─ Third Quarter Earnings Conference Call
11:30 a.m. Eastern June 26, 2018 ─
Schnitzer Steel Industries, Inc. (Nasdaq: SCHN) today announced
preliminary results for its third quarter of fiscal 2018 ended
May 31, 2018. Schnitzer expects third quarter earnings per
share from continuing operations to be in the range of $1.27 -
$1.33 and adjusted earnings per share to be in the range of $1.22 -
$1.28. Third quarter consolidated results are expected to be
significantly improved compared to the prior year third quarter
results of $0.60 earnings per share and $0.56 adjusted earnings per
share. For a reconciliation of adjusted results to U.S. GAAP, see
the table provided in the Non-GAAP Financial Measures section.
For the third quarter of fiscal 2018, Auto and Metals Recycling
(AMR) is expected to report operating income in the range of $53
million - $55 million, or operating income per ferrous ton of $54 -
$56, compared to operating income of $30 million, or operating
income per ferrous ton of $36, in the prior year third quarter.
Ferrous sales volumes are expected to increase by approximately 19%
and nonferrous sales volumes are expected to decrease by
approximately 3% compared to the prior year third quarter. Average
ferrous and nonferrous net selling prices are expected to increase
by approximately 31% and 14%, respectively, compared to the same
period in the prior year. AMR’s higher third quarter performance is
expected to benefit from expanded metal spreads, higher ferrous
sales volumes, higher average ferrous and nonferrous net selling
prices, benefits from commercial initiatives, and sustained
contributions from productivity improvements.
Cascade Steel and Scrap (CSS) is expected to generate operating
income of approximately $11 million, reflecting a significant
improvement from the third quarter of fiscal 2017 operating income
of $1 million. Finished steel sales volumes are expected to be
consistent with the prior year third quarter, and average net
selling prices for finished steel products are expected to increase
by approximately 29% year-over-year. The expected improvement in
CSS operating performance is primarily driven by the higher average
net selling prices for finished steel products which significantly
outpaced the increase in the cost of steelmaking raw materials,
higher utilization, and the continued benefits of productivity
improvements from the integration of our Oregon metal recycling and
steel manufacturing operations.
Consolidated financial performance in the third quarter is
expected to include Corporate expense of approximately $14 million,
an increase of $3 million compared to the prior year third quarter
driven primarily by higher professional service expenses and
increased incentive compensation accruals as a result of improved
operating performance. For the third quarter of fiscal 2018, the
Company’s effective tax rate is expected to be an expense of
approximately 21%.
Operating cash flow is expected to be in the range of $60
million - $65 million in the third quarter of fiscal 2018. Total
debt was $173 million as of the end of the third quarter, and debt,
net of cash, was $163 million (for a reconciliation of debt, net of
cash, see the table provided in the Non-GAAP Financial Measures
section). This represents a total debt reduction of $38 million
sequentially. During the third quarter the Company repurchased a
total of 166,013 shares of its Class A common stock in open market
transactions pursuant to its ongoing authorized share repurchase
program.
The preliminary information provided above is based on the
Company’s current estimates of its financial results for the
quarter ended May 31, 2018 and remains subject to change based
on final review of the Company’s third quarter financial
results.
Schnitzer will report its third quarter fiscal 2018 financial
results on Tuesday, June 26, 2018 and will webcast a conference
call to discuss the performance at 11:30 a.m. Eastern on the same
day. The webcast of the call and the accompanying slide
presentation may be accessed on Schnitzer’s website under Company
> Investors > Event Calendar at
www.schnitzersteel.com/events. The call will be hosted by Tamara L.
Lundgren, President and Chief Executive Officer, and Richard D.
Peach, Senior Vice President, Chief Financial Officer and Chief of
Corporate Operations.
Replay Information
Toll Free Dial: (855) 859-2056
Toll Free International Dial: (404)
537-3406
Conference ID: 2184208
Replay Available: 06/26/2018 to
07/01/2018
About Schnitzer Steel Industries,
Inc.
Schnitzer Steel Industries, Inc. is one of the largest
manufacturers and exporters of recycled metal products in the
United States with operating facilities located in 23 states,
Puerto Rico and Western Canada. Schnitzer has seven deep water
export facilities located on both the East and West Coasts and in
Hawaii and Puerto Rico. The Company’s integrated operating platform
also includes auto parts stores with approximately 5 million annual
retail visits. The Company’s steel manufacturing operations produce
finished steel products, including rebar, wire rod and other
specialty products. The Company began operations in 1906 in
Portland, Oregon.
Non-GAAP Financial
Measures
This press release contains expected performance based on
adjusted diluted earnings per share from continuing operations
attributable to SSI which is a non-GAAP financial measure as
defined under SEC rules. As required by SEC rules, the Company has
provided a reconciliation of this measure for each period discussed
to the most directly comparable U.S. GAAP measure. Management
believes that presenting non-GAAP financial measures provides a
meaningful presentation of our results from business operations
excluding adjustments for other asset impairment charges net of
recoveries, restructuring charges and other exit-related
activities, recoveries related to the resale or modification of
certain previously contracted shipments, and the income tax expense
(benefit) allocated to these adjustments, items which are not
related to underlying business operational performance, and
improves the period-to-period comparability of our results from
business operations. Adjusted operating results in fiscal 2015
excluded the impact from the resale or modification of the terms,
each at significantly lower prices due to sharp declines in selling
prices, of certain previously contracted bulk shipments for
delivery during fiscal 2015. Recoveries resulting from settlements
with the original contract parties, which began in the third
quarter of fiscal 2016 and concluded in the first quarter of fiscal
2018, are reported within selling, general and administrative
expense in the quarterly statements of income and are also excluded
from this measure. Further, management believes that debt, net of
cash is a useful measure for investors because, as cash and cash
equivalents can be used, among other things, to repay indebtedness,
netting this against total debt is a useful measure of our
leverage. These non-GAAP financial measures should be considered in
addition to, but not as a substitute for, the most directly
comparable U.S. GAAP measures.
Diluted Earnings per Share from Continuing
Operations Attributable to SSI ($ per share)
Quarter 3Q18 3Q17
High Low Net income from
continuing operations attributable to SSI $ 1.33 $ 1.27 $ 0.60
Other asset impairment charges
(recoveries), net(1)
(0.05 ) (0.05 ) (0.04 ) Restructuring charges and other
exit-related activities — — — Recoveries related to the resale or
modification of certain previously contracted shipments — — (0.01 )
Income tax expense (benefit) allocated to adjustments(2) — —
— Adjusted diluted earnings from continuing
operations attributable to SSI(3) $ 1.28 $ 1.22 $
0.56
(1) Amounts relate to the AMR reportable segment and reflect a
pre-tax gain of $1.5 million in 3Q18 and $1.0 million in 3Q17.
(2) Income tax allocated to 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.
(3) May not foot due to rounding.
Debt, Net of Cash
The following is a reconciliation of debt, net of cash (in
millions):
May 31, 2018 Total debt $ 173 Less:
cash and cash equivalents 10 Total debt, net of cash $ 163
Safe Harbor for 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 the recently enacted federal tax reform;
the impact of tariffs and other trade actions; the realization of
deferred tax assets; planned capital expenditures; liquidity
positions; ability to generate cash from continuing operations; the
potential impact of adopting new accounting pronouncements;
obligations under our retirement plans; benefits, savings or
additional costs from business realignment, cost containment and
productivity improvement programs; and the adequacy of
accruals.
Forward-looking statements by their nature address matters that
are, to different degrees, uncertain, and often contain words such
as “outlook,” “target,” “aim,” “believes,” “expects,”
“anticipates,” “intends,” “assumes,” “estimates,” “evaluates,”
“may,” “will,” “should,” “could,” “opinions,” “forecasts,”
“projects,” “plans,” “future,” “forward,” “potential,” “probable,”
and similar expressions. However, the absence of these words or
similar expressions does not mean that a statement is not
forward-looking.
We may make other forward-looking statements from time to time,
including in reports filed with the Securities and Exchange
Commission, press releases, presentations and on public conference
calls. All forward-looking statements we make are based on
information available to us at the time the statements are made,
and we assume no obligation to update any forward-looking
statements, except as may be required by law. Our business is
subject to the effects of changes in domestic and global economic
conditions and a number of other risks and uncertainties that could
cause actual results to differ materially from those included in,
or implied by, such forward-looking statements. Some of these risks
and uncertainties are discussed in “Item 1A. Risk Factors” in Part
I of our most recent Annual Report on Form 10-K, as supplemented by
our subsequently filed Quarterly Reports on Form 10-Q. Examples of
these risks include: potential environmental cleanup costs related
to the Portland Harbor Superfund site or other locations; the
cyclicality and impact of general economic conditions; uncertainty
in global markets including the impact of tariffs 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 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20180614006173/en/
Schnitzer Steel Industries, Inc.Investor Relations:Stefano
Gaggini, 503-323-2811ir@schn.comwww.schnitzersteel.com
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