Exhibit 99.1
Schnitzer Reports Record Quarterly
Profits and Declares a 2-for-1 Stock Split
PORTLAND, Ore.--(BUSINESS WIRE)--June 24, 2003--Schnitzer Steel
Industries, Inc. (Nasdaq:SCHN) today reported net income of $15.0
million or $1.56 per diluted share on revenues of $127.9 million for
the third quarter ended May 31, 2003. During the third quarter of
2002, the Company reported net income of $3.4 million or $0.36 per
diluted share on revenues of $95.4 million.
For the first nine months of fiscal 2003, the Company reported net
income of $26.3 million or $2.77 per diluted share on revenues of
$343.3 million. During the same period in fiscal 2002, Schnitzer Steel
reported net income of $4.4 million or $0.47 per diluted share on
revenues of $250.6 million.
The Company also announced that its Board of Directors declared a
2-for-1 stock split for both classes of its common stock. The stock
split will be effected as a share dividend, so shareholders will
receive one additional share of Class A common stock for every share
of Class A common stock held, and one additional share of Class B
common stock for every share of Class B common stock held. The share
dividend is payable August 14, 2003, to shareholders of record on July
24, 2003.
"It's a pleasure to report that today, Schnitzer Steel achieved
record quarterly earnings in the third quarter of fiscal 2003," said
Robert W. Philip, President and Chief Executive Officer. "What's
especially pleasing is to see all of the Company's business segments
showing marked improvement over last year. The most significant
improvements were seen in both our wholly-owned Metals Recycling
Business and the joint ventures in metals recycling. In these two
segments, we saw our operating income rise by $10.6 million or 127%
from last year's third quarter. The strength in the metals recycling
industry has been principally driven by continued good Asian demand,
primarily from China and Korea, for both ferrous and nonferrous metal
coupled with lower supplies of ferrous metal coming from the countries
of the former Soviet Union, primarily the Ukraine and Russia."
Commenting on the stock split, Mr. Philip said, "The Board of
Directors is pleased to announce this stock split, which reflects both
the strong performance of our Company as well as our confidence in the
long-term fundamentals of our business. We also believe that over
time, the split can contribute to increased market liquidity for the
Company's stock and greater trading volumes."
Metals Recycling Business
The Metals Recycling Business reported operating income of $10.1
million in the third quarter of fiscal 2003, an improvement of $6.3
million over the same quarter last year. Higher average selling prices
resulted in increased margins during the quarter. Third quarter 2003
ferrous metals prices averaged $133 per ton, which was 39% higher than
the average price reported for the third quarter of last year. The
higher prices were primarily the result of continued tight supplies of
ferrous metal available in the export market, which began in the
winter of 2002. Sales prices have also benefited from the weakness of
the U.S. dollar relative to other foreign currencies. Third quarter
2003 ferrous sales volumes were 432,000 tons compared to 393,000 tons
in last year's third quarter. The higher selling prices were offset in
part by an increase in the cost to purchase unprocessed metal. Also,
ocean freight costs rose 36% from the third quarter of last year, due
to the combination of higher fuel prices coupled with concerns about
the war with Iraq.
Joint Venture Businesses
As previously reported, on February 14, 2003, a wholly-owned
subsidiary of the Company completed the acquisition of the interest of
its 50% partner in the Pick-N-Pull Auto Dismantlers joint venture (the
"Pick-N-Pull Joint Venture"). Prior to fiscal 2003, the Pick-N-Pull
Joint Venture was accounted for under the equity method and was
included in "Joint Ventures" in the Company's financial statements.
However, as a result of the recent acquisition, the Company elected,
under generally accepted accounting principles, to consolidate the
results of the acquired businesses retroactively to the beginning of
the fiscal year, September 1, 2002. Thus, fiscal 2003 revenues and
expenses of the Pick-N-Pull Joint Venture and other acquired assets
have been included in a separate reporting segment termed the "Auto
Parts Business", which is described below. The financial results of
the Pick-N-Pull Joint Venture for periods prior to fiscal 2003
continue to be reported under Joint Ventures.
Income from Joint Ventures, excluding the Pick-N-Pull Joint
Venture, amounted to $8.8 million for the third quarter of 2003. This
amount compares to $4.6 million, including $1.4 million from the
Pick-N-Pull Joint Venture, in the third quarter of last year. The
higher fiscal 2003 quarterly income was largely driven by improved
results for the Joint Ventures in the Metals Recycling Business, which
benefited from many of the same business fundamentals as the Company's
wholly-owned Metals Recycling Business.
Auto Parts Business
During the third quarter of fiscal 2003, the Auto Parts Business
reported operating income of $6.0 million. On a comparable pro-forma
basis, this business segment earned $4.5 million of operating income
during the fiscal 2002 quarter. The higher 2003 operating profits were
mainly caused by higher retail parts sales coupled with increased
wholesale revenues. Wholesale revenues grew from the third quarter of
fiscal 2002 due to higher prices received from the sale of dismantled
autobodies coupled with changes in operating procedures that increased
the volume and prices of wholesale parts sold.
Steel Manufacturing Business
The Steel Manufacturing Business continued to narrow its operating
losses in the recent quarter. During the third quarter of 2003, this
business segment reported a loss of $0.3 million, which was a $1.1
million improvement from last year's third quarter. The margin
improvement was primarily driven by increasing prices for all three
major product lines. Third quarter 2003 finished steel prices averaged
$293 per ton, which was a $19 per ton or 7% higher than the third
quarter of last year. Sales prices benefited from a higher valued
product sales mix and lower volumes of competing imported steel, which
is partially attributed to the weakness of the U.S. dollar. Third
quarter sales volumes remained relatively unchanged from last year's
quarter at 164,000 tons. Margins also benefited from lower production
costs caused by improved production volumes, which spread the fixed
manufacturing costs over more tons produced. These margin improvements
were offset in part by a sharp rise in the cost of recycled metal.
Outlook
In early 2002, certain countries of the former Soviet Union
enacted export tariffs and export bans to restrict the export of
recycled metal and retain the valuable resource to grow their domestic
economies. These restrictions resulted in the market rebounding to
more normal conditions that have not existed since before the 1998
Asian financial crisis. Ferrous export prices have for the most part,
steadily risen since these restrictions were enacted and for a short
time in early 2003, spiked to near record highs. Since then, prices
have receded 10-15% from the short-term peaks and have stabilized for
the present. Another factor affecting recent price trends are seasonal
reduction in demand from foreign customers who tend to reduce their
finished steel production during the summer months when energy prices
traditionally spike. However, current selling prices continue to
remain significantly above prices reported a year ago. The cost of
unprocessed metals, as well as ocean freight rates, also appeared to
have peaked.
Similar factors are expected to affect our Joint Ventures in the
Metals Recycling Business. In addition, two of these joint ventures
continue to use LIFO inventory accounting, which tends to defer income
taxes. Historically, the affects of LIFO are difficult to predict.
There continue to be signs that the domestic economy is improving,
which should provide needed relief for domestic markets and
businesses, including the Company's Steel Manufacturing Business where
end user demand remains poor. Overall, market prices are expected to
hold steady; however, the Company's steel business should experience
modest improvement in its average prices recognized in the fourth
quarter due to the timing of price increases that were announced
earlier in the year, but have not been fully reflected in the average
as of the end of the third quarter. The higher average prices, coupled
with lower raw material costs, should modestly improve margins for
this business segment in the fourth quarter. The anticipated margin
expansion is expected to be offset in part, by seasonal increases in
electricity rates. The Company believes this business segment will
report a modest operating profit in the fourth quarter, which would be
the first quarterly operating profit reported since the fourth quarter
of fiscal 2001.
The Auto Parts Business traditionally shows modest declines in
retail demand during the fourth fiscal quarter due to seasonably hot
weather during this time of year. Average retail prices are expected
to grow slightly from last year's fourth quarter. Over the last few
quarters, wholesale revenues have been increasing due in part to
higher prices paid for dismantled autobodies. It is expected that
dismantled autobody prices will level off and modestly recede in the
fourth quarter.
Overall, the Company estimates fourth quarter operating income,
before year-end LIFO inventory accounting adjustments, to be in the
$18 million to $20 million range.
The Company anticipates that its effective tax rate will continue
to benefit from net operating loss carryforwards that were acquired as
part of an earlier acquisition. This, as well as state tax credits,
should result in an effective annual tax rate in the high twenty
percent range. The Company refinanced its bank revolving credit
facility in May 2003. The new unsecured credit facility provides for
up to $150 million of borrowings, is a three-year agreement and the
interest rate is variable. The initial borrowing rate under the credit
facility was 2.82%.
Schnitzer Steel Industries, Inc. is one of the nation's largest
recyclers of ferrous metals, a manufacturer of finished steel products
and a leading self-service auto parts and dismantling company. The
Company, with its joint venture partners, processes approximately 4.6
million tons of recycled ferrous 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, particularly the "Outlook" section, 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", "anticipate", "estimate" 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 consolidated 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; world political
conditions; competition; seasonality, including weather; energy
supplies; freight rates; 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.
SCHNITZER STEEL INDUSTRIES, INC.
FINANCIAL HIGHLIGHTS
(in thousands, except per share amounts)
(Unaudited)
For the Three For the Nine
Months Ended Months Ended
May 31, May 31,
------------------- -------------------
2003 2002 2003 2002
--------- --------- --------- ---------
REVENUES:
Metals Recycling Business:
Ferrous sales $ 65,172 $ 43,639 $171,732 $122,412
Nonferrous sales 12,764 11,633 34,548 30,249
Other sales 1,382 1,560 4,328 5,294
--------- --------- --------- ---------
Total sales 79,318 56,832 210,608 157,955
Auto Parts Business 17,311 - 48,205 -
Steel Manufacturing Business 51,076 49,085 135,177 119,389
Intercompany sales
eliminations (19,761) (10,553) (50,720) (26,784)
--------- --------- --------- ---------
Total $127,944 $ 95,364 $343,270 $250,560
========= ========= ========= =========
INCOME (LOSS) FROM OPERATIONS:
Metals Recycling Business $ 10,114 $ 3,769 $ 21,568 $ 5,386
Auto Parts Business 5,965 - 16,074 -
Steel Manufacturing Business (283) (1,339) (2,898) (3,663)
Joint ventures 8,840 4,599 18,209 13,793
Corporate expense (2,445) (2,169) (6,998) (5,953)
Intercompany eliminations (204) 3 (44) (74)
Impairment and other
nonrecurring charges - - (2,100) (2,260)
--------- --------- --------- ---------
Total $ 21,987 $ 4,863 $ 43,811 $ 7,229
========= ========= ========= =========
NET INCOME $ 15,028 $ 3,367 $ 26,331 $ 4,357
========= ========= ========= =========
BASIC EARNINGS PER SHARE $ 1.62 $ 0.37 $ 2.85 $ 0.48
========= ========= ========= =========
DILUTED EARNINGS PER SHARE $ 1.56 $ 0.36 $ 2.77 $ 0.47
========= ========= ========= =========
Share information (thousands):
Basic shares outstanding 9,275 9,134 9,229 9,136
========= ========= ========= =========
Diluted shares outstanding 9,664 9,307 9,492 9,234
========= ========= ========= =========
SCHNITZER STEEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share amounts)
For the Three For the Nine
Months Ended Months Ended
May 31, May 31,
------------------ -------------------
2003 2002 2003 2002
--------- -------- --------- ---------
(Unaudited) (Unaudited)
Revenues $127,944 $95,364 $343,270 $250,560
--------- -------- --------- ---------
Costs and expenses:
Cost of goods sold and other
operating expenses 102,439 87,644 280,233 233,724
Impairment and other
nonrecurring charges - - 2,100 2,260
Selling and administrative
expenses 12,358 7,456 35,335 21,140
--------- -------- --------- ---------
Income (loss) from consolidated
operations 13,147 264 25,602 (6,564)
Income from joint ventures 8,840 4,599 18,209 13,793
--------- -------- --------- ---------
Income from operations 21,987 4,863 43,811 7,229
Other income (expense):
Interest expense (444) (527) (1,134) (1,862)
Other income (expense), net (21) (128) (4) 78
--------- -------- --------- ---------
(465) (655) (1,138) (1,784)
--------- -------- --------- ---------
Income before income taxes 21,522 4,208 42,673 5,445
Income tax provision (5,945) (841) (11,462) (1,088)
--------- -------- --------- ---------
Income before minority
interests, pre-acquisition
interests and cumulative
effect of accounting changes 15,577 3,367 31,211 4,357
Minority interests, net of
income taxes (549) - (1,350) -
Pre-acquisition interests, net
of income taxes - - (2,547) -
-------- ------- -------- --------
Income before cumulative effect
of change in accounting
principle 15,028 3,367 27,314 4,357
Cumulative effect of change in
accounting principle - - (983) -
-------- ------- -------- --------
Net income $ 15,028 $ 3,367 $ 26,331 $ 4,357
========= ======== ========= =========
Basic earnings per share $ 1.62 $ 0.37 $ 2.85 $ 0.48
========= ======== ========= =========
Diluted earnings per share $ 1.56 $ 0.36 $ 2.77 $ 0.47
========= ======== ========= =========
Schnitzer Steel Industries, Inc.
Selected Operating Statistics
(Unaudited)
Q1 FY03 Q2 FY03 Q3 FY03 FY03
----------- ----------- ----------- ----------
Metals Recycling
Business
Ferrous Recycled Metal
Sales Prices ($/LT)
Domestic $100 $108 $125 $112
Export $104 $113 $140 $119
Average $102 $111 $133 $117
Ferrous Sales Volume
(LT)
Domestic - Cascade
Steel 114,988 140,823 144,274 400,085
Domestic - External 37,341 11,916 48,265 97,522
Export 142,199 402,437 239,801 784,437
----------- ----------- ----------- ----------
Total 294,528 555,176 432,340 1,282,044
=========== =========== =========== ==========
Steel Manufacturing
Business
Sales Prices ($/NT)
Rebar $273 $269 $282 $275
Other (including
billets) $293 $299 $305 $299
Average $284 $283 $293 $287
Sales Volume (NT)
Rebar 64,652 74,160 88,323 227,135
Wire Rod 50,216 37,790 47,469 135,475
Other (including
billets) 27,470 25,099 28,418 80,987
----------- ----------- ----------- ----------
Total 142,338 137,049 164,210 443,597
=========== =========== =========== ==========
Joint ventures
JV Ferrous Recycled
Metal Sales Volume
(LT) 637,354 940,138 880,065 2,457,557
Q1 FY02 Q2 FY02 Q3 FY02 Q4 FY02 FY02
-------- -------- -------- -------- ----------
Metals Recycling
Business
Ferrous Recycled Metal
Sales Prices ($/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
======== ======== ======== ======== ==========
Joint ventures
JV Ferrous Recycled
Metal Sales Volume
(LT) 893,700 891,600 896,834 922,022 3,604,156
Note: Price information is shown after a reduction for the cost of
freight incurred to deliver the product to the customer
CONTACT: Schnitzer Steel Industries, Inc.
Financial Contact: Barry Rosen, 503/323-2720
Press Contact: Tom Zelenka, 503/323-2821
www.schnitzersteel.com