Philip Services Corporation Reports Financial Results For The Quarter Ended March 31, 2001

Business Wire, May 21, 2001

Business Editors

CHICAGO--(BUSINESS WIRE)--May 21, 2001

Obtains Covenant Amendment and Redeems Rights Agreement

Philip Services Corporation ("PSC") (NASDAQ:PSCD) (TSE:PSC.) today announced its consolidated financial results for the quarter ended March 31, 2001.

In addition, the Company announced that it has sought and obtained covenant amendments under its two secured loan facilities, including approval allowing the Company to redeem the rights under its Rights Agreement.

"The Company's industrial outsourcing and by-products services businesses posted strong performance in the first quarter, with double-digit revenue growth and improved profitability compared with the prior year," said Anthony Fernandes, President and CEO. "This was the result of increased demand for the Company's services in the refining, petrochemical and utilities sectors, as well as continued momentum in our analytical and by-products management businesses. While PSC posted a first quarter net loss of $9.2 million, this included a negative impact of $9.5 million as a result of three of our clients filing for bankruptcy protection. We have taken additional measures to minimize our credit exposure, while continuing to deliver high quality service and products to our key clients."

Financial Highlights for the Quarter Ended March 31, 2001:

- Revenue for the first quarter of 2001 was $413.0 million compared to revenue of $480.4 million in the same period last year. Excluding the effect of the sale or closure of certain businesses, which contributed revenue of $34.5 million in the first quarter of 2000, revenue decreased by $32.9 million, solely the result of a decline in our metals business. This significant decrease was due to a 21% decrease in the volume of scrap managed by the Metals Services Group and a 32% decrease in ferrous scrap prices, the result of very difficult conditions in the steel market.

- The income from operations for the first quarter of 2001 was $2.9 million, not including special charges of $2.8 million as a result of the Company's process re-engineering program. This represented a decline of $8.9 million compared to the first quarter of 2000, all of which occurred within PSC's Metals Services Group. This decline was primarily due to three of the Company's customers filing for bankruptcy protection, which impacted income by $9.5 million in the first quarter 2001. Income from operations for the first quarter of 2001 increased in both the Industrial Outsourcing and By-Products Services Group compared to the same period in the prior year. The net loss from continuing operations for the first quarter of 2001 was $9.2 million, which included the loss as a result of customer bankruptcy filings described above as well as special charges of $2.8 million. This compared to a net loss from continuing operations of $1.0 million for the same period in the prior year.

- Selling, general and administrative costs (SG&A) for the first quarter of 2001 were $34.3 million compared to $37 million for the first quarter of 2000. This decline in SG&A costs was primarily the result of PSC's continued efforts to establish a highly competitive cost structure.

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

                                    Three Months Ended March 31
                                  2001                     2000
                                                       (Predecessor
                                                          Company)*
                             --------------------------------------
Continuing operations:
Revenue                          413.0                    480.4
Gross margin                      48.4                     61.3
SG&A                              34.3                     37.0
Special charges                    2.8                       --
Income  from operations            0.1                     11.8
Net loss                          (9.2)                    (1.0)
Loss per share (basic and
 diluted)                        (0.38)                     n/a--
Cash flow from operating
 activities                      (37.6)                    (8.0)

- The consolidated financial results for the three months ended March 31, 2000 include the consolidated financial results of Philip Services Corp., an Ontario company, and its subsidiaries (collectively the "Predecessor Company"). Due to the changes in the financial structure of the Philip Services Corporation (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.

--Not applicable as current share structure was established March 31, 2000 following the reorganization.

Results of Operations:

The following table shows the results of these business segments for the first quarter of 2001 and 2000: