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Q4 2008 METALICO INC Earnings Conference Call - Final.

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OPERATOR: Good morning. My name is Kristy and I will be your conference facilitator.

At this time, I would like to welcome everyone to the Metalico fiscal-year 2008 results call. All lines have been placed on mute to prevent any background noise.

After the speakers remarks, there will be a question-and-answer period. I would like to remind you that today's call is being recorded for transcription purposes.

The purpose of today's call is to discuss the results of the Company's operations for the year and quarter ended December 31, 2008. 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 filing through the SEC's EDGAR online files or directly through the Company's Web site at www.Metalico.com. Just log onto the Web site, click on 'investors' at the top of the home page. 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 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 of 877-780-98.

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 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 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 not 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, PRESIDENT AND CEO, METALICO, INC.: 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 will be available to answer any questions you may have. We will also post a transcript of our remarks and the question-and-answer session on the Metalico Web site when the transcript becomes available after the call.

Earlier today, we released financial information showing the severe impact the global economic crisis has 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've tried 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's a lot of negative news in the business section of your newspapers today.

In the first half of 2008, well before the crash, the Company added to it Platinum Group Metals operations 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 and cash flow were going to be deeply affected by 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 freezes.

Over time, we have cut back or eliminated. Where appropriate, operations were temporarily idled. We reassigned personnel and imposed painful employee layoffs. We tightened customer credit terms and pursued more aggressive collection efforts.

We've always run with a lean corporate management team, made leaner now by moving personnel to assist and work more closely with some of our operating locations. In general, we've instituted policies and procedures to maximize economies of scale and minimize losses.

In the fourth quarter, we were also concerned enough about our future ability to comply with our financial covenants that we initiated discussions with our senior lenders. I'm happy to say that our lenders were supportive of our efforts and came through with new terms that more realistically reflect the current status of business and industry and provide more relaxed covenants to help ensure that when business improves, Metalico will have sufficient working capital.

On a more positive note, we reduced overall debt burden substantially. As of today, the outstanding balance under our $60 million revolving credit facility still stands at zero.

We have borrowing availability of $25 million and we have a cash balance on hand of $45 million. Our debt balance today is approximately $170 million, a reduction of more than $15 million from the year-end 2008, but still higher than we would like, given today's business environment. We are continuing to look for ways to reduce debt further this year while maintaining operating flexibility.

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