SEC Form 10-Q filed by Schnitzer Steel Industries Inc.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the Quarterly Period Ended
or
For the Transition Period from __________ to __________
Commission File Number
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The registrant had
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
FORM 10-Q
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS
Statements and information included in this Quarterly Report on Form 10-Q by Schnitzer Steel Industries, Inc. dba Radius Recycling 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 to “we,” “our,” “us,” “the Company,” “Radius Recycling,” and “Radius” refer to Schnitzer Steel Industries, Inc. dba Radius Recycling and its consolidated subsidiaries.
Forward-looking statements in this Quarterly Report on Form 10-Q include statements regarding future events or our expectations, intentions, beliefs, and strategies regarding the future, which may include statements regarding 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, volumes, and profitability; completion of acquisitions and integration of acquired businesses; the progression and impact of investments in processing and manufacturing technology improvements and information technology systems; the impacts of supply chain disruptions, inflation, and rising interest rates; 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 impact of pandemics, epidemics, or other public health emergencies, such as the coronavirus disease 2019 (“COVID-19”) pandemic; 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; the potential impact of adopting new accounting pronouncements; 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. Examples of these risks include: potential environmental cleanup costs related to the Portland Harbor Superfund site or other locations; the impact of goodwill impairment charges; the impact of equipment upgrades, equipment failures, and facility damage on production; failure to realize or delays in realizing expected benefits from capital and other projects, including investments in processing and manufacturing technology improvements and information technology systems; the cyclicality and impact of general economic conditions; the impact of inflation, rising interest rates, and foreign currency fluctuations; changing conditions in global markets including the impact of sanctions and tariffs, quotas, and other trade actions and import restrictions; increases in the relative value of the U.S. dollar; 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; the impact of impairment of assets other than goodwill; the impact of pandemics, epidemics, or other public health emergencies, such as the COVID-19 pandemic; 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; 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 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; the impact of increasing attention to environmental, social, and governance matters; translation risks associated with fluctuation in foreign exchange rates; the impact of hedging transactions; inability to obtain or renew business licenses and permits; environmental compliance costs and potential environmental liabilities; increased environmental regulations and enforcement; 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.
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except per share amounts)
(Currency - U.S. Dollar)
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November 30, 2023 |
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August 31, 2023 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowance for credit losses of $ |
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Inventories |
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Refundable income taxes |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment, net of accumulated depreciation of $ |
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Operating lease right-of-use assets |
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Investments in joint ventures |
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Goodwill |
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Intangibles, net of accumulated amortization of $ |
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Deferred income taxes |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Equity |
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Current liabilities: |
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Short-term borrowings |
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$ |
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$ |
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Accounts payable |
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Accrued payroll and related liabilities |
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Environmental liabilities |
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Operating lease liabilities |
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Accrued income taxes |
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Other accrued liabilities |
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Total current liabilities |
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Deferred income taxes |
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Long-term debt, net of current maturities |
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Environmental liabilities, net of current portion |
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Operating lease liabilities, net of current maturities |
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Other long-term liabilities |
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Total liabilities |
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Radius Recycling (“Radius”) shareholders’ equity: |
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Preferred stock – |
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Class A common stock – |
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Class B common stock – |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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( |
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( |
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Total Radius shareholders’ equity |
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Noncontrolling interests |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.
4
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
(Currency - U.S. Dollar)
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Three Months Ended November 30, |
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2023 |
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2022 |
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Revenues |
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$ |
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$ |
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Operating expense: |
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Cost of goods sold |
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Selling, general and administrative |
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(Income) from joint ventures |
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( |
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( |
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Restructuring charges and other exit-related activities |
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Operating loss |
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( |
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( |
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Interest expense |
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( |
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( |
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Other loss, net |
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( |
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( |
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Loss from continuing operations before income taxes |
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( |
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( |
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Income tax benefit |
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Loss from continuing operations |
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( |
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( |
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Loss from discontinued operations, net of tax |
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( |
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( |
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Net loss |
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( |
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( |
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Net income attributable to noncontrolling interests |
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( |
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( |
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Net loss attributable to Radius shareholders |
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$ |
( |
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$ |
( |
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Net loss per share attributable to Radius shareholders: |
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Basic: |
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Loss per share from continuing operations |
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$ |
( |
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$ |
( |
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Net loss per share |
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$ |
( |
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$ |
( |
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Diluted: |
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Loss per share from continuing operations |
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$ |
( |
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$ |
( |
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Net loss per share |
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$ |
( |
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$ |
( |
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Weighted average number of common shares: |
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Basic |
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Diluted |
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The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.
5
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited, in thousands)
(Currency - U.S. Dollar)
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Three Months Ended November 30, |
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2023 |
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2022 |
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Net loss |
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$ |
( |
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$ |
( |
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Other comprehensive loss, net of tax: |
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Foreign currency translation adjustments |
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( |
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( |
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Cash flow hedges, net |
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( |
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— |
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Pension obligations, net |
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Total other comprehensive loss, net of tax |
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( |
) |
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( |
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Comprehensive loss |
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( |
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( |
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Less comprehensive income attributable to noncontrolling interests |
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( |
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( |
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Comprehensive loss attributable to Radius shareholders |
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$ |
( |
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$ |
( |
) |
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.
6
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited, in thousands, except per share amounts)
(Currency - U.S. Dollar)
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Common Stock |
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Accumulated |
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Class A |
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Class B |
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Additional |
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Other |
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Total Radius |
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Three Months Ended November 30, 2022 |
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Shares |
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Amount |
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Shares |
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Amount |
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Paid-in |
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Retained |
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Comprehensive |
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Shareholders’ |
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Noncontrolling |
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Total |
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Balance as of September 1, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
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Net (loss) income |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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( |
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Other comprehensive loss, net of tax |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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— |
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( |
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Distributions to noncontrolling interests |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Issuance of restricted stock |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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— |
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— |
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Restricted stock withheld for taxes |
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( |
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( |
) |
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— |
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— |
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( |
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— |
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— |
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( |
) |
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— |
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( |
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Share-based compensation cost |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Dividends ($ |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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— |
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( |
) |
Balance as of November 30, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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Common Stock |
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Accumulated |
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Class A |
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Class B |
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Additional |
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Other |
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Total Radius |
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Three Months Ended November 30, 2023 |
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Shares |
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Amount |
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Shares |
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Amount |
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Paid-in |
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Retained |
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Comprehensive |
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Shareholders' |
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Noncontrolling |
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Total |
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Balance as of September 1, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
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Net (loss) income |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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( |
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Other comprehensive loss, net of tax |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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— |
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( |
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Distributions to noncontrolling interests |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Issuance of restricted stock |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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— |
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— |
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Restricted stock withheld for taxes |
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( |
) |
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( |
) |
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— |
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— |
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( |
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— |
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— |
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( |
) |
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— |
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( |
) |
Share-based compensation cost |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Dividends ($ |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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— |
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( |
) |
Balance as of November 30, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.
7
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
(Currency - U.S. Dollar)
|
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Three Months Ended November 30, |
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2023 |
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2022 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
Adjustments to reconcile net loss to cash used in operating activities: |
|
|
|
|
|
|
||
Asset impairment charges |
|
|
|
|
|
|
||
Exit-related asset impairments |
|
|
— |
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
||
Inventory write-downs |
|
|
— |
|
|
|
|
|
Deferred income taxes |
|
|
( |
) |
|
|
( |
) |
Undistributed equity in earnings of joint ventures |
|
|
( |
) |
|
|
( |
) |
Share-based compensation expense |
|
|
|
|
|
|
||
(Gain) loss on disposal of assets, net |
|
|
( |
) |
|
|
|
|
Unrealized foreign exchange loss, net |
|
|
|
|
|
|
||
Credit loss (recovery), net |
|
|
|
|
|
( |
) |
|
Changes in assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
|
||
Inventories |
|
|
|
|
|
( |
) |
|
Income taxes |
|
|
|
|
|
( |
) |
|
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
|
|
Other long-term assets |
|
|
( |
) |
|
|
( |
) |
Operating lease assets and liabilities |
|
|
( |
) |
|
|
|
|
Accounts payable |
|
|
|
|
|
( |
) |
|
Accrued payroll and related liabilities |
|
|
( |
) |
|
|
( |
) |
Other accrued liabilities |
|
|
( |
) |
|
|
( |
) |
Environmental liabilities |
|
|
( |
) |
|
|
( |
) |
Other long-term liabilities |
|
|
|
|
|
|
||
Distributed equity in earnings of joint ventures |
|
|
|
|
|
— |
|
|
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
||
Capital expenditures |
|
|
( |
) |
|
|
( |
) |
Acquisitions, net of acquired cash |
|
|
— |
|
|
|
( |
) |
Proceeds from insurance and sale of assets |
|
|
|
|
|
|
||
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Borrowings from long-term debt |
|
|
|
|
|
|
||
Repayment of long-term debt |
|
|
( |
) |
|
|
( |
) |
Payment of debt issuance costs |
|
|
— |
|
|
|
( |
) |
Taxes paid related to net share settlement of share-based payment awards |
|
|
( |
) |
|
|
( |
) |
Distributions to noncontrolling interests |
|
|
( |
) |
|
|
( |
) |
Dividends paid |
|
|
( |
) |
|
|
( |
) |
Net cash provided by financing activities |
|
|
|
|
|
|
||
Effect of exchange rate changes on cash |
|
|
|
|
|
( |
) |
|
Net decrease in cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
Cash and cash equivalents as of beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents as of end of period |
|
$ |
|
|
$ |
|
||
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.
8
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
(Currency - U.S. Dollar)
|
|
Three Months Ended November 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
SUPPLEMENTAL DISCLOSURES: |
|
|
|
|
|
|
||
Cash paid during the period for: |
|
|
|
|
|
|
||
Interest |
|
$ |
|
|
$ |
|
||
Income taxes paid (refunded), net |
|
$ |
|
|
$ |
( |
) |
|
Schedule of noncash investing and financing transactions: |
|
|
|
|
|
|
||
Purchases of property, plant and equipment included in liabilities |
|
$ |
|
|
$ |
|
||
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.
9
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying Unaudited Condensed Consolidated Financial Statements of Schnitzer Steel Industries, Inc. dba Radius Recycling and its majority-owned and wholly-owned subsidiaries (the “Company”) have been prepared pursuant to generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for Form 10-Q, including Article 10 of Regulation S-X. The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. Certain information and note disclosures normally included in annual financial statements have been condensed or omitted pursuant to the rules and regulations of the SEC. In the opinion of management, all normal, recurring adjustments considered necessary for a fair statement have been included. Management suggests that these Unaudited Condensed Consolidated Financial Statements be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2023. The results for the three months ended November 30, 2023 and 2022 are not necessarily indicative of the results of operations for the entire fiscal year.
Company Name
On July 26, 2023, Schnitzer Steel Industries, Inc. announced its new brand and assumed name, Radius Recycling. The Company will seek shareholder approval to amend the Company’s Articles of Incorporation to change its legal name to Radius Recycling, Inc. at its Annual Meeting of Shareholders to be held on January 30, 2024.
Segment Reporting
The Company acquires and recycles ferrous and nonferrous scrap metal for sale to foreign and domestic metal producers, processors, and brokers, and it procures salvaged vehicles and sells serviceable used auto parts from these vehicles through a network of self-service auto parts stores. Most of these auto parts stores supply the Company’s shredding facilities with auto bodies that are processed into saleable recycled metal products. In addition to the sale of recycled metal products processed at its facilities, the Company provides a variety of recycling and related services. The Company also produces a range of finished steel long products at its electric arc furnace (“EAF”) steel mill using recycled ferrous metal sourced internally from its recycling and joint venture operations and other raw materials.
The accounting standards for reporting information about operating segments define an operating segment as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses for which discrete financial information is available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance. The Company’s internal organizational and reporting structure reflects a functionally based, integrated model and includes a operating and reportable segment.
Cash and Cash Equivalents
Cash and cash equivalents include short-term securities that are not restricted by third parties and have an original maturity date of 90 days or less. Included in accounts payable are book overdrafts representing outstanding payments in excess of funds on deposit of $
Accounts Receivable, net
Accounts receivable represent amounts primarily due from customers on product and other sales. These accounts receivable, which are reduced by an allowance for credit losses, are recorded at the invoiced amount and do not bear interest. The Company extends credit to customers under contracts containing customary and explicit payment terms, and payment is generally required within 30 to 60 days of shipment. Nonferrous export sales typically require a deposit prior to shipment. Historically, almost all of the Company’s ferrous export sales have been made with letters of credit. Ferrous and nonferrous metal sales to domestic customers and finished steel sales are generally made on open account, and a portion of these sales are covered by credit insurance.
The Company evaluates the collectibility of its accounts receivable based on a combination of factors, including whether sales were made pursuant to letters of credit or required deposits prior to shipment, the aging of customer receivable balances, the financial condition of the Company’s customers, historical collection rates, and economic trends. Management uses this evaluation to estimate the amount of customer receivables that may not be collected in the future and records a provision for expected credit losses. Accounts are written off when all efforts to collect have been exhausted.
10
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Also included in accounts receivable are short-term advances to scrap metal suppliers used as a mechanism to acquire unprocessed scrap metal. The advances are generally repaid with scrap metal, as opposed to cash. Repayments of advances with scrap metal are treated as noncash operating activities in the Unaudited Condensed Consolidated Statements of Cash Flows and totaled $
Prepaid Expenses
The Company’s prepaid expenses, reported within prepaid expenses and other current assets in the Unaudited Condensed Consolidated Balance Sheets, totaled $
Other Assets
The Company’s other assets, exclusive of prepaid expenses and assets relating to certain employee benefit plans, consisted primarily of receivables from insurers, major spare parts and equipment, cash held in a client trust account relating to a legal settlement, capitalized implementation costs for cloud computing arrangements, two equity investments, debt issuance costs, and notes and other contractual receivables. Other assets are reported within either prepaid expenses and other current assets or other assets in the Unaudited Condensed Consolidated Balance Sheets based on their expected use either during or beyond the current operating cycle of one year from the reporting date.
Receivables from insurers represent the portion of insured losses expected to be recovered from the Company’s insurers under various insurance policies or from a Qualified Settlement Fund holding settlement amounts deposited by certain insurers of claims against the Company related to the Portland Harbor Superfund site. The receivables are recorded at an amount not to exceed the recorded loss and only if the terms of legally enforceable insurance contracts support that the insurance recovery will not be disputed and is deemed collectible, or if recovery of the loss by the Company from a Qualified Settlement Fund is probable. Receivables from insurers totaled $
The Company invested $
Other assets as of both November 30, 2023 and August 31, 2023 included approximately $
Accounting for Impacts of Involuntary Events
Assets destroyed or damaged as a result of involuntary events are written off or reduced in carrying value to their salvage value. When recovery of all or a portion of the amount of property damage loss or other covered expenses through insurance proceeds is demonstrated
11
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
to be probable, a receivable is recorded and offsets the loss or expense up to the amount of the total loss or expense. No gain is recorded until all contingencies related to the insurance claim have been resolved.
On May 22, 2021, the Company experienced a fire at its steel mill in McMinnville, Oregon. Direct physical loss or damage to property from the incident was limited to the mill’s melt shop, with no bodily injuries and no physical loss or damage to other buildings or equipment. The Company experienced loss of business income during the shutdown of the steel mill and the subsequent ramp-up phase which was substantially completed in fiscal 2022. The Company filed insurance claims for the physical loss and damage experienced at the mill’s melt shop and business income losses resulting from the matter. In the fourth quarter of fiscal 2023, the Company reached a full and final settlement with its insurers for its claims. All insurance proceeds and recovery gains in connection with the Company’s claims had been received and recognized, respectively, as of August 31, 2023.
On December 8, 2021, the Company experienced a fire at its metals recycling facility in Everett, Massachusetts. Direct physical loss or damage to property from the incident was limited to the facility’s shredder building and equipment, with no bodily injuries and no physical loss or damage to property reported at other buildings or equipment. As a result of the fire, shredding operations ceased, while all non-shredding operations at the facility continued, including torching, shearing, separating, and sorting purchased non-shreddable recycled ferrous metals. On January 28, 2022, shredding operations at the facility began ramping up following the replacement and repairs to shredder equipment that had been damaged. In addition, shredding operations temporarily ceased at the facility on June 18, 2022 and, following discussions with the Massachusetts Department of Environmental Protection and the Massachusetts Attorney General’s office, the Company installed a temporary emission capture system and controls that allowed for the resumption of shredding operations on November 11, 2022 and for continued operation during the repair and replacement of the shredder enclosure building. Non-shredding operations at the facility continued during this period. The repair and replacement of most property that experienced physical loss or damage, primarily buildings and improvements, was substantially completed by the end of fiscal 2023. The Company filed insurance claims for the property that experienced physical loss or damage and anticipated business income losses resulting from the matter. As of August 31, 2023, the Company had recognized, in aggregate, $
Investments in Joint Ventures
As of August 31, 2022, the Company had
Business Acquisitions
The Company recognizes the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date. Contingent purchase consideration is recorded at fair value at the date of acquisition. Any excess purchase price over the fair value of the net assets acquired is recorded as goodwill. Within one year from the date of acquisition, the Company may update the value allocated to the assets acquired and liabilities assumed and the resulting goodwill balance as a result of information received regarding the valuation of such assets and liabilities that was not available at the time of purchase. Measuring assets and liabilities at fair value requires the Company to determine the price that would be paid by a third-party market participant based on the highest and best use of the assets or interests acquired. Acquisition costs are expensed as incurred. See Note 3 - Business Acquisitions for further detail.
12
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents, accounts receivable, and derivative financial instruments. The majority of cash and cash equivalents is maintained with major financial institutions. Balances with these and certain other institutions exceeded the Federal Deposit Insurance Corporation insured amount of $
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2023-07 (“ASU 2023-07”), Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, amending reportable segment disclosure requirements to include disclosure of incremental segment information on an annual and interim basis. Among the disclosure enhancements are new disclosures regarding significant segment expenses that are regularly provided to the chief operating decision-maker and included within each reported measure of segment profit or loss, as well as other segment items bridging segment revenue to each reported measure of segment profit or loss. The amendments in ASU 2023-07 are effective for the Company’s fiscal 2025, and interim periods within the Company’s fiscal 2026, and are applied retrospectively. Early adoption is permitted. As the amendments apply to reportable segment disclosures only, the Company does not expect adoption to have a material impact on its consolidated financial statements.
In December 2023, the FASB issued Accounting Standards Update 2023-09 (“ASU 2023-09”), Income Taxes (Topic 740): Improvement to Income Tax Disclosures, amending income tax disclosure requirements for the effective tax rate reconciliation and income taxes paid. The amendments in ASU 2023-09 are effective beginning in the Company’s fiscal 2026 and are applied prospectively. Early adoption and retrospective application of the amendments are permitted. As the amendments apply to income tax disclosures only, the Company does not expect adoption to have a material impact on its consolidated financial statements.
Note 2 - Inventories
Inventories consisted of the following (in thousands):
|
|
November 30, 2023 |
|
|
August 31, 2023 |
|
||
Processed and unprocessed scrap metal |
|
$ |
|
|
$ |
|
||
Semi-finished goods |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Supplies |
|
|
|
|
|
|
||
Inventories |
|
$ |
|
|
$ |
|
||
Note 3 - Business Acquisitions
Fiscal 2023 Business Acquisition
On
13
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Goodwill
The Company evaluates goodwill for impairment annually on July 1 and upon the occurrence of certain triggering events or substantive changes in circumstances that indicate that the fair value of goodwill may be impaired. There were no triggering events identified during the first three months of fiscal 2024 requiring an interim goodwill impairment test, and the Company did not record a goodwill impairment charge in any of the periods presented.
Impairment of goodwill is tested at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment (referred to as a “component”). A component of an operating segment is required to be identified as a reporting unit if the component is a business for which discrete financial information is available and segment management regularly reviews its operating results. The Company most recently performed the quantitative impairment test for goodwill carried by
The determination of fair value of the reporting units used to perform the impairment test requires judgment and involves significant estimates and assumptions about the expected future cash flows and the impact of market conditions on those assumptions. Future events and changing market conditions may impact management's assumptions used to estimate the reporting units’ fair value. Although the Company believes the assumptions used in the July 1, 2023 test of its reporting units’ goodwill for impairment are reasonable, a lack of recovery or further deterioration in market conditions for recycled metals from current levels, a sustained trend of weaker than anticipated financial performance for the reporting units with allocated goodwill, including the pace and extent of operating margin and volume recovery, a lack of recovery or further decline in the Company's share price from current levels for a sustained period, or an increase in the market-based weighted average cost of capital, among other factors, could significantly impact the Company's impairment analysis and may result in future goodwill impairment charges that, if incurred, could have a material adverse effect on its financial condition and results of operations.
The gross change in the carrying amount of goodwill for the three months ended November 30, 2023 was as follows (in thousands):
|
|
Goodwill |
|
|
August 31, 2023 |
|
$ |
|
|
Foreign currency translation adjustment |
|
|
( |
) |
November 30, 2023 |
|
$ |
|
|
Note 5 - Commitments and Contingencies
Contingencies - Environmental
The Company evaluates the adequacy of its environmental liabilities on a quarterly basis. Adjustments to the liabilities are made when additional information becomes available that affects the estimated costs to study or remediate any environmental issues or expenditures are made for which liabilities were established.
Changes in the Company’s environmental liabilities for the three months ended November 30, 2023 were as follows (in thousands):
Balance as of |
|
|
|
|
|
Payments and |
|
|
Balance as of |
|
|
Short-Term |
|
|
Long-Term |
|
||||||
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||
14
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of November 30, 2023 and August 31, 2023, the Company had environmental liabilities of $
Portland Harbor
In December 2000, the Company was notified by the United States Environmental Protection Agency (“EPA”) under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) that it is one of the potentially responsible parties (“PRPs”) that own or operate or formerly owned or operated sites which are part of or adjacent to the Portland Harbor Superfund site (“Portland Harbor”).
The precise nature and extent of cleanup of any specific areas within Portland Harbor, the parties to be involved, the timing of any specific remedial action and the allocation of the costs for any cleanup among responsible parties have not yet been determined. The process of site investigation, remedy selection, identification of additional PRPs, and allocation of costs has been underway for a number of years, but significant uncertainties remain. It is unclear to what extent the Company will be liable for environmental costs or third-party contribution or damage claims with respect to Portland Harbor.
From 2000 to 2017, the EPA oversaw a remedial investigation/feasibility study (“RI/FS”) at Portland Harbor. The Company was not among the parties that performed the RI/FS, but it contributed to the costs through an interim settlement with the performing parties. The performing parties have indicated that they incurred more than $
In January 2017, the EPA issued a Record of Decision (“ROD”) that identified the selected remedy for Portland Harbor. The EPA has estimated the total cost of the selected remedy at $
In the ROD, the EPA acknowledged that much of the data was more than a decade old at that time and would need to be updated with a new round of “baseline” sampling to be conducted prior to the remedial design phase. The remedial design phase is an engineering phase during which additional technical information and data are collected, identified, and incorporated into technical drawings and specifications developed for the subsequent remedial action. Following issuance of the ROD, the EPA proposed that the PRPs, or a subgroup of PRPs, perform the additional investigative work in advance of remedial design.
In December 2017, the Company and
15
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The EPA encouraged PRPs to step forward (individually or in groups) to enter into consent agreements to perform remedial design in various project areas covering Portland Harbor. While certain PRPs executed consent agreements for remedial design work, because of the EPA’s refusal to date to modify the remedy to reflect the most current data on Portland Harbor conditions and because of concerns with the terms of the consent agreement, the Company elected not to enter into a consent agreement. In April 2020, the EPA issued a unilateral administrative order (“UAO”) to the Company and MMGL, LLC (“MMGL”), an unaffiliated company, for the remedial design work in a portion of Portland Harbor designated as the River Mile 3.5 East Project Area. As required by the UAO, the Company notified the EPA of its intent to comply while reserving all of its sufficient cause defenses. Failure to comply with a UAO, without sufficient cause, could subject the Company to significant penalties or treble damages. Pursuant to the optimized remedial design timeline set forth in the UAO, the EPA’s expected schedule for completion of the remedial design work was
Except for certain early action projects in which the Company is not involved, remediation activities at Portland Harbor are not expected to commence for a number of years. Moreover, those activities are expected to be sequenced, and the order and timing of such sequencing has not been determined. In addition, as noted above, the ROD does not determine the allocation of costs among PRPs.
The Company has joined with approximately
In addition to the remedial action process overseen by the EPA, the Portland Harbor Natural Resource Trustee Council (“Trustee Council”) is assessing natural resource damages at Portland Harbor. In 2008, the Trustee Council invited the Company and other PRPs to participate in funding and implementing the Natural Resource Injury Assessment for Portland Harbor. The Company and other participating PRPs ultimately agreed to fund the first two phases of the three-phase assessment, which included the development of the Natural Resource Damage Assessment Plan (“AP”) and implementation of the AP to develop information sufficient to facilitate early settlements between the Trustee Council and Phase 2 participants and the identification of restoration projects to be funded by the settlements. In late May 2018, the Trustee Council published notice of its intent to proceed with Phase 3, which will involve the full implementation of the AP and the final injury and damage determination. The Company is proceeding with the process established by the Trustee Council regarding early settlements under Phase 2. The Company has established an environmental reserve of approximately $
On January 30, 2017, one of the Trustees, the Confederated Tribes and Bands of the Yakama Nation, which withdrew from the council in 2009, filed a suit against approximately
16
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company’s environmental liabilities as of each of November 30, 2023 and August 31, 2023 included $
Because the final remedial actions have not yet been designed and there has not been a determination of the allocation among the PRPs of costs of the investigations or remedial action costs, the Company believes it is not possible to reasonably estimate the amount or range of costs which it is likely to or which it is reasonably possible that it will incur in connection with Portland Harbor, although such costs could be material to the Company’s financial position, results of operations, cash flows, and liquidity. Among the facts being evaluated are detailed information on the history of ownership of and the nature of the uses of and activities and operations performed on each property within Portland Harbor, which are factors that will play a substantial role in determining the allocation of investigation and remedy costs among the PRPs.
The Company has insurance policies that it believes will provide reimbursement for costs it incurs for defense, remediation, and mitigation for or settlement of natural resource damages claims in connection with Portland Harbor although there are no assurances that those policies will cover all the costs which the Company may incur. Most of these policies jointly insure the Company and MMGL, as the successor to a former subsidiary of the Company. The Company and MMGL have negotiated the settlement with certain insurers of claims against them related to Portland Harbor, continue to seek settlements with other insurers, and formed two QSFs which became operative in fiscal 2020 and the second quarter of fiscal 2023, respectively, to hold such settlement amounts until funds are needed to pay or reimburse costs incurred by the Company and MMGL in connection with Portland Harbor. These insurance policies and the funds in the QSFs may not cover all of the costs which the Company may incur. Each QSF is an unconsolidated variable interest entity (“VIE”) with no primary beneficiary. Two managers unrelated to each other, one appointed by the Company and one appointed by MMGL, share equally the power to direct the activities of each VIE that most significantly impact its economic performance. The Company’s appointee to co-manage each VIE is an executive officer of the Company. Neither MMGL nor its appointee to co-manage each VIE is a related party of the Company for the purpose of the primary beneficiary assessment or otherwise.
The Oregon Department of Environmental Quality is separately providing oversight of investigations and source control activities by the Company at various sites adjacent to Portland Harbor that are focused on controlling any current “uplands” releases of contaminants into the Willamette River. The Company has accrued liabilities for source control and related work at two sites, reflecting estimated costs of primarily investigation and design, which costs have not been material in the aggregate to date. No liabilities have been established in connection with investigations for any other sites because the extent of contamination, required source control work, and the Company’s responsibility for the contamination and source control work, in each case if any, have not yet been determined. The Company believes that, pursuant to its insurance policies and agreements with other third parties, it will be reimbursed for the costs it incurs for required source control evaluation and remediation work; however, the Company’s insurance policies and agreements with other third parties may not cover all the costs which the Company incurs. As of each of November 30, 2023 and August 31, 2023, the Company had an insurance receivable in the same amount as the environmental reserve for such source control work.
Other Legacy Environmental Loss Contingencies
The Company’s environmental loss contingencies as of November 30, 2023 and August 31, 2023, other than Portland Harbor, include actual or possible investigation and remediation costs from historical contamination at sites currently or formerly owned or formerly operated by the Company or at other sites where the Company may have responsibility for such costs due to past disposal or other activities (“legacy environmental loss contingencies”). These legacy environmental loss contingencies relate to the potential remediation of waterways and soil and groundwater contamination and may also involve natural resource damages, governmental fines and penalties, and claims by third parties for personal injury and property damage. The Company has been notified that it is or may be a potentially responsible party at certain of these sites, and investigation and remediation activities are ongoing or may be required in the future. The Company recognizes a liability for such matters when the loss is probable and can be reasonably estimated. When investigation, allocation, and remediation activities are ongoing or where the Company has not yet been identified as having responsibility or the contamination has not yet been identified, it is reasonably possible that the Company may need to recognize additional liabilities in connection with such sites but the Company cannot currently reasonably estimate the possible loss or range of loss absent additional information or developments. Such additional liabilities, individually or in the aggregate, may have a material adverse effect on the Company’s results of operations, financial condition, or cash flows.
17
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In fiscal 2018, the Company accrued $
In addition, the Company’s loss contingencies as of November 30, 2023 and August 31, 2023 included $
In addition, the Company’s loss contingencies as of each of November 30, 2023 and August 31, 2023 included $
Summary - Environmental Contingencies
With respect to environmental contingencies other than the Portland Harbor Superfund site and the Other Legacy Environmental Loss Contingencies, which are discussed separately above, management currently believes that adequate provision has been made for the potential impact of its environmental contingencies. Historically, the amounts the Company has ultimately paid for such remediation activities have not been material in any given period, but there can be no assurance that such amounts paid will not be material in the future.
Contingencies – Other
In addition to legal proceedings relating to the contingencies described above, the Company is a party to various legal proceedings arising in the normal course of business. The Company recognizes a liability for such matters when the loss is probable and can be reasonably estimated. The Company does not anticipate that the liabilities arising from such legal proceedings in the normal course of business, after taking into consideration expected insurance recoveries, will have a material adverse effect on its results of operations, financial condition, or cash flows.
18
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss, net of tax, comprise the following (in thousands):
|
|
Three Months Ended November 30, 2023 |
|
|
Three Months Ended November 30, 2022 |
|
||||||||||||||||||||||
|
|
Foreign Currency |
|
|
Cash Flow Hedges, net |
|
|
Pension Obligations, |
|
|
Total |
|
|
Foreign Currency |
|
|
Pension Obligations, |
|
|
Total |
|
|||||||
Balances - September 1 (Beginning of period) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive (loss) income before reclassifications |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
||
Income tax benefit (expense) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||||
Other comprehensive (loss) income before reclassifications, net of tax |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
||
Amounts reclassified from accumulated other comprehensive loss |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||||
Income tax benefit (expense) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||||
Amounts reclassified from accumulated other comprehensive loss, net of tax |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||||
Net periodic other comprehensive (loss) income |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Balances - November 30 (End of period) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Reclassifications from accumulated other comprehensive loss to earnings, both individually and in the aggregate, were not material to the impacted captions in the Unaudited Condensed Consolidated Statements of Operations in all periods presented.
Note 7 - Revenue
Disaggregation of Revenues
The table below illustrates the Company’s revenues disaggregated by major product and sales destination (in thousands):
|
|
Three Months Ended November 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Major product information: |
|
|
|
|
|
|
||
Ferrous revenues |
|
$ |
|
|
$ |
|
||
Nonferrous revenues |
|
|
|
|
|
|
||
Steel revenues(1) |
|
|
|
|
|
|
||
Retail and other revenues |
|
|
|
|
|
|
||
Total revenues |
|
$ |
|
|
$ |
|
||
Revenues based on sales destination: |
|
|
|
|
|
|
||
Foreign |
|
$ |
|
|
$ |
|
||
Domestic |
|
|
|
|
|
|
||
Total revenues |
|
$ |
|
|
$ |
|
||
Receivables from Contracts with Customers
The revenue accounting standard defines a receivable as an entity’s right to consideration that is unconditional, meaning that only the passage of time is required before payment is due. As of November 30, 2023 and August 31, 2023, receivables from contracts with customers, net of an allowance for credit losses, totaled $
19
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Contract Liabilities
Contract consideration received from a customer prior to revenue recognition is recorded as a contract liability and is recognized as revenue when the Company satisfies the related performance obligation under the terms of the contract. The Company’s contract liabilities, which consist almost entirely of customer deposits for recycled metal and finished steel sales contracts, are reported within accounts payable in the Unaudited Condensed Consolidated Balance Sheets and totaled $
Note 8 - Share-Based Compensation
In the first quarter of fiscal 2024, as part of the annual awards under the Company’s Long-Term Incentive Plan, the Compensation Committee of the Company’s Board of Directors granted
The RSUs have a
The performance share awards granted in the first quarter of 2024 comprise two separate and distinct awards with different vesting conditions. Awards vest if the threshold level under the specified metric is met at the end of the approximately
During the first quarter of fiscal 2024, the Company granted
|
|
Percentage |
|
|
Expected share price volatility (Radius) |
|
|
% |
|
Expected share price volatility (Peer group) |
|
|
% |
|
Expected correlation to peer group companies |
|
|
% |
|
Risk-free rate of return |
|
|
% |
|
The estimated aggregate fair value of the TSR-based performance share awards at the date of grant was $
During the first quarter of fiscal 2024, the Company granted
The Company accrues compensation cost for the performance share awards related to recycled metal volume growth based on the probable outcome of achieving specified performance conditions, net of estimated forfeitures, over the requisite service period (or to the date a qualifying employment termination event entitles the recipient to a prorated award, if before the end of the service period).
20
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company reassesses whether achievement of the performance conditions is probable at each reporting date. If it is probable that the actual performance results will exceed the stated target performance conditions, the Company accrues additional compensation cost for the additional performance shares to be awarded. If, upon reassessment, it is no longer probable that the actual performance results will exceed the stated target performance conditions, or it is no longer probable that the target performance conditions will be achieved, the Company reverses any recognized compensation cost for shares no longer probable of being issued. If the performance conditions are not achieved at the end of the performance period, all related compensation cost previously recognized is reversed.
Performance share awards will be paid in Class A common stock as soon as practicable after the end of the requisite service period and vesting date of October 31, 2026.
Note 9 - Derivative Financial Instruments
Interest Rate Swaps
The Company is exposed to interest rate risk on its debt and may enter interest rate swap contracts to effectively manage the impact of interest rate changes on its outstanding debt, which has predominantly floating interest rates. The Company does not enter interest rate swap transactions for trading or speculative purposes.
In the fourth quarter of fiscal 2023, the Company entered three pay-fixed interest rate swap transactions, each with a different major financial institution counterparty and designated as a cash flow hedge, to hedge the variability in interest cash flows associated with the Company’s variable-rate loans under its bank revolving credit facilities. The interest rate swaps involve the receipt of variable-rate amounts from the counterparty in exchange for the Company making fixed-rate payments over the life of the agreement without exchange of the underlying notional amount. These contracts mature in August 2026. As of both November 30, 2023 and August 31, 2023, the total notional amount of these interest rate swaps was $
The fair value of derivative instruments in the Unaudited Condensed Consolidated Balance Sheet as of November 30, 2023 and August 31, 2023 is as follows (in thousands):
|
Asset (Liability) Derivatives |
|
|||||||
|
Balance Sheet Location |
|
November 30, 2023 |
|
|
August 31, 2023 |
|
||
Interest rate swap contracts |
Prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
Interest rate swap contracts |
Other long-term liabilities |
|
|
( |
) |
|
|
( |
) |
See Note 6 - Accumulated Other Comprehensive Loss for tabular presentation of the effects of interest rate swap derivative cash flow hedges on other comprehensive income. All related cash flow hedge amounts reclassified from accumulated other comprehensive income (“AOCI”) were recorded in interest expense on the Unaudited Condensed Consolidated Statement of Operations for the three months ended November 30, 2023, which reclassified amounts totaled less than $
Note 10 - Income Taxes
Effective Tax Rate
The Company’s effective tax rate from continuing operations for the first quarter of fiscal 2024 was a benefit on pre-tax loss of
21
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Valuation Allowances
The Company assesses the realizability of its deferred tax assets on a quarterly basis through an analysis of potential sources of future taxable income, including prior year taxable income available to absorb a carryback of tax losses, reversals of existing taxable temporary differences, tax planning strategies, and forecasts of taxable income. The Company considers all negative and positive evidence, including the weight of the evidence, to determine if valuation allowances against deferred tax assets are required. The Company continues to maintain valuation allowances against certain state and Canadian deferred tax assets. Canadian deferred tax assets against which the Company continues to maintain a valuation allowance relate to indefinite-lived assets.
The Company files federal and state income tax returns in the U.S. and foreign tax returns in Puerto Rico and Canada. For U.S. federal income tax returns, fiscal years 2014 to 2023 remain subject to examination under the statute of limitations.
Note 11 - Net (Loss) Income Per Share
The following table sets forth the information used to compute basic and diluted net (loss) income per share attributable to Radius shareholders (in thousands):
|
|
Three Months Ended November 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Loss from continuing operations |
|
$ |
( |
) |
|
$ |
( |
) |
Net income attributable to noncontrolling interests |
|
|
( |
) |
|
|
( |
) |
Loss from continuing operations attributable to Radius shareholders |
|
$ |
( |
) |
|
$ |
( |
) |
Loss from discontinued operations, net of tax |
|
|
( |
) |
|
|
( |
) |
Net loss attributable to Radius shareholders |
|
$ |
( |
) |
|
$ |
( |
) |
Computation of shares: |
|
|
|
|
|
|
||
Weighted average common shares outstanding, basic |
|
|
|
|
|
|
||
Incremental common shares attributable to dilutive performance share awards, restricted stock units and deferred stock units |
|
|
— |
|
|
|
— |
|
Weighted average common shares outstanding, diluted |
|
|
|
|
|
|
||
Common stock equivalent shares of
Note 12 - Related Party Transactions
The Company purchases recycled metal from one of its joint venture operations at prices that approximate fair market value. These purchases totaled $
22
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section includes a discussion of our operations for the three months ended November 30, 2023 and 2022. The following discussion and analysis provide information which management believes is relevant to an assessment and understanding of our financial condition and results of operations. The discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended August 31, 2023, and the Unaudited Condensed Consolidated Financial Statements and the related Notes thereto included in Part I, Item 1 of this report.
General
Founded in 1906, Radius Recycling is one of North America’s largest recyclers of ferrous and nonferrous metal, including end-of-life vehicles, and a manufacturer of finished steel products. As a vertically integrated organization, we offer a range of products and services to meet global demand through our network that includes 50 retail self-service auto parts stores, 54 metals recycling facilities, and an electric arc furnace (“EAF”) steel mill. Our internal organizational and reporting structure includes a single operating and reportable segment.
We sell recycled ferrous and nonferrous metal in both foreign and domestic markets. We also sell a range of finished steel long products produced at our steel mill. We acquire, process, and recycle end-of-life (salvaged) vehicles, rail cars, home appliances, industrial machinery, manufacturing scrap, and construction and demolition scrap through our facilities. Our retail self-service auto parts stores located across the United States (“U.S.”) and Western Canada, which operate under the commercial brand-name Pick-n-Pull, procure the significant majority of our salvaged vehicles and sell serviceable used auto parts from these vehicles. Upon acquiring a salvaged vehicle, we remove catalytic converters, aluminum wheels, and batteries for separate processing and sale prior to placing the vehicle in our retail lot. After retail customers have removed desired parts from a vehicle, we may remove remaining major component parts containing ferrous and nonferrous metals, which are primarily sold to wholesalers. The remaining auto bodies are crushed and shipped to our metals recycling facilities to be shredded or sold to third parties when geographically more economical. At our metals recycling facilities, we process mixed and large pieces of scrap metal into smaller pieces by crushing, torching, shearing, shredding, separating, and sorting, resulting in recycled ferrous, nonferrous, and mixed metal pieces of a size, density, and metal content required by customers to meet their production needs. Each of our shredding, nonferrous processing, and separation systems is designed to optimize the recovery of valuable recycled metal. We also purchase nonferrous metal directly from industrial vendors and other suppliers and aggregate and prepare this metal for shipment to customers by ship, rail, or truck. In addition to the sale of recycled metal processed at our facilities, we also provide a variety of recycling and related services including brokering the sale of ferrous and nonferrous scrap metal generated by industrial entities and demolition projects to customers in the domestic market, among other services. Our steel mill produces semi-finished goods (billets) and finished goods, consisting of rebar, coiled rebar, wire rod, merchant bar, and other specialty products, using recycled ferrous metal sourced internally from our recycling and joint venture operations and other raw materials.
We operate seven deepwater port locations, six of which are equipped with large-scale shredders. Our deepwater port facilities on both the East and West Coasts of the U.S. (in Everett, Massachusetts; Providence, Rhode Island; Oakland, California; Tacoma, Washington; and Portland, Oregon) and access to public deepwater port facilities (in Kapolei, Hawaii and Salinas, Puerto Rico) allow us to ship bulk cargoes of processed recycled ferrous metal to steel manufacturers located in Europe, Africa, the Middle East, Asia, North America, Central America, and South America. Our exports of nonferrous recycled metal are shipped in containers through various public docks to specialty steelmakers, foundries, aluminum sheet and ingot manufacturers, copper refineries and smelters, brass and bronze ingot manufacturers, wire and cable producers, wholesalers, and other recycled metal processors globally. We also transport both ferrous and nonferrous metals by truck, rail, and barge in order to transfer scrap metal between our facilities for further processing, to load shipments at our export facilities, and to meet regional domestic demand.
23
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
Our results of operations depend in large part on the demand and prices for recycled metal in foreign and domestic markets and on the supply of raw materials, including end-of-life vehicles, available to be processed at our facilities. Our results of operations also depend substantially on our operating leverage from processing and selling higher volumes of recycled metal as well as our ability to efficiently extract ferrous and nonferrous metals from the shredding process. We respond to changes in selling prices for processed metal by seeking to adjust purchase prices for unprocessed scrap metal in order to manage the impact on our operating results. The spread between selling prices for processed metal and the cost of purchased scrap metal (metal spread) is subject to a number of factors, including differences in the market conditions between the domestic regions where scrap metal is acquired and the areas in the world to which the processed metals are sold, market volatility from the time the selling price is agreed upon with the customer until the time the scrap metal is purchased, changes in the availability of scrap metal including the volume generated by source and grade, and changes in transportation costs. We believe we generally benefit from sustained periods of stable or rising recycled metal selling prices, which allow us to better maintain or increase both operating results and unprocessed scrap metal flow into our facilities. When recycled metal selling prices decline, either sharply or for a sustained period, our operating margins typically compress. With respect to finished steel products produced at our steel mill, our results of operations are impacted by demand and prices for these products, which are sold to customers located primarily in the Western U.S. and Western Canada.
Our quarterly operating results fluctuate based on a variety of factors including, but not limited to, changes in market conditions for recycled ferrous and nonferrous metal and finished steel products, the supply of scrap metal in our domestic markets, varying demand for used auto parts from our self-service retail stores, the efficiency of our supply chain, and variations in production and other operating costs. Certain of these factors are influenced, to a degree, by the impact of seasonal changes including severe weather conditions, which can impact the timing of shipments and inhibit construction activity utilizing our products, scrap metal collection and production levels at our facilities, and retail admissions and parts sales at our auto parts stores. Further, sanctions, trade actions, and licensing, product quality, and inspection requirements can impact the level of profitability on sales of our products and, in certain cases, impede or restrict our ability to sell to certain export markets or require us to direct our sales to alternative market destinations, which can cause our quarterly operating results to fluctuate.
Steel Mill Fire
On May 22, 2021, we experienced a fire at our steel mill in McMinnville, Oregon. Direct physical loss or damage to property from the incident was limited to the mill’s melt shop, with no bodily injuries and no physical loss or damage to other buildings or equipment. We experienced loss of business income during the shutdown of the steel mill and the subsequent ramp-up phase which was substantially completed in fiscal 2022. We have insurance that is fully applicable to the losses and filed insurance claims, which are subject to deductibles and various conditions, exclusions, and limits, for the property that experienced physical loss or damage and business income losses resulting from the matter. In the fourth quarter of fiscal 2023, we reached a full and final settlement with our insurers for our claims. All insurance proceeds and recovery gains in connection with our claims had been received and recognized, respectively, as of August 31, 2023.
Everett Facility Shredder Fire
On December 8, 2021, we experienced a fire at our metals recycling facility in Everett, Massachusetts. Direct physical loss or damage to property from the incident was limited to the facility’s shredder building and equipment, with no bodily injuries and no physical loss or damage to property reported at other buildings or equipment. As a result of the fire, shredding operations ceased, while all non-shredding operations at the facility continued, including torching, shearing, separating, and sorting purchased non-shreddable recycled ferrous metals. On January 28, 2022, shredding operations at the facility began ramping up following the replacement and repairs to shredder equipment that had been damaged. In addition, shredding operations temporarily ceased at the facility on June 18, 2022 and, following discussions with the Massachusetts Department of Environmental Protection and the Massachusetts Attorney General’s office, we installed a temporary emission capture system and controls that allowed for us to resume shredding operations on November 11, 2022 and for continued operation during the repair and replacement of the shredder enclosure building. Non-shredding operations at the facility continued during this period. The repair and replacement of most property that experienced physical loss or damage, primarily buildings and improvements, was substantially completed by the end of fiscal 2023. We have insurance that we believe is fully applicable to the losses, including but not limited to the costs of installing the temporary capture and controls system and any associated loss of business income, and have filed insurance claims, which are subject to deductibles and various conditions, exclusions, and limits, for the property damage or loss and business income losses resulting from the matter. The property damage deductible under the policies insuring our assets in this matter is $0.5 million, while the deductible for lost business income is 10 times the Average Daily Gross Earnings which would have been earned had no interruption occurred, calculated subject to judgments and uncertainties. The insurance claims resolution process may extend significantly beyond completion of repair and replacement of the physical plant property that experienced physical loss or damage and the restart of production activities. As of August 31, 2023, we had recognized, in aggregate, $34 million in insurance recovery gains and had received, in aggregate, advance payments from insurers totaling approximately $33 million towards our claims, and not reflecting any final or full settlement of claims with the insurers. During the first quarter of fiscal
24
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
2024, we recognized an additional $4 million insurance receivable and related insurance recovery gain, reported within cost of goods sold on the Unaudited Condensed Consolidated Statements of Operations. As of November 30, 2023 and August 31, 2023 we had receivables from our insurers of $5 million and $1 million, respectively, reported within prepaid expenses and other current assets on the Unaudited Condensed Consolidated Balance Sheets. These amounts do not reflect potential additional recoveries of costs for the repair and replacement of property that experienced physical loss or damage or of business income losses resulting from this matter that may be recognized in the future when settlements of the claims are resolved.
Coronavirus Disease 2019 (“COVID-19”)
Following the onset of COVID-19 and its negative effects on our business, most prominently reflected in our fiscal 2020 results, global economic conditions improved beginning in fiscal 2021 and continued to improve through most of fiscal 2022. However, there are ongoing global impacts resulting directly or indirectly from the pandemic, including labor shortages, logistical challenges, and increases in costs for certain goods and services including due to the impact of inflation, which have negatively impacted our sales volumes, operating costs, and financial results to varying degrees.
Use of Non-GAAP Financial Measures
In this management’s discussion and analysis, we use supplemental measures of our performance, liquidity, and capital structure which are derived from our consolidated financial information, but which are not presented in our consolidated financial statements prepared in accordance with GAAP. We believe that providing these non-GAAP financial measures adds a meaningful presentation of our operating and financial performance, liquidity, and capital structure. For example, we use adjusted EBITDA as one of the measures to compare and evaluate financial performance. Adjusted EBITDA is the sum of our net income before results from discontinued operations, interest expense, income taxes, depreciation and amortization, charges for legacy environmental matters (net of recoveries), asset impairment charges, business development costs not related to ongoing operations including pre-acquisition expenses, amortization of capitalized cloud computing implementation costs, restructuring charges and other exit-related activities, and other items which are not related to underlying business operational performance. See the reconciliations of supplemental financial measures, including adjusted EBITDA, in Non-GAAP Financial Measures at the end of this Item 2.
Our non-GAAP financial measures should be considered in addition to, but not as a substitute for, the most directly comparable GAAP measures. Although we find these non-GAAP financial measures useful in evaluating the performance of our business, our reliance on these measures is limited because they often materially differ from our consolidated financial statements presented in accordance with GAAP. Therefore, we typically use these adjusted amounts in conjunction with our GAAP results to address these limitations. Our non-GAAP financial measures may not be comparable to similarly titled measures of other companies. Other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.
25
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
Financial Highlights of Results of Operations for the First Quarter of Fiscal 2024
Our total revenues were $673 million in the first quarter of fiscal 2024, an increase of 12% from $599 million of total revenues in the prior year quarter primarily due to higher sales volumes, while gross margin decreased year-over-year primarily reflecting the impact of lower metal spreads for our recycled metal and finished steel products. The persistently tight supply conditions for scrap metal, including end of life vehicles, in our domestic markets during the first quarter of fiscal 2024 led to purchase prices for unprocessed scrap metal increasing at a faster rate than selling prices for recycled metal which, combined with significantly lower year-over-year platinum group metals (PGM) prices and higher production and other operating costs, led to margin compression. In the first quarter of fiscal 2024, ferrous and nonferrous sales volumes increased by 35% and 12%, respectively, compared to the prior year quarter, primarily reflecting the adverse impact on sales volumes in the prior year quarter of disruptions related to an extended shredder outage at the Everett metals recycling facility and a regulatory issue limiting operations at our shredder facility in California, both of which were resolved by mid-November 2022. The increases in ferrous and nonferrous sales volumes also included additional volumes arising from our acquisition of the ScrapSource business on November 18, 2022. Finished steel average selling prices were 18% lower in the first quarter of fiscal 2024 compared to the prior year quarter, contributing to significantly lower metal spreads, the effect of which was partially offset by a 10% increase in finished steel sales volumes. Contributions from productivity and cost reduction initiatives implemented throughout fiscal 2023, as well as new initiatives identified and commenced in the first quarter of fiscal 2024, helped to partially offset the effects of inflationary pressure on operating costs.
Selling, general, and administrative (“SG&A”) expense in the first quarter of fiscal 2024 decreased by 2% compared to the prior year quarter primarily due to lower employee-related expenses, including lower incentive compensation accruals, and legacy environmental charges, partially offset by higher technology-related and professional services expenses. Productivity and cost reduction initiatives substantially offset the impact of inflation and growth-related initiatives on our SG&A expense.
The following items further highlight selected liquidity and capital structure metrics:
See the reconciliations of adjusted diluted earnings per share from continuing operations attributable to Radius shareholders, adjusted EBITDA, and debt, net of cash in Non-GAAP Financial Measures at the end of this Item 2.
26
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
Results of Operations
Selected Financial Measures and Operating Statistics
|
|
Three Months Ended November 30, |
|
|||||||||
($ in thousands, except for prices and per share amounts) |
|
2023 |
|
|
2022 |
|
|
% |
|
|||
Ferrous revenues |
|
$ |
348,897 |
|
|
$ |
261,729 |
|
|
|
33 |
% |
Nonferrous revenues |
|
|
169,294 |
|
|
|
177,675 |
|
|
|
(5 |
)% |
Steel revenues(1) |
|
|
113,531 |
|
|
|
124,515 |
|
|
|
(9 |
)% |
Retail and other revenues |
|
|
41,175 |
|
|
|
34,811 |
|
|
|
18 |
% |
Total revenues |
|
|
672,897 |
|
|
|
598,730 |
|
|
|
12 |
% |
Cost of goods sold |
|
|
633,420 |
|
|
|
550,011 |
|
|
|
15 |
% |
Gross margin (total revenues less cost of goods sold) |
|
$ |
39,477 |
|
|
$ |
48,719 |
|
|
|
(19 |
)% |
Gross margin (%) |
|
|
5.9 |
% |
|
|
8.1 |
% |
|
|
(27 |
)% |
Selling, general and administrative expense |
|
$ |
63,102 |
|
|
$ |
64,228 |
|
|
|
(2 |
)% |
Diluted loss per share from continuing operations attributable to Radius shareholders: |
|
|
|
|
|
|
|
|
|
|||
Reported |
|
$ |
(0.64 |
) |
|
$ |
(0.64 |
) |
|
|
(— |
)% |
Adjusted(2) |
|
$ |
(0.64 |
) |
|
$ |
(0.44 |
) |
|
|
45 |
% |
Net loss |
|
$ |
(17,799 |
) |
|
$ |
(17,556 |
) |
|
|
1 |
% |
Adjusted EBITDA(2) |
|
$ |
1,061 |
|
|
$ |
8,362 |
|
|
|
(87 |
)% |
Average ferrous recycled metal sales prices ($/LT)(3): |
|
|
|
|
|
|
|
|
|
|||
Domestic |
|
$ |
342 |
|
|
$ |
313 |
|
|
|
9 |
% |
Foreign |
|
$ |
359 |
|
|
$ |
356 |
|
|
|
1 |
% |
Average |
|
$ |
354 |
|
|
$ |
340 |
|
|
|
4 |
% |
Ferrous volumes (LT, in thousands): |
|
|
|
|
|
|
|
|
|
|||
Domestic(4) |
|
|
535 |
|
|
|
432 |
|
|
|
24 |
% |
Foreign |
|
|
617 |
|
|
|
418 |
|
|
|
47 |
% |
Total ferrous volumes (LT, in thousands)(4)(8) |
|
|
1,152 |
|
|
|
851 |
|
|
|
35 |
% |
Average nonferrous sales price ($/pound)(3)(5) |
|
$ |
0.91 |
|
|
$ |
0.90 |
|
|
|
1 |
% |
Nonferrous volumes (pounds, in thousands)(4)(5) |
|
|
181,728 |
|
|
|
162,720 |
|
|
|
12 |
% |
Finished steel average sales price ($/ST)(3) |
|
$ |
831 |
|
|
$ |
1,015 |
|
|
|
(18 |
)% |
Finished steel sales volumes (ST, in thousands) |
|
|
129 |
|
|
|
118 |
|
|
|
10 |
% |
Cars purchased (in thousands)(6) |
|
|
64 |
|
|
|
69 |
|
|
|
(7 |
)% |
Number of auto parts stores at period end |
|
|
50 |
|
|
|
51 |
|
|
|
(2 |
)% |
Rolling mill utilization(7) |
|
|
95 |
% |
|
|
81 |
% |
|
|
17 |
% |
NM = Not Meaningful
LT = Long Ton, which is equivalent to 2,240 pounds. ST = Short Ton, which is equivalent to 2,000 pounds.
Revenues
Revenues in the first quarter of fiscal 2024 increased by 12% compared to the prior year quarter. Ferrous and nonferrous sales volumes increased by 35% and 12%, respectively, year-over-year, primarily reflecting the adverse impact in the prior year quarter of disruptions related to an extended shredder outage at the Everett metals recycling facility and a regulatory issue limiting operations at our shredder facility in California, both of which were resolved by mid-November 2022. The increases in ferrous and nonferrous sales volumes also included additional volumes arising from our acquisition of the ScrapSource business on November 18, 2022. In the first quarter of fiscal 2024, the average net selling prices for our ferrous and nonferrous products increased by 4% and 1%, respectively, compared to the prior year quarter, the latter of which excludes PGMs in catalytic converters for which selling prices decreased significantly year-over-year. Finished steel average selling prices were 18% lower year-over-year, more than offsetting a 10% increase in finished steel volumes.
27
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
Operating Performance
Net loss in each of the first quarters of fiscal 2024 and 2023 was $18 million. Adjusted EBITDA in the first quarter of fiscal 2024 was $1 million, compared to $8 million in the prior year quarter. While our total revenues increased year-over-year, mainly from significantly higher ferrous sales volumes and to a lesser degree higher ferrous average net selling prices, gross margin decreased primarily reflecting the impact of lower metal spreads for our recycled metal and finished steel products. The persistently tight supply conditions for scrap metal, including end of life vehicles, in our domestic markets during the first quarter of fiscal 2024 led to purchase prices for unprocessed scrap metal increasing at a faster rate than selling prices for recycled metal which, combined with significantly lower year-over-year PGM prices and higher production and other operating costs, led to margin compression. Ferrous metal spreads in the first quarter of fiscal 2024 decreased by approximately 15% compared to the prior year quarter. Finished steel metal spreads were lower in the first quarter of fiscal 2024 driven by an 18% decrease in average selling prices compared to the prior year quarter.
SG&A expense in the first quarter of fiscal 2024 decreased by 2% compared to the prior year quarter primarily due to lower employee-related expenses, including lower incentive compensation accruals, and legacy environmental charges, partially offset by higher technology-related and professional services expenses. Productivity and cost reduction initiatives substantially offset the impact of inflation and growth-related initiatives on our SG&A expense.
In addition to the $60 million in productivity and cost reduction initiatives announced in fiscal 2023, for which we achieved the $15 million full quarterly run rate of benefits starting in the third quarter of fiscal 2023, we identified and began implementing new initiatives in the first quarter of fiscal 2024 with a targeted annual benefit of approximately $30 million. These new initiatives aim to improve profitability through a combination of increased yields, efficiencies in processing, transportation and procurement, and reduced costs including from headcount reductions. We expect to achieve substantially the full quarterly run rate of benefits from these new initiatives in the second quarter of fiscal 2024. Contributions from productivity and cost reduction initiatives implemented throughout fiscal 2023, as well as new initiatives identified and commenced in the first quarter of fiscal 2024, helped to partially offset the effects of inflationary pressure on operating costs.
See the reconciliation of adjusted EBITDA in Non-GAAP Financial Measures at the end of this Item 2.
Interest Expense
Interest expense was $5 million for the first quarter of fiscal 2024, compared to $3 million for the same period in the prior year. The increase in interest expense was primarily due to higher interest rates on amounts outstanding under our bank credit facilities compared to the prior year period.
Income Tax
The effective tax rate from continuing operations for the first quarter of fiscal 2024 was a benefit on pre-tax loss of 36.4% compared to 25.6% for the comparable prior year quarter. Our effective tax rate from continuing operations for the first quarter of fiscal 2024 was higher than the U.S. federal statutory rate of 21% primarily due to the aggregate effect of the Company's financial performance, permanent differences from non-deductible expenses, and unrecognized tax benefits on intra-period allocation of the estimated annual tax provision. For the first quarter of fiscal 2023, the effective tax rate from continuing operations was higher than the U.S. federal statutory rate of 21% primarily due to discrete tax benefits resulting from vesting of share-based awards in the quarter, as well as the impact of permanent differences from non-deductible expenses on the projected annual effective tax rate applied to the quarterly results.
Liquidity and Capital Resources
We rely on cash provided by operating activities as a primary source of liquidity, supplemented by current cash on hand and borrowings under our existing credit facilities.
Sources and Uses of Cash
We had cash balances of $4 million and $6 million as of November 30, 2023 and August 31, 2023, respectively. Cash balances are intended to be used primarily for working capital, capital expenditures, dividends, share repurchases, investments, and acquisitions. We use excess cash on hand to reduce amounts outstanding under our credit facilities. As of November 30, 2023, debt was $284 million compared to $249 million as of August 31, 2023, and debt, net of cash, was $280 million as of November 30, 2023, compared to $243 million as of August 31, 2023. The increases in debt were primarily due to increased borrowings from our credit facilities primarily to fund capital expenditures and working capital needs. See the reconciliation of debt, net of cash, in Non-GAAP Financial Measures at the end of this Item 2.
28
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
Operating Activities
Net cash used in operating activities in the first three months of fiscal 2024 was $1 million, compared to $62 million in the first three months of fiscal 2023.
Uses of cash in the first three months of fiscal 2024 included an $8 million decrease in accrued payroll and related liabilities primarily due to the payment of incentive compensation previously accrued under our fiscal 2023 plans, a $3 million increase in prepaid expenses and other current assets primarily relating to the recognition of insurance receivables, and a $3 million decrease in environmental liabilities primarily due to payments in connection with legacy environmental matters. Sources of cash in the first three months of fiscal 2024 included a $16 million decrease in accounts receivable primarily reflecting the impact of changes in product selling prices and the timing of sales and collections.
Uses of cash in the first three months of fiscal 2023 included a $29 million decrease in accrued payroll and related liabilities primarily due to the payment of incentive compensation previously accrued under our fiscal 2022 plans, a $28 million increase in inventory primarily due to the delay of several bulk shipments to December 2022, and a $19 million decrease in accounts payable due to the timing of purchases and payments. Sources of cash in the first three months of fiscal 2023 included a $17 million decrease in accounts receivable primarily due to a decrease in selling prices for recycled metals and the timing of sales and collections.
Investing Activities
Net cash used in investing activities was $24 million in the first three months of fiscal 2024, compared to $72 million in the first three months of fiscal 2023.
Cash used in investing activities in the first three months of fiscal 2024 included capital expenditures of $25 million to upgrade our equipment and infrastructure and for investments in advanced metals recovery technology, information technology systems, and environmental and safety-related assets, compared to $48 million in the prior year period.
Cash used in investing activities in the first three months of fiscal 2023 included $25 million paid to acquire the assets of the ScrapSource business on November 18, 2022. We funded the acquisition using cash on hand and borrowings under our existing credit facilities. Cash used in investing activities in the first three months of fiscal 2023 also included capital expenditures of $48 million to upgrade our equipment and infrastructure and for investments in advanced metals recovery technology and environmental and safety-related assets.
Financing Activities
Net cash provided by financing activities in the first three months of fiscal 2024 was $24 million, compared to $94 million in the first three months of fiscal 2023.
Cash flows provided by financing activities in the first three months of fiscal 2024 included $35 million in net borrowings of debt, compared to $108 million in the prior year period (refer to Non-GAAP Financial Measures at the end of this Item 2). Uses of cash in the first three months of fiscal 2024 and 2023 included $5 million and $7 million, respectively, for payment of employee tax withholdings resulting from vesting of share-based awards and $6 million in each period for the payment of dividends.
Debt
Our senior secured revolving credit facilities, which provide for revolving loans of $800 million and C$15 million, mature in August 2027 pursuant to a credit agreement with Bank of America, N.A., as administrative agent, and other lenders party thereto. Interest rates on outstanding indebtedness under the credit agreement are based, at our option, on either the Secured Overnight Financing Rate (“SOFR”) (or the Canadian Dollar Offered Rate, "CDOR" for C$ loans), plus a spread of between 1.25% and 2.00%, with the amount of the spread based on a pricing grid tied to our ratio of consolidated net funded debt to EBITDA (as defined by the credit agreement), or the greater of (a) the prime rate, (b) the federal funds rate plus 0.50% or (c) the daily rate equal to Term SOFR plus 1.00%, in each case, plus a spread of between 0.25% and 1.00% based on a pricing grid tied to our consolidated net funded debt to EBITDA ratio. In addition, commitment fees are payable on the unused portion of the credit facilities at rates between 0.175% and 0.30% based on a pricing grid tied to our ratio of consolidated net funded debt to EBITDA.
29
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
Under the credit agreement, we may establish one or more key performance indicators (“KPIs”) to measure our performance with respect to certain of our environmental, social and governance targets. Subject to the terms and conditions of the credit agreement, we may propose to amend the credit agreement to modify (i) the pricing spread and (ii) the commitment fee rate. Such modifications would be tied to our performance against the KPIs and would allow for (i) the pricing spread to be increased or decreased by no more than (a) 0.025% per KPI and (b) 0.05% for all KPIs, and (ii) the commitment fee rate to be increased or decreased by no more than 0.005% for all KPIs. Such adjustments would be determined on an annual basis and would not be cumulative.
We had borrowings outstanding under our credit facilities of $265 million as of November 30, 2023 and $230 million as of August 31, 2023. The weighted average interest rate on amounts outstanding under our credit facilities was 6.97% and 7.17% as of November 30, 2023 and August 31, 2023, respectively.
We use the credit facilities to fund working capital, capital expenditures, dividends, share repurchases, investments, and acquisitions. Our credit agreement contains various representations and warranties, events of default, and financial and other customary covenants which limit (subject to certain exceptions) our ability to, among other things, incur or suffer to exist certain liens, make investments, incur or guaranty additional indebtedness, enter into consolidations, mergers, acquisitions, and sales of assets, make distributions and other restricted payments, change the nature of our business, engage in transactions with affiliates, and enter into restrictive agreements, including agreements that restrict the ability of our subsidiaries to make distributions. The financial covenants under the credit agreement include (a) a consolidated fixed charge coverage ratio, defined as the four-quarter rolling sum of consolidated EBITDA less defined maintenance capital expenditures and certain environmental expenditures divided by consolidated fixed charges, and (b) a consolidated leverage ratio, defined as consolidated funded indebtedness divided by the sum of consolidated net worth and consolidated funded indebtedness.
As of November 30, 2023, we were in compliance with the financial covenants under our credit agreement. The consolidated fixed charge coverage ratio was required to be no less than 1.50 to 1.00 and was 2.67 to 1.00 as of November 30, 2023. The consolidated leverage ratio was required to be no more than 0.55 to 1.00 and was 0.24 to 1.00 as of November 30, 2023.
Our obligations under our credit agreement are guaranteed by substantially all of our subsidiaries. The credit facilities and the related guarantees are secured by senior first priority liens on certain of our and our subsidiaries’ assets, including equipment, inventory, and accounts receivable.
While we currently expect to remain in compliance with the financial covenants under the credit agreement, we may not be able to do so in the event market conditions, or other factors have a significant and sustained adverse impact on our results of operations and financial position. If we do not maintain compliance with our financial covenants and are unable to obtain an amendment or waiver from our lenders, a breach of a financial covenant would constitute an event of default and allow the lenders to exercise remedies under the agreements, the most severe of which is the termination of the credit facility under our committed bank credit agreement and acceleration of the amounts owed under the agreement. In such case, we would be required to evaluate available alternatives and take appropriate steps to obtain alternative funds. We cannot assure that any such alternative funds, if sought, could be obtained or, if obtained, would be adequate or on acceptable terms.
Other debt obligations, which totaled $12 million as of each of November 30, 2023 and August 31, 2023, primarily relate to equipment purchases, the contract consideration for which includes an obligation to make future monthly payments to the vendor in the form of licensing fees. For accounting purposes, such obligations are treated as a partial financing of the purchase price by the equipment vendor. Monthly payments commence when the equipment is placed in service and achieves specified minimum operating metrics, with payments continuing for a period of four years thereafter.
Capital Expenditures
Capital expenditures totaled $25 million for the first three months of fiscal 2024, compared to $48 million for the prior year period. We currently plan to invest approximately $100 million in capital expenditures in fiscal 2024. These capital expenditures include investments in growth, including new nonferrous processing technologies, and to support volume initiatives as well as post-acquisition and other growth projects, and investments to upgrade our equipment, infrastructure, and information technology systems, and for environmental and safety-related assets, using cash generated from operations and available credit facilities. Supply chain disruptions have contributed to some delays in construction activities and equipment deliveries related to our capital projects, and to the time required to obtain permits from government agencies, resulting in the deferral of certain capital expenditures. Given the continually evolving nature of such disruptions and other factors impacting the timing of project completion, the extent to which forecasted capital expenditures could be deferred is uncertain.
30
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
Environmental Compliance
Building on our commitment to recycling and operating our business in an environmentally responsible manner, we continue to invest in facilities that improve our environmental presence in the communities in which we operate. As part of our capital expenditures discussed in the prior paragraph, we invested approximately $5 million in capital expenditures for environmental projects in the first three months of fiscal 2024, and we currently plan to invest approximately $35 million for such projects in fiscal 2024. These projects include investments in equipment to ensure ongoing compliance with air quality and other environmental regulations and storm water systems.
We have been identified by the United States Environmental Protection Agency as one of the potentially responsible parties that own or operate or formerly owned or operated sites which are part of or adjacent to the Portland Harbor Superfund site (“Portland Harbor”). See Note 5 - Commitments and Contingencies in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report for a discussion of this matter, as well as other legacy environmental loss contingencies. We believe it is not possible to reasonably estimate the amount or range of costs which we are likely to or which it is reasonably possible that we will incur in connection with Portland Harbor, although such costs could be material to our financial position, results of operations, cash flows, and liquidity. We have insurance policies and a Qualified Settlement Fund (“QSFs”) that we believe will provide reimbursement for costs we incur for defense, remediation, and mitigation for natural resource damages claims in connection with Portland Harbor, although there are no assurances that those policies and the QSFs will cover all of the costs which we may incur. Significant cash outflows in the future related to Portland Harbor, as well as related to other legacy environmental loss contingencies, could reduce the amounts available for borrowing that could otherwise be used for working capital, capital expenditures, dividends, share repurchases, investments, and acquisitions and could result in our failure to maintain compliance with certain covenants in our debt agreements, and could adversely impact our liquidity.
Dividends
On October 25, 2023, our Board of Directors declared a dividend for the first quarter of fiscal 2024 of $0.1875 per common share, which equates to an annual cash dividend of $0.75 per common share. The dividend was paid on November 27, 2023.
Share Repurchase Program
As of November 30, 2023, pursuant to our board-authorized share repurchase programs, we had remaining authorization to repurchase up to 2.8 million shares of our Class A common stock when we deem such repurchases to be appropriate. We may repurchase our common stock for a variety of reasons, such as to optimize our capital structure and to offset dilution related to share-based compensation arrangements. We consider several factors in determining whether to make share repurchases including, among other things, our cash needs, the availability of funding, our future business plans, and the market price of our stock. We did not repurchase any of our common stock during the first quarter of fiscal 2024 or 2023.
Assessment of Liquidity and Capital Resources
Historically, our available cash resources, internally generated funds, credit facilities, and equity offerings have financed our acquisitions, capital expenditures, working capital, and other financing needs.
We generally believe our current cash resources, internally generated funds, existing credit facilities, and access to the capital markets will provide adequate short-term and long-term liquidity needs for working capital, capital expenditures, dividends, investments and acquisitions, joint ventures, debt service requirements, environmental obligations, share repurchases, and other contingencies. However, in the event of a sustained market deterioration, we may need additional liquidity which would require us to evaluate available alternatives and take appropriate steps to obtain sufficient additional funds. There can be no assurances that any such supplemental funding, if sought, could be obtained or, if obtained, would be adequate or on acceptable terms.
Contractual Obligations
There were no material changes related to contractual obligations and commitments from the information provided in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023.
We maintain stand-by letters of credit to provide support for certain obligations, including workers’ compensation and performance bonds. As of November 30, 2023, we had $8 million outstanding under these arrangements.
31
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
Critical Accounting Estimates
There were no material changes to our critical accounting estimates as described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended August 31, 2023.
Recently Issued Accounting Standards
For a description of recent accounting pronouncements that may have an impact on our financial condition, results of operations, or cash flows, see “Recent Accounting Pronouncements” in Note 1 - Summary of Significant Accounting Policies in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.
Non-GAAP Financial Measures
Debt, net of cash
Debt, net of cash is the difference between (i) the sum of long-term debt and short-term borrowings (i.e., total debt) and (ii) cash and cash equivalents. 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.
The following is a reconciliation of debt, net of cash (in thousands):
|
|
November 30, 2023 |
|
|
August 31, 2023 |
|
||
Short-term borrowings |
|
$ |
5,641 |
|
|
$ |
5,813 |
|
Long-term debt, net of current maturities |
|
|
278,280 |
|
|
|
243,579 |
|
Total debt |
|
|
283,921 |
|
|
|
249,392 |
|
Less cash and cash equivalents |
|
|
4,408 |
|
|
|
6,032 |
|
Total debt, net of cash |
|
$ |
279,513 |
|
|
$ |
243,360 |
|
Net borrowings (repayments) of debt
Net borrowings (repayments) of debt is the sum of borrowings from long-term debt and repayments of long-term debt. We present this amount as the net change in our borrowings (repayments) for the period because we believe it is useful for investors as a meaningful presentation of the change in debt.
The following is a reconciliation of net borrowings (repayments) of debt (in thousands):
|
|
Three Months Ended November 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Borrowings from long-term debt |
|
$ |
135,099 |
|
|
$ |
186,356 |
|
Repayments of long-term debt |
|
|
(100,568 |
) |
|
|
(78,781 |
) |
Net borrowings (repayments) of debt |
|
$ |
34,531 |
|
|
$ |
107,575 |
|
32
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
Adjusted EBITDA, adjusted selling, general, and administrative expense, adjusted loss from continuing operations attributable to Radius shareholders, and adjusted diluted loss per share from continuing operations attributable to Radius shareholders
Management believes that providing these non-GAAP financial measures adds a meaningful presentation of our results from business operations excluding adjustments for charges for legacy environmental matters (net of recoveries), asset impairment charges, business development costs not related to ongoing operations including pre-acquisition expenses, amortization of capitalized cloud computing implementation costs, restructuring charges and other exit-related activities, and the income tax benefit 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.
Following are reconciliations of net (loss) income to adjusted EBITDA and adjusted selling, general, and administrative expense (in thousands):
|
|
Three Months Ended November 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Reconciliation of adjusted EBITDA: |
|
|
|
|
|
|
||
Net loss |
|
$ |
(17,799 |
) |
|
$ |
(17,556 |
) |
Loss from discontinued operations, net of tax |
|
|
2 |
|
|
|
69 |
|
Interest expense |
|
|
4,810 |
|
|
|
3,324 |
|
Income tax benefit |
|
|
(10,170 |
) |
|
|
(6,032 |
) |
Depreciation and amortization |
|
|
23,471 |
|
|
|
21,451 |
|
Charges for legacy environmental matters, net(1) |
|
|
323 |
|
|
|
1,279 |
|
Asset impairment charges(2) |
|
|
219 |
|
|
|
4,000 |
|
Business development costs |
|
|
90 |
|
|
|
235 |
|
Amortization of cloud computing software costs(3) |
|
|
80 |
|
|
|
— |
|
Restructuring charges and other exit-related activities |
|
|
35 |
|
|
|
1,592 |
|
Adjusted EBITDA |
|
$ |
1,061 |
|
|
$ |
8,362 |
|
|
|
|
|
|
|
|
||
Selling, general and administrative expense: |
|
|
|
|
|
|
||
As reported |
|
$ |
63,102 |
|
|
$ |
64,228 |
|
Charges for legacy environmental matters, net(1) |
|
|
(323 |
) |
|
|
(1,279 |
) |
Business development costs |
|
|
(90 |
) |
|
|
(235 |
) |
Adjusted |
|
$ |
62,689 |
|
|
$ |
62,714 |
|
33
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
Following are reconciliations of adjusted net loss from continuing operations attributable to Radius shareholders and adjusted diluted loss per share from continuing operations attributable to Radius shareholders (in thousands, except per share data):
|
|
Three Months Ended November 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Loss from continuing operations attributable to Radius shareholders: |
|
|
|
|
|
|
||
As reported |
|
$ |
(17,962 |
) |
|
$ |
(17,719 |
) |
Charges for legacy environmental matters, net(1) |
|
|
323 |
|
|
|
1,279 |
|
Asset impairment charges(2) |
|
|
219 |
|
|
|
4,000 |
|
Business development costs |
|
|
90 |
|
|
|
235 |
|
Restructuring charges and other exit-related activities |
|
|
35 |
|
|
|
1,592 |
|
Income tax benefit allocated to adjustments(3) |
|
|
(737 |
) |
|
|
(1,714 |
) |
Adjusted |
|
$ |
(18,032 |
) |
|
$ |
(12,327 |
) |
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Diluted loss per share from continuing operations attributable to Radius shareholders: |
|
|
|
|
|
|
||
As reported |
|
$ |
(0.64 |
) |
|
$ |
(0.64 |
) |
Charges for legacy environmental matters, net, per share(1) |
|
|
0.01 |
|
|
|
0.05 |
|
Asset impairment charges, per share(2) |
|
|
0.01 |
|
|
|
0.14 |
|
Business development costs, per share |
|
|
— |
|
|
|
0.01 |
|
Restructuring charges and other exit-related activities, per share |
|
|
— |
|
|
|
0.06 |
|
Income tax benefit allocated to adjustments, per share(3) |
|
|
(0.03 |
) |
|
|
(0.06 |
) |
Adjusted(4) |
|
$ |
(0.64 |
) |
|
$ |
(0.44 |
) |
34
SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Commodity Price Risk
We are exposed to commodity price risk, mainly associated with variations in the market price for ferrous and nonferrous metals, including scrap metal, finished steel products, auto bodies and other commodities. The timing and magnitude of industry cycles are difficult to predict and are impacted by general economic conditions as well as other factors including political and military events. We respond to increases and decreases in forward selling prices by adjusting purchase prices. We actively manage our exposure to commodity price risk and monitor the actual and expected spread between forward selling prices and purchase costs and processing and shipping expense. Sales contracts are based on prices negotiated with our customers, and generally orders are placed 30 to 60 days ahead of the shipment date. However, financial results may be negatively impacted when forward selling prices fall more quickly than we can adjust purchase prices or when customers fail to meet their contractual obligations. We assess the net realizable value of inventory (“NRV”) each quarter based upon contracted sales orders and estimated future selling prices. Based on contracted sales and estimates of future selling prices, a 10% decrease in the estimated selling price of inventory would not have had a material NRV impact as of November 30, 2023.
Interest Rate Risk
There have been no material changes to our disclosure regarding interest rate risk set forth in Item 7A. Quantitative and Qualitative Disclosures About Market Risk included in our Annual Report on Form 10-K for the year ended August 31, 2023.
Credit Risk
Credit risk relates to the risk of loss that might occur as a result of non-performance by counterparties of their contractual obligations to take delivery of scrap metal and finished steel products and to make financial settlements of these obligations, or to provide sufficient quantities of scrap metal or payment to settle advances, loans and other contractual receivables in connection with demolition and scrap extraction projects. We manage our exposure to credit risk through a variety of methods, including shipping ferrous scrap metal exports under letters of credit, collection of deposits prior to shipment for certain nonferrous export customers, establishment of credit limits for certain sales on open terms, credit insurance and designation of collateral and financial guarantees securing advances, loans, and other contractual receivables. We have experienced reductions in the availability of credit insurance that we have historically used to cover a portion of our recycled metal and finished steel sales to domestic customers, which reduced availability may increase our exposure to customer credit risk. In addition, in higher or rising commodity price environments, we have experienced proportionately lower credit insurance coverage of applicable customer credit limits, which may increase our exposure to customer credit risk.
Historically, we have shipped almost all of our large shipments of ferrous scrap metal to foreign customers under contracts supported by letters of credit issued or confirmed by banks deemed creditworthy. The letters of credit ensure payment by the customer. As we generally sell export recycled ferrous metal under contracts or orders that generally provide for shipment within 30 to 60 days after the price is agreed, our customers typically do not have difficulty obtaining letters of credit from their banks in periods of rising ferrous prices, as the value of the letters of credit are collateralized by the value of the inventory on the ship. However, in periods of significantly declining prices, our customers may not be able to obtain letters of credit for the full sales value of the inventory to be shipped.
As of November 30, 2023 and August 31, 2023, 21% and 38%, respectively, of our accounts receivable balance was covered by letters of credit, and the amount of past due receivables was not material.
Foreign Currency Exchange Rate Risk
We are exposed to foreign currency exchange rate risk, mainly associated with sales transactions and related accounts receivable denominated in the U.S. Dollar by our Canadian subsidiary with a functional currency of the Canadian Dollar.
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SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives. Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, has completed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of November 30, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended November 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information regarding reportable legal proceedings is contained in Part I, “Item 3. Legal Proceedings” in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023 and Note 5 - Commitments and Contingencies in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, incorporated by reference herein, and as follows:
We previously disclosed that, on September 3, 2021, the Oregon Department of Environmental Quality (“ODEQ”) issued a Pre-Enforcement Notice (“PEN”) alleging that the Company’s metal shredder facility in Portland, Oregon was in violation of Title V of the federal Clean Air Act (“CAA”). In the PEN, ODEQ also alleged violations of major source new source review, the ODEQ’s Cleaner Air Oregon Program and federal hazardous air pollutant control technology requirements and gave notice to the Company that ODEQ had referred the matter to USEPA for review and possible formal enforcement. On November 3, 2023, ODEQ and the Company entered into a Mutual Agreement and Order resolving the PEN and ODEQ’s enforcement concerns, which included an agreement by the Company to pay a civil penalty in the total amount of $500,000.
ITEM 1A. RISK FACTORS
There have been no material changes to our risk factors reported or new risk factors identified since the filing of our Annual Report on Form 10-K for the year ended August 31, 2023.
ITEM 5. OTHER INFORMATION
During the three months ended November 30, 2023,
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SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
ITEM 6. EXHIBITS
Exhibit Number |
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Exhibit Description |
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10.1* |
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10.2* |
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10.3* |
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Fiscal 2024 Annual Performance Bonus Program for the Chief Executive Officer. |
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31.1 |
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2 |
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Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1 |
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32.2 |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
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Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* Management contract or compensatory plan or arrangement.
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SCHNITZER STEEL INDUSTRIES, INC. dba RADIUS RECYCLING
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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SCHNITZER STEEL INDUSTRIES, INC. |
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(Registrant) |
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Date: |
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January 4, 2024 |
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By: |
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/s/ Tamara L. Lundgren |
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Tamara L. Lundgren |
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Chairman, President and Chief Executive Officer |
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Date: |
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January 4, 2024 |
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By: |
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/s/ Stefano R. Gaggini |
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Stefano R. Gaggini |
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Senior Vice President and Chief Financial Officer |
39