Strong Global Demand and Strategic Actions
Drive Best Operating Performance in a Decade
Schnitzer Board Declares Quarterly
Dividend
Schnitzer Steel Industries, Inc. (NASDAQ: SCHN) today reported
results for its second quarter of fiscal 2021 ended February 28,
2021.
Second Quarter Fiscal 2021 Highlights
- Diluted earnings per share from continuing operations of $1.54,
more than triple earnings per share of $0.50 in the first quarter
of fiscal 2021, and compared to $0.14 in the second quarter of
fiscal 2020
- Adjusted diluted earnings per share from continuing operations
of $1.51, compared to adjusted diluted earnings per share of $0.57
in the first quarter of fiscal 2021 and $0.31 in the second quarter
of fiscal 2020
- Net income of $46 million, more than triple the net income of
$15 million in the first quarter of fiscal 2021, and compared to
net income of $5 million in the second quarter of fiscal 2020
- Adjusted EBITDA of $71 million in the quarter, compared to
adjusted EBITDA of $40 million in the first quarter of fiscal 2021
and $28 million in the second quarter of fiscal 2020
The Company’s performance benefited from strong global demand
for recycled metals and finished steel products, with selling
prices for ferrous and nonferrous scrap reaching multi-year highs.
The sharp increase in selling prices during the quarter contributed
to the Company’s strong margins, while ferrous sales volumes were
impacted by severe weather, which affected the timing of shipments.
Operating results also benefited from the continued strength in
West Coast demand for finished steel products, as well as the
execution of commercial initiatives and productivity improvements
supported by the One Schnitzer operating platform.
Tamara Lundgren, Chairman and Chief Executive Officer, stated,
“We are exceptionally pleased with our performance during the
quarter, reflecting our best operating income per ton since 2008.
This is a testament to the strength and agility of our team in
leveraging positive market conditions while delivering on our
operational and strategic initiatives. Since the end of the second
quarter, we have commissioned two of the advanced metal recovery
technology systems which are key to the execution of our strategic
plan and the achievement of our Sustainability goals.”
Ms. Lundgren continued, “Price volatility during the quarter was
significant, but trading was maintained at much higher price levels
than in the recent past, reflecting the stronger demand associated
with both the economic recovery and positive structural commodity
trends. Decarbonization and broader ESG factors, together with the
catalytic effect of global stimulus, are serving as structural
drivers of demand for recycled metals. Scrap, in other words, is an
important strategic solution for companies, industries and
governments that are focused on carbon reduction.”
Summary Results
($ in millions, except per share
amounts)
Three Months Ended
Six Months Ended
2Q21
1Q21
2Q20
2021
2020
Revenues
$
600
$
492
$
439
$
1,092
$
845
Gross margin (total revenues less cost of
goods sold)
$
113
$
72
$
59
$
185
$
100
Gross margin (%)
18.8
%
14.6
%
13.4
%
16.9
%
11.8
%
Selling, general and administrative
expense
$
54
$
50
$
46
$
104
$
93
Net income (loss)
$
46
$
15
$
5
$
61
$
(2
)
Net income (loss) per ferrous ton
$
47
$
14
$
5
$
30
$
(1
)
Diluted earnings (loss) per share from
continuing operations attributable to SSI shareholders
Reported
$
1.54
$
0.50
$
0.14
$
2.05
$
(0.11
)
Adjusted(1)
$
1.51
$
0.57
$
0.31
$
2.09
$
0.14
Adjusted EBITDA(1)
$
71
$
40
$
28
$
112
$
38
Adjusted EBITDA per ferrous ton(1)
$
73
$
38
$
29
$
55
$
19
Ferrous sales volumes (LT, in
thousands)
977
1,053
988
2,030
1,964
Avg. net ferrous sales prices
($/LT)(2)
$
387
$
269
$
255
$
326
$
235
Nonferrous sales volumes (pounds, in
millions)(3)
136
138
124
274
269
Avg. nonferrous sales prices
($/pound)(2)(3)
$
0.83
$
0.64
$
0.55
$
0.74
$
0.55
Finished steel average net sales price
($/ST)(2)
$
690
$
621
$
627
$
656
$
635
Finished steel sales volumes (ST, in
thousands)
136
134
129
270
242
Rolling mill utilization (%)
88
%
97
%
72
%
93
%
79
%
LT = Long Ton, which is equivalent to 2,240 pounds ST = Short
Ton, which is equivalent to 2,000 pounds
(1)
See Non-GAAP Financial Measures for
reconciliation to U.S. GAAP.
(2)
Price information is shown after netting
the cost of freight incurred to deliver the product to the
customer.
(3)
Nonferrous sales volumes and average
nonferrous prices excludes platinum group metals (PGMs) in
catalytic converters.
Second Quarter Fiscal 2021 Financial Review and
Analysis
Sharply higher average selling prices for ferrous and nonferrous
recycled metals led to an expansion in metal spreads and operating
margins, reflected in net income per ferrous ton of $47 and
adjusted EBITDA per ferrous ton of $73 in the quarter, both of
which reflect a strong sequential increase from $14 and $38,
respectively. Second quarter operating results also included
benefits from average inventory accounting of approximately $10 per
ferrous ton compared to $2 per ferrous ton in the first quarter of
fiscal 2021.
On a sequential basis, ferrous sales volumes were down 7%,
primarily driven by the impact of severe weather conditions in
February on timing of shipments, and nonferrous sales volumes were
down 2%, impacted by the availability of containers. Average
ferrous and nonferrous net selling prices were up 44% and 30%,
respectively. Finished steel sales volumes were up 1% and rolling
mill utilization in the quarter was 88%, reflective of seasonality
and severe weather conditions. Average net selling prices for
finished steel products were up 11%.
Operating cash flow in the second quarter of fiscal 2021 was
positive, as cash flows associated with increased profitability
more than offset the increase in working capital resulting from the
higher price environment. Capital expenditures were $23 million in
the quarter, including investments in maintaining the business,
environmental projects, advanced metal recovery technologies and
other growth projects. Total debt at the end of the quarter was
$171 million and debt, net of cash, was $159 million (for a
reconciliation of adjusted results and debt, net of cash, to U.S.
GAAP, see the table provided in the Non-GAAP Financial Measures
section). The Company has a revolving credit facility of $700
million and CAD$15 million that matures in 2023. The Company’s
effective tax rate for the second quarter of fiscal 2021 was an
expense of 20%.
During the second quarter, the Company returned capital to
shareholders through its 108th consecutive quarterly dividend.
Declaration of Quarterly Dividend
The Board of Directors declared a cash dividend of $0.1875 per
common share, payable May 3, 2021, to shareholders of record on
April 19, 2021. Schnitzer has paid a dividend every quarter since
going public in November 1993.
Analysts’ Conference Call: Second Quarter of Fiscal
2021
A conference call and slide presentation to discuss results will
be held today, April 7, 2021, at 11:30 a.m. Eastern and will be
hosted by Tamara L. Lundgren, Chairman and Chief Executive Officer,
and Richard Peach, Executive Vice President, Chief Financial
Officer and Chief Strategy Officer. The call and the slide
presentation will be webcast and accessible on the Company’s
website under Company > Investors > Event Calendar at
www.schnitzersteel.com/events.
Summary financial data is provided in the following pages. The
slide presentation and related materials will be available prior to
the call on the above website.
About Schnitzer Steel Industries, Inc.
Schnitzer Steel Industries, Inc. is one of the largest
manufacturers and exporters of recycled metal products in North
America with operating facilities located in 23 states, Puerto Rico
and Western Canada. Schnitzer has seven deep water export
facilities located on both the East and West Coasts and in Hawaii
and Puerto Rico. The Company’s integrated operating platform also
includes 50 stores which sell serviceable used auto parts from
salvaged vehicles and receive approximately 5 million annual retail
visits. The Company’s steel manufacturing operations produce
finished steel products, including rebar, wire rod and other
specialty products. The Company began operations in 1906 in
Portland, Oregon.
SCHNITZER STEEL INDUSTRIES,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
($ in thousands, except per share
amounts)
(Unaudited)
Three Months Ended
Six Months Ended
February 28,
2021
November 30,
2020
February 29,
2020
February 28,
2021
February 29,
2020
Revenues
$
600,111
$
492,107
$
439,482
$
1,092,218
$
845,066
Cost of goods sold
487,025
420,094
380,520
907,119
745,280
Selling, general and administrative
expense
54,142
49,906
46,426
104,048
93,200
(Income) from joint ventures
(454
)
(727
)
(190
)
(1,181
)
(389
)
Asset impairment charges
—
—
402
—
2,094
Restructuring charges and other
exit-related activities
814
64
4,633
878
5,100
Operating income (loss)
58,584
22,770
7,691
81,354
(219
)
Interest expense
(1,224
)
(1,780
)
(1,320
)
(3,004
)
(2,743
)
Other (loss) income, net
(242
)
(165
)
(98
)
(407
)
108
Income (loss) from continuing operations
before income taxes
57,118
20,825
6,273
77,943
(2,854
)
Income tax (expense) benefit
(11,469
)
(5,719
)
(1,770
)
(17,188
)
764
Income (loss) from continuing
operations
45,649
15,106
4,503
60,755
(2,090
)
Income (loss) from discontinued
operations, net of tax
30
(42
)
1
(12
)
29
Net income (loss)
45,679
15,064
4,504
60,743
(2,061
)
Net income attributable to noncontrolling
interests
(1,091
)
(960
)
(621
)
(2,051
)
(1,051
)
Net income (loss) attributable to SSI
shareholders
$
44,588
$
14,104
$
3,883
$
58,692
$
(3,112
)
Net income (loss) per share attributable
to SSI shareholders:
Basic:
Income (loss) per share from continuing
operations
$
1.59
$
0.51
$
0.14
$
2.10
$
(0.11
)
Net income (loss) per share
$
1.59
$
0.51
$
0.14
$
2.10
$
(0.11
)
Diluted:
Income (loss) per share from continuing
operations
$
1.54
$
0.50
$
0.14
$
2.05
$
(0.11
)
Net income (loss) per share(1)
$
1.54
$
0.50
$
0.14
$
2.05
$
(0.11
)
Weighted average number of common
shares:
Basic
27,991
27,807
27,721
27,899
27,618
Diluted
28,862
28,485
28,139
28,673
27,618
Dividends declared per common share
$
0.1875
$
0.1875
$
0.1875
$
0.3750
$
0.3750
SCHNITZER STEEL INDUSTRIES, INC.
SELECTED OPERATING
STATISTICS
(Unaudited)
YTD
1Q21
2Q21
2021
Total ferrous volumes (LT, in
thousands)(1)
1,053
977
2,030
Total nonferrous volumes (pounds, in
thousands)(1)(3)
138,236
135,899
274,135
Ferrous selling prices ($/LT)(2)
Domestic
$
242
$
349
$
297
Foreign
$
276
$
399
$
334
Average
$
269
$
387
$
326
Ferrous sales volume (LT, in
thousands)
Domestic
388
391
779
Foreign
665
586
1,251
Total
1,053
977
2,030
Nonferrous average price
($/pound)(2)(3)
$
0.64
$
0.83
$
0.74
Nonferrous sales volume (pounds, in
thousands)(3)
138,236
135,899
274,135
Cars purchased (in thousands)(4)
78
80
158
Auto stores at period end
50
50
50
Finished steel average sales price
($/ST)(2)
$
621
$
690
$
656
Sales volume (ST, in thousands)
Rebar
94
103
197
Coiled products
39
32
71
Merchant bar and other
1
1
2
Finished steel products sold
134
136
270
Rolling mill utilization(5)
97
%
88
%
93
%
(1)
Ferrous and nonferrous volumes sold
externally and delivered to our steel mill for finished steel
production.
(2)
Price information is shown after netting
the cost of freight incurred to deliver the product to the
customer.
(3)
Excludes platinum group metals (“PGMs”) in
catalytic converters.
(4)
Cars purchased by auto parts stores
only.
(5)
Rolling mill utilization is based on
effective annual production capacity under current conditions of
580 thousand tons of finished steel products.
SCHNITZER STEEL INDUSTRIES, INC.
SELECTED OPERATING
STATISTICS
(Unaudited)
Fiscal
Year
1Q20
2Q20
3Q20
4Q20
2020(1)
Total ferrous volumes (LT, in
thousands)(2)
976
988
927
1,063
3,954
Total nonferrous volumes (pounds, in
thousands)(2)(5)
144,176
124,342
122,913
159,135
550,566
Ferrous selling prices ($/LT)(3)
Domestic
$
196
$
244
$
222
$
214
$
220
Foreign
$
229
$
258
$
236
$
242
$
241
Average
$
222
$
255
$
233
$
236
$
237
Ferrous sales volume (LT, in
thousands)
Domestic
363
379
312
375
1,429
Foreign
613
609
616
688
2,525
Total(4)
976
988
927
1,063
3,954
Nonferrous average price
($/pound)(3)(5)
$
0.54
$
0.55
$
0.54
$
0.56
$
0.55
Nonferrous sales volume (pounds, in
thousands)(5)
144,176
124,342
122,913
159,135
550,566
Cars purchased (in thousands)(6)
83
85
74
74
316
Auto stores at period end
51
51
49
50
50
Finished steel average sales price
($/ST)(3)
$
643
$
627
$
633
$
618
$
630
Sales volume (ST, in thousands)
Rebar
83
86
85
105
358
Coiled products
29
42
39
34
144
Merchant bar and other
1
1
1
—
3
Finished steel products sold(4)
114
129
124
139
505
Rolling mill utilization(7)
85
%
72
%
91
%
96
%
86
%
LT = Long Ton, which is equivalent to 2,240 pounds ST = Short
Ton, which is equivalent to 2,000 pounds
(1)
The sum of quarterly amounts may not agree
to full year equivalent due to rounding.
(2)
Ferrous and nonferrous volumes sold
externally and delivered to our steel mill for finished steel
production.
(3)
Price information is shown after netting
the cost of freight incurred to deliver the product to the
customer.
(4)
May not foot due to rounding.
(5)
Excludes platinum group metals (“PGMs”) in
catalytic converters.
(6)
Cars purchased by auto parts stores
only.
(7)
Rolling mill utilization is based on
effective annual production capacity under current conditions of
580 thousand tons of finished steel products.
SCHNITZER STEEL INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
($ in thousands)
(Unaudited)
February 28, 2021
August 31, 2020
Assets
Current assets:
Cash and cash equivalents
$
11,326
$
17,887
Accounts receivable, net
210,480
139,147
Inventories
252,268
157,269
Other current assets
41,159
48,328
Total current assets
515,233
362,631
Property, plant and equipment, net
502,484
487,004
Operating lease right-of-use assets
136,278
140,584
Goodwill and other assets
251,334
239,708
Total assets
$
1,405,329
$
1,229,927
Liabilities
and Equity
Current liabilities:
Short-term borrowings
$
2,372
$
2,184
Operating lease liabilities
20,279
19,760
Other current liabilities
241,831
201,720
Total current liabilities
264,482
223,664
Long-term debt, net of current
maturities
168,441
102,235
Operating lease liabilities, net of
current maturities
119,751
125,001
Other long-term liabilities
118,616
98,591
Total liabilities
671,290
549,491
Total Schnitzer Steel Industries, Inc.
("SSI") shareholders' equity
729,842
676,707
Noncontrolling interests
4,197
3,729
Total equity
734,039
680,436
Total liabilities and equity
$
1,405,329
$
1,229,927
Non-GAAP Financial Measures
This press release contains performance based on adjusted
diluted earnings (loss) per share from continuing operations
attributable to SSI shareholders, adjusted EBITDA and adjusted
EBITDA per ferrous ton which are non-GAAP financial measures as
defined under SEC rules. As required by SEC rules, the Company has
provided a reconciliation of these measures for each period
discussed to the most directly comparable U.S. GAAP measure.
Management believes that providing these non-GAAP financial
measures adds a meaningful presentation of our results from
business operations excluding adjustments for restructuring charges
and other exit-related activities, (recoveries) charges for legacy
environmental matters (net of recoveries), business development
costs not related to ongoing operations, asset impairment charges
and the income tax (benefit) expense 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. We believe
that presenting debt, net of cash is useful to investors as a
measure of our leverage, as cash and cash equivalents can be used,
among other things, to repay indebtedness. 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.
Reconciliation of adjusted diluted
earnings (loss) per share from continuing operations attributable
to SSI shareholders
($ per share)
Three Months Ended
Six Months Ended
2Q21
1Q21
2Q20
2021
2020
As reported
$
1.54
$
0.50
$
0.14
$
2.05
$
(0.11
)
Restructuring charges and other
exit-related activities, per share
0.03
—
0.16
0.03
0.18
(Recoveries) charges for legacy
environmental matters, net, per share(1)
(0.08
)
0.10
0.02
0.02
0.06
Business development costs, per share
—
—
0.03
—
0.03
Asset impairment charges, per share
—
—
0.01
—
0.08
Income tax expense (benefit) allocated to
adjustments, per share(2)
0.01
(0.02
)
(0.05
)
(0.01
)
(0.09
)
Adjusted(3)
$
1.51
$
0.57
$
0.31
$
2.09
$
0.14
Reconciliation of adjusted EBITDA and
adjusted EBITDA per ferrous ton
($ in millions)
Three Months Ended
Six Months Ended
2Q21
1Q21
2Q20
2021
2020
Net income (loss)
$
46
$
15
$
5
$
61
$
(2
)
Plus interest expense
1
2
1
3
3
Plus tax expense (benefit)
11
6
2
17
(1
)
Plus depreciation and amortization
14
15
14
29
28
Plus restructuring charges and other
exit-related activities
1
—
5
1
5
Plus (recoveries) charges for legacy
environmental matters, net(1)
(2
)
3
—
1
2
Plus business development costs
—
—
1
—
1
Plus asset impairment charges
—
—
—
—
2
Adjusted EBITDA(3)
$
71
$
40
$
28
$
112
$
38
Ferrous sales volume (LT, in
thousands)
977
1,053
988
2,030
1,964
Adjusted EBITDA per ferrous ton sold
($/LT)
$
73
$
38
$
29
$
55
$
19
LT = Long Ton, which is equivalent to 2,240 pounds
(1)
Legal and environmental (recoveries)
charges for legacy environmental matters, net of recoveries. Legacy
environmental matters include (recoveries) charges (net of
recoveries) related to the Portland Harbor Superfund site and to
other legacy environmental loss contingencies.
(2)
Income tax allocated to the aggregate
adjustments reconciling reported and adjusted diluted earnings
(loss) per share from continuing operations attributable to SSI
shareholders is determined based on a tax provision calculated with
and without the adjustments.
(3)
May not foot due to rounding.
Reconciliation of debt, net of cash
($ in thousands)
February 28, 2021
November 30, 2020
August 31, 2020
Short-term borrowings
$
2,372
$
2,171
$
2,184
Long-term debt, net of current
maturities
168,441
141,172
102,235
Total debt
170,813
143,343
104,419
Less: cash and cash equivalents
11,326
7,258
17,887
Total debt, net of cash
$
159,487
$
136,085
$
86,532
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,” “the Company” 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 the impact of pandemics, epidemics or other
public health emergencies, such as the coronavirus disease 2019
(“COVID-19”) pandemic; the Company’s outlook, growth initiatives or
expected results or objectives, including pricing, margins, sales
volumes and profitability; liquidity positions; our ability to
generate cash from continuing operations; trends, cyclicality and
changes in the markets we sell into; strategic direction or goals;
targets; changes to manufacturing and production processes; the
realization of deferred tax assets; planned capital expenditures;
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 impact of sanctions and tariffs,
quotas and other trade actions and import restrictions; 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” of 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: the impact of pandemics, epidemics or other
public health emergencies, such as the COVID-19 pandemic; 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 sanctions and tariffs, quotas and other
trade actions and import restrictions; volatile supply and demand
conditions affecting prices and volumes in the markets for raw
materials and other inputs we purchase; significant decreases in
scrap metal prices; imbalances in supply and demand conditions in
the global steel industry; reliance on third party shipping
companies, including with respect to freight rates and the
availability of transportation; inability to obtain or renew
business licenses and permits; the impact of goodwill impairment
charges; the impact of long-lived asset and equity investment
impairment charges; failure to realize or delays in realizing
expected benefits from investments in processing and manufacturing
technology improvements; inability to achieve or sustain the
benefits from productivity, cost savings and restructuring
initiatives; inability to renew facility leases; 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 the
agreement governing our bank credit facilities; the impact of
consolidation in the steel industry; 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 property tax increases or
property tax rate changes; the impact of one or more cybersecurity
incidents; environmental compliance costs and potential
environmental liabilities; 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/20210407005368/en/
Investor Relations: Michael Bennett (503) 323-2811
mcbennett@schn.com
Company Info: www.schnitzersteel.com ir@schn.com
Schnitzer Steel Industries (NASDAQ:SCHN)
Historical Stock Chart
From Aug 2024 to Sep 2024
Schnitzer Steel Industries (NASDAQ:SCHN)
Historical Stock Chart
From Sep 2023 to Sep 2024