News Releases

Schnitzer Steel Reports Third Quarter Results

PORTLAND, Ore.--(BUSINESS WIRE)--Jun. 30, 2009-- Schnitzer Steel Industries, Inc. (Nasdaq:SCHN) today reported revenues of $412 million and a net loss of $1.5 million, or $0.05 per diluted share, for the fiscal 2009 third quarter ended May 31, 2009. For the quarter, the Company generated additional cash from operations of $80 million, bringing the year-to-date cash from operations to $241 million.

(in millions, except per-share data)

  Third Quarter

2009

  Third Quarter

2008

  Second Quarter

2009

  Year to

Date

2009

  Year to

Date

2008

Revenues   $ 412   $ 972   $ 434   $ 1,344   $2,328
Operating Income (Loss)  

($  6)

  $ 102   ($ 18)  

($   74)

 

$  202

Net Income (Loss)  

($  2)

 

$  62

 

($  7)

 

($   42)

 

$  122

Diluted EPS   ($0.05)   $2.14   ($0.25)   ($ 1.51)   $ 4.23

“During the third quarter all of our businesses showed sequential improvements in operating income, reflecting a strengthening of demand for recycled metal in the export markets and the benefit of a full quarter of previously implemented cost containment actions,” said Tamara Lundgren, President and Chief Executive Officer. “As a result of our focus on managing working capital, the benefits from our cost containment program and the flexibility of our platform which enables us to sell our products to the markets where demand and profitability are the greatest, we continued to generate strong cash flow and further reduce our debt levels,” she continued.

“Our Metals Recycling Business was able to increase its purchases of raw materials to support stronger overseas demand. Operating income in our Metals Recycling Business improved despite tighter conditions in the supply markets which pressured margins. Our Auto Parts Business returned to positive operating income performance through higher volumes of purchased vehicles, increased sales of recycled parts and the benefits of improved commodity prices. In the Steel Manufacturing Business, the operating loss narrowed, primarily due to higher sales volumes and higher production volumes. During the quarter, we were able to continue to reduce finished steel inventories and, as a result, we are now able to increase production at the mill to levels which should help future operating results,” added Lundgren.

“As we look forward, our strong balance sheet, positive cash flow and low leverage allow us to continue to undertake acquisitions and investments in technology as we have done throughout the year, enabling us to expand our access to supply and to improve our operating efficiencies,” Lundgren concluded.

Metals Recycling Business

($ in millions, except selling prices; ferrous volume in thousands of long tons, non-ferrous volumes in millions of pounds)

  Third Quarter

2009

  Third Quarter

2008

  Second Quarter

2009

 

 

 

 

Year to

Date

2009

 

 

 

 

Year to

Date

2008

Total Revenues   $ 318   $ 810   $ 337   $ 1,056     $1,888
Ferrous Revenues   $ 268   $ 668   $ 298   $ 878     $1,553
Ferrous Volumes (Processing/Trading)   1,037/0   1,137/151  

1,083/0

 

2,899/0

   

3,265/435

Avg. Net Ferrous Sales Prices ($/LT)(1)

(Processing)

  $ 223   $ 463  

 

$ 253

 

 

$ 271

   

 

$ 360

Nonferrous Volumes   90   129   77   274     314
Avg. Net Nonferrous Sales Prices ($/LB)(1)   $0.51   $ 1.07  

$0.45

 

$0.60

   

$ 1.02

Operating Income (Loss)(2)   $ 6   $ 94   $ 5   ($ 8 )   $ 175

(1) Sales prices are shown net of freight

(2) Includes operating income from joint ventures

Third quarter revenues for the Metals Recycling Business were 6% lower than the second quarter of fiscal 2009, primarily due to a 12% decline in ferrous average net selling prices and a 4% decline in ferrous volumes. During the third quarter, ferrous export net sales prices remained higher than domestic ferrous net sales prices.

Revenues declined 61% from the record third quarter revenues of 2008, primarily as a result of declines of 52% and 9% in average ferrous net selling prices and ferrous processing sales volumes, respectively.

Operating income for the quarter increased 15% compared to the second quarter of 2009, despite a narrowing of cash metal spreads due to the tight market for raw materials. Operating income was 94% lower than the third quarter of 2008 as significantly weaker year-over-year demand, lower commodity prices and restricted flows of raw materials resulted in compressed margins and lower sales volumes.

Auto Parts Business

 

($ in millions, except locations)

  Third Quarter

2009

  Third Quarter

2008

  Second Quarter

2009

 

Year to

Date

2009

 

Year to

Date

2008

Revenues   $ 66   $ 101   $ 58   $ 191   $ 250
Operating Income (Loss)  

$  3

 

$  17

  ($ 5)   ($ 11)  

$  30

Locations (end of quarter)   57   52   58   57  

52

Third quarter revenues for the Auto Parts Business increased 13% compared to the second quarter of fiscal 2009 due to normal seasonal improvements in parts sales, higher car volumes and improved pricing for cores. Revenues decreased 35% over the same period last year, primarily as a result of a 26% decrease in self-service car volumes and lower per car sales of cores and scrap, which more than offset higher full-service parts sales.

Compared to the second quarter of 2009, operating income improved $8 million due to higher car volumes, improved margins on scrap and core sales and higher parts sales. Operating income decreased 82% from the third quarter of 2008, primarily due to the lower car volumes and significantly reduced margins on scrap and core sales.

Steel Manufacturing Business

($ in millions, except selling prices; volume in thousands of tons)

  Third Quarter

2009

  Third Quarter

2008

  Second Quarter

2009

 

Year to

Date

2009

 

Year to

Date

2008

Revenues  

$  47

  $ 168  

$  52

  $ 197   $ 421
Avg. Net Sales Prices ($/T)   $ 524   $ 744   $ 570  

$ 664

 

$ 658

Sales Volume   85   218   82   266   594
Operating Income (Loss)  

($  5)

 

$  23

 

($  6)

  ($ 43)  

$  50

Revenues for the Steel Manufacturing Business decreased 10% compared to the second quarter of 2009, primarily due to continued weakening of market conditions during the quarter. However, market prices appeared to bottom in May. On a year-over-year basis, revenues fell 72% as weak demand led to a 61% decline from the record sales volumes achieved in the third quarter of 2008, coupled with a 30% decline in average net sales prices.

Compared to the second quarter of 2009, operating income improved 22%, due primarily to slightly higher sales volumes and a reduction in the impact of low production volumes, which offset lower average sales prices. During the third quarter, $3 million in production costs could not be charged to inventory, compared to $6 million in the second quarter.

Compared to the record operating income in the third quarter of 2008, operating income declined $28 million due to significantly lower sales volumes and sales prices.

Outlook

The Company said the factors, which are forward-looking statements and subject to uncertainty as discussed below, that will affect its results in the fiscal fourth quarter of 2009 include:

Metals Recycling Business:

Pricing. Near-term demand for ferrous scrap appears to have improved compared to the third fiscal quarter. As a result, based on orders received to date, average ferrous selling prices, net of freight, are expected to increase during the fourth quarter. Nonferrous prices are also expected to improve.

Sales volumes. Fourth quarter ferrous processing sales volumes are expected to increase 100 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 increase 10-15% over volumes shipped in the third quarter.

Margins. Margins in the fourth quarter are expected to improve from the third quarter, although the supply of raw materials is expected to continue to put pressure on metal spreads.

Auto Parts Business:

Revenue. Higher prices for cores and scrap, improved parts sales and higher car volumes are expected to result in increased revenues compared to the recently completed third quarter.

Margins. Improved parts sales and higher prices for cores are expected to result in margins which are improved compared to the third quarter, although higher prices for scrap are expected to be offset by higher purchase costs for scrapped vehicles.

Steel Manufacturing Business:

Pricing. Weak demand in the non-residential and infrastructure construction markets is expected to continue through the fourth quarter. As a result, although prices are expected to increase from the low point in the markets at the end of May, average prices are expected to be slightly lower than the average prices in the recently completed third quarter.

Volumes. Fourth quarter sales volumes are expected to increase slightly compared to the third quarter.

Margins. Higher production volumes are expected to result in margins which are improved compared to the third quarter.

Third Quarter 2009 Conference Call

A conference call to discuss results will be held today, June 30, 2009, at 11:30 a.m. EDT, hosted by Tamara Lundgren, 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 42 operating facilities located in 13 states and Puerto Rico, including seven export facilities located on both the East and West Coasts and in Hawaii and Puerto Rico. 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 39 self-service facilities and 18 full-service facilities located in 14 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; 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 Ended For the Nine Months Ended
May 31, May 31, May 31, May 31,
2009 2008 2009 2008
 
REVENUES:
 
Metals Recycling Business:
Ferrous sales 267,548 667,897 878,061 1,553,266
Nonferrous sales 48,541 140,033 172,056 325,797
Other sales   1,435     2,490     5,422     9,386  
Total sales 317,524 810,420 1,055,539 1,888,449
 
Auto Parts Business 65,851 100,641 191,432 250,137
Steel Manufacturing Business 46,822 167,668 197,378 420,856
Intercompany sales eliminations   (18,367 )   (106,588 )   (100,352 )   (231,931 )
Total $ 411,830   $ 972,141   $ 1,343,997   $ 2,327,511  
 
 
INCOME (LOSS) FROM OPERATIONS:
 
Metals Recycling Business: 6,034 93,516 (7,954 ) 175,093
Auto Parts Business 2,981 16,720 (11,410 ) 30,474
Steel Manufacturing Business (4,961 ) 22,767 (42,642 ) 50,276
Corporate expense (10,593 ) (25,365 ) (25,845 ) (46,871 )
Intercompany eliminations 669 (5,347 ) 14,018 (6,516 )
               
Total $ (5,870 ) $ 102,291   $ (73,833 ) $ 202,456  
 
 
 
NET INCOME (LOSS) $ (1,527 ) $ 61,719   $ (42,494 ) $ 122,301  
 
BASIC EARNINGS (LOSS) PER SHARE $ (0.05 ) $ 2.19   $ (1.51 ) $ 4.32  
 
DILUTED EARNINGS (LOSS) PER SHARE $ (0.05 ) $ 2.14   $ (1.51 ) $ 4.23  
 
SHARE INFORMATION (THOUSANDS):
Basic shares outstanding   28,280     28,177     28,173     28,315  
 
Diluted shares outstanding   28,280     28,847     28,173     28,894  

SCHNITZER STEEL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share amounts)
(Unaudited)
     
For the Three Months Ended For the Nine Months Ended
May 31, May 31, May 31, May 31,
2009 2008 2009 2008
 
 
Revenues $ 411,830   $ 972,141   $ 1,343,997   $ 2,327,511  
 
 
Cost of goods sold 374,048 798,531 1,291,525 1,960,460
Selling, general and administrative 43,536 73,822 134,581 170,632
Environmental matters - 350 (6,080 ) 193
(Income) loss from joint ventures   116     (2,853 )   (2,196 )   (6,230 )
 
 
Operating income (loss) (5,870 ) 102,291 (73,833 ) 202,456
 
Other income (expense):
Interest expense (629 ) (1,707 ) (2,823 ) (6,703 )
Other income   5,634     879     6,785     1,589  

Other income (expense)

  5,005     (828 )   3,962     (5,114 )
 
 
Income (loss) before income taxes and minority interests (865 ) 101,463 (69,871 ) 197,342
 
Income tax benefit (expense)   (114 )   (38,620 )   27,724     (72,726 )
 

Income (loss) before minority interests and pre-acquisition interests

(979 ) 62,843 (42,147 ) 124,616
 
Minority interests, net of tax (548 ) (1,124 )   (347 ) (2,315 )
 
Net income (loss) $ (1,527 ) $ 61,719   $ (42,494 ) $ 122,301  
 
 
Basic earnings (loss) per share $ (0.05 ) $ 2.19   $ (1.51 ) $ 4.32  
 
Diluted earnings (loss) per share $ (0.05 ) $ 2.14   $ (1.51 ) $ 4.23  

Schnitzer Steel Industries, Inc.                
Selected Operating Statistics
(Unaudited)
Total Total

Q1 FY09

Q2 FY09

Q3 FY09

FY09

Q1 FY08

Q2 FY08

Q3 FY08

Q4 FY08

FY08

Metals Recycling Business
Ferrous Processing Selling Prices ($/LT)(1)
Domestic(2) $ 371 $ 209 $ 186 $ 285 $ 279 $ 321 $ 464 $ 583 $ 416
Exports 353 259 228 267 280 329 463 637 455
Average 359 253 223 271 280 327 463 623 442
 
 
Ferrous Processing Sales Volume (LT)(2)
Cascade 145,493 29,761 55,162 230,416 179,686 170,221 186,696 200,523 737,126
Domestic 129,620 99,275 86,555 315,450 178,833 210,824 226,961 188,801 805,419
Export   503,635     954,003     895,167     2,352,805   642,142     746,736     722,973     1,099,203     3,211,054
Total Processed   778,748     1,083,039     1,036,884     2,898,671   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)   778,748     1,083,039     1,036,884     2,898,671   1,135,618     1,276,680     1,287,954     1,496,934     5,197,186
 
Nonferrous Average Price ($/pound)(1) $ 0.784 $ 0.45 $ 0.51 $ 0.60 $ 1.000 $ 0.980 $ 1.069 $ 1.053 $ 1.030
 
Nonferrous Sales Volume (pounds, in thousands) 107,359 76,822 90,226 274,407 88,808 96,278 128,858 125,525 439,469
 
 
Steel Manufacturing Business
Sales Prices ($/NT)(1)(3)
Average $ 864 $ 570 $ 524 $ 664 $ 601 $ 616 $ 744 $ 958 $ 728
 
Sales Volume (NT)(3)
Rebar 46,917 56,588 52,749 156,254 108,856 127,732 128,597 104,926 470,111
Coiled Products 45,051 19,332 25,798 90,181 49,343 57,096 74,270 65,397 246,106
Merchant Bar and Other 6,235 6,783 6,820 19,838 16,031 17,332 15,033 11,576 59,972
Total 98,203 82,703 85,367 266,273 174,230 202,160 217,900 181,899 776,189
 
Auto Parts Business
Number of self-service locations at end of quarter 38 40 39 39 35 35 35 38 38
Number of full-service sites at end of quarter 18 18 18 18 17 17 17 18 18
 
(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)
   
 
  May 31, 2009   August 31, 2008

Assets

Current assets:
Cash and cash equivalents $ 48,721 $ 15,039
Accounts receivable, net 85,740 314,993
Inventories, net 211,097 429,061
Other current assets   68,358   20,433
Total current assets 413,916 779,526
 
Property, plant and equipment, net 454,303 431,898
 
Goodwill and other assets   412,468   343,429
 
Total assets $ 1,280,687 $ 1,554,853
 

Liabilities and Shareholders’ Equity

Current liabilities:
Short-term borrowings $ 1,370 $ 25,490
Other current liabilities   134,408   319,432
Total current liabilities 135,778 344,922
 
 
Long-term debt 124,624 158,933
 
Other long-term liabilities 79,249 68,447
 
Minority interests 3,000 4,399
 
Shareholders’ equity   938,036   978,152
 
Total liabilities and shareholders’ equity $ 1,280,687 $ 1,554,853

Source: Schnitzer Steel Industries, Inc.

Schnitzer Steel Industries, Inc.
Investor Relations:
Rob Stone, 503-224-9900
or
Press Relations:
Tom Zelenka, 503-323-2821
Website: www.schnitzersteel.com
Email: ir@schn.com

Data provided by Thomson Reuters