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Metalico, Inc. (MEA)
Q4 2008 Earnings Call Transcript
March 12, 2009, 2009 10:00 am ET
Carlos Aguero – Chairman, President & CEO
Michael Drury – EVP
Brett Levy – Jefferies & Company
Eric Prouty – Canaccord
Michael Curly [ph] – McGallan Curly [ph]
Scott Reynolds – Thomas Weisel
Paul Schaffer – American Metal Market
Nat Kellogg – Next Generation
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Earlier today Metalico issued a press release announcing fourth quarter results and filed a report on Form 8-K in connection with the release. The company will also be filing its annual report on Form 10-K for 2008 shortly. You can access copies of Metalico’s filings through the SEC’s Edgar online file or directly through the company’s Web site at www.metalico.com. Just log on to the Web site, click on “Investors” at the top of the home page then click on the “SEC Filings” in the left column, then click to download the report. Metalico's filings are also available at the SEC’s Web site at www.sec.gov.
In addition, an audio replay of the call will also be available at 800-642-1687 or 706-645-9291 for the first 48 hours after the call’s conclusion. To access the recording callers will be required to enter the conference identification number at 87-77-80-98.
As is customary let me reiterate the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. The following discussion contains forward-looking statements that are subject to risks and uncertainties including those risks set forth in Metalico's filings with the SEC.
These risks could cause actual results for the current period and beyond to differ materially from those expressed in any forward-looking statements made by or on behalf of the company. We refer you to Metalico's periodic reports that are filed from time to time with the SEC.
For more detailed discussion of forward-looking statements and the discussion of the factors that could cause results to differ materially from the discussion today please refer to the risk factor discussion in Metalico's Form 10-K for 2008 which will also be available online.
In addition, during the course of the conference call certain non-GAAP financial measures may be described which should be considered in addition to and not in lieu of comparable GAAP financial measures. The company has provided reconciliation of these non-GAAP measures to what it believes are the most directly comparable GAAP measures in the earnings release.
Thank you, ladies and gentlemen. I would now like to turn the call over to Mr. Carlos Aguero, President and Chief Executive Officer of Metalico.
Good morning. And thank you for joining today’s conference call. With me here today, Michael Drury, our Executive Vice President and Eric Finlayson, our Senior Vice President and Chief Financial Officer. Following my presentation we will be available to answer any questions you may have. We will also post the transcript of our remarks and the question-and-answer session on Metalico Web site when the transcript becomes available after this call.
Earlier today we released financial information ushering the severe impact of global impact of economic crisis that had on Metalico. In a moment I will review our results in a little bit more detail. But first, I would like to speak about our reaction to the catastrophic downturn and how we try to position ourselves.
The last time we presented our results after the third quarter of 2008 I began by saying that the third quarter saw the beginning of a difficult period for the global commodities market. I also mentioned that the metal sector was experiencing historic downward pressures from the worldwide contraction in capital, credit, production and consumption and free falling commodity prices.
I think by now we all know how bad things have gotten. Unfortunately, the trends we talked about last year continued through the fourth quarter and are still present today. I don’t need to belabor the point that there is a lot of negative moves in the business section from the newspapers today.
In the first half of 2008, well before the crash, the company added to a Platinum Group Metals operation with the American Cat Con acquisition and added an attractive ferrous scrap recycling platform in western Pennsylvania with the purchase of the Snyder Group. These moves allowed Metalico to further diversify among commodities achieving a fair balance between ferrous and nonferrous metals. Of course, with all metal commodities dropping at the same time diversification did not help much in the latter part of the year.
We understood immediately that earnings in cash flow were going to be deeply affected by the recessionary conditions. Early in the fourth quarter we carefully reviewed all aspects of the company’s operations and we moved quickly to make appropriate changes proactively to mitigate the impact of the crisis on our business. First, we aggressively contained our metal buying prices. We concentrated on clearing inventories rapidly, severely limited our expenditures, we instituted hiring and wage freeze. Over time we cut back or eliminate where appropriate operations were temporarily idle. We reassigned personnel and impose painful employee layoff. We tightened customer credit terms and pursued more aggressive collection efforts.