Empire Resources Reports Third Quarter 2013 Results

             Empire Resources Reports Third Quarter 2013 Results

PR Newswire

FORT LEE, N.J., Nov. 14, 2013

FORT LEE, N.J., Nov. 14, 2013 /PRNewswire/ --Empire Resources, Inc. (NASDAQ:
ERS), a distributor of value added, semi-finished metal products, announced
today that net sales for the third quarter of 2013 were $126.4 million, an
increase of 14% from the second quarter of 2013, and 8% lower than the third
quarter of 2012. The sequential improvement in sales was driven by an
increase in sales in Latin America and stronger sales in Europe, offset by
lower sales in North America and in the Australia/New Zealand region.

Gross profit for the third quarter of 2013 was $5.3 million, an increase of 1%
from the second quarter of 2013, and 13% lower than the third quarter of
2012. Gross profit was 4.2% of sales, compared with 4.8% of sales in the
second quarter of 2013 and 4.4% of sales in the third quarter of 2012. The
Company continued to implement its inventory management strategy and reduced
storage and processing costs in the quarter. Increased competitive conditions
in Australia and Brazil reduced gross margin in those regions and resulted in
the decline in the gross margin as a percentage of sales compared with the
prior periods.

Operating income for the third quarter of 2013 was $1.7 million compared with
$1.8 million in the second quarter of 2013 and $2.7 million in the third
quarter of 2012. SG&A expenses were 3% higher sequentially and 5% higher than
the third quarter of 2012 due in part to the Company's investment in employee
count to expand its geographic reach. 

Net interest expense for the third quarter of 2013 was $1.2 million,
approximately level with the second quarter of 2013 and 16% below the third
quarter of 2012. The Company's focus on controlling inventory levels for the
past several quarters has enabled Empire to reduce bank debt by 5%
year-to-date, with resulting savings in interest costs.

In the third quarter of 2013, the Company recognized a non-cash non-operating
gain of $1.7 million related to the change in fair market valuation of the
derivative feature of its convertible subordinated note. That compares with a
non-cash non-operating loss of $0.04 million in the second quarter of 2013 and
a non-cash non-operating gain of $0.4 million in the third quarter of 2012,
both due to the derivative valuation recognized in those periods. 

Before including the non-cash non-operating derivative-related amounts in all
periods, pre-tax income was $0.6 million in both the third quarter of 2013 and
the second quarter of 2013 and $1.3 million in the third quarter of 2012.

Net income for the third quarter of 2013 was $1.5 million, or $0.06 per
diluted share, including the derivative related non-cash non-operating
gain.That compares with net income of $0.4 million, or $0.04 per diluted
share, in the second quarter of 2013, and net income of $1.1 million, or $0.09
per diluted share, in the third quarter of 2012, including the non-cash
non-operating loss and gain in those respective prior year periods. 

For the first nine months of 2013, net sales were $370.3 million; pre-tax
income was $3.4 million, before including a non-cash non-operating
derivative-related loss of $0.45 million; and net income was $1.9 million, or
$0.22 per diluted share, including the derivative-related loss. In the first
nine months of 2012, net sales were $429.0 million; pre-tax income was $4.6
million, before including a non-cash non-operating derivative-related gain of
$0.36 million; and net income was $3.1 million, or $0.31 per diluted share,
including the derivative-related gain. 

Nathan Kahn, President and CEO, commented, "While industry conditions
worldwide have remained challenging, we achieved substantial growth in Latin
America in the third quarter, which was the main driver of the sequential
increase in our sales. Our sales in Latin America were primarily steel
products, which have been an area of strategic focus for Empire since we added
them to our product offerings in 2010. They have reached 23% of our sales
year-to-date in 2013."

"We have seen a pick-up in our bookings since the end of September, but there
is a persistent level of uncertainty in most of our markets. While it is
prudent to remain cautiously optimistic at present, we are fully focused on
executing our strategy and are optimistic about our long-term growth
prospects."

Empire Resources, Inc. is a distributor of a wide range of semi-finished metal
products to customers in the transportation, automotive, housing, appliance
and packaging industries in the U.S., Canada, Latin America, Australia, New
Zealand and Europe. It maintains supply contracts with mills in various parts
of the world.

This press release contains "forward-looking statements." Such statements may
be preceded by the words "intends," "may," "will," "plans," "expects,"
"anticipates," "projects," "predicts," "estimates," "aims," "believes,"
"hopes," "potential" or similar words. Forward-looking statements are not
guarantees of future performance, are based on certain assumptions and are
subject to various known and unknown risks and uncertainties, many of which
are beyond the Company's control, and cannot be predicted or quantified and
consequently, actual results may differ materially from those expressed or
implied by such forward-looking statements. Such risks and uncertainties
include, without limitation, risks and uncertainties associated with (i) the
loss or default of one or more suppliers; (ii) the loss or default of one or
more significant customers; (iii) a default by counterparties to derivative
financial instruments; (iv) changes in general, national or regional economic
conditions; (v) an act of war or terrorism that disrupts international
shipping; (vi) changes in laws, regulations and tariffs; (vii) the imposition
of anti-dumping duties on products the Company imports; (viii) changes in the
size and nature of the Company's competition; (ix) changes in interest rates,
foreign currencies or spot prices of aluminum; (x) the loss of one or more key
executives; (xi) increased credit risk from customers; (xii) the Company's
failure to grow internally or by acquisition and (xiii) the Company's failure
to improve operating margins and efficiencies. More detailed information about
the Company and the risk factors that may affect the realization of
forward-looking statements is set forth in the Company's filings with the
Securities and Exchange Commission (SEC), including the Company's Annual
Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and
security holders are urged to read these documents free of charge on the SEC's
web site at http://www.sec.gov. The Company assumes no obligation to publicly
update or revise its forward-looking statements as a result of new
information, future events or otherwise.



Condensed Consolidated Statements of Income (Unaudited)
(In thousands except per share amounts)
                                    Three MonthsEnded    Nine MonthsEnded
                                    September 30,         September 30,
                                    2013       2012       2013       2012
Net sales                           $ 126,390  $ 137,705  $ 370,288  $ 429,006
Cost of goods sold                    121,082    131,597    353,083    410,123
Gross profit                          5,308      6,108      17,205     18,883
Selling, general and administrative   3,602      3,432      10,361     10,191
expenses
Operating income                      1,706      2,676      6,844      8,692
Other expenses
 Change in value of derivative      1,715      410        (452)      361
liability
 Interest expense, net              (1,156)    (1,378)    (3,403)    (4,119)
Income before income taxes            2,265      1,708      2,989      4,934
Income taxes                          794        656        1,066      1,883
Net income                          $ 1,471    $ 1,052    $ 1,923    $ 3,051
Weighted average shares
outstanding:
 Basic                            8,586      8,594      8,585      9,000
 Diluted                          11,835     11,503     8,856      11,914
Earnings per share:
 Basic                            $0.17      $0.12      $0.22      $0.34
 Diluted                          $0.06      $0.09      $0.22      $0.31
See notes to unaudited condensed consolidated financial
statements



Condensed Consolidated Balance Sheets
(In thousands except share and per share amounts)
                                         September 30, 2013  December 31, 2012
                                         (Unaudited)
ASSETS
Current assets:
 Cash                                $      2,246        $     3,136
 Trade accounts receivable (less
allowance for doubtful                          63,579             53,551
 accounts of $525 and $521)
 Inventories                                123,973            145,547
 Deferred tax assets                        3,634              3,306
 Advance to supplier, net of imputed        3,118              3,061
interest of $206 and $292
 Other current assets                       4,626              3,965
 Total current assets                  201,176            212,566
 Advance to supplier, net of imputed
interest of $89 and                             4,087              6,413
 $234, net of current maturities
 Preferential supply agreement              721                962
 Long-term financing costs, net of          495                862
amortization
 Property and equipment, net                3,902              3,987
Total assets                             $      210,381      $     224,790
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Notes payable - banks               $      117,612      $     124,095
 Current maturities of mortgage             179                171
payable
 Trade accounts payable                     27,983             36,048
 Income taxes payable                       2,219              3,036
 Accrued expenses and derivative            3,538              4,783
liabilities
 Dividends payable                          215                -
 Total current liabilities             151,746            168,133
Mortgage payable, net of current                1,154              1,290
maturities
Subordinated convertible debt net of
unamortized discount                            10,491             10,067
 of $1,509 and $1,933 respectively
Derivative liability for embedded               2,448              1,996
conversion option
Deferred taxes payable                          50                 195
 Total Liabilities                     165,889            181,681
Commitments (Note 19)
Stockholders' equity:
 Common stock $0.01 par value,
20,000,000 shares authorized
 and 11,749,651 shares issued            117                117
 at September 30, 2013 and
December 31, 2012
 Additional paid-in capital                 11,937             11,937
 Retained earnings                          37,920             36,641
 Accumulated other comprehensive            (9)                (136)
loss
 Treasury stock, 3,165,791 and
3,158,597 shares                                (5,473)            (5,450)
 at September 30, 2013 and
December 31, 2012, respectively
 Total stockholders' equity            44,492             43,109
Total liabilities and stockholders'      $      210,381      $     224,790
equity
See notes to unaudited condensed consolidated financial
statements

Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(In thousands)
                                                          Nine Months Ended
                                                         September 30,
                                                         2013       2012
Cash flows from operating activities:
 Net income                                          $ 1,923    $ 3,051
 Adjustments to reconcile net income to net cash
provided
 by operating activities:
 Depreciation and amortization              518        506
 Change in value of derivative liability     452        (361)
 Amortization of convertible note discount   424        424
 Imputed interest on vendor advance          (231)      (347)
 Provision for doubtful accounts             -          (6)
 Amortization of supply agreement            240        -
 Deferred income taxes                      (503)      105
 Foreign exchange loss/(gain), and other     (23)       15
 Loss on sale of marketable securities       32         -
 Changes in:
 Restricted cash                        -          (1,410)
 Trade accounts receivable              (9,932)    (8,854)
 Inventories                            21,708     54,451
 Other current assets                   (666)      7,452
 Trade accounts payable                 (8,061)    (26,366)
 Income taxes payable                   (818)      (1,657)
 Accrued expenses and derivative        (1,221)    3,634
liabilities
 Net cash provided by operating           3,842      30,637
activities
Cash flows provided by/(used in) investing activities:
 Repayment/(advance) related to supply agreement        2,500      (5,000)
 Net proceeds from sale of marketable securities       6          -
 Purchases of property and equipment                    (6)        (38)
 Net cash provided by/(used in)            2,500      (5,038)
investing activities
Cash flows used in financing activities:
 Repayments of notes payable – banks                   (6,594)    (24,462)
 Repayments - mortgage payable                         (127)      (119)
 Dividends paid                                       (429)      (676)
 Deferred financing costs                              (60)       (62)
 Treasury stock purchased                             (23)       (1,932)
 Net cash used in financing activities     (7,233)    (27,251)
Net decrease in cash                                       (891)      (1,652)
 Effect of exchange rate                            1          (1)
Cash at beginning of period                                3,136      4,274
Cash at end of the period                                $ 2,246    $ 2,621
Supplemental disclosures of cash flow information:
 Cash paid during the period for:
 Interest                                       $ 2,913    $ 4,052
 Income taxes                                   $ 1,955    $ 2,664
Non cash financing activities:
 Dividend declared but not yet paid                 $ 215      $ 215
See notes to unaudited condensed consolidated financial
statements



SOURCE Empire Resources, Inc.

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,
dkronfeld@empireresources.com
 
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