UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) |
|
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
|
For the quarterly period ended: September 30, 2015 |
|
|
OR |
|
|
¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-12127
EMPIRE RESOURCES, INC.
(Exact name of registrant as specified in its
charter)
Delaware |
|
22-3136782 |
(State or other jurisdiction of |
|
(I.R.S. Employer |
incorporation or organization) |
|
Identification No.) |
2115 Linwood Avenue
Fort Lee, New Jersey 07024
(Address of principal executive offices)
(Zip Code)
(201) 944-2200
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of
“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
Large accelerated filer ¨ |
|
Accelerated filer ¨ |
|
|
|
Non-accelerated filer ¨ |
|
Smaller reporting company x |
|
|
|
(Do not check if a smaller reporting company) |
|
|
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The number of shares of the registrant’s common stock, $0.01
par value, outstanding as of November 10, 2015: 8,551,634
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. |
Financial Statements |
EMPIRE RESOURCES, INC. AND SUBSIDIARIES
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
EMPIRE RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands except per share amounts)
(Unaudited)
| |
Three Months Ended September 30, | | |
Nine Months Ended September 30, | |
| |
2015 | | |
2014 | | |
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
EMPIRE RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
(Unaudited)
| |
Three Months Ended September 30, | | |
Nine Months Ended September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Net income (loss) | |
$ | 315 | | |
$ | (694 | ) | |
$ | 2,774 | | |
$ | 1,760 | |
Other comprehensive income/(loss) before tax | |
| | | |
| | | |
| | | |
| | |
Foreign currency translation adjustments | |
| 13 | | |
| (278 | ) | |
| (242 | ) | |
| (292 | ) |
Decrease in value of interest rate swap liability | |
| - | | |
| 13 | | |
| | | |
| 39 | |
Other comprehensive income (loss) before tax | |
| 13 | | |
| (265 | ) | |
| (242 | ) | |
| (253 | ) |
Income tax related to components of other comprehensive income | |
| - | | |
| (5 | ) | |
| - | | |
| (15 | ) |
Other comprehensive income (loss), net of tax | |
| 13 | | |
| (270 | ) | |
| (242 | ) | |
| (268 | ) |
Comprehensive income (loss) | |
$ | 328 | | |
$ | (964 | ) | |
$ | 2,532 | | |
$ | 1,492 | |
See notes to unaudited condensed consolidated financial statements
EMPIRE RESOURCES, INC. AND SUBSIDIARIES
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
EMPIRE RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Stockholders’ Equity(Unaudited)
(In thousands, except per share amounts)
| |
Common
Stock Number of
Shares | | |
Common Stock Amount | | |
Additional Paid-in
Capital | | |
Retained Earnings | | |
Accumulated Other Comprehensive Income/(Loss) | | |
Treasury Stock | | |
Total Stockholders' Equity | |
Balance at December 31, 2014 | |
| 11,750 | | |
$ | 117 | | |
$ | 13,678 | | |
$ | 40,805 | | |
$ | (334 | ) | |
$ | (5,455 | ) | |
$ | 48,811 | |
Treasury stock acquired | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (1,407 | ) | |
| (1,407 | ) |
Stock options purchased | |
| | | |
| | | |
| (922 | ) | |
| | | |
| | | |
| | | |
| (922 | ) |
Excess tax benefit related to purchase of stock options | |
| | | |
| | | |
| 282 | | |
| | | |
| | | |
| | | |
| 282 | |
Net change in cumulative translation adjustment | |
| | | |
| | | |
| | | |
| | | |
| (242 | ) | |
| | | |
| (242 | ) |
Dividends declared ($0.075 per share) | |
| | | |
| | | |
| | | |
| (652 | ) | |
| | | |
| | | |
| (652 | ) |
Net income | |
| | | |
| | | |
| | | |
| 2,774 | | |
| | | |
| | | |
| 2,774 | |
Balance at September 30, 2015 | |
| 11,750 | | |
$ | 117 | | |
$ | 13,038 | | |
$ | 42,927 | | |
$ | (576 | ) | |
$ | (6,862 | ) | |
$ | 48,644 | |
See notes to unaudited condensed consolidated financial statements
Empire Resources, Inc. and Subsidiaries.
Notes to Condensed Consolidated Financial
Statements Unaudited
(In thousands, except for per share amounts)
1. The Company
The condensed consolidated financial statements
include the accounts of Empire Resources, Inc. (the “Company”) and its wholly-owned subsidiaries, Empire Resources
Pacific Ltd., the Company’s sales agent in Australia, 6900 Quad Avenue LLC, the owner of a warehouse facility in Baltimore,
Maryland, Imbali Metals BVBA (“Imbali”), the Company’s operating subsidiary in Europe, Empire Resources (UK)
Ltd., the Company’s operating subsidiary in the UK, which was organized in February 2015, and Empire Resources de Mexico,
the Company’s operating subsidiary in Mexico. All significant inter-company transactions and accounts have been eliminated
on consolidation. The Company purchases and sells semi-finished aluminum and steel products to a diverse customer base
located in the Americas, Australia, Europe and New Zealand.
2. Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards
Board (“FASB”) issued new accounting guidance, Accounting Standards Update ("ASU") No. 2014-09, Revenue
from Contracts with Customers, on revenue recognition. The new standard provides for a single five-step model to be applied to
all revenue contracts with customers as well as requires additional financial statement disclosures that will enable users to understand
the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. Companies have an option to
use either a retrospective approach or cumulative effect adjustment approach to implement the standard. There is no option for
early adoption. For public entities, this ASU is effective for fiscal years and interim periods within those years beginning after
December 15, 2016. In August 2015 the FASB extended the deadline of ASU 2014-09 by a year. The Company is currently evaluating
the impact of the new guidance on its consolidated financial statements.
In April 2015, the FASB issued accounting guidance,
Accounting Standards Update (“ASU”) No. 2015-03, Simplifying the Presentation of Debt Issuance Costs. The guidance
requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction
from the carrying amount of the related debt liability, consistent with the presentation of debt discounts. The guidance will be
effective for fiscal years beginning after December 15, 2015. The Company does not believe that the new standard will have a material
impact on its consolidated financial statements.
ln July 2015, the FASB issued accounting Standards
Update 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory ("ASU 2015-11") which changes the measurement
principle for inventory from the lower of cost or market to the lower of cost and net realizable value. ASU 2015-11 defines net
realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion,
disposal, and transportation. The new guidance must be applied on a prospective basis and is effective for periods beginning after
December 15, 2016, with early adoption permitted. The Company is currently evaluating the effect that the new guidance will have
on its financial statements and related disclosures.
3. Interim Financial Statements
The condensed consolidated interim financial
statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”)
for interim reporting. The information and note disclosures normally included in complete financial statements prepared in accordance
with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted pursuant
to such rules and regulations. The interim financial statements should be read in conjunction with the Company’s Annual Report
on Form 10-K for the year ended December 31, 2014.
The Company’s management is responsible
for interim financial information. In the opinion of management, the accompanying unaudited condensed consolidated financial statements
contain all adjustments, which are of a normal and recurring nature, necessary to present fairly the Company’s financial
position as of September 30, 2015 and the results of its operations and cash flows for the three and nine months ended September
30, 2015 and 2014. Interim results may not be indicative of the results that may be expected for the year.
4. Use of Estimates
The preparation of financial statements in
accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income
and expenses during the reporting period. Actual results could differ from these estimates.
5. Concentrations
During the nine month period ended September
30, 2015 one customer, Ryerson, Inc., accounted for 10.6% the Company’s consolidated sales. During the period ended September
30, 2014 no one customer accounted for 10% of the Company’s consolidated sales.
The Company purchases metal products from a
limited number of suppliers throughout the world. Two suppliers, PT Alumindo Light Metal Industry Tbk (“PT. Alumindo”)
and Southeast Aluminum accounted for an aggregate of 44% of total purchases during the nine month period ended September 30, 2015.
For the period ended September 30, 2014, two suppliers, PT Alumindo and Hulamin Ltd. accounted for an aggregate of 39% of total
purchases.
The loss of any one of the Company’s
largest suppliers or a material default by any such supplier in its obligations to the Company could have a material adverse effect
on the Company’s business.
6. Stock Options
Stock-based compensation for an award of equity
instruments, including stock options, is recognized as an expense over the vesting period based on the fair value of the award
at the grant date. On May 19 and May 20, 2015 the Company repurchased 350 fully vested employee stock options at the market value
on the date of repurchase less the exercise price. The purchase price of $922 was charged to additional paid in capital. The repurchase
resulted in a tax deduction which exceeded the cumulative compensation cost for the options recognized for financial reporting
purposes resulting in an excess tax benefit of $282 which was credit to additional paid in capital. As of September 30, 2015, there
were outstanding employee stock options to acquire 50 shares of common stock, which had vested in prior years. During the nine
month period ended September 30, 2015, the Company did not grant any stock options.
7. Treasury Stock
On July 22, 2008, the Board of Directors
authorized the Company to repurchase up to 2,000 shares of its common stock. As of September 30, 2015, the Company repurchased
a total of 1,668 shares under the repurchase program for an aggregate cost of $5,045. During the nine month periods ended September
30, 2015 and 2014, the Company repurchased 330 and 3 common shares at a cost of $1,407 and $13, respectively.
8. Inventories
Inventories, which consist of purchased semi-finished
metal products, are stated at the lower of cost or market value. Cost is determined by the specific-identification method.
Inventory is purchased for specific customer orders and the Company’s own inventory. The carrying amount of inventory
which is hedged by futures contracts designated as fair value hedges, is adjusted to fair value.
9. Notes Payable—Banks
Prior to June 19, 2014, the Company was a party
to a credit agreement with Rabobank International, for itself and as lead arranger and agent, JPMorgan Chase, for itself and as
syndication agent, and ABN AMRO, BNP Paribas, RBS Citizens, Société Générale, and Brown Brothers Harriman
which provided for a $200,000 revolving line of credit, including a commitment to issue letters of credit and a swing-line loan
sub facility, with a maturity date of June 30, 2014.
On June 19, 2014, the Company entered into
an amended and restated committed credit agreement with Rabobank International, for itself and as lead arranger and agent, BNP
Paribas, for itself and as syndication agent, and Société Générale, ABN AMRO, RB International, and
Brown Brothers Harriman as well as a new uncommitted line of credit with Rabobank International, BNP Paribas and Société
Générale. Both credit lines are secured, asset-based credit facilities. The committed credit facility provided for
amounts up to $150,000, and the uncommitted facility provided for a maximum amount of $75,000. The agreement also allowed for an
additional increase in the committed credit facility of $75,000, for a total of $300,000, subject to certain restrictions and conditions.
On December 18, 2014, these credit lines were amended and increased by $50,000 increasing the overall line of credit to $275,000.
The amended committed credit agreement increased by $35,000 to $185,000, and the uncommitted credit facility, increased by $15,000
to $90,000. There were no changes to the interest rate or to the maturity date of the committed facility, which remains June 19,
2017. Subsequent to these amendments the additional aggregate increase available under the term of these agreements is $25,000,
subject to certain restrictions and conditions. Borrowings under these lines of credit are secured by substantially all of the
Company’s assets.
Amounts borrowed bear interest at Eurodollar,
money market or base rates, at the Company’s option, plus an applicable margin. The credit agreements contains
financial and other covenants, including but not limited to, covenants requiring maintenance of minimum tangible net working capital
and compliance with leverage ratios, as well as an ownership minimum and limitations on other indebtedness, liens, distributions
or dividends, and investments and dispositions of assets. As of September 30, 2015, the Company was in compliance with
all covenants under the credit agreements.
Both credit agreements provide that amounts
under the facilities may be borrowed and repaid, and re-borrowed, subject to a borrowing base test. The committed line of credit
matures June 19, 2017. On June 11, 2015, the Company entered into a Second Amendment to the Uncommitted Credit Agreement which
amended the termination date to June 18, 2016 from June 19, 2015. As of September 30, 2015, the committed line of credit had loans
outstanding of $134,000 and the uncommitted line of credit had loans outstanding of $28,000. As of September 30, 2015
and December 31, 2014, the credit utilized amounted to $197,915 and $229,386, respectively (including approximately $35,915 and
$36,586 of outstanding letters of credit).
The Company’s wholly owned Belgian subsidiary,
Imbali, maintained a line of credit with ING Belgium S.A./N.V., (“ING”) for a EUR 8,000 (US$8,942) commitment for loans
and documentary letters of credit. On July 30, 2015, Imbali entered into an uncommitted credit agreement with Rabobank International
for EUR 12,500 (US$13,973) to replace ING and utilized EUR 4,000 (US$4,471) of borrowings under the Rabobank facility to repay
the outstanding balance due to ING. Loan advances are limited to a percentage of Imbali’s pledged accounts receivables and
inventory and bear interest at EURIBOR plus 1.9% This secured credit arrangement is unconditionally guaranteed by the Company.
As of September 30, 2015, the outstanding loan amounted to EUR 4,000 (US $4,471), as compared to EUR 6,850 (US $8,288) on December
31, 2014. As of September 30, 2015, Imbali was in compliance with all financial covenants.
10. Convertible Subordinated Debt
On June 3, 2011, the Company issued $12,000
principal amount of 10% Convertible Senior Subordinated Notes Due June 1, 2016 in a private placement to selected accredited investors. As
of September 30, 2015, the notes are convertible at the option of the holders into shares of common stock at a conversion rate
of 262.21 shares of common stock per $1 principal amount of notes (equivalent to a conversion price of $3.81 per share of common
stock), subject to dilutive adjustment for cash and stock dividends, stock splits and similar transactions, at any time before
maturity. The current conversion price reflects eighteen adjustments for dividends declared on the Company’s common
stock since the issuance of the notes. In addition, if the last reported sale price of the Company’s common stock
for 30 consecutive trading days is equal to or greater than $7.00, and a registration statement is effective covering the resale
of the shares of common stock issuable upon conversion of the notes, the Company has the right, in its sole discretion, to require
the holders to convert all or part of their notes at the then applicable conversion rate. Interest on the notes is payable
in arrears on the first day of June and December every year the notes are outstanding. The purchase agreement pursuant to which
the notes were issued contains covenants, including restrictions on the Company’s ability to incur certain indebtedness and
create certain liens. As of September 30, 2015, the Company was in compliance with all covenants. Officers and directors of the
Company and certain affiliated entities purchased $4,000 principal amount of the notes.
On August 18, 2014, a note holder converted $1,000 principal amount
of notes into 254 shares of common stock, having a fair value on such date of $1,507. The carrying value of the note converted
was $916, and the carrying value of the related embedded conversion option was $427, resulting in a loss on extinguishment of the
debt of $164 which was recorded during the three month period ended September 30, 2014.
As a result of transactions which cause adjustments
to the conversion rate, the embedded conversion option was bifurcated and recorded as a separate derivative liability at a fair
value at issuance of the notes of $2,829, with a corresponding discount recorded on the notes. The derivative liability is carried
at fair value with changes therein recorded in income. The quarterly mark to market of the derivative liability will result in
non-operating, non-cash gains or losses based on decreases or increases in the Company’s stock price, respectively, among
other factors. The non-cash discount is being amortized as additional interest expense over the term of the notes. During the three
and nine month periods ended September 30, 2015, the change in the fair value of the derivative liability resulted in a loss of
$224 and a gain of $1,184, respectively. Amortization of the discount amounted to $130 and $457 for the three and nine month periods
end September 30, 2015, respectively. During the three and nine month periods ended September 30, 2014, the change in the fair
value of the derivative liability resulted in a loss of $2,059 and $2,239, respectively, and amortization of the discount amounted
to $136 and $419, respectively.
The derivative liability was valued using a
lattice model using unobservable level 3 inputs. This technique was selected because it embodies all of the types of inputs that
the Company expects market participants would consider in determining the fair value of equity linked derivatives embedded in hybrid
debt agreements.
The following table summarizes the significant
inputs resulting from the calculations as of September 30, 2015, December 31, 2014 and issuance:
| |
September 30, 2015 | | |
December 31, 2014 | | |
June 3, 2011 | |
| |
| | |
| | |
| |
Equity value | |
$ | 32,101 | | |
$ | 41,738 | | |
$ | 36,811 | |
Volatility | |
| 60 | % | |
| 35 | % | |
| 70 | % |
Risk free return | |
| 0.33 | % | |
| 0.67 | % | |
| 1.60 | % |
Dividend yield | |
| 2.69 | % | |
| 2.15 | % | |
| 2.51 | % |
Strike price | |
$ | 3.81 | | |
$ | 3.88 | | |
$ | 4.65 | |
The majority of the proceeds from the notes
were earmarked for a long term advance in connection with a supply agreement with the Indonesian company PT. Alumindo, a leading
producer of high quality semi-finished aluminum products, and its affiliates, as described below. The Company provided a
$10,000 non-interest bearing advance to an affiliate of PT. Alumindo to enable the expansion of capacity within that group of companies’
production network. Agreements entered into in connection with this loan also provide for a long term, multi-year substantial
and preferential supply position from PT. Alumindo's premier aluminum rolling mill located in Surabaya, Indonesia.
The pre-payment advance became repayable to us beginning on January 1, 2013 in monthly installments of $278. As of November 10,
2015 the payments are up to date and current. If the Company and PT. Alumindo are unable to agree on a product price under the
supply agreement for any given quarter, the monthly re-payment obligation will increase to $556 and the outstanding balance will
accrue interest, at the one month U.S. dollar LIBOR rate plus 3.5% per annum, per month. The entire remaining balance, if any,
must be repaid on January 1, 2016. As consideration for this loan, PT. Alumindo agreed to make available a committed and significant
tonnage of production to the Company on a guaranteed and long-term basis, which should help the Company lessen the risk of an interruption
in the sources of its metal supply from PT. Alumindo’s mill in Surabaya, Indonesia, with which the Company has had substantial
experience. The supply agreement calls for increased supply and minimum tonnages.
Interest at the rate of 3.74%, based on the
interest rate chargeable in the agreement in the event the supplier does not meet its supply commitments, has been imputed on the
non-interest bearing advance and the resulting discount which amounted to $962 has been ascribed to the preferential supply agreement.
Imputed interest is recorded in income over the term of the advance by use of the interest method. The preferential supply agreement
is being amortized by the straight line method over three years starting from January 1, 2013, the date that the increased supply
agreement began. During the nine month periods ended September 30, 2015 and 2014 amortization amounted to $240.
11. Earnings per Share
Basic earnings per share are based upon weighted
average number of shares of common stock outstanding during each period. Diluted earnings per share are based upon the weighted
average number of shares of common stock outstanding during each period, plus potential dilutive shares of common stock from assumed
exercise of the outstanding stock options using the treasury stock method and assumed conversion of subordinated debt.
The following table sets forth the computation
of basic and diluted earnings/(loss) per share:
| |
Three Months Ended September 30, | | |
Nine Months Ended September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Numerator: | |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
$ | 315 | | |
$ | (694 | ) | |
$ | 2,774 | | |
$ | 1,760 | |
Add back of interest on convertible subordinated debt, net of taxes | |
| | | |
| | | |
| 510 | | |
| | |
Add back of amortization of discount on convertible subordinated debt, net of taxes | |
| | | |
| | | |
| 283 | | |
| | |
Adjustment for change in value of convertible note derivative, net of taxes | |
| | | |
| | | |
| (1,010 | ) | |
| | |
Numerator for diluted earnings (loss) per share | |
$ | 315 | | |
$ | (694 | ) | |
$ | 2,557 | | |
$ | 1,760 | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding-basic | |
| 8,870 | | |
| 8,814 | | |
| 8,709 | | |
| 8,705 | |
Dilutive effect of convertible subordinated debt | |
| | | |
| | | |
| 2,884 | | |
| | |
Dilutive effect of stock options | |
| 28 | | |
| | | |
| 143 | | |
| 259 | |
Weighted average shares outstanding-diluted | |
| 8,898 | | |
| 8,814 | | |
| 11,736 | | |
| 8,964 | |
Basic earnings (loss) per share | |
| 0.04 | | |
$ | (0.08 | ) | |
$ | 0.32 | | |
$ | 0.20 | |
Diluted earnings (loss) per share | |
$ | 0.04 | | |
$ | (0.08 | ) | |
$ | 0.22 | | |
$ | 0.20 | |
In computing earnings (loss) per share for
the three months ended September 30, 2015, and 2014 and the nine months ended September 30, 2014, no effect has been given to the
2,884, 2,804 and 2,804 common shares, respectively issuable on conversion of subordinated debt as their effect is anti-dilutive.
For the three months ended September 30, 2014, no effect has been given to the 266 common shares issuable on exercise of stock
options as their effect is anti-dilutive.
12. Dividends
On March 19, 2015, the Company announced a
cash dividend of $0.025 per share to stockholders of record at the close of business on April 3, 2015. The dividend, totaling $218,
was paid on April 13, 2015. On June 19, 2015, the Company announced a cash dividend of $0.025 per share to stockholders of record
at the close of business on July 2, 2015. The dividend, totaling $217, was paid on July 17, 2015. On September 17, 2015, the Company
announced a cash dividend of $0.025 per share to stockholders of record at the close of business on September 30, 2015. The dividend
totaling $217 was paid on October 14, 2015. The Board of Directors will review its dividend policy on a quarterly basis, and make
a determination regarding future dividends subject to the profitability and free cash flow and the other requirements of the business.
13. Derivative Financial Instruments and
Risk Management
The Company uses derivative financial instruments
designated as fair value hedges to manage its exposure to commodity price risk and foreign currency exchange risk inherent in its
operations. It is the Company’s policy to hedge such risks to the extent practicable. The Company enters into high-grade
aluminum futures contracts to limit its gross margin exposure by hedging the metal content element of firmly committed purchase
and sales commitments. The Company also enters into foreign exchange forward contracts to hedge its exposure related to commitments
to buy and sell metals as well as its accounts receivable denominated in international currencies.
The Company’s unrealized assets and liabilities
in respect of its fair value hedges measured at fair value are as follows:
Derivatives designated as fair value hedges | |
Balance Sheet Location | |
September 30, 2015 | | |
December 31, 2014 | |
| |
| |
| | |
| |
Asset derivatives: | |
| |
| | | |
| | |
Aluminum futures contracts | |
Other current assets | |
$ | 5,011 | | |
| 9,769 | |
Foreign currency forward contracts | |
Other current assets | |
| 711 | | |
| 1,337 | |
Total | |
| |
$ | 5,722 | | |
$ | 11,106 | |
For the periods ended September 30, 2015 and
September 30, 2014, hedge ineffectiveness associated with derivatives designated as fair value hedges was insignificant, and no
fair value hedges were derecognized.
The table below summarizes the realized gains
or (losses) of the Company’s derivative instruments and their location in the income statement:
Derivatives in hedging | |
| |
Location of Gain or | |
Three Months Ended
September 30, | | |
Nine Months Ended
September 30, | |
relationships | |
| |
(Loss) Recognized | |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Foreign currency
forward contracts | |
(a) | |
Cost of goods sold | |
$ | 283 | | |
$ | 392 | | |
$ | (196 | ) | |
$ | (9 | ) |
Interest rate swaps | |
(b) | |
Interest expense, net | |
| - | | |
| (13 | ) | |
| - | | |
| (41 | ) |
Aluminum
futures | |
(c) | |
Cost of goods sold | |
| 7,175 | | |
| (3,399 | ) | |
| 17,171 | | |
| (1,694 | ) |
Total | |
| |
| |
$ | 7,458 | | |
$ | (3,020 | ) | |
$ | 16,975 | | |
$ | (1,744 | ) |
| a) | Fair value hedge: the related hedged item is accounts receivable and offsetting losses in the three
and nine months ended September 30, 2015 and gains in the three and nine months ended September 30, 2014 are included in cost of
goods sold in the same respective amounts. |
| b) | Cash flow hedge: recognized loss is reclassified from accumulated other comprehensive loss. |
| c) | Fair value hedge: the related hedged item is inventory and offsetting losses in 2015 and gains
in 2014 are included in cost of goods sold in the same respective amounts. |
14. Fair Value
Authoritative guidance defines fair value as
the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. The fair value hierarchy consists of three broad levels, as described below:
| · | Level 1 - Unadjusted quoted prices in active
markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
| · | Level 2 - Inputs other than quoted prices
included within Level 1 that are observable for the asset or liability, either directly or indirectly. |
| · | Level 3 - Inputs that are both significant to the fair value measurement and unobservable. |
Derivative contracts consisting of aluminum
contracts, foreign currency contracts and interest rates swaps are valued using quoted market prices and significant other observable
inputs. These financial instruments are typically exchange-traded and are generally classified within Level 1 or Level 2 of the
fair value hierarchy depending on whether the exchange is deemed to be an active market or not.
Major categories of assets and liabilities
measured at fair value at September 30, 2015 and December 31, 2014 are classified as follows:
| |
September 30, 2015 | | |
December 31, 2014 | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Assets: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Inventories | |
$ | 143,394 | | |
| | | |
| | | |
$ | 165,586 | | |
| | | |
| | |
Aluminum futures contracts | |
$ | 5,011 | | |
| | | |
| | | |
| 9,769 | | |
| | | |
| | |
Foreign currency forward contracts | |
$ | 711 | | |
| | | |
| | | |
| 1,337 | | |
| | | |
| | |
Liabilities: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Embedded conversion option | |
| | | |
| | | |
$ | 1,550 | | |
| | | |
| | | |
$ | 2,734 | |
15. Fair Value of Financial Instruments
The carrying amounts of variable rate notes
payable to the banks approximate fair value as of September 30, 2015 and December 31, 2014, because these notes reflect market
changes to interest rates. The fair value of the subordinated convertible debt approximates its principal amount of $11,000 at
September 30, 2015 and December 31, 2014, which exceeds its carrying amount as a result of the unamortized discount related to
the bifurcation of the embedded conversion option. The fair value of the advance to supplier approximates its carrying value. Derivative
financial instruments are carried at fair value (see Note 13).
16. Business Segment and Geographic Area
Information
The Company’s only business segment is
the sale and distribution of metals. Sales are attributed to countries based on location of customers as follows:
| |
Three Months Ended September 30, | | |
Nine Months Ended September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
United States | |
$ | 88,920 | | |
$ | 101,907 | | |
$ | 314,337 | | |
$ | 264,604 | |
Latin America | |
| 921 | | |
| 23,995 | | |
| 15,509 | | |
| 81,263 | |
Canada | |
| 9,426 | | |
| 10,665 | | |
| 33,757 | | |
| 35,348 | |
Australia & New Zealand | |
| 10,004 | | |
| 11,241 | | |
| 29,738 | | |
| 33,647 | |
Europe | |
| 12,679 | | |
| 11,558 | | |
| 31,348 | | |
| 29,337 | |
| |
$ | 121,950 | | |
$ | 159,366 | | |
$ | 424,689 | | |
$ | 444,199 | |
17. Accumulated Other Comprehensive (Loss)/Income
Changes in accumulated other comprehensive (loss)/ income by component
on an after tax basis are as follows:
Three Months ended September 30, 2015 | |
Foreign Currency Translation | | |
Interest Rate Swap Contract | | |
Total | |
Beginning balance | |
$ | (589 | ) | |
$ | - | | |
$ | (589 | ) |
Other comprehensive income | |
| 13 | | |
| - | | |
| 13 | |
Net current period other comprehensive income | |
| 13 | | |
| - | | |
| 13 | |
Ending balance | |
$ | (576 | ) | |
$ | - | | |
$ | (576 | ) |
Three Months ended September 30, 2014 | |
Foreign Currency Translation | | |
Interest Rate Swap Contract | | |
Total | |
Beginning balance | |
$ | 70 | | |
$ | (17 | ) | |
$ | 53 | |
Other comprehensive loss before reclassification | |
| (278 | ) | |
| - | | |
| (278 | ) |
Loss reclassified to operations | |
| - | | |
| 8 | (a) | |
| 8 | |
Net current period other comprehensive loss | |
| (278 | ) | |
| 8 | | |
| (270 | ) |
Ending balance | |
$ | (208 | ) | |
$ | (9 | ) | |
$ | (217 | ) |
(a) Reclassified to following line items in the statement of income: | |
| | | |
| | | |
| | |
Interest expense, net | |
| | | |
$ | 13 | | |
| | |
Income taxes | |
| | | |
| (5 | ) | |
| | |
Net of tax | |
| | | |
$ | 8 | | |
| | |
Nine Months ended September 30, 2015 | |
Foreign Currency Translation | | |
Interest Rate Swap Contract | | |
Total | |
Beginning balance | |
$ | (334 | ) | |
$ | - | | |
$ | (334 | ) |
Other comprehensive loss | |
| (242 | ) | |
| - | | |
| (242 | ) |
Net current period other comprehensive loss | |
| (242 | ) | |
| - | | |
| (242 | ) |
Ending balance | |
$ | (576 | ) | |
$ | - | | |
$ | (576 | ) |
Nine Months ended September 30, 2014 | |
Foreign Currency Translation | | |
Interest Rate Swap Contract | | |
Total | |
Beginning balance | |
$ | 84 | | |
$ | (33 | ) | |
$ | 51 | |
Other comprehensive loss before reclassification | |
| (292 | ) | |
| - | | |
| (292 | ) |
Loss reclassified to operations | |
| - | | |
| 24 | (a) | |
$ | 24 | |
Net current period other comprehensive (loss)/income | |
| (292 | ) | |
| 24 | | |
| (268 | ) |
Ending balance | |
$ | (208 | ) | |
$ | (9 | ) | |
$ | (217 | ) |
(a) Reclassified to following line items in the statement of income: | |
| | | |
| | | |
| | |
Interest expense, net | |
| | | |
$ | 39 | | |
| | |
Income taxes | |
| | | |
| (15 | ) | |
| | |
Net of tax | |
| | | |
$ | 24 | | |
| | |
18. Commitments
The Company had $35,915 in outstanding letters
of credit to certain of its suppliers at September 30, 2015 and $36,586 at December 31, 2014.
19. Income Taxes
For interim income tax reporting, the Company
estimates its annual effective tax rate and applies it to its year to date ordinary income. The effect on the tax rate related
to income or loss attributable to the change in value of the derivative liability is separately computed and recognized as such
income or loss occurs. The disproportionate relationship between income taxes and pre-tax income for the nine months ended September
30, 2015, results primarily from no deferred tax being provided on the non-taxable gain resulting from the change in the value
of the derivative liability to the extent such gains exceeds the $457 amortization of the related debt discount, for which a deferred
tax benefit is provided.
The disproportionate relationship between income
taxes and pre-tax income for the three and nine month periods ended September 30, 2014 is primarily attributable to no tax benefit
being recognized for the loss from change in value of the derivative liability and the loss related to extinguishment of debt,
as such losses will not be deductible for income tax purposes.
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
You should read the following discussion
of our financial condition and results of operations in conjunction with the consolidated financial statements and the notes thereto
included elsewhere in this Quarterly Report on Form 10-Q and our 10-K filed with the Securities and Exchange Commission on March
31, 2015. All numbers used in this discussion are in thousands, except for per share information and percentages.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains
“forward-looking statements,” which include information relating to future events, future financial performance, strategies,
expectations, competitive environment and regulation. Words such as “may,” “should,” “could,”
“would,” “predict,” “potential,” “continue,” “expect,” “anticipate,”
“future,” “intend,” “plan,” “believe,” “estimate,” and similar expressions,
as well as statements in future tense, identify forward-looking statements. Forward-looking statements should not be read as a
guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved.
Forward-looking statements are based on information we have when those statements are made or our management’s good faith
belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance
or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that
could cause such differences include, but are not limited to:
| · | loss or default of one or more suppliers; |
| · | loss or default of one or more significant customers; |
| · | default by the counterparties to our derivative financial
instruments; |
| · | changes in general, national or regional economic conditions; |
| · | an act of war
or terrorism that disrupts international shipping; |
| · | changes in laws, regulations and tariffs; |
| · | the imposition of anti-dumping duties on the products we
import; |
| · | changes in the size and nature of our competition; |
| · | changes in interest rates, foreign currencies or spot prices
of aluminum; |
| · | loss of one or more key executives; |
| · | increased credit risk from customers; |
| · | our failure to grow internally or by acquisition; and |
| · | failure to improve operating margins and efficiencies. |
For a discussion of these and other risks that
relate to our business and investing in shares of our common stock, you should carefully review the risk factors and other cautionary
statements in our Annual Report on Form 10-K for the year ended December 31, 2014 that was filed with the Securities and Exchange
Commission on March 31, 2015, and those described from time to time in our other reports filed with the Securities and Exchange
Commission. The forward-looking statements contained in this Quarterly Report on Form 10-Q are expressly qualified in their entirety
by this cautionary statement. We do not undertake any obligation to publicly update any forward-looking statement to reflect events
or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events.
Our Business
We are engaged in the purchase, sale and distribution
of semi-finished aluminum and steel products to a diverse customer base located in the Americas, Europe, Australia and New Zealand.
We sell our products through our own marketing and sales personnel as well as through commission based independent sales agents
located in North America and Europe. We purchase products from suppliers located throughout the world. Our two largest suppliers
furnished approximately 44% of our products during the first nine months of 2015 as compared to an aggregate of 39% of our products
during the same period in 2014. We place orders with our suppliers based upon orders that we receive from our customers and also
purchase material for our own stock, which we typically use for shorter term deliveries to our customers.
Critical Accounting Policies and Estimates
The following discussion and analysis of our
financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in
accordance with generally accepted accounting principles in the U.S. The preparation of financial statements in accordance with
generally accepted accounting principles in the U.S. requires us to make estimates and assumptions that affect the amounts reported
in our financial statements. The financial statements include estimates based on currently available information and our judgment
as to the outcome of future conditions and circumstances. Significant estimates in these financial statements include allowance
for doubtful accounts and the derivative liability for the embedded conversion option in our 10% Convertible Senior Subordinated
Notes Due June 1, 2016 in the principal amount of $11,000. Changes in the status of certain facts or circumstances could result
in material changes to the estimates used in the preparation of the financial statements and actual results could differ from the
estimates and assumptions.
Among the significant judgments made by management
in the preparation of our financial statements are the following:
Allowance for Doubtful Accounts
As of September 30, 2015, we had $76,248 in
trade receivables, after an allowance for doubtful accounts of $356. We report accounts receivable, net of an allowance for doubtful
accounts, to represent our estimate of the amount that ultimately will be realized in cash. We review the adequacy of our allowance
for doubtful accounts on an ongoing basis, using historical collection trends, age of receivables, as well as review of specific
accounts, and make adjustments in the allowance that we believe are necessary. We maintain credit insurance policies on the majority
of our customers. In general, this policy has a 10% deductible; however there are some instances where the co-insurance may vary
and instances where we may exceed the insured values. Changes in economic conditions could have an impact on the collection of
existing receivable balances or future allowance considerations. In addition, changes in the credit insurance environment could
affect the availability of credit insurance and our ability to secure it.
Accruals for Inventory Claims
Generally, our exposure on claims for defective
material is relatively small, as we usually refer all claims on defects back to our suppliers. If we do not believe that a supplier
will honor a material claim for a defective product, we will record an allowance for inventory adjustments.
Results of Operations
General
We are engaged in the purchase, sale and distribution
of semi-finished aluminum and steel products which we purchase from producing mills around the world. The market prices of
materials we purchase, as well as the market price of materials we sell, fluctuate constantly in world markets. Our cost
of sales is composed of metal content, which in part is determined on world metal exchanges, plus a unique fabrication premium
charged by each producer to convert the raw metal to a semi-finished product. In turn, we typically sell to our customers
either on a fixed price basis or based on metal content plus a premium which includes supplier fabrication margin, and costs of
importation, warehousing, and delivery of material to customers. Since metal content costs are the largest component of cost
of sales and selling price, our sales pricing trends and cost of sales trends generally track consistently.
Comparison of Three Months Ended September 30, 2015 and 2014
During the three months ended September 30,
2015, net sales decreased by $37,416, from $159,366 to $121,950 or 23.5% from the same period in 2014. The Latin American
economy, particularly Brazil, has suffered a precipitous drop in local currencies adding to economic stresses. We determined that
the markets were unstable and did not enter into new contracts with local customers resulting in a decline of Latin American sales
of $23,074 in the three month period ended September 30, 2015 as compared to the same period in 2014.
Additionally, our sales in North America declined by $14,226 comprised of a decline in our steel sales offset by an increase
in our aluminum sales.
Gross profit decreased by $2,122, to $5,347
during the three months ended September 30, 2015 from $7,469 in the same period of 2014, representing a 28.4% decrease, of which
$1,641 is attributable to decreased sales and $481 to a decline in the gross margin of 0.3% to 4.4% from 4.7%. The decline in
margin reflects increased competitive market pressures across all regions.
Selling, general and administrative expenses
during the three months ended September 30, 2015 decreased by $725 from $3,819 to $3,094 primarily as a result of lower compensation
costs and lower travel expenses.
During the three months ended September 30,
2015, interest expense increased 36% or $378 to $1,419 from $1,041 for the same period in 2014 as a result of increased bank loans
to support higher inventory levels and lower accounts payable balances. During the three months ended September 30, 2015 and 2014,
interest on our 10% Convertible Senior Subordinated Notes Due June 1, 2016 totaled $275 and $291, respectively.
Amortization of the debt discount in connection with these notes totaled $130 for the three months ended September 30,
2015 and $136 for September 30, 2014.
During the three months ended September 30,
2015 income before other expenses declined by $1,775 from $2,609 to $834 or 68%. This decline is primarily due to the decline in
gross profit, offset by the decrease in selling, general and administrative expenses described above.
Our 10% Convertible Senior Subordinated Notes
Due June 1, 2016 have an embedded conversion option which was bifurcated and recorded as a separate derivative liability at a fair
value at issuance of the notes. The derivative liability is carried at fair value with changes in mark to market recorded in income.
The changes in the fair value of the derivative liability resulted in a non-cash non-operating loss of $224 during the three month
period ended September 30, 2015, as compared to a $2,059 non-cash non-operating loss during the same period in 2014. The valuation
has numerous inputs, however, these changes are driven primarily by the change in the stock price at the end of both quarters.
Fair value accounting requires changes in derivative
liabilities related to our convertible notes to be charged or credited to income during each accounting period. 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 losses of $224 and $2,059 during the quarters ended September 30, 2015 and 2014, respectively. Accordingly,
the tax rate for the quarter ended September 30, 2015 was 48% and 280% for the quarter ended September 30, 2014. The fluctuations
in the tax rates relative to reported income from 2014 to 2015, results from the non-taxable losses, for which no deferred tax
benefit is provided.
Net income increased to $315 during the three months ended September
30, 2015 from a net loss of $694 during the three months ended September 30, 2014. The increase in net income of $1,009 is a function
of the change in the value of the derivative liability and income tax provisions related to such derivative liability.
Comparison of Nine Months Ended September 30, 2015 and 2014
During the nine months ended September 30, 2015, net sales decreased
by $19,510, from $444,199 to $424,689 or 4.4% from the same period in 2014. This decrease was primarily due to decreased
sales of $65,754 in Latin America offset by an increase in sales in North America and Europe during the period ended September
30, 2015 as compared to the same period in 2014.
Gross profit decreased by $2,770 to $18,201 from $20,971 during
the nine months ended September 30, 2015, representing a 13.2% decrease of which $836 is attributable to decreased sales and $1,934
to a decline in the gross margin of 0.4% to 4.3% from 4.7%. The dollar decrease is attributable to lower gross profit margin due
to increased competitive market pressure across all regions.
Selling, general and administrative expenses
for the nine months ended September 30, 2015 increased by $32 from $10,600 to $10,632 for the same period in 2014, primarily as
a result of increases in consulting and legal fees and insurance costs offset by lower compensation and travel expenses.
During the nine months ended September 30, 2015, interest expense
increased by $1,442 to $4,665 from $3,223 for the same period in 2014 as loan balances increased to support higher inventory
levels. Interest on our 10% Convertible Senior Subordinated Notes Due June 1, 2016 and amortization of the debt discount in connection
with these notes totaled $1,282 during the nine months ended September 2015 and $1,290 during the nine months ended September 2014.
Our 10% Convertible Senior Subordinated Notes
Due June 1, 2016 have an embedded conversion option which was bifurcated and recorded as a separate derivative liability at a fair
value at issuance of the notes. The derivative liability is carried at fair value with changes in mark to market recorded in income.
The changes in the fair value of the derivative liability resulted in a non-cash non-operating gain of $1,184 during the nine month
period ended September 30, 2015, as compared to a $2,239 non-cash non-operating loss during the same period in 2014. The valuation
has numerous inputs; however, these changes are driven primarily by the change in the stock price at the end of these periods.
During the nine months ended September 30, 2015 net income of $2,774
increased by $1,014 as compared to the period ended September 30, 2014. This increase is mainly a result of the change in the value
of the derivative liability and tax effect related to such derivative liability.
Liquidity and Capital Resources
Overview
At September 30, 2015, we had cash of $5,536,
net accounts receivable of $76,248, senior secured debt of $162,000, junior secured debt of $4,471, and subordinated debt of $11,000. Management
believes that cash from operations, together with funds available under our credit facility will be sufficient to fund the cash
requirements relating to our existing operations for the next twelve months and the repayment of the convertible debt due in June
2016, if not converted. However, we will require additional debt or equity financing in connection with future expansion of operations.
Comparison of Nine Month Periods Ended September 30, 2015
and 2014
Net cash provided by operating activities was
$39,254 during the nine months ended September 30, 2015, as compared to $24,047 used in operating activities during the same period
in 2014. In the nine months ended September 30, 2015 cash provided by operating activities resulted from decreases in inventories
of $37,828, trade accounts receivable of $13,043 and offset by decreases in trade accounts payable of $19,689.
Our days sales outstanding decreased from 59
days in September 2014 to 48 days in September 2015 attributable to reduced sales in Latin America which has longer payment cycles.
Our inventory in warehouses, available for delivery to customers, as of September 30, 2015 was approximately 80 days of sales as
compared to 38 days as of the same date in 2014. While total inventory levels have been reduced by $38,557 since December 2014,
they are higher than optimal as we received delayed supplier deliveries from the third quarter of 2014 combined with on time supplier
deliveries thereafter. Our inventory turn rate, including materials in transit, was 3.7 times or 98 days on hand, as of September
30, 2015 as compared to 4.9 times or 73 days on hand as of September 30, 2014. The days payable outstanding was 17 days as of September
30, 2015, as compared to 22 days for the same period in 2014.
Cash flows provided by investing activities
during the nine months ended September 30, 2015 and 2014, amounted to $2,263 and $2,481 respectively, which is primarily the monthly
repayment by PT. Alumindo of the advance related to our supply agreement with PT. Alumindo.
Cash flows used in financing activities during
the nine months ended September 30, 2015, amounted to $37,067, as compared to cash provided by financing activities of $23,815
during the same period in 2014. During the first nine months of 2015, we reduced notes payable to banks by $33,978 as compared
to an increase of $25,602 in notes payable during the first nine months of 2014. In addition, we acquired 330 additional common
shares at a cost of $1,407 during the period ended September 30, 2015 and repurchased 350 stock options at a cost of $922,
which resulted in an excess tax benefit of $282.
Credit Agreements and Other Debt
We were a party to a credit agreement with
Rabobank International, for itself and as lead arranger and agent, JPMorgan Chase, for itself and as syndication agent, and ABN
AMRO, BNP Paribas, RBS Citizens, Société Générale, and Brown Brothers Harriman which provided for a
$200,000 revolving line of credit, including a commitment to issue letters of credit and a swing-line loan sub facility, with a
maturity date of June 30, 2014.
On June 19, 2014, we entered into an amended
and restated committed credit agreement with Rabobank International, for itself and as lead arranger and agent, BNP Paribas, for
itself and as syndication agent, and Société Générale, ABN AMRO, RB International, and Brown Brothers
Harriman as well as a new uncommitted line of credit with Rabobank International, BNP Paribas and Société Générale.
Both credit lines are secured, asset-based credit facilities. The committed credit facility provided for amounts up to $150,000,
and the uncommitted facility provided for a maximum amount of $75,000. The agreement also allowed for an additional increase in
the committed credit facility of $75,000, for a total of $300,000, subject to certain restrictions and conditions. On December
18, 2014, we amended and increased these credit lines by an aggregate of $50,000, increasing our overall line of credit to $275,000.
The amended committed credit agreement was increased by $35,000 to $185,000, and the uncommitted credit facility, increased by
$15,000 to $90,000. There were no changes to the interest rate or to the maturity date of the committed facility, which remains
June 19, 2017. Subsequent to these amendments the additional increase available under the term of these agreements is $25,000,
subject to certain restrictions and conditions. Our borrowings under these lines of credit are secured by substantially all of
our assets.
Amounts borrowed bear interest at Eurodollar,
money market or base rates, at our option, plus an applicable margin. The credit agreements contain financial
and other covenants, including but not limited to, covenants requiring maintenance of minimum tangible net working capital and
compliance with leverage ratios, as well as an ownership minimum and limitations on other indebtedness, liens, distributions or
dividends, and investments and dispositions of assets. As of September 30, 2015, we were in compliance with all covenants
under these lines of credit.
Both credit agreements provide that amounts under the facilities
may be borrowed and repaid, and re-borrowed, subject to a borrowing base test. On June 11, 2015 the Company entered into a Second
Amendment to the Uncommitted Credit Agreement which amended the termination date to June 18, 2016 from June 19, 2015. As of September
30, 2015 and December 31, 2014, the credit utilized amounted to, respectively, $197,915 and $229,386 (including approximately $35,915
and $36,586 of outstanding letters of credit). As of September 30, 2015, the committed line of credit had loans outstanding of
$134,000 and the uncommitted line of credit had loans outstanding of $28,000.
Our wholly owned Belgian subsidiary, Imbali,
maintained a line of credit with ING Belgium S.A./N.V., for a EUR 8,000 (US$8,942) commitment for loans and documentary letters
of credit. On July 30, 2015 Imbali entered into a credit agreement with Rabobank to replace the line of credit with ING Belgium
for a line of credit of EUR 12,500(US$13,973). Imbali utilized EUR 4,000 (US$4,471) under the Rabobank facility to repay the outstanding
balance due to ING. Loan advances are limited to a percentage of Imbali’s pledged accounts receivables and inventory and
bear interest at EURIBOR plus 1.9%. This secured credit arrangement is unconditionally guaranteed by us. As of September 30, 2015,
the outstanding loan amounted to EUR 4,000 (US $4,471), as compared to loans outstanding of EUR 6,850 (US $8,288) on December 31,
2014. As of September 30, 2015, Imbali was in compliance with all financial covenants.
On June 3, 2011, we issued $12,000 principal
amount of 10% Convertible Senior Subordinated Notes Due June 1, 2016 in a private placement to selected accredited investors. On
August 18, 2014, a note holder converted $1,000 of notes into common stock. The notes are currently convertible at the option
of the holders into shares of common stock at a conversion rate of 262.21 shares of common stock per $1 principal amount of notes,
subject to adjustment for cash and stock dividends, stock splits and similar transactions, at any time before maturity. The
current conversion price reflects eighteen adjustments for dividends. In addition, if the last reported sale price of
the common stock for 30 consecutive trading days is equal to or greater than $7.00, and a registration statement is effective covering
the resale of the shares of common stock issuable upon conversion of the notes, we have the right, in our sole discretion, to require
the holders to convert all or part of their notes at the then applicable conversion rate. Interest on the notes is payable
in arrears on the first day of June and December every year the notes are outstanding.
Derivative Financial Instruments
Inherent in our business is the risk of matching
the timing of our purchase and sales contracts. The prices of the aluminum products we buy and sell are based on a constantly moving
terminal market price determined by the London Metal Exchange. Were we not to hedge such exposures, we could be exposed to significant
losses due to the continually changing aluminum prices.
We use aluminum futures contracts to manage
our exposure to this commodity price risk. It is generally our policy to hedge such risks to the extent practicable. We enter into
hedges to limit our exposure to volatile price fluctuations that we believe would impact our gross margins on firm purchase and
sales commitments. As an example, if we enter into fixed price contracts with our suppliers and variable priced sales contracts
with our customers, we will generally enter into a futures contract to sell the aluminum for future delivery in the month when
the aluminum is to be priced and delivered to the customer and repurchase this position once the pricing has been fixed with our
customer. If the underlying metal price increases, we suffer a hedging loss and have a derivative liability, but the
sales price to the customer is based on a higher market price and offsets the loss. Conversely, if the metal price decreases, we
have a hedging gain and recognize a derivative asset, but the sales price to the customer is based on the lower market price and
offsets the gain.
We also enter into foreign exchange forward
contracts to hedge our exposure related to commitments to purchase or sell metals and accounts receivable denominated in some international
currencies. In such cases, we will purchase or sell the foreign currency through a bank for an approximate date when we anticipate
making a payment to a supplier or receiving payment from the foreign customer.
In accordance with generally accepted accounting
principles in the U.S., we designate these derivative contracts as fair value hedges and recognize them on our balance sheet at
fair value. We also recognize offsetting changes in the fair value of the related firm purchase and sales commitment
to which the hedge is attributable in earnings upon revenue recognition, which occurs at the time of delivery to our customers.
The potential for losses related to our hedging
activities, given our hedging methodology, arises from counterparty defaults with banks for our foreign exchange hedging, the London
Metal Exchange for our aluminum hedges, or customer defaults. In the event of a customer default, we might be forced to sell the
material in the open market and absorb losses for metal or foreign exchange hedges that were applied to the defaulting customers’
transactions. Our results of operations could be materially impacted by any counterparty or customer default, as we might not be
able to collect money owed to us and/or our hedge might effectively be cancelled.
We use futures and forward contracts as hedges,
for no purpose other than to avoid exposure to changes in aluminum prices and foreign currency rates between when we buy a shipment
of aluminum from a supplier and when we deliver it to a customer. Our derivatives are not for purposes of trading in
the futures market. We earn our gross profit margin through our business operations and not from the movement of aluminum prices.
As part of our business we also engage in the
purchase, sale and distribution of steel products. If we do not have a matching sales contract related to such products, (for example,
any steel products that are unsold in our inventory), we have price risk that we currently do not or are unable to hedge. As such,
any decline in pricing for such products may adversely impact our profitability.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Item 4. Controls and Procedures
Management’s Conclusions Regarding
Effectiveness of Disclosure Controls and Procedures
As of September 30, 2015, we conducted an evaluation,
under the supervision and participation of management including our chief executive officer and chief financial officer, of the
effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). There are inherent limitations to the effectiveness of any system of
disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable
assurance of achieving their control objectives.
Based upon this evaluation, our chief executive
officer and chief financial officer concluded that our disclosure controls and procedures are effective at the reasonable assurance
level as of September 30, 2015.
Changes in Internal Control over Financial
Reporting
There was no change in our internal
control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) or 15d-15(d) of the
Exchange Act that occurred during the quarter ended September 30, 2015 that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds
Period | |
Total Number
of
Shares Purchased | | |
Average
Price Paid per Share | | |
Total
Number of Shares Purchased as Part of Publicly Announced Plans or
Programs | | |
Maximum
Number of Shares that May Yet Be Purchased Under the Plans
or Programs | |
July 1, 2015 - July 31, 2015 | |
| 27 | | |
$ | 4.01 | | |
| | | |
| | |
August 1, 2015 - August 31, 2015 | |
| 15 | | |
$ | 3.06 | | |
| | | |
| | |
September 1, 2015 - September 30, 2015 | |
| 40 | | |
$ | 3.83 | | |
| | | |
| | |
Total | |
| 82 | | |
$ | 3.76 | | |
| 1,668 | | |
| 332 | |
In July 2008, the Board of Directors authorized
the repurchase of 2 million shares of the Company’s common stock at a maximum price of $3.50 per share. In September 2014,
the Board of Directors authorized a change in the maximum per share price from $3.50 to $5.00 per share.
Item 6. Exhibits
See Index to Exhibits.
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 thereunto duly authorized.
|
EMPIRE RESOURCES, INC. |
|
|
|
|
|
Date: November 16, 2015 |
By: |
/s/ Nathan Kahn |
|
|
|
Name: |
Nathan Kahn |
|
|
|
Title: |
President and Chief Executive Officer |
|
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
By: |
/s/Sandra Kahn |
|
|
|
Name: |
Sandra Kahn |
|
|
|
Title: |
Vice President and Chief Financial Officer |
|
|
|
|
(Principal Financial Officer) |
|
EXHIBIT INDEX
|
|
|
31.1* |
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
31.2* |
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
32.1* |
|
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
32.2* |
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101* |
The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, formatted in XBRL (eXtensible Business Reporting Language), (i)Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Statements of Cash Flows, (iv) Condensed Consolidated Statements of Stockholders’ Equity, and (v) the Notes to the Condensed Consolidated Financial Statements |
* Filed
herewith.
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002
I, Nathan Kahn, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Empire Resources, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and |
| d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions): |
| a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and |
| b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting. |
November 16, 2015 |
/s/ Nathan Kahn |
|
Nathan Kahn |
|
President and Chief Executive Officer |
|
(Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002
I, Sandra Kahn, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Empire Resources, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and |
| d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions): |
| a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and |
| b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting. |
November 16, 2015 |
/s/ Sandra Kahn |
|
Sandra Kahn |
|
Vice President and Chief Financial Officer |
|
(Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
This certification is furnished solely pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and accompanies the Quarterly Report on Form 10-Q (the “Form 10-Q”)
for the quarter ended September 30, 2015 of Empire Resources, Inc. (the “Company”). I, Nathan Kahn, the President,
Chief Executive Officer and Principal Executive Officer of the Company, certify that, based on my knowledge:
(1) |
The Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in this report. |
Date: November 16, 2015 |
|
By: |
/s/ Nathan Kahn |
|
|
Name: |
Nathan Kahn |
|
|
Title: |
President and Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
The foregoing certification is being furnished as an exhibit to
the Form 10-Q pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a)
and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-Q
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing
of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
This certification is furnished solely pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and accompanies the Quarterly Report on Form 10-Q (the “Form 10-Q”)
for the quarter ended September 30 , 2015 of Empire Resources, Inc. (the “Company”). I, Sandra Kahn, the Vice President,
Chief Financial Officer and Principal Financial Officer of the Company, certify that, based on my knowledge:
(1) |
The Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in this report. |
Date: November 16, 2015 |
|
By: |
/s/ Sandra Kahn |
|
|
Name: |
Sandra Kahn |
|
|
Title: |
Vice President and Chief Financial Officer |
|
|
|
(Principal Financial Officer) |
The foregoing certification is being furnished as an exhibit to
the Form 10-Q pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a)
and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-Q
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing
of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Empire Resources, Inc. (NASDAQ:ERS)
Historical Stock Chart
From Jul 2024 to Aug 2024
Empire Resources, Inc. (NASDAQ:ERS)
Historical Stock Chart
From Aug 2023 to Aug 2024