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Schnitzer Reports Third Quarter Fiscal 2012 Financial Results

Pricing: Average ferrous prices were flat, compared to prices in the second quarter of fiscal 2012. Average nonferrous prices increased 7%, compared to prices in the second quarter of fiscal 2012.

Margins: Operating income was $18 million in the third quarter of fiscal 2012, which equates to operating income per ferrous ton of $13, a decrease of $2 compared to the second quarter fiscal 2012. Operating margins increased from our market outlook due to higher production and to lower than forecasted cost of goods sold, including purchase prices and freight costs, among other items. However, operating margins remain compressed as a result of the weak economic environment in the U.S.

Auto Parts Business

Our Auto Parts Business delivered increased volumes, revenues and operating income in the third quarter of fiscal 2012 as compared to the prior quarter.
Summary of Auto Parts Business Results
($ in millions, except locations)
3Q12   2Q12   % Change   3Q11
Revenues $ 83   $ 78   6 %   $ 87
Operating Income* 13 9 44 % 17
Car Purchase Volumes (000) 89 84 6 % 93
Locations (end of quarter) 51 51 % 50
* Excludes results from discontinued operations

Revenues: Revenues increased 6% from the prior quarter due to higher parts sales and admissions, while scrap and core revenues were essentially in line with the second quarter.

Margins: Operating margins of 15% reflected improved volumes sequentially, as well as seasonal benefits on parts sales and admissions, and lower SG&A expenses, as compared to the second quarter of fiscal 2012.

Steel Manufacturing Business

In the third quarter, our Steel Manufacturing Business achieved break-even operating income.
Summary of Steel Manufacturing Business Results
($ in millions, except selling prices; volume in thousands of tons)
3Q12   2Q12   % Change   3Q11
Revenues $ 79   $ 85   (7 )%   $ 91
Operating Income (Loss) $ $ (1 )

$ 3
Avg. Net Sales Prices ($/NT) $ 734 $ 725 1 % $ 734
Finished Goods Sales Volumes 103 112 (8 )% 118
NM = Not Meaningful

Sales Volumes: Finished steel sales volumes of 103 thousand tons decreased 8% from the prior quarter.

Pricing: Average net sales prices for finished steel products increased slightly from the prior quarter due to product mix.

Margins: Slightly higher sales prices and lower production costs offset reduced sales volumes, resulting in break-even operating performance.

Market Conditions

Since the end of the third quarter, prices for recycled metals have declined significantly. As average inventory costs typically decline more slowly than the cash purchase costs for raw materials, this may negatively impact our fourth quarter results. The Company intends to provide its fourth quarter market outlook on expected pricing, volumes and margins during the second half of August 2012.

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