News Releases

Schnitzer Reports Strong Fourth Quarter and Fiscal 2002 Results

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PORTLAND, Ore., Oct 2, 2002 (BUSINESS WIRE) -- Schnitzer Steel Industries, Inc. (Nasdaq:SCHN) today reported fourth quarter 2002 income, before nonrecurring items and LIFO, of $6.3 million or $0.67 per diluted share on revenues of $100.1 million.

Including nonrecurring items and LIFO, fourth quarter net earnings totaled $2.2 million or $0.23 per diluted share. Fourth quarter 2001 net income before LIFO amounted to $2.4 million or $0.25 per diluted share on revenues of $70.9 million. Including the year-end LIFO inventory adjustment, last year's fourth quarter net income totaled $3.0 million or $0.32 per diluted share.

Earnings for the year ended Aug. 31, 2002, before nonrecurring items and LIFO, totaled $12.9 million or $1.39 per diluted share on revenues of $350.9 million. Including the nonrecurring items and LIFO, fiscal 2002 net income totaled $6.6 million or $0.71 per diluted share. Fiscal 2001 earnings before LIFO totaled $7.3 million or $0.78 per share on revenues of $322.8 million. Including the year-end LIFO adjustment, 2001 net income totaled $7.9 million or $0.84 per diluted share. Attached to this press release are tables reconciling net income under generally accepted accounting principles to net income before nonrecurring items and LIFO.

"Fiscal 2002 was a challenging, but very gratifying year at Schnitzer Steel," said Robert W. Philip, president and chief executive officer. "Markets in both the metals recycling and steel manufacturing businesses went through significant swings this year. The complex market conditions required the employees of all of our businesses to quickly adjust to changing markets in order for us to successfully navigate through this demanding period. During the year we made a number of difficult, but strategically significant decisions. Many of these decisions resulted from last year's move to measuring and compensating our employees through the use of Economic Value Added (EVA(R)). Using EVA as a tool, we evaluated our operations and made decisions to exit certain investments and operations that we believed were not providing an adequate return to our shareholders over the long-term. For example, during the fourth quarter, we eliminated an unprofitable car-crushing business and terminated a fixed-priced Alaska barge contract of affreightment. In addition, we discontinued operating our Reno, Nevada metals recycling yard and instead sub-let the facility and leased the existing equipment to a third party who is selling us its scrap metal output."

Philip added, "As a result of our strong operating performance coupled with additional focus on working capital, we generated near record cash flow from operations of $36.4 million in fiscal 2002 compared to $8.6 million in fiscal 2001. With this cash and $31.4 million of net cash distributed from our joint venture businesses ($15.5 million received from a new joint venture credit facility), we reduced our net debt outstanding by $56.5 million. We also invested $9.6 million in our operations and returned $3.1 million to our shareholders through the combination of stock repurchases and cash dividends. These successes make me feel optimistic about Schnitzer Steel's future business."

Metals Recycling

During the fourth quarter of 2002, the Company's wholly-owned Metals Recycling Business rebounded strongly and generated operating income of $6.1 million, compared to $2.5 million in the same fiscal 2001 quarter. During the fourth quarter of fiscal 2002, the average ferrous selling price rose to $108 per ton, which was the highest quarterly average price since fiscal 1998. Fourth quarter 2002 ferrous sales volumes were a strong 415,000 tons compared to 305,000 tons in 2001 fourth quarter. Partially offsetting the higher selling prices and volumes was a significant increase in the cost paid for unprocessed metal. Philip commented, "During the first six months of fiscal 2002, ferrous metal prices followed the economy down and fell to near record lows. Beginning in the third quarter and into the early part of the fourth quarter sales prices rebounded strongly. We continue to believe the underlying fundamentals for the recycled metals markets remain good and that worldwide demand for our recycled metal products will grow. Further, we believe that our wholly-owned and joint venture metals recycling businesses are well positioned to take advantage of both domestic and export market opportunities."

Joint Ventures

The Company's joint venture businesses had a record year in fiscal 2002. Fourth quarter 2002 income from joint ventures totaled $5.6 million, which compares to $4.1 million in last year's fourth quarter. Excluding the effects of year-end LIFO adjustments and a nonrecurring gain on the sale of property, fourth quarter 2002 joint venture income totaled $5.9 million, compared to $3.2 million last year. For the year just ended, the joint venture businesses produced record income totaling $19.4 million. Commenting on the year's results, Philip stated, "I am extremely pleased with the improvements made in our joint venture businesses. Only a portion of this year's margin improvement came from recycled metal price increases. The balance came from the combination of record sales volumes coupled with efficiency improvements made in a number of these businesses. Many of these improvements came about by rethinking old strategies and processes that should continue to benefit us in the years ahead."

Steel Manufacturing

The Steel Manufacturing Business reported an operating loss of $2.0 million for the fourth quarter of 2002, compared to an operating profit of $1.4 million during last year's same quarter. Fourth quarter selling prices averaged $279 per ton, compared to $292 per ton during the fourth quarter of 2001 and $274 per ton during the third quarter of this year. Increased sales of wire rod products caused fourth quarter sales volumes to rise by 25% over last year's fourth quarter.

"In March 2002, the U.S. Government imposed three year tariffs to provide temporary relief to the domestic steel industry; however, we have yet to see any significant benefit for most of our finished steel product lines. In fact the fiscal 2002 average selling price of $276 per ton was a record low," said Philip. "End user demand continues to be weak throughout the west coast. We are however, cautiously optimistic that markets will improve during the second half of next fiscal year when economic activity is expected to improve. Until then, we are actively taking measures to lower the costs we can control. Most recently, we made the difficult decision to further reduce our work force in this division and are looking at other cost areas to improve this business. I believe these measures are needed to make our mill more competitive in the global market place."

Income Taxes

During the year, the Company estimates its annual effective tax rate and adjusts it quarterly based upon numerous assumptions. As of the end of the third quarter, the Company estimated its effective tax rate for fiscal 2002 would approximate 20%. During the fourth quarter of 2002 the estimated tax rate was revised downward to approximately 14%, which compares to 30% in fiscal 2001. The Company's effective tax rate continues to benefit from various factors including net operating loss carry forwards that it acquired from a 1996 business acquisition. In addition, in fiscal 2002 the Company successfully applied for and received State of California Enterprise Zone Tax Credits and Los Angeles Revitalization Zone Tax Credits resulting from its successful hiring practices in economically depressed areas of California.

First Quarter Fiscal 2003 Outlook

Recycled metal prices receded modestly during the latter part of the fourth quarter; however, we have recently begun to see market prices firm for late calendar year shipments. The Company's joint ventures in the metals recycling business are expected to be affected by similar pricing factors. The Company is continuing to manage its cost of unprocessed metal and monitoring our cost of production to buffer our product margins. First quarter sales prices for finished steel should show modest improvement over the 2002 fourth quarter, which is the result of some recently announced price increases. These price improvements along with efforts to reduce costs should favorably impact this business. In addition, electricity prices are expected to decline modestly due to seasonal demand factors, which should favorably impact the cost of producing steel. Overall, the Company anticipates income from operations to be in the $3.5 million to $4.5 million range for the first fiscal quarter of 2003. Currently, the Company anticipates its effective tax rate will continue to benefit from net operating loss carry forwards that were acquired in an earlier acquisition. This, as well as other tax benefits, should result in a fiscal 2003 effective tax rate that approximates 26%.

Schnitzer Steel Industries, Inc. is one of the nation's largest recyclers of ferrous metals and a manufacturer of finished steel products. The Company, with its joint venture partners, processes approximately 4.6 million tons of recycled metals per year. In addition, the Company's steel mill has an annual production capacity of approximately 700,000 tons of finished steel products. The Company and its joint venture partners operate primarily along the West Coast and Northeastern seaboard of the United States.

This news release contains forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. One can generally identify these forward-looking statements because they contain "expect", "believe", and other words that convey a similar meaning. One can also identify these statements, as they do not relate strictly to historical or current facts. Examples of factors affecting both Schnitzer Steel Industries, Inc.'s wholly-owned operations and its joint ventures (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 raw materials; world economic conditions; competition; seasonality; energy supplies and pricing; the predictability of joint venture operating results; and the inability to complete expected large scrap export shipments in the current quarter, all as discussed in more detail under the heading "Factors That Could Affect Future Results" in the Company's most recent 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.

EVA(R) is a registered trademark of Stern Stewart & Company.

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

                             For The Three Months    For The Year
                                     Ended               Ended
                                  August 31,          August 31,
                             -------------------- -------------------
                               2002       2001      2002      2001
                             ---------- --------- --------- ---------
REVENUES:

Metals Recycling Business:
   Ferrous sales               $51,061   $31,835  $173,753  $157,413
   Nonferrous sales             11,460    10,882    41,708    43,046
   Other sales                   1,337     1,139     6,631     4,709
                             ---------- --------- --------- ---------
    Total sales                 63,858    43,856   222,092   205,168

Ferrous sales to Steel
 Manufacturing Business        (10,966)  (11,970)  (37,750)  (49,891)
Steel Manufacturing Business    47,197    39,014   166,586   167,554
                             ---------- --------- --------- ---------
    Total                     $100,089   $70,900  $350,928  $322,831
                             ========== ========= ========= =========

INCOME FROM OPERATIONS:

Metals Recycling Business       $6,124    $2,536   $11,402    $7,854
Steel Manufacturing Business    (2,027)    1,400    (5,789)    4,903
Joint ventures, including
 year-end LIFO adjustments       5,597     4,060    19,390     9,837
Corporate expense               (2,184)   (1,984)   (8,499)   (8,437)
Intercompany eliminations         (178)     (223)     (252)      (57)
Impairment and other
 nonrecurring charges           (4,840)       --    (7,100)       --
                             ---------- --------- --------- ---------
    Total                       $2,492    $5,789    $9,152   $14,100
                             ========== ========= ========= =========

NET INCOME                      $2,196    $2,994    $6,553    $7,919
                             ========== ========= ========= =========
BASIC EARNINGS PER SHARE         $0.24     $0.33     $0.72     $0.85
                             ========== ========= ========= =========
DILUTED EARNINGS PER SHARE       $0.23     $0.32     $0.71     $0.84
                             ========== ========= ========= =========


                   SCHNITZER STEEL INDUSTRIES, INC.
                   CONSOLIDATED STATEMENT OF INCOME
               (in thousands, except per share amounts)

                For the Three Months Ended     For the Year Ended
                        August 31,                 August 31,
                -------------------------- ---------------------------
                    2002         2001          2002          2001
                ------------- ------------ ------------- -------------
                          (Unaudited)                 (Audited)

 Revenues           $100,089      $70,900      $350,928      $322,831
                ------------- ------------ ------------- -------------
 Costs and
  expenses:
 Cost of goods
  sold and other
  operating
  expenses           90,636       62,104       324,640       291,434
 Impairment and
  other
  nonrecurring
  charges              4,840           --         7,100            --
 Selling and
  administrative
  expenses             7,718        7,067        29,426        27,134
                ------------- ------------ ------------- -------------
 Income from
  wholly-owned
  operations          (3,105)       1,729       (10,238)        4,263
 Income from
  joint ventures       5,597        4,060        19,390         9,837
                ------------- ------------ ------------- -------------
 Income from
  operations           2,492        5,789         9,152        14,100

Other income
  (expense):
 Interest
  expense               (452)      (1,062)       (2,314)       (5,120)
 Other income,
  net                    162         (442)          809         2,340
                ------------- ------------ ------------- -------------
                        (290)      (1,504)       (1,505)       (2,780)
                ------------- ------------ ------------- -------------
 Income before
  income taxes         2,202        4,285         7,647        11,320
 Income tax
  provision               (6)      (1,291)       (1,094)       (3,401)
                ------------- ------------ ------------- -------------
 Net income         $  2,196      $ 2,994      $  6,553      $  7,919
                ============= ============ ============= =============
 Basic earnings
  per share         $   0.24      $  0.33      $   0.72      $   0.85
                ============= ============ ============= =============
 Diluted
  earnings per
  share             $   0.23      $  0.32      $   0.71      $   0.84
                ============= ============ ============= =============
 Share
  information
  (thousands):

  Basic shares
   outstanding         9,185        9,289         9,148         9,371
                ============= ============ ============= =============
  Diluted shares
   outstanding         9,465        9,232         9,283         9,390
                ============= ============ ============= =============


                   SCHNITZER STEEL INDUSTRIES, INC.
                    Reconciliation of Notable Items
               (in thousands, except per share amounts)

             For the Three Months Ended   For the Three Months Ended
                  August 31, 2002             August 31, 2001
            ----------------------------- ----------------------------
            As        Notable    As       As       Notable    As
            Reported   Items    Adjusted  Reported  Items     Adjusted
            --------- -------   --------- -------- -------   ---------
                     (Unaudited)                 (Unaudited)

 Revenues   $100,089         (4) $100,089 $70,900        (4) $ 70,900
            ---------           --------- --------           ---------
 Costs and
  expenses:
    Cost of
  goods sold
  and other
  operating
    expenses  90,636         (4)  90,636   62,104         (4)  62,104
 Impairment
  and other
  non-
  recurring
  charges      4,840  (4,840)(1)       0       --                  --
 Selling and
  adminis-
  trative
  expenses     7,718               7,718    7,067               7,067
            --------- -------   --------- -------- -------   ---------
 Income from
  wholly-
  owned
  operations  (3,105) (4,840)      1,735    1,729               1,729
 Income from
  joint
  ventures     5,597  (1,205)(2)   5,902    4,060     900 (2)   3,160
                         900 (3)
            --------- -------   --------- -------- -------   ---------
 Income from
  operations   2,492  (5,145)      7,637    5,789     900       4,889

 Other
  income
  (expense):
 Interest
  expense       (452)               (452)  (1,062)             (1,062)
 Other
  income,
  net            162                 162     (442)               (442)
            --------- -------   --------- -------- -------   ---------
                (290)               (290)  (1,504)             (1,504)
            ---------           --------- --------           ---------
 Income
  before
  income
  taxes        2,202  (5,145)      7,347    4,285     900       3,385

 Income tax
  provision       (6)  1,045 (5)  (1,051)  (1,291)   (270)     (1,021)
            --------- -------   --------- -------- -------   ---------
 Net income $  2,196  (4,100)   $  6,296  $ 2,994     630    $  2,364
            ========= =======   ========= ======== =======   =========
 Basic
  earnings
  per share $   0.24   (0.45)   $   0.69  $  0.33    0.07    $   0.26
            ========= =======   ========= ======== =======   =========
 Diluted
  earnings
  per share $   0.23   (0.43)   $   0.67  $  0.32    0.07    $   0.25
            ========= =======   ========= ======== =======   =========

(1) Includes the cost to terminate an Alaska barge contract of
    affreightment, write-down costs associated with the termination of
    a car crushing business and an impairment charge to exit a metal
    recycling yard in Reno, Nevada.

(2) Year-end LIFO inventory adjustments

(3) Gain on sale of joint venture property

(4) In order to conform with recent accounting guidance, the Company
    reclassified the cost of freight and handling it incurs to sell
    products to its customers from a contra-revenue account to cost of
    goods sold and other operating expenses. This reclassification
    resulted in an increase in revenues from amounts previously
    reported. This reclassification has been made to all periods
    presented.

(5) During the year the Company estimates its annual effective tax
    rate and adjusts it quarterly based upon numerous assumptions. As
    of the end of the third quarter of fiscal 2002, the Company
    estimated its tax rate to be approximately 20%. The estimate was
    revised downward in the fourth quarter of 2002 to 14%.


                   SCHNITZER STEEL INDUSTRIES, INC.
                    Reconciliation of Notable Items
               (in thousands, except per share amounts)

           For the Fiscal Year Ended      For the Fiscal Year Ended
                  August 31, 2002              August 31, 2001
            ----------------------------- ----------------------------
            As        Notable    As       As       Notable    As
            Reported   Items    Adjusted  Reported  Items     Adjusted
            --------- -------   --------- -------- -------   ---------
                       (Audited)                   (Audited)

 Revenues   $350,928        (4) $350,928 $322,831        (4) $322,831
            ---------           --------- --------           ---------
 Costs and
  expenses:
 Cost of
  goods sold
  and other
  operating
  expenses   324,640        (4)  324,640  291,434        (4)  291,434
 Impairment
  and other
  non-
  recurring
  charges      7,100 (7,100)(1)        0       --                  --
 Selling and
  adminis-
  trative
  expenses    29,426              29,426   27,134              27,134
            --------- -------   --------- -------- -------   ---------
 Income from
  wholly-
  owned
  operations (10,238)(7,100)      (3,138)   4,263               4,263
 Income from
  joint
  ventures    19,390 (1,205)(2)   19,695    9,837    900 (2)    8,937
                        900 (3)
            --------- -------   --------- -------- -------   ---------
 Income from
  operations   9,152 (7,405)      16,557   14,100    900       13,200
 Other
  income
  (expense):
 Interest
  expense     (2,314)             (2,314)  (5,120)             (5,120)
 Other
  income,
  net            809                 809    2,340               2,340
            --------- -------   --------- -------- -------   ---------
              (1,505)             (1,505)  (2,780)             (2,780)
            ---------           --------- --------           ---------
 Income
  before
  income
  taxes        7,647 (7,405)      15,052   11,320    900       10,420

 Income tax
  provision   (1,094) 1,058       (2,152)  (3,401)  (270)      (3,131)
            --------- -------   --------- -------- -------   ---------
 Net income $  6,553 (6,347)    $ 12,900 $  7,919    630     $  7,289
            ========= ======    ========= ======== ======    =========
 Basic
  earnings
  per share $   0.72  (0.69)    $   1.41 $   0.85   0.07     $   0.78
            ========= ======    ========= ======== ======    =========
 Diluted
  earnings
  per share $   0.71  (0.68)    $   1.39 $   0.84   0.07     $   0.78
            ========= ======    ========= ======== ======    =========

(1) Includes the cost to terminate an Alaska barge contract of
    affreightment, write-down costs associated with the termination of
    a car crushing business, an impairment charge to exit a metal
    recycling yard in Reno, Nevada, termination costs and write-downs
    from two ocean charters used to export recycled metal to Asia and
    a sale of a non-strategic steel forging business.

(2) Year-end LIFO inventory adjustments

(3) Gain on sale of joint venture property

(4) In order to conform with recent accounting guidance, the Company
    reclassified the cost of freight and handling it incurs to sell
    products to its customers from a contra-revenue account to cost of
    goods sold and other operating expenses. This reclassification
    resulted in an increase in revenues from amounts previously
    reported. This reclassification has been made to all periods
    presented.

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

                    Q1 FY02   Q2 FY02   Q3 FY02   Q4 FY02     FY02
                   ---------------------------------------------------
Metals Recycling Business
 Ferrous Recycled
  Metal Sales
  Prices ($/LT)
   Domestic              $84       $82       $95      $109        $93
   Export                $88       $89       $97      $108        $95
   Average               $87       $87       $96      $108        $94

 Ferrous Sales
  Volume (LT)
   Domestic -
    Cascade Steel     93,392    97,999   111,811   103,369    406,571
   Domestic -
    External           5,640    17,474    13,285    45,890     82,289
   Export            248,594   286,210   267,500   265,589  1,067,893
                   ---------------------------------------------------
     Total           347,626   401,683   392,596   414,848  1,556,753
                   ===================================================

Steel Manufacturing Business
 Sales Prices
  ($/NT)
   Rebar                $272      $266      $265      $270       $267
   Other (including
    billets)            $293      $285      $284      $287       $287
   Average              $280      $275      $274      $279       $276

 Sales Volume (NT)
   Rebar              73,901    64,241    92,123    77,157    307,422
   Wire Rod           20,120    24,573    44,826    53,966    143,485
   Other (including
    billets)          30,051    28,019    31,820    28,486    118,376
                   ---------------------------------------------------
     Total           124,072   116,833   168,769   159,609    569,283
                   ===================================================

JV Ferrous Recycled
 Metal Sales Volume
 (LT)                893,700   891,600   896,834   922,022  3,604,156


                    Q1 FY01   Q2 FY01   Q3 FY01   Q4 FY01     FY01
                   ---------------------------------------------------
Metals Recycling Business
 Ferrous Recycled
  Metal Sales
  Prices ($/LT)
   Domestic              $91       $87       $86       $85        $87
   Export                $93       $96       $90       $94        $94
   Average               $92       $92       $88       $90        $91

 Ferrous Sales
  Volume (LT)
   Domestic -
    Cascade Steel    113,361   146,567   166,617   138,953    565,498
   Domestic -
    External          84,502    32,671    17,892     3,623    138,688
   Export            136,524   271,485   207,361   162,124    777,494
                   ---------------------------------------------------
     Total           334,387   450,723   391,870   304,700  1,481,680
                   ===================================================

Steel Manufacturing Business
 Sales Prices
  ($/NT)
   Rebar                $279      $280      $292      $287       $285
   Other (including
    billets)            $303      $304      $300      $300       $302
   Average              $290      $291      $295      $292       $292

 Sales Volume (NT)
   Rebar              85,096    70,493    72,903    80,239    308,731
   Wire Rod           38,503    30,223    23,319    17,758    109,803
   Other (including
    billets)          35,939    33,531    27,825    29,932    127,227
                   ---------------------------------------------------
     Total           159,538   134,247   124,047   127,929    545,761
                   ===================================================

JV Ferrous Recycled
 Metal Sales Volume
 (LT)                548,400   991,000   587,000   930,400  3,056,800


Note: Price information is shown after a reduction for the cost of
freight incurred to deliver the product to the customer


Schnitzer Steel Industries, Inc.

CONTACT:          Schnitzer Steel Industries, Inc.
                  Barry Rosen, 503/323-2720 (Financial Contact)
                  Tom Zelenka, 503/323-2821 (Press Contact)

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