Third Quarter Earnings Conference Call 11:30
a.m. Eastern June 26, 2017
Schnitzer Steel Industries, Inc. (Nasdaq: SCHN) today announced
preliminary results for its third quarter ended May 31, 2017.
Schnitzer expects third quarter earnings per share from continuing
operations to be in the range of $0.56 - $0.60 and adjusted
earnings per share to be in the range of $0.52 - $0.56. These
expected results would reflect a significant increase compared to
fiscal 2017 second quarter earnings per share of $0.40 and adjusted
earnings per share of $0.37, and the prior year third quarter
earnings per share of $0.41 and adjusted earnings per share of
$0.46. For a reconciliation of adjusted results to U.S. GAAP, see
the table provided in the Non-GAAP Financial Measures section.
For the third quarter of fiscal 2017, Auto and Metals Recycling
(AMR) is expected to achieve operating income in the range of $29 -
$30 million, or operating income per ferrous ton of $30 - $31.
AMR’s expected operating income would reflect an increase of
approximately 12% sequentially and 10% from the prior year quarter,
and would represent the best third quarter performance since fiscal
2012. Ferrous sales volumes are expected to be approximately 12%
higher sequentially and 14% higher compared to the prior year
quarter. Nonferrous sales volumes are expected to be approximately
32% higher both sequentially and compared to the prior year
quarter. Average ferrous and nonferrous selling prices are expected
to approximate second quarter levels and increase approximately 20%
and 12%, respectively, compared to the prior year quarter. AMR’s
third quarter results are expected to include an immaterial impact
from average inventory accounting, which compares to a favorable
impact of $4 million and $3 million in the second quarter and prior
year quarter, respectively.
In the Steel Manufacturing Business (SMB), operating performance
is expected to be approximately break-even, which would be an
improvement of approximately $2 million sequentially and slightly
below prior year operating income of $1 million. Sales volumes are
expected to increase by approximately 33% sequentially and 6% from
the prior year quarter. Average selling prices are expected to
increase by approximately 5% sequentially and 9% from the prior
year quarter. During the quarter, improved seasonal demand
positively impacted sequential results, while continued pressure
from low-priced imports limited increases in selling prices in a
period of rising raw material costs which compressed SMB’s
operating margins.
Operating cash flow is expected to be in the range of $40 - $45
million. Total debt was $184 million as of the end of the third
quarter which is a reduction of $25 million, or 12%, from the
second quarter. Debt, net of cash was $169 million as of the end of
the third quarter which is a reduction of $30 million, or 15%, from
the end of the second quarter. For a reconciliation of debt, net of
cash, see the table provided in the Non-GAAP Financial Measures
section.
Since the end of the third quarter, we integrated our SMB
segment with AMR’s Oregon metals recycling operations, forming a
new division, Cascade Steel and Scrap (CSS). This change in
organizational structure is intended to enhance our flexibility,
generate internal synergies, and enable us to more effectively
adjust to market changes across our recycling and steel production
operations. We expect to report the results of CSS operations as a
single reportable segment beginning in the fourth quarter of fiscal
2017.
The preliminary information provided above is based on the
Company’s current estimates of its financial results for the third
quarter ended May 31, 2017 and remains subject to change based on
final review of the Company’s third quarter financial results.
Schnitzer will report its third quarter fiscal 2017 financial
results on Monday, June 26, 2017 and will webcast a conference call
to discuss the performance at 11:30 a.m. Eastern on the same day.
The webcast of the call and the accompanying slide presentation may
be accessed on Schnitzer’s website under the Investor section Event
Calendar at www.schnitzersteel.com/events. The call will be hosted
by Tamara L. Lundgren, President and Chief Executive Officer, and
Richard D. Peach, Senior Vice President, Chief Financial Officer
and Chief of Corporate Operations.
Replay Information
Toll Free Dial: (855) 859-2056
Toll Free International Dial: (404)
537-3406
Conference ID: 28950688
Replay Available: 06/26/2017 to 7/01/2017
About Schnitzer Steel Industries,
Inc.
Schnitzer Steel Industries, Inc. is one of the largest
manufacturers and exporters of recycled metal products in the
United States with operating facilities located in 23 states,
Puerto Rico and Western Canada. Schnitzer has seven deep water
export facilities located on both the East and West Coasts and in
Hawaii and Puerto Rico. The Company’s integrated operating platform
also includes auto parts stores with approximately 5 million annual
retail visits. The Company’s steel manufacturing business produces
finished steel products, including rebar, wire rod and other
specialty products. The Company began operations in 1906 in
Portland, Oregon.
Non-GAAP Financial
Measures
This press release contains expected performance based on
adjusted diluted earnings per share from continuing operations
attributable to SSI, which is a non-GAAP financial measure as
defined under SEC rules. As required by SEC rules, the Company has
provided reconciliations of this measure for each period discussed
to the most directly comparable U.S. GAAP measure. Management
believes that providing adjusted non-GAAP financial measures
provides a meaningful presentation of our results from business
operations excluding adjustments for other asset impairment charges
net of recoveries, restructuring charges and other exit-related
activities, recoveries related to the resale or modification of
previously contracted shipments, the non-cash write-off of debt
issuance costs, and the income tax expense (benefit) associated
with these adjustments, items which are not related to underlying
business operational performance, and improves the period-to-period
comparability of our results from business operations. Adjusted
operating results in fiscal 2015 excluded the impact of the resale
or modification of the terms, each at significantly lower prices
due to sharp declines in selling prices, of certain
previously-contracted bulk shipments for delivery during fiscal
2015. Recoveries resulting from settlements with the original
contract parties, which began in the third quarter of fiscal 2016,
are reported within SG&A expense in the quarterly statements of
operations and are also excluded from the measure. Further,
management believes that debt, net of cash is a useful measure for
investors because, as cash and cash equivalents can be used, among
other things, to repay indebtedness, netting this against total
debt is a useful measure of our leverage. These non-GAAP financial
measures should be considered in addition to, but not as a
substitute for, the most directly comparable U.S. GAAP
measures.
Diluted Earnings
Per Share From Continuing Operations Attributable to
SSI
Quarter 3Q17 2Q17
3Q16 High Low Income per
share from continuing operations attributable to SSI $ 0.60 $ 0.56
$ 0.40 $ 0.41 Other asset impairment charges (recoveries), net, per
share (0.04 ) (0.04 ) — — Restructuring charges and other
exit-related activities, per share — — (0.02 ) 0.02 Recoveries
related to the resale or modification of previously contracted
shipments, per share (0.01 ) (0.01 ) (0.01 ) (0.01 ) Non-cash
write-off of debt issuance costs, per share — — — 0.03 Income tax
expense (benefit) allocated to adjustments, per share(1) — —
— 0.01 Adjusted diluted earnings per share
from continuing operations attributable to SSI(2) $ 0.56 $
0.52 $ 0.37 $ 0.46
(1)
Income tax allocated to the aggregate adjustments
reconciling reported and adjusted diluted earnings per share from
continuing operations attributable to SSI is determined based on a
tax provision calculated with and without the adjustments.
(2)
May not foot due to rounding.
Debt, Net of
Cash
($ in thousands)
The following is a reconciliation of debt,
net of cash (in thousands):
February 28, 2017 May 31, 2017 Total debt
209,477 184,443 Less: cash and cash equivalents 9,830 15,209 Total
debt, net of cash $ 199,647 $ 169,234
Safe Harbor for Forward-Looking
Statements
Statements and information included in this press release that
are not purely historical are forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934 and
are made pursuant to the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995. Except as noted herein or
as the context may otherwise require, all references in this press
release to “we,” “our,” “us,” “Company,” “Schnitzer,” and “SSI”
refer to by Schnitzer Steel Industries, Inc. and its
consolidated subsidiaries.
Forward-looking statements in this press release include
statements regarding future events or our expectations, intentions,
beliefs and strategies regarding the future, which may include
statements regarding trends, cyclicality and changes in the markets
we sell into; the Company’s outlook or expected results, including
pricing, margins, sales volumes and profitability; strategic
direction or goals; targets; changes to manufacturing and
production processes; the cost of and the status of any agreements
or actions related to our compliance with environmental and other
laws; expected tax rates, deductions and credits; the realization
of deferred tax assets; planned capital expenditures; liquidity
positions; ability to generate cash from continuing operations; the
potential impact of adopting new accounting pronouncements;
obligations under our retirement plans; benefits, savings or
additional costs from business realignment, cost containment and
productivity improvement programs; and the adequacy of
accruals.
Forward-looking statements by their nature address matters that
are, to different degrees, uncertain, and often contain words such
as “outlook,” “target,” “aim,” “believes,” “expects,”
“anticipates,” “intends,” “assumes,” “estimates,” “evaluates,”
“may,” “will,” “should,” “could,” “opinions,” “forecasts,”
“projects,” “plans,” “future,” “forward,” “potential,” “probable,”
and similar expressions. However, the absence of these words or
similar expressions does not mean that a statement is not
forward-looking.
We may make other forward-looking statements from time to time,
including in reports filed with the Securities and Exchange
Commission, press releases, presentations and on public conference
calls. All forward-looking statements we make are based on
information available to us at the time the statements are made,
and we assume no obligation to update any forward-looking
statements, except as may be required by law. Our business is
subject to the effects of changes in domestic and global economic
conditions and a number of other risks and uncertainties that could
cause actual results to differ materially from those included in,
or implied by, such forward-looking statements. Some of these risks
and uncertainties are discussed in “Item 1A. Risk Factors” in Part
I of our most recent Annual Report on Form 10-K, as supplemented in
“Item 1A. Risk Factors” in Part II of subsequent Quarterly Reports
on Form 10-Q. Examples of these risks include: potential
environmental cleanup costs related to the Portland Harbor
Superfund site; the cyclicality and impact of general economic
conditions; instability in international markets; volatile supply
and demand conditions affecting prices and volumes in the markets
for both our products and raw materials we purchase; imbalances in
supply and demand conditions in the global steel industry; the
impact of goodwill impairment charges; the impact of long-lived
asset and joint venture investment impairment charges; the
realization of expected benefits or cost reductions associated with
productivity improvement and restructuring initiatives;
difficulties associated with acquisitions and integration of
acquired businesses; customer fulfillment of their contractual
obligations; changes in the relative value of the U.S. dollar; the
impact of foreign currency fluctuations; potential limitations on
our ability to access capital resources and existing credit
facilities; restrictions on our business and financial covenants
under our bank credit agreement; the impact of the consolidation in
the steel industry; inability to realize expected benefits from
investments in technology; freight rates and the availability of
transportation; the impact of equipment upgrades, equipment
failures and facility damage on production; product liability
claims; the impact of legal proceedings and legal compliance; the
adverse impact of climate change; the impact of not realizing
deferred tax assets; the impact of tax increases and changes in tax
rules; the impact of a cybersecurity incident; costs associated
with compliance with environmental regulations; inability to obtain
or renew business licenses and permits; compliance with greenhouse
gas emission regulations; reliance on employees subject to
collective bargaining agreements; and the impact of the underfunded
status of multiemployer plans in which we participate.
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version on businesswire.com: http://www.businesswire.com/news/home/20170615005337/en/
Schnitzer Steel Industries, Inc.Alexandra Deignan,
646-278-9711ir@schn.comwww.schnitzersteel.com
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