FORT LEE, N.J., May 16, 2016 /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 2016 were $122.1 million,
a decrease of 27.4% from the first quarter of 2015 and an
increase of 25.8% from the fourth quarter of 2015. The year on
year decrease in sales was driven by a decline in sales across all
regions except Europe.
Gross profit for the first quarter of 2016 decreased 26.8% from
the first quarter of 2015 to $5.25
million, or 4.3% of sales, compared with $7.2 million, or 4.3% of sales, in the first
quarter of 2015. Gross profit in the first quarter of 2016
increased 12.9% from $4.7 million, or
4.8% of sales, in the fourth quarter of 2015.
Operating income for the first quarter of 2016 was $2.3 million, a decrease of 29.9% from the first
quarter of 2015 and 200% higher than the fourth quarter of
2015.
Net interest expense for the first quarter of 2016 decreased by
$0.4 million to $1.3 million from $1.7
million in first quarter of 2015, and was flat as
compared to the fourth quarter of 2015.
The Company recognized a non-cash non-operating gain of
$0.7 million in the first quarter of
2016 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 $1.0 million in the first quarter of 2015, and a
non-cash non-operating gain of $0.6
million in the fourth 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, including tenor and changes in the
Company's stock price, with increases in the stock price increasing
the value of the derivative liability, causing losses, while
decreases in the stock price reduce the value of the derivative
liability, producing gains. Such losses are not tax deductible, and
likewise any recoveries of such losses are not taxable upon
recovery. The resultant effective tax rates were 33.4% for
the first quarter of 2016, 36.3% for the first quarter of 2015.
Non-GAAP net income for the first quarter of 2016, excluding the
effect of the change in fair market valuation of the derivative
liability and the associated tax treatment, was $0.6 million, or $0.06 per diluted share, compared with
$1.0 million, or $0.08 per diluted share in the first quarter of
2015, and $(0.5) million, or
$(0.06) per diluted share, in the
fourth quarter of 2015.
On a GAAP basis, the Company reported net income for the first
quarter of 2016 of $1.1 million, or
$0.07 per diluted share, compared
with net income of $1.7 million, or
$0.09 per diluted share, in the first
quarter of 2015, and $0.04 million,
or $0.00 per diluted share, in the
fourth quarter of 2015.
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.
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, Europe, Australia, New
Zealand and Latin America.
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.
Unaudited
Consolidated Statements of Income (In thousands except
per share amounts)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
2016
2015
|
Net sales
|
|
$
|
122,125
|
|
$
|
168,253
|
Cost of goods
sold
|
|
|
116,872
|
|
|
161,077
|
Gross
profit
|
|
|
5,253
|
|
|
7,176
|
Selling, general and
administrative expenses
|
|
|
2,954
|
|
|
3,898
|
Operating
income
|
|
|
2,299
|
|
|
3,278
|
Interest
expense, net
|
|
|
1,274
|
|
|
1,675
|
Income before change
in value of derivative liability
|
|
|
1,025
|
|
|
1,603
|
Reduction in value of derivative liability
|
|
|
700
|
|
|
996
|
Income before income
taxes
|
|
|
1,725
|
|
|
2,599
|
Income
taxes
|
|
|
576
|
|
|
944
|
Net
income
|
|
$
|
1,149
|
|
$
|
1,655
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
Basic
|
|
|
8,510
|
|
|
8,807
|
Diluted
|
|
|
11,460
|
|
|
11,924
|
Earnings per
share:
|
|
|
|
|
|
|
Basic
|
|
|
$0.14
|
|
|
$0.19
|
Diluted
|
|
|
$0.07
|
|
|
$0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Consolidated Statements of Income
(In thousands except per share amounts)
|
|
|
Three Months
Ended March 31,
2016
2015
|
GAAP income before
income taxes
|
|
|
1,725
|
|
|
2,599
|
Elimination of the
change in value of
derivative liability
|
|
|
(700)
|
|
|
(996)
|
Non-GAAP net income
before taxation
|
|
|
1,025
|
|
|
1,603
|
Income
taxes
|
|
|
400
|
|
|
625
|
Non-GAAP net
income
|
|
$
|
625
|
|
$
|
978
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
Basic
|
|
|
8,510
|
|
|
8,807
|
Diluted
|
|
|
11,460
|
|
|
11,924
|
Non-GAAP earnings
per share:
|
|
|
|
|
|
|
Basic
|
|
|
$0.07
|
|
|
$0.11
|
Diluted
|
|
|
$0.06
|
|
|
$0.08
|
Consolidated
Balance Sheets (In thousands except share and per share
amounts)
|
|
March 31,
2016 (unaudited)
|
|
December 31,
2015
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
|
$
|
8,732
|
|
$
|
7,315
|
Trade accounts receivable
(less allowance for doubtful
accounts of $1,193 and
$1,190)
|
|
73,417
|
|
|
60,525
|
Inventories
|
|
139,426
|
|
|
157,025
|
Deferred tax
assets
|
|
5,102
|
|
|
5,101
|
Other current assets,
including derivatives
|
|
7,037
|
|
|
10,601
|
Total current assets
|
|
233,714
|
|
|
240,567
|
Property and equipment,
net
|
|
7,321
|
|
|
7,340
|
Total
assets
|
$
|
241,035
|
|
$
|
247,907
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Notes payable - banks (net
of unamortized financing costs of
$488
and $629)
|
$
|
123,755
|
|
$
|
138,517
|
Current maturities of
mortgage payable
|
|
265
|
|
|
265
|
Subordinated convertible
debt net of unamortized discount of
$86
and $216
|
|
10,914
|
|
|
10,784
|
Trade accounts
payable
|
|
40,275
|
|
|
35,741
|
Income taxes
payable
|
|
2,624
|
|
|
2,092
|
Accrued expenses and
derivative liabilities
|
|
8,670
|
|
|
6,177
|
Derivative liability for
embedded conversion option
|
|
241
|
|
|
942
|
Dividends payable
|
|
212
|
|
|
213
|
Total current liabilities
|
|
186,956
|
|
|
194,731
|
|
|
|
|
|
|
Mortgage payable, net
of current maturities
|
|
4,903
|
|
|
4,969
|
Deferred taxes
payable
|
|
-
|
|
|
8
|
Total liabilities
|
|
191,859
|
|
|
199,708
|
|
|
|
|
|
|
Commitments (Note
18)
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
Common stock $0.01 par
value, 20,000,000 shares authorized
and 11,749,651 shares
issued
at March 31, 2016 and
December 31, 2015
|
|
117
|
|
|
117
|
Additional paid-in
capital
|
|
13,037
|
|
|
13,037
|
Retained earnings
|
|
43,686
|
|
|
42,749
|
Accumulated other
comprehensive loss
|
|
(505)
|
|
|
(666)
|
Treasury stock, 3,252,191
and 3,218,691 shares
at March 31, 2016 and
December 31, 2015
|
|
(7,159)
|
|
|
(7,038)
|
Total stockholders' equity
|
|
49,176
|
|
|
48,199
|
Total liabilities and
stockholders' equity
|
$
|
241,035
|
|
$
|
247,907
|
Unaudited
Consolidated Statements of Cash Flows (In
thousands)
|
|
Three Months Ended
March 31,
2016
2015
|
Cash flows -
operating activities:
|
|
|
|
|
|
Net income
|
$
|
1,149
|
|
$
|
1,655
|
Adjustments to reconcile net
income to net cash provided by/(used in) operating
activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
186
|
|
|
162
|
Reduction in value of derivative liability
|
|
(700)
|
|
|
(996)
|
Amortization of convertible note discount
|
|
130
|
|
|
197
|
Imputed interest on vendor advance
|
|
-
|
|
|
(26)
|
Provision for doubtful accounts
|
|
(7)
|
|
|
-
|
Amortization of supply agreement
|
|
-
|
|
|
80
|
Deferred income taxes
|
|
(9)
|
|
|
9
|
Foreign exchange loss and other
|
|
152
|
|
|
460
|
Changes in:
|
|
|
|
|
|
Trade accounts receivable
|
|
(12,742)
|
|
|
(19,269)
|
Inventories
|
|
17,989
|
|
|
4,409
|
Other current assets
|
|
2,923
|
|
|
4,959
|
Trade accounts payable
|
|
4,588
|
|
|
(11,217)
|
Income taxes payable
|
|
529
|
|
|
716
|
Accrued expenses and derivative liabilities
|
|
3,013
|
|
|
804
|
Net cash provided by/(used in) operating
activities
|
|
17,201
|
|
|
(18,057)
|
Cash flows -
investing activities:
|
|
|
|
|
|
Repayment related to supply agreement
|
|
-
|
|
|
833
|
Purchases of property and equipment
|
|
(26)
|
|
|
(116)
|
Net cash (used in) /provided by investing activities
|
|
(26)
|
|
|
717
|
Cash flows -
financing activities:
|
|
|
|
|
|
(Repayment of)/proceeds from
notes payable – banks
|
|
(15,343)
|
|
|
22,163
|
Repayments of mortgage
loan
|
|
(66)
|
|
|
-
|
Deferred financing
costs
|
|
-
|
|
|
(13)
|
Dividends
paid
|
|
(213)
|
|
|
(449)
|
Treasury stock
purchased
|
|
(121)
|
|
|
(741)
|
Net cash (used in)/provided by financing activities
|
|
(15,743)
|
|
|
20,960
|
Net increase in
cash
|
|
1,432
|
|
|
3,620
|
Effect of
exchange rate
|
|
(15)
|
|
|
(98)
|
Cash at beginning of
period
|
|
7,315
|
|
|
1,130
|
Cash at end of
period
|
$
|
8,732
|
|
$
|
4,652
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
Cash paid during the period
for:
|
|
|
|
|
|
Interest
|
$
|
1,147
|
|
$
|
1,310
|
Income taxes
|
$
|
234
|
|
$
|
614
|
Non cash financing
activities:
|
|
|
|
|
|
Dividend declared but
not yet paid
|
$
|
212
|
|
$
|
218
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/empire-resources-reports-results-for-first-quarter-of-2016-300268756.html
SOURCE Empire Resources, Inc.