Metalico Reports Second Quarter Results

Marketwired

CRANFORD, NJ--(Marketwired - Aug 9, 2013) - Metalico, Inc. (NYSE MKT: MEA) reported a consolidated net loss of $2.7 million, or $.06 per share, for the second quarter of 2013, compared to net income of $2.9 million or $.06 per share for the same period in the prior year.

The Company posted sales of $130 million for the June 2013 quarter, compared to $148 million for the 2012 second quarter. The current year period was principally impacted by 12% lower ferrous selling prices and 9% lower non-ferrous pricing. Scrap metal unit shipments were little changed versus Q2 of 2012. 

Selling, general and administrative expenses decreased, but were more than offset by higher metal costs in the period. The combination of the above resulted in an operating loss of $2 million in the quarter, compared to operating income of $1.6 million in the prior year period.

While Metalico's Scrap segment continued to underperform, the Company had another strong performance from its Lead Fabricating segment. In the first half of 2013, operating income improved by 62% to $2.6 million, compared to $1.6 million in the first half of 2012.

The Company will host a conference call today at 10:00 a.m. Eastern time to discuss its second quarter results and to provide an update on business developments. The call can be accessed by dialing (800) 446-1671 (toll free) or (847) 413-3362 (toll call), Conference Confirmation Number 35356820. Callers should identify the Metalico Second Quarter results call.

Prior Year's Second Quarter Comparison

Year-over-year second quarter comparisons reflect lower financial results on flat volumes:

  • Sales fell 14% to $130 million from $148 million.
  • Operating loss was $2.0 million, compared to operating income of $1.6 million.
  • Net loss of $2.7 million was down from net income of $2.9 million.
  • Loss per share of $0.06 compares to earnings per share of $0.06.
  • EBITDA dropped to $2.7 million from $9.8 million.
  • Non-ferrous unit volume shipments increased 1% while ferrous volume fell by 3%. 
  • Lead Fabricating segment operating income of $1.4 million is a 5% increase over $1.2 million.

Sequential Comparison to First Quarter of 2013

  • Sales fell 6% to $130 million from $138 million.
  • Operating loss of $2.0 million compared to operating income of $611,000.
  • Net loss widened to $2.7 million from $1.2 million.
  • Loss per share increased to $.06, compared to a loss of $.02.
  • EBITDA dropped to $2.7 million from $5.5 million.
  • Unit volumes shipped fell by 2% for non-ferrous scrap and 5% for ferrous scrap. 
  • Lead product shipments increased by 10% to 11.7 million pounds from 10.6 million pounds.

Excluding corporate overhead charges, the Company's Scrap Metal segment reported an operating loss of $1.4 million in the second quarter compared to operating income of $1.6 million last year. The Company's Lead Fabricating segment reported revenues of $19.7 million compared to $19.0 million in the prior-year period, a 4% increase.

Commenting on the results for the quarter, Carlos E. Agüero, Metalico's President and Chief Executive Officer, said, "We are certainly not pleased with the results, which were impacted by lower commodity selling prices across most product lines. But although pricing and margins were down, we are encouraged that unit volumes held up well and we had another solidly profitable performance from the fabricated lead product segment.

"Despite our loss, Metalico is cash-flow neutral on a year to date basis, and we remain focused on improving margins and controlling costs while we work at de-leveraging the balance sheet through the sale of non-core assets and refinancing our debt."

He added, "Metalico maintains significant liquidity to finance operations and tuck-in acquisitions, as evidenced by the two recently closed transactions we've previously announced. We continue to adhere to our longstanding practice of prompt payment terms with all of our metal suppliers and other vendors. Our liquidity has facilitated opportunistic scrap buying in this difficult market. Additionally, we have begun to see improved flows of scrap at our operating facilities.

"It will likely take some time, but metal margins in our industry and for our company will improve," Agüero said, "and we will participate in that recovery as it occurs."

   
   
Volume Comparisons
   
Quarterly volume of units sold                    
            Q2 2013         Q2 2013  
    Q2 2013   Q1 2013   Change     Q2 2012   Change  
                         
Ferrous (gross tons)   136,200   143,100   -5 %   139,800   -3 %
Non-Ferrous (pounds)   44,312,000   45,186,000   -2 %   43,939,000   1 %
Lead (pounds)   11,658,000   10,608,000   10 %   12,332,000   -5 %
                         
                         

Balance Sheet Summary

As a result of reclassification of the Company's senior credit facility to short term due to its 2014 potential maturity, Metalico's reported working capital at June 30, 2013 is $10.6 million versus the first quarter's $79 million. Availability under the revolving credit facility was at $39 million on August 7, 2013. The Company is optimistic about refinancing its convertible notes this year and extending the credit facility to 2017 under the terms of the governing loan agreement.

Outstanding debt dropped to $123.5 million as of June 30, 2013, from $130.4 million at year-end. The decrease resulted from principal payments and reduced borrowings under the Company's revolving credit facility. 

Shareholders' equity declined by $2.8 million to $177.7 million as of June 30, 2013, from $180.5 million as of December 31, 2012. 

As of June 30, 2013, Metalico had 48,019,478 common shares issued and outstanding.

Business Outlook

Ferrous: Sluggish demand from exporters and an oversupplied domestic shred market have impacted the price gains achieved in July 2013 and are expected to be soft into the fourth quarter. Steel industry capacity utilization is expected to fluctuate within the 75% - 79% range through year-end, dampened by competition from imported steel products.

Scrap availability, although still under significant competitive pressure, is adequate and appears driven by seasonal upswings in demolition activity, along with more cars being scrapped and replaced by surging new vehicle sales.

Non-Ferrous (Including Aluminum De-ox): Not surprisingly, metal prices for aluminum, copper, nickel and lead have remained under pressure due to lackluster Chinese demand, dampened investor interest, a strong U.S. dollar and, with the exception of the automotive sector, a sluggish overall construction and manufacturing recovery in North America. De-ox demand and pricing is expected to remain unimpressive at levels comparable to those seen during the first half of the year.

The prices of platinum group and minor metals have been trending lower during Q2 and Q3. Based on rising demand for PGM's from auto manufacturers and a stabilizing minor metal market, the second half of 2013 could show improvement in metal demand and possibly support related commodity prices.

Lead Fabricating: Metalico expects continued steady to slightly improving demand in its markets served and products sold. The supply and pricing of scrap and refined lead is expected to be more than adequate to meet the Company's raw material requirements for the remainder of the year.

About Metalico
Metalico, Inc. is a holding company with operations in two principal business segments: Ferrous and Non-Ferrous Scrap Metal Recycling, including PGM and Minor Metals Recycling, and Fabrication of Lead-Based Products. The Company operates recycling facilities in New York, Pennsylvania, Ohio, West Virginia, New Jersey, Texas, and Mississippi and lead fabricating plants in Alabama, Illinois, and California. Metalico's common stock is traded on the NYSE MKT under the symbol MEA.

Forward-looking Statements
This news release, and in particular its "Outlook and Update" section, contains, and the August 9 conference call may contain, "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 remaining quarters of 2013, 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,  
    2013     2012     2013     2012  
                         
Revenue   $ 129,897     $ 148,213     $ 267,592     $ 312,298  
Costs and expenses                                
  Operating expenses     121,060       134,279       247,056       281,166  
  Selling, general, and administrative expenses     6,337       8,126       12,940       15,454  
  Depreciation and amortization     4,459       4,217       8,944       8,192  
      131,856       146,622       268,940       304,812  
    Operating (loss) income     (1,959 )     1,591       (1,348 )     7,486  
Financial and other income (expense)                                
  Interest expense     (2,136 )     (2,327 )     (4,439 )     (4,639 )
  Gain on settlement     -       4,558       -       4,558  
  Equity in loss of unconsolidated investee     (49 )     (62 )     (120 )     (72 )
  Financial instruments fair value adjustments     -       334       3       182  
  Other     5       (9 )     9       98  
      (2,180 )     2,494       (4,547 )     127  
    (Loss) income before income taxes     (4,139 )     4,085       (5,895 )     7,613  
(Benefit) provision for federal and state income taxes     (1,410 )     1,150       (1,934 )     2,462  
    Consolidated net (loss) income   $ (2,729 )   $ 2,935     $ (3,961 )   $ 5,151  
                                 
Net (income) loss attributable to noncontrolling interest     (3 )     -       50       -  
    Net (loss) income attributable to Metalico, Inc.   $ (2,732 )   $ 2,935     $ (3,911 )   $ 5,151  
                                 
  Diluted (loss) earnings per common share   $ (0.06 )   $ 0.06     $ (0.08 )   $ 0.11  
                                 
  Diluted Weighted Average Common Shares Outstanding:     47,937,871       47,557,918       47,846,120       47,526,649  
                                 
                                 
 
 
METALICO, INC.
SELECTED HISTORICAL FINANCIAL DATA (CONTINUED)
(UNAUDITED)
($ thousands, except per share data)
 
    June 30,
 2013
  December 31,
 2012
Assets:        
  Current Assets   $ 145,119   $ 150,496
  Property & Equipment, net     100,111     101,580
  Intangible and Other Assets     97,970     99,902
    Total Assets   $ 343,200   $ 351,978
             
Liabilities & Stockholders' Equity:            
  Current Liabilities   $ 134,480   $ 39,925
  Debt & Other Long-Term Liabilities     29,927     130,378
    Total Liabilities     164,407     170,303
  Total Metalico, Inc. and Subsidiaries Equity     177,677     180,509
  Noncontrolling interest     1,116     1,166
  Total Liabilities & Equity   $ 343,200   $ 351,978
             
             

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, other non-cash gains, income taxes, other expense, equity in loss of unconsolidated investee, depreciation and amortization, financial instruments fair value adjustments and noncontrolling interest. 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 Months Ended
June 30,
 2013
    Three Months Ended
June 30,
2012
    Six Months Ended
June 30,
 2013
    Six Months Ended
June 30,
2012
 
    (UNAUDITED)  
    ($ thousands)  
EBITDA   $ 2,742     $ 9,770     $ 8,231     $ 20,057  
  Less:                                
    Interest expense     2,136       2,327       4,439       4,639  
    Equity in loss of unconsolidated investee     49       62       120       72  
    Non-cash portion of settlement gain     -       (1,017 )     -       (1,017 )
    Stock-based compensation     244       421       585       838  
    Provision for federal and state income taxes     (1,410 )     1,150       (1,934 )     2,462  
    Depreciation and amortization     4,460       4,217       8,944       8,192  
    Financial instruments fair value adjustments     -       (334 )     (3 )     (182 )
    Noncontrolling interest     (3 )     -       50       -  
    Other     (5 )     9       (9 )     (98 )
Net (loss) income   $ (2,729 )   $ 2,935     $ (3,911 )   $ 5,151  
                                 
                                 

The Company disclosed segment operating income excluding corporate overhead charges for the quarters ended June 30, 2013 and 2012. Set forth below is the reconciliation from segment operating income, excluding corporate overhead, to segment operating income as reported:

 
 
Segment Reporting
($ in thousands)
   
Quarter Ended June 30, 2013  
   
    Consolidated     Scrap Metal
Recycling
    Lead Fabrication     Corporate
and Other
 
Operating income before Corporate overhead   $ 1,959 )   $ (1,409 )   $ 1,411     $ (1,961 )
less: Corporate overhead     -       (1,890 )     (165 )     2,055  
Segment operating income   $ (1,959 )   $ (3,299 )   $ 1,246     $ 94  
                                 
                                 
   
   
Quarter Ended June 30, 2012  
   
    Consolidated   Scrap Metal
Recycling
    Lead Fabrication     Corporate
and Other
 
Operating income before Corporate overhead   $ 1,591   $ 1,576     $ 1,240     $ (1,225 )
less: Corporate overhead     -     (1,725 )     (165 )     1,890  
Segment operating income   $ 1,591   $ (149 )   $ 1,075     $ 665  
                               
                               
Contact:

Metalico, Inc.
Carlos E. Aguero
Michael J. Drury
Email Contact

186 North Avenue East
Cranford, NJ 07016
(908) 497-9610
Fax: (908) 497-1097
www.metalico.com
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