Schnitzer Reports Fourth Quarter and Full Year Fiscal 2012 Financial Results
Schnitzer Reports Fourth Quarter and Full Year Fiscal 2012 Financial Results
Fourth Quarter Revenues $762 million, Adjusted Diluted EPS $0.10 and Cash From Operations $108 million
Full Year Revenues $3.3 billion, Adjusted Diluted EPS $1.11 and Cash From Operations $245 million
PORTLAND, Ore.--(BUSINESS WIRE)-- Schnitzer Steel Industries, Inc. (NAS: SCHN) today reported adjusted diluted earnings per share of $0.10, excluding a $5 million pre-tax restructuring charge ($0.12 per diluted share) associated with initiatives announced in August. Including the restructuring charge, the Company reported a loss per share of $(0.02) for the fourth quarter ended August 31, 2012. This compares with diluted earnings per share of $1.31 for the fourth quarter of fiscal 2011. For the 2012 fiscal year, Schnitzer reported full year revenues of $3.3 billion, compared to $3.5 billion in fiscal 2011, and adjusted diluted earnings per share of $1.11, excluding the fourth quarter restructuring charge, compared to $4.23 in fiscal 2011. Including the restructuring charge, reported diluted earnings per share were $0.99 for fiscal 2012. Fourth quarter financial results exceeded the Company's recent market outlook primarily due to the achievement of higher than anticipated operational performance in August in our Metals Recycling and Auto Parts businesses.
Our quarterly financial performance was adversely impacted by a rapid decline in selling prices at the beginning of the quarter while the supply of scrap continued to be constrained by weak US GDP growth. As a result of these conditions, average inventory costs did not decline as quickly as cash purchase costs for raw materials, resulting in margin compression. Average inventory costs adversely impacted consolidated operating income by approximately $30 million compared to the third quarter, with nearly two-thirds of this impact affecting our Metals Recycling Business.
Summary Results | ||||||||||||||||||||||||||||
($ in millions, except per share amounts) | ||||||||||||||||||||||||||||
Quarter | Year | |||||||||||||||||||||||||||
4Q12 | 3Q12 | 4Q11 | 2012 | 2011 | % Chg | |||||||||||||||||||||||
Revenues | $ | 762 | $ | 880 | $ | 1,081 | $ | 3,341 | $ | 3,459 | (3 | )% | ||||||||||||||||
Operating Income (Loss) | $ | (1 | ) | $ | 22 | $ | 56 | $ | 54 | $ | 186 | (71 | )% | |||||||||||||||
Restructuring Charges | 5 | — | — | 5 | — | |||||||||||||||||||||||
Adjusted Operating Income(1) | $ | 4 | $ | 22 | $ | 56 | $ | 59 | $ | 186 | (68 | )% | ||||||||||||||||
Net Income (Loss) attributable to SSI | $ | — | $ | 11 | $ | 37 | $ | 27 | $ | 118 | (77 | )% | ||||||||||||||||
Restructuring Charges, net of tax | 3 | — | — | 3 | — | |||||||||||||||||||||||
Adjusted Net Income attributable to SSI(1)(2) | $ | 3 | $ | 11 | $ | 37 | $ | 31 | $ | 118 | (74 | )% | ||||||||||||||||
Net Income (Loss) per share attributable to SSI | $ | (0.02 | ) | $ | 0.40 | $ | 1.31 | $ | 0.99 | $ | 4.23 | (77 | )% | |||||||||||||||
Restructuring Charges, net of tax, per share | 0.12 | — | — | 0.12 | — | |||||||||||||||||||||||
Adjusted diluted EPS attributable to SSI(1) | $ | 0.10 | $ | 0.40 | $ | 1.31 | $ | 1.11 | $ | 4.23 | (74 | )% | ||||||||||||||||
(1) Adjusted for restructuring charges taken in 4Q12. See Non-GAAP Financial Measures for reconciliation to U.S. GAAP. | ||||||||||||||||||||||||||||
(2) Numbers may not foot due to rounding | ||||||||||||||||||||||||||||
"Amid significant global economic uncertainty and declining prices throughout the year, we delivered strong cash flow and relatively stable volumes, demonstrating the flexibility and resiliency of our platform. Despite the challenging market conditions, we generated $245 million in operating cash flow during fiscal 2012 which enabled us to reduce our net leverage to 18% by fiscal year end while returning capital to shareholders through a significant dividend increase and the repurchase of 1.1 million in outstanding shares," said Tamara Lundgren, President and Chief Executive Officer.
"During the fourth quarter, we undertook initiatives in order to extract greater synergies from the significant investments we made in fiscal 2011, to further integrate our Metals Recycling and Auto Parts Businesses, and to reduce our cost base. We expect to drive $25 million in annualized pre-tax savings through the implementation of these initiatives and the benefits of our more streamlined organization. In fiscal 2013, we will continue to focus on maximizing value through our growth strategy of expanding our Metals Recycling export platform and our Auto Parts business and enhancing performance through advanced technologies, operational synergies and continuous improvement initiatives."
Key business drivers during fiscal 2012:
Metals Recycling Business (MRB) shipped 5.1 million ferrous tons and 629 million nonferrous pounds while continuing to execute our strategy for growth through investment in our Western Canada facilities, achieving higher nonferrous yields and delivering enhanced operational synergies.
Auto Parts Business (APB) focused on maximizing throughput across its 51 locations, generating an 11% operating margin on an aggregate of 339 thousand cars purchased.
Steel Manufacturing Business (SMB) achieved slightly below break-even operating performance.
Metals Recycling Business
Summary of Metals Recycling Business Results | |||||||||||||||||||||||||||||
($ in millions, except selling prices; Fe volumes 000s long tons; NFe volumes M lbs) | |||||||||||||||||||||||||||||
Quarter | Year | ||||||||||||||||||||||||||||
4Q12 | 3Q12 | 4Q11 | 2012 | 2011 | % Chg | ||||||||||||||||||||||||
Total Revenues | $ | 652 | $ | 787 | $ | 962 | $ | 2,949 | $ | 3,070 | (4 | )% | |||||||||||||||||
Ferrous Revenues | $ | 485 | $ | 622 | $ | 740 | $ | 2,298 | $ | 2,425 | (5 | )% | |||||||||||||||||
Ferrous Volumes | 1,178 | 1,353 | 1,534 | 5,115 | 5,329 | (4 | )% | ||||||||||||||||||||||
Avg. Net Ferrous Sales Prices ($/LT)(1) | $ | 378 | $ | 424 | $ | 443 | $ | 415 | $ | 416 | — | % | |||||||||||||||||
Nonferrous Revenues | $ | 158 | $ | 155 | $ | 213 | $ | 614 | $ | 620 | (1 | )% | |||||||||||||||||
Nonferrous Volumes | 169 | 154 | 191 | 629 | 569 | 11 | % | ||||||||||||||||||||||
Avg. Net Nonferrous Sales Prices ($/lb)(1) | $ | 0.90 | $ | 0.97 | $ | 1.08 | $ | 0.94 | $ | 1.06 | (11 | )% | |||||||||||||||||
Operating Income(2) | $ | 13 | $ | 18 | $ | 52 | $ | 64 | $ | 165 | (61 | )% | |||||||||||||||||
(1) Sales prices are shown net of freight | |||||||||||||||||||||||||||||
(2) Operating income does not include the impact of restructuring charges | |||||||||||||||||||||||||||||
Sales Volumes: Ferrous sales volumes of 1.2 million tons in the fourth quarter decreased 13% from third quarter levels, primarily due to reduced flows of raw materials resulting from the lower price environment and unusually hot weather. Nonferrous sales volumes of 169 million pounds increased 10% sequentially, primarily due to the impact of increased shipments in August.
Export customers accounted for 78% of total ferrous sales volumes in the fourth quarter. Our ferrous and nonferrous products were shipped to 18 countries, with Turkey, South Korea and Taiwan the top export destinations.
Pricing: Demand softened in the export markets in early June, driving average ferrous net sales prices in the fourth quarter down $46 per ton, or 11%, from third quarter levels. Nonferrous prices decreased 7% in the fourth quarter sequentially primarily due to lower commodity prices.
Margins: Operating income per ferrous ton was $11 in the fourth quarter of fiscal 2012, slightly below the third quarter. Operating performance exceeded our fourth quarter market outlook due to higher than anticipated nonferrous shipments. Overall, the fourth quarter was impacted significantly by the adverse effect of average inventory accounting and the impact of lower volumes on unit costs, partly offset by improved cash metal spreads generated in the early part of the quarter and reduced SG&A which included a decrease in environmental liabilities of $2 million.
Auto Parts Business
Summary of Auto Parts Business Results | |||||||||||||||||||||||||||||
($ in millions) | |||||||||||||||||||||||||||||
Quarter | Year | ||||||||||||||||||||||||||||
4Q12 | 3Q12 | 4Q11 | 2012 | 2011 | % Chg | ||||||||||||||||||||||||
Revenues | $ | 72 | $ | 83 | $ | 94 | $ | 317 | $ | 320 | (1 | )% | |||||||||||||||||
Operating Income(1) | $ | 2 | $ | 13 | $ | 17 | $ | 33 | $ | 64 | (48 | )% | |||||||||||||||||
Car Purchase Volumes (000s) | 81 | 89 | 97 | 339 | 353 | (4 | )% | ||||||||||||||||||||||
Locations (end of quarter) | 51 | 51 | 50 | 51 | 50 | 2 | % | ||||||||||||||||||||||
(1) Operating income does not include the impact of restructuring charges | |||||||||||||||||||||||||||||
Revenues: Revenues in the fourth quarter decreased 14% sequentially primarily due to the impact of falling commodity prices and seasonally lower admissions.
Margins: Operating margins during the fourth quarter were compressed by the significant negative impact from average inventory accounting, as well as effects of falling commodity prices on sales and the seasonal impact of hot weather on admissions. Operating performance exceeded our fourth quarter market outlook due to higher than anticipated ferrous and nonferrous sales volumes.
Steel Manufacturing Business
Summary of Steel Manufacturing Business Results | |||||||||||||||||||||||||||||
($ in millions, except selling prices; volume in thousands of short tons) | |||||||||||||||||||||||||||||
Quarter | Year | ||||||||||||||||||||||||||||
4Q12 | 3Q12 | 4Q11 | 2012 | 2011 | % Chg | ||||||||||||||||||||||||
Revenues | $ | 90 | $ | 79 | $ | 93 | $ | 333 | $ | 317 | 5 | % | |||||||||||||||||
Operating Income (Loss)(1) | $ | (3 | ) | $ | — | $ | 2 | $ | (2 | ) | $ | 3 | NM | ||||||||||||||||
Avg. Net Sales Prices ($/ST) | $ | 685 | $ | 734 | $ | 721 | $ | 715 | $ | 697 | 3 | % | |||||||||||||||||
Finished Goods Sales Volumes | 126 | 103 | 124 | 447 | 439 | 2 | % | ||||||||||||||||||||||
(1) Operating income does not include the impact of restructuring charges | |||||||||||||||||||||||||||||
NM = Not meaningful | |||||||||||||||||||||||||||||
