UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Metalico, Inc.
  Delaware(State or other jurisdiction
of  incorporation or organization)
    
    001-32453(Commission file number)
    
    52-2169780(I.R.S. Employer Identification No.)186 North Avenue East 
Cranford, NJ(Address of Principal Executive Offices)
    
    07016(Zip Code)
    
    (908) 497-9610(Registrants Telephone Number)
 þ o
  Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o o þ
 o o




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##### 



METALICO, INC.
Form 10-Q Quarterly Report
Table of Contents
 PART I  FINANCIAL INFORMATIONItem 1.
    
    Financial Statements.
    
    Page 1Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations.
    
    Page 21Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
    
    Page 34Item 4.
    
    Controls and Procedures.
    
    Page 34PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings.
    
    Page 35Item 1A.
    
    Risk Factors.
    
    Page 36Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.
    
    Page 36Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    Page 36Item 6.
    
    Exhibits
    
    Page 36Signatures




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##### 



PART I. FINANCIAL INFORMATION
 Item 1. Financial Statements
 METALICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of September 30, 2009 and December 31, 2008
 September 30,
    
    
    December 31,2009
    
    
    2008(unaudited)
    
    
    (Note 1)($ thousands)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    12,249
    
    
    $
    62,933Trade receivables, less allowance for doubtful accounts 2009 $1,682; 2008 $1,896
    
    
    39,283
    
    
    
    20,503Inventories
    
    
    41,073
    
    
    
    31,772Prepaid expenses and other
    
    
    3,526
    
    
    
    3,413Income taxes receivable
    
    
    1,539
    
    
    
    11,112Deferred income taxes
    
    
    2,719
    
    
    
    3,626Total current assets
    
    
    100,389
    
    
    
    133,359Property and Equipment, net
    
    
    73,914
    
    
    
    80,083Goodwill
    
    
    69,301
    
    
    
    69,451Other Intangibles, net
    
    
    41,448
    
    
    
    43,604Other Assets, net
    
    
    12,290
    
    
    
    13,796$
    297,342
    
    
    $
    340,293LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesCurrent maturities of other long-term debt
    
    $
    3,571
    
    
    $
    30,897Accounts payable
    
    
    13,532
    
    
    
    10,875Accrued expenses and other liabilities
    
    
    6,678
    
    
    
    24,779Total current liabilities
    
    
    23,781
    
    
    
    66,551Long-Term LiabilitiesSenior unsecured convertible notes payable
    
    
    80,357
    
    
    
    98,403Other long-term debt, less current maturities
    
    
    32,587
    
    
    
    55,409Accrued expenses and other
    
    
    5,122
    
    
    
    2,958Total long-term liabilities
    
    
    118,066
    
    
    
    156,770Total liabilities
    
    
    141,847
    
    
    
    223,321Redeemable common stock
    
    
    4,000
    
    
    
    4,000Commitments and ContingenciesStockholders EquityCapital StockPreferred  $.001 par value; 2009 and 2008 Authorized: 10,000,000 shares; no
shares issued and outstanding
    
    
    
    
    
    
    Common  $.001 par value; 2009 and 2008 Authorized: 100,000,000 shares2009 issued and outstanding 46,402,285 shares2008 issued and outstanding 36,428,154 shares
    
    
    46
    
    
    
    36Additional paid-in capital
    
    
    167,184
    
    
    
    131,248Accumulated deficit
    
    
    (14,936
    )
    
    
    (17,527
    )Accumulated other comprehensive loss
    
    
    (799
    )
    
    
    (785
    )Total stockholders equity
    
    
    151,495
    
    
    
    112,972$
    297,342
    
    
    $
    340,293
  1




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##### 



METALICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Nine Months Ended September 30, 2009 and 2008
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited)($ thousands, except per share data)Revenue
    
    $
    91,480
    
    
    $
    288,043
    
    
    $
    207,112
    
    
    $
    753,653Costs and expensesOperating expenses
    
    
    72,982
    
    
    
    274,397
    
    
    
    167,335
    
    
    
    672,337Selling, general, and administrative expenses
    
    
    7,578
    
    
    
    3,592
    
    
    
    19,286
    
    
    
    22,550Depreciation and amortization
    
    
    3,174
    
    
    
    3,305
    
    
    
    9,768
    
    
    
    8,82683,734
    
    
    
    281,294
    
    
    
    196,389
    
    
    
    703,713Operating income
    
    
    7,746
    
    
    
    6,749
    
    
    
    10,723
    
    
    
    49,940Financial and other income (expense)Interest expense
    
    
    (3,799
    )
    
    
    (5,001
    )
    
    
    (12,858
    )
    
    
    (12,441
    )Equity in loss of unconsolidated investee
    
    
    (297
    )
    
    
    (85
    )
    
    
    (1,030
    )
    
    
    (85
    )Financial instruments fair value adjustment
    
    
    613
    
    
    
    8,283
    
    
    
    (1,421
    )
    
    
    485Gain on debt extinguishment
    
    
    3,048
    
    
    
    
    
    
    
    8,072
    
    
    
    Other
    
    
    
    
    
    
    29
    
    
    
    182
    
    
    
    202(435
    )
    
    
    3,226
    
    
    
    (7,055
    )
    
    
    (11,839
    )Income from continuing operations before
provision for income taxes
    
    
    7,311
    
    
    
    9,975
    
    
    
    3,668
    
    
    
    38,101Provision for federal and state income taxes
    
    
    2,254
    
    
    
    270
    
    
    
    1,261
    
    
    
    13,836Income from continuing operations
    
    
    5,057
    
    
    
    9,705
    
    
    
    2,407
    
    
    
    24,265Discontinued operations, net of income taxes
    
    
    (5
    )
    
    
    (43
    )
    
    
    177
    
    
    
    (833
    )Net income
    
    
    5,052
    
    
    
    9,662
    
    
    
    2,584
    
    
    
    23,432Noncontrolling interests
    
    
    2
    
    
    
    2
    
    
    
    7
    
    
    
    412Net income attributable to Company
    
    $
    5,054
    
    
    $
    9,664
    
    
    $
    2,591
    
    
    $
    23,844Amounts attributable to common shareholders:Income from continuing operations
    
    $
    5,059
    
    
    $
    9,707
    
    
    $
    2,414
    
    
    $
    24,677Income (loss) from discontinued operations
    
    
    (5
    )
    
    
    (43
    )
    
    
    177
    
    
    
    (833
    )Net income
    
    $
    5,054
    
    
    $
    9,664
    
    
    $
    2,591
    
    
    $
    23,844Earnings (loss) per common share:Basic:Income from continuing operations
    
    $
    0.12
    
    
    $
    0.27
    
    
    $
    0.06
    
    
    $
    0.71Income (loss) from discontinued operations, net
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    (0.02
    )Net income
    
    $
    0.12
    
    
    $
    0.27
    
    
    $
    0.07
    
    
    $
    0.69Diluted:Income from continuing operations
    
    $
    0.12
    
    
    $
    0.25
    
    
    $
    0.06
    
    
    $
    0.68Income (loss) from discontinued operations, net
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    (0.02
    )Net income
    
    $
    0.12
    
    
    $
    0.25
    
    
    $
    0.07
    
    
    $
    0.66Weighted Average Common Shares Outstanding:Basic
    
    
    43,534,362
    
    
    
    36,086,982
    
    
    
    39,445,479
    
    
    
    34,752,321Diluted
    
    
    43,534,362
    
    
    
    43,679,145
    
    
    
    39,502,013
    
    
    
    39,141,880
  2




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##### 



METALICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2009 and 2008
 2009
    
    
    2008(Unaudited)($ thousands)Cash Flows from Operating ActivitiesNet income attributable to Company
    
    $
    2,591
    
    
    $
    23,844Adjustments to reconcile net income to net cash (used in) provided by operating activities:Depreciation and amortization
    
    
    10,886
    
    
    
    9,127Deferred income taxes
    
    
    939
    
    
    
    587Change in doubtful accounts receivable
    
    
    (103
    )
    
    
    1,051(Recovery) provision for loss on vendor advances
    
    
    (204
    )
    
    
    1,486Financial instruments fair value adjustments
    
    
    1,421
    
    
    
    (485
    )(Gain) loss on sale of property and equipment
    
    
    (147
    )
    
    
    437Gain on debt extinguishment
    
    
    (8,072
    )
    
    
    Equity in loss of unconsolidated investee
    
    
    1,030
    
    
    
    85Compensation expense on restricted stock, stock options and warrants issued
    
    
    1,845
    
    
    
    1,377Excess tax benefit from stock options
    
    
    
    
    
    
    (129
    )Deferred financing costs expensed
    
    
    542
    
    
    
    Net loss
attributable to noncontrolling interests
    
    
    (7
    )
    
    
    (412
    )Change in assets and liabilities, net of acquisitions:(Increase) decrease in:Trade receivables
    
    
    (18,677
    )
    
    
    (35,282
    )Inventories
    
    
    (9,301
    )
    
    
    7,511Prepaid expenses and other
    
    
    9,029
    
    
    
    96Increase (decrease) in:Accounts payable, accrued expenses, and income taxes payable
    
    
    (14,620
    )
    
    
    1,310Net cash (used in) provided by operating activities
    
    
    (22,848
    )
    
    
    10,603Cash Flows from Investing ActivitiesProceeds from sale of property and equipment
    
    
    219
    
    
    
    118Purchase of property and equipment
    
    
    (1,612
    )
    
    
    (9,280
    )Change in cash restricted for investment
    
    
    
    
    
    
    1,871Investments in unconsolidated subsidiary
    
    
    
    
    
    
    (600
    )Decrease (increase) in other assets
    
    
    (29
    )
    
    
    438Cash paid for business acquisitions, less cash acquired
    
    
    
    
    
    
    (107,171
    )Net cash used in investing activities
    
    
    (1,422
    )
    
    
    (114,624
    )Cash Flows from Financing ActivitiesProceeds from sale of common stock
    
    
    24,799
    
    
    
    28,497Proceeds from issuance of subsidiary stock
    
    
    
    
    
    
    3,875Repayment of borrowings under revolving lines-of-credit
    
    
    
    
    
    
    (29,435
    )Proceeds from other borrowings
    
    
    45
    
    
    
    125,267Proceeds from borrowings of subsidiary
    
    
    
    
    
    
    1,700Principal payments on other borrowings
    
    
    (50,193
    )
    
    
    (6,045
    )Excess tax benefit from stock-based compensation
    
    
    
    
    
    
    129Debt issue costs
    
    
    (1,078
    )
    
    
    (5,814
    )Proceeds from issuance of common stock on exercised warrants and options
    
    
    13
    
    
    
    678Net cash (used in) provided by financing activities
    
    
    (26,414
    )
    
    
    118,852Net (decrease) increase in cash and cash equivalents
    
    
    (50,684
    )
    
    
    14,831Cash and cash equivalents:Beginning of period
    
    
    62,933
    
    
    
    3,309Ending of period
    
    $
    12,249
    
    
    $
    18,140
  3




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##### 



METALICO, INC. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
($ thousands, except share data)
(Unaudited)
 Note 1  General
 Business
  Basis of Presentation
    Recent Accounting Pronouncements
   4




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##### 



Note 2  Major Customer
  Net sales to Customeras a percentage of Total Revenues
    
    Trade Receivable Balance as ofThree Months
    
    Three Months
    
    Nine Months
    
    Nine MonthsEnded
September 30,
    
    EndedSeptember 30,
    
    EndedSeptember 30,
    
    EndedSeptember 30,
    
    September 30,
    
    December 31,2009
    
    2008
    
    2009
    
    2008
    
    2009
    
    2008Customer A
    
    
    16
    %
    
    
    27
    %
    
    
    14
    %
    
    
    31
    %
    
    $
    3,168
    
    
    $
    347
 Note 3  Inventories
  September 30,
    
    
    December 31,2009
    
    
    2008Raw materials
    
    $
    4,316
    
    
    $
    5,240Finished goods
    
    
    6,582
    
    
    
    7,909Work-in-process
    
    
    2,532
    
    
    
    534Ferrous scrap metal
    
    
    11,131
    
    
    
    8,241Non-ferrous scrap metal
    
    
    16,512
    
    
    
    9,848$
    41,073
    
    
    $
    31,772
 Note 4
 Investment in Beacon Energy Holdings, Inc.
   Three Months
    
    Three Months
    
    Nine Months
    
    Nine MonthsEnded
    
    Ended
    
    Ended
    
    EndedSeptember 30, 2009
    
    September 30, 2008
    
    September 30, 2009
    
    September 30, 2008Revenues
    
    $
    1,963
    
    
    $
    10,974
    
    
    $
    4,789
    
    
    $
    16,098Operating loss
    
    $
    (578
    )
    
    $
    (561
    )
    
    $
    (2,463
    )
    
    $
    (1,361
    )Net loss
    
    $
    (749
    )
    
    $
    (539
    )
    
    $
    (2,968
    )
    
    $
    (1,211
    )
 5




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##### 



Note 5  Goodwill and Other Intangibles
   Gross
    
    
    
    
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Impairment
    
    
    CarryingAmount
    
    
    Amortization
    
    
    Charges
    
    
    AmountSeptember 30, 2009Covenants not-to-compete
    
    $
    4,310
    
    
    $
    (2,369
    )
    
    $
    
    
    
    $
    1,941Trademarks and tradenames
    
    
    6,075
    
    
    
    
    
    
    
    
    
    
    
    6,075Customer relationships
    
    
    1,055
    
    
    
    (1,002
    )
    
    
    
    
    
    
    53Supplier relationships
    
    
    36,600
    
    
    
    (3,688
    )
    
    
    
    
    
    
    32,912Know how
    
    
    397
    
    
    
    
    
    
    
    
    
    
    
    397Patents and databases
    
    
    94
    
    
    
    (24
    )
    
    
    
    
    
    
    70$
    48,531
    
    
    $
    (7,083
    )
    
    $
    
    
    
    $
    41,448December 31, 2008Covenants not-to-compete
    
    $
    6,731
    
    
    $
    (2,194
    )
    
    $
    (2,129
    )
    
    $
    2,408Trademarks and tradenames
    
    
    18,275
    
    
    
    
    
    
    
    (12,200
    )
    
    
    6,075Customer relationships
    
    
    2,605
    
    
    
    (986
    )
    
    
    (1,408
    )
    
    
    211Supplier relationships
    
    
    44,440
    
    
    
    (2,990
    )
    
    
    (7,031
    )
    
    
    34,419Know how
    
    
    397
    
    
    
    
    
    
    
    
    
    
    
    397Patents and databases
    
    
    113
    
    
    
    (4
    )
    
    
    (15
    )
    
    
    94$
    72,561
    
    
    $
    (6,174
    )
    
    $
    (22,783
    )
    
    $
    43,604
  Years ending December 31,
    
    Amount2009
    
    $
    3,0252010
    
    
    2,7402011
    
    
    2,4222012
    
    
    2,3712013
    
    
    2,647Thereafter
    
    
    23,927$
    37,132
 6




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##### 



Note 6  Accrued Expenses and Other Liabilities
  September 30, 2009
    
    
    December 31, 2008Current
    
    
    Long-Term
    
    
    Total
    
    
    Current
    
    
    Long-Term
    
    
    TotalEnvironmental remediation costs
    
    $
    96
    
    
    $
    1,518
    
    
    $
    1,614
    
    
    $
    115
    
    
    $
    1,518
    
    
    $
    1,633Payroll and employee benefits
    
    
    2,515
    
    
    
    
    
    
    
    2,515
    
    
    
    3,572
    
    
    
    
    
    
    
    3,572Interest, bank fees and interest rate swap
    
    
    1,344
    
    
    
    1,008
    
    
    
    2,352
    
    
    
    1,887
    
    
    
    1,028
    
    
    
    2,915Obligations under purchase commitments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,973
    
    
    
    
    
    
    
    1,973Obligations under put options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,481
    
    
    
    
    
    
    
    6,481Obligations under put warrants
    
    
    
    
    
    
    2,596
    
    
    
    2,596
    
    
    
    
    
    
    
    412
    
    
    
    412Obligations under make-whole agreements
(see Note 16)
    
    
    448
    
    
    
    
    
    
    
    448
    
    
    
    3,546
    
    
    
    
    
    
    
    3,546Obligations under earnout agreements
    
    
    133
    
    
    
    
    
    
    
    133
    
    
    
    5,250
    
    
    
    
    
    
    
    5,250Other
    
    
    2,142
    
    
    
    
    
    
    
    2,142
    
    
    
    1,955
    
    
    
    
    
    
    
    1,955$
    6,678
    
    
    $
    5,122
    
    
    $
    11,800
    
    
    $
    24,779
    
    
    $
    2,958
    
    
    $
    27,737
 Note 7  Stock Options and Stock Based Compensation
   Note 8  Short and Long-Term Debt
   7




---



##### 



Covenant
    
    4.43:1.00Actual
    
    1.54:1.00
  Covenant
    
    $9,931Actual
    
    $21,629
  Covenant
    
    $6,325Actual
    
    $1,612
     8




---



##### 



Leverage Ratio  Leverage Ratio must not exceed covenantCovenant
    
    
    4.43:1.00Actual
    
    
    1.54:1.00Fixed Charge Coverage Ratio  Fixed Charge Coverage Ratio must not be less than covenantCovenant
    
    
    0.31:1.00Actual
    
    
    1.17:1.00Minimum EBITDA  Trailing Nine Month EBITDA must not be less than covenantCovenant
    
    
    $  9,931Actual
    
    
    $21,629Monthly Minimum EBITDA  Monthly Minimum EBITDA must not be less than covenantCovenant
    
    
    $   250Actual
    
    
    $4,671Year 2009 Capital Expenditures  Year 2009 capital expenditures must not exceed covenantCovenant
    
    
    $6,325Actual
    
    
    $1,612Working Assets  Working assets must not be less than covenantCovenant
    
    
    $55,488Actual
    
    
    $92,605
      9




---



##### 



Periods Ending September 30:
    
    Amount2010
    
    $
    3,5712011
    
    
    1,0842012
    
    
    5872013
    
    
    30,7502014
    
    
    18Thereafter
    
    
    80,505$
    116,515
 Convertible Note Exchanges
  10




---



##### 



Note 9  Stockholders Equity
   AccumulatedOther
    
    
    TotalCommon
    
    
    Additional
    
    
    
    
    
    
    Comprehensive
    
    
    StockholdersShares
    
    Stock
    
    
    Paid-in Capital
    
    
    Accumulated Deficit
    
    
    Loss
    
    
    EquityBalance December 31, 2008
    
    
    36,428,154
    
    $
    36
    
    
    $
    131,248
    
    
    $
    (17,527
    )
    
    $
    (785
    )
    
    $
    112,972Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,584
    
    
    
    
    
    
    
    2,584Net loss attributable to noncontrolling
interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    7Stock issued for cash
    
    
    6,000,000
    
    
    6
    
    
    
    24,793
    
    
    
    
    
    
    
    
    
    
    
    24,799Stock issued for exercise of warrants and
options
    
    
    105,832
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    13Stock issued for make-whole agreements
    
    
    159,393
    
    
    
    
    
    
    289
    
    
    
    
    
    
    
    
    
    
    
    289Stock issued for Convertible Note Exchange
    
    
    3,708,906
    
    
    4
    
    
    
    8,996
    
    
    
    
    
    
    
    
    
    
    
    9,000Stock based compensation expense
    
    
    
    
    
    
    
    
    
    1,845
    
    
    
    
    
    
    
    
    
    
    
    1,845Unrealized loss on interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14
    )
    
    
    (14
    )Balance September 30, 2009
    
    
    46,402,285
    
    $
    46
    
    
    $
    167,184
    
    
    $
    (14,936
    )
    
    $
    (799
    )
    
    $
    151,495
  11




---



##### 



Note 10  Statements of Cash Flows Information
  Nine Months
    
    Nine MonthsEnded
    
    EndedSeptember 30, 2009
    
    September 30, 2008Convertible notes exchanged for common stock
    
    $
    18,390
    
    
    $
    Issuance of common stock under make-whole agreement
    
    
    289
    
    
    
    Issuance of common stock for business acquisitions
    
    
    
    
    
    
    8,306Issuance of short and long-term debt for business acquisition
    
    
    
    
    
    
    3,860
 Note 11  Earnings Per Share
  Three Months Ended September 30, 2009
    
    
    Three Months Ended September 30, 2008Income
    
    
    Shares
    
    
    Per Share
    
    
    Income
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    Amount
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPSIncome from continuing
operations available to common
stockholders
    
    $
    5,059
    
    
    
    43,534,362
    
    
    $
    0.12
    
    
    $
    9,707
    
    
    
    36,086,982
    
    
    $
    0.27Effect of Dilutive SecuritiesCommon stock warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    89,527Options and rights
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    359,779Convertible notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,085
    
    
    
    7,142,857Diluted EPSIncome from continuing
operations available to common
stockholders plus assumed
conversions
    
    $
    5,059
    
    
    
    43,534,362
    
    
    $
    0.12
    
    
    $
    10,805
    
    
    
    43,679,145
    
    
    $
    0.25
  Nine Months Ended September 30, 2009
    
    
    Nine Months Ended September 30, 2008Income
    
    
    Shares
    
    
    Per Share
    
    
    Income
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    Amount
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPSIncome from continuing
operations available to common
stockholders
    
    $
    2,414
    
    
    
    39,445,479
    
    
    $
    0.06
    
    
    $
    24,677
    
    
    
    34,752,321
    
    
    $
    0.71Effect of Dilutive SecuritiesCommon stock warrants
    
    
    
    
    
    
    48,501
    
    
    
    
    
    
    
    21
    
    
    
    89,553Options and rights
    
    
    
    
    
    
    8,033
    
    
    
    
    
    
    
    
    
    
    
    415,752Convertible notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,808
    
    
    
    3,884,254Diluted EPSIncome from continuing
operations available to common
stockholders plus assumed
conversions
    
    $
    2,414
    
    
    
    39,502,013
    
    
    $
    0.06
    
    
    $
    26,506
    
    
    
    39,141,880
    
    
    $
    0.68
 12




---



##### 



Note 12  Commitments and Contingencies
 Environmental Remediation Matters
      13




---



##### 



Pending Litigation
   14




---



##### 



.
 Other Matters
  Note 13  Segment Reporting
  Scrap Metal
    
    
    
    
    
    CorporateRecycling
    
    Lead Fabrication
    
    and Other
    
    ConsolidatedThree months ended September 30, 2009Revenues from external customers
    
    $
    74,281
    
    
    $
    17,199
    
    
    $
    
    
    
    $
    91,480Operating income (loss)
    
    
    7,794
    
    
    
    692
    
    
    
    (740
    )
    
    
    7,746Three months ended September 30, 2008Revenues from external customers
    
    $
    265,390
    
    
    $
    22,653
    
    
    $
    
    
    
    $
    288,043Operating income (loss)
    
    
    6,202
    
    
    
    (1,178
    )
    
    
    1,725
    
    
    
    6,749
 Scrap Metal
    
    
    
    
    
    CorporateRecycling
    
    Lead Fabrication
    
    and Other
    
    ConsolidatedNine months ended September 30, 2009Revenues from external customers
    
    $
    157,187
    
    
    $
    49,925
    
    
    $
    
    
    
    $
    207,112Operating income
    
    
    7,469
    
    
    
    2,228
    
    
    
    1,026
    
    
    
    10,723Total assets
    
    
    231,168
    
    
    
    39,330
    
    
    
    26,844
    
    
    
    297,342Nine months ended September 30, 2008Revenues from external customers
    
    $
    674,168
    
    
    $
    74,361
    
    
    $
    5,124
    
    
    $
    753,653Operating income (loss)
    
    
    54,045
    
    
    
    (1,928
    )
    
    
    (2,177
    )
    
    
    49,940Total assets
    
    
    346,143
    
    
    
    54,543
    
    
    
    34,297
    
    
    
    434,983
 Note 14 Income Taxes
  15




---



##### 



Note 15  Discontinued Operations
   Note 16  Financial Instruments Liabilities
      16




---



##### 



Note 17 Fair Value Disclosure
   Cash and cash equivalents, trade receivables, accounts payable and accrued liabilities:
 Notes payable and long-term debt:
 Seller Put obligations:
 Interest Rate Swap and obligations under purchase contracts:
 Put Warrants:
 Obligations under make-whole agreements:
   17




---



##### 




    
    Level 1  Unadjusted quoted prices in active markets that are accessible at the measurement date for
identical, unrestricted assets.
    
    Level 2  Significant other observable inputs other than Level 1 prices such as quoted prices in
markets that are not active, quoted prices for similar
assets, or other inputs that are observable, either
directly or indirectly, for substantially the full term
of the asset.
    
    Level 3  Prices or valuation techniques that require inputs that are both significant to the fair
value measurement and unobservable (i.e., supported by
little or no market activity).
  Liabilities
    
    Level 1
    
    Level 2
    
    Level 3
    
    TotalPut warrants
    
    
    
    
    
    
    
    
    
    $
    2,596
    
    
    $
    2,596Obligations under make-whole agreements
    
    
    
    
    
    
    
    
    
    
    448
    
    
    
    448Interest rate swaps
    
    
    
    
    
    $
    1,008
    
    
    
    
    
    
    
    1,008
  Put Warrants:
 Obligations under make-whole agreements:
 Interest Rate Swaps:
  Fair Value MeasurementsUsing Significant UnobservableInputs (Level 3)Three months ended
    
    
    Nine months endedSeptember 30, 2009
    
    
    September 30, 2009Obligation under
    
    
    
    
    
    
    
    
    
    
    Obligation undermake-
    
    
    
    
    
    
    
    
    
    
    make-Put Warrants
    
    
    wholeagreements
    
    
    Total
    
    
    Put Warrants
    
    
    wholeagreements
    
    
    TotalBeginning balance
    
    $
    3,046
    
    
    $
    1,050
    
    
    $
    4,096
    
    
    $
    412
    
    
    $
    3,546
    
    
    $
    3,958Purchases, issuances and settlements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total (gains) or losses (realized/unrealized)Included in earnings
    
    
    (450
    )
    
    
    (163
    )
    
    
    (613
    )
    
    
    2,184
    
    
    
    (763
    )
    
    
    1,421Included in other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payments, conversions, redemptions and
additional issued shares
    
    
    
    
    
    
    (439
    )
    
    
    (439
    )
    
    
    
    
    
    
    (2,335
    )
    
    
    (2,335
    )Ending balance
    
    $
    2,596
    
    
    $
    448
    
    
    $
    3,044
    
    
    $
    2,596
    
    
    $
    448
    
    
    $
    3,044The amount of total (gains) or losses
included in earnings for the period
attributable to the change in unrealized
gains or losses relating to financial
instruments still held at the reporting date
    
    $
    (450
    )
    
    $
    (163
    )
    
    $
    (613
    )
    
    $
    2,184
    
    
    $
    (763
    )
    
    $
    1,421
 18




---



##### 



Note 18  Derivative Instruments and Hedging Activities
  Asset
    
    LiabilityDerivatives
    
    DerivativesFair Value at
    
    Fair Value at
    
    Fair Value at

   
    Fair Value atDerivatives designated as hedging
    
    Balance Sheet

    
    September 30,
    
    December 31,
    
    September 30,
    
    December 31,instruments
    
    Location
    
    2009
    
    2008
    
    2009
    
    2008Commodity
purchase contracts
    
    Other Current Liabilities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,973Interest Rate Swap
    
    Other Non-current Liabilities
    
    $
    
    
    
    $
    
    
    
    $
    1,008
    
    
    $
    1,028
 Cash Flow Hedges
  Amount of (Loss)
    
    
    Location of (Loss)
    
    
    Amount of (Loss)Recognized in
    
    
    Recognized in Income on
    
    
    Recognized in Income onOCI on Derivatives
    
    
    Derivatives (Ineffective
    
    
    Derivatives (Ineffective(Effective Portion)
    
    



    Portion)
    
    
    Portion)Three Months ended
    
    
    
    
    
    Three Months endedDerivatives designated as Cash Flow
    
    September 30,
    
    
    
    
    
    September 30,hedging instruments under ASC Topic 815
    
    2009
    
    
    2008
    
    
    
    
    
    2009
    
    
    2008Interest Rate Swap
    
    $
    (7
    )
    
    $
    (89
    )
    
    Interest expense
    
    $
    (138
    )
    
    $
    Nine Months ended
    
    
    
    
    
    
    Nine Months endedSeptember 30,
    
    
    
    
    
    
    September 30,2009
    
    
    2008
    
    
    
    
    
    
    2009
    
    
    2008Interest Rate Swap
    
    $
    (14
    )
    
    $
    (146
    )
    
    Interest expense
    
    $
    (231
    )
    
    $
    
 Fair Value Hedges
  19




---



##### 



Derivatives designated as Fair Valuehedging instruments ASC Topic 815
    
    Location of gain or(loss) recognizedin income of derivative
    
    
    Amount of gain or (loss) recognized in income on derivativeThree Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008Commodity purchase contracts
    
    Operating expenses
    
    $
    231
    
    
    $
    (1,574
    )Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008Commodity purchase contracts
    
    Operating expenses
    
    $
    1,010
    
    
    $
    (1,657
    )
  20




---



##### 



This Form 10-Q includes certain statements that may be deemed to be forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements
in this Form 10-Q which address activities, events or developments that Metalico, Inc. (herein,
Metalico, the Company, we, us, our or other similar terms) expects or anticipates will or
may occur in the future, including such things as future acquisitions (including the amount and
nature thereof), business strategy, expansion and growth of our business and operations, general
economic and market conditions and other such matters are forward-looking statements. Although we
believe the expectations expressed in such forward-looking statements are based on reasonable
assumptions within the bounds of our knowledge of our business, a number of factors could cause
actual results to differ materially from those expressed in any forward-looking statements. These
and other risks, uncertainties and other factors are discussed under Risk Factors appearing in
our Annual Report on Form 10-K for the year ended December 31, 2008, as the same may be amended
from time to time.
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion should be read in conjunction with the unaudited condensed
consolidated financial statements and notes thereto included under Item 1 of this Report. In
addition, reference should be made to the audited consolidated financial statements and notes
thereto and related Managements Discussion and Analysis of Financial Condition and Results of
Operations included in our Annual Report on Form 10-K for the year ended December 31, 2008 (Annual
Report). Amounts reported in the following discussions are not reported in thousands unless
otherwise specified.
 General
   Critical Accounting Policies and Use of Estimates
  21




---



##### 



Goodwill:
        22




---



##### 



Intangible Assets and Other Long-Lived Assets:
   Financial Instrument Liabilities:
   Stock-based Compensation:
  Revenue Recognition
  Accounts Receivable and Allowance for Uncollectible Accounts Receivable
  23




---



##### 



Inventory
  Contingencies
  Derivative financial instruments
     RESULTS OF OPERATIONS
   24




---



##### 



RevenuesThree Months Ended
    
    
    Three Months Ended
    
    
    Nine Months Ended
    
    
    Nine Months EndedSeptember 30, 2009
    
    
    September 30, 2008
    
    
    September 30, 2009
    
    
    September 30, 2008($, pounds and tons in thousands)Net
    
    
    
    
    
    
    
    
    
    
    Net
    
    
    
    
    
    
    
    
    
    
    Net
    
    
    
    
    
    
    
    
    
    
    NetWeight
    
    
    Sales
    
    
    %
    
    
    Weight
    
    
    Sales
    
    
    %
    
    
    Weight
    
    
    Sales
    
    
    %
    
    
    Weight
    
    
    Sales
    
    
    %Scrap Metal RecyclingFerrous metals (tons)
    
    
    105.3
    
    
    $
    28,307
    
    
    
    30.9
    
    
    
    154.7
    
    
    $
    82,953
    
    
    
    28.8
    
    
    
    246.1
    
    
    $
    60,305
    
    
    
    29.1
    
    
    
    386.2
    
    
    $
    197,091
    
    
    
    26.2Non-ferrous metals (lbs.)
    
    
    27,305
    
    
    
    26,849
    
    
    
    29.4
    
    
    
    42,271
    
    
    
    57,320
    
    
    
    19.9
    
    
    
    68,313
    
    
    
    57,805
    
    
    
    27.9
    
    
    
    111,683
    
    
    
    154,510
    
    
    
    20.5Platinum group metals (lbs.)
    
    
    813
    
    
    
    19,125
    
    
    
    20.9
    
    
    
    3,182
    
    
    
    125,117
    
    
    
    43.4
    
    
    
    1,711
    
    
    
    39,077
    
    
    
    18.9
    
    
    
    7,271
    
    
    
    322,567
    
    
    
    42.8Total Scrap Metal Recycling
    
    
    
    
    
    
    74,281
    
    
    
    81.2
    
    
    
    
    
    
    
    265,390
    
    
    
    92.1
    
    
    
    
    
    
    
    157,187
    
    
    
    75.9
    
    
    
    
    
    
    
    674,168
    
    
    
    89.5Lead Fabrication (lbs.)
    
    
    14,699
    
    
    
    17,199
    
    
    
    18.8
    
    
    
    14,824
    
    
    
    22,653
    
    
    
    7.9
    
    
    
    49,301
    
    
    
    49,925
    
    
    
    24.1
    
    
    
    44,308
    
    
    
    74,361
    
    
    
    9.9Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,124
    
    
    
    0.6Total Revenue
    
    
    
    
    
    $
    91,480
    
    
    
    100.0
    
    
    
    
    
    
    $
    288,043
    
    
    
    100.0
    
    
    
    
    
    
    $
    207,112
    
    
    
    100.0
    
    
    
    
    
    
    $
    753,653
    
    
    
    100.0
  Average
    
    Average
    
    Average
    
    AverageFerrous
    
    Non-Ferrous
    
    PGM
    
    LeadFor the quarter ending:
    
    Price per ton
    
    Price per lb.
    
    Price per lb
    
    Price per lb.September 30, 2009
    
    $
    269
    
    
    $
    0.98
    
    
    $
    23.52
    
    
    $
    1.17June 30, 2009
    
    $
    205
    
    
    $
    0.83
    
    
    $
    24.77
    
    
    $
    0.94March 31, 2009
    
    $
    252
    
    
    $
    0.68
    
    
    $
    17.38
    
    
    $
    0.95December 31, 2008
    
    $
    329
    
    
    $
    1.11
    
    
    $
    20.92
    
    
    $
    1.34September 30, 2008
    
    $
    536
    
    
    $
    1.36
    
    
    $
    39.32
    
    
    $
    1.53June 30, 2008
    
    $
    555
    
    
    $
    1.41
    
    
    $
    50.51
    
    
    $
    1.73March 31, 2008
    
    $
    376
    
    
    $
    1.39
    
    
    $
    44.35
    
    
    $
    1.78
 Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008
  Scrap Metal Recycling
 Ferrous Sales
  Non-Ferrous Sales
  25




---



##### 



Platinum Group Metals
  Lead Fabrication
  Operating Expenses
  Selling, General, and Administrative
  Depreciation and Amortization
  Operating Income
  Financial and Other Income/(Expense)
  26




---



##### 



Income Taxes
  Noncontrolling interest
  Discontinued Operations
   27




---



##### 



Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008
  Scrap Metal Recycling
 Ferrous Revenues
  Non-Ferrous Revenues
  Platinum Group Metals
  Lead Fabrication
  Operating Expenses
  28




---



##### 



Selling, General, and Administrative
  Depreciation and Amortization
  Operating Income
  Financial and Other Income/(Expense)
      29




---



##### 



Income Taxes
  Noncontrolling
interests
  Discontinued Operations
   LIQUIDITY AND CAPITAL RESOURCES
 Cash Flows
  30




---



##### 



31




---



##### 



Effective interestRate as of
    
    
    Principal balance
    
    
    
    
    
    
    Principal balanceSeptember 30,
    
    
    January 1,
    
    
    Repayments
    
    
    September 30,
    
    
    Annual interest2009
    
    
    2009
    
    
    and Exchanges
    
    
    2009
    
    
    savings (1)Wells Fargo Foothill  Term Loans
    
    
    4.50
    %
    
    $
    10,614
    
    
    $
    (10,614
    )
    
    $
    
    
    
    $
    478Ableco Finance, LLC
    
    
    14.00
    %
    
    
    67,150
    
    
    
    (36,520
    )
    
    
    30,630
    
    
    
    5,1137% Convertible Notes
    
    
    7.00
    %
    
    
    100,000
    
    
    
    (18,390
    )
    
    
    81,610
    
    
    
    1,287Total
    
    
    
    
    
    $
    177,764
    
    
    $
    (65,524
    )
    
    $
    112,240
    
    
    $
    6,878
 
 (1)
    
    Calculated by multiplying the effective annual interest rate by the principal reductions made by repayments and debt for equity
exchanges. 32




---



##### 



Future Capital Requirements
     Off-Balance Sheet Arrangements
  Beacon Energy Investment
   33




---



##### 



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest rate risk
  Commodity price risk
  Foreign currency risk
  Common stock market price risk
  Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
 (a) Evaluation of disclosure controls and procedures.
 34




---



##### 



(b) Changes in internal controls over financial reporting.
  PART II. OTHER INFORMATION
 Item 1. Legal Proceedings
   35




---



##### 



Item 1A. Risk Factors
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Item 4. Submission of Matters to a Vote of Security Holders.
  Item 6. Exhibits
  31.1
    
    Certification of Chief Executive Officer of Metalico, Inc. pursuant
to Rule 13a-14(a) promulgated under the Securities Exchange Act of
1934, as amended31.2
    
    Certification of Chief Financial Officer of Metalico, Inc. pursuant
to Rule 13a-14(a) promulgated under the Securities Exchange Act of
1934, as amended32.1
    
    Certification of Chief Executive Officer of Metalico, Inc. pursuant
to Rule 13a-14(a) promulgated under the Securities Exchange Act of
1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the
United States Code32.2
    
    Certification of Chief Financial Officer of Metalico, Inc. pursuant
to Rule 13a-14(a) promulgated under the Securities Exchange Act of
1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the
United States Code
 36




---



##### 



SIGNATURES
  METALICO, INC.
(Registrant)Date:  November 5, 2009
    By:
    /s/ CARLOS E. AGÜEROCarlos E. AgüeroChairman, President and Chief
Executive OfficerDate:  November 5, 2009
    By:
    /s/ ERIC W. FINLAYSONEric W. FinlaysonSenior Vice President and Chief
Financial Officer (Principal Financial
Officer and Principal Accounting Officer) 37




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EXHIBIT INDEX
 Exhibit No.
    
    Exhibit31.1
    
    Certification of Chief Executive Officer of Metalico, Inc.
pursuant to Rule 13a-14(a) promulgated under the Securities
Exchange Act of 1934, as amended31.2
    
    Certification of Chief Financial Officer of Metalico, Inc.
pursuant to Rule 13a-14(a) promulgated under the Securities
Exchange Act of 1934, as amended32.1
    
    Certification of Chief Executive Officer of Metalico, Inc.
pursuant to Rule 13a-14(a) promulgated under the Securities
Exchange Act of 1934, as amended, and Section 1350 of Chapter
63 of Title 18 of the United States Code32.2
    
    Certification of Chief Financial Officer of Metalico, Inc.
pursuant to Rule 13a-14(a) promulgated under the Securities
Exchange Act of 1934, as amended, and Section 1350 of Chapter
63 of Title 18 of the United States Code
 38