Metalico Reports Continued Improvement in Second Quarter
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.
Contact:
Metalico, Inc.
Carlos E. Agüero
Michael J. Drury
Email Contact
186 North Avenue East
Cranford, NJ 07016
(908) 497-9610
Fax: (908) 497-1097
www.metalico.com
