Best First Quarter Earnings in Company’s
History
Schnitzer Board Declares Quarterly
Dividend
Schnitzer Steel Industries, Inc. (NASDAQ: SCHN) today reported
results for its first quarter of fiscal 2022 ended November 30,
2021.
First Quarter Fiscal 2022 Highlights
- Diluted earnings per share from continuing operations of $1.55,
more than triple earnings per share of $0.50 in the first quarter
of fiscal 2021
- Adjusted diluted earnings per share from continuing operations
of $1.58, compared to adjusted diluted earnings per share of $0.57
in the first quarter of fiscal 2021
- Net income of $47 million, more than triple net income of $15
million in the first quarter of fiscal 2021
- Adjusted EBITDA of $78 million in the quarter, compared to $40
million in the first quarter of fiscal 2021
- Highest first quarter net income and adjusted EBITDA,
notwithstanding supply chain disruptions which contributed to the
delay of several planned November shipments of ferrous and
nonferrous recycled metals.
The Company’s first quarter performance benefited from the
strong global demand for recycled metals and a robust West Coast
market for finished steel products. The results reflected average
selling prices at or near multi-year highs for ferrous, nonferrous,
and finished steel products, increased contributions from our steel
mill as operations continued to ramp-up after re-starting in August
2021 following the mill fire outage, benefits from higher
year-over-year ferrous and nonferrous sales volumes, and initial
contributions from Columbus Recycling assets after the completion
of the acquisition on October 1, 2021.
Tamara Lundgren, Chairman and Chief Executive Officer stated,
“Our results this quarter are our Company’s best first quarter
earnings on record. Our strategic initiatives related to volume
growth and productivity contributed to our expanded profitability,
with higher ferrous and nonferrous sales volumes benefiting from
our recent acquisition of the Columbus Recycling assets. We also
benefited from positive market conditions supported by cyclical and
structural trends, including the global focus on decarbonization
and the increased use of recycled ferrous metals in
steelmaking.”
Ms. Lundgren continued, “Earlier this month, we published our
Fiscal 2021 Sustainability Report: Essential Recycling, Sustainable
Products, Successful Communities. We made significant progress
against our People, Planet, and Profit goals, including achieving
100% net carbon-free electricity use at our facilities ahead of our
fiscal 2022 target. By supplying our global customers with high
quality, low-carbon recycled metals that are critical to the
production of sustainable products and infrastructure, we are
continuing to deliver on our commitment to creating a more
sustainable future.”
Summary Results
($ in millions, except per share amounts,
and prices per ton/pound)
Quarter
1Q22
4Q21
1Q21
Revenues
$
798
$
846
$
492
Gross margin (total revenues less cost of
goods sold)
$
115
$
126
$
72
Selling, general and administrative
expense
$
55
$
77
$
50
Net income (loss)
$
47
$
44
$
15
Net income (loss) per ferrous ton
$
41
$
38
$
14
Diluted earnings (loss) per share from
continuing operations attributable to SSI shareholders
Reported
$
1.55
$
1.43
$
0.50
Adjusted(1)
$
1.58
$
1.81
$
0.57
Adjusted EBITDA(1)
$
78
$
80
$
40
Adjusted EBITDA per ferrous ton(1)
$
68
$
69
$
38
Ferrous sales volumes (LT, in
thousands)
1,148
1,163
1,053
Avg. net ferrous sales prices
($/LT)(2)
$
446
$
449
$
269
Nonferrous sales volumes (pounds, in
millions)(3)
153
164
138
Avg. nonferrous sales prices
($/pound)(2)(3)
$
1.05
$
1.01
$
0.64
Finished steel average net sales price
($/ST)(2)
$
979
$
920
$
621
Finished steel sales volumes (ST, in
thousands)
99
65
134
Rolling mill utilization (%)
78
%
28
%
97
%
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)
Average nonferrous sales volumes and
prices excludes platinum group metals (PGMs) in catalytic
converters.
First Quarter Fiscal 2022 Financial Review and
Analysis
Net income per ferrous ton was $41 and adjusted EBITDA per
ferrous ton was $68 in the first quarter of fiscal 2022, a strong
year-over-year increase from $14 and $38, respectively.
Year-over-year performance benefited from higher average selling
prices and higher sales volumes for recycled ferrous and nonferrous
metals. These benefits were partially offset by the effect of
supply chain disruptions, which contributed to delays in certain
planned November shipments of ferrous bulk cargos and containers of
nonferrous products, as well as a decline in the price of platinum
group metals, and higher SG&A expense. The effect of average
inventory accounting was insignificant in the first quarter of
fiscal 2022 compared to a benefit of $2 per ferrous ton in the
prior year quarter.
Ferrous and nonferrous sales volumes in the first quarter of
fiscal 2022 were up year-over-year by 9% and 11%, respectively,
despite the supply chain disruptions, and included two months of
volumes from Columbus Recycling. Average ferrous and nonferrous net
selling prices were up 66% and 64% year-over-year, respectively.
Finished steel sales volumes were down 26% year-over-year,
reflecting the continued ramp-up of operations after re-starting in
August 2021 following the mill fire outage. Rolling mill
utilization averaged 78% in the quarter, with November reaching
91%. Average net selling prices for finished steel products were up
58% year-over-year, the highest prices on record.
The first quarter of fiscal 2022 had negative operating cash
flow of $34 million, as cash flows associated with profitability
were more than offset by increased working capital due primarily to
inventory rebuild at the steel mill, the cash payment in November
of incentive compensation accrued in fiscal 2021, and the impact of
shipment delays on the timing of collecting receivables.
Capital expenditures were $30 million in the quarter, including
investments in advanced metal recovery technologies, maintaining
the business and environmental projects, net of $10 million in
insurance payments related to the repair and replacement of
property damaged by the mill fire. Total debt at the end of the
quarter was $260 million, and debt, net of cash, was $241 million.
The increase in debt was primarily driven by the acquisition of the
assets of Columbus Recycling and increased working capital (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’s effective tax rate for the first quarter of
fiscal 2022 was an expense of 19% reflecting discrete tax benefits
associated with the vesting of previously awarded share-based
incentive compensation.
During the first quarter, the Company returned capital to
shareholders through its 111th consecutive quarterly dividend.
Shredder Fire at Metals Recycling Facility in the U.S.
Northeast
On December 8, 2021 the Company experienced a fire at its metals
recycling facility in Everett, Massachusetts. There were no
injuries to personnel, and property loss or damage from the
incident was limited to the facility’s shredder building and
equipment. Given that the incident occurred after the end of the
Company’s fiscal first quarter, this matter did not have an impact
on the Company’s results of operations for the quarter.
Declaration of Quarterly Dividend
The Board of Directors declared a cash dividend of $0.1875 per
common share, payable February 14, 2022 to shareholders of record
on January 31, 2022. Schnitzer has paid a dividend every quarter
since going public in November 1993.
Analysts’ Conference Call: First Quarter of Fiscal
2022
A conference call and slide presentation to discuss results will
be held today, January 6, 2022, at 11:30 a.m. Eastern and will be
hosted by Tamara L. Lundgren, Chairman and Chief Executive Officer,
and Richard Peach, Executive Vice President, Chief Financial
Officer and Chief Strategy Officer. The call and the slide
presentation will be webcast and accessible on the Company’s
website under Company > Investors > Event Calendar at
www.schnitzersteel.com/company/investors/event-calendar.
Summary financial data is provided in the following pages. The
slide presentation and related materials will be available prior to
the call on the above website.
About Schnitzer Steel Industries, Inc.
Schnitzer Steel Industries, Inc. is one of the largest
manufacturers and exporters of recycled metal products in North
America with operating facilities located in 25 states, Puerto Rico
and Western Canada. Schnitzer has seven deep water export
facilities located on both the East and West Coasts and in Hawaii
and Puerto Rico. The Company’s integrated operating platform also
includes 50 stores which sell serviceable used auto parts from
salvaged vehicles and receive over 4.3 million annual retail
visits. The Company’s steel manufacturing operations produce
finished steel products, including rebar, wire rod and other
specialty products. The Company began operations in 1906 in
Portland, Oregon.
SCHNITZER STEEL INDUSTRIES,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
($ in thousands, except per share
amounts)
(Unaudited)
Three Months Ended
November 30, 2021
August 31, 2021
November 30, 2020
Revenues
$
798,118
$
845,615
$
492,107
Cost of goods sold
683,244
719,941
420,094
Selling, general and administrative
expense
55,267
76,528
49,906
Income from joint ventures
(236
)
(1,875
)
(727
)
Restructuring charges and other
exit-related activities
22
26
64
Operating income
59,821
50,995
22,770
Interest expense
(1,372
)
(898
)
(1,780
)
Other (loss) income, net
(47
)
66
(165
)
Income from continuing operations before
income taxes
58,402
50,163
20,825
Income tax expense
(11,097
)
(6,346
)
(5,719
)
Income from continuing operations
47,305
43,817
15,106
Loss from discontinued operations, net of
tax
(29
)
(21
)
(42
)
Net income
47,276
43,796
15,064
Net income attributable to noncontrolling
interests
(1,077
)
(1,011
)
(960
)
Net income attributable to SSI
shareholders
$
46,199
$
42,785
$
14,104
Net income per share attributable to SSI
shareholders:
Basic:
Income per share from continuing
operations
$
1.64
$
1.52
$
0.51
Net income per share
$
1.64
$
1.52
$
0.51
Diluted:
Income per share from continuing
operations
$
1.55
$
1.43
$
0.50
Net income per share
$
1.55
$
1.43
$
0.50
Weighted average number of common
shares:
Basic
28,159
28,087
27,807
Diluted
29,885
29,882
28,485
Dividends declared per common share
$
0.1875
$
0.1875
$
0.1875
SCHNITZER STEEL INDUSTRIES, INC.
SELECTED OPERATING
STATISTICS
(Unaudited)
1Q22
Total ferrous volumes (LT, in
thousands)(1)
1,148
Total nonferrous volumes (pounds, in
thousands)(1)(2)
153,227
Ferrous selling prices ($/LT)(3)
Domestic
$
431
Foreign
$
450
Average
$
446
Ferrous sales volume (LT, in
thousands)
Domestic
430
Foreign
718
Total
1,148
Nonferrous average price
($/pound)(2)(3)
$
1.05
Cars purchased (in thousands)(4)
80
Auto stores at period end
50
Finished steel average sales price
($/ST)(3)
$
979
Sales volume (ST, in thousands)
Rebar
74
Coiled products
25
Merchant bar and other
—
Finished steel products sold
99
Rolling mill utilization(5)
78
%
(1)
Ferrous and nonferrous volumes sold
externally and delivered to our steel mill for finished steel
production.
(2)
Excludes platinum group metals (“PGMs”) in
catalytic converters.
(3)
Price information is shown after netting
the cost of freight incurred to deliver the product to the
customer.
(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
1Q21
2Q21
3Q21
4Q21
2021
Total ferrous volumes (LT, in
thousands)(1)
1,053
977
1,215
1,163
4,408
Total nonferrous volumes (pounds, in
thousands)(1)(2)
138,236
135,899
155,657
163,586
593,378
Ferrous selling prices ($/LT)(3)
Domestic
$
242
$
349
$
395
$
453
$
364
Foreign
$
276
$
399
$
401
$
446
$
385
Average
$
269
$
387
$
400
$
449
$
381
Ferrous sales volume (LT, in
thousands)
Domestic
388
391
412
309
1,500
Foreign
665
586
803
854
2,908
Total(4)
1,053
977
1,215
1,163
4,408
Nonferrous average price
($/pound)(2)(3)
$
0.64
$
0.83
$
0.97
$
1.01
$
0.88
Cars purchased (in thousands)(4)
78
80
91
89
338
Auto stores at period end
50
50
50
50
50
Finished steel average sales price
($/ST)(3)
$
621
$
690
$
802
$
920
$
737
Sales volume (ST, in thousands)
Rebar
94
103
106
50
353
Coiled products
39
32
47
14
132
Merchant bar and other
1
1
—
1
3
Finished steel products sold
134
136
153
65
488
Rolling mill utilization(5)
97
%
88
%
98
%
28
%
78
%
LT = Long Ton, which is equivalent to
2,240 pounds
ST = Short Ton, which is equivalent to
2,000 pounds
(1)
Ferrous and nonferrous volumes sold
externally and delivered to our steel mill for finished steel
production.
(2)
Excludes platinum group metals (“PGMs”) in
catalytic converters.
(3)
Price information is shown after netting
the cost of freight incurred to deliver the product to the
customer.
(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.
CONDENSED CONSOLIDATED BALANCE
SHEETS
($ in thousands)
(Unaudited)
November 30, 2021
August 31, 2021
Assets
Current assets:
Cash and cash equivalents
$
19,081
$
27,818
Accounts receivable, net
303,541
214,098
Inventories
313,872
256,427
Other current assets
35,934
44,771
Total current assets
672,428
543,114
Property, plant and equipment, net
579,872
562,674
Operating lease right-of-use assets
127,865
131,221
Goodwill and other assets
339,603
257,354
Total assets
$
1,719,768
$
1,494,363
Liabilities
and Equity
Current liabilities:
Short-term borrowings
$
3,501
$
3,654
Operating lease liabilities
21,695
21,417
Other current liabilities
323,442
327,779
Total current liabilities
348,638
352,850
Long-term debt, net of current
maturities
256,215
71,299
Environmental liabilities, net of current
portion
55,089
52,385
Operating lease liabilities, net of
current maturities
109,191
113,165
Other long-term liabilities
75,879
64,885
Total liabilities
845,012
654,584
Total Schnitzer Steel Industries, Inc.
("SSI") shareholders' equity
870,690
835,764
Noncontrolling interests
4,066
4,015
Total equity
874,756
839,779
Total liabilities and equity
$
1,719,768
$
1,494,363
Non-GAAP Financial Measures
This press release contains performance based on adjusted
diluted earnings 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 business development costs not related to ongoing
operations including pre-acquisition expenses, legacy environmental
matters (net of recoveries), restructuring charges and other
exit-related activities, 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 per share from continuing operations attributable to SSI
shareholders
($ per share)
Three Months Ended
1Q22
4Q21
1Q21
As reported
$
1.55
$
1.43
$
0.50
Business development costs, per share
0.02
0.05
—
Charges for legacy environmental matters,
net, per share(1)
0.02
0.43
0.10
Restructuring charges and other
exit-related activities, per share
—
—
—
Income tax benefit allocated to
adjustments, per share(2)
(0.01
)
(0.10
)
(0.02
)
Adjusted(3)
$
1.58
$
1.81
$
0.57
Reconciliation of adjusted EBITDA and
adjusted EBITDA per ferrous ton
($ in millions)
Three Months Ended
1Q22
4Q21
1Q21
Net income
$
47
$
44
$
15
Plus interest expense
1
1
2
Plus tax expense
11
6
6
Plus depreciation and amortization
17
15
15
Plus business development costs
1
1
—
Plus restructuring charges and other
exit-related activities
—
1
—
Plus charges for legacy environmental
matters, net(1)
—
13
3
Adjusted EBITDA(3)
$
78
$
80
$
40
Ferrous sales volume (LT, in
thousands)
1,148
1,163
1,053
Adjusted EBITDA per ferrous ton sold
($/LT)
$
68
$
69
$
38
LT = Long Ton, which is equivalent to
2,240 pounds
(1)
Legal and environmental charges for legacy
environmental matters, net of recoveries. Legacy environmental
matters include 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)
November 30, 2021
August 31, 2021
November 30, 2020
Short-term borrowings
$
3,501
$
3,654
$
2,171
Long-term debt, net of current
maturities
256,215
71,299
141,172
Total debt
259,716
74,953
143,343
Less: cash and cash equivalents
19,081
27,818
7,258
Total debt, net of cash
$
240,635
$
47,135
$
136,085
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 impact of equipment upgrades, equipment
failures and facility damage on production, including timing of
repairs and resumption of operations; the realization of insurance
recoveries; the Company’s outlook, growth initiatives or expected
results or objectives, including pricing, margins, sales volumes
and profitability; completion of acquisitions and integration of
acquired businesses; the impacts of supply chain disruptions and
inflation; 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; the impact of
labor shortages or increased labor costs; 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; the
impact of equipment upgrades, equipment failures and facility
damage on production; 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 recycled metal prices; imbalances in
supply and demand conditions in the global steel industry;
difficulties associated with acquisitions and integration of
acquired businesses; supply chain disruptions; 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;
customer fulfillment of their contractual obligations; increases in
the relative value of the U.S. dollar; the impact of inflation and
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; 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;
compliance with climate change and greenhouse gas emission laws and
regulations; the impact of labor shortages or increased labor
costs; 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/20220106005278/en/
Investor Relations: Michael Bennett (503) 323-2811
mcbennett@schn.com
Company Info: www.schnitzersteel.com ir@schn.com
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