News Releases

Schnitzer Steel Reports Record Quarterly and Annual Financial Results

PORTLAND, Ore.--(BUSINESS WIRE)--Oct. 28, 2008--Schnitzer Steel Industries, Inc. (Nasdaq:SCHN) today reported record net income of $126 million, or $4.38 per diluted share, for the fiscal fourth quarter ended August 31, 2008. Revenues of $1.3 billion were also a record, marking the first time that quarterly revenues exceeded one billion dollars. Compared to the fourth quarter of fiscal 2007, diluted earnings per share increased 242%.

For the fiscal year, the Company reported record net income of $249 million, or $8.61 per diluted share. Consolidated revenues of $3.6 billion were also a record. Compared to the prior year, revenues increased 42%, while diluted earnings per share increased 99%.

                            Fourth   Fourth   Third
(in millions, except per-  Quarter  Quarter  Quarter   Fiscal  Fiscal
        share data)          2008     2007     2008     2008    2007
----------------------------------------------------------------------
Revenues                     $1,314    $ 749    $ 972   $3,642  $2,572
----------------------------------------------------------------------
Operating Income             $  200    $  63    $ 102   $  402  $  214
----------------------------------------------------------------------
Net Income                   $  126    $  38    $  62   $  249  $  131
----------------------------------------------------------------------
Diluted EPS                  $ 4.38    $1.28    $2.14   $ 8.61  $ 4.32
----------------------------------------------------------------------

"The fourth quarter proved to be a very successful end to another outstanding year for Schnitzer Steel," said John Carter, President and CEO. "We turned in a strong operating performance and continued to invest in technology and infrastructure to prepare our Company for future growth. Our operating platform and deep water port facilities allowed us to maximize the benefits from the robust markets in which we operated during the year, leading to record net income and strong operating cash flows. I'd like to thank all of our 3700 employees for their hard work in delivering these record quarterly and annual financial results."

"As we enter a new fiscal year, there is no question that the near-term market environment has changed. While we continue to be optimistic about the long-term forecasted growth in steel consumption around the world and the demand for recycled metals, the markets in the early part of fiscal 2009 have significantly weakened, and it is uncertain when we might see improvements. We believe, however, that our strong balance sheet, positive cash flows and many of the actions we have taken which contributed to an outstanding 2008 will serve us well in this challenging environment."

"During the year, we increased our focus on our continuous improvement program, continued to make capital investments in technology that provided greater recovery of nonferrous materials and improved operating efficiencies, and again delivered higher asset utilization and production volumes," continued Tamara Lundgren, Executive Vice President and COO. "In addition, our global market visibility allowed us to maximize the benefits from rising markets and react swiftly to reduce our buy prices in the face of rapidly slowing worldwide demand. This allowed us to partially mitigate the impact of the significant decline in prices which occurred late in the fourth quarter and, along with our actions to adjust our production to match lower current demand, should help to maintain strong metal spreads and contribute to positive operating cash flow in the first fiscal quarter of 2009."

Metals Recycling Business

The Metals Recycling Business continued to utilize its bi-coastal export platform to take advantage of robust overseas markets for recycled metals.

($ in millions,
 except selling
 prices;
 ferrous volume
 in thousands
 of long tons,
 non-ferrous
 volumes in      Fourth    Fourth     Third
 millions of    Quarter   Quarter    Quarter     Fiscal      Fiscal
 pounds)          2008      2007       2008       2008        2007
----------------------------------------------------------------------
Total Revenues  $  1,174 $      616 $      810 $    3,063 $      2,089
----------------------------------------------------------------------
Ferrous
 Revenues       $  1,038 $      501 $      668 $    2,591 $      1,682
----------------------------------------------------------------------
Ferrous Volumes
 (Processing/
 Trading)        1,489/8  1,252/253  1,137/151  4,754/444  4,291/1,212
----------------------------------------------------------------------
Avg. Net
 Ferrous Sales
 Prices
 ($/LT)(1)
(Processing/
 Trading)       $623/590 $  287/298 $  463/440 $  442/370 $    263/279
----------------------------------------------------------------------
Nonferrous
 Volumes             126        105        129        439          383
----------------------------------------------------------------------
Avg. Net
 Nonferrous
 Sales Prices
 ($/LB)(1)      $   1.05 $     1.05 $     1.07 $     1.03 $       1.02
----------------------------------------------------------------------
Operating
 Income (2)     $    182 $       46 $       94 $      357 $        166
----------------------------------------------------------------------

(1) Sales prices are shown net of freight
(2) Includes operating income from joint ventures

Revenues from the Metals Recycling Business increased 45% over the third quarter of fiscal 2008 and 91% over the fourth quarter of 2007, driven by record ferrous volumes and sales prices. Processed ferrous sales volumes of 1.5 million tons increased 31% quarter over quarter and 19% year over year. Processed ferrous average net selling prices of $623/ton increased 35% over the third quarter of fiscal 2008 and 117% over the fourth quarter of 2007. During the quarter, nonferrous volumes and prices also remained strong.

Operating income increased 295% over the fourth quarter of fiscal 2007 and nearly doubled the previous record for operating income established in the third quarter of fiscal 2008. During the quarter, the rise in export sales prices significantly outpaced domestic raw material purchase costs, resulting in substantially wider margins and, coupled with higher ferrous sales volumes, led to the record operating income. However, toward the end of the quarter the markets for recycled metals began to weaken substantially. As a result of the significant fall in forward selling prices, the Company recognized a $49 million pre-tax charge to adjust year-end inventory values to the lower of cost or market which was included in the fourth quarter results.

Auto Parts Business

The Auto Parts Business reported record quarterly and annual revenues and operating income.

                            Fourth  Fourth   Third
($ in millions, except      Quarter Quarter Quarter Fiscal    Fiscal
 locations)                  2008    2007    2008    2008      2007
----------------------------------------------------------------------
Revenues                       $103     $74    $101    $353       $266
----------------------------------------------------------------------
Operating Income               $ 16     $10    $ 17    $ 47       $ 29
----------------------------------------------------------------------
Locations (end of quarter)       56      52      53      56         52
----------------------------------------------------------------------

Revenues for the Auto Parts Business increased 38% over the fourth quarter of 2007, primarily as a result of higher core and scrap prices, improved parts sales and higher car volumes.

Fourth quarter operating income increased 62% over the fourth quarter of 2007 and was narrowly higher than the record operating income in the third quarter of this year. Higher car volumes and improved margins on core and scrap sales led to the year over year increase in operating income.

Steel Manufacturing Business

The Steel Manufacturing Business benefited from record high prices and strong sales volumes.

($ in millions, except selling   Fourth  Fourth   Third
 prices; volume in thousands of  Quarter Quarter Quarter Fiscal Fiscal
 tons)                            2008    2007    2008    2008   2007
----------------------------------------------------------------------
Revenues                            $182    $117    $168   $603   $425
----------------------------------------------------------------------
Avg. Net Sales Prices ($/T)         $958    $617    $744   $728   $575
----------------------------------------------------------------------
Sales Volume                         185     184     218    808    713
----------------------------------------------------------------------
Operating Income                    $ 22    $ 20    $ 23   $ 72   $ 64
----------------------------------------------------------------------

Revenues for the Steel Manufacturing business rose 56% compared to the fourth quarter of fiscal 2007 and 9% from the third quarter of 2008. Average net sales prices rose sharply despite softening demand toward the end of the quarter, reflecting a continuing lack of competition from imported steel products.

Year over year operating income increased slightly as sales prices increased at a greater rate than raw material costs. On a quarter over quarter basis, lower sales volumes resulted in a slight decline in operating income.

Share Repurchases

During the quarter, the Company repurchased 250,000 shares of its Class 'A' common stock. Since November 2006, the Company has repurchased 3.2 million shares, or approximately 10% of the total shares outstanding. Under the authority granted by its Board of Directors, the Company may repurchase an additional 1.5 million shares.

Outlook

Current market conditions are extremely unsettled and forward visibility is limited. In light of the short period of time remaining between the date of this release and the end of the Company's first fiscal quarter, the Company is able to provide limited qualitative guidance on first quarter results. Investors are cautioned that a great deal of uncertainty remains regarding near-term market conditions, and the Company does not assume responsibility for updating this guidance prior to the first quarter earnings release.

The factors that may affect the Company's results in the first quarter of fiscal 2009 include:

Metals Recycling Business:

Pricing. While the Company's long-term outlook for scrap demand remains positive, substantially diminished short-term demand has resulted in a significant drop in ferrous scrap prices from the record levels achieved in the recently completed fourth quarter. Based on sales made to date, average net ferrous selling prices for the first quarter are expected to range from $300/ton to $375/ton, which would exceed the average net prices realized in the first quarter of fiscal 2008. This range reflects prices which were higher in September than are expected in November. Average net nonferrous sales prices are expected to decline 20-25% from the levels achieved throughout fiscal 2008. Raw material purchase prices have been reduced in response to the declining selling prices.

Sales volumes. First quarter ferrous scrap volumes are currently expected to decline 10-25% from the one million tons shipped during the first quarter of fiscal 2008. It should be noted that quarterly results will be highly dependent on currently contracted shipments occurring as scheduled. Nonferrous sales volumes are expected to increase 10-20% on a year over year basis. Overall raw material purchases have been reduced to reflect the lower expected ferrous sales volumes.

Margins. Notwithstanding the Company's actions to quickly reduce raw material purchase prices, the significant fall in selling prices for both ferrous and nonferrous metals during the first quarter, combined with the impact of average inventory costing, are currently expected to result in reported margins which approximate the margins in the first quarter of fiscal 2008 but are lower than the record results in the fourth quarter. Actual margins will be highly dependent on currently contracted shipments occurring as scheduled, as well as changes in current and forward market conditions.

Auto Parts Business:

Revenues. Higher self-service parts sales are expected to be offset by lower prices for scrapped vehicles and cores and a weakening economic environment leading to fewer collision repairs. As a result, revenues are expected to be flat on a year over year basis.

Margins. The Company's actions to reduce purchase prices for scrapped vehicles are currently expected to help to maintain a positive cash spread between core and scrap selling prices and the cost of scrapped vehicles. However, prices for scrap and cores are expected to decline more than the average inventory costs, and combined primarily with weaker full-service parts sales, are expected to more than offset the higher self-service parts sales and result in negative operating margins.

Steel Manufacturing Business:

Pricing. Despite reduced demand from West Coast construction, first quarter net sales prices for finished goods are expected to remain 30-40% higher than the prices received in the first quarter of fiscal 2008, but decline 10-15% from the record prices achieved in the recently completed fourth quarter.

Sales Volumes. Lower demand and increased competition is expected to result in first quarter sales volumes declining to between 105,000 and 115,000 tons. Output in the melt shop and rolling mills has been reduced to reflect lower current demand.

Margins. Despite current period scrap costs which have declined more than average sales prices, the impact of average inventory costing is expected to result in an operating margin per ton which approximates the first quarter of 2008 but is lower than the fourth quarter.

Fourth Quarter 2008 Conference Call

A conference call and slide presentation to discuss results will be held today, October 28, 2008, at 11:30 a.m. EDT, hosted by John Carter, President and Chief Executive Officer, Tamara Lundgren, Chief Operating Officer and Richard Peach, Chief Financial Officer. The call and the slides will be webcast and 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 39 operating facilities located in 12 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 38 self-service facilities and 18 full-service facilities located in 16 states and in western Canada. With an annual production capacity of nearly 800,000 tons, the Company's steel manufacturing business produces finished steel products, including rebar, wire rod and other specialty products. The Company commenced its 103rd year of operations in fiscal 2009.

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; unsettled credit markets; 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 and availability of credit to 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.
                   CONSOLIDATED STATEMENT OF INCOME
               (in thousands, except per share amounts)
                             (Unaudited)

                           For the Three Months  For the Twelve Months
                                   Ended                 Ended
                           --------------------- ---------------------
                           August 31, August 31, August 31, August 31,
                              2008       2007       2008       2007
                           ---------- ---------- ---------- ----------


 Revenues                  $1,314,039  $ 748,520 $3,641,550 $2,572,265
                           ---------- ---------- ---------- ----------


 Cost of goods sold         1,052,947    634,052  3,013,250  2,178,113
 Selling, general and
  administrative               66,741     53,219    237,723    186,030
 (Income) from joint
  ventures                    (5,476)    (1,704)   (11,706)    (5,441)
                           ---------- ---------- ---------- ----------


 Operating income             199,827     62,953    402,283    213,563

 Other income (expense):
 Interest expense             (1,946)    (1,994)    (8,649)    (8,213)
 Other income (expense),
  net                           1,055      1,021      2,644      3,615
                           ---------- ---------- ---------- ----------
                                (891)      (973)    (6,005)    (4,598)
                           ---------- ---------- ---------- ----------


 Income before income taxes
  and minority interests      198,936     61,980    396,278    208,965

 Income tax expense          (71,477)   (23,366)  (144,203)   (75,333)
                           ---------- ---------- ---------- ----------

Income before minority
 interests and pre-
 acquisition interests        127,459     38,614    252,075    133,632
 Minority interests, net of
  tax                         (1,077)      (638)    (3,392)    (2,298)
                           ---------- ---------- ---------- ----------
 Net income                $  126,382  $  37,976 $  248,683 $  131,334
                           ========== ========== ========== ==========


 Basic earnings per share  $     4.49  $    1.29 $     8.79 $     4.38
                           ========== ========== ========== ==========

 Diluted earnings per share$     4.38  $    1.28 $     8.61 $     4.32
                           ========== ========== ========== ==========


                   SCHNITZER STEEL INDUSTRIES, INC.
                         FINANCIAL HIGHLIGHTS
               (in thousands, except per share amounts)
                             (Unaudited)

                          For the Three Months For the Twelve Months
                                  Ended                 Ended
                          -------------------- -----------------------
                          August 31,  August   August 31,  August 31,
                                        31,
                             2008      2007       2008        2007
                          ---------- --------- ----------- -----------

REVENUES:

Metals Recycling Business:
 Ferrous sales:
  Processing              $1,032,299 $ 416,806 $ 2,405,081 $ 1,300,787
  Trading                      5,231    84,560     185,715     381,066
 Nonferrous sales            134,842   111,125     460,639     395,737
 Other sales                   2,029     3,185      11,415      11,681
                          ---------- --------- ----------- -----------
  Total sales              1,174,401   615,676   3,062,850   2,089,271

Auto Parts Business          102,545    74,322     352,682     266,354
Steel Manufacturing
 Business                    182,333   117,101     603,189     424,550
Intercompany sales
 eliminations              (145,240)  (58,579)   (377,171)   (207,910)
                          ---------- --------- ----------- -----------
  Total                   $1,314,039 $ 748,520 $ 3,641,550 $ 2,572,265
                          ========== ========= =========== ===========


INCOME (LOSS) FROM
 OPERATIONS:

Metals Recycling Business:
  Processing              $  183,356 $  46,935 $   351,819 $   164,964
  Trading                    (1,576)     (897)       5,054         635
Auto Parts Business           16,260    10,028      46,734      29,050
Steel Manufacturing
 Business                     22,024    19,520      72,300      64,355
Corporate expense           (17,119)  (14,218)    (63,990)    (45,684)
Intercompany eliminations    (3,118)     1,585     (9,634)         243

                          ---------- --------- ----------- -----------
  Total                   $  199,827 $  62,953 $   402,283 $   213,563
                          ========== ========= =========== ===========



NET INCOME                $  126,382 $  37,976 $   248,683 $   131,334
                          ========== ========= =========== ===========

BASIC EARNINGS PER SHARE  $     4.49 $    1.29 $      8.79 $      4.38
                          ========== ========= =========== ===========

DILUTED EARNINGS PER SHARE$     4.38 $    1.28 $      8.61 $      4.32
                          ========== ========= =========== ===========

SHARE INFORMATION
 (THOUSANDS):
  Basic shares outstanding    28,165    29,388      28,278      29,997
                          ========== ========= =========== ===========

  Diluted shares
   outstanding                28,834    29,781      28,894      30,400
                          ========== ========= =========== ===========
Schnitzer Steel Industries, Inc.
Selected Operating Statistics
(Unaudited)

                                                              Total
                 Q1 FY08    Q2 FY08    Q3 FY08    Q4 FY08      FY08
                ------------------------------------------------------
Metals Recycling
 Business
 Ferrous
  Recycled Metal
  Sales Prices
  ($/LT)(1)
   Domestic     $      279 $      321 $      464 $      583 $      416
   Exports             280        329        463        636        455
     Total
      Processing       280        327        463        623        442
   Trading             313        337        440        590        370

 Ferrous
  Processing
  Sales Volume
  (LT)(2)
  Cascade          179,686    170,221    186,696    200,523    737,126
  Domestic         178,833    210,824    226,961    188,801    805,419
  Export           642,142    746,736    722,973  1,099,203  3,211,054
                ------------------------------------------------------
    Total
     Processed   1,000,661  1,127,781  1,136,630  1,488,527  4,753,599
                ------------------------------------------------------

 Ferrous Trading
  Sales Volume
  (LT)
   Trading         134,957    148,899    151,324      8,407    443,587

                ------------------------------------------------------
 Total Ferrous
  Sales Volume
  (LT)(2)        1,135,618  1,276,680  1,287,954  1,496,934  5,197,186
                ======================================================

 Nonferrous
  Average Price
  ($/pound)(1)  $    1.000 $    0.980 $    1.069 $    1.053 $    1.030

 Nonferrous
  Sales Volume
  (pounds, in
  thousands)        88,808     96,278    128,858    125,525    439,469


Steel
 Manufacturing
 Business
 Sales Prices
  ($/NT)(1) (2)
  (3)
   Average      $      601 $      616 $      744 $      958 $      728

 Sales Volume
  (NT)(3)
   Rebar           108,856    127,732    128,597    104,926    470,111
   Coiled
    Products        49,343     57,096     74,270     65,397    246,106
   Merchant Bar
    and Other       16,031     17,332     15,033     11,576     59,972
                ------------------------------------------------------
     Total         174,230    202,160    217,900    181,899    776,189
                ======================================================

Auto Parts
 Business
 Number of self-
  service
  locations at
  end of quarter        35         35         35         38         38
 Number of full-
  service sites
  at end of
  quarter               17         17         17         18         18

                                                              Total
                 Q1 FY07    Q2 FY07    Q3 FY07    Q4 FY07      FY07
                ------------------------------------------------------
Metals Recycling
 Business
 Ferrous
  Recycled Metal
  Sales 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)(2)
  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)(2)        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
 Sales Prices
  ($/NT)(1) (2)
  (3)
   Average      $      546 $      536 $      596 $      617 $      575

 Sales Volume
  (NT)(3)
   Rebar            98,491    111,136    125,515    116,482    451,624
   Coiled
    Products        51,823     50,134     40,407     50,483    192,847
   Merchant Bar
    and Other       19,281     16,031     16,505     16,670     68,487
                ------------------------------------------------------
     Total         169,595    177,301    182,427    183,635    712,958
                ======================================================

Auto Parts
 Business
 Number of self-
  service
  locations at
  end of quarter        35         35         35         35         35
 Number of full-
  service sites
  at end of
  quarter               17         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.
(2) Includes sales to the Steel Manufacturing Business for all
 quarters.
(3) Excludes billet sales.
                   SCHNITZER STEEL INDUSTRIES, INC.
                CONDENSED CONSOLIDATED BALANCE SHEETS
         (Unaudited, in thousands, except per share amounts)


                                                   August     August
                                                   31, 2008   31, 2007
                                                 ---------- ----------
                     Assets
-------------------------------------------------
Current assets:
             Cash and cash equivalents           $   15,039 $   13,410
             Accounts receivable, net               314,993    170,212
             Inventories                            429,061    258,568
             Other current assets                    20,433     19,286
                                                 ---------- ----------
              Total current assets                  779,526    461,476

Property, plant and equipment, net                  431,898    383,910

Goodwill and other assets                           343,429    306,028
                                                 ---------- ----------

              Total assets                       $1,554,853 $1,151,414
                                                 ========== ==========

      Liabilities and Shareholders' Equity
-------------------------------------------------
Current liabilities:
             Short-term borrowings               $   25,490 $   20,275
             Other current liabilities              319,432    171,914
                                                 ---------- ----------
              Total current liabilities             344,922    192,189


Long-term debt                                      158,933    124,079

Other long-term liabilities                          68,447     64,709

Minority interests                                    4,399      5,373

Shareholders' equity                                978,152    765,064
                                                 ---------- ----------

              Total liabilities and shareholders'
               equity                            $1,554,853 $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.

Data provided by Thomson Reuters