Schnitzer Reports Third Quarter 2019 Financial Results

AMR Ferrous and Nonferrous Volumes up 9% and CSS Finished Steel Volumes Up 38% Sequentially

Strong Third Quarter Operating Cash Flow of $40 million

PORTLAND, Ore.--()--Schnitzer Steel Industries, Inc. (Nasdaq: SCHN) today reported results for its third quarter of fiscal 2019 ended May 31, 2019. The Company reported earnings per share from continuing operations of $0.56 and adjusted earnings per share of $0.63, a sequential improvement from the second quarter reported and adjusted earnings per share from continuing operations of $0.46 and $0.48, respectively. In the third quarter of fiscal 2018, the Company’s reported and adjusted earnings per share from continuing operations were $1.31 and $1.26, respectively. 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.

Auto and Metals Recycling (AMR) achieved operating income of $29 million, or $31 per ferrous ton, compared to operating income in the second quarter of fiscal 2019 of $22 million, or $25 per ferrous ton. AMR’s sequential improvement of $6 per ferrous ton was primarily driven by higher ferrous and nonferrous sales volumes which were up 9%, seasonally improved supply flows and retail sales, higher nonferrous average net selling prices which were up 7%, and continuing benefits from productivity initiatives, partially offset by higher selling, general and administrative (SG&A) expense.

Cascade Steel and Scrap (CSS) achieved operating income of $8 million, compared to operating income in the second quarter of fiscal 2019 of $6 million. The $2 million improvement in CSS’s performance was primarily driven by the benefits of higher finished steel sales volumes which were up 38% and increased utilization, partially offset by the impact of lower average net selling prices which were down 5% and high beginning inventory costs resulting from lower production in the second quarter.

“Our team delivered another quarter of strong operating performance with both segments achieving higher volumes while navigating a volatile price environment. AMR’s sequentially improved results reflect the team’s ability to continue to optimize purchase volumes and diversify sales, while CSS delivered sequentially higher performance on significantly increased sales volumes and utilization,” commented Tamara Lundgren, President and Chief Executive Officer. “We also generated strong cash flow and decreased our debt in the quarter. Looking forward, we remain focused on the continued implementation of our productivity initiatives, volume growth and capital investment strategy to support our objectives of increasing our efficiency and operating leverage, expanding our products and broadening our customer reach.”

Summary Results

($ in millions, except per share amounts)

 

Quarter

 

3Q19

 

3Q18

 

Change

 

2Q19

 

Change

Revenues

$

547

 

 

$

652

 

 

(16

)%

 

$

474

 

 

16

%

 

 

 

 

 

 

 

 

 

 

Operating income

$

24

 

 

$

51

 

 

(52

)%

 

$

19

 

 

28

%

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

2

 

 

 

 

NM

 

 

 

NM

Asset impairment charges (recoveries), net

 

 

(1

)

 

NM

 

 

 

NM

Restructuring charges and other exit-related activities

 

 

 

 

NM

 

1

 

 

NM

Adjusted operating income(1)(2)

$

27

 

 

$

50

 

 

(46

)%

 

$

20

 

 

37

%

 

 

 

 

 

 

 

 

 

 

Net income attributable to SSI

$

16

 

 

$

37

 

 

(58

)%

 

$

13

 

 

22

%

 

 

 

 

 

 

 

 

 

 

Net income from continuing operations attributable to SSI

$

16

 

 

$

37

 

 

(58

)%

 

$

13

 

 

20

%

 

 

 

 

 

 

 

 

 

 

Adjusted net income from continuing operations attributable to SSI(1)

$

18

 

 

$

36

 

 

(51

)%

 

$

13

 

 

31

%

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to SSI

$

0.56

 

 

$

1.31

 

 

(57

)%

 

$

0.46

 

 

22

%

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share from continuing operations attributable to SSI

$

0.56

 

 

$

1.31

 

 

(57

)%

 

$

0.46

 

 

21

%

 

 

 

 

 

 

 

 

 

 

Adjusted diluted earnings per share from continuing operations attributable to SSI(1)

$

0.63

 

 

$

1.26

 

 

(50

)%

 

$

0.48

 

 

31

%

 

 

 

 

 

 

 

 

 

 

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

(2) May not foot due to rounding.

NM = Not Meaningful

Auto and Metals Recycling

Summary of Auto and Metals Recycling Results

($ in millions, except selling prices and data per ton; Fe volumes 000s long tons; NFe volumes Ms lbs)

 

Quarter

 

3Q19

 

3Q18

 

Change

 

2Q19

 

Change

Total revenues

$

429

 

 

$

530

 

(19

)%

 

$

386

 

11

%

 

 

 

 

 

 

 

 

 

 

Ferrous revenues

$

280

 

 

$

364

 

(23

)%

 

$

257

 

9

%

Ferrous volume

938

 

 

983

 

(5

)%

 

858

 

9

%

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

$

293

 

 

$

337

 

(13

)%

 

$

287

 

2

%

 

 

 

 

 

 

 

 

 

 

Nonferrous revenues

$

113

 

 

$

127

 

(11

)%

 

$

99

 

13

%

Nonferrous volume(2)

154

 

 

146

 

5

%

 

141

 

9

%

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

$

0.62

 

 

$

0.74

 

(16

)%

 

$

0.58

 

7

%

 

 

 

 

 

 

 

 

 

 

Cars purchased for retail (000s)

102

 

 

109

 

(6

)%

 

89

 

15

%

 

 

 

 

 

 

 

 

 

 

Operating income

$

29

 

 

$

55

 

(47

)%

 

$

22

 

34

%

Operating income per Fe ton

$

31

 

 

$

56

 

(44

)%

 

$

25

 

23

%

 

 

 

 

 

 

 

 

 

 

Adjusted operating income(3)

$

29

 

 

$

54

 

(45

)%

 

$

22

 

34

%

Adjusted operating income per Fe ton

$

31

 

 

$

54

 

(43

)%

 

$

25

 

23

%

 

 

 

 

 

 

 

 

 

 

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.

Volumes: Ferrous sales volumes in the third quarter increased 9% sequentially, driven by the benefits from seasonally improved supply flows following unusually severe weather conditions in the second quarter and higher car purchase volumes, and decreased 5% compared to the prior year third quarter. Nonferrous sales volumes in the third quarter were also 9% higher sequentially, due primarily to the impact of higher purchase volumes, and were 5% higher compared to the prior year third quarter.

Export customers accounted for 67% of total ferrous sales volumes. Our ferrous and nonferrous products were shipped to 22 countries in the third quarter, with Bangladesh, South Korea and Turkey representing the top export destinations for ferrous shipments.

Pricing: Average ferrous net selling prices increased $6 per ton, or 2%, sequentially and decreased $44 per ton, or 13%, compared to the prior year third quarter. Average nonferrous net selling prices increased 7% sequentially and decreased 16% compared to the prior year third quarter.

Margins: Operating income was $29 million in the third quarter, $7 million, or 34%, higher sequentially. Operating income per ferrous ton of $31 was $6 higher sequentially. AMR’s improvement sequentially primarily reflected the benefits from higher retail sales, increased ferrous and nonferrous sales volumes, and higher average nonferrous net selling prices, which were partially offset by increased SG&A expense including higher incentive compensation accruals. Operating income in the prior year third quarter was $55 million or $56 per ferrous ton. The year-over-year margin compression resulted primarily from the decline in average net selling prices for nonferrous and ferrous products and lower ferrous sales volumes, partially offset by the benefits from productivity initiatives. Third quarter operating results include an adverse impact from average inventory accounting of $1 million compared to adverse impact of $1 million in the second quarter of fiscal 2019 and a benefit of $2 million in the third quarter of fiscal 2018.

Cascade Steel and Scrap

Summary of Cascade Steel and Scrap Results

($ in millions, except selling prices and volumes)

 

Quarter

 

3Q19

 

3Q18

 

Change

 

2Q19

 

Change

Steel revenues

$

97

 

 

$

104

 

 

(7

)%

 

$

74

 

 

31

%

Recycling revenues

25

 

 

26

 

 

(6

)%

 

16

 

 

51

%

Total revenues

$

121

 

 

$

130

 

 

(7

)%

 

$

90

 

 

34

%

 

 

 

 

 

 

 

 

 

 

Operating income

$

8

 

 

$

11

 

 

(25

)%

 

$

6

 

 

41

%

 

 

 

 

 

 

 

 

 

 

Finished steel average net sales price ($/ST)(1)

$

703

 

 

$

703

 

 

%

 

$

737

 

 

(5

)%

Finished steel sales volume (000s ST)

130

 

 

140

 

 

(7

)%

 

94

 

 

38

%

 

 

 

 

 

 

 

 

 

 

Rolling mill utilization

98

%

 

91

%

 

8

%

 

76

%

 

29

%

 

 

 

 

 

 

 

 

 

 

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

(1) 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 third quarter were 38% higher sequentially, primarily due to seasonality, including from the impact of weather-related construction delays in our West Coast markets that occurred in the prior quarter, and were 7% lower year-over-year. Recycling revenues were 51% higher sequentially primarily as a result of improved supply flows and the timing of shipments, and down 6% compared to the prior year third quarter.

Pricing: Average net selling prices for finished steel products decreased 5% sequentially and were consistent with the prior year third quarter reflecting low levels of steel imports.

Margins: Operating income for the third quarter of fiscal 2019 was $8 million, an improvement of $2 million compared to the second quarter of fiscal 2019 due primarily to the benefits of higher finished steel sales volumes and higher utilization, partially offset by lower average net selling prices and high beginning inventory costs resulting from lower production in the second quarter. Year-over-year, operating income declined by $3 million primarily as a result of lower finished steel sales volumes, the impact of the high beginning inventory costs, and a $1 million impact from a spike in gas prices in March 2019, partially offset by benefits from productivity initiatives and lower SG&A expense.

Corporate Items

In the third quarter of fiscal 2019, consolidated financial performance included Corporate expense of $13 million, an increase of $4 million compared to the second quarter of fiscal 2019, and decrease of $2 million from the prior year third quarter. Sequentially, the increase in expense was primarily driven by a $2 million charge related to the settlement of a wage and hour class action lawsuit and higher incentive compensation accruals. The year-over-year decrease was driven primarily by lower incentive compensation accruals and benefits from productivity initiatives, partially offset by the class action settlement charge.

The Company continued to make significant progress in implementing the productivity initiatives which were announced earlier in fiscal 2019 and target annual benefits of $35 million. Consolidated results in the third quarter of fiscal 2019 reflected $9 million of benefits from these measures, of which $7 million were achieved by AMR and the remainder by CSS and Corporate. Year-to-date, the Company has achieved $20 million of benefits from these measures and expects to achieve at least 80% of the total targeted benefits in fiscal 2019, with the full amount expected to be achieved in fiscal 2020.

The Company’s effective tax rate for the third quarter of fiscal 2019 was an expense of 26%.

In the third quarter of fiscal 2019, the Company generated operating cash flow of $40 million. Total debt at the end of the third quarter of fiscal 2019 was $142 million, and debt, net of cash, was $134 million, a decrease compared to $163 million and $150 million, respectively, at the end of the second quarter of fiscal 2019 (refer to Non-GAAP Financial Measures provided after the financial statements in this document).

During the third quarter, the Company returned capital to shareholders through its 101st consecutive quarterly dividend.

Analysts’ Conference Call: Third Quarter of Fiscal 2019

A conference call and slide presentation to discuss results will be held today, June 26, 2019, at 11:30 a.m. Eastern 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 related materials will be available prior to the call on the 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 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 Nine Months Ended

 

 

May 31,
2019

 

February 28,
2019

 

May 31,
2018

 

May 31,
2019

 

May 31,
2018

 

 

 

 

 

 

 

 

 

 

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Auto and Metals Recycling:

 

 

 

 

 

 

 

 

 

 

Ferrous revenues

 

$

280,362

 

 

$

257,488

 

 

$

363,566

 

 

$

836,662

 

 

$

926,236

 

Nonferrous revenues

 

112,785

 

 

99,484

 

 

127,288

 

 

316,450

 

 

348,019

 

Retail and other revenues

 

35,876

 

 

29,093

 

 

38,757

 

 

98,388

 

 

103,195

 

Total Auto and Metals Recycling revenues

 

429,023

 

 

386,065

 

 

529,611

 

 

1,251,500

 

 

1,377,450

 

 

 

 

 

 

 

 

 

 

 

 

Cascade Steel and Scrap:

 

 

 

 

 

 

 

 

 

 

Steel revenues

 

96,626

 

 

74,025

 

 

103,726

 

 

271,988

 

 

265,714

 

Recycling revenues

 

24,805

 

 

16,373

 

 

26,350

 

 

70,227

 

 

71,060

 

Total Cascade Steel and Scrap revenues

 

121,431

 

 

90,398

 

 

130,076

 

 

342,215

 

 

336,774

 

Intercompany sales eliminations

 

(3,058

)

 

(2,898

)

 

(7,271

)

 

(8,734

)

 

(19,086

)

Total revenues

 

$

547,396

 

 

$

473,565

 

 

$

652,416

 

 

$

1,584,981

 

 

$

1,695,138

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AMR operating income

 

$

29,189

 

 

$

21,741

 

 

$

54,980

 

 

$

73,947

 

 

$

135,284

 

CSS operating income

 

$

8,116

 

 

$

5,768

 

 

$

10,793

 

 

$

25,802

 

 

$

24,682

 

Consolidated operating income

 

$

24,459

 

 

$

19,036

 

 

$

51,234

 

 

$

66,184

 

 

$

111,015

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted AMR operating income(1)

 

$

29,189

 

 

$

21,741

 

 

$

53,515

 

 

$

74,010

 

 

$

133,402

 

Adjusted CSS operating income(1)

 

8,116

 

 

5,768

 

 

10,793

 

 

25,802

 

 

24,594

 

Adjusted segment operating income(1)

 

37,305

 

 

27,509

 

 

64,308

 

 

99,812

 

 

157,996

 

Corporate expense, adjusted(2)

 

(10,172

)

 

(8,095

)

 

(14,467

)

 

(30,472

)

 

(47,861

)

Intercompany eliminations

 

(269

)

 

158

 

 

(2

)

 

50

 

 

(829

)

Adjusted operating income(1)

 

26,864

 

 

19,572

 

 

49,839

 

 

69,390

 

 

109,306

 

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

 

(2,330

)

 

 

 

 

 

(2,330

)

 

 

Asset impairment (charges) recoveries, net

 

 

 

 

 

1,465

 

 

(63

)

 

1,553

 

Restructuring charges and other exit-related activities

 

(75

)

 

(536

)

 

(70

)

 

(813

)

 

(261

)

Recoveries related to the resale or modification of previously contracted shipments

 

 

 

 

 

 

 

 

 

417

 

Total operating income

 

$

24,459

 

 

$

19,036

 

 

$

51,234

 

 

$

66,184

 

 

$

111,015

 

(1)

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

(2)

Corporate expense has been adjusted for the three and nine months ended May 31, 2019 to exclude a $2 million charge related to the settlement of a wage and hour class action lawsuit. See Non-GAAP Financial Measures for reconciliation to U.S. GAAP.

SCHNITZER STEEL INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Nine Months Ended

 

 

May 31,
2019

 

February 28,
2019

 

May 31,
2018

 

May 31,
2019

 

May 31,
2018

Revenues

 

$

547,396

 

 

$

473,565

 

 

$

652,416

 

 

$

1,584,981

 

 

$

1,695,138

 

Cost of goods sold

 

474,598

 

 

414,688

 

 

549,164

 

 

1,379,418

 

 

1,427,877

 

Selling, general and administrative

 

48,575

 

 

39,489

 

 

54,185

 

 

139,483

 

 

158,866

 

(Income) from joint ventures

 

(311

)

 

(184

)

 

(772

)

 

(980

)

 

(1,328

)

Asset impairment charges (recoveries), net

 

 

 

 

 

(1,465

)

 

63

 

 

(1,553

)

Restructuring charges and other exit-related activities

 

75

 

 

536

 

 

70

 

 

813

 

 

261

 

Operating income

 

24,459

 

 

19,036

 

 

51,234

 

 

66,184

 

 

111,015

 

Interest expense

 

(2,294

)

 

(2,067

)

 

(2,483

)

 

(6,267

)

 

(6,823

)

Other income, net

 

29

 

 

321

 

 

403

 

 

373

 

 

1,353

 

Income from continuing operations before income taxes

 

22,194

 

 

17,290

 

 

49,154

 

 

60,290

 

 

105,545

 

Income tax expense

 

(5,762

)

 

(3,855

)

 

(10,650

)

 

(13,733

)

 

(6,030

)

Income from continuing operations

 

16,432

 

 

13,435

 

 

38,504

 

 

46,557

 

 

99,515

 

Income (loss) from discontinued operations, net of tax

 

8

 

 

(138

)

 

(56

)

 

(202

)

 

72

 

Net income

 

16,440

 

 

13,297

 

 

38,448

 

 

46,355

 

 

99,587

 

Net income attributable to noncontrolling interests

 

(750

)

 

(405

)

 

(1,046

)

 

(1,585

)

 

(2,806

)

Net income attributable to SSI

 

$

15,690

 

 

$

12,892

 

 

$

37,402

 

 

$

44,770

 

 

$

96,781

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to SSI:

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

Income per share from continuing operations attributable to SSI

 

$

0.57

 

 

$

0.47

 

 

$

1.35

 

 

$

1.63

 

 

$

3.49

 

Income (loss) per share from discontinued operations attributable to SSI

 

 

 

 

 

 

 

(0.01

)

 

 

Net income per share attributable to SSI(1)

 

$

0.57

 

 

$

0.47

 

 

$

1.35

 

 

$

1.63

 

 

$

3.49

 

Diluted:

 

 

 

 

 

 

 

 

 

 

Income per share from continuing operations attributable to SSI

 

$

0.56

 

 

$

0.46

 

 

$

1.31

 

 

$

1.60

 

 

$

3.38

 

Income (loss) per share from discontinued operations attributable to SSI

 

 

 

 

 

 

 

(0.01

)

 

 

Net income per share attributable to SSI

 

$

0.56

 

 

$

0.46

 

 

$

1.31

 

 

$

1.59

 

 

$

3.38

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares:

 

 

 

 

 

 

 

 

 

 

Basic

 

27,510

 

 

27,630

 

 

27,676

 

 

27,548

 

 

27,719

 

Diluted

 

28,074

 

 

28,114

 

 

28,636

 

 

28,184

 

 

28,646

 

Dividends declared per common share

 

$

0.1875

 

 

$

0.1875

 

 

$

0.1875

 

 

$

0.5625

 

 

$

0.5625

 

(1) May not foot due to rounding.

SCHNITZER STEEL INDUSTRIES, INC.

SELECTED OPERATING STATISTICS

(Unaudited)

 

 

 

 

 

 

 

 

YTD

 

 

1Q19

 

2Q19

 

3Q19

 

2019

SSI Total Volume(1)

 

 

 

 

 

 

 

 

Total ferrous volume (LT)(2)

 

1,079,705

 

 

992,061

 

 

1,079,354

 

 

3,151,120

 

Total nonferrous volume (000s LB)

 

166,977

 

 

154,571

 

 

169,912

 

 

491,460

 

Auto and Metals Recycling

 

 

 

 

 

 

 

 

Ferrous selling prices ($/LT)(3)

 

 

 

 

 

 

 

 

Domestic

 

$

290

 

 

$

286

 

 

$

268

 

 

$

282

 

Export

 

$

314

 

 

$

288

 

 

$

303

 

 

$

302

 

Average

 

$

306

 

 

$

287

 

 

$

293

 

 

$

295

 

Ferrous sales volume (LT)

 

 

 

 

 

 

 

 

Domestic

 

339,879

 

 

343,017

 

 

311,408

 

 

994,304

 

Export

 

578,976

 

 

515,171

 

 

627,046

 

 

1,721,193

 

Total

 

918,855

 

 

858,188

 

 

938,454

 

 

2,715,497

 

 

 

 

 

 

 

 

 

 

Nonferrous average price ($/LB)(3)(4)

 

$

0.59

 

 

$

0.58

 

 

$

0.62

 

 

$

0.60

 

Nonferrous sales volume (000s LB)(4)

 

152,869

 

 

141,307

 

 

153,936

 

 

448,112

 

Car purchase volume (000s)(5)

 

94

 

 

89

 

 

102

 

 

285

 

Auto stores at end of quarter

 

51

 

 

51

 

 

51

 

 

51

 

Cascade Steel and Scrap

 

 

 

 

 

 

 

 

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

 

$

747

 

 

$

737

 

 

$

703

 

 

$

728

 

Sales volume (ST)

 

 

 

 

 

 

 

 

Rebar

 

81,470

 

 

59,424

 

 

90,826

 

 

231,720

 

Coiled products

 

37,418

 

 

34,489

 

 

38,525

 

 

110,432

 

Merchant bar and other

 

316

 

 

209

 

 

362

 

 

887

 

Finished steel products sold

 

119,204

 

 

94,122

 

 

129,713

 

 

343,039

 

 

 

 

 

 

 

 

 

 

Rolling mill utilization(6)

 

87

%

 

76

%

 

98

%

 

87

%

(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)

Excludes PGM metals in catalytic converters.

(5)

Cars purchased by auto parts stores only.

(6)

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

 

 

1Q18

 

2Q18

 

3Q18

 

4Q18

 

2018

SSI Total Volume(1)

 

 

 

 

 

 

 

 

 

 

Total ferrous volume (LT)

 

912,145

 

 

1,062,260

 

 

1,118,743

 

 

1,205,803

 

 

4,298,951

 

Total nonferrous volume (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 netting the cost of freight incurred to deliver the product to the customer.

(3) Excludes PGM metals in catalytic converters.

(4) Cars purchased by auto parts 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)

 

May 31, 2019

 

August 31, 2018

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

8,119

 

 

$

4,723

 

Accounts receivable, net

167,988

 

 

169,418

 

Inventories

202,192

 

 

205,877

 

Other current assets

39,050

 

 

68,341

 

Total current assets

417,349

 

 

448,359

 

 

 

 

 

Property, plant and equipment, net

437,456

 

 

415,711

 

 

 

 

 

Goodwill and other assets

237,817

 

 

240,747

 

 

 

 

 

Total assets

$

1,092,622

 

 

$

1,104,817

 

 

 

 

 

Liabilities and Equity

 

 

 

Current liabilities:

 

 

 

Short-term borrowings

$

1,234

 

 

$

1,139

 

Other current liabilities

175,704

 

 

253,538

 

Total current liabilities

176,938

 

 

254,677

 

 

 

 

 

Long-term debt

140,895

 

 

106,237

 

 

 

 

 

Other long-term liabilities

81,085

 

 

73,793

 

 

 

 

 

Equity:

 

 

 

Total Schnitzer Steel Industries, Inc. (“SSI”) shareholders’ equity

689,028

 

 

666,078

 

Noncontrolling interests

4,676

 

 

4,032

 

Total equity

693,704

 

 

670,110

 

Total liabilities and equity

$

1,092,622

 

 

$

1,104,817

 

 

 

 

 

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 presenting these non-GAAP financial measures provides a meaningful presentation of our results from business operations excluding adjustments for a charge related to the settlement of a wage and hour class action lawsuit, asset impairment charges net of recoveries, restructuring charges and other exit-related activities, recoveries related to the resale or modification of 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 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 the 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

 

YTD

 

3Q19

 

3Q18

 

2Q19

 

3Q19

 

3Q18

Consolidated operating income:

 

 

 

 

 

 

 

 

 

Operating income

$

24

 

 

$

51

 

 

$

19

 

 

$

66

 

 

$

111

 

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

2

 

 

 

 

 

 

2

 

 

 

Asset impairment charges (recoveries), net

 

 

(1

)

 

 

 

 

 

(2

)

Restructuring charges and other exit-related activities

 

 

 

 

1

 

 

1

 

 

 

Recoveries related to the resale or modification of previously contracted shipments

 

 

 

 

 

 

 

 

 

Adjusted consolidated operating income(1)

$

27

 

 

$

50

 

 

$

20

 

 

$

69

 

 

$

109

 

 

 

 

 

 

 

 

 

 

 

AMR operating income:

 

 

 

 

 

 

 

 

 

Operating income

$

29

 

 

$

55

 

 

$

22

 

 

$

74

 

 

$

135

 

Asset impairment charges (recoveries), net

 

 

(1

)

 

 

 

 

 

(1

)

Recoveries related to the resale or modification of previously contracted shipments

 

 

 

 

 

 

 

 

 

Adjusted AMR operating income(1)

$

29

 

 

$

54

 

 

$

22

 

 

$

74

 

 

$

133

 

 

 

 

 

 

 

 

 

 

 

CSS operating income:

 

 

 

 

 

 

 

 

 

Operating income

$

8

 

 

$

11

 

 

$

6

 

 

$

26

 

 

$

25

 

Asset impairment charges (recoveries), net

 

 

 

 

 

 

 

 

 

Adjusted CSS operating income

$

8

 

 

$

11

 

 

$

6

 

 

$

26

 

 

$

25

 

 

 

 

 

 

 

 

 

 

 

(1) May not foot due to rounding.

Net income from continuing operations attributable to SSI

($ in millions)

Quarter

 

YTD

 

3Q19

 

3Q18

 

2Q19

 

3Q19

 

3Q18

Net income from continuing operations attributable to SSI

$

16

 

 

$

37

 

 

$

13

 

 

$

45

 

 

$

97

 

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

2

 

 

 

 

 

 

2

 

 

 

Asset impairment charges (recoveries), net

 

 

(1

)

 

 

 

 

 

(2

)

Restructuring charges and other exit-related activities

 

 

 

 

1

 

 

1

 

 

 

Recoveries related to the resale or modification of previously contracted shipments

 

 

 

 

 

 

 

 

 

Income tax expense (benefit) allocated to adjustments(1)

(1

)

 

 

 

 

 

(1

)

 

 

Adjusted net income from continuing operations attributable to SSI(2)

$

18

 

 

$

36

 

 

$

13

 

 

$

47

 

 

$

95

 

(1)

Income tax allocated to the aggregate adjustments reconciling reported and adjusted net income 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.

Diluted earnings per share from continuing operations attributable to SSI

($ per share)

Quarter

 

YTD

 

3Q19

 

3Q18

 

2Q19

 

3Q19

 

3Q18

Diluted earnings per share from continuing operations attributable to SSI

$

0.56

 

 

$

1.31

 

 

$

0.46

 

 

$

1.60

 

 

$

3.38

 

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

0.08

 

 

 

 

 

 

0.08

 

 

 

Asset impairment charges (recoveries), net

 

 

(0.05

)

 

 

 

 

 

(0.05

)

Restructuring charges and other exit-related activities

 

 

 

 

0.02

 

 

0.03

 

 

0.01

 

Recoveries related to the resale or modification of previously contracted shipments

 

 

 

 

 

 

 

 

(0.01

)

Income tax expense (benefit) allocated to adjustments(1)

(0.02

)

 

 

 

 

 

(0.02

)

 

0.01

 

Adjusted diluted earnings per share from continuing operations attributable to SSI(2)

$

0.63

 

 

$

1.26

 

 

$

0.48

 

 

$

1.68

 

 

$

3.32

 

(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)

 

May 31, 2019

 

February 28, 2019

 

August 31, 2018

Short-term borrowings

$

1,234

 

 

$

1,215

 

 

$

1,139

 

Long-term debt, net of current maturities

140,895

 

 

161,866

 

 

106,237

 

Total debt

142,129

 

 

163,081

 

 

107,376

 

Less: cash and cash equivalents

8,119

 

 

13,173

 

 

4,723

 

Total debt, net of cash

$

134,010

 

 

$

149,908

 

 

$

102,653

 

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 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 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 equity investment impairment charges; inability to achieve or sustain the benefits from productivity, cost savings 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.

Contacts

Investor Relations:
Michael Bennett
(503) 323-2811
mcbennett@schn.com

Company Info:
www.schnitzersteel.com
ir@schn.com

Contacts

Investor Relations:
Michael Bennett
(503) 323-2811
mcbennett@schn.com

Company Info:
www.schnitzersteel.com
ir@schn.com