Schnitzer Steel (SCHN) Prelim. Q4 EPS Tops Views

Schnitzer Steel Industries, Inc. (Nasdaq: SCHN) announced preliminary results for its fourth quarter of fiscal 2016 ended August 31, 2016. Schnitzer expects fourth quarter earnings per share from continuing operations attributable to SSI to be in the range of $0.55 - $0.59, including a benefit from an insurance reimbursement of approximately $0.21 per share. Adjusted earnings per share from continuing operations attributable to SSI are expected to be in the range of $0.56 - $0.60, excluding asset impairment charges of $0.08, a net gain associated with restructuring charges and other exit-related activities of approximately $0.04, net benefits associated with contract settlements of approximately $0.02 and income tax benefit associated with these adjustments of $0.01. For the fourth quarter of fiscal 2015, reported earnings per share from continuing operations attributable to SSI was $0.42 and adjusted earnings per share from continuing operations attributable to SSI was $0.31.

*** The Street sees Q4 EPS of $0.31 and revenue of $381 million.

Our Auto and Metals Recycling (AMR) division is expected to generate operating income in the range of $18 - $20 million, including an estimated adverse impact of average inventory accounting of approximately $3 million. This compares to operating income of $16 million in the fourth quarter of fiscal 2015 which included an estimated adverse impact of $5 million from average inventory accounting. Average ferrous selling prices are expected to be approximately 10% lower than last year's fourth quarter and ferrous sales volumes are expected to be down by approximately 2%. The adverse impact of lower ferrous prices and volumes is expected to be offset by increased benefits from cost savings and productivity initiatives.

Our Steel Manufacturing Business (SMB) is expected to generate operating income of approximately $1 million and adjusted operating income of $3 million, which excludes a $2 million asset impairment charge. Compared to the prior year fourth quarter, SMB's expected lower fourth quarter reported and adjusted operating income reflects the adverse impact of finished steel imports on average selling prices and volumes which were down by approximately 12% and 15%, respectively.

Consolidated financial performance is expected to include a benefit in Corporate of approximately $6 million from an insurance reimbursement of legal and other defense costs which were incurred in previous years and were associated with environmental matters. The Company expects to report operating cash flow in a range of $45 - $50 million and to reduce debt as of August 31, 2016 compared to May 31, 2016.

The preliminary, unaudited information provided above is based on the Company’s current estimate of its financial results for the fourth quarter ended August 31, 2016 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 the financial results for its fourth quarter and fiscal year ended August 31, 2016, on Tuesday, October 25, 2016. The Company will webcast a conference call to discuss these results at 11:30 a.m. Eastern time on the same day. The webcast of the call and the accompanying slide presentation may be accessed on Schnitzer’s website under the Investor section Event Calendar at www.schnitzersteel.com/events. The call will be hosted by Tamara L. Lundgren, President and Chief Executive Officer, and Richard D. Peach, Senior Vice President, Chief Financial Officer and Chief of Corporate Operations.

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