News Releases
Schnitzer Steel Reports Record Quarter
PORTLAND, Ore.--(BUSINESS WIRE)--July 1, 2008--Schnitzer Steel
Industries, Inc. (Nasdaq:SCHN) today reported record quarterly net
income of $62 million, or $2.14 per diluted share, for the fiscal 2008
third quarter ended May 31, 2008. Revenues of $972 million were also a
quarterly record. Compared to the third quarter of fiscal 2007,
revenues increased 37% and diluted earnings per share increased 46%.
(in millions, except per-share data)
Year Year
Third Third Second to to
Quarter Quarter Quarter Date Date
2008 2007 2008 2008 2007
----------------------------------------------------------------------
Revenues $ 972 $ 709 $ 751 $2,328 $1,824
----------------------------------------------------------------------
Operating Income $ 102 $ 70 $ 59 $ 202 $ 151
----------------------------------------------------------------------
Net Income $ 62 $ 44 $ 36 $ 122 $ 93
----------------------------------------------------------------------
Diluted EPS $2.14 $1.47 $1.25 $ 4.23 $ 3.06
----------------------------------------------------------------------
We are pleased to report the strongest quarterly financial
results in the Company's history, as each of our three operating
divisions posted record revenues and operating income, said John D.
Carter, President and Chief Executive Officer. Global demand for
recycled metals remained robust, driven by economic growth in
developing countries. In the Metals Recycling Business, our worldwide
market visibility and flexibility to sell both domestically and
internationally allowed us to take advantage of strong markets and
significantly expand margins and operating income.
In the Steel Manufacturing Business, tight domestic supply
conditions resulting from a low level of imports affecting our product
lines contributed to record quarterly sales volumes and record selling
prices for finished steel products, added Carter. The Auto Parts
Business continued its focus on increasing vehicle purchases which led
to its sixth consecutive quarter of year over year operating income
growth.
Commenting on the third quarter results, Tamara Lundgren,
Executive Vice President and Chief Operating Officer, said All three
of the Company's operating divisions were able to maximize the
benefits of the strong markets in which we operate through operating
efficiencies and higher throughput. In the Metals Recycling Business,
our capital investments to increase capacity allowed us to process the
strong inflow of raw materials at all our major locations. Increased
production capacity enabled the Steel Manufacturing Business to
produce and ship record sales volumes, and in the Auto Parts Business
our ability to process the increased car purchases while extracting
more value from every car was a major factor in achieving record
operating income.
Metals Recycling Business
The Metals Recycling Business continued to leverage its bi-coastal
port facilities to access the robust export markets for recycled
metals.
($ in millions, except selling prices; ferrous volume in thousands of
long tons, non-ferrous volumes in millions of pounds)
Third Third Second Year to Year to
Quarter Quarter Quarter Date Date
2008 2007 2008 2008 2007
----------------------------------------------------------------------
Total Revenues $ 810 $ 587 $ 597 $ 1,888 $ 1,474
----------------------------------------------------------------------
Ferrous
Revenues $ 668 $ 470 $ 497 $ 1,553 $ 1,180
----------------------------------------------------------------------
Ferrous Volumes
(Processing/
Trading) 1,137/151 1,028/362 1,128/149 3,265/435 3,039/959
----------------------------------------------------------------------
Avg. Net
Ferrous Sales
Prices
($/LT)(1)
(Processing/
Trading) $ 463/440 $ 294/308 $ 326/337 $ 360/366 $ 253/274
----------------------------------------------------------------------
Nonferrous
Volumes 129 108 96 314 278
----------------------------------------------------------------------
Avg. Net
Nonferrous
Sales
Prices
($/LB)(1) $ 1.07 $ 1.05 $ 0.98 $ 1.02 $ 1.01
----------------------------------------------------------------------
Operating
Income (2) $ 94 $ 55 $ 52 $ 175 $ 120
----------------------------------------------------------------------
(1) Sales prices are shown net of freight
(2) Includes operating income from joint ventures
Revenues for the Metals Recycling Business increased 38% over the
third quarter of 2007, primarily as a result of record ferrous scrap
prices and higher nonferrous sales volumes. Average net ferrous
processing sales prices were $463/ton, a 57% year over year increase,
while nonferrous sales volumes increased 19% over last year.
Operating income for the quarter was 70% higher than the third
quarter of 2007. During the quarter, export sales prices increased
more rapidly than domestic purchase prices for ferrous scrap and,
combined with higher ferrous and nonferrous processing sales volumes,
resulted in the significant increase in year over year operating
income and operating margins.
Auto Parts Business
A continued focus on increasing car volumes, combined with higher
prices for cores and scrap, resulted in healthy year over year growth
in sales and operating income for the Auto Parts Business.
($ in millions, except locations)
Third Third Second Year to Year to
Quarter Quarter Quarter Date Date
2008 2007 2008 2008 2007
----------------------------------------------------------------------
Revenues $ 101 $ 71 $ 77 $ 250 $192
----------------------------------------------------------------------
Operating Income $ 17 $ 10 $ 7 $ 30 $ 19
----------------------------------------------------------------------
Locations (end of quarter) 53 52 53 53 52
----------------------------------------------------------------------
Third quarter revenues for the Auto Parts Business increased 41%
over the same period last year, primarily as a result of a 20%
increase in self-service car volumes, higher per car sales of cores
and scrap and improved full-service and self-service parts sales.
Operating income increased 64% from the third quarter of 2007,
primarily due to the increased car volumes and significantly improved
margins on scrap and core sales.
Steel Manufacturing Business
The Steel Manufacturing Business utilized its increased production
capacity to produce and ship record sales volumes for the second
consecutive quarter.
($ in millions, except selling prices; volume in thousands of tons)
Third Third Second Year to Year to
Quarter Quarter Quarter Date Date
2008 2007 2008 2008 2007
----------------------------------------------------------------------
Revenues $ 168 $ 112 $ 143 $ 421 $ 307
----------------------------------------------------------------------
Avg. Net Sales Prices ($/T) $ 744 $ 596 $ 616 $ 658 $ 561
----------------------------------------------------------------------
Sales Volume 218 182 202 594 526
----------------------------------------------------------------------
Operating Income $ 23 $ 18 $ 13 $ 50 $ 45
----------------------------------------------------------------------
Revenues for the Steel Manufacturing Business rose 49% on a year
over year basis due to a 36 thousand ton, or 20% increase in sales
volumes, coupled with a $148/ton, or 25%, increase in average net
sales prices. Compared to the second quarter of 2008, revenues
increased 17% as average net prices during the quarter increased
$128/ton. Higher overseas prices and a weak U.S. dollar continue to
limit the volume of finished steel products imported for sale in the
U.S., resulting in price increases despite soft domestic demand.
Operating income, which was a quarterly record, increased 30% year
over year as the higher sales volumes offset higher costs for scrap
and other raw materials.
Outlook
The Company said the factors that will affect its results in the
fiscal fourth quarter of 2008 include:
Metals Recycling Business:
Pricing. The export markets for ferrous scrap metal continue to
strengthen. As a result, based on orders received to date, average
ferrous selling prices, net of freight, are expected to increase an
additional $100 to $125/ton over the net prices received in the
recently completed third quarter. Nonferrous prices are expected to
decline slightly.
Sales volumes. Fourth quarter ferrous processing sales volumes are
expected to increase 175 thousand to 200 thousand tons over the
volumes shipped in the third quarter, depending on the timing of
shipments. Quarter over quarter nonferrous sales volumes are expected
to approximate the record volumes shipped in the third quarter.
Margins. Higher export prices for ferrous metals are expected to
result in higher margins on both a year over year and quarter over
quarter basis.
Auto Parts Business:
Revenue. Higher prices for cores and scrap and improved parts
sales are expected to result in significantly higher revenues compared
to the fourth quarter of fiscal 2007. Revenues are expected to
approximate the recently completed third quarter as normal seasonal
declines in parts sales are expected to offset higher selling prices
for scrapped vehicles.
Margins. Margins are expected to increase slightly when compared
to the fourth quarter of last year. Compared to the third quarter of
this year, lower parts sales and higher vehicle purchase costs are
expected to result in a slight decline in margins.
Steel Manufacturing Business:
Pricing. Market prices for finished steel products are expected to
remain strong despite soft domestic demand as the level of import
activity continues to remain low. Higher raw material costs,
particularly for scrap, are also expected to contribute to higher
selling prices. As a result of these conditions, prices for steel
products on the West Coast should continue to rise, with average
selling prices during the fourth quarter increasing 15-20% compared to
the recently completed third quarter.
Volumes. Sales volumes are expected to remain at relatively high
levels with a slight increase over the fourth quarter of 2007,
although declining modestly from the record volumes in the recently
completed third quarter.
Margins. Scrap prices are expected to rise at a comparable rate to
sales prices, resulting in margins which should approximate the third
quarter of 2008.
Third Quarter 2008 Conference Call
A conference call to discuss results will be held today, July 1,
2008, at 11:30 a.m. EDT, hosted by John Carter, Chief Executive
Officer, and Richard Peach, Chief Financial Officer. The call will be
webcast and is accessible on Schnitzer Steel's web site at
www.schnitzersteel.com.
Schnitzer Steel Industries, Inc. is one of the largest
manufacturers and exporters of recycled ferrous metal products in the
United States with 36 operating facilities located in 11 states
throughout the country, including six export facilities located on
both the East and West Coasts and in Hawaii. The Company's vertically
integrated operating platform also includes its auto parts and steel
manufacturing businesses. The Company's auto parts business sells used
auto parts through its 35 self-service facilities and 18 full-service
facilities located in 15 states and in western Canada. With an annual
production capacity of over 750,000 tons, the Company's steel
manufacturing business produces finished steel products, including
rebar, wire rod and other specialty products. The Company commenced
its 102nd year of operations in fiscal 2008.
This news release, particularly the Outlook section, contains
forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, (the Exchange Act)
which are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements include, without limitation, statements regarding the
Company's outlook for the business and statements as to expected
pricing, sales volume, operating margins and operating income. Such
statements can generally be identified because they contain expect,
believe, anticipate, estimate and other words that convey a
similar meaning. One can also identify these statements as statements
that do not relate strictly to historical or current facts. Examples
of factors affecting the Company that could cause actual results to
differ materially from current expectations are the following:
volatile supply and demand conditions affecting prices and volumes in
the markets for both the Company's products and the raw materials it
purchases; world economic conditions; world political conditions;
changes in federal and state income tax laws; government regulations
and environmental matters; impact of pending or new laws and
regulations regarding imports and exports into the United States and
other foreign countries; foreign currency fluctuations; competition;
seasonality, including weather; energy supplies; freight rates and
availability of transportation; loss of key personnel; expectations
regarding the Company's compliance program; the inability to obtain
sufficient quantities of scrap metal to support current orders;
purchase price estimates made during acquisitions; business
integration issues relating to acquisitions of businesses; new
accounting pronouncements; availability of capital resources;
creditworthiness of suppliers and customers; and business disruptions
resulting from installation or replacement of major capital assets, as
discussed in more detail in Management's Discussion and Analysis of
Financial Condition and Results of Operations in the Company's most
recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q.
One should understand that it is not possible to predict or identify
all factors that could cause actual results to differ from the
Company's forward-looking statements. Consequently, the reader should
not consider any such list to be a complete statement of all potential
risks or uncertainties. The Company does not assume any obligation to
update any forward-looking statement.
For more information about Schnitzer Steel Industries, Inc., go to
www.schnitzersteel.com.
SCHNITZER STEEL INDUSTRIES, INC.
FINANCIAL HIGHLIGHTS
(in thousands, except per share amounts)
(Unaudited)
For the Three Months For the Nine Months Ended
Ended
--------------------- -------------------------
May 31, May 31, May 31, 2008 May 31, 2007
2008 2007
---------- ---------- ------------ ------------
REVENUES:
Metals Recycling
Business:
Ferrous sales:
Processing $ 594,856 $344,959 $1,372,782 $ 883,981
Trading 73,041 124,578 180,484 296,505
Nonferrous sales 140,033 114,687 325,797 284,612
Other sales 2,490 2,766 9,386 8,497
---------- ---------- ------------ ------------
Total sales 810,420 586,990 1,888,449 1,473,595
Auto Parts Business 100,641 71,439 250,137 192,032
Steel Manufacturing
Business 167,668 112,464 420,856 307,448
Intercompany sales
eliminations (106,588) (61,444) (231,931) (149,329)
---------- ---------- ------------ ------------
Total $ 972,141 $ 709,449 $ 2,327,511 $ 1,823,746
========== ========== ============ ============
INCOME (LOSS) FROM
OPERATIONS:
Metals Recycling
Business:
Processing $ 90,513 $ 55,323 $ 168,463 $ 118,030
Trading 3,003 (361) 6,630 1,532
Auto Parts Business 16,720 10,220 30,474 19,022
Steel Manufacturing
Business 22,767 17,565 50,276 44,834
Corporate expense (25,365) (10,699) (46,871) (31,467)
Intercompany
eliminations (5,347) (2,278) (6,516) (1,340)
---------- ---------- ------------ ------------
Total $ 102,291 $ 69,770 $ 202,456 $ 150,611
========== ========== ============ ============
NET INCOME $ 61,719 $ 43,754 $ 122,301 $ 93,358
========== ========== ============ ============
BASIC EARNINGS PER
SHARE $ 2.19 $ 1.48 $ 4.32 $ 3.09
========== ========== ============ ============
DILUTED EARNINGS PER
SHARE $ 2.14 $ 1.47 $ 4.23 $ 3.06
========== ========== ============ ============
SHARE INFORMATION (THOUSANDS):
Basic shares
outstanding 28,177 29,510 28,315 30,203
========== ========== ============ ============
Diluted shares
outstanding 28,847 29,739 28,894 30,502
========== ========== ============ ============
SCHNITZER STEEL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Unaudited)
For the Three For the Nine Months
Months Ended Ended
------------------- -----------------------
May 31, May 31, May 31, May 31,
2008 2007 2008 2007
--------- --------- ----------- -----------
Revenues $972,141 $709,449 $2,327,511 $1,823,746
--------- --------- ----------- -----------
Cost of goods sold 798,531 593,736 1,960,303 1,544,060
Selling, general and
administrative 74,172 47,213 170,982 132,813
(Income) from joint
ventures (2,853) (1,270) (6,230) (3,738)
--------- --------- ----------- -----------
Operating income 102,291 69,770 202,456 150,611
Other income (expense):
Interest expense (1,707) (2,852) (6,703) (6,219)
Other income (expense),
net 879 1,192 1,589 2,593
--------- --------- ----------- -----------
(828) (1,660) (5,114) (3,626)
--------- --------- ----------- -----------
Income before income taxes
and minority interests 101,463 68,110 197,342 146,985
Income tax expense (38,620) (23,631) (72,726) (51,967)
--------- --------- ----------- -----------
Income before minority
interests 62,843 44,479 124,616 95,018
Minority interests, net of
tax (1,124) (725) (2,315) (1,660)
-------- -------- ----------- ----------
Net income $ 61,719 $ 43,754 $ 122,301 $ 93,358
========= ========= =========== ===========
Basic earnings per share $ 2.19 $ 1.48 $ 4.32 $ 3.09
========= ========= =========== ===========
Diluted earnings per share$ 2.14 $ 1.47 $ 4.23 $ 3.06
========= ========= =========== ===========
Schnitzer Steel Industries, Inc.
Selected Operating Statistics
(Unaudited)
Total
Q1 FY08 Q2 FY08 Q3 FY08 FY08
---------- ---------- ---------- ----------
Metals Recycling
Business
Ferrous
Recycled Metal
Selling Prices
($/LT)(1)
Domestic $ 279 $ 323 $ 464 $ 359
Exports 280 329 463 360
Total
Processing 280 326 463 360
Trading 313 337 440 366
Ferrous
Processing
Sales Volume
(LT)
Cascade 179,686 170,221 186,696 536,603
Domestic 178,833 210,825 226,961 616,619
Export 642,142 746,736 722,973 2,111,851
-------------------------------------------
Total
Processed 1,000,661 1,127,782 1,136,630 3,265,073
-------------------------------------------
Ferrous Trading
Sales Volume
(LT)
Trading 134,957 148,899 151,324 435,180
-------------------------------------------
Total Ferrous
Sales Volume
(LT) 1,135,618 1,276,681 1,287,954 3,700,253
===========================================
Nonferrous
Average Price
($/pound)(1) $ 1.000 $ 0.980 $ 1.069 $ 1.020
Nonferrous
Sales Volume
(pounds, in
thousands) 88,808 96,278 128,858 313,944
Steel
Manufacturing
Business
Finished Goods
Selling Prices
($/NT)(1)
Average $ 601 $ 616 $ 744 $ 658
Sales Volume
(NT)
Finished
Goods 174,230 202,160 217,900 594,290
Auto Parts
Business
Number of self-
service
locations at
end of quarter 35 35 35 35
Number of full-
service sites
at end of
quarter 18 18 18 18
Total
Q1 FY07 Q2 FY07 Q3 FY07 Q4 FY07 FY07
---------- ---------- ---------- ---------- ----------
Metals Recycling
Business
Ferrous
Recycled Metal
Selling Prices
($/LT)(1)
Domestic $ 219 $ 233 $ 293 $ 273 $ 256
Exports 230 238 295 292 266
Total
Processing 226 237 294 287 263
Trading 252 257 308 298 279
Ferrous
Processing
Sales Volume
(LT)
Cascade 191,090 151,383 185,281 176,768 704,522
Domestic 155,970 174,752 199,587 191,250 721,559
Export 521,200 816,683 643,031 884,104 2,865,018
------------------------------------------------------
Total
Processed 868,260 1,142,818 1,027,899 1,252,122 4,291,099
------------------------------------------------------
Ferrous Trading
Sales Volume
(LT)
Trading 320,018 276,220 362,305 253,281 1,211,824
------------------------------------------------------
Total Ferrous
Sales Volume
(LT) 1,188,278 1,419,038 1,390,204 1,505,403 5,502,923
======================================================
Nonferrous
Average Price
($/pound)(1) $ 1.017 $ 0.964 $ 1.049 $ 1.042 $ 1.020
Nonferrous
Sales Volume
(pounds, in
thousands) 79,729 90,140 108,149 105,068 383,086
Steel
Manufacturing
Business
Finished Goods
Selling Prices
($/NT)(1)
Average $ 548 $ 536 $ 596 $ 617 $ 574
Sales Volume
(NT)
Finished
Goods 166,938 177,301 182,427 183,635 710,301
Auto Parts
Business
Number of self-
service
locations at
end of quarter 35 35 35 35
Number of full-
service sites
at end of
quarter 17 17 17 17
(1) Price information is shown after a reduction for the cost of
freight incurred to deliver the product to the customer.
SCHNITZER STEEL INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except per share amounts)
May 31, August
2008 31, 2007
---------- ----------
Assets
------------------------------------------------
Current assets:
Cash and cash equivalents $ 9,205 $ 13,410
Accounts receivable, net 285,708 170,212
Inventories 385,274 258,568
Other current assets 24,306 19,286
---------- ----------
Total current assets 704,493 461,476
Property, plant and equipment, net 410,241 383,910
Goodwill and other assets 335,521 306,028
---------- ----------
Total assets $1,450,255 $1,151,414
========== ==========
Liabilities and Shareholders' Equity
------------------------------------------------
Current liabilities:
Short-term borrowings $ 24,522 $ 20,275
Other current liabilities 260,085 171,914
---------- ----------
Total current liabilities 284,607 192,189
Long-term debt 215,023 124,079
Other long-term liabilities 75,439 64,709
Minority interests 4,564 5,373
Shareholders' equity 870,622 765,064
---------- ----------
Total liabilities and shareholders' equity $1,450,255 $1,151,414
========== ==========
CONTACT: Schnitzer Steel Industries, Inc.
Investor Relations Contact:
Rob Stone, 503-224-9900
or
Press Relations Contact:
Tom Zelenka, 503-323-2821
Website: www.schnitzersteel.com
Email: ir@schn.com
SOURCE: Schnitzer Steel Industries, Inc.