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Industrial Services Q2 Hit by Declining Volume and Metals Prices

Date: August 14, 2012

Source: Industrial Services of America, Inc.

Industrial Services of America, Inc. Announces Second Quarter 2012 Results

Published: August 14, 2012

Industrial Services of America, Inc. (NASDAQ: IDSA), a company that buys, processes and markets ferrous and non-ferrous metals and other recyclable commodities for domestic users and export markets and offers programs and equipment to help businesses manage waste, today announced financial results for the second quarter ended June 30, 2012.

Revenue for the quarter was $49.9 million compared with $65.1 million in the second quarter of 2011. Net loss for the quarter was ($1.2) million, or $(0.18) on a per diluted share basis, compared with net income of $0.3 million, or $0.05 per diluted share, for the comparable period in 2011.

Key Highlights

  • EBITDA for the six months of 2012 was $1.4 million

  • Current ratio at June 30, 2012, was 2.7 to 1

  • Working capital as of June 30, 2012 was $28.6 million

  • Opened ISA Pick.Pull.Save effective July 2

Brian Donaghy

, President and Chief Operating Officer of ISA, stated, “Contracting margins and lower volumes contributed to a weak second quarter within our recycling segment. As prices in the base metals complex fell during the quarter, we reduced our purchase prices accordingly. However, average inventory costs did not fall as quickly. Results for the quarter were also negatively impacted $0.01 per share for start-up costs related to our ISA Pick.Pull.Save retail initiative, as well as a $0.01 per share tax adjustment. Also, as noted in the notes to our financial statements, we changed our estimation methodology related to the residual value of our shredder material in inventory. This change in estimate resulted in an after-tax increase in our net loss of $0.03 per share. Our efforts continue to be focused on increasing our margins and reducing our cost of operation.”

Harry Kletter, founder and Chairman of ISA, stated, “The second quarter of 2012 was a particularly difficult one for scrap metals companies, as declining prices paid by buyers resulted in declining margins and lower scrap brought to the market. We have seen shredded scrap prices drop by approximately $100/GT from January to June, with another drop in July. Likewise, nickel, aluminum and copper all dropped during the quarter. In the face of these difficult conditions, we remain committed to our businesses and continue to position ISA to best take advantage of market opportunities as they arise. In fact, ferrous scrap prices show signs of considerable improvement thus far in August.”

ISA’s SEC filings are available for review at the Securities and Exchange Commission web site at http://www.sec.gov/edgar/searchedgar/companysearch.html.

About ISA

Headquartered in Louisville, Kentucky, Industrial Services of America, Inc., is a publicly traded company whose core business is buying, processing and marketing scrap metals and recyclable materials for domestic users and export markets. Additionally, ISA offers commercial, industrial and business customers a variety of programs and equipment to manage waste. More information about ISA is available at www.isa-inc.com.

This news release contains forward-looking statements that involve risks and uncertainties that could cause actual results to differ from predicted results. Specific risks include fluctuations in the price of recycled materials, varying demand for waste managing systems, equipment and services, competitive pressures in waste managing systems and equipment, competitive pressures in the waste managing business, and loss of customers. Further information on factors that could affect ISA’s results is detailed in ISA’s filings with the Securities and Exchange Commission. ISA undertakes no obligation to publicly release the results of any revisions to the forward-looking statements.

FINANCIAL RESULTS AND SUPPLEMENTAL FINANCIAL INFORMATION FOLLOW

Industrial Services of America, Inc. and Subsidiaries

Consolidated Statements of Income

 
THREE MONTHS ENDED   SIX MONTHS ENDED

June 30, 2012

 

June 30, 2011

June 30, 2012

 

June 30, 2011

 
Revenue from services $ 1,023,207 $ 1,289,879 $ 2,307,788 $ 2,661,398
Revenue from product sales   48,828,751     63,771,701     109,222,482     168,801,492  
Total revenue 49,851,958 65,061,580 111,530,270 171,462,890
 
Cost of goods sold for services 943,584 1,005,870 2,136,807 2,283,175
Cost of goods sold for product sales   47,340,586     59,611,858     104,137,930     156,527,352  
Total cost of goods sold 48,284,170 60,617,728 106,274,737 158,810,527
 

Provision for employee terminations and severances

17,077 — 228,400 —
Other selling, general and administrative expense   2,949,829     2,734,763     5,949,482     6,673,393  
Total selling, general and administrative expense 2,966,906 2,734,763 6,177,882 6,673,393
 

(Loss) income before other income (expense)

(1,399,118 ) 1,709,089 (922,349 ) 5,978,970
 
Other income (expense)
Interest expense (455,293 ) (632,803 ) (939,427 ) (1,518,638 )
Interest income 2,729 4,606 5,912 10,546
Gain on sale of assets 16,200 91,941 34,858 141,230
Provision for lawsuit settlement — (175,000 ) — (175,000 )
Other income (loss)   117     (501,684 )   (141 )   (501,621 )
(436,247 ) (1,212,940 ) (898,798 ) (2,043,483 )
 
(Loss) income before income taxes (1,835,365 ) 496,149 (1,821,147 ) 3,935,487
 
Income tax (benefit) provision   (595,688 )   183,575     (590,001 )   1,456,130  
 
Net (loss) income $ (1,239,677 ) $ 312,574   $ (1,231,146 ) $ 2,479,357  
 
 
Basic (loss) earnings per share $ (0.18 ) $ 0.05   $ (0.18 ) $ 0.36  
Diluted (loss) earnings per share $ (0.18 ) $ 0.05   $ (0.18 ) $ 0.36  
 
Weighted shares outstanding:
Basic: 6,943,937 6,789,917 6,942,227 6,912,997
Diluted: 6,943,937 6,825,108 6,942,227 6,952,549

 

INDUSTRIAL SERVICES OF AMERICA, INC.

SUPPLEMENTAL FINANCIAL INFORMATION

 

Reconciliation of EBITDA (1):

 

    Three Months ending

June 30,

  Six Months ending

June 30,

   

2012

 

2011

 

2012

 

2011

Net (loss) income   $ (1,239,677 )   $ 312,576   $ (1,231,146 )   $ 2,479,358
Interest expense     455,293       632,803     939,427       1,518,638
Income tax (benefit) provision     (595,688 )     183,575     (590,001 )     1,456,130
Depreciation     929,177       948,194     1,860,974       1,879,646
Amortization     187,500       187,500     375,000       375,000
EBITDA (1)   $ (263,395 )   $ 2,264,648   $ 1,354,254     $ 7,708,772

 

(1) EBITDA is calculated by the Company as net income before interest expense, income tax expense, depreciation and amortization. The Company uses EBITDA as a key performance measure of results of operations for purposes of evaluating performance internally. This non-GAAP measurement is not intended to replace the presentation of our financial results in accordance with GAAP. Rather, we believe the EBITDA calculation provides additional information to investors and debt holders due to the fact that tax credits, tax rates and other tax related items vary by company. Additionally, years of service for fixed assets and amortizable assets are based on company judgment. Finally, companies have several ways of raising capital which can affect interest expense. We believe the presentation of EBITDA provides a meaningful measure of performance exclusive of these unique items.

 

For more information, contact:
Industrial Services of America, Inc.
Alan Gildenberg, 502-366-3452
agildenberg@isa-inc.com.
http://www.isa-inc.com/.

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