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.

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 ~~26,943,066~~27,253,708 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 January ~~6, 2020~~4, 2021.

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 ~~trends, cyclicality and changes in~~ the ~~markets we sell into;~~impact of pandemics, epidemics or other public health emergencies, such as the coronavirus disease 2019 (“COVID-19”) pandemic; the Company’s outlook, growth initiatives or expected results or objectives, including pricing, margins, sales volumes and profitability; 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 realization of deferred tax assets; planned capital expenditures; liquidity positions; our ability to generate cash from continuing operations;~~ the potential impact of adopting new accounting pronouncements; obligations under our retirement plans; benefits, savings or additional costs from business realignment, cost containment and productivity improvement programs; and the adequacy of accruals.

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

We may make other forward-looking statements from time to time, including in reports filed with the Securities and Exchange Commission, press releases, presentations and on public conference calls. All forward-looking statements we make are based on information available to us at the time the statements are made, and we assume no obligation to update any forward-looking statements, except as may be required by law. Our business is subject to the effects of changes in domestic and global economic conditions and a number of other risks and uncertainties that could cause actual results to differ materially from those included in, or implied by, such forward-looking statements. Some of these risks and uncertainties are discussed in “Item 1A. Risk Factors” of Part I of our most recent Annual Report on Form 10-K, as supplemented by our subsequently filed Quarterly Reports on Form 10-Q. Examples of these risks include: the impact of pandemics, epidemics or other public health emergencies, such as the COVID-19 pandemic; potential environmental cleanup costs related to the Portland Harbor Superfund site or other locations; the cyclicality and impact of general economic conditions; changing conditions in global markets including the impact of sanctions and tariffs, quotas and other trade actions and import restrictions; volatile supply and demand conditions affecting prices and volumes in the markets for ~~both our products and~~ raw materials and other inputs we purchase; significant decreases in scrap metal prices; imbalances in supply and demand conditions in the global steel industry; the impact of goodwill impairment charges; the impact of long-lived asset and equity investment impairment charges; failure to realize or delays in realizing expected benefits from investments in processing and manufacturing technology improvements; inability to achieve or sustain the benefits from productivity, cost savings and restructuring initiatives; ~~inability to realize or delays in realizing expected benefits from investments in technology;~~ inability to renew facility leases; difficulties associated with acquisitions and integration of acquired businesses; customer fulfillment of their contractual obligations; increases in the relative value of the U.S. dollar; the impact of foreign currency fluctuations; potential limitations on our ability to access capital resources and existing credit facilities; restrictions on our business and financial covenants under the agreement governing our bank credit ~~agreement;~~facilities; the impact of consolidation in the steel industry; reliance on third party shipping companies, including with respect to freight rates and the availability of transportation; the impact of equipment upgrades, equipment failures and facility damage on production; 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 property tax increases or property tax rate changes; the impact of one or more cybersecurity incidents; environmental compliance costs and potential environmental liabilities; inability to obtain or renew business licenses and permits; compliance with climate change and greenhouse gas emission laws and regulations; reliance on employees subject to collective bargaining agreements; and the impact of the underfunded status of multiemployer plans in which we participate.

	November 30, 2019			August 31, 2019			November 30, 2020			August 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	9,624		$	12,377		$	7,258		$	17,887
Accounts receivable, net of allowance for doubtful accounts of $1,601 and $1,569		115,012			145,617
Accounts receivable, net of allowance for credit losses of $1,602 and $1,593								166,215			139,147
Inventories		177,934			187,320			185,347			157,269
Refundable income taxes		5,777			5,867			13,398			18,253
Prepaid expenses and other current assets		31,533			115,107			28,812			30,075
Total current assets		339,880			466,288			401,030			362,631
Property, plant and equipment, net of accumulated depreciation of $776,514 and $766,033		456,714			456,400
Property, plant and equipment, net of accumulated depreciation of $823,092 and $811,623								495,376			487,004
Operating lease right-of-use assets		124,458			—			140,320			140,584
Investments in joint ventures		10,434			10,276			10,930			10,057
Goodwill		169,292			169,237			169,686			169,627
Intangibles, net of accumulated amortization of $2,995 and $3,116		3,811			4,482
Intangibles, net of accumulated amortization of $3,392 and $3,528								4,434			4,585
Deferred income taxes		28,297			28,850			26,083			27,152
Other assets		25,706			25,213			29,674			28,287
Total assets	$	1,158,592		$	1,160,746		$	1,277,533		$	1,229,927
Liabilities and Equity
Current liabilities:
Short-term borrowings	$	1,431		$	1,321		$	2,171		$	2,184
Accounts payable		72,172			110,297			116,507			106,676
Accrued payroll and related liabilities		16,392			27,547			24,871			41,436
Environmental liabilities		5,576			6,030			7,620			6,302
Operating lease liabilities		18,824			—			19,901			19,760
Other accrued liabilities		43,036			123,035			42,350			47,306
Total current liabilities		157,431			268,230			213,420			223,664
Deferred income taxes		22,232			25,466			41,840			38,292
Long-term debt, net of current maturities		126,875			103,775			141,172			102,235
Environmental liabilities, net of current portion		45,778			45,769			47,105			47,162
Operating lease liabilities, net of current maturities		107,801			—			124,225			125,001
Other long-term liabilities		13,439			16,210			21,223			13,137
Total liabilities		473,556			459,450			588,985			549,491
Commitments and contingencies (Note 5)
Commitments and contingencies (Note 4)
Schnitzer Steel Industries, Inc. (“SSI”) shareholders’ equity:
Preferred stock – 20,000 shares $1.00 par value authorized, NaN issued		—			—			0			0
Class A common stock – 75,000 shares $1.00 par value authorized, 26,943 and 26,464 shares issued and outstanding		26,943			26,464
Class A common stock – 75,000 shares $1.00 par value authorized, 27,254 and 26,899 shares issued and outstanding								27,254			26,899
Class B common stock – 25,000 shares $1.00 par value authorized, 200 and 200 shares issued and outstanding		200			200			200			200
Additional paid-in capital		29,528			33,700			35,310			36,616
Retained earnings		662,707			675,363			658,710			649,863
Accumulated other comprehensive loss		(38,525	)		(38,763	)		(36,892	)		(36,871	)
Total SSI shareholders’ equity		680,853			696,964			684,582			676,707
Noncontrolling interests		4,183			4,332			3,966			3,729
Total equity		685,036			701,296			688,548			680,436
Total liabilities and equity	$	1,158,592		$	1,160,746		$	1,277,533		$	1,229,927

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

Three Months Ended November 30,

2019

2018

Revenues

$
405,584

$
564,020

Operating expense:

Cost of goods sold

364,760

490,132

Selling, general and administrative

46,774

51,419

(Income) from joint ventures

(199
)

(485
)
Asset impairment charges

1,692

63

Restructuring charges and other exit-related activities

467

202

Operating (loss) income

(7,910
)

22,689

Interest expense

(1,423
)

(1,906
)
Other income, net

206

23

(Loss) income from continuing operations before income taxes

(9,127
)

20,806

Income tax benefit (expense)

2,534

(4,116
)
(Loss) income from continuing operations

(6,593
)

16,690

Income (loss) from discontinued operations, net of tax

28

(72
)
Net (loss) income

(6,565
)

16,618

Net income attributable to noncontrolling interests

(430
)

(430
)
Net (loss) income attributable to SSI shareholders

$
(6,995
)

$
16,188

Net (loss) income per share attributable to SSI shareholders:

Basic:

(Loss) income per share from continuing operations

$
(0.26
)

$
0.59

Income (loss) per share from discontinued operations

—

—

Net (loss) income per share⁽¹⁾

$
(0.25
)

$
0.59

Diluted:

(Loss) income per share from continuing operations

$
(0.26
)

$
0.57

Income (loss) per share from discontinued operations

—

—

Net (loss) income per share⁽¹⁾

$
(0.25
)

$
0.57

Weighted average number of common shares:

Basic

27,515

27,505

Diluted

27,515

28,364

	Three Months Ended November 30,
	2020			2019
Revenues	$	492,107		$	405,584
Operating expense:
Cost of goods sold		420,094			364,760
Selling, general and administrative		49,906			46,774
(Income) from joint ventures		(727	)		(199	)
Asset impairment charges		—			1,692
Restructuring charges and other exit-related activities		64			467
Operating income (loss)		22,770			(7,910	)
Interest expense		(1,780	)		(1,423	)
Other (loss) income, net		(165	)		206
Income (loss) from continuing operations before income taxes		20,825			(9,127	)
Income tax (expense) benefit		(5,719	)		2,534
Income (loss) from continuing operations		15,106			(6,593	)
(Loss) income from discontinued operations, net of tax		(42	)		28
Net income (loss)		15,064			(6,565	)
Net income attributable to noncontrolling interests		(960	)		(430	)
Net income (loss) attributable to SSI shareholders	$	14,104		$	(6,995	)

Net income (loss) per share attributable to SSI shareholders:
Basic:
Income (loss) per share from continuing operations	$	0.51		$	(0.26	)
Net income (loss) per share	$	0.51		$	(0.25	)
Diluted:
Income (loss) per share from continuing operations	$	0.50		$	(0.26	)
Net income (loss) per share	$	0.50		$	(0.25	)
Weighted average number of common shares:
Basic		27,807			27,515
Diluted		28,485			27,515

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

Common Stock

Accumulated

Class A

Class B

Additional

Other

Total SSI

Three Months Ended November 30, 2018

Shares

Amount

Shares

Amount

Paid-in
Capital

Retained
Earnings

Comprehensive
Loss

Shareholders'
Equity

Noncontrolling
Interests

Total
Equity

Balance as of September 1, 2018

26,502

$
26,502

200

$
200

$
36,929

$
639,684

$
(37,237
)

$
666,078

$
4,032

$
670,110

Net income

—

—

—

—

—

16,188

—

16,188

430

16,618

Other comprehensive loss, net of tax

—

—

—

—

—

—

(1,162
)

(1,162
)

—

(1,162
)
Distributions to noncontrolling interests

—

—

—

—

—

—

—

—

(393
)

(393
)
Share repurchases

(150
)

(150
)

—

—

(3,945
)

—

—

(4,095
)

—

(4,095
)
Restricted stock withheld for taxes

(276
)

(276
)

—

—

(7,046
)

—

—

(7,322
)

—

(7,322
)
Issuance of restricted stock

750

750

—

—

(750
)

—

—

—

—

—

Share-based compensation expense

—

—

—

—

7,404

—

—

7,404

—

7,404

Dividends ($0.1875 per common share)

—

—

—

—

—

(5,177
)

—

(5,177
)

—

(5,177
)
Balance as of November 30, 2018

26,826

$
26,826

200

$
200

$
32,592

$
650,695

$
(38,399
)

$
671,914

$
4,069

$
675,983

	Common Stock																Accumulated
	Class A						Class B				Additional						Other			Total SSI
Three Months Ended November 30, 2019	Shares			Amount			Shares		Amount		Paid-in Capital			Retained Earnings			Comprehensive Loss			Shareholders' Equity			Noncontrolling Interests			Total Equity
Balance as of August 31, 2019		26,464		$	26,464			200	$	200	$	33,700		$	675,363		$	(38,763	)	$	696,964		$	4,332		$	701,296
Cumulative effect on adoption of new accounting guidance for leases, net of tax		—			—			—		—		—			(463	)		—			(463	)		—			(463	)
Balance as of September 1, 2019		26,464			26,464			200		200		33,700			674,900			(38,763	)		696,501			4,332			700,833
Net (loss) income		—			—			—		—		—			(6,995	)		—			(6,995	)		430			(6,565	)
Other comprehensive income, net of tax		—			—			—		—		—			—			238			238			—			238
Distributions to noncontrolling interests		—			—			—		—		—			—			—			—			(579	)		(579	)
Restricted stock withheld for taxes		(274	)		(274	)		—		—		(5,571	)		—			—			(5,845	)		—			(5,845	)
Issuance of restricted stock		753			753			—		—		(753	)		—			—			—			—			—
Share-based compensation cost		—			—			—		—		2,152			—			—			2,152			—			2,152
Dividends ($0.1875 per common share)		—			—			—		—		—			(5,198	)		—			(5,198	)		—			(5,198	)
Balance as of November 30, 2019		26,943		$	26,943			200	$	200	$	29,528		$	662,707		$	(38,525	)	$	680,853		$	4,183		$	685,036

Common Stock

Accumulated

Class A

Class B

Additional

Other

Total SSI

Three Months Ended November 30, 2019

Shares

Amount

Shares

Amount

Paid-in
Capital

Retained
Earnings

Comprehensive
Loss

Shareholders'
Equity

Noncontrolling
Interests

Total
Equity

Balance as of August 31, 2019

26,464

$
26,464

200

$
200

$
33,700

$
675,363

$
(38,763
)

$
696,964

$
4,332

$
701,296

Cumulative effect on adoption of new
accounting guidance for leases, net of tax

—

—

—

—

—

(463
)

—

(463
)

—

(463
)
Balance as of September 1, 2019

26,464

26,464

200

200

33,700

674,900

(38,763
)

696,501

4,332

700,833

Net (loss) income

—

—

—

—

—

(6,995
)

—

(6,995
)

430

(6,565
)
Other comprehensive income, net of tax

—

—

—

—

—

—

238

238

—

238

Distributions to noncontrolling interests

—

—

—

—

—

—

—

—

(579
)

(579
)
Restricted stock withheld for taxes

(274
)

(274
)

—

—

(5,571
)

—

—

(5,845
)

—

(5,845
)
Issuance of restricted stock

753

753

—

—

(753
)

—

—

—

—

—

Share-based compensation expense

—

—

—

—

2,152

—

—

2,152

—

2,152

Dividends ($0.1875 per common share)

—

—

—

—

—

(5,198
)

—

(5,198
)

—

(5,198
)
Balance as of November 30, 2019

26,943

$
26,943

200

$
200

$
29,528

$
662,707

$
(38,525
)

$
680,853

$
4,183

$
685,036

	Common Stock																Accumulated
	Class A						Class B				Additional						Other			Total SSI
Three Months Ended November 30, 2020	Shares			Amount			Shares		Amount		Paid-in Capital			Retained Earnings			Comprehensive Loss			Shareholders' Equity			Noncontrolling Interests			Total Equity
Balance as of September 1, 2020		26,899		$	26,899			200	$	200	$	36,616		$	649,863		$	(36,871	)	$	676,707		$	3,729		$	680,436
Net income (loss)		—			—			—		—		—			14,104			—			14,104			960			15,064
Other comprehensive income, net of tax		—			—			—		—		—			—			(21	)		(21	)		—			(21	)
Distributions to noncontrolling interests		—			—			—		—		—			—			—			—			(723	)		(723	)
Restricted stock withheld for taxes		(188	)		(188	)		—		—		(3,782	)		—			—			(3,970	)		—			(3,970	)
Issuance of restricted stock		543			543			—		—		(543	)		—			—			—			—			—
Share-based compensation cost		—			—			—		—		3,019			—			—			3,019			—			3,019
Dividends ($0.1875 per common share)		—			—			—		—		—			(5,257	)		—			(5,257	)		—			(5,257	)
Balance as of November 30, 2020		27,254		$	27,254			200	$	200	$	35,310		$	658,710		$	(36,892	)	$	684,582		$	3,966		$	688,548

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

	Three Months Ended November 30,						Three Months Ended November 30,
	2019			2018			2020			2019
Cash flows from operating activities:
Net (loss) income	$	(6,565	)	$	16,618
Adjustments to reconcile net (loss) income to cash provided by (used in) operating activities:
Net income (loss)							$	15,064		$	(6,565	)
Adjustments to reconcile net income (loss) to cash (used in) provided by operating activities:
Asset impairment charges		1,692			63			—			1,692
Exit-related asset impairments		117			23			—			117
Depreciation and amortization		14,087			13,297			14,826			14,087
Deferred income taxes		(2,456	)		(697	)		4,770			(2,456	)
Undistributed equity in earnings of joint ventures		(199	)		(485	)		(727	)		(199	)
Share-based compensation expense		2,152			7,404			2,984			2,152
(Gain) loss on the disposal of assets, net		(386	)		255
Unrealized foreign exchange gain, net		(16	)		—
Bad debt expense (recoveries), net		32			(1	)
Gain on the disposal of assets, net								(61	)		(386	)
Unrealized foreign exchange loss (gain), net								82			(16	)
Credit loss, net								33			32
Changes in assets and liabilities, net of acquisitions:
Accounts receivable		28,202			(28,046	)		(29,116	)		28,202
Inventories		11,870			9,626			(25,928	)		11,870
Income taxes		(227	)		4,722			5,324			(227	)
Prepaid expenses and other current assets		(356	)		(732	)		738			(356	)
Other long-term assets		(57	)		456			(737	)		(57	)
Operating lease assets and liabilities		105			—			(375	)		105
Accounts payable		(28,953	)		(6,881	)		19,015			(28,953	)
Accrued payroll and related liabilities		(11,159	)		(27,046	)		(12,529	)		(11,159	)
Other accrued liabilities		3,771			(224	)		(5,204	)		3,771
Environmental liabilities		(553	)		(168	)		1,252			(553	)
Other long-term liabilities		32			43			3,158			32
Distributed equity in earnings of joint ventures		—			167
Net cash provided by (used in) operating activities		11,133			(11,606	)
Net cash (used in) provided by operating activities								(7,431	)		11,133
Cash flows from investing activities:
Capital expenditures		(23,973	)		(27,209	)		(31,827	)		(23,973	)
Joint venture receipts, net		—			641
Proceeds from sale of assets		2			1,279			80			2
Net cash used in investing activities		(23,971	)		(25,289	)		(31,747	)		(23,971	)
Cash flows from financing activities:
Borrowings from long-term debt		114,339			158,859			92,714			114,339
Repayment of long-term debt		(92,190	)		(97,699	)		(53,781	)		(92,190	)
Payment of debt issuance costs		—			(95	)
Repurchase of Class A common stock		—			(4,095	)
Taxes paid related to net share settlement of share-based payment awards		(5,845	)		(7,322	)		(3,970	)		(5,845	)
Distributions to noncontrolling interests		(579	)		(393	)		(723	)		(579	)
Dividends paid		(5,653	)		(5,554	)		(5,680	)		(5,653	)
Net cash provided by financing activities		10,072			43,701			28,560			10,072
Effect of exchange rate changes on cash		13			(313	)		(11	)		13
Net (decrease) increase in cash and cash equivalents		(2,753	)		6,493
Net decrease in cash and cash equivalents								(10,629	)		(2,753	)
Cash and cash equivalents as of beginning of period		12,377			4,723			17,887			12,377
Cash and cash equivalents as of end of period	$	9,624		$	11,216		$	7,258		$	9,624

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

The accompanying Unaudited Condensed Consolidated Financial Statements of Schnitzer Steel Industries, Inc. 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, ~~2019.~~2020. The results for the three months ended November 30, ~~2019~~2020 and ~~2018~~2019 are not necessarily indicative of the results of operations for the entire fiscal year.

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 scrap metal. The Company also produces a range of finished steel long products at its steel mini-mill using ferrous recycled scrap metal primarily 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.

Prior to the first quarter of fiscal 2021, the Company’s internal organizational and reporting structure ~~includes~~included 2 operating and reportable segments: the Auto and Metals Recycling (“AMR”) business and the Cascade Steel and Scrap (“CSS”) business. In the first quarter of fiscal 2021, in accordance with its plan announced in April 2020, the Company completed its transition to a new internal organizational and reporting structure reflecting a functionally-based, integrated model. The Company consolidated its operations, sales, services and other functional capabilities at an enterprise level reflecting enhanced focus by management on optimizing the Company’s vertically integrated value chain. This change resulted in a realignment of how the Chief Executive Officer, who is considered the Company’s chief operating decision-maker, reviews performance and makes decisions on resource allocation, supporting a single segment. The Company began reporting on this new single-segment structure in the first quarter of fiscal 2021 as reflected in this Quarterly Report on Form 10-Q.

As of the beginning of the first quarter of fiscal 2020, the Company adopted an accounting standards update ~~initially issued in February 2016,~~ that requires a lessee to recognize a lease liability and a lease right-of-use asset on its balance sheet for all leases greater than 12 months, including those classified as operating leases. ~~The update supersedes the previous lease accounting standard.~~ The Company adopted the new lease accounting standard using the modified retrospective transition method, whereby it applied the new requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings as of September 1, 2019. Such cumulative-effect adjustment for the Company was ~~not material.~~ ~~Adoption using~~less than $1 million, which is presented separately in the ~~modified retrospective transition method did not have an impact on any prior period earnings~~Unaudited Condensed Consolidated Statement of ~~the Company, and no comparative prior periods were adjusted~~Equity for the new guidance. The Company elected a package of practical expedients permitted under the transition guidance within the new lease accounting standard, which among other things, permit carrying forward the historical lease classification. The Company also elected the practical expedient exempting short-term leases from balance sheet recognition, whereby payments for such leases are recognized in the income statement on a straight-line basis over the lease term. In addition, the Company elected the practical expedient to not separate lease and non-lease components, which the Company elected to apply to all classes of underlying assets. Adoption of the new standard resulted in recogniti~~on of $126 million and $128 million of operating~~ three months ended November 30, 2019.~~lease right-of-use assets and liabilities, respectively, as of September 1, 2019,~~ ~~which are presented as separate line items on the balance sheet. Operating lease right-of-use assets are considered long-lived assets subject to existing long-lived asset impairment guidance.~~ Adoption also resulted in the reclassification of the Company’s capital lease assets and obligations as finance lease right-of-use assets and liabilities as of September 1, 2019, with such reclassification having no impact on the carrying amounts or financial statement line items within which the leases are reported. ~~See Note 3 - Leases for the disclosures required under the new standard.~~

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 checks in excess of funds on deposit o~~f $14~~of $27 million and ~~$27~~$20 million as of November 30, ~~2019~~2020 and August 31, ~~2019,~~2020, respectively.

Accounts receivable represent amounts primarily due from customers on product and other sales. These accounts receivable, which are reduced by an allowance for ~~doubtful accounts,~~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. ~~Domestic ferrous~~Ferrous and nonferrous metal sales ~~nonferrous metal sales~~to domestic customers and finished steel sales are generally made on open account, and ~~the majority~~a portion of these sales are covered by credit insurance.

The Company evaluates the ~~collectibility~~collectability of its accounts receivable based on a combination of factors, including whether sales were made pursuant to letters of credit or credit insurance is in place. ~~In cases where management is aware~~Management evaluates the aging of ~~circumstances that may impair a customer’s ability to meet its~~customer receivable balances, the financial ~~obligations, management records a specific allowance against amounts due and reduces~~condition of the ~~receivable to the amount the Company believes will be collected. For all other~~Company’s customers, ~~the Company maintains an allowance that considers the total receivables outstanding,~~ historical collection rates and economic ~~trends.~~trends 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.

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 $2 million for each of ~~and $4 million for~~ the three months ended November 30, ~~2019~~2020 and ~~2018, respectively.~~2019.

The Company’s prepaid expenses, reported within prepaid expenses and other current assets in the Unaudited Condensed Consolidated Balance Sheets, totaled $22 million and $23 million as of November 30, ~~2019~~2020 and August 31, ~~2019,~~2020, respectively, and consisted primarily of deposits on capital projects, prepaid services, prepaid ~~property taxes~~insurance and prepaid ~~insurance.~~property taxes.

The Company’s other assets, exclusive of prepaid expenses and assets relating to certain retirement plans, consist primarily of ~~receivables from insurers,~~ spare parts, an equity investment, receivables from insurers, capitalized implementation costs for cloud computing arrangements, 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 totaled~~ ~~$7 million and~~ ~~$89 million as of November 30, 2019 and August 31, 2019, respectively, with~~ ~~the decrease~~ in the first quarter of fiscal 2020 resulting primarily from full payment by the Company’s insurers of settlements for lawsuits arising from a 2016 motor vehicle collision. See “Contingencies – Other” in Note 5 – Commitments and Contingencies for further discussion of this matter.

The Company invested $6 million in the equity of a privately-held waste and recycling entity in fiscal 2017. The equity investment does not have a readily determinable fair value and, therefore, is carried at cost and adjusted for impairments and observable price changes. The investment is ~~presented as part of the AMR reportable segment and~~ reported within other assets in the Unaudited Condensed Consolidated Balance Sheets. The carrying value of the investment was $6 million as of November 30, ~~2019~~2020 and August 31, ~~2019.~~2020. The Company has not recorded any impairments or upward or downward adjustments to the carrying value of the investment since acquisition.

The Company tests long-lived tangible and intangible assets for impairment at the asset group level, which is determined based on the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. The segment realignment completed in the first quarter of fiscal 2021 described above in this Note under “Segment Reporting” did not significantly impact the composition of the Company’s asset groups.

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents, accounts receivable, and notes and other contractual receivables. 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 ~~$250,000~~$250 thousand as of November 30, ~~2019.~~2020. Concentration of credit risk with respect to accounts receivable is limited because a large number of geographically diverse customers make up the Company’s customer base. The Company controls credit risk through credit approvals, credit limits, credit insurance, letters of credit or other collateral, cash deposits and monitoring procedures. ~~The Company is exposed to a residual credit risk with respect to open letters of credit by virtue of the possibility of the failure of a bank providing a letter of credit. The Company~~ ~~had $46 million and $49~~ ~~million of open letters of credit as of November 30, 2019 and August 31, 2019, respectively.~~

The Company ~~enters into leases to obtain access to real property, machinery and equipment assets. Most~~does not expect that its adoption in the future of the Company’s lease obligations relate to real property leases for AMR operating sites, including the substantial majority of its auto parts stores, and for the Company’s administrative offices. The Company determines whether an arrangement contains a lease at inception by assessing whether it receives the right to direct the use of and obtain substantially all of the economic benefit from use of the underlying asset. Lease classification, measurement, and recognition are determined at lease commencement, which is the date the underlying asset is available for use by the Company. Theany recently issued accounting ~~classification of a lease is based on whether the arrangement is effectively a financed purchase of the underlying asset (finance lease) or not (operating lease). Leases that, at lease commencement,~~pronouncements will have a non-cancellable lease term of 12 months or less and do not include an option to either purchase the underlying asset or renew the lease beyond 12 months that the Company is reasonably certain to exercise are classified as short-term leases and are not recognizedmaterial impact on ~~the balance sheet.~~its consolidated financial statements.

For leases other than short-term leases, the Company recognizes right-of-use assets and lease liabilities based primarily on the present value of future minimum lease payments over the lease term at lease commencement. Right-of-use assets represent the Company’s right to use the underlying asset during the lease term, while lease liabilities represent the Company’s obligation to make future lease payments. The lease term is the non-cancellable period of the lease, together with periods covered by renewal (or termination) options which the Company is reasonably certain to exercise (or not to exercise). Lease payments are discounted to present value using the Company’s incremental borrowing rate, unless the discount rate implicit in the lease is readily determinable. The Company’s incremental borrowing rate for each lease is the estimated rate of interest that the Company would have to pay to borrow the aggregate lease payments on a collateralized basis over the lease term. Estimation of the incremental borrowing rate requires judgment by management and reflects an assessment of the Company’s credit standing to derive an implied secured credit rating and corresponding yield curve. The Company used the incremental borrowing rate to recognize all operating lease right-of-use assets and liabilities as of the new lease accounting standard application date. Right-of-use assets and lease liabilities are subject to remeasurement after lease commencement when certain events or changes in circumstances arise, such as a change in the lease term due to reassessment of whether the Company is reasonably certain to exercise a renewal or termination option.Note 2 - Inventories

For operating leases, lease expense is recognized on a straight-line basis over the lease term. For finance leases, the lease right-of-use asset is amortized on a straight-line basis and interest expense is recognized on the lease liability using the effective interest rate method. Many of the Company’s real property leases contain variable lease payments that depend on an index or a rate, which are included in the measurement of the right-of-use asset and lease liability using the index or rate at lease commencement, or with respect to the Company’s transition to the new lease accounting standard the index or rate at the application date. Subsequent changes in variable lease payments are recorded as variable lease expenses during the period in which they are incurred. The Company elected a practical expedient to not separate lease and related non-lease components for accounting purposes and, thus, costs related to such non-lease components are disclosed as lease expense. Payments for short-term leases are recognized in the income statement on a straight-line basis over the lease term.

The Company’s operating leases for real property underlying its auto parts stores, metals recycling facilities, and administrative offices generally have non-cancellable lease terms of 5 to 10 years and the significant majority, but not all, contain multiple renewal options for a further 5 to 20 years. R~~enewal options which the Company is reasonably certain to exercise are included in the measurement of lease term.~~ The Company’s finance leases and other operating leases involve primarily transportation equipment assets, have non-cancellable lease terms of less than 10 years and usually do not include renewal options.

For the three months ended November 30, 2019, the Company’s total lease cost was $7 million, consisting primarily of operating lease expense of $6 million and short-term lease expense of $1 million. The other components of the Company’s total lease cost for the period, including finance lease amortization and interest expense, variable lease expense and sublease income, were not material both individually and in aggregate. The substantial majority of the Company’s total lease cost for the three months ended November 30, 2019 is presented within cost of goods sold in the Unaudited Condensed Consolidated Statements of Operations.

~~Finance lease-related assets and liabilities~~Inventories consisted of the following (in thousands):

~~The weighted average remaining lease terms and weighted average discount rates for the Company’s leases as of November 30, 2019 were as follows:~~

~~Maturities of lease liabilities by fiscal year as of November 30, 2019 were as follows (in thousands):~~

~~Supplemental cash flow information and non-cash activity related to leases are as follows (in thousands):~~

As a result of adopting the new lease accounting guidance on September 1, 2019 using the modified retrospective transition method, the Company is required to present future minimum lease commitments for capital leases and operating leases that were previously disclosed in the Company’s 2019 Annual Report on Form 10-K and accounted for under previous lease guidance.

~~Principal payments on capital lease obligations during the next five fiscal years and thereafter as of August 31, 2019 are as follows (in thousands):~~

~~The table below sets forth the Company’s future minimum obligations under non-cancelable operating leases as of August 31, 2019 (in thousands):~~

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~~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 ~~during~~as a reporting unit if the ~~first three months of fiscal 2020 requiring an interim goodwill impairment~~ ~~test.~~ component is a business for which discrete financial information is available and segment management regularly reviews its operating results.

As of ~~November 30, 2019 and~~ August 31, ~~2019, all but~~ $1 ~~million~~2020, the balance of the Company’s goodwill was $170 million, and all but $1 million of such balance was carried by a single reporting unit within ~~AMR.~~the AMR operating segment that existed at the time. The Company had last performed the quantitative impairment test of goodwill carried by this reporting unit in the fourth quarter of fiscal 2020 using a measurement date of July 1, 2020. The estimated fair value of the reporting unit exceeded its carrying amount by approximately 29% as of July 1, 2020. In the first quarter of fiscal 2021, the Company completed its transition to a new internal organizational and reporting structure reflecting a functionally-based, integrated model, resulting in a single operating segment, replacing the AMR and CSS operating segments. The change in structure led to the identification of components within the single operating segment based on disaggregation of financial information regularly reviewed by segment management. In accordance with the accounting guidance, the Company then reassigned the Company's goodwill to the reporting units affected based on the relative fair values of the elements transferred and the elements remaining within the original reporting units as of the date of the reassessment, September 1, 2020. The Company measured the relative fair values of such elements under the market approach based on earnings multiple data. Beginning on the date of reassessment of September 1, 2020, the Company's goodwill is carried by 3 reporting units comprising 2 separate regional groups of metals recycling operations and the Company’s retail auto parts stores.

In connection with the segment realignment and redefinition of the Company's reporting units effective as of September 1, 2020, management evaluated if it was more likely than not that the fair value of any of the either legacy or new reporting units with allocated goodwill was below its carrying value as of September 1, 2020, which would indicate a triggering event requiring a goodwill impairment test. Based on management's assessment as of September 1, 2020, it was not more likely than not that the fair value of each reporting unit with allocated goodwill was below its carrying value. The Company did not record a goodwill impairment charge in any of the periods presented.

The gross change in the carrying amount of goodwill for the three months ended November 30, ~~2019~~2020 was as follows (in thousands):

Accumulated goodwill impairment charges were $471 million as of November 30, ~~2019~~2020 and August 31, ~~2019.~~2020.

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, ~~2019~~2020 were as follows (in thousands):

As of November 30, ~~2019~~2020 and August 31, ~~2019,~~2020, the ~~Company’s recycling operations~~Company had environmental liabilities of $5155 million and ~~$52~~$53 million, respectively, for the potential remediation of locations where it has conducted business or has environmental liabilities from historical or recent activities. The liabilities relate to the investigation and potential future remediation of contaminated sediments and riverbanks, soil contamination, groundwater contamination, storm water runoff issues and other natural resource damages. Except for Portland Harbor and certain liabilities discussed under Other Legacy Environmental Loss Contingencies immediately below, such liabilities were not individually material at any site.

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 (the “Site”). The precise nature and extent of cleanup of any specific areas within the Site, 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 natural resource damage claims or third party contribution or damage claims with respect to the Site.

While the Company participated in certain preliminary Site study efforts, it was not party to the consent order entered into by the EPA with certain other PRPs, referred to as the “Lower Willamette Group” (“LWG”), for a remedial investigation/feasibility study (“RI/FS”). During fiscal 2007, the Company and certain other parties agreed to an interim settlement with the LWG under which the Company made a cash contribution to the LWG RI/FS. The LWG has indicated that it had incurred over $155 million in investigation-related costs over an approximately 18 year period working on the RI/FS. Following submittal of draft RI and FS documents which the EPA largely rejected, the EPA took over the RI/FS process.

The Company has joined with approximately 100 other PRPs, including the LWG members, in a voluntary process to establish an allocation of costs at the Site, including the costs incurred by the LWG in the RI/FS process. The LWG members have also commenced federal court litigation, which has been stayed, seeking to bring additional parties into the allocation process.

In January 2008, the Portland Harbor Natural Resource Trustee Council (“Trustee Council”) invited the Company and other PRPs to participate in funding and implementing the Natural Resource Injury Assessment for the Site. Following meetings among the Trustee Council and the PRPs, funding and participation agreements were negotiated under which the participating PRPs, including the Company, agreed to fund the first phase of the three-phase natural resource damage assessment. Phase 1, which included the development of the Natural Resource Damage Assessment Plan (“AP”) and implementation of several early studies, was substantially completed in 2010. In December 2017, the Company joined with other participating PRPs in agreeing to fund Phase 2 of the natural resource damage assessment, which includes the 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. ~~It is uncertain whether the Company will enter into an early settlement for natural resource damages or what costs it may incur in any such early settlement.~~

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 30 parties, including the Company, seeking reimbursement of certain past and future response costs in connection with remedial action at the Site and recovery of assessment costs related to natural resources damages from releases at and from the Site to the Multnomah Channel and the Lower Columbia River. The parties ~~have~~ filed various motions to dismiss or stay this suit, and in August 2019, the court issued an order denying the motions to dismiss and staying the action. ~~A number of parties have filed to appeal the court’s denial of the motions to dismiss, which filing the Company joined in part.~~ The Company intends to defend against the claims in this suit and does not have sufficient information to determine the likelihood of a loss in this matter or to estimate the amount of damages being sought or the amount of such damages that could be allocated to the Company.

Estimates of the cost of remedial action for the cleanup of the in-river portion of the Site have varied widely in various drafts of the FS and in the EPA’s final FS issued in June 2016 ranging from approximately $170 million to over $2.5 billion (net present value), depending on the remedial alternative and a number of other factors. In comments submitted to the EPA, the Company and certain other stakeholders identified a number of serious concerns regarding the EPA’s risk and remedial alternatives assessments, cost estimates, scheduling assumptions and conclusions regarding the feasibility and effectiveness of remediation technologies.

In January 2017, the EPA issued a Record of Decision (“ROD”) that identified the selected remedy for the Site. The selected remedy is a modified version of one of the alternative remedies evaluated in the EPA’s FS that was expanded to include additional work at a greater cost. The EPA has estimated the total cost of the selected remedy at $1.7 billion with a net present value cost of $1.05 billion (at a 7% discount rate) and an estimated construction period of 13 years following completion of the remedial designs. In the ROD, the EPA stated that the cost estimate is an order-of-magnitude engineering estimate that is expected to be within +50% to -30% of the actual project cost and that changes in the cost elements are likely to occur as a result of new information and data collected during the engineering design. The Company has identified a number of concerns regarding the remedy described in the ROD, which is based on data that is more than a decade old, and the EPA’s estimates for the costs and time required to implement the selected remedy. Because of ongoing questions regarding cost effectiveness, technical feasibility, and the use of stale data, it is uncertain whether the ROD will be implemented as issued. In addition, the ROD did not determine or allocate the responsibility for remediation costs among the PRPs.

In the ROD, the EPA acknowledged that much of the data used in preparing the ROD was more than a decade old and would need to be updated with a new round of “baseline” sampling to be conducted prior to the remedial design phase. Accordingly, the ROD provided for additional pre-remedial design investigative work and baseline sampling to be conducted in order to provide a baseline of current conditions and delineate particular remedial actions for specific areas within the Site. This additional sampling was required prior to proceeding with the next phase in the process which is the remedial design. The remedial design phase is an engineering phase during which additional technical information and data ~~will be~~are collected, identified and incorporated into technical drawings and specifications developed for the subsequent remedial action. Moreover, the ROD provided only Site-wide cost estimates and did not provide sufficient detail to estimate costs for specific sediment management areas within the Site. Following issuance of the ROD, EPA proposed that the PRPs, or a subgroup of PRPs, perform the additional investigative work identified in the ROD under a new consent order.

In December 2017, the Company and 3 other PRPs entered into a new Administrative Settlement Agreement and Order on Consent with EPA to perform such pre-remedial design investigation and baseline sampling over a ~~two year~~two-year period. The Company estimated that its share of the costs of performing such work would be approximately $2 million, which it ~~recorded to environmental liabilities and selling, general and administrative expense in the consolidated financial statements~~accrued in fiscal 2018. ~~The Company believes that such~~Such costs ~~will be~~were fully covered by existing insurance coverage and, thus, the Company also recorded an insurance receivable for $2 million in fiscal 2018, resulting in no net impact to the Company’s consolidated results of operations. The Company’s loss contingencies as of November 30, 2019 and August 31, 2019 included $1 million for its estimated share of the costs of the investigation, including pre-remedial design investigative activities.

The pre-remedial design investigation and baseline sampling work has been completed, and the report evaluating the data was submitted to EPA on June 17, 2019. The evaluation report concludes that Site conditions have improved substantially since the data forming the basis of the ROD was collected over a decade ago. The analysis contained in the report has significant implications for remedial design and remedial action at the Site. EPA has reviewed the report, finding with a few limited corrections that the data is of suitable quality and generally acceptable and stating that such data will be used, in addition to existing and forthcoming design-level data, to inform implementation of the ROD. However, EPA did not agree that the data or the analysis ~~support~~warrants a change to the ~~conclusions presented in the report.~~remedy at this time and reaffirmed its commitment to proceed with remedial design. The Company and other PRPs disagree with EPA’s position on use of the more recent data and ~~are reviewing EPA’s comments~~will continue to pursue limited, but critical, changes to the selected remedy for the Site during the remedial design phase.

EPA encouraged PRPs to step forward (individually or in groups) to enter into consent agreements to perform remedial design covering the entire Site and proposed dividing the ~~Company’s options.~~Site into 8 to 10 subareas for remedial design. Certain PRPs have since

EPA has stated that it wants PRPs to step forward (individually or in groups) to enter into consent agreements to perform remedial design covering the entire Site and has proposed dividing the Site into 8 to 10 subareas for remedial design. Certain PRPs have since executed consent agreements for remedial design work incovering a ~~few portions~~little more than half of the remedial action areas at the Site. Because of EPA’s refusal to date to modify the remedy to reflect the most current data on Site conditions and because of concerns with the terms of the consent agreement, the Company elected not to enter into a consent agreement for remedial design with respect to any of the subareas at the Site. On March 26, 2020, EPA ~~recently indicated~~issued a unilateral administrative order (UAO) to the Company and MMGL, LLC (“MMGL”), an unaffiliated company, for the remedial design work in the portion of one of the EPA identified subareas within the Site designated as the River Mile 3.5 East Project Area. Following a conference with the Company to discuss the UAO and written comments submitted by the Company, EPA made limited modifications to the UAO and issued an amendment to the UAO on April 27, 2020 with an effective date of May 4, 2020. As required by the UAO, the Company notified EPA of its intent to comply with the UAO on the effective date 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, EPA’s expected schedule for completion of the remedial design work is four years. EPA has estimated the cost of the work at approximately $4 million. The Company has agreed with the other respondent to the UAO, MMGL, that the Company will lead the performance and be responsible for a portion of the costs of the work for remedial design under the UAO and also entered into an agreement with another PRP pursuant to which such other PRP has agreed to fund a portion of the costs of such work. These agreements are not an allocation of liability or claims associated with the Site as between the respondents or with respect to any third party. The Company estimated that its share of the costs of performing such work under the UAO would be approximately $3 million, which it recorded to environmental liabilities and selling, general and administrative expense in the consolidated financial statements in the third quarter of fiscal 2020. The Company has insurance policies that it believes will provide reimbursement for costs it incurs for remedial design, but not ~~issue Special Notice Letters~~ for ~~full remedial design/remedial action work at this time, but stated that,~~any penalties. The Company also expects to pursue in ~~early 2020, it plans to complete pending negotiations with~~the future allocation or contribution from other PRPs for ~~additional~~a portion of such remedial design ~~consent agreements~~costs.

The Company’s environmental liabilities as of November 30, 2020 and ~~will utilize its enforcement tools, which include issuance of orders,~~August 31, 2020 included $6 million and $4 million, respectively, relating to advance progress on remedial design. However, the Company does not currently expect EPA to take immediate enforcement actions pending ongoing discussions with EPA on the results of the pre-remedial design investigation work. The Company has engaged in good-faith negotiations with EPA with respect to potentially performing remedial design; but it is unclear whether the Company will reach agreement with EPA, and the timing for completion of remedial design is uncertain but could take three to four years.Portland Harbor.

Except for certain early action projects in which the Company is not involved, remediation activities are not expected to commence for a number of years. Moreover, remediation activities at the Site are expected to be sequenced, and the order and timing of such sequencing has not been determined. In addition, as discussed above, responsibility for implementing and funding the remedy will be determined in a separate allocation process, which is on-going. The Company ~~would expect~~expects the next major stage of the allocation process to proceed in parallel with the remedial design process.

Because the final remedial actions have not yet been designed and there has not been a determination of the ~~specific remediation actions that will be required, the~~ amount of natural resource damages or of the allocation among the PRPs of costs of the investigations, ~~and any remedy and~~remedial action costs or natural resource damages, ~~among the PRPs,~~ 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 the Site, although such costs could be material to the Company’s financial position, results of operations, cash flows and liquidity. Among the facts currently being developed 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 the Site, 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, ~~(including the pre-remedial design investigative activities),~~ remedial design, remedial action and mitigation for or settlement of natural resource damages claims in connection with the Site. 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 the Site, ~~although there is no assurance that those~~continue to seek settlements with other insurers and formed a Qualified Settlement Fund (“QSF”) which became operative in the fourth quarter of fiscal 2020 to hold such settlement amounts until funds are needed to pay or reimburse costs incurred by the Company and MMGL in connection with the Site. These insurance policies ~~will~~and the funds in the QSF may not cover all of the costs which the Company may incur. The QSF is an unconsolidated variable interest entity (“VIE”) with no primary beneficiary. Two parties unrelated to each other, one appointed by the Company and one appointed by MMGL, share equally the power to direct the activities of the VIE that most significantly impact its economic performance. The Company’s appointee to co-manage the VIE is an executive officer of the Company. Neither MMGL nor its appointee to co-manage the 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 voluntary investigations and source control activities by the Company involving the Company’s sites adjacent to the Portland Harbor which are focused on controlling any current “uplands” releases of contaminants into the Willamette River. No liabilities have been established in connection with these investigations because the extent of contamination (if any) and the Company’s responsibility for the contamination (if any) have not yet been determined.

The Company’s environmental loss contingencies as of November 30, ~~2019~~2020 and August 31, ~~2019,~~2020, other than Portland Harbor, include actual or possible investigation and cleanup 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 cleanup 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 and cleanup 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.

During fiscal 2018, the Company accrued $4 million ~~in expense at its Corporate division~~ for the estimated costs related to remediation of shredder residue disposed of in or around the 1970s at third-party sites located near each other. Investigation activities have been conducted under oversight of the applicable state regulatory agency. As of November 30, ~~2019~~2020 and August 31, ~~2019,~~2020, the Company had $4 million accrued for this matter. It is reasonably possible that the Company may recognize additional liabilities in connection with this matter at the time such losses are probable and can be reasonably estimated. The Company ~~currently estimates~~previously estimated a range of reasonably possible losses related to this matter in excess of current accruals at between 0 and $28 million based on a range of remedial alternatives and subject to development and approval by regulators of a specific remedy implementation plan. However, subsequent to the development of those remedial alternatives, the Company performed additional investigative activities under new state requirements that have the potential to impact the required remedial actions and associated cost estimates pending further analysis and discussion by the Company and regulators.The Company is

investigating whether a portion or all of the current and future losses related to this matter, if incurred, are covered by existing insurance coverage or may be offset by contributions from other responsible parties.

In addition, the Company’s loss contingencies as of November 30, ~~2019~~2020 and August 31, ~~2019 incl~~2020 included $5~~ude $7~~ million and $8 million, respectively, for the estimated costs related to ~~remediation of soil and groundwater conditions, including penalties,~~ environmental matters in connection with a closed facility owned and previously operated by an indirect, wholly-owned ~~subsidiary.~~subsidiary, including monitoring and remediation of soil and groundwater conditions. Investigation activities have been conducted under the oversight of the applicable state regulatory agency, and the Company has also been working with local officials with respect to the protection of public water supplies. The decrease in the loss contingency accrual in the first quarter of fiscal 2021 primarily reflects payment during the quarter of penalties in the amount of $2.7 million pursuant to the previously agreed settlement. It is reasonably possible that the Company may recognize additional liabilities ~~including penalties,~~ in connection with this matter at the time such additional losses are probable and can be reasonably estimated. However, the Company cannot reasonably estimate at this time the possible additional loss or range of possible additional losses associated with this matter pending completion of on-going studies and determination of remediation ~~plans and pending further negotiations to settle the related enforcement matter.~~plans. As part of its activities relating to the protection of public water supplies, the Company has agreed to reimburse the municipality for certain studies and plans, and it is reasonably possible that it may incur additional liabilities and costs in the future, including for wellhead treatment, which ~~may~~in the case of costs for installation of wellhead treatment, if incurred, could be ~~material.~~

~~The Company’s steel manufacturing operations~~ ~~had 0 known environmental~~ ~~liabilities as~~in the range of ~~November 30, 2019 and August 31, 2019.~~

The steel mill’s electric arc furnace generates dust (“EAF dust”) that is classified as hazardous waste by the EPA because of its zinc and lead content. As a result, the Company captures the EAF dust and ships it in specialized rail cars$10 million to ~~firms that apply treatments that allow for the ultimate disposal of the EAF dust.~~

~~The Company’s~~ steel mill has an operating permit issued under Title V of the Clean Air Act Amendments of 1990, which governs certain air quality standards. The permit is based on an annual production capacity of approximately 950 thousand tons. The Company’s permit was first issued in 1998 and has since been renewed through February 1, 2018. The permit renewal process occurs every five years, and the renewal process is underway; however, the existing permit is extended by administrative rule until the current renewal process is finalized.$13 million.

With respect to environmental contingencies other than the Portland Harbor Superfund site and the ~~other legacy environmental loss contingencies,~~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 ~~loss~~ 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.

Schnitzer Southeast, LLC (a wholly-owned subsidiary of the Company, “SSE”), an SSE employee, the Company and one of the Company’s insurance carriers had been named as defendants in 5 separate wrongful death lawsuits filed in the State of Georgia arising from an accident in 2016 in Alabama involving a tractor trailer driven by the SSE employee and owned by SSE. In ~~fiscal~~February 2019, the Company ~~settled 3~~received a letter sent on behalf of the ~~five lawsuits~~District Attorneys for ~~a total of $35 million. In the first quarter of fiscal 2020,~~six counties in California notifying the Company ~~settled~~of a joint investigation into the ~~2 remaining lawsuits for a total~~alleged mishandling of ~~$68 million. The aggregate settlement amount of $103 million was substantially covered by insurance, resulting in no net impact to~~hazardous materials and hazardous waste and into the Company’s ~~consolidated results of operations. As of August 31, 2019,~~disposal practices, as well as alleged water pollution violations, at various retail auto parts stores within California and requesting a meeting to discuss the alleged violations. The Company has implemented additional compliance measures, and based on these additional actions and the initial discussions with the District Attorneys’ offices, the Company ~~had accrued loss contingencies and offsetting insurance receivables related~~expects to ~~the lawsuits totaling $83 million. The full amount accrued as~~negotiate a settlement of ~~August 31, 2019 was paid by the Company’s insurers in the first quarter of fiscal 2020. There are 0 further contingencies in relation to~~ this matter asthat will address the concerns raised in this joint investigation. There has been no discussion to date of ~~November 30, 2019.~~potential monetary sanctions. The Company may recognize a liability in connection with this matter at the time a loss is probable and can be reasonably estimated. However, the Company cannot reasonably estimate at this time the probable or possible loss or range of probable or possible loss associated with this matter pending further discussions with the District Attorneys’ offices.

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 resolution of such legal proceedings arising 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.

Changes in accumulated other comprehensive loss, net of tax, comprise the following (in thousands):

	Three Months Ended November 30, 2019									Three Months Ended November 30, 2018									Three Months Ended November 30, 2020									Three Months Ended November 30, 2019
	Foreign Currency Translation Adjustments			Pension Obligations, Net			Total			Foreign Currency Translation Adjustments			Pension Obligations, Net			Total			Foreign Currency Translation Adjustments			Pension Obligations, Net			Total			Foreign Currency Translation Adjustments			Pension Obligations, Net			Total
Balances - September 1 (Beginning of period)	$	(35,689	)	$	(3,074	)	$	(38,763	)	$	(34,129	)	$	(3,108	)	$	(37,237	)	$	(34,184	)	$	(2,687	)	$	(36,871	)	$	(35,689	)	$	(3,074	)	$	(38,763	)
Other comprehensive income (loss) before reclassifications		211			(17	)		194			(1,364	)		208			(1,156	)		239			(385	)		(146	)		211			(17	)		194
Income tax benefit (expense)		—			4			4			—			(46	)		(46	)		0			87			87			0			4			4
Other comprehensive income (loss) before reclassifications, net of tax		211			(13	)		198			(1,364	)		162			(1,202	)		239			(298	)		(59	)		211			(13	)		198
Amounts reclassified from accumulated other comprehensive loss		—			52			52			—			52			52			0			49			49			0			52			52
Income tax benefit		—			(12	)		(12	)		—			(12	)		(12	)		0			(11	)		(11	)		0			(12	)		(12	)
Amounts reclassified from accumulated other comprehensive loss, net of tax		—			40			40			—			40			40			0			38			38			0			40			40
Net periodic other comprehensive income (loss)		211			27			238			(1,364	)		202			(1,162	)		239			(260	)		(21	)		211			27			238
Balances - November 30 (End of period)	$	(35,478	)	$	(3,047	)	$	(38,525	)	$	(35,493	)	$	(2,906	)	$	(38,399	)	$	(33,945	)	$	(2,947	)	$	(36,892	)	$	(35,478	)	$	(3,047	)	$	(38,525	)

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 ~~for~~in all periods ~~presented~~.presented.

~~The table below illustrates the Company’s revenues disaggregated by major product and sales destination for each reportable segment (in thousands):~~

The table below illustrates the Company’s revenues disaggregated by major product and sales destination (in thousands):

	Three Months Ended November 30, 2018									Three Months Ended November 30,
	AMR		CSS		Intercompany Revenue Eliminations			Total		2020		2019
Major product information:
Ferrous revenues	$	298,812	$	19,743	$	(2,508	)	$	316,047	$	252,206	$	199,898
Nonferrous revenues		104,181		9,031		(270	)		112,942		119,709		97,841
Steel revenues⁽¹⁾		—		101,337		—			101,337
Steel revenues⁽¹⁾											88,414		77,325
Retail and other revenues		33,419		275		—			33,694		31,778		30,520
Total revenues	$	436,412	$	130,386	$	(2,778	)	$	564,020	$	492,107	$	405,584
Revenues based on sales destination:
Foreign	$	263,511	$	28,131	$	—		$	291,642	$	268,399	$	218,482
Domestic		172,901		102,255		(2,778	)		272,378		223,708		187,102
Total revenues	$	436,412	$	130,386	$	(2,778	)	$	564,020	$	492,107	$	405,584

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, ~~2019~~2020 and August 31, ~~2019,~~ 2020, receivables from contracts with customers, net of an allowance for ~~doubtful accounts,~~credit losses, totaled ~~$112~~$161 million and ~~$142~~$135 million representing ~~97%~~97% of the respective total accounts receivable reported on the Unaudited Condensed Consolidated Balance Sheets.

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 consist almost entirely of customer deposits for recycled scrap metal sales contracts, which are reported within accounts payable on the Unaudited Condensed Consolidated Balance Sheets and totaled $3$7 million and $8 million as of November 30, ~~2019~~2020 and August 31, ~~2019.~~2020, respectively. Unsatisfied performance obligations reflected in these contract liabilities relate to contracts with original expected durations of one year or less and, therefore, are not disclosed. During the three months ended November 30, 2020, the Company reclassified $5 million in customer deposits as of August 31, 2020 to revenues as a result of satisfying performance obligations during the period. During the three months ended November 30, 2019, the Company reclassified $2$2 million in customer deposits as of August 31, 2019 to revenues as a result of satisfying performance obligations during the period. During the three months ended November 30, 2018, the Company reclassified $7 million in customer deposits as of August 31, 2018 to revenues as a result of satisfying performance obligations during the period.

In the first quarter of fiscal ~~2020,~~2021, 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 ~~337,700~~317,760 restricted stock units (“RSUs”) and 316,649 performance share awards to the Company’s key employees and officers under the Company’s 1993 Amended and Restated Stock Incentive Plan. The RSUs have a five-year term and vest 20% per year commencing October 31, 2021. The aggregate fair value of all of the RSUs granted was based on the market closing price of the underlying Class A common stock on the grant date and totaled $7 million. The compensation expense associated with the RSUs is recognized over the requisite service period of the awards, net of forfeitures, which for participants who were retirement eligible as of the grant date or who will become retirement eligible during the five-year term of the awards is the longer of two years or the period ending on the date retirement eligibility is achieved.

The performance share awards 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 three-year performance period. For awards granted in the first quarter of fiscal ~~2020,~~2021, the performance metrics were the Company’s total shareholder return (“TSR”) relative to a designated peer group of 15 ~~companies~~and the Company’s return on capital employed (“ROCE"). Award share payouts depend on the extent to which the performance goals have been achieved. The number of shares that a participant receives is equal to the number of performance shares granted multiplied by a payout factor, which ranges from a threshold of 50% to a maximum of 200%. The TSR award stipulates certain limitations to the payout in the event the value of the payout reaches a defined ceiling level or the Company’s TSR is negative.

The Company granted ~~165,834~~157,791 performance share awards based on its relative TSR metric over a performance period spanning November ~~14, 2019~~9, 2020 to August 31, ~~2022.~~2023. The Company estimates the fair value of TSR awards using a Monte-Carlo simulation model utilizing several key assumptions, including the following for TSR awards granted on November ~~14, 2019:~~9, 2020:

The estimated fair value of the TSR awards at the date of grant was $4 million. ~~The TSR award stipulates certain limitations to the payout in the event the payout reaches a defined ceiling level or the Company’s TSR is negative.~~ The compensation expense for the TSR awards based on the grant-date fair value, net of estimated forfeitures, is recognized 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), regardless of whether the market condition has been or will be satisfied.

The Company granted ~~171,936~~158,858 performance share awards based on its ROCE for the three-year performance period consisting of the Company’s ~~2020,~~ 2021, 2022 and ~~2022~~2023 fiscal years. The fair value of the awards granted was based on the market closing price of the underlying Class A common stock on the grant date and totaled $4 million.

The Company accrues compensation cost for ROCE awards 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). 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 that 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 service 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, ~~2022.~~2023.

The Company’s effective tax rate from continuing operations for the first quarter of fiscal ~~2020~~2021 was ~~a benefit~~an expense on pre-tax income of ~~27.8%~~27.5%, compared to ~~an expense~~a benefit on a pre-tax loss of ~~19.8%~~27.8% for the prior year period. ~~The~~For each quarterly period, the Company’s effective tax rate from continuing operations ~~for the first quarter of fiscal 2020~~ was higher than the U.S. federal statutory rate of 21% primarily due to the ~~impact of non-deductible officers’ compensation and other expenses, as well as the~~ aggregate impact of state taxes and the impact of permanent differences from non-deductible expenses on the projected annual effective tax rate applied to the quarterly results.

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 maintains valuation allowances against certain ~~U.S. federal,~~ state, Canadian and all Puerto Rican deferred tax 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 2013 to ~~2019~~2020 remain subject to examination under the statute of limitations.

On January 8, 2020, subsequent to the end of the first quarter of fiscal 2020, the Company committed to certain restructuring initiatives aimed at further reducing its annual operating expenses, primarily SG&A, at Corporate, AMR and CSS, primarily through reductions in non-trade procurement spend, including outside and professional services, lower employee-related expenses and other non-headcount measures. The Company expects to incur aggregate estimated restructuring charges, as defined in ~~ASC 420, Exit or Disposal Cost Obligations~~, and other exit-related costs of approximately $4 million in connection with these initiatives. The Company expects the substantial majority of the restructuring charges to be recognized by the end of fiscal 2020 and to require the Company to make cash payments.

The following table sets forth the information used to compute basic and diluted net income (loss) ~~income~~ per share attributable to SSI shareholders (in thousands):

Common stock equivalent shares of 153,374 and 865,354 ~~and~~ ~~102,755~~ were considered antidilutive and were excluded from the calculation of diluted net income (loss) ~~income~~ per share for the three months ended November 30, 2020 and 2019, ~~and 2018,~~ respectively.

The Company purchases recycled metal from its joint venture operations at prices that approximate fair market value. These purchases totaled ~~$3 million~~ ~~and $4~~$3 million for each of the three months ended November 30, ~~2019~~2020 and ~~2018, respectively.~~2019.

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 includes 2 operating and reportable segments: the Auto and Metals Recycling (“AMR”) business and the Cascade Steel and Scrap (“CSS”) business.

AMR acquires and recycles ferrous and nonferrous scrap metal for sale to foreign and domestic metal producers, processors and brokers, and procures salvaged vehicles and sells serviceable used auto parts from these vehicles through a network of self-service auto parts stores. These auto parts stores also supply the Company’s shredding facilities with auto bodies that are processed into saleable recycled scrap metal.

CSS operates a steel mini-mill that produces a range of finished steel long products using recycled scrap metal and other raw materials. CSS’s steel mill obtains substantially all of its recycled scrap metal raw material requirements from its integrated metals recycling and joint venture operations. CSS’s metals recycling operations also sell recycled metal to external customers primarily in export markets.

~~The Company holds noncontrolling ownership interests in joint~~ ventures, which are either in the metals recycling business or are suppliers of unprocessed metal. The Company’s allocable portion of the results of these joint ventures is reported within the segment results. As of November 30, 2019 and August 31, 2019, the Company had 2 50%-owned joint venture interests, 1 presented as part of AMR operations, and 1 presented as part of CSS operations. The joint venture within CSS sells recycled scrap metal to other operations within CSS at prices that approximate local market rates, which produces intercompany ~~profit. This intercompany profit is eliminated while the products remain in inventories and is not recognized until the finished products are sold to third parties.~~

Intersegment sales from AMR to CSS are made at prices that approximate local market rates. These intercompany sales tend to produce intercompany profit which is not recognized until the finished products are ultimately sold to third parties.

The information provided below is obtained from internal information that is provided to the Company’s chief operating decision maker for the purpose of corporate management. The Company uses segment operating income to measure segment performance. The Company does not allocate corporate interest income and expense, income taxes and other income and expense to its reportable segments. Certain expenses related to shared services that support operational activities and transactions are allocated from Corporate to the segments. Unallocated Corporate expense consists primarily of expense for management and certain administrative services that benefit both reportable segments. In addition, the Company does not allocate certain items to segment operating income because management does not include the information in its measurement of the performance of the operating segments. Such unallocated items include restructuring charges and other exit-related activities, charges (net of recoveries) related to legacy environmental matters, and provisions for certain legal matters. Because of the unallocated income and expense, the operating income of each reportable segment does not reflect the operating income the reportable segment would report as a stand-alone business. The results of discontinued operations are excluded from segment operating income and are presented separately, net of tax, from the results of ongoing operations for all periods presented.

~~See Note 7 - Revenue in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report for presentation of the Company’s revenues by reportable segment.~~

~~The table below illustrates the reconciliation of the Company’s segment operating (loss) income to (loss) income from continuing operations before income taxes (in thousands):~~

~~The following is a summary of the Company’s total assets by reportable segment (in thousands):~~

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, ~~2019~~2020 and ~~2018.~~2019. The following discussion and analysis ~~provides~~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, ~~2019,~~2020, and the Unaudited Condensed Consolidated Financial Statements and the related Notes thereto included in Part I, Item 1 of this report.

Founded in 1906, Schnitzer Steel Industries, Inc. (“SSI”), an Oregon corporation, is one of North America’s largest recyclers of ferrous and nonferrous scrap 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, 44 metals recycling facilities and a steel mini-mill in Oregon.

~~Our~~Prior to the first quarter of fiscal 2021, our internal organizational and reporting structure ~~includes~~included two operating and reportable segments: the Auto and Metals Recycling (“AMR”) business and the Cascade Steel and Scrap (“CSS”) business. In the first quarter of fiscal 2021, in accordance with our plan announced in April 2020, we completed the transition to a new internal organizational and reporting structure reflecting a functionally-based, integrated model, supporting a single segment. We consolidated our operations, sales, services and other functional capabilities at an enterprise level reflecting enhanced focus by management on optimizing our vertically integrated value chain. We began reporting on this new single-segment structure in the first quarter of fiscal 2021 as reflected in this Quarterly Report on Form 10-Q.

~~AMR sells~~We sell ferrous and nonferrous recycled scrap metal in both foreign and domestic markets. ~~AMR acquires, processes~~We also sell a range of finished steel long products produced at our steel mini-mill. We acquire, process and ~~recycles~~recycle auto bodies, rail cars, home appliances, industrial machinery, manufacturing scrap and construction and demolition scrap through ~~its 90~~our recycling ~~auto and metals recycling~~ facilities. Our ~~largest source of auto bodies is our own network of~~ retail ~~auto parts stores, which operate under the commercial brand-name Pick-n-Pull. AMR procures salvaged vehicles and sells serviceable used auto parts from these vehicles through its~~ 51 self-service auto parts stores located across the United States and Western ~~Canada.~~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 where geographically more economical. ~~AMR then processes~~At our metals recycling facilities, we process mixed and large pieces of scrap metal into smaller pieces by crushing, torching, shearing, shredding and sorting, resulting in scrap metal pieces of a size, density and metal content required by customers to meet their production needs. The manufacturing process includes physical separation of ferrous and nonferrous materials through automated and manual processes into various sub-classifications, each of which has a value and metal content used by our customers for their end products. ~~AMR uses~~We use a variety of shredding and separation systems to efficiently process and sort recycled scrap metal.

~~CSS operates a~~ Our steel mini-mill ~~in McMinnville, Oregon that~~ produces ~~a range of~~ finished steel ~~long~~ products such as ~~reinforcing~~rebar, wire rod, coiled rebar, merchant bar ~~(rebar)~~ and ~~wire rod. The primary feedstock for the manufacture of its~~other specialty products isusing ferrous recycled scrap ~~metal. CSS’s steel mill obtains substantially all of its scrap~~ metal ~~raw material requirements~~primarily sourced internally from ~~its integrated metals~~our recycling and joint venture ~~operations. CSS’s metals recycling~~ operations comprise a collection, shredding and export operation in Portland, Oregon, four feeder yard operations located in Oregon and Southern Washington, and one metals recycling joint venture ownership interest. Additionally, CSS purchases small volumes of ferrous scrap metal from AMR and sells ferrous and nonferrous recycled scrap metal primarily into the export market.

~~We use segment operating income to measure our segment performance. We do not allocate corporate interest income and expense, income taxes~~ and other income and expense to our reportable segments. Certain expenses related to shared services that support operational activities and transactions are allocated from Corporate to the segments. Unallocated Corporate expense consists primarily of expense for management and certain administrative services that benefit both reportable segments. In addition, we do not allocate certain items to segment operating income because management does not include the information in its measurement of the performance of the operating segments. Such unallocated items include restructuring charges and other exit-related activities, charges (net of recoveries) related to legacy environmental matters, and provisions for certain legal matters. Because of the unallocated income and expense, the operating income of each reportable segment does not reflect the operating income the reportable segment would report as a stand-alone business. The results of discontinued operations are excluded from segment operating income and are presented separately, net of tax, from the results of ongoing operations for all periods presented.raw materials.

For further information regarding our reportable segments, see Note 13 - Segment Information in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.

Our deep water 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 deep water port facilities (in Kapolei, Hawaii and Salinas, Puerto Rico) allow us to efficiently meet the global demand for recycled ferrous metal by enabling us to ship bulk cargoes 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. 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 scrap metal selling prices, which allow us to better maintain or increase both operating results and unprocessed scrap metal flow into our facilities. When recycled scrap metal selling prices decline, either sharply or for a sustained period, our operating margins typically compress. Our results of operations also depend on the demand and prices for our finished steel products, ~~the manufacture of~~ which ~~uses internally sourced ferrous recycled scrap metal as the primary feedstock, as well as other raw materials. Our steel mill in Oregon sells~~are sold to ~~industrial~~ customers located primarily in ~~North America.~~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 ferrous and nonferrous recycled metal and finished steel products, the supply of scrap metal in our domestic markets, and varying demand for used auto parts from our self-service retail stores. 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 at our facilities and production levels in our yards, and retail admissions and parts sales at our auto parts stores. Further, trade actions, including tariffs and any retaliation by affected countries, and licensing 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~~fluctuate.

In March 2020, the World Health Organization characterized COVID-19 as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The outbreak has resulted in governments around the world implementing measures with various levels of stringency to help control the spread of the virus. In addition, governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to counteract the impacts of COVID-19.

We are a company operating in a critical infrastructure industry, as defined by the U.S. Department of Homeland Security. Consistent with federal guidelines and with state and local orders to date, we have continued to operate across our footprint throughout the COVID-19 pandemic. Ensuring the health and welfare of our employees, and all who visit our sites, is our top priority, and we are following all U.S. Centers for Disease Control and Prevention and state and local health department guidelines. Further, we implemented infection control measures at all our sites and put in place travel and in-person meeting .restrictions and other physical distancing measures. Notwithstanding our continued operations, COVID-19 has negatively impacted our business and may have further negative impacts on our financial performance, operations, supply chain and flows of raw materials, transportation and logistics networks and customers. Global economic conditions improved during the first quarter of fiscal 2021, resulting in increased demand for our products, which led to our earnings for the first quarter of fiscal 2021 exceeding the results for the pre-pandemic prior year quarter.

26Because the severity, magnitude and duration of the COVID-19 pandemic and its economic consequences are uncertain, continually changing and difficult to predict, the pandemic’s impact on our operations and financial performance, as well as its impact on our ability to successfully execute our business strategies and initiatives, remains uncertain and difficult to predict. Further, the ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control, including, but not limited to: governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic (including restrictions on travel and transport and workforce pressures); the impact of the pandemic and actions taken in response on global and regional economies, travel, and economic activity; the availability of federal, state or local funding programs; general economic uncertainty in key global markets and financial market volatility; global economic conditions and levels of economic growth; and the pace of economic recovery. While the COVID-19 pandemic could continue to negatively impact our results of operations, cash flows and financial position, the current level of uncertainty over the economic and operational impacts of COVID-19 means the related financial impact cannot be reasonably estimated at this time.

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. Our non-GAAP financial measures should be considered in addition to, but not as a substitute for, the ~~First Quarter~~most directly comparable U.S. GAAP measures. Although we find these non-GAAP financial measures useful in evaluating the performance of ~~Fiscal 2020~~

~~We generated~~our business, our reliance on these measures is limited because they often materially differ from our consolidated ~~revenues~~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 ~~$406 million~~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. For example, following the modification of our internal organizational and reporting structure completed in the first quarter of fiscal ~~2020,~~ ~~a decrease~~2021, we use adjusted EBITDA as one of ~~28%~~the measures to compare and evaluate financial performance. Adjusted EBITDA is the sum of our net income before results from ~~the $564 million of consolidated revenues in the first quarter of fiscal 2019, primarily due to~~ ~~significantly lower average net selling prices for our ferrous~~discontinued operations, interest expense, income taxes, depreciation and nonferrous products, in both export and domestic markets, and reduced sales volumes compared to the prior year quarter. These decreases were driven by weaker market conditions for recycled metals globally primarily due to softer demand for finished steel and structural changes to the market for certain recycled nonferrous products resulting from Chinese import restrictions and tariffs. Market selling prices for ferrous recycled metal declined sharply by approximately $60 per ton, or approximately 20%, between the beginning of August and October 2019, before partially recovering in November. Compared to the prior year quarter, average net selling prices for our ferrous products at AMR decreased by 28% and ferrous sales volumes at AMR decreased by 10%, reflecting weaker demand globally and reduced supply of raw materials including end-of-life vehicles due to the lower price environment. Nonferrous revenues at AMR in the first quarter of fiscal 2020 decreased by 14% compared to the prior year quarter, as nonferrous average net selling prices and sales volumes at AMR decreased by 8% and 14%, respectively. S~~teel revenues in the first quarter of fiscal 2020~~ ~~decreased by 24% compared to the prior year quarter primarily reflecting the impact of significantly lower average net selling prices for our finished steel products and decreased sales volumes.~~

~~Consolidated operating loss~~ ~~was $(8) million~~ ~~in the first quarter of fiscal 2020, compared to income of $23 million in the first quarter of fiscal 2019. Adjusted consolidated operating loss was~~ ~~$(4) million~~ ~~in the first quarter of fiscal 2020, compared to income of $23 million in the first quarter of fiscal 2019. Adjusted consolidated operating (loss) income for each period excludes the impact of~~amortization, charges for legacy environmental matters ~~net~~(net of ~~recoveries, asset impairment charges, and~~recoveries), restructuring charges and other exit-related ~~activities.~~activities, asset impairment charges (net of recoveries) and other items which are not related to underlying business operational performance. See the ~~reconciliation~~reconciliations of supplemental financial measures, including adjusted ~~consolidated operating (loss) income~~EBITDA, in Non-GAAP Financial Measures at the end of this Item 2.

Financial Highlights of Results of Operations for the First Quarter of Fiscal 2021

Market conditions for recycled metals improved in the first quarter of fiscal ~~2020 of~~ ~~$(2) million, compared~~2021, leading to ~~income of~~ ~~$23 million~~ ~~in the prior year period. The sharply~~ declining price environment during most of the first quarter of fiscal 2020 had a significant adverse impact on operating margins and overall operating results at AMR for the period. Ferrous metal spreads at AMR in the first quarter of fiscal 2020 declined by approximately 20% andsignificantly increased average net selling prices for ~~AMR’s~~our ferrous and nonferrous ~~joint~~ products ~~that are recovered from the shredding process, comprising primarily zorba, decreased by 12%,~~ compared to the prior year quarter. ~~In the sharply declining commodity price environment, average inventory costs did not decrease as quickly as purchase~~ costs for scrap metal, resulting in an adverse effect on cost of goods sold and overall operating results at AMR. In addition, the lower price environment adversely impacted the supply of scrap metal including end-of-life vehicles, which resulted in lower processed volumes compared to the prior year quarter. The adverse effects of the market conditions on AMR’s operatingOur results in the first quarter of fiscal ~~2020 were partially offset by~~2021 reflected an expansion in our ferrous metal spreads from the ~~benefits from productivity initiatives implemented subsequent to the prior year quarter.~~

~~CSS reported operating income of~~ ~~$4 million~~ ~~in the first quarter of fiscal 2020, compared to $12 million in the prior year quarter, with the decrease primarily reflecting the impact of the declining~~higher price environment and increased sales volumes for our ferrous and finished steel ~~during the first quarter of fiscal 2020. Finished steel average net selling prices declined~~ ~~$104~~ ~~per ton,~~ ~~or 14%,~~ products compared to the prior year quarter, ~~which led to a~~ ~~compression of~~driven by stronger market conditions for recycled metals globally and resilient demand for finished steel ~~margins as decreases~~ in selling prices outpaced the reduction in raw material purchase prices and other input costs. The effects of finished steel margin compression were partially offset by benefits from productivity initiatives. CSS operating resultsWest Coast construction markets. We also benefited in the ~~first~~ quarter ~~of fiscal 2019 reflected higher finished steel margins compared to the current quarter,~~from commercial initiatives and productivity improvements that were supported by the ~~higher and rising price environment at the time.~~

~~Consolidated selling, general and administrative (“SG&A”) expense in the first quarter of fiscal 2020 decreased by~~ ~~$5 million, or 9%, compared to the prior year quarter primarily due to a $6 million~~ ~~decrease in employee-related expenses, including from lower incentive compensation accruals, partially offset by a $1 million charge related to an environmental matter at AMR.~~

~~In the first quarter of fiscal 2020, we invested $24 million in capital expenditures, including towards the~~ implementation of ~~advanced metals recovery technology at several of~~ our major export facilities consistent with our strategic plan, which we expect will deliver benefits to our profitability beginning in the second half of fiscal 2020. We currently plan to invest up to $125 million in capital expenditures in fiscal 2020, including $60 million for investments in growth, including advanced metals recovery technology and to support volume initiatives and other growth projects.

~~Net loss from continuing operations attributable to SSI shareholders in the first quarter of fiscal 2020 was $(7) million,~~ ~~or $(0.26) per~~ diluted share, compared to net income of $16 million, or $0.57 per diluted share, in the prior year quarter. Adjusted net loss from continuing operations attributable to SSI shareholders in the first quarter of fiscal 2020 was ~~$(5) million~~, ~~or $(0.17) per~~ diluted share, compared to net income of $17 million, or $0.59 per diluted share, in the prior year quarter. See the reconciliation of adjusted net (loss) income from continuing operations attributable to SSI shareholders and adjusted diluted (loss) earnings per share from continuing operations attributable to SSI shareholders in Non-GAAP Financial Measures at the end of this Item 2.One Schnitzer functionally-based organization model.

The following items further highlight selected liquidity and capital structure metrics:

See the reconciliations of adjusted diluted earnings (loss) 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.

Three Months Ended November 30,

($ in thousands)

2019

2018

% Change

Revenues:

Auto and Metals Recycling

$
312,757

$
436,412

(28
)%
Cascade Steel and Scrap

94,266

130,386

(28
)%
Intercompany revenue eliminations⁽¹⁾

(1,439
)

(2,778
)

(48
)%
Total revenues

405,584

564,020

(28
)%
Cost of goods sold:

Auto and Metals Recycling

280,129

378,736

(26
)%
Cascade Steel and Scrap

86,244

114,335

(25
)%
Intercompany cost of goods sold eliminations⁽¹⁾

(1,613
)

(2,939
)

(45
)%
Total cost of goods sold

364,760

490,132

(26
)%
Selling, general and administrative expense:

Auto and Metals Recycling

33,519

34,766

(4
)%
Cascade Steel and Scrap

3,945

4,448

(11
)%
Corporate⁽²⁾

9,310

12,205

(24
)%
Total selling, general and administrative expense

46,774

51,419

(9
)%
Income from joint ventures:

Auto and Metals Recycling

(39
)

(170
)

(77
)%
Cascade Steel and Scrap

(160
)

(315
)

(49
)%
Total income from joint ventures

(199
)

(485
)

(59
)%
Asset impairment charges:

Auto and Metals Recycling

1,580

63

NM

Corporate

112

—

NM

Total asset impairment charges

1,692

63

NM

Operating (loss) income:

Auto and Metals Recycling

(2,432
)

23,017

NM

Cascade Steel and Scrap

4,237

11,918

(64
)%
Segment operating income

1,805

34,935

NM

Restructuring charges and other exit-related activities⁽³⁾

(467
)

(202
)

131
%
Corporate expense⁽²⁾

(9,422
)

(12,205
)

(23
)%
Change in intercompany profit elimination⁽⁴⁾

174

161

8
%
Total operating (loss) income

$
(7,910
)

$
22,689

NM

	Three Months Ended November 30,
($ in thousands, except for prices and per share amounts)	2020			2019			% Change
Ferrous revenues	$	252,206		$	199,898			26	%
Nonferrous revenues		119,709			97,841			22	%
Steel revenues⁽¹⁾		88,414			77,325			14	%
Retail and other revenues		31,778			30,520			4	%
Total revenues		492,107			405,584			21	%
Cost of goods sold		420,094			364,760			15	%
Gross margin (total revenues less cost of goods sold)	$	72,013		$	40,824			76	%
Gross margin (%)		14.6	%		10.1	%		45	%
Selling, general and administrative expense	$	49,906		$	46,774			7	%
Diluted earnings (loss) per share from continuing operations attributable to SSI shareholders:
Reported	$	0.50		$	(0.26	)	NM
Adjusted⁽²⁾	$	0.57		$	(0.17	)	NM
Net income (loss)	$	15,064		$	(6,565	)	NM
Adjusted EBITDA⁽²⁾	$	40,255		$	9,835			309	%
Average ferrous recycled metal sales prices ($/LT)⁽³⁾:
Domestic	$	242		$	196			23	%
Foreign	$	276		$	229			21	%
Average	$	269		$	222			21	%
Ferrous volumes (LT, in thousands):
Domestic⁽⁴⁾		388			363			7	%
Foreign		665			613			9	%
Total ferrous volumes (LT, in thousands)⁽⁴⁾		1,053			976			8	%
Average nonferrous sales price ($/pound)⁽³⁾⁽⁵⁾	$	0.64		$	0.54			19	%
Nonferrous volumes (pounds, in thousands)⁽⁴⁾⁽⁵⁾		138,236			144,176			(4	)%
Finished steel average sales price ($/ST)⁽³⁾	$	621		$	643			(3	)%
Finished steel sales volumes (ST, in thousands)		134			114			18	%
Cars purchased (in thousands)⁽⁶⁾		78			83			(6	)%
Number of auto parts stores at period end		50			51			(2	)%
Rolling mill utilization⁽⁷⁾		97	%		85	%		14	%

We operate our business across two reportable segments: AMR and CSS. Additional financial information relating to these reportable segments is contained in Note 13 - Segment Information in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.

Three Months Ended November 30,

($ in thousands, except for prices)

2019

2018

% Change

Ferrous revenues

$
192,472

$
298,812

(36
)%
Nonferrous revenues

89,812

104,181

(14
)%
Retail and other revenues

30,473

33,419

(9
)%
Total segment revenues

312,757

436,412

(28
)%
Segment operating (loss) income

$
(2,432
)

$
23,017

NM

Average ferrous recycled metal sales prices ($/LT)⁽¹⁾:

Domestic

$
195

$
290

(33
)%
Foreign

$
229

$
314

(27
)%
Average

$
221

$
306

(28
)%
Ferrous sales volume (LT, in thousands):

Domestic

247

340

(27
)%
Foreign

583

579

1
%
Total ferrous sales volume (LT, in thousands)

830

919

(10
)%
Average nonferrous sales price ($/pound)⁽¹⁾⁽²⁾

$
0.54

$
0.59

(8
)%
Nonferrous sales volume (pounds, in thousands)⁽²⁾

131,501

152,869

(14
)%
Cars purchased (in thousands)⁽³⁾

83

94

(12
)%
Number of auto parts stores at period end

51

51

(—
)%

~~Revenues in the first quarter of fiscal 2020~~ ~~decreased~~ ~~by 28% compared to the prior year quarter primarily due to~~ significantly lower average net selling prices for our ferrous and nonferrous products, in both export and domestic markets, and reduced sales volumes compared to the prior year quarter. These decreases were driven by weaker market conditions for recycled metals globally primarily due to softer demand for finished steel and structural changes to the market for certain recycled nonferrous products. Market selling prices for ferrous recycled metal declined sharply by approximately $60 per ton, or approximately 20%, between the beginning of August and early October 2019, before partially recovering in November. Compared to the prior year quarter, average net selling prices for shipments of ferrous products at AMR decreased by 28% and ferrous sales volumes decreased by 10%, reflecting weaker demand globally and reduced supply of raw materials including end-of-life vehicles due to the lower price environment. ~~Nonferrous revenues in the first quarter of fiscal 2020~~ ~~decreased~~ ~~by 14% compared to the prior year quarter, as nonferrous average net selling prices and sales volumes~~ ~~decreased by 8% and 14%, respectively.~~

~~Operating (loss) income in the first quarter of fiscal~~ ~~2020~~ ~~was $(2) million compared to $23 million in the prior year quarter. The sharply~~ declining price environment during most of the first quarter of fiscal 2020 had a significant adverse impact on operating margins and overall operating results at AMR for the period. Ferrous metal spreads at AMR in the first quarter of fiscal 2020 declined by approximately 20% and average net selling prices for AMR’s nonferrous joint products that are recovered from the shredding process, comprising primarily zorba, decreased by 12%, compared to the prior year quarter. In the sharply declining commodity price environment, average inventory costs did not decrease as quickly as purchase costs for scrap metal, resulting in an adverse effect on cost of goods sold and overall operating results at AMR. In addition, the lower price environment adversely impacted the supply of scrap metal including end-of-life vehicles, which resulted in lower processed volumes compared to the prior year quarter. The adverse effects of the market conditions on AMR’s operating results in the first quarter of fiscal 2020 were partially offset by the benefits from productivity initiatives implemented subsequent to the prior year quarter. Operating results at AMR in the first quarter of fiscal 2019 included $8 million in positive contributions from a limited-duration contract, which was substantially complete at the end of fiscal 2019, and which had provided a high margin source of supply.

~~Revenues~~We generated revenues of $492 million in the first quarter of fiscal ~~2020~~ ~~decreased~~2021, an increase of 21% from the $406 million of revenues generated in the prior year quarter primarily due to significantly higher average net selling prices for our ferrous and nonferrous products and increased ferrous sales volumes compared to the prior year quarter. These increases were driven by ~~$36 million, or 28%~~stronger market conditions for recycled metals globally compared to the prior year quarter, which prior year quarter experienced a sharp decline in prices for recycled metals that adversely impacted the supply of raw materials including end-of-life vehicles. Finished steel sales volumes were significantly higher in the first quarter of fiscal 2021 compared to the prior year quarter, reflecting ~~significantly~~resilient demand in West Coast construction markets and higher rolling mill utilization, partially offset by marginally lower average ~~net selling prices for our~~ finished steel ~~products, lower finished steel sales~~ ~~volumes and decreased sales of ferrous recycled scrap metal.~~

Net income in the first quarter of fiscal ~~2020~~2021 was $4$15 million, compared to ~~$12~~a net loss of $(7) million in the prior year ~~quarter, with the decrease primarily reflecting the impact of the declining price environment for finished steel during~~quarter. Adjusted EBITDA in the first quarter of fiscal ~~2020. Finished steel~~2021 was $40 million, compared to $10 million in the prior year quarter. The improvement in our results for the first quarter of fiscal 2021 reflected an expansion in our ferrous metal spreads from the higher price environment for recycled metals in the quarter, including for certain recycled nonferrous products. Ferrous metal spreads in the first quarter of fiscal 2021 increased by approximately 5%, and average net selling prices ~~declined $104 per ton, or 14%~~for our nonferrous joint products that are recovered from the shredding process, comprising primarily zorba, increased by 29%, compared to the prior year ~~quarter, which led to a~~ compression of finished steel margins as decreases in selling prices outpaced the reduction in raw material purchase prices and other input costs. The effects of finished steel margin compression were partially offset by benefits from productivity initiatives. CSS operatingquarter. Our results in the first quarter of fiscal ~~2019~~2021 also reflected positive contributions from sales of higher ~~finished steel margins~~priced PGM products compared to the ~~current~~prior year quarter ~~supported by~~and achievement of the ~~higher and rising~~full run rate of benefits from productivity initiatives implemented throughout fiscal 2020. In comparison, the sharply declining price environment ~~at the time.~~

~~Corporate SG&A expense for~~during most of the first quarter of fiscal 2020 ~~decreased~~had a significant negative impact on our ferrous metal spreads as well as on the supply of scrap metal including end-of-life vehicles, which resulted in lower processed volumes and an adverse impact from average inventory accounting. Selling, general and administrative expense in the first quarter of fiscal 2021 increased by $3 million, or ~~24%~~7%, compared to the prior year quarter primarily due to ~~decreased~~an increase in employee-related expenses, including from ~~lower~~higher incentive compensation accruals. ~~The lower incentive compensation accruals primarily reflect~~See the ~~reduced expense attributable to share-based awards granted~~reconciliation of adjusted EBITDA in Non-GAAP Financial Measures at the ~~first~~end of this Item 2.

~~In order to mitigate the weaker price environment in the ferrous and nonferrous markets, in fiscal 2019~~ we implemented productivity initiatives aimed at delivering $35 million in annual benefits primarily through a combination of production cost efficiencies and reductions in SG&A expense. Of the total, approximately 75% of the targeted benefits are in AMR with the remainder split between CSS and Corporate. For fiscal 2019, we achieved approximately $30 million in benefits as a result of these initiatives, with the full amount expected to be achieved in fiscal 2020. Our first quarter fiscal 2020 performance reflects achievement of the full quarterly run rate of these initiatives. In addition, in fiscal 2020 we also initiated and are in the process of implementing additional productivity initiatives aimed at further reducing our annual operating expenses, ~~at Corporate, AMR and CSS,~~ mainly through reductions in non-trade procurement spend, including outside and professional services, lower employee-related expenses and other non-headcount measures. We ~~are targeting $15~~achieved approximately $18 million in realized benefits in fiscal 2020 from these additional ~~initiatives.~~

~~We expect to incur aggregate estimated restructuring charges and other exit-related costs of approximately $4~~over $20 million ~~in connection with these initiatives, the substantial majority of which are expected~~ to be ~~recognized~~achieved in fiscal 2021.

In the first quarter of fiscal 2021, in accordance with our plan announced in April 2020, we completed the transition to a new internal organizational and reporting structure reflecting a functionally-based, integrated model. This change in structure is intended to ~~require the Company to make cash payments. The estimated charges consist primarily of employee termination benefits of $2 million, professional services costs of $1 million,~~result in a more agile organization and ~~a loss associated with a lease contract termination of $1 million.~~solidify recent productivity improvement and cost reduction initiatives.

The effective tax rate from continuing operations for the first quarter of fiscal ~~2020~~ 2021 was an expense on pre-tax income of 27.5% compared to a benefiton a pre-tax loss of 27.8% ~~compared to an expense of 19.8%~~ for the comparable prior year period. For each quarterly period, ~~The~~the effective tax rate from continuing operations ~~for the first quarter of fiscal 2020~~ was higher than the U.S. federal statutory rate of 21% primarily due to the ~~impact of non-deductible officers’ compensation and other expenses, as well as the~~ aggregate impact of state taxes and the impact of permanent differences from non-deductible expenses on the projected annual effective tax rate applied to the quarterly results.

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.

We had cash balances of $107 million and ~~$12~~$18 million as of November 30, ~~2019~~2020 and August 31, ~~2019,~~2020, 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, ~~2019,~~2020, debt was ~~$128~~$143 million compared to ~~$105~~$104 million as of August 31, ~~2019,~~2020, and debt, net of cash, was ~~$119~~$136 million as of November 30, ~~2019~~2020 compared to ~~$93~~$87 million as of August 31, ~~2019~~2020 (refer to Non-GAAP Financial Measures at the end of this Item 2).

Net cash ~~provided by~~ used in operating activities in the first three months of fiscal ~~2020~~2021 was ~~$11~~$7 million, compared tonet cash ~~used in~~provided by operating activities of ~~$12~~$11 million in the first three months of fiscal ~~2019.~~2020.

Uses of cash in the first three months of fiscal 2021 included a $29 million increase in accounts receivable due to higher selling prices for recycled metals and the timing of sales and collections, a $26 million increase in inventories due to higher raw material purchase prices and the timing of purchases and sales, and a $13 million decrease in accrued payroll and related liabilities primarily due to the payment of incentive compensation previously accrued under our fiscal 2020 plans. Sources of cash in the first three months of fiscal 2021, other than from earnings, included a $19 million increase in accounts payable primarily due to higher raw material purchases prices and the timing of purchases and payments.

Sources of cash in the first three months of fiscal 2020 included a $28 million decrease in accounts receivable primarily due to the timing of sales and collections, and a $12 million decrease in inventories due to lower raw material purchase prices and the timing of purchases and sales. Uses of cash in the first three months of fiscal 2020 included a $29 million decrease in accounts payable primarily due to lower raw material purchase prices and the timing of payments, and aan $11 ~~million~~ ~~decrease~~ ~~in accrued payroll and related liabilities primarily due to the~~ ~~payment of incentive compensation previously accrued under our fiscal 2019 plans.~~

~~Uses of cash in the first three months of fiscal 2019 included a $28 million increase in accounts receivable primarily due to the timing of sales and collections and a $27~~ million decrease in accrued payroll and related liabilities due to the payment of incentive compensation previously accrued under our fiscal ~~2018~~2019 plans. Sources of cash other than from earnings in the first three months of fiscal 2019 included a $10 million decrease in inventories primarily due to lower raw material purchase prices and the impact of timing of purchases and sales.

Net cash used in investing activities was $32 million in the first three months of fiscal 2021, compared to $24 million in the first three months of fiscal ~~2020, compared to $25 million in the first three months of fiscal 2019.~~2020.

Cash used in investing activities in the first three months of fiscal ~~2020~~2021 included capital expenditures of $2432 million to upgrade our equipment and infrastructure and for investments in advanced metals recovery technology and environmental and safety-related assets, compared to ~~$27~~$24 million in the prior year period.

Net cash provided by financing activities in the first three months of fiscal ~~2020~~2021 was ~~$10~~$29 million, compared to ~~$44~~$10 million in the first three months of fiscal ~~2019.~~2020.

Cash flows from financing activities in the first three months of fiscal ~~2020~~2021 included ~~$22~~$39 million in net borrowings of debt, compared to ~~$61~~$22 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 ~~2020~~2021 and ~~2019~~2020 included $6 million for the payment of dividends. ~~Cash used in financing activities in the first three months of fiscal 2019 also included $4 million for share repurchases.~~

Our senior secured revolving credit facilities, which provide for revolving loans of $700 million and C$15 million, mature in August 2023 pursuant to a credit agreement with Bank of America, N.A., as administrative agent, and other lenders party thereto. Interest rates on outstanding indebtedness under the credit agreement are based, at our option, on either the London Interbank Offered Rate (“LIBOR”)~~, or~~ (or the Canadian equivalent for C$ ~~loans,~~loans), plus a spread of between 1.25% and ~~2.75%~~3.50%, with the amount of the spread based on a pricing grid tied to our ratio of consolidated funded debt to EBITDA ~~ratio,~~(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 one-month LIBOR plus 1.75%, in each case, plus a spread of between ~~zero~~0.00% and ~~1.50%~~2.50% based on a pricing grid tied to our consolidated funded debt to EBITDA ratio. In addition, commitment fees are payable on the unused portion of the credit facilities at rates between ~~0.15%~~0.20% and ~~0.45%~~0.50% based on a pricing grid tied to our ratio of consolidated funded debt to ~~EBITDA ratio.~~EBITDA.

We had borrowings outstanding under our credit facilities of $~~119~~129 millionas of November 30, ~~2019~~2020 and ~~$97~~$90 million as of August 31, ~~2019.~~2020. The weighted average interest rate on amounts outstanding under our credit facilities was ~~3.25%~~2.05% and ~~3.78%~~4.59% as of November 30, ~~2019~~2020 and August 31, ~~2019,~~2020, respectively.

We use the credit facilities to fund working capital, capital expenditures, dividends, share repurchases, investments and acquisitions. ~~The~~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 ~~adjusted~~ 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, and (c) a consolidated asset coverage ratio, defined as consolidated asset values divided by consolidated funded indebtedness.

As of November 30, ~~2019,~~2020, we were in compliance with the financial covenants under ~~the~~our credit agreement. The consolidated fixed charge coverage ratio was required to be no less than ~~1.50~~1.10 to 1.00 and was ~~2.74~~2.99 to 1.00 as of November 30, ~~2019.~~2020. The consolidated leverage ratio was required to be no more than 0.55 to 1.00 and was 0.18 to 1.00 as of November 30, ~~2019.~~2020. The consolidated asset coverage ratio was required to be no less than 1.00 to 1.00 and was 2.33 to 1.00 as of November 30, 2020.

Our obligations under ~~the~~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, ~~there can be no assurances that~~ we ~~will~~may not be able to do so in the event market conditions, COVID-19 or other negative factors ~~which adversely~~have a significant adverse impact on our results of operations and financial ~~position lead to a trend of consolidated net losses.~~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. ~~There can be no assurances~~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 primarily relate to an equipment purchase, 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 obligation is treated as a partial financing of the purchase price by the equipment vendor. Monthly payments commence when the equipment is placed in service and continue for a period of four years thereafter. We impute interest on this obligation at a rate of 4.25% reflecting the estimated rate that would be recorded in a market transaction with similar terms.

Capital expenditures totaled ~~$24~~$32 million for the first three months of fiscal ~~2020,~~2021, compared to ~~$27~~$24 million for the prior year period. We currently plan to invest up to $125 million in capital expenditures in fiscal ~~2020,~~2021, including approximately $60 million for investments in growth, including ~~advanced metals recovery technology and to~~new nonferrous processing technologies, support for volume initiatives and other growth projects, using cash generated from operations and available credit facilities. The COVID-19 pandemic has caused 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 the COVID-19 pandemic and other factors impacting the timing of project completion, the extent to which forecasted capital expenditures could be deferred is uncertain.

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 $3 million in capital expenditures for environmental projects in the first three months of fiscal 2020,~~

~~and~~ plan to invest up to ~~$15~~$25 million for such projects in fiscal ~~2020.~~2021. These projects include investments in storm water systems and equipment to ensure ongoing compliance with air quality and other environmental regulations.

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 (the “Site”). See Note 54 - 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 the Site, although such costs could be material to our financial position, results of operations, cash flows and liquidity. We have insurance policies that we believe will provide reimbursement for costs we incur for defense, ~~(including pre-remedial design investigative activities), remedial design, remedial action~~remediation and mitigation for natural resource damages claims in connection with the Site, although there are no assurances that those policies will cover all of the costs which we may incur. Significant cash outflows in the future related to the Site and other environmental matters 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.

On~~November 6, 2019,~~ October 20, 2020, our Board of Directors declared a dividend for the first quarter of fiscal ~~2020~~2021 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 ~~29, 2019~~16, 2020.

Pursuant to our ~~amended~~ share repurchase program as ~~of November 30, 2019,~~amended in 2001, 2006 and 2008, we ~~have existing authorization remaining under the program~~were authorized to repurchase up to ~~approximately~~nine million shares of our Class A common stock. As of November 30, 2020, we had authorization to repurchase up to a remaining 706 ~~759~~ thousand 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.

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, share repurchases, investments and acquisitions, joint ventures, debt service requirements, environmental obligations 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.

None requiring disclosure pursuant to Item 303 of Regulation S-K under the Securities Exchange Act of 1934.

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, ~~2019.~~2020.

We maintain stand-by letters of credit to provide support for certain obligations, including workers’ compensation and performance bonds. As of November 30, ~~2019,~~2020, we had ~~$10~~$9 million outstanding under these arrangements.

There were no material changes to our critical accounting policies and 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, ~~2019, except for changes resulting from adoption of the new lease accounting standard in the first quarter of fiscal~~ 2020. ~~Refer to Note 3~~

~~- Leases in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report for the disclosures required under the new lease accounting standard.~~

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.

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 ~~useful~~ measure ~~for investors because,~~of our leverage, as cash and cash equivalents can be used, among other things, to repay ~~indebtedness, netting this against total debt is a useful measure of our leverage.~~indebtedness.

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 borrowings (repayments) for the period because we believe it is useful to investors as a meaningful presentation of the change in debt.

The following is a reconciliation of net borrowings (repayments) of debt (in thousands):

Adjusted ~~consolidated operating (loss) income,~~EBITDA, adjusted ~~AMR operating (loss) income, adjusted Corporate~~selling, general and administrative expense, adjusted ~~net~~income (loss) ~~income~~ from continuing operations attributable to SSI shareholders, and adjusted diluted earnings (loss) ~~earnings~~ per share from continuing operations attributable to SSI ~~shareholders.~~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,~~ restructuring charges and other exit-related activities, asset impairment charges, and the income tax expense (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.

~~The following is a reconciliation~~Following are reconciliations of net income (loss) to adjusted ~~consolidated operating (loss) income, adjusted AMR operating (loss) income~~EBITDA, and adjusted ~~Corporate~~selling, general and administrative expense (in thousands):

	Three Months Ended November 30,						Three Months Ended November 30,
	2019			2018			2020			2019
Consolidated operating (loss) income:
As reported	$	(7,910	)	$	22,689
Charges for legacy environmental matters, net⁽¹⁾		1,293			471
Reconciliation of adjusted EBITDA:
Net income (loss)							$	15,064		$	(6,565	)
Loss (income) from discontinued operations, net of tax								42			(28	)
Interest expense								1,780			1,423
Income tax expense (benefit)								5,719			(2,534	)
Depreciation and amortization								14,826			14,087
Charges for legacy environmental matters, net⁽¹⁾								2,760			1,293
Restructuring charges and other exit-related activities		467			202			64			467
Asset impairment charges		1,692			63			—			1,692
Adjusted EBITDA							$	40,255		$	9,835

Selling, general and administrative expense:
As reported							$	49,906		$	46,774
Charges for legacy environmental matters, net⁽¹⁾								(2,760	)		(1,293	)
Adjusted	$	(4,458	)	$	23,425		$	47,146		$	45,481

AMR operating (loss) income:
As reported	$	(2,432	)	$	23,017
Asset impairment charges		1,580			63
Adjusted	$	(852	)	$	23,080

Corporate expense:
As reported	$	9,422		$	12,205
Charges for legacy environmental matters, net⁽¹⁾		(1,293	)		(471	)
Asset impairment charges		(112	)		—
Adjusted	$	8,017		$	11,734

~~The following is a reconciliation~~Following are reconciliations of adjusted ~~net~~income (loss) ~~income~~ from continuing operations attributable to SSI shareholders and adjusted diluted earnings (loss) ~~earnings~~ per share from continuing operations attributable to SSI shareholders (in thousands, except per share data):

	Three Months Ended November 30,						Three Months Ended November 30,
		2019			2018		2020			2019
Net (loss) income from continuing operations attributable to SSI shareholders:
Income (loss) from continuing operations attributable to SSI shareholders:
As reported	$	(7,023	)	$	16,260		$	14,146		$	(7,023	)
Charges for legacy environmental matters, net⁽¹⁾		1,293			471
Charges for legacy environmental matters, net⁽¹⁾								2,760			1,293
Restructuring charges and other exit-related activities		467			202			64			467
Asset impairment charges		1,692			63			—			1,692
Income tax benefit allocated to adjustments⁽²⁾		(1,151	)		(184	)
Income tax benefit allocated to adjustments⁽²⁾								(649	)		(1,151	)
Adjusted	$	(4,722	)	$	16,812		$	16,321		$	(4,722	)

Diluted (loss) earnings per share from continuing operations attributable to SSI shareholders:
Diluted earnings (loss) per share from continuing operations attributable to SSI shareholders:
As reported	$	(0.26	)	$	0.57		$	0.50		$	(0.26	)
Charges for legacy environmental matters, net, per share⁽¹⁾		0.05			0.02
Charges for legacy environmental matters, net, per share⁽¹⁾								0.10			0.05
Restructuring charges and other exit-related activities, per share		0.02			0.01			—			0.02
Asset impairment charges, per share		0.06			—			—			0.06
Income tax benefit allocated to adjustments, per share⁽²⁾		(0.04	)		(0.01	)
Adjusted	$	(0.17	)	$	0.59
Income tax benefit allocated to adjustments, per share⁽²⁾								(0.02	)		(0.04	)
Adjusted⁽³⁾							$	0.57		$	(0.17	)

We believe that these non-GAAP financial measures allow for a better understanding of our operating and financial performance. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, the most directly comparable U.S. GAAP measures. Although we find these non-GAAP financial measures useful in evaluating the performance of our business, our reliance on these measures is limited because the adjustments often have a material impact on 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.

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. 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 selling price of inventory would not have had a material NRV impact ~~on any of our reportable segments~~ as of November 30, ~~2019.~~2020.

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, ~~2019.~~2020.

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. As a result of COVID-19, 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.

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, ~~2019~~2020 and August 31, ~~2019,~~2020, ~~38%~~45% and ~~32%~~40%, respectively, of our accounts receivable balance was covered by letters of credit. Of the remaining balance, 97% and ~~96%~~98% was less than 60 days past due as of November 30, ~~2019~~2020 and August 31, ~~2019,~~2020, respectively.

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. In certain instances, we may use derivatives to manage some portion of this risk. As of November 30, ~~2019~~2020 and August 31, ~~2019,~~ 2020, we did not have any derivative contracts.

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, ~~2019,~~2020, our disclosure controls and procedures were effective at the reasonable assurance level.

During the quarter ended November 30, 2019, we implemented changes to our processes, systems, and internal controls over financial reporting relating to our adoption of and ongoing compliance with the new lease accounting standard, ASC 842, which we adopted as of September 1, 2019. There ~~were~~was no ~~other changes~~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 ~~our most recent fiscal~~the quarter ended November 30, 2020, that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

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, ~~2019,~~2020, and below in this Part II, “Item 1. Legal Proceedings” of this Quarterly Report on Form 10-Q. Also see Note 54 - Commitments and Contingencies in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item I, incorporated by reference herein.

~~With respect to the~~As previously reported, ~~matter in which~~New England Metal Recycling LLC (NEMR), an indirectly wholly-owned subsidiary of the Company, ~~has been in settlement discussions~~entered into a consent decree as of September 17, 2020 with the ~~Alameda County District Attorney and the California~~New Hampshire Office of the Attorney General ~~(COAG)~~, ~~the latter~~acting on behalf of ~~certain state agencies, regarding~~the New Hampshire Department of Environmental Services, in resolution of an enforcement matter in connection with a legacy environmental issue at a closed facility in New Hampshire owned and previously operated by NEMR. The consent decree, which provided for a civil penalty in the amount of $2.7 million and the schedule for completing the remaining remedial work, was filed with and entered as an order of the Strafford Superior Court, State of New Hampshire on October 1, 2020. The civil penalty under the consent decree was paid in November 2020.

In addition, as previously reported, the Company had reached agreement with the Bay Area Air Quality Management District (BAAQMD) on the terms of a Compliance and Settlement Agreement (CSA) to resolve a July 2019 Notice of Violation with respect to alleged violations of ~~environmental requirements~~a BAAQMD air emissions rule at one of our ~~operations~~facilities in ~~California stemming from investigations initiated in 2013 and inspections conducted in 2015,~~Oakland, California. The CSA covers the Company has completed various facility upgrades that we believe resolve the underlying environmental concerns identified by the agencies and has agreed to settle the matter for $4.556 million, inclusiveperiod pending installation of ~~civil penalties, reimbursement of the agencies’ enforcement costs and Supplemental Environmental Projects (SEPs), which amount includes a credit of $925 thousand for performance of a SEP to install~~ additional ~~emission~~emissions controls at the ~~facility. The settlement is subject~~facility and provides for the payment of a civil penalty in the amount of $400,000, a suspended payment in the amount of $100,000 to ~~finalization of~~be forgiven in the ~~stipulation and settlement agreement and final approval~~event the Company completes the compliance work by the ~~agencies~~agreed deadline, and the purchase by the Company of certain emission reduction credits. The CSA was executed as of September 22, 2020. The $400,000 civil penalty was paid and the ~~settlement including~~emission reduction credits were purchased in the ~~SEP credit.~~first quarter of fiscal 2021.

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, ~~2019~~2020.

On January 8, 2020, subsequent to the end of our fiscal 2020 first quarter, we committed to certain restructuring initiatives aimed at further reducing our annual operating expenses, primarily SG&A, at Corporate, AMR and CSS, mainly through reductions in non-trade procurement spend, including outside and professional services, lower employee-related expenses and other non-headcount measures. We expect to incur aggregate estimated restructuring charges, as defined in ~~ASC 420, Exit or Disposal Cost Obligations~~, and other exit-related costs of approximately $4 million in connection with these initiatives. The estimated charges consist primarily of employee termination benefits of $2 million, professional services costs of $1 million, and a loss associated with a lease contract termination of $1 million. We expect the substantial majority of the restructuring charges to be recognized by the end of fiscal 2020 and to require the Company to make cash payments.None.

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.



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)


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


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

	PAGE
~~FORWARD LOOKING~~FORWARD-LOOKING STATEMENTS	3

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)	4

Unaudited Condensed Consolidated Balance Sheets as of November 30, ~~2019~~2020 and August 31, ~~2019~~2020	4

Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended November 30, ~~2019~~2020 and ~~2018~~2019	5

Unaudited Condensed Consolidated Statements of ComprehensiveIncome (Loss) ~~Income~~ for the Three Months Ended November 30, ~~2019~~2020 and ~~2018~~2019	6

Unaudited Condensed Consolidated Statements of Equity for the Three Months Ended November 30, ~~2019~~2020 and ~~2018~~2019	7

Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended November 30, ~~2019~~2020 and ~~2018~~2019	8

Notes to the Unaudited Condensed Consolidated Financial Statements	10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2521

Item 3. Quantitative and Qualitative Disclosures about Market Risk	3831

Item 4. Controls and Procedures	3932

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	4033

Item 1A. Risk Factors	4033

Item 5. Other Information	4033

Item 6. Exhibits	4134

SIGNATURES	4235

	Three Months Ended November 30,					Three Months Ended November 30,
	2019		2018			2020			2019
SUPPLEMENTAL DISCLOSURES:
Cash paid (refunded) during the period for:
Cash paid during the period for:
Interest	$	885	$	1,441		$	1,364		$	885
Income taxes paid (refunded), net	$	104	$	(8	)
Income taxes (refunded) paid, net						$	(4,389	)	$	104
Schedule of noncash investing and financing transactions:
Purchases of property, plant and equipment included in current liabilities	$	8,106	$	7,418		$	11,412		$	8,106

	November 30, 2019		August 31, 2019
Processed and unprocessed scrap metal	$	70,070	$	81,313
Semi-finished goods		9,770		8,712
Finished goods		55,386		53,796
Supplies		42,708		43,499
Inventories	$	177,934	$	187,320

	Balance Sheet Classification	November 30, 2019
Assets:
Finance lease right-of-use assets⁽¹⁾	Property, plant and equipment, net	$	7,132
Liabilities:
Finance lease liabilities - current	Short-term borrowings	$	1,357
Finance lease liabilities - non-current	Long-term debt, net of current maturities		7,159
Total finance lease liabilities		$	8,516

	November 30, 2019
	Weighted Average Remaining Lease Term (Years)		Weighted Average Discount Rate
Operating leases		9.7		3.41	%
Finance leases		6.6		8.83	%

Year Ending August 31,	Finance Leases			Operating Leases
2020 (for the remainder of fiscal 2020)	$	1,487		$	17,372
2021		1,855			20,226
2022		1,818			19,646
2023		1,681			19,084
2024		1,409			14,928
Thereafter		2,445			60,615
Total lease payments	$	10,695		$	151,871
Less amounts representing interest		(2,179	)		(25,246	)
Total lease liabilities	$	8,516		$	126,625
Less current maturities		(1,357	)		(18,824	)
Lease liabilities, net of current maturities	$	7,159		$	107,801

	Three Months Ended November 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	5,648
Operating cash flows for finance leases	$	176
Financing cash flows for finance leases	$	329
Lease liabilities arising from obtaining right-of-use assets:
Operating leases	$	3,458
Finance leases	$	1,078

Year Ending August 31,	Capital Lease Obligations
2020	$	1,917
2021		1,799
2022		1,751
2023		1,622
2024		1,346
Thereafter		1,694
Total		10,129
Amounts representing interest		(2,355	)
Total less interest	$	7,774

Year Ending August 31,	Operating Leases
2020	$	21,286
2021		15,301
2022		12,488
2023		10,419
2024		5,035
Thereafter		16,095
Total	$	80,624

	Percentage
Expected share price volatility (SSI)		~~38.9~~48.5	%
Expected share price volatility (Peer group)		~~44.5~~54.9	%
Expected correlation to peer group companies		~~34.3~~44.5	%
Risk-free rate of return		~~1.58~~0.23	%

	November 30, 2019			August 31, 2019
AMR⁽¹⁾	$	1,655,799		$	1,561,267
CSS⁽¹⁾		768,270			769,930
Total segment assets		2,424,069			2,331,197
Corporate and eliminations⁽²⁾		(1,265,477	)		(1,170,451	)
Total assets	$	1,158,592		$	1,160,746

	Three Months Ended November 30,
($ in thousands)	2019			2018			% Change
Revenues:
Auto and Metals Recycling	$	312,757		$	436,412			(28	)%
Cascade Steel and Scrap		94,266			130,386			(28	)%
Intercompany revenue eliminations⁽¹⁾		(1,439	)		(2,778	)		(48	)%
Total revenues		405,584			564,020			(28	)%
Cost of goods sold:
Auto and Metals Recycling		280,129			378,736			(26	)%
Cascade Steel and Scrap		86,244			114,335			(25	)%
Intercompany cost of goods sold eliminations⁽¹⁾		(1,613	)		(2,939	)		(45	)%
Total cost of goods sold		364,760			490,132			(26	)%
Selling, general and administrative expense:
Auto and Metals Recycling		33,519			34,766			(4	)%
Cascade Steel and Scrap		3,945			4,448			(11	)%
Corporate⁽²⁾		9,310			12,205			(24	)%
Total selling, general and administrative expense		46,774			51,419			(9	)%
Income from joint ventures:
Auto and Metals Recycling		(39	)		(170	)		(77	)%
Cascade Steel and Scrap		(160	)		(315	)		(49	)%
Total income from joint ventures		(199	)		(485	)		(59	)%
Asset impairment charges:
Auto and Metals Recycling		1,580			63		NM
Corporate		112			—		NM
Total asset impairment charges		1,692			63		NM
Operating (loss) income:
Auto and Metals Recycling		(2,432	)		23,017		NM
Cascade Steel and Scrap		4,237			11,918			(64	)%
Segment operating income		1,805			34,935		NM
Restructuring charges and other exit-related activities⁽³⁾		(467	)		(202	)		131	%
Corporate expense⁽²⁾		(9,422	)		(12,205	)		(23	)%
Change in intercompany profit elimination⁽⁴⁾		174			161			8	%
Total operating (loss) income	$	(7,910	)	$	22,689		NM

	Three Months Ended November 30,
($ in thousands, except for prices)	2019			2018		% Change
Ferrous revenues	$	192,472		$	298,812		(36	)%
Nonferrous revenues		89,812			104,181		(14	)%
Retail and other revenues		30,473			33,419		(9	)%
Total segment revenues		312,757			436,412		(28	)%
Segment operating (loss) income	$	(2,432	)	$	23,017	NM
Average ferrous recycled metal sales prices ($/LT)⁽¹⁾:
Domestic	$	195		$	290		(33	)%
Foreign	$	229		$	314		(27	)%
Average	$	221		$	306		(28	)%
Ferrous sales volume (LT, in thousands):
Domestic		247			340		(27	)%
Foreign		583			579		1	%
Total ferrous sales volume (LT, in thousands)		830			919		(10	)%
Average nonferrous sales price ($/pound)⁽¹⁾⁽²⁾	$	0.54		$	0.59		(8	)%
Nonferrous sales volume (pounds, in thousands)⁽²⁾		131,501			152,869		(14	)%
Cars purchased (in thousands)⁽³⁾		83			94		(12	)%
Number of auto parts stores at period end		51			51		(—	)%

	Three Months Ended November 30,
($ in thousands, except for price)	2019			2018			% Change
Steel revenues⁽¹⁾	$	77,325		$	101,337			(24	)%
Recycling revenues⁽²⁾		16,941			29,049			(42	)%
Total segment revenues		94,266			130,386			(28	)%
Segment operating income	$	4,237		$	11,918			(64	)%
Finished steel average sales price ($/ST)⁽³⁾	$	643		$	747			(14	)%
Finished steel sales volume (ST, in thousands)		114			119			(5	)%
Rolling mill utilization⁽⁴⁾		85	%		87	%		(2	)%

Exhibit Number		Exhibit Description

10.1*		Form of Long-Term Incentive Award Agreement under the 1993 Stock Incentive Plan used for awards granted in fiscal ~~2020.~~2021.

10.2*		Form of Restricted Stock Unit Award Agreement under the 1993 Stock Incentive Plan used for awards granted in fiscal 2021.

10.3*		Fiscal ~~2020~~2021 Annual Performance Bonus Program for the Chief Executive Officer.

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)

		SCHNITZER STEEL INDUSTRIES, INC.
		(Registrant)

Date:	January ~~8, 2020~~7, 2021	By:	/s/ Tamara L. Lundgren
			Tamara L. Lundgren
			Chairman, President and Chief Executive Officer

Date:	January ~~8, 2020~~7, 2021	By:	/s/ Richard D. Peach
			Richard D. Peach
			~~Senior~~Executive Vice President, Chief Financial Officer and Chief ~~of Corporate Operations~~Strategy Officer