 5, 2009, the Company sold 100% of its interest in Globe Metais
Indústria e Comércio S.A. (Globe Metais) pursuant to a purchase agreement
entered into on that same date by and among the Company and Dow Corning
Corporation (Dow Corning). The cash received by the Company in connection with
the disposition was approximately $65,600, which represents a purchase price of
$75,000 less withholding taxes and certain expenses. Dow Corning assumed Globe
Metais’ cash balances totaling $16,555 and $14,000 of export prepayment
financing. The final purchase price is subject to adjustment for changes in
working capital as provided for in the purchase agreement.





The sale
of the Company’s equity interest in Globe Metais was executed in connection with
the sale of a 49% membership interest in WVA LLC, a newly formed entity by the
Company, to Dow Corning, the execution of a long-term supply agreement, and an
amendment to an existing supply agreement between Dow Corning and the Company to
reduce the amount required to be sold in calendar year 2010 to 20,000 metric
tons of silicon metal.





For
accounting purposes, the Company allocated $75,000 of the total purchase price
received from Dow Corning to the sale of the equity of Globe Metais and $100,000
to the sale of membership interests in WVA LLC. The allocation of total purchase
price to the separate transactions was based on the relative fair values of
Globe Metais and the membership interests in WVA LLC.





ASC
815.40 requires an entity to consolidate all subsidiaries over which it has a
controlling financial interest and considers changes in the ownership interest
while the entity retains its controlling financial interest in the subsidiary as
equity transactions, resulting in no gain or loss recognition in the statement
of operations. As the Company retained a controlling financial interest in WVA
LLC, no gain has been recognized in net income on the sale of the 49% membership
interest. Rather, noncontrolling interest has been adjusted to reflect the
change in our ownership interest in WVA LLC. The difference between the fair
value of the consideration received, net of transaction and related costs of
$2,146 and provision for income taxes of $25,943, and the amount by which
noncontrolling interest increased has been recognized as an increase in
additional paid-in capital.





(4)  Restructuring
Charges





During
the third quarter of fiscal year 2009, the Company implemented formal
restructuring programs, including the temporary shutdown of certain furnace
operations and furloughing or terminating employees. Cash payments associated
with these restructuring programs were completed as of March 31, 2010. The
restructuring programs included employee severance and benefits, as well as
costs associated with lease termination obligations.





Activity
during the nine months ended March 31, 2010 related to the restructuring
liability is as follows:








Liability
      at
            
            
            
            
            
            
            
            
            Liability
      atJune
      30,
            
            
            
            
            
            Cash
            
            
            March
      31,2009
            
            
            Adjustments(2)
            
            
            Payments
            
            
            2010Severance
      and benefit-related costs (1)
            
            $
            227
            
            
            
            (81
            )
            
            
            (146
            )
            
            
            -(1)
      Includes severance payments made to employees, payroll taxes, and other
      benefit-related costs in connection with the terminations of
      employees.(2)
      Adjustments are for employees who were rehired by the Company in
      conjunction with the restarting of certain furnace operations during the
      nine months ended March 31, 2010.




Total
restructuring expenses of $1,711 were incurred during fiscal year 2009. There is
no remaining unpaid liability as of March 31, 2010, and no additional costs are
expected to be incurred associated with these restructuring
actions.





(5)  Treasury
Securities





During
March 2008, the Company purchased U.S. government treasury securities with
a term to maturity of 125 days. The securities were redeemed for $2,987
during the first quarter of fiscal year 2009.





(6)  Inventories





Inventories
comprise the following:




March
      31,
              2010
            
            
            June 30,
              2009Finished
      goods
            
            $
            15,419
            
            
            
            23,867Work
      in process
            
            
            2,645
            
            
            
            3,462Raw
      materials
            
            
            37,756
            
            
            
            31,323Parts
      and supplies
            
            
            7,163
            
            
            
            8,742Total
            
            $
            62,983
            
            
            
            67,394





At March
31, 2010, $56,415 in inventory is valued using the first-in, first-out method
and $6,568 using the average cost method. At June 30, 2009, $46,712 in
inventory is valued using the first-in, first-out method and $20,682 using the
average cost method.





During
the three and nine months ended March 31, 2009, the Company recorded inventory
write-downs totaling $1,600 and $5,061, respectively, due to expected lower net
realizable values for certain Solsil, Inc. (Solsil) and Ningxia Yonvey Coal
Industrial Co., Ltd (Yonvey) inventories. These write-downs have been recorded
in cost of goods sold. There were no significant inventory write-downs during
the three and nine months ended March 31, 2010.





8


(7)  Property,
Plant, and Equipment





Property,
plant, and equipment, net of accumulated depreciation and amortization, comprise
the following:














March
      31,
            
            
            June
      30,2010
            
            
            2009Land,
      land improvements, and land use rights
            
            $
            5,097
            
            
            
            13,835Building
      and improvements
            
            
            32,084
            
            
            
            24,176Machinery
      and equipment
            
            
            71,506
            
            
            
            56,912Furnaces
            
            
            107,338
            
            
            
            99,429Other
            
            
            3,050
            
            
            
            15,728Construction
      in progress
            
            
            19,446
            
            
            
            47,257Property,
      plant, and equipment, gross
            
            
            238,521
            
            
            
            257,337Less
      accumulated depreciation and amortization
            
            
            (49,117
            )
            
            
            (39,830
            )Property,
      plant, and equipment, net of accumulated depreciation and
      amortization
            
            $
            189,404
            
            
            
            217,507








Depreciation
expense for the three and nine months ended March 31, 2010 was $5,055 and
$14,558, of which $4,959 and $14,242 is recorded in cost of goods sold and $96
and $316 is recorded in selling, general, and administrative expenses,
respectively. Depreciation expense for the three and nine months ended March 31,
2009 was $4,467 and $13,061, of which $4,355 and $12,740 is recorded in cost of
goods sold and $112 and $321 is recorded in selling, general, and administrative
expenses, respectively.





Capitalized
interest for the three and nine months ended March 31, 2010 was $70 and $368,
respectively. Capitalized interest for the three and nine months ended March 31,
2009 was $223 and $737, respectively.





(8)  Goodwill
and Other Intangibles





Goodwill
and other intangibles presented below have been allocated to the Company’s
operating segments.





a.  Goodwill





Changes
in the carrying amount of goodwill during the nine months ended March 31, 2010
are as follows:








Balance
      at June 30, 2009
            
            $
            51,828Foreign
      exchange rate changes
            
            
            9Balance
      at March 31, 2010
            
            $
            51,837








There was
no goodwill associated with Globe Metais, which was sold on November 5, 2009 as
discussed in note 3.





b.  Other
Intangible Assets





Changes
in the carrying amounts of definite lived intangible assets during the nine
months ended March 31, 2010 are as follows:








ElectricityContracts
            
            
            OtherCost:Balance
      at June 30, 2009
            
            $
            7,905
            
            
            
            323Sale
      of Globe Metais (see note 3)
            
            
            (5,073
            )
            
            
            (78
            )Balance
      at March 31, 2010
            
            $
            2,832
            
            
            
            245Accumulated
      amortization:Balance
      at June 30, 2009
            
            $
            7,151
            
            
            
            323Sale
      of Globe Metais (see note 3)
            
            
            (4,629
            )
            
            
            (78
            )Amortization
      expense
            
            
            310
            
            
            
            —Balance
      at March 31, 2010
            
            
            2,832
            
            
            
            245Net
      balance at March 31, 2010
            
            $
            —
            
            
            
            —








There
were no changes in the value of the Company’s indefinite lived intangible assets
during the nine months ended March 31, 2010. The trade name balance at both
March 31, 2010 and June 30, 2009 is $477.





Amortization
expense of purchased intangible assets for the three and nine months ended March
31, 2010 was $0 and $310, respectively, which is recorded in cost of goods sold.
Amortization expense of purchased intangible assets for the three and nine
months ended March 31, 2009 was $340 and $1,679, respectively, which is recorded
in cost of goods sold.





c.  Goodwill
and Intangible Asset Impairment





During
the second quarter of fiscal year 2009, the Company experienced a decrease in
profitability, and a significant decline in demand for high purity solar-grade
silicon. Consistent with the guidance in ASC Subtopic 350, Intangibles — Goodwill and
Other, the Company performed an interim impairment test of goodwill and
indefinite-lived intangible assets at the end of the second quarter of fiscal
year 2009. In performing this test, the Company made a substantial downward
revision in the forecasted cash flows from its Solsil reporting unit as a result
of a decrease in the market price for solar-grade silicon and weakness in demand
for solar products. The Company recorded a preliminary estimate of impairment
charges totaling $65,196, comprised of $57,512 of goodwill and $12,048 of
unpatented technology offset by related deferred taxes totaling $4,364. These
impairment charges were entirely associated with the Company’s Solsil business
unit. The impairment charges were finalized in the third quarter of fiscal year
2009, in conjunction with the Company’s annual impairment assessment, resulting
in an additional $144 goodwill impairment charge.





9


(9)  Debt





a.  Short-Term
Debt





Short-term
debt comprises the following:





WeightedOutstanding
              
              
              Average
              
              
              UnusedBalance
              
              
              Interest
      Rate
              
              
              Credit
      LineMarch
      31, 2010:Type
      debt:Revolving credit
              
              $
              22,000
              
              
              
              2.50
              %
              
              $
              2,902Export
      financing
              
              
              —
              
              
              
              —
              
              
              
              3,000Other
              
              
              13,859
              
              
              
              4.56
              
              
              
              504Total
              
              $
              35,859
              
              
              
              
              
              
              $
              6,406June
      30, 2009:Type
      debt:Revolving credit
              
              $
              —
              
              
              
              —
              %
              
              $
              34,560Export
      financing
              
              
              —
              
              
              
              —
              
              
              
              7,400Other
              
              
              6,688
              
              
              
              6.69
              
              
              
              —Total
              
              $
              6,688
              
              
              
              
              
              
              $
              41,960
   Revolving Credit Agreements —
A summary of the Company’s revolving credit agreements at March 31, 2010 is as
follows:








Outstanding
              Balance
            
            
            Unused
              Commitment
            
            
            Total
              CommitmentSenior
      credit facility
            
            $
            22,000
            
            
            
            2,902
            
            
            
            28,000





As part of
the Dow Corning transactions discussed in note 3, the Company agreed to modify
the terms of its senior credit facility, which included a reduction of revolving
credit from $35,000 to $28,000 in exchange for the release of the assets of West
Virginia Alloys as a security for the senior credit facility. This revolving
credit agreement expires in September 2013. Interest on advances under the
revolving credit facility accrues at LIBOR plus an applicable margin percentage
or, at the Company’s option, prime plus an applicable margin percentage. The
amount available under the revolving credit facility is subject to a borrowing
base calculation. The total commitment on the revolving credit facility includes
$10,000 for letters of credit associated with foreign supplier contracts. At
March 31, 2010, there was a $22,000 balance outstanding on this revolver. The
total commitment on this credit facility includes $1,288 outstanding letters of
credit associated with foreign supplier contracts and a $1,810 outstanding
letter of credit associated with a power supply contract. The revolving credit
facility is secured by substantially all of the assets of Globe Metallurgical,
Inc. (GMI), and is subject to certain restrictive and financial covenants, which
include limits on additional debt, restrictions on capital expenditures,
restrictions on dividend and other equity distributions, a maximum ratio of debt
to earnings before interest, taxes, depreciation, and amortization, and minimum
net worth and interest coverage requirements. The commitment under the revolving
credit facility may be withdrawn if the Company defaults under the terms of
these covenants or fails to remit payments when due. The Company was in
compliance with the loan covenants at March 31, 2010.





Export Financing
Agreements — The Company’s Argentine subsidiary maintains various
short-term export financing agreements. Generally, these arrangements are for
periods ranging between seven and eleven months, and require the Company to
pledge as collateral certain export accounts receivable. There is no export
financing debt outstanding at March 31, 2010.





Other — The Company’s
subsidiary, Yonvey, has $7,324 in outstanding promissory notes, which mature
through August 2010. The notes accrue interest at rates ranging from 5.3% to
8.5%. The promissory notes are secured by certain Yonvey assets. In addition,
the balance includes $5,880 in short-term notes payable to Dow Corning related
to working capital loans given to WVA LLC, which accrue interest at
3.0%.





b.  Long-Term
Debt





Long-term
debt comprises the following:








March
      31,
            
            
            June
      30,2010
            
            
            2009Senior
      term loan
            
            $
            19,021
            
            
            
            33,684Export
      prepayment financing
            
            
            —
            
            
            
            17,000Other
            
            
            159
            
            
            
            2,241Total
            
            
            19,180
            
            
            
            52,925Less
      current portion of long-term debt
            
            
            (8,571
            )
            
            
            (16,561
            )Long-term
      debt, net of current portion
            
            $
            10,609
            
            
            
            36,364








Senior Term Loan — The
Company’s subsidiary, GMI, entered into a five-year senior term loan in an
aggregate principal amount of $40,000 during September 2008. Interest on the
senior term loan accrues at LIBOR plus an applicable margin percentage or, at
the Company’s option, prime plus an applicable margin percentage. Principal
payments are due in quarterly installments of $2,105, commencing on
December 31, 2008, and the unpaid principal balance is due in full in
September 2013, subject to certain mandatory prepayments. A mandatory prepayment
of $2,347 was made during the second quarter of fiscal year 2010 based on
excess cash flow, as defined in the loan agreement, generated during
fiscal year 2009. As part of the Dow Corning transactions discussed in note
3, the Company made a $6,000 prepayment of the senior term loan, applied to the
scheduled installments of principal in inverse order of maturity, in exchange
for the release of the assets of West Virginia Alloys as security for the senior
term loan. The interest rate on this loan was 2.50%, equal to LIBOR plus 2.25%,
at March 31, 2010. The senior term loan is secured by substantially all of the
assets of GMI and is subject to certain restrictive and financial covenants,
which include limits on additional debt, restrictions on capital expenditures,
restrictions on dividend and other equity distributions, a maximum ratio of debt
to earnings before interest, taxes, depreciation, and amortization, and minimum
net worth and interest coverage requirements. The Company was in compliance with
these loan covenants at March 31, 2010.





Export Prepayment Financing –The export prepayment financing was related to Globe Metais, which was
sold in November 2009 as discussed in note 3.





See
note 10 (Derivative Instruments) for discussion of derivative financial
instruments entered into to reduce the Company’s exposure to interest rate
fluctuations on outstanding long-term debt.





c.  Fair
Value of Debt





The
recorded carrying values of our debt balances approximate fair value given our
debt is at variable rates tied to market indicators or is short-term in
nature.





10


(10)  Derivative
Instruments





The
Company enters into derivative instruments to hedge certain interest rate risks
and previously entered into derivative instruments to hedge certain foreign
currency risks. The Company does not engage in interest rate, currency, or
commodity speculation, and no derivatives are held for trading purposes. All
derivatives are accounted for using mark-to-market accounting. The Company
believes it is not practical to designate its derivative instruments as hedging
instruments as defined under ASC Subtopic 815-10, Derivatives and Hedging(ASC 815).
Accordingly, the Company adjusts its derivative financial instruments to current
market value through the condensed consolidated statement of operations based on
the fair value of the agreement as of period-end. Although not designated as
hedged items as defined under ASC 815, these derivative instruments serve to
significantly offset the Company’s interest rate risks and served to
significantly offset foreign exchange risks associated with Globe Metais prior
to its sale discussed in note 3. Gains or losses from these transactions offset
gains or losses on the assets, liabilities, or transactions being hedged. No
credit loss is anticipated as the counterparties to these agreements are major
financial institutions that are highly rated.




Interest
Rate Risk:





The
Company is exposed to market risk from changes in interest rates on certain of
its long-term debt obligations.





In
connection with GMI’s revolving credit facility and senior term loan
(note 9), the Company entered into an interest rate cap arrangement and
three interest rate swap agreements to reduce our exposure to interest rate
fluctuations.





In
October 2008, the Company entered into an interest rate cap arrangement to cap
LIBOR on a $20,000 notional amount of debt, with the notional amount decreasing
by $1,053 per quarter through the interest rate cap’s expiration on
June 30, 2013. Under the interest rate cap, the Company capped LIBOR at a
maximum of 4.5% over the life of the agreement.





In
November 2008, the Company entered into an interest rate swap agreement
involving the exchange of interest obligations relating to a $13,333 notional
amount of debt, with the notional amount decreasing by $702 per quarter. Under
the interest rate swap, the Company receives LIBOR in exchange for a fixed
interest rate of 2.85% over the life of the agreement. The agreement expires in
June 2013.





In
January 2009, the Company entered into a second interest rate swap agreement
involving the exchange of interest obligations relating to a $12,632 notional
amount of debt, with the notional amount decreasing by $702 per quarter. Under
the interest rate swap, the Company receives LIBOR in exchange for a fixed
interest rate of 1.66% over the life of the agreement. The agreement expires in
June 2013.





In April
2009, the Company entered into a third interest rate swap agreement involving
the exchange of interest obligations relating to an $11,228 notional amount of
debt, with the notional amount decreasing by $702 per quarter. Under the
interest rate swap, the Company receives LIBOR in exchange for a fixed interest
rate of 2.05% over the life of the agreement. The agreement expires in June
2013.





The
remaining notional amount of debt swapped under these three interest rate swaps
totals $27,368 at March 31, 2010. Based on total prepayments of $8,347 made on
GMI’s senior term loan in the second quarter of fiscal year 2010 (see
note 9), the total remaining balance outstanding on GMI’s senior term loan
is only $19,021 at March 31, 2010.





In
connection with the Company’s export prepayment financing arrangement
(note 9), the Company entered into an interest rate swap agreement
involving the exchange of interest obligations relating to a $14,000 notional
amount of debt, with the notional amount decreasing by $3,000 on a semiannual
basis through August 2011, and a final $2,000 notional amount swapped for the
six-month period ended January 2012. Under the interest rate swap, the Company
received LIBOR in exchange for a fixed interest rate of 2.66% over the life of
the agreement. This agreement, as well as the related export prepayment
financing arrangement, was transferred with the sale of Globe Metais discussed
in note 3.





Foreign
Currency Risk:





The
Company is exposed to market risk arising from changes in currency exchange
rates as a result of its operations outside the United States, principally in
Argentina and China. A portion of the Company’s net sales generated from its
non-U.S. operations is denominated in currencies other than the
U.S. dollar. Most of the Company’s operating costs for its
non-U.S. operations are denominated in local currencies, principally the
Argentine peso and the Chinese renminbi. Consequently, the translated
U.S. dollar value of the Company’s non-U.S. dollar net sales, and
related accounts receivable balances, and our operating costs are subject to
currency exchange rate fluctuations. Derivative instruments are not used
extensively to manage this risk. The Company utilized derivative financial
instruments to manage a portion of its net foreign currency exposure to the
Brazilian real. All of these contracts were settled prior to the sale of Globe
Metais discussed in note 3.





Commodity
Price Risk:





The
Company is exposed to price risk for certain raw materials and energy used in
its production process. The raw materials and energy that the Company uses are
largely commodities subject to price volatility caused by changes in global
supply and demand and governmental controls. Derivative financial instruments
are not used to manage the Company’s exposure to fluctuations in the cost of
commodity products used in its operations. The Company attempts to reduce the
impact of increases in its raw material and energy costs by negotiating
long-term contracts and through the acquisition of companies or assets for the
purpose of increasing its access to raw materials with favorable pricing
terms.





The
effect of the Company’s derivative instruments on the condensed consolidated
statements of operations is summarized in the following table:





(Loss)
      Gain Recognized
            
            
            (Loss)
      Gain RecognizedDuring
      the Three Months
            
            
            During
      the Nine MonthsEnded
      March 31,
            
            
            Ended
      March 31,
            
            Location2010
            
            
            2009
            
            
            2010
            
            
            2009
            
            of
      (Loss) GainInterest
      rate derivatives
            
            $
            (282
            )
            
            
            (255
            )
            
            
            (1,027
            )
            
            
            (1,082
            )
            Interest
      expenseForeign
      exchange forward contracts
            
            
            —
            
            
            
            1,173
            
            
            
            849
            
            
            
            1,012
            
            Foreign
      exchange (loss) gain





The fair
values of the Company’s derivative instruments at March 31, 2010 are summarized
in note 17 (Fair Value Measures). The $406 liability associated with the
Company’s interest rate derivatives is included in other long-term
liabilities.





(11)  Pension
Plans





The
Company’s subsidiary, GMI, sponsors three noncontributory defined benefit
pension plans covering certain domestic employees. These plans were frozen in
2003. The components of net periodic pension expense for the Company’s defined
benefit pension plans are as follows:








Three
      Months Ended
            
            
            Nine
      Months EndedMarch
      31,
            
            
            March
      31,2010
            
            
            2009
            
            
            2010
            
            
            2009Interest
      cost
            
            $
            302
            
            
            
            306
            
            
            
            906
            
            
            
            918Expected
      return on plan assets
            
            
            (247
            )
            
            
            (309
            )
            
            
            (740
            )
            
            
            (927
            )Amortization
      of net loss
            
            
            143
            
            
            
            58
            
            
            
            429
            
            
            
            172Net
      periodic pension expense
            
            $
            198
            
            
            
            55
            
            
            
            595
            
            
            
            163








The
Company expects to contribute approximately $756 to the plans for the fiscal
year ended June 30, 2010, of which $502 has been contributed through March
31, 2010.





11


(12)  Income
Taxes





The
following table summarizes our provision for income taxes and effective tax
rates for the three and nine months ended March 31, 2010 and 2009:








Three
      Months Ended
            
            
            Nine
      Months EndedMarch
      31,
            
            
            March
      31,2010
            
            
            2009
            
            
            2010
            
            
            2009Income
      (loss) before provision for income taxes
            
            $
            2,796
            
            
            
            952
            
            
            
            46,848
            
            
            
            (39,351)Provision
      for income taxes
            
            
            1,751
            
            
            
            916
            
            
            
            19,702
            
            
            
            7,290Effective
      tax rate
            
            
            62.6%
            
            
            
            96.2%
            
            
            
            42.1%
            
            
            
            (18.5%)








The
provision for income taxes is based on the current estimate of the annual
effective tax rate, adjusted as necessary for quarterly events. In accordance
with ASC Topic 740, Income
Taxes,the Company’s quarterly effective tax rate does not reflect a
benefit associated with losses related to certain foreign subsidiaries. The
effective tax rates for the three and nine months ended March 31, 2010 and 2009
were based on our forecasted annualized effective tax rates, adjusted for
discrete items that occurred within the respective periods.




The
Company’s effective tax rate for the three months ended March 31, 2010 was 62.6%
compared to 96.2% for the three months ended March 31, 2009. The Company’s
effective tax rate for the nine months ended March 31, 2010 was 42.1% compared
to (18.5)% for the nine months ended March 31, 2009. These rates differ from the
Company’s statutory rate of 35% mainly as a result of increases to the effective
tax rate from U.S. state tax expense, the exclusion of the impact of net
losses from our Chinese operations, the tax benefit of which is not considered
more likely than not to be realized due to a history of operating losses. In
addition, the Company recognized and paid income taxes totaling $9,270 during
the second quarter of fiscal year 2010 in connection with the gain on the sale
of Globe Metais discussed in note 3. These increases are offset by the benefit
from a tax holiday in Argentina, which is forecasted to be lower in fiscal year
2010 compared with fiscal year 2009, and the benefit from a tax holiday in
Brazil for the period that we owned Globe Metais. Our effective tax rate for the
nine months ended March 31, 2009 also differs from the Company’s statutory rate
primarily as a result of the Solsil goodwill impairment charge of $57,656
recorded in fiscal year 2009, which was not deductible for tax
purposes.





During
fiscal year 2010, the Company recorded a provision for income taxes of $25,943
as reduction of additional paid-in capital in connection with the sale of the
noncontrolling interest in WVA LLC discussed in note 3.





The
Company currently operates under a tax holiday in Argentina and operated under a
tax holiday in Brazil prior to the sale of Globe Metais. In Argentina, the
Company’s manufacturing income is taxed at a preferential rate, which varies
based on production levels from the Company’s Argentine facilities, compared to
a statutory rate of 35%. The tax holiday in Argentina expires in 2012. In
Brazil, the Company operated under a tax holiday, which resulted in a
preferential tax rate of 15.25% of the Company’s manufacturing income as
compared to a statutory rate of 34%. The anticipated effects of these tax
holidays are incorporated into the Company’s annualized effective tax rate as
noted above. For the three and nine months ended March 31, 2010, the foreign tax
holidays in Argentina and Brazil provided a benefit of $194 and $651,
respectively to net income. For the three and nine months ended March 31, 2009,
the foreign tax holidays in Argentina and Brazil provided a benefit of $60 and
$1,231, respectively to net loss.





The
Company maintains valuation allowances where it is more likely than not that all
or a portion of a deferred tax asset will not be realized. In determining
whether a valuation allowance is warranted, the Company evaluates factors such
as prior earnings history, expected future earnings, carry back and carry
forward periods, and tax strategies that could potentially enhance the
likelihood of the realization of a deferred tax asset. During the nine months
ended March 31, 2010, the Company’s net valuation allowances increased due to
the establishment of additional valuation allowances against net operating
losses (NOLs) in China that may not be utilized and changes related to foreign
exchange fluctuations associated with our foreign NOLs, and decreased due to the
sale of Globe Metais.





(13)  Commitments
and Contingencies





a.  Legal
Contingencies





The
Company is subject to various lawsuits, claims, and proceedings that arise in
the normal course of business, including employment, commercial, environmental,
safety, and health matters, as well as claims associated with our historical
acquisitions and divestitures. Although it is not presently possible to
determine the outcome of these matters, in the opinion of management, the
ultimate disposition of these matters will not have a material adverse effect on
the Company’s consolidated financial position, results of operations, or
liquidity.





b.  Environmental
Contingencies





It is the
Company’s policy to accrue for costs associated with environmental assessments,
remedial efforts, or other environmental liabilities when it becomes probable
that a liability has been incurred and the costs can be reasonably estimated.
When a liability for environmental remediation is recorded, such amounts will be
recorded without giving effect to any possible future recoveries. At March 31,
2010, there are no significant liabilities recorded for environmental
contingencies. With respect to the cost for ongoing environmental compliance,
including maintenance and monitoring, such costs are expensed as incurred unless
there is a long-term monitoring agreement with a governmental agency, in which
case a liability is established at the inception of the agreement.





c.  Employee
Contracts





As of
March 31, 2010, there are 65 employees that are covered by a union agreement in
the United States expiring within one year.





d.  Power
Commitments





On
May 20, 2008, Empire State Development and New York Power Authority
announced that hydropower from the Niagara Power Project would be supplied to
the Company, which enabled it to reopen and expand its previously idle
manufacturing facility in Niagara Falls, New York. On January 30, 2009, the
Company entered into a commodity purchase agreement with New York Power
Authority and Niagara Mohawk Power Corporation where the Company is supplied up
to a maximum of 40,000 kW of hydropower from the Niagara Power Project to
operate its Niagara Falls facility. The hydropower is supplied at preferential
power rates plus market-based delivery charges for a period of up to
5 years. Under the terms of the contract, the Company has committed to
specified employment levels and a $60,000 capital expansion program, which, if
not met, could reduce the Company’s power allocation from the Niagara Power
Project. As of March 31, 2010, the Company has spent approximately $29,000
related to the capital expansion of our Niagara Falls facility.





e.  Joint
Development Supply Agreement





On
April 24, 2008, the Company’s subsidiaries, Solsil and GMI, entered into a
technology license, joint development and supply agreement with BP Solar
International Inc. (BP Solar) for the sale of solar grade silicon. As part of
this agreement, BP Solar paid Solsil $10,000 as an advance for research and
development services and facilities construction. This amount would be
refundable to BP Solar if the Company cancels, terminates, or fails to perform
under certain terms of the agreement, including lack of performance of research
and development services or facilities construction. Revenue associated with
facilities construction will be deferred until specified contract milestones
have been achieved, less any penalties resulting from construction delays.
Revenue associated with research and development services will be deferred until
these services are successful in reducing manufacturing costs and then
recognized ratably as product is delivered to BP Solar. If research and
development services are performed, but are unsuccessful, revenue will be
deferred until contract expiration and then recognized. No revenue associated
with this agreement has been recognized in earnings as of March 31, 2010 in
accordance with ASC 605.25.





f.  Deferred
Revenue





In
January 2009, the Company entered into a warehousing arrangement with a customer
whereby we agreed to deliver and store uncrushed silicon metal based on the
customer’s purchase instructions. The customer is required to pay for delivered
material within 30 days from the date the material is placed in our
warehouse. Further, the customer is required to pay a monthly storage fee based
on the quantity stored. As the arrangement does not meet the revenue recognition
criteria contained in SAB 104 given the Company has remaining, specific
performance obligations such that the earnings process is not complete, no
revenue will be recognized for silicon metal stored under this warehousing
arrangement. Revenue is recognized when the remaining, specific performance
obligations have been performed and delivery has occurred. As of March 31, 2010,
all material previously stored under the warehousing arrangement was delivered
to the customer and all remaining performance obligations were met. Accordingly,
there are no deferred revenues under this agreement at March 31,
2010.





12


(14)  Stockholders’
Equity





a.  Common
Stock





In
August 2009, the Company closed on an initial public offering on the NASDAQ
Global Select Market of 16,100,000 shares of its common stock at $7.00 per
share. Of the shares offered, 5,600,000 new shares were offered by the Company
and 10,500,000 existing shares were offered by selling stockholders (which
included 2,100,000 shares sold by the selling stockholders pursuant to the
exercise of the underwriters’ over-allotment option). Total proceeds of the
offering were $112,700, of which the selling stockholders received $68,355, net
of underwriting discounts and commissions totaling $5,145, and the Company
received $36,456, net of underwriting discounts and commissions totaling $2,744.
In addition, the Company also recognized offering costs of $1,688.





b.  Warrants





In
connection with the Company’s initial public offering on the AIM market of the
London Stock Exchange on October 3, 2005, the Company sold
33,500,000 units, consisting of one share of the Company’s common stock and
two redeemable common stock purchase warrants. Also in connection with this
initial public offering, the Company issued an option to purchase
1,675,000 units (individually, UPO) at an exercise price of $7.50 per UPO.
Each UPO consists of one share of the Company’s common stock and two redeemable
common stock purchase warrants. All of the Company’s warrants had an exercise
price of $5.00 per common share and were scheduled to expire on October 3,
2009.





Prior to
the expiration date, the Company received exercise notifications from the
holders of substantially all of the outstanding warrants and UPOs. The holders
of the UPOs exercising their UPOs also immediately exercised the warrants
issuable upon the exercise of their UPOs. As a result of all of these exercises,
the Company issued 1,775,933 shares of common stock to the former holders
of the warrants and UPOs, and no warrants or UPOs remain outstanding at March
31, 2010. The Company received $1,497 in cash with respect to these exercises,
and the remainder of the shares were issued on a net, cashless basis. The sales
and issuances of shares pursuant to the warrant and UPO exercises were deemed to
be exempt from registration under the Securities Act of 1933 by virtue of
Section 4(2) pertaining to private offers and sales or Regulation S
pertaining to foreign offers and sales.





c.  Noncontrolling
Interest





On
November 28, 2008, the Company entered into a subscription agreement for
capital increase associated with its ownership interest in Yonvey. Under the
terms of this agreement, the Company agreed to contribute an additional $10,236
in specified installments in exchange for an additional 12% interest in Yonvey.
The Company has remitted the entire balance of the capital increase. The
subscription agreement provides a call option such that within a period of three
years from the agreement’s effective date, the minority shareholder may
repurchase up to a maximum 12% ownership interest in Yonvey at a price equal to
the relevant percentage of the additional $10,236 registered capital plus a
premium calculated using a specified interest rate. In connection with our
adoption of ASC 810.10 and ASC 815.40, as Yonvey is a substantive entity,
the subscription agreement does not have any contingent exercise provisions, and
the settlement amount is tied to the fair value of the Yonvey equity, the call
option is considered an equity instrument. As such, the Company reclassified the
fair value of the call option liability at June 30, 2009 of $1,072 from
other long-term liabilities to noncontrolling interest in stockholders’
equity.





As
discussed in note 3, the Company recorded an increase in noncontrolling interest
of $27,012 in association with the sale of a 49% membership interest in WVA LLC
on November 5, 2009.





(15)  Earnings
(Loss) Per Share





Basic
earnings (loss) per common share are calculated based on the weighted average
number of common shares outstanding during the three and nine months ended March
31, 2010 and 2009, respectively. Diluted earnings (loss) per common share
assumes the exercise of stock options, the conversion of warrants, and the
exercise of UPOs, provided in each case the effect is dilutive.





The
reconciliation of the amounts used to compute basic and diluted earnings (loss)
per common share for the three and nine months ended March 31, 2010 and 2009 is
as follows:








Three
      Months Ended
            
            
            Nine
      Months EndedMarch
      31,
            
            
            March
      31,2010
            
            
            2009
            
            
            2010
            
            
            2009Basic
      earnings (loss) per share computationNumerator:Net
      income (loss) attributable to Globe Specialty Metals, Inc.
            
            $
            516
            
            
            
            937
            
            
            
            27,492
            
            
            
            (43,619
            )Denominator:Weighted
      average basic shares outstanding
            
            
            74,320,358
            
            
            
            63,930,084
            
            
            
            73,238,833
            
            
            
            63,819,677Basic
      earnings (loss) per common share
            
            $
            0.01
            
            
            
            0.01
            
            
            
            0.38
            
            
            
            (0.68
            )Diluted
      earnings (loss) per share computationNumerator:Net
      income (loss) attributable to Globe Specialty Metals, Inc.
            
            $
            516
            
            
            
            937
            
            
            
            27,492
            
            
            
            (43,619
            )Denominator:Weighted
      average basic shares outstanding
            
            
            74,320,358
            
            
            
            63,930,084
            
            
            
            73,238,833
            
            
            
            63,819,677Effect
      of dilutive securities
            
            
            1,249,635
            
            
            
            2,966,216
            
            
            
            1,172,638
            
            
            
            —Weighted
      average diluted shares outstanding
            
            
            75,569,993
            
            
            
            66,896,300
            
            
            
            74,411,471
            
            
            
            63,819,677Diluted
      earnings (loss) per common share
            
            $
            0.01
            
            
            
            0.01
            
            
            
            0.37
            
            
            
            (0.68
            )





The
following potential common shares were excluded from the calculation of diluted
earnings (loss) per common share because their effect would be
anti-dilutive:








Three
      Months Ended
            
            
            Nine
      Months EndedMarch
      31,
            
            
            March
      31,2010
            
            
            2009
            
            
            2010
            
            
            2009Stock
      options
            
            
            160,000
            
            
            
            1,873,000
            
            
            
            160,000
            
            
            
            1,837,000Warrants
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            19,161,473UPOs
            
            
            —
            
            
            
            1,325,414
            
            
            
            —
            
            
            
            1,325,414Total
            
            
            160.000
            
            
            
            3,198,414
            
            
            
            160,000
            
            
            
            22,323,887








13


(16)  Share-Based
Compensation





The
Company’s share-based compensation program consists of the Globe Specialty
Metals, Inc. 2006 Employee, Director and Consultant Stock Plan (the Stock Plan),
which was approved by the Company’s stockholders on November 10, 2006. The
Stock Plan provides for the issuance of a maximum of 5,000,000 shares of
common stock for the granting of incentive stock options, nonqualified options,
stock grants, and share-based awards. Any remaining shares available for grant,
but not yet granted, will be carried over and used in the following fiscal
years. During the nine months ended March 31, 2010, share-based compensation
awards were limited to the issuance of nonqualified stock options and 3,081
common stock grants.





At March
31, 2010, there were 631,919 shares available for grant. 3,533,500
outstanding incentive stock options vest and become exercisable in equal
one-quarter increments every six months from the date of grant or date of
modification. 810,000 option grants vest and become exercisable in equal
one-third increments on the first, second, and third anniversaries of the date
of grant. 21,500 option grants and 3,081 common stock grants were issued as
immediately vested at the date of grant. All option grants have maximum
contractual terms ranging from 5 to 10 years.





A summary
of the changes in options outstanding under the Stock Plan during the nine
months ended March 31, 2010 is presented below:








Weighted-AverageWeighted-
            
            
            Remaining
            
            
            AggregateNumber
      of
            
            
            Average
            
            
            Contractual
            
            
            IntrinsicOptions
            
            
            Exercise
      Price
            
            
            Term
      in Years
            
            
            ValueOutstanding
      as of June 30, 2009
            
            
            4,315,000
            
            
            $
            5.12
            
            
            
            4.83
            
            
            $
            5,095Granted
            
            
            60,000
            
            
            
            11.40Exercised
            
            
            —
            
            
            
            —Forfeited
      and expired
            
            
            (10,000
            )
            
            
            4.00Outstanding
      as of March 31, 2010
            
            
            4,365,000
            
            
            $
            5.21
            
            
            
            4.09
            
            
            $
            27,536Exercisable
      as of March 31, 2010
            
            
            1,631,083
            
            
            $
            6.02
            
            
            
            3.89
            
            
            $
            8,741








During
the nine months ended March 31, 2010, 1,101,084 options vested, resulting in
total vested options of 1,631,083. There are 2,733,917 nonvested options
outstanding with a grant date fair value, as modified, of $1.67. The weighted
average per share fair value of stock option grants at March 31, 2010 is
$4.14.





For the
three and nine months ended March 31, 2010, share-based compensation expense was
$1,260 ($680 after tax) and $4,491 ($2,423 after tax), respectively. For the
three and nine months ended March 31, 2009, share-based compensation expense was
$1,508 ($813 after tax) and $4,704 ($2,538 after tax), respectively. The expense
is reported within selling, general, and administrative expenses.





As of
March 31, 2010, the Company has unearned compensation expense of $5,432, before
income taxes, related to nonvested stock option awards. The unrecognized
compensation expense is expected to be recognized over the following periods
ending on June 30:




2010
            
            
            2011
            
            
            2012
            
            
            2013
            
            
            2014Share-based
      compensation (pretax)
            
            $
            1,215
            
            
            
            4,102
            
            
            
            113
            
            
            
            2
            
            
            
            —








It is the
Company’s policy to issue new shares to satisfy the requirements of its
share-based compensation plan. The Company does not expect to repurchase shares
in the future to support its share-based compensation plan.





(17)  Fair
Value Measures





Effective
July 1, 2009, the Company completed its adoption of ASC 820, which
establishes a fair value hierarchy for disclosure of fair value measurements.
The fair value framework requires the categorization of assets and liabilities
into three levels based upon the assumptions (inputs) used to value the assets
or liabilities. Level 1 provides the most reliable measure of fair value,
whereas Level 3 generally requires significant management judgment. The
three levels are defined as follows:





Level 1 — Quoted
prices in active markets for identical assets or liabilities.





Level 2 —
Observable inputs other than those included in Level 1. For example, quoted
prices for similar assets or liabilities in active markets or quoted prices for
identical assets or liabilities in inactive markets.





Level 3 —
Unobservable inputs reflecting management’s own assumptions about the inputs
used in pricing the asset or liability. For example, cash flow modeling using
inputs based on management’s assumptions.





The
Company does not have any assets that are required to be remeasured at fair
value at March 31, 2010. The following table summarizes liabilities measured at
fair value on a recurring basis at March 31, 2010:








Total
            
            
            Level
      1
            
            
            Level
      2
            
            
            Level
      3Interest
      rate derivatives
            
            $
            406
            
            
            
            —
            
            
            
            406
            
            
            
            —








Derivative
liabilities relate to the interest rate cap and interest rate swap agreements
summarized in note 10 (Derivative Instruments). Fair values are determined
by independent brokers using quantitative models based on readily observable
market data. See note 9 (Debt) for information regarding the fair value of
our outstanding debt.





In
connection with our adoption of ASC 810.10 and ASC 815.40, the Yonvey call
option, previously included as a Level 3 liability, was reclassified to
noncontrolling interest in stockholders’ equity. See note 14 (Stockholders’
Equity) for additional information.





(18)  Related
Party Transactions





From time
to time, the Company enters into transactions in the normal course of business
with related parties. Management believes that such transactions are at arm’s
length and for terms that would have been obtained from unaffiliated third
parties.





A current
and a former member of the board of directors are affiliated with Marco
International and Marco Realty. During the three and nine months ended March 31,
2010 and 2009, the Company:





•
            Paid
      Marco Realty $51 and $47 during the three months ended March 31, 2010 and
      2009, respectively, and $149 and $144 during the nine months ended March
      31, 2010 and 2009, respectively, to rent office space for its corporate
      headquarters in New York City, New
York.





14


•
            Entered
      into agreements with Marco International to purchase carbon electrodes.
      Marco International billed $3,462 and $0 during the three months
      ended March 31, 2010 and 2009, respectively, and $6,485 and $0 during the
      nine months ended March 31, 2010 and 2009, respectively, under these
      agreements.





•
            Entered
      into an agreement to sell ferrosilicon to Marco International. Net sales
      were $107 and $74 during the three months ended March 31, 2010 and 2009,
      respectively, and $373 and $250 during the nine months ended March 31,
      2010 and 2009, respectively, under this
  agreement.





•
            Entered
      into agreements to purchase sodium carbonate from Marco International.
      During the three months ended March 31, 2010 and 2009, purchases totaled
      $0 and $40, respectively. During the nine months ended March 31, 2010 and
      2009, purchases totaled $0 and $126,
  respectively.




The
Company is affiliated with Norchem, Inc. (Norchem) through its 50.0% equity
interest. During the three months ended March 31, 2010 and 2009, the Company
sold Norchem product valued at $1,219 and $1,103, respectively. During the nine
months ended March 31, 2010 and 2009, the Company sold Norchem product valued at
$2,485 and $3,218, respectively. At March 31, 2010, receivables from Norchem
totaled $675.





Certain
entities of the D.E. Shaw group are stockholders of the Company. The Company had
outstanding financing arrangements totaling $17,000 with certain entities of the
D.E. Shaw group at June 30, 2008. The notes were paid in full in September
2008. Interest expense on these financing arrangements totaled $0 and $389
during the three and nine months ended March 31, 2009,
respectively.





Prior to
our Yonvey business combination, Yonvey’s predecessor had entered into a lending
agreement with the remaining minority stockholder. At March 31, 2010, $845
remained payable to Yonvey from this related party.





(19)  Operating
Segments





Operating
segments are based upon the Company’s management reporting structure and include
the following six reportable segments:





•
            GMI —a
      manufacturer of silicon metal and silicon-based alloys located in the
      United States.





•
            Globe Metais —a
      distributor of silicon metal manufactured in Brazil. This segment includes
      the historical Brazilian manufacturing operations, comprised of a
      manufacturing plant in Breu Branco, mining operations, and forest
      reserves, which were sold on November 5,
2009.





•
            Globe Metales —a
      manufacturer of silicon-based alloys located in
  Argentina.





•
            Solsil —a
      manufacturer of upgraded metallurgical grade silicon metal located in the
      United States.





•
            Corporate —general corporate expenses, investments, and related investment
      income.





•
            Other —segments
      that do not fit into the above reportable segments and are immaterial for
      purposes of separate disclosure. The operating segments include Yonvey’s
      electrode production operations and certain other distribution operations
      for the sale of silicon metal and silicon-based
  alloys.





Each of
our reportable segments distributes its products in both its country of domicile
as well as to other international customers. The following presents the
Company’s consolidated net sales by product line:








Three
      Months Ended
              March
      31,
            
            
            Nine
      Months Ended
              March
      31,2010
            
            
            2009
            
            
            2010
            
            
            2009Silicon
      metal
            
            $
            73,006
            
            
            
            47,578
            
            
            
            216,592
            
            
            
            205,454Silicon-based
      alloys
            
            
            34,192
            
            
            
            24,054
            
            
            
            94,098
            
            
            
            116,651Other,
      primarily by-products
            
            
            5,288
            
            
            
            4,514
            
            
            
            15,532
            
            
            
            22,505Total
            
            $
            112,486
            
            
            
            76,146
            
            
            
            326,222
            
            
            
            344,610








a.  Segment
Data





The
Company began to allocate certain general corporate expenses in fiscal year
2009. Segment results for the three and nine months ended March 31, 2009 have
been updated to conform to this reporting convention. Summarized financial
information for our reportable segments as of, and for, the three and nine
months ended March 31, 2010 and 2009, is shown in the following
tables:








Three
      Months Ended
            
            
            Three
      Months EndedMarch
      31,
            
            
            March
      31,2010
            
            
            2009Net
      Sales
            
            
            Operating
      Income (Loss)
            
            
            Income
      (Loss) Before Income Taxes
            
            
            Net
      Sales
            
            
            Operating
      Income (Loss)
            
            
            Income
      (Loss) Before Income TaxesGMI
            
            $
            86,693
            
            
            
            4,913
            
            
            
            4,404
            
            
            
            48,459
            
            
            
            2,717
            
            
            
            3,274Globe
      Metais
            
            
            12,623
            
            
            
            210
            
            
            
            204
            
            
            
            18,598
            
            
            
            2,121
            
            
            
            2,280Globe
      Metales
            
            
            11,979
            
            
            
            2,009
            
            
            
            2,141
            
            
            
            9,002
            
            
            
            2,443
            
            
            
            1,983Solsil
            
            
            -
            
            
            
            (295
            )
            
            
            (295
            )
            
            
            112
            
            
            
            (1,421
            )
            
            
            (1,424
            )Corporate
            
            
            -
            
            
            
            (3,012
            )
            
            
            (2,777
            )
            
            
            -
            
            
            
            (2,333
            )
            
            
            (2,457
            )Other
            
            
            3,309
            
            
            
            (844
            )
            
            
            (1,207
            )
            
            
            3,275
            
            
            
            (2,639
            )
            
            
            (2,791
            )Eliminations
            
            
            (2,118
            )
            
            
            326
            
            
            
            326
            
            
            
            (3,300
            )
            
            
            87
            
            
            
            87$
            112,486
            
            
            
            3,307
            
            
            
            2,796
            
            
            
            76,146
            
            
            
            975
            
            
            
            952








15





Nine
      Months Ended
            
            
            Nine
      Months EndedMarch
      31,
            
            
            March
      31,2010
            
            
            2009Net
      Sales
            
            
            Operating
      Income (Loss)
            
            
            Income
      (Loss) Before Income Taxes
            
            
            Total
      Assets
            
            
            Net
      Sales
            
            
            Operating
      Income (Loss)
            
            
            Income
      (Loss) Before Income TaxesGMI
            
            $
            234,068
            
            
            
            26,840
            
            
            
            25,501
            
            
            
            273,069
            
            
            
            223,354
            
            
            
            41,839
            
            
            
            41,120Globe
      Metais
            
            
            53,603
            
            
            
            4,159
            
            
            
            7,485
            
            
            
            8,510
            
            
            
            77,064
            
            
            
            13,590
            
            
            
            8,754Globe
      Metales
            
            
            35,502
            
            
            
            8,243
            
            
            
            7,645
            
            
            
            68,561
            
            
            
            41,640
            
            
            
            13,664
            
            
            
            12,809Solsil
            
            
            20
            
            
            
            (1,186
            )
            
            
            (1,216
            )
            
            
            25,286
            
            
            
            2,117
            
            
            
            (79,150
            )
            
            
            (78,993
            )Corporate
            
            
            -
            
            
            
            10,858
            
            
            
            10,696
            
            
            
            416,404
            
            
            
            -
            
            
            
            (16,683
            )
            
            
            (15,510
            )Other
            
            
            8,932
            
            
            
            (3,495
            )
            
            
            (3,943
            )
            
            
            41,713
            
            
            
            14,673
            
            
            
            (5,741
            )
            
            
            (6,220
            )Eliminations
            
            
            (5,903
            )
            
            
            680
            
            
            
            680
            
            
            
            (231,277
            )
            
            
            (14,238
            )
            
            
            (1,311
            )
            
            
            (1,311
            )$
            326,222
            
            
            
            46,099
            
            
            
            46,848
            
            
            
            602,266
            
            
            
            344,610
            
            
            
            (33,792
            )
            
            
            (39,351
            )





The
accounting policies of our operating segments are the same as those disclosed in
note 2 (Summary of Significant Accounting Policies) to our June 30,
2009 financial statements. We evaluate segment performance principally based on
operating income (loss). Intersegment net sales are not material.








b.  Geographic
Data





Net sales
are attributed to geographic regions based upon the location of the selling
unit. Net sales by geographic region for the three and nine months ended March
31, 2010 and 2009 consist of the following:








Three
      Months Ended
            
            
            Nine
      Months EndedMarch
      31,
            
            
            March
      31,2010
            
            
            2009
            
            
            2010
            
            
            2009United
      States
            
            $
            99,318
            
            
            
            61,874
            
            
            
            274,721
            
            
            
            265,912Argentina
            
            
            10,387
            
            
            
            7,058
            
            
            
            30,597
            
            
            
            34,178Brazil
            
            
            —
            
            
            
            5,210
            
            
            
            12,820
            
            
            
            35,877China
            
            
            48
            
            
            
            162
            
            
            
            472
            
            
            
            3,171Poland
            
            
            2,733
            
            
            
            1,842
            
            
            
            7,612
            
            
            
            5,472Total
            
            $
            112,486
            
            
            
            76,146
            
            
            
            326,222
            
            
            
            344,610








Long-lived
assets by geographical region at March 31, 2010 and June 30, 2009 consist
of the following:








March
      31,
            
            
            June
      30,2010
            
            
            2009United
      States
            
            $
            180,888
            
            
            
            180,392Argentina
            
            
            31,641
            
            
            
            32,515Brazil
            
            
            -
            
            
            
            29,760China
            
            
            28,382
            
            
            
            27,060Poland
            
            
            807
            
            
            
            839Total
            
            $
            241,718
            
            
            
            270,566








Long-lived
assets consist of property, plant, and equipment, net of accumulated
depreciation and amortization, and goodwill and other intangible
assets.





c.  Major
Customer Data





The
following is a summary of the Company’s major customers and their respective
percentages of consolidated net sales for the three and nine months ended March
31, 2010 and 2009:








Three
      Months Ended
            
            
            Nine
      Months EndedMarch
      31,
            
            
            March
      31,2010
            
            
            2009
            
            
            2010
            
            
            2009Dow
      Corning
            
            
            10
            %
            
            
            21
            %
            
            
            14
            %
            
            
            16
            %Wacker
      Chemie AG
            
            
            12
            
            
            
            16
            
            
            
            13
            
            
            
            10All
      other customers
            
            
            78
            
            
            
            63
            
            
            
            73
            
            
            
            74100
            %
            
            
            100
            %
            
            
            100
            %
            
            
            100
            %








The
Company currently has one contract with Dow Corning. The agreement is a four
year arrangement in which Dow Corning was to purchase 30,000 metric tons of
silicon metal per calendar year through December 31, 2010. This contract
was amended in November 2008 to provide for the sale of an additional 17,000
metric tons of silicon metal to be purchased in calendar year 2009. The contract
was further amended in connection with the Dow Corning transactions discussed in
note 3 to reduce the amount required to be sold in calendar year 2010 to 20,000
metric tons of silicon metal. Under a prior arrangement, effective
December 1, 2007 through January 31, 2009, the Company supplied Dow
Corning 13,000 metrics tons of silicon metal.





(20)  Subsequent
Events





On April
1, 2010, the Company, pursuant to a Purchase and Sale Agreement dated as of
March 26, 2010 (the Purchase Agreement), purchased from Ospraie Special
Opportunities Master Alternative Holdings LLC, The Ospraie Fund L.P., Ospraie
Holdings, Inc., and the individuals named in the Purchase Agreement all of the
ownership interests in Core Metals Groups Holdings LLC (Core Metals), a Delaware
limited liability company, for $52,000 in cash, including $15,329 borrowed under
the Company’s senior revolving credit facility. The purchase price is subject to
customary post-closing adjustments for changes in working capital and related
matters. Core Metals is a leading producer, marketer, and distributor of
ferroalloys and specialty materials for the North American steel and foundry
industry. The acquisition was made to strengthen our growing ferrosilicon
business and expand the line of products and services we offer to steel markets
around the world.





On April
7, 2010, the Company sold Masterloy Products Company (Masterloy), an unlimited
liability company located in Ontario, Canada, for $3,000 in cash. Masterloy was
acquired in connection with the Company’s acquisition of Core Metals. Masterloy
is a producer of ferrovanadium and ferromolybdenum, an ancillary business we do
not consider critical to our fundamental business strategy.





The
Company has evaluated subsequent events through the date these financial
statements were issued.





16


Item 2.Management’s
Discussion and Analysis of Financial Condition and Results of
Operations





This Quarterly Report on
Form 10-Q contains “forward-looking statements” as that term is used in the Private
Securities Litigation Reform Act of 1995. Certain statements made in this quarterly
report involve risks and uncertainties. These forward-looking statements reflect
the Company’s best judgment based on our current expectations, assumptions, estimates
and projections about us and our industry, and although we base these statements on
circumstances that we believe to be reasonable when made, there can be no assurance
that future events will not affect the accuracy of such forward-looking information.
As such, the forward-looking statements are not guarantees of future performance,
and actual results may vary materially from the results and expectations discussed
in this report. Factors that might cause the Company’s actual results to differ
materially from those anticipated in forward-looking statements are more
fully described in the “Risk Factors” sections contained in our Annual Report on
Form 10-K for the fiscal year ended June 30, 2009 and in this
Quarterly Report. The following discussion should be read in conjunction with the
unaudited condensed consolidated financial statements and the notes thereto included
elsewhere in this report, as well as the more detailed information in our Annual Report on
Form 10-K for the fiscal year ended June 30,
2009.





Introduction





Globe
Specialty Metals, Inc., together with its subsidiaries (collectively, “we,”
“our,” “GSM” or the “Company”) is one of the leading manufacturers of silicon
metal and silicon-based alloys. As of March 31, 2010, we owned and operated
eight manufacturing facilities, principally in three primary operating segments:
GMI, our U.S. operations; Globe Metais, our Brazilian operations, the
manufacturing component of which was sold on November 5, 2009; and, Globe
Metales, our Argentine operations.





Business
Segments





We
operate in six reportable segments:





•
            GMI —a
      manufacturer of silicon metal and silicon-based alloys located in the
      United States with plants in Beverly, Ohio, Alloy, West Virginia, Niagara
      Falls, New York and Selma, Alabama and a quartzite mine in Billingsley,
      Alabama;





•
            Globe Metais —a
      distributor of silicon metal manufactured in Brazil. This segment includes
      the historical Brazilian manufacturing operations, comprised of a
      manufacturing plant in Breu Branco, mining operations and forest reserves
      which were sold on November 5,
2009;





•
            Globe Metales —a
      manufacturer of silicon-based alloys located in Argentina with a
      silicon-based alloys plant in Mendoza and a cored-wire fabrication
      facility in San Luis;





•
            Solsil —a
      developer and manufacturer of upgraded metallurgical grade silicon metal
      located in the United States with operations in Beverly,
    Ohio;





•
            Corporate —a
      corporate office including general expenses, investments, and related
      investment income; and





•
            Other —includes
      an electrode production operation in China and a cored-wire production
      facility located in Poland. These segments do not fit into the above
      reportable segments, and are immaterial for purposes of separate
      disclosure.





Overview
and Recent Developments





Our
markets for silicon metal and silicon-based alloys continue to improve and
expand with both pricing and volume increasing.  Our primary end
markets, which include chemicals, steel, aluminum and solar are all continuing
their quarter-over-quarter growth as they recover from the global recession. The
chemical end market in particular, which represents producers of silicones,
appears to have recovered to pre-recession levels. Major silicones producers
have recently announced volume growth and increased capacity utilization amid
strong customer demand. Steel industry capacity utilization continues to rise
and, in the United States, reached 72% in March 2010, its highest level in
eighteen months. Aluminum demand is also rising as domestic auto production
continues to recover from the recession and demand from polysilicon producers
continues to grow as new capacity comes on line. Overall, we continue to see
increasing customer demand and rising prices for silicon metal and silicon-based
alloys.





We
increased our production volume during the quarter ended March 31, 2010 in
response to increasing customer demand and, by March 31, 2010, all sixteen of
our furnaces in our five silicon and silicon-based alloy plants were running.
This includes restarting our Selma, Alabama plant in January 2010, which had
been idled since April 2009 at the height of the global economic recession, and
continuing the process of ramping up production at our Niagara Falls, New York
plant, which had been idled for more than five years. The Selma plant has a
capacity of 25,000 MT of silicon metal and, since the plant was idled for only
eight months, we were able to ramp up production to full capacity by March 31,
2010. In the quarter, we incurred approximately $600,000 of pre-tax start-up
expense related to the Selma plant.





The
Niagara Falls plant has a capacity of 30,000 MT of silicon metal. As the
facility was idled for an extended period of time, reaching full capacity has
been difficult. For the quarter ended March 31, 2010, the Niagara Falls plant
was running both of its furnaces, but produced only 75% of its expected output
as we worked to stabilize the furnaces. The cost of production at Niagara Falls
was also significantly higher than expected, reflected in reduced output and
higher raw material and staffing costs. We incurred approximately $2,400,000 of
pre-tax start-up costs in the quarter for Niagara Falls. Our Alloy, West
Virginia plant, jointly owned with Dow Corning Corporation (Dow Corning), is
operating at full capacity as expected.





Net sales
for the quarter ended March 31, 2010 increased approximately $4,208,000, or 4%,
from the previous quarter ended December 31, 2009, despite an approximate
$6,800,000 decline in sales from Globe Metais as a result of the sale of our
Brazilian manufacturing operations to Dow Corning. Our average selling price of
silicon metal declined by 8% versus the previous quarter primarily as a result
of an increase in material shipped at cost to Dow Corning from the Alloy joint
venture and a reduction in volume from calendar 2009 above market
contracts, which had only modest carryover volume in the current quarter and
were fully satisfied by the end of the quarter.





The
average price of silicon-based alloys increased 4% in the quarter as
ferrosilicon prices began to rise and we focused on specialty grade product.
Tons shipped in the quarter increased 7% as customer demand continues to
accelerate. Silicon metal tons shipped increased 7% and silicon-based alloy
shipments increased 8%. Net sales increased $36,340,000, or 48%, over the same
quarter in the prior year primarily due to increased customer demand, partially
offset by a decline in sales of approximately $6,000,000 from Globe
Metais.





Income
before provision for income taxes totaled approximately $2,796,000 in the
quarter and included start-up costs described above of approximately $3,000,000.
This compares to income before provision for income taxes in the preceding
quarter ended December 31, 2009 of approximately $30,500,000, which included a
pre-tax gain of approximately $23,368,000 from the sale of our Brazilian
manufacturing operations, and a $952,000 pre-tax profit in the same quarter in
the prior year.





On April
1, 2010, we purchased all of the ownership interests in Core Metals Groups
Holdings LLC (Core Metals), a Delaware limited liability company, for
$52,000,000 in cash, including $15,329,000 borrowed under our senior revolving
credit facility. The purchase price is subject to customary post-closing
adjustments for changes in working capital and related matters. Core Metals is a
leading producer, marketer, and distributor of ferroalloys and specialty
materials for the North American steel and foundry industry. The acquisition was
made to strengthen our growing ferrosilicon business and expand the line of
products and services we offer to steel markets around the world. Core Metals
will be included in our GMI reportable segment. For the fiscal third quarter
ended March 31, 2010, we incurred $521,000 in selling, general and
administrative expenses related to the Core Metals acquisition.





On April
7, 2010, the Company sold Masterloy Products Company (Masterloy), an unlimited
liability company located in Ontario, Canada, for $3,000,000 in cash. Masterloy
was acquired in connection with our acquisition of Core Metals. Masterloy is a
producer of ferrovanadium and ferromolybdenum, an ancillary business we do not
consider critical to our fundamental business strategy.





17


Outlook





Demand
for our products continues to increase as customers experience continued end
market growth. As demand continues to improve, the spot price for silicon metal
and silicon-based alloys has risen, a trend which we anticipate to continue.
However, we expect our average selling price of silicon metal to decline
modestly in our fiscal fourth quarter ending June 30, 2010 as we ship a higher
volume of material under a long-term, low-priced contract with Dow Corning,
which expires on December 31, 2010.





We expect
sales volumes to increase in the quarter ended June 30, 2010 from the Core
Metals acquisition and as we operate all sixteen existing furnaces, including
increasing output at Niagara Falls. We are making improvements at our Niagara
Falls plant, including enhanced employee training and supervision and improved
maintenance. Although the plant continues to operate at approximately 75% of its
stated capacity, we anticipate these improvements will increase production at
the plant by the end of our fourth fiscal quarter.





The
acquisition of Core Metals Group, which closed on April 1, 2010, will provide us
with approximately 42,000 MT of additional annual ferrosilicon (a silicon-based
alloy) production capacity from its Bridgeport, Alabama plant. Ferrosilicon
demand and pricing are rising as the domestic steel industry continues to
recover from the global economic recession. Bridgeport has traditionally
produced a mix of higher-margin 75% ferrosilicon and lower-margin standard grade
50% ferrosilicon. We anticipate shifting production towards the higher margin
products to further improve gross margin. Overall, the Core Metals acquisition
should lower our average selling price of silicon-based alloys, since
ferrosilicon is sold on a silicon-contained basis, but it will add meaningfully
to our gross margin. The gross margin produced from Core Metals will initially
be modest in our fiscal fourth quarter since the acquired finished goods
inventory will be valued at estimated selling price less the sum of costs of
disposal and a profit allowance for our selling efforts.





We
anticipate a modest increase in earnings in our fiscal fourth quarter ending
June 30, 2010 from the quarter ended March 31, 2010 as a result of the expected
increase in production from our existing plants and the acquisition of Core
Metals Group, partially offset by an expected decline in the average selling
price of silicon metal. At the beginning of calendar 2011, after the
below-market 20,000 MT contract expires and our calendar 2010 annual contracts
re-price, we expect a significant increase in our silicon metal average selling
price, which would directly improve earnings.





Critical
Accounting Policies





We
prepare our financial statements in accordance with accounting principles
generally accepted in the United States of America (U.S. GAAP). The
preparation of these financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses, as well as the disclosure of contingent assets and
liabilities. Management bases our estimates and judgments on historical
experience and other factors that are believed to be reasonable under the
circumstances. Actual results may differ from the estimates used under different
assumptions or conditions. We have provided a description of significant
accounting policies in the notes to our condensed consolidated financial
statements and our Annual Report on Form 10-K for the fiscal year ended
June 30, 2009. Our critical accounting policies have not significantly
changed from those discussed in “Part II — Item 7. —
Management’s Discussion and Analysis of Financial Condition and Results of
Operations — Critical Accounting Policies” of our Annual Report on
Form 10-K for the fiscal year ended June 30, 2009, except as
follows:





Income
Taxes





In
determining our quarterly provision for income taxes, we use an estimated annual
effective tax rate, which is based on our expected annual income, statutory tax
rates and tax planning opportunities available to us in the various
jurisdictions in which we operate. Subsequent recognition, derecognition and
measurement of a tax position taken in a previous period are separately
recognized in the quarter in which they occur.





Goodwill
and Other Intangibles





We
annually review, in the third quarter of our fiscal year, goodwill and other
intangibles with indefinite useful lives for impairment. After performing this
review in the third quarter of fiscal year 2010, management concluded that no
material goodwill or other intangibles exist that are at risk of failing step
one of the impairment test, as defined in ASC 350, Intangibles–Goodwill and
Other.





Results
of Operations





GSM
Three Months Ended March 31, 2010 vs. 2009





Consolidated
Operations:


Three
      Months EndedMarch
      31,
              
              
              Increase
              
              
              Percentage2010
              
              
              2009
              
              
              (Decrease)
              
              
              Change(Dollars
      in thousands)Results
      of OperationsNet
      sales
              
              $
              112,486
              
              
              
              76,146
              
              
              
              36,340
              
              
              
              47.7
              %Cost
      of goods sold
              
              
              99,135
              
              
              
              62,894
              
              
              
              36,241
              
              
              
              57.6
              %Selling,
      general and administrative expenses
              
              
              10,008
              
              
              
              10,500
              
              
              
              (492
              )
              
              
              (4.7
              %)Research
      and development
              
              
              36
              
              
              
              246
              
              
              
              (210
              )
              
              
              (85.4
              %)Restructuring
      charges
              
              
              -
              
              
              
              1,387
              
              
              
              (1,387
              )
              
              NAGoodwill
      and intangible asset impairment
              
              
              -
              
              
              
              144
              
              
              
              (144
              )
              
              NAOperating
      income
              
              
              3,307
              
              
              
              975
              
              
              
              2,332
              
              
              
              239.2
              %Interest
      expense, net
              
              
              (993
              )
              
              
              (1,350
              )
              
              
              357
              
              
              
              (26.4
              %)Other
      income
              
              
              482
              
              
              
              1,327
              
              
              
              (845
              )
              
              
              (63.7
              %)Income
      before provision for income taxes
              
              
              2,796
              
              
              
              952
              
              
              
              1,844
              
              
              
              193.7
              %Provision
      for income taxes
              
              
              1,751
              
              
              
              916
              
              
              
              835
              
              
              
              91.2
              %Net
    income
              
              
              1,045
              
              
              
              36
              
              
              
              1,009
              
              
              
              2,802.8
              %(Income)
      losses attributable to noncontrolling interest, net of tax
              
              
              (529
              )
              
              
              901
              
              
              
              (1,430
              )
              
              
              (158.7
              %)Net
      income attributable to Globe Specialty Metals, Inc.
              
              $
              516
              
              
              
              937
              
              
              
              (421
              )
              
              
              (44.9
              %)
  18


Net
Sales:





Three
      Months Ended March 31, 2010
            
            
            Three
      Months Ended March 31, 2009Net
      Sales
            
            
            Net
      Sales$
      (in 000s)
            
            
            MT
            
            
            $/MT
            
            
            $
      (in 000s)
            
            
            MT
            
            
            $/MTSilicon
      metal
            
            $
            73,006
            
            
            
            30,681
            
            
            $
            2,380
            
            
            $
            47,578
            
            
            
            18,564
            
            
            $
            2,563Silicon-based
      alloys
            
            
            34,192
            
            
            
            17,003
            
            
            
            2,011
            
            
            
            24,054
            
            
            
            9,729
            
            
            
            2,472Silicon
      metal and silicon-based alloys
            
            
            107,198
            
            
            
            47,684
            
            
            
            2,248
            
            
            
            71,632
            
            
            
            28,293
            
            
            
            2,532Silica
      fume and other
            
            
            5,288
            
            
            
            
            
            
            
            
            
            
            
            4,514Total
      net sales
            
            $
            112,486
            
            
            
            
            
            
            
            
            
            
            $
            76,146








Net sales
increased $36,340,000 from the prior year to $112,486,000 primarily as a result
of a 69% increase in tons sold offset by an 11% decline in our average selling
price. The increase in tons sold, which represents sales of $49,039,000,
resulted from a 65% increase in silicon metal volume and a 75% increase in
silicon-based alloy volume. The increase in tons sold of silicon metal was due
to additional volume of approximately 5,800 tons produced by the Niagara Falls
plant, which reopened in November 2009, driven by demand from our silicones and
aluminum end markets. The increase in tons sold of silicon-based alloys was due
to higher customer demand from increased steel production driven by higher
automobile production and construction spending. Silica fume and other revenue
increased by $774,000 as a result of an increase in production levels and sales
of by-products.





The GMI
segment includes the Alloy joint venture, which was entered into on
November 5, 2009, and sells 49% of the output of the Alloy plant to
Dow Corning at cost. We control the joint venture and consolidate its results in
our financial statements.





Cost
of Goods Sold:





The
$36,241,000, or 58%, increase in cost of goods sold was a result of a 69%
increase in tons sold, which contributed $43,105,000 to cost of goods sold,
offset by a 7% decline in our cost per ton sold. This decrease was the result of
several factors, including our overall cost reduction programs, the
curtailment of Solsil production, which lowered cost of goods sold by $773,000
and tons sold by only 33, and a mix shift within silicon-based alloys, which
lowered cost of goods sold by approximately $1,800,000. These cost decreases
were partially offset by lower capacity utilization during the quarter and
start-up costs of approximately $3,000,000, primarily at our Niagara Falls and
Selma plants.





Gross
margin represented approximately 17% of net sales in the third quarter of fiscal
year 2009 and decreased to approximately 12% of net sales in the third quarter
of fiscal year 2010, primarily as a result of lower silicon-based alloy selling
prices and the start-up costs at Niagara Falls and Selma.





Selling,
General and Administrative Expenses:





The
decrease in selling, general and administrative expenses of $492,000 was
primarily due to the timing of the sale of our Brazilian manufacturing
operations, which resulted in a $1,700,000 expense reduction, offset by an
increase of $537,000 in wages, benefits and bonuses at GMI, and transaction
costs of $521,000 associated with the acquisition of Core Metals.





Research
and Development:





The
decrease in research and development expenses of $210,000 was primarily due to
the suspension of production activities at Solsil, which resulted in a decrease
of $96,000.





Goodwill
and Intangible Asset Impairment:





Goodwill
and intangible asset impairment for the second quarter of fiscal year 2009 was
approximately $69,560,000 and was associated with the Solsil business unit. The
global economic slowdown, combined with a decrease in oil prices, caused a sharp
decline in the product price and demand for upgraded metallurgical grade
silicon. As a result, it was determined that the value of the Solsil business
unit no longer supported its goodwill and intangible asset balances. The
impairment charges were finalized in the third quarter of fiscal year 2009, in
conjunction with our annual impairment assessment, resulting in an additional
$144,000 goodwill impairment charge.





Net
Interest Expense:





Net
interest expense decreased by $357,000 due the timing of the sale of our
Brazilian manufacturing operations on November 5, 2009, which resulted in a
reduction in interest expense of $588,000, offset by higher interest expense of
$292,000 at GMI due primarily to an increase in our interest rate swap liability
in the third quarter of fiscal year 2010.





Other
Income:





Other
income decreased by $845,000 due primarily to a one-time gain from the
settlement of litigation at GMI of $1,002,000 and an $851,000 gain at Globe
Metais on our foreign exchange forward contracts, both of which occurred in the
third fiscal quarter of 2009. We did not have any foreign exchange forward
contracts in the third fiscal quarter of 2010. These two prior year gains were
offset by year-over-year increases in income from GMI’s Norchem affiliate of
$404,000, hydropower dividends at Globe Metales of $398,000 due to the timing of
the annual dividend, and a year-over-year decrease in losses of $257,000 from
the revaluation of real denominated assets and liabilities.





Provision
for Income Taxes:





Provision
for income taxes as a percentage of pre-tax income was approximately 63%, or
$1,751,000, in the third quarter of fiscal year 2010 and was approximately 96%,
or $916,000, in the third quarter of fiscal year 2009. The decrease in the
effective tax rate is due primarily to a smaller unfavorable impact in the
period of the Company not recording a tax benefit for net losses generated from
our Chinese operations due to a history of operating losses, coupled with a
change in the mix of operating income earned year-over-year from various taxing
jurisdictions.





19


Segment
Operations





GMI




Three
      Months EndedMarch
      31,
            
            
            Increase
            
            
            Percentage2010
            
            
            2009
            
            
            (Decrease)
            
            
            Change(Dollars
      in thousands)Results
      of OperationsNet
      sales
            
            $
            86,693
            
            
            
            48,459
            
            
            
            38,234
            
            
            
            78.9
            %Cost
      of goods sold
            
            
            76,370
            
            
            
            41,302
            
            
            
            35,068
            
            
            
            84.9
            %Selling,
      general and administrative expenses
            
            
            5,410
            
            
            
            4,185
            
            
            
            1,225
            
            
            
            29.3
            %Restructuring
      charges
            
            
            -
            
            
            
            255
            
            
            
            (255
            )
            
            NAOperating
      income
            
            $
            4,913
            
            
            
            2,717
            
            
            
            2,196
            
            
            
            80.8
            %








Net sales
increased $38,234,000, or 79%, from the prior year to $86,693,000. The increase
was primarily attributable to a 77% increase in tons sold. Silicon metal volumes
were up 96% due to increased customer demand and the timing of the fulfillment
of long-term contracts, as well as the impact of the reopening of the Niagara
Falls plant in November 2009 and the shutdown of Selma in April 2009, which
combined provided approximately 7,800 incremental tons. Silicon-based alloy
volume was up 44% due to an increase in demand for ferrosilicon due to higher
steel production and magnesium ferrosilicon, primarily from the automotive
industry. Pricing for silicon metal was up by 2% due to favorable annual
contracts offset by the impact of the Alloy joint venture pricing. Pricing for
silicon-based alloys was down 8% due to a shift in product mix towards
ferrosilicon coupled with reduced ferrosilicon pricing, which was a result of
reduced demand and aggressive imports.





The GMI
segment includes the Alloy joint venture, which was entered into on
November 5, 2009, and sells 49% of the output of the Alloy plant to Dow
Corning at cost. We control the joint venture and consolidate its results in our
financial statements. As a result of the joint venture, GMI’s total sales and
gross margin have been reduced by virtue of the material sold to Dow Corning at
cost. Silicon metal pricing was down 5% from the immediately preceding quarter,
largely due to material supplied at cost under the joint venture
agreement.





Operating
income increased by $2,196,000 from the prior year to $4,913,000. This was
primarily due to increased production volumes partially offset by increased
production costs. Cost of goods sold increased by 85% while volumes increased
only by 77%. This increase in cost per ton sold was due to start-up costs of
approximately $2,400,000 and $600,000 at Niagara Falls and Selma, respectively,
higher labor costs and higher electrode prices.





Globe
Metais




Three
      Months EndedMarch
      31,
            
            
            Increase
            
            
            Percentage2010
            
            
            2009
            
            
            (Decrease)
            
            
            Change(Dollars
      in thousands)Results
      of OperationsNet
      sales
            
            $
            12,623
            
            
            
            18,598
            
            
            
            (5,975
            )
            
            
            (32.1
            %)Cost
      of goods sold
            
            
            12,319
            
            
            
            13,970
            
            
            
            (1,651
            )
            
            
            (11.8
            %)Selling,
      general and administrative expenses
            
            
            94
            
            
            
            2,113
            
            
            
            (2,019
            )
            
            
            (95.6
            %)Research
      and development
            
            
            -
            
            
            
            23
            
            
            
            (23
            )
            
            NARestructuring
      charges
            
            
            -
            
            
            
            371
            
            
            
            (371
            )
            
            NAOperating
      income
            
            $
            210
            
            
            
            2,121
            
            
            
            (1,911
            )
            
            
            (90.1
            %)








Net sales
decreased $5,975,000, or 32%, from the prior year to $12,623,000. The decrease
was primarily attributable to a decrease in tons sold of 25% and a decrease in
average selling prices of 6%. After the sale of our Brazilian manufacturing
operations on November 5, 2009, we continued to fulfill certain foreign
customer contracts, which were less favorably priced starting in calendar
2010, and experienced a decrease in the sale of by-products of $867,000, as
well as a sales decrease of $4,375,000 on lower volumes.





Operating
income decreased by $1,911,000 from the prior year to $210,000. On
November 5, 2009, we sold our Brazilian manufacturing operations to Dow
Corning for net proceeds of approximately $65,600,000. We retained certain
export customers from the Brazilian manufacturing operations, which should
account for approximately $40,000,000 of annual sales. During calendar
year 2010, we are obligated to purchase the material to fulfill these
contracts from Dow Corning in Brazil, and we expect to earn only a modest gross
margin; however, beginning in January 2011, we can source this material from our
other plants at a lower cost. Now that this operating segment has transitioned
to a distribution business, we expect to incur only modest selling, general and
administrative expenses as virtually all costs will be included in cost of goods
sold.





20


Globe
Metales




Three
      Months EndedMarch
      31,
            
            
            Increase
            
            
            Percentage2010
            
            
            2009
            
            
            (Decrease)
            
            
            Change(Dollars
      in thousands)Results
      of OperationsNet
      sales
            
            $
            11,979
            
            
            
            9,002
            
            
            
            2,977
            
            
            
            33.1
            %Cost
      of goods sold
            
            
            9,150
            
            
            
            5,356
            
            
            
            3,794
            
            
            
            70.8
            %Selling,
      general and administrative expenses
            
            
            820
            
            
            
            734
            
            
            
            86
            
            
            
            11.7
            %Restructuring
      charges
            
            
            -
            
            
            
            469
            
            
            
            (469
            )
            
            NAOperating
      income
            
            $
            2,009
            
            
            
            2,443
            
            
            
            (434
            )
            
            
            (17.8
            %)





Net sales
increased $2,977,000 from the prior year to $11,979,000. This increase was the
result of two significant offsetting trends, a 104% increase in volume and a 30%
decrease in average selling price. Volumes increased from higher shipments of
magnesium ferrosilicon and calcium silicon as demand in the automotive and steel
end markets continued to recover. Pricing decreased due to the completion of
certain favorable long-term contracts.





Operating
income decreased by $434,000 from the prior year to $2,009,000. The decrease was
primarily due to a decrease in average selling price offset by higher volumes
and lower production costs. Average selling prices decreased by 30% while cost
per ton decreased by 16%. This decrease in cost per ton sold was primarily due
to aggressive cost reductions. Power costs increased beginning in November 2009
as our long-term power agreement expired. We are currently negotiating a new
contract, which we expect will be at a higher rate than the expired contract,
and are paying a month-to-month rate until a new contract is
completed.





Solsil




Three
      Months EndedMarch
      31,
            
            
            Increase
            
            
            Percentage2010
            
            
            2009
            
            
            (Decrease)
            
            
            Change(Dollars
      in thousands)Results
      of OperationsNet
      sales
            
            $
            0
            
            
            
            112
            
            
            
            (112
            )
            
            NACost
      of goods sold
            
            
            166
            
            
            
            939
            
            
            
            (773
            )
            
            
            (82.3
            %)Selling,
      general and administrative expenses
            
            
            93
            
            
            
            131
            
            
            
            (38
            )
            
            
            (29.0
            %)Research
      and development
            
            
            36
            
            
            
            132
            
            
            
            (96
            )
            
            
            (72.7
            %)Restructuring
      charges
            
            
            -
            
            
            
            187
            
            
            
            (187
            )
            
            NAGoodwill
      and intangible asset impairment
            
            
            -
            
            
            
            144
            
            
            
            (144
            )
            
            NAOperating
      loss
            
            $
            (295
            )
            
            
            (1,421
            )
            
            
            1,126
            
            
            
            (79.2
            %)





Net sales
decreased $112,000 from the prior year to $0. The decrease was primarily
attributable to Solsil suspending commercial production as a result of a
significant decline in the price of polysilicon and the decline in demand for
upgraded metallurgical grade silicon. As a result, we are concentrating our
efforts at Solsil on research and development activities.





Operating
loss decreased by $1,126,000 from the prior year to $295,000. The primary driver
of the reduction was a decrease in cost of goods sold of $773,000 from the prior
year to $166,000 as a result of Solsil’s suspension of commercial production and
enhanced focus on refining its production processes to enhance yield and reduce
the cost of production. As a result of these changes, selling, general and
administrative expenses decreased $38,000 and research and development expenses
decreased $96,000.





Corporate




Three
      Months EndedMarch
      31,
            
            
            Increase
            
            
            Percentage2010
            
            
            2009
            
            
            (Decrease)
            
            
            Change(Dollars
      in thousands)Results
      of OperationsSelling,
      general and administrative expenses
            
            $
            3,012
            
            
            
            2,238
            
            
            
            774
            
            
            
            34.6
            %Restructuring
      charges
            
            
            -
            
            
            
            95
            
            
            
            (95
            )
            
            NAOperating
      loss
            
            $
            (3,012
            )
            
            
            (2,333
            )
            
            
            (679
            )
            
            
            29.1
            %





Operating
loss increased by $679,000 from the prior year to $3,012,000. The increase in
operating loss was primarily due to an increase in selling, general and
administrative expenses of $774,000 from the prior year to $3,012,000. This was
primarily due to transaction costs of $521,000 associated with the Core Metals
business acquisition.





21


GSM
Nine Months Ended March 31, 2010 vs. 2009





Consolidated
Operations:








Nine
      Months EndedMarch
      31,
            
            
            Increase
            
            
            Percentage2010
            
            
            2009
            
            
            (Decrease)
            
            
            Change(Dollars
      in thousands)Results
      of OperationsNet
      sales
            
            $
            326,222
            
            
            
            344,610
            
            
            
            (18,388
            )
            
            
            (5.3
            %)Cost
      of goods sold
            
            
            267,087
            
            
            
            261,989
            
            
            
            5,098
            
            
            
            1.9
            %Selling,
      general and administrative expenses
            
            
            35,873
            
            
            
            44,200
            
            
            
            (8,327
            )
            
            
            (18.8
            %)Research
      and development
            
            
            151
            
            
            
            1,122
            
            
            
            (971
            )
            
            
            (86.5
            %)Restructuring
      charges
            
            
            (81
            )
            
            
            1,387
            
            
            
            (1,468
            )
            
            
            (105.8
            %)Gain
      on sale of Globe Metais
            
            
            (22,907
            )
            
            
            -
            
            
            
            (22,907
            )
            
            NAGoodwill
      and intangible asset impairment
            
            
            -
            
            
            
            69,704
            
            
            
            (69,704
            )
            
            NAOperating
      income (loss)
            
            
            46,099
            
            
            
            (33,792
            )
            
            
            79,891
            
            
            
            (236.4
            %)Interest
      expense, net
            
            
            (3,211
            )
            
            
            (4,966
            )
            
            
            1,755
            
            
            
            (35.3
            %)Other
      income (loss)
            
            
            3,960
            
            
            
            (593
            )
            
            
            4,553
            
            
            
            (767.8
            %)Income
      (loss) before provision for income taxes
            
            
            46,848
            
            
            
            (39,351
            )
            
            
            86,199
            
            
            
            (219.1
            %)Provision
      for income taxes
            
            
            19,702
            
            
            
            7,290
            
            
            
            12,412
            
            
            
            170.3
            %Net
      income (loss)
            
            
            27,146
            
            
            
            (46,641
            )
            
            
            73,787
            
            
            
            (158.2
            %)Losses
      attributable to noncontrolling interest, net of tax
            
            
            346
            
            
            
            3,022
            
            
            
            (2,676
            )
            
            
            (88.6
            %)Net
      income (loss) attributable to Globe Specialty Metals, Inc.
            
            $
            27,492
            
            
            
            (43,619
            )
            
            
            71,111
            
            
            
            (163.0
            %)





Net
Sales:








Nine
      Months Ended March 31, 2010
              
              
              Nine
      Months Ended March 31, 2009Net
      Sales
              
              
              Net
      Sales$
      (in 000s)
              
              
              MT
              
              
              $/MT
              
              
              $
      (in 000s)
              
              
              MT
              
              
              $/MTSilicon
      metal
              
              $
              216,592
              
              
              
              85,402
              
              
              $
              2,536
              
              
              $
              205,454
              
              
              
              80,373
              
              
              $
              2,556Silicon-based
      alloys
              
              
              94,098
              
              
              
              46,862
              
              
              
              2,008
              
              
              
              116,651
              
              
              
              47,460
              
              
              
              2,458Silicon
      metal and silicon-based alloys
              
              
              310,690
              
              
              
              132,264
              
              
              
              2,349
              
              
              
              322,105
              
              
              
              127,833
              
              
              
              2,520Silica
      fume and other
              
              
              15,532
              
              
              
              
              
              
              
              
              
              
              
              22,505Total
      net sales
              
              $
              326,222
              
              
              
              
              
              
              
              
              
              
              $
              344,610


Net sales
decreased $18,388,000, or 5%, from the prior year to $326,222,000 primarily as a
result of a 7% decline in average selling price offset by a 4% increase in tons
sold. The
decline in average selling price resulted in decreased net sales of
approximately $22,801,000 and was a result of an 18% decrease in the average
selling price of silicon-based alloys and a 1% decrease in the average selling
price of silicon metal. The decline in silicon-based alloy pricing was due to a
significant reduction in steel production driven by lower automobile production
and construction spending. This resulted in an overall reduction in customer
demand, which caused us to reduce pricing to retain volume and also caused a mix
shift towards the production of ferrosilicon, which is our lowest priced alloy.
The decrease in silicon metal pricing was primarily due to the impact of
shipping 49% of the Alloy joint venture output at cost to Dow Corning, offset by
favorable annual contracts. The increase in tons sold resulted in an increase in
net sales of $11,386,000 and was related to a 6% increase in silicon metal,
offset by a 1% decrease in silicon-based alloy tons sold. Silicon metal volume
sold was up due to the reopening of the Niagara Falls facility in November 2009,
which provided approximately an additional 8,900 tons, offset by a decrease in
production volumes in Selma of approximately 6,400 tons due to plant closure
starting in April 2009. The lower silicon-based alloy volume came from fewer
annual contracts and decreased spot sales caused by the global economic
recession, which resulted in an across the board reduction in end market demand.
This decrease occurred mostly in the first quarter of calendar year 2009. Silica
fume and other revenue decreased by $6,973,000 as a result of a decline of
$2,699,000 in our sales of electrodes to third parties, and lower production
levels and sales of other by-products.





The GMI
segment includes the Alloy joint venture, which was entered into on
November 5, 2009, and sells 49% of the output of the Alloy plant to Dow
Corning at cost. We control the joint venture and consolidate its results in our
financial statements.





Cost
of Goods Sold:





The
$5,098,000, or 2%, increase in cost of goods sold was a result of a 4% increase
in tons sold offset by a 2% decline in cost per ton sold. This decline in cost
per ton sold was the result of several factors, including the curtailment of
Solsil production, which lowered cost of goods sold by $8,878,000 and tons sold
by only 213, a mix shift within silicon-based alloys to lower cost ferrosilicon,
which reduced cost of goods sold by approximately $7,300,000 and our overall
cost reduction programs. These cost decreases were partially offset by lower
capacity utilization during the first three quarters of fiscal year 2010 and
start-up costs totaling approximately $6,900,000, primarily at our Niagara Falls
and Selma plants.





Gross
margin represented approximately 24% of net sales in the fiscal year to date
period ending March 2009 and decreased to approximately 18% of net sales in the
fiscal year to date period ending March 2010, primarily as a result of the
start-up costs for Niagara Falls and Selma, the impact of selling 49% of the
Alloy joint venture output at cost, and the lower silicon-based alloy average
selling price.





Selling,
General and Administrative Expenses:





The
decrease in selling, general and administrative expenses of $8,327,000, or 19%,
was largely due to the write-off of $2,527,000 of deferred offering costs in the
second quarter of fiscal year 2009, caused by a more than 90 day delay in
our initial public offering, a decrease of $1,179,000 and $632,000 in audit and
audit related professional fees at Corporate and Yonvey, respectively, a
decrease of $1,033,000 of wages, insurance and general expense at Yonvey through
aggressive cost cutting measures, a decrease of $489,000 primarily in salaries
and wages at Solsil due to the suspension of commercial production, and a
decrease of approximately $4,262,000 at Metais, of which $3,550,000 was due to
the timing of the sale of our Brazilian manufacturing operations, and the
balance was due to aggressive cost reduction measures. These decreases were
offset in part by an increase in bonus accruals, and salaries and benefits of
$626,000 and $527,000, respectively at Corporate.





Research
and Development:





The
decrease in research and development expenses of $971,000 was primarily due to
the suspension of production and related activities at Solsil, which resulted in
a decrease of $763,000.





Gain
on Sale of Globe Metais:





Gain on
sale of Globe Metais recorded in the second quarter of fiscal year 2010 was
approximately $22,907,000 and was net of transaction expense of $2,699,000. The
gain was associated with the sale of our Brazilian manufacturing operations on
November 5, 2009 for net cash proceeds of $65,600,000, which represented a
purchase price of $75,000,000 less withholding taxes and certain
expenses.





22


Goodwill
and Intangible Asset Impairment:





Goodwill
and intangible asset impairment for the second quarter of fiscal year 2009 was
approximately $69,560,000 and was associated with the Solsil business unit. The
global economic slowdown, combined with a decrease in oil prices, caused a sharp
decline in the product price and demand for upgraded metallurgical grade
silicon. As a result, it was determined that the value of the Solsil business
unit no longer supported its goodwill and intangible asset balances. The
impairment charges were finalized in the third quarter of fiscal year 2009, in
conjunction with the annual impairment assessment, resulting in an additional
$144,000 goodwill impairment charge.


Net Interest
Expense:





Net
interest expense decreased by $1,755,000 due to the refinancing and repayment of
credit facilities at GMI and Yonvey, which resulted in lower average debt
balances and interest rates, and the timing of the sale of our Brazilian
manufacturing operations on November 5, 2009.





Other
Income (Loss):





Other
income (loss) increased by $4,553,000 due to a year-over-year foreign exchange
gain of $6,183,000 driven primarily by fluctuations of the Brazilian real
against the U.S. dollar, and a year-over-year increase in income from GMI’s
Norchem affiliate of $421,000, offset by a one-time gain at GMI of $934,000 due
to the settlement of litigation in the first nine months of fiscal year 2009 and
a year-over-year decrease of $465,000 of other income related to royalties
associated with the lease of certain property at GMI. The foreign exchange gain
consisted of a year-over-year increase of $7,407,000 at Globe Metais which was
primarily associated with the revaluation of long-term real denominated tax
assets, and a year-over-year loss at Corporate of $1,307,000 primarily related
to the revaluation of real denominated liabilities.





Provision
for Income Taxes:





Provision
for income taxes as a percentage of pre-tax income was approximately 42%, or
$19,702,000, in the fiscal year to date period ending March 2010 and (19%), or
$7,290,000, in the fiscal year to date period ending March 2009. The change in
our tax provision was primarily due to the fact that the goodwill impairment
charge recorded in fiscal year 2009 arose from a non-taxable acquisition and no
tax benefit was obtained from the impairment charge. The increase in the
effective tax rate is also due to a provision for income taxes totaling
$9,270,000 in connection with the sale of our Brazilian manufacturing
operations, a smaller unfavorable impact in the period of the Company not
recording a tax benefit for net losses generated from our Chinese operations due
to a history of operating losses, as well as a reduction in the benefit from tax
holidays in Argentina.





Segment
Operations





GMI




Nine
      Months EndedMarch
      31,
            
            
            Increase
            
            
            Percentage2010
            
            
            2009
            
            
            (Decrease)
            
            
            Change(Dollars
      in thousands)Results
      of OperationsNet
      sales
            
            $
            234,068
            
            
            
            223,354
            
            
            
            10,714
            
            
            
            4.8
            %Cost
      of goods sold
            
            
            192,291
            
            
            
            167,596
            
            
            
            24,695
            
            
            
            14.7
            %Selling,
      general and administrative expenses
            
            
            15,018
            
            
            
            13,664
            
            
            
            1,354
            
            
            
            9.9
            %Restructuring
      charges
            
            
            (81
            )
            
            
            255
            
            
            
            (336
            )
            
            
            (131.8
            %)Operating
      income
            
            $
            26,840
            
            
            
            41,839
            
            
            
            (14,999
            )
            
            
            (35.8
            %)





Net sales
increased $10,714,000, or 5%, from the prior year to $234,068,000. The increase
was primarily attributable to a 5% increase in tons sold. Silicon metal volume
was up 20% primarily due to the impact of the reopening of the Niagara Falls
facility in November 2009, which provided approximately an additional 8,900
tons, offset by a decrease in production volumes in Selma of approximately 6,400
tons due to plant closure starting in April 2009. Silicon-based alloy volume was
down 17% due to a decline in demand for magnesium ferrosilicon, primarily from
the automotive industry. Pricing for silicon metal was up 5% due to favorable
annual contracts and improving market spot prices. Pricing for silicon-based
alloys was down 14% due to a product mix shift towards ferrosilicon coupled with
reduced ferrosilicon pricing, which was the result of reduced demand and
aggressive foreign imports.





The GMI
segment includes the Alloy joint venture, which was entered into on
November 5, 2009, and sells 49% of the output of the Alloy plant to Dow
Corning at cost. We control the joint venture and consolidate its results in our
financial statements. As a result of the joint venture, GMI’s total sales and
gross margin have been reduced by virtue of the material sold to Dow Corning at
cost. Silicon metal pricing was down 5% from the immediately preceding quarter
largely due to material supplied at cost under the joint venture
agreement.





Operating
income decreased by $14,999,000 from the prior year to $26,840,000. This was
primarily due to increased production costs and lower average selling prices on
silicon-based alloys. Cost of goods sold increased by 15% while volumes
increased by only 5%. This caused an increase in the cost per ton sold, which
was due to reduced capacity utilization, start-up costs of approximately
$6,600,000 at Niagara Falls and Selma and higher electrode prices.




Globe
Metais


Nine
      Months EndedMarch
      31,
              
              
              Increase
              
              
              Percentage2010
              
              
              2009
              
              
              (Decrease)
              
              
              Change(Dollars
      in thousands)Results
      of OperationsNet
      sales
              
              $
              53,603
              
              
              
              77,064
              
              
              
              (23,461
              )
              
              (30.4
              %)Cost
      of goods sold
              
              
              44,990
              
              
              
              56,016
              
              
              
              (11,026
              )
              
              
              (19.7
              %)Selling,
      general and administrative expenses
              
              
              2,695
              
              
              
              6,957
              
              
              
              (4,262
              )
              
              
              (61.3
              %)Research
      and development
              
              
              11
              
              
              
              130
              
              
              
              (119
              )
              
              
              (91.5
              %)Restructuring
      charges
              
              
              -
              
              
              
              371
              
              
              
              (371
              )
              
              NAGain
      on sale of Globe Metais
              
              
              1,748
              
              
              
              -
              
              
              
              1,748
              
              
              NAOperating
      loss
              
              $
              4,159
              
              
              
              13,590
              
              
              
              (9,431
              )
              
              
              (69.4
              %)


Net sales
decreased $23,461,000, or 30%, from the prior year to $53,603,000. The decrease
was primarily attributable to a 29% decrease in tons sold and a decrease in the
sale of by-products of $3,380,000. The decrease in volume was due to the timing
of the sale of our Brazilian manufacturing operations on November 5, 2009
and the global economic recession, which caused a pronounced decline in domestic
Brazilian demand and European demand from producers of silicones and aluminum.
After the sale of our Brazilian manufacturing operations, we no longer produce
and sell by-products.





Operating
income decreased by $9,431,000, or 69%, from the prior year to $4,159,000. The
decrease was primarily due to the timing of the sale of our Brazilian
manufacturing operations, which led to lower sales volumes and transaction costs
associated with the sale of Globe Metais of $1,748,000, offset by lower selling,
general and administrative expenses due to the timing of the sale and aggressive
cost reduction measures. Cost of goods sold decreased 20% while volumes
decreased 29%, which caused an increase in the cost per ton sold. This increase
was due to lower capacity utilization and increased production costs associated
with the appreciation of the real, which was offset by gains on our foreign
exchange forward contract, which are recorded in other income (loss). Selling,
general and administrative expenses decreased by $4,262,000 due to the timing of
the sale of our Brazilian manufacturing operations on November 5, 2009,
which resulted in a cost reduction of approximately $3,550,000, and the balance
was due to aggressive cost reduction measures.





The
current year to date gain on sale of Globe Metais reflects only transaction
costs of $1,748,000 associated with the sale of our Brazilian manufacturing
operations, as the gain on the sale of the manufacturing operations is reported
in the Corporate operating segment.





23


Globe
Metales




Nine
      Months Ended
              March
      31,
            
            
            Increase
            
            
            Percentage2010
            
            
            2009
            
            
            (Decrease)
            
            
            Change(Dollars
      in thousands)Results
      of OperationsNet
      sales
            
            $
            35,502
            
            
            
            41,640
            
            
            
            (6,138
            )
            
            
            (14.7
            %)Cost
      of goods sold
            
            
            24,911
            
            
            
            24,883
            
            
            
            28
            
            
            
            0.1
            %Selling,
      general and administrative expenses
            
            
            2,348
            
            
            
            2,624
            
            
            
            (276
            )
            
            
            (10.5
            %)Restructuring
      charges
            
            
            -
            
            
            
            469
            
            
            
            (469
            )
            
            NAOperating
      income
            
            $
            8,243
            
            
            
            13,664
            
            
            
            (5,421
            )
            
            
            (39.7
            %)





Net sales
decreased $6,138,000, or 15%, from the prior year to $35,502,000. The decrease
was primarily attributable to a 32% decrease in average selling price offset by
a 30% increase in tons sold. Pricing decreased due to the completion of certain
favorable long-term contracts, a change in product mix, which included the sale
of lower priced ferrosilicon, the market price of which was affected by a
reduction in global steel production. Volumes increased primarily due to the
re-entry of Globe Metales into the lower priced ferrosilicon
market.





Operating
income decreased by $5,421,000 from the prior year to $8,243,000. The decrease
was primarily due to a decrease in average selling prices offset by higher
volumes and lower production costs. Average selling prices decreased by 32% and
cost per ton decreased by only 23%. The reduced gross margin and operating
income resulted primarily from the change in product mix, which included the
production of lower priced ferrosilicon, partially offset by our aggressive cost
reduction initiatives.


Solsil




Nine
      Months EndedMarch
      31,
            
            
            Increase
            
            
            Percentage2010
            
            
            2009
            
            
            (Decrease)
            
            
            Change(Dollars
      in thousands)Results
      of OperationsNet
      sales
            
            $
            20
            
            
            
            2,117
            
            
            
            (2,097
            )
            
            
            (99.1
            %)Cost
      of goods sold
            
            
            690
            
            
            
            9,568
            
            
            
            (8,878
            )
            
            
            (92.8
            %)Selling,
      general and administrative expenses
            
            
            378
            
            
            
            907
            
            
            
            (529
            )
            
            
            (58.3
            %)Research
      and development
            
            
            138
            
            
            
            901
            
            
            
            (763
            )
            
            
            (84.7
            %)Restructuring
      charges
            
            
            -
            
            
            
            187
            
            
            
            (187
            )
            
            NAGoodwill
      and intangible asset impairment
            
            
            -
            
            
            
            69,704
            
            
            
            (69,704
            )
            
            NAOperating
      loss
            
            $
            (1,186
            )
            
            
            (79,150
            )
            
            
            77,964
            
            
            
            (98.5
            %)





Net sales
decreased $2,097,000 from the prior year to $20,000. The decrease was primarily
attributable to Solsil suspending commercial production as a result of a
significant decline in the price of polysilicon and the decline in demand for
upgraded metallurgical grade silicon. As a result, we are concentrating our
efforts on research and development activities focused on reducing our cost of
production.





Cost of
goods sold decreased $8,878,000 from the prior year to $690,000. Cost of goods
sold was $7,451,000 in excess of sales in 2009, reflecting Solsil’s additional
investment to refine its production processes. Selling, general and
administrative expenses decreased $529,000 and research and development expenses
decreased $763,000 as a result of suspended production and the focus on
enhancing production yields and lowering the cost of production. Solsil recorded
a goodwill and intangible asset impairment in the second quarter of fiscal year
2009 of $69,560,000. The global economic slowdown, combined with the decrease in
oil prices, caused a sharp decline in the product price and demand for upgraded
metallurgical grade silicon. As a result, it was determined that the value of
the Solsil business no longer supported its goodwill and intangible asset
balances. The impairment charges were finalized in the third quarter of fiscal
year 2009, in conjunction with our annual impairment assessment, resulting in an
additional $144,000 goodwill impairment charge.





Corporate




Nine
      Months EndedMarch
      31,
            
            
            Increase
            
            
            Percentage2010
            
            
            2009
            
            
            (Decrease)
            
            
            Change(Dollars
      in thousands)Results
      of OperationsSelling,
      general and administrative expenses
            
            $
            13,797
            
            
            
            16,588
            
            
            
            (2,791
            )
            
            
            (16.8
            %)Restructuring
      charges
            
            
            -
            
            
            
            95
            
            
            
            (95
            )
            
            NAGain
      on sale of Globe Metais
            
            
            (24,655
            )
            
            
            -
            
            
            
            (24,655
            )
            
            NAOperating
      income (loss)
            
            $
            10,858
            
            
            
            (16,683
            )
            
            
            27,541
            
            
            
            (165.1
            %)





Operating
income (loss) increased by $27,541,000 from the prior year to $10,858,000. The
increase was primarily due to the $24,655,000 gain on the sale of Globe Metais
recorded in the second quarter of fiscal year 2010, which was net of transaction
expenses of $951,000 at Corporate. The gain was associated with the sale of our
Brazilian manufacturing operations on November 5, 2009 for net cash
proceeds of approximately $65,600,000, representing a purchase price of
$75,000,000 less income taxes and transaction expenses.





Selling,
general and administrative expenses decreased $2,791,000 or 17%, from the prior
year to $13,797,000. This was primarily due to the write-off of $2,527,000 of
deferred offering costs in the second quarter of fiscal year 2009 because our
initial public offering was postponed by more than 90 days, a decrease of
$1,179,000 in audit and audit related professional fees, partially offset by an
increase in bonus and bonus accruals of $626,000 and an increase in salaries and
benefits of $527,000.





24


Liquidity
and Capital Resources





Sources
of Liquidity





Our
principal sources of liquidity are cash flows from operations and available
borrowings under GMI’s revolving credit facility. At March 31, 2010, our
cash and cash equivalents balance was approximately $219,787,000. At
March 31, 2010, we had $2,902,000 available on a revolving credit facility;
there was a $22,000,000 balance outstanding on the revolving credit facility at
March 31, 2010, and there were outstanding letters of credit in the amount
of $1,288,000 associated with foreign supplier contracts and $1,810,000
associated with a power supply contract. In connection with the sale of a 49%
interest in WVA LLC to Dow Corning, we agreed to modify the terms of our senior
credit facility. The modifications included a reduction of revolving credit from
$35,000,000 to $28,000,000 in exchange for the release of the assets of West
Virginia Alloys as security for the senior credit facility.





Our
subsidiaries borrow funds in order to finance capital expansion programs. The
terms of certain of those financing arrangements place restrictions on
distributions of funds to us, however, we do not expect this to have an impact
on our ability to meet our cash obligations. We believe we have access to
adequate resources to meet our needs for normal operating costs, capital
expenditure, mandatory debt redemptions, and working capital for our existing
business. These resources include cash and cash equivalents, cash provided by
operating activities, and unused lines of credit. Given the current uncertainty
in the financial markets, our ability to access capital and the terms under
which we can do so may change. Should we be required to raise capital in this
environment, potential outcomes might include higher borrowing costs, less
available capital, more stringent terms and tighter covenants, or in extreme
conditions, an inability to raise capital. We estimate that our fiscal year 2010
capital expenditures will be approximately $24,000,000, which includes
approximately $14,000,000 for maintenance capital expenditures and approximately
$10,000,000 for scheduled enhancement projects. This amount could increase if we
undertake additional projects. Our ability to satisfy debt service obligations,
to fund planned capital expenditures and make acquisitions will depend upon our
future operating performance, which will be affected by prevailing economic
conditions in our industry as well as financial, business and other factors,
some of which are beyond our control.





See Long-Term Debtfor a summary
of our long-term debt agreements.





Cash
Flows





The
following table is a summary of consolidated cash flows:





Nine
      Months Ended
              March 31,2010
            
            
            2009(Dollars
      in thousands)Cash and cash equivalents at beginning of period
            
            $
            61,876
            
            
            
            73,994Cash flows (used in) provided by operating activities
            
            
            (27,656
            )
            
            
            31,639Cash flows provided by (used in) investing activities
            
            
            41,280
            
            
            
            (43,255
            )Cash flows provided by (used in) financing activities
            
            
            144,315
            
            
            
            (17,398
            )Effect of exchange rate changes on cash
            
            
            (28
            )
            
            
            42Cash and cash equivalents at end of period
            
            $
            219,787
            
            
            
            45,022





Operating
Activities:





Our
business is cyclical and cash flows from operating activities may fluctuate
during the year and from year-to-year due to economic conditions.





Net cash
(used in) provided by operating activities was $(27,656,000) and $31,639,000
during the first nine months of fiscal year 2010 and 2009, respectively. Net
cash provided by operating activities excludes changes in our operating assets
and liabilities associated with the sale of our Brazilian manufacturing
operations, but include the operating cash flows of these operations prior to
the November 5, 2009 date of sale. Excluding the impact of the one-time
goodwill and intangible asset charge and the gain on the sale of Globe Metais,
the $59,295,000 decrease in net cash provided by operating activities was due to
an increase in net working capital and lower operating results, as well as a tax
payments of $38,449,000 made on the taxable gains on sale of Globe Metais and a
noncontrolling interest in WVA Manufacturing LLC (WVA LLC). In the first nine
months of fiscal year 2010, accounts receivable increased significantly due to
the start-up of Niagara Falls and Selma and overall increased sales. Further,
accounts payable increased due to additional maintenance and furnace overhaul
and purchases associated with the restart of furnaces, as well as the impact of
purchases of product from Brazil that were previously produced by the Globe
Metais business. Finally, the Company reduced accrued liabilities due to the
timing of recognition of deferred revenue based on product
shipment.





Investing
Activities:





Net cash
provided by (used in) investing activities was approximately $41,280,000 and
$(43,255,000) during the first nine months of fiscal years 2010 and 2009,
respectively. In the first nine months of fiscal year 2010, $58,445,000 of cash
was provided by the sale of 100% of our interest in the manufacturing operations
of Globe Metais, net of cash transferred with the sale of $16,555,000.
Year-over-year capital expenditures decreased from approximately $46,507,000 to
$16,432,000 as capital expenditures related to the reopening and expansion of
the Niagara Falls facility, capital investments to increase the upgraded
metallurgical grade silicon capacity of Solsil, and capital improvements at
Yonvey have largely been completed. Capital expenditures in the first nine
months of fiscal year 2010 primarily consisted of maintenance capital
expenditure and the completion of the Niagara Falls facility expansion. Net cash
provided by investing activities of approximately $2,987,000 in the first nine
months of fiscal year 2009 was due to the redemption of U.S. government
treasury securities.





25


Financing
Activities:





Net cash
provided by (used in) financing activities was approximately $144,315,000 and
$(17,398,000) during the first nine months of fiscal years 2010 and 2009,
respectively. The increase of approximately $161,713,000 in cash provided by
(used in) financing activities was mainly due to $100,000,000 of cash provided
by the sale of a 49% interest in WVA LLC, net of transaction costs. Proceeds
from the close of our initial public offering and listing on the NASDAQ
contributed $36,456,000, net of underwriting discounts and commissions of
$2,744,000. Additionally, net borrowings of approximately $9,420,000 of
long-term and short-term debt, including the borrowing of $22,000,000 used
primarily for the acquisition of the Core Metals business, occurred during the
first nine months of fiscal year 2010, compared to net repayments of $17,756,000
in the first nine months of fiscal year 2009. Cash provided by warrant and UPO
exercises increased by approximately $664,000 year-over-year, as UPO and warrant
holders exercised these financial instruments prior to their expiration in
October 2009.





Exchange
Rate Change on Cash:





The
effect of exchange rate changes on cash was related to fluctuations in renminbi,
the functional currency of our Chinese subsidiary, Yonvey.





Commitments
and Contractual Obligations





In
connection with the sale of our Brazilian manufacturing operations, $14,000,000
of export prepayment financing was transferred to Dow Corning, as well as the
related interest rate swap. We also settled the foreign exchange forward
contracts utilized to manage a portion of our net foreign currency exposure to
the Brazilian real in November 2009, prior to the sale of our Brazilian
manufacturing operations. In addition, in connection with the joint venture
agreement with Dow Corning at our Alloy plant, we agreed to modify the
terms of our senior term loan and senior credit facility. These modifications
included a $6,000,000 prepayment of the senior term loan, applied to reduce the
scheduled installments of principal in inverse order of maturity, and a
reduction of revolving credit from $35,000,000 to $28,000,000 in exchange for
the release of the assets of West Virginia Alloys as security for both the
senior term loan and senior credit facility.





Our
remaining commitments and contractual obligations have not changed significantly
from those disclosed in “Part II — Item 7 — Management’s
Discussion and Analysis of Financial Condition and Results of Operations —
Commitments and Contractual Obligations” of our Annual Report on Form 10-K
for the fiscal year ended June 30, 2009.





Internal
Controls and Procedures





We are
required to comply with the internal control requirements of the Sarbanes-Oxley
Act for the fiscal year ending June 30, 2010. At June 30, 2009, we
identified certain deficiencies in our internal controls that we considered to
be significant deficiencies. We continue to remediate these significant
deficiencies, but the corrective actions we have taken have not been fully
tested and may not adequately resolve the remaining significant deficiencies.
Management intends to complete its control assessment and cure any significant
deficiencies by the end of fiscal year 2010, when our management must provide an
assessment of the effectiveness of our internal controls and procedures and our
auditors must provide an attestation thereof.





Off-Balance
Sheet Arrangements





We do not
have any material off-balance sheet arrangements or relationships with
unconsolidated entities of financial partnerships, such as entities often
referred to as structured finance or special purpose entities.





Litigation
and Contingencies





We are
subject to various lawsuits, claims and proceedings that arise in the normal
course of business, including employment, commercial, environmental, safety and
health matters, as well as claims associated with our historical acquisitions.
Although it is not presently possible to determine the outcome of these matters,
in the opinion of management, the ultimate disposition of these matters will not
have a material adverse effect on our consolidated financial position, results
of operations, or liquidity.





At
March 31, 2010 and June 30, 2009, there are no significant liabilities
recorded for environmental contingencies. With respect to the cost for ongoing
environmental compliance, including maintenance and monitoring, such costs are
expensed as incurred unless there is a long-term monitoring agreement with a
governmental agency, in which case a liability is established at the inception
of the agreement.





Long-Term
Debt





Long-term
debt comprises the following:








March
      31,
            
            
            June
      30,2010
            
            
            2009(Dollars
      in thousands)Senior
      term loan
            
            $
            19,021
            
            
            
            33,684Export
      prepayment financing
            
            
            —
            
            
            
            17,000Other
            
            
            159
            
            
            
            2,241Total
            
            
            19,180
            
            
            
            52,925Less
      current portion of long-term debt
            
            
            (8,571
            )
            
            
            (16,561
            )Long-term
      debt, net of current portion
            
            $
            10,609
            
            
            
            36,364








Senior Term Loan — The
Company entered into a five-year senior term loan in an aggregate principal
amount of $40,000,000 during September 2008. Interest on the senior term loan
accrues at LIBOR plus an applicable margin percentage or, at the Company’s
option, prime plus an applicable margin percentage. Principal payments are due
in quarterly installments of $2,105,000 commencing on December 31, 2008,
and the unpaid principal balance is due in full in September 2013, subject to
certain mandatory prepayments. A mandatory prepayment of $2,347,000 was made
during the second quarter of fiscal year 2010 based on excess cash flow, as
defined in the loan agreement, generated during fiscal year 2009. As part of the
Dow Corning transactions, the Company made a $6,000,000 prepayment of the senior
term loan, applied to the scheduled installments of principal in inverse order
of maturity, in exchange for the release of the assets of West Virginia Alloys
as security for the senior term loan. The interest rate on this loan was 2.50%,
equal to LIBOR plus 2.25%, at March 31, 2010. The senior term loan is secured by
substantially all of the assets of GMI and is subject to certain restrictive and
financial covenants, which include limits on additional debt, restrictions on
capital expenditures, restrictions on dividend and other equity distributions, a
maximum ratio of debt to earnings before interest, taxes, depreciation, and
amortization, and minimum net worth and interest coverage requirements. The
Company was in compliance with these loan covenants at March 31,
2010.





Export Prepayment Financing –The export prepayment financing debt was related to Globe Metais, which
was sold in November 2009.





26


Recently
Implemented Accounting Pronouncements





In June
2009, the FASB issued SFAS No. 168, The FASB Accounting Standards
Codificationtm
and the Hierarchy of Generally Accepted Accounting Principles. This statement
identifies the sources of accounting principles used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with U.S. GAAP (the GAAP hierarchy). This statement establishes
the FASB Accounting Standards
Codificationtm
(the Codification/ASC) as the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in conformity with U.S. GAAP, except
for SEC rules and interpretive releases, which are also authoritative
U.S. GAAP for SEC registrants. The Codification standard (FASB ASC Subtopic
105-10 on generally accepted accounting principles) was adopted on July 1,
2009. This change had no effect on the Company’s financial position or results
of operations.





In
December 2007, the FASB issued ASC Subtopic 805-10, Business Combinations. This
statement establishes principles and requirements for how the acquirer
(i) recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquired entity, (ii) recognizes and measures the goodwill acquired in the
business combination or a gain from a bargain purchase, and
(iii) determines what information to disclose to enable users of the
financial statements to evaluate the nature and financial effects of the
business combination. This accounting standard was adopted on July 1, 2009.
This statement will be applied prospectively to the Company’s business
combinations for which the acquisition date is on or after July 1,
2009.





In
December 2007, the FASB issued ASC Subtopic 810-10, Consolidation — Consolidation of Entities Controlled
by Contract(ASC 810.10) and ASC Subtopic 815-40, Derivatives and Hedging —
Contracts in Entity’s Own Equity(ASC 815.40). The
Company adopted ASC 810.10 and ASC 815.40 on July 1, 2009. The objective of
these statements is to improve the relevance, comparability, and transparency of
the financial information that a reporting entity provides in its financial
statements by establishing accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. In accordance with ASC 810.10 and ASC 815.40, the Company has
provided the enhanced disclosures required by ASC 810.10 and ASC 815.40 in the
condensed consolidated balance sheets and condensed consolidated statement of
changes in stockholders’ equity for all periods presented.





In
September 2006, the FASB issued ASC Subtopic 820-10, Fair Value Measurements and Disclosures(ASC 820).
The Company partially adopted ASC 820 on July 1, 2008. This adoption did
not have a material impact to the Company’s consolidated results of operations
or financial condition. The Company fully adopted ASC 820 on July 1, 2009.
ASC 820 defines fair value, establishes a framework for the measurement of fair
value, and enhances disclosures about fair value measurements. The statement
does not require any new fair value measures. The Company carries its derivative
agreements, as well as available-for-sale securities, at fair value, determined
using observable market based inputs. See our March 31, 2010 and 2009
condensed consolidated financial statements for additional
information.





In
September 2009, the FASB issued an amendment to ASC Subtopic 740-10, Income Taxes(ASC 740). The Company
adopted this amendment on December 31, 2009. This amendment to ASC 740 adds
implementation guidance for all entities about applying the accounting
requirements for uncertain tax matters. The implementation of this additional
guidance had no effect on the Company’s financial position or results of
operations. See our March 31, 2010 and 2009 condensed consolidated
financial statements for additional information.





Accounting
Pronouncements to be Implemented





In June
2009, the FASB issued an amendment to ASC Subtopic 860-10, Transfers and Servicing(ASC 860). The
objective of this amendment is to improve the relevance, representational
faithfulness, and comparability of the information that a reporting entity
provides in its financial statements about a transfer of financial assets; the
effects of a transfer on its financial position, financial performance, and cash
flows; and a transferor’s continuing involvement, if any, in transferred
financial assets. This amendment improves financial reporting by eliminating
(1) the exceptions for qualifying special-purpose entities from the
consolidation guidance and (2) the exception that permitted sale accounting
for certain mortgage securitizations when a transferor has not surrendered
control over the transferred financial assets. This amendment is effective for
the Company on July 1, 2010. The Company is currently assessing the
potential effect of the amendment of ASC 860 on its financial position or
results of operations.





In June
2009, the FASB issued an amendment to ASC Subtopic 810-10, Consolidation — Variable
Interest Entities(ASC 810). The objective of this amendment is to
improve financial reporting by enterprises involved with variable interest
entities by eliminating the quantitative-based risks and rewards calculation and
requiring an enterprise to perform an analysis to determine whether the
enterprise’s variable interest or interests give it a controlling interest in a
variable interest entity. In addition, the amendment requires an ongoing
reassessment of whether an enterprise is the primary beneficiary of a variable
interest entity. This amendment is effective for the Company on July 1,
2010. The Company is not currently involved with variable interest entities and,
therefore, does not currently expect any impact from the amendment to ASC 810 on
its financial position and results of operations.





In
December 2008, the FASB issued an amendment to ASC Subtopic 715-10, Compensation — Retirement
Benefits(ASC 715). This amendment provides guidance on an employer’s
disclosures about plan assets of a defined benefit pension or other
postretirement plan. The amendment requires employers of public entities to
disclose more information about how investment allocation decisions are made,
more information about major categories of plan assets, including concentrations
of risk and fair-value measurements, and the fair-value techniques and inputs
used to measure plan assets. The disclosure requirements of the amendment to ASC
715 are effective for fiscal years ending after December 15, 2009. The
amendment to ASC 715 has no impact on the Company’s financial position or
results of operations.





In
October 2009, the FASB issued an amendment to ASC Subtopic 820-10, Fair Value Measurements and Disclosures(ASC 820). This amendment requires reporting entities to make new
disclosures about recurring or nonrecurring fair value measurements including
significant transfers into and out of Level 1 and Level 2 fair value
measurements and information about purchases, sales, issuances, and settlements
on a gross basis in the reconciliation of Level 3 fair value measurements.
The amendment also clarifies existing fair value measurement disclosure guidance
about the level of disaggregation, inputs, and valuation techniques. The
disclosure requirements of the amendment to ASC 820, except for the detailed
Level 3 roll forward disclosures, is effective for annual and interim
reporting periods beginning after December 15, 2009. The new disclosures
about purchases, sales, issuances, and settlements in the roll forward activity
for Level 3 fair value measurements are effective for interim and annual
reporting periods beginning after December 15, 2010. This amendment to ASC
820 has no impact on the Company’s financial position and results of
operations.





Item 3.Quantitative and
Qualitative Disclosures About Market Risk





In
connection with the sale of our Brazilian manufacturing operations, we
transferred our long-term lease mining rights and forest reserves in Brazil, as
well as $14,000,000 of export prepayment financing and the related interest rate
swap, to Dow Corning. Further, we settled the remaining foreign exchange forward
contracts utilized to manage a portion of our net foreign currency exposure to
the Brazilian real in November 2009, prior to the sale of our Brazilian
manufacturing operations. With the sale of our Brazilian manufacturing
operations, our exposure to commodity price fluctuations in Brazil, as well as
foreign exchange rate fluctuations with the Brazilian real have been
substantially reduced. We retained certain export customers from the Brazilian
manufacturing operations, and for calendar year 2010 we will be buying material
from Dow Corning for sale to these export customers and expect to earn only a
modest gross margin on the sales.





Our
remaining market risks have not changed significantly from those disclosed in
“Part II — Item 7A. — Quantitative and Qualitative
Disclosures About Market Risk” of our Annual Report on Form 10-K for the
fiscal year ended June 30, 2009.





Item 4.Controls and
Procedures





Conclusion
Regarding the Effectiveness of Disclosure Controls and Procedures





Under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer (our Principal Executive Officer
and Principal Financial Officer, respectively), we have evaluated our disclosure
controls and procedures (as defined in Securities Exchange Act Rule 13a
-15(e)) as of March 31, 2010. Based upon that evaluation, our Principal
Executive Officers and Principal Financial Officer have concluded that our
disclosure controls and procedures were effective.





Changes
in Internal Control Over Financial Reporting





There
have been no changes in the company’s internal control over financial reporting
that occurred during the period covered by the report that have materially
affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.





27


PART II





Item 1.Legal
Proceedings





In the
ordinary course of business, we are subject to periodic lawsuits,
investigations, claims and proceedings, including, but not limited to,
contractual disputes, employment, environmental, health and safety matters, as
well as claims associated with our historical acquisitions. Although we cannot
predict with certainty the ultimate resolution of lawsuits, investigations,
claims and proceedings asserted against us, we do not believe any currently
pending legal proceeding to which we are a party will have a material adverse
effect on our business, prospects, financial condition, cash flows, results of
operations or liquidity.





Item 1A.Risk
Factors





A
description of the risks associated with our business, financial condition, and
results of operations is set forth in “Part I — Item 1A. —
Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended
June 30, 2009. There have been no material changes in our risks from such
description, except as follows:





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





As
discussed in our Annual Report on Form 10-K, due to the fact that energy
constitutes a high percentage of our production costs, we are particularly
vulnerable to cost fluctuations in the energy industry. The energy which we use
is subject to price volatility caused by changes in global supply and demand and
governmental controls, and we attempt to reduce the impact of increases in our
energy costs by negotiating long-term contracts.





As of
October 31, 2009, our power agreement related to our operations in
Argentina expired, and we expect prices to increase under a new contract.
Negotiations on a fixed-price long-term contract are ongoing, however, a new
contract has not been formalized as of the date of issuance of this report. The
non-renewal of this contract, or a material increase in the price of energy,
could materially adversely affect our future earnings and our low cost
competitive advantage. If we are not able to increase our sales prices to
mitigate our exposure to rising energy prices, it could have a material adverse
effect on our results of operations and operating cash flows.





Item 6.Exhibits





Exhibit
              Number
            Description of
      Document31.1
            Certification
      of Principal Executive Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002†31.2
            Certification
      of Principal Financial Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002†32.1
            Certification
      of the Principal Executive Officer and Principal Financial Officer
      Pursuant to 18 U.S.C. 1350, as adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002†


____________





†
            Filed
      herewith.


28


SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.







Globe
Specialty Metals, Inc.


(Registrant)





By:                      /s/  Jeff
Bradley


Jeff
Bradley


Chief
Executive Officer





By:               /s/  Malcolm
Appelbaum


Malcolm
Appelbaum


Chief
Financial Officer











May 17,
2010