─ Fourth Quarter and Fiscal Year-End
Earnings Conference Call October 24, 2017 11:30 a.m. Eastern
─
Schnitzer Steel Industries, Inc. (Nasdaq: SCHN) today announced
preliminary results for its fourth quarter of fiscal 2017 ended
August 31, 2017. Schnitzer expects fourth quarter earnings per
share from continuing operations to be in the range of $0.62 -
$0.65. Adjusted earnings per share are expected to be in the range
of $0.60 - $0.63. For the fourth quarter of fiscal 2016, reported
earnings per share were $0.59 and adjusted earnings per share were
$0.60, both of which included a benefit of $0.21 per share from an
insurance reimbursement of $6 million. For a reconciliation of
adjusted results to U.S. GAAP, see the table provided in the
Non-GAAP Financial Measures section.
In the fourth quarter of fiscal 2017, Schnitzer completed the
previously announced integration of its steel manufacturing and
Oregon metals recycling operations into a single operating segment,
Cascade Steel and Scrap (CSS). As a result, our Auto and Metals
Recycling (AMR) performance now excludes the Oregon metals
recycling operations. This change in operating segments is
reflected in the preliminary results for the fourth quarter of
fiscal 2017 presented below and comparable prior period information
has been recasted to reflect this change. Additional recasted
historical financial information will be provided at the time of
our fourth quarter earnings release. Recasting this historical
information does not have an impact on the consolidated financial
performance of the Company for any of the periods presented.
AMR is expected to generate operating income in the range of $23
- $24 million and operating income per ferrous ton in the range of
$27 - $28 for the fourth quarter of fiscal 2017 which compares
favorably to operating income of $19 million and operating income
per ferrous ton of $23 in the fourth quarter of 2016. Operating
income per ferrous ton in the fourth quarter of fiscal 2017 was
adversely impacted by sharply higher ferrous market prices in
August which led to increases in the cost of raw materials,
compressing margins on shipments contracted earlier in the quarter.
Average ferrous net selling prices are expected to increase
approximately 25% compared to last year's fourth quarter, and
ferrous sales volumes are expected to be approximately 7% higher.
Average nonferrous net selling prices are expected to increase
approximately 7% from the prior year quarter, and nonferrous sales
volumes are expected to be 8% higher.
CSS is expected to generate operating income of approximately $8
million for the fourth quarter of fiscal 2017, including a gain on
sale of an Oregon metals recycling joint venture investment of
approximately $1 million. This compares favorably to the prior year
fourth quarter operating income for CSS of $3 million, which
included an asset impairment charge of $2 million in the steel
manufacturing operations. Operating performance in the fourth
quarter of fiscal 2017 primarily reflects the benefits from higher
shipments of finished steel products, an expansion of finished
steel metal spreads and productivity improvements, including
initial synergies from the integration with the Oregon metals
recycling operations. CSS's average finished steel selling prices
are expected to increase approximately 7%, and finished steel sales
volumes are expected to increase approximately 20% compared to the
prior year fourth quarter.
For fiscal 2017, total ferrous volumes, including external sales
by AMR and CSS, and transfers to our steel mill, are expected to
increase by 10% compared to fiscal 2016. AMR’s operating income per
ferrous ton is expected to be $29 on a reported and adjusted basis
for fiscal 2017 compared to reported operating income per ton of $8
and adjusted operating income per ton of $16 in fiscal 2016.
Consolidated financial performance in the fourth quarter is
expected to include Corporate expense of approximately $10 million,
an increase compared to the prior year quarter primarily due to the
$6 million insurance reimbursement in the fourth quarter of fiscal
2016. For fiscal 2017, the Company’s effective tax rate is expected
to be approximately 2.7%.
For the fourth quarter, the Company expects to report operating
cash flow of approximately $49 million. Total debt was $145 million
as of August 31, 2017 which is a reduction of $39 million, or 21%,
compared to May 31, 2017. Debt, net of cash, was $138 million as of
August 31, 2017 which is a reduction of $31 million, or 19%,
compared to May 31, 2017. For a reconciliation of debt, net of
cash, see the table provided in the Non-GAAP Financial Measures
section.
The preliminary, unaudited information provided above is based
on the Company’s current estimate of its financial results for the
fourth quarter and fiscal year ended August 31, 2017 and remains
subject to change based on management’s ongoing review of the
Company’s fourth quarter financial results and the completion of
the Company’s annual audit.
The Company will report the financial results for its fourth
quarter and fiscal year ended August 31, 2017, on Tuesday, October
24, 2017. The Company will webcast a conference call to discuss
these results at 11:30 a.m. Eastern time on the same day. The
webcast of the call and the accompanying slide presentation may be
accessed on Schnitzer’s website under the Investor section Event
Calendar at www.schnitzersteel.com/events. The call will be hosted
by Tamara L. Lundgren, President and Chief Executive Officer, and
Richard D. Peach, Senior Vice President, Chief Financial Officer
and Chief of Corporate Operations.
Replay Information
Toll Free Dial: (855) 859-2056
Toll Free International Dial: (404)
537-3406
Conference ID: 74679936
Replay Available: 10/24/2017 to
10/29/2017
About Schnitzer Steel Industries,
Inc.
Schnitzer Steel Industries, Inc. is one of the largest
manufacturers and exporters of recycled metal products in North
America. Schnitzer has seven deep water export facilities operating
facilities located in 23 states, Puerto Rico and Western Canada.
The Company's vertically integrated operating platform includes
retail auto parts stores which sell recycled auto parts and receive
approximately 5 million annual customer visits. The Company’s
electric arc furnace mill in McMinnville, Oregon produces
finished steel products, including rebar, wire rod and other
specialty products using recycled metal as its primary raw
material. 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 and adjusted AMR operating income, which are a
non-GAAP financial measures as defined under SEC rules. As required
by SEC rules, the Company has provided reconciliations of these
measures 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 goodwill
impairment charges, other asset impairment charges net of
recoveries, restructuring charges and other exit-related
activities, recoveries related to the resale or modification of
previously contracted shipments, and the income tax expense
(benefit) associated with these adjustments, items which are not
related to underlying business operational performance, and
improves the period-to-period comparability of our results from
business operations. Adjusted operating results in fiscal 2015
excluded the impact of the resale or modification of the terms,
each at significantly lower prices due to sharp declines in selling
prices, of certain previously-contracted bulk shipments for
delivery during fiscal 2015. Recoveries resulting from settlements
with the original contract parties, which began in the third
quarter of fiscal 2016, are reported within selling, general and
administrative expense in the quarterly 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.
Diluted Earnings Per Share From
Continuing Operations Attributable to SSI
4Q17 4Q16
Low High Income per share from
continuing operations attributable to SSI $ 0.62 $ 0.65 $ 0.59
Other asset impairment charges (recoveries), net, per share — —
0.08 Restructuring charges and other exit-related activities, per
share — — (0.04 ) Recoveries related to the resale or modification
of previously contracted shipments, per share (0.01 ) (0.01 ) (0.02
) Income tax expense (benefit) allocated to adjustments, per
share(1) — — (0.01 ) Adjusted
diluted earnings per share from continuing operations attributable
to SSI(2) $ 0.60 $ 0.63 $ 0.60 (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.
Auto and Metals Recycling Adjusted
Operating Income and Adjusted Operating Income per Ferrous Ton
Fiscal AMR operating income:
2017 2016 ($ in millions) Operating
income $ 91 $ 23 Goodwill impairment charge — 9 Other asset
impairment charges (recoveries), net — 16 Recoveries related to the
resale or modification of previously contracted shipments (1
) (1 ) Adjusted AMR operating income(1) $ 90 $ 48
AMR operating income per ferrous ton:
Operating income per ferrous ton $ 29 $ 8 Adjusted operating income
per ferrous ton $ 29 $ 16 (1) May not foot due to rounding.
Debt, Net of Cash
The following is a reconciliation of debt,
net of cash (in thousands):
May 31, 2017
August 31, 2017 Total debt $ 184,443 $ 145,124 Less: cash
and cash equivalents 15,209 7,287 Total debt, net of
cash $ 169,234 $ 137,837
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; the realization of deferred tax assets; planned capital
expenditures; liquidity positions; ability to generate cash from
continuing operations; the potential impact of adopting new
accounting pronouncements; obligations under our retirement plans;
benefits, savings or additional costs from business realignment,
cost containment and productivity improvement programs; and the
adequacy of accruals.
Forward-looking statements by their nature address matters that
are, to different degrees, uncertain, and often contain words such
as “outlook,” “target,” “aim,” “believes,” “expects,”
“anticipates,” “intends,” “assumes,” “estimates,” “evaluates,”
“may,” “will,” “should,” “could,” “opinions,” “forecasts,”
“projects,” “plans,” “future,” “forward,” “potential,” “probable,”
and similar expressions. However, the absence of these words or
similar expressions does not mean that a statement is not
forward-looking.
We may make other forward-looking statements from time to time,
including in reports filed with the Securities and Exchange
Commission, press releases, presentations and on public conference
calls. All forward-looking statements we make are based on
information available to us at the time the statements are made,
and we assume no obligation to update any forward-looking
statements, except as may be required by law. Our business is
subject to the effects of changes in domestic and global economic
conditions and a number of other risks and uncertainties that could
cause actual results to differ materially from those included in,
or implied by, such forward-looking statements. Some of these risks
and uncertainties are discussed in “Item 1A. Risk Factors” in Part
I of our most recent Annual Report on Form 10-K, as supplemented in
“Item 1A. Risk Factors” in Part II of subsequent Quarterly Reports
on Form 10-Q. Examples of these risks include: potential
environmental cleanup costs related to the Portland Harbor
Superfund site or other locations; the cyclicality and impact of
general economic conditions; instability in international markets;
volatile supply and demand conditions affecting prices and volumes
in the markets for both our products and raw materials we purchase;
imbalances in supply and demand conditions in the global steel
industry; the impact of goodwill impairment charges; the impact of
long-lived asset and cost and equity method investment impairment
charges; the inability to sustain the benefits or cost reductions
associated with productivity improvement and restructuring
initiatives; difficulties associated with acquisitions and
integration of acquired businesses; customer fulfillment of their
contractual obligations; changes in the relative value of the U.S.
dollar; the impact of foreign currency fluctuations; potential
limitations on our ability to access capital resources and existing
credit facilities; restrictions on our business and financial
covenants under our bank credit agreement; the impact of the
consolidation in the steel industry; inability to realize expected
benefits from investments in technology; freight rates and the
availability of transportation; the impact of equipment upgrades,
equipment failures and facility damage on production; product
liability claims; the impact of legal proceedings and legal
compliance; the adverse impact of climate change; the impact of not
realizing deferred tax assets; the impact of tax increases and
changes in tax rules; the impact of one or more cybersecurity
incidents; costs associated with compliance with environmental
regulations; inability to obtain or renew business licenses and
permits or renew facility leases; compliance with greenhouse gas
emission regulations; reliance on employees subject to collective
bargaining agreements; and the impact of the underfunded status of
multiemployer plans in which we participate.
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version on businesswire.com: http://www.businesswire.com/news/home/20170927006363/en/
Schnitzer Steel Industries, Inc.Investor Relations:Alexandra
Deignan, 646-278-9711ir@schn.comwww.schnitzersteel.com
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