SCHN

Schnitzer Steel Industries, Inc. (SCHN)

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Schnitzer Steel Industries Inc. (SCHN)

F4Q2010 Earnings Call Transcript

October 7, 2010 5:00 pm ET

Executives

Alexandra Deignan – VP, IR

Tamara Lundgren – President and CEO

Richard Peach – SVP and CFO

Analysts

Brent Thielman – D.A. Davidson

Eric Glover – Canaccord

Torin Eastburn – CJS Securities

Luke Folta – Longbow Research

Timna Tanners – UBS

Sal Tharani – Goldman Sachs

David Lerner [ph]

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Schnitzer Steel’s fourth quarter 2010 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions)

As a reminder, today’s call is being recorded. At this time, I would now like to turn the conference over to your host, Ms. Alexandra Deignan. You may begin.

Alexandra Deignan

Thank you, Joe. Good afternoon, I’m Alexandra Deignan, the company’s Investor Relations contact. I’d like to thank everyone for taking the time to join us today. In addition to today’s audio comments, we have prepared a set of slides which were made available concurrently with our earnings press release. You can access the slides through our website at www.schnitzersteel.com or www.schn.com.

Before we get started, let me call your attention to the detailed Safe Harbor statements on slide two which were also included in our press release of today and in the company’s Form 10-K for the fiscal year ended August 31, 2010, which will be filed this afternoon.

These statements, in summary, say that in spite of management’s good faith, current opinions on various forward-looking matters, circumstances can change and not everything we think will happen always happens. In addition, we have guidance regarding our outlook for the first quarter of 2011 in our press release and in this presentation, and subsequent to this call we will not be under any obligation to update our outlook.

Finally, please note, we will be discussing some non-GAAP measures during our presentation today. We have included a reconciliation of those metrics to GAAP in the appendix of this slide presentation.

Now, let me turn the call over to Tamara Lundgren, our Chief Executive Officer. She will host the call today with Richard Peach, our Chief Financial Officer.

Tamara Lundgren

Thanks, Alley [ph], and good afternoon everyone. For those of you on the call who haven’t yet met Alley, Alexandra Deignan, is our new Vice President of Investor Relations. She is transitioning into this role as Rob Stone has expanded his treasury responsibilities to become our new Chief Risk Officer in addition to holding his title of treasurer.

As Alley is in our Portland office today and tomorrow, for those of you who’ve follow-up questions after the call, she’ll be with Rob and they can be reached in Rob’s office.

Today, I’ll walk you through our fourth quarter and fiscal year 2010 performance. Richard will then discuss the fourth quarter performance of each of our segments and our year-end capital structure and then I’ll provide an outlook for our first quarter.

So let’s get started by turning to slide four. Our fourth quarter performance echoed our strong full-year performance. We delivered a healthy revenue increase year-over-year of 21% and an EBITDA improvement of 32%. As a result, we’re pleased to announce a robust fourth quarter year-over-year EPS improvement of 66% to $0.58.

As expected, the short-term market volatility that we benefited from in the third quarter reversed in the fourth quarter. However, our fourth quarter earnings still showed a healthy improvement from the lower levels of Q4 2009. Our strong cash flow enabled us to spend about $50 million in CapEx and in share repurchases without increasing our leverage during the quarter.

Now, I’d like to take a moment to highlight our fiscal year 2010 performance. So let’s turn to slide five. As we look at our fiscal year 2010 in aggregate, I’m pleased to report that it was another very successful year for our company. We shipped over 4.2 million long tons of ferrous scrap and nearly 480 million pounds of non-ferrous products achieving revenue growth of nearly 30%. All three of our businesses sold higher volumes and delivered increased operating income and significantly higher operating margin.

Like others in our industry we benefited from improving markets driven by rising global demand. Our financial performance however, is not just about better market. It’s also a clear reflection of the combination of our platform, our people, and our cutting edge processes and results from a capitally-crossed strategy in years of investment. We achieved 29% growth this year and $2.3 billion in revenues.

Starting with our bi-coastal export platforms, we have the flexibility to deliver our product to wherever demand is greatest at any point in time. In addition, we leveraged the full cycle of the reclamation process, sourcing products through a wide network at the earliest stages of disposals. Maximizing the value of scraps to our collection and shredding operations and producing finished steel products with our own recycled scraps.

But we never forget that our greatest resource is our people. The significant expertise and commitment to excellence demonstrated by our 3,200 employees enable us to deliver the high performance metrics that we measure and benchmark against on a daily basis. Finally, our innovative approach to processes both through our continuous improvement program and steady investment in state-of-the-art technologies, these processes allow us to enhance our yield and to generate new revenue sources from within the way strength.

Read the rest of this transcript for free on seekingalpha.com