Schnitzer Steel Reports Record Earnings

"Schnitzer Steel completed another strong quarter that resulted in a record year for earnings and revenues not only for the company as a whole, but also for each of our three business segments," John D. Carter, president and CEO, says. "We continue to see good demand for all our products and remain optimistic regarding the fundamentals underpinning our businesses."

For the fourth quarter ended Aug. 31, 2005, Schnitzer reports net income of $34.4 million, or $1.11 per diluted share, on revenues of $195.7 million. In comparison, net income was $37.9 million, or $1.22 per diluted share, on revenues of $204.5 million for the last quarter of fiscal year 2004.

"We feel that our recent transactions to grow Schnitzer will position it well for the positive market conditions we anticipate in 2006,” Carter says. “We are pleased with the initial progress in integrating the businesses that we acquired through the separation of our joint ventures with Hugo Neu. We will further strengthen the recently acquired New England metals recycling operation when we acquire the minority interests in the Rhode Island business. Finally, we believe our Greenleaf acquisition will enable a significant expansion of our Pick-N-Pull Auto Parts Business in a region where supplies are growing," he adds.

Carter says the company is pleased, in particular, with the strong margins its wholly owned metals recycling business has produced despite volatile pricing conditions. “The sales volumes in our wholly owned scrap business were below our average quarterly run rate; this reflects low inventory levels in our yards, driven in part by necessary operational adjustments while we carry out our capital investment program and install new equipment," he says.

Schnitzer’s Metals Recycling Business reports 2005 operating income of $123.6 million, an increase of 60 percent compared with the $77.3 million reported in the 2004 fiscal year. Ferrous sales volume in fiscal 2005 approximated last year's level and totaled 1.9 million tons. Average ferrous selling prices rose to $230 per ton, representing a 25 percent improvement over fiscal year 2004, according to the company.

For the fourth quarter of fiscal 2005, the Metals Recycling Business reported operating income of $22.4 million, which the company says is an increase of 3 percent compared with $21.8 million in the fourth quarter of last year. The improved profitability resulted primarily from higher average ferrous selling prices, which increased $12 per ton, or 6 percent, from the fourth quarter of last year. These amounts were offset in part by a 15 percent decline in fourth quarter 2005 ferrous sales volume, which principally reflected lower fourth quarter inventory available to sell as higher volumes were shipped during the first nine months of fiscal 2005 as compared with 2004.

 For fiscal 2005, Schnitzer’s Auto Parts Business reports record revenues of $107.8 million, representing an increase of 32 percent over the same period last year, according to Schnitzer. This increase primarily reflects the mid-January 2005 addition of four new stores in the Midwest and Eastern United States.

The Auto Parts Business reported record operating income of $29.6 million in fiscal 2005, an 11 percent increase from fiscal 2004. Also, as expected, administrative expenses increased over the same period last year in light of the development of the Auto Parts Business management infrastructure in support of the Schnitzer’s growth plans.

During the fourth quarter of fiscal 2005, the Auto Parts Business grew its revenue by 24 percent compared with the same period last year. This increase principally reflected the addition of new stores. The Auto Parts Business reported operating income of $6.5 million for the fourth quarter of fiscal 2005, an 11 percent decline from the prior year's fourth quarter. According to Schnitzer, the lower operating income primarily reflected a decline in ferrous scrap selling prices affecting the revenue realized for crushed auto-bodies, as well as the sale of higher-cost inventory, which compressed margins.

Sept. 30, 2005, Schnitzer closed its acquisition of Greenleaf Auto Recyclers LLC and five locations leased by Greenleaf, which is in the auto dismantling and parts recycling business, selling its products primarily to collision and mechanical repair shops. The total consideration paid in connection with the Greenleaf transaction was $44 million, subject to a post-closing working capital adjustment.

 Schnitzer’s Steel Manufacturing Business reports its second consecutive year of record earnings. The mill reported a fiscal 2005 operating profit of $42.7 million, a 73 percent improvement from the record earnings recorded the year earlier. The improved profitability principally reflected higher average selling prices, which were offset in part by an 8 percent reduction in sales volumes and generally higher costs incurred to procure scrap metal and other raw materials used in the production process, according to the company. Average selling prices were $512 per ton for the year ended Aug. 31, 2005, while last year prices averaged $404 per ton. The average selling prices increased in light of higher worldwide demand for steel, coupled with strong West Coast consumption of finished steel.