FORT LEE, N.J., May 15, 2015 /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 2015 were $168.3
million, an increase of 22% from both the first quarter of
2014 and the fourth quarter of 2014. The increase in sales was
driven by strong growth in all global regions, with the exception
of a reduction in sales in Latin
America, due to weak local economic
conditions.
Gross profit for the first quarter of 2015 increased 11% from
the first quarter of 2014 to $7.2
million, or 4.3% of sales, compared with $6.5 million, or 4.7% of sales, in the first
quarter of 2014. Gross profit increased 30% from $5.5 million, or 4.0% of sales, in the fourth
quarter of 2014.
Operating income for the first quarter of 2015 was $3.3 million, an increase of 3% from the first
quarter of 2014 and 42% higher than the fourth quarter of
2014.
Net interest expense for the first quarter of 2015 increased by
$0.6 million to $1.7 million from $1.1
million in both the first and fourth quarters of 2014. This
resulted from increased bank loans primarily to support higher
inventory levels and higher accounts receivable. Inventories which
were $117.6 million at the end of the
first quarter of 2014, increased to $192.1
million as of December 31,
2014 and have been reduced to $186.8
million by March 31, 2015.
The Company recognized a non-cash non-operating gain of
$1.0 million in the first quarter of
2015 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 first quarter of 2014, and a
non-cash non-operating gain of $1.1
million in the fourth quarter of 2014.
Fair value accounting requires that changes in derivative
liabilities related to the Company's convertible notes be charged
or credited to income during each accounting period. The changes in
valuation have several drivers, primary among them is the change in
the Company's stock price, with increases in the stock price
increasing the value of the derivative liability, causing losses,
while decreases in the stock price reduce the value of the
derivative liability, producing gains. Such losses are not tax
deductible, and likewise any recoveries of such losses are not
taxable upon recovery. Accordingly, no tax effect was given
to the non-cash non-operating gain of $1.0
million in the first quarter of 2015, the non-cash
non-operating loss of $0.4 million in
the first quarter of 2014, or the non-cash non-operating gain of
$1.1 million in the fourth quarter of
2014. The resultant effective tax rates were 36% for the first
quarter of 2015, 51% for the first quarter of 2014, and 15% for the
fourth quarter of 2014.
Non-GAAP net income for the first quarter of 2015, excluding the
effect of the change in fair market valuation of the derivative
liability and the associated tax treatment, was $1.0 million, or $0.08 per diluted share, compared with
$1.3 million, or $0.15 per diluted share in the first quarter of
2014, and $0.7 million, or
$0.06 per diluted share, in the
fourth quarter of 2014.
On a GAAP basis, the Company reported net income for the first
quarter of 2015 of $1.7 million, or
$0.09 per diluted share, compared
with net income of $0.8 million, or
$0.09 per diluted share, in the first
quarter of 2014, and $2.0 million, or
$0.09 per diluted share, in the
fourth quarter of 2014.
The Company uses the non-GAAP measures internally, which exclude
the effect of the non-cash non-operating gains and losses due to
the quarterly changes in the valuation of the derivative liability,
to evaluate its operating performance and believes that this is a
useful measure also used by investors.
Nathan Kahn, President and CEO,
commented, "High global demand for our products, especially
aluminum, drove our continued and strong sales growth in the first
quarter. This growth was achieved despite our decision to take a
conservative stance in Latin
America, given the economic stresses in the region,
especially in Brazil. We are taking proactive measures to
strengthen our profitability, with an emphasis on returning
inventories to more normal levels, while still supporting backlog
and demand. Our sequential progress in the first quarter was a step
forward in this effort."
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 Statements of Income (In thousands
except per share amounts)
|
|
Three Months Ended
March 31,
|
|
|
2015
|
|
2014
|
|
|
Unaudited
|
|
Unaudited
|
|
|
|
|
See Note
20
|
Net sales
|
$
|
168,253
|
|
$
|
138,317
|
Cost of goods
sold
|
|
161,077
|
|
|
131,830
|
Gross
profit
|
|
7,176
|
|
|
6,487
|
Selling, general and
administrative expenses
|
|
3,898
|
|
|
3,299
|
Operating
income
|
|
3,278
|
|
|
3,188
|
Interest
expense, net
|
|
1,675
|
|
|
1,091
|
Income before other
expenses
|
|
1,603
|
|
|
2,097
|
Other
expenses
|
|
|
|
|
|
Change
in value of derivative liability
|
|
996
|
|
|
(429)
|
Income before income
taxes
|
|
2,599
|
|
|
1,668
|
Income
taxes
|
|
944
|
|
|
860
|
Net
income
|
$
|
1,655
|
|
$
|
808
|
Weighted average
shares outstanding:
|
|
|
|
|
|
Basic
|
|
8,807
|
|
|
8,629
|
Diluted
|
|
11,924
|
|
|
8,886
|
Earnings per
share:
|
|
|
|
|
|
Basic
|
|
$0.19
|
|
|
$0.09
|
Diluted
|
|
$0.09
|
|
|
$0.09
|
See notes to
unaudited condensed consolidated financial statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Consolidated Statements of Income
(In thousands except per share amounts)
|
|
Three Months Ended
March 31,
|
|
|
2015
|
|
2014
|
|
|
Unaudited
|
|
Unaudited
|
GAAP income before
income taxes
|
|
2,599
|
|
|
1,668
|
Elimination of the
change in value of
derivative liability
|
|
(996)
|
|
|
429
|
Non-GAAP net income
before taxation
|
|
1,603
|
|
|
2,097
|
Income
taxes
|
|
625
|
|
|
807
|
Non-GAAP net
income
|
$
|
978
|
|
$
|
1,290
|
Weighted average
shares outstanding:
|
|
|
|
|
|
Basic
|
|
8,807
|
|
|
8,629
|
Diluted
|
|
11,924
|
|
|
8,886
|
Non-GAAP earnings
per share:
|
|
|
|
|
|
Basic
|
|
$0.11
|
|
|
$0.15
|
Diluted
|
|
$0.08
|
|
|
$0.15
|
Condensed
Consolidated Balance Sheets
(In thousands except share and per share
amounts)
|
|
March 31,
2015
Unaudited
|
|
December 31,
2014
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
|
$
|
4,652
|
|
$
|
1,130
|
Trade accounts receivable
(less allowance for doubtful
accounts of $536 and
$562)
|
|
108,094
|
|
|
89,693
|
Inventories
|
|
186,753
|
|
|
192,064
|
Deferred tax
assets
|
|
3,901
|
|
|
3,911
|
Advance to supplier, net of
imputed interest of $31 and $66
|
|
2,469
|
|
|
3,277
|
Other current assets,
including derivatives
|
|
13,640
|
|
|
18,605
|
Total current assets
|
|
319,509
|
|
|
308,680
|
Preferential supply
agreement, net
|
|
240
|
|
|
321
|
Long-term financing costs,
net of amortization
|
|
915
|
|
|
1,024
|
Property and equipment,
net
|
|
4,335
|
|
|
4,258
|
Total
assets
|
$
|
324,999
|
|
$
|
314,283
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Notes payable -
banks
|
$
|
222,331
|
|
$
|
201,088
|
Trade accounts
payable
|
|
31,389
|
|
|
42,626
|
Income taxes
payable
|
|
4,898
|
|
|
4,190
|
Accrued expenses and
derivative liabilities
|
|
4,859
|
|
|
4,137
|
Dividends payable
|
|
218
|
|
|
449
|
Total current liabilities
|
|
263,695
|
|
|
252,490
|
|
|
|
|
|
|
Subordinated
convertible debt net of unamortized discount
of $605 and $803 respectively
|
|
10,395
|
|
|
10,197
|
Derivative liability
for embedded conversion option
|
|
1,738
|
|
|
2,734
|
Deferred taxes
payable
|
|
49
|
|
|
51
|
Total liabilities
|
|
275,877
|
|
|
265,472
|
|
|
|
|
|
|
Commitments (Note
19)
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
Common stock $0.01 par
value, 20,000,000 shares authorized
and 11,749,651 shares
issued
at March 31, 2015 and
December 31, 2014
|
|
117
|
|
|
117
|
Additional paid-in
capital
|
|
13,678
|
|
|
13,678
|
Retained earnings
|
|
42,242
|
|
|
40,805
|
Accumulated other
comprehensive loss
|
|
(719)
|
|
|
(334)
|
Treasury stock, 3,007,528
and 2,843,717 shares
at March 31, 2015 and
December 31, 2014, respectively
|
|
(6,196)
|
|
|
(5,455)
|
Total stockholders' equity
|
|
49,122
|
|
|
48,811
|
Total liabilities and
stockholders' equity
|
$
|
324,999
|
|
$
|
314,283
|
See notes to
unaudited condensed consolidated financial statements
|
Condensed
Consolidated Statements of Cash Flows (In
thousands)
|
|
Three Months Ended
March 31,
|
|
2015
|
|
2014
|
|
Unaudited
|
|
Unaudited
|
Cash flows -
operating activities:
|
|
|
|
|
|
Net income
|
$
|
1,655
|
|
$
|
808
|
Adjustments to reconcile net
income to net cash used in operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
162
|
|
|
275
|
Change in value of derivative liability
|
|
(996)
|
|
|
429
|
Amortization of convertible note discount
|
|
197
|
|
|
141
|
Imputed interest on vendor advance
|
|
(26)
|
|
|
(55)
|
Amortization of supply agreement
|
|
80
|
|
|
80
|
Deferred income taxes
|
|
9
|
|
|
2
|
Foreign exchange loss/(gain) and other
|
|
460
|
|
|
(2)
|
Stock-based compensation
|
|
-
|
|
|
373
|
Changes in:
|
|
|
|
|
|
Trade accounts receivable
|
|
(19,269)
|
|
|
(25,743)
|
Inventories
|
|
4,409
|
|
|
22,124
|
Other current assets
|
|
4,959
|
|
|
769
|
Trade accounts payable
|
|
(11,217)
|
|
|
(13,776)
|
Income taxes payable
|
|
716
|
|
|
838
|
Accrued expenses and derivative liabilities
|
|
804
|
|
|
2,584
|
Net cash used in operating activities
|
|
(18,057)
|
|
|
(11,153)
|
Cash flows -
investing activities:
|
|
|
|
|
|
Repayment related to supply agreement
|
|
833
|
|
|
833
|
Purchases of property and equipment
|
|
(116)
|
|
|
(11)
|
Net cash provided by investing activities
|
|
717
|
|
|
822
|
Cash flows -
financing activities:
|
|
|
|
|
|
Proceeds from notes payable
– banks
|
|
22,163
|
|
|
9,833
|
Repayments - mortgage
payable
|
|
-
|
|
|
(44)
|
Deferred financing
costs
|
|
(13)
|
|
|
-
|
Dividends
paid
|
|
(449)
|
|
|
(215)
|
Treasury stock
purchased
|
|
(741)
|
|
|
(13)
|
Net cash provided by financing activities
|
|
20,960
|
|
|
9,561
|
Net
increase/(decrease) in cash
|
|
3,620
|
|
|
(770)
|
Effect of
exchange rate
|
|
(98)
|
|
|
1
|
Cash at beginning of
period
|
|
1,130
|
|
|
2,477
|
Cash at end of the
period
|
$
|
4,652
|
|
$
|
1,708
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
Cash paid during the period
for:
|
|
|
|
|
|
Interest
|
$
|
1,310
|
|
$
|
1,509
|
Income taxes
|
$
|
614
|
|
$
|
241
|
Non cash financing
activities:
|
|
|
|
|
|
Dividend declared but
not yet paid
|
$
|
218
|
|
$
|
217
|
See notes to
unaudited condensed consolidated financial statements
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/empire-resources-reports-solid-results-for-first-quarter-of-2015-300083927.html
SOURCE Empire Resources, Inc.