Schnitzer Provides Outlook for Third Quarter of Fiscal 2014
PORTLAND, Ore.--(BUSINESS WIRE)--May 23, 2014--
Schnitzer Steel Industries, Inc. (Nasdaq: SCHN) announced its outlook
for its third quarter of fiscal 2014 ending May 31, 2014. Demand for
recycled metals remained steady compared to the second quarter, however,
selling prices for ferrous metals declined approximately $40 from the
end of the second quarter, which is expected to result in a significant
adverse average inventory impact to our Metals Recycling Business.
Seasonal improvements in our Auto Parts Business and higher sales
volumes in our Steel Manufacturing Business are expected to lead to
sequential improvements in profitability in both businesses. Reported
earnings per share in the third quarter are expected to be in the range
of $0.10 - $0.15, including significant tax benefits. Adjusted earnings
per share, adjusted for restructuring and other impairment charges, is
expected to be less than reported earnings per share due to the
allocation of tax benefits in the third quarter.
In the Metals Recycling Business, ferrous sales volumes are expected to
approximate the second quarter and average ferrous selling prices are
expected to decline approximately 5% sequentially with a 10% decline in
peak to trough selling prices. Nonferrous sales volumes are expected to
increase by approximately 5% and average nonferrous selling prices are
expected to approximate the second quarter. Due to the significant fall
in ferrous sales prices, adverse effects of average inventory costs in
the third quarter are expected to more than offset the benefits from
productivity improvements, cost reductions and increased nonferrous
sales. As a result, we anticipate operating income per ton to be in the
range of $3, subject to the timing of shipments.
In the Auto Parts Business, seasonally higher retail sales are expected
to drive significantly higher operating income sequentially which is
anticipated to more than offset the impact of lower commodity prices.
Seasonal improvements are also expected to drive a 15% increase in car
purchase volumes compared to the second quarter. Operating income is
expected to increase significantly with operating margins anticipated to
be in the range of 9% - 10%, which includes the impact of stores owned
for less than a year.
In the Steel Manufacturing Business, sales volumes are expected to
increase by approximately 15% sequentially. Average selling prices are
expected to approximate the second quarter. Stronger demand and
increased sales volumes during the third quarter are expected to more
than offset approximately $1 million of operating expenses related to a
planned maintenance outage. As a result, operating income is expected to
be slightly above the second quarter.
The Company expects to report third quarter fiscal 2014 results toward
the end of June.
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 to “we,” “our,” “us” and “SSI” refer
to the Company and its consolidated subsidiaries.
Forward-looking statements in this press release include statements
regarding our expectations, intentions, beliefs and strategies regarding
the future, which may include statements regarding trends, cyclicality
and changes in the markets we sell into; strategic direction; 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; expected results, including pricing, sales volumes and
profitability; obligations under our retirement plans; benefits, savings
or additional costs from business realignment and cost containment
programs; and the adequacy of accruals.
When used in this report, the words “believes,” “expects,”
“anticipates,” “intends,” “assumes,” “estimates,” “evaluates,” “may,”
“could,” “opinions,” “forecasts,” “future,” “forward,” “potential,”
“probable,” and similar expressions are intended to identify
forward-looking statements.
We may make other forward-looking statements from time to time,
including in reports filed with the Securities and Exchange Commission,
press releases and 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 our most
recent annual report on Form 10-K and quarterly report on Form 10-Q.
Examples of these risks include: potential environmental cleanup costs
related to the Portland Harbor Superfund site; the impact of general
economic conditions; volatile supply and demand conditions affecting
prices and volumes in the markets for both our products and raw
materials we purchase; difficulties associated with acquisitions and
integration of acquired businesses; the impact of goodwill impairment
charges; the impact of long-lived asset impairment charges; the
realization of expected cost reductions related to restructuring
initiatives; the inability of customers to fulfill their contractual
obligations; 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; the impact of imports of foreign steel into the U.S.;
inability to realize expected benefits from investments in technology;
freight rates and availability of transportation; impact of equipment
upgrades and failures on production; product liability claims; the
impact of impairment of our deferred tax assets; costs associated with
compliance with environmental regulations; the adverse impact of climate
change; inability to obtain or renew business licenses and permits;
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.
Non-GAAP Financial Measures
This press release includes expected performance based on adjusted
earnings per share, a non-GAAP financial measure as defined under SEC
rules. Adjusted earnings per share exclude certain costs related to
restructuring charges, other exit-related costs and other asset
impairment charges. Management believes that the foregoing non-GAAP
financial measure provides a meaningful presentation of the Company's
results from its core business operations excluding items that are not
related to the Company's ongoing core business operations and improves
the period-to-period comparability of the Company's results from its
core business operations. This non-GAAP financial measure should be
considered in addition to, but not as a substitute for, the most
directly comparable US GAAP measure.
About Schnitzer Steel Industries, Inc.
Schnitzer Steel Industries, Inc. is one of the largest manufacturers and
exporters of recycled ferrous metal products in the United States with
operating facilities located in 14 states, Puerto Rico and Western
Canada. The business 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 its auto parts and
steel manufacturing businesses. The Company's auto parts business sells
used auto parts through its self-service facilities located in 16 states
and Western Canada. With an effective annual production capacity of
approximately 800,000 tons, the Company's steel manufacturing business
produces finished steel products, including rebar, wire rod and other
specialty products. The Company commenced its 108th year of
operations in 2014.
Source: Schnitzer Steel Industries, Inc.
Schnitzer Steel Industries, Inc.
Investor Relations:
Alexandra
Deignan, 646-278-9711
or
Media Relations:
Tom Zelenka,
503-323-2821
www.schnitzersteel.com
[email protected]