Metals Recycling Business—The Metals Recycling Business's third quarter 2004 operating income amounted to $32.5 million, representing an improvement of 221% over the third quarter of last year. The increase was primarily driven by higher selling prices and sales volumes. Ferrous metal sales prices averaged a record $237 per ton during the recent quarter, which compares to $133 per ton reported in last year's third quarter and $158 per ton recognized in the second quarter of fiscal 2004. Many of the sales reported in the third quarter of fiscal 2004 were the result of orders taken late in the second quarter when market selling prices for ferrous metals rose to record levels. Third quarter 2004 sales volumes amounted to 445,000 tons, which were 3% higher than the volume shipped in the third quarter of fiscal 2003.

 

The higher sales prices were offset in part by sizable increases in the cost of unprocessed metal as well as export shipping costs that continued to rise due to record ocean charter rates. During the third quarter of fiscal 2004, the Company's average export shipping costs rose 80% above the levels experienced in the third quarter of 2003 and 17% above the amounts reported in the second quarter of 2004. The rise in ocean charter costs has been primarily driven by the improving world economy resulting in increased demand.

Joint Venture Businesses—Income from Joint Ventures amounted to $28.0 million in the third quarter of fiscal 2004, representing a 217% improvement over the prior year period. The improvement came almost entirely from the joint ventures in the metals recycling business that experienced similar market changes as the company's wholly owned Metals Recycling Business. Sales volumes rose to record levels during the recent quarter and totaled 1.8 million tons, representing a 42% increase over last year's third quarter. The majority of the volume improvement came from the joint venture brokerage business, which has continued to grow its market share. In addition, the processing joint ventures shipped a record 1.1 million tons in the third quarter of 2004, representing a 23% increase over the 2003 quarter. The higher sales volumes shipped by the processing joint ventures were caused in part by the sale of inventory that had temporarily built up during the first half of the year and was sold during the recent quarter.

Auto Parts Business—During the third quarter of fiscal 2004, the Auto Parts Business' grew its operating income to $8.6 million, which was 42% above the operating income of $6.0 million in the prior year's third quarter. Overall, revenues grew 35% from the third quarter of 2003 due to increases in both the retail and wholesale segments of the business. This improvement was driven by the addition of three new Canadian stores that were acquired in March 2004 and from the combination of higher recycled metal prices and continuing refinements in the business's core program. The higher revenues were offset in part by increases in the cost of inventory, which was affected by the rise in recycled metal prices.