Horsehead Holding CEO Discusses Q3 2010 Results - Earnings Call Transcript
Horsehead Holding Corp. (
)
Q3 2010 Earnings Call
November 05, 2010 11:00 am ET
Executives
Ali Alavi - VP, Corporate Administration, General Counsel and Secretary
Jim Hensler - President and CEO
Bob Scherich - CFO
Analysts
Carter Driscoll - CapStone Investments
Eric Prouty - Canaccord
Paul Forward - Stifel Nicolaus
Scott Blumenthal - Emerald Advisers
Steve Riccio - Buyside Research
Mitesh Thakkar - FBR Capital Markets
Presentation
Operator
Welcome to the Third Quarter 2010 Earnings Conference Call. (Operator instructions) As a reminder this conference is being recorded.
I would now like to turn the conference over to your host Mr. Ali Alavi. Please go ahead.
Ali Alavi
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Horsehead Holding Corporation Q3 2009 Earnings Call Transcript
Good morning everyone, and thank you for joining us on our third quarter 2010 earnings release conference call. My name is Ali Alavi and I am Horsehead’s Vice President of Corporate Administration, General Counsel and Secretary.
Before I turn the call over to Jim Hensler, I would like to quickly remind everyone that this communication may include forward-looking statements about our company, our market and our prospects that are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements.
These risks and uncertainties include a variety of factors, some of which are beyond our control. These forward-looking statements speak as of today and you should not rely on them as representing our views in the future. We undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after this communication. You should refer to our filings with the US Securities and Exchange Commission, including our most recent Annual Report on Form 10-K filed on March 16, 2010, for a more detailed description of the risk factors that may affect our results.
With that, I am pleased to introduce Jim Hensler, our President and CEO. Jim?
Jim Hensler
I would like to welcome you to this conference call to discuss the third quarter 2010 results. I will review the performance of our operations and markets during the quarter, while Bob Scherich, our CFO will review the financial results.
Although demand for our products and services was strong and the commodity price have strengthened considerably during the quarter. Our financial results were overshadowed by the impact of the incident, which occurred in the Monaca refinery on July 22nd, which fatally injured two employees and temporarily shutdown our production capability for zinc oxide and refined zinc metal.
The net loss for the quarter was $2.4 million or negative $0.05 per share versus the net loss of $3.6 million or negative $0.10 per share in the third quarter of 2009. As a result of the incident, zinc product production was 25% less than expected and earnings per share by were reduced by approximately $0.13.
The quarter was helped by positive net income from INMETCO, which was not in our results in the prior year quarter. We were also pleased to have started up the second kiln at our new Barnwell facility in September. Bob Scherich will provide detailed analysis of the quarter.
The smelting facility at Monaca operated at a reduced rate during the quarter, as we were forced to idle one of our six furnaces due to the refinery shutdown because we did not have sufficient downstream capacity to handle these additional metals. We were able to offset a portion of lost revenue from zinc oxide and refined zinc metal with additional sales of prime western zinc and by resuming zinc oxide production in our Larvik furnaces.
I am pleased with the very thorough investigation of this incident by our team and by the rapid response of our engineers and operators to design and implement enhanced safety measures in the refinery.
It is estimated that the cost of the repairs and safety enhancements combined with the restart cost of Larvik furnaces will be approximately $13 million. I am pleased to report that after several weeks of diligent effort, production has restarted on the first two refinery columns yesterday.
We expect to start up the remaining eight columns in stages over the next seven weeks, as construction activity is completed. It is expected that full production capability we restored by the end of the year. We expect to restart the six smelting furnace by the end of November.
We are pursuing recovery of the cost of repairs and lost profit under our property insurance and business interruption insurance. We submitted the first claim covering the time period from the date of the incident until the end of the third quarter. We will be reviewing these initial claims in the middle with our career in the next few days. Our insurance provider has already made an advance partial payment of $4.5 million before we submitted this claim.
Moving on to discuss other matters, EAF dust receipts increased 6% compared to the prior year quarter to 135,000 tons. Receipts were 3% lower than the second quarter of 2010, as output from the steel industry softness slightly.
According to industry’s statistics domestic steel production averaged 71% of capacity of utilization during the third quarter, which is down slightly from the 73% of level during the second quarter. The steel industry capacity utilization has been operating in the high 60% range for the past four weeks. Industry receipts have dropped slightly as a result of this decline in steel production.
We expect to operate our recycling facilities at full capacity from most of the fourth quarter as we reduced the backlog of dust at each plant. I am happy to report that the Barnwell operation is now fully commissioned. The start up of the second kiln, which occurred in mid September, is on very smoothly.
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