Exhibit 99.1
Schnitzer Steel Reports 23% Increase
in First Quarter Earnings Per Share
PORTLAND, Ore.--(BUSINESS WIRE)--Jan. 7, 2008--Schnitzer Steel
Industries, Inc. (Nasdaq:SCHN) today reported net income of $25
million, or $0.85 per diluted share, for the fiscal 2008 first quarter
ended November 30, 2007. For the quarter, revenues increased 18% and
earnings per share increased 23% over the first quarter of fiscal
2007.
First First Fourth
Quarter Quarter Quarter
(in millions, except per-share data) 2008 2007 2007
- ----------------------------------------------------------------------
Revenues $ 604 $ 510 $ 749
- ----------------------------------------------------------------------
Operating Income $ 41 $ 34 $ 63
- ----------------------------------------------------------------------
Net Income $ 25 $ 21 $ 38
- ----------------------------------------------------------------------
Diluted EPS $0.85 $0.69 $1.28
- ----------------------------------------------------------------------
"We are pleased to report healthy increases in our financial
results on a year over year basis," said John D. Carter, President and
Chief Executive Officer. "These results reflect strong revenue growth
in all three of our operating businesses and operating income growth
in our Metals Recycling and Auto Parts businesses. As expected, our
Metals Recycling Business was impacted by both the high cost of ocean
freight as well as the tight supply of ships to carry export cargos.
The latter resulted in the delay of five shipments, which should be
reflected in our second quarter sales volumes. In addition, the
positive long-term fundamentals for recycled metals of strong demand
and a relatively tight supply appear to be resulting in upward price
trends in both the domestic and export markets."
"The Auto Parts Business showed impressive year over year
improvement in revenues and operating income, which reflects the
change in the purchasing model put in place at the end of the first
quarter of fiscal 2007," added Carter. "The Steel Manufacturing
Business posted solid results despite softening West Coast demand for
steel products, increased competition from domestic suppliers and
continuing cost pressure on the raw materials, including scrap, used
in the manufacture of steel products," he concluded.
Commenting on the first quarter results, Tamara Lundgren,
Executive Vice President and Chief Operating Officer said, "The
results in our Metals Recycling Business were driven by increases in
processed ferrous and nonferrous volumes. During 2007, the Company
installed three new megashredders and implemented new technology which
has increased the recovery of nonferrous material from the shredding
process. The higher processed ferrous and nonferrous volumes on a year
over year basis are primarily the result of these capital
improvements, as well as the Company's efforts to increase throughput
at each of its facilities. In our Auto Parts Business, the higher
volume of car purchases contributed to higher core and scrap sales,
and in the Steel Manufacturing Business we continued to see benefits
from the capital projects completed last year which increased the
capacity of our mill," she added.
Metals Recycling Business
The worldwide demand for recycled metal remained strong, although
the Metals Recycling Business was impacted by rapid increases in
freight costs and a tight shipping market.
($ in millions, except selling prices; First First Fourth
ferrous volume in thousand long tons, Quarter Quarter Quarter
nonferrous volumes in million pounds) 2008 2007 2007
- ----------------------------------------------------------------------
Total Revenues $481 $400 $616
- ----------------------------------------------------------------------
Ferrous Revenues $388 $315 $501
- ----------------------------------------------------------------------
Ferrous Volumes (Processing/Trading) 1,001/135 868/320 1,252/253
- ----------------------------------------------------------------------
Avg. Net Ferrous Sales Prices ($/LT)(1)
(Processing/Trading) $280/313 $226/252 $287/298
- ----------------------------------------------------------------------
Nonferrous Volumes 89 80 105
- ----------------------------------------------------------------------
Avg. Net Nonferrous Sales Prices
($/LB)(1) $1.00 $1.02 $1.04
- ----------------------------------------------------------------------
Operating Income(2) $30 $25 $46
- ----------------------------------------------------------------------
(1)Price information is shown after netting the cost of freight
incurred to deliver the product to the customer
(2)Includes operating income from joint ventures
Revenues for the Metals Recycling Business increased 20% over the
first quarter of 2007. The increase was a result of higher processed
ferrous and nonferrous scrap sales volumes and higher ferrous scrap
prices. Ferrous processing sales volumes increased 133 thousand tons,
or 15%, and nonferrous sales volumes increased nine million pounds, or
11%, which together offset a 185 thousand ton reduction in ferrous
trading volumes.
Compared to the fourth quarter of 2007, revenues declined 22% as
lower ferrous and nonferrous volumes and lower nonferrous prices
offset higher gross ferrous sales prices. During the quarter, the
tight market for shipping resulted in the delay of five shipments into
the second quarter of 2008. These delayed shipments represented
material for committed sales which had been processed but could not be
loaded before the end of the quarter because vessels were not
available.
Export markets for ferrous scrap metal remained strong, with
average gross prices significantly higher than the first quarter of
2007 and slightly higher than the fourth quarter. During the quarter,
export freight costs increased more than selling prices, and as a
result net selling prices declined on a quarter over quarter basis.
Nonferrous prices, although lower than during the fourth quarter,
remained strong for all grades of materials.
Operating income for the quarter was 19% higher than the first
quarter of 2007 due to the higher ferrous and nonferrous volumes and
the costs incurred in the first quarter of 2007 associated with
anticipated operational disruptions while new shredders were being
installed in Oakland and Boston. As expected, operating income
declined from the fourth quarter of 2007, primarily due to
significantly higher export freight costs which, when coupled with
higher raw material costs, narrowed the margin between buying and
selling prices, and lower volumes attributable to the delayed
shipments.
Auto Parts Business
The Auto Parts Business showed healthy year over year growth in
sales and operating income due to higher prices for cores and scrap
and its focus on increasing volumes.
First First Fourth
Quarter Quarter Quarter
($ in millions, except locations) 2008 2007 2007
- ----------------------------------------------------------------------
Revenues $72 $61 $74
- ----------------------------------------------------------------------
Operating Income $ 7 $ 4 $10
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Locations (end of quarter) 53 52 52
- ----------------------------------------------------------------------
Revenues for the Auto Parts Business increased 19% over the same
period last year, primarily as a result of higher self-service
volumes, higher prices for cores and scrap and improved full-service
parts sales. Compared to the fourth quarter of 2007, revenues declined
approximately 3%, as normal seasonal improvements in self-service
parts sales were offset by lower scrap and core revenues due to lower
volumes and seasonal declines in full-service parts sales.
Operating income increased 90% from the first quarter of 2007,
primarily due to higher self-service volumes, a widening of the spread
between core and scrap revenues and the cost of purchasing scrapped
vehicles and higher full-service parts sales. Compared to the fourth
quarter of 2007, operating income declined 28% due to lower scrap and
core sales volumes and lower full-service parts sales.
Steel Manufacturing Business
The Steel Manufacturing Business recorded solid year over year
sales growth.
First First Fourth
($ in millions, except selling prices; Quarter Quarter Quarter
volume in thousand tons) 2008 2007 2007
- ----------------------------------------------------------------------
Revenues $110 $ 96 $117
- ----------------------------------------------------------------------
Avg. Net Sales Prices ($/T) $601 $546 $617
- ----------------------------------------------------------------------
Sales Volume 174 170 184
- ----------------------------------------------------------------------
Operating Income $ 14 $ 15 $ 20
- ----------------------------------------------------------------------
Revenues for the Steel Manufacturing Business rose 14% on a year
over year basis on a $55 per ton increase in average selling prices
and slightly higher sales volumes. Compared to the fourth quarter of
2007, softening West Coast demand led to a 6% decline in revenues as
both sales prices and sales volumes were lower.
Operating income was slightly lower than in the same period last
year, as the cost of the raw materials used in steelmaking, primarily
scrap and alloys, increased more than net selling prices and offset
slightly higher sales volumes. Compared to the fourth quarter of 2007,
lower volumes and sales prices and higher costs for alloys and scrap
led to a reduction in operating income.
Share Repurchase Program
During the quarter, the Company repurchased 300,000 shares of its
Class A common stock at an average cost of $62/share. Under the
authorities granted by its Board of Directors, the Company may
repurchase an additional 1.9 million shares.
Outlook
The Company said the factors that will affect its results in the
second quarter of 2008 include:
Metals Recycling Business:
Pricing. The export markets for ferrous scrap metal appear to be
strengthening in most regions and domestic demand is also firming. In
addition, the recent increases in export freight costs appear to be
moderating. As a result, average ferrous selling prices, net of
freight, are expected to increase over the recently completed first
quarter, despite a number of shipments in the early part of the
quarter which were contracted before the recent price increases.
Nonferrous prices are expected to decline slightly, but remain high by
historical standards.
Sales volumes. Due to shipments delayed from the first quarter,
second quarter 2008 volumes are expected to increase 150 thousand to
200 thousand tons on a quarter over quarter basis and be slightly
higher than the volumes shipped in the second quarter of 2007.
Nonferrous sales volumes should increase slightly on both a quarter
over quarter and year over year basis.
Margins. Higher gross ferrous selling prices and moderating
freight rates are expected to result in net selling prices which
increase more than the cost of raw materials, particularly for
shipments made in the latter part of the quarter. As a result, margins
are expected to improve compared to the first quarter of this year.
Auto Parts Business:
Revenue. When compared to the second quarter of 2007, all sources
of revenue are expected to show improvement due to higher volumes and
higher prices for recycled metals. Compared to the first quarter of
2008, seasonal weather conditions are expected to result in lower
self-service admissions and parts sales and offset normal seasonal
improvements in full-service sales. Winter weather conditions, which
typically slow the volume of scrapped vehicles available for purchase,
are also expected to result in lower scrap and core sales.
Margins. Margins in the second quarter are expected to approximate
margins realized during the same period in 2007 as core and scrap
revenues increase proportionately with the cost of scrapped vehicles.
Compared to the first quarter, seasonal declines in revenues are
expected to result in slightly lower margins.
Steel Manufacturing Business:
Pricing. A low level of import activity and low customer
inventories are expected to result in average net prices during the
second quarter which are significantly higher than the prices obtained
during the same period in 2007. However, slower business conditions
experienced by West Coast customers and increased competition from
domestic steel producers are expected to partially offset the lower
imports. This will likely lead to average net prices which should
approximate the recently completed first quarter.
Volumes. Soft demand is expected to result in a slight decline in
sales volumes of finished steel products from both the first quarter
of 2008 and the second quarter of 2007.
Margins. Higher costs for scrap and other raw materials and costs
associated with shutdowns of the melt shop and rolling mill for
planned maintenance are expected to have a negative impact on margins
during the quarter.
First Quarter 2008 Conference Call
A conference call to discuss results will be held today, January
7, 2008, at 11:30 a.m. ET, hosted by John Carter, 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 34 operating facilities located in 11 states
throughout the country, including six export facilities located on
both the East and West Coasts and in Hawaii. 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 35 self-service facilities and 18 full-service
facilities located in 14 states and in western Canada. With an annual
production capacity of over 750,000 tons, the Company's steel
manufacturing business produces finished steel products, including
rebar, wire rod and other specialty products. The Company commenced
its 102nd year of operations in fiscal 2008.
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
--------------------------
November 30, November 30,
2007 2006
------------- ------------
REVENUES:
Metals Recycling Business:
Ferrous sales:
Processing $ 338,951 $ 223,092
Trading 49,331 91,513
Nonferrous sales 89,606 81,994
Other sales 3,583 3,886
------------- ------------
Total sales 481,471 400,485
Auto Parts Business 72,163 60,807
Steel Manufacturing Business 109,689 96,060
Intercompany sales eliminations (59,426) (47,498)
------------- ------------
Total $ 603,897 $ 509,854
============= ============
INCOME (LOSS) FROM OPERATIONS:
Metals Recycling Business:
Processing $ 29,194 $ 23,893
Trading 443 951
Auto Parts Business 7,214 3,795
Steel Manufacturing Business 14,344 15,359
Corporate expense (9,512) (9,696)
Intercompany eliminations (314) (726)
------------ -----------
Total $ 41,369 $ 33,576
============= ============
NET INCOME $ 24,712 $ 21,158
============= ============
BASIC EARNINGS PER SHARE $ 0.87 $ 0.69
============= ============
DILUTED EARNINGS PER SHARE $ 0.85 $ 0.69
============= ============
SHARE INFORMATION (THOUSANDS):
Basic shares outstanding 28,529 30,751
============= ============
Diluted shares outstanding 29,055 30,876
============= ============
SCHNITZER STEEL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share amounts)
(Unaudited)
For the Three Months Ended
--------------------------
November 30, November 30,
2007 2006
------------ -------------
Revenues $ 603,897 $ 509,854
------------ -------------
Cost of goods sold 519,378 434,706
Selling, general and administrative 44,891 42,858
(Income) from joint ventures (1,741) (1,286)
Operating income 41,369 33,576
Other income (expense):
Interest expense (2,348) (1,061)
Other income (expense), net 614 1,116
------------ -------------
(1,734) 55
------------ -------------
Income before income taxes and minority
interests 39,635 33,631
Income tax expense (14,225) (12,071)
------------ -------------
Income before minority interests 25,410 21,560
Minority interests, net of tax (698) (402)
----------- ------------
Net income $ 24,712 $ 21,158
============ =============
Basic earnings per share $ 0.87 $ 0.69
============ =============
Diluted earnings per share $ 0.85 $ 0.69
============ =============
Schnitzer Steel Industries, Inc.
Selected Operating Statistics
(Unaudited)
Total
Q1 FY08 FY08
---------- ----------
Metals Recycling Business
Ferrous Recycled Metal Sales Prices
($/LT)(1)
Domestic $ 279 $ 279
Exports 280 280
Total Processing 280 280
Trading 313 313
Ferrous Processing Sales Volume (LT)
Cascade 179,686 179,686
Domestic 178,833 178,833
Export 642,142 642,142
---------------------
Total Processed 1,000,661 1,000,661
---------------------
Ferrous Trading Sales Volume (LT)
Trading 134,957 134,957
---------------------
Total Ferrous Sales Volume (LT) 1,135,618 1,135,618
=====================
Nonferrous Average Price ($/pound)(1) $ 1.000 $ 1.000
Nonferrous Sales Volume (pounds, in
thousands) 88,808 88,808
Steel Manufacturing Business
Sales Prices ($/NT)(1)
Average $ 601 $ 601
Sales Volume (NT)
Rebar 108,856 108,856
Coiled Products 49,343 49,343
Merchant Bar and Other 16,031 16,031
---------------------
Total 174,230 174,230
=====================
Auto Parts Business
Number of self-service locations at end of
quarter 35
Number of full-service sites at end of
quarter 18
Total
Q1 FY07 Q2 FY07 Q3 FY07 Q4 FY07 FY07
---------- ---------- ---------- ---------- ----------
Metals
Recycling
Business
Ferrous
Recycled
Metal Sales
Prices
($/LT)(1)
Domestic $ 219 $ 233 $ 293 $ 273 $ 256
Exports 230 238 295 292 266
Total
Processing 226 237 294 287 263
Trading 252 257 308 298 279
Ferrous
Processing
Sales Volume
(LT)
Cascade 191,090 151,383 185,281 176,768 704,522
Domestic 155,970 174,752 199,587 191,250 721,559
Export 521,200 816,683 643,031 884,104 2,865,018
------------------------------------------------------
Total
Processed 868,260 1,142,818 1,027,899 1,252,122 4,291,099
------------------------------------------------------
Ferrous
Trading Sales
Volume (LT)
Trading 320,018 276,220 362,305 253,281 1,211,824
------------------------------------------------------
Total Ferrous
Sales Volume
(LT) 1,188,278 1,419,038 1,390,204 1,505,403 5,502,923
======================================================
Nonferrous
Average Price
($/pound)(1) $ 1.017 $ 0.964 $ 1.049 $ 1.042 $ 1.020
Nonferrous
Sales Volume
(pounds, in
thousands) 79,729 90,140 108,149 105,068 383,086
Steel
Manufacturing
Business
Sales Prices
($/NT)(1)
Average $ 546 $ 536 $ 596 $ 617 $ 575
Sales Volume
(NT)
Rebar 98,491 111,136 125,515 116,482 451,624
Coiled
Products 51,823 50,134 40,407 50,483 192,847
Merchant Bar
and Other 19,281 16,031 16,505 16,670 68,487
------------------------------------------------------
Total 169,595 177,301 182,427 183,635 712,958
======================================================
Auto Parts
Business
Number of
self-service
locations at
end of
quarter 35 35 35 35
Number of
full-service
sites at end
of quarter 17 17 17 17
(1)Price information is shown after a reduction for the cost of
freight incurred to deliver the product to the customer.
SCHNITZER STEEL INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except per share amounts)
November 30, 2007 August 31, 2007
------------------ ----------------
Assets
- ---------------------------------
Current assets:
Cash and cash equivalents $ 7,035 $ 13,410
Accounts receivable, net 160,494 170,212
Inventories 313,505 258,568
Other current assets 27,895 19,286
------------------ ----------------
Total current assets 508,929 461,476
Property, plant and equipment,
net 396,220 383,910
Goodwill and other assets 324,898 306,028
------------------ ----------------
Total assets $ 1,230,047 $ 1,151,414
================== ================
Liabilities and Shareholders'
Equity
- ---------------------------------
Current liabilities:
Short-term borrowings $ 4,897 $ 20,275
Other current liabilities 150,092 171,914
------------------ ----------------
Total current liabilities 154,989 192,189
Long-term debt 226,558 124,079
Other long-term liabilities 68,937 64,709
Minority interests 5,402 5,373
Shareholders' equity 774,161 765,064
------------------ ----------------
Total liabilities and
shareholders' equity $ 1,230,047 $ 1,151,414
================== ================
CONTACT: Schnitzer Steel Industries, Inc.
Investor Relations
Rob Stone, 503-224-9900
Press Relations
Tom Zelenka, 503-323-2821
ir@schn.com
www.schnitzersteel.com