Schnitzer Steel Reports Third Quarter Results

PORTLAND, Ore.--(Business Wire)--
Schnitzer Steel Industries, Inc. (Nasdaq:SCHN) today reported revenues of $412
million and a net loss of $1.5 million, or $0.05 per diluted share, for the
fiscal 2009 third quarter ended May 31, 2009. For the quarter, the Company
generated additional cash from operations of $80 million, bringing the
year-to-date cash from operations to $241 million.

(in millions, except per-share data) Third Quarter Third Quarter Second Quarter Year to Year to
2009 2008 2009 Date Date

2009
2008
Revenues $ 412 $ 972 $ 434 $ 1,344 $2,328
Operating Income (Loss) ($ 6) $ 102 ($ 18) ($ 74) $ 202
Net Income (Loss) ($ 2) $ 62 ($ 7) ($ 42) $ 122
Diluted EPS ($0.05) $2.14 ($0.25) ($ 1.51) $ 4.23

"During the third quarter all of our businesses showed sequential improvements
in operating income, reflecting a strengthening of demand for recycled metal in
the export markets and the benefit of a full quarter of previously implemented
cost containment actions," said Tamara Lundgren, President and Chief Executive
Officer. "As a result of our focus on managing working capital, the benefits
from our cost containment program and the flexibility of our platform which
enables us to sell our products to the markets where demand and profitability
are the greatest, we continued to generate strong cash flow and further reduce
our debt levels," she continued.

"Our Metals Recycling Business was able to increase its purchases of raw
materials to support stronger overseas demand. Operating income in our Metals
Recycling Business improved despite tighter conditions in the supply markets
which pressured margins. Our Auto Parts Business returned to positive operating
income performance through higher volumes of purchased vehicles, increased sales
of recycled parts and the benefits of improved commodity prices. In the Steel
Manufacturing Business, the operating loss narrowed, primarily due to higher
sales volumes and higher production volumes. During the quarter, we were able to
continue to reduce finished steel inventories and, as a result, we are now able
to increase production at the mill to levels which should help future operating
results," added Lundgren.

"As we look forward, our strong balance sheet, positive cash flow and low
leverage allow us to continue to undertake acquisitions and investments in
technology as we have done throughout the year, enabling us to expand our access
to supply and to improve our operating efficiencies," Lundgren concluded.

Metals Recycling Business

($ in millions, except selling prices; ferrous volume in thousands of long tons, non-ferrous volumes in millions of pounds) Third Quarter Third Quarter Second Quarter Year to Year to
2009 2008 2009
Date
Date

2009
2008
Total Revenues $ 318 $ 810 $ 337 $ 1,056 $1,888
Ferrous Revenues $ 268 $ 668 $ 298 $ 878 $1,553
Ferrous Volumes (Processing/Trading) 1,037/0 1,137/151 1,083/0 2,899/0 3,265/435
Avg. Net Ferrous Sales Prices ($/LT)(1) $ 223 $ 463 $ 253 $ 271 $ 360
(Processing)
Nonferrous Volumes 90 129 77 274 314
Avg. Net Nonferrous Sales Prices ($/LB)(1) $0.51 $ 1.07 $0.45 $0.60 $ 1.02
Operating Income (Loss)(2) $ 6 $ 94 $ 5 ($ 8 ) $ 175

(1) Sales prices are shown net of freight

(2) Includes operating income from joint ventures

Third quarter revenues for the Metals Recycling Business were 6% lower than the
second quarter of fiscal 2009, primarily due to a 12% decline in ferrous average
net selling prices and a 4% decline in ferrous volumes. During the third
quarter, ferrous export net sales prices remained higher than domestic ferrous
net sales prices.

Revenues declined 61% from the record third quarter revenues of 2008, primarily
as a result of declines of 52% and 9% in average ferrous net selling prices and
ferrous processing sales volumes, respectively.

Operating income for the quarter increased 15% compared to the second quarter of
2009, despite a narrowing of cash metal spreads due to the tight market for raw
materials. Operating income was 94% lower than the third quarter of 2008 as
significantly weaker year-over-year demand, lower commodity prices and
restricted flows of raw materials resulted in compressed margins and lower sales
volumes.

Auto Parts Business

($ in millions, except locations) Third Quarter Third Quarter Second Quarter Year to Year to
2009 2008 2009
Date
Date

2009
2008
Revenues $ 66 $ 101 $ 58 $ 191 $ 250
Operating Income (Loss) $ 3 $ 17 ($ 5) ($ 11) $ 30
Locations (end of quarter) 57 52 58 57 52

Third quarter revenues for the Auto Parts Business increased 13% compared to the
second quarter of fiscal 2009 due to normal seasonal improvements in parts
sales, higher car volumes and improved pricing for cores. Revenues decreased 35%
over the same period last year, primarily as a result of a 26% decrease in
self-service car volumes and lower per car sales of cores and scrap, which more
than offset higher full-service parts sales.

Compared to the second quarter of 2009, operating income improved $8 million due
to higher car volumes, improved margins on scrap and core sales and higher parts
sales. Operating income decreased 82% from the third quarter of 2008, primarily
due to the lower car volumes and significantly reduced margins on scrap and core
sales.

Steel Manufacturing Business

($ in millions, except selling prices; volume in thousands of tons) Third Quarter Third Quarter Second Quarter Year to Year to
2009 2008 2009
Date
Date

2009
2008
Revenues $ 47 $ 168 $ 52 $ 197 $ 421
Avg. Net Sales Prices ($/T) $ 524 $ 744 $ 570 $ 664 $ 658
Sales Volume 85 218 82 266 594
Operating Income (Loss) ($ 5) $ 23 ($ 6) ($ 43) $ 50

Revenues for the Steel Manufacturing Business decreased 10% compared to the
second quarter of 2009, primarily due to continued weakening of market
conditions during the quarter. However, market prices appeared to bottom in May.
On a year-over-year basis, revenues fell 72% as weak demand led to a 61% decline
from the record sales volumes achieved in the third quarter of 2008, coupled
with a 30% decline in average net sales prices.

Compared to the second quarter of 2009, operating income improved 22%, due
primarily to slightly higher sales volumes and a reduction in the impact of low
production volumes, which offset lower average sales prices. During the third
quarter, $3 million in production costs could not be charged to inventory,
compared to $6 million in the second quarter.

Compared to the record operating income in the third quarter of 2008, operating
income declined $28 million due to significantly lower sales volumes and sales
prices.

Outlook

The Company said the factors, which are forward-looking statements and subject
to uncertainty as discussed below, that will affect its results in the fiscal
fourth quarter of 2009 include:

Metals Recycling Business:

Pricing. Near-term demand for ferrous scrap appears to have improved compared to
the third fiscal quarter. As a result, based on orders received to date, average
ferrous selling prices, net of freight, are expected to increase during the
fourth quarter. Nonferrous prices are also expected to improve.

Sales volumes. Fourth quarter ferrous processing sales volumes are expected to
increase 100 thousand to 200 thousand tons over the volumes shipped in the third
quarter, depending on the timing of shipments. Quarter-over-quarter nonferrous
sales volumes are expected to increase 10-15% over volumes shipped in the third
quarter.

Margins. Margins in the fourth quarter are expected to improve from the third
quarter, although the supply of raw materials is expected to continue to put
pressure on metal spreads.

Auto Parts Business:

Revenue. Higher prices for cores and scrap, improved parts sales and higher car
volumes are expected to result in increased revenues compared to the recently
completed third quarter.

Margins. Improved parts sales and higher prices for cores are expected to result
in margins which are improved compared to the third quarter, although higher
prices for scrap are expected to be offset by higher purchase costs for scrapped
vehicles.

Steel Manufacturing Business:

Pricing. Weak demand in the non-residential and infrastructure construction
markets is expected to continue through the fourth quarter. As a result,
although prices are expected to increase from the low point in the markets at
the end of May, average prices are expected to be slightly lower than the
average prices in the recently completed third quarter.

Volumes. Fourth quarter sales volumes are expected to increase slightly compared
to the third quarter.

Margins. Higher production volumes are expected to result in margins which are
improved compared to the third quarter.

Third Quarter 2009 Conference Call

A conference call to discuss results will be held today, June 30, 2009, at 11:30
a.m. EDT, hosted by Tamara Lundgren, 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 42
operating facilities located in 13 states and Puerto Rico, including seven
export facilities located on both the East and West Coasts and in Hawaii and
Puerto Rico. 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 39 self-service facilities and
18 full-service facilities located in 14 states and in western Canada. With an
annual production capacity of nearly 800,000 tons, the Company`s steel
manufacturing business produces finished steel products, including rebar, wire
rod and other specialty products. The Company commenced its 103rd year of
operations in fiscal 2009.

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 For the Nine Months Ended
May 31, May 31, May 31, May 31,
2009 2008 2009 2008

REVENUES:

Metals Recycling Business:
Ferrous sales 267,548 667,897 878,061 1,553,266
Nonferrous sales 48,541 140,033 172,056 325,797
Other sales 1,435 2,490 5,422 9,386
Total sales 317,524 810,420 1,055,539 1,888,449

Auto Parts Business 65,851 100,641 191,432 250,137
Steel Manufacturing Business 46,822 167,668 197,378 420,856
Intercompany sales eliminations (18,367 ) (106,588 ) (100,352 ) (231,931 )
Total $ 411,830 $ 972,141 $ 1,343,997 $ 2,327,511

INCOME (LOSS) FROM OPERATIONS:

Metals Recycling Business: 6,034 93,516 (7,954 ) 175,093
Auto Parts Business 2,981 16,720 (11,410 ) 30,474
Steel Manufacturing Business (4,961 ) 22,767 (42,642 ) 50,276
Corporate expense (10,593 ) (25,365 ) (25,845 ) (46,871 )
Intercompany eliminations 669 (5,347 ) 14,018 (6,516 )

Total $ (5,870 ) $ 102,291 $ (73,833 ) $ 202,456

NET INCOME (LOSS) $ (1,527 ) $ 61,719 $ (42,494 ) $ 122,301

BASIC EARNINGS (LOSS) PER SHARE $ (0.05 ) $ 2.19 $ (1.51 ) $ 4.32

DILUTED EARNINGS (LOSS) PER SHARE $ (0.05 ) $ 2.14 $ (1.51 ) $ 4.23

SHARE INFORMATION (THOUSANDS):
Basic shares outstanding 28,280 28,177 28,173 28,315

Diluted shares outstanding 28,280 28,847 28,173 28,894

SCHNITZER STEEL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share amounts)
(Unaudited)

For the Three Months Ended For the Nine Months Ended
May 31, May 31, May 31, May 31,
2009 2008 2009 2008

Revenues $ 411,830 $ 972,141 $ 1,343,997 $ 2,327,511

Cost of goods sold 374,048 798,531 1,291,525 1,960,460
Selling, general and administrative 43,536 73,822 134,581 170,632
Environmental matters - 350 (6,080 ) 193
(Income) loss from joint ventures 116 (2,853 ) (2,196 ) (6,230 )

Operating income (loss) (5,870 ) 102,291 (73,833 ) 202,456

Other income (expense):
Interest expense (629 ) (1,707 ) (2,823 ) (6,703 )
Other income 5,634 879 6,785 1,589
Other income (expense) 5,005 (828 ) 3,962 (5,114 )

Income (loss) before income taxes and minority interests (865 ) 101,463 (69,871 ) 197,342

Income tax benefit (expense) (114 ) (38,620 ) 27,724 (72,726 )

Income (loss) before minority interests and pre-acquisition interests (979 ) 62,843 (42,147 ) 124,616

Minority interests, net of tax (548 ) (1,124 ) (347 ) (2,315 )

Net income (loss) $ (1,527 ) $ 61,719 $ (42,494 ) $ 122,301

Basic earnings (loss) per share $ (0.05 ) $ 2.19 $ (1.51 ) $ 4.32

Diluted earnings (loss) per share $ (0.05 ) $ 2.14 $ (1.51 ) $ 4.23

Schnitzer Steel Industries, Inc.
Selected Operating Statistics
(Unaudited)
Total Total
Q1 FY09 Q2 FY09 Q3 FY09 FY09 Q1 FY08 Q2 FY08 Q3 FY08 Q4 FY08 FY08
Metals Recycling Business
Ferrous Processing Selling Prices ($/LT)(1)
Domestic(2) $ 371 $ 209 $ 186 $ 285 $ 279 $ 321 $ 464 $ 583 $ 416
Exports 353 259 228 267 280 329 463 637 455
Average 359 253 223 271 280 327 463 623 442

Ferrous Processing Sales Volume (LT)(2)
Cascade 145,493 29,761 55,162 230,416 179,686 170,221 186,696 200,523 737,126
Domestic 129,620 99,275 86,555 315,450 178,833 210,824 226,961 188,801 805,419
Export 503,635 954,003 895,167 2,352,805 642,142 746,736 722,973 1,099,203 3,211,054
Total Processed 778,748 1,083,039 1,036,884 2,898,671 1,000,661 1,127,781 1,136,630 1,488,527 4,753,599

Ferrous Trading Sales Volume (LT)
Trading - - - - 134,957 148,899 151,324 8,407 443,587

Total Ferrous Sales Volume (LT)(2) 778,748 1,083,039 1,036,884 2,898,671 1,135,618 1,276,680 1,287,954 1,496,934 5,197,186

Nonferrous Average Price ($/pound)(1) $ 0.784 $ 0.45 $ 0.51 $ 0.60 $ 1.000 $ 0.980 $ 1.069 $ 1.053 $ 1.030

Nonferrous Sales Volume (pounds, in thousands) 107,359 76,822 90,226 274,407 88,808 96,278 128,858 125,525 439,469

Steel Manufacturing Business
Sales Prices ($/NT)(1)(3)
Average $ 864 $ 570 $ 524 $ 664 $ 601 $ 616 $ 744 $ 958 $ 728

Sales Volume (NT)(3)
Rebar 46,917 56,588 52,749 156,254 108,856 127,732 128,597 104,926 470,111
Coiled Products 45,051 19,332 25,798 90,181 49,343 57,096 74,270 65,397 246,106
Merchant Bar and Other 6,235 6,783 6,820 19,838 16,031 17,332 15,033 11,576 59,972
Total 98,203 82,703 85,367 266,273 174,230 202,160 217,900 181,899 776,189

Auto Parts Business
Number of self-service locations at end of quarter 38 40 39 39 35 35 35 38 38
Number of full-service sites at end of quarter 18 18 18 18 17 17 17 18 18

(1) Price information is shown after a reduction for the cost of freight incurred to deliver the product to the customer.
(2) Includes sales to the Steel Manufacturing Business for all quarters.
(3) Excludes billet sales.

SCHNITZER STEEL INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except per share amounts)

May 31, 2009 August 31, 2008
Assets
Current assets:
Cash and cash equivalents $ 48,721 $ 15,039
Accounts receivable, net 85,740 314,993
Inventories, net 211,097 429,061
Other current assets 68,358 20,433
Total current assets 413,916 779,526

Property, plant and equipment, net 454,303 431,898

Goodwill and other assets 412,468 343,429

Total assets $ 1,280,687 $ 1,554,853

Liabilities and Shareholders` Equity
Current liabilities:
Short-term borrowings $ 1,370 $ 25,490
Other current liabilities 134,408 319,432
Total current liabilities 135,778 344,922

Long-term debt 124,624 158,933

Other long-term liabilities 79,249 68,447

Minority interests 3,000 4,399

Shareholders` equity 938,036 978,152

Total liabilities and shareholders` equity $ 1,280,687 $ 1,554,853

Schnitzer Steel Industries, Inc.
Investor Relations:
Rob Stone, 503-224-9900
or
Press Relations:
Tom Zelenka, 503-323-2821
Website: www.schnitzersteel.com
Email: ir@schn.com

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