##### Table of Contents



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 June 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.
 (Exact name of registrant as specified in its charter)
 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
    
    07016
    
    (908) 497-9610(Address of Principal Executive Offices)
    
    (Zip Code)
    
    (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 2Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    Page 22Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    Page 34Item 4. Controls and Procedures
    
    Page 35PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    Page 36Item 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 37SignaturesEX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 METALICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 2009 and December 31, 2008
 June 30,
    
    
    December 31,2009
    
    
    2008(unaudited)
    
    
    (Note 1)($ thousands)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    30,631
    
    
    $
    62,933Trade receivables, less allowance for doubtful accounts 2009 $1,450; 2008 $1,896
    
    
    26,526
    
    
    
    20,503Inventories
    
    
    35,755
    
    
    
    31,772Prepaid expenses and other
    
    
    2,866
    
    
    
    3,413Income taxes receivable
    
    
    4,143
    
    
    
    11,112Deferred income taxes
    
    
    4,970
    
    
    
    3,626Total current assets
    
    
    104,891
    
    
    
    133,359Property and Equipment, net
    
    
    76,015
    
    
    
    80,083Goodwill
    
    
    69,451
    
    
    
    69,451Other Intangibles, net
    
    
    42,132
    
    
    
    43,604Other Assets, net
    
    
    12,747
    
    
    
    13,796$
    305,236
    
    
    $
    340,293LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesCurrent maturities of other long-term debt
    
    $
    21,493
    
    
    $
    30,897Accounts payable
    
    
    12,805
    
    
    
    10,875Accrued expenses and other liabilities
    
    
    14,683
    
    
    
    24,779Total current liabilities
    
    
    48,981
    
    
    
    66,551Long-Term LiabilitiesSenior unsecured convertible notes payable
    
    
    83,604
    
    
    
    98,403Other long-term debt, less current maturities
    
    
    42,101
    
    
    
    55,409Accrued expenses and other
    
    
    5,570
    
    
    
    2,958Total long-term liabilities
    
    
    131,275
    
    
    
    156,770Total liabilities
    
    
    180,256
    
    
    
    223,321Redeemable common stock
    
    
    4,000
    
    
    
    4,000Commitments and ContingenciesStockholders EquityCapital StockPreferred  $.001 par value; 2009 and 2008 Authorized: 10,000,000; no shares
issued and outstanding
    
    
    
    
    
    
    Common  $.001 par value; 2009 and 2008 Authorized: 100,000,0002009 issued and outstanding 40,401,7242008 issued and outstanding 36,425,154
    
    
    40
    
    
    
    36Additional paid-in capital
    
    
    141,721
    
    
    
    131,248Accumulated deficit
    
    
    (19,990
    )
    
    
    (17,527
    )Accumulated other comprehensive loss
    
    
    (791
    )
    
    
    (785
    )Total stockholders equity
    
    
    120,980
    
    
    
    112,972$
    305,236
    
    
    $
    340,293
  2




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##### Table of Contents



METALICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months Ended June 30, 2009 and 2008
 Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited)($ thousands, except per share data)Revenue
    
    $
    62,348
    
    
    $
    295,062
    
    
    $
    115,632
    
    
    $
    465,610Costs and expensesOperating expenses
    
    
    50,880
    
    
    
    249,692
    
    
    
    94,353
    
    
    
    397,940Selling, general, and administrative expenses
    
    
    5,399
    
    
    
    11,804
    
    
    
    11,708
    
    
    
    18,958Depreciation and amortization
    
    
    3,307
    
    
    
    3,494
    
    
    
    6,594
    
    
    
    5,52159,586
    
    
    
    264,990
    
    
    
    112,655
    
    
    
    422,419Operating income
    
    
    2,762
    
    
    
    30,072
    
    
    
    2,977
    
    
    
    43,191Financial and other income (expense)Interest expense
    
    
    (4,402
    )
    
    
    (4,223
    )
    
    
    (9,059
    )
    
    
    (7,440
    )Equity in loss of unconsolidated investee
    
    
    (287
    )
    
    
    
    
    
    
    (733
    )
    
    
    Financial instruments fair value adjustment
    
    
    (1,504
    )
    
    
    (7,798
    )
    
    
    (2,034
    )
    
    
    (7,798
    )Gain on debt extinguishment
    
    
    5,024
    
    
    
    
    
    
    
    5,024
    
    
    
    Other
    
    
    30
    
    
    
    49
    
    
    
    182
    
    
    
    173(1,139
    )
    
    
    (11,972
    )
    
    
    (6,620
    )
    
    
    (15,065
    )Income (Loss) from continuing operations
before income taxes
    
    
    1,623
    
    
    
    18,100
    
    
    
    (3,643
    )
    
    
    28,126Provision (benefit) for federal and state income taxes
    
    
    563
    
    
    
    9,856
    
    
    
    (993
    )
    
    
    13,566Income (Loss) from continuing operations
    
    
    1,060
    
    
    
    8,244
    
    
    
    (2,650
    )
    
    
    14,560Discontinued operations, net of income taxes
    
    
    24
    
    
    
    (385
    )
    
    
    182
    
    
    
    (790
    )Net income (loss)
    
    
    1,084
    
    
    
    7,859
    
    
    
    (2,468
    )
    
    
    13,770Noncontrolling interest in net loss of subsidiaries
    
    
    4
    
    
    
    252
    
    
    
    5
    
    
    
    410Net(loss) income attributable to Company
    
    $
    1,088
    
    
    $
    8,111
    
    
    $
    (2,463
    )
    
    $
    14,180Amounts attributable to common shareholders:Income (Loss) from continuing operations
    
    $
    1,064
    
    
    $
    8,496
    
    
    $
    (2,645
    )
    
    $
    14,970Income (Loss) from discontinued operations
    
    
    24
    
    
    
    (385
    )
    
    
    182
    
    
    
    (790
    )Net income (loss)
    
    $
    1,088
    
    
    $
    8,111
    
    
    $
    (2,463
    )
    
    $
    14,180Earnings (loss) per common share:Basic:Income (loss) from continuing operations
    
    $
    0.03
    
    
    $
    0.24
    
    
    $
    (0.07
    )
    
    $
    0.44Loss from discontinued operations, net
    
    
    
    
    
    
    (0.01
    )
    
    
    
    
    
    
    (0.02
    )Net income (loss)
    
    $
    0.03
    
    
    $
    0.23
    
    
    $
    (0.07
    )
    
    $
    0.42Diluted:Income (loss) from continuing operations
    
    $
    0.03
    
    
    $
    0.23
    
    
    $
    (0.07
    )
    
    $
    0.43Loss from discontinued operations, net
    
    
    
    
    
    
    (0.01
    )
    
    
    
    
    
    
    (0.02
    )Net income (loss)
    
    $
    0.03
    
    
    $
    0.22
    
    
    $
    (0.07
    )
    
    $
    0.41Weighted Average Common Shares Outstanding:Basic
    
    
    38,295,781
    
    
    
    35,810,875
    
    
    
    37,367,007
    
    
    
    34,075,172Diluted
    
    
    38,354,045
    
    
    
    41,057,092
    
    
    
    37,367,007
    
    
    
    36,852,598
  3




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##### Table of Contents



METALICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2009 and 2008
 2009
    
    
    2008(Unaudited)($ thousands)Cash Flows from Operating ActivitiesNet (loss) income attributable to Company
    
    $
    (2,463
    )
    
    $
    14,180Adjustments to reconcile net (loss) income attributable to Company to net
cash used in operating activities:Depreciation and amortization
    
    
    7,326
    
    
    
    5,666Deferred income taxes
    
    
    (1,311
    )
    
    
    942Change in doubtful accounts receivable
    
    
    (103
    )
    
    
    1,804(Recovery)Provision for loss on vendor advances
    
    
    (204
    )
    
    
    1,414Financial instruments fair value adjustments
    
    
    2,034
    
    
    
    7,798(Gain) Loss on sale of property and equipment
    
    
    (3
    )
    
    
    400Gain on debt extinguishment
    
    
    (5,024
    )
    
    
    Equity in loss (income) of unconsolidated investee
    
    
    733
    
    
    
    Compensation expense on restricted stock, stock options and warrants issued
    
    
    1,178
    
    
    
    800Excess tax benefit from stock options
    
    
    
    
    
    
    (134
    )Deferred financing costs expensed
    
    
    254
    
    
    
    Net loss attributable to noncontrolling interest
    
    
    (5
    )
    
    
    (410
    )Change in assets and liabilities, net of acquisitions:(Increase) decrease in:Trade receivables
    
    
    (5,920
    )
    
    
    (50,795
    )Inventories
    
    
    (3,983
    )
    
    
    (24,640
    )Vendor advances
    
    
    
    
    
    
    (9,036
    )Prepaid expenses and other
    
    
    7,470
    
    
    
    640Increase (decrease) in:Accounts payable, accrued expenses, and income taxes payable
    
    
    (7,594
    )
    
    
    13,820Net cash used in operating activities
    
    
    (7,615
    )
    
    
    (37,551
    )Cash Flows from Investing ActivitiesProceeds from sale of property and equipment
    
    
    69
    
    
    
    100Purchase of property and equipment
    
    
    (1,116
    )
    
    
    (9,494
    )Change in cash restricted for investment
    
    
    
    
    
    
    9,232Investments in unconsolidated subsidiary
    
    
    
    
    
    
    (600
    )Decrease (Increase) in other assets
    
    
    3
    
    
    
    (4,380
    )Cash paid for business acquisitions, less cash acquired
    
    
    
    
    
    
    (107,023
    )Net cash used in investing activities
    
    
    (1,044
    )
    
    
    (112,165
    )Cash Flows from Financing ActivitiesSale of common stock
    
    
    
    
    
    
    28,497Proceeds from issuance of subsidiary stock
    
    
    
    
    
    
    3,875Net borrowings under revolving lines-of-credit
    
    
    
    
    
    
    11,720Proceeds from other borrowings
    
    
    
    
    
    
    118,190Proceeds from borrowings of subsidiary
    
    
    
    
    
    
    1,700Principal payments on other borrowings
    
    
    (22,712
    )
    
    
    (3,841
    )Excess tax benefit from stock-based compensation
    
    
    
    
    
    
    134Debt issue costs
    
    
    (941
    )
    
    
    (5,510
    )Proceeds from issuance of common stock on exercised warrants and options
    
    
    10
    
    
    
    346Net cash provided by (used in) financing activities
    
    
    (23,643
    )
    
    
    155,111Net increase (decrease) in cash and cash equivalents
    
    
    (32,302
    )
    
    
    5,395Cash and cash equivalents:Beginning
    
    
    62,933
    
    
    
    3,309Ending
    
    $
    30,631
    
    
    $
    8,704
  4




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##### Table of Contents



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
   5




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##### Table of Contents



Note 2  Business Acquisitions
   Three Months
    
    Six MonthsEnded
    
    EndedJune 30, 2008
    
    June 30, 2008Revenues
    
    $
    315,059
    
    
    $
    521,231Net Income
    
    $
    12,864
    
    
    $
    22,702Earnings Per ShareBasic
    
    $
    0.36
    
    
    $
    0.66Diluted
    
    $
    0.31
    
    
    $
    0.58
 Note 3  Major Customer
  Net sales to Customeras a percentage of Total Revenues
    
    Trade Receivable Balance as ofThree Months
    
    Three Months
    
    Six Months
    
    Six MonthsEnded
    
    Ended
    
    Ended
    
    Ended
    
    June 30,
    
    December 31,June 30, 2009
    
    June 30, 2008
    
    June 30, 2009
    
    June 30, 2008
    
    2009
    
    2008Customer A
    
    
    13
    %
    
    
    32
    %
    
    
    12
    %
    
    
    33
    %
    
    $
    1,971
    
    
    $
    347
 6




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##### Table of Contents



Note 4  Inventories
  June 30,
    
    
    December 31,2009
    
    
    2008Raw materials
    
    $
    5,098
    
    
    $
    5,240Finished goods
    
    
    5,792
    
    
    
    7,909Work-in-process
    
    
    1,705
    
    
    
    534Ferrous scrap metal
    
    
    10,501
    
    
    
    8,241Non-ferrous scrap metal
    
    
    12,659
    
    
    
    9,848$
    35,755
    
    
    $
    31,772
 Note 5
 Investment in Beacon Holdings, LLC.
   Three Months
    
    Three Months
    
    Six Months
    
    Six MonthsEnded
    
    Ended
    
    Ended
    
    EndedJune 30, 2009
    
    June 30, 2008
    
    June 30, 2009
    
    June 30, 2008Revenues
    
    $
    1,784
    
    
    $
    5,124
    
    
    $
    2,826
    
    
    $
    5,124Loss from continuing operations
    
    $
    (942
    )
    
    $
    (402
    )
    
    $
    (2,159
    )
    
    $
    (800
    )Net loss
    
    $
    (942
    )
    
    $
    (376
    )
    
    $
    (2,159
    )
    
    $
    (671
    )
 Note 6  Goodwill and Other Intangibles
   7




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##### Table of Contents



Gross
    
    
    
    
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Impairment
    
    
    CarryingAmount
    
    
    Amortization
    
    
    Charges
    
    
    AmountJune 30, 2009Covenants not-to-compete
    
    $
    4,261
    
    
    $
    (2,200
    )
    
    $
    
    
    
    $
    2,061Trademarks and tradenames
    
    
    6,075
    
    
    
    
    
    
    
    
    
    
    
    6,075Customer relationships
    
    
    1,055
    
    
    
    (949
    )
    
    
    
    
    
    
    106Supplier relationships
    
    
    36,600
    
    
    
    (3,185
    )
    
    
    
    
    
    
    33,415Know how
    
    
    397
    
    
    
    
    
    
    
    
    
    
    
    397Patents and databases
    
    
    94
    
    
    
    (16
    )
    
    
    
    
    
    
    78$
    48,482
    
    
    $
    (6,350
    )
    
    $
    
    
    
    $
    42,132December 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
 Note 7  Accrued Expenses and Other Liabilities
  June 30, 2009
    
    
    December 31, 2008Long-
    
    
    
    
    
    
    
    
    
    
    Long-Current
    
    
    Term
    
    
    Total
    
    
    Current
    
    
    Term
    
    
    TotalEnvironmental remediation costs
    
    $
    100
    
    
    $
    1,518
    
    
    $
    1,618
    
    
    $
    115
    
    
    $
    1,518
    
    
    $
    1,633Payroll and employee benefits
    
    
    2,094
    
    
    
    
    
    
    
    2,094
    
    
    
    3,572
    
    
    
    
    
    
    
    3,572Interest, bank fees and interest rate swap
    
    
    1,722
    
    
    
    1,008
    
    
    
    2,730
    
    
    
    1,887
    
    
    
    1,028
    
    
    
    2,915Obligations under purchase commitments
    
    
    683
    
    
    
    
    
    
    
    683
    
    
    
    1,973
    
    
    
    
    
    
    
    1,973Obligations under put options
    
    
    6,738
    
    
    
    
    
    
    
    6,738
    
    
    
    6,481
    
    
    
    
    
    
    
    6,481Obligations under make-whole agreements
(see Note 17)
    
    
    1,050
    
    
    
    
    
    
    
    1,050
    
    
    
    3,546
    
    
    
    
    
    
    
    3,546Obligations under earnout agreements
    
    
    283
    
    
    
    
    
    
    
    283
    
    
    
    5,250
    
    
    
    
    
    
    
    5,250Other
    
    
    2,013
    
    
    
    3,044
    
    
    
    5,057
    
    
    
    1,955
    
    
    
    412
    
    
    
    2,367$
    14,683
    
    
    $
    5,570
    
    
    $
    20,253
    
    
    $
    24,779
    
    
    $
    2,958
    
    
    $
    27,737
 8




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##### Table of Contents



Note 8  Stock Options and Stock Based Compensation
   Note 9  Short and Long-Term Debt
     Covenant
    
    
    8.84:1.00Actual
    
    
    5.85:1.00
  Covenant
    
    $
    7,073Actual
    
    $
    10,370
  Covenant
    
    $
    6,325Actual
    
    $
    1,116
  9




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##### Table of Contents



Covenant
    
    
    8.84:1.00Actual
    
    
    5.85:1.00
  Covenant
    
    
    0.54:1.00Actual
    
    
    0.83:1.00
  Covenant
    
    $
    7,073Actual
    
    $
    10,370
  Covenant
    
    $
    250Actual
    
    $
    4,495
  Covenant
    
    $
    6,325Actual
    
    $
    1,116
  Covenant
    
    $
    66,172Actual
    
    $
    92,912
 10




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##### Table of Contents



Periods Ending June 30:
    
    Amount2010
    
    $
    21,4932011
    
    
    1,1762012
    
    
    6872013
    
    
    40,0672014
    
    
    18Thereafter
    
    
    83,757$
    147,198
 Convertible Note Exchanges
  11




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##### Table of Contents



Note 10  Stockholders Equity
  AccumulatedOther
    
    
    TotalCommon
    
    
    Additional
    
    
    Accumulated
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Paid-in Capital
    
    
    Deficit
    
    
    Loss
    
    
    EquityBalance December 31, 2008
    
    $
    36
    
    
    $
    131,248
    
    
    $
    (17,527
    )
    
    $
    (785
    )
    
    $
    112,972Net loss
    
    
    
    
    
    
    
    
    
    
    (2,468
    )
    
    
    
    
    
    
    (2,468
    )Net loss attributable to noncontrolling
interest
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5Stock issued for exercise of warrants and
options
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    10Stock issued for make-whole agreements
    
    
    
    
    
    
    289
    
    
    
    
    
    
    
    
    
    
    
    289Stock issued for Convertible Note Exchange
    
    
    4
    
    
    
    8,996
    
    
    
    
    
    
    
    
    
    
    
    9,000Stock based compensation expense
    
    
    
    
    
    
    1,178
    
    
    
    
    
    
    
    
    
    
    
    1,178Unrealized loss on interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )Balance June 30, 2009
    
    $
    40
    
    
    $
    141,721
    
    
    $
    (19,990
    )
    
    $
    (791
    )
    
    $
    120,980
  12




---



##### Table of Contents



Note 11  Statements of Cash Flows Information
  Six Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30, 2009
    
    
    June 30, 2008Convertible notes exchanged for common stock
    
    $
    15,075
    
    
    $
    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 12  Earnings Per Share
  Three Months Ended June 30, 2009
    
    
    Three Months Ended June 30, 2008Income
    
    
    Shares
    
    
    Per Share
    
    
    Income
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    Amount
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPSIncome from continuing
operations available to common
stockholders
    
    $
    1,064
    
    
    
    38,295,781
    
    
    $
    0.03
    
    
    $
    8,496
    
    
    
    35,810,875
    
    
    $
    0.24Effect of Dilutive SecuritiesCommon stock warrants
    
    
    
    
    
    
    57,041
    
    
    
    
    
    
    
    9
    
    
    
    230,072Options and rights
    
    
    
    
    
    
    1,223
    
    
    
    
    
    
    
    
    
    
    
    542,048Convertible notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    735
    
    
    
    4,474,097Diluted EPSIncome from continuing
operations available to common
stockholders plus assumed
conversions
    
    $
    1,064
    
    
    
    38,354,045
    
    
    $
    0.03
    
    
    $
    9,240
    
    
    
    41,057,092
    
    
    $
    0.23
  Six Months Ended June 30, 2009
    
    
    Six Months Ended June 30, 2008Income
    
    
    Shares
    
    
    Per Share
    
    
    Income
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    Amount
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPSIncome (loss) from continuing
operations available to common
stockholders
    
    $
    (2,645
    )
    
    
    37,367,007
    
    
    $
    (0.07
    )
    
    $
    14,970
    
    
    
    34,075,172
    
    
    $
    0.44Effect of Dilutive SecuritiesCommon stock warrants
    
    
    n\a
    
    
    
    n\a
    
    
    
    
    
    
    
    
    
    
    
    89,799Options and rights
    
    
    n\a
    
    
    
    n\a
    
    
    
    
    
    
    
    
    
    
    
    450,578Convertible notes
    
    
    n\a
    
    
    
    n\a
    
    
    
    
    
    
    
    735
    
    
    
    2,237,049Diluted EPSIncome from continuing
operations available to common
stockholders plus assumed
conversions
    
    
    n\a
    
    
    
    n\a
    
    
    
    n\a
    
    
    $
    15,705
    
    
    
    36,852,598
    
    
    $
    0.43
   13




---



##### Table of Contents



Note 13  Commitments and Contingencies
 Environmental Remediation Matters
      14




---



##### Table of Contents



Pending Litigation
   15




---



##### Table of Contents



.
 Other Matters
  Note 14  Segment Reporting
  Scrap Metal
    
    Lead
    
    CorporateRecycling
    
    Fabrication
    
    and Other
    
    ConsolidatedThree months ended June 30, 2009Revenues from external customers
    
    $
    44,321
    
    
    $
    18,027
    
    
    $
    
    
    
    $
    62,348Operating income
    
    
    479
    
    
    
    1,289
    
    
    
    994
    
    
    
    2,762
 Three months ended June 30, 2008Revenues from external customers
    
    $
    265,289
    
    
    $
    24,648
    
    
    $
    5,125
    
    
    $
    295,062Operating income (loss)
    
    
    31,514
    
    
    
    1,518
    
    
    
    (2,960
    )
    
    
    30,072
 Scrap Metal
    
    Lead
    
    CorporateRecycling
    
    Fabrication
    
    and Other
    
    ConsolidatedSix months ended June 30, 2009Revenues from external customers
    
    $
    82,906
    
    
    $
    32,726
    
    
    $
    
    
    
    $
    115,632Operating income (loss)
    
    
    (352
    )
    
    
    1,533
    
    
    
    1,796
    
    
    
    2,977Total assets
    
    
    213,362
    
    
    
    40,278
    
    
    
    51,596
    
    
    
    305,236
 Six months ended June 30, 2008Revenues from external customers
    
    $
    408,778
    
    
    $
    51,707
    
    
    $
    5,125
    
    
    $
    465,610Operating income (loss)
    
    
    47,843
    
    
    
    (749
    )
    
    
    (3,903
    )
    
    
    43,191Total assets
    
    
    402,218
    
    
    
    59,326
    
    
    
    19,847
    
    
    
    481,391
 Note 15 Income Taxes
   16




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##### Table of Contents



Note 16  Discontinued Operations
   Note 17  Financial Instruments Liabilities
       17




---



##### Table of Contents



Note 18 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:
    
    
    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
 18




---



##### Table of Contents



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
    
    
    
    
    
    
    
    
    
    $
    3,046
    
    
    $
    3,046Obligations under purchase contracts
    
    
    
    
    
    $
    683
    
    
    
    
    
    
    $
    683Obligations under make-whole agreements
    
    
    
    
    
    
    
    
    
    $
    1,050
    
    
    $
    1,050Interest rate swaps
    
    
    
    
    
    $
    1,008
    
    
    
    
    
    
    $
    1,008
  Put Warrants:
 Obligations under purchase contracts:
 Obligations under make-whole agreements:
 Interest Rate Swaps:
  Fair Value MeasurementsUsing Significant UnobservableInputs (Level 3)Three months ended June 30, 2009
    
    
    Six months ended June 30, 2009Obligation
    
    
    
    
    
    
    
    
    
    
    Obligationunder
    
    
    
    
    
    
    
    
    
    
    undermake-
    
    
    
    
    
    
    
    
    
    
    make-Put
    
    
    whole
    
    
    
    
    
    
    Put
    
    
    wholeWarrants
    
    
    agreements
    
    
    Total
    
    
    Warrants
    
    
    agreements
    
    
    TotalBeginning balance
    
    $
    582
    
    
    $
    2,442
    
    
    $
    3,024
    
    
    $
    412
    
    
    $
    3,546
    
    
    $
    3,958Purchases, issuances, and settlements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total (gains) or losses (realized/unrealized)Included in earnings
    
    
    2,464
    
    
    
    (960
    )
    
    
    1,504
    
    
    
    2,634
    
    
    
    (600
    )
    
    
    2,034Included in other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payments, conversions, redemptions and
additional issued shares
    
    
    
    
    
    
    (432
    )
    
    
    (432
    )
    
    
    
    
    
    
    (1,896
    )
    
    
    (1,896
    )Ending balance
    
    $
    3,046
    
    
    $
    1,050
    
    
    $
    4,096
    
    
    $
    3,046
    
    
    $
    1,050
    
    
    $
    4,096The 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
    
    $
    2,464
    
    
    $
    (960
    )
    
    $
    1,504
    
    
    $
    2,634
    
    
    $
    (600
    )
    
    $
    2,034
 Note 19  Derivative Instruments and Hedging Activities
  19




---



##### Table of Contents



Asset
    
    LiabilityDerivatives
    
    DerivativesFair Value
    
    Fair Value at
    
    Fair Value
    
    Fair Value atDerivatives designated as hedging
    
    Balance Sheet
    
    at June 30,
    
    December 31,
    
    at June 30,
    
    December 31,instruments under SFAS No. 133
    
    Location
    
    2009
    
    2008
    
    2009
    
    2008Commodity purchase contracts
    
    Other Current Liabilities
    
    
    
    
    
    
    
    
    
    $
    683
    
    
    $
    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
    
    June 30
    
    
    
    
    
    
    June 30hedging instruments under SFAS No. 133
    
    2009
    
    
    2008
    
    
    
    
    
    
    2009
    
    
    2008Interest Rate Swap
    
    $
    (3
    )
    
    $
    328
    
    
    Interest expense
    
    $
    (37
    )
    
    $
    Six Months ended
    
    
    
    
    
    
    Six Months endedJune 30
    
    
    
    
    
    
    June 302009
    
    
    2008
    
    
    
    
    
    
    2009
    
    
    2008Interest Rate Swap
    
    $
    (6
    )
    
    $
    (57
    )
    
    Interest expense
    
    $
    (92
    )
    
    $
    
 Fair Value Hedges
  Location of gain or
    
    
    Amount of gain or (loss)Derivatives designated as Fair Value hedging
    
    (loss) recognized in
    
    
    recognized in income oninstruments under SFAS No. 133
    
    income of derivative
    
    
    derivativeThree Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008Commodity purchase contracts
    
    Operating expenses
    
    $
    262
    
    
    $
    (23
    )
 20




---



##### Table of Contents



Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008Commodity purchase contracts
    
    Operating expenses
    
    $
    779
    
    
    $
    (83
    )
  Note 20  Subsequent Events
    21




---



##### Table of Contents



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.
 
 tem 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
  Goodwill:
 Goodwill and Other Intangible Assets,
  22




---



##### Table of Contents



Intangible Assets and Other Long-Lived Assets:
  Accounting for the Impairment or Disposal of Long-Lived
Assets,
 23




---



##### Table of Contents



Financial Instrument Liabilities:
   Stock-based Compensation:
 Share-Based Payment
 Revenue Recognition
  Accounts Receivable and Allowance for Uncollectible Accounts Receivable
   Inventory
  24




---



##### Table of Contents



Contingencies
  Derivative financial instruments
     RESULTS OF OPERATIONS
   RevenuesThree Months Ended
    
    
    Three Months Ended
    
    
    Six Months Ended
    
    
    Six Months EndedJune 30, 2009
    
    
    June 30, 2008
    
    
    June 30, 2009
    
    
    June 30, 2008($, pounds and tons in thousands)Net
    
    
    
    
    
    
    
    
    
    
    Net
    
    
    
    
    
    
    
    
    
    
    Net
    
    
    
    
    
    
    
    
    
    
    NetWeight
    
    
    Sales
    
    
    %
    
    
    Weight
    
    
    Sales
    
    
    %
    
    
    Weight
    
    
    Sales
    
    
    %
    
    
    Weight
    
    
    Sales
    
    
    %Scrap Metal RecyclingFerrous metals (tons)
    
    
    73.7
    
    
    $
    15,118
    
    
    
    24.3
    
    
    
    146.4
    
    
    $
    82,144
    
    
    
    27.8
    
    
    
    140.8
    
    
    $
    31,998
    
    
    
    27.7
    
    
    
    231.5
    
    
    $
    114,138
    
    
    
    24.5Non-ferrous metals (lbs.)
    
    
    20,364
    
    
    
    16,838
    
    
    
    27.0
    
    
    
    35,938
    
    
    
    50,825
    
    
    
    17.2
    
    
    
    41,008
    
    
    
    30,957
    
    
    
    26.8
    
    
    
    69,411
    
    
    
    97,190
    
    
    
    20.9
 25




---



##### Table of Contents



RevenuesThree Months Ended
    
    
    Three Months Ended
    
    
    Six Months Ended
    
    
    Six Months EndedJune 30, 2009
    
    
    June 30, 2008
    
    
    June 30, 2009
    
    
    June 30, 2008($, pounds and tons in thousands)Net
    
    
    
    
    
    
    
    
    
    
    Net
    
    
    
    
    
    
    
    
    
    
    Net
    
    
    
    
    
    
    
    
    
    
    NetWeight
    
    
    Sales
    
    
    %
    
    
    Weight
    
    
    Sales
    
    
    %
    
    
    Weight
    
    
    Sales
    
    
    %
    
    
    Weight
    
    
    Sales
    
    
    %Platinum group metals (lbs.)
    
    
    461
    
    
    
    12,365
    
    
    
    19.8
    
    
    
    2,620
    
    
    
    132,320
    
    
    
    44.9
    
    
    
    898
    
    
    
    19,951
    
    
    
    17.2
    
    
    
    4,088
    
    
    
    197,450
    
    
    
    42.4Total Scrap Metal Recycling
    
    
    
    
    
    
    44,321
    
    
    
    71.1
    
    
    
    
    
    
    
    265,289
    
    
    
    89.9
    
    
    
    
    
    
    
    82,906
    
    
    
    71.7
    
    
    
    
    
    
    
    408,778
    
    
    
    87.8Lead Fabrication (lbs.)
    
    
    19,080
    
    
    
    18,027
    
    
    
    28.9
    
    
    
    14,265
    
    
    
    24,648
    
    
    
    8.4
    
    
    
    34,601
    
    
    
    32,726
    
    
    
    28.3
    
    
    
    29,484
    
    
    
    51,707
    
    
    
    11.1Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,125
    
    
    
    1.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,125
    
    
    
    1.1Total Revenue
    
    
    
    
    
    $
    62,348
    
    
    
    100.0
    
    
    
    
    
    
    $
    295,062
    
    
    
    100.0
    
    
    
    
    
    
    $
    115,632
    
    
    
    100.0
    
    
    
    
    
    
    $
    465,610
    
    
    
    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.June 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 June 30, 2009 Compared to Three Months Ended June 30, 2008
  Scrap Metal Recycling
 Ferrous Sales
  Non-Ferrous Sales
  Platinum Group Metals
  26




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##### Table of Contents



Lead Fabrication
  Operating Expenses
  Selling, General, and Administrative
  Depreciation and Amortization
  Operating Income
  Financial and Other Income/(Expense)
  27




---



##### Table of Contents



Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity.
  Income Taxes
  Noncontrolling interest
  Discontinued Operations
   28




---



##### Table of Contents



Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008
  Scrap Metal Recycling
 Ferrous Revenues
  Non-Ferrous Revenues
  Platinum Group Metals
  Lead Fabrication
  Operating Expenses
  29




---



##### Table of Contents



Selling, General, and Administrative
  Depreciation and Amortization
  Operating Income
  Financial and Other Income/(Expense)
     Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity.
 30




---



##### Table of Contents



Income Taxes
  Noncontrolling interest
  Discontinued Operations
   LIQUIDITY AND CAPITAL RESOURCES
 Cash Flows
  31




---



##### Table of Contents



32




---



##### Table of Contents



Future Capital Requirements
    33




---



##### Table of Contents



Off-Balance Sheet Arrangements
  Beacon Energy Investment
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest rate risk
  34




---



##### Table of Contents



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.
   35




---



##### Table of Contents



(b) Changes in internal controls over financial reporting.
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 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.
   36




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##### Table of Contents



FOR
    
    AGAINST
    
    ABSTAINCarlos E. Agüero
    
    
    30,122,590
    
    
    
    810,017
    
    
    
    229,574Michael J. Drury
    
    
    30,022,347
    
    
    
    792,527
    
    
    
    347,307Earl B. Cornette
    
    
    28,232,919
    
    
    
    2,667,361
    
    
    
    261,600Bret R. Maxwell
    
    
    28,540,514
    
    
    
    2,362,915
    
    
    
    258,451Walter H. Barandiaran
    
    
    28,546,155
    
    
    
    2,388,051
    
    
    
    227,675Paul A. Garrett
    
    
    30,258,369
    
    
    
    673,786
    
    
    
    230,026
  FOR
    
    AGAINST
    
    ABSTAIN30,666,442
    
    325,390
    
    170,348
  FOR
    
    AGAINST
    
    ABSTAIN16,487,059
    
    281,296
    
    38,241
 
 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
 37




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##### Table of Contents



SIGNATURES
  METALICO, INC.
(Registrant)Date:  July 28, 2009
    By:
    /s/ CARLOS E. AGÜEROCarlos E. AgüeroChairman, President and Chief
              Executive OfficerDate:  July 28, 2009
    By:
    /s/ ERIC W. FINLAYSONEric W. FinlaysonSenior Vice President and Chief
              Financial Officer
(Principal Financial 
              Officer
and Principal Accounting Officer) 38




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##### Table of Contents



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
 39