Schnitzer Provides Outlook for Third Quarter of Fiscal 2013

  Schnitzer Provides Outlook for Third Quarter of Fiscal 2013

Business Wire

PORTLAND, Ore. -- May 29, 2013

Schnitzer Steel Industries, Inc. (Nasdaq:SCHN) announced today its outlook for
the third quarter of fiscal 2013 ending May 31, 2013. During the third
quarter, ferrous export selling prices declined steadily throughout the
quarter with market prices at the end of May approximately $50 per ton lower
than at the end of the second quarter of fiscal 2013 driven primarily by lower
export demand. The combination of declining selling prices, continued
constrained supply trends, and lower tax benefits are expected to result in
sequentially lower consolidated net income.

In our Metals Recycling Business, average net ferrous sales prices for
shipments during the third quarter are expected to decrease approximately $5
per ton from the second quarter of fiscal 2013 which is less than the decline
in current market prices due to the impact of higher priced sales orders
before the market dropped. Ferrous sales volumes are expected to increase 5%
to 10%. Nonferrous average sales prices are expected to approximate the second
quarter while sales volumes are expected to increase approximately 10% due to
higher production. In the declining selling price environment that we are
currently experiencing, average inventory costs did not decline as quickly as
cash purchase costs for raw materials resulting in margin compression. As a
result, operating income per ferrous ton is expected to be in the range of $6
to $8, which includes a significant adverse impact from average inventory
costs as compared to the second quarter. Absent the impact from average
inventory accounting, operating income per ferrous ton was in line with the
second quarter.

In our Auto Parts Business, seasonally stronger car purchases, admissions and
part sales, and the incremental volume contribution of acquisitions, are
expected to result in an increase of approximately 10% in revenues from the
second quarter of fiscal 2013. Car purchase volumes are expected to increase
sequentially by approximately 9%. APB’s operating margin, excluding the impact
of new locations added since the first quarter, is expected to be
approximately 12%, a sequential increase over the second quarter’s
performance. During the second quarter, APB added ten new locations which, as
anticipated, will result in approximately $2 million of integration and
startup costs during the third quarter. These costs will impact APB’s reported
operating margin which is expected to be approximately 9% for the third
quarter.

During the quarter, we continued with the integration of our ten new Auto
Parts locations in Western Canada, the Midwest and New England and with
construction activity on our Metals Recycling project in Western Canada. We
expect these projects, which provide synergistic sources of supply to MRB and
strengthen APB’s presence in core markets, to be accretive in fiscal 2014.

In our Steel Manufacturing Business, average selling prices are expected to
decrease slightly from the second quarter while sales volumes are expected to
be approximately 30% higher due to gradually improving end markets in the
third quarter, and scheduled maintenance and seasonally lower sales which
occurred in the second quarter. Operating income is expected to be
approximately breakeven in the third quarter.

In the first three quarters of fiscal 2013, consolidated SG&A, excluding the
impact of recent acquisitions, is expected to be approximately 9% lower as
compared to the prior year period, which is on track with our restructuring
program announced in August 2012. In the third quarter, we expect to incur a
pre-tax restructuring charge of approximately $1 million in connection with
our August 2012 restructuring program. The Company’s full year tax rate for
fiscal 2013 is anticipated to be approximately 33%. However, due to the
anticipated low level of operating income in the third quarter, we anticipate
the third quarter effective tax rate will be significantly higher than the
anticipated full year rate. Actual financial performance may be materially
different based on, among other factors, market conditions and the timing of
shipments.

Forward-Looking Statements

Statements and information included in this press release that are not purely
historical are forward-looking statements within the meaning of Section 21E 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
which may include 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 continuing 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; 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.

Non-GAAP Financial Measures

This press release includes expected performance excluding certain costs
related to acquisitions. Management believes that this non-GAAP financial
measure allows for a better understanding of our operating and financial
performance. This non-GAAP financial measures should be considered in addition
to, but not as a substitute for, the most directly comparable US GAAP measure.

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 61
self-service facilities located in 16 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 fiscal 2013.

Contact:

Schnitzer Steel Industries, Inc.
Investor Relations:
Alexandra Deignan, 646-278-9711
or
Media Relations:
Chip Terhune, 503-367-2568
ir@schn.com
www.schnitzersteel.com
 
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