The Company's net income for the quarter ended June 30, 2009 was $1.1 million or $0.03 per share (on a diluted basis) on sales of $62.3 million, compared to a loss of $3.6 million or $0.10 per share (on a diluted basis) on sales of $53.3 million for the quarter ended March 31, 2009. Results for the quarter were positively impacted by a gain on debt extinguishment offset by financial instruments fair value adjustments, resulting in a net after-tax benefit of $1.8 million. Operating income for the 2009 second quarter was $2.8 million, compared to $215,000 for the first quarter.

For the quarter ended June 30, 2008, the Company earned net income of $8.1 million or $0.22 per share (on a diluted basis) on sales of $295.1 million, for a decrease in sales of $232.8 million to same-quarter 2009 results. Operating income for the 2008 second quarter was $30.1 million.

The Company had previously announced repayments of outstanding term loans in the aggregate amount of $15.2 million during the first quarter, with additional reductions of $22.3 million in the second quarter from paydowns of debt and exchanges of outstanding debt for equity. Metalico's previously disclosed equity exchanges have reduced the balance of its 7.0% senior unsecured convertible notes due April 30, 2028 from $100 million to $81.6 million, including the effects of a true-up determined on July 27, 2009.

Since January 1, 2009 through today, Metalico has lowered its debt by approximately $48 million, reducing annualized interest expense by $4.3 million. The Company may engage in additional exchanges in respect to its outstanding indebtedness or may issue common stock as favorable opportunities arise. It has also executed amendments to its institutional lending agreements providing, among other terms, covenant relief, no changes in interest rates, and scheduling certain prepayments for additional debt reductions.

Sequential Quarter Comparison

Compared sequentially with the first quarter of 2009, operating performance improved substantially:

 --  Second quarter 2009 sales increased to $62.3 million, or 16.9%, from     $53.3 million. --  Second quarter 2009 operating income was $2.8 million, compared to     $215,000. --  Second quarter 2009 EBITDA (as defined below) was $6.4 million,     compared to EBITDA of $3.8 million. --  Second quarter 2009 unit volumes shipped increased by 10% for ferrous     scrap and were virtually unchanged at 20.4 million pounds for non-ferrous     scrap. --  Lead product shipments in the seasonally busy quarter were up by 23%. --  Shipments of Platinum Group Metals ("PGM") substrates were up by 5.7%.      

Second quarter metal margins improved substantially, in part related to stronger scrap metal prices and increased units shipped as compared to the first quarter of 2009. The prior period was negatively impacted by pricing erosion and depressed unit volumes.

Prior Year's Second Quarter Comparison

 --  Second quarter 2009 sales decreased to $62.3 million, compared to     $295.1 million in the quarter ended June 30, 2008. --  Operating income for the quarter was $2.8 million, compared to     operating income of $30.1 million. --  Income from continuing operations fell to $0.03 per diluted share for     the second quarter of 2009 compared to income of $0.22 per share. --  EBITDA decreased to $6.4 million compared to $34.2 million.      

Excluding acquisitions, Metalico's Scrap Metal segment experienced quarter-over-quarter unit volume decreases of approximately 53% for ferrous, 46% for non-ferrous and 82% for PGMs. The Lead Fabricating segment saw an increase in volume of 34% quarter-over-quarter. Average metal selling prices decreased 63% for ferrous metals, 41% for non-ferrous metals, 51% for PGMs and 46% for lead fabricated products.

Excluding Corporate overhead charges, the Company's Lead Fabricating segment reported $1.6 million in operating income compared to $1.9 million in the prior-year period. The Company's Scrap Metal segment reported $2.7 million in operating income in the second quarter compared to $33.4 million in operating income for the same period last year.

The Company's Hypercat manufacturing operation (PGM coating of replacement converter parts) is experiencing rapidly expanding product shipments and backlog through the second quarter and into the third.

Six Month Results

For the first six months of 2009, the Company reported a net loss of $2.5 million or $.07 per diluted share. Net income for the corresponding 2008 period was $14.2 million or $.41 per diluted share.

First half 2009 sales were $115.6 million compared with $465.6 million for the prior year. Shipments for the first six months, including acquisitions, were down 39% for ferrous, 23% for non-ferrous, including lead, and 78% for PGMs. The steep reduction in shipments and sales was partly attributable to the severe decline in the world economy and specifically in the steel and automotive related industries.

Carlos Agueero, Metalico's President and Chief Executive Officer, said, "General business conditions seem to be improving modestly. The flow of scrap metal volume into yards lately is being helped by firmer commodity price conditions for copper, stainless steel, aluminum and steel. Domestic mills are gradually ramping up their production and consequently buying more scrap and deox aluminum products to replenish drawn down levels of inventory."

He added, "Although we're not ready to declare that the recession is over, we are encouraged by the uptick in business that occurred late in the second quarter which appears to have carried over into July."

Shareholders Equity and Debt

Metalico's outstanding debt decreased to approximately $147.2 million as of June 30, 2009 from $184.7 million at December 31, 2008, a reduction of $37.5 million, largely from repayment of principal outstanding under the Company's institutional financing agreements and the exchange of common stock for convertible notes as noted above. The Company had $30.6 million cash on hand as of June 30, 2009 and net working capital of $55.9 million.

Shareholders' equity increased by 7% or $8.0 million to $121.0 million as of June 30, 2009, from $113.0 million as of December 31, 2008. As of June 30, 2009, Metalico had 40,401,724 common shares issued and outstanding. The Company has no outstanding preferred stock.

Metalico operates in the highly cyclical and volatile commodity metals universe, made even more difficult by the current challenging economic and capital market conditions. The Company's core business strategy emphasizes balanced growth of the ferrous and non-ferrous Scrap Metal Recycling business through acquisitions or new facility development in existing and new markets.

Metalico's stated goal is to maintain and enhance its status as a leading producer of recycled metal in the markets where it operates, focusing on broad diversification among various commodity metal groups and taking a long-term view to achieve growth and above-average financial results.