Table of Contents

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

 

☒   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended May 31, 2023

or

☐   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Transition Period from __________ to __________

Commission File Number 000-22496

 

SCHNITZER STEEL INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

OREGON		93-0341923
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
299 SW Clay Street, Suite 350, Portland, Oregon		97201
(Address of principal executive offices)		(Zip Code)

(503) 224-9900

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A Common Stock, $1.00 par value		SCHN		The Nasdaq Stock Market LLC

 

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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.

Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐

 

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 ☐ No ☒

The registrant had 27,311,089 shares of Class A common stock, par value of $1.00 per share, and 200,000 shares of Class B common stock, par value of $1.00 per share, outstanding as of June 23, 2023.

 

 

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SCHNITZER STEEL INDUSTRIES, INC.

FORM 10-Q

TABLE OF CONTENTS

 

	PAGE
FORWARD-LOOKING STATEMENTS	3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)	4
Unaudited Condensed Consolidated Balance Sheets as of May 31, 2023 and August 31, 2022	4
Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended May 31, 2023 and 2022	5
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended May 31, 2023 and 2022	6
Unaudited Condensed Consolidated Statements of Equity for the Three and Nine Months Ended May 31, 2023 and 2022	7
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended May 31, 2023 and 2022	9
Notes to the Unaudited Condensed Consolidated Financial Statements	11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3. Quantitative and Qualitative Disclosures about Market Risk	39
Item 4. Controls and Procedures	40
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	41
Item 1A. Risk Factors	41
Item 5. Other Information	41
Item 6. Exhibits	42
SIGNATURES	43

 

 

 

 

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FORWARD-LOOKING STATEMENTS

Statements and information included in this Quarterly Report on Form 10-Q by Schnitzer Steel Industries, Inc. 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,” and “SSI” refer to Schnitzer Steel Industries, Inc. 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, sales volumes, and profitability; completion of acquisitions and integration of acquired businesses; 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 equipment upgrades, equipment failures, and facility damage on production; failure to realize or delays in realizing expected benefits from capital projects, including investments in processing and manufacturing technology improvements; 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 goodwill impairment charges; the impact of long-lived asset and equity investment impairment charges; 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 adverse impact of climate change; the impact of not realizing deferred tax assets; the impact of tax increases and changes in tax rules; the impact of one or more cybersecurity incidents; translation risks associated with fluctuation in foreign exchange rates; 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.

 

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

SCHNITZER STEEL INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except per share amounts)

(Currency - U.S. Dollar)

 

		May 31, 2023				August 31, 2022
Assets
Current assets:
Cash and cash equivalents		$	4,511			$	43,803
Accounts receivable, net of allowance for credit losses of $1,513    and $1,566			297,444				237,654
Inventories			298,979				315,189
Refundable income taxes			2,298				1,696
Prepaid expenses and other current assets			56,143				73,044
Total current assets			659,375				671,386
Property, plant and equipment, net of accumulated depreciation of $894,216 and $855,032			697,396				664,120
Operating lease right-of-use assets			118,399				122,413
Investments in joint ventures			10,120				12,841
Goodwill			268,595				255,198
Intangibles, net of accumulated amortization of $10,927 and $7,256			34,055				26,155
Deferred income taxes			22,695				24,598
Other assets			55,793				49,886
Total assets		$	1,866,428			$	1,826,597
Liabilities and Equity
Current liabilities:
Short-term borrowings		$	6,724			$	6,041
Accounts payable			209,795				217,689
Accrued payroll and related liabilities			29,018				59,702
Environmental liabilities			11,521				13,031
Operating lease liabilities			20,357				21,660
Accrued income taxes			1,074				3,856
Other accrued liabilities			63,667				59,594
Total current liabilities			342,156				381,573
Deferred income taxes			61,761				63,328
Long-term debt, net of current maturities			344,084				242,521
Environmental liabilities, net of current portion			54,340				55,469
Operating lease liabilities, net of current maturities			98,175				101,651
Other long-term liabilities			26,320				23,581
Total liabilities			926,836				868,123
Commitments and contingencies (Note 5)
Schnitzer Steel Industries, Inc. (“SSI”) shareholders’ equity:
Preferred stock – 20,000 shares $1.00 par value authorized, none issued			—				—
Class A common stock – 75,000 shares $1.00 par value authorized,    27,311 and 26,747 shares issued and outstanding			27,311				26,747
Class B common stock – 25,000 shares $1.00 par value authorized,    200 and 200 shares issued and outstanding			200				200
Additional paid-in capital			23,287				22,975
Retained earnings			925,399				941,146
Accumulated other comprehensive loss			(40,185	)			(37,089	)
Total SSI shareholders’ equity			936,012				953,979
Noncontrolling interests			3,580				4,495
Total equity			939,592				958,474
Total liabilities and equity		$	1,866,428			$	1,826,597

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statement are an integral part of these statements.

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SCHNITZER STEEL INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

(Currency - U.S. Dollar)

 

		Three Months Ended May 31,								Nine Months Ended May 31,
		2023				2022				2023				2022
Revenues		$	809,610			$	1,010,087			$	2,164,293			$	2,591,403
Operating expense:
Cost of goods sold			713,685				834,375				1,946,633				2,188,158
Selling, general and administrative			68,527				77,672				196,712				194,020
(Income) from joint ventures			(285	)			(762	)			(1,386	)			(1,589	)
Asset impairment charges			—				932				—				932
Restructuring charges and other exit-related activities			169				26				2,589				52
Operating income			27,514				97,844				19,745				209,830
Interest expense			(5,146	)			(2,223	)			(13,378	)			(5,496	)
Other loss, net			(1,306	)			(34	)			(5,289	)			(136	)
Income from continuing operations before income taxes			21,062				95,587				1,078				204,198
Income tax expense			(7,221	)			(20,037	)			(676	)			(43,207	)
Income from continuing operations			13,841				75,550				402				160,991
Loss from discontinued operations, net of tax			(233	)			(46	)			(78	)			(46	)
Net income			13,608				75,504				324				160,945
Net income attributable to noncontrolling interests			(148	)			(870	)			(299	)			(2,497	)
Net income attributable to SSI shareholders		$	13,460			$	74,634			$	25			$	158,448
Net income per share attributable to SSI shareholders:
Basic:
Income per share from continuing operations		$	0.49			$	2.65			$	—			$	5.63
Net income per share		$	0.48			$	2.65			$	—			$	5.63
Diluted:
Income per share from continuing operations		$	0.48			$	2.52			$	—			$	5.33
Net income per share		$	0.47			$	2.52			$	—			$	5.33
Weighted average number of common shares:
Basic			28,114				28,143				27,980				28,161
Diluted			28,659				29,625				28,646				29,741

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.

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SCHNITZER STEEL INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, in thousands)

(Currency - U.S. Dollar)

 

		Three Months Ended May 31,								Nine Months Ended May 31,
		2023				2022				2023				2022
Net income		$	13,608			$	75,504			$	324			$	160,945
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments			362				153				(3,245	)			(240	)
Pension obligations, net			58				40				149				549
Total other comprehensive income (loss), net of tax			420				193				(3,096	)			309
Comprehensive income (loss)			14,028				75,697				(2,772	)			161,254
Less comprehensive income attributable to noncontrolling interests			(148	)			(870	)			(299	)			(2,497	)
Comprehensive income (loss) attributable to SSI shareholders		$	13,880			$	74,827			$	(3,071	)		$	158,757

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.

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SCHNITZER STEEL INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited, in thousands, except per share amounts)

(Currency - U.S. Dollar)

 

		Common Stock																								Accumulated
		Class A								Class B								Additional								Other				Total SSI
Three Months Ended May 31, 2022		Shares				Amount				Shares				Amount				Paid-in Capital				Retained Earnings				Comprehensive Loss				Shareholders’ Equity				Noncontrolling Interests				Total Equity
Balance as of March 1, 2022			27,433			$	27,433				200			$	200			$	40,821			$	866,776			$	(34,438	)		$	900,792			$	3,857			$	904,649
Net income			—				—				—				—				—				74,634				—				74,634				870				75,504
Other comprehensive income, net of tax			—				—				—				—				—				—				193				193				—				193
Distributions to noncontrolling interests			—				—				—				—				—				—				—				—				(545	)			(545	)
Share repurchases			(244	)			(244	)			—				—				(9,749	)			—				—				(9,993	)			—				(9,993	)
Issuance of restricted stock			89				89				—				—				(89	)			—				—				—				—				—
Restricted stock withheld for taxes			(31	)			(31	)			—				—				(1,395	)			—				—				(1,426	)			—				(1,426	)
Share-based compensation cost			—				—				—				—				4,838				—				—				4,838				—				4,838
Dividends ($0.1875 per common share)			—				—				—				—				—				(5,350	)			—				(5,350	)			—				(5,350	)
Balance as of May 31, 2022			27,247			$	27,247				200			$	200			$	34,426			$	936,060			$	(34,245	)		$	963,688			$	4,182			$	967,870

 

		Common Stock																								Accumulated
		Class A								Class B								Additional								Other				Total SSI
Three Months Ended May 31, 2023		Shares				Amount				Shares				Amount				Paid-in Capital				Retained Earnings				Comprehensive Loss				Shareholders' Equity				Noncontrolling Interests				Total Equity
Balance as of March 1, 2023			27,255			$	27,255				200			$	200			$	20,831			$	917,266			$	(40,605	)		$	924,947			$	3,491			$	928,438
Net income			—				—				—				—				—				13,460				—				13,460				148				13,608
Other comprehensive income, net of tax			—				—				—				—				—				—				420				420				—				420
Distributions to noncontrolling interests			—				—				—				—				—				—				—				—				(59	)			(59	)
Issuance of restricted stock			84				84				—				—				(84	)			—				—				—				—				—
Restricted stock withheld for taxes			(28	)			(28	)			—				—				(774	)			—				—				(802	)			—				(802	)
Share-based compensation cost			—				—				—				—				3,314				—				—				3,314				—				3,314
Dividends ($0.1875 per common share)			—				—				—				—				—				(5,327	)			—				(5,327	)			—				(5,327	)
Balance as of May 31, 2023			27,311			$	27,311				200			$	200			$	23,287			$	925,399			$	(40,185	)		$	936,012			$	3,580			$	939,592

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.

 

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SCHNITZER STEEL INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited, in thousands, except per share amounts)

(Currency - U.S. Dollar)

 

		Common Stock																								Accumulated
		Class A								Class B								Additional								Other				Total SSI
Nine Months Ended May 31, 2022		Shares				Amount				Shares				Amount				Paid-in Capital				Retained Earnings				Comprehensive Loss				Shareholders' Equity				Noncontrolling Interests				Total Equity
Balance as of September 1, 2021			27,332			$	27,332				200			$	200			$	49,074			$	793,712			$	(34,554	)		$	835,764			$	4,015			$	839,779
Net income			—				—				—				—				—				158,448				—				158,448				2,497				160,945
Other comprehensive income, net of tax			—				—				—				—				—				—				309				309				—				309
Distributions to noncontrolling interests			—				—				—				—				—				—				—				—				(2,330	)			(2,330	)
Share repurchases			(444	)			(444	)			—				—				(17,414	)			—				—				(17,858	)			—				(17,858	)
Issuance of restricted stock			568				568				—				—				(568	)			—				—				—				—				—
Restricted stock withheld for taxes			(209	)			(209	)			—				—				(10,794	)			—				—				(11,003	)			—				(11,003	)
Share-based compensation cost			—				—				—				—				14,128				—				—				14,128				—				14,128
Dividends ($0.5625 per common share)			—				—				—				—				—				(16,100	)			—				(16,100	)			—				(16,100	)
Balance as of May 31, 2022			27,247			$	27,247			200				$	200			$	34,426			$	936,060			$	(34,245	)		$	963,688			$	4,182			$	967,870

 

		Common Stock																								Accumulated
		Class A								Class B								Additional								Other				Total SSI
Nine Months Ended May 31, 2023		Shares				Amount				Shares				Amount				Paid-in Capital				Retained Earnings				Comprehensive Loss				Shareholders' Equity				Noncontrolling Interests				Total Equity
Balance as of September 1, 2022			26,747			$	26,747				200			$	200			$	22,975			$	941,146			$	(37,089	)		$	953,979			$	4,495			$	958,474
Net income			—				—				—				—				—				25				—				25				299				324
Other comprehensive loss, net of tax			—				—				—				—				—				—				(3,096	)			(3,096	)			—				(3,096	)
Distributions to noncontrolling interests			—				—				—				—				—				—				—				—				(1,214	)			(1,214	)
Issuance of restricted stock			846				846				—				—				(846	)			—				—				—				—				—
Restricted stock withheld for taxes			(282	)			(282	)			—				—				(7,329	)			—				—				(7,611	)			—				(7,611	)
Share-based compensation cost			—				—				—				—				8,487				—				—				8,487				—				8,487
Dividends ($0.5625 per common share)			—				—				—				—				—				(15,772	)			—				(15,772	)			—				(15,772	)
Balance as of May 31, 2023			27,311			$	27,311				200			$	200			$	23,287			$	925,399			$	(40,185	)		$	936,012			$	3,580			$	939,592

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.

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SCHNITZER STEEL INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

(Currency - U.S. Dollar)

 

		Nine Months Ended May 31,
		2023				2022
Cash flows from operating activities:
Net income		$	324			$	160,945
Adjustments to reconcile net income to cash provided by operating activities:
Asset impairment charges			5,455				932
Exit-related asset impairments			254				—
Depreciation and amortization			66,390				54,566
Inventory write-downs			575				3,199
Deferred income taxes			(933	)			23,851
Undistributed equity in earnings of joint ventures			(1,386	)			(1,589	)
Share-based compensation expense			8,438				14,046
Loss on disposal of assets, net			10				1,192
Unrealized foreign exchange loss, net			126				193
Credit loss, net			195				17
Changes in assets and liabilities, net of acquisitions:
Accounts receivable			(71,016	)			(43,340	)
Inventories			23,215				(164,196	)
Income taxes			(2,992	)			8,843
Prepaid expenses and other current assets			(12,476	)			(14,771	)
Other long-term assets			(3,868	)			(1,068	)
Operating lease assets and liabilities			(276	)			(2,049	)
Accounts payable			10,259				44,874
Accrued payroll and related liabilities			(30,451	)			(16,890	)
Other accrued liabilities			10,381				1,747
Environmental liabilities			(2,542	)			(14,744	)
Other long-term liabilities			2,850				650
Distributed equity in earnings of joint ventures			2,000				1,600
Net cash provided by operating activities			4,532				58,008
Cash flows from investing activities:
Capital expenditures			(101,270	)			(97,972	)
Acquisitions, net of acquired cash			(26,902	)			(177,070	)
Proceeds from insurance and sale of assets			10,775				18,244
Purchase of equity investment			—				(5,000	)
Deposit on land option			—				(80	)
Net cash used in investing activities			(117,397	)			(261,878	)
Cash flows from financing activities:
Borrowings from long-term debt			501,761				895,175
Repayment of long-term debt			(403,129	)			(655,440	)
Payment of debt issuance costs			(156	)			—
Repurchase of Class A common stock			—				(17,858	)
Taxes paid related to net share settlement of share-based payment awards			(7,611	)			(11,003	)
Distributions to noncontrolling interests			(1,214	)			(2,330	)
Dividends paid			(16,023	)			(16,172	)
Net cash provided by financing activities			73,628				192,372
Effect of exchange rate changes on cash			(55	)			(195	)
Net decrease in cash and cash equivalents			(39,292	)			(11,693	)
Cash and cash equivalents as of beginning of period			43,803				27,818
Cash and cash equivalents as of end of period		$	4,511			$	16,125

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.

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SCHNITZER STEEL INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

(Currency - U.S. Dollar)

 

		Nine Months Ended May 31,
		2023				2022
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest		$	11,763			$	3,249
Income taxes, net		$	4,565			$	10,502
Schedule of noncash investing and financing transactions:
Purchases of property, plant and equipment included in liabilities		$	12,605			$	19,868

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.

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SCHNITZER STEEL INDUSTRIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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SCHNITZER STEEL INDUSTRIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

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SCHNITZER STEEL INDUSTRIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

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SCHNITZER STEEL INDUSTRIES, INC.

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 and nine months ended May 31, 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, 2022, 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, Schnitzer Steel Industries, Inc. 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.

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.

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. 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.

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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. The rolling mill production ceased in early June 2021. In August 2021, our steel mill began ramping up operations following the substantial completion of replacement and repairs of property and equipment in the melt shop that had been lost or damaged by the fire. We experienced the loss of business income during the shutdown of the steel mill and the subsequent ramp-up phase which was substantially completed during the second quarter of fiscal 2022. We have insurance that we believe is fully applicable to the losses and have 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. The property damage deductible under the policies insuring our assets in this matter is $1 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. As of August 31, 2021, prepaid expenses and other current assets included an initial $10 million insurance receivable recognized in fiscal 2021, primarily offsetting applicable losses including capital purchases of $10 million that we had incurred as of August 31, 2021. In the first nine months of fiscal 2022, we increased the amount of this insurance receivable to $25 million and recognized a related $15 million insurance recovery gain, $3 million and $12 million of which were recognized in the first and second quarters of fiscal 2022, respectively, within cost of goods sold in the Unaudited Condensed Consolidated Statements of Operations, reflecting recovery of applicable losses incurred as a result of the fire to date. In addition, during the first nine months of fiscal 2022, we received advance payments from insurers totaling approximately $30 million towards our claims, and not reflecting any final or full settlement of claims with the insurers, which amount reduced the $25 million insurance receivable to zero with the remaining amount of advance payments reported within other accrued liabilities on the Unaudited Condensed Consolidated Balance Sheets. In the third quarter of fiscal 2023, we received additional advance payments from insurers of approximately $13 million towards our claims, increasing the total of such advance payments from insurers to approximately $43 million, and not reflecting any final or full settlement of claims with the insurers. The amount of advance payments reported within other accrued liabilities was $18 million as of May 31, 2023 and $5 million as of August 31, 2022. These amounts do not reflect potential additional recoveries of business income losses resulting from this matter that may be recognized in the future when settlements of the business interruption claims are resolved.

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SCHNITZER STEEL INDUSTRIES, INC.

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. Completion of the remainder of repair and replacement of property that experienced physical loss or damage, primarily buildings and improvements, will occur over a longer period and impacts on business income may continue. 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. 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. In fiscal 2022, after the fire, we recognized an aggregate $17 million insurance receivable and related insurance recovery gain, $10 million and $1 million of which were recorded in the second and third quarters of fiscal 2022, respectively. In the third quarter and first nine months of fiscal 2023, we recognized an additional $2 million insurance receivable and related insurance recovery gain. As of May 31, 2023, we had recognized a total of $20 million in insurance recovery gains, all reported within cost of goods sold, reflecting recovery of applicable losses to date including impairment charges of $7 million related to the carrying value of plant and equipment assets lost in or damaged by the fire and initial capital purchases, non-capitalizable repair and replacement costs, and other applicable losses totaling $13 million. Also, in the third quarters of fiscal 2023 and 2022, we received advance payments from insurers totaling approximately $8 million and $7 million, respectively, towards our claims, and not reflecting any final or full settlement of claims with the insurers, which amounts reduced the insurance receivable to $5 million and $10 million as of May 31, 2023 and August 31, 2022, respectively. The insurance receivable is reported within prepaid expenses and other current assets in 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.

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, restructuring charges and other exit-related activities, business development costs not related to ongoing operations including pre-acquisition expenses, charges related to non-ordinary course legal settlements, 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.

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SCHNITZER STEEL INDUSTRIES, INC.

Financial Highlights of Results of Operations for the Third Quarter of Fiscal 2023

Market conditions for recycled metals were weaker in the third quarter of fiscal 2023 compared to the prior year quarter, leading to lower average net selling prices for our ferrous and nonferrous products, and a compression in metal spreads. The average net selling prices for our ferrous and nonferrous products decreased by 24% and 10%, respectively, compared to the third quarter of fiscal 2022. Ferrous and nonferrous sales volumes increased by 2% and 3%, respectively, compared to the prior year quarter, primarily reflecting additional volumes arising from our two business acquisitions completed in April and November 2022, as well as the impact on prior year quarterly ferrous sales volumes of delays in contracting and shipping bulk cargoes. Market conditions for our finished steel products were softer in the third quarter of fiscal 2023, leading to finished steel average selling prices decreasing 18% and lower metal spreads compared to the prior year quarter. Our results in the third quarter of fiscal 2023 also reflected tighter supply flows and reduced processed volumes in the lower price environment, lower year-over-year platinum group metals (PGM) prices, and a less favorable impact from average inventory accounting compared to the prior year quarter. In the third quarter of fiscal 2023, we achieved the full quarterly run rate of $10 million of productivity initiatives announced in October 2022 and the full quarterly run rate of $5 million of selling, general, and administrative (“SG&A”) savings initiatives announced in January 2023, which helped to offset the effects of higher operating costs including from inflationary pressure.

SG&A expense in the third quarter of fiscal 2023 decreased by 12% compared to the prior year quarter reflecting lower incentive compensation accruals due to Company performance, partially offset by higher legacy environmental charges and legal costs. Productivity and cost reduction initiatives substantially offset the impact of inflation and growth-related initiatives on our SG&A expense.

The following items highlight selected liquidity and capital structure metrics:

See the reconciliations of adjusted diluted earnings per share from continuing operations attributable to SSI shareholders, adjusted EBITDA, and debt, net of cash in Non-GAAP Financial Measures at the end of this Item 2.

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SCHNITZER STEEL INDUSTRIES, INC.

Results of Operations

Selected Financial Measures and Operating Statistics

		Three Months Ended May 31,												Nine Months Ended May 31,
($ in thousands, except for prices and per share amounts)		2023				2022				%				2023				2022				%
Ferrous revenues		$	405,350			$	530,303				(24	)%		$	1,101,201			$	1,434,473				(23	)%
Nonferrous revenues			222,904				272,208				(18	)%			580,234				662,779				(12	)%
Steel revenues(1)			137,426				165,210				(17	)%			369,766				384,644				(4	)%
Retail and other revenues			43,930				42,366				4	%			113,092				109,507				3	%
Total revenues			809,610				1,010,087				(20	)%			2,164,293				2,591,403				(16	)%
Cost of goods sold			713,685				834,375				(14	)%			1,946,633				2,188,158				(11	)%
Gross margin (total revenues less cost of goods sold)		$	95,925			$	175,712				(45	)%		$	217,660			$	403,245				(46	)%
Gross margin (%)			11.8	%			17.4	%			(32	)%			10.1	%			15.6	%			(35	)%
Selling, general and administrative expense		$	68,527			$	77,672				(12	)%		$	196,712			$	194,020				1	%
Diluted earnings per share from continuing operations attributable to SSI shareholders:
Reported		$	0.48			$	2.52				(81	)%		$	—			$	5.33			NM
Adjusted(2)		$	0.67			$	2.59				(74	)%		$	0.38			$	5.54				(93	)%
Net income		$	13,608			$	75,504				(82	)%		$	324			$	160,945				(100	)%
Adjusted EBITDA(2)		$	55,610			$	119,090				(53	)%		$	95,822			$	272,435				(65	)%
Average ferrous recycled metal sales prices ($/LT)(3):
Domestic		$	414			$	516				(20	)%		$	365			$	458				(20	)%
Foreign		$	414			$	552				(25	)%		$	380			$	484				(21	)%
Average		$	413			$	541				(24	)%		$	376			$	477				(21	)%
Ferrous volumes (LT, in thousands):
Domestic(4)			548				490				12	%			1,424				1,329				7	%
Foreign			609				639				(5	)%			1,846				2,020				(9	)%
Total ferrous volumes (LT, in thousands)(4)(8)			1,157				1,129				2	%			3,270				3,349				(2	)%
Average nonferrous sales price ($/pound)(3)(5)		$	1.01			$	1.12				(10	)%		$	0.97			$	1.10				(12	)%
Nonferrous volumes (pounds, in thousands)(4)(5)			207,714				201,413				3	%			535,230				501,785				7	%
Finished steel average sales price ($/ST)(3)		$	924			$	1,129				(18	)%		$	959			$	1,059				(9	)%
Finished steel sales volumes (ST, in thousands)			142				135				5	%			369				340				9	%
Cars purchased (in thousands)(6)			78				84				(7	)%			219				237				(8	)%
Number of auto parts stores at period end			50				50				(—	)%			50				50				(—	)%
Rolling mill utilization(7)			97	%			96	%			1	%			84	%			87	%			(3	)%

 

NM = Not Meaningful

LT = Long Ton, which is equivalent to 2,240 pounds. ST = Short Ton, which is equivalent to 2,000 pounds.

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Revenues

Revenues in the third quarter and first nine months of fiscal 2023 decreased by 20% and 16%, respectively, compared to the prior year periods primarily due to lower average net selling prices for our ferrous and nonferrous products driven by weaker market conditions for recycled metals globally. In the third quarter and first nine months of fiscal 2023, the average net selling prices for our ferrous products decreased by 24% and 21%, respectively, and for our nonferrous products decreased by 10% and 12%, respectively, compared to the prior year periods. Ferrous sales volumes in the third quarter and first nine months of fiscal 2023 increased by 2% and decreased by 2%, respectively, and nonferrous sales volumes increased by 3% and 7%, respectively, compared to the prior year periods. Our ferrous and nonferrous sales volumes in the fiscal 2023 periods in part reflected additional volumes arising from the Columbus Recycling business acquired on October 1, 2021, the Encore Recycling business acquired on April 29, 2022, and the ScrapSource business acquired on November 18, 2022, as well as the adverse impact on sales volumes in the prior year periods of the initial Everett shredder downtime. Our ferrous sales volumes in the first nine months of fiscal 2023 were adversely impacted by disruptions related to an extended shredder outage at the Everett facility and a regulatory issue limiting operations at our shredder facility in California, both of which were resolved by mid-November 2022, as well as tight supply flows in the lower price environment. Market conditions for our finished steel products were softer in the third quarter and first nine months of fiscal 2023, leading to finished steel average selling prices decreasing 18% and 9%, respectively, compared to the prior year periods. Finished steel sales volumes increased 9% in the first nine months of fiscal 2023, compared to the prior year period, primarily reflecting the impact on the prior period volumes of the ramp up of steel mill operations that began in August 2021 and which was substantially completed during the second quarter of fiscal 2022. The ramp-up of steel mill operations during the first half of fiscal 2022 followed completion of repair and replacement of damaged property arising from the May 2021 steel mill fire.

Operating Performance

Net income in the third quarter and first nine months of fiscal 2023 was $14 million and near breakeven, respectively, compared to net income of $76 million and $161 million, respectively, in the prior year periods. Adjusted EBITDA in the third quarter and first nine months of fiscal 2023 was $56 million and $96 million, respectively, compared to $119 million and $272 million, respectively, in the prior year periods. The lower price environment for recycled metals, as well as the impact of tight supply flows, reduced processed volumes, and the extended operational disruptions in the first quarter of fiscal 2023, had a significant adverse impact on our operating margins and overall operating results in the first nine months of fiscal 2023. Ferrous metal spreads in the third quarter and first nine months of fiscal 2023 decreased by approximately 32% and 25%, respectively, compared to the prior year periods. Finished steel metal spreads were also lower in the third quarter and first nine months of fiscal 2023 compared to the prior year periods. Our results in the third quarter and first nine months of fiscal 2023 also reflected lower year-over-year PGM prices, recognized fair value losses related to an equity investment, and the impact of inflation on operating costs. The impact from average inventory accounting was less favorable in the third quarter, but more favorable in the first nine months, of fiscal 2023, compared to the prior year periods.

SG&A expense in the third quarter and first nine months of fiscal 2023 decreased by 12% and increased by 1%, respectively, compared to the prior year periods. The fiscal 2023 periods reflected lower incentive compensation accruals due to Company performance, partially offset by higher legacy environmental charges and legal costs compared to the fiscal 2022 periods. SG&A expense in the first nine months of fiscal 2023 also reflected higher salaries and wages, outside and professional services, and travel expenses, partially resulting from our acquisitions and other growth-related initiatives, and the impact of inflation. The higher expenses in the first nine months of fiscal 2023 were partially offset by benefits from productivity and cost reduction initiatives when compared to the prior year period.

In October 2022, we announced and began implementing productivity and cost reduction initiatives with a targeted annual benefit of approximately $40 million, the vast majority of which is expected to be achieved in fiscal 2023. In addition, in January 2023, we announced incremental initiatives aiming to reduce SG&A costs by approximately $20 million annually, of which approximately two-thirds is expected to be achieved in fiscal 2023. These initiatives aim to improve profitability through a combination of increased yields, efficiencies in processing, procurement, and pricing, and reduced costs including from headcount reductions, decreased lease costs, professional and outside services, and implementation of operational efficiencies. In the third quarter of fiscal 2023, we achieved the full quarterly run rate of benefits from these initiatives, and others implemented during fiscal 2022, which 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 and $13 million, respectively, for the third quarter and first nine months of fiscal 2023, compared to $2 million and $5 million for the same periods in the prior year. The increase in interest expense was primarily due to higher interest rates on amounts outstanding under our bank credit facilities, as well as increased average borrowings, compared to the prior year periods.

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Income Tax

The effective tax rate from continuing operations for the third quarter and first nine months of fiscal 2023 was an expense on pre-tax income of 34.3% and 62.7%, respectively, compared to 21.0% and 21.2%, respectively, for the comparable prior year periods. Our effective tax rate from continuing operations for the third quarter of fiscal 2023 was higher than the U.S. federal statutory rate of 21% primarily due to the aggregate effect of permanent differences from non-deductible expenses and also unrecognized tax benefits on intra-period allocation. For the first nine months of fiscal 2023, the higher-than-statutory effective tax rate primarily reflected our near-breakeven financial performance for the period. For the third quarter and first nine months of fiscal 2022, our effective tax rate approximated the U.S. federal statutory rate reflecting primarily the aggregate impact of state taxes and permanent differences from non-deductible expenses on the projected annual effective tax rate applied to the quarterly results, offset by discrete tax benefits resulting from vesting of share-based awards in the applicable periods and the favorable effects of other discrete items.

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 $5 million and $44 million as of May 31, 2023 and August 31, 2022, 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 May 31, 2023, debt was $351 million compared to $249 million as of August 31, 2022, and debt, net of cash, was $346 million as of May 31, 2023, compared to $205 million as of August 31, 2022, which increases were primarily due to increased borrowings from our credit facilities to fund capital expenditures, higher net working capital needs, and the acquisition of the ScrapSource business on November 18, 2022. See the reconciliation of debt, net of cash, in Non-GAAP Financial Measures at the end of this Item 2.

Operating Activities

Net cash provided by operating activities in the first nine months of fiscal 2023 was $5 million, compared to $58 million in the first nine months of fiscal 2022.

Sources of cash other than from earnings in the first nine months of fiscal 2023 included a $23 million decrease in inventories primarily due to lower raw material purchase costs and the timing of purchases and sales, a $10 million increase in accounts payable primarily due to the timing of purchases and payments, and a $10 million increase in other accrued liabilities due in part to receipt of additional advance payments from insurers towards our claims arising from the May 2021 steel mill fire. Uses of cash in the first nine months of fiscal 2023 included a $71 million increase in accounts receivable primarily due to the timing of sales and collections and a $30 million decrease in accrued payroll and related liabilities primarily due to the payment of incentive compensation in the first quarter of fiscal 2023 previously accrued under our fiscal 2022 plans.

Sources of cash other than from earnings in the first nine months of fiscal 2022 included a $45 million increase in accounts payable primarily due to higher raw material purchase prices and the timing of purchases and payments and a $9 million increase in income tax accruals. Uses of cash in the first nine months of fiscal 2022 included a $164 million increase in inventories due to higher raw material purchase costs and the timing of purchases and sales, a $43 million increase in accounts receivable primarily due to higher selling prices for most of our products, as well as the timing of sales and collections, a $17 million decrease in accrued payroll and related liabilities primarily due to the payment of incentive compensation in the first quarter of fiscal 2022 previously accrued under our fiscal 2021 plans, and a $15 million decrease in environmental liabilities primarily due to payments in connection with legacy environmental matters. The sources and uses of cash related to operating activities described above also reflect higher net working capital needs during the ramp-up of steel mill operations that began in August 2021 following completion of repair and replacement of damaged property arising from the May 2021 steel mill fire.

Investing Activities

Net cash used in investing activities was $117 million in the first nine months of fiscal 2023, compared to $262 million in the first nine months of fiscal 2022.

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Cash used in investing activities in the first nine 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. See Note 3 - Business Acquisitions in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further detail. Cash used in investing activities also included capital expenditures of $101 million to upgrade our equipment and infrastructure and for investments in advanced metals recovery technology and environmental and safety-related assets, compared to $98 million in the prior year period. Cash flows from investing activities in the first nine months of fiscal 2023 included proceeds of $8 million representing the portion of advance payments from insurers deemed a recovery of capital purchases incurred for repair and replacement of damaged property arising from the December 2021 Everett facility shredder fire, compared to such proceeds totaling $17 million in the prior year period in connection with our insurance claims relating to the May 2021 steel mill fire and the December 2021 Everett facility shredder fire.

Cash used in investing activities in the first nine months of fiscal 2022 included $114 million paid to acquire the assets of the Columbus Recycling business on October 1, 2021, which amount included $7 million paid at closing for estimated net working capital in excess of an agreed-upon benchmark, and also included $63 million paid to acquire the assets of the Encore Recycling business on April 29, 2022, which amount included $8 million paid at closing for estimated net working capital in excess of an agreed-upon benchmark. We funded these acquisitions using cash on hand and borrowings under our existing credit facilities. Cash used in investing activities in the first nine months of fiscal 2022 also included the purchase of an investment in the equity of a privately-held Canadian recycling entity for $5 million.

Financing Activities

Net cash provided by financing activities in the first nine months of fiscal 2023 was $74 million, compared to $192 million in the first nine months of fiscal 2022.

Cash flows from financing activities in the first nine months of fiscal 2023 included $99 million in net borrowings of debt, compared to $240 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 nine months of fiscal 2023 and 2022 included $8 million and $11 million, respectively, for payment of employee tax withholdings resulting from settlement of share-based awards and $16 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.

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 $330 million as of May 31, 2023 and $230 million as of August 31, 2022. The weighted average interest rate on amounts outstanding under our credit facilities was 6.72% and 3.65% as of May 31, 2023 and August 31, 2022, respectively.

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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 May 31, 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 2.64 to 1.00 as of May 31, 2023. The consolidated leverage ratio was required to be no more than 0.55 to 1.00 and was 0.28 to 1.00 as of May 31, 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 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 $13 million as of both May 31, 2023 and August 31, 2022, respectively, 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 $101 million for the first nine months of fiscal 2023, compared to $98 million for the prior year period. Capital expenditures in the first nine months of fiscal 2023 included approximately $27 million for investments in growth. We currently plan to invest in the range of $110 million to $120 million in capital expenditures in fiscal 2023, which range excludes capital expenditures associated with the ongoing repair and replacement of the shredder enclosure building damaged by the fire at our Everett facility, as these expenditures are expected to be substantially recovered through insurance. 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 and infrastructure 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.

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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 $19 million in capital expenditures for environmental projects in the first nine months of fiscal 2023, and we currently plan to invest in the range of $30 million to $40 million for such projects in fiscal 2023. 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 Qualified Settlement Funds ("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 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 April 5, 2023, our Board of Directors declared a dividend for the third quarter of fiscal 2023 of $0.1875 per common share, which equates to an annual cash dividend of $0.75 per common share. The dividend was paid on May 8, 2023.

Share Repurchase Program

As of May 31, 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 nine months of fiscal 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, 2022.

We maintain stand-by letters of credit to provide support for certain obligations, including workers’ compensation and performance bonds. As of May 31, 2023, we had $7 million outstanding under these arrangements.

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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, 2022.

Recently Issued Accounting Standards

We have not identified any recent accounting pronouncements that are expected to have a material impact on our financial condition, results of operations, or cash flows upon adoption.

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):

 

		May 31, 2023				August 31, 2022
Short-term borrowings		$	6,724			$	6,041
Long-term debt, net of current maturities			344,084				242,521
Total debt			350,808				248,562
Less cash and cash equivalents			4,511				43,803
Total debt, net of cash		$	346,297			$	204,759

 

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):

 

		Nine Months Ended May 31,
		2023				2022
Borrowings from long-term debt		$	501,761			$	895,175
Repayments of long-term debt			(403,129	)			(655,440	)
Net borrowings (repayments) of debt		$	98,632			$	239,735

 

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Adjusted EBITDA, adjusted selling, general, and administrative expense, adjusted income from continuing operations attributable to SSI shareholders, and adjusted diluted earnings per share from continuing operations attributable to SSI shareholders

Management believes that providing these non-GAAP financial measures adds a meaningful presentation of our results from business operations excluding charges for legacy environmental matters (net of recoveries), asset impairment charges, adjustments for restructuring charges and other exit-related activities, business development costs not related to ongoing operations including pre-acquisition expenses, charges related to non-ordinary course legal settlements, 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 income to adjusted EBITDA and adjusted selling, general, and administrative expense (in thousands):

 

		Three Months Ended May 31,								Nine Months Ended May 31,
		2023				2022				2023				2022
Reconciliation of adjusted EBITDA:
Net income		$	13,608			$	75,504			$	324			$	160,945
Loss from discontinued operations, net of tax			233				46				78				46
Interest expense			5,146				2,223				13,378				5,496
Income tax expense			7,221				20,037				676				43,207
Depreciation and amortization			22,540				18,750				66,390				54,566
Charges for legacy environmental matters, net(1)			5,167				62				6,523				4,522
Asset impairment charges(2)			1,455				932				5,455				932
Restructuring charges and other exit-related activities			169				26				2,589				52
Business development costs			71				920				409				2,079
Charges related to legal settlements(3)			—				590				—				590
Adjusted EBITDA		$	55,610			$	119,090			$	95,822			$	272,435
Selling, general and administrative expense:
As reported		$	68,527			$	77,672			$	196,712			$	194,020
Charges for legacy environmental matters, net(1)			(5,167	)			(62	)			(6,523	)			(4,522	)
Business development costs			(71	)			(920	)			(409	)			(2,079	)
Adjusted		$	63,289			$	76,690			$	189,780			$	187,419

 

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Following are reconciliations of adjusted income from continuing operations attributable to SSI shareholders and adjusted diluted earnings per share from continuing operations attributable to SSI shareholders (in thousands, except per share data):

 

		Three Months Ended May 31,								Nine Months Ended May 31,
		2023				2022				2023				2022
Income from continuing operations attributable to SSI shareholders:
As reported		$	13,693			$	74,680			$	103			$	158,494
Charges for legacy environmental matters, net(1)			5,167				62				6,523				4,522
Asset impairment charges(2)			1,455				932				5,455				932
Restructuring charges and other exit-related activities			169				26				2,589				52
Business development costs			71				920				409				2,079
Charges related to legal settlements(3)			—				590				—				590
Income tax benefit allocated to adjustments(4)			(1,324	)			(557	)			(4,189	)			(1,879	)
Adjusted		$	19,231			$	76,653			$	10,890			$	164,790
Diluted earnings per share from continuing operations attributable to SSI shareholders:
As reported		$	0.48			$	2.52			$	—			$	5.33
Charges for legacy environmental matters, net, per share(1)			0.18				—				0.23				0.15
Asset impairment charges, per share(2)			0.05				0.03				0.19				0.03
Restructuring charges and other exit-related activities, per share			0.01				—				0.09				—
Business development costs, per share			—				0.03				0.01				0.07
Charges related to legal settlements, per share(3)			—				0.02				—				0.02
Income tax benefit allocated to adjustments, per share(4)			(0.05	)			(0.02	)			(0.15	)			(0.06	)
Adjusted(5)		$	0.67			$	2.59			$	0.38			$	5.54

 

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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 May 31, 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, 2022.

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 May 31, 2023 and August 31, 2022, 35% and 24%, 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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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. Consistent with guidance issued by the Securities and Exchange Commission that an assessment of internal controls over financial reporting of a recently acquired business may be omitted from management's evaluation of disclosure controls and procedures, management is excluding an assessment of the internal controls of the ScrapSource business, which we acquired on November 18, 2022, from its evaluation of the effectiveness of our disclosure controls and procedures. The ScrapSource business represented less than 2% of our consolidated total assets and less than 1% of our consolidated total revenues as of and for the nine months ended May 31, 2023. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of May 31, 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 May 31, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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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, 2022; and in Part II, “Item 1. Legal Proceedings” in our Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2023. Also see 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.

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, 2022.

ITEM 5. OTHER INFORMATION

On June 27, 2023, Schnitzer Steel Industries, Inc. (the “Company”) announced that Michael R. Henderson plans to retire from his position as the Company’s Senior Vice President and President, Operations, effective July 21, 2023 or such earlier date as agreed by the Company and Mr. Henderson.

On June 27, 2023, the Company and Mr. Henderson entered into a separation agreement (the “Separation Agreement”) under which Mr. Henderson will provide consulting services to the Company for up to a one-year period following his retirement (the “Consulting Term”). In consideration of the consulting services, the Company will pay Mr. Henderson a fee in the form of salary continuation payments at Mr. Henderson’s current annualized salary rate through the end of the Consulting Term. Additionally, in consideration of Mr. Henderson’s agreement to a customary release of claims and certain restrictive covenants pursuant to the Separation Agreement, the Company will provide Mr. Henderson with approximately $20,000 in Company-paid COBRA continuation coverage. In accordance with Mr. Henderson’s retirement eligible status under the Company’s incentive plans, the Separation Agreement reflects that Mr. Henderson’s equity awards will vest and be settled to the extent provided in accordance with their existing terms and Mr. Henderson will be entitled to receive a pro-rated annual bonus for the 2023 fiscal year.

 

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ITEM 6. EXHIBITS

 

Exhibit Number		Exhibit Description
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		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.
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		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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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.

 

				SCHNITZER STEEL INDUSTRIES, INC.
				(Registrant)
Date:		June 27, 2023		By:		/s/ Tamara L. Lundgren
						Tamara L. Lundgren
						Chairman, President and Chief Executive Officer
Date:		June 27, 2023		By:		/s/ Stefano R. Gaggini
						Stefano R. Gaggini
						Senior Vice President and Chief Financial Officer

 

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