Schnitzer Steel Industries, Inc. reported net income of $36.0 million on revenues of $215.7 million for its fiscal 2005 second quarter that ended February 28, 2005.

Second Quarter Results—Net income of $36.0 million ($1.15 per diluted share) compares with net income of $18.5 million ($0.60 per diluted share) for the second quarter of fiscal 2004. Revenues of $215.7 million compare with revenues of $161.6 million for the second quarter of fiscal 2004.

Six Month Results—Schnitzer reported net income of $78.9 million ($2.53 per diluted share) for the first six months of fiscal 2005, which compares to net income of $30.7 million ($0.99 per diluted share) for the first half of fiscal 2004. Revenues of $414.7 million compare to revenues of $290.0 million for the first half of fiscal 2004.

Comments—"Schnitzer Steel continued to report excellent profits and shareholder returns during the second quarter of fiscal 2005," said Robert W. Philip, Chairman and CEO. "The company's strong financial results came from all three of its primary business segments. The most significant improvement came from our businesses that process and sell recycled ferrous and nonferrous metals. These businesses continue to benefit from excellent industry fundamentals as well as from strategic coastal locations that give us the ability to efficiently access both domestic and export markets. Our second quarter results were also supported by our Steel Manufacturing and Auto Parts Businesses that produced good operating income, despite normal seasonal declines in demand. Overall, the company remains optimistic about the outlook for our businesses."

The company's wholly-owned Metals Recycling Business' operating income of $39.5 million compares to $13.2 million in the second quarter of fiscal 2004. The improved operating margin resulted from significantly higher ferrous selling prices ($82 per ton or 52% above last year's second quarter), reduced in part by lower sales volumes, higher costs to purchase unprocessed metal, and a 17% increase in ocean freight costs. Sales volumes were 5% lower than last year's second fiscal quarter.

Operating income from joint venture businesses was $16.2 million, compared to $8.7 million reported for last year's second quarter. The increase resulted primarily from higher average selling prices and an increase in the quarterly ferrous metal sales volumes. Ferrous sales volumes increased 27% compared to the same period in fiscal 2004, driven by the combination of increased raw material intake and the timing of when export orders are received and shipped. Higher average selling prices and sales volumes were mitigated in part by significant increases in the amounts paid to procure unprocessed metal.

Schnitzer’s Auto Parts Business reported operating income of $7.2 million, a 42% increases over the second quarter of fiscal 2004. The earnings growth was driven in part by the acquisition of seven new stores, which represents a 30% increase. Wholesale revenues grew as the result of the rise in prices for recycled metals, offset in part by the continuing increase in the cost to procure inventory. Administrative expenses ran modestly ahead of last year's run rate due to improvements in the business' infrastructure to support strategic growth plans.

The Steel Manufacturing Business reported operating income of $5.4 million, which compares to $2.7 million for last year's second quarter. The increase resulted from higher average selling prices (47% higher), which were primarily the result of strong world wide consumption of finished steel products. Selling prices for finished steel declined 3% on average from the first quarter of fiscal 2005, which was principally caused by a change in product mix coupled with a slight decline in market selling prices.

Sales volumes normally decline to their lowest levels during the company's second fiscal quarter of each year due to adverse weather conditions that slow demand. In addition, certain customers began reducing purchases of inventory in an effort to reduce their inventories built throughout most of fiscal 2004. Second quarter sales volumes were lower than normal seasonal levels due to the continued rebalancing of inventories by distributors and fabricators; however, consumption has remained strong. Sales volumes amounted to 125,000 tons during the second quarter of fiscal 2005, which compare to an unusually high rate of 162,000 tons sold during last year's second fiscal quarter. Since the end of the second fiscal quarter, the company has experienced strong demand for its finished steel products and it currently anticipates sales volumes for the 2005 third fiscal quarter to approximate the levels achieved in last year's third quarter.

Outlook—Schnitzer estimates its third quarter 2005 operating income to be in the $46 to $53 million range. This amount compares to operating income of $67.3 million reported for the third quarter of fiscal 2004.