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Schnitzer Reports Second Quarter Fiscal 2012 Financial Results

Pricing: Average ferrous and nonferrous prices decreased 3% and 9%, respectively, compared to prices in the first quarter of fiscal 2012. Despite improved export demand during the quarter, the market disruption experienced in the first quarter, caused mainly by an escalation in the European financial crisis, resulted in a sharp decline in sales prices that impacted shipments during the beginning of the second quarter. In addition, mild winter conditions during the quarter generated softness in selling prices toward the end of the quarter.

Margins: Operating income per ferrous ton was $15 in the second quarter of fiscal 2012, an increase of 39% compared to $11 per ton in the first quarter fiscal 2012. While performance improved during the quarter, operating margins remained compressed due to weak market conditions and tight availability of supply.

Auto Parts Business

Our Auto Parts Business delivered steady volumes and lower revenues in the second quarter of fiscal 2012 as compared to the prior quarter. Weak market conditions led to a further decline in commodities pricing which, together with the tight supply conditions, resulted in operating margins of 11%.
Summary of Auto Parts Business Results
($ in millions, except locations)
2Q12   1Q12 % Change 2Q11
Revenues $ 78 $ 84 (7 )% $ 73
Operating Income* 9 10 (17 )% 16
Car Purchase Volumes (000) 84 85 (1 )% 81
Locations (end of quarter) 51 50 2 % 50
* Excludes results from discontinued operations

Revenues: Revenues decreased 7% from the prior quarter due to lower production volumes and lower commodity prices on revenues from scrap and core sales. Parts sales and admissions declined sequentially due to normal seasonal factors, but increased year over year due to successful organic marketing initiatives.

Margins: Operating margins of 11% were compressed primarily by tighter supply markets for end-of-life vehicles, seasonally lower parts sales and higher SG&A legal expense.

Steel Manufacturing Business

In the second quarter, our Steel Manufacturing Business results continued to reflect tepid demand from the construction industry on the West Coast.
Summary of Steel Manufacturing Business Results
($ in millions, except selling prices; volume in thousands of tons)
2Q12 1Q12   % Change     2Q11
Revenues $ 85 $ 80 6 % $ 70
Operating Income (Loss) $ (1 ) $ 1 NM $ (1 )
Avg. Net Sales Prices ($/NT) $ 725 $ 722 % $ 687
Finished Goods Sales Volumes 112 107 5 % 99
NM = Not Meaningful

Sales Volumes: Finished steel sales volumes of 112 thousand tons increased 5% from the prior quarter.

Pricing: Average net sales prices for finished steel products remained consistent with the prior quarter.

Margins: Slightly lower utilization and higher planned maintenance costs resulted in an operating loss of $1 million.

Market Conditions

In order to provide our investors with increased visibility into quarterly results, going forward the Company intends to provide its outlook on expected pricing, volumes and margins during the second half of the third month in the quarter. For the third quarter of fiscal 2012, we intend to issue a market outlook during the second half of May 2012.

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