Empire Resources Reports Fourth Quarter And Full Year 2013 Results

FORT LEE, N.J., March 31, 2014 /PRNewswire/ -- Empire Resources, Inc. (NASDAQ: ERS), a distributor of value added, semi-finished metal products, announced today that net sales for the fourth quarter of 2013 were $112.4 million, an increase of 3% from the fourth quarter of 2012, and 11% lower than the third quarter of 2013. The improvement compared with the 2012 fourth quarter reflected increased sales in Europe, Latin America and North America, offset by lower sales in the Australia/New Zealand region. Sequentially, sales were higher in Australia/New Zealand and Europe and lower in the Americas.

Gross profit for the fourth quarter of 2013 was $4.5 million, or 4.0% of sales, compared with 5.6% of sales in the fourth quarter of 2012 and 4.2% of sales in the 2013 third quarter. Competitive market conditions negatively affected the gross profit margin as did the imposition of import duty on one of the Company's principal supplier, to a lesser extent.

Operating income for the fourth quarter of 2013 was $1.5 million compared with $3.0 million in the fourth quarter of 2012 and $1.7 million in the third quarter of 2013. SG&A expenses were 1% lower than the fourth quarter of 2012 and 16% lower sequentially, due in part to the alignment of commissions paid with sales level.

Net interest expense for the fourth quarter of 2013 was $1.1 million, approximately level with both the fourth quarter of 2012 and the third quarter of 2013.

Pre-tax income, before including non-cash non-operating derivative-related amounts in all periods was $0.4 million in the fourth quarter of 2013, compared with $1.9 million in fourth quarter of 2012 and $0.6 million in the third quarter of 2013.

The Company recognized a non-cash non-operating gain of $0.4 million in the fourth quarter of 2013, related to the change in fair market valuation of the derivative feature of its convertible subordinated note. That compares with a non-cash non-operating loss of $0.4 million in the fourth quarter of 2012 and a non-cash non-operating gain of $1.7 million in the third quarter of 2013, due to the derivative valuation recognized in those periods.

Net income for the fourth quarter of 2013 was $0.5 million, or $0.04 per diluted share, including the derivative related non-cash non-operating gain. That compares with net income of $0.9 million, or $0.11 per diluted share, in the fourth quarter of 2012, and net income of $1.5 million, or $0.06 per diluted share, in the third quarter of 2013, including the non-cash non-operating loss and gain in those respective prior year periods.

For full year 2013, net sales were $482.7 million; pre-tax income was $3.8 million, before including a non-cash non-operating derivative-related loss of $0.05 million; and net income was $2.4 million, or $0.27 per diluted share, including the derivative-related loss. For full year 2012, net sales were $538.5 million; pre-tax income was $6.5 million, before including a non-cash non-operating derivative-related loss of $0.06 million; and net income was $4.0 million, or $0.42 per diluted share, including the derivative-related loss.

Nathan Kahn, President and CEO, commented, "Through the efforts of our entire team, we achieved solid sales and profitability in each quarter of 2013, including the fourth quarter, despite exceptionally difficult industry and competitive conditions.

"Even with those challenges, our sales initiatives have enabled us to improve our results in Europe, where our fourth quarter sales were at the highest level since 2011. We also realized a sequential step-up in our sales in the Australia/New Zealand region in the final quarter of the year. And, we have expanded our presence in Latin America, which represented 14% of full year sales versus 11% in 2012. At the same time, our ongoing inventory management efforts have enabled us to reduce storage and processing costs, lower working capital and pay down debt.

"While current market conditions remain difficult, we are continuing to see promising signs in our bookings. In the meantime, we are firmly focused on executing our growth strategy to increase shareholder value. Towards that end, we are pleased to have recently announced our 44th consecutive quarterly cash dividend."

Empire Resources, Inc. is a distributor of a wide range of semi-finished metal products to customers in the transportation, automotive, housing, appliance and packaging industries in the U.S., Canada, Latin America, Australia, New Zealand and Europe. It maintains supply contracts with mills in various parts of the world.

This press release contains "forward-looking statements." Such statements may be preceded by the words "intends," "may," "will," "plans," "expects," "anticipates," "projects," "predicts," "estimates," "aims," "believes," "hopes," "potential" or similar words. Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company's control, and cannot be predicted or quantified and consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with (i) the loss or default of one or more suppliers; (ii) the loss or default of one or more significant customers; (iii) a default by counterparties to derivative financial instruments; (iv) changes in general, national or regional economic conditions; (v) an act of war or terrorism that disrupts international shipping; (vi) changes in laws, regulations and tariffs; (vii) the imposition of anti-dumping duties on products the Company imports; (viii) changes in the size and nature of the Company's competition; (ix) changes in interest rates, foreign currencies or spot prices of aluminum; (x) the loss of one or more key executives; (xi) increased credit risk from customers; (xii) the Company's failure to grow internally or by acquisition and (xiii) the Company's failure to improve operating margins and efficiencies. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company's filings with the Securities and Exchange Commission (SEC), including the Company's Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC's web site at http://www.sec.gov. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.


	Three Months Ended December 31,				Year Ended December 31,
In thousands (except per share amounts)	2013		2012		2013		2012
Net sales	$	112,395	$	109,521	$	482,683	$	538,527
Cost of goods sold		107,861		103,437		460,944		513,560
Gross profit		4,534		6,084		21,739		24,967
Selling, general and administrative expenses		3,031		3,067		13,392		13,258
Operating income		1,503		3,017		8,347		11,709
Other expenses
Change in value of derivative liability		400		(424)		(52)		(63)
Interest expense, net		(1,111)		(1,106)		(4,514)		(5,225)
Income before income taxes		792		1,487		3,781		6,421
Income taxes		319		574		1,385		2,457
Net income	$	473	$	913	$	2,396	$	3,964
Weighted average shares outstanding:
Basic		8,581		8,357		8,583		8,897
Diluted		11,855		11,493		8,852		12,028
Earnings per share:
Basic		$0.06		$0.11		$0.28		$0.45
Diluted		$0.04		$0.11		$0.27		$0.42

		Unaudited				See notes to consolidated financial statements


	December 31, 2013		December 31, 2012
ASSETS
Current assets:
Cash	$	2,477	$	3,136
Trade accounts receivable (less allowance for doubtful accounts of $562 and $521)		52,696		53,551
Inventories		139,752		145,547
Deferred tax assets		3,217		3,306
Advance to supplier, net of imputed interest of $176 and $292		3,147		3,061
Other current assets, including derivatives		6,081		3,965
Total current assets		207,370		212,566
Advance to supplier, net of imputed interest of $56 and $234, net of current maturities		3,287		6,413
Preferential supply agreement, net		641		962
Long-term financing costs, net of amortization		358		862
Property and equipment, net		3,949		3,987
Deferred Tax assets		215		-
Total assets	$	215,820	$	224,790

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - banks	$	107,922	$	124,095
Current maturities of mortgage payable		1,290		171
Trade accounts payable		44,058		36,048
Income taxes payable		2,042		3,036
Accrued expenses and derivative liabilities		2,844		4,783
Dividends payable		215		-
Total current liabilities		158,371		168,133

Mortgage payable, net of current maturities		-		1,290
Subordinated convertible debt net of unamortized discount of $1,368 and $1,933 respectively		10,632		10,067
Derivative liability for embedded conversion option		2,048		1,996
Deferred taxes payable		-		195
Total Liabilities		171,051		181,681

Commitments (Note R)

Stockholders' equity:
Common stock $0.01 par value, 20,000,000 shares authorized and 11,749,651 shares issued at December 31, 2013 and December 31, 2012		117		117
Additional paid-in capital		11,937		11,937
Retained earnings		38,178		36,641
Accumulated other comprehensive income/(loss)		51		(136)
Treasury stock, 3,177,708 and 3,158,597 shares at December 31, 2013 and December 31, 2012, respectively		(5,514)		(5,450)
Total stockholders' equity		44,769		43,109
Total liabilities and stockholders' equity	$	215,820	$	224,790
See notes to consolidated financial statements


	Year Ended December 31,
	2013		2012
Cash flows from operating activities:
Net income	$	2,396	$	3,964
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		697		686
Change in value of derivative liability		52		63
Amortization of convertible note discount		566		566
Imputed interest on vendor advance		(293)		(436)
Provision for doubtful accounts		33		(6)
Amortization of supply agreement		321		-
Deferred income taxes		(356)		45
Foreign exchange gain and other		(29)		(6)
Loss on sale of marketable securities		31		-
Changes in:
Trade accounts receivable		981		3,012
Inventories		5,969		38,655
Other current assets		(2,121)		7,083
Trade accounts payable		8,008		(14,016)
Income taxes payable		(994)		(1,024)
Accrued expenses and derivative liabilities		(1,893)		741
Net cash provided by operating activities		13,368		39,327
Cash flows provided by/(used in) investing activities:
Repayment/(advance) related to supply agreement		3,333		(5,000)
Net proceeds from sale of marketable securities		6		-
Purchases of property and equipment		(95)		(73)
Net cash provided by/(used in) investing activities		3,244		(5,073)
Cash flows used in financing activities:
Repayments of notes payable – banks		(16,361)		(30,412)
Repayments - mortgage payable		(171)		(160)
Dividends paid		(644)		(2,825)
Deferred financing costs		(60)		(62)
Treasury stock purchased		(64)		(1,941)
Stock options exercised		0
Tax benefit from stock options exercised		0
Net cash used in financing activities		(17,300)		(35,400)
Net decrease in cash		(688)		(1,146)
Effect of exchange rate		29		8
Cash at beginning of period		3,136		4,274
Cash at end of the period	$	2,477	$	3,136
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	3,739	$	5,107
Income taxes	$	2,553	$	3,197
Non cash financing activities:
Dividend declared but not yet paid	$	215	$	-
See notes to consolidated financial statements