Exhibit 99.1
Schnitzer Steel Reports Another Strong Quarter
PORTLAND, Ore.--(BUSINESS WIRE)--July 6, 2005--Schnitzer Steel
Industries, Inc. (Nasdaq:SCHN) today reported net income of $33.5
million or $1.08 per diluted share on revenues of $226.8 million for
the third quarter ended May 31, 2005. In comparison, the Company
reported net income of $42.5 million or $1.37 per diluted share on
revenues of $193.8 million for the quarter ended May 31, 2004.
For the first nine months of fiscal 2005, Schnitzer Steel reported
net income of $112.4 million or $3.61 per diluted share on revenues of
$641.5 million. These amounts compare to net income of $73.2 million
or $2.36 per diluted share on revenues of $483.7 million during the
first nine months of fiscal 2004.
"Schnitzer Steel's wholly-owned operations continued to benefit
from strong market conditions during the third quarter of fiscal 2005,
including continued good demand for recycled ferrous metal and
finished steel products," said John D. Carter, President and Chief
Executive Officer. "Although the quarter's earnings were down from the
near record levels reported in the 2004 fiscal third quarter, the
results for our business remained strong. Our business continues to
benefit from the strength of our growing asset base and the excellent
management team of this Company."
Schnitzer also announced that its wholly-owned subsidiary, Cascade
Steel Rolling Mills, Inc., appointed Jeff Dyck to the position of
President. Jeff held the position of Rolling Mill Superintendent for
approximately six years and in September 2004 was promoted to Director
of Operations. Mr. Carter commented, "Jeff is well deserving of this
promotion as he has been instrumental in Cascade's product
diversification and business growth since he joined the Company in
1994. In addition, Jeff recently led the successful installation of
the mill's new and efficient electric arc furnace and has overseen the
business during this record-setting year."
"On June 9, 2005, the Company announced that it signed an
agreement to separate and terminate its joint ventures with Hugo Neu
Corporation," added Mr. Carter. "We remain on track to close this
transaction sometime around the end of fiscal 2005. Our management
team is actively developing and implementing a plan to smoothly
transition and integrate the new businesses that we will receive in
the separation. The Company believes that this transaction provides us
with a number of advantages including complete operational and
financial control of strategic scrap franchises, improved direct
access to scrap supply, and expanded access to worldwide markets.
Finally, this transaction provides us with a stronger geographic
platform and additional capital to expand our business, which we are
actively pursuing."
Metals Recycling Business
The wholly-owned Metals Recycling Business third quarter 2005
operating income amounted to $27.4 million, which is a decline of 15%
compared to the near record of $32.5 million reported in the third
quarter of last year. The decrease in operating income was driven by
the lower ferrous metal selling prices combined with higher costs
incurred to procure unprocessed metals compared to the same period
last year.
Ferrous sales volume rose 11% in the third quarter of fiscal 2005
to 496,000 tons, offset by a 3% decline in average net ferrous metal
selling prices to $230 per ton from the same period last year.
Joint Venture Businesses
Operating income from Joint Ventures amounted to $11.2 million in
the third quarter of fiscal 2005, representing a 60% decline over the
prior year period. The lower profits were primarily due to compressed
margins caused by higher freight rates and increased raw material
costs, conditions which were more pronounced for the East Coast joint
ventures and which caused the trading joint venture to incur an
operating loss. Operating income for the processing joint ventures was
also adversely affected by a 25% decrease in ferrous sales volume as
compared to the third quarter of 2005, which was caused in part by the
timing of large export shipments and lower purchases of unprocessed
metal. The combined processing and trading sales volumes declined only
slightly by 3% to 1.7 million tons as the decrease in processing
volume was offset by a 35% increase in trading volume.
On June 9, 2005, the Company announced that it had signed a Master
Agreement with Hugo Neu Corporation ("HNC") to separate and terminate
its joint venture relationships, which is currently expected to close
around the end of fiscal 2005. The Company will acquire HNC's interest
in the joint ventures operating in New England, the scrap metal
trading business operating in Russia and certain Baltic countries, and
HNC's wholly-owned scrap metal and green waste recycling business in
Hawaii, and the Company will receive a cash payment of approximately
$52 million. HNC will acquire the Company's interests in the joint
ventures operating in New York, New Jersey and California, and the
scrap metal trading business operating outside of Russia and the
Baltic countries referred to above.
Auto Parts Business
During the third quarter of fiscal 2005, the Auto Parts Business
grew its revenue by 33% as compared to the same period last year. This
growth was due to the strong wholesale revenues resulting from higher
metal prices and the addition of four new stores in the mid-west and
eastern U.S. that were acquired in mid-January 2005 improving retail
sales. The Auto Parts Business reported operating income of $8.5
million, which approximated the operating income of the prior year's
third quarter. The higher revenues were partially offset by increases
in the cost of procuring inventory, which was affected by the rise in
prices for unprocessed scrap metals. Also, as expected, administrative
expenses increased over the same period last year due to the
development of management infrastructure in support of the Company's
growth plans.
Steel Manufacturing Business
The Steel Manufacturing Business reported an operating profit of
$13.4 million in the third quarter of fiscal 2005, which was a 93%
increase or $6.5 million improvement over the third quarter of 2004.
The quarter-over-quarter increase was driven by higher average selling
prices spurred by the strong demand and increased volumes. The third
quarter 2005 sales volumes amounted to 171,900 tons, which was 11% and
38% higher than the volumes shipped in the third quarter of fiscal
2004 and the second quarter of fiscal 2005, respectively. Sales
volumes grew due to seasonal improvements in demand for construction
related products. In addition, the mill held higher inventory levels
as it entered the third quarter of fiscal 2005, which allowed it to
fulfill the strong seasonal demand. Average selling prices reached
$510 per ton for the third quarter of 2005 while during the same
period of last year the average selling prices were $448 per ton. The
third quarter average selling prices declined by $7 per ton from the
second quarter of 2005 due to product mix and price reductions.
Outlook
Recycled metal markets continue to experience significant price
volatility; however, consumption remains strong. Over the last 60
days, market selling prices for ferrous metal declined, but recent
export market activity has shown evidence that prices may have firmed
and even risen modestly on some individual sales. The Company's
wholly-owned Metals Recycling Business traditionally takes ferrous
export orders 60 to 90 days ahead of shipment, which may provide
management with the ability to adjust its buying prices to minimize
the margin impact of changes in selling prices. Ocean freight rates
have declined sharply in recent weeks, which partially mitigates the
reduction in ferrous selling prices. Based upon the wholly-owned
Metals Recycling Businesses' current order backlog, contracted average
net selling prices that are anticipated to be shipped in the fourth
fiscal quarter of 2005 will be lower than the $230 per ton average
reported in the third quarter of fiscal 2005, but should remain above
the $199 per ton reported in last year's fourth fiscal quarter. Fourth
quarter 2005 sales volumes are anticipated to be below the fiscal 2005
quarterly run rate, but total fiscal 2005 sales volume should
approximate last year's level. The lower fourth quarter sales volumes
are due in part to the timing of export shipping dates and lower
fourth quarter inventory levels. The cost of unprocessed ferrous metal
also remains very competitive and volatile.
Joint ventures in the metals recycling business are expected to
experience similar market trends as the Company's wholly-owned Metals
Recycling Business; however, their financial results will vary
depending on a number of factors including geographic locations,
competition and available inventory.
The Auto Parts Business generally experiences modest seasonal
declines in retail demand in the summer months due to hot weather
conditions reducing customer admissions. Wholesale revenues are
anticipated to have mixed results during the fiscal 2005 fourth
quarter; core sales volumes and pricing should remain strong, but
prices for crushed auto bodies are expected to be lower than the
prices realized during the third quarter of fiscal 2005 due to the
recent decline in ferrous metal selling prices. Over the last few
quarters the business has incurred increasing costs to procure
automobile inventories due to rising ferrous metal prices. In recent
weeks, the business has reduced its prices paid to procure inventory
and is anticipated to continue to do so through the balance of the
fourth quarter. However, fourth quarter margins are anticipated to be
affected as the higher priced inventory is sold and replaced by lower
cost automobiles.
West Coast consumption of finished steel long products remains
strong. The Steel Manufacturing Business continues to experience good
overall demand. In May 2005 the Company announced a $30 per ton price
decrease for rebar and merchant bar products, which was in reaction to
declines by other domestic competitors. Also, in early July, the
Company announced a similar decrease for wire rod products. The
announced price decreases are anticipated to result in a modest
decline in fourth quarter average selling prices as compared to the
third quarter of fiscal 2005 and the fourth quarter of fiscal 2004.
The reduction in average selling prices is anticipated to be partially
mitigated by declines in ferrous metal purchase prices. Fourth quarter
2005 sales volumes should approximate 155,000 tons, which should
approximate the estimated volume of steel produced during the period.
The Company's effective fourth quarter tax rate should approximate
36%.
Third Quarter 2005 Conference Call
In conjunction with this release, Schnitzer Steel invites you to
listen to its conference call that will be broadcast over the Internet
today, July 6, 2005, at 11:30 a.m. EST with John Carter, Chief
Executive Officer, Kenneth M. Novack, Chairman, Gary Schnitzer,
Executive Vice President and Kelly Lang, Acting Chief Financial
Officer. The call is being webcast by CCBN and can be accessed on
Schnitzer Steel's Web site at www.schnitzersteel.com.
Schnitzer Steel Industries, Inc. is one of the nation's largest
recyclers of ferrous metals, a leading self-service used auto parts
retailer with 30 locations in the U.S. and Canada, and manufacturer of
finished steel products. The Company, with its joint venture partners,
processes approximately 5.4 million tons of recycled ferrous metals
per year as well as trades nearly 3.0 million tons. 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. These forward looking statements include, without limitation,
statements regarding the Company's outlook for the business, the
timing of the closing under the Master Agreement with HNC, and the
anticipated operational and financial benefits expected from the
transactions contemplated by the Master Agreement; and can be
identified generally 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 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; 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; loss of key personnel; the unpredictability
of joint venture operating results; the inability to complete the
proposed joint venture separation due to inability to satisfy closing
conditions; the inability to complete expected large scrap export
shipments in the current quarter; consequences of the pending
investigation by the Company's audit committee into Far East payment
practices; business integration issues relating to acquisitions of
businesses; and business disruptions resulting from installation or
replacement of major capital assets, as discussed in more detail under
the heading "Factors That Could Affect Future Results" 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 For the Nine
Months Ended Months Ended
------------------- -------------------
May 31, May 31, May 31, May 31,
2005 2004 2005 2004
--------- --------- ---------- --------
REVENUES:
Metals Recycling Business:
Ferrous sales $129,495 $121,086 $ 389,974 $282,526
Nonferrous sales 19,440 15,174 52,037 39,661
Other sales 1,719 1,737 5,255 4,739
--------- --------- ---------- ---------
Total sales 150,654 137,997 447,266 326,926
Auto Parts Business 30,980 23,294 78,814 58,199
Steel Manufacturing Business 91,351 72,048 228,193 185,128
Intercompany sales
eliminations (46,196) (39,589) (112,777) (86,524)
--------- --------- ---------- ---------
Total $226,789 $193,750 $ 641,496 $483,729
========= ========= ========== =========
INCOME FROM OPERATIONS:
Metals Recycling Business $ 27,441 $ 32,462 $ 101,210 $ 55,547
Auto Parts Business 8,548 8,554 23,139 19,537
Steel Manufacturing Business 13,408 6,956 31,526 9,506
Joint ventures 11,152 28,013 47,821 42,634
Corporate expense (5,894) (6,053) (14,493) (11,717)
Intercompany eliminations 430 (2,617) (1,994) (5,869)
Environmental matter - - (8,225) -
--------- --------- ---------- ---------
Total $ 55,085 $ 67,315 $ 178,984 $109,638
========= ========= ========== =========
NET INCOME $ 33,508 $ 42,514 $ 112,425 $ 73,241
========= ========= ========== =========
BASIC EARNINGS PER SHARE $ 1.10 $ 1.41 $ 3.70 $ 2.45
========= ========= ========== =========
DILUTED EARNINGS PER SHARE $ 1.08 $ 1.37 $ 3.61 $ 2.36
========= ========= ========== =========
SHARE INFORMATION (THOUSANDS):
Basic shares outstanding 30,463 30,088 30,412 29,897
========= ========= ========== =========
Diluted shares
outstanding 31,143 31,059 31,160 31,049
========= ========= ========== =========
SCHNITZER STEEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share amounts)
(Unaudited)
For the Three For the Nine
Months Ended Months Ended
------------------- -------------------
May 31, May 31, May 31, May 31,
2005 2004 2005 2004
--------- --------- ---------- --------
Revenues $226,789 $193,750 $ 641,496 $483,729
--------- --------- ---------- ---------
Cost of goods sold 167,721 140,179 462,787 384,046
Selling, general and
administrative 15,135 14,269 39,321 32,679
Environmental matter - - 8,225 -
--------- --------- ---------- ---------
Income from wholly-owned
operations 43,933 39,302 131,163 67,004
Operating income from joint
ventures 11,152 28,013 47,821 42,634
--------- --------- ---------- ---------
Operating income 55,085 67,315 178,984 109,638
Other expense:
Interest expense (110) (562) (740) (1,488)
Other expense, net (195) (315) (555) (161)
--------- --------- ---------- ---------
(305) (877) (1,295) (1,649)
--------- --------- ---------- ---------
Income before income taxes
and minority interests 54,780 66,438 177,689 107,989
Income tax provision (20,485) (23,187) (63,257) (32,951)
--------- --------- ---------- ---------
Income before minority
interests 34,295 43,251 114,432 75,038
Minority interests, net of
tax (787) (737) (2,007) (1,797)
--------- --------- ---------- ---------
Net income $ 33,508 $ 42,514 $ 112,425 $ 73,241
========= ========= ========== =========
Basic earnings per share $ 1.10 $ 1.41 $ 3.70 $ 2.45
========= ========= ========== =========
Diluted earnings per share $ 1.08 $ 1.37 $ 3.61 $ 2.36
========= ========= ========== =========
Schnitzer Steel Industries, Inc.
Selected Operating Statistics
(Unaudited)
Q1 FY05 Q2 FY05 Q3 FY05 FY05
----------- ----------- ----------- -----------
Metals Recycling
Business
Ferrous Recycled
Metal Sales Prices
($/LT)
Domestic $ 221 $ 220 $ 222 $ 221
Export $ 245 $ 247 $ 236 $ 243
Average $ 236 $ 240 $ 230 $ 236
Ferrous Sales Volume
(LT)
Domestic Processed(a) 133,687 98,900 163,254 395,841
Domestic Brokered(a) 42,276 20,573 43,208 106,057
Export 294,900 356,607 289,388 940,895
---------- ---------- ---------- ----------
Total (a) 470,863 476,080 495,850 1,442,793
========== ========== ========== ==========
(a)Includes sales to
the Steel
Manufacturing
Business 159,463 110,033 189,559 459,055
========== ========== ========== ==========
Steel Manufacturing
Business
Sales Prices ($/NT)
Average $ 534 $ 517 $ 510 $ 519
Sales Volume (NT)
Rebar 55,956 62,302 103,973 222,231
Coiled Products 56,679 50,391 51,579 158,649
Merchant Bar and
Other 13,703 11,957 16,349 42,009
---------- ---------- ---------- ----------
Total 126,338 124,650 171,901 422,889
========== ========== ========== ==========
Joint Ventures Ferrous
Recycled Metal Sales
Volume
Processing (LT) 929,667 1,049,572 814,522 2,793,761
Trading (LT) 750,034 717,574 839,752 2,307,360
---------- ---------- ---------- ----------
1,679,701 1,767,146 1,654,274 5,101,121
========== ========== ========== ==========
Auto Parts Business
Number of retail
locations at end of
quarter 26 30 30 NA
Q1 FY04 Q2 FY04 Q3 FY04 Q4 FY04 FY04
---------- ---------- ---------- ---------- ---------
Metals Recycling
Business
Ferrous
Recycled Metal
Sales Prices
($/LT)
Domestic $ 135 $ 168 $ 228 $ 186 $ 179
Export $ 144 $ 154 $ 243 $ 208 $ 187
Average $ 140 $ 158 $ 237 $ 199 $ 184
Ferrous Sales
Volume (LT)
Domestic
Processed(a) 99,781 105,371 112,310 142,198 459,660
Domestic
Brokered(a) 73,366 40,658 52,627 49,333 215,984
Export 235,481 355,304 280,493 298,484 1,169,762
---------- ---------- ---------- ---------- ---------
Total (a) 408,628 501,333 445,430 490,015 1,845,406
========== ========== ========== ========== =========
(a) Includes
sales to the
Steel
Manufacturing
Business 157,989 131,837 158,314 169,459 617,599
========== ========== ========== ========== =========
Steel Manu-
facturing
Business
Sales Prices
($/NT)
Average $ 310 $ 351 $ 448 $ 511 $ 404
Sales Volume
(NT)
Rebar 91,204 89,699 71,069 88,462 340,434
Coiled
Products 55,171 54,111 66,250 57,826 233,358
Merchant Bar
and Other 16,219 18,499 17,510 16,039 68,267
---------- ---------- ---------- ---------- ---------
Total 162,594 162,309 154,829 162,327 642,059
========== ========== ========== ========== =========
Joint Ventures
Ferrous
Recycled Metal
Sales Volume
Processing (LT) 674,622 827,787 1,086,024 993,326 3,581,759
Trading (LT) 677,395 623,077 620,640 754,981 2,676,093
---------- ---------- ---------- ---------- ---------
1,352,017 1,450,864 1,706,664 1,748,307 6,257,852
========== ========== ========== ========== =========
Auto Parts
Business
Number of
retail
locations at
end of quarter 23 23 26 26 NA
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.
Kelly Lang, 503-224-9900 (Investor Contact)
or
Tom Zelenka, 503-323-2821 (Press Contact)
www.schnitzersteel.com