─ First Quarter Earnings Conference Call
11:30 a.m. Eastern January 9, 2019 ─
Schnitzer Steel Industries, Inc. (Nasdaq: SCHN) today announced
preliminary results for its first quarter of fiscal 2019 ended
November 30, 2018.
Consolidated Results
Schnitzer expects first quarter earnings per share from
continuing operations to be in the range of $0.53 - $0.57 and
adjusted earnings per share to be in the range of $0.54 - $0.58.
For the first quarter of fiscal 2018, reported earnings per share
from continuing operations were $0.64 and adjusted earnings per
share were $0.63. For a reconciliation of adjusted results to U.S.
GAAP, see the table provided in the Non-GAAP Financial Measures
section.
Divisional Operating
Performance
Auto and Metals Recycling (AMR) expects to report operating
income in the range of $22 million - $23 million, or operating
income per ferrous ton of $24 - $25, which is lower than in the
prior year’s first quarter. AMR’s expected performance reflects the
compression of operating margins resulting primarily from the
significant decline in selling prices for zorba and other
nonferrous products that outpaced the reduction in purchase prices
for raw materials, more than offsetting the benefits of operating
leverage from higher volumes. Average nonferrous net selling prices
are expected to decrease by approximately 19%, while average
ferrous net selling prices are expected to increase by
approximately 5% compared to the same period in the prior year.
Ferrous sales volumes are expected to increase by approximately 15%
and nonferrous sales volumes are expected to increase by
approximately 18% compared to the prior year first quarter.
AMR’s expected first quarter performance is lower than
anticipated as a result of developments during the second half of
the quarter, including a further compression of nonferrous margins,
increased freight costs for bulk ships, environmental-related
expenses and lower retail sales which were affected by unusually
inclement weather and California wildfires.
Cascade Steel and Scrap (CSS) expects to report operating income
of approximately $12 million, an improvement from the prior year
first quarter driven primarily by higher average net selling prices
for finished steel products which significantly outpaced the
increase in the cost of steelmaking raw materials. Average net
selling prices for finished steel products in the quarter are
expected to increase by approximately 25% year-over-year. Finished
steel sales volumes are expected to be 6% lower year-over-year due
primarily to lower production caused by the combination of a
temporary disruption to a major external natural gas pipeline and
downtime related to the implementation of mill equipment upgrades
aimed at improving productivity. The detrimental impact of the
natural gas supply disruption is estimated at $1 million in the
quarter.
Corporate Items
Consolidated financial performance in the first quarter is
expected to include Corporate expense of approximately $12 million,
a decrease of $4 million compared to the prior year first quarter,
which included a charge for a legacy environmental liability of $4
million. The Company’s effective tax rate for the first quarter of
fiscal 2019 is expected to be an expense of approximately 20%,
which includes a discrete tax benefit associated with share-based
compensation.
As of the end of the first quarter, total debt was $169 million.
Debt, net of cash, was $157 million (for a reconciliation of debt,
net of cash, see the table provided in the Non-GAAP Financial
Measures section), a sequential increase of $55 million primarily
driven by higher net working capital due to the annual timing of
the cash payment of incentive compensation accrued in fiscal 2018
and the timing of shipments. During the first quarter, the Company
also repurchased a total of 150,000 shares of its Class A common
stock in open market transactions pursuant to its ongoing
authorized share repurchase program.
The preliminary information provided above is based on the
Company’s current estimates of its financial results for the
quarter ended November 30, 2018 and remains subject to change based
on final review of the Company’s first quarter financial
results.
Schnitzer will report its first quarter fiscal 2019 financial
results on Wednesday, January 9, 2019 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 Company
> Investors > 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: 1365218
Replay Available: 01/09/2019 to
01/14/2019
About Schnitzer Steel Industries,
Inc.
Schnitzer Steel Industries, Inc. is one of the largest
manufacturers and exporters of recycled metal products in North
America 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 operations produce
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 a reconciliation of this measure for each period discussed
to the most directly comparable U.S. GAAP measure. Management
believes that presenting 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
certain previously contracted shipments, and the income tax expense
(benefit) allocated to 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 from 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 and concluded in the first quarter of fiscal
2018, are reported within selling, general and administrative
expense in the quarterly statements of income and are also excluded
from this 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
($ per share)
Quarter
1Q19
1Q18
High
Low
Diluted earnings per share from continuing
operations attributable to SSI
$
0.57
$
0.53
$
0.64
Other asset impairment charges
(recoveries), net
—
—
—
Restructuring charges and other
exit-related activities
0.01
0.01
—
Recoveries related to the resale or
modification of certain previously contracted shipments
—
—
(0.01
)
Income tax expense (benefit) allocated to
adjustments
—
—
—
Adjusted diluted earnings per share from
continuing operations attributable to SSI
$
0.58
$
0.54
$
0.63
Debt, Net of Cash
The following is a reconciliation of debt, net of cash (in
millions):
November 30, 2018
August 31, 2018
Total debt
$
169
$
107
Less: cash and cash equivalents
11
5
Total debt, net of cash(1)
$
157
$
103
(1) May not foot due to rounding.
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 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, growth initiatives or expected
results or objectives, 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 and the impact of federal tax reform; the impact of
tariffs, quotas and other trade actions; 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 by
our subsequently filed Quarterly Reports on Form 10-Q. Examples of
these risks include: potential environmental cleanup costs related
to the Portland Harbor Superfund site or other locations; the
cyclicality and impact of general economic conditions; changing
conditions in global markets including the impact of tariffs,
quotas and other trade actions; 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
equity investment impairment charges; inability to sustain the
benefits from productivity and restructuring initiatives;
difficulties associated with acquisitions and integration of
acquired businesses; customer fulfillment of their contractual
obligations; increases 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 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 one or more cybersecurity incidents;
environmental compliance costs and potential environmental
liabilities; inability to obtain or renew business licenses and
permits or renew facility leases; compliance with climate change
and greenhouse gas emission laws and regulations; reliance on
employees subject to collective bargaining agreements; and the
impact of the underfunded status of multiemployer plans in which we
participate.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181220005137/en/
Investor Relations: Michael Bennett (503) 323-2811 Website:
www.schnitzersteel.com Email: ir@schn.com
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