Armco Metals Holdings Announces Financial Results for the Fourth Quarter and Full Year of 2013

Armco Metals Holdings Announces Financial Results for the Fourth Quarter and 
Full Year of 2013 
SAN MATEO, CA -- (Marketwired) -- 04/04/14 --  Armco Metals Holdings,
Inc. ("Armco Metals Holdings") (NYSE MKT: AMCO), a U.S. based company
that engages in the import, sale, and distribution of metal ore and
non-ferrous metals in the People's Republic of China, recycles scrap
metals used by steel mills in the production of recycled steel and
provides sourcing and pricing services for various metals to its
network of customers, today announced its financial results for its
fourth quarter and for the fiscal year ended December 31, 2013. 
SUMMARY FINANCIALS 


 
                                                                            
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Fourth Quarter 2013 Results                                                 
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                                          Q4 2013              Q4 2012      
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Sales                                  $66.2 million        $38.0 million   
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Gross Profit                           $2.2 million         $4.4 million    
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Income (Loss) from Operations          $0.4 million         $1.75 million   
----------------------------------------------------------------------------
Net Income (Loss)                     $(0.4) million        $0.6 million    
----------------------------------------------------------------------------
EPS (Fully Diluted) (Loss)                ($0.01)               $0.03       
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----------------------------------------------------------------------------
Full Year 2013 Results                                                      
----------------------------------------------------------------------------
                                          FY 2013              FY 2012      
----------------------------------------------------------------------------
Sales                                 $128.7 million       $106.6 million   
----------------------------------------------------------------------------
Gross Profit                           $3.3 million         $8.5 million    
----------------------------------------------------------------------------
Income (Loss) from Operations         ($2.6) million        $0.9 million    
----------------------------------------------------------------------------
Net Income (Loss)                     ($4.1) million       ($2.6) million   
----------------------------------------------------------------------------
EPS (Fully Diluted) (Loss)                ($0.17)              ($0.14)      
----------------------------------------------------------------------------

 
Fourth Quarter of 2013 Financial Results 
For the fourth quarter ended December 31, 2013, net revenue increased
74% to $66.2 million due to a significant increase in sales in our
metal trading business which totaled $40.0 million as compared to
$1.1 million in the same period in 2012. Revenues from our recycling
business in the fourth quarter of 2013 declined to $26.2 million as
compared to $36.6 million in the same period in 2012, largely due to
price decline and weak demand. Gross profit for the fourth quarter of
2013 was $2.2 million as compared to $4.4 million in the fourth
quarter of 2012. We recorded operating income of $0.4 million in the
fourth quarter of 2013 as compared to operating income of $1.75
million in the fourth quarter of 2012. Our operations resulted in a
net loss of ($0.4) million or (0.01) per diluted share in the fourth
quarter of 2013 compared to net income of $0.6 million in the 2012
quarter, or $0.03 per diluted share. Diluted loss per share was
($0.17) and ($0.14) for the year ended December 31, 2013 and December
31, 2012, respectively. 
Results for the Year Ended December 31, 2013 
Net revenues in 2013 reached $128.7 million, a 21% increase from
$106.6 million in 2012. By business section, the net revenues from
our metal recycling business increased by $3.3 million, or by 5%, to
$64.9 million, compared to 2012; our net revenues for our metal
trading business increased approximately 42% in 2013 to $63.8
million, compared to $45.0 million in 2012. The increase was largely
due to sales of stainless steel and nickel which we added to our
product offerings in 2013 as well as sales of chrome. This was
partially offset by a reduction in sales of iron ore due to corporate
risk management initiatives. Our recycling business accounted for
approximately 50.4% of our total revenue and continued to exceed our
metal trading business as the largest source of our net revenue.
Gross profit for the full year 2013 was $3.3 million, a decrease of
54% from $8.5 million for the year ended December 31, 2012. Gross
margins decreased to 3.0% in 2013 compared to 8.0% in 2012, which was
primarily attributable to lower margin sales in both our trading and
recycling businesses. Gross margins were also negatively impacted by
an inventory write-off of $2.3 million to reflect industry price
declines. 
Operating expenses of $5.9 million in 2013 decreased by $1.7 million,
or 22.1% compared to 2012, primarily due to the decrease in general
and administrative expenses of $1.7 million, and a decrease in
selling expense of $0.24 million. The decrease was partially offset
by an increase in professional fees of $0.23 million. Operating cost
of idled manufacturing facility, one of our major operating costs,
remained flat at $1.8 compared to 2012. 
Our net loss in 2013 was $4.1 million, compared to net loss of $2.6
million in 2012, the increase in net loss is primarily due to a
decrease in gross profit of $5.2 million as a result of a significant
decline in gross margin, partially offset by a decrease in total
operating expenses of $1.7 million, a decrease in other expenses of
$1.6 million, and a decrease in tax expense of $0.31 million. 
In reviewing the financial performance for the quarter and year ended
2013, Mr. Kexuan Yao, Chairman and CEO of China Armco, was pleased
that the company was able to grow revenue in both business sections
and particularly in metal trading during this past year. Mr. Yao
remarked that "2013 proved to be another very challenging year for
the China steel industry. While we made significant sales gains and
reduced overall expenses we suffered the effects of rapidly declining
prices in the second half of 2013 which negatively impacted gross
margins in both metal trading and metal recycling. The recycling
business continued to be our largest source of revenue and we
continue to believe the metal recycling business will continue to be
the major growth driver for our company." 
Mr. Yao further stated that "We intend to further our improvements in
cost control, developing and streamlining our supply chain, and the
establishment of long term strategic partnership with key clients. As
we position the company for a cyclical recovery in the steel industry
we will continue our efforts to obtain additional qualifications and
licenses to increase our business, and build our brand in the
industry. We have driven sales growth in a very challenging
environment while reducing costs significantly. We believe this will
serve as a springboard for significant financial improvement when our
end markets improve." 
Select Balance Sheet Items 
As of December 31, 2013, the Company had $0.6 million in cash and
cash equivalents, compared to $1.4 million at year-end 2012. The
Company had working capital of $0.8 million and a current ratio of
1.02:1 on December 31, 2012 compared to $0.3 million and 1.01:1 on
December 31, 2012. As of December 31, 2013, shareholders' equity was
$42.6 million, slightly up from $41.8 million at the end of 2012.  
Business Outlook 
Our financial performance during 2013 showed increased sales with a
substantially lower gross margin in comparison to 2012 as a result of
a difficult pricing environment pressuring margins and resulting in a
$2.3 million inventory write-down. Looking at 2014, management
believes China's steel demand is expected to grow at a slower pace
while China's crude steel output growth expect to fall in 2014 and
domestic steel prices are estimated to remain at cyclically low
levels. In the middle and long term, we believe that the low income
housing construction, ongoing urbanization and increasing domestic
consumption in China will continue to support the growth of the steel
industry. In the long run, we also expect our recycling business to
benefit substantially from the measures and policies to be
implemented gradually by the Chinese government according to its 12th
Five Year Plan (2011-2015). Under this plan, China intends to
restructure its iron and steel industry to be more energy efficient
and have increased environmental protection by adopting and
developing the most advanced technology in the world.  
In our Metal Trading business we experienced high volatility in metal
ore prices in 2013. The imported iron ore price rebounded rapidly in
July from June and reached its high in the middle of August then
began to fall into the fourth quarter. We anticipate the price of
iron ore may stabilize at its current level in 2014. We continued to
firm our business relationship with worldwide suppliers and stabilize
our supply capacity. We believe that 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 progresses which we have obtained support from several banks.  
In our Metal Recycling business we experienced weak market for steel
scrap in 2013 which may continue in 2014 while steel price are
expected to stabilize after the decline in the second half of 2013.
However, in the long-term, we believe the country's ongoing
urbanization process will increase new steel demand and eventually
drive the steel scrap market during the 13th Five-Year-Plan period.
We intend to devote a significant amount of our resources towards the
improvement of our operations and if appropriate, its expansion. At
the same time, we will continue to pursue our strategy to create a
local network of raw material suppliers for our recycling facility
and expand our oversea supply channels. In addition, we will continue
to develop our new sale and operation model in recycling business
described above to obtain more customers and business opportunities
under the model in the coming years.  
The company intends to explore potential merger and acquisition
opportunities in businesses related to the steel industry in 2014 in
an effort to diversify its revenue streams while leveraging its
current customer base. As of March 2014 the Company has entered into
negotiations with one such candidate for a potential merger
opportunity. 
The conference call will take place at 5:00 pm. EDT on Friday, April
4, 2014. To attend the call, please use the dial-in information
below. When prompted, ask for the "Armco Metals call" and/or be
prepared to provide the conference ID. 
Conference Call      
Date: Friday, April 4, 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# 13579516: 2013 Fourth Quarter and Year End Financial
Results Call     
Webcast link: http://www.investorcalendar.com/IC/CEPage.asp?ID=172560 
The playback of the webcast can be accessed until July 7, 2014.  
Teleconference Replay:
 Replay Number (Toll Free): 1-877-660-6853 
Replay Number (International): 1-201-612-7415
 Replay Passcode needs
Conference ID#: 13579516
 Teleconference will be available for replay
until 11:59 PM 04/21/2014 
ABOUT ARMCO METALS HOLDINGS, INC. 
Armco Metals Holdings, Inc. is engaged in the sale and distribution
of metal ore and non-ferrous metals throughout China and is in the
recycling business in China. Armco Metals' customers include some of
the fastest growing steel producing mills and foundries throughout
China. Raw materials are acquired from a global group of suppliers
located in various countries, including, but not limited to, Brazil,
India, Indonesia, Ukraine and the United States. Armco Metals'
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 Armco Metals,
please visit http://www.armcometals.com. 
SAFE HARBOR STATEMENT  
In connection with the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, Armco Metals Holdings,
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") are forward-looking and 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, pricing and demand for our product lines and
the extent of government imposed energy and monetary policy
restrictions and resulting blackouts and associated impact on our
trading and recycling operations.  
We caution that investors should not place undue reliance on any
forward-looking statements herein. 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. 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 disclosure contained in our
Securities and Exchange Commission filings, including our Annual
Report on Form 10-K for the year ended December 31, 2013, and our
subsequent filing with the Securities and Exchange Commission. 


 
                                                                            
                                                                            
                        ARMCO METALS HOLDINGS, INC.                         
   CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)    
                                                                            
                                           For the Year      For the Year   
                                               Ended             Ended      
                                           December 31,      December 31,   
                                               2013              2012       
                                         ----------------  ---------------- 
                                                                            
                                                                            
NET REVENUES                             $    128,738,194  $    106,569,474 
                                                                            
COST OF GOODS SOLD                            125,426,672        98,102,412 
                                         ----------------  ---------------- 
                                                                            
GROSS PROFIT                                    3,311,522         8,467,062 
                                                                            
OPERATING EXPENSES:                                                         
  Selling expenses                                177,118           413,352 
  Professional fees                               512,474           278,502 
  General and administrative expenses           3,397,191         5,112,131 
  Operating cost of idle manufacturing                                      
   facility                                     1,840,967         1,807,313 
                                         ----------------  ---------------- 
                                                                            
    Total operating expenses                    5,927,750         7,611,298 
                                         ----------------  ---------------- 
                                                                            
INCOME (LOSS) FROM OPERATIONS                  (2,616,228)          855,764 
                                         ----------------  ---------------- 
                                                                            
OTHER (INCOME) EXPENSE:                                                     
  Interest income                                (325,256)         (190,999)
  Interest expense                              2,157,156         2,001,535 
  Foreign currency transaction (gain)                                       
   loss - marketable securities                         0            36,957 
  Impairment other than temporary -                                         
   marketable securities                                0           386,941 
  Change in fair value of derivative                                        
   liability                                     (929,883)          306,505 
  Loan guarantee expense                           45,733            59,744 
  Forgiveness of debt                                   0           (16,343)
  Other expense                                   145,849           148,097 
                                         ----------------  ---------------- 
                                                                            
    Total other (income) expense                1,093,599         2,732,437 
                                         ----------------  ---------------- 
                                                                            
LOSS BEFORE INCOME TAXES PROVISION             (3,709,827)       (1,876,673)
                                                                            
INCOME TAX PROVISION                              421,585           732,663 
                                         ----------------  ---------------- 
                                                                            
NET LOSS                                       (4,131,412)       (2,609,336)
                                                                            
OTHER COMPREHENSIVE INCOME (LOSS):                                          
  Change in unrealized income (loss) of                                     
   marketable securities                         (694,512)              797 
  Foreign currency translation gain             1,367,863           263,532 
                                         ----------------  ---------------- 
                                                                            
COMPREHENSIVE LOSS                       $     (3,458,061) $     (2,345,007)
                                         ================  ================ 
                                                                            
NET LOSS PER COMMON SHARE - BASIC AND                                       
 DILUTED:                                                                   
                                                                            
  Net loss per common share - basic and                                     
   diluted                               $          (0.17) $          (0.14)
                                         ================  ================ 
                                                                            
  Weighted Average Common Shares                                            
   Outstanding - basic and diluted             24,886,617        18,482,234 
                                         ================  ================ 
                                                                            
      See accompanying notes to the consolidated financial statements.      
                                                                            
                                                                            
                                                                            
                                                                            
                        ARMCO METALS HOLDINGS, INC.                         
                        CONSOLIDATED BALANCE SHEETS                         
                                                                            
                                                                            
                                                     December     December  
                                                     31, 2013     31, 2012  
                                                   -----------  ----------- 
                                                                            
                                                                            
ASSETS                                                                      
CURRENT ASSETS:                                                             
  Cash                                             $   596,557  $ 1,367,171 
  Pledged deposits                                   4,652,222    4,590,829 
  Marketable securities                                519,129    1,213,641 
  Bank acceptance notes receivable                           -        7,926 
  Accounts receivable, net                          25,595,516   15,699,390 
  Inventories                                       20,456,920   13,378,445 
  Advance on purchases                                 733,285    2,238,652 
  Prepayments and other current assets               1,181,371      453,299 
                                                   -----------  ----------- 
                                                                            
    Total Current Assets                            53,735,000   38,949,353 
                                                                            
PROPERTY, PLANT AND EQUIPMENT                                               
  Property, plant and equipment                     44,856,611   43,319,218 
  Accumulated depreciation                          (9,360,933)  (6,284,162)
                                                   -----------  ----------- 
                                                                            
    PROPERTY, PLANT AND EQUIPMENT, net              35,495,678   37,035,056 
                                                                            
LAND USE RIGHTS                                                             
  Land use rights                                    6,681,779    6,473,761 
  Accumulated amortization                            (416,478)    (260,897)
                                                   -----------  ----------- 
                                                                            
    LAND USE RIGHTS, net                             6,265,301    6,212,864 
                                                   -----------  ----------- 
                                                                            
                                                                            
      Total Assets                                 $95,495,979  $82,197,273 
                                                   ===========  =========== 
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
CURRENT LIABILITIES:                                                        
  Loans payable                                    $27,415,638  $19,109,930 
  Banker's acceptance notes payable and letters of                          
   credit                                            8,473,217    8,624,734 
  Current maturities of capital lease obligation       904,990    2,615,296 
  Accounts payable                                  10,062,463    1,141,583 
  Advances received from Chairman and CEO              668,332            - 
  Due to related parties                               403,141            - 
  Customer deposits                                    649,488    1,577,194 
  Corporate income tax payable                         822,207      407,621 
  Derivative liabilities - current portion              61,429      306,708 
  Value added tax and other taxes payable            2,202,331    2,504,677 
  Accrued expenses and other current liabilities     1,228,753    2,355,903 
                                                   -----------  ----------- 
                                                                            
    Total Current Liabilities                       52,891,989   38,643,646 
                                                                            
CAPITAL LEASE OBLIGATION, net of current                                    
 maturities                                                  -    1,749,955 
                                                   -----------  ----------- 
                                                                            
      Total Liabilities                             52,891,989   40,393,601 
                                                   -----------  ----------- 
                                                                            
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, 29,876,327 and 20,319,698                             
   shares issued and outstanding as of December                             
   31, 2013 and 2012, respectively                      29,876       20,320 
  Additional paid-in capital                        35,790,906   31,542,083 
  Retained earnings                                  2,625,287    6,756,699 
  Accumulated other comprehensive income (loss):                            
    Change in unrealized loss on marketable                                 
     securities                                       (694,512)           - 
    Foreign currency translation gain                4,852,433    3,484,570 
                                                   -----------  ----------- 
                                                                            
    Total Stockholders' Equity                      42,603,990   41,803,672 
                                                   -----------  ----------- 
                                                                            
    Total Liabilities and Stockholders' Equity     $95,495,979  $82,197,273 
                                                   ===========  =========== 
                                                                            
      See accompanying notes to the consolidated financial statements.      
                                                                            
                                                                            
                                                                            
                                                                            
                        ARMCO METALS HOLDINGS, INC.                         
                   CONSOLIDATED STATEMENTS OF CASH FLOWS                    
                                                                            
                                                For the Year   For the Year 
                                                   Ended          Ended     
                                                December 31,   December 31, 
                                                    2013           2012     
                                               -------------  ------------- 
CASH FLOWS FROM OPERATING ACTIVITIES:                                       
Net loss                                       $  (4,131,412) $  (2,609,336)
Adjustments to reconcile net loss to net cash                               
 used in operating activities                                               
  Depreciation expense                             2,847,606      2,742,995 
  Amortization expense                               145,499         49,766 
  Writ-down of inventories                         2,291,915              - 
  Change in fair value of derivative liability      (929,883)       306,505 
  Amortization of debt discount                        8,004              - 
  Loss from foreign currency exchange rate                                  
   change on marketable securities                         -         36,957 
  Impairment other than temporary - marketable                              
   securities                                              -        386,941 
  Stock based compensation                         1,377,715      1,444,019 
  Shares issued for financing cost                    21,155              - 
Adjustments to reconcile net loss to net cash                               
 used in operating activities                                               
  Changes in operating assets and liabilities:                              
    Bank acceptance notes receivable                  (8,072)        (7,926)
    Accounts receivable                           (9,319,280)   (14,935,416)
    Inventories                                   (8,838,672)    20,095,232 
    Advance on purchases                           1,556,395        865,391 
    Prepaid value added taxes                              -        471,244 
    Prepayments and other current assets            (780,339)     1,369,997 
    Banker's acceptance notes payable               (422,970)         1,585 
    Accounts payable                               8,690,406    (17,410,355)
    Customer deposits                               (957,536)    (4,320,862)
    Taxes payable                                     92,685      2,812,095 
    Accrued expenses and other current                                      
     liabilities                                  (1,163,596)      (310,424)
                                               -------------  ------------- 
                                                                            
NET CASH USED IN OPERATING ACTIVITIES             (9,520,380)    (9,011,592)
                                                                            
CASH FLOWS FROM INVESTING ACTIVITIES:                                       
  Proceeds from release of pledged deposits       21,162,708     20,718,637 
  Payment made towards pledged deposits          (21,077,956)   (16,902,377)
  Purchase of property, plant and equipment         (167,962)      (826,350)
                                               -------------  ------------- 
                                                                            
NET CASH PROVIDED BY (USED IN) INVESTING                                    
 ACTIVITIES                                          (83,210)     2,989,910 
                                                                            
CASH FLOWS FROM FINANCING ACTIVITIES:                                       
  Proceeds from loans payable                     49,611,412     64,716,249 
  Repayment of loans payable                     (39,959,898)   (52,413,180)
  Banker's acceptance notes payable                        -        380,433 
  Repayment of capital lease obligation           (3,552,805)    (2,007,291)
  Repayment of long-term debt                              -     (3,962,844)
  Advances from (repayment to) Chairman and                                 
   CEO                                               754,740       (319,306)
  Advances from (repayment to) related parties       368,081              - 
  Proceeds from sales of common stock              1,621,356              - 
                                               -------------  ------------- 
                                                                            
NET CASH PROVIDED BY FINANCING ACTIVITIES          8,842,886      6,394,061 
                                                                            
EFFECT OF EXCHANGE RATE CHANGES ON CASH               (9,910)       (47,799)
                                               -------------  ------------- 
                                                                            
NET CHANGE IN CASH                                  (770,614)       324,580 
                                                                            
Cash at beginning of the year                      1,367,171      1,042,591 
                                               -------------  ------------- 
                                                                            
Cash at end of the year                        $     596,557  $   1,367,171 
                                               =============  ============= 
                                                                            
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS                                       
 INFORMATION:                                                               
    Interest paid                              $   1,951,630  $   2,001,337 
                                               =============  ============= 
    Income tax paid                            $      12,615  $           - 
                                               =============  ============= 
                                                                            
NON CASH FINANCING AND INVESTING ACTIVITIES:                                
  Debt discount due to convertible feature     $      60,795  $           - 
                                               =============  ============= 
  Reclassification of derivative liability                                  
   from equity                                 $     623,809  $           - 
                                               =============  ============= 
  Common shares issued for conversion of                                    
   advances from Chairman and CEO              $   1,045,369  $     353,753 
                                               =============  ============= 
  Common shares issued for conversion of                                    
   short-term loan                             $     816,593  $           - 
                                               =============  ============= 
                                                                            
      See accompanying notes to the consolidated financial statements.      

  
Contact:
CONTACT INFORMATION: 
Armco Metals Holdings, Inc.
US Investor Relations Contact
Christina Xiong
Office: 650.212.7620
Email: ir@armcometals.com 
Website: www.armcometals.com  
China 
Ripple Zhang
Office: 86-21-62375286
Email: ripple.zhang@armcometals.com 
Website: www.armcometals.com
 
 
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