Schnitzer Reports Third Quarter Fiscal 2021 Financial Results

June 30, 2021

Best Quarterly Operating Performance Since FY2008

Strong Sequential Improvement in Sales Volumes, with Ferrous Up 24%, Nonferrous Up 15% and Finished Steel Up 12%

Schnitzer Board Declares Quarterly Dividend

PORTLAND, Ore.–(BUSINESS WIRE)–Schnitzer Steel Industries, Inc. (NASDAQ: SCHN) today reported results for its third quarter of fiscal 2021 ended May 31, 2021.

Third Quarter Fiscal 2021 Highlights

Diluted earnings per share from continuing operations of $2.16, compared to earnings per share of $1.54 in the second quarter of fiscal 2021 and a loss of ($0.18) per share in the third quarter of fiscal 2020

Adjusted diluted earnings per share from continuing operations of $2.20, compared to adjusted diluted earnings per share of $1.51 in the second quarter of fiscal 2021 and $0.05 in the third quarter of fiscal 2020

Net income of $65 million, compared to net income of $46 million in the second quarter of fiscal 2021 and a net loss of ($5) million in the third quarter of fiscal 2020

Adjusted EBITDA of $97 million in the quarter, compared to adjusted EBITDA of $71 million in the second quarter of fiscal 2021 and $19 million in the third quarter of fiscal 2020

The Company’s performance during the third quarter of fiscal 2021 benefited from strong demand for recycled metals globally and for finished steel products on the West Coast, with ferrous, nonferrous and finished steel selling prices reaching multi-year highs during the quarter. In addition, results for the quarter reflected the operating leverage benefits from significantly higher ferrous, nonferrous and finished steel sales volumes sequentially.

Tamara Lundgren, Chairman and Chief Executive Officer, stated, “Our third quarter financial and operational results are Schnitzer’s best in over a decade. Our performance this quarter continued to benefit from both operating efficiencies gained from the implementation of our One Schnitzer organizational model and volume growth achieved from the execution of our strategic plan. Prices for recycled ferrous and nonferrous metals during the quarter rose to multi-year highs, with peaks and troughs in prices at respectively higher levels than we’ve seen in the past decade. The post-pandemic economic recovery and positive structural commodity trends are contributing to the higher price levels.”

Ms. Lundgren continued, “During the quarter, we began ramping up production on two of our new major advanced metal recovery technology systems, with additional systems on track for commissioning by the end of this calendar year. Extracting more nonferrous metals from our shredding activities is a significant value-added process and is directly aligned with global decarbonization and demand trends. Increasing the use of ferrous and nonferrous scrap in industrial production is a great example of how ‘old economy’ tools will lead the way to decarbonization of the new economy.”

Summary Results
($ in millions, except per share amounts)
	Three Months Ended									Nine Months Ended
	3Q21			2Q21			3Q20			2021			2020
Revenues	$	821		$	600		$	403		$	1,913		$	1,248
Gross margin (total revenues less cost of goods sold)	$	142		$	113		$	46		$	328		$	146
Gross margin (%)		17.4	%		18.8	%		11.5	%		17.1	%		11.7	%
Selling, general and administrative expense	$	62		$	54		$	46		$	166		$	139
Net income (loss)	$	65		$	46		$	(5	)	$	126		$	(7	)
Net income (loss) per ferrous ton	$	54		$	47		$	(5	)	$	39		$	(2	)
Diluted earnings (loss) per share from continuing operations attributable to SSI shareholders
Reported	$	2.16		$	1.54		$	(0.18	)	$	4.23		$	(0.29	)
Adjusted⁽¹⁾	$	2.20		$	1.51		$	0.05		$	4.31		$	0.19
Adjusted EBITDA⁽¹⁾	$	97		$	71		$	19		$	209		$	57
Adjusted EBITDA per ferrous ton⁽¹⁾	$	80		$	73		$	20		$	64		$	20

Ferrous sales volumes (LT, in thousands)		1,215			977			927			3,245			2,891
Avg. net ferrous sales prices ($/LT)⁽²⁾	$	400		$	387		$	233		$	354		$	237
Nonferrous sales volumes (pounds, in millions)⁽³⁾		156			136			123			430			391
Avg. nonferrous sales prices ($/pound)⁽²⁾⁽³⁾	$	0.97		$	0.83		$	0.54		$	0.82		$	0.54
Finished steel average net sales price ($/ST)⁽²⁾	$	802		$	690		$	633		$	709		$	633
Finished steel sales volumes (ST, in thousands)		153			136			124			423			366
Rolling mill utilization (%)		98	%		88	%		91	%		94	%		83	%

LT = Long Ton, which is equivalent to 2,240 pounds

ST = Short Ton, which is equivalent to 2,000 pounds

⁽¹⁾		See Non-GAAP Financial Measures for reconciliation to U.S. GAAP.
⁽²⁾		Price information is shown after netting the cost of freight incurred to deliver the product to the customer.
⁽³⁾		Nonferrous sales volumes and average nonferrous prices excludes platinum group metals (PGMs) in catalytic converters.

Third Quarter Fiscal 2021 Financial Review and Analysis

The benefits from higher sales volumes and increased average selling prices for ferrous and nonferrous recycled metals and finished steel products led to an expansion in operating margins, reflected in net income per ferrous ton of $54 and adjusted EBITDA per ferrous ton of $80, a sequential increase from $47 and $73, respectively. The Company’s sequential performance also reflected seasonally higher revenues from retail sales and benefits from the execution of commercial initiatives and productivity improvements supported by the One Schnitzer operating platform. Third quarter operating results also included benefits from average inventory accounting of approximately $7 per ferrous ton compared to $10 per ferrous ton in the second quarter of fiscal 2021.

On a sequential basis, ferrous sales volumes were up 24% and nonferrous sales volumes were up 15%, both driven by strong global demand. Average ferrous and nonferrous net selling prices were up 3% and 17%, respectively. Finished steel sales volumes were up 12% and rolling mill utilization in the quarter was 98%. Average net selling prices for finished steel products were up 16%.

On May 22, 2021, the Company experienced a fire at its Cascade Steel Rolling Mill in McMinnville, Oregon. There were no injuries to personnel, and property loss or damage from the incident was limited to the mill’s melt shop. Given that the incident occurred near the end of the fiscal third quarter, there was no significant impact on the results of operations in the quarter.

Operating cash flow in the third quarter of fiscal 2021 was $53 million, as cash flows associated with increased profitability more than offset the increase in working capital requirements associated with higher volumes and prices. Capital expenditures were $22 million in the quarter, including investments in maintaining the business, environmental projects, advanced metal recovery technologies and other growth projects. Total debt at the end of the quarter was $154 million and debt, net of cash, was $136 million (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). The Company has a revolving credit facility of $700 million and CAD$15 million that matures in 2023. The Company’s effective tax rate for the third quarter of fiscal 2021 was an expense of 18%, lower sequentially due to benefits from higher Company financial performance and certain discrete tax items.

During the third quarter, the Company returned capital to shareholders through its 109th consecutive quarterly dividend.

Declaration of Quarterly Dividend

The Board of Directors declared a cash dividend of $0.1875 per common share, payable July 26, 2021 to shareholders of record on July 12, 2021. Schnitzer has paid a dividend every quarter since going public in November 1993.

Analysts’ Conference Call: Third Quarter of Fiscal 2021

A conference call and slide presentation to discuss results will be held today, June 30, 2021, at 11:30 a.m. Eastern and will be hosted by Tamara L. Lundgren, Chairman and Chief Executive Officer, and Richard Peach, Executive Vice President, Chief Financial Officer and Chief Strategy Officer. The call and the slide presentation will be webcast and accessible on the Company’s website under Company > Investors > Event Calendar at www.schnitzersteel.com/company/investors/event-calendar.

Summary financial data is provided in the following pages. The slide presentation and related materials will be available prior to the call on the above website.

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 50 stores which sell serviceable used auto parts from salvaged vehicles and receive 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.

SCHNITZER STEEL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share amounts)
(Unaudited)

	Three Months Ended									Nine Months Ended
	May 31, 2021			February 28, 2021			May 31, 2020			May 31, 2021			May 31, 2020
Revenues	$	820,718		$	600,111		$	402,683		$	1,912,936		$	1,247,749
Cost of goods sold		678,297			487,025			356,217			1,585,416			1,101,497
Selling, general and administrative expense		61,887			54,142			45,544			165,935			138,744
(Income) from joint ventures		(950	)		(454	)		(309	)		(2,131	)		(698	)
Asset impairment charges		—			—			2,227			—			4,321
Restructuring charges and other exit-related activities		104			814			2,710			982			7,810
Operating income (loss)		81,380			58,584			(3,706	)		162,734			(3,925	)
Interest expense		(1,383	)		(1,224	)		(2,656	)		(4,387	)		(5,399	)
Other (loss) income, net		(114	)		(242	)		(90	)		(521	)		18
Income (loss) from continuing operations before income taxes		79,883			57,118			(6,452	)		157,826			(9,306	)
Income tax (expense) benefit		(14,401	)		(11,469	)		1,804			(31,589	)		2,568
Income (loss) from continuing operations		65,482			45,649			(4,648	)		126,237			(6,738	)
(Loss) income from discontinued operations, net of tax		(46	)		30			(69	)		(58	)		(40	)
Net income (loss)		65,436			45,679			(4,717	)		126,179			(6,778	)
Net income attributable to noncontrolling interests		(1,801	)		(1,091	)		(278	)		(3,852	)		(1,329	)
Net income (loss) attributable to SSI shareholders	$	63,635		$	44,588		$	(4,995	)	$	122,327		$	(8,107	)

Net income (loss) per share attributable to SSI shareholders:
Basic:
Income (loss) per share from continuing operations	$	2.27		$	1.59		$	(0.18	)	$	4.38		$	(0.29	)
Net income (loss) per share	$	2.27		$	1.59		$	(0.18	)	$	4.38		$	(0.29	)
Diluted:
Income (loss) per share from continuing operations	$	2.16		$	1.54		$	(0.18	)	$	4.23		$	(0.29	)
Net income (loss) per share	$	2.15		$	1.54		$	(0.18	)	$	4.22		$	(0.29	)
Weighted average number of common shares:
Basic		28,047			27,991			27,724			27,948			27,653
Diluted		29,543			28,862			27,724			28,963			27,653
Dividends declared per common share	$	0.1875		$	0.1875		$	0.1875		$	0.5625		$	0.5625

SCHNITZER STEEL INDUSTRIES, INC.
SELECTED OPERATING STATISTICS
(Unaudited)
										YTD
	1Q21			2Q21			3Q21			2021
Total ferrous volumes (LT, in thousands)⁽¹⁾		1,053			977			1,215			3,245
Total nonferrous volumes (pounds, in thousands)⁽¹⁾⁽²⁾		138,236			135,899			155,657			429,792
Ferrous selling prices ($/LT)⁽³⁾
Domestic	$	242		$	349		$	395		$	332
Foreign	$	276		$	399		$	401		$	360
Average	$	269		$	387		$	400		$	354
Ferrous sales volume (LT, in thousands)
Domestic		388			391			412			1,191
Foreign		665			586			803			2,054
Total		1,053			977			1,215			3,245
Nonferrous average price ($/pound)⁽²⁾⁽³⁾	$	0.64		$	0.83		$	0.97		$	0.82
Nonferrous sales volume (pounds, in thousands)⁽²⁾		138,236			135,899			155,657			429,792
Cars purchased (in thousands)⁽⁴⁾		78			80			91			249
Auto stores at period end		50			50			50			50
Finished steel average sales price ($/ST)⁽³⁾	$	621		$	690		$	802		$	709
Sales volume (ST, in thousands)
Rebar		94			103			106			303
Coiled products		39			32			47			118
Merchant bar and other		1			1			—			2
Finished steel products sold		134			136			153			423
Rolling mill utilization⁽⁵⁾		97	%		88	%		98	%		94	%

⁽¹⁾		Ferrous and nonferrous volumes sold externally and delivered to our steel mill for finished steel production.
⁽²⁾		Excludes platinum group metals (“PGMs”) in catalytic converters.
⁽³⁾		Price information is shown after netting the cost of freight incurred to deliver the product to the customer.
⁽⁴⁾		Cars purchased by auto parts stores only.
⁽⁵⁾		Rolling mill utilization is based on effective annual production capacity under current conditions of 580 thousand tons of finished steel products.

SCHNITZER STEEL INDUSTRIES, INC.
SELECTED OPERATING STATISTICS
(Unaudited)

													Fiscal Year
	1Q20			2Q20			3Q20			4Q20			2020⁽¹⁾
Total ferrous volumes (LT, in thousands)⁽²⁾		976			988			927			1,063			3,954
Total nonferrous volumes (pounds, in thousands)⁽²⁾⁽³⁾		144,176			124,342			122,913			159,135			550,566
Ferrous selling prices ($/LT)⁽⁴⁾
Domestic	$	196		$	244		$	222		$	214		$	220
Foreign	$	229		$	258		$	236		$	242		$	241
Average	$	222		$	255		$	233		$	236		$	237
Ferrous sales volume (LT, in thousands)
Domestic		363			379			312			375			1,429
Foreign		613			609			616			688			2,525
Total⁽⁵⁾		976			988			927			1,063			3,954
Nonferrous average price ($/pound)⁽³⁾⁽⁴⁾	$	0.54		$	0.55		$	0.54		$	0.56		$	0.55
Nonferrous sales volume (pounds, in thousands)⁽³⁾		144,176			124,342			122,913			159,135			550,566
Cars purchased (in thousands)⁽⁶⁾		83			85			74			74			316
Auto stores at period end		51			51			49			50			50
Finished steel average sales price ($/ST)⁽⁴⁾	$	643		$	627		$	633		$	618		$	630
Sales volume (ST, in thousands)
Rebar		83			86			85			105			358
Coiled products		29			42			39			34			144
Merchant bar and other		1			1			1			—			3
Finished steel products sold⁽⁵⁾		114			129			124			139			505
Rolling mill utilization⁽⁷⁾		85	%		72	%		91	%		96	%		86	%

LT = Long Ton, which is equivalent to 2,240 pounds

ST = Short Ton, which is equivalent to 2,000 pounds

⁽¹⁾		The sum of quarterly amounts may not agree to full year equivalent due to rounding.
⁽²⁾		Ferrous and nonferrous volumes sold externally and delivered to our steel mill for finished steel production.
⁽³⁾		Excludes platinum group metals (“PGMs”) in catalytic converters.
⁽⁴⁾		Price information is shown after netting the cost of freight incurred to deliver the product to the customer.
⁽⁵⁾		May not foot due to rounding.
⁽⁶⁾		Cars purchased by auto parts stores only.
⁽⁷⁾		Rolling mill utilization is based on effective annual production capacity under current conditions of 580 thousand tons of finished steel products.

SCHNITZER STEEL INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)
(Unaudited)

	May 31, 2021		August 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	17,927	$	17,887
Accounts receivable, net		266,007		139,147
Inventories		257,229		157,269
Other current assets		44,026		48,328
Total current assets		585,189		362,631
Property, plant and equipment, net		510,762		487,004
Operating lease right-of-use assets		132,987		140,584
Goodwill and other assets		256,800		239,708
Total assets	$	1,485,738	$	1,229,927

Liabilities and Equity
Current liabilities:
Short-term borrowings	$	2,834	$	2,184
Operating lease liabilities		20,462		19,760
Other current liabilities		273,408		201,720
Total current liabilities		296,704		223,664
Long-term debt, net of current maturities		150,939		102,235
Operating lease liabilities, net of current maturities		116,017		125,001
Other long-term liabilities		119,495		98,591
Total liabilities		683,155		549,491

Total Schnitzer Steel Industries, Inc. (“SSI”) shareholders’ equity		798,031		676,707
Noncontrolling interests		4,552		3,729
Total equity		802,583		680,436
Total liabilities and equity	$	1,485,738	$	1,229,927

Non-GAAP Financial Measures

This press release contains performance based on adjusted diluted earnings (loss) per share from continuing operations attributable to SSI shareholders, adjusted EBITDA and adjusted EBITDA per ferrous ton which are non-GAAP financial measures as defined under SEC rules. As required by SEC rules, the Company has provided a reconciliation of these measures for each period discussed to the most directly comparable U.S. GAAP measure. Management believes that providing these non-GAAP financial measures adds a meaningful presentation of our results from business operations excluding adjustments for business development costs not related to ongoing operations, charges related to non-ordinary course legal settlements, legacy environmental matters (net of recoveries), restructuring charges and other exit-related activities, asset impairment charges (recoveries), net, and the income tax (benefit) expense 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. We believe that presenting debt, net of cash is useful to investors as a measure of our leverage, as cash and cash equivalents can be used, among other things, to repay indebtedness. 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.

Reconciliation of adjusted diluted earnings (loss) per share from continuing operations attributable to SSI shareholders
($ per share)	Three Months Ended									Nine Months Ended
	3Q21			2Q21			3Q20			2021			2020
As reported	$	2.16		$	1.54		$	(0.18	)	$	4.23		$	(0.29	)
Business development costs, per share		0.03			—			0.03			0.03			0.06
Charges related to legal settlements, per share⁽¹⁾		0.01			—			—			0.01			—
Charges (recoveries) for legacy environmental matters, net, per share⁽²⁾		0.01			(0.08	)		0.07			0.03			0.14
Restructuring charges and other exit-related activities, per share		—			0.03			0.10			0.03			0.28
Asset impairment charges (recoveries), net, per share		—			—			0.08			—			0.16
Income tax (benefit) expense allocated to adjustments, per share⁽³⁾		(0.01	)		0.01			(0.06	)		(0.02	)		(0.15	)
Adjusted⁽⁴⁾	$	2.20		$	1.51		$	0.05		$	4.31		$	0.19

Reconciliation of adjusted EBITDA and adjusted EBITDA per ferrous ton
($ in millions)	Three Months Ended									Nine Months Ended
	3Q21			2Q21			3Q20			2021			2020
Net income (loss)	$	65		$	46		$	(5	)	$	126		$	(7	)
Plus interest expense		1			1			3			4			5
Plus tax expense (benefit)		14			11			(2	)		32			(3	)
Plus depreciation and amortization		14			14			15			44			43
Plus business development costs		1			—			1			1			2
Plus restructuring charges and other exit-related activities		—			1			3			1			8
Plus (recoveries) charges for legacy environmental matters, net⁽¹⁾		—			(2	)		2			1			4
Plus asset impairment charges (recoveries), net		—			—			2			—			4
Adjusted EBITDA⁽³⁾	$	97		$	71		$	19		$	209		$	57

Ferrous sales volume (LT, in thousands)		1,215			977			927			3,245			2,891
Adjusted EBITDA per ferrous ton sold ($/LT)	$	80		$	73		$	20		$	64		$	20

LT = Long Ton, which is equivalent to 2,240 pounds

⁽¹⁾		Charges related to legal settlements in the three and nine months ended May 31, 2021 relate to a claim with a utility provider for past charges, and in the three and nine months ended May 31, 2020 relate to the settlement of a wage and hour class action lawsuit.
⁽²⁾		Legal and environmental (recoveries) charges for legacy environmental matters, net of recoveries. Legacy environmental matters include (recoveries) charges related to the Portland Harbor Superfund site and to other legacy environmental loss contingencies.
⁽³⁾		Income tax allocated to the aggregate adjustments reconciling reported and adjusted diluted earnings (loss) per share from continuing operations attributable to SSI shareholders is determined based on a tax provision calculated with and without the adjustments.
⁽⁴⁾		May not foot due to rounding.

Reconciliation of debt, net of cash
($ in thousands)
	May 31, 2021		February 28, 2021		August 31, 2020
Short-term borrowings	$	2,834	$	2,372	$	2,184
Long-term debt, net of current maturities		150,939		168,441		102,235
Total debt		153,773		170,813		104,419
Less: cash and cash equivalents		17,927		11,326		17,887
Total debt, net of cash	$	135,846	$	159,487	$	86,532

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 the impact of pandemics, epidemics or other public health emergencies, such as the coronavirus disease 2019 (“COVID-19”) pandemic; the impact of equipment upgrades, equipment failures and facility damage on production, including timing of repairs and resumption of operations; the Company’s outlook, growth initiatives or expected results or objectives, including pricing, margins, sales volumes and profitability; liquidity positions; our ability to generate cash from continuing operations; trends, cyclicality and changes in the markets we sell into; strategic direction or goals; targets; changes to manufacturing and production processes; the realization of insurance recoveries; the realization of deferred tax assets; planned capital expenditures; 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; the impact of sanctions and tariffs, quotas and other trade actions and import restrictions; the potential impact of adopting new accounting pronouncements; the impact of labor shortages or increased labor costs; obligations under our retirement plans; benefits, savings or additional costs from business realignment, cost containment and productivity improvement programs; and the adequacy of accruals.

Contacts

Investor Relations:
Michael Bennett

(503) 323-2811

mcbennett@schn.com

Company Info:
www.schnitzersteel.com
ir@schn.com

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