Schnitzer Reports Stronger Numbers

Schnitzer Steel Industries, Inc. reported fourth quarter income. Including nonrecurring items and LIFO, fourth quarter net earnings totaled $2.2 million. Fourth quarter net income before LIFO amounted to $2.4 million on revenues of $70.9 million. Including the year-end LIFO inventory adjustment, last year's fourth quarter net income totaled $3.0 million.

Earnings for the year before nonrecurring items and LIFO, totaled $12.9 million on revenues of $350.9 million. Including the nonrecurring items and LIFO, fiscal 2002 net income totaled $6.6 million.

Fiscal 2001 earnings before LIFO totaled $7.3 million on revenues of $322.8 million. Including the year-end LIFO adjustment, 2001 net income totaled $7.9 million.

"Fiscal 2002 was a challenging, but very gratifying year at Schnitzer Steel," said Robert Philip, president and CEO. "Markets in both the metals recycling and steel manufacturing businesses went through significant swings this year. The complex market conditions required the employees of all of our businesses to quickly adjust to changing markets in order for us to successfully navigate through this demanding period.

“During the year we made a number of difficult, but strategically significant decisions. Many of these decisions resulted from last year's move to measuring and compensating our employees through the use of Economic Value Added. Using EVA as a tool, we evaluated our operations and made decisions to exit certain investments and operations that we believed were not providing an adequate return to our shareholders over the long-term. For example, during the fourth quarter, we eliminated an unprofitable car-crushing business and terminated a fixed-priced Alaska barge contract of affreightment. In addition, we discontinued operating our Reno, Nev., metals recycling yard and instead sub-let the facility and leased the existing equipment to a third party who is selling us its scrap metal output."

During the fourth quarter the company’s wholly-owned Metals Recycling Business generated operating income of $6.1 million, compared to $2.5 million the same time last year. During the quarter, the average ferrous selling price rose to $108 per ton, which was the highest quarterly average price since fiscal 1998.

Fourth quarter ferrous sales volumes were 415,000 tons compared to 305,000 tons in 2001 fourth quarter. Partially offsetting the higher selling prices and volumes was a significant increase in the cost paid for unprocessed metal. Philip commented, "During the first six months of fiscal 2002, ferrous metal prices followed the economy down and fell to near record lows. Beginning in the third quarter and into the early part of the fourth quarter sales prices rebounded strongly. We continue to believe the underlying fundamentals for the recycled metals markets remain good and that worldwide demand for our recycled metal products will grow. Further, we believe that our wholly-owned and joint venture metals recycling businesses are well positioned to take advantage of both domestic and export market opportunities."

The company's joint venture businesses had a record year in fiscal 2002. Fourth quarter income from joint ventures totaled $5.6 million, which compares to $4.1 million in last year's fourth quarter.

The Steel Manufacturing Business reported an operating loss of $2 million for the fourth quarter, compared to an operating profit of $1.4 million during last year's same quarter. Fourth quarter selling prices averaged $279 per ton, compared to $292 per ton during the fourth quarter of 2001 and $274 per ton during the third quarter of this year. Increased sales of wire rod products caused fourth quarter sales volumes to rise by 25 percent over last year's fourth quarter.

Looking out toward next year, Schnitzer noted that while scrap metal prices receded modestly during the latter part of the fourth quarter; the company has recently begun to see market prices firm for late calendar year shipments.

The company's joint ventures in the metals recycling business are expected to be affected by similar pricing factors.

First quarter sales prices for finished steel should show modest improvement over the 2002 fourth quarter, which is the result of some recently announced price increases. These price improvements along with efforts to reduce costs should favorably impact this business. In addition, electricity prices are expected to decline modestly due to seasonal demand factors, which should favorably impact the cost of producing steel.