Best Fourth Quarter and Fiscal Year
Operating Income Since Fiscal 2011
Fourth Quarter Total SSI Volumes Up 22% for
Ferrous and Up 15% for Nonferrous Year-Over-Year
Strong Fourth Quarter Operating Cash Flow of
$106 million
Schnitzer Steel Industries, Inc. (Nasdaq: SCHN) today reported
financial results for its fourth quarter and fiscal year ended
August 31, 2018. The Company reported earnings per share from
continuing operations for the quarter of $2.08 and adjusted
earnings per share of $2.06, both of which include a discrete tax
benefit of $30 million, or $1.06 per share, associated with the
release of valuation allowances on certain deferred tax assets.
These results are significantly higher than fourth quarter fiscal
2017 reported earnings per share from continuing operations of
$0.65 and adjusted earnings per share of $0.63. The Company’s
fiscal 2018 full year reported earnings per share of $5.46 and
adjusted earnings per share of $5.39, both of which include
discrete tax benefits of $1.58 per share, also represent
significant increases compared to fiscal 2017 reported earnings per
share of $1.60 and adjusted earnings per share of $1.53. For a
reconciliation of the adjusted results to U.S. GAAP, see the
Non-GAAP Financial Measures provided after the financial statements
in this document.
In the fourth quarter of fiscal 2018, Auto and Metals Recycling
(AMR) generated operating income of $34 million, or $33 per ferrous
ton, which is a 41% increase in operating income from the prior
year fourth quarter. AMR’s improved operating income year-over-year
was driven by expanded metal spreads, higher ferrous and nonferrous
sales volumes of 19% and 11%, respectively, higher average ferrous
and nonferrous selling prices of 23% and 8%, respectively, and a
continued focus on productivity and commercial initiatives,
including measures to increase supply flows. Compared to the prior
year fourth quarter, AMR experienced an adverse impact from average
inventory accounting and higher selling, general and administrative
(SG&A) expense.
Cascade Steel and Scrap (CSS) generated fourth quarter operating
income of $14 million, a 70% increase compared to the prior year
fourth quarter operating income of $8 million. The strong
year-over-year improvement in operating income was driven primarily
by an increase in finished steel average net selling prices of 31%
which significantly outpaced the increase in the cost of
steel-making raw materials and higher export sales volumes,
partially offset by a 14% reduction in finished steel sales volumes
primarily due to lower production as a result of planned
maintenance, including rolling mill upgrades aimed at improving
productivity.
“We delivered our best fourth quarter performance since fiscal
2011, capping a year which reflected our strongest full year
financial and operating performance in seven years. Our
consolidated operating income of $38 million reflects an increase
of more than 70% versus last year’s fourth quarter. For the full
year, AMR achieved operating income per ferrous ton of $46,
underpinned by volume increases and the resulting operating
leverage generated from ongoing productivity initiatives. CSS also
delivered excellent results, driven by higher prices and demand,
metal spread expansion, low levels of imports, and benefits from
productivity and efficiency investments,” said Tamara Lundgren,
President and CEO. “The combination of our strong profitability and
effective working capital management enabled us to generate
operating cash flow of $160 million in fiscal 2018, which allowed
us to increase our investments in growth capex and return capital
to our shareholders through both our dividend and share
repurchases, while reducing our debt to its lowest level in the
past eight years. Looking forward, our strong balance sheet
provides us with the ability to continue our investments in
advanced processing technologies, environmental stewardship, and
transactional market opportunities, while continuing to return
capital to our shareholders,” added Lundgren.
AMR’s fiscal 2018 operating income of $169 million and operating
income per ferrous ton of $46 represent a significant improvement
compared to fiscal 2017 operating income of $91 million and
operating income per ferrous ton of $29. In fiscal 2018, AMR’s
ferrous and nonferrous sales volumes increased 18% and 6%,
respectively. In fiscal 2018, total ferrous volumes, including
external sales by AMR and CSS, and transfers to our steel mill,
increased 19% compared to fiscal 2017.
In fiscal 2018, CSS’s operating income of $38 million represents
a significant increase compared to operating income of $5 million
in fiscal 2017 and reflects the strongest operating performance
since fiscal 2008. In addition to an increase in finished steel
average net selling prices of 25%, CSS’s fiscal 2018 operating
performance also benefited from a higher utilization rate compared
to the prior fiscal year and ongoing productivity improvements from
the integration of our steel manufacturing and Oregon metal
recycling operations, which took place in the fourth quarter of
fiscal 2017.
Summary Results ($ in millions, except per share amounts)
Quarter Year 4Q18
4Q17 3Q18 2018 2017
Revenues $ 670 $ 494 $ 652 $ 2,365 $ 1,688 Operating income
$ 38 $ 22 $ 51 $ 149 $ 56 Other asset impairment charges
(recoveries), net 1 — (1 ) (1 ) (1 ) Restructuring charges and
other exit-related activities (1 ) — — (1 ) — Resale or
modification of previously contracted shipments, net of recoveries
— — — — (1 ) Adjusted operating
income(1) $ 38 $ 22 $ 50 $ 147 $ 54 Net income attributable
to SSI $ 60 $ 18 $ 37 $ 156 $ 45 Net income from continuing
operations attributable to SSI $ 59 $ 18 $ 37 $ 156 $ 45 Adjusted
net income from continuing operations attributable to SSI(1) $ 59 $
18 $
36
$ 154 $ 43 Diluted earnings per share attributable to SSI $
2.09 $ 0.64 $ 1.31 $ 5.47 $ 1.58 Diluted earnings per share from
continuing operations attributable to SSI $ 2.08 $ 0.65 $ 1.31 $
5.46 $ 1.60 Adjusted diluted EPS from continuing operations
attributable to SSI(1) $ 2.06 $ 0.63 $ 1.26 $ 5.39 $ 1.53
(1) See Non-GAAP Financial Measures for reconciliation to U.S.
GAAP.
Auto and Metals Recycling
AMR segment results and operating statistics for all periods
have been recast to reflect the integration of the Oregon metals
recycling operations into CSS in the fourth quarter of 2017.
Summary of Auto and Metals Recycling Results ($ in millions,
except selling prices)
Quarter Year
4Q18 4Q17 3Q18 2018
2017 Total revenues $ 532 $ 393 $ 530 $ 1,909 $ 1,364
Ferrous revenues $ 362 $ 249 $ 364 $ 1,288 $ 843 Ferrous
volumes (000s LT) 1,032 864 983 3,708 3,145 Avg. net ferrous sales
prices ($/LT)(1) $ 321 $ 262 $ 337 $ 317 $ 242 Nonferrous
revenues $ 134 $ 112 $ 127 $ 482 $ 395 Nonferrous volumes (Ms
LB)(2) 167 150 146 572 541 Avg. net nonferrous sales prices
($/LB)(1)(2) $ 0.69 $ 0.64 $ 0.74 $ 0.72 $ 0.63 Cars
purchased for retail (000s) 105 113 109 424 411 Operating
income(3) $ 34 $ 24 $ 55 $ 169 $ 91 Operating income per Fe ton $
33 $ 28 $ 56 $ 46 $ 29 Adjusted operating income(4) $ 34 $
24 $ 54 $ 168 $ 90 Adjusted operating income per Fe ton $ 33 $ 28 $
54 $ 45 $ 29
(1) Sales prices are shown net of freight. (2) Excludes PGM
metals in catalytic converters. (3) Operating income does not
include the impact of restructuring charges and other exit-related
activities. (4) See Non-GAAP Financial Measures for reconciliation
to U.S. GAAP.
Volumes: Ferrous sales volumes in the fourth quarter
increased 19% compared to the prior year quarter and 5%
sequentially, primarily due to stronger export and domestic demand
for recycled metals and commercial initiatives to increase our
supply flows. Nonferrous sales volumes increased 11% compared to
the prior year quarter and 14% sequentially.
Export customers accounted for 69% of total ferrous sales
volumes in the fourth quarter, with Turkey, South Korea and
Bangladesh as the top export destinations. Our products, including
ferrous, nonferrous and recycled auto parts, were shipped to 20
countries in the fourth quarter and a total of 25 countries in
fiscal 2018.
Pricing: Average ferrous net selling prices increased $59
per ton, or 23%, in the fourth quarter compared to the same period
of the prior year, and decreased sequentially by $16 per ton, or
5%. Nonferrous average net selling prices in the fourth quarter
increased 8% compared to the prior year quarter and decreased 7%
sequentially.
Margins: Operating income was $34 million in the fourth
quarter, an increase of $10 million or 41% compared to the prior
year fourth quarter and a decrease of $21 million or 38%
sequentially. Operating income per ton of $33 in the fourth quarter
increased 18% compared to the same period of the prior year
reflecting metal spread expansion, increased volumes and average
net selling prices for ferrous and nonferrous products, and
benefits from commercial initiatives. The improved year-over-year
performance was partially offset by an adverse impact from average
inventory accounting and higher selling, general and administrative
expense.
Sequentially, operating income per ton was lower primarily due
to a decline in ferrous and nonferrous selling prices during the
quarter, coupled with the adverse effect of average inventory
accounting and seasonally lower retail revenues, which were
partially offset by benefits of higher ferrous and nonferrous sales
volumes, reduced purchase costs for raw materials and our continued
focus on productivity and commercial initiatives, including
nonferrous processing improvements. The fourth quarter includes an
adverse impact of $2 million from average inventory accounting
compared to a benefit of $3 million in the same period of the prior
year and a benefit of $2 million in the third quarter of fiscal
2018.
Cascade Steel and Scrap
CSS segment results and operating statistics reflect the
integrated steel manufacturing operations and Oregon metals
recycling operations for all periods presented.
Summary of Cascade Steel and Scrap Results ($ in millions,
except selling prices)
Quarter Year 4Q18 4Q17 3Q18
2018 2017 Steel revenues $ 102 $ 88 $ 104 $ 368 $ 281
Recycling revenues 42 17 26 113 59
Total segment revenues $ 144 $ 105 $
130 $ 481 $ 340 Operating income $ 14 $
8 $ 11 $ 38 $ 5 Adjusted operating income(1) $ 14 $ 7 $ 11 $ 38 $ 5
Finished steel average net sales price ($/ST)(2) $ 741 $ 565
$ 703 $ 666 $ 534 Finished steel sales volumes (000s ST) 127 147
140 519 496 Rolling mill utilization 83 % 95 % 91 % 88 % 83
%
(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.
Volumes: Finished steel sales volumes in the fourth
quarter of 127 thousand tons decreased 14% from the prior year
quarter and 9% sequentially, primarily due to lower production as a
result of planned maintenance, including rolling mill upgrades
aimed at improving productivity.
Pricing: Average net selling prices for finished steel
increased 31% from the prior year fourth quarter, primarily due to
reduced pressure from steel imports. Sequentially, finished steel
prices increased 5%, primarily reflecting higher raw material
costs.
Margins: Operating income for the fourth quarter of
fiscal 2018 was $14 million, an increase of $6 million compared to
the same period of the prior year and $3 million sequentially. The
improved performance in the fourth quarter both year-over-year and
sequentially reflected an expansion in finished steel margins
resulting from higher average selling prices, which significantly
outpaced the increase in the cost of steel-making raw materials,
and additional productivity improvements resulting from the
integration of our steel manufacturing and Oregon metal recycling
operations in the fourth quarter of fiscal 2017, partially offset
by lower sales volumes.
Corporate Items
In the fourth quarter of fiscal 2018, consolidated financial
performance included Corporate expense of $11 million, an increase
of $1 million compared to the prior year quarter and a decrease of
$4 million compared to the third quarter of fiscal 2018. The
sequential reduction in Corporate expense was driven primarily by
lower professional service expenses.
The Company’s effective tax rate for the fourth quarter was a
benefit of approximately 65.1%, driven primarily by a discrete tax
benefit of $30 million, or $1.06 per share, associated with the
release of valuation allowances on certain deferred tax assets. The
effective tax rate for fiscal 2018 was a benefit of 12.4%.
The Company generated operating cash flow of $106 million in the
fourth quarter, driven by profitability and strong working capital
management. Total debt was $107 million as of August 31, 2018, or
26% lower than at the end of fiscal 2017, and debt, net of cash,
was $103 million (for a reconciliation of debt, net of cash, see
the table provided in the Non-GAAP Financial Measures section).
Pursuant to our ongoing authorized share repurchase program, the
Company repurchased a total of 250,000 shares of its Class A common
stock in open market transactions during the fourth quarter,
bringing share repurchases for fiscal 2018 to 516,013 shares, or
1.9%, of total outstanding shares. The Company also returned
capital to shareholders through its 98th consecutive quarterly
dividend.
Analysts’ Conference Call: Fourth Quarter and Fiscal
2018
A conference call and slide presentation to discuss results will
be held today, October 24, 2018, at 11:30 a.m. EDT hosted by
Tamara Lundgren, President and Chief Executive Officer, and Richard
Peach, Senior Vice President, Chief Financial Officer and Chief of
Corporate Operations. The call and the slides 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
slides and appendix will be available on the website prior to the
call.
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.
SCHNITZER STEEL INDUSTRIES, INC. FINANCIAL HIGHLIGHTS
(in thousands) (Unaudited) For
the Three Months Ended For the Year Ended
August 31,2018
August 31,2017
May 31,2018
August 31,2018
August 31,2017
REVENUES: Auto and Metals Recycling: Ferrous revenues
$ 362,051 $ 248,856 $ 363,566 $ 1,288,287 $ 843,222 Nonferrous
revenues 133,758 111,881 127,288 481,777 394,977 Retail and other
revenues 35,707 32,570 38,757 138,902
125,419 Total Auto and Metals Recycling 531,516 393,307
529,611 1,908,966 1,363,618 Cascade Steel and Scrap: Steel
revenues 101,846 87,915 103,726 367,560 280,767 Recycling revenues
42,021 17,334 26,350 113,081 58,853
Total Cascade Steel and Scrap 143,867 105,249 130,076
480,641 339,620 Intercompany sales eliminations (5,806 ) (4,298 )
(7,271 ) (24,892 ) (15,647 ) Total revenues $ 669,577 $
494,258 $ 652,416 $ 2,364,715 $ 1,687,591
OPERATING INCOME: AMR operating income
$ 33,836 $ 23,992 $ 54,980 $ 169,120 $ 91,405 CSS operating income
13,604 8,019 10,793 38,286 5,275 Consolidated operating income $
37,973 $ 22,108 $ 51,234 $ 148,988 $ 56,013 Adjusted AMR
operating income(1) $ 34,368 $ 24,435 $ 53,515 $ 167,770 $ 90,077
Adjusted CSS operating income(1) 13,604 7,085 10,793
38,198 4,742 Adjusted segment operating
income(1)(2) 47,972 31,520 64,308 205,968 94,819 Corporate expense
(10,928 ) (10,107 ) (14,467 ) (58,789 ) (40,788 ) Intercompany
eliminations 539 294 (2 ) (290 ) 12 Adjusted
operating income(1) 37,583 21,707 49,839
146,889 54,043 Other asset impairment (charges)
recoveries, net (532 ) 74 1,465 1,021 717 Restructuring charges and
other exit-related activities 922 (90 ) (70 ) 661 109 Recoveries
related to the resale or modification of previously contracted
shipments — 417 — 417 1,144
Total operating income $ 37,973 $ 22,108 $ 51,234
$ 148,988 $ 56,013
(1) See Non-GAAP Financial Measures for reconciliation to
U.S. GAAP. (2) Segment operating income does not include the impact
of restructuring charges and other exit-related activities.
SCHNITZER STEEL INDUSTRIES, INC. CONDENSED CONSOLIDATED
STATEMENTS OF INCOME (in thousands, except per share amounts)
(Unaudited) For the Three Months Ended For the Year
Ended
August 31,2018
August 31,2017
May 31,2018
August 31,2018
August 31,2017
Revenues $ 669,577 $ 494,258 $ 652,416 $
2,364,715 $ 1,687,591 Cost of goods sold 582,608
430,703 549,164 2,010,485 1,464,508 Selling, general and
administrative 50,011 41,805 54,185 208,877 171,570 (Income) from
joint ventures (625 ) (374 ) (772 ) (1,953 ) (3,674 ) Other asset
impairment charges (recoveries), net 532 (74 ) (1,465 ) (1,021 )
(717 ) Restructuring charges and other exit-related activities (922
) 90 70 (661 ) (109 ) Operating income 37,973 22,108
51,234 148,988 56,013 Interest expense (2,160 ) (2,112 ) (2,483 )
(8,983 ) (8,081 ) Other income (expense), net 495 (561 ) 403
1,848 758 Income from continuing operations
before income taxes 36,308 19,435 49,154 141,853 48,690 Income tax
(expense) benefit 23,620 (586 ) (10,650 ) 17,590
(1,322 ) Income from continuing operations 59,928 18,849 38,504
159,443 47,368 Income (loss) from discontinued operations, net of
tax 273 (114 ) (56 ) 346 (390 ) Net income 60,201
18,735 38,448 159,789 46,978 Net income attributable to
noncontrolling interests (532 ) (500 ) (1,046 ) (3,338 ) (2,467 )
Net income attributable to SSI $ 59,669 $ 18,235 $
37,402 $ 156,451 $ 44,511 Basic: Income
per share from continuing operations attributable to SSI $ 2.17 $
0.66 $ 1.35 $ 5.65 $ 1.63 Income (loss) per share from discontinued
operations 0.01 — — 0.01 (0.01 ) Net
income per share attributable to SSI $ 2.18 $ 0.66 $ 1.35 $ 5.66 $
1.62 Diluted: Income per share from continuing operations
attributable to SSI $ 2.08 $ 0.65 $ 1.31 $ 5.46 $ 1.60 Income
(loss) per share from discontinued operations 0.01 —
— 0.01 (0.01 ) Net income per share attributable to
SSI(1) $ 2.09 $ 0.64 $ 1.31 $ 5.47 $ 1.58 Weighted average
number of common shares: Basic 27,427 27,650 27,676 27,645 27,537
Diluted 28,524 28,409 28,636 28,589 28,141 Dividends declared per
common share $ 0.1875 $ 0.1875 $ 0.1875 $ 0.750 $ 0.750 (1)
May not foot due to rounding.
SCHNITZER STEEL INDUSTRIES,
INC. SELECTED OPERATING STATISTICS (Unaudited)
Fiscal Year 1Q18
2Q18 3Q18 4Q18
2018 SSI Total Volumes(1) Total ferrous
volumes (LT) 912,145 1,062,260 1,118,743 1,205,803 4,298,951 Total
nonferrous volumes (000s LB) 141,046 144,024 162,667 188,359
636,096
Auto and Metals Recycling Ferrous selling prices
($/LT)(2) Domestic $ 259 $ 278 $ 314 $ 303 $ 291 Export
$ 306 $ 327 $ 347
$ 328 $ 328 Average $ 292 $ 314 $ 337 $ 321 $
317
Ferrous sales volume (LT) Domestic 237,464 239,571
293,323 314,974 1,085,332 Export 559,154
656,738 690,019 716,834
2,622,745 Total 796,618 896,309 983,342 1,031,808 3,708,077
Nonferrous average price ($/LB)(2)(3) $ 0.73 $
0.72 $ 0.74 $ 0.69 $ 0.72
Nonferrous sales volume (000s
LB)(3) 129,137 129,549 146,043 166,976 571,705
Car
purchase volume (000s)(4) 108 102 109 105 424
Auto
stores at end of quarter 53 53 53 52 52
Cascade Steel and
Scrap Finished steel average sales price ($/ST)
(2) $ 599
$ 619 $ 703 $ 741 $ 666
Sales volume (ST) Rebar 84,243
79,718 91,603 81,182 336,746 Coiled products 40,928 43,056 46,673
43,878 174,535 Merchant bar and other 2,049
1,937 1,945 1,950 7,881
Finished steel products sold 127,220 124,711 140,221 127,010
519,162
Rolling mill utilization(5) 95 % 83 % 91 % 83
% 88 %
(1) Ferrous and nonferrous volumes sold externally by AMR
and CSS and delivered to our steel mill for finished steel
production. (2) Price information is shown after a reduction for
the cost of freight incurred to deliver the product to the
customer. (3) Excludes PGM metals in catalytic converters. (4) Cars
purchased by auto 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 1Q17 2Q17
3Q17 4Q17 2017 SSI Total
Volumes(1) Total ferrous volumes (LT) 833,889 852,036
951,230 990,516 3,627,671 Total nonferrous volumes (000s LB)
136,057 122,554 161,832 164,342 584,785
Auto and Metals
Recycling Ferrous selling prices ($/LT)(2)
Domestic $ 169 $ 237 $ 263 $ 257 $ 236 Export $ 203
$ 252 $ 255 $ 263
$ 244 Average $ 194 $ 247 $ 258 $ 262 $ 242
Ferrous sales
volume (LT) Domestic 197,255 220,975 291,227 238,930 948,387
Export 519,510 518,200 534,164
625,168 2,197,042 Total 716,765
739,175 825,391 864,098 3,145,429
Nonferrous average
price ($/LB)(2)(3) $ 0.58 $ 0.64 $ 0.65 $ 0.64 $ 0.63
Nonferrous sales volume (000s LB)(3) 125,817 114,275
150,356 150,343 540,791
Car purchase volume (000s)(4)
94 96 108 113 411
Auto stores at end of quarter 52 52 53 53
53
Cascade Steel and Scrap Finished steel average sales
price ($/ST)(2) $ 492 $ 517 $ 545 $ 565 $ 534
Sales volume
(ST) Rebar 73,903 69,136 84,166 96,323 323,528 Coiled products
23,934 34,371 54,629 48,349 161,283 Merchant bar and other
3,038 2,482 2,426 2,759
10,705 Finished steel products sold 100,875
105,989 141,221 147,431 495,516 Rolling mill utilization(5)
65 % 89 % 85 % 95 % 83 %
(1)
Ferrous and nonferrous volumes sold externally by AMR and
CSS and delivered to our steel mill for finished steel production.
(2)
Price information is shown after a reduction for the cost of
freight incurred to deliver the product to the customer.
(3)
Excludes PGM metals in catalytic converters.
(4)
Cars purchased by auto 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) August 31, 2018 August 31, 2017
Assets
Current assets: Cash and cash equivalents $ 4,723 $ 7,287 Accounts
receivable, net 169,418 138,998 Inventories 205,877 166,942 Other
current assets 68,341 24,723 Total current assets 448,359
337,950 Property, plant and equipment, net 415,711 390,629
Goodwill and other assets 240,747 205,176
Total assets $ 1,104,817 $ 933,755
Liabilities and
Equity
Current liabilities: Short-term borrowings $ 1,139 $ 721 Other
current liabilities 253,538 175,539 Total current
liabilities 254,677 176,260 Long-term debt, net of current
maturities 106,237 144,403 Other long-term liabilities
73,793 75,599 Equity: Total Schnitzer Steel Industries, Inc.
(“SSI”) shareholders’ equity 666,078 533,586 Noncontrolling
interests 4,032 3,907 Total equity 670,110 537,493
Total liabilities and equity $ 1,104,817 $ 933,755
Non-GAAP Financial Measures
This press release contains performance based on adjusted net
income and adjusted diluted earnings per share from continuing
operations attributable to SSI and adjusted consolidated, AMR and
CSS operating income, which are non-GAAP financial measures as
defined under SEC rules. As required by SEC rules, we have provided
reconciliations of these measures for each period discussed to the
most directly comparable U.S. GAAP measure. Management believes
that providing 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 our
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 fiscal 2016 and concluded
in fiscal 2018, are reported within selling, general and
administrative expense in the Consolidated Statements of Operations
and are also excluded from these measures. 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.
($ in millions)
Quarter Year
4Q18 4Q17 3Q18 2018
2017 Consolidated operating income: Operating
income $ 38 $ 22 $ 51 $ 149 $ 56 Other asset impairment charges
(recoveries), net 1 — (1 ) (1 ) (1 ) Restructuring charges and
other exit-related activities (1 ) — — (1 ) — Recoveries related to
the resale or modification of certain previously contracted
shipments — — — — (1 ) Adjusted
operating income $ 38 $ 22 $ 50 $ 147 $
54
AMR operating income: Operating income $ 34
$ 24 $ 55 $ 169 $ 91 Other asset impairment charges (recoveries),
net 1 1 (1 ) (1 ) — Recoveries related to the resale or
modification of certain previously contracted shipments — —
— — (1 ) Adjusted AMR operating income(1) $ 34
$ 24 $ 54 $ 168 $ 90
CSS operating income: Operating income $ 14 $ 8 $ 11 $ 38 $
5 Other asset impairment charges (recoveries), net — (1 ) —
— (1 ) Adjusted CSS operating income(1) $ 14 $
7 $ 11 $ 38 $ 5 (1) May not foot
due to rounding.
Net income from continuing operations
attributable to SSI ($ in millions)
Quarter
Year 4Q18 4Q17
3Q18 2018 2017 Net income from
continuing operations attributable to SSI $ 59 $ 18 $ 37 $ 156 $ 45
Other asset impairment charges (recoveries), net 1 — (1 ) (1 ) (1 )
Restructuring charges and other exit-related activities (1 ) — — (1
) — Recoveries related to the resale or modification of certain
previously contracted shipments — — — — (1 ) Income tax expense
(benefit) allocated to adjustments(1) — — — —
— Adjusted net income from continuing operations
attributable to SSI $ 59 $ 18 $ 36 $ 154
$ 43
(1) Income tax allocated to adjustments reconciling Reported
and Adjusted net income from continuing operations attributable to
SSI and diluted earnings per share from continuing operations
attributable to SSI is determined based on a tax provision
calculated with and without the adjustments.
Diluted
earnings per share from continuing operations attributable to
SSI ($ per share)
Quarter Year
4Q18 4Q17 3Q18 2018
2017 Diluted earnings per share from continuing
operations attributable to SSI 2.08 0.65 1.31 5.46 1.60 Other asset
impairment charges (recoveries), net 0.02 — (0.05 ) (0.04 ) (0.03 )
Restructuring charges and other exit-related activities (0.03 ) — —
(0.02 ) — Recoveries related to the resale or modification of
previously contracted shipments — (0.01 ) — (0.01 ) (0.04 ) Income
tax expense (benefit) allocated to adjustments(1) (0.01 ) —
— — — Adjusted diluted earnings per share from
continuing operations attributable to SSI(2) $ 2.06 $ 0.63
$ 1.26 $ 5.39 $ 1.53
(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)
August 31, 2018 August 31,
2017 May 31, 2018 Short-term borrowings $ 1,139 $ 721 $
1,146 Long-term debt, net of current maturities 106,237
144,403 171,545 Total debt 107,376 145,124 172,691 Less:
cash and cash equivalents 4,723 7,287 10,090 Total
debt, net of cash $ 102,653 $ 137,837 $ 162,601
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 our
most recent annual report on Form 10-K and in our 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 cost and equity method 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/20181024005238/en/
Schnitzer Steel Industries, Inc.Investor
Relations:Michael Bennett,
503-323-2811mcbennett@schn.comorCompany
Info:www.schnitzersteel.comir@schn.com
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