FORT LEE, N.J., Nov. 16, 2015 /PRNewswire/ -- Empire
Resources, Inc. (NASDAQ: ERS), a distributor of value added,
semi-finished metal products, announced today that net sales for
the third quarter of 2015 were $122.0
million, compared with $159.4
million in the third quarter of 2014, and $134.5 million in the second quarter of 2015.
Compared with the 2015 second quarter, strong sales growth in
Europe and solid recovery in
Australia were offset by
substantially lower sales in Latin America. In the U.S.,
stronger sales of aluminum products were offset by lower sales of
steel products, in line with challenging steel industry
conditions.
Gross profit for the third quarter of 2015 was $5.3 million, or 4.4% of sales, compared with
$7.5 million, or 4.7% of sales, in
the third quarter of 2014, and $5.7
million, or 4.2% of sales, in the second quarter of
2015. Gross profit has been negatively impacted by a lower
sales level as well as increased competitive pressures across all
regions. The sequential improvement in the gross margin as a
percentage of sales was due to the reduction of lower-margin carbon
steel sales in Latin America.
Operating income for the third quarter of 2015 was $2.3 million, compared with $3.7 million for the third quarter of 2014 and
$2.0 million for the second quarter
of 2015. The improvement from the second quarter of 2015 was
primarily due to lower SG&A as a result of lower sales
commissions, travel expenses, and lower repairs and maintenance on
our Baltimore warehouse during the
third quarter of 2015.
Net interest expense for the third quarter of 2015 was
$1.4 million compared with
$1.0 million in the third quarter of
2014 and $1.6 million in the second
quarter of 2015. The reduction in interest expense from the
2015 second quarter reflected the Company's further progress in
reducing inventory levels, which totaled $153.5 million at September 30, 2015 compared with $192.1 million at December
31, 2014.
The Company recognized a non-cash non-operating loss of
$0.2 million in the third 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 $2.1 million in the third quarter of 2014 and a
non-cash non-operating gain of $0.4
million in the second quarter of 2015.
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
causing losses, increasing the value of the derivative liability,
while decreases in the stock price produce gains, reducing the
value of the derivative liability. Such losses are not tax
deductible, and likewise any recoveries of such losses are not
taxable upon recovery.
Non-GAAP net income for the third quarter of 2015, excluding the
effect of the change in fair market valuation of the derivative
liability and the associated tax treatment, was $0.5 million, or $0.06 per diluted share, compared with
$1.5 million, or $0.16 per diluted share, in the third quarter of
2014, and $0.3 million, or
$0.02 per diluted share, in the
second quarter of 2015.
On a GAAP basis, the Company reported net income for the third
quarter of 2015 of $0.3 million, or
$0.04 per diluted share, compared
with a net loss of $0.7 million, or
$(0.08) per diluted share, in the
third quarter of 2014, and net income of $0.8 million, or $0.06 per diluted share for the second quarter of
2015.
For the first nine months of 2015, net sales were $424.7 million and net income was $2.8 million, or $0.22 per diluted share, on a GAAP basis, and
$1.8 million, or $0.15 per diluted share, on a non-GAAP
basis. For the first nine months of 2014, net sales were
$444.2 million and net income was
$1.8 million, or $0.20 per diluted share, on a GAAP basis, and
$4.3 million, or $0.48 per diluted share, on a non-GAAP basis.
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, "Global markets remained challenging in the third
quarter. Even so, we improved sales in Europe, as well as maintaining a solid sales
performance in Australia, and
continued strong sales of our aluminum products in the U.S.
We are continuing to focus on our customers' needs, especially for
just-in-time delivery. To better serve those needs today and in the
future, we recently acquired and are moving to a substantially
larger and more modern distribution facility in Baltimore."
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)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
2015
2014
|
|
Nine Months Ended
September 30,
2015
2014
|
Net sales
|
$
|
121,950
|
|
$
|
159,366
|
|
$
|
424,689
|
|
$
|
444,199
|
Cost of goods
sold
|
|
116,603
|
|
|
151,897
|
|
|
406,488
|
|
|
423,228
|
Gross
profit
|
|
5,347
|
|
|
7,469
|
|
|
18,201
|
|
|
20,971
|
Selling, general and
administrative expenses
|
|
3,094
|
|
|
3,819
|
|
|
10,632
|
|
|
10,600
|
Operating
income
|
|
2,253
|
|
|
3,650
|
|
|
7,569
|
|
|
10,371
|
Interest
expense, net
|
|
1,419
|
|
|
1,041
|
|
|
4,665
|
|
|
3,223
|
Income before other
expenses
|
|
834
|
|
|
2,609
|
|
|
2,904
|
|
|
7,148
|
Other
expenses
|
|
|
|
|
|
|
|
|
|
|
|
Change
in value of derivative liability
|
|
(224)
|
|
|
(2,059)
|
|
|
1,184
|
|
|
(2,239)
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
related to extinguishment of debt
converted into common
stock
|
|
-
|
|
|
(164)
|
|
|
-
|
|
|
(164)
|
Income before income
taxes
|
|
610
|
|
|
386
|
|
|
4,088
|
|
|
4,745
|
Income
taxes
|
|
295
|
|
|
1,080
|
|
|
1,314
|
|
|
2,985
|
Net income
(loss)
|
$
|
315
|
|
$
|
(694)
|
|
$
|
2,774
|
|
$
|
1,760
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
8,870
|
|
|
8,814
|
|
|
8,709
|
|
|
8,705
|
Diluted
|
|
8,898
|
|
|
8,814
|
|
|
11,736
|
|
|
8,964
|
Earnings
(loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$0.04
|
|
|
($0.08)
|
|
|
$0.32
|
|
|
$0.20
|
Diluted
|
|
$0.04
|
|
|
($0.08)
|
|
|
$0.22
|
|
|
$0.20
|
See notes to
unaudited condensed consolidated financial statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Consolidated Statements of Income
(In thousands except per share amounts)
|
|
Three Months Ended
September 30,
2015
2014
|
|
Nine Months Ended
September 30,
2015 2014
|
GAAP income before
income taxes
|
|
610
|
|
|
386
|
|
|
4,088
|
|
|
4,745
|
Elimination of the
change in value of
derivative liability
|
|
224
|
|
|
2,059
|
|
|
(1,184)
|
|
|
2,239
|
Non-GAAP net income
before taxation
|
|
834
|
|
|
2,445
|
|
|
2,904
|
|
|
6,984
|
Income
taxes
|
|
325
|
|
|
954
|
|
|
1,133
|
|
|
2,724
|
Non-GAAP net
income
|
$
|
509
|
|
$
|
1,491
|
|
$
|
1,771
|
|
$
|
4,260
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
8,870
|
|
|
8,814
|
|
|
8,709
|
|
|
8,705
|
Diluted
|
|
8,898
|
|
|
9,080
|
|
|
11,736
|
|
|
8,964
|
Non-GAAP earnings
per share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$0.06
|
|
|
$0.17
|
|
|
$0.20
|
|
|
$0.49
|
Diluted
|
|
$0.06
|
|
|
$0.16
|
|
|
$0.15
|
|
|
$0.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets (In thousands except share
and per share amounts)
|
|
September 30,
2015
Unaudited
|
|
December 31,
2014
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
|
$
|
5,536
|
|
$
|
1,130
|
Trade accounts receivable
(less allowance for doubtful
accounts of $356
and $562)
|
|
76,248
|
|
|
89,693
|
Inventories
|
|
153,507
|
|
|
192,064
|
Deferred tax
assets
|
|
3,834
|
|
|
3,911
|
Advance to supplier, net of
imputed interest of $3 and $66
|
|
831
|
|
|
3,277
|
Other current assets,
including derivatives
|
|
13,232
|
|
|
18,605
|
Total current assets
|
|
253,188
|
|
|
308,680
|
Preferential supply
agreement, net
|
|
80
|
|
|
321
|
Long-term financing costs,
net of amortization
|
|
817
|
|
|
1,024
|
Property and equipment,
net
|
|
4,372
|
|
|
4,258
|
Total
assets
|
$
|
258,457
|
|
$
|
314,283
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Notes payable -
banks
|
$
|
166,471
|
|
$
|
201,088
|
Subordinated convertible
debt net of unamortized discount of $346
|
|
10,654
|
|
|
-
|
Trade accounts
payable
|
|
22,928
|
|
|
42,626
|
Income taxes
payable
|
|
1,209
|
|
|
4,190
|
Accrued expenses and
derivative liabilities
|
|
6,737
|
|
|
4,137
|
Dividends payable
|
|
217
|
|
|
449
|
Total current liabilities
|
|
208,216
|
|
|
252,490
|
|
|
|
|
|
|
Subordinated
convertible debt net of unamortized discount of
$803
|
|
-
|
|
|
10,197
|
Derivative liability
for embedded conversion option
|
|
1,550
|
|
|
2,734
|
Deferred taxes
payable
|
|
47
|
|
|
51
|
Total liabilities
|
|
209,813
|
|
|
265,472
|
|
|
|
|
|
|
Commitments (Note
18)
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
Common stock $0.01 par
value, 20,000,000 shares authorized
and 11,749,651 shares
issued
at September 30, 2015
and December 31, 2014
|
|
117
|
|
|
117
|
Additional paid-in
capital
|
|
13,038
|
|
|
13,678
|
Retained earnings
|
|
42,927
|
|
|
40,805
|
Accumulated other
comprehensive loss
|
|
(576)
|
|
|
(334)
|
Treasury stock, 3,173,843
and 2,843,717 shares
at September 30, 2015
and December 31, 2014, respectively
|
|
(6,862)
|
|
|
(5,455)
|
Total stockholders' equity
|
|
48,644
|
|
|
48,811
|
Total liabilities and
stockholders' equity
|
$
|
258,457
|
|
$
|
314,283
|
See notes to
unaudited condensed consolidated financial statements
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows (In
thousands)
|
(Unaudited)
|
Nine Months Ended
September 30,
2015
2014
|
Cash flows -
operating activities:
|
|
|
|
|
|
Net income
|
$
|
2,774
|
|
$
|
1,760
|
Adjustments to reconcile net
income to net cash provided by/(used in) operating
activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
487
|
|
|
482
|
Change in value of derivative liability
|
|
(1,184)
|
|
|
2,239
|
Amortization of convertible note discount
|
|
457
|
|
|
419
|
Imputed interest on vendor advance
|
|
(53)
|
|
|
(144)
|
Loss related to extinguishment of debt converted into common
stock
|
|
-
|
|
|
164
|
Reduction in allowance for doubtful accounts
|
|
(188)
|
|
|
-
|
Amortization of supply agreement
|
|
240
|
|
|
240
|
Deferred income taxes
|
|
73
|
|
|
271
|
Foreign exchange loss and other
|
|
437
|
|
|
296
|
Stock-based compensation
|
|
-
|
|
|
630
|
Changes in:
|
|
-
|
|
|
-
|
Trade accounts receivable
|
|
13,043
|
|
|
(45,330)
|
Inventories
|
|
37,828
|
|
|
18,947
|
Other current assets
|
|
5,353
|
|
|
27
|
Trade accounts payable
|
|
(19,689)
|
|
|
(10,751)
|
Income taxes payable
|
|
(2,973)
|
|
|
995
|
Accrued expenses and derivative liabilities
|
|
2,649
|
|
|
5,708
|
Net cash provided by/(used in) operating
activities
|
|
39,254
|
|
|
(24,047)
|
Cash flows -
investing activities:
|
|
|
|
|
|
Repayment related to supply agreement
|
|
2,500
|
|
|
2,500
|
Purchases of property and equipment
|
|
(237)
|
|
|
(19)
|
Net cash provided by investing activities
|
|
2,263
|
|
|
2,481
|
Cash flows -
financing activities:
|
|
|
|
|
|
(Repayment of)/proceeds from
notes payable – banks
|
|
(33,978)
|
|
|
25,602
|
Repayments - mortgage
payable
|
|
-
|
|
|
(136)
|
Deferred financing
costs
|
|
(158)
|
|
|
(1,005)
|
Dividends
paid
|
|
(884)
|
|
|
(648)
|
Treasury stock
purchased
|
|
(1,407)
|
|
|
(13)
|
Purchase of stock
options
|
|
(922)
|
|
|
-
|
Proceeds from stock options
exercised
|
|
-
|
|
|
15
|
Excess tax benefit related
to purchase of stock options
|
|
282
|
|
|
-
|
Net cash (used in)/provided by financing activities
|
|
(37,067)
|
|
|
23,815
|
Net increase in
cash
|
|
4,450
|
|
|
2,249
|
Effect of
exchange rate
|
|
(44)
|
|
|
(63)
|
Cash at beginning of
period
|
|
1,130
|
|
|
2,477
|
Cash at end of the
period
|
$
|
5,536
|
|
$
|
4,663
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
Cash paid during the period
for:
|
|
|
|
|
|
Interest
|
$
|
4,024
|
|
$
|
3,476
|
Income taxes
|
$
|
2,480
|
|
$
|
2,737
|
Non cash financing
activities:
|
|
|
|
|
|
Dividend declared but
not yet paid
|
$
|
217
|
|
$
|
224
|
Treasury stock
issued on conversion of subordinated debt
|
|
|
|
|
1,507
|
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-results-for-third-quarter-of-2015-300179055.html
SOURCE Empire Resources, Inc.