FORT LEE, N.J., May 15, 2014 /PRNewswire/ -- Empire Resources,
Inc. (NASDAQ: ERS), a distributor of value added, semi-finished
metal products, announced today that net sales for the first
quarter of 2014 were $138.3 million,
an increase of 23% from the fourth quarter of 2013, and 4% higher
than the 2013 first quarter. The improvement compared with
the 2013 fourth quarter reflected increased sales across all
regions including Latin America,
North America, Australia/New
Zealand and Europe.
Gross profit for the first quarter of 2014 was $6.5 million, or 4.7% of sales, compared with
$4.5 million, or 4.0% of sales, in
the fourth quarter of 2013, and $6.6
million, or 5.0% of sales, in the 2013 first quarter.
The sequential improvement in gross profit was due to a pick-up in
market demand compared with the fourth quarter, as well as the
Company's continued focus on cost reduction.
Operating income for the first quarter of 2014 was $3.2 million, which is more than double the
operating income of $1.5 million in
the fourth quarter of 2013. Operating income was $3.4 million in the first quarter of 2013.
While SG&A expenses in the first quarter of 2014 were
approximately level with the first quarter of 2013, they were 9%
higher than the 2013 fourth quarter, due to compensation expenses
in line with higher sales volume.
Net interest expense for the first quarter of 2014 was
$1.1 million, which is level with
both the fourth and first quarters of 2013.
The Company recognized a non-cash non-operating loss of
$0.4 million in the first quarter of
2014 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 gain of $0.4 million in the fourth quarter of 2013 and a
non-cash non-operating loss of $2.1
million in the first quarter of 2013, related to the
derivative valuation recognized in those periods.
For the first quarter of 2014, net income was $1.0 million, or $0.12 per diluted share, versus net income of
$0.5 million, or $0.04 per diluted share, in the fourth quarter of
2013, and $0.1 million, or
$0.01 per diluted share, in the first
quarter of 2013.
Non-GAAP net income, which excludes changes in the value of the
derivative liability, net of tax, was $1.3
million, or $0.15 per diluted
share, for the first quarter of 2014, compared with non-GAAP net
income of $0.2 million, or
$0.03 per diluted share, in the
fourth quarter of 2013, and non-GAAP net income of $1.4 million, or $0.16 per diluted share in the first quarter of
2013. The Company uses this measure internally to evaluate
its operating performance and believes that this is a useful
measure also used by investors.
Nathan Kahn, President and CEO,
commented, "The strong sequential increase in our first quarter
sales was due to improved market demand across all regions, with
growth especially strong in Latin
America, driven by demand for our steel products,
demonstrating the benefit of our diversification into steel over
the past few years. Our sales initiatives in Europe and Australia/New
Zealand also resulted in sequential sales growth of nearly
20% in each region. Our continuing effort to manage variable
costs contributed to the improvement in our first quarter
profitability. Going forward, our focus will remain on
building shareholder value."
About Empire Resources, Inc.
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.
Use of Non-GAAP Financial Measures
To supplement the Company's consolidated financial statements
presented on a GAAP basis, the Company discloses non-GAAP net
income, because management uses this supplemental non-GAAP
financial measure to evaluate performance period over period, to
analyze the underlying trends in its business, and to establish
operational goals. In addition, the Company believes investors
already use this non-GAAP measure to monitor the Company's
performance. Non-GAAP net income is defined by the Company as net
income excluding non-cash, non-operating changes in value of
derivative liability related to the conversion option on its
convertible debt.
Generally, a non-GAAP financial measure is a numerical measure
of a company's performance, financial position or cash flow that
either excludes or includes amounts that are not normally excluded
or included in the most directly comparable measure calculated and
presented in accordance with GAAP. The non-GAAP measure discussed
above, however, should be considered in addition to, and not as a
substitute for or superior to net income or other measures of
financial performance prepared in accordance with GAAP. A
reconciliation of non-GAAP to GAAP net income is set forth in the
table below.
The Company believes that providing this information assists
investors in understanding the Company's operating performance and
the methodology used by management to evaluate and measure such
performance.
Forward-Looking Statements:
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.
Condensed
Consolidated Statements of Income (Unaudited)
|
Three Months Ended
March 31,
|
(In thousands
except per share amounts)
|
|
2014
|
|
|
2013
|
Net sales
|
$
|
138,317
|
|
$
|
133,430
|
Cost of goods
sold
|
|
131,830
|
|
|
126,800
|
Gross
profit
|
|
6,487
|
|
|
6,630
|
Selling, general and
administrative expenses
|
|
3,299
|
|
|
3,258
|
Operating
income
|
|
3,188
|
|
|
3,372
|
Other
expenses
|
|
|
|
|
|
Change
in value of derivative liability
|
|
(429)
|
|
|
(2,123)
|
Interest
expense, net
|
|
(1,091)
|
|
|
(1,113)
|
Income before income
taxes
|
|
1,668
|
|
|
136
|
Income
taxes
|
|
642
|
|
|
51
|
Net
income
|
$
|
1,026
|
|
$
|
85
|
Weighted average
shares outstanding:
|
|
|
|
|
|
Basic
|
|
8,629
|
|
|
8,586
|
Diluted
|
|
8,886
|
|
|
8,852
|
Earnings per
share:
|
|
|
|
|
|
Basic
|
|
$0.12
|
|
|
$0.01
|
Diluted
|
|
$0.12
|
|
|
$0.01
|
See notes to
unaudited condensed consolidated financial statements
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets
|
March 31,
2014
|
|
December 31,
2013
|
(In thousands,
except share and per share amounts)
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
|
$
|
1,708
|
|
$
|
2,477
|
Trade accounts receivable
(less allowance for doubtful
accounts of $562 and
$562)
|
|
78,453
|
|
|
52,696
|
Inventories
|
|
117,641
|
|
|
139,752
|
Deferred tax
assets
|
|
3,211
|
|
|
3,217
|
Advance to supplier, net of
imputed interest of $147 and $176
|
|
3,177
|
|
|
3,147
|
Other current assets,
including derivatives
|
|
5,312
|
|
|
6,081
|
Total current assets
|
|
209,502
|
|
|
207,370
|
Advance to supplier, net of
imputed interest of $31 and $56,
and net of current
maturities
|
|
2,479
|
|
|
3,287
|
Preferential supply
agreement, net
|
|
561
|
|
|
641
|
Long-term financing costs,
net of amortization
|
|
111
|
|
|
358
|
Property and equipment,
net
|
|
3,932
|
|
|
3,949
|
Deferred tax
assets
|
|
431
|
|
|
215
|
Total
assets
|
$
|
217,016
|
|
$
|
215,820
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Notes payable -
banks
|
$
|
117,764
|
|
$
|
107,922
|
Current maturities of
mortgage payable
|
|
1,245
|
|
|
1,290
|
Trade accounts
payable
|
|
30,283
|
|
|
44,058
|
Income taxes
payable
|
|
2,880
|
|
|
2,042
|
Accrued expenses and
derivative liabilities
|
|
5,424
|
|
|
2,844
|
Dividends payable
|
|
217
|
|
|
215
|
Total current liabilities
|
|
157,813
|
|
|
158,371
|
|
|
|
|
|
|
Subordinated
convertible debt net of unamortized discount
of $1,226 and $1,368 respectively
|
|
10,774
|
|
|
10,632
|
Derivative liability
for embedded conversion option
|
|
2,477
|
|
|
2,048
|
Total Liabilities
|
|
171,064
|
|
|
171,051
|
|
|
|
|
|
|
Commitments (Note
18)
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
Common stock $0.01 par
value, 20,000,000 shares authorized
and 11,749,651 shares
issued
at March 31, 2014 and
December 31, 2013
|
|
117
|
|
|
117
|
Additional paid-in
capital
|
|
12,200
|
|
|
11,937
|
Retained earnings
|
|
38,987
|
|
|
38,178
|
Accumulated other
comprehensive income
|
|
65
|
|
|
51
|
Treasury stock, 3,081,086
and 3,177,708 shares
at March 31, 2014 and
December 31, 2013, respectively
|
|
(5,417)
|
|
|
(5,514)
|
Total stockholders' equity
|
|
45,952
|
|
|
44,769
|
Total liabilities and
stockholders' equity
|
$
|
217,016
|
|
$
|
215,820
|
See notes to
unaudited condensed consolidated financial statements
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
Three Months Ended
March 31,
|
(In
thousands)
|
|
2014
|
|
|
2013
|
Cash flows from
operating activities:
|
|
|
|
|
|
Net income
|
$
|
1,026
|
|
$
|
85
|
Adjustments to reconcile net
income to net cash (used in)/provided
by operating
activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
275
|
|
|
173
|
Change in value of derivative liability
|
|
429
|
|
|
2,123
|
Amortization of convertible note discount
|
|
141
|
|
|
141
|
Imputed interest on vendor advance
|
|
(55)
|
|
|
(85)
|
Amortization of supply agreement
|
|
80
|
|
|
80
|
Deferred income taxes
|
|
(216)
|
|
|
(866)
|
Foreign exchange (loss)/gain and other
|
|
(2)
|
|
|
19
|
Stock-based compensation
|
|
373
|
|
|
-
|
Changes in:
|
|
|
|
|
|
Trade accounts receivable
|
|
(25,743)
|
|
|
(12,512)
|
Inventories
|
|
22,124
|
|
|
16,355
|
Other current assets
|
|
769
|
|
|
(4,761)
|
Trade accounts payable
|
|
(13,776)
|
|
|
4,475
|
Income taxes payable
|
|
838
|
|
|
915
|
Accrued expenses and derivative liabilities
|
|
2,584
|
|
|
(789)
|
Net cash (used in)/provided by operating
activities
|
|
(11,153)
|
|
|
5,353
|
Cash flows
provided by investing activities:
|
|
|
|
|
|
Repayment related to supply agreement
|
|
833
|
|
|
833
|
Purchases of property and equipment
|
|
(11)
|
|
|
(9)
|
Net cash provided by investing activities
|
|
822
|
|
|
824
|
Cash flows
provided by/(used in) financing activities:
|
|
|
|
|
|
Proceeds from/(repayments)
of notes payable – banks
|
|
9,833
|
|
|
(6,580)
|
Repayments - mortgage
payable
|
|
(44)
|
|
|
(42)
|
Dividends
paid
|
|
(215)
|
|
|
-
|
Treasury stock
purchased
|
|
(13)
|
|
|
(21)
|
Net cash provided by/(used in) financing activities
|
|
9,561
|
|
|
(6,643)
|
Net decrease in
cash
|
|
(770)
|
|
|
(466)
|
Effect of
exchange rate
|
|
1
|
|
|
(6)
|
Cash at beginning of
period
|
|
2,477
|
|
|
3,136
|
Cash at end of the
period
|
$
|
1,708
|
|
$
|
2,664
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
Cash paid during the period
for:
|
|
|
|
|
|
Interest
|
$
|
1,509
|
|
$
|
766
|
Income taxes
|
$
|
241
|
|
$
|
110
|
Non cash financing
activities:
|
|
|
|
|
|
Dividend declared but
not yet paid
|
$
|
217
|
|
$
|
215
|
See notes to
unaudited condensed consolidated financial statements
|
|
|
|
|
|
Non-GAAP
Consolidated Statements of Income (Unaudited)
|
Three Months
Ended
|
(In thousands
except per share amounts)
|
March 31,
2014
|
|
December 31,
2013
|
|
March
31, 2013
|
GAAP income before
income taxes
|
|
1,668
|
|
|
792
|
|
|
136
|
Addback: change in
value of derivative liability
|
|
429
|
|
|
(400)
|
|
|
2,123
|
Non-GAAP net income
before taxation
|
|
2,097
|
|
|
392
|
|
|
2,259
|
Income
taxes
|
|
807
|
|
|
158
|
|
|
847
|
Non-GAAP net
income
|
$
|
1,290
|
|
$
|
234
|
|
$
|
1,412
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
8,629
|
|
|
8,581
|
|
|
8,586
|
Diluted
|
|
8,886
|
|
|
8,842
|
|
|
8,852
|
Non-GAAP earnings
per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$0.15
|
|
|
$0.03
|
|
|
$0.16
|
Diluted
|
|
$0.15
|
|
|
$0.03
|
|
|
$0.16
|
SOURCE Empire Resources, Inc.