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 16, 2015
EMPIRE RESOURCES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware |
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001-12127 |
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22-3136782 |
(State or other jurisdiction of incorporation) |
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(Commission File Number) |
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(IRS Employer
Identification No.) |
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2115 Linwood
Avenue Fort Lee, New Jersey |
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07024 |
(Address of principal executive offices) |
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(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 16, 2015, Empire Resources, Inc. issued a press release announcing its financial results for the quarter ended September
30, 2015. 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 16, 2015 |
* 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. |
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Dated: November 17, 2015 |
By: |
/s/ Sandra Kahn |
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Name: Sandra Kahn Title: Chief Financial Officer |
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Exhibit 99.1
EMPIRE RESOURCES, INC.
Empire Resources Reports Results for
Third Quarter of 2015
| · | Net
Sales are $122.0 Million, |
| · | Operating
Income Totals $2.3 Million |
| · | GAAP
Net Income per Diluted Share Is $0.04; Non-GAAP Net Income per Diluted Share Is $0.06 |
Fort Lee, NJ, November 16, 2015 -- Empire Resources, Inc.
(NASDAQ: ERS), a distributor of value added, semi-finished metal products, announced today that net sales for the third quarter
of 2015 were $122.0 million, compared with $159.4 million in the third quarter of 2014, and $134.5 million in the second quarter
of 2015. Compared with the 2015 second quarter, strong sales growth in Europe and solid recovery in Australia were offset by substantially
lower sales in Latin America. In the U.S., stronger sales of aluminum products were offset by lower sales of steel products, in
line with challenging steel industry conditions.
Gross profit for the third quarter of 2015 was $5.3 million,
or 4.4% of sales, compared with $7.5 million, or 4.7% of sales, in the third quarter of 2014, and $5.7 million, or 4.2% of sales,
in the second quarter of 2015. Gross profit has been negatively impacted by a lower sales level as well as increased competitive
pressures across all regions. The sequential improvement in the gross margin as a percentage of sales was due to the reduction
of lower-margin carbon steel sales in Latin America.
Operating income for the third quarter of 2015 was $2.3 million,
compared with $3.7 million for the third quarter of 2014 and $2.0 million for the second quarter of 2015. The improvement from
the second quarter of 2015 was primarily due to lower SG&A as a result of lower sales commissions, travel expenses, and lower
repairs and maintenance on our Baltimore warehouse during the third quarter of 2015.
Net interest expense for the third quarter of 2015 was $1.4
million compared with $1.0 million in the third quarter of 2014 and $1.6 million in the second quarter of 2015. The reduction in
interest expense from the 2015 second quarter reflected the Company’s further progress in reducing inventory levels, which totaled
$153.5 million at September 30, 2015 compared with $192.1 million at December 31, 2014.
The Company recognized a non-cash non-operating loss of $0.2
million in the third quarter of 2015 related to the change in fair market valuation of the derivative feature of its convertible
subordinated note. That compares with a non-cash non-operating loss of $2.1 million in the third quarter of 2014 and a non-cash
non-operating gain of $0.4 million in the second quarter of 2015.
Fair value accounting requires that changes in derivative liabilities
related to the Company’s convertible notes be charged or credited to income during each accounting period. The changes in valuation
have several drivers, primary among them is the change in the Company’s stock price, with increases in the stock price causing
losses, increasing the value of the derivative liability, while decreases in the stock price produce gains, reducing the value
of the derivative liability. Such losses are not tax deductible, and likewise any recoveries of such losses are not taxable upon
recovery.
Non-GAAP net income for the third quarter of 2015, excluding
the effect of the change in fair market valuation of the derivative liability and the associated tax treatment, was $0.5 million,
or $0.06 per diluted share, compared with $1.5 million, or $0.16 per diluted share, in the third quarter of 2014, and $0.3 million,
or $0.02 per diluted share, in the second quarter of 2015.
On a GAAP basis, the Company reported net income for the third
quarter of 2015 of $0.3 million, or $0.04 per diluted share, compared with a net loss of $0.7 million, or $(0.08) per diluted share,
in the third quarter of 2014, and net income of $0.8 million, or $0.06 per diluted share for the second quarter of 2015.
For the first nine months of 2015, net sales were $424.7 million
and net income was $2.8 million, or $0.22 per diluted share, on a GAAP basis, and $1.8 million, or $0.15 per diluted share, on
a non-GAAP basis. For the first nine months of 2014, net sales were $444.2 million and net income was $1.8 million, or $0.20 per
diluted share, on a GAAP basis, and $4.3 million, or $0.48 per diluted share, on a non-GAAP basis.
The Company uses the non-GAAP measures internally, which exclude
the effect of the non-cash non-operating gains and losses due to the quarterly changes in the valuation of the derivative liability,
to evaluate its operating performance and believes that this is a useful measure also used by investors.
Nathan Kahn, President and CEO, commented, “Global markets
remained challenging in the third quarter. Even so, we improved sales in Europe, as well as maintaining a solid sales performance
in Australia, and continued strong sales of our aluminum products in the U.S. We are continuing to focus on our customers’ needs,
especially for just-in-time delivery. To better serve those needs today and in the future, we recently acquired and are moving
to a substantially larger and more modern distribution facility in Baltimore.”
About Empire Resources, Inc.
Empire Resources, Inc. is a distributor of a wide range of semi-finished
metal products to customers in the transportation, automotive, housing, appliance and packaging industries in the U.S., Canada,
Latin America, Australia, New Zealand and Europe. The Company maintains supply contracts with mills in various parts of the world.
Use of Non-GAAP Financial Measures
To supplement the Company’s consolidated financial statements
presented on a GAAP basis, the Company discloses non-GAAP net income, because management uses this supplemental non-GAAP financial
measure to evaluate performance period over period, to analyze the underlying trends in its business, and to establish operational
goals. In addition, the Company believes investors already use this non-GAAP measure to monitor the Company’s performance. Non-GAAP
net income is defined by the Company as net income excluding non-cash, non-operating changes in value of derivative liability related
to the conversion option on its convertible debt.
Generally, a non-GAAP financial measure is a numerical measure
of a company’s performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded
or included in the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP measure discussed
above, however, should be considered in addition to, and not as a substitute for, or superior to net income or other measures of
financial performance prepared in accordance with GAAP. A reconciliation of non-GAAP to GAAP net income is set forth in the
table below.
The Company believes that providing this information assists
investors in understanding the Company’s operating performance and the methodology used by management to evaluate and measure such
performance.
Forward-Looking Statements:
This press release contains “forward-looking statements.”
Such statements may be preceded by the words “intends,” “may,” “will,” “plans,” “expects,”
“anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,”
“hopes,” “potential” or similar words. Forward-looking statements are not guarantees of future performance,
are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond
the Company’s control, and cannot be predicted or quantified and consequently, actual results may differ materially from those
expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties
associated with (i) the loss or default of one or more suppliers; (ii) the loss or default of one or more significant customers;
(iii) a default by counterparties to derivative financial instruments; (iv) changes in general, national or regional economic conditions;
(v) an act of war or terrorism that disrupts international shipping; (vi) changes in laws, regulations and tariffs; (vii) the imposition
of anti-dumping duties on products the Company imports; (viii) changes in the size and nature of the Company’s competition; (ix)
changes in interest rates, foreign currencies or spot prices of aluminum; (x) the loss of one or more key executives; (xi) increased
credit risk from customers; (xii) the Company’s failure to grow internally or by acquisition and (xiii) the Company’s failure to
improve operating margins and efficiencies. More detailed information about the Company and the risk factors that may affect the
realization of forward-looking statements is set forth in the Company’s filings with the Securities and Exchange Commission (SEC),
including the Company’s Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and security holders are urged
to read these documents free of charge on the SEC’s web site at http://www.sec.gov. The Company
assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events
or otherwise.
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,
Condensed Consolidated Balance Sheets
(In thousands except share and per share amounts)
| |
September 30,
2015
Unaudited | | |
December 31, 2014 | |
ASSETS | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash | |
$ | 5,536 | | |
$ | 1,130 | |
Trade accounts receivable (less allowance for doubtful accounts of $356 and $562) | |
| 76,248 | | |
| 89,693 | |
Inventories | |
| 153,507 | | |
| 192,064 | |
Deferred tax assets | |
| 3,834 | | |
| 3,911 | |
Advance to supplier, net of imputed interest of $3 and $66 | |
| 831 | | |
| 3,277 | |
Other current assets, including derivatives | |
| 13,232 | | |
| 18,605 | |
Total current assets | |
| 253,188 | | |
| 308,680 | |
Preferential supply agreement, net | |
| 80 | | |
| 321 | |
Long-term financing costs, net of amortization | |
| 817 | | |
| 1,024 | |
Property and equipment, net | |
| 4,372 | | |
| 4,258 | |
Total assets | |
$ | 258,457 | | |
$ | 314,283 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Notes payable - banks | |
$ | 166,471 | | |
$ | 201,088 | |
Subordinated convertible debt net of unamortized discount of $346 | |
| 10,654 | | |
| - | |
Trade accounts payable | |
| 22,928 | | |
| 42,626 | |
Income taxes payable | |
| 1,209 | | |
| 4,190 | |
Accrued expenses and derivative liabilities | |
| 6,737 | | |
| 4,137 | |
Dividends payable | |
| 217 | | |
| 449 | |
Total current liabilities | |
| 208,216 | | |
| 252,490 | |
| |
| | | |
| | |
Subordinated convertible debt net of unamortized discount of $803 | |
| - | | |
| 10,197 | |
Derivative liability for embedded conversion option | |
| 1,550 | | |
| 2,734 | |
Deferred taxes payable | |
| 47 | | |
| 51 | |
Total liabilities | |
| 209,813 | | |
| 265,472 | |
| |
| | | |
| | |
Commitments (Note 18) | |
| | | |
| | |
| |
| | | |
| | |
Stockholders' equity: | |
| | | |
| | |
Common stock $0.01 par value, 20,000,000 shares authorized and 11,749,651 shares issued at September 30, 2015 and December 31, 2014 | |
| 117 | | |
| 117 | |
Additional paid-in capital | |
| 13,038 | | |
| 13,678 | |
Retained earnings | |
| 42,927 | | |
| 40,805 | |
Accumulated other comprehensive loss | |
| (576 | ) | |
| (334 | ) |
Treasury stock, 3,173,843 and 2,843,717 shares at September 30, 2015 and December 31, 2014, respectively | |
| (6,862 | ) | |
| (5,455 | ) |
Total stockholders' equity | |
| 48,644 | | |
| 48,811 | |
Total liabilities and stockholders' equity | |
$ | 258,457 | | |
$ | 314,283 | |
See notes to unaudited condensed consolidated financial statements
Condensed Consolidated Statements of Income
(In thousands except per share amounts)
(Unaudited)
| |
Three Months Ended September 30, 2015 2014 | | |
Nine Months Ended September 30, 2015 2014 | |
Net sales | |
$ | 121,950 | | |
$ | 159,366 | | |
$ | 424,689 | | |
$ | 444,199 | |
Cost of goods sold | |
| 116,603 | | |
| 151,897 | | |
| 406,488 | | |
| 423,228 | |
Gross profit | |
| 5,347 | | |
| 7,469 | | |
| 18,201 | | |
| 20,971 | |
Selling, general and administrative expenses | |
| 3,094 | | |
| 3,819 | | |
| 10,632 | | |
| 10,600 | |
Operating income | |
| 2,253 | | |
| 3,650 | | |
| 7,569 | | |
| 10,371 | |
Interest expense, net | |
| 1,419 | | |
| 1,041 | | |
| 4,665 | | |
| 3,223 | |
Income before other expenses | |
| 834 | | |
| 2,609 | | |
| 2,904 | | |
| 7,148 | |
Other expenses | |
| | | |
| | | |
| | | |
| | |
Change in value of derivative liability | |
| (224 | ) | |
| (2,059 | ) | |
| 1,184 | | |
| (2,239 | ) |
| |
| | | |
| | | |
| | | |
| | |
Loss related to extinguishment of debt converted into common stock | |
| - | | |
| (164 | ) | |
| - | | |
| (164 | ) |
Income before income taxes | |
| 610 | | |
| 386 | | |
| 4,088 | | |
| 4,745 | |
Income taxes | |
| 295 | | |
| 1,080 | | |
| 1,314 | | |
| 2,985 | |
Net income (loss) | |
$ | 315 | | |
$ | (694 | ) | |
$ | 2,774 | | |
$ | 1,760 | |
Weighted average shares outstanding: | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 8,870 | | |
| 8,814 | | |
| 8,709 | | |
| 8,705 | |
Diluted | |
| 8,898 | | |
| 8,814 | | |
| 11,736 | | |
| 8,964 | |
Earnings (loss) per share: | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | 0.04 | | |
($ | 0.08 | ) | |
$ | 0.32 | | |
$ | 0.20 | |
Diluted | |
$ | 0.04 | | |
($ | 0.08 | ) | |
$ | 0.22 | | |
$ | 0.20 | |
See notes to unaudited condensed consolidated financial statements
Non-GAAP Consolidated Statements of Income
(In thousands except per share amounts)
| |
Three Months Ended September 30, 2015 2014 | | |
Nine Months Ended September 30, 2015 2014 | |
GAAP income before income taxes | |
| 610 | | |
| 386 | | |
| 4,088 | | |
| 4,745 | |
Elimination of the change in value of derivative liability | |
| 224 | | |
| 2,059 | | |
| (1,184 | ) | |
| 2,239 | |
Non-GAAP net income before taxation | |
| 834 | | |
| 2,445 | | |
| 2,904 | | |
| 6,984 | |
Income taxes | |
| 325 | | |
| 954 | | |
| 1,133 | | |
| 2,724 | |
Non-GAAP net income | |
$ | 509 | | |
$ | 1,491 | | |
$ | 1,771 | | |
$ | 4,260 | |
Weighted average shares outstanding: | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 8,870 | | |
| 8,814 | | |
| 8,709 | | |
| 8,705 | |
Diluted | |
| 8,898 | | |
| 9,080 | | |
| 11,736 | | |
| 8,964 | |
Non-GAAP earnings per share: | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | 0.06 | | |
$ | 0.17 | | |
$ | 0.20 | | |
$ | 0.49 | |
Diluted | |
$ | 0.06 | | |
$ | 0.16 | | |
$ | 0.15 | | |
$ | 0.48 | |
Condensed Consolidated
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
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