These gains don't cause pain. A capital gain is the amount of money you pocket by selling one of your investments for more than you paid for it. Technically, capital gains only count for what's called a capital asset, but that's really just anything you own for investment purposes. Stocks and bonds obviously qualify, but your house and household furnishings can also count.

For tax purposes, capital gains are classified as either long-term (held for more than one year) or short-term (held for less than one year) and there are different tax implications for how long you hold onto a capital asset. For most long-term capital gains, you're taxed no more than 15% of the value of the asset. Short-term gains get taxed as regular income, so you pay the rate for the tax bracket you're in.

Capital gains can also be realized or unrealized. When you physically sell an asset like a stock, you've realized the capital gain. When you're holding the stock, and it has a value over its purchase price, but you're not selling it, you've got an unrealized gain, and you won't realize it until you sell.

In a perfect world, we'd all have capital gains. But no one¿s that smart or lucky. When the value of an asset at sale is below what you've paid for it, it's called a capital loss. The good news is that the government lets you count that loss against any gains you've had, lowering the taxes you pay. In fact, many people who sell a stock that has risen far over their purchase price tend to sell some stinkers, too, at the same time for the tax benefit. This is known as a capital-loss offset.

Home / Markets / Industries / Industrials

Tuesday, July 01, 2008

Schnitzer Steel Reports Record Quarter

Email this Story | Respond to Editor | Print

Comtex

PORTLAND, Ore., Jul 01, 2008 (BUSINESS WIRE) ----Schnitzer Steel Industries, Inc. (Nasdaq:SCHN) today reported record quarterly net income of $62 million, or $2.14 per diluted share, for the fiscal 2008 third quarter ended May 31, 2008. Revenues of $972 million were also a quarterly record. Compared to the third quarter of fiscal 2007, revenues increased 37% and diluted earnings per share increased 46%.

 (in millions,
   except per-share data) Year Year Third Third Second to to Quarter Quarter Quarter Date Date 2008 2007 2008 2008 2007 ----------------------------------------------------------------------
   Revenues $ 972 $ 709 $ 751 $2,328 $1,824 ---------------------------------------------------------------------- Operating
   Income $ 102 $ 70 $ 59 $ 202 $ 151 ---------------------------------------------------------------------- Net Income $ 62
   $ 44 $ 36 $ 122 $ 93 ---------------------------------------------------------------------- Diluted EPS $2.14 $1.47 $1.25
   $ 4.23 $ 3.06 ----------------------------------------------------------------------

"We are pleased to report the strongest quarterly financial results in the Company's history, as each of our three operating divisions posted record revenues and operating income," said John D. Carter, President and Chief Executive Officer. "Global demand for recycled metals remained robust, driven by economic growth in developing countries. In the Metals Recycling Business, our worldwide market visibility and flexibility to sell both domestically and internationally allowed us to take advantage of strong markets and significantly expand margins and operating income."

"In the Steel Manufacturing Business, tight domestic supply conditions resulting from a low level of imports affecting our product lines contributed to record quarterly sales volumes and record selling prices for finished steel products," added Carter. "The Auto Parts Business continued its focus on increasing vehicle purchases which led to its sixth consecutive quarter of year over year operating income growth."

Commenting on the third quarter results, Tamara Lundgren, Executive Vice President and Chief Operating Officer, said "All three of the Company's operating divisions were able to maximize the benefits of the strong markets in which we operate through operating efficiencies and higher throughput. In the Metals Recycling Business, our capital investments to increase capacity allowed us to process the strong inflow of raw materials at all our major locations. Increased production capacity enabled the Steel Manufacturing Business to produce and ship record sales volumes, and in the Auto Parts Business our ability to process the increased car purchases while extracting more value from every car was a major factor in achieving record operating income."

Metals Recycling Business

The Metals Recycling Business continued to leverage its bi-coastal port facilities to access the robust export markets for recycled metals.

 ($ in millions, except selling prices; ferrous volume in thousands of long tons, non-ferrous volumes in
   millions of pounds) Third Third Second Year to Year to Quarter Quarter Quarter Date Date 2008 2007 2008 2008 2007 ----------------------------------------------------------------------
   Total Revenues $ 810 $ 587 $ 597 $ 1,888 $ 1,474 ---------------------------------------------------------------------- Ferrous
   Revenues $ 668 $ 470 $ 497 $ 1,553 $ 1,180 ---------------------------------------------------------------------- Ferrous
   Volumes (Processing/ Trading) 1,137/151 1,028/362 1,128/149 3,265/435 3,039/959 ----------------------------------------------------------------------
   Avg. Net Ferrous Sales Prices ($/LT)(1) (Processing/ Trading) $ 463/440 $ 294/308 $ 326/337 $ 360/366 $ 253/274 ----------------------------------------------------------------------
   Nonferrous Volumes 129 108 96 314 278 ---------------------------------------------------------------------- Avg. Net Nonferrous
   Sales Prices ($/LB)(1) $ 1.07 $ 1.05 $ 0.98 $ 1.02 $ 1.01 ----------------------------------------------------------------------
   Operating Income (2) $ 94 $ 55 $ 52 $ 175 $ 120 ---------------------------------------------------------------------- (1)
   Sales prices are shown net of freight (2) Includes operating income from joint ventures

Revenues for the Metals Recycling Business increased 38% over the third quarter of 2007, primarily as a result of record ferrous scrap prices and higher nonferrous sales volumes. Average net ferrous processing sales prices were $463/ton, a 57% year over year increase, while nonferrous sales volumes increased 19% over last year.

Operating income for the quarter was 70% higher than the third quarter of 2007. During the quarter, export sales prices increased more rapidly than domestic purchase prices for ferrous scrap and, combined with higher ferrous and nonferrous processing sales volumes, resulted in the significant increase in year over year operating income and operating margins.

Auto Parts Business

A continued focus on increasing car volumes, combined with higher prices for cores and scrap, resulted in healthy year over year growth in sales and operating income for the Auto Parts Business.

 ($ in millions, except locations) Third Third Second Year to Year to Quarter Quarter Quarter Date
   Date 2008 2007 2008 2008 2007 ---------------------------------------------------------------------- Revenues $ 101 $ 71 $
   77 $ 250 $192 ---------------------------------------------------------------------- Operating Income $ 17 $ 10 $ 7 $ 30 $
   19 ---------------------------------------------------------------------- Locations (end of quarter) 53 52 53 53 52 ----------------------------------------------------------------------

Third quarter revenues for the Auto Parts Business increased 41% over the same period last year, primarily as a result of a 20% increase in self-service car volumes, higher per car sales of cores and scrap and improved full-service and self-service parts sales.

Operating income increased 64% from the third quarter of 2007, primarily due to the increased car volumes and significantly improved margins on scrap and core sales.

Steel Manufacturing Business

The Steel Manufacturing Business utilized its increased production capacity to produce and ship record sales volumes for the second consecutive quarter.

 ($ in millions, except selling prices; volume in thousands of tons) Third Third Second Year to Year to Quarter Quarter
   Quarter Date Date 2008 2007 2008 2008 2007 ---------------------------------------------------------------------- Revenues
   $ 168 $ 112 $ 143 $ 421 $ 307 ---------------------------------------------------------------------- Avg. Net Sales Prices
   ($/T) $ 744 $ 596 $ 616 $ 658 $ 561 ---------------------------------------------------------------------- Sales Volume 218
   182 202 594 526 ---------------------------------------------------------------------- Operating Income $ 23 $ 18 $ 13 $ 50
   $ 45 ----------------------------------------------------------------------

Revenues for the Steel Manufacturing Business rose 49% on a year over year basis due to a 36 thousand ton, or 20% increase in sales volumes, coupled with a $148/ton, or 25%, increase in average net sales prices. Compared to the second quarter of 2008, revenues increased 17% as average net prices during the quarter increased $128/ton. Higher overseas prices and a weak U.S. dollar continue to limit the volume of finished steel products imported for sale in the U.S., resulting in price increases despite soft domestic demand.

Operating income, which was a quarterly record, increased 30% year over year as the higher sales volumes offset higher costs for scrap and other raw materials.

Outlook

The Company said the factors that will affect its results in the fiscal fourth quarter of 2008 include:

Metals Recycling Business:

Pricing. The export markets for ferrous scrap metal continue to strengthen. As a result, based on orders received to date, average ferrous selling prices, net of freight, are expected to increase an additional $100 to $125/ton over the net prices received in the recently completed third quarter. Nonferrous prices are expected to decline slightly.

Sales volumes. Fourth quarter ferrous processing sales volumes are expected to increase 175 thousand to 200 thousand tons over the volumes shipped in the third quarter, depending on the timing of shipments. Quarter over quarter nonferrous sales volumes are expected to approximate the record volumes shipped in the third quarter.

Margins. Higher export prices for ferrous metals are expected to result in higher margins on both a year over year and quarter over quarter basis.

Auto Parts Business:

Revenue. Higher prices for cores and scrap and improved parts sales are expected to result in significantly higher revenues compared to the fourth quarter of fiscal 2007. Revenues are expected to approximate the recently completed third quarter as normal seasonal declines in parts sales are expected to offset higher selling prices for scrapped vehicles.

Margins. Margins are expected to increase slightly when compared to the fourth quarter of last year. Compared to the third quarter of this year, lower parts sales and higher vehicle purchase costs are expected to result in a slight decline in margins.

Steel Manufacturing Business:

Pricing. Market prices for finished steel products are expected to remain strong despite soft domestic demand as the level of import activity continues to remain low. Higher raw material costs, particularly for scrap, are also expected to contribute to higher selling prices. As a result of these conditions, prices for steel products on the West Coast should continue to rise, with average selling prices during the fourth quarter increasing 15-20% compared to the recently completed third quarter.

Volumes. Sales volumes are expected to remain at relatively high levels with a slight increase over the fourth quarter of 2007, although declining modestly from the record volumes in the recently completed third quarter.

Margins. Scrap prices are expected to rise at a comparable rate to sales prices, resulting in margins which should approximate the third quarter of 2008.

Third Quarter 2008 Conference Call

A conference call to discuss results will be held today, July 1, 2008, at 11:30 a.m. EDT, hosted by John Carter, Chief Executive Officer, and Richard Peach, Chief Financial Officer. The call will be webcast and is accessible on Schnitzer Steel's web site at www.schnitzersteel.com.

Schnitzer Steel Industries, Inc. is one of the largest manufacturers and exporters of recycled ferrous metal products in the United States with 36 operating facilities located in 11 states throughout the country, including six export facilities located on both the East and West Coasts and in Hawaii. The Company's vertically integrated operating platform also includes its auto parts and steel manufacturing businesses. The Company's auto parts business sells used auto parts through its 35 self-service facilities and 18 full-service facilities located in 15 states and in western Canada. With an annual production capacity of over 750,000 tons, the Company's steel manufacturing business produces finished steel products, including rebar, wire rod and other specialty products. The Company commenced its 102nd year of operations in fiscal 2008.

This news release, particularly the Outlook section, contains forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding the Company's outlook for the business and statements as to expected pricing, sales volume, operating margins and operating income. Such statements can generally be identified because they contain "expect," "believe," "anticipate," "estimate" and other words that convey a similar meaning. One can also identify these statements as statements that do not relate strictly to historical or current facts. Examples of factors affecting the Company that could cause actual results to differ materially from current expectations are the following: volatile supply and demand conditions affecting prices and volumes in the markets for both the Company's products and the raw materials it purchases; world economic conditions; world political conditions; changes in federal and state income tax laws; government regulations and environmental matters; impact of pending or new laws and regulations regarding imports and exports into the United States and other foreign countries; foreign currency fluctuations; competition; seasonality, including weather; energy supplies; freight rates and availability of transportation; loss of key personnel; expectations regarding the Company's compliance program; the inability to obtain sufficient quantities of scrap metal to support current orders; purchase price estimates made during acquisitions; business integration issues relating to acquisitions of businesses; new accounting pronouncements; availability of capital resources; creditworthiness of suppliers and customers; and business disruptions resulting from installation or replacement of major capital assets, as discussed in more detail in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q. One should understand that it is not possible to predict or identify all factors that could cause actual results to differ from the Company's forward-looking statements. Consequently, the reader should not consider any such list to be a complete statement of all potential risks or uncertainties. The Company does not assume any obligation to update any forward-looking statement.

For more information about Schnitzer Steel Industries, Inc., go to www.schnitzersteel.com.

 SCHNITZER STEEL INDUSTRIES, INC. FINANCIAL
   HIGHLIGHTS (in thousands, except per share amounts) (Unaudited) For the Three Months For the Nine Months Ended Ended ---------------------
   ------------------------- May 31, May 31, May 31, 2008 May 31, 2007 2008 2007 ---------- ---------- ------------ ------------
   REVENUES: Metals Recycling Business: Ferrous sales: Processing $ 594,856 $344,959 $1,372,782 $ 883,981 Trading 73,041 124,578
   180,484 296,505 Nonferrous sales 140,033 114,687 325,797 284,612 Other sales 2,490 2,766 9,386 8,497 ---------- ----------
   ------------ ------------ Total sales 810,420 586,990 1,888,449 1,473,595 Auto Parts Business 100,641 71,439 250,137 192,032
   Steel Manufacturing Business 167,668 112,464 420,856 307,448 Intercompany sales eliminations (106,588) (61,444) (231,931)
   (149,329) ---------- ---------- ------------ ------------ Total $ 972,141 $ 709,449 $ 2,327,511 $ 1,823,746 ========== ==========
   ============ ============ INCOME (LOSS) FROM OPERATIONS: Metals Recycling Business: Processing $ 90,513 $ 55,323 $ 168,463
   $ 118,030 Trading 3,003 (361) 6,630 1,532 Auto Parts Business 16,720 10,220 30,474 19,022 Steel Manufacturing Business 22,767
   17,565 50,276 44,834 Corporate expense (25,365) (10,699) (46,871) (31,467) Intercompany eliminations (5,347) (2,278) (6,516)
   (1,340) ---------- ---------- ------------ ------------ Total $ 102,291 $ 69,770 $ 202,456 $ 150,611 ========== ==========
   ============ ============ NET INCOME $ 61,719 $ 43,754 $ 122,301 $ 93,358 ========== ========== ============ ============
   BASIC EARNINGS PER SHARE $ 2.19 $ 1.48 $ 4.32 $ 3.09 ========== ========== ============ ============ DILUTED EARNINGS PER
   SHARE $ 2.14 $ 1.47 $ 4.23 $ 3.06 ========== ========== ============ ============ SHARE INFORMATION (THOUSANDS): Basic shares
   outstanding 28,177 29,510 28,315 30,203 ========== ========== ============ ============ Diluted shares outstanding 28,847
   29,739 28,894 30,502 ========== ========== ============ ============

 SCHNITZER STEEL INDUSTRIES, INC. CONDENSED
   CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) (Unaudited) For the Three For the Nine Months Months
   Ended Ended ------------------- ----------------------- May 31, May 31, May 31, May 31, 2008 2007 2008 2007 --------- ---------
   ----------- ----------- Revenues $972,141 $709,449 $2,327,511 $1,823,746 --------- --------- ----------- ----------- Cost
   of goods sold 798,531 593,736 1,960,303 1,544,060 Selling, general and administrative 74,172 47,213 170,982 132,813 (Income)
   from joint ventures (2,853) (1,270) (6,230) (3,738) --------- --------- ----------- ----------- Operating income 102,291 69,770
   202,456 150,611 Other income (expense): Interest expense (1,707) (2,852) (6,703) (6,219) Other income (expense), net 879 1,192
   1,589 2,593 --------- --------- ----------- ----------- (828) (1,660) (5,114) (3,626) --------- --------- ----------- -----------
   Income before income taxes and minority interests 101,463 68,110 197,342 146,985 Income tax expense (38,620) (23,631) (72,726)
   (51,967) --------- --------- ----------- ----------- Income before minority interests 62,843 44,479 124,616 95,018 Minority
   interests, net of tax (1,124) (725) (2,315) (1,660) -------- -------- ----------- ---------- Net income $ 61,719 $ 43,754
   $ 122,301 $ 93,358 ========= ========= =========== =========== Basic earnings per share $ 2.19 $ 1.48 $ 4.32 $ 3.09 =========
   ========= =========== =========== Diluted earnings per share$ 2.14 $ 1.47 $ 4.23 $ 3.06 ========= ========= =========== ===========

 Schnitzer Steel Industries, Inc. Selected Operating Statistics (Unaudited) Total Q1 FY08 Q2 FY08 Q3 FY08 FY08
   ---------- ---------- ---------- ---------- Metals Recycling Business Ferrous Recycled Metal Selling Prices ($/LT)(1) Domestic
   $ 279 $ 323 $ 464 $ 359 Exports 280 329 463 360 Total Processing 280 326 463 360 Trading 313 337 440 366 Ferrous Processing
   Sales Volume (LT) Cascade 179,686 170,221 186,696 536,603 Domestic 178,833 210,825 226,961 616,619 Export 642,142 746,736
   722,973 2,111,851 ------------------------------------------- Total Processed 1,000,661 1,127,782 1,136,630 3,265,073 -------------------------------------------
   Ferrous Trading Sales Volume (LT) Trading 134,957 148,899 151,324 435,180 ------------------------------------------- Total
   Ferrous Sales Volume (LT) 1,135,618 1,276,681 1,287,954 3,700,253 =========================================== Nonferrous Average
   Price ($/pound)(1) $ 1.000 $ 0.980 $ 1.069 $ 1.020 Nonferrous Sales Volume (pounds, in thousands) 88,808 96,278 128,858 313,944
   Steel Manufacturing Business Finished Goods Selling Prices ($/NT)(1) Average $ 601 $ 616 $ 744 $ 658 Sales Volume (NT) Finished
   Goods 174,230 202,160 217,900 594,290 Auto Parts Business Number of self- service locations at end of quarter 35 35 35 35
   Number of full- service sites at end of quarter 18 18 18 18 Total Q1 FY07 Q2 FY07 Q3 FY07 Q4 FY07 FY07 ---------- ----------
   ---------- ---------- ---------- Metals Recycling Business Ferrous Recycled Metal Selling Prices ($/LT)(1) Domestic $ 219
   $ 233 $ 293 $ 273 $ 256 Exports 230 238 295 292 266 Total Processing 226 237 294 287 263 Trading 252 257 308 298 279 Ferrous
   Processing Sales Volume (LT) Cascade 191,090 151,383 185,281 176,768 704,522 Domestic 155,970 174,752 199,587 191,250 721,559
   Export 521,200 816,683 643,031 884,104 2,865,018 ------------------------------------------------------ Total Processed 868,260
   1,142,818 1,027,899 1,252,122 4,291,099 ------------------------------------------------------ Ferrous Trading Sales Volume
   (LT) Trading 320,018 276,220 362,305 253,281 1,211,824 ------------------------------------------------------ Total Ferrous
   Sales Volume (LT) 1,188,278 1,419,038 1,390,204 1,505,403 5,502,923 ======================================================
   Nonferrous Average Price ($/pound)(1) $ 1.017 $ 0.964 $ 1.049 $ 1.042 $ 1.020 Nonferrous Sales Volume (pounds, in thousands)
   79,729 90,140 108,149 105,068 383,086 Steel Manufacturing Business Finished Goods Selling Prices ($/NT)(1) Average $ 548 $
   536 $ 596 $ 617 $ 574 Sales Volume (NT) Finished Goods 166,938 177,301 182,427 183,635 710,301 Auto Parts Business Number
   of self- service locations at end of quarter 35 35 35 35 Number of full- service sites at end of quarter 17 17 17 17 (1) Price
   information is shown after a reduction for the cost of freight incurred to deliver the product to the customer.

   SCHNITZER STEEL INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands, except per share amounts)
   May 31, August 2008 31, 2007 ---------- ---------- Assets ------------------------------------------------ Current assets:
   Cash and cash equivalents $ 9,205 $ 13,410 Accounts receivable, net 285,708 170,212 Inventories 385,274 258,568 Other current
   assets 24,306 19,286 ---------- ---------- Total current assets 704,493 461,476 Property, plant and equipment, net 410,241
   383,910 Goodwill and other assets 335,521 306,028 ---------- ---------- Total assets $1,450,255 $1,151,414 ========== ==========
   Liabilities and Shareholders' Equity ------------------------------------------------ Current liabilities: Short-term borrowings
   $ 24,522 $ 20,275 Other current liabilities 260,085 171,914 ---------- ---------- Total current liabilities 284,607 192,189
   Long-term debt 215,023 124,079 Other long-term liabilities 75,439 64,709 Minority interests 4,564 5,373 Shareholders' equity
   870,622 765,064 ---------- ---------- Total liabilities and shareholders' equity $1,450,255 $1,151,414 ========== ==========

SOURCE: Schnitzer Steel Industries, Inc.

Schnitzer Steel Industries, Inc. Investor Relations Contact: Rob
   Stone, 503-224-9900 or Press Relations Contact: Tom Zelenka, 503-323-2821 Website: www.schnitzersteel.com Email: ir@schn.com