Schnitzer Reports First Quarter 2013 Financial Results

  Schnitzer Reports First Quarter 2013 Financial Results

Delivers Positive Operating Income and Expands Auto Parts Business Platform by
                                  Ten Stores

Business Wire

PORTLAND, Ore. -- January 8, 2013

Schnitzer Steel Industries, Inc. (Nasdaq:SCHN) today reported adjusted
operating income of $3 million, an adjusted loss per share of $0.02 and a loss
per share of $0.06 for its fiscal 2013 first quarter ended November 30, 2012.
Adjusted results for the quarter exclude a $2 million pre-tax restructuring
charge associated with cost reduction initiatives announced in August 2012.
All three of the Company's business segments generated positive operating
income. Reported results for the first quarter include the adverse impact of a
noncash valuation allowance on deferred tax assets of approximately $2
million, which equates to $0.06 per share, and the $2 million restructuring
charge, which equates to $0.04 per share. In the fourth quarter of 2012, the
Company reported a loss per share of $0.02.

During the first quarter, export and domestic sales prices for recycled
ferrous metals dropped approximately $50 per ton from August levels driven by
significantly lower domestic utilization rates and weak global economic
conditions which continued to adversely impact overall steel demand. In
addition, the supply of scrap continued to be constrained by low US GDP
growth, and supply volumes were negatively impacted by the lower price
environment. The combination of declining trend in selling prices, the impact
of constrained supply volumes on production costs and the timing of shipments
resulted in lower sales volumes and compressed margins during the quarter.


Summary Results
($ in millions, except per share amounts)
                           Quarter
                            1Q13       4Q12       Change  1Q12      Change
Revenues                    $ 593       $ 762       (22 )%   $ 812      (27 )%
                                                                            
Operating Income (Loss)     $ 1         $ (1    )   NM       $ 15       (92 )%
Restructuring Charges       2          5          (68 )%   —         —   
Adjusted Operating          $ 3         $ 4         (23 )%   $ 15       (81 )%
Income^(1)
                                                                            
Net Income (Loss)           $ (2    )   $ —         NM       $ 7        NM
attributable to SSI
Restructuring Charges,      1          3          (67 )%   —         —   
net of tax
Adjusted Net Income
(Loss) attributable to      $ (1    )   $ 3         NM       $ 7        NM
SSI^(1)
                                                                            
Net Income (Loss) per       $ (0.06 )   $ (0.02 )   NM       $ 0.25     NM
share attributable to SSI
Restructuring Charges,      0.04       0.12       (67 )%   —         —   
net of tax, per share
Adjusted diluted EPS        $ (0.02 )   $ 0.10      NM       $ 0.25     NM
attributable to SSI^(1)

(1) Adjusted for restructuring charges. See Non-GAAP Financial Measures for
reconciliation to U.S. GAAP.
NM = Not meaningful


"As anticipated, during the first quarter of fiscal 2013 we continued to face
difficult market conditions for recycled metals, including a sharp drop in
both ferrous sales prices and volumes, due to soft demand resulting from
slowing global growth and the weak domestic economic environment which
continues to impact scrap generation. Despite these challenges, each of our
business segments remained profitable and our Auto Parts and Steel
Manufacturing businesses improved operating margins sequentially," said Tamara
Lundgren, President and Chief Executive Officer. "We are on track with our
restructuring initiatives to adjust our cost base to reflect the current
market environment, while preserving our ability to take advantage of stronger
future demand and improved scrap flows."

"Recently, our Auto Parts Business added 10 new stores through a combination
of acquisitions and organic investment, seven of which are in geographic
proximity to our major metals recycling export facilities. These new stores
will increase the number of stores by 20% and are consistent with our growth
initiatives in the Auto Parts Business which maximizes value throughout the
automotive recycling process while enhancing ferrous and nonferrous supply for
our Metals Recycling Business. As we continue to deliver enhanced synergies
between our Metals Recycling and Auto Parts businesses, our strong balance
sheet, reduced cost base and export-focused platform strategically position us
to benefit from an improvement in economic conditions domestically and
abroad."

Key business drivers during the first quarter of fiscal 2013:

  *Metals Recycling Business (MRB) shipped 955 thousand ferrous tons and 119
    million nonferrous pounds. The sequential volume declines reflected softer
    demand, reduced flows of raw materials and the timing of shipments.
  *Auto Parts Business (APB) generated a 9% operating margin on 79 thousand
    cars purchased. Operating margins expanded sequentially primarily due to
    lower inventory costs.
  *Steel Manufacturing Business (SMB) achieved $3 million in operating income
    on sequentially flat selling prices and volumes, primarily due to improved
    utilization and lower raw material costs.

Metals Recycling Business


Summary of Metals Recycling Business Results
($ in millions, except selling prices; Fe volumes 000s long tons; NFe volumes
M lbs)
                              Quarter
                               1Q13     4Q12      Change  1Q12      Change
Total Revenues                 $ 494     $ 652      (24 )%   $ 728      (32 )%
                                                                        
Ferrous Revenues               $ 370     $ 485      (24 )%   $ 578      (36 )%
Ferrous Volumes                 955      1,178    (19 )%    1,232    (23 )%
Avg. Net Ferrous Sales         $ 358     $ 378      (5  )%   $ 432      (17 )%
Prices ($/LT)^(1)
                                                                        
Nonferrous Revenues            $ 117     $ 158      (26 )%   $ 142      (18 )%
Nonferrous Volumes              119      169      (30 )%    137      (13 )%
Avg. Net Nonferrous Sales      $ 0.95    $ 0.90     6   %    $ 1.00     (5  )%
Prices ($/lb)^(1)
                                                                        
Operating Income^(2)           $ 6       $ 13       (57 )%   $ 13       (57 )%

(1) Sales prices are shown net of freight
(2) Operating income does not include the impact of restructuring charges


Sales Volumes: Ferrous sales volumes of 955 thousand tons in the first quarter
decreased 19% from fourth quarter levels, primarily due to reduced flows of
raw materials resulting from the lower price environment as well as the timing
of shipments. Nonferrous sales volumes of 119 million pounds decreased 30%
sequentially, primarily due to the impact of lower beginning inventories and
raw material flows.

Export customers accounted for 71% of total ferrous sales volumes in the first
quarter. Our ferrous and nonferrous products were shipped to 14 countries,
with Turkey, South Korea, Taiwan and Indonesia being the top ferrous export
destinations.

Pricing: Demand softened in the export markets in September and October,
driving average net ferrous selling prices down 5% from fourth quarter levels.
Nonferrous prices increased 6% sequentially primarily due to slightly higher
demand for nonferrous commodities and product mix.

Margins: Operating income per ferrous ton was $6, a decline of 46%
sequentially. Overall, the first quarter was significantly impacted by a sharp
decline in selling prices and lower volumes.

Auto Parts Business


Summary of Auto Parts Business Results
($ in millions)
                               Quarter
                                1Q13     4Q12   Change  1Q12   Change
Revenues                        $  70     $ 72    (3  )%   $ 84    (17 )%
Operating Income^(1)            $  6      $ 2     295 %    $ 10    (39 )%
                                                                   
Car Purchase Volumes (000s)     79        81      (2  )%   85      (7  )%
Locations (end of quarter)      51        51      —        50      2   %

(1) Operating income does not include the impact of restructuring charges


Revenues: Revenues in the first quarter decreased 3% sequentially due to lower
shipped volumes and lower commodity prices.

Margins: Operating margins during the first quarter increased sequentially to
9%, primarily due to lower average inventory costs which more than offset the
negative impact of lower commodity prices on sales.

New Stores: Since the end of the first quarter, APB has invested in 10 new
self-service retail stores:

  *Acquired four stores in Richmond and Surrey, British Columbia, expanding
    our presence in Western Canada near our Metals Recycling facility in
    Surrey, British Columbia;
  *Developing a greenfield location in Calgary, Alberta, further enhancing
    our North American supply;
  *Acquired two stores in the Kansas City metropolitan area, MO and KS, and
    developing a greenfield location in Springfield, MO, expanding APB’s
    presence in the Midwestern U.S.; and
  *Acquired two stores in Massachusetts, establishing a new Auto Parts
    presence in the Northeast near our Metals Recycling facilities.

These growth initiatives further penetrate core markets for our Auto Parts
Business, leveraging existing operational resources and enhancing scrap flows
available to our Metals Recycling Business.

Steel Manufacturing Business


Summary of Steel Manufacturing Business Results
($ in millions, except selling prices; volume in thousands of short tons)
                              Quarter
                               1Q13    4Q12     Change    1Q12    Change
Revenues                       $ 92     $ 90      2      %    $ 80     15  %
Operating Income               $ 3      $ (3  )   NM          $ 1      179 %
                                                                       
Avg. Net Sales Prices ($/ST)   $ 680    $ 685     (1     )%   $ 722    (6  )%
Finished Goods Sales Volumes   130      126       3      %    107      22  %

NM = Not meaningful


Sales Volumes: Finished steel sales volumes of 130 thousand tons increased 3%
from the fourth quarter of fiscal 2012.

Pricing: Average net sales prices for finished steel products of $680
approximated the fourth quarter.

Margins: Steady market conditions, combined with improved utilization of 70%
and reduced costs of raw materials, resulted in operating income of $3 million
during the first quarter.

Cost Reductions

In August, we announced initiatives to generate greater synergies from our
fiscal 2011 investments and to realign our organization by further integrating
our Metals Recycling and Auto Parts Businesses, streamlining our corporate
functions, and reducing organizational layers. In the first quarter, SG&A was
14% lower as compared to the prior year first quarter. First quarter SG&A
improved slightly as compared to the fourth quarter of fiscal 2012 excluding
nonrecurring benefits of approximately $4 million in the fourth quarter from
changes in environmental reserves and accrued compensation expense.

In aggregate, cost reduction initiatives are expected to lower annual pre-tax
operating costs by $25 million through a combination of lower production and
administrative expenses and be substantially complete by the end of fiscal
2013. Total pre-tax restructuring charges are expected to be approximately $11
million. During the first quarter, we incurred $2 million of the restructuring
charge. In aggregate, we have incurred $7 million of the total $11 million
anticipated restructuring charge, and we expect to recognize the balance
during the remainder of fiscal 2013.

Corporate Items

Corporate expense in the first quarter was $2 million higher sequentially due
to nonrecurring benefits in the fourth quarter of fiscal 2012 from a reduction
in compensation expense. In addition, intercompany profit eliminations were
slightly higher in the first quarter due to higher inventories arising from
the timing of shipments.

Income tax expense included the impact of a noncash valuation allowance on
deferred tax assets of a foreign subsidiary of approximately $2 million.

Total debt increased by $20 million to $355 million, primarily reflecting
higher working capital related to increases in accounts receivable and
replenishing inventories to support second quarter sales volumes.

Analysts' Conference Call: First Quarter of Fiscal 2013

A conference call and slide presentation to discuss results will be held
today, January 8, 2013, at 11:30 a.m. EST hosted by Tamara Lundgren, President
and Chief Executive Officer, and Richard Peach, Chief Financial Officer. The
call and the slides will be webcast and accessible on the Company's website at
www.schnitzersteel.com.

Summary financial data is provided in the following tables. The slides and
related materials will be available prior to the call on the website.


SCHNITZER STEEL INDUSTRIES, INC.
FINANCIAL HIGHLIGHTS
(in thousands)
(Unaudited)

                                     For the Three Months Ended
                                      November 30, 2012  November 30, 2011
                                                          
REVENUES:
                                                          
Metal Recycling Business:
Ferrous sales                         $   370,476         $   578,024
Nonferrous sales                      116,601             142,290
Other sales                           7,384              8,124         
TOTAL MRB SALES                       494,461             728,438
                                                          
Auto Parts Business                   69,555              84,054
Steel Manufacturing Business          92,029              79,902
Intercompany sales and eliminations   (63,225       )     (80,218       )
Total Revenues                        $   592,820         $   812,176
                                                          
                                                          
OPERATING INCOME:
Metal Recycling Business              $   5,654           $   13,099
Auto Parts Business                   6,364               10,442
Steel Manufacturing Business          3,404              1,218         
Segment operating income              15,422              24,759
                                                          
Corporate expense                     (11,144       )     (10,296       )
Intercompany eliminations             (1,472        )     507
                                                         
Adjusted operating income             2,806              14,970        
                                                          
Restructuring charges                 (1,593        )     —             
Total operating income                $   1,213          $   14,970    



SCHNITZER STEEL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)

                                        For the Three Months Ended
                                         November 30, 2012  November 30, 2011
Revenues                                 $   592,820         $   812,176
Cost of goods sold                       541,884             742,215
Selling, general and administrative      47,995              55,992
Loss (Income) from joint ventures        135                 (1,001        )
Restructuring charges                    1,593              —             
Operating income                         1,213               14,970
Interest expense                         (2,017        )     (3,271        )
Other income (expense), net              321                (393          )
Income (loss) before income taxes        (483          )     11,306
Income tax expense                       (960          )     (3,561        )
Net income (loss)                        (1,443        )     7,745
Net income attributable to               (228          )     (727          )
noncontrolling interests
Net income (loss) attributable to SSI    $   (1,671    )     $   7,018
                                                             
Income (loss) per share attributable     $   (0.06     )     $   0.26
to SSI - basic
Income (loss) per share attributable     $   (0.06     )     $   0.25
to SSI - diluted
                                                             
Weighted average number of common
shares:
Basic                                    26,567              27,451
Diluted                                  26,567              27,715
Dividends declared per common share      $   0.188           $   0.017



SCHNITZER STEEL INDUSTRIES, INC.
SELECTED OPERATING STATISTICS
(Unaudited)

               1Q13         1Q12           2Q12           3Q12           4Q12           Fiscal
                                                                                              2012
Metals
Recycling                                                                                
Business
Ferrous
Selling
Prices ($/LT)
^(1)
Domestic        $ 354         $ 420           $ 424           $ 414           $ 357           $ 406
Exports          360         436          420          427          384          417
Average         $ 358         $ 432           $ 421           $ 424           $ 378           $ 415
                                                                                              
Ferrous Sales
Volume (LT)
Domestic          279,450       319,451         297,142         308,521         261,747         1,186,861
Export           675,212     912,939      1,055,237    1,044,063    915,927      3,928,166
Total             954,662       1,232,390       1,352,379       1,352,584       1,177,674       5,115,027
                                                                                              
Nonferrous
Average Price   $ 0.95        $ 1.00          $ 0.91          $ 0.97          $ 0.90          $ 0.94
($/LB) ^(1)
                                                                                              
Nonferrous
Sales Volume      118,931       137,243         168,545         154,071         168,794         628,652
(LB, in 000s)
                                                                                              
Steel
Manufacturing
Business
Sales Prices
($/ST) ^(1)
(2)
Average         $ 680         $ 722           $ 725           $ 734           $ 685           $ 715
                                                                                              
Sales Volume
(ST) ^(2)
Rebar             78,159        62,487          51,141          55,378          74,797          243,803
Coiled            45,533        39,120          55,785          42,753          45,103          182,761
Products
Merchant Bar     5,926       5,030        5,097        4,812        5,837        20,776
and Other
Total             129,618       106,637         112,023         102,943         125,737         447,340
                                                                                              
Auto Parts
Business
Car purchase      79            85              84              89              81              339
volumes (000)
Number of
self-service
locations at      51            50              51              51              51              51
end of
quarter

(1) Price information is shown after a reduction for the cost of freight incurred to deliver the product
to the customer
(2) Excludes billet sales



SCHNITZER STEEL INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

                                          November 30, 2012  August 31, 2012
Assets
Current Assets:
Cash and cash equivalents                  $   24,404          $   89,863
Accounts receivable, net                   152,860             137,313
Inventories, net                           302,626             246,992
Other current assets                       35,491             42,651
Total current assets                       515,381             516,819
                                                               
Property, plant and equipment, net         564,110             564,185
                                                               
Goodwill and other assets                  679,713             682,569
                                                              
Total assets                               $   1,759,204      $   1,763,573
                                                               
Liabilities and Equity
Current liabilities:
Short-term borrowings                      $   9,169           $   683
Other current liabilities                  157,291            178,159
Total current liabilities                  166,460             178,842
                                                               
Long-term debt                             345,797             334,629
                                                               
Other long-term liabilities                142,592             142,158
                                                               
Redeemable noncontrolling interest         23,602              22,248
                                                               
Equity:
Total Schnitzer Steel Industries, Inc.     1,075,345           1,080,583
("SSI") shareholders' equity
Noncontrolling interests                   5,408              5,113
Total equity                               1,080,753          1,085,696
Total liabilities and equity               $   1,759,204      $   1,763,573


Non-GAAP Financial Measures

This press release contains certain non-GAAP financial measures as defined
under SEC rules such as adjusted operating income, adjusted net income (loss)
attributable to SSI and adjusted diluted earnings per share attributable to
SSI. As required by SEC rules, the Company has provided reconciliations of
these measures to the most directly comparable U.S. GAAP measures. Management
believes that each of the foregoing non-GAAP financial measures provides a
meaningful presentation of the Company's results from its core business
operations excluding adjustments for restructuring charges that are not
related to the Company's ongoing core business operations and improves the
period-to-period comparability of the Company's results from its core business
operations. These non-GAAP financial measures should be considered in addition
to, but not as a substitute for, the most directly comparable U.S.GAAP
measures.


Operating Income (Loss)
($ in millions)
                                               Quarter
                                                1Q13       4Q12       1Q12
Operating Income (Loss)                         $ 1         $ (1    )   $ 15
Restructuring Charges                            2         5         —
Adjusted Operating Income                       $ 3         $ 4         $ 15



Net Income (Loss) attributable to SSI
($ in millions)
                                                Quarter
                                                1Q13        4Q12        1Q12
Net Income (Loss) attributable to SSI           $ (2    )   $ —         $ 7
Restructuring Charges, net of tax                1         3         —
Adjusted Net Income (Loss) attributable to      $ (1    )   $ 3         $ 7
SSI



Diluted Earnings per share attributable to SSI
($ in millions)
                                                Quarter
                                                1Q13        4Q12        1Q12
Net Income (Loss) per share attributable to     $ (0.06 )   $ (0.02 )   $ 0.25
SSI
Restructuring Charges, net of tax, per share     0.04      0.12      —
Adjusted Diluted EPS attributable to SSI        $ (0.02 )   $ 0.10      $ 0.25


About Schnitzer Steel Industries, Inc.

Schnitzer Steel Industries, Inc. is one of the largest manufacturers and
exporters of recycled ferrous metal products in the United States with 58
operating facilities located in 14 states, Puerto Rico and Western Canada. The
business has seven deep water export facilities located on both the East and
West Coasts and in Hawaii and Puerto Rico. The Company's integrated operating
platform also includes its auto parts and steel manufacturing businesses. The
Company's auto parts business sells used auto parts through its 59
self-service facilities located in 15 states and Western Canada. With an
effective annual production capacity of approximately 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 107^th year of operations in 2013.

Safe Harbor for Forward Looking Statements

Statements and information included in this press release that are not purely
historical are forward-looking statements within the meaning of Section21E of
the Securities Exchange Act of 1934 and are made pursuant to the “safe harbor”
provisions of the Private Securities Litigation Reform Act of 1995. Except as
noted herein or as the context may otherwise require, all references to “we,”
“our,” “us” and “SSI” refer to the Company and its consolidated subsidiaries.

Forward-looking statements in this press release include statements regarding
our expectations, intentions, beliefs and strategies regarding the future,
including statements regarding trends, cyclicality and changes in the markets
we sell into; strategic direction; changes to manufacturing and production
processes; the cost of compliance with environmental and other laws; expected
tax rates, deductions and credits; the realization of deferred tax assets;
planned capital expenditures; liquidity positions; ability to generate cash
from operations; the potential impact of adopting new accounting
pronouncements; expected results, including pricing, sales volumes and
profitability; obligations under our retirement plans; savings or additional
costs from business realignment and cost containment programs; and the
adequacy of accruals.

When used in this report, the words “believes,” “expects,” “anticipates,”
“intends,” “assumes,” “estimates,” “evaluates,” “may,” “could,” “opinions,”
“forecasts,” “future,” “forward,” “potential,” “probable,” and similar
expressions are intended to identify forward-looking statements.

We may make other forward-looking statements from time to time, including in
reports filed with the Securities and Exchange Commission, press releases and
public conference calls. All forward-looking statements we make are based on
information available to us at the time the statements are made, and we assume
no obligation to update any forward-looking statements, except as may be
required by law. Our business is subject to the effects of changes in domestic
and global economic conditions and a number of other risks and uncertainties
that could cause actual results to differ materially from those included in,
or implied by, such forward-looking statements. Some of these risks and
uncertainties are discussed in "Risk Factors" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in our most recent
annual report on Form 10-K and quarterly report on Form 10-Q. Examples of
these risks include: potential environmental cleanup costs related to the
Portland Harbor Superfund site; the impact of general economic conditions;
volatile supply and demand conditions affecting prices and volumes in the
markets for both our products and raw materials we purchase; difficulties
associated with acquisitions and integration of acquired businesses; the
impact of goodwill impairment charges; the realization of expected cost
reductions related to restructuring initiatives; the inability of customers to
fulfill their contractual obligations; the impact of foreign currency
fluctuations; potential limitations on our ability to access capital resources
and existing credit facilities; restrictions on our business and financial
covenants under our bank credit agreement; the impact of the consolidation in
the steel industry; the impact of imports of foreign steel into the U.S.;
inability to realize expected benefits from investments in technology; freight
rates and availability of transportation; product liability claims; costs
associated with compliance with environmental regulations; the adverse impact
of climate change; inability to obtain or renew business licenses and permits;
compliance with greenhouse gas emission regulations; reliance on employees
subject to collective bargaining agreements; and the impact of the underfunded
status of multiemployer plans in which we participate.

Contact:

Schnitzer Steel Industries, Inc.
Investor Relations:
Alexandra Deignan, 646-278-9711
adeignan@schn.com
or
Media Relations:
Chip Terhune, 503-265-6370
cterhune@schn.com
or
Company Info:
www.schnitzersteel.com
ir@schn.com