Philip Services Corporation Reports Financial Results for the Quarter Ended September 30, 2000

Business Wire, Nov 10, 2000

Business Editors

CHICAGO--(BUSINESS WIRE)--Nov. 10, 2000

Philip Services Corporation ("PSC") (NASDAQ:PSCD) (TSE:PSC) today announced its consolidated financial results for the quarter ended September 30, 2000.

All currency figures are stated in U.S. dollars. Results have been presented according to U.S. generally accepted accounting principles.

"Our third quarter financial results demonstrate measurable progress towards achieving key business objectives for the year 2000," said Anthony Fernandes, President and Chief Executive Officer. "These include establishing strong market presence, increasing our gross margin, decreasing overhead costs and improving our financial liquidity."

"Each of our business segments had operating results which generated a substantial improvement over last year, with certain businesses achieving steady market growth. We have also established substantial liquidity, in part through more effective cash management procedures. While our gross margin improvements and overhead cost reductions have continued into the third quarter, we are seeking other opportunities to achieve near-term profitability."

Highlights for the Third Quarter Ended September 30, 2000:

      - Revenue from the Industrial Outsourcing Services, By-Products
and Specialty Businesses segments for the third quarter 2000 was $223
million, an increase of 6% compared to revenue in the third quarter of
1999, after excluding the effect of the closure of certain
unprofitable businesses in Europe and the United States. Revenue from
the Metals Services businesses declined approximately $33 million in
the third quarter 2000 compared to the same period last year. This was
the result of the sale of the UK Metals business, which contributed
revenue of approximately $21 million in the third quarter of 1999, and
a 10% decline in ferrous scrap prices in the third quarter of 2000.
      - The operating loss from continuing operations for the period was
$1.6 million, a $14.7 million improvement over the third quarter last
year. The net loss from continuing operations for the third quarter of
2000 was $10.5 million, which included $9.8 million in interest
expense. This compares to a net loss of $80.2 million for the third
quarter of 1999, including $64 million in reorganization costs and
professional fees and $0.6 million in interest expense.
      - The gross margin for the third quarter of 2000 was $42.9 million
or 12% of revenue, compared to $33.1 million or 8.6% of revenue for
the same period last year. The gross margin percentage increase
reflects the continued consolidation of facilities and the closure of
unprofitable locations.
      - The Company has maintained substantial liquidity, with working
capital at September 30, 2000 of approximately $210 million, a cash
balance of $61 million and $175 million in working capital financing,
of which $75 million has been used to support letters of credit. The
Company has not needed to draw down cash from its working capital
facility to support its business requirements. Cash generated by
continuing operating activities in the third quarter 2000 was $28.5
million compared to a cash usage of $12.5 million in the third quarter
of 1999. The increase in the Company's cash position is the result of
improved cash collection activities and a volume decrease in the
Metals Services business.
      - SG & A costs for the third quarter of 2000 were $33.3 million
compared to $36.2 million for the same period last year. The SG&A
costs for the third quarter of 2000 included approximately $1.7
million of external costs to support The Philip Way, a program to
establish an integrated management system throughout the Company.
Excluding these costs, SG & A costs declined 13% from the same period
last year, the result of ongoing overhead cost reduction efforts.


                           Financial Highlights
                   (unaudited, millions of $, except EPS)

                              Three Months Ended   Nine Months Ended
                                 September 30        September 30
                                2000      1999     2000*       1999
                                     (Predecessor        (Predecessor
                                        Company)            Company)
                              ---------------------------------------
Continuing operations:
  Revenue                      359.3     383.4   1,274.2    1,196.0
  Gross margin                  42.9      33.1     157.7      130.2
  SG&A                          33.3      36.2     108.5      136.2
  Income(loss) from operations  (1.6)    (16.3)     14.3      (47.7)
  EBITDA**                      12.0      (1.1)     62.1       (2.7)
  Net earnings (loss)          (10.5)    (80.2)    (16.4)    (180.8)
  Loss per share (basic and
   diluted)                    (0.44)   n/a***    n/a***     n/a***
  Cash flow from operating
   activities                   28.5     (12.5)     92.9( )   (10.9)

* The consolidated financial results for the nine months ended September 30, 2000 include the consolidated financial results for Philip Services Corp., an Ontario company, (the "Predecessor Company") for the three months ended March 31, 2000 and the consolidated financial results for Philip Services Corporation, a Delaware company, (the "Company") for the six months ended September 30, 2000. Due to the changes in the financial structure of the Company and the application of fresh start reporting as a result of its financial reorganization, as described at the end of this release, the consolidated financial statements of the Predecessor Company for periods ending on or prior to March 31, 2000 may not be comparable with the consolidated financial statements of the Company issued subsequent to March 31, 2000.