Empire Resources Reports Fourth Quarter And Full Year 2013 Results

- Fourth Quarter EPS is $0.04 on Sales of $112.4 Million

- Full Year EPS is $0.27 on Sales of $482.7 Million

31 Mar, 2014, 16:30 ET from Empire Resources, Inc.

FORT LEE, N.J., March 31, 2014 /PRNewswire/ -- Empire Resources, Inc. (NASDAQ: ERS), a distributor of value added, semi-finished metal products, announced today that net sales for the fourth quarter of 2013 were $112.4 million, an increase of 3% from the fourth quarter of 2012, and 11% lower than the third quarter of 2013.  The improvement compared with the 2012 fourth quarter reflected increased sales in Europe, Latin America and North America, offset by lower sales in the Australia/New Zealand region.  Sequentially, sales were higher in Australia/New Zealand and Europe and lower in the Americas.

Gross profit for the fourth quarter of 2013 was $4.5 million, or 4.0% of sales, compared with 5.6% of sales in the fourth quarter of 2012 and 4.2% of sales in the 2013 third quarter.  Competitive market conditions negatively affected the gross profit margin as did the imposition of import duty on one of the Company's principal supplier, to a lesser extent. 

Operating income for the fourth quarter of 2013 was $1.5 million compared with $3.0 million in the fourth quarter of 2012 and $1.7 million in the third quarter of 2013.  SG&A expenses were 1% lower than the fourth quarter of 2012 and 16% lower sequentially, due in part to the alignment of commissions paid with sales level.   

Net interest expense for the fourth quarter of 2013 was $1.1 million, approximately level with both the fourth quarter of 2012 and the third quarter of 2013. 

Pre-tax income, before including non-cash non-operating derivative-related amounts in all periods was $0.4 million in the fourth quarter of 2013, compared with $1.9 million in fourth quarter of 2012 and $0.6 million in the third quarter of 2013.

The Company recognized a non-cash non-operating gain of $0.4 million in the fourth quarter of 2013, related to the change in fair market valuation of the derivative feature of its convertible subordinated note.  That compares with a non-cash non-operating loss of $0.4 million in the fourth quarter of 2012 and a non-cash non-operating gain of $1.7 million in the third quarter of 2013, due to the derivative valuation recognized in those periods.  

Net income for the fourth quarter of 2013 was $0.5 million, or $0.04 per diluted share, including the derivative related non-cash non-operating gain.  That compares with net income of $0.9 million, or $0.11 per diluted share, in the fourth quarter of 2012, and net income of $1.5 million, or $0.06 per diluted share, in the third quarter of 2013, including the non-cash non-operating loss and gain in those respective prior year periods.  

For full year 2013, net sales were $482.7 million; pre-tax income was $3.8 million, before including a non-cash non-operating derivative-related loss of $0.05 million; and net income was $2.4 million, or $0.27 per diluted share, including the derivative-related loss.  For full year 2012, net sales were $538.5 million; pre-tax income was $6.5 million, before including a non-cash non-operating derivative-related loss of $0.06 million; and net income was $4.0 million, or $0.42 per diluted share, including the derivative-related loss.   

Nathan Kahn, President and CEO, commented, "Through the efforts of our entire team, we achieved solid sales and profitability in each quarter of 2013, including the fourth quarter, despite exceptionally difficult industry and competitive conditions. 

"Even with those challenges, our sales initiatives have enabled us to improve our results in Europe, where our fourth quarter sales were at the highest level since 2011.  We also realized a sequential step-up in our sales in the Australia/New Zealand region in the final quarter of the year.  And, we have expanded our presence in Latin America, which represented 14% of full year sales versus 11% in 2012.  At the same time, our ongoing inventory management efforts have enabled us to reduce storage and processing costs, lower working capital and pay down debt. 

"While current market conditions remain difficult, we are continuing to see promising signs in our bookings.  In the meantime, we are firmly focused on executing our growth strategy to increase shareholder value.  Towards that end, we are pleased to have recently announced our 44th consecutive quarterly cash dividend."

Empire Resources, Inc. is a distributor of a wide range of semi-finished metal products to customers in the transportation, automotive, housing, appliance and packaging industries in the U.S., Canada, Latin America, Australia, New Zealand and Europe. 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 Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC's web site at http://www.sec.gov. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.

 

Three  Months  Ended December 31,

Year Ended December 31,

In thousands (except per share amounts)

2013

2012

2013

2012

Net sales

$

112,395

$

109,521

$

482,683

$

538,527

Cost of goods sold

107,861

103,437

460,944

513,560

Gross profit

4,534

6,084

21,739

24,967

Selling, general and administrative expenses

3,031

3,067

13,392

13,258

Operating income

1,503

3,017

8,347

11,709

Other expenses

   Change in value of derivative liability 

400

(424)

(52)

(63)

   Interest expense, net

(1,111)

(1,106)

(4,514)

(5,225)

Income before income taxes

792

1,487

3,781

6,421

Income taxes

319

574

1,385

2,457

Net income

$

473

$

913

$

2,396

$

3,964

Weighted average shares outstanding:

     Basic

8,581

8,357

8,583

8,897

     Diluted

11,855

11,493

8,852

12,028

Earnings per share:

     Basic

$0.06

$0.11

$0.28

$0.45

     Diluted

$0.04

$0.11

$0.27

$0.42

Unaudited

See notes to consolidated financial statements

 

December 31, 2013

December 31, 2012

ASSETS 

Current assets:

     Cash

$

2,477

$

3,136

     Trade accounts receivable (less allowance for doubtful         accounts of $562 and $521)

52,696

53,551

     Inventories

139,752

145,547

     Deferred tax assets

3,217

3,306

     Advance to supplier, net of imputed interest of $176 and  $292

3,147

3,061

     Other current assets, including derivatives

6,081

3,965

          Total current assets

207,370

212,566

     Advance to supplier, net of imputed interest of $56 and         $234, net of current maturities

3,287

6,413

     Preferential supply agreement, net

641

962

     Long-term financing costs, net of amortization 

358

862

     Property and equipment, net

3,949

3,987

     Deferred Tax assets

215

-

Total assets

$

215,820

$

224,790

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

     Notes payable - banks

$

107,922

$

124,095

     Current maturities of mortgage payable

1,290

171

     Trade accounts payable

44,058

36,048

     Income taxes payable

2,042

3,036

     Accrued expenses and derivative liabilities

2,844

4,783

     Dividends payable

215

-

          Total current liabilities

158,371

168,133

Mortgage payable, net of current maturities

-

1,290

Subordinated convertible debt net of unamortized discount    of $1,368 and $1,933 respectively

10,632

10,067

Derivative liability for embedded conversion option

2,048

1,996

Deferred taxes payable

-

195

          Total Liabilities

171,051

181,681

Commitments (Note R)

Stockholders' equity:

     Common stock $0.01 par value, 20,000,000 shares authorized         and 11,749,651 shares issued         at December 31, 2013 and December 31, 2012

117

117

     Additional paid-in capital

11,937

11,937

     Retained earnings

38,178

36,641

     Accumulated other comprehensive income/(loss)

51

(136)

     Treasury stock, 3,177,708 and 3,158,597 shares         at December 31, 2013 and December 31, 2012, respectively

(5,514)

(5,450)

          Total stockholders' equity

44,769

43,109

Total liabilities and stockholders' equity

$

215,820

$

224,790

See notes to consolidated financial statements

 

  Year Ended December 31,

2013

2012

Cash flows from operating activities:

     Net income

$

2,396

$

3,964

     Adjustments to reconcile net income to net cash provided         by operating activities:

               Depreciation and amortization 

697

686

               Change in value of derivative liability

52

63

               Amortization of convertible note discount

566

566

               Imputed interest on vendor advance

(293)

(436)

               Provision for doubtful accounts

33

(6)

               Amortization of supply agreement

321

-

               Deferred income taxes 

(356)

45

               Foreign exchange gain and other

(29)

(6)

               Loss on sale of marketable securities

31

-

               Changes in:

                    Trade accounts receivable

981

3,012

                    Inventories

5,969

38,655

                    Other current assets

(2,121)

7,083

                    Trade accounts payable

8,008

(14,016)

                    Income taxes payable

(994)

(1,024)

                    Accrued expenses and derivative liabilities

(1,893)

741

                 Net cash  provided by operating activities

13,368

39,327

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

    Repayment/(advance) related to supply agreement

3,333

(5,000)

    Net proceeds from sale of marketable securities 

6

-

    Purchases of property and equipment

(95)

(73)

                 Net cash provided by/(used in) investing activities

3,244

(5,073)

Cash flows used in financing activities:

     Repayments of notes payable – banks

(16,361)

(30,412)

     Repayments - mortgage payable

(171)

(160)

     Dividends paid 

(644)

(2,825)

     Deferred financing costs

(60)

(62)

     Treasury stock purchased 

(64)

(1,941)

     Stock options exercised

0

     Tax benefit from stock options exercised

0

                 Net cash used in financing activities

(17,300)

(35,400)

Net decrease in cash

(688)

(1,146)

        Effect of exchange rate

29

8

Cash at beginning of period

3,136

4,274

Cash at end of the period

$

2,477

$

3,136

Supplemental disclosures of cash flow information:

     Cash paid during the period for:

          Interest

$

3,739

$

5,107

          Income taxes

$

2,553

$

3,197

Non cash financing activities:

      Dividend declared but not yet paid

$

215

$

-

See notes to consolidated financial statements

 

SOURCE Empire Resources, Inc.