UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
_________________
Date of Report (Date of earliest event reported):
November 14, 2014
EMPIRE RESOURCES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware |
|
001-12127 |
|
22-3136782 |
(State or other jurisdiction
of incorporation) |
|
(Commission File Number) |
|
(IRS Employer
Identification No.) |
|
|
|
One Parker
Plaza
Fort Lee, New Jersey |
|
07024 |
(Address of principal executive offices) |
|
(Zip Code) |
Registrant’s telephone number, including
area code: (201) 944-2200
(Former name or former address, if changed since last report) |
Check the appropriate box below if the Form
8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant
to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications
pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4(c))
| Item 2.02 | Results of Operations and Financial Condition. |
On
November 14, 2014, Empire Resources, Inc. issued a press release announcing its financial results for the fiscal quarter ended
September 30, 2014. A copy of this press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
In accordance with General Instruction B.2
of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, that is furnished pursuant to this Item
2.02 shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference
into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except
as shall be expressly set forth by specific reference in such filing.
| Item 9.01 | Financial Statements and Exhibits. |
Exhibit
Number |
|
Description |
*99.1 |
|
Earnings release dated November 14, 2014 |
* This exhibit is furnished pursuant to
Item 2.02 and shall not be deemed to be “filed.”
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
|
EMPIRE RESOURCES, INC. |
|
|
|
|
Dated: November 17, 2014 |
By: /s/ Sandra Kahn___ |
|
Name: Sandra Kahn |
|
Title: Chief Financial Officer |
EXHIBIT 99.1
EMPIRE RESOURCES, INC.
EMPIRE RESOURCES REPORTS STRONG THIRD
QUARTER 2014 RESULTS
- Net Sales Increase 26% from Third Quarter
of 2013 to $159.4 Million, Up 9% Sequentially
- Operating Income of $3.7 Million Is
More than Double 2013 Third Quarter Level
- GAAP Net Loss per Diluted Share Is
$0.08, Non-GAAP Net Income per Diluted Share Is $0.17
FORT LEE, N.J., November 14, 2014 -- Empire Resources, Inc.
(NASDAQ: ERS), a distributor of value added, semi-finished metal products, announced today that net sales for the third quarter
of 2014 were $159.4 million, an increase of 26% from the third quarter of 2013, and 9% higher sequentially. The growth in
revenue compared with both the third quarter of 2013 as well as the second quarter of 2014 was primarily driven by a strong increase
in sales in the U.S.
Gross profit for the third quarter of 2014 increased 41% from
the third quarter of 2013 to $7.5 million, or 4.7% of sales, compared with $5.3 million, or 4.2% of sales, in the third quarter
of 2013. In the second quarter of 2014, gross profit was $7.0 million, or 4.8% of sales.
Operating income for the third quarter of 2014 was $3.7 million,
which is more than double the operating income of $1.7 million reported in the third quarter of 2013 and up 3% from operating
income of $3.5 million in the second quarter of 2014.
Net interest expense for the third quarter of 2014 was $1.0
million, which is 10% below the third quarter of 2013 and 5% below the second quarter of 2014, reflecting the lower interest rate
environment in the most recent quarter and reduced interest expense due to a reduction in the Company's convertible debt.
The Company recognized a non-cash non-operating loss of $2.1
million in the third quarter of 2014 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 gain of $1.7 million in the third quarter of 2013, and a non-cash
non-operating gain of $0.2 million in the second quarter of 2014.
Fair value accounting requires that changes in derivative liabilities
related to the Company's convertible notes be charged or credited to income during each accounting period. The changes in valuation
have several drivers, primary among them is the change in the Company's stock price, with increases in the stock price causing
losses on the derivative liability, while decreases in the stock price produce gains on the derivative liability. 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 loss of $2.1 million in the third quarter of 2014 or the non-cash non-operating gains of $1.7 million
in the third quarter of 2013 and the $0.2 million in the second quarter of 2014. The resultant effective tax rate for the third
quarter of 2014 was 279.8%, 8.6% for the third quarter of 2013 and 38.8% in the second quarter of 2014.
Non-GAAP net income for the third quarter of 2014, excluding
the effect of the change in fair market valuation of the derivative liability and the associated tax treatment, increased 345%
to $1.5 million, or $0.17 per diluted share, compared with non-GAAP net income of $0.3 million, or $0.04 per diluted share, in
the third quarter of 2013. Non-GAAP net income was $1.5 million, or $0.17 per diluted share, in the second quarter of 2014.
On a GAAP basis, the Company reported a net loss of $0.7 million,
or $0.08 per diluted share, for the third quarter of 2014, compared with net income of $2.1 million, or $0.06 per diluted share,
in the third quarter of 2013, and net income of $1.6 million, or $0.15 per diluted share, in the second quarter of 2014.
For the first nine months of 2014, net sales increased 20% to
$444.2 million compared with $370.3 million in the first nine months of 2013. On a GAAP basis, net income for the first nine months
of 2014 was $1.8 million, or $0.20 per diluted share, compared with $1.9 million, or $0.22 per diluted share, in the first nine
months of 2013. On a non-GAAP basis, net income increased 103% to $4.3 million, or $0.48 per diluted share, for the first nine
months of 2014, compared with non-GAAP net income of $2.1 million, or $0.24 per diluted share, in the first nine months of 2013.
The Company uses the non-GAAP measures internally, which exclude
the effect of the non-cash non-operating gains and losses due to the quarterly changes in the valuation of the derivative liability,
to evaluate its operating performance and believes that this is a useful measure also used by investors.
Nathan Kahn, President and CEO, commented, "For a third
consecutive quarter, we achieved both sequential and year-over-year top-line growth, as we continue to benefit from our geographic
and product diversity. Robust market demand in the U.S. was the main driver of our sales in the third quarter, both in aluminum
and steel. We also realized improved growth in Europe, where our team's focus on execution is making a difference despite locally
soft economic conditions. Sales in Latin America remained nearly level while the Australia/New Zealand team continued the year-over-year
improvement they have achieved for the past two quarters. We are also pleased to report continued growth in operating income, which
is at the highest level in four years, while our non-GAAP net income year-to-date is double the level we achieved last year."
Restatement Due to Change in Income Tax Provision
Losses and gains arising from the change in values of the derivative
liability are excluded from deferred income tax calculations and adjustments for this have been reflected in the accounting for
deferred income taxes. Net income for the three months ended September 30, 2013 has been increased by $0.6 million, or $0.07 per
basic share, and by $0.00 per diluted share, from the amount of $1.5 million previously reported, to reflect a reduction in the
deferred income tax provision attributable to the income from the change in value of the derivative liability. Correspondingly,
the net income for the three months ended March 31, 2013 has been decreased by $0.6 million, or $0.07 per basic and diluted share,
from the amount of $0.1 million previously reported to reflect an increase in the deferred income tax provision attributable to
the loss from change in value of the derivative liability. Similarly, the net income for the three months ended March 31, 2014
has been decreased by $0.2 million, or $0.03 per basic and diluted share, from the amount of $1.0 million previously reported.
About Empire Resources, Inc.
Empire Resources, Inc. is a distributor of a wide range of semi-finished
metal products to customers in the transportation, automotive, housing, appliance and packaging industries in the U.S., Canada,
Latin America, Australia, New Zealand and Europe. The Company maintains supply contracts with mills in various parts of the world.
Use of Non-GAAP Financial Measures
To supplement the Company's consolidated financial statements
presented on a GAAP basis, the Company discloses non-GAAP net income, because management uses this supplemental non-GAAP financial
measure to evaluate performance period over period, to analyze the underlying trends in its business, and to establish operational
goals. In addition, the Company believes investors already use this non-GAAP measure to monitor the Company's performance. Non-GAAP
net income is defined by the Company as net income excluding non-cash, non-operating changes in value of derivative liability related
to the conversion option on its convertible debt.
Generally, a non-GAAP financial measure is a numerical measure
of a company's performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded
or included in the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP measure discussed
above, however, should be considered in addition to, and not as a substitute for, or superior to net income or other measures of
financial performance prepared in accordance with GAAP. A reconciliation of non-GAAP to GAAP net income is set forth in the
table below.
The Company believes that providing this information assists
investors in understanding the Company's operating performance and the methodology used by management to evaluate and measure such
performance.
Forward-Looking Statements:
This press release contains "forward-looking statements."
Such statements may be preceded by the words "intends," "may," "will," "plans," "expects,"
"anticipates," "projects," "predicts," "estimates," "aims," "believes,"
"hopes," "potential" or similar words. Forward-looking statements are not guarantees of future performance,
are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond
the Company's control, and cannot be predicted or quantified and consequently, actual results may differ materially from those
expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties
associated with (i) the loss or default of one or more suppliers; (ii) the loss or default of one or more significant customers;
(iii) a default by counterparties to derivative financial instruments; (iv) changes in general, national or regional economic conditions;
(v) an act of war or terrorism that disrupts international shipping; (vi) changes in laws, regulations and tariffs; (vii) the imposition
of anti-dumping duties on products the Company imports; (viii) changes in the size and nature of the Company's competition; (ix)
changes in interest rates, foreign currencies or spot prices of aluminum; (x) the loss of one or more key executives; (xi) increased
credit risk from customers; (xii) the Company's failure to grow internally or by acquisition and (xiii) the Company's failure to
improve operating margins and efficiencies. More detailed information about the Company and the risk factors that may affect the
realization of forward-looking statements is set forth in the Company's filings with the Securities and Exchange Commission (SEC),
including the Company's Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and security holders are urged
to read these documents free of charge on the SEC's web site at http://www.sec.gov. The Company assumes no obligation to publicly
update or revise its forward-looking statements as a result of new information, future events or otherwise.
Condensed Consolidated Statements of Income (Unaudited)
(In thousands except per share amounts) |
| |
Three Months Ended September 30, 2014 2013 (see note 20) | | |
Nine Months Ended September 30, 2014 2013 | |
Net sales | |
$ | 159,366 | | |
$ | 126,390 | | |
$ | 444,199 | | |
$ | 370,288 | |
Cost of goods sold | |
| 151,897 | | |
| 121,082 | | |
| 423,228 | | |
| 353,083 | |
Gross profit | |
| 7,469 | | |
| 5,308 | | |
| 20,971 | | |
| 17,205 | |
Selling, general and administrative expenses | |
| 3,819 | | |
| 3,602 | | |
| 10,600 | | |
| 10,361 | |
Operating income | |
| 3,650 | | |
| 1,706 | | |
| 10,371 | | |
| 6,844 | |
Interest expense, net | |
| 1,041 | | |
| 1,156 | | |
| 3,223 | | |
| 3,403 | |
Income before other expenses | |
| 2,609 | | |
| 550 | | |
| 7,148 | | |
| 3,441 | |
Other expenses | |
| | | |
| | | |
| | | |
| | |
Change in value of derivative liability | |
| (2,059 | ) | |
| 1,715 | | |
| (2,239 | ) | |
| (452 | ) |
Loss related to extinguishment of debt converted into common stock | |
| (164 | ) | |
| - | | |
| (164 | ) | |
| - | |
Income before income taxes | |
| 386 | | |
| 2,265 | | |
| 4,745 | | |
| 2,989 | |
Income taxes | |
| 1,080 | | |
| 194 | | |
| 2,985 | | |
| 1,066 | |
Net (loss)/income | |
$ | (694 | ) | |
$ | 2,071 | | |
$ | 1,760 | | |
$ | 1,923 | |
Weighted average shares outstanding: | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 8,814 | | |
| 8,586 | | |
| 8,705 | | |
| 8,585 | |
Diluted | |
| 8,814 | | |
| 11,835 | | |
| 8,964 | | |
| 8,856 | |
Earnings per share: | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | (0.08 | ) | |
$ | 0.24 | | |
$ | 0.20 | | |
$ | 0.22 | |
Diluted | |
$ | (0.08 | ) | |
$ | 0.06 | | |
$ | 0.20 | | |
$ | 0.22 | |
See notes to unaudited condensed consolidated financial statements |
Non-GAAP Consolidated Statements of Income (Unaudited)
(In thousands except per share amounts) |
| |
Three Months Ended September 30, 2014 2013 | | |
Nine Months Ended September 30, 2014 2013 | |
GAAP income before income taxes | |
| 386 | | |
| 2,265 | | |
| 4,745 | | |
| 2,989 | |
Elimination of the change in value of derivative liability | |
| 2,059 | | |
| (1,715 | ) | |
| 2,239 | | |
| 452 | |
Non-GAAP net income before taxation | |
| 2,445 | | |
| 550 | | |
| 6,984 | | |
| 3,441 | |
Income taxes | |
| 954 | | |
| 215 | | |
| 2,724 | | |
| 1,342 | |
Non-GAAP net income | |
$ | 1,491 | | |
$ | 336 | | |
$ | 4,260 | | |
$ | 2,099 | |
Weighted average shares outstanding: | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 8,814 | | |
| 8,586 | | |
| 8,705 | | |
| 8,585 | |
Diluted | |
| 8,814 | | |
| 8,850 | | |
| 8,964 | | |
| 8,856 | |
Non-GAAP earnings per share: | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | 0.17 | | |
$ | 0.04 | | |
$ | 0.49 | | |
$ | 0.24 | |
Diluted | |
$ | 0.17 | | |
$ | 0.04 | | |
$ | 0.48 | | |
$ | 0.24 | |
Condensed Consolidated Balance Sheets
(In thousands except share and per share amounts) |
| |
September 30, 2014 (Unaudited) | | |
December 31, 2013 | |
ASSETS | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash | |
$ | 4,663 | | |
$ | 2,477 | |
Trade accounts receivable (less allowance for doubtful accounts of $543 and $562) | |
| 97,393 | | |
| 52,696 | |
Inventories | |
| 120,104 | | |
| 139,752 | |
Deferred tax assets | |
| 3,194 | | |
| 3,217 | |
Advance to supplier, net of imputed interest of $87 and $176 | |
| 3,236 | | |
| 3,147 | |
Other current assets, including derivatives | |
| 6,051 | | |
| 6,081 | |
Total current assets | |
| 234,641 | | |
| 207,370 | |
Advance to supplier, net of imputed interest of $3 and $56, and net of current maturities | |
| 841 | | |
| 3,287 | |
Preferential supply agreement, net | |
| 401 | | |
| 641 | |
Long-term financing costs, net of amortization | |
| 962 | | |
| 358 | |
Property and equipment, net | |
| 3,886 | | |
| 3,949 | |
Deferred tax assets | |
| - | | |
| 215 | |
Total assets | |
$ | 240,731 | | |
$ | 215,820 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Notes payable - banks | |
$ | 132,785 | | |
$ | 107,922 | |
Current maturities of mortgage payable | |
| 1,154 | | |
| 1,290 | |
Trade accounts payable | |
| 33,488 | | |
| 44,058 | |
Income taxes payable | |
| 3,037 | | |
| 2,042 | |
Accrued expenses and derivative liabilities | |
| 8,257 | | |
| 2,844 | |
Dividends payable | |
| 224 | | |
| 215 | |
Total current liabilities | |
| 178,945 | | |
| 158,371 | |
| |
| | | |
| | |
Subordinated convertible debt net of unamortized discount of $865 and $1,368 respectively | |
| 10,135 | | |
| 10,632 | |
Derivative liability for embedded conversion option | |
| 3,860 | | |
| 2,048 | |
Deferred taxes payable | |
| 49 | | |
| - | |
Total Liabilities | |
| 192,989 | | |
| 171,051 | |
| |
| | | |
| | |
Commitments (Note 19) | |
| | | |
| | |
| |
| | | |
| | |
Stockholders' equity: | |
| | | |
| | |
Common stock $0.01 par value, 20,000,000 shares authorized and 11,749,651 shares issued at September 30, 2014 and December 31, 2013 | |
| 117 | | |
| 117 | |
Additional paid-in capital | |
| 13,678 | | |
| 11,937 | |
Retained earnings | |
| 39,280 | | |
| 38,178 | |
Accumulated other comprehensive (loss)/income | |
| (217 | ) | |
| 51 | |
Treasury stock, 2,773,420 and 3,177,708 shares at September 30, 2014 and December 31, 2013, respectively | |
| (5,116 | ) | |
| (5,514 | ) |
Total stockholders' equity | |
| 47,742 | | |
| 44,769 | |
Total liabilities and stockholders' equity | |
$ | 240,731 | | |
$ | 215,820 | |
See notes to unaudited condensed consolidated financial statements |
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands) |
| |
Nine Months Ended September 30, 2014 2013 | |
Cash flows - operating activities: | |
| | | |
| | |
Net income | |
$ | 1,760 | | |
$ | 1,923 | |
Adjustments to reconcile net income to net cash (used in)/provided by operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 482 | | |
| 518 | |
Change in value of derivative liability | |
| 2,239 | | |
| 452 | |
Loss related to extinguishment of debt converted into common stock | |
| 164 | | |
| - | |
Amortization of convertible note discount | |
| 419 | | |
| 424 | |
Imputed interest on vendor advance | |
| (144 | ) | |
| (231 | ) |
Loss on sale of marketable securities | |
| - | | |
| 32 | |
Amortization of supply agreement | |
| 240 | | |
| 240 | |
Deferred income taxes | |
| 271 | | |
| (503 | ) |
Foreign exchange loss/(gain) and other | |
| 296 | | |
| (23 | ) |
Stock-based compensation | |
| 630 | | |
| - | |
Changes in: | |
| | | |
| | |
Trade accounts receivable | |
| (45,330 | ) | |
| (9,932 | ) |
Inventories | |
| 18,947 | | |
| 21,708 | |
Other current assets | |
| 27 | | |
| (666 | ) |
Trade accounts payable | |
| (10,751 | ) | |
| (8,061 | ) |
Income taxes payable | |
| 995 | | |
| (818 | ) |
Accrued expenses and derivative liabilities | |
| 5,708 | | |
| (1,221 | ) |
Net cash (used in)/provided by operating activities | |
| (24,047 | ) | |
| 3,842 | |
Cash flows - investing activities: | |
| | | |
| | |
Repayment related to supply agreement | |
| 2,500 | | |
| 2,500 | |
Net proceeds from sale of marketable securities | |
| - | | |
| 6 | |
Purchases of property and equipment | |
| (19 | ) | |
| (6 | ) |
Net cash provided by investing activities | |
| 2,481 | | |
| 2,500 | |
Cash flows - financing activities: | |
| | | |
| | |
Proceeds from/(repayments) of notes payable – banks | |
| 25,602 | | |
| (6,594 | ) |
Repayments - mortgage payable | |
| (136 | ) | |
| (127 | ) |
Deferred Financing Costs | |
| (1,005 | ) | |
| (60 | ) |
Dividends paid | |
| (648 | ) | |
| (429 | ) |
Proceeds from stock options exercised | |
| 15 | | |
| - | |
Treasury stock purchased | |
| (13 | ) | |
| (23 | ) |
Net cash provided by/(used in) financing activities | |
| 23,815 | | |
| (7,233 | ) |
Net increase/(decrease) in cash | |
| 2,249 | | |
| (891 | ) |
Effect of exchange rate | |
| (63 | ) | |
| 1 | |
Cash at beginning of period | |
| 2,477 | | |
| 3,136 | |
Cash at end of the period | |
$ | 4,663 | | |
$ | 2,246 | |
Supplemental disclosures of cash flow information: | |
| | | |
| | |
Cash paid during the period for: | |
| | | |
| | |
Interest | |
$ | 3,476 | | |
$ | 2,913 | |
Income taxes | |
$ | 2,737 | | |
$ | 1,955 | |
Non cash financing activities: | |
| | | |
| | |
Dividend declared but not yet paid | |
$ | 224 | | |
$ | 215 | |
Treasury stock issued on conversion of subordinated debt | |
$ | 1,507 | | |
| - | |
See notes to unaudited condensed consolidated financial statements |
CONTACT: Investor Relations, Comm-Counsellors, LLC, Edward Nebb,
+1-203-972-8350, enebb@optonline.net, or June Filingeri, +1-203-972-0186, junefil@optonline.net; or Shareholders, David Kronfeld,
+1 917-408-1940, kronfeld@empireresources.com
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