Fourth Quarter and Fiscal Year-End Earnings
Conference Call 11:30 a.m. Eastern on October 24, 2019
Schnitzer Steel Industries, Inc. (NASDAQ: SCHN) today announced
preliminary results for its fiscal 2019 fourth quarter ended August
31, 2019. The Company expects fourth quarter earnings from
continuing operations to be in the range of $0.37 - $0.42 per share
and adjusted earnings to be in the range of $0.38 - $0.43 per
share. This range is a decrease compared to third quarter of fiscal
2019 reported and adjusted earnings from continuing operations of
$0.56 and $0.65 per share, respectively, and a decrease relative to
fourth quarter of 2018 reported and adjusted earnings of $2.08 and
$2.11 per share, respectively, which included a discrete tax
benefit of $1.06 per share.
Markets for recycled metals weakened in the fourth quarter,
including a marked deterioration in August with a continued decline
in September. In Auto and Metals Recycling (AMR), weak domestic and
export demand for scrap metal led to a significant decrease in
selling prices for ferrous products to levels last seen in 2017
contributing to a compression in metal spreads in the fourth
quarter. Market prices for nonferrous products, and zorba in
particular, also continued to decline throughout the fourth quarter
as they were impacted by the ongoing effects of trade actions,
including Chinese tariffs on imports from the US and a global
slowdown in manufacturing production, as well as new Chinese import
regulations, effective July 1, 2019, which imposed restrictive
import quotas, and license and other requirements on imports of
scrap products by Chinese companies. In Cascade Steel and Scrap
(CSS), average finished steel prices in the fourth quarter are
expected to decrease by over 10% from the multi-year peak reached
earlier in the year, negatively impacted by extended customer
destocking and outpacing the decline in scrap prices.
Divisional Operating
Performance
AMR expects to report quarterly operating income in the range of
$21 million - $22 million, or $21 - $22 per ferrous ton, which
represents a sequential decrease due primarily to a significant
decline in ferrous and nonferrous scrap prices during the latter
two months of the quarter, as well as seasonally lower retail sales
and higher environmental-related expense. Average net ferrous and
nonferrous selling prices are expected to be lower sequentially by
8% and 10%, respectively. Ferrous and nonferrous sales volumes are
expected to increase sequentially by 9% and 4%, respectively.
However, the benefits from higher volumes and from reductions in
purchase prices for raw materials were only able to partially
offset the decline in selling prices for scrap.
CSS expects to report quarterly operating income of
approximately $6 million. While finished steel sales volumes are
expected to increase by approximately 4% from the third quarter,
operating income is expected to be lower sequentially primarily due
to lower average net selling prices for finished steel products,
particularly wire rod, outpacing the decline in raw material
costs.
Corporate Items
Consolidated financial performance in the fourth quarter is
expected to include Corporate expense of approximately $11 million
compared to $13 million in the third quarter, which included a $2
million charge related to the settlement of a wage and hour class
action lawsuit. The effective tax rate for the fourth quarter of
fiscal 2019 is expected to be an expense of approximately 23%.
We expect to generate strong operating cash flow in the range of
$80 million for the fourth quarter, resulting in a $37 million
sequential reduction in debt to $105 million and a reduction in
debt, net of cash to $93 million as of the end of the fourth
quarter. We expect capital expenditures to be in the range of $33
million in the fourth quarter. (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.)
During the fourth quarter, we returned capital to shareholders
through our 102nd consecutive quarterly dividend and the repurchase
of approximately 115,000 shares of our Class A common stock in open
market transactions pursuant to our ongoing authorized share
repurchase program.
The preliminary, unaudited information provided above is based
on the Company’s current estimates of its financial results for the
fourth quarter and fiscal year ended August 31, 2019 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 financial results for its fourth quarter
and fiscal year ended August 31, 2019 on Thursday, October 24, 2019
and will host a webcast conference call to discuss the results as
well as an update on market conditions and outlook for its first
quarter of fiscal 2020 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: 2174549 Replay
Available: 10/24/2019 to 10/29/2019
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, charges for legacy
environmental matters net of recoveries, asset impairment charges
net of recoveries, restructuring (recoveries) charges and other
exit-related activities, and 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.
Adjusted Diluted Earnings per Share
from Continuing Operations Attributable to SSI
($ per share)
Quarter
4Q19
3Q19
4Q18
High
Low
Diluted earnings per share from continuing
operations attributable to SSI
$
0.42
$
0.37
$
0.56
$
2.08
Charge related to the settlement of a wage
and hour class action lawsuit
—
—
0.08
—
Charges for legacy environmental matters,
net (1)
0.03
0.03
0.02
0.05
Asset impairment charges, net
—
—
—
0.02
Restructuring (recoveries) charges and
other exit-related activities
(0.02
)
(0.02
)
—
(0.03
)
Income tax (benefit) expense allocated to
adjustments
—
—
(0.01
)
(0.01
)
Adjusted diluted earnings per share from
continuing operations attributable to SSI
$
0.43
$
0.38
$
0.65
$
2.11
(1)
Legal and environmental charges for legacy
environmental matters, net of recoveries. Prior 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. See Note 5 –Commitments and Contingencies, ‘Portland
Harbor’ and ‘Other Legacy Environmental Loss Contingencies’ in the
Company’s most recently filed 10-Q on June 26, 2019.
Debt, Net of Cash
The following is a reconciliation of debt, net of cash (in
millions):
August 31, 2019
May 31, 2019
August 31, 2018
Total debt
$
105
$
142
$
107
Less: cash and cash equivalents
12
8
5
Total debt, net of cash(1)
$
93
$
134
$
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,” “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 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; 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” in Part
I of our most recent Annual Report on Form 10-K. 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/20190926005260/en/
Investor Relations: Michael Bennett (503) 323-2811 Website:
www.schnitzersteel.com Email: ir@schn.com
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