Schnitzer Steel Industries, Inc. (NASDAQ: SCHN) today reported results for its second quarter of fiscal 2022 ended February 28, 2022.

Second Quarter Fiscal 2022 Highlights

• Diluted earnings per share from continuing operations of $1.27 compared to $1.54 in the second quarter of fiscal 2021

• Adjusted diluted earnings per share from continuing operations of $1.38 compared to adjusted diluted earnings per share of $1.51 in the second quarter of fiscal 2021

• Net income of $38 million compared to $46 million in the second quarter of fiscal 2021

• Adjusted EBITDA of $75 million compared to $71 million in the second quarter of fiscal 2021

The Company’s performance in the quarter continued to benefit from strong global demand for recycled metals and robust West Coast market conditions for finished steel products. Average selling prices for ferrous and nonferrous recycled metals were at or near multi-year highs in the quarter, while average finished steel prices reached all-time highs. Ferrous and nonferrous sales volumes increased year-over-year by 10% and 8%, respectively.

Tamara Lundgren, Chairman and Chief Executive Officer, stated, “After delivering record first quarter results, our second quarter performance continued the trend of strong financial and operating performance leading to first half results that were the highest in our Company’s 116-year history. We continued to invest in the rollout of our new advanced metal recovery technology at our major recycling operations and returned capital to our shareholders through both our dividend and share repurchases, while delivering positive operating cash flow. Shortly after the end of the quarter, we announced the launch of GRN Steel™, a line of net zero carbon products from our Cascade steel mill which reflects evolving customer demand trends and represents an important step towards achieving our sustainability goals.”

Ms. Lundgren continued, “Global demand for our products and services remains very high, our outlook is strong, and our team is committed to supporting all our stakeholders safely and responsibly as we navigate through these challenging times and advance our strategic priorities.”

Second Quarter Fiscal 2022 Financial Review and Analysis

Net income of $38 million and adjusted EBITDA of $75 million in the second quarter of fiscal 2022 benefited from higher year-over-year sales volumes for recycled ferrous and nonferrous metals, increased average net selling prices and recognition of insurance recoveries. Performance in the quarter also reflected the impact of supply chain disruptions and compressed metal spreads on contracted ferrous sales for February shipments due to a surge in market prices in the second half of the quarter, lower year-over-year PGM prices, inflationary pressure on operating costs and the adverse impact of the Everett, MA shredder downtime. The benefit from average inventory accounting was approximately $1 per ferrous ton in the quarter compared to a benefit of $10 per ferrous ton in the prior year quarter.

Ferrous and nonferrous sales volumes were up year-over-year by 10% and 8%, respectively. Sales volumes included the first full quarter contribution from the Columbus Recycling acquisition. Average ferrous and nonferrous net selling prices were up year-over-year by 15% and 33%, respectively, supported by strong global demand.

Finished steel sales volumes were down year-over-year by 22%, also due to supply chain disruptions, including delays to construction projects related to a concrete workers’ strike in the Pacific Northwest, but up 7% sequentially as the mill completed its ramp-up and inventory rebuild during the quarter and achieved average utilization of 86%. Average net selling prices for finished steel products increased year-over-year by 51%, reaching all-time highs.

Operating cash flow in the quarter was $47 million, as cash flows associated with profitability more than offset the increase in working capital including from the higher price environment and mill inventory rebuild. Capital expenditures were $30 million in the quarter, including investments in advanced metal recovery technologies, maintaining the business and environmental projects. Total debt at the end of the quarter was $262 million, and debt, net of cash, was $244 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’s effective tax rate for the second quarter of fiscal 2022 was an expense of 24%.

During the second quarter, the Company returned capital to shareholders through its 112th consecutive quarterly dividend and the repurchase of 200,000 shares, or 0.7%, of its Class A common stock in open market transactions pursuant to its ongoing authorized share repurchase program.

Declaration of Quarterly Dividend

The Board of Directors declared a cash dividend of $0.1875 per common share, payable May 2, 2022 to shareholders of record on April 18, 2022. Schnitzer has paid a dividend every quarter since going public in November 1993.

Analysts’ Conference Call: Second Quarter of Fiscal 2022

A conference call and slide presentation to discuss results will be held today, April 6, 2022, 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 25 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 over 4.3 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.

Non-GAAP Financial Measures

This press release contains performance based on adjusted diluted earnings 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 legacy environmental matters (net of recoveries), business development costs not related to ongoing operations including pre-acquisition expenses, restructuring charges and other exit-related activities, 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.

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 realization of insurance recoveries; the Company’s outlook, growth initiatives, or expected results or objectives, including pricing, margins, sales volumes, and profitability; completion of acquisitions and integration of acquired businesses; the impacts of supply chain disruptions and inflation; 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 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.

Forward-looking statements by their nature address matters that are, to different degrees, uncertain, and often contain words such as “outlook,” “target,” “aim,” “believes,” “expects,” “anticipates,” “intends,” “assumes,” “estimates,” “evaluates,” “may,” “will,” “should,” “could,” “opinions,” “forecasts,” “projects,” “plans,” “future,” “forward,” “potential,” “probable,” and similar expressions. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking.

We may make other forward-looking statements from time to time, including in reports filed with the Securities and Exchange Commission, press releases, presentations, and on 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 “Item 1A. Risk Factors” of Part I of our most recent Annual Report on Form 10-K, as supplemented by our subsequently filed Quarterly Reports on Form 10-Q. Examples of these risks include: the impact of pandemics, epidemics, or other public health emergencies, such as the COVID-19 pandemic; the impact of equipment upgrades, equipment failures, and facility damage on production; potential environmental cleanup costs related to the Portland Harbor Superfund site or other locations; the cyclicality and impact of general economic conditions; changing conditions in global markets including the impact of sanctions and tariffs, quotas, and other trade actions and import restrictions; economic and geopolitical instability including as a result of military conflict; volatile supply and demand conditions affecting prices and volumes in the markets for raw materials and other inputs we purchase; significant decreases in recycled metal prices; imbalances in supply and demand conditions in the global steel industry; difficulties associated with acquisitions and integration of acquired businesses; supply chain disruptions; reliance on third-party shipping companies, including with respect to freight rates and the availability of transportation; inability to obtain or renew business licenses and permits; the impact of goodwill impairment charges; the impact of long-lived asset and equity investment impairment charges; failure to realize or delays in realizing expected benefits from investments in processing and manufacturing technology improvements; inability to achieve or sustain the benefits from productivity, cost savings, and restructuring initiatives; inability to renew facility leases; customer fulfillment of their contractual obligations; increases in the relative value of the U.S. dollar; the impact of inflation and foreign currency fluctuations; potential limitations on our ability to access capital resources and existing credit facilities; restrictions on our business and financial covenants under the agreement governing our bank credit facilities; the impact of consolidation in the steel industry; product liability claims; the impact of legal proceedings and legal compliance; the adverse impact of climate change; the impact of not realizing deferred tax assets; the impact of tax increases and changes in tax rules; the impact of one or more cybersecurity incidents; environmental compliance costs and potential environmental liabilities; compliance with climate change and greenhouse gas emission laws and regulations; the impact of labor shortages or increased labor costs; reliance on employees subject to collective bargaining agreements; and the impact of the underfunded status of multiemployer plans in which we participate.