China Armco Metals Announces First Quarter 2013 Financial Results

China Armco Metals Announces First Quarter 2013 Financial Results 
SAN MATEO, CA -- (Marketwired) -- 05/15/13 --  China Armco Metals,
Inc. (NYSE MKT: CNAM) ("China Armco" or the "Company"), a distributor
of imported metal ore and metal recycler, today announced its
financial results for the first quarter of 2013. 
SUMMARY FINANCIALS 


 
                                                                          
--------------------------------------------------------------------------
 First quarter 2013 Results                                               
--------------------------------------------------------------------------
                            Q1 2013          Q1 2012           CHANGE     
--------------------------------------------------------------------------
 Revenue                 $14.3 million    $49.3 million          -71%     
--------------------------------------------------------------------------
 Gross Profit            $0.64 million    $1.46 million          -56%     
--------------------------------------------------------------------------
 Net Income (Loss)      ($1.09 million)  ($1.66 million)          n/a     
--------------------------------------------------------------------------
 EPS (Fully Diluted)         ($0. 05)         ($0.10)             n/a     
--------------------------------------------------------------------------

 
First Quarter of 2013 Financial Results 
For the quarter ended March 31, 2013, net revenue decreased to $14.3
million compared to $49.3 million for the same period of 2012. The
decline in sales in the quarter resulted from the significant
decrease of $35.9 million, or 87%, in our trading business sales
which the Company proactively reacted to the metal ore market change
and slowed down our trading activities to manage risks. China Armco
sold 32,286 tons various metal ores at an average price of $166 per
ton through its trading business compared to sales of a total of
324,849 tons various ores at an average price of $127 per ton in the
first quarter of 2012. China Armco's metal recycling business
contributed $9.0 million in sales during the first three months of
2013, increased 12% compared to $8.0 million in sales in same period
of 2012.  
Gross profit for the first quarter of 2013 decreased 56% to $0.64
million, compared to $1.46 million in the first quarter of 2012
mainly due to the decline in trading business. Gross profits for the
trading and metal recycling business were $0.002 million and $0.63
million respectively. Gross margin for the trading business declined
to 0.3% and recycling businesses increased to 7%, compared to 3% for
trading business and 2% for recycling business in the first quarter
of 2012 respectively. 
Operating expenses remained at approximately $1.7 million for the
first quarter of 2013 compared to same period of 2012. As a
percentage of sales, operating expenses were 11.8% and 3.4% in the
first quarter of 2013 and 2012, respectively, the increase primarily
due to the significant decrease in our trading business sales and a
one-time leasing fee adjustment in the first quarter of 2013. 
Operating loss for the first quarter of 2013 was $1.05 million
compared to an operating loss of $0.23 million in the first quarter
of 2012.  
Net loss for the first quarter of 2013 was $1.09 million, or $0.05
loss per diluted share, compared to net loss $1.66 million or $0.10
per share for the same period last year. The weighted average diluted
shares outstanding increased from 16.7 million in the first quarter
of 2012 to 23.3 million in the first quarter of 2013, due to equity
issuance for capital raise, payment and compensation and converted
debt after the end of first quarter of 2012 .  
Mr. Kexuan Yao, Chairman and CEO of China Armco stated, "Although the
China steel industry had a turnaround from losses to profits for the
first quarter, the total profit posted a downward trend with
record-high output over the first three months of 2013 suggesting
that the sector remained weak due to fiercer competition amid
industrial overcapacity. Our trading business was adversely affected
by the market resulting in sharp declines on net revenues and gross
margins during the quarter. However, our revenue and gross margin in
our recycling business continued to grow steady; the quantities of
scrap metals processed and sold from our recycling facility in the
first quarter continued to increase compared to the first quarter of
2012. We believe our solid and sound foundation in the industry, our
strong relationship with our customers and suppliers around the
world, and the strategy we have developed will enable us to overcome
various challenges and fully leverage our operating model to generate
incremental revenue and profitability, especially, recently in the
second quarter we have started to increase our production of recycled
nonferrous metal scraps which is expected to further improve our
recycling business profitability." 
Financial Conditions 
As of March 31, 2013, the Company had $1.33 million in cash and cash
equivalents, compared to $1.37 million at the end of 2012. Working
capital was $1.4 million and a current ratio of 1.03:1 on March 31,
2013 compared to $0.3 million and 1.01:1 on December 31, 2012. Total
accounts receivable decreased $7.6 million to $8.1 million at the end
of the first quarter of 2013 compared to $15.7 million at the year
end of 2012 primarily due to the payment we received in the first
quarter for our scrap metal sales made during 2012. Inventories
increased $5.4 million at March 31, 2013 from December 31, 2012,
primarily due to the inventories of $3.57 million of Chrome ore and
the increase of scrap metal inventories for increased production. We
have signed sales contracts and received deposits for the sales order
of the Chrome ore inventories which are expected to be delivered in
the second quarter. As of March 31, 2013, shareholders' equity was
$42 million, essentially flat from December 31, 2012.  
The Company had a $3.3 million net cash inflow from operations in the
first quarter of 2013 compared to a net cash outflow of $26.1 million
in the same period last year. During the first quarter of 2013, China
Armco successfully sold (delivered) or locked sales contracts (to be
delivered) for all of our metal ores inventories and scrap metals
recycled in the quarter to control market risks and speed up capital
turnover. The Company has bank facilities, which provide for cash
borrowings or the issuance of commercial letters of credit required
in its metal ore trading business, aggregating $57 million.
Approximately $37 million was available under these facilities at
March 31, 2013. 
Business Updates 
Our trading business decreased to approximately $5.4 million in net
revenues during the first quarter of 2013 compared to $41.3 million
in the same period in 2012. In the first quarter of 2013, to manage
market risks, we significantly decreased new purchase of metal ore
and locked sales orders for our ore inventories of $3.57 million to
be delivered in second quarter. We continued to firm our business
relationship with worldwide suppliers and stabilize our supply
capacity. We believe our effort to build our supply capacity will
benefit us in the long term and strengthen our market position in the
industry in the PRC. Moreover, we continued to develop our new
"Commodity Financing" model and expect to make some major progress in
this year which we have obtained support from several large banks. 
During the first quarter of 2013, despite the Chinese New Year
holiday and the weak demand and market, both production and revenues
for our recycling business continued to increase compared to the same
period of last year. The scrap metals recycled at our recycling
facility increased by 75% to 43,795 MT compared to 25,071 MT in the
same period of last year. Our scrap metal business sold approximately
23,001 MT of scrap metals, generating approximately $9.0 million of
revenue. By comparison, for the first quarter of 2012, our scrap
metal business sold approximately 16,753 MT of scrap metals,
generating approximately $8.0 million of revenue. The gross profit
margin for our recycling business also increased significantly to 7%
for the first quarter in 2013 compared to 2% for same period of 2012
due to the improvement of our recycling business operation. Through
the past two years' operation, we have achieved many accomplishments
in fundamental aspects of our recycling business, such as optimizing
production process, improving cost control and management, developing
and streamlining supply chain, establishment of long term strategic
partnership with key clients, obtaining various qualifications and
licenses, and building our brand in the industry. In addition, as an
effort to improve our operation and profitability of the recycling
business, we strived to obtain a series of qualifications from the
Chinese government. Recently in the second quarter of 2013 we have
increased our production of recycled nonferrous metal scraps which is
expected to further improve our recycling business profitability. We
expect to continue to expend resources to build and firm our
customer/business partner bases and supply chain for our recycling
business, and recent developments include negotiations on businesses
cooperation with large state-owned China steel mills and overseas
suppliers.  
Conference Call 
The Company will conduct a conference call at 5:00 p.m. ET on Monday,
May 20, 2013. To attend the call, please use the dial-in information
below. When prompted, ask for the "China Armco Metals call" and/or be
prepared to provide the conference ID. 


 
                                                                            
Conference Call                                                             
Date:                            Monday, May 20, 2013                       
Time:                            5:00 p.m. Eastern Time, US                 
Conference Line Dial-In (U.S.):  1-877-407-9210                             
International Dial-In:           1-201-689-8049                             
Conference ID# 414423:           2013 1st Quarter Financial Results Call    
Webcast link:                    
http://www.investorcalendar.com/IC/CEPage.asp?ID=170982                         

 
The playback of the webcast can be accessed until 08/20/2013. To
access the webcast, you will need to have the Windows Media Player on
your desktop. For the free download of the Media Player, please
visit:
http://windows.microsoft.com/en-us/windows/download-windows-media-player 
Teleconference Replay:  
Replay Number (Toll Free): 1-877-660-6853  
Replay Number (International): 1-201-612-7415  
Replay Passcode needs Conference ID#: 414423  
Conference ID#: 414423  
Teleconference will be available for replay until 11:59 PM 06/03/2013 
About China Armco Metals, Inc. 
China Armco Metals, Inc. is engaged in the sale and distribution of
metal ore and non-ferrous metals throughout the PRC and is in the
recycling business in the PRC. China Armco's customers throughout
China include some of the fastest growing steel producing mills and
foundries in the PRC. Raw materials are acquired from a global group
of suppliers located in diverse countries, including, but not limited
to, Brazil, India, Indonesia, Ukraine and the United States. China
Armco's product lines include ferrous and non-ferrous ore, iron ore,
chrome ore, nickel ore, magnesium, copper ore, manganese ore, steel
billet and recycled scrap metals. For more information about China
Armco, please visit http://www.armcometals.com. 
Forward-Looking Statement 
In connection with the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, China Armco Metals, Inc.,
is hereby providing cautionary statements identifying important
factors that could cause our actual results to differ materially from
those projected in forward-looking statements (as defined in such
act). Any statements that are not historical facts and that express,
or involve discussions as to, expectations, beliefs, plans,
objectives, assumptions or future events or performance (often, but
not always, indicated through the use of words or phrases such as
"will likely result," "are expected to," "will continue," "is
anticipated," "estimated," "intends," "plans," "believes" and
"projects") may be forward-looking and may involve estimates and
uncertainties which could cause actual results to differ materially
from those expressed in the forward-looking statements. These
statements include, but are not limited to, our expectations
regarding our revenues and production related to our scrap metal
recycling operations and the extent of government imposed energy
restrictions and resulting blackouts and impact on our recycling
operations. 
In addition, any such statements are qualified in their entirety by
reference to, and are accompanied by, the following key factors that
have a direct bearing on our results of operations: 
We caution that the factors described herein could cause actual
results to differ materially from those expressed in any
forward-looking statements we make and that investors should not
place undue reliance on any such forward-looking statements. Further,
any forward-looking statement speaks only as of the date on which
such statement is made, and we undertake no obligation to update any
forward-looking statement to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence
of anticipated or unanticipated events or circumstances. New factors
emerge from time to time, and it is not possible for us to predict
all of such factors. Further, we cannot assess the impact of each
such factor on our results of operations or the extent to which any
factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements.
This press release is qualified in its entirety by the following,
including, but not limited to, any expectations with respect to the
Company's revenues and operations, institution of governmental
regulations relating to our businesses and the international economic
climate, and the cautionary statements and risk factor disclosures
contained in our Securities and Exchange Commission filings,
including our Annual Report on Form 10-K for the year ended December
31, 2012. 
-- FINANCIAL TABLES -- 


 
                                                                            
                                                                            
                          CHINA ARMCO METALS, INC.                          
   CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)    
                                                                            
                                            For the Three    For the Three  
                                             Months Ended     Months Ended  
                                            March 31, 2013   March 31, 2012 
                                           ---------------  --------------- 
                                             (Unaudited)      (Unaudited)   
                                                                            
NET REVENUES                               $    14,343,077  $    49,284,191 
                                                                            
COST OF GOODS SOLD                              13,698,412       47,824,094 
                                           ---------------  --------------- 
                                                                            
GROSS MARGIN                                       644,665        1,460,097 
                                                                            
OPERATING EXPENSES:                                                         
  Selling expenses                                  29,226          130,523 
  Professional fees                                196,497          114,595 
  General and administrative expenses            1,046,694          945,583 
  Operating cost of idle manufacturing                                      
   facility                                        423,221          497,224 
                                           ---------------  --------------- 
                                                                            
    Total operating expenses                     1,695,638        1,687,925 
                                           ---------------  --------------- 
                                                                            
LOSS FROM OPERATIONS                            (1,050,973)        (227,828)
                                           ---------------  --------------- 
                                                                            
OTHER (INCOME) EXPENSE:                                                     
  Interest income                                   (2,725)          (1,052)
  Interest expense                                 729,372          786,512 
  Foreign currency transaction (gain) loss                                  
   - marketable securities                               -           35,553 
  Impairment other than temporary -                                         
   marketable securities                                 -          386,941 
  Change in fair value of derivative                                        
   liability                                      (615,946)             549 
  Loan guarantee expense                            12,500           16,667 
  Other (income) expense                           (75,896)         119,807 
                                           ---------------  --------------- 
                                                                            
    Total other (income) expense                    47,305        1,344,977 
                                           ---------------  --------------- 
                                                                            
LOSS BEFORE INCOME TAXES PROVISION              (1,098,278)      (1,572,805)
                                                                            
INCOME TAX PROVISION                                (8,510)          87,403 
                                           ---------------  --------------- 
                                                                            
NET LOSS                                        (1,089,768)      (1,660,208)
                                                                            
OTHER COMPREHENSIVE INCOME (LOSS):                                          
  Change in unrealized income (loss) of                                     
   marketable securities                             5,499              797 
  Foreign currency translation gain (loss)        (239,518)         237,466 
                                           ---------------  --------------- 
                                                                            
COMPREHENSIVE LOSS                         $    (1,323,787) $    (1,421,945)
                                           ===============  =============== 
                                                                            
NET LOSS PER COMMON SHARE - BASIC AND                                       
 DILUTED:                                                                   
                                                                            
  Net loss per common share - basic and                                     
   diluted                                 $         (0.05) $         (0.10)
                                           ===============  =============== 
                                                                            
  Weighted Average Common Shares                                            
   Outstanding - basic and diluted              23,304,334       16,668,006 
                                           ===============  =============== 
                                                                            
      See accompanying notes to the consolidated financial statements.      
                                                                            
                                                                            
                                                                            
                          CHINA ARMCO METALS, INC.                          
                        CONSOLIDATED BALANCE SHEETS                         
                                                                            
                                              March 31,       December 31,  
                                                 2013             2012      
                                           ---------------  --------------- 
                                             (Unaudited)                    
                                                                            
ASSETS                                                                      
CURRENT ASSETS:                                                             
  Cash                                     $     1,327,506  $     1,367,171 
  Pledged deposits                               8,767,003        4,590,829 
  Marketable securities                          1,219,140        1,213,641 
  Bank acceptance notes receivable               1,123,667            7,926 
  Accounts receivable, net                       8,147,497       15,699,390 
  Inventories                                   18,810,715       13,378,445 
  Advance on purchases                           3,381,326        2,238,652 
  Prepayments and other current assets           1,502,408          453,299 
                                           ---------------  --------------- 
                                                                            
    Total Current Assets                        44,279,262       38,949,353 
                                           ---------------  --------------- 
                                                                            
PROPERTY, PLANT AND EQUIPMENT                                               
  Property, plant and equipment                 43,651,046       43,319,218 
  Accumulated depreciation                      (7,023,448)      (6,284,162)
                                           ---------------  --------------- 
                                                                            
    PROPERTY, PLANT AND EQUIPMENT, net          36,627,598       37,035,056 
                                           ---------------  --------------- 
                                                                            
LAND USE RIGHTS                                                             
  Land use rights                                6,509,360        6,473,761 
  Accumulated amortization                        (321,522)        (260,897)
                                           ---------------  --------------- 
                                                                            
    LAND USE RIGHTS, net                         6,187,838        6,212,864 
                                           ---------------  --------------- 
                                                                            
      Total Assets                         $    87,094,698  $    82,197,273 
                                           ===============  =============== 
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
CURRENT LIABILITIES:                                                        
  Loans payable                            $    12,179,406  $    19,109,930 
  Banker's acceptance notes payable and                                     
   letters of credit                            14,346,281        8,624,734 
  Current maturities of capital lease                                       
   obligation                                    3,076,534        2,615,296 
  Accounts payable                               4,708,366        1,141,583 
  Advances received from Chairman and CEO          121,922                - 
  Customer deposits                              3,319,213        1,577,194 
  Corporate income tax payable                     401,572          407,621 
  Derivative warrant liability                     314,571          306,708 
  Value added tax and other taxes payable        1,239,007        2,504,677 
  Accrued expenses and other current                                        
   liabilities                                   3,158,528        2,355,903 
                                           ---------------  --------------- 
                                                                            
    Total Current Liabilities                   42,865,400       38,643,646 
                                                                            
LONG-TERM LIABILITIES                                                       
  Capital lease obligation, net of current                                  
   maturities                                    1,336,113        1,749,955 
  Long-term debt - CEO                           1,004,128                - 
                                           ---------------  --------------- 
                                                                            
    Total Long-Term Liabilities                  2,340,241        1,749,955 
                                           ---------------  --------------- 
                                                                            
      Total Liabilities                         45,205,641       40,393,601 
                                           ---------------  --------------- 
                                                                            
COMMITMENTS AND CONTINGENCIES                                               
                                                                            
STOCKHOLDERS' EQUITY:                                                       
  Preferred stock, $0.001 par value;                                        
   1,000,000 shares authorized; none                                        
   issued or outstanding                                 -                - 
  Common stock, $0.001 par value,                                           
   74,000,000 shares authorized,                                            
   24,470,743 and 20,139,698 shares issued                                  
   and outstanding, respectively                    24,471           20,320 
  Additional paid-in capital                    32,947,104       31,542,083 
  Retained earnings                              5,666,931        6,756,699 
  Accumulated other comprehensive income                                    
   (loss):                                                                  
    Change in unrealized gain on                                            
     marketable securities                           5,499                - 
    Foreign currency translation gain            3,245,052        3,484,570 
                                           ---------------  --------------- 
                                                                            
    Total Stockholders' Equity                  41,889,057       41,803,672 
                                           ---------------  --------------- 
                                                                            
    Total Liabilities and Stockholders'                                     
     Equity                                $    87,094,698  $    82,197,273 
                                           ===============  =============== 
                                                                            
      See accompanying notes to the consolidated financial statements.      
                                                                            
                                                                            
                                                                            

 
                          CHINA ARMCO METALS, INC.                          
                   CONSOLIDATED STATEMENTS OF CASH FLOWS                    
                                                                            
                                            For the Three    For the Three  
                                             Months Ended     Months Ended  
                                            March 31, 2013   March 31, 2012 
                                           ---------------  --------------- 
                                             (Unaudited)      (Unaudited)   
                                                                            
CASH FLOWS FROM OPERATING ACTIVITIES:                                       
Net loss                                   $    (1,089,768) $    (1,660,208)
                                                                            
Adjustments to reconcile net loss to net                                    
 cash provided by (used in) operating                                       
 activities                                                                 
  Depreciation expense                             706,402          704,941 
  Amortization expense                              59,190           12,422 
  Change in fair value of derivative                                        
   liability                                      (615,946)             549 
  (Gain) loss from foreign currency                                         
   exchange rate change on marketable                                       
   securities                                            -           35,553 
  Impairment other than temporary -                                         
   marketable securities                                 -          386,941 
  Stock based compensation                         411,625          155,382 
  Changes in operating assets and                                           
   liabilities:                                                             
    Bank acceptance notes receivable            (1,115,698)        (158,265)
    Accounts receivable                          7,635,827      (27,480,173)
    Inventories                                 (5,354,655)      22,233,344 
    Advance on purchases                        (1,130,362)      (3,138,063)
    Prepayments and other current assets        (1,113,145)        
 362,154 
    Accounts payable                             3,468,335      (15,217,453)
    Customer deposits                            1,733,345       (3,386,988)
    Taxes payable                               (1,285,492)         277,761 
    Advance for Stock Subscription                       -          820,715 
    Accrued expenses and other current                                      
     liabilities                                   980,317                - 
                                           ---------------  --------------- 
                                                                            
NET CASH PROVIDED BY (USED IN) OPERATING                                    
 ACTIVITIES                                      3,289,975      (26,051,388)
                                                                            
CASH FLOWS FROM INVESTING ACTIVITIES:                                       
  Proceeds from release of pledged                                          
   deposits                                      3,756,871        8,413,409 
  Payment made towards pledged deposits         (7,907,848)      (9,534,359)
  Purchase of property, plant and                                           
   equipment                                       (97,858)      (1,297,120)
                                           ---------------  --------------- 
                                                                            
NET CASH USED IN INVESTING ACTIVITIES           (4,248,835)      (2,418,070)
                                                                            
CASH FLOWS FROM FINANCING ACTIVITIES:                                       
  Proceeds from loans payable                    9,503,386       43,404,164 
  Repayment of loans payable                   (16,504,984)     (16,372,992)
  Banker's acceptance notes payable              5,674,121        1,899,185 
  Repayment of capital lease obligation            (71,329)        (528,916)
  Advances from (repayment to) Chairman                                     
   and CEO                                         187,929           19,016 
  Proceeds from Related Party Loan               1,004,128                - 
  Proceeds from sales of common stock            1,621,356                - 
                                           ---------------  --------------- 
                                                                            
NET CASH PROVIDED BY FINANCING ACTIVITIES        1,414,607       28,420,457 
                                                                            
EFFECT OF EXCHANGE RATE CHANGES ON CASH           (495,412)         (11,727)
                                           ---------------  --------------- 
                                                                            
NET CHANGE IN CASH                                 (39,665)         (60,728)
                                                                            
Cash at beginning of the period                  1,367,171        1,042,591 
                                           ---------------  --------------- 
                                                                            
Cash at end of the period                  $     1,327,506  $       981,863 
                                           ===============  =============== 
                                                                            
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS                                       
 INFORMATION:                                                               
    Interest paid                          $       729,372  $       786,512 
                                           ===============  =============== 
    Income tax paid                        $         1,777  $             - 
                                           ===============  =============== 
                                                                            
NON CASH FINANCING AND INVESTING                                            
 ACTIVITIES:                                                                
  Accrued compensation paid in common                                       
   shares in lieu of cash                  $             -  $        15,591 
                                           ===============  =============== 
                                                                            
      See accompanying notes to the consolidated financial statements.      

  
For more information, please contact: 
Company:
US Contact:
Christina Xiong
Investor Relations
China Armco Metals, Inc.
Office: 650.212.7620
Email: christina@armcometals.com
Website: www.armcometals.com 
China Contact:
Ripple Zhang
Office: 021-62375286
Email: ripple.zhang@armcometals.com
Website: www.armcometals.com