-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Goql0kDdz17FdAQ6QcEccV648TD4jlpAWd5AlN7vIuYvnVpK4pES7x15YXxfinql jzKxCkoqKBNijOqD5CPftg== 0000950117-05-001932.txt : 20050516 0000950117-05-001932.hdr.sgml : 20050516 20050516104206 ACCESSION NUMBER: 0000950117-05-001932 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20050331 FILED AS OF DATE: 20050516 DATE AS OF CHANGE: 20050516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMPIRE RESOURCES INC /NEW/ CENTRAL INDEX KEY: 0001019272 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-METALS SERVICE CENTERS & OFFICES [5051] IRS NUMBER: 223136782 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12127 FILM NUMBER: 05831918 BUSINESS ADDRESS: STREET 1: ONE PARKER PLAZA CITY: FORT LEE STATE: NJ ZIP: 07024 BUSINESS PHONE: 201-944-22 MAIL ADDRESS: STREET 1: ONE PARKER PLAZA CITY: FORT LEE STATE: NJ ZIP: 07024 FORMER COMPANY: FORMER CONFORMED NAME: INTEGRATED TECHNOLOGY USA INC DATE OF NAME CHANGE: 19960720 10-Q 1 a39820.txt EMPIRE RESOURCES, INC. U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [x] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2005 [ ] Transition report under Section 13 or 15(d) of the Exchange Act For the transition period from _________ to_________ Commission file number 001-12127 EMPIRE RESOURCES, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 22-3136782 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) One Parker Plaza Fort Lee, NJ 07024 (Address of Principal Executive Offices) 201 944-2200 (Registrant's Telephone Number, Including Area Code) Check whether the Registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] APPLICABLE ONLY TO CORPORATE ISSUERS Common Stock, par value $0.01 per share 9,599,251 (Class) (Outstanding on May 10, 2005) EMPIRE RESOURCES, INC. FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2005 INDEX PART I FINANCIAL INFORMATION
Item 1 Financial Statements Page Condensed Consolidated Balance Sheets as of March 31, 2005 (unaudited) and December 31, 2004.......................................................2 Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2005 and 2004 (unaudited) ..................................3 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2004 (unaudited) ..................................4 Notes to Condensed Consolidated Financial Statements (unaudited)............5 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations...................................................8 Item 3 Quantitative and Qualitative Disclosure of Market Risk.....................11 Item 4 Controls and Procedures ...................................................11 PART II OTHER INFORMATION Item 1 Legal Proceedings..........................................................13 Item 2 Unregistered Sales of Equity Securities and Use of Proceeds ...............13 Item 3 Defaults Upon Senior Securities ...........................................13 Item 4 Submission of Matters to a Vote of Security Holders .......................13 Item 5 Other Information .........................................................13 Item 6 Exhibits ..................................................................13 Signatures..............................................................14
(i) Introduction The condensed consolidated interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been omitted pursuant to such rules and regulations. In the opinion of management, such financial statements reflect all adjustments necessary for a fair presentation of the results for the interim periods presented and to make such financial statements not misleading. The results of operations of the Company for the three months ended March 31, 2005 are not necessarily indicative of the results to be expected for the full year. It is suggested that these interim financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report filed on Form 10-K for the year ended December 31, 2004. 1 EMPIRE RESOURCES, INC. Condensed Consolidated Balance Sheets In Thousands, except shares and per share amounts
March 31, December 31, -------------------------- 2005 2004 -------------------------- (unaudited) ASSETS Current assets: Cash $ 2,765 $ 287 Trade accounts receivable (less allowance for doubtful accounts of 49,394 30,367 $191 and $191) Inventories 63,145 58,969 Other current assets 1,116 1,397 --------- --------- Total current assets 116,420 91,020 Property and Equipment (less accumulated depreciation of $492 and $472) 3,196 2,895 --------- --------- 119,616 93,915 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable - banks $ 63,050 $ 40,300 Current maturities of long-term debt 104 94 Trade accounts payable 28,241 25,411 Accrued expenses 5,695 6,796 Dividends Payable 384 960 --------- --------- Total current liabilities 97,474 73,561 --------- --------- Long-term debt, net of current maturities 2,371 2,406 Commitments and contingencies Stockholders' equity: Common stock $.01 par value, 20,000,000 shares authorized and $ 117 117 11,749,651 shares issued at March 31, 2005 and December 31, 2004 Additional paid-in capital 10,827 10,827 Retained earnings 11,386 9,547 Accumulated other comprehensive income (2) 14 Treasury stock (2,150,400 shares) (2,557) (2,557) --------- --------- Total stockholders' equity 19,771 17,948 --------- --------- 119,616 93,915 ========= =========
See notes to condensed consolidated financial statements 2 Condensed Consolidated Statements of Income (Unaudited) In thousands, except per share amounts
Three Months Ended March 31, --------------------- 2005 2004 --------------------- Net sales $80,014 $54,185 Cost of goods sold 74,140 50,349 ------- ------- Gross profit 5,874 3,836 Selling, general and administrative expenses 1,756 1,691 ------- ------- Operating income 4,118 2,145 Interest expense 564 299 ------- ------- Income before income taxes 3,554 1,846 Income taxes 1,330 711 ------- ------- Net income $ 2,224 $ 1,135 ======= ======= Weighted average shares outstanding: Basic 9,599 9,530 ======= ======= Diluted 9,848 9,885 ======= ======= Earnings per share: Basic $ 0.23 $ 0.12 ======= ======= Diluted $ 0.23 $ 0.11 ======= =======
See notes to condensed consolidated financial statements 3 Condensed Consolidated Statements of Cash Flows (Unaudited) In thousands
Three Months Ended March 31, ----------------------- 2005 2004 ----------------------- Cash flows from operating activities: Net income $ 2,224 $ 1,135 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 20 15 Changes in: Trade accounts receivable (19,027) (5,547) Inventories (4,176) 6,651 Other current assets 281 3,045 Trade accounts payable 2,830 (695) Accrued expenses (1,118) (4,029) -------- -------- Net cash (used in) provided by operating activities (18,966) 575 -------- -------- Cash flows used in investing activities: Additions to fixed assets (321) (33) -------- -------- Cash flows from financing activities: Net proceeds from notes payable - banks 22,725 200 Proceeds - option exercised 0 22 Dividends Paid (960) (762) -------- -------- Net cash provided by (used in) financing activities 21,765 (540) -------- -------- Net increase in cash 2,478 2 Cash at beginning of period 287 1,477 -------- -------- Cash at end of period $ 2,765 $ 1,479 ======== ======== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 601 $ 352 Income taxes $ 818 $ 140 Non Cash Financing Activities: Dividend Declared but not yet paid $ 384 $ 382
See notes to condensed consolidated financial statements 4 Empire Resources, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) - -------------------------------------------------------------------------------- 1. The Company Empire Resources, Inc. (the "Company") is engaged in the purchase, sale and distribution of principally nonferrous metals to a diverse customer base located throughout the United States and Canada, Australia and New Zealand. The Company sells its products through its own marketing and sales personnel and its independent sales agents located in North America who receive commissions on sales. The Company purchases its products from suppliers located throughout the world; however, one supplier, Hulett Aluminium Ltd., supplied approximately 42% of the Company's products during the first quarter of 2005. The Company does not typically purchase inventory for stock; rather, it places orders with its suppliers based upon orders that it has received from its customers. In the fall of 2004, the Company entered into an agreement to purchase a used aluminum extrusion press. The Company is modernizing and installing the press in the newly purchased warehouse/distribution facility in Baltimore, Maryland. The Company expects to begin manufacturing extrusions in the new facility in late 2005 and expects that its current customers are potential customers for its extrusions production. The condensed consolidated financial statements include the accounts of Empire Resources, Inc. and its wholly-owned subsidiaries, Empire Resources Pacific Ltd., which acts as a sales agent for the Company in Australia. In addition, the statements include 6900 Quad Avenue LLC, the company which purchased the warehouse facility, and Empire Extrusions LLC the company which will manufacture extrusions. All significant intercompany transactions and accounts have been eliminated in consolidation. 2. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. The principle estimate made relates to the allowance for doubtful accounts. Actual results could differ from these estimates. 3. Concentrations One major customer accounted for approximately 17% of the Company's consolidated net sales for the period ended March 31, 2005 and 16% for the period ended March 31, 2004. The Company's purchase of nonferrous metal is from a limited number of suppliers located throughout the world. One supplier, Hulett Aluminium Ltd., accounted for 42% of total purchases during the period ended March 31, 2005 and three other suppliers accounted for 43% of total purchases. The Company's loss of any one of its largest suppliers or a material default by any such supplier in its obligations to the Company would have at least a short-term material adverse effect on the Company's business. 5 Empire Resources, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) - -------------------------------------------------------------------------------- 4. Stock Options The Company accounts for stock-based employee compensation under the recognitions and measurement principles of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations. No stock-based employee compensation cost is reflected in net income as all options granted under the Plan had an exercise price equal to the market value of the underlying common stock on the date of grant. The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation." For the three months ended March 31, 2005 and 2004, there would be no effect on net income and earnings per share if the fair value based method had been applied to all awards. 5. Inventories Inventories, which consist of purchased semi-finished aluminum products, are stated at the lower of cost or market. Cost is determined by the specific-identification method. Inventory has generally been purchased for specific customer orders. 6. Notes Payable--Banks As of March 31, 2005, the Company operated under a $75,000,000 committed credit facility with four commercial banks. This facility as amended, expires on June 30, 2006. Borrowings by the Company under this line of credit are collateralized by security interests in substantially all its assets. Under the agreement, the Company is required to maintain working capital and net worth ratios as defined by the loan agreement. As of March 31, 2005 and 2004 respectively, the credit utilized under this facility amounted to $63.05 million and $43.6 million (and approximately $10.7 million and $9.0 million of outstanding letters of credit). Interest on borrowings is either (i) the federal funds rate, (ii) the prime rate of JP Morgan Chase or (iii) LIBOR, plus the applicable margins defined in the loan agreement. In December 2004, the Company entered into a mortgage and an interest rate swap in connection with the purchase of a warehouse. The mortgage, which requires monthly payments of approximately $21,000 including interest, bears interest at Libor + 1.75% and matures in December 2014. At the same time, the Company entered into an interest rate swap with a bank which has been designated as a cash flow hedge. Effective 2004 through December 29, 2014 each month the Company will pay a fixed interest rate of 6.37% to the bank on a notional principal equal to the outstanding principal balance of the mortgage. In return, the bank will pay to the Company a floating rate, namely, LIBOR, to reset monthly plus 1.75% on the same notional principal amount. 6 Empire Resources, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) - -------------------------------------------------------------------------------- 7. Earnings Per Share
Three months ended March 31, --------------------- 2005 2004 ---- ---- Weighted average shares outstanding-basic 9,599 9,530 Dilutive effect of stock options 249 355 ----- ----- Weighted average shares outstanding-diluted 9,848 9,885 ===== =====
Basic earnings per share are based upon the Company's weighted average number of common shares outstanding during each period. Diluted earnings per share are based upon the weighted average number of common shares outstanding during each period, assuming the issuance of common shares for all dilutive potential common shares outstanding during the period, using the treasury stock method. 8. Dividends On March 10, 2005, the Board of Directors of the Company declared a cash dividend of $0.04 per share to stockholders of record at the close of business on March 31, 2005. The dividend totaling $384,000 is reflected in dividends payable at March 31, 2005 and was paid on April 19, 2005. 9. Commitments and Contingencies Empire has contingent liabilities in the form of letters of credit to certain of its suppliers, which at March 31, 2005 amounted to approximately $10.7 million. The Company hedges metal pricing and foreign currency as it deems appropriate for a portion of its purchase and sales contracts. There is a risk of a counterparty default in fulfilling the hedge contract. Should there be a counterparty default, the Company could be exposed to losses on the original hedged contract. 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward Looking Statements The discussions set forth below and elsewhere herein contain certain statements that may be considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. The Company may make written or oral forward-looking statements in other documents we file with the Securities and Exchange Commission, in our annual reports to stockholders, in press releases and other written materials, and in oral statements made by our officers, directors or employees. You can identify forward-looking statements by the use of the words "believe," "expect," "anticipate," "intend," estimate," "assume," "will," "should," and other expressions which predict or indicate future events or trends and which do not relate to historical matters. You should not rely on forward-looking statements, because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of the Company. These risks, uncertainties and other factors may cause the actual results, performance or achievements of the Company to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements. Among the significant factors that could cause our actual results to differ materially from those expressed in forward-looking statements are: changes in general, national or regional economic conditions; an act of war or terrorism that disrupts international shipping; changes in laws, regulations and tariffs, the imposition of anti-dumping duties on the products imported, including those produced by Hulett Aluminium Ltd.; changes in the size and nature of the Company's competition; changes in interest rates, foreign currencies or spot prices of aluminum; loss of one or more foreign suppliers or key executives; loss of one or more significant customers, increased credit risk from customers; failure of the Company to grow internally or by acquisition and to integrate acquired businesses; failure to improve operating margins and efficiencies; and changes in the assumptions used in making such forward-looking statements. The risks set forth in the immediately preceding sentence are not exhaustive. You should carefully review all of these risk factors, and you should be aware that there may be other factors that could cause these differences, including, among others, the factors listed under "Risk Factors," beginning on page 17 of our Annual Report on Form 10-K for the year ended December 31, 2004. Readers should carefully review the factors described under "Risk Factors" and should not place undue reliance on our forward-looking statements. These forward-looking statements were based on information, plans and estimates at the date of this report, and we undertake no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes. New risk factors emerge from time to time, and it is not possible for us to predict all risk factors, nor can we predict the impact of all risk factors on our business or to the extent which any factor, or combination of factors, may cause actual results to differ materially from those contained in forward-looking statements. Overview Empire is a distributor of value added, semi-finished aluminum products. Consequently, Empire's sales volume has been, and will continue to be, a function of its ongoing ability to secure 8 quality aluminum products from its suppliers. While the Company maintains long-term supply relationships with several foreign mills, one such supplier, Hulett Aluminium Ltd., ("Hulett") accounted for approximately 42% of the Company's purchases during the quarter ended March 31, 2005. The Company's ability to succeed is driven in part by continued customer satisfaction, supplier and customer loyalty and the ability to manage the competitive economic environment through the expansion and upgrading of its service to its suppliers and customers. This includes the ability to ship material on a just in time basis from both private and public warehouses, and the establishment of a proprietary on-line service modules for customers to track their shipments. This bolstered the Company's commitment to service and customer satisfaction. The Company has also used its excellent customer relationships to leverage sales per employee by developing long term relationships with its customer and understanding their needs. Because the Company has always engaged in a strategy of developing long term relationships, it has been able to build sales volume without a similar increase in selling, general and administrative expenses that would otherwise accompany customer turn-over. The stable customer and supplier base has enabled the Company to increase its purchases from its suppliers and to sell the majority of these quantities to its existing customer base. While this does expose the Company to concentration risks, it has provided the foundation of the Company's growth and performance. Application of Critical Accounting Policies The Company's condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America. Certain accounting policies have a significant impact on amounts reported in the financial statements. A summary of those significant accounting policies can be found in Note B to the Company's financial statements included in the Company's 2004 Annual Report on Form 10-K. The Company has not adopted any significant new accounting policies during the three-month period ended March 31, 2005. Among the significant judgments made by management in the preparation of the Company's financial statements are the determination of the allowance for doubtful accounts and accruals for inventory claims. These adjustments are made each quarter in the ordinary course of accounting. The Company reports accounts receivable, net of an allowance for doubtful accounts, to represent its estimate of the amount that ultimately will be realized in cash. The Company reviews the adequacy of its allowance for doubtful accounts on an ongoing basis, using historical collection trends, aging of receivables, as well as review of specific accounts, and makes adjustments in the allowance as it believes necessary. The Company maintains a credit insurance policy on the majority of its customers. This policy generally has a co-insurance provision and specific limits on each customer's receivables. The co-pay may be increased in selected instances and the Company sometimes elects to exceed these specific credit limits. Changes in economic conditions could have an impact on the collection of existing receivable balances or future allowance considerations. Generally, the Company's exposure on claims for defective material is small as the Company refers all claims on defects back to the mill supplying the material. In the event that the Company does not believe the mill will honor a claim, the Company will record an allowance for inventory adjustments. 9 Results of Operations (in thousands) During the first quarter of 2005 net sales increased $25,829 to $80,014, or a 48% increase, from $54,185 in the first quarter of 2004. This increase was due to approximately a 15% increase in shipments to the Company's customers and an increase during the first quarter of approximately 15% in U.S. aluminum metal pricing. Gross profit increased $2,038 to $5,874 in the first quarter of 2005, or a 53% increase, from $3,836 in the first quarter of 2004. During this period gross profit as a percentage of sales remained stable; the increase is due to an overall increase of the Company's sales. The Company experienced approximately a 4% increase in selling, general and administrative costs. This is primarily attributable to increased payroll costs. Interest expense grew during the quarter by $265 from $299 to $564. This 88% increase in interest expense is due to both the growth in loans outstanding during the quarter to support revenue growth and the continued upward trend in interest rates. The Company's ability to grow sales without a substantial percentage increase in selling, general and administrative costs led to an increase in net income of 96% from $1,135 in March 2004 to $2,224 in March 2005. The Company's ability to increase its supply has been and will continue to be the main factor for increased revenues. The Company's top ten customers represented 43% of sales in the first quarter of 2005 as compared to 48% during the first quarter of 2004. Liquidity and Capital Resources (in thousands, except per share data) The Company's cash flow from operations decreased by $19,541 from a use of cash of $18,966 in the first quarter of 2005 compared to cash being provided by operations of $575 in the first quarter of 2004 primarily due to the increase in accounts receivable. This increase in accounts receivable is driven by the increase in sales for the first quarter of 2005. The Company maintains a credit insurance policy on its receivables and the Company believes that they are collectible. Notes payable to the Company's bank increased by $22,750 during the first quarter of 2005 to support the increase in accounts receivable and inventories. The $21,765 of net cash provided by financing activities was primarily the result of borrowings under the Company's line of credit. Empire currently operates under a $75,000 revolving line of credit, including a commitment to issue letters of credit, with four commercial banks. The Company's borrowings under this line of credit are collateralized by security interests in substantially all of Empire's assets. Empire is required to maintain working capital and net worth ratios under this credit agreement. This facility will expire on June 30, 2006. On March 11, 2005, the Company announced that its Board of Directors declared a cash dividend of $0.04 per share. The dividend totaling $384 was paid on April 19, 2005 to stockholders of record at the close of business on March 31, 2005. The Board of Directors will review its dividend policy on a quarterly basis and a determination by the Board of Directors will be made subject to the profitability and free cash flow and the other requirements of the business. 10 Management believes that cash from operations, together with funds available under its credit facility, will be sufficient to fund the cash requirements relating to the Company's existing operations for the next twelve months. Empire may require additional debt or equity financing in connection with the future expansion of its operations. Commitments and Contingencies (in thousands) Empire has contingent liabilities in the form of letters of credit totaling $10,700 to certain of its suppliers and as of March 31, 2005, the credit utilized under its credit facility amounted to $63,050. Except as noted, there have been no material changes to the Company's commitments and contingencies from that disclosed in our Annual Report on Form 10-K for the year ended December 31, 2004. The Company hedges metal pricing and foreign currency as it deems appropriate for a portion of its purchase and sales contracts. There is a risk of a counterparty default in fulfilling the hedge contract. Should there be a counterparty default, the Company could be exposed to losses on the original hedged contract. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK The Company uses financial instruments designated as fair value hedges to manage its exposure to commodity price risk and foreign currency exchange risk inherent in its operations. It is the Company's policy to hedge such risks, to the extent practicable. The Company enters into high-grade aluminum futures contracts to limit its gross margin exposure by hedging the metals content element of firmly committed purchase and sales commitments. The Company also enters into foreign exchange forward contracts to hedge its exposure related to commitments to purchase or sell non-ferrous metals denominated in international currencies. The Company records "mark-to-market" adjustments on these futures and forward positions, and on the underlying firm purchase and sales commitments which they hedge, and reflects the net gains and losses currently in earnings. Refer to our Annual Report on Form 10-K for the year ended December 31, 2004 for more detailed disclosure about quantitative and qualitative disclosure of market risk. Quantitative and qualitative disclosure about market risk have not materially changed since December 31, 2004. ITEM 4. CONTROLS AND PROCEDURES As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company's management conducted an evaluation with the participation of the Company's Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of the Company's disclosure controls and procedures, as of the end of the last fiscal quarter. In designing and evaluating the Company's disclosure controls and procedures, the Company and its management recognize that any controls and procedures, no matter how well designed and operated, can provide only a reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that they believe the Company's disclosure controls and procedures are reasonably effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. We intend to continue to review and document our disclosure controls and procedures, including our internal controls and procedures for financial 11 reporting, and we may from time to time make changes to the disclosure controls and procedures to enhance their effectiveness and to ensure that our systems evolve with our business. There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 12 PART II OTHER INFORMATION Item 1. Legal Proceedings. The Company is party from time to time to certain legal proceedings and claims that arise in the ordinary course of business. The Company does not believe that any such litigation would have a material adverse effect on its results of operation or financial condition. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. None. Item 3. Defaults upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. On February 23, 2005, the Company entered into Amendment No. 5 to its Credit Facility with JP Morgan Chase Bank, N.A., as Lead Arranger and Administrative Agent. This Amendment added a new lender to the credit facility, Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. and increased the total committed amount under the credit facility to $75 million. The borrowings under the credit facility remain collateralized by security interests in substantially all of the Company's assets and remains subject to certain financial ratios provided in the loan agreement. Item 6. Exhibits. The following are included as exhibits to this report: Exhibit No. Description 10.19 Amendment No. 5 to Credit Facility, dated February 23, 2005 between the Registrant and JP Morgan Chase Bank, N.A. as Lead Arranger and Administrative Agent.* 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934* 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934* 32.1 Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** - ------------------------- * Filed herewith ** Furnished herewith 13 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned hereunto duly authorized. EMPIRE RESOURCES, INC. Dated: May 16, 2005 By: /s/ Sandra Kahn ---------------- Sandra Kahn Chief Financial Officer (signing both on behalf of the registrant and in her capacity as Principal Financial and Principal Accounting Officer) 14 EX-10 2 ex10-19.txt EXHIBIT 10.19 Exhibit 10.19 AMENDMENT NO. 5 AMENDMENT NO. 5, dated as of February 23, 2005 (this "Amendment"), among EMPIRE RESOURCES, INC., a corporation duly organized and validly existing under the laws of the State of Delaware (the "Company"); each of the existing lenders that is a signatory hereto (individually, a "Continuing Bank" and, collectively, the "Continuing Banks"); COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK INTERNATIONAL", NEW YORK BRANCH, as a new lender (the "New Bank" and together with the Continuing Banks, the "Banks"); and JPMORGAN CHASE BANK, N.A., as agent for the Banks (in such capacity, together with its successors in such capacity, the "Agent"). The Company, the Banks and the Agent are parties to a Credit Agreement, dated as of December 21, 2000 (as heretofore modified and supplemented and in effect on the date hereof, the "Credit Agreement"), providing, subject to the terms and conditions thereof, for extensions of credit to be made by said Banks to the Company. The Company, the Banks and the Agent now wish to amend the Credit Agreement in certain respects and, accordingly, the parties hereto hereby agree as follows: Section 1. Definitions. Except as otherwise defined in this Amendment No. 5, terms defined in the Credit Agreement are used herein as defined therein. Section 2. New Bank; Non-Pro-Rata Reduction in Bank Outstanding Principal Amount and Commitment; Banks' Commitments. Subject to the occurrence of the Amendment Effective Date (as defined below) and effective on such date: 2.01. Each of the parties hereto agrees that the New Bank is a "Bank" party to the Credit Agreement with all of the rights and obligations of a "Bank" under the Credit Agreement, and each reference to "Bank" in the Credit Agreement and all other Basic Documents shall for all purposes include the New Bank. The New Bank hereby agrees to be bound by all of the terms and provisions of the Credit Agreement applicable to "Banks". 2.02. Each Bank that has not made a Loan or that has made Loans, the outstanding principal amount of which are ratably ("Ratably") less than the outstanding principal amount of Loans made by other Banks (the "Other Banks"), in each case as determined in accordance with such Bank's Loans outstanding (before giving effect to this Amendment) in proportion to its Commitments (after giving effect to this Amendment), shall fund its portion of the Loans in an amount that will result in the aggregate outstanding principal amount of all Loans being allocated Ratably among the Banks and, accordingly, the Other Bank's Loans shall be reduced Ratably by such fundings. 2.03. The New Bank (i) represents and warrants to the Administrative Agent and each Continuing Bank that it has received a copy of the Credit Agreement and each other Basic Document, (ii) agrees that it has, independently and without reliance on the Administrative Agent or any Continuing Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Company and its Subsidiaries and decision to enter into the Credit Agreement and this Amendment No. 5, and (iii) confirms its obligations under Section 10.06 of the Credit Agreement. 2.04. The Company agrees to (i) execute and deliver a Note to the New Bank reflecting its Commitment and (ii) execute and deliver a new Note to each of the Continuing Banks reflecting the Commitment for each such Continuing Bank upon delivery to the Company by each such Continuing Bank of the Note previously issued to each such Continuing Bank by the Company. Section 3. Amendment. Subject to the occurrence of the Amendment Effective Date and effective on such date, the Credit Agreement shall be amended as follows: 3.01. The second paragraph of the preamble shall be amended by replacing the number "$60,000,000" therein with the number "$75,000,000". 3.02 The definition of "Commitment" in Section 1.01 of the Credit Agreement (Definitions) shall be amended in its entirety to read: "Commitment" shall mean, as to each Bank, the obligation of such Bank to make Loans, issue Letters of Credit and create Acceptances in an aggregate principal or face amount at any one time outstanding up to but not exceeding the amount set opposite such Bank's name under the caption "Commitment" in Schedule IV hereto (as the same may be reduced from time to time pursuant to Section 2.05 hereof and increased pursuant to Section 2.01(b) hereof); provided that in no event shall the aggregate amount of the Commitments to make Loans exceed the Loan Commitment Sub-limit. The aggregate amount of the Commitments on the date hereof is $75,000,000. 3.03. The definition of "Loan Commitment Sub-limit" in Section 1.01 of the Credit Agreement (Definitions) shall be amended by replacing the number "$50,000,000" therein with the number "$65,000,000". 3.04. The definition of "Quad Avenue Loan Agreement" in Section 1.01 of the Credit Agreement (Definitions) shall be amended by replacing the words "to be entered into" with the words "dated as of December 27, 2004". 3.05. Section 2.03 of the Credit Agreement (Letters of Credit) shall be amended by replacing the number "$3,000,000" in clause (ii) of the first sentence thereof with the number "$4,000,000". 3.06. Section 2.06 of the Credit Agreement (Commitment Fee) shall be amended by replacing the number "$60,000,000" therein with the number "$75,000,000". 3.07. The Credit Agreement is hereby amended by (x) deleting the "Schedule IV" thereto and (y) inserting a new "Schedule IV" thereto identical to Schedule I hereto. Section 4. Representations and Warranties. The Company represents and warrants to the Banks as of the Amendment Effective Date that (x) the representations and warranties set forth 2 in Section 7 of the Credit Agreement and in Article III the Security Agreement are true and complete on the date hereof as if made on and as of the date hereof and as if each reference in said Section 7 to "this Agreement" included reference to this Amendment No. 5, except (i) changes resulting from transactions contemplated by or permitted by the Credit Agreement, and (ii) those applicable to a specific date or period and (y) no Default has occurred and is continuing. Section 5. Conditions Precedent. As provided in Section 3 above, the amendments to the Credit Agreement set forth in said Section 3 shall become effective, as of February 23, 2005 (the "Amendment Effective Date"), upon (i) the execution of this Amendment No. 5 by the Company, each of the Banks and the Agent, (ii) the delivery by the Company of board of director resolutions approving this Amendment No. 5 and the transactions contemplated herein, in form and substance satisfactory to the Agent and (iii) the payment by the Company of all fees and expenses due and owing on such date. Section 6. Miscellaneous. Except as herein provided, the Credit Agreement shall remain unchanged and in full force and effect. This Amendment No. 5 may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Amendment No. 5 by signing any such counterpart. This Amendment No. 5 shall be governed by, and construed in accordance with, the law of the State of New York. 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 5 to be duly executed and delivered as of the day and year first above written. EMPIRE RESOURCES, INC. By: /s/ Sandra Kahn --------------- Name: Sandra R. Kahn Title: Vice President 4 JPMORGAN CHASE BANK, N.A., as Agent By: /s/ Thomas S. Drake ------------------- Name: Thomas S. Drake Title: Vice President 5 BROWN BROTHERS HARRIMAN & CO. By: /s/ Kathryn C. George --------------------- Name: Kathryn C. George Title: Managing Director 6 CITICORP USA, INC. By: /s/ Keith Pallmann ------------------ Name: Keith Pallmann Title: Vice President 7 JPMORGAN CHASE BANK, N.A. By: /s/ Thomas S. Drake ------------------- Name: Thomas S. Drake Title: Vice President 8 COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK INTERNATIONAL", NEW YORK BRANCH By: /s/ Brett Delfino ----------------- Name: Brett Delfino Title: Executive Director By: /s/ Michelle S. Ruocco ---------------------- Name: Michelle S. Ruocco Title: Vice President 9 SCHEDULE I SCHEDULE IV Commitments
----------------------------------------------------------------- Bank Commitment ----------------------------------------------------------------- JPMorgan Chase Bank, N.A. $30,000,000 ----------------------------------------------------------------- Citicorp USA, Inc. $18,000,000 ----------------------------------------------------------------- Brown Brothers Harriman & Co. $15,000,000 ----------------------------------------------------------------- Cooperatieve Centrale $12,000,000 Raiffeisen-Boerenleenbank B.A., "Rabobank International", New York Branch -----------------------------------------------------------------
10 EX-31 3 ex31-1.txt EXHIBIT 31.1 Exhibit 31.1 CERTIFICATION PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002 I, Nathan Kahn, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Empire Resources, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 16, 2005 By: /s/ Nathan Kahn --------------- Nathan Kahn Chief Executive Officer EX-31 4 ex31-2.txt EXHIBIT 31.2 Exhibit 31.2 CERTIFICATION PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002 I, Sandra Kahn, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Empire Resources, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 16, 2005 By: /s/ Sandra Kahn -------------- Sandra Kahn Chief Financial Officer EX-32 5 ex32-1.txt EXHIBIT 32.1 Exhibit 32.1 CERTIFICATIONS The undersigned officer of Empire Resources, Inc. (the "Company") hereby certifies that the Company's quarterly report on Form 10-Q for the period ended March 31, 2003 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is provided solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed to be a part of the Report or "filed" for any purpose whatsoever. Date: May 16, 2005 By: /s/ Nathan Kahn ------------------------- Nathan Kahn, Chief Executive Officer and President The undersigned officer of Empire Resources, Inc. (the "Company") hereby certifies that the Company's quarterly report on Form 10-Q for the period ended March 31, 2004 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is provided solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed to be a part of the Report or "filed" for any purpose whatsoever. Date: May 16, 2005 By: /s/ Sandra Kahn -------------------------------- Sandra Kahn, Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----