News Release

Schnitzer Reports Third Quarter 2020 Financial Results

Positive Segment Operating Performance and Cash Flow Demonstrate Resilience

PORTLAND, Ore.--(BUSINESS WIRE)--Jul. 1, 2020-- Schnitzer Steel Industries, Inc. (NASDAQ: SCHN) today reported results for its fiscal third quarter ended May 31, 2020. Reflecting the impact of the COVID-19 pandemic, the Company reported a loss per share from continuing operations for the quarter of $(0.18) and adjusted earnings per share of $0.05, compared to second quarter reported and adjusted earnings per share of $0.14 and $0.31, respectively. Comparatively, prior year third quarter reported and adjusted earnings per share from continuing operations were $0.56 and $0.65, respectively.

Auto and Metals Recycling (AMR) achieved operating income in the third quarter of $3 million or $3 per ferrous ton and adjusted operating income of $5 million or $6 per ferrous ton, both of which include an adverse impact from average inventory accounting of approximately $3 per ferrous ton. The COVID-19 pandemic and subsequent measures introduced by local and national governments resulted in an economic slowdown which reduced supply flows and caused a sharp decline in scrap prices before prices partially recovered later in the quarter. Reflecting the success of AMR’s global sales diversification strategy, AMR’s ferrous and nonferrous sales were shipped to 21 countries despite the weaker global markets.

Cascade Steel and Scrap (CSS) achieved operating income in the third quarter of $7 million, almost double the operating income achieved in the second quarter. The improved CSS operating performance was primarily driven by margin expansion due to the lower cost of raw materials, higher utilization and the benefits of productivity initiatives. Construction demand in the West Coast markets continued to show strength during the quarter despite the negative impact of COVID-19 on general economic activity.

“Our team has worked tirelessly through this pandemic, serving our customers and communities, and supporting our suppliers, demonstrating the critical and essential role of our business. Early on, we deployed health, safety, and wellness protocols in all our facilities in order to protect the health of our employees and all who visit our sites. I am very proud of how our employees have responded to the COVID-19 crisis, and our results can be attributed to their swift actions and agility,” said Tamara L. Lundgren, Chairman and Chief Executive Officer.

“During one of the most challenging quarters in recent times, we kept our focus on optimizing our sales, both wholesale and retail, aligning our operating costs with supply and production volumes, and moving ahead with our strategic investments. As a result, CSS almost doubled its operating income sequentially, and AMR delivered solid results in a market environment where ferrous scrap prices dropped to levels not seen since 2016,” she added. “We kept a strong focus on our strategic priorities, delivering ahead of schedule the full run rate on the targeted productivity initiatives we announced last October, and achieving early benefits from the ongoing transition to our One Schnitzer model that we will be completing in the fall. In addition, effective working capital management enabled us to deliver strong operating cash flow and reduce our net debt. While the near-term environment remains subject to uncertainty, we are encouraged by the gradual re-start of economic activity in the U.S. and globally.”

The Company announced last quarter that it is transitioning from its multi-divisional organizational structure to a functionally-based, integrated operating model. This reflects the culmination of a multi-phase organizational development strategy over the last several years. The Company will consolidate its operations, sales, services and other functional capabilities at the enterprise level. This new structure will result in a more agile organization and solidify the productivity improvement and cost reduction initiatives announced at the start of this fiscal year that have been substantially implemented. The Company expects to complete this transition and report its financial results in a single operating segment in the first quarter of fiscal 2021.

Summary Results

 

($ in millions, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter

 

 

 

3Q20

 

 

2Q20

 

 

3Q19

 

Revenues

 

$

403

 

 

$

439

 

 

$

547

 

Operating (loss) income

 

$

(4

)

 

$

8

 

 

$

24

 

Restructuring charges and other exit-related activities

 

 

3

 

 

 

5

 

 

 

 

Asset impairment charges

 

 

2

 

 

 

 

 

 

 

Charges for legacy environmental matters, net(1)

 

 

2

 

 

 

 

 

 

1

 

Business development costs

 

 

1

 

 

 

1

 

 

 

 

Charges related to the settlement of a wage and hour class action lawsuit

 

 

 

 

 

 

 

 

2

 

Adjusted operating income(2)

 

$

4

 

 

$

14

 

 

$

27

 

Net (loss) income attributable to SSI shareholders

 

$

(5

)

 

$

4

 

 

$

16

 

Net (loss) income from continuing operations attributable to SSI shareholders

 

$

(5

)

 

$

4

 

 

$

16

 

Adjusted net income from continuing operations

attributable to SSI shareholders(2)

 

$

1

 

 

$

9

 

 

$

18

 

Diluted (loss) earnings per share attributable to SSI shareholders

 

$

(0.18

)

 

$

0.14

 

 

$

0.56

 

Diluted (loss) earnings per share from continuing operations

attributable to SSI shareholders

 

$

(0.18

)

 

$

0.14

 

 

$

0.56

 

Adjusted diluted earnings per share from continuing operations

attributable to SSI shareholders(2)

 

$

0.05

 

 

$

0.31

 

 

$

0.65

 

(1)

Legal and environmental charges for legacy environmental matters, net of recoveries. The prior year period has been recast for comparability. Legacy environmental matters include charges (net of recoveries) related to the Portland Harbor Superfund site and to other legacy environmental loss contingencies.

(2)

See Non-GAAP Financial Measures for reconciliation to U.S. GAAP.

Auto and Metals Recycling

 

Summary of Auto and Metals Recycling Results

 

 

 

 

 

($ in millions, except selling prices and data per ton)

 

 

 

 

 

 

 

Quarter

 

 

 

 

 

 

 

3Q20

 

 

2Q20

 

 

Change

 

 

3Q19

 

 

Change

 

Total revenues

 

$

300

 

 

$

338

 

 

 

(11

)%

 

$

429

 

 

 

(30

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ferrous revenues

 

$

190

 

 

$

222

 

 

 

(15

)%

 

$

280

 

 

 

(32

)%

Ferrous volumes (LT, in thousands)

 

 

779

 

 

 

850

 

 

 

(8

)%

 

 

938

 

 

 

(17

)%

Avg. net ferrous sales prices ($/LT)(1)

 

$

232

 

 

$

253

 

 

 

(8

)%

 

$

293

 

 

 

(21

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonferrous revenues

 

$

79

 

 

$

88

 

 

 

(10

)%

 

$

113

 

 

 

(30

)%

Nonferrous volumes (pounds, in millions)(2)

 

 

111

 

 

 

113

 

 

 

(2

)%

 

 

154

 

 

 

(28

)%

Avg. net nonferrous sales prices ($/pound)(1)(2)

 

$

0.54

 

 

$

0.55

 

 

 

(2

)%

 

$

0.62

 

 

 

(13

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cars purchased (in thousands)

 

 

74

 

 

 

85

 

 

 

(13

)%

 

 

102

 

 

 

(27

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

3

 

 

$

19

 

 

 

(87

)%

 

$

29

 

 

 

(91

)%

Operating income ($/LT)

 

$

3

 

 

$

23

 

 

 

(86

)%

 

$

31

 

 

 

(90

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating income(3)

 

$

5

 

 

$

20

 

 

 

(76

)%

 

$

29

 

 

 

(84

)%

Adjusted operating income ($/LT)

 

$

6

 

 

$

23

 

 

 

(74

)%

 

$

31

 

 

 

(80

)%

 

LT = Long Ton, which is equivalent to 2,240 pounds

(1)

Price information is shown after netting the cost of freight incurred to deliver the product to the customer.

(2)

Excludes platinum group metals (PGMs) in catalytic converters.

(3)

See Non-GAAP Financial Measures for reconciliation to U.S. GAAP.

AMR achieved operating income in the third quarter of $3 million or $3 per ferrous ton and adjusted operating income of $5 million or $6 per ferrous ton, including an adverse impact from average inventory accounting of approximately $3 per ferrous ton. The COVID-19 pandemic resulted in an economic slowdown and ferrous selling prices fell sharply through mid-April before prices partially recovered in the second half of the quarter. Supply flows also declined significantly during the quarter amid the lower levels of economic activity. On a sequential basis, average ferrous selling prices and ferrous sales volumes both fell by 8%, while average nonferrous selling prices and sales volumes both decreased by 2%. AMR’s sequential performance also reflected higher revenues from retail sales and benefits from productivity initiatives implemented during FY20, which offset the sequential decline in the price of platinum group metal products.

Export customers accounted for 73% of total ferrous sales volumes for the quarter, with Bangladesh, Turkey and Vietnam representing the top export destinations for ferrous shipments.

Cascade Steel and Scrap

 

Summary of Cascade Steel and Scrap Results

 

 

 

 

 

($ in millions, except selling prices)

 

 

 

 

 

 

 

Quarter

 

 

 

 

 

 

 

3Q20

 

 

2Q20

 

 

Change

 

 

3Q19

 

 

Change

 

Steel revenues

 

$

83

 

 

$

86

 

 

 

(2

)%

 

$

97

 

 

 

(14

)%

Recycling revenues

 

 

21

 

 

 

19

 

 

 

14

%

 

 

25

 

 

 

(15

)%

Total segment revenues(1)

 

$

105

 

 

$

104

 

 

 

%

 

$

121

 

 

 

(14

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

7

 

 

$

4

 

 

 

97

%

 

$

8

 

 

 

(15

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finished steel average net sales price ($/ST)(2)

 

$

633

 

 

$

627

 

 

 

1

%

 

$

703

 

 

 

(10

)%

Finished steel sales volumes (ST, in thousands)

 

 

124

 

 

 

129

 

 

 

(4

)%

 

 

130

 

 

 

(4

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rolling mill utilization

 

 

91

%

 

 

72

%

 

 

26

%

 

 

98

%

 

 

(7

)%

 

ST = Short Ton, which is equivalent to 2,000 pounds

(1)

May not foot due to rounding.

(2)

Price information is shown after netting the cost of freight incurred to deliver the product to the customer.

CSS achieved operating income in the third quarter of $7 million, compared to $4 million in the second quarter. On a sequential basis, operating performance benefited from margin expansion as a result of lower costs for steel-making raw materials, coupled with slightly higher average net selling prices for finished steel products. Finished steel sales volumes in the quarter were only 4% lower sequentially, as the impact on construction demand in our West Coast markets from COVID-19 was limited. Higher utilization and benefits from productivity initiatives also contributed to the sequentially improved operating performance.

Corporate Items

In the third quarter of fiscal 2020, consolidated financial performance included Corporate expense of $10 million and adjusted Corporate expense of $8 million, compared to $10 million and $9 million, respectively, in the second quarter of fiscal 2020. The Company’s effective tax rate for the third quarter of fiscal 2020 was a benefit of 28%.

The Company has substantially implemented ahead of schedule the productivity initiatives announced in October 2019 targeting realized benefits of $15 million in fiscal 2020 and annualized benefits of $20 million. Consolidated results in the third quarter reflected an estimated $6 million of benefits from these measures, with total benefits achieved through the first nine months of fiscal 2020 of approximately $12 million. In connection with ongoing productivity initiatives, the Company incurred restructuring charges and other exit-related costs of approximately $3 million in the quarter.

In the third quarter, the Company generated positive operating cash flow of $39 million. Total debt at the end of the quarter was $428 million and debt, net of cash, was $121 million (for a reconciliation of adjusted results and debt, net of cash, to U.S. GAAP, see the table provided in the Non-GAAP Financial Measures section). The Company has a revolving credit facility of $700 million and CAD$15 million which matures in 2023. In order to preserve financial flexibility in light of uncertainties resulting from the COVID-19 outbreak, during the quarter the Company increased its borrowings under the revolving credit facility by $250 million, contributing to its cash position of $308 million as of May 31, 2020.

During the third quarter, the Company returned capital to shareholders through its 105th consecutive quarterly dividend. Capital expenditures were $22 million in the quarter and $59 million year to date, including investments for advanced metal recovery technologies and other growth projects.

Analysts’ Conference Call: Third Quarter of Fiscal 2020

A conference call and slide presentation to discuss results will be held today, July 1, 2020, at 11:30 a.m. Eastern and will be hosted by Tamara L. Lundgren, Chairman and Chief Executive Officer, and Richard Peach, Executive Vice President, Chief Financial Officer and Chief Strategy Officer. The call and the slide presentation will be webcast and accessible on the Company’s website under Company > Investors > Event Calendar at www.schnitzersteel.com/events.

Summary financial data is provided in the following pages. The slide presentation and related materials will be available prior to the call on the above website.

About Schnitzer Steel Industries, Inc.

Schnitzer Steel Industries, Inc. is one of the largest manufacturers and exporters of recycled metal products in North America with operating facilities located in 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 50 stores which sell serviceable used auto parts from salvaged vehicles and receive 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 Nine Months Ended

 

 

 

May 31,

2020

 

 

February 29,

2020

 

 

May 31,

2019

 

 

May 31,

2020

 

 

May 31,

2019

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Auto and Metals Recycling:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ferrous revenues

 

$

189,783

 

 

$

222,465

 

 

$

280,362

 

 

$

604,720

 

 

$

836,662

 

Nonferrous revenues

 

 

78,858

 

 

 

87,901

 

 

 

112,785

 

 

 

256,571

 

 

 

316,450

 

Retail and other revenues

 

 

31,736

 

 

 

27,303

 

 

 

35,876

 

 

 

89,512

 

 

 

98,388

 

Total Auto and Metals Recycling revenues

 

 

300,377

 

 

 

337,669

 

 

 

429,023

 

 

 

950,803

 

 

 

1,251,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cascade Steel and Scrap:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Steel revenues(1)

 

 

83,414

 

 

 

85,539

 

 

 

96,626

 

 

 

246,278

 

 

 

271,988

 

Recycling revenues

 

 

21,136

 

 

 

18,620

 

 

 

24,805

 

 

 

56,697

 

 

 

70,227

 

Total Cascade Steel and Scrap revenues

 

 

104,550

 

 

 

104,159

 

 

 

121,431

 

 

 

302,975

 

 

 

342,215

 

Intercompany sales eliminations

 

 

(2,244

)

 

 

(2,346

)

 

 

(3,058

)

 

 

(6,029

)

 

 

(8,734

)

Total revenues

 

$

402,683

 

 

$

439,482

 

 

$

547,396

 

 

$

1,247,749

 

 

$

1,584,981

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING (LOSS) INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AMR operating income

 

$

2,503

 

 

$

19,304

 

 

$

29,189

 

 

$

19,375

 

 

$

73,947

 

CSS operating income

 

$

6,931

 

 

$

3,524

 

 

$

8,116

 

 

$

14,692

 

 

$

25,802

 

Consolidated operating (loss) income

 

$

(3,706

)

 

$

7,691

 

 

$

24,459

 

 

$

(3,925

)

 

$

66,184

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted AMR operating income(2)

 

$

4,730

 

 

$

19,688

 

 

$

29,189

 

 

$

23,566

 

 

$

74,010

 

CSS operating income

 

 

6,931

 

 

 

3,524

 

 

 

8,116

 

 

 

14,692

 

 

 

25,802

 

Adjusted segment operating income(2)

 

 

11,661

 

 

 

23,212

 

 

 

37,305

 

 

 

38,258

 

 

 

99,812

 

Adjusted corporate expense(2)

 

 

(7,542

)

 

 

(9,198

)

 

 

(9,670

)

 

 

(24,757

)

 

 

(28,802

)

Intercompany eliminations

 

 

54

 

 

 

(36

)

 

 

(269

)

 

 

192

 

 

 

50

 

Adjusted operating income(2)

 

 

4,173

 

 

 

13,978

 

 

 

27,366

 

 

 

13,693

 

 

 

71,060

 

Restructuring charges and other exit-related activities

 

 

(2,710

)

 

 

(4,633

)

 

 

(75

)

 

 

(7,810

)

 

 

(813

)

Asset impairment charges

 

 

(2,227

)

 

 

(402

)

 

 

 

 

 

(4,321

)

 

 

(63

)

Charges for legacy environmental matters, net(3)

 

 

(2,078

)

 

 

(451

)

 

 

(502

)

 

 

(3,822

)

 

 

(1,670

)

Business development costs

 

 

(791

)

 

 

(801

)

 

 

 

 

 

(1,592

)

 

 

 

Charges related to the settlement of a wage and hour class action lawsuit

 

 

(73

)

 

 

 

 

 

(2,330

)

 

 

(73

)

 

 

(2,330

)

Total operating (loss) income

 

$

(3,706

)

 

$

7,691

 

 

$

24,459

 

 

$

(3,925

)

 

$

66,184

 

(1)

Steel revenues include primarily sales of finished steel products, semi-finished goods (billets) and manufacturing scrap.

(2)

See Non-GAAP Financial Measures for reconciliation to U.S. GAAP.

(3)

Legal and environmental charges for legacy environmental matters, net of recoveries. The prior year periods have been recast for comparability. Legacy environmental matters include charges (net of recoveries) related to the Portland Harbor Superfund site and to other legacy environmental loss contingencies.

SCHNITZER STEEL INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in thousands, except per share amounts)

(Unaudited)

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

May 31,

2020

 

 

February 29,

2020

 

 

May 31,

2019

 

 

May 31,

2020

 

 

May 31,

2019

 

Revenues

 

$

402,683

 

 

$

439,482

 

 

$

547,396

 

 

$

1,247,749

 

 

$

1,584,981

 

Cost of goods sold

 

 

356,217

 

 

 

380,520

 

 

 

474,598

 

 

 

1,101,497

 

 

 

1,379,418

 

Selling, general and administrative

 

 

45,544

 

 

 

46,426

 

 

 

48,575

 

 

 

138,744

 

 

 

139,483

 

(Income) from joint ventures

 

 

(309

)

 

 

(190

)

 

 

(311

)

 

 

(698

)

 

 

(980

)

Asset impairment charges

 

 

2,227

 

 

 

402

 

 

 

 

 

 

4,321

 

 

 

63

 

Restructuring charges and other exit-related activities

 

 

2,710

 

 

 

4,633

 

 

 

75

 

 

 

7,810

 

 

 

813

 

Operating (loss) income

 

 

(3,706

)

 

 

7,691

 

 

 

24,459

 

 

 

(3,925

)

 

 

66,184

 

Interest expense

 

 

(2,656

)

 

 

(1,320

)

 

 

(2,294

)

 

 

(5,399

)

 

 

(6,267

)

Other (expense) income, net

 

 

(90

)

 

 

(98

)

 

 

29

 

 

 

18

 

 

 

373

 

(Loss) income from continuing operations before income taxes

 

 

(6,452

)

 

 

6,273

 

 

 

22,194

 

 

 

(9,306

)

 

 

60,290

 

Income tax benefit (expense)

 

 

1,804

 

 

 

(1,770

)

 

 

(5,762

)

 

 

2,568

 

 

 

(13,733

)

(Loss) income from continuing operations

 

 

(4,648

)

 

 

4,503

 

 

 

16,432

 

 

 

(6,738

)

 

 

46,557

 

(Loss) income from discontinued operations, net of tax

 

 

(69

)

 

 

1

 

 

 

8

 

 

 

(40

)

 

 

(202

)

Net (loss) income

 

 

(4,717

)

 

 

4,504

 

 

 

16,440

 

 

 

(6,778

)

 

 

46,355

 

Net income attributable to noncontrolling interests

 

 

(278

)

 

 

(621

)

 

 

(750

)

 

 

(1,329

)

 

 

(1,585

)

Net (loss) income attributable to SSI shareholders

 

$

(4,995

)

 

$

3,883

 

 

$

15,690

 

 

$

(8,107

)

 

$

44,770

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income per share from continuing operations

 

$

(0.18

)

 

$

0.14

 

 

$

0.57

 

 

$

(0.29

)

 

$

1.63

 

Net (loss) income per share

 

$

(0.18

)

 

$

0.14

 

 

$

0.57

 

 

$

(0.29

)

 

$

1.63

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income per share from continuing operations

 

$

(0.18

)

 

$

0.14

 

 

$

0.56

 

 

$

(0.29

)

 

$

1.60

 

Net (loss) income per share

 

$

(0.18

)

 

$

0.14

 

 

$

0.56

 

 

$

(0.29

)

 

$

1.59

 

Weighted average number of common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

27,724

 

 

 

27,721

 

 

 

27,510

 

 

 

27,653

 

 

 

27,548

 

Diluted

 

 

27,724

 

 

 

28,139

 

 

 

28,074

 

 

 

27,653

 

 

 

28,184

 

Dividends declared per common share

 

$

0.1875

 

 

$

0.1875

 

 

$

0.1875

 

 

$

0.5625

 

 

$

0.5625

 

SCHNITZER STEEL INDUSTRIES, INC.

SELECTED OPERATING STATISTICS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

YTD

 

 

 

1Q20

 

 

2Q20

 

 

3Q20

 

 

2020(1)

 

SSI Total Volumes(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total ferrous volumes (LT, in thousands)

 

 

976

 

 

 

988

 

 

 

927

 

 

 

2,891

 

Total nonferrous volumes (pounds, in thousands)

 

 

144,176

 

 

 

124,342

 

 

 

122,913

 

 

 

391,431

 

Auto and Metals Recycling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ferrous selling prices ($/LT)(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic

 

$

195

 

 

$

243

 

 

$

221

 

 

$

221

 

Export

 

$

229

 

 

$

257

 

 

$

236

 

 

$

241

 

Average

 

$

221

 

 

$

253

 

 

$

232

 

 

$

236

 

Ferrous sales volume (LT, in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic

 

 

247

 

 

 

275

 

 

 

213

 

 

 

734

 

Export

 

 

583

 

 

 

576

 

 

 

566

 

 

 

1,725

 

Total(4)

 

 

830

 

 

 

850

 

 

 

779

 

 

 

2,459

 

Nonferrous average price ($/pound)(3)(5)

 

$

0.54

 

 

$

0.55

 

 

$

0.54

 

 

$

0.54

 

Nonferrous sales volume (pounds, in thousands)(5)

 

 

131,501

 

 

 

112,765

 

 

 

111,028

 

 

 

355,294

 

Cars purchased (in thousands)(6)

 

 

83

 

 

 

85

 

 

 

74

 

 

 

242

 

Auto stores at period end

 

 

51

 

 

 

51

 

 

 

49

 

 

 

49

 

Cascade Steel and Scrap

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finished steel average sales price ($/ST)(3)

 

$

643

 

 

$

627

 

 

$

633

 

 

$

634

 

Sales volume (ST, in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rebar

 

 

83

 

 

 

86

 

 

 

85

 

 

 

254

 

Coiled products

 

 

29

 

 

 

42

 

 

 

39

 

 

 

110

 

Merchant bar and other

 

 

1

 

 

 

1

 

 

 

1

 

 

 

2

 

Finished steel products sold(4)

 

 

114

 

 

 

129

 

 

 

124

 

 

 

366

 

Rolling mill utilization(7)

 

 

85

%

 

 

72

%

 

 

91

%

 

 

83

%

Tons for recycled ferrous metal are LT (Long Ton, which is equivalent to 2,240 pounds) and for finished steel products are ST (Short Ton, which is equivalent to 2,000 pounds).

(1)

The sum of quarterly amounts may not agree to full year equivalent due to rounding.

(2)

Ferrous and nonferrous volumes sold externally by AMR and CSS and delivered to our steel mill for finished steel production.

(3)

Price information is shown after netting the cost of freight incurred to deliver the product to the customer.

(4)

May not foot due to rounding.

(5)

Excludes platinum group metals (“PGMs”) in catalytic converters.

(6)

Cars purchased by auto parts stores only.

(7)

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

 

 

 

1Q19

 

 

2Q19

 

 

3Q19

 

 

4Q19

 

 

2019

 

SSI Total Volumes(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total ferrous volumes (LT, in thousands)(2)

 

 

1,080

 

 

 

992

 

 

 

1,079

 

 

 

1,168

 

 

 

4,319

 

Total nonferrous volumes (pounds, in thousands)

 

 

166,977

 

 

 

154,571

 

 

 

169,912

 

 

 

175,874

 

 

 

667,334

 

Auto and Metals Recycling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ferrous selling prices ($/LT)(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic

 

$

290

 

 

$

286

 

 

$

268

 

 

$

232

 

 

$

272

 

Export

 

$

314

 

 

$

288

 

 

$

303

 

 

$

281

 

 

$

295

 

Average

 

$

306

 

 

$

287

 

 

$

293

 

 

$

270

 

 

$

289

 

Ferrous sales volume (LT, in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic

 

 

340

 

 

 

343

 

 

 

311

 

 

 

271

 

 

 

1,265

 

Export

 

 

579

 

 

 

515

 

 

 

627

 

 

 

754

 

 

 

2,475

 

Total(4)

 

 

919

 

 

 

858

 

 

 

938

 

 

 

1,024

 

 

 

3,739

 

Nonferrous average price ($/pound)(3)(5)

 

$

0.59

 

 

$

0.58

 

 

$

0.62

 

 

$

0.56

 

 

$

0.59

 

Nonferrous sales volume (pounds, in thousands)(5)

 

 

152,869

 

 

 

141,307

 

 

 

153,936

 

 

 

160,182

 

 

 

608,294

 

Cars purchased (in thousands)(6)

 

 

94

 

 

 

89

 

 

 

102

 

 

 

101

 

 

 

386

 

Auto stores at period end

 

 

51

 

 

 

51

 

 

 

51

 

 

 

51

 

 

 

51

 

Cascade Steel and Scrap

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finished steel average sales price ($/ST)(3)

 

$

747

 

 

$

737

 

 

$

703

 

 

$

675

 

 

$

713

 

Sales volume (ST, in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rebar

 

 

81

 

 

 

59

 

 

 

91

 

 

 

100

 

 

 

331

 

Coiled products(7)

 

 

37

 

 

 

34

 

 

 

39

 

 

 

32

 

 

 

143

 

Merchant bar and other

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

3

 

Finished steel products sold(4)(7)

 

 

119

 

 

 

94

 

 

 

130

 

 

 

134

 

 

 

478

 

Rolling mill utilization(8)

 

 

87

%

 

 

76

%

 

 

98

%

 

 

90

%

 

 

88

%

Tons for recycled ferrous metal are LT (Long Ton, which is equivalent to 2,240 pounds) and for finished steel products are ST (Short Ton, which is equivalent to 2,000 pounds).

(1)

Ferrous and nonferrous volumes sold externally by AMR and CSS and delivered to our steel mill for finished steel production.

(2)

Subsequent to the earnings release for the second quarter of fiscal 2019, total ferrous volumes for the second quarter of fiscal 2019 were revised to include an additional 35 thousand LT.

(3)

Price information is shown after netting the cost of freight incurred to deliver the product to the customer.

(4)

May not foot due to rounding.

(5)

Excludes platinum group metals (“PGMs”) in catalytic converters.

(6)

Cars purchased by auto parts stores only.

(7)

The sum of quarterly amounts may not agree to full year equivalent due to rounding.

(8)

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)

 

 

May 31, 2020

 

 

August 31, 2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

307,655

 

 

$

12,377

 

Accounts receivable, net

 

 

134,538

 

 

 

145,617

 

Inventories

 

 

161,543

 

 

 

187,320

 

Other current assets

 

 

49,491

 

 

 

120,974

 

Total current assets

 

 

653,227

 

 

 

466,288

 

Property, plant and equipment, net

 

 

459,312

 

 

 

456,400

 

Operating lease right-of-use assets

 

 

127,418

 

 

 

 

Goodwill and other assets

 

 

234,139

 

 

 

238,058

 

Total assets

 

$

1,474,096

 

 

$

1,160,746

 

 

 

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Short-term borrowings

 

$

1,401

 

 

$

1,321

 

Operating lease liabilities

 

 

18,683

 

 

 

 

Other current liabilities

 

 

145,184

 

 

 

266,909

 

Total current liabilities

 

 

165,268

 

 

 

268,230

 

Long-term debt, net of current maturities

 

 

426,791

 

 

 

103,775

 

Operating lease liabilities, net of current maturities

 

 

111,963

 

 

 

 

Other long-term liabilities

 

 

95,727

 

 

 

87,445

 

Equity:

 

 

 

 

 

 

 

 

Total Schnitzer Steel Industries, Inc. ("SSI") shareholders' equity

 

 

670,626

 

 

 

696,964

 

Noncontrolling interests

 

 

3,721

 

 

 

4,332

 

Total equity

 

 

674,347

 

 

 

701,296

 

Total liabilities and equity

 

$

1,474,096

 

 

$

1,160,746

 

Non-GAAP Financial Measures

This press release contains performance based on adjusted net (loss) income and adjusted diluted (loss) earnings per share from continuing operations attributable to SSI shareholders and adjusted consolidated operating (loss) income and AMR operating income as well as adjusted segment operating income and adjusted corporate expense which are non-GAAP financial measures as defined under SEC rules. As required by SEC rules, the Company has provided a reconciliation of these measures for each period discussed to the most directly comparable U.S. GAAP measure. Management believes that providing these non-GAAP financial measures adds a meaningful presentation of our results from business operations excluding adjustments for restructuring charges and other exit-related activities, asset impairment charges, charges for legacy environmental matters (net of recoveries), business development costs not related to ongoing operations, charges related to the settlement of a wage and hour class action lawsuit, 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. 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.

Reconciliation of adjusted consolidated operating (loss) income, adjusted AMR operating income, adjusted segment operating income and adjusted corporate expense

 

($ in millions)

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

May 31,

2020

 

 

February 29,

2020

 

 

May 31,

2019

 

 

May 31,

2020

 

 

May 31,

2019

 

Consolidated operating (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As reported

 

$

(4

)

 

$

8

 

 

$

24

 

 

$

(4

)

 

$

66

 

Restructuring charges and other exit-related activities

 

 

3

 

 

 

5

 

 

 

 

 

 

8

 

 

 

1

 

Asset impairment charges

 

 

2

 

 

 

 

 

 

 

 

 

4

 

 

 

 

Charges for legacy environmental matters, net(1)

 

 

2

 

 

 

 

 

 

1

 

 

 

4

 

 

 

2

 

Business development costs

 

 

1

 

 

 

1

 

 

 

 

 

 

2

 

 

 

 

Charges related to the settlement of a wage and hour class action lawsuit

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

2

 

Adjusted(2)

 

$

4

 

 

$

14

 

 

$

27

 

 

$

14

 

 

$

71

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AMR operating income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As reported

 

$

3

 

 

$

19

 

 

$

29

 

 

$

19

 

 

$

74

 

Asset impairment charges

 

 

2

 

 

 

 

 

 

 

 

 

4

 

 

 

 

Adjusted(2)

 

$

5

 

 

$

20

 

 

$

29

 

 

$

24

 

 

$

74

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment operating income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As reported

 

$

9

 

 

$

23

 

 

$

37

 

 

$

34

 

 

$

100

 

AMR asset impairment charges

 

 

2

 

 

 

 

 

 

 

 

 

4

 

 

 

 

Adjusted(2)

 

$

12

 

 

$

23

 

 

$

37

 

 

$

38

 

 

$

100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As reported

 

$

10

 

 

$

10

 

 

$

13

 

 

$

30

 

 

$

33

 

Charges for legacy environmental matters, net(1)

 

 

(2

)

 

 

 

 

 

(1

)

 

 

(4

)

 

 

(2

)

Business development costs

 

 

(1

)

 

 

(1

)

 

 

 

 

 

(2

)

 

 

 

Charges related to the settlement of a wage and hour class action lawsuit

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

Asset impairment charges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted(2)

 

$

8

 

 

$

9

 

 

$

10

 

 

$

25

 

 

$

29

 

Reconciliation of adjusted net (loss) income from continuing operations attributable to SSI shareholders

 

($ in millions)

 

Quarter

 

 

 

3Q20

 

 

2Q20

 

 

3Q19

 

Net (loss) income from continuing operations attributable to

SSI shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

As reported

 

$

(5

)

 

$

4

 

 

$

16

 

Restructuring charges and other exit-related activities

 

 

3

 

 

 

5

 

 

 

 

Asset impairment charges

 

 

2

 

 

 

 

 

 

 

Charges for legacy environmental matters, net(1)

 

 

2

 

 

 

 

 

 

1

 

Business development costs

 

 

1

 

 

 

1

 

 

 

 

Charges related to the settlement of a wage and hour class action lawsuit

 

 

 

 

 

 

 

 

2

 

Income tax benefit allocated to adjustments(3)

 

 

(2

)

 

 

(1

)

 

 

 

Adjusted(2)

 

$

1

 

 

$

9

 

 

$

18

 

Reconciliation of diluted (loss) earnings per share from continuing operations attributable to SSI shareholders

 

($ per share)

 

 

 

Quarter

 

 

 

3Q20

 

 

2Q20

 

 

3Q19

 

Diluted (loss) earnings per share from continuing operations

attributable to SSI shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

As reported

 

$

(0.18

)

 

$

0.14

 

 

$

0.56

 

Restructuring charges and other exit-related activities

 

 

0.10

 

 

 

0.16

 

 

 

 

Asset impairment charges

 

 

0.08

 

 

 

0.01

 

 

 

 

Charges for legacy environmental matters, net(1)

 

 

0.07

 

 

 

0.02

 

 

 

0.02

 

Business development costs

 

 

0.03

 

 

 

0.03

 

 

 

 

Charges related to the settlement of a wage and hour class action lawsuit

 

 

 

 

 

 

 

 

0.08

 

Income tax benefit allocated to adjustments(3)

 

 

(0.06

)

 

 

(0.05

)

 

 

(0.01

)

Adjusted(2)

 

$

0.05

 

 

$

0.31

 

 

$

0.65

 

(1)

Legal and environmental charges for legacy environmental matters, net of recoveries. The prior year periods have been recast for comparability. Legacy environmental matters include charges (net of recoveries) related to the Portland Harbor Superfund site and to other legacy environmental loss contingencies.

(2)

May not foot due to rounding.

(3)

Income tax allocated to the aggregate adjustments reconciling reported and adjusted net income (loss) from continuing operations attributable to SSI shareholders and diluted earnings (loss) per share from continuing operations attributable to SSI shareholders is determined based on a tax provision calculated with and without the adjustments.

Reconciliation of debt, net of cash

 

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 31, 2020

 

 

February 29, 2020

 

 

August 31, 2019

 

Short-term borrowings

 

$

1,401

 

 

$

1,411

 

 

$

1,321

 

Long-term debt, net of current maturities

 

 

426,791

 

 

 

140,521

 

 

 

103,775

 

Total debt

 

 

428,192

 

 

 

141,932

 

 

 

105,096

 

Less: cash and cash equivalents

 

 

307,655

 

 

 

10,326

 

 

 

12,377

 

Total debt, net of cash

 

$

120,537

 

 

$

131,606

 

 

$

92,719

 

 

Forward Looking Statements

Statements and information included in this press release that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Except as noted herein or as the context may otherwise require, all references in this press release to “we,” “our,” “us,” “the Company” and “SSI” refer to Schnitzer Steel Industries, Inc. and its consolidated subsidiaries.

Forward-looking statements in this press release include statements regarding future events or our expectations, intentions, beliefs and strategies regarding the future, which may include statements regarding 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 impact of sanctions and tariffs, quotas and other trade actions and import restrictions; the impact of pandemics, epidemics or other public health emergencies, such as the coronavirus disease 2019 (COVID-19) pandemic; the realization of deferred tax assets; planned capital expenditures; liquidity positions; our 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” of Part I of our most recent Annual Report on Form 10-K, as supplemented by our subsequently filed Quarterly Reports on Form 10-Q. Examples of these risks include: potential environmental cleanup costs related to the Portland Harbor Superfund site or other locations; the cyclicality and impact of general economic conditions; changing conditions in global markets including the impact of sanctions and tariffs, quotas and other trade actions and import restrictions; the impact of pandemics, epidemics or other public health emergencies, such as the coronavirus disease 2019 (COVID-19) pandemic; 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 equity investment impairment charges; inability to achieve or sustain the benefits from productivity, cost savings and restructuring initiatives; inability to realize or delays in realizing expected benefits from investments in technology; inability to renew facility leases; 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; 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; 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.

Investor Relations:
Michael Bennett
(503) 323-2811
[email protected]

Company Info:
www.schnitzersteel.com
[email protected]

Source: Schnitzer Steel Industries, Inc.

Data provided by Thomson Reuters