During the quarter, the market experienced the steepest decline in ferrous prices since 2012. From September through November 2014, ferrous export selling prices declined approximately US$80 per ton, or 20%, and ferrous domestic prices declined approximately US$60 per ton, or 15%. For the quarter, we reported adjusted earnings per share of US$0.08, excluding the adverse impact of reselling or modifying the terms of certain previously contracted bulk ferrous shipments and charges attributed to restructuring. This compares to the first quarter of fiscal 2014 adjusted loss per share of US$0.18, excluding charges attributed to restructuring. The reported loss per share of US$0.09 for the first quarter ended 30 November 2014 compares to a reported loss per share of US$0.23 for the prior year quarter.
During the first quarter of fiscal 2015, all three business segments generated positive operating income, largely due to benefits from productivity initiatives. The Metals Recycling and Auto Parts Businesses were both significantly impacted by the decline in ferrous selling prices, resulting in an adverse impact from average inventory accounting estimated to be approximately US$9 million, or US$0.23 per share, which offset the benefits of productivity improvements and cost savings. Metals Recycling's adjusted operating income per ton of US$8 excluded the impact of reselling or modifying the terms of certain previously contracted bulk ferrous shipments for delivery during the first quarter of approximately US$6 per ton. Metals Recycling's reported operating income per ton of US$2 increased from US$1 operating income per ton reported in the first quarter of fiscal 2014, notwithstanding an estimated adverse impact of approximately US$7 per ton from average inventory accounting. In Auto Parts, operating income of US$2 million included an estimated adverse impact of average inventory accounting of approximately US$2 million. The Steel Manufacturing Business generated US$6 million in operating income, continuing to benefit from strong demand in West Coast construction markets and contributions from productivity initiatives.
"While global commodity markets remain challenging, the recovering U.S. economy is driving higher domestic demand for steel. The Steel Manufacturing Business more than tripled its first quarter operating income versus last year benefiting from higher selling prices, increased rolling mill utilization and contributions from productivity improvements. In the Metals Recycling Business, we delivered ahead of schedule on the productivity improvement and cost savings initiatives which contributed significantly toward year-over-year improved performance in that segment," said Tamara Lundgren, president and chief executive officer. "We are continuing to take steps to improve business efficiency and reduce the cost base across the organization. We have identified further targeted initiatives in the Auto Parts Business and now anticipate annual benefits of US$14 million, which is up from the US$7 million we previously announced, approximately half of which we expect to realize during the second half of fiscal 2015. We believe these actions will continue to enhance the performance and should provide greater opportunity for margin expansion as market conditions improve.”
|
Summary Results |
|
|
|
|
|
|
|
|
|
|
|
(US$ in millions, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter |
|
|
|
1Q15 |
|
1Q14 |
|
Change |
|
4Q14 |
|
Change |
|
Revenues |
|
US$ |
556 |
|
|
US$ |
588 |
|
|
(5)% |
|
US$ |
692 |
|
(20)% |
|
Operating Income (Loss) |
|
US$ |
— |
|
|
US$ |
(4 |
) |
|
NM |
|
US$ |
16 |
|
(100)% |
|
Resale or modification of certain previously contracted shipments |
|
|
6 |
|
|
|
— |
|
|
NM |
|
|
— |
|
NM |
|
Restructuring Charges and Other Exit-related Costs |
|
|
1 |
|
|
|
2 |
|
|
66% |
|
|
— |
|
61% |
|
Adjusted Operating Income (Loss)(1)(3) |
|
US$ |
6 |
|
|
US$ |
(2 |
) |
|
NM |
|
US$ |
16 |
|
(61)% |
|
Net Income (Loss) attributable to SSI(2) |
|
US$ |
(2 |
) |
|
US$ |
(6 |
) |
|
60% |
|
US$ |
7 |
|
NM |
|
Net Income (Loss) from continuing operations attributable to SSI |
|
US$ |
(2 |
) |
|
US$ |
(6 |
) |
|
60% |
|
US$ |
6 |
|
NM |
|
Adjusted Net Income (Loss) from continuing operations attributable to SSI |
|
US$ |
2 |
|
|
US$ |
(5 |
) |
|
NM |
|
US$ |
9 |
|
(76)% |
|
Net Income (Loss) per share attributable to SSI(2) |
|
US$ |
(0.09 |
) |
|
US$ |
(0.23 |
) |
|
61% |
|
US$ |
0.27 |
|
NM |
|
Net Income (Loss) per share from continuing operations attributable to SSI |
|
US$ |
(0.09 |
) |
|
US$ |
(0.23 |
) |
|
61% |
|
US$ |
0.24 |
|
NM |
|
Adjusted diluted EPS from continuing operations attributable to SSI(1) |
|
US$ |
0.08 |
|
|
US$ |
(0.18 |
) |
|
NM |
|
US$ |
0.33 |
|
(76)% |
|
(1) Adjusted operating income excludes the impact of the resale or modification of certain previously contracted bulk ferrous shipments for delivery in the first quarter of fiscal 2015, restructuring charges and other exit-related costs. See Non-GAAP Financial Measures for reconciliation to U.S. GAAP. |
|
(2) Net income per share in the ftheth quarter of fiscal 2014 includes a US$1 million benefit after tax from discontinued operations related to a reduction in environmental liabilities of previously disposed operations. |
|
(3) May not foot due to rounding. |
|
NM = not meaningful |
Metals Recycling Business
|
Summary of Metals Recycling Business Results |
|
(US$ in millions, except selling prices; Fe volumes 000s long tons; NFe volumes Ms lbs) |
|
|
|
|
|
Quarter |
|
|
|
1Q15 |
|
1Q14 |
|
Change |
|
4Q14 |
|
Change |
|
Total Revenues |
|
US$ |
456 |
|
US$ |
490 |
|
(7 |
)% |
|
US$ |
560 |
|
(19 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ferrous Revenues |
|
US$ |
338 |
|
US$ |
370 |
|
(9 |
)% |
|
US$ |
416 |
|
(19 |
)% |
|
Ferrous Volumes |
|
|
938 |
|
|
978 |
|
(4 |
)% |
|
|
1,092 |
|
(14 |
)% |
|
Avg. Net Ferrous Sales Prices (US$/LT)(1) |
|
US$ |
328 |
|
US$ |
348 |
|
(6 |
)% |
|
US$ |
351 |
|
(7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonferrous Revenues |
|
US$ |
113 |
|
US$ |
113 |
|
— |
% |
|
US$ |
137 |
|
(18 |
)% |
|
Nonferrous Volumes |
|
|
127 |
|
|
124 |
|
3 |
% |
|
|
156 |
|
(18 |
)% |
|
Avg. Net Nonferrous Sales Prices (US$/lb)(1) |
|
US$ |
0.85 |
|
US$ |
0.89 |
|
(4 |
)% |
|
US$ |
0.85 |
|
— |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income(2) |
|
US$ |
2 |
|
US$ |
1 |
|
226 |
% |
|
US$ |
15 |
|
(87 |
)% |
|
Operating Income per Fe ton |
|
US$ |
2 |
|
US$ |
1 |
|
239 |
% |
|
US$ |
14 |
|
(85 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income(3) |
|
US$ |
8 |
|
US$ |
1 |
|
1,172 |
% |
|
US$ |
15 |
|
(50 |
)% |
|
Adjusted Operating Income per Fe ton |
|
US$ |
8 |
|
US$ |
1 |
|
1,225 |
% |
|
US$ |
14 |
|
(42 |
)% |
|
(1) Sales prices are shown net of freight. |
|
(2) Operating income does not include the impact of restructuring charges and other exit-related costs. |
|
(3) Adjusted operating income for the first quarter of fiscal 2015 excludes the impact of the resale or modification of certain previously contracted bulk ferrous shipments. See Non-GAAP Financial Measures for reconciliation to U.S. GAAP. |
Sales Volumes: Ferrous sales volumes of 1 million tons in the first quarter declined 4% from the prior year quarter, primarily due to weaker export demand and the impact of the lower price environment on scrap supply and the timing of shipments. Nonferrous sales volumes of 127 million pounds increased 3% from the prior year quarter, largely due to higher processing efficiencies.
In total, export customers accounted for 64% of the ferrous sales volumes. Ferrous and nonferrous products were shipped to 16 countries, with Turkey, Egypt and Thailand the top export destinations for ferrous shipments.
Pricing: Beginning in August, ferrous scrap metal pricing dropped sharply, resulting in a decline in average export selling prices of US$33 per ton, or 9%, from fourth quarter levels. Nonferrous prices in the first quarter were in line sequentially.
Margins: Reported operating income per ton of US$2 increased by US$1 per ton from the prior year quarter, largely due to benefits from productivity initiatives which offset the estimated US$7 per ton adverse impact of average inventory costs. These did not decline as quickly as purchase prices, resulting in operating margin compression compared to the fourth quarter of fiscal 2014. Adjusted operating income of US$8 per ferrous ton in the first quarter of fiscal 2015 excluded a US$6 million adverse impact from reselling or modifying the terms, at significantly lower prices, of previously contracted bulk ferrous shipments for delivery in the quarter. Due to the sharp decline in selling prices that occurred during the quarter, the revised prices associated with these shipments were significantly lower than the prices in the original sales contracts entered into between August and October 2014.
Auto Parts Business
|
Summary of Auto Parts Business Results |
|
|
|
|
|
|
|
|
|
(US$ in millions, volume 000s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter |
|
|
|
1Q15 |
|
1Q14 |
|
Change |
|
4Q14 |
|
Change |
|
Revenues |
|
US$ |
81 |
|
US$ |
80 |
|
2 |
% |
|
US$ |
88 |
|
(8) |
% |
|
Operating Income(1) |
|
US$ |
2 |
|
US$ |
6 |
|
(65) |
% |
|
US$ |
5 |
|
(57) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Car Purchase Volumes |
|
|
97 |
|
|
91 |
|
7 |
% |
|
|
106 |
|
(8) |
% |
|
Locations (end of quarter) |
|
|
62 |
|
|
62 |
|
— |
% |
|
|
62 |
|
— |
% |
|
(1) Operating income does not include the impact of restructuring charges and other exit-related costs. |
Revenues: Revenues in the first quarter increased 2% from the prior year quarter due to higher car volumes which offset the adverse impact of lower commodity prices.
Margins: Operating margins of 2% were lower compared to the prior year first quarter, primarily due to an estimated adverse impact of US$2 million from average inventory accounting and the sharp drop in commodity prices which further compressed operating margins. Cost reduction and productivity initiatives currently underway are expected to benefit operating performance in fiscal 2015, primarily in the second half.
Steel Manufacturing Business
|
Summary of Steel Manufacturing Business Results |
|
|
|
|
|
|
|
(US$ in millions, except selling prices; volume 000s of short tons) |
|
|
|
|
|
|
|
Quarter |
|
|
|
1Q15 |
|
1Q14 |
|
Change |
|
4Q14 |
|
Change |
|
Revenues |
|
US$ |
95 |
|
US$ |
88 |
|
8 |
% |
|
US$ |
117 |
|
(19 |
)% |
|
Operating Income |
|
US$ |
6 |
|
US$ |
2 |
|
256 |
% |
|
US$ |
9 |
|
(28 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Avg. Net Sales Prices (US$/ST) |
|
US$ |
683 |
|
US$ |
657 |
|
4 |
% |
|
US$ |
688 |
|
(1 |
)% |
|
Finished Goods Sales Volumes |
|
|
127 |
|
|
128 |
|
(1 |
)% |
|
|
156 |
|
(18 |
)% |
Sales Volumes: Finished steel sales volumes of 127,000 tons were in line with the prior year first quarter but lower sequentially due to a planned maintenance outage.
Pricing: Average net sales prices for finished steel products increased 4% from the prior year first quarter, reflecting higher demand for long products on the West Coast.
Margins: Operating income of US$6 million increased substantially compared to the prior year first quarter, with the strong quarterly performance improvement resulting from higher selling prices, increased rolling mill utilization and contributions from productivity improvements.
Productivity Improvements
We achieved ahead of schedule the targeted US$40 million in benefits under the cost reduction and productivity program announced in fiscal 2014, delivering US$10 million in benefits during the first quarter of fiscal 2015, an increase of US$6 million from the prior year first quarter. These benefits offset the impact of volatile market conditions during the first quarter and contributed to the positive operating income generated in each of the business segments.
Beginning in the ftheth quarter of fiscal 2014, the Auto Parts Business launched cost reduction and productivity initiatives targeted to achieve annual savings of US$7 million. Today, we are announcing an increase of the target to US$14 million. The completion of these initiatives is expected to yield higher earnings and increased efficiencies by centralizing and streamlining field support activities, reducing organizational layers and achieving cost reductions. The initiatives announced today are expected to reduce annual SG&A costs by US$7 million. We anticipate a workforce reduction of approximately 4% of Auto Parts headcount and a restructuring charge of US$2 million. We expect to realize approximately 50% of the targeted annual benefits in fiscal 2015, primarily in the second half, with the full annual run rate expected to be reached in fiscal 2016.
|
SCHNITZER STEEL INDUSTRIES, INC. |
|
SELECTED OPERATING STATISTICS |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
|
1Q15 |
|
1Q14 |
2Q14 |
3Q14 |
4Q14 |
2014 |
|
Metals Recycling Business |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ferrous Selling Prices (US$/LT)(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
US$ |
344 |
|
|
US$ |
356 |
|
US$ |
374 |
|
US$ |
354 |
|
US$ |
349 |
|
US$ |
358 |
|
Exports |
|
US$ |
319 |
|
|
US$ |
344 |
|
US$ |
361 |
|
US$ |
341 |
|
US$ |
352 |
|
US$ |
350 |
|
Average |
|
US$ |
328 |
|
|
US$ |
348 |
|
US$ |
365 |
|
US$ |
346 |
|
US$ |
351 |
|
US$ |
353 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ferrous Sales Volume (LT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
333,798 |
|
|
322,531 |
|
328,005 |
|
344,526 |
|
328,308 |
|
1,323,369 |
|
Export |
|
604,626 |
|
|
655,072 |
|
701,259 |
|
679,009 |
|
763,608 |
|
2,798,948 |
|
Total |
|
938,424 |
|
|
977,603 |
|
1,029,264 |
|
1,023,535 |
|
1,091,916 |
|
4,122,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonferrous Average Price (US$/LB)(1) |
|
US$ |
0.85 |
|
|
US$ |
0.89 |
|
US$ |
0.86 |
|
US$ |
0.86 |
|
US$ |
0.85 |
|
US$ |
0.86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonferrous Sales Volume (LB, in 000s) |
|
127,473 |
|
|
123,941 |
|
135,935 |
|
139,273 |
|
155,659 |
|
554,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steel Manufacturing Business |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales Prices (US$/ST)(1) (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
US$ |
683 |
|
|
US$ |
657 |
|
US$ |
676 |
|
US$ |
686 |
|
US$ |
688 |
|
US$ |
677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales Volume (ST)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rebar |
|
79,065 |
|
|
83,618 |
|
83,838 |
|
85,633 |
|
101,076 |
|
354,165 |
|
Coiled Products |
|
40,361 |
|
|
38,322 |
|
25,656 |
|
41,892 |
|
46,682 |
|
152,552 |
|
Merchant Bar and Other |
|
7,698 |
|
|
6,222 |
|
5,305 |
|
6,984 |
|
7,979 |
|
26,490 |
|
Total |
|
127,124 |
|
|
128,162 |
|
114,799 |
|
134,509 |
|
155,737 |
|
533,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto Parts Business |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Car purchase volumes (000) |
|
97 |
|
|
91 |
|
85 |
|
98 |
|
106 |
|
380 |
|
Number of self-service locations at end of quarter |
|
62 |
|
|
62 |
|
61 |
|
61 |
|
62 |
|
62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Price information is shown after a reduction for the cost of freight incurred to deliver the product to the customer |
|
(2) Excludes billet sales |
