Metalico Inc (MEA)

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Metalico, Inc. (MEA)

Q2 2010 Earnings Call

August 5, 2010; 10:00 am ET

Management

Carlos Aguero - President & Chief Executive Officer

Michael Drury - Executive Vice President

Eric Finlayson - Senior Vice President & Chief Financial Officer

Analysts

Brent Thielman - D.A. Davidson

Matthew Lerner - Platts

Eric Prouty - Canaccord

Bob Sullivan - Satuit Capital Management

Chris Olin - Cleveland Research

Gregory Macosko - Lord Abbett

Scott Huntington - Bodell Overcash

Presentation

Operator

Operator

Good morning, my name is Melissa and I will be your conference facilitator. At this time, I would like to welcome everyone to the Metalico 2010 second quarter results call. (Operator Instructions) The purpose of today's call is to discuss the results of the company's operations for the quarter ended June 30, 2010.

Earlier today, Metalico issued a press release announcing second quarter results and filed a report on Form 8-K in connection with the release. The company is scheduled to file its quarterly report on From 10-Q for the quarter shortly. You can access copies of Metalico's filings through the SEC at their 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 889-706-53.

As it 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 a more detailed discussion of forward-looking statements and a discussion of the factors that could cause results to differ materially from the discussion’s today, please refer to the risk factor discussion in Metalico's annual report on 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

Carlos Aguero

Good morning and thank you for joining our 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 will be available to answer any questions you might have.

We will also post a transcript of our remarks and 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 second quarter of 2010 showing improvements in revenue, operating income, net income and EBITDA as compared to same period in 2009. At the same time, on a sequential basis sales and net income improved, but several key measures of operating performance declined in comparison. We view this as the results of an acceptable quarter suffering by comparison to an outstanding first period result.

Now let’s go over some of the highlights. Second quarter financial highlights include the following, all as compared to the second quarter of 2009. Sales increased to a $144.6 million, an increase of $82.3 million or 132% over the $62 million of last year. Operating income was $6.7 million compared to operating income of $2.8, an increase of $3.9 or 139%.

Net income increased to $4.4 million, tripling from net income of $1.1. EBITDA rose to $10.7 million, an increase of $4.3 or 67% over the $6.4 million last year. Net income of $0.10 per diluted share compared to net income of $0.03 per share. Unit volume shift increased by 40% for ferrous scrap and 77% for non-ferrous scrap.

PGM unit volumes increased 165% to a total of 39,042 troy ounces from 14,690 troy ounces. Lead product shipments were down 33% from Q2 of ‘09 related primarily to unusually high ammunition product related sales in ‘09.

Excluding corporate overhead charges, the company’s scrap segment saw operating income more than triple to $8.8 million from $2.7 million. While the Lead Fabricating segment showed an operating loss of $100,000 compared to an operating income of $1.6 million in the second quarter of ‘09.

Compared sequentially with the first quarter of 2010, sales and net income improved, but operating income and EBITDA were lower. Sales increased to $144.6 million, an increase of $10.5 million or 8% over the $134.1 million posted in the first quarter. Operating income was $6.7 million compared to $13.6 million, a decrease of $6.9 or 51%.

Net income increased to $4.4 million, a 26% improvement from net income of $3.5 million. EBITDA decreased to $10.7, a decrease of $6.9 million or 39% versus $17.6 million. Net income of $0.10 per share compared to net income of $0.08 per share. Unit volumes shipped decreased by 19% for ferrous scrap and remain virtually flat for non-ferrous scrap. PGM unit volumes increased 9% to 39,042 troy ounces from 35,704 troy ounces shipped in the first quarter. And finally, lead product shipments were up 32% sequentially from Q1 of 2010.

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