UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
_________________
Date of Report (Date of earliest event reported):
May 15, 2015
EMPIRE RESOURCES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware |
|
001-12127 |
|
22-3136782 |
(State or other jurisdiction
of incorporation) |
|
(Commission File Number) |
|
(IRS Employer
Identification No.) |
|
|
|
One Parker
Plaza
Fort Lee, New Jersey |
|
07024 |
(Address of principal executive offices) |
|
(Zip Code) |
Registrant’s telephone number, including
area code: (201) 944-2200
(Former name or former address, if changed since last report) |
Check the appropriate box below if the Form
8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4
(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02 | Results of Operations and Financial Condition. |
On
May 15, 2015, Empire Resources, Inc. issued a press release announcing its financial results for the quarter ended March 31, 2015.
A copy of this press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
In accordance with General Instruction B.2
of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, that is furnished pursuant to this Item
2.02 shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference
into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except
as shall be expressly set forth by specific reference in such filing.
| Item 9.01 | Financial Statements and Exhibits. |
Exhibit Number |
|
Description |
*99.1 |
|
Earnings release dated May 15, 2015 |
* This exhibit is furnished pursuant to
Item 2.02 and shall not be deemed to be “filed.”
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
hereunto duly authorized.
|
EMPIRE RESOURCES, INC. |
|
|
|
Dated: May 19, 2015 |
By: |
/s/
Sandra Kahn |
|
|
Name: Sandra Kahn |
|
|
Title: Chief Financial Officer |
Exhibit 99.1
![](image_001.jpg)
EMPIRE RESOURCES, INC.
Empire Resources Reports Solid Results
For First Quarter of 2015
| · | Net Sales of $168.3 Million Are Up 22% from First Quarter of 2014
and Fourth Quarter of 2014 |
| · | Operating Income Increases 3% from First Quarter of 2014 and 42%
Sequentially to $3.3 Million |
| · | For First Quarter of 2015, GAAP Net Income per Diluted Share Is
$0.09; Non-GAAP Net Income per Diluted Share Is $0.08 |
Fort Lee, NJ, May 15, 2015 -- 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
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