News Releases

Schnitzer Reports Fourth Quarter and Fiscal 2018 Financial Results

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

PORTLAND, Ore.--(BUSINESS WIRE)--Oct. 24, 2018-- 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.

Source: Schnitzer Steel Industries, Inc.

Schnitzer Steel Industries, Inc.
Investor Relations:
Michael Bennett, 503-323-2811
mcbennett@schn.com
or
Company Info:
www.schnitzersteel.com
ir@schn.com

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