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Empire Resources Reports First Quarter 2013 Results

- First Quarter 2013 Sales Increase 22% Sequentially to $133.4 Million

- Operating Income Rises 12% to $3.4 Million from 2012 Fourth Quarter

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FORT LEE, N.J., May 14, 2013 /PRNewswire/ -- Empire Resources, Inc. (NASDAQ: ERS), a distributor of value added, semi-finished metal products, announced today that net sales for the first quarter of 2013 were $133.4 million, which is an increase of 22% from the fourth quarter of 2012, and 8% lower than the 2012 first quarter.  While pounds shipped increased over both prior periods, lower metal pricing versus the 2012 first quarter resulted in reduced sales compared to that quarter.

Gross profit for the first quarter of 2013 was $6.6 million, which is 9% higher than in the 2012 fourth quarter and 4% higher than in the first quarter of 2012.  Gross profit as a percentage of sales was 5.0% in the first quarter of 2013.  This compares with 5.1% of sales in the fourth quarter of 2012 (before including a partial recovery of a claim against MF Global) and 4.4% of sales in the first quarter of 2012. 

Operating income for the first quarter of 2013 reached $3.4 million, an increase of 12% from the fourth quarter of 2012 and up 16% from the 2012 first quarter, reflecting the improvement in the gross profit along with the Company's ongoing efforts to control SG&A expenses.  

Interest expense was in line with the fourth quarter of 2012, and 16% below the first quarter of 2012 as the Company has been able to reduce bank debt because of its success in controlling inventory levels.   Total inventories decreased $16.5 million from the end of the fourth quarter of 2012 and were $43.6 million lower than at the end of the first quarter of 2012.

In the first quarter of 2013, the Company recognized a non-cash non-operating loss of $2.1 million related to the change in fair market valuation of the derivative feature of its convertible subordinated note.  The recent increase in the Company's stock price following its listing on the NASDAQ Capital Market in February 2013 and the resulting mark-to-market of the derivative liability accounted for the change in fair value in the 2013 first quarter. Non-cash non-operating losses related to the derivative feature totaled $0.4 million in the fourth quarter of 2012 and $0.2 million in the first quarter of 2012.    

Pre-tax income, before including the derivative-related loss, was $2.3 million in first quarter of 2013, an increase of 18% from the fourth quarter of 2012 and up 44% from the first quarter of 2012, before including the derivative-related losses in those prior periods.

Net income for the first quarter of 2013 was $0.1 million, or $0.01 per diluted share, including the non-cash non-operating loss related to the change in fair value of the derivative feature of the Company's convertible subordinated notes.  Net income was $0.9 million, or $0.11 per diluted share, for the fourth quarter of 2012, and $0.8 million, or $0.09 per diluted share, in the first quarter of 2012, also including the non-cash losses attributable to the derivative-related liability in both periods.    

Nathan Kahn, President and CEO, commented, "Continued execution of our strategy enabled us to achieve improved results in the first quarter despite continued challenging industry conditions.

"The 22% sequential improvement in our sales in the quarter included growth in all geographic regions, highlighted by our further gains in market share in South America along with improved sales in North America after the sharp drop in demand industry-wide at the end of 2012.  We also advanced in our sales of steel products in the quarter.  Increasing our position in steel products, while maintaining our strong market position in aluminum, is a key component of our strategy to accelerate top-line growth.

"We also made additional progress in strengthening our profitability in the first quarter, most notably by further reducing our inventory while maintaining revenues. The resulting increase in inventory turns enabled us to reduce working capital and pay down bank debt for a third consecutive quarter, improving our profitability and cash flow.

"Most importantly, our progress in the first quarter, both in sales and operating income, was accompanied by our full commitment to being effective partners to our customers and suppliers.  It is on that foundation that we will continue to pursue future profitable growth."

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, Brazil, Australia, New Zealand and Europe. It maintains supply contracts with mills in various parts of the world.

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 prospectus filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended, with the SEC on May 3, 2012 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 (Unaudited)

(In thousands except per share amounts)








Three Months  Ended March 31,
2013                        2012

Net sales

$

133,430


$

145,609

Cost of goods sold


126,800



139,255

Gross profit


6,630



6,354

Selling, general and administrative expenses


3,258



3,452

Operating income


3,372



2,902

Other expenses






   Change in value of derivative liability 


(2,123)



(244)

   Interest expense, net


(1,113)



(1,328)

Income before income taxes


136



1,330

Income taxes


51



499

Net income

$

85


$

831

Weighted average shares outstanding:






     Basic


8,586



9,221

     Diluted


8,852



9,422

Earnings per share:






     Basic


$0.01



$0.09

     Diluted


$0.01



$0.09

See notes to unaudited condensed consolidated financial statements




 

 

Condensed Consolidated Balance Sheets

(In thousands except share amounts)



March 31, 2013
 (Unaudited)


December 31, 2012

ASSETS 






Current assets:






     Cash

$

2,664


$

3,136

     Trade accounts receivable (less allowance for doubtful
        accounts of $515 and $521)


65,956



53,551

     Inventories


129,015



145,547

     Deferred tax assets


4,183



3,306

     Advance to supplier, net of imputed interest of $264 and  $292


3,060



3,061

     Other current assets


8,723



3,965

          Total current assets


213,601



212,566

     Advance to supplier, net of imputed interest of $178 and
        $234, respectively, net of current maturities


5,665



6,413

     Preferential supply agreement


882



962

     Long-term financing costs, net of amortization 


719



862

     Property and equipment, net


3,966



3,987

Total assets

$

224,833


$

224,790







LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities:






     Notes payable - banks

$

117,358


$

124,095

     Current maturities of mortgage payable


174



171

     Trade accounts payable


40,495



36,048

     Income taxes payable


3,951



3,036

     Accrued expenses and derivative liabilities


3,968



4,783

     Dividends payable


215



-

          Total current liabilities


166,161



168,133







Mortgage payable, net of current maturities


1,245



1,290

Subordinated convertible debt net of unamortized discount
   of $1,792 and $1,933 respectively


10,208



10,067

Derivative liability for embedded conversion option


4,119



1,996

Deferred taxes payable


213



195

          Total Liabilities


181,946



181,681







Commitments and Contingencies (Note 19)












Stockholders' equity:






     Common stock $.01 par value, 20,000,000 shares authorized
        and 11,749,651 shares issued
        at March 31, 2013 and December 31, 2012


117



117

     Additional paid-in capital


11,937



11,937

     Retained earnings


36,511



36,641

     Accumulated other comprehensive loss


(207)



(136)

     Treasury stock, 3,165,249 and 3,158,597 shares
        at March 31, 2013 and December 31, 2012, respectively


(5,471)



(5,450)

          Total stockholders' equity


42,887



43,109

Total liabilities and stockholders' equity

$

224,833


$

224,790

See notes to unaudited condensed consolidated financial statements










 

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)








Three Months Ended March 31,
2013                           2012

Cash flows from operating activities:






     Net income

$

85


$

831

     Adjustments to reconcile net income to net cash provided
        by/(used in)  operating activities:






               Depreciation and amortization 


173



163

               Change in value of derivative liability


2,123



244

               Amortization of convertible note discount


141



141

               Imputed interest on vendor advance


(85)



(173)

               Amortization of supply agreement


80



-

               Deferred income taxes 


(866)



(94)

               Foreign exchange loss/(gain), and other


19



(57)

               Changes in:






                    Trade accounts receivable


(12,512)



(10,730)

                    Inventories


16,355



11,824

                    Other current assets


(4,761)



4,773

                    Trade accounts payable


4,475



(8,311)

                    Income taxes payable


915



592

                    Accrued expenses and derivative liabilities


(789)



(258)

                 Net cash  provided by/(used in) operating activities


5,353



(1,055)

Cash flows provided by/(used in) investing activities:






    Repayment/(advance) related to supply agreement


833



(5,000)

    Purchases of property and equipment


(9)



(20)

                 Net cash provided by/(used in) investing activities


824



(5,020)

Cash flows (used in)/provided by financing activities:






     (Repayments of)/proceeds from notes payable – banks


(6,580)



3,949

     Repayments - mortgage payable


(42)



(39)

     Dividends paid 


-



(231)

     Deferred financing costs


-



(2)

     Treasury stock purchased 


(21)



(121)

                 Net cash (used in)/provided by financing activities


(6,643)



3,556

Net decrease in cash


(466)



(2,519)

        Effect of exchange rate


(6)



15

Cash at beginning of period


3,136



4,274

Cash at end of the period

$

2,664


$

1,770

Supplemental disclosures of cash flow information:






     Cash paid during the period for:






          Interest

$

766



1,058

          Income taxes

$

110



743

Non cash financing activities:






      Dividend declared but not yet paid

$

215



230

See notes to unaudited condensed consolidated financial statements












SOURCE Empire Resources, Inc.



RELATED LINKS
http://www.empireresources.com

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