Metalico Inc (MEA)

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Metalico, Inc. (MEA)

Q1 2010 Earnings Call Transcript

May 6, 2010 10:00 am ET

Executives

Carlos Aguero – Chairman, President and CEO

Michael Drury – EVP

Analysts

Richard Paget – Morgan Joseph

Brett Levy – Jefferies and Company

Eric Prouty – Canaccord

Brent Thielman – D.A. Davidson

Nat Kellogg – Hudson Securities

Scott Blumenthal – Emerald Advisers

Shaun Nicholson – Kennedy Capital

Presentation

Operator

Good morning. My name is Jessica and I will be your conference facilitator. At this time, I would like to welcome everyone to the Metalico 2010 first quarter results. (Operator Instructions) The purpose of today's call is to discuss the results of the company's operations for the quarter ended March 31, 2010.

Earlier today, Metalico issued a press release announcing first quarter results and filed a report on Form 8-K in connection with the release. You can access copies of Metalico's filings in the SEC's EDGAR online files or directly through the company's website at www.metalico.com. Just log on to the website, click on Investors at the top of the home page and then click on SEC Filings in the left column. Then, click to download the report. Metalico's filings are also available at the SEC's website 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 week after the call's conclusion. To access the recording, callers will be required to enter the conference identification number of 70262512.

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 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 a more detailed discussion of forward-looking statements and a discussion of the factors that could cause results to differ materially from the discussion today, please refer to Metalico's Form 10-K for 2009, which is also 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 reconciliations 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.

Carlos Aguero

Good morning and thank you for joining today's conference call. With me here today are Michael Drury, our Executive Vice President and Eric Finlayson, our Senior Vice President and Chief Financial Officer. Following my presentation, we'll be available to answer any questions you might have. We will also post a transcript of our remarks in the question-and-answer session on the Metalico website when the transcript becomes available after the call.

Earlier today, Metalico released financial results for the third quarter of 2010 showing substantial improvements in virtually all of the operating metrics tracked by the company. These include but are not limited to revenue, unit shipment, operating income and EBITDA.

Those results are attributed to all around hard work and solid execution, combined with the positive effect of increased shipment and commodity metal price tailwinds during the period. They also reflect an economy that is showing tons of recovery and industrial production and consumer spending and a company that is positioned to participate in the recovery. Momentarily, I'll review our results in detail but first, I'd like to share with you our general observations on conditions affecting our performance.

During the first quarter, capacity utilization in the steel industry rose steadily, thus having a positive impact on ferrous scrap pricing. We also experienced rising demand from consumers of non-ferrous commodity metals and rising selling prices during the period.

Many areas of the economy and related employment have not yet recovered. Manufacturing activity and consumer spending trends are still well behind where they were a few years ago. Since these are primary drivers of the generation of scrap metal in all commodity types, scrap supplies continue to be below historic norms. However, with the end of the winter weather, we have seen a healthy uptick in volumes at all of our locations.

During the quarter, both demand from scrap – for scrap from consumers and commodity metal prices experienced considerable positive momentum. As we have discussed in previous calls, we had made debt and operating cost reduction our highest priority last year and we believe that today we've seen positive results from those efforts that position us well for the future.

Let's go over some of the highlights. First quarter financial highlights include the following, all as compared to the first quarter of 2009. Sales jumped by 152% to $134 million. Operating income of $13.6 million recovered substantially from nearly breakeven last year.

Net income on a non-GAAP adjusted basis was $6.4 million and adjusted earnings per share were $0.15. We'll explain these adjustments in just a few minutes. Under GAAP, reported net income was $3.5 million or $.08 per share, compared to a loss of $3.6 million or $0.10 per share a year ago.

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