Philip Services Suffers Loss for Quarter, Year

Philip Services Corp. announced an increase in its financing structure and its consolidated financial results for the quarter and year.

"PSC had a difficult year losing $78.1 million or approximately $3.25 per share. The company was significantly affected throughout 2001 by the difficulties in the North American steel industry which impacted both pricing and demand for finished scrap," said Thomas O'Neill, Jr., CFO. "With the strengthening in the North American economy, combined with the actions we have taken to exit unprofitable businesses, reorganize our corporate structure, and focus on our core markets we expect our financial performance to improve. We have additional financial resources to invest in our businesses and a strengthened financial platform."

The company also announced that it has reached an agreement with its lenders to increase its revolving loan facility and extending the term of the facility through the first quarter of 2003.

For the fourth quarter Philip reported revenue of $351.2 million compared to $369.4 million for the fourth quarter of 2000. This decrease was primarily due to declining scrap volumes and prices due to weakness in the steel industry.

Revenue for the year was $1.510 billion compared to $1.637 billion in the same period last year. Revenue from the company's Metals Services business declined by about $149 million on a year-over-year basis due to a significant decrease in scrap volume managed by PSC and price declines, as well as the sale of its UK Metals business in April 2000. The average price for a ton of ferrous scrap fell from $87.00 at the end of 2000 to $76.00 at the end of 2001.

The loss from operations for the fourth quarter was $34.5 million which included charges of about $19 million related to unusual bad debt provisions for failing steel companies, insurance claims with a bankrupt insurance carrier, environmental, impairment and closure costs and a provision for a contract dispute.

This compared to a loss of $17.6 million during the same period last year. The loss from operations for the year was $37.4 million compared to an operating loss of $3.3 million for the year 2000.

The gross margin declined to $36.8 million for the fourth quarter of 2001 from $49.7 million of revenue for the fourth quarter of 2000, primarily as a result of lower scrap metal volumes and provisions for environmental, closure costs and asset impairments.

Gross margin for the year was $186.9 million or 12.4 percent of revenue compared to $214.3 million or 13.1 percent of revenue in 2000. The decrease was largely due to declining volumes and margins at various facilities that were being sold or closed during the year and a high-margin project that was completed in 2000.