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 ~~27,323,590~~27,247,009 shares of Class A common stock, par value of $1.00 per share, and 200,000 shares of Class B common stock, par value of $1.00 per share, outstanding as of June ~~28, 2021.~~27, 2022.

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”~~Company,” and “SSI” refer to Schnitzer Steel Industries, Inc. and its consolidated subsidiaries.

Forward-looking statements in this Quarterly Report on Form 10-Q include statements regarding future events or our expectations, intentions, beliefs, and strategies regarding the future, which may include statements regarding the impact of pandemics, epidemics, or other public health emergencies, such as the coronavirus disease 2019 (“COVID-19”) pandemic; the impact of equipment upgrades, equipment failures, and facility damage on production, including timing of repairs and resumption of operations; the realization of insurance recoveries; the Company’s outlook, growth initiatives, or expected results or objectives, ~~including~~including pricing, margins, sales volumes, and profitability; completion of acquisitions and integration of acquired businesses; the impacts of supply chain disruptions and inflation; liquidity positions; our ability to generate cash from continuing operations; trends, cyclicality, and changes in the markets we sell into; strategic direction or goals; targets; changes to manufacturing and production processes; ~~the realization of insurance recoveries;~~ the realization of deferred tax assets; planned capital expenditures; the cost of and the status of any agreements or actions related to our compliance with environmental and other laws; expected tax rates, deductions, and credits; the impact of sanctions and tariffs, quotas, and other trade actions and import restrictions; the potential impact of adopting new accounting pronouncements; the impact of labor shortages or increased labor costs; obligations under our retirement plans; benefits, savings, or additional costs from business realignment, cost containment, and productivity improvement programs; and the adequacy of accruals.

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

We may make other forward-looking statements from time to time, including in reports filed with the Securities and Exchange Commission, press releases, presentations, and on public conference calls. All forward-looking statements we make are based on information available to us at the time the statements are made, and we assume no obligation to update any forward-looking statements, except as may be required by law. Our business is subject to the effects of changes in domestic and global economic conditions and a number of other risks and uncertainties that could cause actual results to differ materially from those included in, or implied by, such forward-looking statements. Some of these risks and uncertainties are discussed in “Item 1A. Risk Factors” of Part I of our most recent Annual Report on Form 10-K, as supplemented by our subsequently filed Quarterly Reports on Form 10-Q. Examples of these risks include: the impact of pandemics, epidemics, or other public health emergencies, such as the COVID-19 pandemic; the impact of equipment upgrades, equipment failures, and facility damage on production; potential environmental cleanup costs related to the Portland Harbor Superfund site or other locations; the cyclicality and impact of general economic conditions; changing conditions in global markets including the impact of sanctions and tariffs, quotas, and other trade actions and import restrictions; economic and geopolitical instability including as a result of military conflict; volatile supply and demand conditions affecting prices and volumes in the markets for raw materials and other inputs we purchase; significant decreases in ~~scrap~~recycled metal prices; imbalances in supply and demand conditions in the global steel industry; difficulties associated with acquisitions and integration of acquired businesses; supply chain disruptions; reliance on ~~third party~~third-party shipping companies, including with respect to freight rates and the availability of transportation; inability to obtain or renew business licenses and permits; the impact of goodwill impairment charges; the impact of long-lived asset and equity investment impairment charges; failure to realize or delays in realizing expected benefits from investments in processing and manufacturing technology improvements; inability to achieve or sustain the benefits from productivity, cost savings, and restructuring initiatives; inability to renew facility leases; ~~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 inflation and foreign currency fluctuations; potential limitations on our ability to access capital resources and existing credit facilities; restrictions on our business and financial covenants under the agreement governing our bank credit facilities; the impact of consolidation in the steel industry; product liability claims; the impact of legal proceedings and legal compliance; the adverse impact of climate change; the impact of not realizing deferred tax assets; the impact of tax increases and changes in tax rules; the impact of ~~property tax increases or property tax rate changes; the impact of~~ one or more cybersecurity incidents; environmental compliance costs and potential environmental liabilities; increased environmental regulations and enforcement; compliance with climate change and greenhouse gas emission laws and regulations; the impact of labor shortages or increased labor costs; reliance on employees subject to collective bargaining agreements; and the impact of the underfunded status of multiemployer plans in which we participate.


	May 31, 2021			August 31, 2020			May 31, 2022			August 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	17,927		$	17,887		$	16,125		$	27,818
Accounts receivable, net of allowance for credit losses of $1,589 and $1,593		266,007			139,147
Accounts receivable, net of allowance for credit losses of $1,556 and $1,566								283,819			214,098
Inventories		257,229			157,269			439,704			256,427
Refundable income taxes		509			18,253			1,285			837
Prepaid expenses and other current assets		43,517			30,075			46,992			43,934
Total current assets		585,189			362,631			787,925			543,114
Property, plant and equipment, net of accumulated depreciation of $843,115 and $811,623		510,762			487,004
Property, plant and equipment, net of accumulated depreciation of $847,366 and $837,293								629,104			562,674
Operating lease right-of-use assets		132,987			140,584			127,311			131,221
Investments in joint ventures		11,343			10,057			13,461			12,844
Goodwill		171,233			169,627			254,511			170,304
Intangibles, net of accumulated amortization of $3,694 and $3,528		4,132			4,585
Intangibles, net of accumulated amortization of $6,219 and $3,846								26,199			3,980
Deferred income taxes		27,200			27,152			24,988			27,561
Other assets		42,892			28,287			48,942			42,665
Total assets	$	1,485,738		$	1,229,927		$	1,912,441		$	1,494,363
Liabilities and Equity
Current liabilities:
Short-term borrowings	$	2,834		$	2,184		$	5,764		$	3,654
Accounts payable		153,454			106,676			223,816			179,917
Accrued payroll and related liabilities		55,819			41,436			56,681			69,622
Environmental liabilities		12,548			6,302			11,600			24,743
Operating lease liabilities		20,462			19,760			21,964			21,417
Accrued income taxes		1,166			—			10,140			3,521
Other accrued liabilities		50,421			47,306			50,898			49,976
Total current liabilities		296,704			223,664			380,863			352,850
Deferred income taxes		42,415			38,292			62,133			40,593
Long-term debt, net of current maturities		150,939			102,235			316,108			71,299
Environmental liabilities, net of current portion		53,893			47,162			54,950			52,385
Operating lease liabilities, net of current maturities		116,017			125,001			106,745			113,165
Other long-term liabilities		23,187			13,137			23,772			24,292
Total liabilities		683,155			549,491			944,571			654,584
Commitments and contingencies (Note 4)
Commitments and contingencies (Note 5)
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, 27,323 and 26,899 shares issued and outstanding		27,323			26,899
Class B common stock – 25,000 shares $1.00 par value authorized, 200 and 200 shares issued and outstanding		200			200
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, 27,247 and 27,332 shares issued and outstanding								27,247			27,332
Class B common stock – 25,000 shares $1.00 par value authorized, 200 and 200 shares issued and outstanding								200			200
Additional paid-in capital		44,977			36,616			34,426			49,074
Retained earnings		756,262			649,863			936,060			793,712
Accumulated other comprehensive loss		(30,731	)		(36,871	)		(34,245	)		(34,554	)
Total SSI shareholders’ equity		798,031			676,707			963,688			835,764
Noncontrolling interests		4,552			3,729			4,182			4,015
Total equity		802,583			680,436			967,870			839,779
Total liabilities and equity	$	1,485,738		$	1,229,927		$	1,912,441		$	1,494,363

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

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

Common Stock

Additional

Accumulated
Other

Total SSI

Class A

Class B

Paid-in

Retained

Comprehensive

Shareholders’

Noncontrolling

Total

Nine Months Ended May 31, 2020

Shares

Amount

Shares

Amount

Capital

Earnings

Loss

Equity

Interests

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

—

—

—

—

—

(8,107
)

—

(8,107
)

1,329

(6,778
)
Other comprehensive loss, net of tax

—

—

—

—

—

—

(2,136
)

(2,136
)

—

(2,136
)
Distributions to noncontrolling interests

—

—

—

—

—

—

—

—

(1,940
)

(1,940
)
Share repurchases

(53
)

(53
)

—

—

(861
)

—

—

(914
)

—

(914
)
Issuance of restricted stock

762

762

—

—

(762
)

—

—

—

—

—

Restricted stock withheld for taxes

(274
)

(274
)

—

—

(5,571
)

—

—

(5,845
)

—

(5,845
)
Share-based compensation cost

—

—

—

—

6,758

—

—

6,758

—

6,758

Dividends ($0.5625 per common share)

—

—

—

—

—

(15,631
)

—

(15,631
)

—

(15,631
)
Balance as of May 31, 2020

26,899

$
26,899

200

$
200

$
33,264

$
651,162

$
(40,899
)

$
670,626

$
3,721

$
674,347

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

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

On October 1, 2021, the Company used cash on hand and borrowings under existing credit facilities to acquire 8 metals recycling facilities across Mississippi, Tennessee, and Kentucky from Columbus Recycling, a provider of recycled ferrous and nonferrous metal products and recycling services. The transaction qualified as a business combination for accounting purposes, which involves application of the acquisition method described in Accounting Standards Codification Topic 805, Business Combinations, and summarized in “Business Acquisitions” in Note 1 - Summary of Significant Accounting Policies. The cash purchase price was approximately $107 million, subject to adjustment for acquired net working capital relative to an agreed-upon benchmark, as well as other adjustments. The Company paid at closing an additional $7 million for estimated net working capital in excess of the benchmark, which is still subject to adjustment as of the date of this report, resulting in total purchase consideration measured as of the end of the third quarter of fiscal 2022 of approximately $114million. As of the date of this report, measurement of actual acquired net working capital, as well as the fair values of certain other acquired assets and assumed liabilities, is still preliminary and subject to change based on the completion of valuation procedures. The acquired Columbus Recycling operations purchase and process scrap metal from industrial manufacturers, local recycling companies, and individuals, and sell the recycled products to regional foundries and steel mills. Combined with the Company’s regional metals recycling facilities in Georgia, Alabama, and Tennessee, the acquired operations offer additional recycling products, services, and logistics solutions to customers and suppliers across the Southeast, giving rise to expected benefits supporting the amount of acquired goodwill.

The results of operations for the acquired Columbus Recycling business beginning as of the October 1, 2021 acquisition date are included in the accompanying financial statements. For each of the three and nine months ended May 31, 2022, the revenues of the acquired Columbus Recycling business contributed 5% or less of the Company’s consolidated revenues reported in the Unaudited Condensed Consolidated Statements of Income, and the amount of net income contributed by the acquired Columbus Recycling business was 3% or less of the Company’s consolidated net income reported in the Unaudited Condensed Consolidated Statements of Income.

On April 29, 2022, the Company used cash on hand and borrowings under existing credit facilities to acquire 2 recycling facilities in the greater Atlanta, Georgia metropolitan area, including a metal shredding operation and recycled auto-parts center from the previous owners of Encore Recycling. The acquired Encore Recycling operations purchase and process scrap metal and end-of life vehicles from industrial manufacturers, local recycling companies, and individuals, and sell the recycled products to regional foundries and steel mills. Combined with the Company’s existing regional metals recycling facilities and recycled auto-parts centers, the acquired operations offer additional recycling products, services, and logistics solutions to customers and suppliers across portions of the Southeast, giving rise to expected benefits supporting the amount of acquired goodwill. The transaction qualified as a business combination for accounting purposes. The cash purchase price was approximately $55 million, subject to adjustment for acquired net working capital relative to an agreed-upon benchmark, as well as other adjustments. The Company paid at closing an additional $8 million for estimated net working capital in excess of the benchmark, which is still subject to adjustment as of the date of this report, resulting in total purchase consideration measured as of the end of the third quarter of fiscal 2022 of approximately $63 million. As of the date of this report, measurement of actual acquired net working capital, as well as the fair values of certain other acquired assets and assumed liabilities, is still preliminary and subject to change based on the completion of valuation procedures.

The Company is in the process of completing a fair valuation of the assets acquired and liabilities assumed by the Company as of the April 29, 2022 acquisition date. The following table summarizes the provisional fair values of the assets acquired and liabilities assumed by the Company as of the April 29, 2022 acquisition date (in thousands):

The results of operations for the acquired Encore Recycling business beginning as of the April 29, 2022 acquisition date are included in the accompanying financial statements. For each of the three and nine months ended May 31, 2022, the revenues and net income contributed by the acquired Encore Recycling business and reported in the Unaudited Condensed Consolidated Statements of Income were not material to the financial statements taken as a whole.

There are no individually material, nonrecurring pro forma adjustments directly attributable to the business combinations included in these pro forma revenues and earnings.

The information included in the pro forma amounts is derived from historical information obtained from the sellers of the businesses. These pro forma results are not necessarily indicative of what actual results would have been had these acquisitions occurred for the periods presented. In addition, the pro forma results are not intended to be a projection of future results and do not reflect any synergies that may be achieved from combining operations.

Note 45 - Commitments and Contingencies

Contingencies - Environmental

The Company evaluates the adequacy of its environmental liabilities on a quarterly basis. Adjustments to the liabilities are made when additional information becomes available that affects the estimated costs to study or remediate any environmental issues or expenditures are made for which liabilities were established.

Changes in the Company’s environmental liabilities for the nine months ended May 31, ~~2021~~2022 were as follows (in thousands):

Balance as of September 1, 2020

Liabilities
Established
(Released), Net

Payments and
Other

Balance as of
May 31, 2021

Short-Term

Long-Term

$
53,464

$
15,389

$
(2,412
)

$
66,441

$
12,548

$
53,893


Balance as of September 1, 2021		Liabilities Established (Released), Net		Payments and Other			Balance as of May 31, 2022		Short-Term		Long-Term
$	77,128	$	7,577	$	(18,155	)	$	66,550	$	11,600	$	54,950

~~As of May 31, 2021 and August 31, 2020, the~~The Company had environmental liabilities of $~~$66~~67 million and ~~$53~~$77 million as of May 31, 2022 and August 31, 2021, 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 u~~nder~~under “Other Legacy Environmental Loss Contingencies” below, such liabilities were not individually material at any site.

~~Table of Contents~~

~~SCHNITZER STEEL INDUSTRIES, INC.~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Portland Harbor

In December 2000, the Company was notified by the United States Environmental Protection Agency (“EPA”) under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) that it is one of the potentially responsible parties (“PRPs”) that own or operate or formerly owned or operated sites which are part of or adjacent to the Portland Harbor Superfund site (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 ~~third party~~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~~From 2000 to ~~the consent order entered into by~~2017, the EPA ~~with certain other PRPs, referred to as the “Lower Willamette Group” (“LWG”), for~~oversaw a remedial investigation/feasibility study (“RI/FS”)~~. During fiscal 2007,~~ at the Site. The Company ~~and certain other~~was not among the parties ~~agreed~~that performed the RI/FS, but it contributed to the costs through an interim settlement with the ~~LWG~~performing parties. The performing parties have indicated that they incurred more than $155 million in that effort.

Table of Contents

SCHNITZER STEEL INDUSTRIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In January 2017, the EPA issued a Record of Decision (“ROD”) that identified the selected remedy for the Site. 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 15 years old, and the EPA’s estimates for the costs and time required to implement the selected remedy. 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. 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 was more than a decade old at that time and would need to be updated with a new round of “baseline” sampling to be conducted prior to the remedial design phase. The remedial design phase is an engineering phase during which additional technical information and data are collected, identified, and incorporated into technical drawings and specifications developed for the subsequent remedial action. Following issuance of the ROD, the EPA proposed that the PRPs, or a subgroup of PRPs, perform the additional investigative work in advance of remedial design.

In December 2017, the Company and 3 other PRPs entered into an Administrative Settlement Agreement and Order on Consent with the EPA to perform such pre-remedial design investigation and baseline sampling over a two-year period. The report analyzing the results concluded that Site conditions have improved substantially since the data forming the basis of the ROD was collected. The EPA found with a few limited corrections that the data is of suitable quality and stated that such data will be used, in addition to existing and forthcoming design-level data, to inform implementation of the ROD. However, the EPA did not agree that the data or the analysis warranted a change to the remedy at this time and reaffirmed its commitment to proceed with remedial design. The Company and other PRPs disagree with the EPA’s position on use of the more recent data and will continue to pursue limited, but critical, changes to the selected remedy for the Site during the remedial design phase.

The EPA encouraged PRPs to step forward (individually or in groups) to enter into consent agreements to perform remedial design in various project areas covering the entire Site. While certain PRPs executed consent agreements for remedial design work, because of the EPA’s refusal to date to modify the remedy to reflect the most current data on Site conditions and because of concerns with the terms of the consent agreement, the Company elected not to enter into a consent agreement. In April 2020, the EPA issued a unilateral administrative order (“UAO”) to the Company and MMGL, LLC (“MMGL”), an unaffiliated company, for the remedial design work in a portion of the Site designated as the River Mile 3.5 East Project Area. As required by the UAO, the Company notified the EPA of its intent to comply while reserving all of its sufficient cause defenses. Failure to comply with a UAO, without sufficient cause, could subject the Company to significant penalties or treble damages. Pursuant to the optimized remedial design timeline set forth in the UAO, the EPA’s expected schedule for completion of the remedial design work is four years. The 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 pursuant to which the Company ~~made~~is being reimbursed for the costs it has incurred for remedial design. In the second quarter of fiscal 2021, the Company recorded an insurance receivable and a ~~cash~~related insurance recovery to selling, general, and administrative expense for approximately $3 million. See “Other Assets” in Note 1 - Summary of Significant Accounting Policies for further discussion of receivables from insurers. The Company also expects to pursue in the future allocation or contribution tofrom other PRPs for a portion of such remedial design costs. In February 2021, the ~~LWG RI/FS. The LWG has indicated~~EPA announced that ~~it had incurred over $155 million~~100 percent of the Site’s areas requiring active cleanup are in ~~investigation-related costs over an approximately 18 year period working on~~ the ~~RI/FS. Following submittal~~remedial design phase of ~~draft RI and FS documents~~the process.

Except for certain early action projects in which the ~~EPA largely rejected,~~Company is not involved, remediation activities at the ~~EPA took over~~Site are not expected to commence for a number of years. Moreover, those activities are expected to be sequenced, and the ~~RI/FS process.~~order and timing of such sequencing has not been determined. In addition, as noted above, the ROD does not determine the allocation of costs among PRPs.

The Company has joined with approximately 100 other PRPs, including the ~~LWG members,~~RI/FS performing parties, 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.~~ongoing remedial design costs, and future remedial action costs. The ~~LWG members have also commenced federal court litigation, which has been stayed, seeking to bring additional parties into~~Company expects the next major stage of the allocation process to proceed in parallel with the remedial design process.

Table of Contents

SCHNITZER STEEL INDUSTRIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In ~~January 2008,~~addition to the remedial action process overseen by the EPA, the Portland Harbor Natural Resource Trustee Council (“Trustee Council”) is assessing natural resource damages at the Site. In 2008, the 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~~The Company and ~~the PRPs, funding and participation agreements were negotiated under which the~~other participating PRPs ~~including the Company,~~ultimately agreed to fund the first ~~phase~~two phases of the three-phase ~~natural resource damage assessment. Phase 1,~~assessment, 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. The Company has established an environmental reserve of approximately ~~$2.3~~$2.3 million for this alleged natural resource damages liability as it continues to work with the Trustee Council to finalize an early ~~settlement~~.settlement. The Company has insurance policies that it believes will provide reimbursement for costs related to this matter. As of May 31, 2022 and August 31, 2021, the Company had an insurance receivable in the same amount as the environmental reserve. See “Other Assets” in Note 1 –- Summary of Significant Accounting Policies for further discussion of receivables from insurers.

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 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. 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 ranged 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.

~~Table of Contents~~

~~SCHNITZER STEEL INDUSTRIES, INC.~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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. 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. 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 are collected, identified and incorporated into technical drawings and specifications developed for the subsequent remedial action. 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~~ period. The Company estimated that its share of the costs of performing such work would be approximately $2 million, which it accrued in fiscal 2018. Such costs 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 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 warrants a change to the 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 will continue to pursue limited, but critical, changes to the selected remedy for the Site during the remedial design phase.

~~Table of Contents~~

~~SCHNITZER STEEL INDUSTRIES, INC.~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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 Site into 8 to 10 subareas for remedial design. While certain PRPs executed consent agreements for remedial design work, 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 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 pursuant to which the Company is being reimbursed for the costs it has incurred for remedial design. In the second quarter of fiscal 2021, the Company recorded an insurance receivable and a related insurance recovery to selling, general and administrative expense for approximately $3 million. See “Other Assets” in Note 1 – Summary of Significant Accounting Policies for further discussion of receivables from insurers. The Company also expects to pursue in the future allocation or contribution from other PRPs for a portion of such remedial design costs. In February 2021, EPA announced that 100 percent of the Site’s areas requiring active cleanup are in the remedial design phase of the process.

The Company’s environmental liabilities as of May 31, ~~2021~~2022 and August 31, ~~2020~~ 2021 included $6 $4million and $46 million, respectively, relating to the Portland Harbor matters described above.

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 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 allocation among the PRPs of costs of the investigations or remedial action costs, the Company believes it is not possible to reasonably estimate the amount or range of costs which it is likely to or which it is reasonably possible that it will incur in connection with the Site, although such costs could be material to the Company’s financial position, results of operations, cash flows, and liquidity. Among the facts being evaluated are detailed information on the history of ownership of and the nature of the uses of and activities and operations performed on each property within 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, 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, 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 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.

~~Table of Contents~~

~~SCHNITZER STEEL INDUSTRIES, INC.~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

The Oregon Department of Environmental Quality is separately providing oversight of investigations and source control activities by the Company at various sites adjacent to Portland Harbor that are focused on controlling any current “uplands” releases of contaminants into the Willamette River. The Company has accrued liabilities for source control and related work at two sites, reflecting estimated costs of primarily investigation and design, which costs have not been material in the aggregate to date. No liabilities have been established in connection with these investigations ~~beyond the costs of investigation and design, which costs have not been material to date,~~for any other sites because the extent of contamination, required source control work, and the Company’s responsibility for the contamination and source control work, in each case if any, have not yet been determined. In addition, pursuant to its insurance policies, the Company is being reimbursed for the costs it incurs for required source control evaluation and remediation work. As of each of May 31, 2022 and August 31, 2021, the Company had an insurance receivable in the same amount as the environmental reserve for such source control work.

Table of Contents

SCHNITZER STEEL INDUSTRIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Other Legacy Environmental Loss Contingencies

The Company’s environmental loss contingencies as of May 31, ~~2021~~2022 and August 31, ~~2020,~~2021, other than Portland Harbor, include actual or possible investigation and ~~cleanup~~remediation costs from historical contamination at sites currently or formerly owned or formerly operated by the Company or at other sites where the Company may have responsibility for such costs due to past disposal or other activities (“legacy environmental loss contingencies”). These legacy environmental loss contingencies relate to the potential remediation of waterways and soil and groundwater contamination and may also involve natural resource damages, governmental fines and penalties, and claims by third parties for personal injury and property damage. The Company has been notified that it is or may be a potentially responsible party at certain of these sites, and investigation and ~~cleanup~~remediation activities are ongoing or may be required in the future. The Company recognizes a liability for such matters when the loss is probable and can be reasonably estimated. When investigation, allocation, and ~~cleanup~~remediation activities are ongoing or where the Company has not yet been identified as having responsibility or the contamination has not yet been identified, it is reasonably possible that the Company may need to recognize additional liabilities in connection with such sites but the Company cannot currently reasonably estimate the possible loss or range of loss absent additional information or developments. Such additional liabilities, individually or in the aggregate, may have a material adverse effect on the Company’s results of operations, financial condition, or cash flows.

~~During~~In fiscal 2018, the Company accrued $4an initial $4 million 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 both May 31, ~~2021~~2022 and August 31, ~~2020,~~2021, the Company had $4$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 previously estimated a range of reasonably possible losses related to this matter in excess of current accruals at between 0 and ~~$28~~$28 million based on a range of remedial alternatives and subject to development and approval by regulators of a specific remedy implementation ~~plan.~~plans. However, subsequent to the development of those remedial alternatives, the Company performed additional investigative activities under new state requirements that ~~have the potential~~are likely to impact the required remedial actions and associated cost estimates, ~~pending~~but the scope of such impacts and the amount or the range of the additional associated costs are not reasonably estimable at this time and are subject to further investigation, 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 ~~each of~~ May 31, ~~2021~~2022 and August 31, ~~2020~~2021 included $8$8 million and $19 million, respectively, for the estimated costs related to environmental matters in connection with a closed facility owned and previously operated by an indirect, wholly-owned subsidiary, including monitoring and remediation of soil and groundwater ~~conditions.~~conditions and funding for wellhead treatment facilities. In the first nine months of fiscal 2022, the Company accrued $3 million for certain soil remediation activities based on additional information related to estimated costs to complete. Investigation and remediation activities have been conducted under the oversight of the applicable state regulatory agency and are on-going, and the ~~Company~~Company’s subsidiary has also been working with state and local officials with respect to the protection of public and private water supplies. ~~The~~As part of its activities relating to the protection of public water supplies, the Company’s subsidiary agreed to reimburse the municipality for certain studies and plans and to provide funding for the construction and operation by the municipality of wellhead treatment facilities, which agreement resulted in payment by the Company ~~accrued $4~~to the municipality of $11 million in the second quarter of fiscal 2021 for incremental estimated remediation costs, which was offset by payments during the first nine months of fiscal 2021 including payment during the first quarter of penalties in the amount of $2.7 million pursuant to a previously agreed settlement.2022. It is reasonably possible that the Company may recognize additional liabilities 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 the on-going implementation of the approved remediation ~~plan. As part~~plan for soil and groundwater conditions and completion and operation 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 in the case of costs for installation of wellhead treatment, if incurred, could be in the range of $10 million to $13 million.~~facilities.

~~Table of Contents~~

~~SCHNITZER STEEL INDUSTRIES, INC.~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

In addition, the Company’s loss contingencies as of both May 31, ~~2021~~2022 and August 31, ~~2020~~2021 included $8$8 million ~~and less than $1 million, respectively,~~ for the estimated costs related to remediation of a site a portion of which was previously leased to and operated by an indirect, wholly-owned subsidiary. In connection with settlement of a lawsuit relating to allocation of the remediation costs, the Company’s subsidiary agreed to perform the remedial action related to metals contamination on the site estimated to cost approximately ~~$7.9~~$7.9 million, and another potentially liable party agreed to perform the remedial action related to creosote contamination at the site. As part of the settlement, other potentially liable parties agreed to make payments totaling approximately ~~$7.6~~$7.6 million to fund the remediation of the metals contamination at the site in exchange for a release and indemnity. This amount was fully funded into a client trust account for the Company’s subsidiary in December 2020. See “Other Assets” in Note 1 –- Summary of Significant Accounting Policies for further discussion of this client trust account. It is reasonably possible that the Company may recognize additional liabilities 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, approval, and implementation of the remediation action plan.

Table of Contents

SCHNITZER STEEL INDUSTRIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Summary - Environmental Contingencies

With respect to environmental contingencies other than the Portland Harbor Superfund site and the Other Legacy Environmental Loss Contingencies, which are discussed separately above, management currently believes that adequate provision has been made for the potential impact of its environmental contingencies. Historically, the amounts the Company has ultimately paid for such remediation activities have not been material in any given period, but there can be no assurance that such amounts paid will not be material in the future.

Contingencies -– Other

In addition to legal proceedings relating to the contingencies described above, the Company is a party to various legal proceedings arising in the normal course of business. The Company recognizes a liability for such matters when the loss is probable and can be reasonably estimated. The Company does not anticipate that the liabilities arising from such legal proceedings in the normal course of business, after taking into consideration expected insurance recoveries, will have a material adverse effect on its results of operations, financial condition, or cash flows.

~~Table of Contents~~

~~SCHNITZER STEEL INDUSTRIES, INC.~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Note 56 - Accumulated Other Comprehensive Loss

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


	Three Months Ended May 31, 2021									Three Months Ended May 31, 2020									Three Months Ended May 31, 2022									Three Months Ended May 31, 2021
	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 - March 1 (Beginning of period)	$	(32,373	)	$	(2,909	)	$	(35,282	)	$	(36,108	)	$	(2,932	)	$	(39,040	)	$	(32,002	)	$	(2,436	)	$	(34,438	)	$	(32,373	)	$	(2,909	)	$	(35,282	)
Other comprehensive income (loss) before reclassifications		4,514			0			4,514			(1,904	)		0			(1,904	)
Income tax benefit		0			0			0			0			0			0
Other comprehensive income (loss) before reclassifications, net of tax		4,514			0			4,514			(1,904	)		0			(1,904	)
Other comprehensive income before reclassifications																				153			0			153			4,514			0			4,514
Income tax (expense)																				0			0			0			0			0			0
Other comprehensive income before reclassifications, net of tax																				153			0			153			4,514			0			4,514
Amounts reclassified from accumulated other comprehensive loss		0			49			49			0			58			58			0			52			52			0			49			49
Income tax (benefit)		0			(12	)		(12	)		0			(13	)		(13	)		0			(12	)		(12	)		0			(12	)		(12	)
Amounts reclassified from accumulated other comprehensive loss, net of tax		0			37			37			0			45			45			0			40			40			0			37			37
Net periodic other comprehensive income (loss)		4,514			37			4,551			(1,904	)		45			(1,859	)
Net periodic other comprehensive income																				153			40			193			4,514			37			4,551
Balances - May 31 (End of period)	$	(27,859	)	$	(2,872	)	$	(30,731	)	$	(38,012	)	$	(2,887	)	$	(40,899	)	$	(31,849	)	$	(2,396	)	$	(34,245	)	$	(27,859	)	$	(2,872	)	$	(30,731	)


	Nine Months Ended May 31, 2022									Nine Months Ended May 31, 2021
	Foreign Currency Translation Adjustments			Pension Obligations, Net			Total			Foreign Currency Translation Adjustments			Pension Obligations, Net			Total
Balances - September 1 (Beginning of period)	$	(31,609	)	$	(2,945	)	$	(34,554	)	$	(34,184	)	$	(2,687	)	$	(36,871	)
Other comprehensive (loss) income before reclassifications		(240	)		451			211			6,325			(385	)		5,940
Income tax (expense) benefit		0			(101	)		(101	)		0			87			87
Other comprehensive (loss) income before reclassifications, net of tax		(240	)		350			110			6,325			(298	)		6,027
Amounts reclassified from accumulated other comprehensive loss		0			257			257			0			147			147
Income tax (benefit)		0			(58	)		(58	)		0			(34	)		(34	)
Amounts reclassified from accumulated other comprehensive loss, net of tax		0			199			199			0			113			113
Net periodic other comprehensive (loss) income		(240	)		549			309			6,325			(185	)		6,140
Balances - May 31 (End of period)	$	(31,849	)	$	(2,396	)	$	(34,245	)	$	(27,859	)	$	(2,872	)	$	(30,731	)

Nine Months Ended May 31, 2021

Nine Months Ended May 31, 2020

Foreign
Currency
Translation
Adjustments

Pension
Obligations,
Net

Total

Foreign
Currency
Translation
Adjustments

Pension
Obligations,
Net

Total

Balances - September 1 (Beginning of period)

$
(34,184
)

$
(2,687
)

$
(36,871
)

$
(35,689
)

$
(3,074
)

$
(38,763
)
Other comprehensive income (loss) before reclassifications

6,325

(385
)

5,940

(2,323
)

(17
)

(2,340
)
Income tax benefit

0

87

87

0

4

4

Other comprehensive income (loss) before reclassifications, net of tax

6,325

(298
)

6,027

(2,323
)

(13
)

(2,336
)
Amounts reclassified from accumulated other comprehensive loss

0

147

147

0

258

258

Income tax (benefit)

0

(34
)

(34
)

0

(58
)

(58
)
Amounts reclassified from accumulated other comprehensive loss, net of tax

0

113

113

0

200

200

Net periodic other comprehensive income (loss)

6,325

(185
)

6,140

(2,323
)

187

(2,136
)
Balances - May 31 (End of period)

$
(27,859
)

$
(2,872
)

$
(30,731
)

$
(38,012
)

$
(2,887
)

$
(40,899
)

Table of Contents

SCHNITZER STEEL INDUSTRIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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~~Income in all periods ~~presented~~presented.

.Note 7 - Revenue

~~Table of Contents~~

~~SCHNITZER STEEL INDUSTRIES, INC.~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Note 6 - Revenue~~

Disaggregation of Revenues

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


	Three Months Ended May 31,				Nine Months Ended May 31,
	2022		2021		2022		2021
Major product information:
Ferrous revenues	$	530,303	$	448,684	$	1,434,473	$	1,023,569
Nonferrous revenues		272,208		204,512		662,779		471,543
Steel revenues(1)		165,210		129,057		384,644		316,662
Retail and other revenues		42,366		38,465		109,507		101,162
Total revenues	$	1,010,087	$	820,718	$	2,591,403	$	1,912,936
Revenues based on sales destination:
Foreign	$	533,087	$	466,739	$	1,439,731	$	1,067,335
Domestic		477,000		353,979		1,151,672		845,601
Total revenues	$	1,010,087	$	820,718	$	2,591,403	$	1,912,936

Three Months Ended May 31,

Nine Months Ended May 31,

2021

2020

2021

2020

Major product information:

Ferrous revenues

$
448,684

$
201,972

$
1,023,569

$
633,936

Nonferrous revenues

204,512

85,506

471,543

277,869

Steel revenues⁽¹⁾

129,057

83,414

316,662

246,278

Retail and other revenues

38,465

31,791

101,162

89,666

Total revenues

$
820,718

$
402,683

$
1,912,936

$
1,247,749

Revenues based on sales destination:

Foreign

$
466,739

$
213,403

$
1,067,335

$
656,388

Domestic

353,979

189,280

845,601

591,361

Total revenues

$
820,718

$
402,683

$
1,912,936

$
1,247,749

(1)

Steel revenues include predominantly sales of finished steel products, in addition to sales of semi-finished goods (billets) and steel manufacturing scrap.

~~(1)~~

~~Steel revenues include primarily sales of finished steel products, semi-finished goods (billets) and steel manufacturing scrap.~~

Receivables from Contracts with Customers

The revenue accounting standard defines a receivable as an entity’s right to consideration that is unconditional, meaning that only the passage of time is required before payment is due. As of May 31, ~~2021~~2022 and August 31, ~~2020,~~2021, receivables from contracts with customers, net of an allowance for credit losses, totaled ~~$262~~$278 million and ~~$135~~$210 million, respectively, representing ~~99% and 97%, respectively,~~98% of total accounts receivable reported on the Unaudited Condensed Consolidated Balance ~~Sheets.~~Sheets at each reporting date.

Contract Liabilities

Contract consideration received from a customer prior to revenue recognition is recorded as a contract liability and is recognized as revenue when the Company satisfies the related performance obligation under the terms of the contract. The Company’s contract liabilities, which consist almost entirely of customer deposits for recycled ~~scrap~~ metal and finished steel sales contracts, ~~which~~ are reported within accounts payable onin the Unaudited Condensed Consolidated Balance Sheets and totaled $8$10 million and $8 million as of ~~each of~~ May 31, ~~2021~~2022 and August 31, ~~2020.~~2021, 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 and nine months ended May 31, 2022, the Company reclassified less than $1 million and $7 million, respectively, in contract liabilities as of August 31, 2021 to revenues as a result of satisfying performance obligations during the period. During the three and nine months ended May 31, 2021, the Company reclassified less than $1$1 million and $7 $7million, respectively, in ~~customer deposits~~contract liabilities as of August 31, 2020 to revenues as a result of satisfying performance obligations during the respective periods. During the three and nine months ended May 31, 2020, the Company reclassified less than $1 million and $3 million, respectively, in customer deposits as of August 31, 2019 to revenues as a result of satisfying performance obligations during the respective periods.period.

Note 78 - Share-Based Compensation

In the first quarter of fiscal ~~2021,~~2022, 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 ~~317,760~~158,656 restricted stock units (“RSUs”) and ~~316,649~~153,080 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%~~20% per year commencing October 31, ~~2021.~~2022. 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$8 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.

2122

Table of Contents

SCHNITZER STEEL INDUSTRIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 ~~2021,~~2022, the performance metrics ~~were~~are the Company’s ~~total shareholder return (“TSR”) relative to a designated peer group~~ recycled metal volume growthand ~~the Company’s~~its return on capital employed (“~~ROCE"~~ROCE”). Award share payouts depend on the extent to which the performance goals have been ~~achieved.~~achieved, which performance-based payout factors are adjusted by a total shareholder return (“TSR”) modifier based on the Company’s average TSR percentile rank relative to a designated peer group. The number of shares that a participant receives is equal to the number of performance shares granted multiplied by aan initial payout factor based on recycled metal volume growth and ROCE, which ranges from a threshold of ~~50%~~50% to a maximum of ~~200%~~200%. The final payout factor is then determined by applying the TSR ~~award stipulates certain limitations~~modifier to the initial payout ~~in the event the value~~factor within a certain range, with a maximum increase or decrease of ~~the payout reaches a defined ceiling level or the Company’s TSR is negative.~~20%.

The Company granted ~~157,791~~76,540 performance share awards based on its ~~relative~~recycled metal volume growth metric with TSR modifier and 76,540 performance share awards based on its ROCE metric with TSR modifier over a three-year performance period ~~spanning November 9, 2020 to August 31, 2023.~~ consisting of the Company’s 2022, 2023, and 2024 fiscal years. The Company ~~estimates~~estimated the fair value of ~~TSR~~performance share awards granted in the first quarter of fiscal 2022 using a Monte-Carlo simulation model utilizing several key assumptions, including the ~~following for TSR awards granted on November 9, 2020:~~

following:


	Percentage
Expected share price volatility (SSI)		~~48.5~~51.6	%
Expected share price volatility (Peer group)		~~54.9~~58.5	%
Expected correlation to peer group companies		~~44.5~~46.0	%
Risk-free rate of return		~~0.23~~0.61	%

The estimated aggregate fair value of ~~the TSR~~these performance share awards at the date of grant was $4$8 million. 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 158,858 performance share awards based on its ROCE for the~~ ~~three-year~~ performance period consisting of the Company’s 2021, 2022 and 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~~these performance share 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.~~awarded irrespective of the TSR modifier, the effects of which are incorporated in the grant-date fair value of the awards. 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~~performance period, all related compensation cost previously recognized is reversed.

Performance share awards will be paid in Class A common stock as soon as practicable after the end of the requisite service period and vesting date of October 31, ~~2023.~~2024.

In the second quarter of fiscal ~~2021,~~2022, the Company granted deferred stock units (“DSUs”) to each of its non-employee directors under the Company’s ~~SIP.~~1993 Stock Incentive Plan, as amended. Each DSU gives the director the right to receive 1 share of Class A common stock at a future date. The grant included an aggregate of ~~28,042~~18,924 shares that will vest in full on the day before the Company’s ~~2022~~2023 annual meeting of shareholders, subject to continued Board service. The total fair value of these awards at the grant date was $1$1 million.

Note 89 - Income Taxes

Effective Tax Rate

The Company’s effective tax rate from continuing operations for the third quarter and first nine months of fiscal ~~2021~~2022 was an expense on pre-tax income of ~~18.0%~~21.0% and ~~20.0%~~21.2%, respectively, compared to ~~a benefit on pre-tax loss of 28.0%~~18.0% and ~~27.6%~~20.0%, respectively, for the comparable prior year periods. The Company’s effective tax rate from continuing operations for the third quarter and first nine months of fiscal ~~2021 was lower than that~~2022 approximated the U.S. federal statutory rate of 21%, reflecting primarily the aggregate impact of state taxes and permanent differences from non-deductible expenses on the projected annual effective tax rate applied to the quarterly results, offset by discrete tax benefits resulting from vesting of share-based awards in the periods and the favorable effects of other discrete items. The Company’s effective tax rate from continuing operations for the ~~comparable prior year periods primarily due to the effects~~third quarter and first nine months of ~~higher pre-tax income compared to the prior year periods, and~~fiscal 2021 was lower than the U.S. federal statutory rate ~~of 21%~~ primarily due to the benefit from the foreign derived intangible income deduction in fiscal 2021 and the impacts of research and development credits and other discrete items.

2223

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SCHNITZER STEEL INDUSTRIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company typically measures the provision for income taxes for interim reporting periods by applying the projected annual effective tax rate to the quarterly results. For the third quarter and first nine months of fiscal 2020, based on the Company’s projection of full-year results at the time, as well as the projected impact of permanent tax differences and other items that are generally not proportional to full-year results, small changes in the projections would have led to significant changes in the projected annual effective tax rate. Therefore, applying the Company’s typical method would not have provided a reliable estimate of the provision for income taxes for the fiscal 2020 interim reporting periods presented in this report. Accordingly, the Company measured the year-to-date fiscal 2020 tax benefit based on year-to-date results, referred to as the discrete method, and it measured the third quarter fiscal 2020 tax benefit as the foregoing year-to-date fiscal 2020 tax benefit less the tax benefit recognized previously in the first half of fiscal 2020.Valuation Allowances

~~Valuation Allowances~~

The Company assesses the realizability of its deferred tax assets on a quarterly basis through an analysis of potential sources of future taxable income, including prior year taxable income available to absorb a carryback of tax losses, reversals of existing taxable temporary differences, tax planning strategies, and forecasts of taxable income. The Company considers all negative and positive evidence, including the weight of the evidence, to determine if valuation allowances against deferred tax assets are required. The Company ~~maintains~~continues to maintain valuation allowances against certain state ~~Canadian~~ and ~~all Puerto Rican~~Canadian deferred tax assets. Canadian deferred tax assets against which the Company continues to maintain a valuation allowance relate to indefinite-lived assets.

The Company files federal and state income tax returns in the U.S. and foreign tax returns in Puerto Rico and Canada. For U.S. federal income tax returns, fiscal years 2014 to ~~2020~~2021 remain subject to examination under the statute of limitations.

~~Note 9 - Restructuring Charges and Other Exit-Related Activities~~

In fiscal 2020, the Company implemented restructuring initiatives aimed at further reducing its annual operating expenses, primarily selling, general and administrative, mainly through reductions in non-trade procurement spend, including outside and professional services, lower employee-related expenses and other non-headcount measures. Additionally, in April 2020, the Company announced its intention to modify its internal organizational and reporting structure to the One Schnitzer functionally-based, integrated model, which it completed in the first quarter of fiscal 2021. During the first nine months of fiscal 2020, the Company incurred severance costs of $2 million, exit-related costs associated with a lease contract termination of $1 million, and professional services costs related to these initiatives of $5 million.

Note 10 - Net Income ~~(Loss)~~ Per Share

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

Three Months Ended May 31,

Nine Months Ended May 31,

2021

2020

2021

2020

Income (loss) from continuing operations

$
65,482

$
(4,648
)

$
126,237

$
(6,738
)
Net income attributable to noncontrolling interests

(1,801
)

(278
)

(3,852
)

(1,329
)
Income (loss) from continuing operations attributable to SSI shareholders

63,681

(4,926
)

122,385

(8,067
)
Loss from discontinued operations, net of tax

(46
)

(69
)

(58
)

(40
)
Net income (loss) attributable to SSI shareholders

$
63,635

$
(4,995
)

$
122,327

$
(8,107
)
Computation of shares:

Weighted average common shares outstanding, basic

28,047

27,724

27,948

27,653

Incremental common shares attributable to dilutive performance share awards, restricted stock units and deferred stock units

1,496

—

1,015

—

Weighted average common shares outstanding, diluted

29,543

27,724

28,963

27,653


	Three Months Ended May 31,						Nine Months Ended May 31,
	2022			2021			2022			2021
Income from continuing operations	$	75,550		$	65,482		$	160,991		$	126,237
Net income attributable to noncontrolling interests		(870	)		(1,801	)		(2,497	)		(3,852	)
Income from continuing operations attributable to SSI shareholders	$	74,680		$	63,681		$	158,494		$	122,385
(Loss) income from discontinued operations, net of tax		(46	)		(46	)		(46	)		(58	)
Net income attributable to SSI shareholders	$	74,634		$	63,635		$	158,448		$	122,327
Computation of shares:
Weighted average common shares outstanding, basic		28,143			28,047			28,161			27,948
Incremental common shares attributable to dilutive performance share awards, restricted stock units and deferred stock units		1,482			1,496			1,580			1,015
Weighted average common shares outstanding, diluted		29,625			29,543			29,741			28,963

~~NaN common stock equivalent shares were considered antidilutive for the three months and nine months ended May 31, 2021.~~ Common stock equivalent shares of ~~1,228,857~~47,095 and ~~887,760~~172,288 were considered antidilutive and were excluded from the calculation of diluted net income ~~(loss)~~ per share ~~attributable to SSI shareholders~~ for the three and nine months ended May 31, ~~2020,~~2022, respectively. NaN ~~respectively~~common stock equivalent shares were considered antidilutive for the three and nine months ended May 31, 2021..

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~~SCHNITZER STEEL INDUSTRIES, INC.~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Note 11 - Related Party Transactions

The Company purchases recycled metal from one of its joint venture operations at prices that approximate fair market value. These purchases totaled $10 million and $6 million ~~and~~ ~~$3 million~~for the three months ended May 31, ~~2021~~2022 and ~~2020,~~2021, respectively, and $21million and $14 ~~million~~ ~~and $8~~ million for the nine months ended May 31, 2022 and 2021, ~~and 2020,~~ respectively.

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SCHNITZER STEEL INDUSTRIES, INC.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section includes a discussion of our operations for the three and nine months ended May 31, ~~2021~~2022 and ~~2020.~~2021. The following discussion and analysis provide information which management believes is relevant to an assessment and understanding of our financial condition and results of operations. The discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended August 31, ~~2020,~~2021, and the Unaudited Condensed Consolidated Financial Statements and the related Notes thereto included in Part I, Item 1 of this report.

General

Founded in 1906, Schnitzer Steel Industries, Inc. ~~(“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, 4454 metals recycling facilities, and aan electric arc furnace (“EAF”) steel ~~mini-mill in Oregon.~~mill.

Prior to the first quarter of fiscal 2021, our internal organizational and reporting structure 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 our Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2020.

We sell recycled ferrous and nonferrous ~~recycled scrap~~ metal in both foreign and domestic markets. We also sell a range of finished steel long products produced at our steel ~~mini-mill.~~mill. We acquire, process, and recycle ~~auto bodies,~~end-of-life (salvaged) vehicles, rail cars, home appliances, industrial machinery, manufacturing scrap, and construction and demolition scrap through our ~~recycling~~ facilities. Our retail self-service auto parts stores located across the United States (“U.S.”) and Western Canada, which operate under the commercial brand-name Pick-n-Pull, procure the significant majority of our salvaged vehicles and sell serviceable used auto parts from these vehicles. Upon acquiring a salvaged vehicle, we remove catalytic converters, aluminum wheels, and batteries for separate processing and sale prior to placing the vehicle in our retail lot. After retail customers have removed desired parts from a vehicle, we may remove remaining major component parts containing ferrous and nonferrous metals, which are primarily sold to wholesalers. The remaining auto bodies are crushed and shipped to our metals recycling facilities to be shredded or sold to third parties ~~where~~when geographically more economical. At our metals recycling facilities, we process mixed and large pieces of scrap metal into smaller pieces by crushing, torching, shearing, shredding, separating, and sorting, resulting in ~~scrap~~recycled ferrous, nonferrous, and mixed metal pieces of a size, density, and metal content required by customers to meet their production needs. ~~The manufacturing process includes physical~~Each of our shredding, nonferrous processing, and separation systems is designed to optimize the recovery of valuable recycled metal. We also purchase nonferrous metal directly from industrial vendors and ~~processing~~other suppliers and aggregate and prepare this metal for shipment to customers by ship, rail, or truck. In addition to the sale of recycled metal processed at our facilities, we also provide a variety of recycling and related services including brokering the sale of ferrous and nonferrous ~~materials through automated~~scrap metal generated by industrial entities and ~~manual processes into various sub-classifications, each of which has a value and metal content used by our~~demolition projects to customers ~~for their end products. We use a variety of shredding and separation systems to efficiently process and sort recycled scrap metal.~~in the domestic market, among other services. Our steel ~~mini-mill~~mill produces semi-finished goods (billets) and finished ~~steel products such as~~goods, consisting of rebar, coiled rebar, wire rod, ~~coiled rebar,~~ merchant bar, and other specialty products, using recycled ferrous ~~recycled scrap~~ metal ~~primarily~~ sourced internally from our recycling and joint venture operations and other raw materials.

We operate seven deepwater port locations, six of which are equipped with large-scale shredders. Our ~~deep water~~deepwater port facilities on both the East and West Coasts of the U.S. (in Everett, Massachusetts; Providence, Rhode Island; Oakland, California; Tacoma, Washington; and Portland, Oregon) and access to public ~~deep water~~deepwater 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.

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~~SCHNITZER STEEL INDUSTRIES, INC.~~

Our results of operations depend in large part on the demand and prices for recycled metal in foreign and domestic markets and on the supply of raw materials, including end-of-life vehicles, available to be processed at our facilities. Our results of operations also depend substantially on our operating leverage from processing and selling higher volumes of recycled metal as well as our ability to efficiently extract ferrous and nonferrous metals from the shredding process. We respond to changes in selling prices for processed metal by seeking to adjust purchase prices for unprocessed scrap metal in order to manage the impact on our operating results. We believe we generally benefit from sustained periods of stable or rising recycled ~~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~~With respect to finished steel products produced at our steel mill, our results of operations ~~also depend on the~~are impacted by demand and prices for ~~our finished steel~~these products, which are sold to customers located primarily in the Western U.S. and Western Canada.

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SCHNITZER STEEL INDUSTRIES, INC.

Our quarterly operating results fluctuate based on a variety of factors including, but not limited to, changes in market conditions for recycled ferrous and nonferrous ~~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.~~stores, the efficiency of our supply chain, and variations in production and other operating costs. Certain of these factors are influenced, to a degree, by the impact of seasonal changes including severe weather conditions, which can impact the timing of shipments and inhibit construction activity utilizing our products, scrap metal collection and production levels at our facilities, and retail admissions and parts sales at our auto parts stores. Further, sanctions, trade actions, ~~including tariffs and any retaliation by affected countries,~~ and licensing, product quality, and inspection requirements can impact the level of profitability on sales of our products and, in certain cases, impede or restrict our ability to sell to certain export markets or require us to direct our sales to alternative market destinations, which can cause our quarterly operating results to fluctuate.

Coronavirus Disease 2019 ~~(COVID-19)~~(“COVID-19”)

We continue to monitor the impact of COVID-19 on all aspects of our business. The COVID-19 outbreak, which the World Health Organization characterized as a pandemic in March 2020, has resulted in governments around the world implementing measures with various levels of stringency to help control the spread of the virus as well as vaccination programs to build levels of immunity among the population. 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~~safety 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.~~ Following the onset of COVID-19 and its negative effects on our business, most prominently reflected in our ~~third~~ ~~quarter~~ fiscal 2020 results, global economic conditions improved during ~~the first nine months of our~~ fiscal 2021, resulting in increased demand for our ~~products, which led to our earnings for the third quarter and first nine months of our fiscal 2021 substantially exceeding the results for the comparable prior periods.~~products. Beginning in our second quarter of fiscal 2021 and continuing through thethird quarter of fiscal 2022, there has been a trend in many parts of the world of increasing availability and administration of vaccines against COVID-19, as well as an easing of restrictions on individual, business, and government activities. The ~~easing~~existence of ~~restrictions and the existence of~~new or enduring variant strains of COVID-19 may lead to a rise in infections, which could ~~result~~cause delays in the ~~reinstatement~~easing of ~~some of the~~ restrictions previously in place and the implementation of new restrictions and mandates, and there are ongoing global impacts resulting directly or indirectly from the pandemic including labor shortages, logistical challenges such as increased port congestion, and increases in costs for certain goods and ~~services.~~services, which have negatively impacted our sales volumes and operating results to varying degrees. While the ongoing effects of the COVID-19 pandemic could 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.

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~~SCHNITZER STEEL INDUSTRIES, INC.~~

Steel Mill Fire

On May 22, 2021, we experienced a fire at our ~~Cascade Steel Rolling Mill~~steel mill in McMinnville, Oregon. Direct physical loss or damage to property from the incident was limited to the mill’s melt shop, with no bodily injuries and no physical loss or damage to other buildings or equipment. ~~Given that~~As a result of the ~~incident occurred near~~fire, the ~~end of our third quarter of fiscal~~rolling mill production ceased in early June 2021. In August 2021, the ~~matter did not have a significant impact on our results~~steel mill began ramping up operations following the substantial completion of ~~operations for that quarter. Based on our current schedule, we expect to substantially complete the repair~~replacement and ~~replacement~~repairs of property ~~that experienced physical loss or damage~~ and ~~resume operations~~equipment in the melt shop that had been lost or damaged by the ~~end~~fire. We experienced the loss of business income during the shutdown of the ~~fourth~~steel mill and the subsequent ramp-up phase which was substantially completed during the second quarter of fiscal 2021 or by early September, with rolling mill production which ceased in early June expected to ramp up thereafter. Impacts on business income are expected to continue during the ramp-up phases and may continue thereafter.2022. We have insurance that we believe is fully applicable to the losses and have filed initial insurance claims, which are subject to deductibles and various conditions, exclusions, and limits, for the property that experienced physical loss or damage and business income losses resulting from the matter. The property damage deductible under the policies insuring the Company’s assets in this matter is $1 million, while the deductible for lost business income is 10 times the Average Daily Gross Earnings which would have been earned had no interruption occurred, calculated subject to judgments and uncertainties. As of August 31, 2021, prepaid expenses and other current assets in the Unaudited Condensed Consolidated Balance Sheets included an initial $10 million insurance receivable recognized in the fourth quarter of fiscal 2021, primarily offsetting applicable losses including capital purchases of $10 million that we had incurred as of August 31, 2021. In the first nine months of fiscal 2022, we increased the amount of this insurance receivable to $25 million and recognized a related $15 million insurance recovery gain, $3 million recorded in the first quarter and $12 million recorded in the second quarter, within cost of goods sold in the Unaudited Condensed Consolidated Statements of Income, reflecting recovery of applicable losses incurred as a result of the fire to date. In addition, during the first nine months of fiscal 2022, we received advance payments from insurers totaling approximately $30 million towards our claims, and not reflecting any final or full settlement of claims with the insurers, which amount reduced the $25 million insurance receivable to zero with the remaining amount of advance payments of $5 million reported within other accrued liabilities in the Unaudited Condensed Consolidated Balance Sheets as of May 31, 2022. These amounts do not reflect potential additional recoveries of business income losses resulting from this matter that may be recognized in the future when settlements of the business interruption claims are resolved.

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SCHNITZER STEEL INDUSTRIES, INC.

Everett Facility Shredder Fire

On December 8, 2021, we experienced a fire at our metals recycling facility in Everett, Massachusetts. Direct physical loss or damage to property from the incident was limited to the facility’s shredder building and equipment, with no bodily injuries and no physical loss or damage to property reported at other buildings or equipment. As a result of the fire, shredding operations ceased, while all non-shredding operations at the facility continued, including torching, shearing, separating, and sorting purchased non-shreddable recycled ferrous metals. On January 28, 2022, shredding operations at the facility began ramping up following the replacement and repairs to shredder equipment that had been damaged. Completion of the remainder of repair and replacement of property that experienced physical loss or damage, primarily buildings and improvements, will occur over a longer period and impacts on business income may continue. For example, as of June 18, 2022, shredder operations temporarily ceased at the facility pending completion of discussions with the Massachusetts Department of Environmental Protection and the Massachusetts Attorney General's office regarding installation and operation of temporary emission capture and controls that would allow operation of the shredder prior to completion of the repair and replacement of the shredder enclosure building. Non-shredding operations at the facility continue. We have insurance that we believe is fully applicable to the losses, including but not limited to the costs of installing the temporary capture and controls system and any associated loss of business income, and have filed initial insurance claims, which are subject to deductibles and various conditions, exclusions, and limits, for the property damage or loss and business income losses resulting from the matter. The property damage deductible under the policies insuring our assets in this matter is $0.5 million, while the deductible for lost business income is 10 times the Average Daily Gross Earnings which would have been earned had no interruption occurred, calculated subject to judgments and uncertainties. The insurance claims resolution process may extend significantly beyond completion of repair and replacement of the physical plant property that experienced physical loss or damage ~~at the melt shop~~ and the restart of production ~~activities, which themselves are subject to significant uncertainty for a variety~~activities. In the second quarter of ~~reasons. For further discussion of the accounting for this matter, see “Accounting for Impacts of Steel Mill Fire”~~fiscal 2022, we recognized an initial $10 million insurance receivable and related insurance recovery gain, reported within prepaid expenses and other current assets in ~~Note 1 - Summary of Significant Accounting Policies in the Notes to~~ the Unaudited Condensed Consolidated ~~Financial~~Balance Sheets and within cost of goods sold in the Unaudited Condensed Consolidated Statements ~~in Part I, Item 1~~of Income, respectively, reflecting recovery of applicable losses including impairment charges of $6 million related to the carrying value of plant and equipment assets damaged by the fire and initial capital purchases and other costs totaling $4 million that we had incurred as of February 28, 2022. In the third quarter of fiscal 2022, we increased the amount of this ~~report.~~insurance receivable to $11 million and recognized a related $1 million insurance recovery gain, reflecting recovery of applicable losses incurred as a result of the fire to date. Also in the third quarter of fiscal 2022, we received advance payments from insurers totaling approximately $7 million towards our claims, and not reflecting any final or full settlement of claims with the insurers, which amount reduced the insurance receivable to $4 million as of May 31, 2022. These amounts do not reflect potential additional recoveries of costs for the repair and replacement of property that experienced physical loss or damage or of business income losses resulting from this matter that may be recognized in the future when settlements of the claims are resolved.

Use of Non-GAAP Financial Measures

In this management’s discussion and analysis, we use supplemental measures of our performance, liquidity, and capital structure which are derived from our consolidated financial information, but which are not presented in our consolidated financial statements prepared in accordance with GAAP. We believe that providing these non-GAAP financial measures adds a meaningful presentation of our operating and financial performance, liquidity, and capital structure. For example, ~~following the modification of our internal organizational and reporting structure completed in the first quarter of fiscal 2021,~~ we use adjusted EBITDA as one of the measures to compare and evaluate financial performance. Adjusted EBITDA is the sum of our net income before results from discontinued operations, interest expense, income taxes, depreciation and amortization, asset impairment charges, business development costs not related to ongoing operations including pre-acquisition expenses, charges related to non-ordinary course legal settlements, charges for legacy environmental matters (net of recoveries), restructuring charges and other exit-related activities, ~~asset impairment charges (net of recoveries)~~ and other items which are not related to underlying business operational performance. See the reconciliations of supplemental financial measures, including adjusted EBITDA, in Non-GAAP Financial Measures at the end of this Item 2.

Our non-GAAP financial measures should be considered in addition to, but not as a substitute for, the most directly comparable ~~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 they often materially differ from our consolidated financial statements presented in accordance with GAAP. Therefore, we typically use these adjusted amounts in conjunction with our GAAP results to address these limitations. Our non-GAAP financial measures may not be comparable to similarly titled measures of other companies. Other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.

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SCHNITZER STEEL INDUSTRIES, INC.

Financial Highlights of Results of Operations for the Third Quarter of Fiscal ~~2021~~2022

•

Diluted earnings per share from continuing operations attributable to SSI shareholders ~~in the third quarter of fiscal 2021 was $2.16, compared to a loss per share of $(0.18) in the prior year quarter.~~

•

~~Adjusted diluted earnings per share from continuing operations attributable to SSI shareholders in the third quarter of fiscal 2021 was $2.20, compared to $0.05 in the prior year quarter.~~

•

~~Net income in the third quarter of fiscal 2021 was $65 million, compared to a loss of $(5) million in the prior year quarter.~~

•

~~Adjusted EBITDA in the third quarter of fiscal 2021 was $97 million, compared to $19 million in the prior year quarter.~~

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~~SCHNITZER STEEL INDUSTRIES, INC.~~

~~Market conditions for recycled metals improved~~ in the third quarter of fiscal ~~2021, with selling prices~~2022 was $2.52, compared to $2.16 per share in the prior year quarter.

Market demand for ~~many~~ recycled ~~metal commodities reaching multi-year highs during~~metals was strong in the ~~quarter. Average~~third quarter of fiscal 2022, leading to significantly higher average net selling prices for our ferrous and nonferrous ~~products increased significantly compared to the prior year quarter which was negatively impacted by the effects of the COVID-19 pandemic.~~products. In the third quarter of fiscal ~~2021,~~2022, the average net selling prices for our ferrous and nonferrous products increased by ~~72%~~35% and ~~80%, respectively, and sales volumes for these products increased by 31% and 27%~~15%, respectively, compared to the prior year ~~period.~~quarter. Sales volumes for our nonferrous products in the third quarter of fiscal 2022 increased by 29% compared to the prior year quarter, while quarterly sales volumes for our ferrous products decreased by 7% year-over-year primarily due to the impact of slower export demand in the second half of the third quarter of fiscal 2022, which resulted in delays in contracting and shipping bulk cargoes. Our ferrous and nonferrous sales volumes in the third quarter of fiscal 2022 included additional volumes arising from the Columbus Recycling business acquired on October 1, 2021 and the Encore Recycling business acquired on April 29, 2022. Market ~~conditions~~demand for our finished steel products also improved in the third quarter of fiscal ~~2021,~~2022, which contributed to finished steel average selling prices ~~and sales volumes~~ increasing by ~~27% and 23%, respectively,~~41% compared to the prior year ~~period. Our results~~quarter. Finished steel sales volumes, however, were 12% lower in the third quarter of fiscal ~~2021~~2022 compared to the prior year quarter in part due to the impact of supply chain disruptions on current quarter volumes, including logistics constraints and delays to construction projects related to a four-month concrete industry strike in the Pacific Northwest that ended in April 2022. Our results for the third quarter of fiscal 2022 reflected ~~substantial~~ benefits from the higher price environment for most of our products including a significant expansion in our ferrous ~~metal~~and finished steel spreads and increased nonferrous sales volumes ~~supported~~driven by strong demand ~~and improved supply flows, greater contributions from sales~~compared to the prior year quarter. Our results in the third quarter of ~~nonferrous products and~~fiscal 2022 also reflected a ~~favorable impact~~lower benefit from average inventory accounting compared to the prior year ~~period.~~quarter, the effects of ongoing supply chain disruptions, lower year-over-year platinum group metals (PGM) prices, and the impact of inflation. Contributions from recent acquisitions and productivity initiatives helped to partially offset the effects of inflationary pressure on operating costs.

Selling, general, and administrative expense in the third quarter of fiscal 2022 increased by 26% compared to the prior year quarter primarily due to higher employee-related expenses, including from increased competition for employees in a tight labor market and higher incentive compensation accruals aligned with business performance, increased outside and professional services and travel expenses, including from higher costs resulting from our acquisitions and other growth-related initiatives, as well as the impact of inflation partially offset by benefits from productivity initiatives.

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 May 31,

Nine Months Ended May 31,

($ in thousands, except for prices
and per share amounts)

2021

2020

%

2021

2020

%

Ferrous revenues

$
448,684

$
201,972

122
%

$
1,023,569

$
633,936

61
%
Nonferrous revenues

204,512

85,506

139
%

471,543

277,869

70
%
Steel revenues⁽¹⁾

129,057

83,414

55
%

316,662

246,278

29
%
Retail and other revenues

38,465

31,791

21
%

101,162

89,666

13
%
Total revenues

820,718

402,683

104
%

1,912,936

1,247,749

53
%
Cost of goods sold

678,297

356,217

90
%

1,585,416

1,101,497

44
%
Gross margin (total revenues less cost of goods sold)

$
142,421

$
46,466

207
%

$
327,520

$
146,252

124
%
Gross margin (%)

17.4
%

11.5
%

50
%

17.1
%

11.7
%

46
%
Selling, general and administrative expense

$
61,887

$
45,544

36
%

$
165,935

$
138,744

20
%
Diluted earnings (loss) per share from continuing operations attributable to SSI shareholders:

Reported

$
2.16

$
(0.18
)

NM

$
4.23

$
(0.29
)

NM

Adjusted⁽²⁾

$
2.20

$
0.05

NM

$
4.31

$
0.19

NM

Net income (loss)

$
65,436

$
(4,717
)

NM

$
126,179

$
(6,778
)

NM

Adjusted EBITDA⁽²⁾

$
97,254

$
18,826

417
%

$
208,920

$
56,926

267
%
Average ferrous recycled metal sales prices ($/LT)⁽³⁾:

Domestic

$
395

$
222

78
%

$
332

$
221

50
%
Foreign

$
401

$
236

70
%

$
360

$
241

49
%
Average

$
400

$
233

72
%

$
354

$
237

49
%
Ferrous volumes (LT, in thousands):

Domestic⁽⁴⁾

412

312

32
%

1,191

1,054

13
%
Foreign

803

616

30
%

2,054

1,837

12
%
Total ferrous volumes (LT, in thousands)⁽⁴⁾⁽⁵⁾

1,215

927

31
%

3,245

2,891

12
%
Average nonferrous sales price ($/pound)⁽³⁾⁽⁶⁾

$
0.97

$
0.54

80
%

$
0.82

$
0.54

51
%
Nonferrous volumes (pounds, in thousands)⁽⁴⁾⁽⁶⁾

155,657

122,913

27
%

429,792

391,431

10
%
Finished steel average sales price ($/ST)⁽³⁾

$
802

$
633

27
%

$
709

$
633

12
%
Finished steel sales volumes (ST, in thousands)

153

124

23
%

423

366

15
%
Cars purchased (in thousands)⁽⁷⁾

91

74

23
%

249

242

3
%
Number of auto parts stores at period end

50

49

2
%

50

49

2
%
Rolling mill utilization⁽⁸⁾

98
%

91
%

8
%

94
%

83
%

13
%

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

Revenues in the third quarter and first nine months of fiscal ~~2021~~2022 increased by ~~104%~~23% and ~~53%~~35%, respectively, compared to the same periods in the prior year primarily due to significantly higher average net selling prices ~~and increased sales volumes~~ for our ferrous and nonferrous products ~~in both export and domestic markets. These increases were~~ driven by ~~stronger~~strong market ~~conditions~~demand for recycled metals ~~globally, with~~globally. In each of the third quarter and first nine months of fiscal 2022, the average net selling prices for ~~many recycled metal commodities reaching multi-year highs during~~our ferrous products increased by 35%, and the ~~third quarter of fiscal 2021.~~average net selling prices for our nonferrous products increased by 15% and 34%, respectively, compared to the prior year periods. In the third quarter and first nine months of fiscal ~~2021, the average net selling price for our ferrous products~~2022, nonferrous sales volumes increased by ~~72%~~29% and ~~49%, respectively, and the average net selling price for our nonferrous products increased by 80% and 51%~~17%, respectively, compared to the prior year ~~periods.~~periods, reflecting strong demand for these products globally. Ferrous sales volumes increased by 31% and 12%, respectively, and nonferrous sales volumes increased by 27% and 10%, respectively, for the third quarter and first nine months of fiscal 2021 compared to the prior year periods. Ferrous and nonferrous sales volumes in the third quarter of fiscal ~~2021 benefited from recognition~~2022 decreased by 7% compared to the prior year quarter primarily due to the impact of ~~shipments that had been delayed at~~slower export demand in the ~~end~~second half of the ~~second~~third quarter of fiscal ~~2021. Market conditions for our finished steel products also improved~~2022, which resulted in delays in contracting and shipping bulk cargoes. Our ferrous and nonferrous sales volumes in the third quarter and first nine months of fiscal 2022 included additional volumes arising from the Columbus Recycling business acquired on October 1, 2021 ~~which contributed to higher finished~~and the Encore Recycling business acquired on April 29, 2022. Finished steel average selling prices were significantly higher in the third quarter and ~~sales volumes~~first nine months of fiscal 2022 compared to the prior year periods, reflecting robust market demand for these products. The impact of the higher average selling prices on steel revenues in ~~West Coast~~the third quarter and first nine months of fiscal 2022 was partially offset by lower sales volumes compared to the prior year periods. For the first nine months of fiscal 2022, finished steel sales volumes were lower compared to the same period in the prior year primarily due to the impact of the ramp-up of steel mill operations that began in August 2021 and which was substantially completed during the second quarter, as well as the impact of supply chain disruptions on current volumes, including logistics constraints and delays to construction ~~markets~~projects related to a four-month concrete industry strike in the Pacific Northwest that ended in April 2022. The ramp-up of steel mill operations followed completion of repair and ~~higher rolling~~replacement of damaged property arising from the May 2021 steel mill ~~utilization.~~fire.

Net income in the third quarter and first nine months of fiscal ~~2021~~2022 was $76 million and $161 million, respectively, compared to $65 million and $126 million ~~respectively, compared to net loss of $5 million and $7 million, respectively,~~ in the prior year periods. Adjusted EBITDA in the third quarter and first nine months of fiscal ~~2021~~2022 was $119 million and $272 million, respectively, compared to $97 million and $209 ~~million, respectively, compared to $19 million and $57~~ million, respectively, in the prior year periods. ~~The improvement in our~~Our results for the third quarter and first nine months of fiscal ~~2021~~2022 reflected ~~substantial~~ benefits from the higher price environment for most of our products ~~including a significant expansion in our ferrous metal spreads,~~ and increased nonferrous sales volumes supported by strong demand ~~and improved supply flows, greater contributions from sales of nonferrous products~~ ~~and a favorable impact from average inventory accounting,~~ compared to the prior year periods. Ferrous metal spreads in the third quarter and first nine months of fiscal ~~2021~~2022 increased by approximately ~~40%~~45% and 30%, respectively, and average net selling prices for our nonferrous joint products that are recovered from the shredding process, comprising primarily zorba, increased by approximately ~~66%~~15% and ~~53%~~30%, respectively, compared to the prior year periods. The expansion in ferrous metal spreads compared to the prior year periods in part reflected higher spreads on certain ferrous sales contracted prior to a decline in market selling prices that occurred during the latter part of the third quarter of fiscal 2022. Finished steel spreads also expanded significantly in the third quarter and first nine months of fiscal 2022, compared to the prior year periods. Our results in the third quarter and first nine months of fiscal ~~2021~~2022 also reflected ~~substantially increased contributions~~the adverse impact of lower third quarter ferrous sales volumes year-over-year, a lower benefit from ~~sales of higher priced PGM products~~average inventory accounting compared to the prior year ~~periods~~period, the effects of ongoing supply chain disruptions, lower year-over-year PGM prices, the impact of inflation, and ~~achievement~~the adverse impact of the ~~full run rate~~Everett shredder downtime in the first half of ~~benefits~~fiscal 2022. Contributions from recent acquisitions and productivity initiatives ~~implemented throughout~~helped to partially offset the effects of inflationary pressure on operating costs.

In the first nine months of fiscal ~~2020.~~2022, we recognized insurance recoveries of $15 million in connection with the May 2021 fire at our steel mill in McMinnville, Oregon, reflecting recovery of applicable costs incurred by the mill operations following the incident. In ~~comparison, our results in~~ the third quarter and first nine months of fiscal ~~2020 reflected periods~~2022, we also recognized insurance recoveries of ~~sharply declining commodity prices~~$1 million and ~~constrained supply~~$11 million, respectively, in connection with the December 2021 fire at our Everett shredder facility, reflecting recovery of ~~scrap metal, especially during~~applicable losses including asset impairment charges, initial capital purchases, and other costs incurred in the ~~third quarter~~periods. These amounts do not reflect potential additional recoveries of ~~fiscal 2020~~business income losses due ~~in large part~~ to the ~~effects~~interruptions that may be recognized in the future when settlements of the ~~COVID-19 pandemic, which had a significant negative impact on operating margins and overall operating results for the fiscal 2020 periods.~~ business interruption claims are resolved.

Selling, general, and administrative expense in the third quarter and first nine months of fiscal ~~2021~~2022 increased by ~~36%~~26% and ~~20%~~17%, respectively, compared to the prior year periods primarily due to ~~an increase in~~higher employee-related expenses, ~~primarily~~including from ~~higher incentive compensation accruals aligned with improved business performance,~~increased competition for employees in a tight labor market, and increased ~~legal~~outside and professional services and travel expenses, including from higher costs resulting from our acquisitions and other growth-related initiatives, as well as the impact of inflation partially offset by benefits from productivity initiatives. Accruals in connection with our annual incentive compensation plans were higher in the third quarter of fiscal 2022, compared to the prior year quarter, but lower ~~environmental-related expense relating primarily to~~for the nine-month period year-over-year. We also incurred higher legacy environmental ~~matters.~~ charges during the first nine months of fiscal 2022, compared to the prior year period.

See the reconciliation of adjusted EBITDA in Non-GAAP Financial Measures at the end of this Item 2.

In fiscal 2020, we implemented productivity initiatives aimed at reducing our annual operating expenses, mainly through reductions in non-trade procurement spend, including outside and professional services, lower employee-related expenses and other non-headcount measures. We targeted $20 million in annual benefits from these initiatives, and we achieved the full quarterly run rate of benefits in the third quarter of fiscal 2020. We achieved approximately $15 million and $12 million in realized benefits in the first nine months of fiscal 2021 and fiscal 2020, respectively. Additionally, in April 2020, we announced our intention to modify our internal organizational and reporting structure to the One Schnitzer functionally-based, integrated model, which we completed in the first quarter of fiscal 2021. This change in structure has resulted in a more agile organization and solidified achievement of recent productivity improvements and cost reduction initiatives. During the first nine months of fiscal 2020, we incurred severance costs of $2 million, exit-related costs associated with a lease contract termination of $1 million, and professional services costs related to these initiatives of $5 million.

On May 22, 2021, we experienced a fire at our Cascade Steel Rolling Mill in McMinnville, Oregon. In the third quarter of fiscal 2021, we recognized losses of $1 million related to the carrying value of plant, equipment and inventory assets that experienced physical loss or damage as a result of the fire, as well as an insurance receivable and a related insurance recovery in the same amount. See the “Steel Mill Fire” section above within this Item 2 for further discussion of this matter.

Because of the sharp decline in market selling prices that occurred during the latter part of the third quarter of fiscal 2022, which has continued through the date of this report, we expect our net selling prices for primarily ferrous recycled metal products in the fourth quarter of fiscal 2022 to be lower than the average net selling prices for the third quarter of fiscal 2022. While we aim to respond to changes in selling prices by seeking to adjust purchase prices for unprocessed scrap metal, we may not be able to reduce our purchase prices to fully offset the reduction in selling prices, which may negatively impact our operating margins.

The effective tax rate from continuing operations for the third quarter and first nine months of fiscal ~~2021~~2022 was an expense on pre-tax income of ~~18.0%~~21.0% and ~~20.0%~~21.2%, respectively, compared to ~~a benefit on pre-tax loss of 28.0%~~18.0% and ~~27.6%~~20.0%, respectively, for the comparable prior year periods. ~~The~~Our effective tax rate from continuing operations for the third quarter and first nine months of fiscal 2022 approximated the U.S. federal statutory rate of 21%, reflecting primarily the aggregate impact of state taxes and permanent differences from non-deductible expenses on the projected annual effective tax rate applied to the quarterly results, offset by discrete tax benefits resulting from vesting of share-based awards in the periods and the favorable effects of other discrete items. Our effective tax rate from continuing operations for the third quarter and first nine months of fiscal 2021 was lower than ~~that for the comparable prior year periods primarily due to the effects of higher pre-tax income compared to the prior year periods, and was lower than~~ the U.S. federal statutory rate ~~of 21%~~ primarily due to the benefit from the foreign derived intangible income deduction in fiscal 2021 and the impacts of research and development credits and other discrete items.

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 ~~$18~~$16 million and $28 million as of ~~each of~~May 31, ~~2021~~2022 and August 31, ~~2020.~~2021, respectively. Cash balances are intended to be used primarily for working capital, capital expenditures, dividends, share repurchases, investments, and acquisitions. We use excess cash on hand to reduce amounts outstanding under our credit facilities. As of May 31, ~~2021,~~2022, debt was ~~$154~~$322 million compared to ~~$104~~$75 million as of August 31, ~~2020,~~2021, and debt, net of cash, was ~~$136~~$306 million as of May 31, ~~2021~~2022, compared to ~~$87~~$47 million as of August 31, ~~2020 (refer~~2021, which increases were primarily due to increased borrowings from our credit facilities to fund the acquisitions of the assets of the Columbus Recycling business on October 1, 2021 and the Encore Recycling business on April 29, 2022, and higher net working capital needs. See the reconciliation of debt, net of cash, in Non-GAAP Financial Measures at the end of this Item ~~2).~~2.

Net cash provided by operating activities in the first nine months of fiscal ~~2021~~2022 was ~~$51~~$58 million,, compared to ~~$56~~net cash provided by operating activities of $51 million in the first nine months of fiscal ~~2020.~~2021.

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

Sources of cash other than from earnings in the first nine months of fiscal 2021 included a ~~$56~~$56 million increase in accounts payable primarily due to higher raw material purchase prices and the timing of payments, a $19 million increase in income tax accruals, and a $14 million increase in accrued payroll and related liabilities primarily due to increased incentive compensation liabilities. Uses of cash in the first nine months of fiscal 2021 included a ~~$133~~$133 million increase in accounts receivable primarily due to increases in selling prices for recycled metals and finished steel and higher sales volumes, as well as the timing of sales and collections, and a $92 million increase in inventories due to higher raw material purchase prices, higher volumes on hand and the timing of purchases and ~~sales~~sales..

Net cash used in investing activities was $262 million in the first nine months of fiscal ~~2020 included a $33 million decrease in inventories due~~2022, compared to lower raw material purchase prices and volumes and the timing of purchases and sales. Uses of cash in the first nine months of fiscal 2020 included a $32 million decrease in accounts payable primarily due to lower raw material purchase prices and volumes and the timing of payments.

~~Net~~ ~~cash used in investing~~ ~~activities was~~ $76 million in the first nine months of fiscal ~~2021, compared to $58 million in the first nine months~~2021.

Cash used in investing activities in the first nine months of fiscal 2022 included $114 million paid to acquire the assets of the Columbus Recycling business on October 1, 2021, which amount included $7 million paid at closing for estimated net working capital in excess of an agreed-upon benchmark, and also included $63 million paid to acquire the assets of the Encore Recycling business on April 29, 2022, which amount included $8 million paid at closing for estimated net working capital in excess of an agreed-upon benchmark. We funded these acquisitions using cash on hand and borrowings under our existing credit facilities. See Note 3 - Business Acquisitions in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further detail.

Cash used in investing activities in the first nine months of fiscal 2022 also included capital expenditures of ~~$77~~$98 million to upgrade our equipment and infrastructure and for investments in advanced metals recovery technology and environmental and safety-related assets, compared to ~~$59~~$77 million in the prior year period.

~~Net~~ ~~cash provided by financing~~ Cash flows from investing activities in the first nine months of fiscal 2022 included proceeds of $17million representing the portion of advance payments from insurance carriers deemed a recovery of capital purchases incurred for repair and replacement of damaged property arising from the May 2021 ~~was $24 million, compared to~~ ~~$298 million~~steel mill fire and the December 2021 Everett facility shredder fire. Cash used in investing activities in the first nine months of fiscal ~~2020.~~2022 also included the purchase of an investment in the equity of a privately-held Canadian recycling entity for $5 million.

Net cash provided by financing activities in the first nine months of fiscal 2022 was $192 million, compared to $24 million in the first nine months of fiscal 2021.

Cash flows from financing activities in the first nine months of fiscal ~~2021~~2022 included ~~$49~~$240 million in net borrowings of debt, compared to ~~$322~~$49 million in the prior year period (refer to Non-GAAP Financial Measures at the end of this Item 2). During the third quarter of fiscal 2020, we borrowed an incremental $250 million under our credit facilities in order to increase our cash position and preserve financial flexibility in light of the COVID-19 outbreak. We repaid the $250 million of additional borrowings in the fourth quarter of fiscal 2020. Uses of cash in the first nine months of fiscal 2022 and 2021 included $11 million and ~~2020 included~~$5 million, respectively, for payment of employee tax withholdings resulting from vesting of share-based awards and $16 million in each period for the payment of dividends. Cash used in financing activities infor the first nine months of fiscal ~~2020~~2022 also included $1$18 million for share repurchases.

Our senior secured revolving credit facilities, which provide for revolving loans of $700 million and C$15 million, mature in August 2023 pursuant to a credit agreement with Bank of America, N.A., as administrative agent, and other lenders party thereto. Interest rates on outstanding indebtedness under the credit agreement are based, at our option, on either the London Interbank Offered Rate (“LIBOR”) (or the Canadian equivalent for C$ loans), plus a spread of between 1.25% and 3.50%, with the amount of the spread based on a pricing grid tied to our ratio of consolidated funded debt to EBITDA (as defined by the credit agreement), or the greater of (a) the prime rate, (b) the federal funds rate plus 0.50%, or (c) the daily rate equal to one-month LIBOR plus 1.75%, in each case, plus a spread of between 0.00% and 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 0.20% and 0.50% based on a pricing grid tied to our ratio of consolidated funded debt to EBITDA. The credit facility provides that LIBOR or any LIBOR successor rate is subject to a 0.50% floor and contains mechanics by which the parties may replace the benchmark interest rate used in the agreement from LIBOR to one or more rates based on the secured overnight financing rate administered by the Federal Reserve Bank of New York or another alternative benchmark rate.

We had borrowings outstanding under our credit facilities of ~~$140~~$303 million as of May 31, ~~2021~~2022 and ~~$90~~$60 million as of August 31, ~~2020,~~ ~~with the increase relating primarily to funding working capital and capital expenditures.~~2021. The weighted average interest rate on amounts outstanding under our credit facilities was ~~2.00%~~2.53% and ~~4.59%~~1.75% as of May 31, ~~2021~~2022 and August 31, ~~2020,~~2021, respectively.

We use the credit facilities to fund working capital, capital expenditures, dividends, share repurchases, investments, and acquisitions. Our credit agreement contains various representations and warranties, events of default, and financial and other customary covenants which limit (subject to certain exceptions) our ability to, among other things, incur or suffer to exist certain liens, make investments, incur or guaranty additional indebtedness, enter into consolidations, mergers, acquisitions, and sales of assets, make distributions and other restricted payments, change the nature of our business, engage in transactions with affiliates, and enter into restrictive agreements, including agreements that restrict the ability of our subsidiaries to make distributions. The financial covenants under the credit agreement include (a) a consolidated fixed charge coverage ratio, defined as the four-quarter rolling sum of consolidated EBITDA less defined maintenance capital expenditures and certain environmental expenditures divided by consolidated fixed charges, and (b) a consolidated leverage ratio, defined as consolidated funded indebtedness divided by the sum of consolidated net worth and consolidated funded ~~indebtedness, and (c) a consolidated asset coverage ratio, defined as consolidated asset values divided by consolidated funded~~ indebtedness.

As of May 31, ~~2021~~,2022, we were in compliance with the financial covenants under our credit agreement. The consolidated fixed charge coverage ratio was required to be no less than 1.101.50 to 1.00 and was ~~6.61~~6.67 to 1.00 as of May 31, ~~2021~~.2022. The consolidated leverage ratio was required to be no more than 0.55 to 1.00 and was ~~0.17~~0.25 to 1.00 as of May 31, ~~2021~~2022.

~~. The consolidated asset coverage ratio was required to be no less than 1.00 to 1.00 and was 2.98 to 1.00 as~~32

Our obligations under our credit agreement are guaranteed by substantially all of our subsidiaries. The credit facilities and the related guarantees are secured by senior first priority liens on certain of our and our subsidiaries’ assets, including equipment, inventory, and accounts receivable.

While we currently expect to remain in compliance with the financial covenants under the credit agreement, we may not be able to do so in the event market conditions, COVID-19, or other negative factors have a significant adverse impact on our results of operations and financial position. If we do not maintain compliance with our financial covenants and are unable to obtain an amendment or waiver from our lenders, a breach of a financial covenant would constitute an event of default and allow the lenders to exercise remedies under the agreements, the most severe of which is the termination of the credit facility under our committed bank credit agreement and acceleration of the amounts owed under the agreement. In such case, we would be required to evaluate available alternatives and take appropriate steps to obtain alternative funds. We cannot assure that any such alternative funds, if sought, could be obtained or, if obtained, would be adequate or on acceptable terms.

Other debt obligations, which totaled $7$13 million and $8 million as of ~~each of~~ May 31, ~~2021~~2022 and August 31, ~~2020,~~2021, respectively, primarily relate to an equipment ~~purchase,~~purchases, the contract consideration for which includes an obligation to make future monthly payments to the vendor in the form of licensing fees. For accounting purposes, such ~~obligation is~~obligations are treated as a partial financing of the purchase price by the equipment vendor. Monthly payments commence when the equipment is placed in service and ~~continue~~achieves specified minimum operating metrics, with payments continuing for a period of four years thereafter.

Capital expenditures totaled ~~$77~~$98 million for the first nine months of fiscal ~~2021,~~2022, compared to ~~$59~~$77 million for the prior year period. Capital expenditures in the first nine months of fiscal 2022 included approximately $34 million for investments in growth. We currently plan to invest upin the range of $130 million to ~~$110~~$150 million in capital expenditures in fiscal ~~2021, including approximately $45 million for~~2022. These capital expenditures include investments in growth, including new nonferrous processing technologies, and to support ~~for~~ volume initiatives as well as post-acquisition and other growth projects, and investments to upgrade our equipment and infrastructure and for environmental and safety-related assets, using cash generated from operations and available credit facilities. The COVID-19 pandemic has contributed to some delays in construction activities and equipment deliveries related to our capital projects, and to the time required to obtain permits from government agencies, resulting in the deferral of certain capital expenditures. Given the continually evolving nature of 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 approximately ~~$10~~$13 million in capital expenditures for environmental projects in the first nine months of fiscal ~~2021,~~2022, and we currently plan to invest upin the range of $25 million to ~~$20~~$35 million for such projects in fiscal ~~2021.~~2022. These projects include investments in ~~storm water systems and~~ equipment to ensure ongoing compliance with air quality and other environmental ~~regulations.~~regulations and storm water systems.

We have been identified by the United States Environmental Protection Agency as one of the potentially responsible parties that own or operate or formerly owned or operated sites which are part of or adjacent to the Portland Harbor Superfund site (the “Site”). See Note 45 - 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, 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~~as well as related to other legacy environmental ~~matters~~loss contingencies, could reduce the amounts available for borrowing that could otherwise be used for working capital, capital expenditures, dividends, share repurchases, investments, and acquisitions and could result in our failure to maintain compliance with certain covenants in our debt agreements, and could adversely impact our liquidity.

On April ~~7, 2021,~~6, 2022, our Board of Directors declared a dividend for the third quarter of fiscal ~~2021~~2022 of $0.1875 per common share, which equates to an annual cash dividend of $0.75 per common share. The dividend ~~totaling $5 million~~ was paid on May ~~3, 2021~~2, 2022..

Pursuant to our share repurchase program as amended in 2001, 2006 and 2008, we were authorized to repurchase up to ~~nine~~9 million shares of our Class A common stock. As of May 31, ~~2021,~~2022, we had repurchased approximately 8.7 million shares under the program and had authorization to repurchase up to a remaining ~~706~~262 thousand shares of our Class A common stock when we deem such repurchases to be appropriate. On June 27, 2022, the Company's Board of Directors authorized the repurchase of up to an additional 3.0 million shares of our Class A common stock. We may repurchase our common stock for a variety of reasons, such as to optimize our capital structure and to offset dilution related to share-based compensation arrangements. We consider several factors in determining whether to make share repurchases including, among other things, our cash needs, the availability of funding, our future business plans and the market price of our stock. ~~We did not repurchase~~In the third quarter and first nine months of fiscal 2022, we repurchased 244 thousand and 444 thousand shares, respectively, of our Class A common stock ~~during the first nine~~in open-market transactions for a total of ~~fiscal 2021.~~$10 million and $18 million, respectively.

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. While we expect the fire incident at our steel mill in May 2021 to impact our cash flows and liquidity needs, including related to working capital, capital expenditures and recoveries from insurance, we believe our available liquidity in the short- and long-term is adequate to meet our needs. See the “Steel Mill Fire” section above within this Item 2 for further discussion of this matter.

~~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, ~~2020.~~2021.

We maintain stand-by letters of credit to provide support for certain obligations, including workers’ compensation and performance bonds. As of May 31, ~~2021,~~2022, we had $8$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, ~~2020.~~2021, other than the following.

We recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date. Contingent purchase consideration is recorded at fair value at the date of acquisition. Any excess purchase price over the fair value of the net assets acquired is recorded as goodwill. Within one year from the date of acquisition, we may update the value allocated to the assets acquired and liabilities assumed, and the resulting goodwill balance, based on information received regarding the valuation of such assets and liabilities that was not available at the time of purchase. Measuring assets and liabilities at fair value requires us to determine the price that would be paid by a third-party market participant based on the highest and best use of the assets or interests acquired. See Note 3 - Business Acquisitions in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report for disclosure of our acquisition of the assets of the Columbus Recycling business on October 1, 2021 and our acquisition of the assets of the Encore Recycling business on April 29, 2022. As of the date of this report, measurement of actual acquired net working capital, as well as the fair values of certain other acquired assets and assumed liabilities for both acquisitions, is still preliminary and subject to change based on the completion of valuation procedures.

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 measure of our leverage, as cash and cash equivalents can be used, among other things, to repay 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 our borrowings (repayments) for the period because we believe it is useful tofor investors as a meaningful presentation of the change in debt.

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

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

Management believes that providing these non-GAAP financial measures adds a meaningful presentation of our results from business operations excluding adjustments for charges for asset impairment charges, business development costs not related to ongoing operations including pre-acquisition expenses, charges related to non-ordinary course legal settlements, legacy environmental matters (net of recoveries), restructuring charges and other exit-related activities, ~~asset impairment charges (recoveries), net,~~ and the income tax ~~expense (benefit)~~benefit allocated to these adjustments, items which are not related to underlying business operational performance, and improves the period-to-period comparability of our results from business operations.

Following are reconciliations of net income ~~(loss)~~ to adjusted EBITDA ~~and adjusted selling, general and administrative expense~~ (in thousands):

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

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.~~conditions as well as other factors including political and military events. We respond to increases and decreases in forward selling prices by adjusting purchase prices. We actively manage our exposure to commodity price risk and monitor the actual and expected spread between forward selling prices and purchase costs and processing and shipping expense. Sales contracts are based on prices negotiated with our customers, and generally orders are placed 30 to 60 days ahead of the shipment date. However, financial results may be negatively impacted when forward selling prices fall more quickly than we can adjust purchase prices or when customers fail to meet their contractual obligations. We assess the net realizable value of inventory (“NRV”) each quarter based upon contracted sales orders and estimated future selling prices. As a result of this assessment as of May 31, 2022, we recorded inventory write-downs of $3 million in the third quarter of fiscal 2022. Based on contracted sales and estimates of future selling prices, a 10% decrease in the estimated selling price of inventory would not have had a material NRV impact as of May 31, ~~2021.~~2022.

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, ~~2020.~~2021.

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. ~~Due in part to the effects~~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. In addition, in higher or rising commodity price environments, we have experienced proportionately lower credit insurance coverage of applicable customer credit limits, which may increase our exposure to customer credit risk.

Historically, we have shipped almost all of our large shipments of ferrous scrap metal to foreign customers under contracts supported by letters of credit issued or confirmed by banks deemed creditworthy. The letters of credit ensure payment by the customer. As we generally sell export recycled ferrous metal under contracts or orders that generally provide for shipment within 30 to 60 days after the price is agreed, our customers typically do not have difficulty obtaining letters of credit from their banks in periods of rising ferrous prices, as the value of the letters of credit are collateralized by the value of the inventory on the ship. However, in periods of significantly declining prices, our customers may not be able to obtain letters of credit for the full sales value of the inventory to be shipped.

As of May 31, ~~2021~~2022 and August 31, ~~2020, 44%~~2021, 21% and ~~40%~~30%, respectively, of our accounts receivable balance was covered by letters of credit. Of the remaining balance, 98%99% and 97% was less than 60 days past due as of ~~each of~~ May 31, ~~2021~~2022 and August 31, ~~2020.~~2021, 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 May 31, ~~2021~~2022 and August 31, ~~2020,~~ 2021, 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. Consistent with guidance issued by the Securities and Exchange Commission that an assessment of internal controls over financial reporting of a recently acquired business may be omitted from management's evaluation of disclosure controls and procedures, management is excluding an assessment of the internal controls of the acquired Columbus Recycling business, which we acquired on October 1, 2021, and the Encore Recycling business, which we acquired on April 29, 2022, from its evaluation of the effectiveness of our disclosure controls and procedures. Together, the Columbus Recycling and Encore Recycling businesses represented approximately 10% of our consolidated total assets and 5% of our consolidated total revenues as of and for the nine months ended May 31, 2022. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of May 31, ~~2021,~~2022, our disclosure controls and procedures were effective at the reasonable assurance level.

There was no change in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended May 31, ~~2021,~~2022, that has materially affected, or 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, ~~2020;~~2021; and in Part II, “Item 1. Legal Proceedings” in our Quarterly ~~Reports~~Report on Form 10-Q for the quarterly ~~periods~~period ended November 30, ~~2020 and February 28,~~ 2021; and below in this Part II, “Item 1. Legal Proceedings” of this Quarterly Report on Form 10-Q. Also see Note 45 - Commitments and Contingencies in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item I,1, incorporated by reference herein.

As previously disclosed, the Company had reached agreement with the United States Environmental Protection Agency (USEPA) and the United States Department of Justice (USDOJ) to settle a 2018 finding of violation letter with respect to alleged violations of environmental requirements stemming from refrigerant recovery management program inspections at 12 of our facilities in the New England and Pacific Northwest regions in 2017. On April 21, 2022, the USDOJ on behalf of the USEPA filed a Complaint and lodged a proposed Consent Decree with the United States District Court for the District of Massachusetts. Pursuant to the proposed Consent Decree, without admitting any liability with respect to the allegations in the Complaint and as previously disclosed, the Company would settle this matter for a civil penalty of $1.55 million, implementation of an approved enhanced refrigerant recovery management program, and execution of a R-12 refrigerant destruction mitigation project. The proposed Consent Decree was published in the Federal Register on April 27, 2022 for a 30-day public comment period. No public comments were received, and the Court entered the Consent Decree as a final judgment on June 23, 2022 (Effective Date). The Company has implemented the USEPA approved enhanced refrigerant recovery management program at its metals recycling facilities, and payment of the civil penalty is due within 30 days after the Effective Date.

As previously disclosed, the Company had reached agreement with the District Attorneys for six counties in California to settle a joint investigation which had commenced in or prior to 2019 into the alleged mishandling of hazardous materials and hazardous waste, including the commingling of nonhazardous and hazardous wastes, as well as alleged water pollution violations, at various Pick-n-Pull locations within California. On March 10, 2022, the Superior Court of the State of California, County of Santa Clara issued a Final Stipulated Judgment resolving this matter. Pursuant to the Final Stipulated Judgment, without admitting any violation of law and as previously disclosed, Pick-n-Pull agreed to settle this matter for a civil penalty of $1.85 million, plus payments of $300,000 for supplemental environmental projects and $350,000 for reimbursement of investigation and enforcement costs, and to comply with injunctive terms relating to the facilities’ waste management activities. Pick-N-Pull has implemented additional compliance measures at all operating Pick-n-Pull locations in the state and on April 4, 2022 made the payments required under the Final Stipulated Judgment.

As previously disclosed, the Company had received a Pre-Enforcement Notice (PEN) in September 2021 from the Oregon Department of Environmental Quality (ODEQ) alleging that the Company’s metal shredder facility in Portland, Oregon is in violation of Title V of the Clean Air Act (CAA) and stating that ODEQ had referred the matter to USEPA for review and possible formal enforcement. On April 25, 2022, the Company received an Information Request from USEPA, Region 10 under Section 114 of the CAA with respect to both the Portland shredder facility and the Tacoma metal shredder facility owned and operated by a subsidiary of the Company. The Company is responding to the Information Request. In a response letter, we identified why Title V does not apply to the Portland and Tacoma facilities, explained that we had submitted an application to ODEQ in December 2018 for an Air Contaminant Discharge Permit with plant site emission limits that would limit emissions to less than Title V thresholds, noted that the Tacoma facility operates pursuant to an Order of Approval issued by the Puget Sound Clean Air Agency, described that we were proactively enclosing the shredders and installing particulate and volatile organic compound controls at both facilities, and included information on the permit applications that had been submitted in connection with the enclosure and emission control projects. The Company does not believe that any enforcement action is warranted in this matter.

As previously ~~reported~~disclosed, the Company had reached agreement with the Alameda County District Attorney and the California Office of the Attorney General (COAG) to settle certain alleged violations of environmental requirements at our Oakland metals recycling facility pursuant to a Stipulation for Entry of Final Judgment and Order on Consent (Consent Order) issued by the Superior Court of the State of California, County of Alameda in February 2021. On March 30, 2022, the Company received a letter from the COAG alleging violations of the Consent Order and demanding that the Company take additional measures to address the off-site release and deposition of light fibrous material (LFM). The Company does not believe that it is in violation of the Consent Order and in a response letter detailed the additional control measures that the Company has implemented and continues to implement to reduce the potential for releases of LFM from its Oakland facility. The Company is in continuing discussions with the COAG, the Alameda County District Attorney’s office, and the California State Department of Toxic Substances Control (DTSC) regarding this matter and does not believe that enforcement action is warranted.

As previously disclosed in the matter filed by The Athletics Investment Group LLC (A’s) against the ~~California State Department of Toxic Substance Control (DTSC)~~DTSC as Respondent and the Company as Real Party in Interest ~~seeking recission~~in the Superior Court of the State of California, County of Alameda, the A’s obtained an initial order requiring the DTSC to rescind the Company’s “f” ~~letter~~letters pursuant to which DTSC classified treated shredder ~~waste~~residue from the Company’s metal shredding facility in California as a “nonhazardous ~~waste”~~waste,” which among other things ~~permits~~allows its use as alternative daily cover at municipal landfills. The DTSC rescinded the Company’s “f” letters on November 29, 2021 pursuant to such order. As an additional element of DTSC’s compliance with the order, DTSC adopted an emergency regulation (CTMSR Regulation) that allows metal shredding facilities to transport and dispose of treated shredder residue as non-hazardous waste under a conditional exclusion. The CTMSR Regulation became effective on December 10, 2021, and the Company resumed shipment of treated shredder residue for use as alternative daily cover at municipal landfills in California in late December 2021. On January 14, 2022, the ~~Court~~A’s filed a motion to enforce the Court’s order, and on April ~~16, 2021~~18, 2022, the Superior Court issued an order granting that motion and ~~writ~~prohibiting the application of ~~mandate commanding~~the CTMSR Regulation to the Company’s operations. Both the DTSC ~~within 30 days to rescind~~and the ~~Company’s “f letter”. The~~ Company have filed a notice of appeal of the Superior Court’s most recent order to the California State Court of Appeals, First Appellate District, Division Three, which notice of appeal has the effect of automatically staying the order. On June 10, 2022, the A’s filed a “Second Motion to Enforce” the Superior Court’s order, effectively seeking to lift the automatic stay and seeking sanctions against the DTSC. In the meantime, the Company’s appeal of both the Superior Court’s initial order requiring rescission of the “f” letters and the Superior Court’s order lifting the initial stay remain pending before the same State Court of Appeals.

Following an inspection by the DTSC of the Company’s Oakland metal shredding facility on May 16 and 17, 2022, the Company in its compilation and review of records requested by the DTSC during that inspection discovered and promptly self-disclosed to the DTSC that it is unable to confirm that it was in compliance with certain aspects of the CTMSR Regulation for certain periods since the adoption of the emergency regulation. The Company reported the corrective actions it has taken and the numerous detailed procedures that are now in place to prevent recurrence. The Company is confident that any failure to comply with the CTMSR Regulation did not pose a risk to human health or the environment. On June 23, 2022, the DTSC issued an Amended Summary of Violations (SOV) alleging that the Company is treating and storing CTMSR without a permit or other grant of authorization in violation of the California Hazardous Waste Control Law and its implementing regulations and that without such authorization the Company cannot utilize the CTSMR Regulation. The Company had previously discussed with DTSC the various forms of authorization that would satisfy the CTMSR Regulation and had promptly obtained a Permit by Rule which it understood to be a satisfactory option. The Company disputes the allegations in the SOV and has filed an application for a different form of authorization (Interim Status) under a reservation of rights that allows the Company to continue treating, storing, transporting, and disposing of CTSMR.

On May 6, 2022, the A’s ~~have~~filed an action in the Superior Court of the State of California, County of Alameda against the Bay Area Air Quality Management District (BAAQMD) as Respondent and the Company as Real Party in Interest alleging that the BAAQMD has failed to properly regulate the Company’s Oakland shredder facility under the federal and California Clean Air Acts and seeking an order requiring the BAAQMD to revoke the Company’s Permit to Operate for the Oakland facility. On June 3, 2022, the BAAQMD with the consent of the Company removed this action to the United States District Court, Northern District of California, Oakland Division. The Company has filed a motion to ~~lift~~relate this most recent A’s lawsuit to a substantially similar action filed by the ~~stay.~~A’s against the Company on July 7, 2021 in the United States District Court, Northern District of California, Oakland Division under the federal Clean Air Act’s citizen suit provision alleging violations by the Oakland facility of the federal Clean Air Act and permit conditions and seeking declaratory and injunctive relief, which action is currently in discovery with a trial, if any, currently scheduled for October 2023.

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, ~~2020,~~2021, except for the changes disclosed in the subsequent Quarterly ~~Report~~Reports on Form 10-Q for the quarterly ~~period~~periods ended November 30, 2021 and February 28, ~~2021,~~2022.

Pursuant to a share repurchase program, as amended in 2001, 2006, and 2008, our Board of Directors had previously authorized the repurchase of up to 9 million shares of our Class A common stock when management deems such repurchases to be appropriate. We repurchased 244 thousand shares of our Class A common stock under the program in open-market transactions during the third quarter of fiscal 2022. As of May 31, 2022, we had existing authorization remaining under the program to repurchase up to approximately 262 thousand shares.

The table below presents a summary of our share repurchases during the quarter ended May 31, 2022:

On June 27, 2022, our Board of Directors authorized a new share repurchase program of up to three million shares of our Class A common stock for a total repurchase authority as ~~follows:~~

~~Risk Factors Relating~~of the date of this filing of 3,262,206 shares, reflecting the additional 262,206 shares available for repurchase pursuant to ~~Our Business~~

~~Equipment upgrades, equipment failures~~our previously authorized share repurchase program to repurchase up to an aggregate of nine million shares. The share repurchase program does not require us to acquire any specific number of shares. The program does not have a stated expiration date, and ~~facility damage~~we may ~~lead to production curtailments~~suspend, extend, or ~~shutdowns~~

Our business operations and recycling and manufacturing processes depend on critical pieces of equipment, including information technology equipment, shredders, nonferrous sorting technology, furnaces and a rolling mill, whichterminate the program at any time without prior notice. The program may be ~~out of service occasionally for scheduled upgrades~~executed through open-market purchases, privately negotiated transactions, or maintenance or as a result of unanticipated failures. Our facilities are subject to equipment failures and the risk of catastrophic loss due to unanticipated events such as mechanical failures, fires, earthquakes, accidents or violent weather conditions. For instance, certain facilities in California, Oregon and Washington were briefly closed in September 2020 due to poor air quality as a result of wildfires, although the impact on our operations was not significant. Additionally, in May 2021, we experienced a fire at our Cascade Steel Rolling Mill in McMinnville, Oregon. Direct physical loss or damage to property from the incident was limited to property located at the mill’s melt shop. We expect to incur costs to repair and replace property that experienced physical loss or damage and business income losses associated with the interruption of production activities. We carry insurance that we anticipate will cover repair and replacement of property that experienced physical loss or damage and business income losses resulting from the fire at the mill. However, our insurance coverage is subject to deductibles, and various conditions, exclusions and limits. The deductible applicable to physical loss or damage to property is $1 million, while the deductible for lost business income is 10 times the Average Daily Gross Earnings which would have been earned had no interruption occurred, calculated subject to judgments and uncertainties. Our insurance coverage may be unavailable or insufficient to protect us against losses in the case of future events. In addition, insurance may not continue to be available in the future on acceptable terms or at acceptable costs. Interruptions in our processing and production capabilities and shutdowns resulting from unanticipated events could disrupt customer and supplier relationships and could have a material adverse effect on our financial condition, results of operations and cash flows.utilizing Rule 10b5-1 programs.

~~Labor shortages or increased labor costs may adversely affect our operating results, financial condition and cash flows~~

~~Our employees contribute to developing and meeting our business goals and objectives, and labor~~ ~~is a significant component of operating our business. The impact of labor shortages or increased labor costs because of increased competition for~~ ~~employees, unemployment levels and benefits,~~ higher employee turnover rates, increases in the federally-mandated or state-mandated minimum wage, change in exempt and non-exempt status, or other employee benefits costs (including costs associated with health insurance coverage or workers’ compensation insurance), may increase our costs or impede our ability to operate our facilities and could have a material adverse effect on our results of operations, financial condition and cash flows. As a result of the tight labor markets, we have experienced fewer job applicants in certain local markets, which hindered our ability to reach full staffing levels at some of our facilities. Recruiting and retaining employees in sufficient numbers to optimally staff our facilities may result in increases in our labor costs. Labor shortages and increased labor costs may continue to be realized as a direct or indirect result of the COVID-19 pandemic, including related response measures implemented by governments, or due to other factors, which may adversely affect our operating results, financial condition and cash flows.

For information regarding the authorization of a new share repurchase program by our Board of Directors on June 27, 2022, see “Item 2. Unregistered Sales of Equity Securities and Use of Proceeds” above in Part II of this report, incorporated by reference herein.

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~~The Nasdaq Stock Market LLC


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


	PAGE
FORWARD-LOOKING STATEMENTS	3

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)	4

Unaudited Condensed Consolidated Balance Sheets as of May 31, ~~2021~~2022 and August 31, ~~2020~~2021	4

Unaudited Condensed Consolidated Statements of ~~Operations~~Income for the Three and Nine Months Ended May 31, ~~2021~~2022 and ~~2020~~2021	5

Unaudited Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the Three and Nine Months Ended May 31, ~~2021~~2022 and ~~2020~~2021	6

Unaudited Condensed Consolidated Statements of Equity for the Three and Nine Months Ended May 31, ~~2021~~2022 and ~~2020~~2021	7

Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended May 31, ~~2021~~2022 and ~~2020~~2021	9

Notes to the Unaudited Condensed Consolidated Financial Statements	11

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3. Quantitative and Qualitative Disclosures about Market Risk	3738

Item 4. Controls and Procedures	3839

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	3940

Item 1A. Risk Factors	3942

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 5. Other Information	4042

Item 6. Exhibits	4143

SIGNATURES	4244


	Nine Months Ended May 31,
	2022			2021
Cash flows from operating activities:
Net income	$	160,945		$	126,179
Adjustments to reconcile net income to cash provided by operating activities:
Asset impairment charges		932			—
Depreciation and amortization		54,566			43,621
Inventory write-downs		3,199			—
Deferred income taxes		23,851			11,393
Undistributed equity in earnings of joint ventures		(1,589	)		(2,131	)
Share-based compensation expense		14,046			13,987
Loss (gain) on disposal of assets, net		1,192			(48	)
Unrealized foreign exchange loss, net		193			137
Credit loss, net		17			21
Changes in assets and liabilities, net of acquisitions:
Accounts receivable		(43,340	)		(133,164	)
Inventories		(164,196	)		(92,114	)
Income taxes		8,843			18,932
Prepaid expenses and other current assets		(14,771	)		(9,671	)
Other long-term assets		(1,068	)		(4,524	)
Operating lease assets and liabilities		(2,049	)		(696	)
Accounts payable		44,874			56,394
Accrued payroll and related liabilities		(16,890	)		14,269
Other accrued liabilities		1,747			1,208
Environmental liabilities		(14,744	)		2,055
Other long-term liabilities		650			3,496
Distributed equity in earnings of joint ventures		1,600			1,250
Net cash provided by operating activities		58,008			50,594
Cash flows from investing activities:
Capital expenditures		(97,972	)		(76,730	)
Acquisitions, net of acquired cash		(177,070	)		—
Proceeds from insurance and sale of assets		18,244			462
Purchase of equity investment		(5,000	)		—
Deposit on land option		(80	)		630
Net cash used in investing activities		(261,878	)		(75,638	)
Cash flows from financing activities:
Borrowings from long-term debt		895,175			445,829
Repayment of long-term debt		(655,440	)		(396,810	)
Payment of debt issuance costs		—			(23	)
Repurchase of Class A common stock		(17,858	)		—
Taxes paid related to net share settlement of share-based payment awards		(11,003	)		(5,435	)
Distributions to noncontrolling interests		(2,330	)		(3,029	)
Dividends paid		(16,172	)		(16,067	)
Net cash provided by financing activities		192,372			24,465
Effect of exchange rate changes on cash		(195	)		619
Net (decrease) increase in cash and cash equivalents		(11,693	)		40
Cash and cash equivalents as of beginning of period		27,818			17,887
Cash and cash equivalents as of end of period	$	16,125		$	17,927


	Common Stock																Accumulated
	Class A						Class B				Additional						Other			Total SSI
Three Months Ended May 31, 2021	Shares			Amount			Shares		Amount		Paid-in Capital			Retained Earnings			Comprehensive Loss			Shareholders’ Equity			Noncontrolling Interests			Total Equity
Balance as of March 1, 2021		27,263		$	27,263			200	$	200	$	39,695		$	697,966		$	(35,282	)	$	729,842		$	4,197		$	734,039
Net income		—			—			—		—		—			63,635			—			63,635			1,801			65,436
Other comprehensive income, net of tax		—			—			—		—		—			—			4,551			4,551			—			4,551
Distributions to noncontrolling interests		—			—			—		—		—			—			—			—			(1,446	)		(1,446	)
Issuance of restricted stock		91			91			—		—		(91	)		—			—			—			—			—
Restricted stock withheld for taxes		(31	)		(31	)		—		—		(1,433	)		—			—			(1,464	)		—			(1,464	)
Share-based compensation cost		—			—			—		—		6,806			—			—			6,806			—			6,806
Dividends ($0.1875 per common share)		—			—			—		—		—			(5,339	)		—			(5,339	)		—			(5,339	)
Balance as of May 31, 2021		27,323		$	27,323			200	$	200	$	44,977		$	756,262		$	(30,731	)	$	798,031		$	4,552		$	802,583

	Common Stock								Additional					Accumulated Other			Total SSI
	Class A				Class B				Paid-in		Retained			Comprehensive			Shareholders’			Noncontrolling			Total
Three Months Ended May 31, 2020	Shares		Amount		Shares		Amount		Capital		Earnings			Loss			Equity			Interests			Equity
Balance as of March 1, 2020		26,899	$	26,899		200	$	200	$	31,174	$	661,418		$	(39,040	)	$	680,651		$	4,297		$	684,948
Net (loss) income		—		—		—		—		—		(4,995	)		—			(4,995	)		278			(4,717	)
Other comprehensive loss, net of tax		—		—		—		—		—		—			(1,859	)		(1,859	)		—			(1,859	)
Distributions to noncontrolling interests		—		—		—		—		—		—			—			—			(854	)		(854	)
Share-based compensation cost		—		—		—		—		2,090		—			—			2,090			—			2,090
Dividends ($0.1875 per common share)		—		—		—		—		—		(5,261	)		—			(5,261	)		—			(5,261	)
Balance as of May 31, 2020		26,899	$	26,899		200	$	200	$	33,264	$	651,162		$	(40,899	)	$	670,626		$	3,721		$	674,347

	Nine Months Ended May 31,
	2021			2020
Cash flows from operating activities:
Net income (loss)	$	126,179		$	(6,778	)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Asset impairment charges (recoveries), net		—			4,321
Exit-related asset impairments		—			971
Depreciation and amortization		43,621			43,215
Deferred income taxes		11,393			8,570
Undistributed equity in earnings of joint ventures		(2,131	)		(698	)
Share-based compensation expense		13,987			6,710
Gain on the disposal of assets, net		(48	)		(19	)
Unrealized foreign exchange loss (gain), net		137			(24	)
Credit loss, net		21			53
Changes in assets and liabilities, net of acquisitions:
Accounts receivable		(133,164	)		3,914
Inventories		(92,114	)		32,754
Income taxes		18,932			(11,428	)
Prepaid expenses and other current assets		(9,671	)		(1,209	)
Other long-term assets		(4,524	)		563
Operating lease assets and liabilities		(696	)		23
Accounts payable		56,394			(32,489	)
Accrued payroll and related liabilities		14,269			(1,257	)
Other accrued liabilities		1,208			5,064
Environmental liabilities		2,055			2,314
Other long-term liabilities		3,496			266
Distributed equity in earnings of joint ventures		1,250			1,000
Net cash provided by operating activities		50,594			55,836
Cash flows from investing activities:
Capital expenditures		(76,730	)		(59,287	)
Proceeds from sale of assets		462			739
Deposit on land option		630			630
Net cash used in investing activities		(75,638	)		(57,918	)
Cash flows from financing activities:
Borrowings from long-term debt		445,829			685,527
Repayment of long-term debt		(396,810	)		(363,470	)
Payment of debt issuance costs		(23	)		—
Repurchase of Class A common stock		—			(914	)
Taxes paid related to net share settlement of share-based payment awards		(5,435	)		(5,845	)
Distributions to noncontrolling interests		(3,029	)		(1,940	)
Dividends paid		(16,067	)		(15,803	)
Net cash provided by financing activities		24,465			297,555
Effect of exchange rate changes on cash		619			(195	)
Net increase in cash and cash equivalents		40			295,278
Cash and cash equivalents as of beginning of period		17,887			12,377
Cash and cash equivalents as of end of period	$	17,927		$	307,655


	May 31, 2022		August 31, 2021
Processed and unprocessed scrap metal	$	299,681	$	164,960
Semi-finished goods		18,457		7,671
Finished goods		69,949		39,368
Supplies		51,617		44,428
Inventories	$	439,704	$	256,427


Cash	$	325
Accounts receivable		22,763
Inventories		10,060
Other current assets		255
Property, plant and equipment		13,491
Operating lease right-of-use assets		254
Goodwill(1)		62,552
Intangibles and other assets		19,741
Total assets acquired		129,441
Current liabilities		11,828
Other liabilities		3,350
Total liabilities assumed		15,178
Net assets acquired	$	114,263


Accounts receivable	$	10,464
Inventories		4,270
Other current assets		65
Property, plant and equipment		24,937
Operating lease right-of-use assets		402
Goodwill(1)		21,715
Intangibles and other assets(2)		3,816
Total assets acquired		65,669
Current liabilities		1,447
Other liabilities		1,091
Total liabilities assumed		2,538
Net assets acquired	$	63,131

	Goodwill
September 1, 2020	$	169,627
Foreign currency translation adjustment		1,606
May 31, 2021	$	171,233

	Nine Months Ended May 31, 2021									Nine Months Ended May 31, 2020
	Foreign Currency Translation Adjustments			Pension Obligations, Net			Total			Foreign Currency Translation Adjustments			Pension Obligations, Net			Total
Balances - September 1 (Beginning of period)	$	(34,184	)	$	(2,687	)	$	(36,871	)	$	(35,689	)	$	(3,074	)	$	(38,763	)
Other comprehensive income (loss) before reclassifications		6,325			(385	)		5,940			(2,323	)		(17	)		(2,340	)
Income tax benefit		0			87			87			0			4			4
Other comprehensive income (loss) before reclassifications, net of tax		6,325			(298	)		6,027			(2,323	)		(13	)		(2,336	)
Amounts reclassified from accumulated other comprehensive loss		0			147			147			0			258			258
Income tax (benefit)		0			(34	)		(34	)		0			(58	)		(58	)
Amounts reclassified from accumulated other comprehensive loss, net of tax		0			113			113			0			200			200
Net periodic other comprehensive income (loss)		6,325			(185	)		6,140			(2,323	)		187			(2,136	)
Balances - May 31 (End of period)	$	(27,859	)	$	(2,872	)	$	(30,731	)	$	(38,012	)	$	(2,887	)	$	(40,899	)

	Three Months Ended May 31,									Nine Months Ended May 31,
($ in thousands, except for prices and per share amounts)	2021			2020			%			2021			2020			%
Ferrous revenues	$	448,684		$	201,972			122	%	$	1,023,569		$	633,936			61	%
Nonferrous revenues		204,512			85,506			139	%		471,543			277,869			70	%
Steel revenues⁽¹⁾		129,057			83,414			55	%		316,662			246,278			29	%
Retail and other revenues		38,465			31,791			21	%		101,162			89,666			13	%
Total revenues		820,718			402,683			104	%		1,912,936			1,247,749			53	%
Cost of goods sold		678,297			356,217			90	%		1,585,416			1,101,497			44	%
Gross margin (total revenues less cost of goods sold)	$	142,421		$	46,466			207	%	$	327,520		$	146,252			124	%
Gross margin (%)		17.4	%		11.5	%		50	%		17.1	%		11.7	%		46	%
Selling, general and administrative expense	$	61,887		$	45,544			36	%	$	165,935		$	138,744			20	%
Diluted earnings (loss) per share from continuing operations attributable to SSI shareholders:
Reported	$	2.16		$	(0.18	)	NM			$	4.23		$	(0.29	)	NM
Adjusted⁽²⁾	$	2.20		$	0.05		NM			$	4.31		$	0.19		NM
Net income (loss)	$	65,436		$	(4,717	)	NM			$	126,179		$	(6,778	)	NM
Adjusted EBITDA⁽²⁾	$	97,254		$	18,826			417	%	$	208,920		$	56,926			267	%
Average ferrous recycled metal sales prices ($/LT)⁽³⁾:
Domestic	$	395		$	222			78	%	$	332		$	221			50	%
Foreign	$	401		$	236			70	%	$	360		$	241			49	%
Average	$	400		$	233			72	%	$	354		$	237			49	%
Ferrous volumes (LT, in thousands):
Domestic⁽⁴⁾		412			312			32	%		1,191			1,054			13	%
Foreign		803			616			30	%		2,054			1,837			12	%
Total ferrous volumes (LT, in thousands)⁽⁴⁾⁽⁵⁾		1,215			927			31	%		3,245			2,891			12	%
Average nonferrous sales price ($/pound)⁽³⁾⁽⁶⁾	$	0.97		$	0.54			80	%	$	0.82		$	0.54			51	%
Nonferrous volumes (pounds, in thousands)⁽⁴⁾⁽⁶⁾		155,657			122,913			27	%		429,792			391,431			10	%
Finished steel average sales price ($/ST)⁽³⁾	$	802		$	633			27	%	$	709		$	633			12	%
Finished steel sales volumes (ST, in thousands)		153			124			23	%		423			366			15	%
Cars purchased (in thousands)⁽⁷⁾		91			74			23	%		249			242			3	%
Number of auto parts stores at period end		50			49			2	%		50			49			2	%
Rolling mill utilization⁽⁸⁾		98	%		91	%		8	%		94	%		83	%		13	%


	Three Months Ended May 31,									Nine Months Ended May 31,
($ in thousands, except for prices and per share amounts)	2022			2021			%			2022			2021			%
Ferrous revenues	$	530,303		$	448,684			18	%	$	1,434,473		$	1,023,569			40	%
Nonferrous revenues		272,208			204,512			33	%		662,779			471,543			41	%
Steel revenues(1)		165,210			129,057			28	%		384,644			316,662			21	%
Retail and other revenues		42,366			38,465			10	%		109,507			101,162			8	%
Total revenues		1,010,087			820,718			23	%		2,591,403			1,912,936			35	%
Cost of goods sold		834,375			678,297			23	%		2,188,158			1,585,416			38	%
Gross margin (total revenues less cost of goods sold)	$	175,712		$	142,421			23	%	$	403,245		$	327,520			23	%
Gross margin (%)		17.4	%		17.4	%		(—	)%		15.6	%		17.1	%		(9	)%
Selling, general and administrative expense	$	77,672		$	61,887			26	%	$	194,020		$	165,935			17	%
Diluted earnings per share from continuing operations attributable to SSI shareholders:
Reported	$	2.52		$	2.16			17	%	$	5.33		$	4.23			26	%
Adjusted(2)	$	2.59		$	2.20			18	%	$	5.54		$	4.31			29	%
Net income	$	75,504		$	65,436			15	%	$	160,945		$	126,179			28	%
Adjusted EBITDA(2)	$	119,090		$	97,254			22	%	$	272,435		$	208,920			30	%
Average ferrous recycled metal sales prices ($/LT)(3):
Domestic	$	516		$	395			31	%	$	458		$	332			38	%
Foreign	$	552		$	401			38	%	$	484		$	360			34	%
Average	$	541		$	400			35	%	$	477		$	354			35	%
Ferrous volumes (LT, in thousands):
Domestic(4)		490			412			19	%		1,329			1,191			12	%
Foreign		639			803			(20	)%		2,020			2,054			(2	)%
Total ferrous volumes (LT, in thousands)(4)(8)		1,129			1,215			(7	)%		3,349			3,245			3	%
Average nonferrous sales price ($/pound)(3)(5)	$	1.12		$	0.97			15	%	$	1.10		$	0.82			34	%
Nonferrous volumes (pounds, in thousands)(4)(5)		201,413			155,657			29	%		501,785			429,792			17	%
Finished steel average sales price ($/ST)(3)	$	1,129		$	802			41	%	$	1,059		$	709			49	%
Finished steel sales volumes (ST, in thousands)	135				153			(12	)%		340			423			(20	)%
Cars purchased (in thousands)(6)	84				91			(8	)%		237			249			(5	)%
Number of auto parts stores at period end	50				50			(—	)%		50			50			(—	)%
Rolling mill utilization(7)		96	%		98	%		(2	)%		87	%		94	%		(7	)%


	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that may yet be Purchased under the Plans or Programs
March 1 - March 31, 2022		—	$	—		—		505,998
April 1 - April 30, 2022		15,000	$	47.56		15,000		490,998
May 1 - May 31, 2022		228,792	$	40.56		228,792		262,206
Total third quarter 2022		243,792				243,792


Exhibit Number		Exhibit Description

10.1* 31.1		~~Schnitzer Steel Industries Deferred Compensation Plan. Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 4, 2021 and incorporated herein by reference.~~

~~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:	June ~~30, 2021~~29, 2022	By:	/s/ Tamara L. Lundgren
			Tamara L. Lundgren
			Chairman, President and Chief Executive Officer

Date:	June ~~30, 2021~~29, 2022	By:	/s/ Richard D. Peach
			Richard D. Peach
			Executive Vice President, Chief Financial Officer and Chief Strategy Officer

Useful Life

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