SOURCE: Metalico, Inc.
August 05, 2010 08:20 ET
Metalico Reports Continued Improvement in Second Quarter
CRANFORD, NJ--(Marketwire - August 5, 2010) - Metalico, Inc. (NYSE Amex: MEA) today reported
net income of $4.4 million and earnings of $0.10 per share for the quarter
ended June 30, 2010, with continued increases in volume, revenues, and
operating income compared to the prior-year quarter.
Sales were $144.6 million, an increase of $82.3 million, or 132%, over
same-quarter 2009 results. Operating income for the 2010 second quarter
was $6.7 million, compared to $2.8 million for the prior-year quarter.
EBITDA (as defined below) increased by 67% to $10.7 million from $6.4
million for the same quarter in 2009.
Second quarter 2010 results include a non-cash fair value benefit for
financial instruments of $2.1 million or $.04 per share compared with a
$1.5 million expense or ($.04) per share in the prior year quarter.
Sequential Quarter Comparison
Compared sequentially with the first quarter of 2010, sales and net income
improved but several measures of operating performance declined.
-- Sales of $144.6 million increased by $10.5 million, or 8%, over $134.1
million.
-- Net income was $4.4 million, compared to net income of $3.5 million.
-- On a per-diluted-share basis, net income rose to $0.10, compared to
$0.08 per share.
-- Operating income was $6.7 million, a decrease of $6.9 million, or 51%,
from $13.6 million.
-- EBITDA was $10.7 million, a decrease of $6.9 million from $17.6
million.
-- Unit volumes shipped decreased by 19% for ferrous scrap and remained
flat for non-ferrous scrap.
-- Platinum Group Metal ("PGM") unit volumes were up by 9%.
-- Lead product shipments in the quarter rose by 32%.
The Company said its higher sales were largely driven by strong operating
results from its PGM business.
Prior Year's Second Quarter Comparison
Year-over-year comparison to the second quarter of 2010 reflects
substantially improved operating performance:
-- Sales increased to $144.6 million, an increase of $82.3 million, or
132%, over $62.3 million.
-- Operating income was $6.7 million, compared to operating income of $2.8
million, an increase of $3.9 million, or 139%.
-- Net income increased to $4.4 million, a 300% improvement from net
income of $1.1 million.
-- EBITDA rose to $10.7 million, an increase of $4.3 million, or 67% over
$6.4 million.
-- Net income of $0.10 per diluted share, compared to net income of $0.03
per share.
-- Unit volumes shipped increased by 40% for ferrous scrap and 77% for
non-ferrous scrap.
-- PGM unit volumes increased 165% to 39,042 troy ounces from 14,690 troy
ounces.
-- Lead product shipments were down 33% from Q2 2009 related primarily to
unusually high ammunition product-related sales in 2009.
Excluding corporate overhead charges, the Company's Scrap Metal segment
reported $8.8 million in operating income in the 2010 second quarter
compared to $2.7 million for the same period last year. The Company's Lead
Fabrication segment reported an operating loss of $99,000 compared to
operating income of $1.6 million in the prior-year period, also excluding
corporate overhead charges.
Volume and Price Comparisons
Metalico's Scrap Metal segment experienced substantial year-over-year unit
volume increases. Sequential quarterly volumes increased for PGM and
non-ferrous, and fell for ferrous. Volumes in the Lead Fabricating segment
rose sequentially, but were lower year-over-year due to 2009's strong
market for ammunition-related products.
Quarterly volume of units sold
Q2 2010 Q2 2010
Q2 2010 Q1 2010 Change Q2 2009 Change
---------- ---------- --------- ---------- ---------
Ferrous (gross
tons) 103,200 127,100 -19% 73,700 40%
Non-Ferrous
(pounds) 36,102,000 36,013,000 0% 20,364,000 77%
PGM (troy ounces) 39,042 35,704 9% 14,690 165%
Lead (pounds) 12,845,000 9,752,000 32% 19,080,000 -33%
Average selling prices increased for all metals, both sequentially and
year-over-year, with the exception of a 3% decline in sequential selling
prices for lead products.
Quarterly selling price per unit sold
Q2 2010 Q2 2010
Q2 2010 Q1 2010 Change Q2 2009 Change
---------- ---------- --------- ---------- ---------
Ferrous (gross
ton) $ 392 $ 357 10% $ 205 91%
Non-Ferrous
(pound) $ 1.11 $ 1.05 6% $ 0.83 34%
PGM (troy ounce) $ 1,122 $ 966 16% $ 661 70%
Lead (pound) $ 1.42 $ 1.46 -3% $ 0.94 51%
Carlos E. Agüero, Metalico's President and Chief Executive Officer, said,
"The second quarter when compared to 2009 showed significant improvement
but was below the excellent performance posted in the first quarter of this
year. The quarter was characterized by rising inventory purchase costs
early in the period while selling prices for many ferrous and non-ferrous
commodities steadily dropped in May and June, thereby squeezing metal
margins. Operations generated EBITDA margins of 7.4%, which is less than
our target of 10%. However, through the first six months of 2010, EBITDA
margins were 10.2%.
"We anticipate market conditions will remain choppy for the remainder of
the year as domestic consumers grapple with erratic order books and foreign
consumers who enter the U.S. only when they see opportunistic buying
conditions. Non-ferrous markets were impacted by price volatility brought
on by concerns over Europe's sovereign debt issues and banking concerns. We
are concerned that similar issues and concerns over domestic issues will
roil the commodity markets for the foreseeable future."
He added, "As we said earlier this year, we expect to enhance the operating
leverage of our existing platforms by opening or acquiring additional scrap
metal buying centers in strategic adjacent areas that will provide
additional market penetration. Our goal is to add four or five such new
buying centers over the next twelve months, all subject to finding,
securing and permitting such properties to accept scrap metals."
Shareholders' Equity and Debt
Metalico's outstanding debt remained flat at approximately $127 million as
of June 30, 2010 compared to March 31, 2010, but net working capital
improved by approximately $3.8 million. Shareholders' equity increased by
$5.2 million to $160.1 million as of the end of the second quarter from
$154.9 million as of the prior quarter-end.
As of June 30, 2010, Metalico had 46,449,085 common shares issued and
outstanding. The Company has no outstanding preferred stock.
Metalico operates in the highly volatile and cyclical commodity metals
industry and therefore deems it unreliable to provide earnings guidance.
The Company's core business strategy emphasizes balanced growth of the
ferrous and non-ferrous Scrap Metal Recycling business through acquisitions
or new facility development in existing and contiguous new markets.
Outlook and Update
In April of 2010, selling prices for ferrous scrap metal increased and
domestic demand remained firm while scrap buying prices continued to rise.
The remainder of the quarter was marked by steadily declining ferrous
selling prices with some grades of scrap in surplus, along with lackluster
demand from many consumers. Metalico's average inventory cost rose during
the period and the Company sold 19% less scrap as compared to first
quarter.
The Company believes that, going into the third quarter, domestic ferrous
scrap prices have reached a plateau and demand is somewhat more stable.
Metalico expects prices and demand to strengthen over the period. While
intake of ferrous scrap at its yards has been below expectations since May,
Metalico used the second quarter lull as a buying opportunity and is well
positioned with ample inventories to participate in the anticipated
improvement in the ferrous markets and stronger pricing for non-ferrous
commodities.
Demand for non-ferrous scrap continues to be strong, but pricing for most
grades declined modestly through the quarter in part due to strength in the
US Dollar and weakness in the Euro. The flow of non-ferrous scrap into
yards slowed down somewhat from the brisk pace of early to middle Spring
but is expected to improve as long as non-ferrous metal pricing holds
during the third quarter. Non-ferrous consumers appear to have strong
order books, which should help support prices and keep scrap supplies
tight.
Demand for aluminum de-ox has slowed. Selling prices have declined in
tandem with quotations on the LME and a drop in steel industry capacity
utilization.
During the second quarter Metalico experienced a 9% improvement in PGM troy
ounces recycled. This increase was driven by aggressive buying
complemented by strong metal selling prices in the early part of the
quarter, and resulted in superior performance for this part of the
Company's business.
After starting out strong early in the quarter, average prices for PGM's
fell approximately 10% in the latter part of the quarter, resulting in a
declining supply of catalyst. Barring non-market pricing disruptions,
Metalico believes that PGM prices have started to rebound and will continue
to recover during the remainder of 2010, which will help drive the supply
of catalyst into the market place.
The Company's lead segment continues to be impacted by competitive
pressures and weak demand in many of the markets Metalico sells to.
Segments of the economy such as commercial construction including medical
facilities, diagnostic and therapy equipment manufacturers, plumbing supply
and lead anode consumers remain deeply impacted by the continuing economic
softness.
However, the Company said that shot sales, seasonal roof flashings and
Department of Defense sales remain robust.
About Metalico
Metalico, Inc. is a holding company with operations in two principal
business segments: ferrous and non-ferrous scrap metal recycling, and
fabrication of lead-based products. The Company operates twenty-four
recycling facilities in New York, Pennsylvania, Ohio, West Virginia, New
Jersey, Texas, and Mississippi and four lead fabricating plants in Alabama,
Illinois, and California. Metalico's common stock is traded on the NYSE
Amex under the symbol MEA.
EBITDA Reconciliation
The Company defines EBITDA as earnings before interest, stock-based
compensation, accelerated amortization and other costs related to
refinancing of senior debt, income taxes, depreciation and amortization,
financial instruments fair value adjustments, gain on extinguishment of
debt, and discontinued operations. EBITDA is considered non-GAAP financial
information and a reconciliation of net income to EBITDA is included in the
attached financial tables.
Forward-looking Statements
This news release, and in particular its "Industry Outlook and Update"
section, contains "forward-looking statements" made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995,
such as Metalico's expectations with respect to its results of operations
for the third quarter of 2010 and beyond, commodity pricing, volumes, and
trends. These statements may contain terms like "expect," "anticipate,"
"believe," "should," "appear," "estimate" and other words that convey a
similar meaning, or are statements that do not relate strictly to
historical or current facts. Forward-looking statements include statements
with respect to Metalico's beliefs, plans, objectives, goals, expectations,
anticipations, assumptions, estimates, intentions, and future performance,
and involve known and unknown risks, uncertainties and other factors, which
may be beyond Metalico's control, and which may cause Metalico's actual
results, performance or achievements to be materially different from future
results, performance, expectations or achievements expressed or implied by
such forward-looking statements. Factors that could cause such material
difference are discussed in more detail in the Company's most recent Annual
Report on Form 10-K and other filings with the Securities and Exchange
Commission. All statements other than statements of historical fact are
statements that could be forward-looking statements. Metalico assumes no
obligation to update the information contained in this news release.
METALICO, INC.
SELECTED HISTORICAL FINANCIAL DATA
(UNAUDITED)
($ thousands, except per share data)
Three months ended Six months ended
---------------------- ----------------------
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
---------- ---------- ---------- ----------
Revenue $ 144,575 $ 62,348 $ 278,654 $ 115,632
---------- ---------- ---------- ----------
Costs and expenses
Operating expenses 128,127 50,880 238,020 94,353
Selling, general, and
administrative expenses 6,464 5,399 13,645 11,708
Depreciation and
amortization 3,236 3,307 6,636 6,594
---------- ---------- ---------- ----------
137,827 59,586 258,301 112,655
---------- ---------- ---------- ----------
Operating income 6,748 2,762 20,353 2,977
---------- ---------- ---------- ----------
Financial and other income
(expense)
Interest expense (2,346) (4,402) (5,294) (8,805)
Accelerated amortization
and other costs related
to refinancing of senior
debt - - (3,046) (254)
Equity in loss of
unconsolidated investee - (287) - (733)
Financial instruments fair
value adjustments 2,063 (1,504) 1,115 (2,034)
Gain on debt
extinguishment - 5,024 - 5,024
Other 3 34 (87) 187
---------- ---------- ---------- ----------
(280) (1,135) (7,312) (6,615)
---------- ---------- ---------- ----------
Income (loss) from
continuing operations
before income taxes 6,468 1,627 13,041 (3,638)
Provision (benefit) for
federal and state income
taxes 2,045 563 5,099 (993)
---------- ---------- ---------- ----------
Income (loss) from
continuing operations 4,423 1,064 7,942 (2,645)
Discontinued operations,
net of income taxes (5) 24 (10) 182
---------- ---------- ---------- ----------
Net income (loss) $ 4,418 $ 1,088 $ 7,932 $ (2,463)
========== ========== ========== ==========
Diluted earnings (loss)
per common share:
Income (loss) from
continuing operations $ 0.10 $ 0.03 $ 0.17 $ (0.07)
Discontinued operations,
net - - - -
---------- ---------- ---------- ----------
Net income (loss) $ 0.10 $ 0.03 $ 0.17 $ (0.07)
========== ========== ========== ==========
Diluted Weighted Average
Common Shares
Outstanding: 46,463,537 38,354,045 46,476,453 37,367,007
========== ========== ========== ==========
METALICO, INC.
SELECTED HISTORICAL FINANCIAL DATA (CONTINUED)
(UNAUDITED)
($ thousands, except per share data)
June 30, December 31,
2010 2009
------------ ------------
Assets:
Current Assets $ 129,949 $ 102,720
Property & Equipment, net 73,618 75,253
Intangible and Other Assets 116,104 118,728
------------ ------------
Total Assets $ 319,671 $ 296,701
============ ============
Liabilities & Stockholders' Equity:
Current Liabilities $ 36,809 $ 29,362
Debt & Other Long-Term Liabilities 122,787 117,082
------------ ------------
Total Liabilities 159,596 146,444
Stockholders' Equity 160,075 150,257
------------ ------------
Total Liabilities & Stockholders'
Equity $ 319,671 $ 296,701
============ ============
Non-GAAP Financial Information
Reconciliation of Non-GAAP EBITDA and Net Income
When the Company uses the term "EBITDA," the Company is referring to
earnings before interest, stock-based compensation, accelerated
amortization and other costs related to refinancing of senior debt, income
taxes, depreciation and amortization, financial instruments fair value
adjustments, gain on extinguishment of debt, and discontinued operations.
Other companies may define and compute EBITDA differently than we do. The
Company presents EBITDA because it considers it an important supplemental
measure of the Company's performance and believes it is frequently used by
securities analysts, investors and other interested parties in the
evaluation of companies in Metalico's industry. The Company also uses
EBITDA to determine its compliance with some of the covenants under its
credit facility. EBITDA is not a recognized term under generally accepted
accounting principles in the United States "GAAP," and has limitations as
an analytical tool. You should not consider it in isolation or as a
substitute for net income, operating income, cash flows from operating,
investing or financing activities or any other measure calculated in
accordance with GAAP. Other companies in the Company's industry may
calculate EBITDA differently from how the Company does, limiting its
usefulness as a comparative measure. EBITDA should not be considered as a
measure of discretionary cash available to the Company to invest in the
growth of its business. The following table reconciles EBITDA to net
income:
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
-------- -------- -------- --------
(UNAUDITED)
($ thousands)
EBITDA $ 10,741 $ 6,395 $ 28,348 $ 10,203
Less:
Interest expense 2,346 4,402 5,294 8,805
Accelerated amortization and other
costs related to refinancing of
senior debt - - 3,046 254
Stock based compensation
expense 754 579 1,446 1,178
Provision (benefit) for federal and
state income taxes 2,045 563 5,099 (993)
Gain on debt extinguishment - (5,024) - (5,024)
Depreciation and amortization 3,236 3,307 6,636 6,594
Financial instruments fair value
adjustment (2,063) 1,504 (1,115) 2,034
Discontinued operations, net 5 (24) 10 (182)
-------- -------- -------- --------
Net income (loss) $ 4,418 $ 1,088 $ 7,932 $ (2,463)
======== ======== ======== ========