Second Quarter Results—Net income of $18.5 million ($0.89 per diluted share) compares to net income of $8.4 million ($0.44 per diluted share) for the quarter ended February 28, 2003. Revenues of $161.6 million compare to revenues of $124.7 million for last year’s second quarter.

Six Month Results—Net earnings of $30.7 million ($1.48 per diluted share) compare to net income of $11.3 million ($0.60 per diluted share) for the first six months of fiscal 2003. Revenues of $290.0 million compare to revenues of $215.3 million during the first six months of fiscal 2003.

Comments—"The second quarter of fiscal 2004 was a strong quarter for Schnitzer Steel," said Robert W. Philip, Chairman and CEO. "In fact, our quarterly net income achieved record levels and our income from operations exceeded the forecasted range we provided in our last earnings release. The quarter's results were led by the exceptional performance of our wholly owned Metals Recycling Business. Overall, markets for recycled ferrous metal were strong and rising throughout the second quarter. Demand continued to remain good in Asia, but the domestic market seemed to show the greatest improvement as demand and prices for finished steel products rose. Partially offsetting the higher ferrous metal selling prices were sharp rises in the amounts paid for both unprocessed metal and export shipping costs. The second quarter of fiscal 2004 was also highlighted by the return to profitability of our Steel Manufacturing Business and the announced expansion of our Pick-N-Pull Auto Parts Business."

Outlook—As mentioned earlier, the ferrous recycled metal market continued to strengthen throughout the second quarter of fiscal 2004. However, the market for recycled metal continues to remain volatile and difficult to predict. The Metals Recycling Business normally accepts orders 60 to 90 days before shipment. Based upon the Metals Recycling Businesses' third quarter 2004 order backlog, contracted selling prices are, on average, significantly higher than the amounts realized in the second quarter of fiscal 2004 and the third quarter of fiscal 2003. Third quarter 2004 sales volumes are anticipated to be in the general range of last year's third quarter level. Ocean freight rates continue to remain high from a historical context, however, it appears freight rates are beginning to stabilize and may begin to show a modest decline in the coming months. The cost of unprocessed ferrous metal remains very competitive and volatile. The company anticipates the cost of unprocessed metal to generally follow the trend of market selling prices.

The joint venture processors in the metals recycling business are anticipated to experience similar market trends as the company's wholly owned Metals Recycling Business; however, their financial results may vary depending on geographical locations, competition and other factors.

The domestic economy appears to be improving, which has spurred an increase in demand for finished steel and has benefited the company's Steel Manufacturing Business. Over the last few months, finished steel selling prices steadily rose across all product lines. Finished steel sales volumes traditionally increase in the third fiscal quarter due to seasonal improvements in demand. However, management believes that certain customers appear to have built inventories during the second quarter, which is expected to modestly reduce third quarter sales volumes. It's anticipated that third quarter sales volumes will be in excess of 150,000 tons. Market prices are expected to continue to rise throughout the third quarter. The higher selling prices are anticipated to be partially offset by higher raw material costs. Overall, it is estimated that the Steel Manufacturing Business will continue to be profitable in the third quarter of fiscal 2004.

The Auto Parts Business typically experiences increased retail demand in the third quarter of each year as customer admissions increase in concert with improving weather conditions. Wholesale revenues should remain strong and may improve modestly over the second quarter of this fiscal year. The anticipated increase in revenues is expected to be offset in part by higher inventory costs. The Auto Parts Business's operating profits are also anticipated to benefit from the addition of the three new Canadian stores.

Overall, the company estimates its third quarter 2004 income from operations to be in the $38 million to $43 million range. This amount compares to income from operations of $22.0 million reported for the third quarter of fiscal 2003.

The company's effective tax rate should continue to benefit from Extraterritorial Income Exclusion benefits associated with certain export sales. These, as well as other factors, including increased profitability, should result in an effective fiscal 2004 annual tax rate in the 29% to 30% range.

Schnitzer Steel Industries, Inc. is one of the nation's largest recyclers of ferrous metals, a manufacturer of finished steel products and a leading self-service used auto parts retailer. The company, with its joint venture partners, processes approximately 4.9 million tons of recycled ferrous metals per year. In addition, the company's steel mill Cascade Steel Rolling Mills - has an annual production capacity of approximately 700,000 tons of finished steel products. The company and its joint venture partners operate primarily along the West Coast and Northeastern seaboard of the United States.