News Releases
Schnitzer Steel Industries Provides Update on First Quarter Results and Business Environment
PORTLAND, Ore.--(BUSINESS WIRE)--Dec. 17, 2008--Schnitzer Steel Industries, Inc. (NASDAQ:SCHN), today provided an update
regarding its expectations for financial and operating results in its
fiscal 2009 first quarter ended November 30, 2008. The updated guidance
reflects the impact of economic and market conditions since October 28,
2008, when the Company provided qualified guidance in its fourth quarter
earnings release.
In the final month of the 2009 fiscal first quarter, market conditions
weakened in all three of the Company's businesses. Combined with a
number of renegotiations, deferrals and cancellations of customer
contracts, this led to lower sales volumes and reduced sales prices.
This is anticipated to result in a non-cash write down of the value of
the Company's Metals Recycling and Steel Manufacturing inventories by an
amount currently estimated to be in the range of $60 million. As a
result, the Company expects to report a net loss for the first quarter.
Commenting on the current business environment, Tamara L. Lundgren,
President and Chief Executive Officer, stated, "While we continue to
face weak demand, we have undertaken actions announced previously to
adjust our costs and production levels to meet this reduced demand. We
have adjusted our buy prices for raw materials to maintain positive cash
metal spreads while reducing our production output to match end demand.
We have implemented a cost containment program and have reduced
headcount, reduced operating hours and eliminated non-essential
overtime. Current production output in all three of our businesses, on
average, has declined from average 2008 levels by approximately 40
percent. We have been able to undertake these cost reductions while
preserving our ability to quickly increase production when stronger,
sustainable demand returns to the market."
"While we will be reporting a first quarter net loss, we are encouraged
by the fact that the financial results for our Metals Recycling and
Steel Manufacturing Businesses are expected to be approximately
breakeven prior to the inventory write downs. Our actions to
aggressively reduce purchase prices in our Metals Recycling Business
have resulted in positive cash metal spreads and point to our ability to
be profitable once the market stabilizes. Our Steel Manufacturing
Business also continues to show positive cash metal spreads, but weak
market conditions have led us to temporarily cut production more than
the drop in demand in order to reduce inventories to levels consistent
with current and anticipated demand. As expected, our Auto Parts
Business will report an operating loss due to weak demand and the impact
of inventory costs not falling as rapidly as sales prices," added
Lundgren.
"We generated positive operating cash flow during the first quarter and
further reduced our debt levels," said Richard Peach, Chief Financial
Officer. "As of November 30, 2008, debt, net of cash, was approximately
$121 million, compared to $169 million at August 31, 2008. We believe
our strong balance sheet positions us well to take advantage of
opportunities that may arise during this period of industry-wide
weakness."
The Company expects to issue a press release with the full first quarter
results and conduct an investor conference call on January 8, 2009. At
that time, the Company expects to provide its outlook regarding the
second fiscal quarter. Details regarding the call will be provided prior
to that date.
The Company is making this announcement due to the unprecedented market
conditions in which it is operating. The Company does not plan to
provide any further updates prior to January 8, 2009. In the future, the
Company does not intend to provide updated guidance except when it
releases full quarterly results.
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 contains forward-looking statements, within the
meaning of Section 21E of the Securities Exchange Act of 1934 (the
"Exchange Act"), as amended, 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 expected net loss, the expect amount of the
write down of its inventory values, the Company's outlook for the
business and statements as to expected pricing, sales volume, operating
margins and operating losses. 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; the Company's
ability to match output with demand; 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;
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.
CONTACT: Schnitzer Steel Industries, Inc.
Investor Relations: Rob Stone, 503-224-9900
Press Relations: Tom Zelenka, 503-323-2821
www.schnitzersteel.com
ir@schn.com
Source: Schnitzer Steel Industries, Inc.