Third Quarter Earnings Conference Call 11:30
a.m. Eastern on June 26, 2019
Schnitzer Steel Industries, Inc. (Nasdaq: SCHN) today announced
preliminary results for its third quarter of fiscal 2019 ended
May 31, 2019.
Consolidated Results
Schnitzer expects fiscal 2019 third quarter earnings per share
from continuing operations to be in the range of $0.52 - $0.56 and
adjusted earnings per share to be in the range of $0.58 - $0.62, a
sequential improvement from the second quarter reported and
adjusted earnings per share from continuing operations of $0.46 and
$0.48, respectively. For the third quarter of fiscal 2018, reported
and adjusted earnings per share from continuing operations were
$1.31 and $1.26, respectively, reflecting significantly higher
ferrous and nonferrous selling prices. For a reconciliation of
adjusted results to U.S. GAAP, see the table provided in the
Non-GAAP Financial Measures section.
Divisional Operating
Performance
Auto and Metals Recycling (AMR) expects to report operating
income in the range of $28 million - $29 million. Operating income
per ferrous ton is expected to be in the range of $30 - $31, which
is an improvement of $5 - $6 per ferrous ton sequentially but is
lower than the prior year third quarter. Sequentially, AMR’s
expected performance reflects benefits from higher ferrous and
nonferrous sales volumes which were up approximately 9%, seasonally
improved supply flows and retail sales, and continuing benefits
from productivity initiatives. Year-over-year, AMR’s performance is
expected to decrease primarily due to lower average net nonferrous
selling prices of approximately 16% and lower average net selling
prices for ferrous products of approximately 13%, partially offset
by the benefits from productivity initiatives.
Cascade Steel and Scrap (CSS) expects to report operating income
of approximately $8 million, which is a $2 million improvement
sequentially but is lower than the prior year third quarter.
Sequentially, the expected improvement in performance is due
primarily to the benefits of seasonally higher finished steel sales
volumes of 38% and significantly increased utilization, which more
than offset the impact of lower average net selling prices which
were down approximately 5%, and high beginning inventory costs
resulting from lower production in the second quarter. The expected
year-over-year decrease in CSS’s performance primarily reflects
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, partially offset by benefits from productivity
initiatives.
Corporate Items
Consolidated financial performance in the third quarter is
expected to include Corporate expense of approximately $13 million
compared to Corporate expense of $8 million in the second quarter
and $14 million in the prior year third quarter. Sequentially, the
expected increase in expense is driven by a $2 million charge
related to the settlement of a wage and hour class action lawsuit
and higher incentive compensation accruals. The expected
year-over-year decrease in expense is driven primarily by lower
incentive compensation accruals and benefits from productivity
initiatives, partially offset by the class action settlement
charge. The Company’s effective tax rate for the third quarter of
fiscal 2019 is expected to be an expense of approximately 26%.
For the third quarter, the Company expects to report operating
cash flow in the range of $32 million - $37 million. As of the end
of the third quarter, total debt was $142 million and debt, net of
cash, was $134 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 $21 million during the
quarter.
The preliminary information provided above is based on the
Company’s current estimates of its financial results for the
quarter ended May 31, 2019 and remains subject to change based on
final review of the Company’s third quarter financial results.
Schnitzer will report its third quarter fiscal 2019 financial
results on Wednesday, June 26, 2019 and will host a webcast
conference call to discuss the performance at 11:30 a.m. Eastern 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
Lundgren, President and Chief Executive Officer, and Richard 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: 4485666
Replay Available: 06/26/2019 to
07/01/2019
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 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, 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.
Diluted Earnings
per Share from Continuing Operations Attributable to
SSI
($ per share)
Quarter 3Q19 2Q19
3Q18 High Low
Diluted earnings per share from continuing operations
attributable to SSI $ 0.56 $ 0.52 $ 0.46 $ 1.31 Charge related to
the settlement of a wage and hour class action lawsuit 0.08 0.08 —
— Asset impairment charges (recoveries), net — — — (0.05 )
Restructuring charges and other exit-related activities — — 0.02 —
Income tax expense (benefit) allocated to adjustments (0.02 ) (0.02
) — — Adjusted diluted earnings per share from
continuing operations attributable to SSI $ 0.62 $ 0.58
$ 0.48 $ 1.26
Debt, Net of Cash
The following is a reconciliation of debt, net of cash (in
millions):
May 31, 2019 February 28, 2019
August 31, 2018 Total debt $ 142 $ 163 $ 107
Less: cash and cash equivalents 8 13 5 Total debt,
net of cash(1) $ 134 $ 150 $ 103 (1) May not
foot due to rounding.
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190614005070/en/
Investor Relations: Michael Bennett (503)
323-2811Website: www.schnitzersteel.com Email:
ir@schn.com
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