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x
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Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
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For the Quarterly Period Ended November 30, 2012
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o
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Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
|
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For the Transition Period from _______ to_______
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Commission File Number 0-22496
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OREGON
|
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93-0341923
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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|
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3200 NW Yeon Ave.
Portland, OR
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97210
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
|
x
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Accelerated filer
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o
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Non-accelerated filer
|
o
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Smaller Reporting company
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o
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PAGE
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ITEM 1.
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FINANCIAL STATEMENTS (UNAUDITED)
|
|
November 30, 2012
|
|
August 31, 2012
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
24,404
|
|
|
$
|
89,863
|
|
Accounts receivable, net of allowance for doubtful accounts of $1,038 and $4,459
|
152,860
|
|
|
137,313
|
|
||
Inventories, net
|
302,626
|
|
|
246,992
|
|
||
Deferred income taxes
|
5,458
|
|
|
6,362
|
|
||
Refundable income taxes
|
6,269
|
|
|
7,671
|
|
||
Prepaid expenses and other current assets
|
23,764
|
|
|
28,618
|
|
||
Total current assets
|
515,381
|
|
|
516,819
|
|
||
Property, plant and equipment, net of accumulated depreciation of $553,099 and $535,728
|
564,110
|
|
|
564,185
|
|
||
Investments in joint venture partnerships
|
16,339
|
|
|
17,126
|
|
||
Goodwill
|
634,451
|
|
|
635,491
|
|
||
Intangibles, net of accumulated amortization of $20,262 and $19,023
|
14,544
|
|
|
15,778
|
|
||
Other assets
|
14,379
|
|
|
14,174
|
|
||
Total assets
|
$
|
1,759,204
|
|
|
$
|
1,763,573
|
|
Liabilities and Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Short-term borrowings
|
$
|
9,169
|
|
|
$
|
683
|
|
Accounts payable
|
97,331
|
|
|
115,007
|
|
||
Accrued payroll and related liabilities
|
19,741
|
|
|
22,130
|
|
||
Environmental liabilities
|
2,261
|
|
|
2,185
|
|
||
Accrued income taxes
|
47
|
|
|
38
|
|
||
Other accrued liabilities
|
37,911
|
|
|
38,799
|
|
||
Total current liabilities
|
166,460
|
|
|
178,842
|
|
||
Deferred income taxes
|
86,068
|
|
|
85,447
|
|
||
Long-term debt, net of current maturities
|
345,797
|
|
|
334,629
|
|
||
Environmental liabilities, net of current portion
|
44,939
|
|
|
44,874
|
|
||
Other long-term liabilities
|
11,585
|
|
|
11,837
|
|
||
Total liabilities
|
654,849
|
|
|
655,629
|
|
||
Commitments and contingencies (Note 6)
|
|
|
|
||||
Redeemable noncontrolling interest
|
23,602
|
|
|
22,248
|
|
||
Schnitzer Steel Industries, Inc. (“SSI”) shareholders’ equity:
|
|
|
|
||||
Preferred stock – 20,000 shares $1.00 par value authorized, none issued
|
—
|
|
|
—
|
|
||
Class A common stock – 75,000 shares $1.00 par value authorized, 25,684 and 25,219 shares issued and outstanding
|
25,684
|
|
|
25,219
|
|
||
Class B common stock – 25,000 shares $1.00 par value authorized, 720 and 1,113 shares issued and outstanding
|
720
|
|
|
1,113
|
|
||
Additional paid-in capital
|
3,171
|
|
|
816
|
|
||
Retained earnings
|
1,049,399
|
|
|
1,056,024
|
|
||
Accumulated other comprehensive loss
|
(3,629
|
)
|
|
(2,589
|
)
|
||
Total SSI shareholders’ equity
|
1,075,345
|
|
|
1,080,583
|
|
||
Noncontrolling interests
|
5,408
|
|
|
5,113
|
|
||
Total equity
|
1,080,753
|
|
|
1,085,696
|
|
||
Total liabilities and equity
|
$
|
1,759,204
|
|
|
$
|
1,763,573
|
|
|
Three Months Ended November 30,
|
||||||
|
2012
|
|
2011
|
||||
Revenues
|
$
|
592,820
|
|
|
$
|
812,176
|
|
Operating expense:
|
|
|
|
||||
Cost of goods sold
|
541,884
|
|
|
742,215
|
|
||
Selling, general and administrative
|
47,995
|
|
|
55,992
|
|
||
Loss (income) from joint ventures
|
135
|
|
|
(1,001
|
)
|
||
Restructuring charges
|
1,593
|
|
|
—
|
|
||
Operating income
|
1,213
|
|
|
14,970
|
|
||
Interest expense
|
(2,017
|
)
|
|
(3,271
|
)
|
||
Other income (expense), net
|
321
|
|
|
(393
|
)
|
||
Income (loss) before income taxes
|
(483
|
)
|
|
11,306
|
|
||
Income tax expense
|
(960
|
)
|
|
(3,561
|
)
|
||
Net income (loss)
|
(1,443
|
)
|
|
7,745
|
|
||
Net income attributable to noncontrolling interests
|
(228
|
)
|
|
(727
|
)
|
||
Net income (loss) attributable to SSI
|
$
|
(1,671
|
)
|
|
$
|
7,018
|
|
|
|
|
|
||||
Net income (loss) per share attributable to SSI - basic
|
$
|
(0.06
|
)
|
|
$
|
0.26
|
|
Net income (loss) per share attributable to SSI - diluted
|
$
|
(0.06
|
)
|
|
$
|
0.25
|
|
Weighted average number of common shares:
|
|
|
|
||||
Basic
|
26,567
|
|
|
27,451
|
|
||
Diluted
|
26,567
|
|
|
27,715
|
|
||
Dividends declared per common share
|
$
|
0.188
|
|
|
$
|
0.017
|
|
|
Three Months Ended November 30,
|
||||||
|
2012
|
|
2011
|
||||
Net income (loss)
|
$
|
(1,443
|
)
|
|
$
|
7,745
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
||||
Foreign currency translation adjustments
(1)
|
(1,258
|
)
|
|
(6,438
|
)
|
||
Cash flow hedges, net
(2)
|
17
|
|
|
—
|
|
||
Pension obligations, net
(3)
|
375
|
|
|
67
|
|
||
Total other comprehensive loss, net of tax
|
(866
|
)
|
|
(6,371
|
)
|
||
Comprehensive income (loss)
|
(2,309
|
)
|
|
1,374
|
|
||
Less amounts attributable to noncontrolling interests:
|
|
|
|
||||
Net income attributable to noncontrolling interests
|
(228
|
)
|
|
(727
|
)
|
||
Foreign currency translation adjustment attributable to redeemable noncontrolling interest
|
(174
|
)
|
|
(377
|
)
|
||
Total amounts attributable to noncontrolling interests
|
(402
|
)
|
|
(1,104
|
)
|
||
Comprehensive income (loss) attributable to SSI
|
$
|
(2,711
|
)
|
|
$
|
270
|
|
(1)
|
Net of tax benefit of
$(91)
and
$(468)
for each respective period.
|
(2)
|
Net of tax expense of
$24
and
$0
for each respective period.
|
(3)
|
Net of tax expense of
$216
and
$39
for each respective period.
|
|
Three Months Ended November 30,
|
||||||
|
2012
|
|
2011
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income (loss)
|
$
|
(1,443
|
)
|
|
$
|
7,745
|
|
Adjustments to reconcile net income (loss) to cash used in operating activities:
|
|
|
|
||||
Depreciation and amortization
|
20,899
|
|
|
20,346
|
|
||
Deferred income taxes
|
2,261
|
|
|
906
|
|
||
Undistributed equity in earnings of joint ventures
|
(40
|
)
|
|
(963
|
)
|
||
Share-based compensation expense
|
4,210
|
|
|
4,613
|
|
||
Excess tax benefit from share-based payment arrangements
|
—
|
|
|
(413
|
)
|
||
(Gain) loss on disposal of assets
|
226
|
|
|
(116
|
)
|
||
Unrealized foreign exchange loss, net
|
46
|
|
|
272
|
|
||
Bad debt recoveries
|
(1,573
|
)
|
|
—
|
|
||
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
||||
Accounts receivable
|
(20,010
|
)
|
|
8,278
|
|
||
Inventories
|
(50,776
|
)
|
|
(74,117
|
)
|
||
Income taxes
|
903
|
|
|
(20,126
|
)
|
||
Prepaid expenses and other current assets
|
1,173
|
|
|
(1,148
|
)
|
||
Intangibles and other long-term assets
|
298
|
|
|
(1,079
|
)
|
||
Accounts payable
|
(10,429
|
)
|
|
(19,193
|
)
|
||
Accrued payroll and related liabilities
|
(1,950
|
)
|
|
(14,745
|
)
|
||
Other accrued liabilities
|
(3,687
|
)
|
|
3,452
|
|
||
Environmental liabilities
|
(74
|
)
|
|
(312
|
)
|
||
Other long-term liabilities
|
(303
|
)
|
|
(81
|
)
|
||
Distributed equity in earnings of joint ventures
|
735
|
|
|
525
|
|
||
Net cash used in operating activities
|
(59,534
|
)
|
|
(86,156
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Capital expenditures
|
(26,675
|
)
|
|
(25,551
|
)
|
||
Joint venture receipts, net
|
222
|
|
|
353
|
|
||
Proceeds from sale of assets
|
532
|
|
|
251
|
|
||
Net cash used in investing activities
|
(25,921
|
)
|
|
(24,947
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from line of credit
|
135,500
|
|
|
173,000
|
|
||
Repayment of line of credit
|
(127,000
|
)
|
|
(159,000
|
)
|
||
Borrowings from long-term debt
|
72,742
|
|
|
294,212
|
|
||
Repayment of long-term debt
|
(61,449
|
)
|
|
(214,396
|
)
|
||
Repurchase of Class A common stock
|
—
|
|
|
(3,117
|
)
|
||
Taxes paid related to net share settlement of share-based payment arrangements
|
(1,104
|
)
|
|
(840
|
)
|
||
Excess tax benefit from share-based payment arrangements
|
—
|
|
|
413
|
|
||
Contributions from noncontrolling interest
|
1,970
|
|
|
454
|
|
||
Distributions to noncontrolling interest
|
(375
|
)
|
|
(1,477
|
)
|
||
Dividends paid
|
—
|
|
|
(468
|
)
|
||
Net cash provided by financing activities
|
20,284
|
|
|
88,781
|
|
||
Effect of exchange rate changes on cash
|
(288
|
)
|
|
(151
|
)
|
||
Net decrease in cash and cash equivalents
|
(65,459
|
)
|
|
(22,473
|
)
|
||
Cash and cash equivalents as of beginning of period
|
89,863
|
|
|
49,462
|
|
||
Cash and cash equivalents as of end of period
|
$
|
24,404
|
|
|
$
|
26,989
|
|
•
|
Level 1
– Unadjusted quoted prices in active markets for identical assets and liabilities.
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
|
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
•
|
Level 2
– Inputs other than quoted prices included within Level 1 that are observable for the determination of the fair value of the asset or liability, either directly or indirectly.
|
•
|
Level 3
– Unobservable inputs that are significant to the determination of the fair value of the asset or liability.
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
|
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
November 30, 2012
|
|
August 31, 2012
|
||||
Processed and unprocessed scrap metal
|
$
|
209,067
|
|
|
$
|
152,930
|
|
Semi-finished steel products (billets)
|
4,950
|
|
|
7,328
|
|
||
Finished goods
|
51,797
|
|
|
49,988
|
|
||
Supplies
|
36,812
|
|
|
36,746
|
|
||
Inventories, net
|
$
|
302,626
|
|
|
$
|
246,992
|
|
•
|
The Company acquired substantially all of the assets of Ralph’s Auto Supply (B.C.) Ltd., a used auto parts business with
four
stores in Richmond and Surrey, British Columbia, which expanded the Auto Parts Business (“APB”)’s presence in Western Canada and is near the Metals Recycling Business’ operations in Surrey, British Columbia.
|
•
|
The Company acquired substantially all of the assets of U-Pick-It, a used auto parts business with
two
stores in the Kansas City metropolitan area in Missouri and Kansas, which expanded APB’s presence in the Midwestern U.S.
|
•
|
The Company acquired all of the equity interests of Freetown Self Serve Used Auto Parts, LLC, Freetown Transfer Facility, LLC, Millis Used Auto Parts, Inc. and Millis Industries, Inc., which together operated a used auto parts business with
two
stores in Massachusetts. This acquisition established a new APB presence in the Northeast near our Metals Recycling Business’ operations.
|
|
Metals Recycling Business
|
|
Auto Parts Business
|
|
Total
|
||||||
Balance as of August 31, 2012
|
$
|
471,954
|
|
|
$
|
163,537
|
|
|
$
|
635,491
|
|
Purchase accounting adjustments
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|||
Foreign currency translation adjustment
|
(904
|
)
|
|
(134
|
)
|
|
(1,038
|
)
|
|||
Balance as of November 30, 2012
|
$
|
471,048
|
|
|
$
|
163,403
|
|
|
$
|
634,451
|
|
Reporting Segment
|
Balance as of August 31, 2012
|
|
Liabilities Established (Released), Net
|
|
Payments and Other
|
|
Balance as of November 30, 2012
|
|
Short-Term
|
|
Long-Term
|
||||||||||||
Metals Recycling Business
|
$
|
30,859
|
|
|
$
|
165
|
|
|
$
|
(124
|
)
|
|
$
|
30,900
|
|
|
$
|
1,707
|
|
|
$
|
29,193
|
|
Auto Parts Business
|
16,200
|
|
|
100
|
|
|
—
|
|
|
16,300
|
|
|
554
|
|
|
15,746
|
|
||||||
Total
|
$
|
47,059
|
|
|
$
|
265
|
|
|
$
|
(124
|
)
|
|
$
|
47,200
|
|
|
$
|
2,261
|
|
|
$
|
44,939
|
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
|
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
|
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
Balance as of August 31, 2012
|
|
Charges
|
|
Payments and Other
|
|
Balance as of November 30, 2012
|
|
Total Charges to Date
|
|
Total Expected Charges
|
||||||||||||
Severance costs
|
|
$
|
2,477
|
|
|
$
|
939
|
|
|
$
|
(2,548
|
)
|
|
$
|
868
|
|
|
$
|
3,680
|
|
|
$
|
4,000
|
|
Contract termination costs
|
|
414
|
|
|
5
|
|
|
(59
|
)
|
|
360
|
|
|
445
|
|
|
4,100
|
|
||||||
Other exit costs
|
|
64
|
|
|
649
|
|
|
(693
|
)
|
|
20
|
|
|
2,480
|
|
|
2,600
|
|
||||||
Total
|
|
$
|
2,955
|
|
|
$
|
1,593
|
|
|
$
|
(3,300
|
)
|
|
$
|
1,248
|
|
|
$
|
6,605
|
|
|
$
|
10,700
|
|
|
As of November 30, 2012
|
|||||||||||
|
|
Current Period Charges
|
|
Total Charges to Date
|
|
Total Expected Charges
|
||||||
Metals Recycling Business
|
|
$
|
550
|
|
|
$
|
2,209
|
|
|
$
|
2,400
|
|
Auto Parts Business
|
|
187
|
|
|
420
|
|
|
600
|
|
|||
Unallocated (Corporate)
|
|
856
|
|
|
3,976
|
|
|
7,700
|
|
|||
Total
|
|
$
|
1,593
|
|
|
$
|
6,605
|
|
|
$
|
10,700
|
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
|
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
2012
|
|
2011
|
||||
Balances - September 1 (Beginning of period)
|
|
$
|
22,248
|
|
|
$
|
19,053
|
|
Net loss attributable to noncontrolling interest
|
|
(442
|
)
|
|
(207
|
)
|
||
Currency translation adjustment
|
|
(174
|
)
|
|
(377
|
)
|
||
Capital contributions from noncontrolling interest holder
|
|
1,970
|
|
|
467
|
|
||
Balances - November 30 (End of period)
|
|
$
|
23,602
|
|
|
$
|
18,936
|
|
|
Fiscal 2013
|
|
Fiscal 2012
|
||||||||||||||||||||
|
SSI Shareholders’
Equity
|
|
Noncontrolling
Interests
|
|
Total
Equity
|
|
SSI Shareholders’
Equity
|
|
Noncontrolling
Interests
|
|
Total
Equity
|
||||||||||||
Balances - September 1 (Beginning of period)
|
$
|
1,080,583
|
|
|
$
|
5,113
|
|
|
$
|
1,085,696
|
|
|
$
|
1,094,712
|
|
|
$
|
6,524
|
|
|
$
|
1,101,236
|
|
Net income (loss)
(1)
|
(1,671
|
)
|
|
670
|
|
|
(1,001
|
)
|
|
7,018
|
|
|
934
|
|
|
7,952
|
|
||||||
Other comprehensive loss, net of tax
(2)
|
(1,040
|
)
|
|
—
|
|
|
(1,040
|
)
|
|
(6,748
|
)
|
|
—
|
|
|
(6,748
|
)
|
||||||
Distributions to noncontrolling interests
|
—
|
|
|
(375
|
)
|
|
(375
|
)
|
|
—
|
|
|
(1,477
|
)
|
|
(1,477
|
)
|
||||||
Share repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,117
|
)
|
|
—
|
|
|
(3,117
|
)
|
||||||
Restricted stock withheld for taxes
|
(1,104
|
)
|
|
—
|
|
|
(1,104
|
)
|
|
(840
|
)
|
|
—
|
|
|
(840
|
)
|
||||||
Share-based compensation
|
4,210
|
|
|
—
|
|
|
4,210
|
|
|
5,210
|
|
|
—
|
|
|
5,210
|
|
||||||
Excess tax (deficiency) benefit from stock options exercised and restricted stock units vested
|
(681
|
)
|
|
—
|
|
|
(681
|
)
|
|
413
|
|
|
—
|
|
|
413
|
|
||||||
Cash dividends ($0.188 and $0.017 per share)
|
(4,952
|
)
|
|
—
|
|
|
(4,952
|
)
|
|
(463
|
)
|
|
—
|
|
|
(463
|
)
|
||||||
Balances - November 30 (End of period)
|
$
|
1,075,345
|
|
|
$
|
5,408
|
|
|
$
|
1,080,753
|
|
|
$
|
1,096,185
|
|
|
$
|
5,981
|
|
|
$
|
1,102,166
|
|
(1)
|
Net income attributable to noncontrolling interests for the
three
months ended
November 30, 2012
and
2011
excludes net losses of
$(442) thousand
and
$(207) thousand
, respectively, allocable to the redeemable noncontrolling interest, which is reported in the mezzanine section of the Unaudited Condensed Consolidated Balance Sheets. See
Note 8
- Redeemable Noncontrolling Interest.
|
(2)
|
Other comprehensive loss, net of tax for the
three
months ended
November 30, 2012
and
2011
excludes
$(174) thousand
and
$(377) thousand
, respectively, relating to foreign currency translation adjustments for the redeemable noncontrolling interest, which is reported in the mezzanine section of the Unaudited Condensed Consolidated Balance Sheets. See
Note 8
- Redeemable Noncontrolling Interest.
|
|
November 30, 2012
|
|
August 31, 2012
|
||||
Foreign currency translation adjustments
|
$
|
2,226
|
|
|
$
|
3,658
|
|
Pension obligations, net
|
(5,731
|
)
|
|
(6,106
|
)
|
||
Cash flow hedges, net
|
(124
|
)
|
|
(141
|
)
|
||
Total accumulated other comprehensive loss
|
$
|
(3,629
|
)
|
|
$
|
(2,589
|
)
|
|
Three Months Ended November 30,
|
||||
|
2012
|
|
2011
|
||
Federal statutory rate
|
35.0
|
%
|
|
35.0
|
%
|
State taxes, net of credits
|
7.1
|
|
|
1.3
|
|
Foreign income taxed at different rates
|
(1.0
|
)
|
|
(1.6
|
)
|
Section 199 deduction
|
4.6
|
|
|
(1.7
|
)
|
Non-deductible officers’ compensation
|
(1.1
|
)
|
|
0.7
|
|
Noncontrolling interests
|
48.5
|
|
|
(2.0
|
)
|
Research and development credits
|
21.7
|
|
|
—
|
|
Valuation allowance on deferred tax assets
|
(312.1
|
)
|
|
—
|
|
Other
|
(1.5
|
)
|
|
(0.2
|
)
|
Effective tax rate
|
(198.8
|
)%
|
|
31.5
|
%
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
|
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
Three Months Ended November 30,
|
||||||
|
2012
|
|
2011
|
||||
Net income (loss)
|
$
|
(1,443
|
)
|
|
$
|
7,745
|
|
Net income attributable to noncontrolling interests
|
(228
|
)
|
|
(727
|
)
|
||
Net income (loss) attributable to SSI
|
(1,671
|
)
|
|
7,018
|
|
||
Computation of shares:
|
|
|
|
||||
Weighted average common shares outstanding, basic
|
26,567
|
|
|
27,451
|
|
||
Incremental common shares attributable to dilutive stock options, performance share awards, DSUs and RSUs
|
—
|
|
|
264
|
|
||
Weighted average common shares outstanding, diluted
|
26,567
|
|
|
27,715
|
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
|
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
Three Months Ended November 30,
|
||||||
|
2012
|
|
2011
|
||||
Revenues:
|
|
|
|
||||
Metals Recycling Business:
|
|
|
|
||||
Revenues
|
$
|
494,461
|
|
|
$
|
728,438
|
|
Less: Intersegment revenues
|
(47,255
|
)
|
|
(58,696
|
)
|
||
MRB external customer revenues
|
447,206
|
|
|
669,742
|
|
||
Auto Parts Business:
|
|
|
|
||||
Revenues
|
69,555
|
|
|
84,054
|
|
||
Less: Intersegment revenues
|
(15,970
|
)
|
|
(21,522
|
)
|
||
APB external customer revenues
|
53,585
|
|
|
62,532
|
|
||
Steel Manufacturing Business:
|
|
|
|
||||
Revenues
|
92,029
|
|
|
79,902
|
|
||
Total revenues
|
$
|
592,820
|
|
|
$
|
812,176
|
|
|
Three Months Ended November 30,
|
||||||
|
2012
|
|
2011
|
||||
Metals Recycling Business
|
$
|
5,654
|
|
|
$
|
13,099
|
|
Auto Parts Business
|
6,364
|
|
|
10,442
|
|
||
Steel Manufacturing Business
|
3,404
|
|
|
1,218
|
|
||
Segment operating income
|
15,422
|
|
|
24,759
|
|
||
Restructuring charges
|
(1,593
|
)
|
|
—
|
|
||
Corporate and eliminations
|
(12,616
|
)
|
|
(9,789
|
)
|
||
Operating income
|
1,213
|
|
|
14,970
|
|
||
Interest expense
|
(2,017
|
)
|
|
(3,271
|
)
|
||
Other income (expense), net
|
321
|
|
|
(393
|
)
|
||
Income (loss) before income taxes
|
$
|
(483
|
)
|
|
$
|
11,306
|
|
|
November 30, 2012
|
|
August 31, 2012
|
||||
Metals Recycling Business
(1)
|
$
|
1,680,808
|
|
|
$
|
1,696,296
|
|
Auto Parts Business
|
337,734
|
|
|
329,327
|
|
||
Steel Manufacturing Business
|
325,741
|
|
|
322,398
|
|
||
Total segment assets
|
2,344,283
|
|
|
2,348,021
|
|
||
Corporate and eliminations
|
(585,079
|
)
|
|
(584,448
|
)
|
||
Total assets
|
$
|
1,759,204
|
|
|
$
|
1,763,573
|
|
(1)
|
MRB total assets include
$16 million
and
$17 million
as of
November 30, 2012
and
August 31, 2012
, respectively, for investments in joint venture partnerships.
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
•
|
Revenues of
$593 million
, compared to
$812 million
in the
first
quarter of fiscal
2012
;
|
•
|
Operating income of
$1 million
, compared to operating income of
$15 million
in the
first
quarter of fiscal
2012
;
|
•
|
Net loss attributable to SSI of
$2 million
, or
$(0.06)
per diluted share, compared to net income of
$7 million
, or
$0.25
per diluted share, in the
first
quarter of fiscal
2012
;
|
•
|
Net cash used in operating activities of
$60 million
in the first
three
months of fiscal
2013
, compared to
$86 million
in the first quarter of fiscal 2012;
|
•
|
Debt, net of cash, of
$331 million
as of
November 30, 2012
, compared to
$245 million
as of
August 31, 2012
(see the reconciliation of Debt, net of cash in Non-GAAP Financial Measures at the end of this Item 2).
|
•
|
MRB revenues and operating income of
$494 million
and
$6 million
, respectively, compared to
$728 million
and
$13 million
in the
first
quarter of fiscal
2012
, respectively;
|
•
|
APB revenues and operating income of
$70 million
and
$6 million
, respectively, compared to
$84 million
and
$10 million
in the
first
quarter of fiscal
2012
, respectively; and
|
•
|
SMB revenues and operating income of
$92 million
and
$3 million
, respectively, compared to
$80 million
and
$1 million
in the
first
quarter of fiscal
2012
, respectively.
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
|
Three Months Ended November 30,
|
|||||||||
($ in thousands)
|
2012
|
|
2011
|
|
% Change
|
|||||
Revenues:
|
|
|
|
|
|
|||||
Metals Recycling Business
|
$
|
494,461
|
|
|
$
|
728,438
|
|
|
(32
|
)%
|
Auto Parts Business
|
69,555
|
|
|
84,054
|
|
|
(17
|
)%
|
||
Steel Manufacturing Business
|
92,029
|
|
|
79,902
|
|
|
15
|
%
|
||
Intercompany revenue eliminations
(1)
|
(63,225
|
)
|
|
(80,218
|
)
|
|
(21
|
)%
|
||
Total revenues
|
592,820
|
|
|
812,176
|
|
|
(27
|
)%
|
||
Cost of goods sold:
|
|
|
|
|
|
|||||
Metals Recycling Business
|
466,587
|
|
|
686,456
|
|
|
(32
|
)%
|
||
Auto Parts Business
|
50,044
|
|
|
59,460
|
|
|
(16
|
)%
|
||
Steel Manufacturing Business
|
86,944
|
|
|
77,005
|
|
|
13
|
%
|
||
Intercompany cost of goods sold eliminations
(1)
|
(61,691
|
)
|
|
(80,706
|
)
|
|
(24
|
)%
|
||
Total cost of goods sold
|
541,884
|
|
|
742,215
|
|
|
(27
|
)%
|
||
Selling, general and administrative expense:
|
|
|
|
|
|
|||||
Metals Recycling Business
|
22,173
|
|
|
29,865
|
|
|
(26
|
)%
|
||
Auto Parts Business
|
13,147
|
|
|
14,152
|
|
|
(7
|
)%
|
||
Steel Manufacturing Business
|
1,681
|
|
|
1,679
|
|
|
—
|
%
|
||
Corporate
(2)
|
10,994
|
|
|
10,296
|
|
|
7
|
%
|
||
Total SG&A expense
|
47,995
|
|
|
55,992
|
|
|
(14
|
)%
|
||
Loss (income) from joint ventures:
|
|
|
|
|
|
|||||
Metals Recycling Business
|
47
|
|
|
(982
|
)
|
|
NM
|
|
||
Change in intercompany profit elimination
(3)
|
88
|
|
|
(19
|
)
|
|
NM
|
|
||
Total joint venture loss (income)
|
135
|
|
|
(1,001
|
)
|
|
NM
|
|
||
Operating income:
|
|
|
|
|
|
|||||
Metals Recycling Business
|
5,654
|
|
|
13,099
|
|
|
(57
|
)%
|
||
Auto Parts Business
|
6,364
|
|
|
10,442
|
|
|
(39
|
)%
|
||
Steel Manufacturing Business
|
3,404
|
|
|
1,218
|
|
|
179
|
%
|
||
Segment operating income
|
15,422
|
|
|
24,759
|
|
|
(38
|
)%
|
||
Restructuring charges
(4)
|
(1,593
|
)
|
|
—
|
|
|
NM
|
|
||
Corporate expense
(2)
|
(11,144
|
)
|
|
(10,296
|
)
|
|
8
|
%
|
||
Change in intercompany profit elimination
(5)
|
(1,472
|
)
|
|
507
|
|
|
NM
|
|
||
Total operating income
|
$
|
1,213
|
|
|
$
|
14,970
|
|
|
(92
|
)%
|
(1)
|
MRB sells ferrous recycled metal to SMB at rates per ton that approximate West Coast U.S. export market prices. In addition, APB sells ferrous and nonferrous material to MRB. These intercompany revenues and cost of goods sold are eliminated in consolidation.
|
(2)
|
Corporate expense consists primarily of unallocated expenses for services that benefit all three reporting segments. As a consequence of this unallocated expense, the operating income of each segment does not reflect the operating income the segment would have as a stand-alone business.
|
(3)
|
The joint ventures sell recycled recycled metal to MRB and then subsequently to SMB at rates per ton that approximate West Coast U.S. export market prices. Consequently, these intercompany revenues produce intercompany operating income (loss), which is not recognized until the finished products are sold to third parties; therefore, intercompany profit is eliminated while the products remain in inventory.
|
(4)
|
Restructuring charges consist of expense for severance, contract termination and other exit costs that management does not include in its measurement of the performance of the operating segments.
|
(5)
|
Intercompany profits are not recognized until the finished products are sold to third parties; therefore, intercompany profit is eliminated while the products remain in inventory.
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
|
|
MRB
|
|
APB
|
|
Corporate
|
|
Total charges in the Period
|
|
Total Expected Charges
|
||||||||||
Severance costs
|
|
$
|
521
|
|
|
$
|
111
|
|
|
$
|
307
|
|
|
$
|
939
|
|
|
$
|
4,000
|
|
Contract termination costs
|
|
5
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
4,100
|
|
|||||
Other exit costs
|
|
24
|
|
|
76
|
|
|
549
|
|
|
649
|
|
|
2,600
|
|
|||||
Total
|
|
$
|
550
|
|
|
$
|
187
|
|
|
$
|
856
|
|
|
$
|
1,593
|
|
|
$
|
10,700
|
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
|
Three Months Ended November 30,
|
|||||||||
($ in thousands, except for prices)
|
2012
|
|
2011
|
|
% Change
|
|||||
Ferrous revenues
|
$
|
370,476
|
|
|
$
|
578,024
|
|
|
(36
|
)%
|
Nonferrous revenues
|
116,601
|
|
|
142,290
|
|
|
(18
|
)%
|
||
Other
|
7,384
|
|
|
8,124
|
|
|
(9
|
)%
|
||
Total segment revenues
|
494,461
|
|
|
728,438
|
|
|
(32
|
)%
|
||
Cost of goods sold
|
466,587
|
|
|
686,456
|
|
|
(32
|
)%
|
||
Selling, general and administrative expense
|
22,173
|
|
|
29,865
|
|
|
(26
|
)%
|
||
Loss (income) from joint ventures
|
47
|
|
|
(982
|
)
|
|
NM
|
|
||
Segment operating income
|
$
|
5,654
|
|
|
$
|
13,099
|
|
|
(57
|
)%
|
Average ferrous recycled metal sales prices ($/LT):
(1)
|
|
|
|
|
|
|||||
Domestic
|
$
|
354
|
|
|
$
|
420
|
|
|
(16
|
)%
|
Foreign
|
$
|
360
|
|
|
$
|
436
|
|
|
(17
|
)%
|
Average
|
$
|
358
|
|
|
$
|
432
|
|
|
(17
|
)%
|
Ferrous sales volume (LT, in thousands):
|
|
|
|
|
|
|||||
Domestic
|
279
|
|
|
319
|
|
|
(13
|
)%
|
||
Foreign
|
675
|
|
|
913
|
|
|
(26
|
)%
|
||
Total ferrous sales volume (LT, in thousands)
|
954
|
|
|
1,232
|
|
|
(23
|
)%
|
||
Average nonferrous sales price ($/pound)
(1)
|
$
|
0.95
|
|
|
$
|
1.00
|
|
|
(5
|
)%
|
Nonferrous sales volumes (pounds, in thousands)
|
118,931
|
|
|
137,243
|
|
|
(13
|
)%
|
||
Outbound freight included in cost of goods sold
|
$
|
32,322
|
|
|
$
|
50,086
|
|
|
(35
|
)%
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
|
Three Months Ended November 30,
|
|||||||||
($ in thousands)
|
2012
|
|
2011
|
|
% Change
|
|||||
Revenues
|
$
|
69,555
|
|
|
$
|
84,054
|
|
|
(17
|
)%
|
Cost of goods sold
|
50,044
|
|
|
59,460
|
|
|
(16
|
)%
|
||
Selling, general and administrative expense
|
13,147
|
|
|
14,152
|
|
|
(7
|
)%
|
||
Segment operating income
|
$
|
6,364
|
|
|
$
|
10,442
|
|
|
(39
|
)%
|
Number of stores at period end
|
51
|
|
|
50
|
|
|
2
|
%
|
||
Cars purchased (in thousands)
|
79
|
|
|
85
|
|
|
(7
|
)%
|
|
Three Months Ended November 30,
|
|||||||||
($ in thousands, except for price)
|
2012
|
|
2011
|
|
% Change
|
|||||
Revenues
|
$
|
92,029
|
|
|
$
|
79,902
|
|
|
15
|
%
|
Cost of goods sold
|
86,944
|
|
|
77,005
|
|
|
13
|
%
|
||
Selling, general and administrative
|
1,681
|
|
|
1,679
|
|
|
—
|
%
|
||
Segment operating income
|
$
|
3,404
|
|
|
$
|
1,218
|
|
|
179
|
%
|
Finished steel products average sales price ($/ton)
(1)
|
$
|
680
|
|
|
$
|
722
|
|
|
(6
|
)%
|
Finished steel products sold (tons, in thousands)
|
130
|
|
|
107
|
|
|
21
|
%
|
||
Rolling mill utilization
|
70
|
%
|
|
60
|
%
|
|
|
(1)
|
Price information is shown after netting the cost of freight incurred to deliver the product to the customer.
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
|
November 30, 2012
|
|
August 31, 2012
|
||||
Short-term borrowings
|
$
|
9,169
|
|
|
$
|
683
|
|
Long-term debt, net of current maturities
|
345,797
|
|
|
334,629
|
|
||
Total debt
|
354,966
|
|
|
335,312
|
|
||
Less: cash and cash equivalents
|
24,404
|
|
|
89,863
|
|
||
Total debt, net of cash
|
$
|
330,562
|
|
|
$
|
245,449
|
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
|
Three Months Ended November 30,
|
||||||
|
2012
|
|
2011
|
||||
Borrowings from long-term debt
|
$
|
72,742
|
|
|
$
|
294,212
|
|
Proceeds from line of credit
|
135,500
|
|
|
173,000
|
|
||
Repayment of long-term debt
|
(61,449
|
)
|
|
(214,396
|
)
|
||
Repayment of line of credit
|
(127,000
|
)
|
|
(159,000
|
)
|
||
Net borrowings of debt
|
$
|
19,793
|
|
|
$
|
93,816
|
|
|
November 30, 2012
|
||
Net loss attributable to SSI:
|
|
||
As reported
|
$
|
(1,671
|
)
|
Restructuring charges, net of tax
|
1,055
|
|
|
Adjusted
|
$
|
(616
|
)
|
|
|
||
Diluted loss per share attributable to SSI:
|
|
||
As reported
|
$
|
(0.06
|
)
|
Restructuring charges, net of tax, per share
|
0.04
|
|
|
Adjusted
|
$
|
(0.02
|
)
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
ITEM 6.
|
EXHIBITS
|
Exhibit Number
|
Exhibit Description
|
*10.1
|
Form of Restricted Stock Unit Award Agreement under the 1993 Stock Incentive Plan used for awards granted in fiscal 2013.
|
|
|
*10.2
|
Form of Long-Term Incentive Award Agreement under the 1993 Stock Incentive Plan used for awards granted in fiscal 2012.
|
|
|
*10.3
|
Amendment No. 1 to Employment Agreement by and between the Registrant and John D. Carter dated November 6, 2012.
|
|
|
31.1
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31.2
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.1
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.2
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
101
|
The following financial information from Schnitzer Steel Industries, Inc.’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations for the three months ended November 30, 2012 and 2011, (ii) Condensed Consolidated Balance Sheets as of November 30, 2012, and August 31, 2012, (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended November 30, 2012 and 2011; (iv) Condensed Consolidated Statements of Cash Flows for the three months ended November 30, 2012 and 2011; and (v) the Notes to Condensed Consolidated Financial Statements.
(1)
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
|
|
SCHNITZER STEEL INDUSTRIES, INC.
|
|
|
|
(Registrant)
|
|
|
|
|
|
Date:
|
January 8, 2013
|
By:
|
/s/ Tamara L. Lundgren
|
|
|
|
Tamara L. Lundgren
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
Date:
|
January 8, 2013
|
By:
|
/s/ Richard D. Peach
|
|
|
|
Richard D. Peach
|
|
|
|
Senior Vice President and Chief Financial Officer
|
|
% of RSUs Vested
|
Prior to first anniversary of the Vesting Reference Date
|
—%
|
First anniversary of the Vesting Reference Date
|
20%
|
Second anniversary of the Vesting Reference Date
|
40%
|
Third anniversary of the Vesting Reference Date
|
60%
|
Fourth anniversary of the Vesting Reference Date
|
80%
|
Fifth anniversary of the Vesting Reference Date
|
100%
|
|
SCHNITZER STEEL INDUSTRIES, INC.
|
||
|
|
||
|
|
||
|
By:
|
|
|
|
|
Authorized Officer
|
Fiscal 2013
|
Fiscal 2014
|
Annual EBITDA
|
EBITDA Improvement
|
EBITDA Improvement
|
Payout Factor
|
[Intentionally Omitted]
|
|
|
Fiscal 2013
|
Fiscal 2014
|
Annual ROE
|
ROE Improvement
|
ROE Improvement
|
Payout Factor
|
[Intentionally Omitted]
|
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Schnitzer Steel Industries, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Tamara L. Lundgren
|
Tamara L. Lundgren
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Schnitzer Steel Industries, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Richard D. Peach
|
Richard D. Peach
Senior Vice President and Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Tamara L. Lundgren
|
Tamara L. Lundgren
President and Chief Executive Officer
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Richard D. Peach
|
Richard D. Peach
Senior Vice President and Chief Financial Officer
|