Schnitzer Provides Market Outlook for Second Quarter of Fiscal 2013
PORTLAND, Ore. -- February 28, 2013
Schnitzer Steel Industries, Inc. (Nasdaq: SCHN) announced today its market
outlook for the second quarter of fiscal 2013 ended February 28, 2013. The
Company expects to report a sequential improvement in its consolidated
financial performance in the second quarter of fiscal 2013. For the second
quarter, fully diluted earnings per share are expected to be in the range of
$0.20 – $0.26 before restructuring charges. In the second quarter, we expect
to incur a pre-tax restructuring charge in connection with our announcement in
August of approximately $2 million, which equates to $0.04 earnings per share.
Actual financial performance may be materially different based on, among other
factors, market conditions and the timing of shipments.
In our Metals Recycling Business, ferrous export selling prices strengthened
throughout the quarter, with prices for February shipments approximately $40
per ton higher than shipments at the end of the first quarter, while domestic
selling prices weakened slightly toward the end of the quarter. The supply of
scrap continued to be constrained by low US GDP growth, resulting in high raw
material costs which moderated the overall improvement to margins. During the
second quarter, ferrous average net selling prices increased slightly from the
first quarter of fiscal 2013 and ferrous sales volumes increased approximately
15% – 20%. Nonferrous average selling prices are in line with the first
quarter while volumes increased approximately 10%. The combination of higher
selling price and volumes trends are expected to generate operating income per
ferrous ton of approximately $12, an increase of 100% from the first quarter
of fiscal 2013.
In our Auto Parts Business, higher commodity prices, stronger car purchases
and the incremental volume contribution of acquisitions are expected to result
in an increase of approximately 10% in revenues from the first quarter of
fiscal 2013. APB’s operating margin, excluding the impact of new locations
added since the first quarter, is expected to be approximately 10%, a
sequential increase over the prior quarter’s performance. During the second
quarter, APB added 10 new locations which, as anticipated, will result in
approximately $2 million of transaction, integration and startup costs which
will impact APB’s reported operating margin, expected to be approximately 7%,
in the quarter.
In our Steel Manufacturing Business, average selling prices are expected to
increase slightly from the first quarter while sales volumes are expected to
be approximately 25% lower than the first quarter. Higher costs for raw
materials, a lower utilization rate resulting from planned maintenance and a
typical seasonal slowdown in demand during the quarter are expected to result
in SMB operating income of approximately $1 million.
The effective tax rate for the second quarter is expected to include tax
credits and other benefits in the range of $1 – $2 million.
We continue to focus on cost reductions, strategic growth initiatives, and
increasing synergies between our Metals Recycling and Auto Parts Businesses.
In the first half of fiscal 2013, consolidated SG&A is expected to be
approximately 10% lower as compared to the prior year period and is on track
with our restructuring program announced in August 2012. In February, our
Metals Recycling Business successfully commenced the testing of its newly
constructed shredder near Vancouver, BC, which is expected to be operational
in the third quarter. As previously announced, our Auto Parts Business
completed eight acquisitions and commenced two greenfield developments in the
second quarter, which will increase the number of APB stores by 20% and
increase annual car purchase volumes by approximately 15%. These new
locations, which include Western Canada, the Pacific Northwest and New
England, strengthen APB’s presence in core markets while providing synergistic
sources of supply to our Metals Recycling Business.
Annually in the second quarter we evaluate the carrying value of our goodwill.
Our assessment considers conditions in our markets, macro-economic
uncertainties, our market capitalization and other factors. Accordingly, our
market outlook for the second quarter, as described above, does not reflect
completion of our review. See ‘Critical Accounting Policies and Estimates’
within our Form 10-Q for the first quarter of fiscal 2013 for a discussion of
the evaluation of goodwill.
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,
including statements regarding trends, cyclicality and changes in the markets
we sell into; strategic direction; changes to manufacturing and production
processes; the cost of 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; 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 "Risk Factors" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in 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 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; 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; product liability claims; 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 excluding expected
restructuring charges. Management believes that these non-GAAP financial
measures allows for a better understanding of our operating and financial
performance. These non-GAAP financial measures should be considered in
addition to, but not as a substitute for, the most directly comparable US GAAP
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 58
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 59
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 107^th year of operations in fiscal 2013.
Schnitzer Steel Industries, Inc.
Alexandra Deignan, 646-278-9711
Chip Terhune, 503-367-2568
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