Horsehead Holding's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Horsehead Holding (ZINC)

Q1 2012 Earnings Call

May 04, 2012 11:00 am ET

Executives

Gary R. Whitaker - Vice President, General Counsel and Secretary

James M. Hensler - Chairman, Chief Executive Officer and President

Robert Scherich - Chief Financial Officer, Principal Accounting Officer and Vice President

Analysts

Carter W. Driscoll - Capstone Investments, Research Division

Mitesh Thakkar - FBR Capital Markets & Co., Research Division

Daniel Moore - CJS Securities, Inc.

Paul Forward - Stifel, Nicolaus & Co., Inc., Research Division

Robert Howard

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Horsehead Holding Corporation's First Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I'd now like to turn the conference over to our host, Mr. Gary Whitaker. Please go ahead.

Gary R. Whitaker

Good morning, everyone, and thank you for joining us on our first quarter 2012 earnings release conference call. My name is Gary Whitaker and I'm Horsehead's Vice President, 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 markets 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 U.S. Securities and Exchange Commission, including our most recent Annual Report on Form 10-K filed on March 9, 2012, for a more detailed description of the risk factors that may affect our results.

With that, I'm pleased to introduce Jim Hensler, our President and CEO. Jim?

James M. Hensler

Thanks, Gary. I'd like to welcome you to this conference call to discuss the results of the first quarter of 2012. I will review the performance of our operations and markets during the quarter, and Bob Scherich, our CFO, will review the financial results.

The consolidated net earnings for the quarter were a loss of $8.5 million or $0.19 per share, including non-cash charges related to hedges and the accelerated write-off of a portion of the Monaca, PA, facility. This compares to a gain of $14.8 million or $0.33 per diluted share for the first quarter of 2011.

Excluding these non-cash charges, consolidated net earnings for the first quarter of 2012 were $2.1 million or $0.05 per diluted share. For the same period in 2011, excluding an insurance recovery, consolidated net earnings were $8.6 million or $0.19 per diluted share.

The LME zinc price was 15% lower versus the same quarter last year, reducing earnings by an estimated $0.15 per share for the quarter, and a 22% increase in the price of metallurgical coke versus the prior year's quarter also had a $0.035 per share negative impact on the current quarter.

These adverse impacts were offset somewhat by new records for EAF dust receipts, EAF dust processing rates, zinc production and zinc product shipments during the first quarter of 2012. Compared to the prior year's first quarter, EAF dust receipts increased 24% on an annualized rate of 664,000 tons and dust process increased 15% to an annualized rate of 660,000 tons for the quarter, both record levels.

Zinc product shipments, which for the first time include a full quarter of Zochem results, increased 13,813 tons or 38% to 50,273 tons, also a record.

However, the LME zinc price averaged only $0.92 per pound for the first quarter of 2012 compared to $1.09 per pound for the first quarter of 2011, while the nickel price averaged $8.91 per pound for the first quarter of 2012 versus $12.20 per pound for the same period in 2011.

We also took a $15.2 million pretax charge related to the amortization of expiring put option positions and mark-to-market adjustments on open hedge positions. And cost of sales also included a $3.3 million non-cash impairment charge associated with the continued write-down of the Monaca, PA, smelter in anticipation of its eventual closure with the startup of our North Carolina facility and with the potential acquisition of the Monaca site by Shell Chemical.

I am pleased that our operating results were positive despite much lower commodity prices and higher coke prices compared with the prior year when you eliminate these non-cash charges.

The integration of Zochem into our zinc oxide business continued to proceed smoothly during the first quarter, making a positive contribution to our results. And INMETCO contributed solid earnings as a 7% productivity gain outpaced the reduced price of nickel. Also, we're pleased with the progress on construction at the site of our new zinc production facility in Rutherford County, North Carolina. We've placed orders for a significant portion of the equipment, and work at the site is proceeding without delay. I encourage you to follow the progress we're making on the construction of this new plant on our website. We continue to be on schedule and on budget for a startup in the third quarter of 2013.

I'd now like to discuss the operating results in more detail. We processed 166,500 tons of electric arc furnace dust during the quarter, a 15.4% increase from the same quarter last year. EAF dust receipts increased from the prior year's first quarter from 134,000 tons to 166,000 tons, a 23.7% increase.

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