FORT LEE, N.J., Aug. 14, 2014 /PRNewswire/ -- Empire
Resources, Inc. (NASDAQ: ERS), a distributor of value added,
semi-finished metal products, announced today that net sales for
the second quarter of 2014 were $146.5
million, representing an increase of 33% from the second
quarter of 2013, and 6% higher sequentially. The improvement
compared with the second quarter of 2013 reflected increased sales
across all geographic regions, led by a four-fold increase in sales
to Latin America and a tripling of
sales in Europe. Strong sales growth in North America drove the increase in sales as
compared to the first quarter of 2014.
Gross profit for the second quarter of 2014 also increased 33%
from the second quarter of 2013 to $7.0
million, or 4.8% of sales, compared with $5.3 million, or 4.8% of sales, in the second
quarter of 2013. In the first quarter of 2014, gross profit was
$6.5 million, or 4.7% of
sales.
Operating income for the second quarter of 2014 was $3.5 million, which is double the operating
income of $1.8 million reported in
the second quarter of 2013 and up 11% from operating income
of $3.2 million in the first quarter
of 2014.
Net interest expense for the second quarter of 2014 was
$1.1 million, which is level with
both the second quarter of 2013 and the first quarter of
2014.
The Company recognized a non-cash non-operating gain of
$0.2 million in the second 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 loss of $0.04 million in the second quarter of 2013, and
a non-cash non-operating loss of $0.4
million in the first quarter of 2014.
For the second quarter of 2014, net income was $1.6 million, or $0.15 per diluted share, compared with net income
of $0.4 million, or $0.04 per diluted share, in the second quarter of
2013, and net income of $1.0 million,
or $0.12 per diluted share, in the
first quarter of 2014.
Non-GAAP net income for the second quarter of 2014, which
excludes changes in the value of the derivative liability, net of
tax, increased 279% to $1.5 million,
or $0.17 per diluted share, compared
with non-GAAP net income of $0.4
million, or $0.04 per diluted
share, in the second quarter of 2013. Non-GAAP net income was
$1.3 million, or $0.15 per diluted share, in the first quarter of
2014.
For the first six months of 2014, net sales were $284.8 million and net income was $2.7 million, or $0.28 per diluted share, on a GAAP basis, and
$2.8 million, or $0.31 per diluted share, on a non-GAAP
basis. For the first six months of 2013, net sales were
$243.9 million and net income was
$0.5 million, or $0.05 per diluted share, on a GAAP basis, and
$1.8 million, or $0.20 per diluted share, on a non-GAAP
basis.
The Company uses the non-GAAP measures, which exclude the effect
of the non-cash non-operating gains and losses due the quarterly
change in derivatives valuation, 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 recovery that began in our first quarter this year
continued in the second quarter, yielding our highest level of
sales since the second quarter of 2012 and our highest operating
income since the third quarter of 2010. In combination, the
benefits of our product and geographic diversification, our
investment in our sales team, the continued sharp focus of our team
on executing our strategy, and improved market conditions in the
U.S. enabled us to achieve this additional progress."
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. The
Company 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 Balance Sheets
(In thousands except share and per share amounts)
|
|
|
June 30, 2014
(Unaudited)
|
|
December 31,
2013
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
|
$
|
2,749
|
|
$
|
2,477
|
Trade accounts receivable
(less allowance for doubtful
accounts of $561 and
$562)
|
|
92,629
|
|
|
52,696
|
Inventories
|
|
124,312
|
|
|
139,752
|
Deferred tax
assets
|
|
3,206
|
|
|
3,217
|
Advance to supplier, net of
imputed interest of $117 and $176
|
|
3,207
|
|
|
3,147
|
Other current assets,
including derivatives
|
|
5,634
|
|
|
6,081
|
Total current assets
|
|
231,737
|
|
|
207,370
|
Advance to supplier, net of
imputed interest of $13 and $56,
and net of current
maturities
|
|
1,664
|
|
|
3,287
|
Preferential supply
agreement, net
|
|
481
|
|
|
641
|
Long-term financing costs,
net of amortization
|
|
1,060
|
|
|
358
|
Property and equipment,
net
|
|
3,910
|
|
|
3,949
|
Deferred tax
assets
|
|
388
|
|
|
215
|
Total
assets
|
$
|
239,240
|
|
$
|
215,820
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Notes payable -
banks
|
$
|
134,154
|
|
$
|
107,922
|
Current maturities of
mortgage payable
|
|
1,200
|
|
|
1,290
|
Trade accounts
payable
|
|
33,314
|
|
|
44,058
|
Income taxes
payable
|
|
3,751
|
|
|
2,042
|
Accrued expenses and
derivative liabilities
|
|
6,076
|
|
|
2,844
|
Dividends payable
|
|
217
|
|
|
215
|
Total current liabilities
|
|
178,712
|
|
|
158,371
|
|
|
|
|
|
|
Subordinated
convertible debt net of unamortized discount
of $1,085 and $1,368 respectively
|
|
10,915
|
|
|
10,632
|
Derivative liability
for embedded conversion option
|
|
2,228
|
|
|
2,048
|
Total Liabilities
|
|
191,855
|
|
|
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 June 30, 2014 and
December 31, 2013
|
|
117
|
|
|
117
|
Additional paid-in
capital
|
|
12,210
|
|
|
11,937
|
Retained earnings
|
|
40,417
|
|
|
38,178
|
Accumulated other
comprehensive income
|
|
53
|
|
|
51
|
Treasury stock, 3,077,086
and 3,177,708 shares
at June 30, 2014 and
December 31, 2013, respectively
|
|
(5,412)
|
|
|
(5,514)
|
Total stockholders' equity
|
|
47,385
|
|
|
44,769
|
Total liabilities and
stockholders' equity
|
$
|
239,240
|
|
$
|
215,820
|
See notes to
unaudited condensed consolidated financial statements
|
Condensed
Consolidated Statements of Income (Unaudited)
(In thousands except per share amounts)
|
|
|
Three Months Ended
June 30,
|
|
Six Months
Ended June 30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Net sales
|
$
|
146,516
|
|
$
|
110,468
|
|
$
|
284,833
|
|
$
|
243,898
|
Cost of goods
sold
|
|
139,501
|
|
|
105,201
|
|
|
271,331
|
|
|
232,001
|
Gross
profit
|
|
7,015
|
|
|
5,267
|
|
|
13,502
|
|
|
11,897
|
Selling, general and
administrative expenses
|
|
3,482
|
|
|
3,501
|
|
|
6,781
|
|
|
6,759
|
Operating
income
|
|
3,533
|
|
|
1,766
|
|
|
6,721
|
|
|
5,138
|
Other
expenses
|
|
|
|
|
|
|
|
|
|
|
|
Change
in value of derivative liability
|
|
249
|
|
|
(44)
|
|
|
(180)
|
|
|
(2,167)
|
Interest
expense, net
|
|
(1,091)
|
|
|
(1,134)
|
|
|
(2,182)
|
|
|
(2,247)
|
Income before income
taxes
|
|
2,691
|
|
|
588
|
|
|
4,359
|
|
|
724
|
Income
taxes
|
|
1,045
|
|
|
221
|
|
|
1,687
|
|
|
272
|
Net
income
|
$
|
1,646
|
|
$
|
367
|
|
$
|
2,672
|
|
$
|
452
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
8,669
|
|
|
8,586
|
|
|
8,649
|
|
|
8,585
|
Diluted
|
|
11,968
|
|
|
8,871
|
|
|
11,949
|
|
|
8,860
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$0.19
|
|
|
$0.04
|
|
|
$0.31
|
|
|
$0.05
|
Diluted
|
|
$0.15
|
|
|
$0.04
|
|
|
$0.28
|
|
|
$0.05
|
See notes to
unaudited condensed consolidated financial statements
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Consolidated Statements of Income (Unaudited)
(In thousands except per share amounts)
|
|
Three Months Ended
June 30,
|
|
Six Months
Ended June 30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
GAAP income before
income taxes
|
|
2,691
|
|
|
588
|
|
|
4,359
|
|
|
724
|
Elimination of the
change in value of
derivative liability
|
|
(249)
|
|
|
44
|
|
|
180
|
|
|
2,167
|
Non-GAAP net income
before taxation
|
|
2,442
|
|
|
632
|
|
|
4,539
|
|
|
2,891
|
Income
taxes
|
|
948
|
|
|
238
|
|
|
1,757
|
|
|
1,086
|
Non-GAAP net
income
|
$
|
1,494
|
|
$
|
394
|
|
$
|
2,782
|
|
$
|
1,805
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
8,669
|
|
|
8,586
|
|
|
8,649
|
|
|
8,585
|
Diluted
|
|
8,924
|
|
|
8,871
|
|
|
8,905
|
|
|
8,860
|
Non-GAAP earnings
per share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$0.17
|
|
|
$0.05
|
|
|
$0.32
|
|
|
$0.21
|
Diluted
|
|
$0.17
|
|
|
$0.04
|
|
|
$0.31
|
|
|
$0.20
|
Condensed
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
|
|
|
Six Months
Ended June 30,
2014
2013
|
Cash flows -
operating activities:
|
|
|
|
|
|
Net income
|
$
|
2,672
|
|
$
|
452
|
Adjustments to reconcile net
income to net cash (used in)/provided
by operating
activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
317
|
|
|
286
|
Change in value of derivative liability
|
|
180
|
|
|
2,167
|
Amortization of convertible note discount
|
|
283
|
|
|
283
|
Imputed interest on vendor advance
|
|
(103)
|
|
|
(161)
|
Loss on sale of marketable securities
|
|
-
|
|
|
31
|
Amortization of supply agreement
|
|
160
|
|
|
160
|
Deferred income taxes
|
|
(173)
|
|
|
(942)
|
Foreign exchange loss and other
|
|
2
|
|
|
10
|
Stock-based compensation
|
|
373
|
|
|
-
|
Changes in:
|
|
|
|
|
|
Trade accounts receivable
|
|
(39,954)
|
|
|
(4,900)
|
Inventories
|
|
15,421
|
|
|
25,879
|
Other current assets
|
|
448
|
|
|
(6,270)
|
Trade accounts payable
|
|
(10,742)
|
|
|
(8,562)
|
Income taxes payable
|
|
1,708
|
|
|
1,212
|
Accrued expenses and derivative liabilities
|
|
3,260
|
|
|
(1,746)
|
Net cash (used in)/provided by operating
activities
|
|
(26,148)
|
|
|
7,899
|
Cash flows -
investing activities:
|
|
|
|
|
|
Repayment related to supply agreement
|
|
1,667
|
|
|
1,667
|
Net proceeds from sale of marketable securities
|
|
-
|
|
|
6
|
Purchases of property and equipment
|
|
(16)
|
|
|
(4)
|
Net cash provided by investing activities
|
|
1,651
|
|
|
1,669
|
Cash flows -
financing activities:
|
|
|
|
|
|
Proceeds from/(repayments)
of notes payable – banks
|
|
26,255
|
|
|
(10,169)
|
Repayments - mortgage
payable
|
|
(90)
|
|
|
(84)
|
Deferred Financing
Costs
|
|
(965)
|
|
|
-
|
Dividends
paid
|
|
(431)
|
|
|
(215)
|
Proceeds from stock options
exercised
|
|
15
|
|
|
-
|
Treasury stock
purchased
|
|
(13)
|
|
|
(21)
|
Net cash provided by/(used in) financing activities
|
|
24,771
|
|
|
(10,489)
|
Net
increase/(decrease) in cash
|
|
274
|
|
|
(921)
|
Effect of
exchange rate
|
|
(2)
|
|
|
(3)
|
Cash at beginning of
period
|
|
2,477
|
|
|
3,136
|
Cash at end of the
period
|
$
|
2,749
|
|
$
|
2,212
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
Cash paid during the period
for:
|
|
|
|
|
|
Interest
|
$
|
2,502
|
|
$
|
2,137
|
Income taxes
|
$
|
1,404
|
|
$
|
1,825
|
Non cash financing
activities:
|
|
|
|
|
|
Dividend declared but
not yet paid
|
$
|
217
|
|
$
|
215
|
See notes to
unaudited condensed consolidated financial statements
|
SOURCE Empire Resources, Inc.