Exhibit 99.1
Schnitzer Steel Reports Record Revenues and Profits
PORTLAND, Ore.--(BUSINESS WIRE)--Oct. 2, 2003--Schnitzer Steel
Industries, Inc. (Nasdaq:SCHN) today reported net income of $16.9
million or $0.84 per diluted share on revenues of $153.6 million for
the fourth quarter ended August 31, 2003. During the fourth quarter of
2002, the Company reported net income of $2.2 million or $0.12 per
diluted share on revenues of $100.1 million.
For the fiscal year ended August 31, 2003, the Company reported
net income of $43.2 million or $2.20 per diluted share on revenues of
$496.9 million. During fiscal 2002, Schnitzer Steel reported net
income of $6.6 million or $0.35 per diluted share on revenues of
$350.6 million.
"Fiscal 2003 was a record year for Schnitzer Steel," said Robert
W. Philip, President and Chief Executive Officer. "It was also the
first year since the 1997 Asian financial crisis in which we
experienced an extended period of improving prices for ferrous
recycled metal. It is truly gratifying to see all of our business
segments showing significant gains over fiscal 2002, most of which
were driven by improving market conditions. Both our wholly-owned
Metals Recycling Business and our joint ventures in the metals
recycling business produced record profits in fiscal 2003, enabled in
part by our strategic deep water export terminals that have the size,
scope and capability to efficiently service the strong demand from our
Asian customer base. Also, our recently acquired Auto Parts Business
provided us with significant earnings gains in fiscal 2003 and gives
us a strong base to grow this business segment that fits within our
core metals recycling strategy. Finally, our Steel Manufacturing
business made significant improvement in its operating results during
fiscal 2003, which came primarily from modest increases in domestic
demand coupled with a rising price environment."
Mr. Philip continued, "Our record fiscal 2003 operating
performance was clearly driven by improved market conditions; however,
much of the credit goes directly to our partners, managers and
employees of our many businesses who executed our strategies and
allowed us to capture the market opportunities."
Metals Recycling Business
The Metals Recycling Business reported operating income of $14.2
million in the fourth quarter of fiscal 2003, an improvement of $8.1
million or 131% over the same quarter last year. In the fourth quarter
2003, this business segment shipped 530,000 tons of ferrous metal,
which was near record levels, and was 28% ahead of the volume reported
in the same period a year ago. The higher sales volumes came from the
combination of increased tonnage of lower margin brokerage material
coupled with a larger than average number of export shipments. The
average ferrous selling price increased 27% from last year's fourth
quarter and was up 3% over the third quarter of fiscal 2003. The
higher selling prices were driven by strong demand from China and
other Asian countries. The cost of unprocessed metal also rose during
the fourth quarter of fiscal 2003, which tempered the margin benefit
from the higher selling prices and sales volumes.
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 $6.2 million for the fourth quarter of 2003. This
amount compares to $5.6 million, including $2.0 million from the
Pick-N-Pull Joint Venture, in the fourth 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. However, these businesses did
not report the same relative increase in ferrous sales volumes during
the fourth quarter of fiscal 2003 as did the Company's wholly-owned
Metals Recycling Business.
Auto Parts Business
The Auto Parts Business reported operating income of $5.7 million
in the fourth quarter of fiscal 2003. On a comparable pro-forma basis,
this business segment earned $5.8 million of operating income during
the fiscal 2002 quarter. Revenues and gross margins showed modest
gains over the pro-forma results for the year earlier period; however,
higher operating expense, primarily insurance costs, offset the
improved gross margins.
Steel Manufacturing Business
The Steel Manufacturing Business reported its first quarterly
operating profit in two years during the most recent quarter.
Operating income amounted to $0.4 million in the fourth quarter of
fiscal 2003, which compares to an operating loss of $2.0 million in
the fiscal 2002 quarter. The operating margin improvement was driven
by the combination of higher sales prices and volumes, offset in part
by higher recycled metal and energy costs. Fourth quarter 2003
finished steel prices averaged $300 per ton, which was 8% higher than
the year ago level and was also the highest quarterly average since
the second quarter of fiscal 1999. Sales volumes amounted to 178,000
tons in the fourth quarter of fiscal 2003, which was 12% above last
year's fourth quarter and was the third highest quarterly volume ever
shipped by this business segment. Both sales volumes and prices
benefited from modest improvements in domestic demand as well as from
lower volumes of steel imports, which is partially attributed to the
recent weakness of the U.S. dollar as well as the continuing impact of
the import duties. Selling prices also increased as domestic steel
manufacturers raised prices in an attempt to pass through the rise in
raw material and energy costs.
Outlook
In early calendar 2002, certain countries of the former Soviet
Union, primarily the Ukraine and Russia, enacted export tariffs and
bans to restrict the export of recycled metal and retain the valuable
resource to grow and redevelop their domestic economies. These
restrictions in tandem with other market factors resulted in the
international ferrous recycled metal market rebounding to price levels
that had not existed since before the 1997 Asian financial crisis.
Based upon the Metals Recycling Businesses' first quarter 2004
order backlog, contracted selling prices are on average, modestly
higher than the amount recognized in the most recent quarter, and
significantly higher than the amount reported during last year's first
fiscal quarter. Tempering the higher selling prices is an expected
increase in ocean freight costs due principally to strong demand from
Asian countries for bulk cargos, as well as upward pressure on the
cost to purchase metal from suppliers. First quarter 2004 ferrous
sales volumes are anticipated to be lower than the near record fourth
quarter 2003 sales volumes, due to lower year-end inventories and
typical quarterly variations, but are expected to be approximately 50%
above last year's first quarter levels. Similar market factors are
expected to affect our joint ventures in the metals recycling
business.
We anticipate the domestic economy will continue to improve during
the first quarter of fiscal 2004, which should further benefit the
Company's Steel Manufacturing Business. The Steel Manufacturing
Business announced a number of price increases over the last few
months, two of which take effect during the first quarter of fiscal
2004, which are expected to increase the Company's average selling
price for finished steel. The higher selling prices are expected to
offset the rise in recycled metal costs and further improve the
businesses' profitability during the first quarter of fiscal 2004. The
Auto Parts Business is anticipated to report a quarterly operating
profit that is modestly above last year's first quarter level of $5.2
million. Overall, the Company estimates its first quarter 2004 income
from operations to be in the $18 million to $20 million range. This
amount compares to income from operations of $8.7 million that was
reported for the first quarter of fiscal 2003.
The Company anticipates that its effective tax rate will continue
to benefit from net operating loss carryforwards that were acquired as
part of a 1996 acquisition as well as from Extraterritorial Income
Exclusion benefits associated with certain export sales. These, as
well as other factors should result in an effective fiscal 2004 tax
rate in the high twenty percent range.
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 4.9
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 it purchases; world economic conditions;
world political conditions; changes in federal and state income tax
laws; foreign currency fluctuations; competition; seasonality,
including weather; energy supplies; freight rates; 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 Months Ended For the Year Ended
August 31, August 31,
2003 2002 2003 2002
REVENUES:
Metals Recycling Business:
Ferrous sales $ 83,501 $ 51,061 $255,232 $173,473
Nonferrous
sales 13,240 11,460 47,788 41,708
Other sales 1,204 1,337 5,533 6,631
------------- ------------- ------------- -------------
Total sales 97,945 63,858 308,553 221,812
Auto Parts
Business 17,020 - 65,225 -
Steel
Manufacturing
Business 56,684 47,197 191,861 166,586
Intercompany
sales
eliminations (18,053) (10,966) (68,773) (37,750)
------------- ------------- ------------- -------------
Total $153,596 $100,089 $496,866 $350,648
============= ============= ============= =============
INCOME (LOSS) FROM OPERATIONS:
Metals Recycling
Business $ 14,213 $ 6,154 $ 35,781 $ 11,541
Auto Parts
Business 5,732 - 21,968 -
Steel
Manufacturing
Business 376 (1,986) (2,522) (5,649)
Joint ventures 6,212 5,597 24,421 19,390
Corporate expense (2,968) (2,066) (9,966) (8,020)
Intercompany
eliminations 1,247 (178) 1,203 (253)
Impairment and
other
nonrecurring
charges - (4,840) (2,100) (7,100)
------------- ------------- ------------- -------------
Total $ 24,812 $ 2,681 $ 68,785 $ 9,909
============= ============= ============= =============
NET INCOME $ 16,873 $ 2,196 $ 43,201 $ 6,553
============= ============= ============= =============
BASIC EARNINGS
PER SHARE $ 0.88 $ 0.12 $ 2.32 $ 0.36
============= ============= ============= =============
DILUTED
EARNINGS PER
SHARE $ 0.84 $ 0.12 $ 2.20 $ 0.35
============= ============= ============= =============
SHARE INFORMATION (THOUSANDS):
Basic shares
outstanding 19,221 18,370 18,650 18,296
============= ============= ============= =============
Diluted shares
outstanding 20,188 18,930 19,653 18,566
============= ============= ============= =============
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,
2003 2002 2003 2002
(Unaudited) (Audited)
Revenues $153,596 $100,089 $496,866 $350,648
-------- -------- -------- --------
Costs and expenses:
Cost of goods sold and other
operating
expenses 124,932 90,636 413,043 324,360
Impairment and other
nonrecurring
charges - 4,840 2,100 7,100
Selling and commission
expenses 1,500 774 5,311 2,863
General and administrative
expenses 8,564 6,755 32,048 25,806
----- ----- ------ ------
Income (loss) from
consolidated
operations 18,600 (2,916) 44,364 (9,481)
Income from joint
ventures 6,212 5,597 24,421 19,390
----- ----- ------ ------
Income from
operations 24,812 2,681 68,785 9,909
Other income (expense):
Interest expense (644) (452) (1,778) (2,314)
Other income
(expense), net (371) (27) (540) 52
----- ---- ----- ---
(1,015) (479) (2,318) (2,262)
------- ----- ------- -------
Income before income
taxes 23,797 2,202 66,467 7,647
Income tax provision (6,484) (6) (17,946) (1,094)
------- ------ -------- -------
Income before minority interests, pre-acquisition
interests and cumulative effect of accounting
change 17,313 2,196 48,521 6,553
Minority interests,
net of income taxes (474) - (1,824) -
Pre-acquisition interests,
net of income taxes 34 - (2,513) -
---- --- ------ ---
Income before cumulative
effect of change in
accounting principle 16,873 2,196 44,184 6,553
Cumulative effect of
change in accounting
principle - - (983) -
------- ----- ------ -----
Net income $ 16,873 $ 2,196 $ 43,201 $ 6,553
======== ======= ======== ========
Basic earnings
per share $ 0.88 $ 0.12 $ 2.32 $ 0.36
======== ======= ======== ========
Diluted earnings
per share $ 0.84 $ 0.12 $ 2.20 $ 0.35
======== ======= ======== ========
Schnitzer Steel Industries, Inc.
Selected Operating Statistics
(Unaudited)
Q1 FY03 Q2 FY03 Q3 FY03 Q4 FY03 FY03
------- ------- ------- ------- ----
Metals Recycling Business
Ferrous Recycled Metal Sales Prices ($/LT)
Domestic $100 $108 $125 $119 $114
Export $104 $113 $140 $144 $127
Average $102 $111 $133 $137 $122
Ferrous Sales Volume (LT)
Domestic Processed/a 113,439 95,277 132,217 82,087 423,020
Domestic Brokered/a 38,890 57,462 60,322 75,376 232,050
Export 142,199 402,437 239,801 372,658 1,157,095
--------------------------------------------
Total/a 294,528 555,176 432,340 530,121 1,812,165
============================================
(a) Includes sales to
the Steel Manufacturing
Business 114,988 140,823 144,274 134,787 534,872
============================================
Steel Manufacturing Business
Sales Prices ($/NT)
Rebar $273 $269 $282 $298 $282
Other $293 $299 $305 $303 $300
Average $284 $283 $293 $300 $291
Sales Volume (NT)
Rebar 64,652 74,160 88,323 99,829 326,964
Wire Rod 50,216 37,790 47,469 51,016 186,491
Other 27,470 25,099 28,418 27,170 108,157
--------------------------------------------
Total 142,338 137,049 164,210 178,015 621,612
============================================
Joint Ventures
JV Ferrous Recycled Metal
Sales Volume (LT) 637,354 940,138 880,065 865,254 3,322,811
============================================
Note: Price information is shown after a reduction for the cost of
freight incurred to deliver the product to the customer
Q1 FY02 Q2 FY02 Q3 FY02 Q4 FY02 FY02
------- ------- ------- ------- ----
Metals Recycling Business
Ferrous Recycled Metal Sales Prices ($/LT)
Domestic $84 $82 $95 $109 $93
Export $88 $89 $97 $108 $95
Average $87 $87 $96 $108 $94
Ferrous Sales Volume (LT)
Domestic Processed/a 74,794 95,805 95,612 129,049 395,260
Domestic Brokered/a 24,238 19,668 29,484 20,210 93,600
Export 248,594 286,210 267,500 265,589 1,067,893
----------------------------------------------
Total/a 347,626 401,683 392,596 414,848 1,556,753
==============================================
(a) Includes sales to
the Steel Manufacturing
Business 93,392 97,999 111,811 103,369 406,571
==============================================
Steel Manufacturing Business
Sales Prices ($/NT)
Rebar $272 $266 $265 $270 $267
Other $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 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) 893,671 891,612 896,831 796,450 3,478,564
==============================================
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