Profile
Founded in 1906 as a one-man scrap metal operation, Schnitzer Steel Industries, Inc., has become one of the nation's largest recyclers of scrap metal, a leading provider of used and recycled auto parts and a manufacturer of finished steel products.
With a rapidly growing national and global reach, the company achieved $2.6 billion in revenues in fiscal 2007 and is now a member of the Fortune 1000. Schnitzer Steel common stock is traded on the NASDAQ Stock Market under the symbol SCHN.
With corporate headquarters based in Portland, Oregon, the company is split into three vertically integrated business units, the Metals Recycling Business, the Auto Parts Business and the Steel Manufacturing Business.
Metals Recycling Business
The Metals Recycling Business collects, trades, brokers, processes and recycles metal, both ferrous (containing iron) and nonferrous (not containing iron).
Raw scrap metal is purchased from industrial manufacturers, railroads, auto salvage facilities, metal dealers and individuals. The metal generally comes from obsolete machinery and equipment such as autos, railroad cars, railroad tracks, home appliances and demolition metal from buildings and other obsolete structures. As part of the company's vertical integration, we also purchase crushed auto bodies from our Auto Parts Business facilities, where geographically feasible. Purchased materials arrive at our 35 metals recycling facilities daily by ship, barge, rail, truck, car and even individuals on foot.
Our proximity to large industrial suppliers and major railroad routes, deep water ports and major highways provides us with a competitive advantage. We purchase raw material from the Western U.S. and Canada, Hawaii, Alaska, the New England states and the Southeast.
Once the raw scrap metal arrives at one of our yards, it is processed by sorting, shearing, shredding, torching and baling. This results in metal processed into pieces of a size, density and purity required by steel mills and foundries for melting and use in the production of new finished steel and other metal products. Smaller, more homogeneous pieces of processed metal have more value because they are more easily utilized by steel mills and foundries.
One of the most efficient ways to process metal is to use shredding systems, such as those installed at eight of our facilities. A shredder can reduce auto bodies, home appliances and other metal into fist-sized pieces in seconds. Shredded material is then carried by conveyor under magnetized drums which attract the ferrous materials and separate them from the nonferrous materials. The remaining nonferrous metal is sorted and graded before being sold or is sold unsorted. Processed recycled metals are sold to domestic and foreign customers including ferrous metals sold to our Steel Manufacturing Business (highlighting another example of our company's vertical integration). We ship to our customers primarily via ships, railroad cars and trucks and achieve cost efficiencies by taking advantage of our six facilities located at deep water ports and locations close to major railroads and highways. In fiscal 2007, our recycling facilities processed almost 4.3 million tons of ferrous metal and over 383 million pounds of nonferrous metal.
Our Schnitzer Global Exchange subsidiary is a trading company that provides scrap metal to global markets by purchasing processed ferrous metal from metal processors in Russia and the rest of the Baltic region and then sells it to steel mills around the world. Global Exchange traded 1.2 million tons of steel to numerous countries around the world in fiscal 2007. Global Exchange allows Schnitzer Steel to further meet customer needs and expands our share of the global market for recycled ferrous metal.
We are also involved in several joint ventures that provide us additional opportunities for recycling metals and other materials.
Auto Parts Business
The Auto Parts Business runs one of the nation's leading self-service and full-service used auto parts networks. Our 54 locations in 18 U.S. states and Canadian provinces are dedicated to supplying our customers with low-cost, quality used auto parts.
In general, we purchase used and salvaged vehicles from tow companies, private parties, auto auctions and charities. Generally, the parts are then removed and sold through our stores although some repairable vehicles are sold as is. The remaining portions of vehicles are crushed and sold to metal recyclers (including Metals Recycling Business facilities where geographically feasible) which process them into sellable recycled metal.
Our Pick-n-Pull self-service stores generally accommodate older, end-of-life vehicles and are geared towards retail customers such as “do-it-yourselfers”. Each facility stocks a large number of domestic and foreign cars, vans and light trucks which are continually replaced by new arrivals to offer our customers a wide and fresh selection of parts to choose from. At these self-service stores, the customer pays a nominal admission fee, finds a vehicle with the desired parts and removes them without the assistance of our store personnel. After a vehicle has finished its time in the customer area, our staff removes remaining “core” parts that can be sold wholesale such as engines, transmissions and alternators, and sells them at auction. The remaining auto body is crushed and sold as scrap metal.
Our GreenLeaf full-service stores generally feature late model vehicles and are geared towards wholesale customers such as collision and mechanical repair shops providing insurance-funded repairs. Each facility has a professional staff that dismantles the vehicles, tests the individual parts and places them in our warehouses. As orders come in, our staff pulls the requested parts, packages them and ships them to our customers via our delivery trucks. As with the self-service stores, the remaining auto bodies are crushed and sold as scrap metal.
Steel Manufacturing Business
The Steel Manufacturing Business purchases recycled metal from the Metals Recycling Business and turns it into high-quality finished steel products. Operating as Cascade Steel Rolling Mills , we produce a wide range of products at our state-of-the-art mini-mill such as reinforcing bar (rebar), coiled reinforcing bar, wire rod, merchant bar and other specialty products. Our mini-mill is the only one in the Western U.S. that obtains all its recycled metal from its own affiliated metal recycling operations. In fiscal 2007, the division produced over 712,000 tons of finished products.
Cascade Steel's electric arc furnace (EAF) is more energy efficient and environmentally friendly than traditional blast furnaces. Processed scrap is melted by the EAF and then cast into billets. On-site rolling mills convert the billets into the finished products.
Cascade Steel sells to customers primarily located in the 10 western states from its mill in McMinnville, OR (near Portland) and distribution centers in El Monte, CA (near Los Angeles) and Lathrop, CA (near Stockton). Typical customers are steel service centers, construction industry subcontractors, steel fabricators, wire drawers and major farm and wood product suppliers.
| By The Numbers - Fiscal 2007 |
|---|
| Recycled metal bought, traded, brokered and processed | 5.7 million long tons |
| Finished steel products produced | 712,958 short tons |
| Metals recycling facilities | 35* |
| Locations with deep water ports | 6 |
| Auto parts locations | 54* |
| Full-Time Employees | 3,499 |
| Revenue | $2.57 billion |
| As of end of fiscal year 2007 (8/31/2007) except those with asterisks are as of 12/14/2007 |
Growth
Schnitzer Steel has grown into a global leader in the steel industry through value-creating acquisitions and constant improvements to our processing, manufacturing and information technologies. Over the last three fiscal years, we have spent $216 million in capital improvements to maintain our competitive advantage as an efficient metals recycler and manufacturer. In the last five years, metal recycling volume has risen 205% and revenue has grown by 418%. Our growth strategy has been a big part of our success in the past and will continue to be in the future.
Sustainability
Our strength and success is directly related to our focus on sustainability. We've worked hard over the years to integrate that focus into every layer of our culture.
Sustainability starts with our business model. Recycling metal instead of using virgin ore to create new steel products saves energy and natural resources. By using recycled metals, the steel industry saves enough energy each year to power 18 million households. Recycling one ton of steel conserves 2,500 pounds of iron ore, 1,400 pounds of coal and 120 pounds of limestone. Creating products from recycled steel instead of virgin ore uses 40% less water and reduces mining wastes by 97%. And of course, each auto part that is re-used is one less part that needs to be created, not to mention the metals, plastics, and other materials that would need to be produced for it.
However, sustainability doesn't end with our business model. All of our businesses are constantly working on reducing our environmental footprint. Over the years, we've improved our processes and controls, invested capital to increase our efficiency and decrease our energy use, and fostered a culture of resourcefulness and accountability. For example, some of our metals recycling facilities have installed state-of-the-art storm water collection systems to protect the surrounding communities and ultra-efficient power substations to reduce energy use. All of our auto parts locations follow a standardized environmentally friendly process to remove and recycle vehicle fluids and hazardous materials before parts are removed. Overall, we've shown that it is possible to operate profitably while maintaining a focus on sustainability and being responsible stewards of our environment.
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