Schnitzer Provides Preliminary Results for Fourth Quarter of Fiscal 2018
Fourth Quarter and Fiscal Year-End Earnings Conference Call 11:30
a.m. Eastern October 24, 2018
PORTLAND, Ore.--(BUSINESS WIRE)--Sep. 27, 2018--
Schnitzer Steel Industries, Inc. (Nasdaq: SCHN) today announced
preliminary results for its fourth quarter of fiscal 2018 ended August
31, 2018. Schnitzer expects fourth quarter earnings per share from
continuing operations to be in the range of $0.95 - $1.00 and adjusted
earnings per share to be in the range of $0.93 - $0.98. For the fourth
quarter of fiscal 2017, reported earnings per share from continuing
operations were $0.65 and adjusted earnings per share were $0.63. The
ranges for the Company’s preliminary results for its fourth quarter of
fiscal 2018 do not include a potential discrete non-cash tax benefit
associated with the realizability of certain deferred tax assets, which
is still under review. For a reconciliation of adjusted results to U.S.
GAAP, see the table provided in the Non-GAAP Financial Measures section.
For the fourth quarter of fiscal 2018, Auto and Metals Recycling (AMR)
is expected to report operating income in the range of $32 million - $34
million, or operating income per ferrous ton of $31 - $33, compared to
operating income of $24 million, or operating income per ferrous ton of
$28, in the same period of the prior year. On a sequential basis,
operating performance in the quarter is expected to be adversely
impacted by a decline in ferrous and nonferrous selling prices, the
effect of average inventory accounting and seasonally lower retail
revenues, partially offset by benefits of higher ferrous and nonferrous
sales volumes, reduced purchase costs for raw materials and our
continued focus on productivity, including nonferrous processing
improvements. Compared to last year’s fourth quarter, average ferrous
net selling prices are expected to increase approximately 23% and
ferrous sales volumes are expected to be approximately 19% higher.
Average nonferrous net selling prices are expected to increase
approximately 8% from the prior year quarter, and nonferrous sales
volumes are expected to be 11% higher. AMR’s expected higher fourth
quarter performance compared to the prior year is driven primarily by
expanded metal spreads, increased ferrous and nonferrous selling prices
and volumes, and benefits from commercial initiatives, partially offset
by higher selling, general and administrative expense due primarily to
higher employee-related expenses and an adverse impact from average
inventory accounting of $5 million, compared to a benefit of $3 million
in the same period of the prior year.
Cascade Steel and Scrap (CSS) is expected to generate operating income
of approximately $14 million in the fourth quarter of fiscal 2018,
reflecting a significant improvement from the fourth quarter of fiscal
2017 operating income of $8 million. CSS’s average finished steel
selling prices are expected to increase approximately 31%
year-over-year. Finished steel sales volumes are expected to decrease
approximately 14% compared to the prior year fourth quarter due
primarily to lower production as a result of planned maintenance,
including rolling mill upgrades aimed at improving productivity. The
expected improvement in CSS operating performance is primarily driven by
higher average net selling prices for finished steel products which
significantly outpaced increases in the cost of steelmaking raw
materials, higher export sales volumes and continued benefits of
productivity improvements from the integration of our Oregon metal
recycling and steel manufacturing operations.
For fiscal 2018, total ferrous volumes, including external sales by AMR
and CSS, and transfers to our steel mill, are expected to increase by
17% compared to fiscal 2017. AMR’s operating income per ferrous ton is
expected to be $46 for fiscal 2018 compared to operating income per ton
of $29 for fiscal 2017.
Consolidated financial performance in the fourth quarter of fiscal 2018
is expected to include Corporate expense of approximately $11 million,
an increase of $1 million compared to the prior year quarter. For the
fourth quarter of fiscal 2018, the Company’s effective tax rate is
expected to be an expense of approximately 20%. This rate for the
Company’s preliminary results for its fourth quarter does not include a
potential discrete non-cash tax benefit associated with the
realizability of certain deferred tax assets, which is still under
review.
For the fourth quarter, the Company expects to report operating cash
flow in the range of $100 million - $105 million. Total debt was $107
million as of August 31, 2018, 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). This represents a total debt
reduction of $65 million, or 38%, compared to May 31, 2018. Pursuant to
its 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 year 2018 to 516,013 shares.
The preliminary, unaudited information provided above is based on the
Company’s current estimate of its financial results for the fourth
quarter and fiscal year ended August 31, 2018 and remains subject to
change based on management’s ongoing review of the Company’s fourth
quarter financial results and the completion of the Company’s annual
audit.
The Company will report the financial results for its fourth quarter and
fiscal year ended August 31, 2018, on Wednesday, October 24, 2018. The
Company will webcast a conference call to discuss these results at 11:30
a.m. Eastern time on the same day. The webcast of the call and the
accompanying slide presentation may be accessed on Schnitzer’s website
under 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: 3198639
|
|
Replay Available: 10/24/2018 to 10/29/2018
|
|
|
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.
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
|
|
|
4Q18
|
|
4Q17
|
|
|
|
Low
|
|
High
|
|
|
|
Net income from continuing operations attributable to SSI
|
|
$
|
0.95
|
|
|
$
|
1.00
|
|
|
$
|
0.65
|
|
|
Other asset impairment charges (recoveries), net
|
|
0.02
|
|
|
0.02
|
|
|
—
|
|
|
Restructuring charges and other exit-related activities
|
|
(0.03
|
)
|
|
(0.03
|
)
|
|
—
|
|
|
Recoveries related to the resale or modification of certain
previously contracted shipments
|
|
—
|
|
|
—
|
|
|
(0.01
|
)
|
|
Income tax expense (benefit) allocated to adjustments(1)
|
|
(0.01
|
)
|
|
(0.01
|
)
|
|
—
|
|
|
Adjusted diluted earnings from continuing operations attributable to
SSI(2)
|
|
$
|
0.93
|
|
|
$
|
0.98
|
|
|
$
|
0.63
|
|
|
(1)
|
|
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.
|
|
(2)
|
|
May not foot due to rounding.
|
|
|
|
|
Debt, Net of Cash
The following is a reconciliation of debt, net of cash (in thousands):
|
|
|
August 31, 2018
|
|
May 31, 2018
|
|
Total debt
|
|
$
|
107,376
|
|
$
|
172,691
|
|
Less: cash and cash equivalents
|
|
4,723
|
|
10,090
|
|
Total debt, net of cash
|
|
$
|
102,653
|
|
$
|
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 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
subsequent Quarterly Reports on Form 10-Q. Examples of these risks
include: potential environmental cleanup costs related to the Portland
Harbor Superfund site or other locations; the cyclicality and impact of
general economic conditions; 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 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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20180927005225/en/
Source: Schnitzer Steel Industries, Inc.
Schnitzer Steel Industries, Inc.
Michael Bennett, 503-323-2811
Investor
Relations:
www.schnitzersteel.com
[email protected]