Schnitzer Provides Outlook for Fourth Quarter of Fiscal 2013

  Schnitzer Provides Outlook for Fourth Quarter of Fiscal 2013

Business Wire

PORTLAND, Ore. -- August 27, 2013

Schnitzer Steel Industries, Inc. (Nasdaq: SCHN) announced its outlook for its
fourth quarter of fiscal 2013 ending August 31, 2013. During the quarter,
export demand for recycled metals weakened versus the third quarter as
reflected by lower shipped volumes and lower average sales prices. Average
purchase prices for material shipped during the quarter declined more slowly
than sales prices resulting in lower margins compared to the third quarter.
Positive operating cash flow, driven by a strong focus on working capital, is
expected to result in a reduction of total debt outstanding in the fourth
quarter, after payment of the Company’s quarterly dividend. During the fourth
quarter, the Company completed the construction of its major capital projects
in Canada and Puerto Rico which is expected to result in a significant
reduction in capital expenditures in fiscal 2014.

In the Metals Recycling Business, ferrous sales volumes are anticipated to be
5-10% lower than the third quarter and average ferrous selling prices are
expected to decline 8-10% sequentially. Nonferrous sales volumes are expected
to approximate the third quarter while average nonferrous selling prices are
expected to decline approximately 5%. Operating results in the fourth quarter
are expected to be adversely impacted by the weaker market conditions,
including the impact of average inventory costs which, in a declining selling
price environment, do not decrease as quickly as cash purchase costs for raw
materials, as well as higher unit costs resulting from lower anticipated
volumes and a material increase in bad debt expense. These factors are
expected to contribute to the Metals Recycling Business incurring an operating
loss in the fourth quarter.

In the fourth quarter, the Metals Recycling Business also anticipates
recording a material non-cash impairment charge to the carrying value of
goodwill reflecting the broader impact of the weaker macroeconomic environment
as well as other factors. In addition, the Company expects to record a
non-cash deferred tax valuation allowance in the fourth quarter related to
foreign operations in the Metals Recycling Business. The impairment charge and
valuation allowance are not expected to impact the Company’s ability to
continue the quarterly dividend or to repurchase shares.

In the Auto Parts Business, car purchase volumes are expected to approximate
the third quarter. Despite challenging market conditions, car purchase volumes
for the full year are anticipated to increase 5% compared to the prior fiscal
year, including the impact of new stores acquired in fiscal 2013. Operating
margins are expected to be positive but lower sequentially mainly due to the
adverse impact of average inventory accounting. The fourth quarter will also
include approximately $2 million of start-up costs related to the 11 new
stores added in fiscal 2013, including our recently acquired first store in
Rhode Island. The new stores are expected to provide additional benefits to
the Auto Parts Business in fiscal 2014 as the start-up phase is completed.

In the Steel Manufacturing Business, sales volumes are expected to increase
sequentially by approximately 10%, driven by improvements in demand for
finished steel in the Western US. These volume benefits are expected to offset
a slight decline in average selling prices compared to the third quarter
resulting from lower scrap costs. The improvement in demand and additional
cost efficiencies from increased productivity are expected to generate
positive operating income and to result in the best full-year performance for
the Steel Manufacturing Business since fiscal 2008.

Consolidated financial performance, including corporate expenses, net interest
expense and taxes, is expected to result in a net loss on a reported and
adjusted basis for restructuring, goodwill impairment and other charges.

The Company continues to adjust to market conditions by reducing costs,
further integrating its Metals Recycling and Auto Parts Businesses, and
focusing on improved returns from its previous capital investments. The
Company believes its ability to utilize its Auto Parts platform to supply its
Metals Recycling Business remains a competitive advantage and it continues to
be a strategic priority to maximize these benefits. Fiscal 2014 is expected to
benefit from a full year of the previously announced $25 million of cost
reductions and we anticipate further cost reductions to be phased in over the
next 12 months.

The Company expects to report fourth quarter and fiscal 2013 results in the
second half of October.

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; benefits, 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 benefits
and cost reductions related to restructuring and business realignment
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 bad debt expense, restructuring and non-cash impairment and
deferred tax valuation charges. Management believes that these non-GAAP
financial measures allows for a better understanding of our operating and
financial performance. This non-GAAP financial measure 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 60
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