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Schnitzer Provides Market Outlook For Fourth Quarter Of Fiscal 2012 And Announces Significant Cost Reductions

In our Auto Parts Business, the sharp drop in commodity prices is expected to result in a decline of 15-20% in revenues from the third quarter of fiscal 2012. Operating margins in the fourth quarter are expected to approximate break-even, with over half of the decline from the third quarter due to the significant negative impact from average inventory accounting. The remainder of the decline is expected to result from the effects of falling commodity prices on scrap and core revenues and seasonally lower parts sales. For fiscal year 2012, our Auto Parts Business is expected to generate an operating margin of approximately 10% on an aggregate 340 thousand cars purchased.

In our Steel Manufacturing Business, volume increases of approximately 15% are expected to be more than offset by a decline in average selling prices of slightly more than 5% from the third quarter. The lower selling prices, combined with unscheduled downtime and an adverse impact of average inventory accounting, are expected to result in an operating loss for the division of approximately $3 million. For fiscal year 2012, operating performance in our Steel Manufacturing Business is expected to be slightly below break-even.

Today we are also announcing initiatives which we expect will extract greater synergies from the significant acquisitions and technology investments which we made in fiscal 2011 and realign our organization to support our future growth. The completion of these initiatives is expected to yield higher earnings and to increase shareholder returns by further integrating our Metals Recycling and Auto Parts Businesses, streamlining our corporate functions, and reducing organizational layers. These initiatives are expected to lower annual operating costs by $25 million and be substantially complete by the end of the first quarter of fiscal 2013. Total restructuring charges are expected to be approximately $12 million, with $5 million of that amount expected to be incurred in the fourth quarter of fiscal 2012. Of the remainder, approximately half is expected to be incurred in the first quarter of fiscal 2013, with the balance by the end of the fiscal 2013. The restructuring charges primarily represent costs connected with the elimination of approximately 300 positions, or 7% of our current workforce, and contract termination costs, including from the consolidation of certain administrative offices. More detailed information will be provided during the Company’s fourth quarter earnings call in October.

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