# EDGAR Filing Document

**Accession Number:** 0000912603
**File Stem:** 0000950170-23-000211
**Filing Date:** 2023-1
**Character Count:** 218374
**Document Hash:** 2a04af357694d039291105c4845a0dc8
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000950170-23-000211.hdr.sgml**: 20230105

**ACCESSION NUMBER**: 0000950170-23-000211

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 68

**CONFORMED PERIOD OF REPORT**: 20221130

**FILED AS OF DATE**: 20230105

**DATE AS OF CHANGE**: 20230105

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** SCHNITZER STEEL INDUSTRIES, INC.
- **CENTRAL INDEX KEY:** 0000912603
- **STANDARD INDUSTRIAL CLASSIFICATION:** WHOLESALE-MISC DURABLE GOODS [5090]
- **IRS NUMBER:** 930341923
- **STATE OF INCORPORATION:** OR
- **FISCAL YEAR END:** 0831

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-22496
- **FILM NUMBER:** 23510627

**BUSINESS ADDRESS:**
- **STREET 1:** 299 SW CLAY ST.
- **CITY:** PORTLAND
- **STATE:** OR
- **ZIP:** 97201
- **BUSINESS PHONE:** 5032249900

**MAIL ADDRESS:**
- **STREET 1:** P O BOX 10047
- **CITY:** PORTLAND
- **STATE:** OR
- **ZIP:** 97296

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** SCHNITZER STEEL INDUSTRIES INC
- **DATE OF NAME CHANGE:** 19930927

?xml version="1.0" encoding="ASCII"? 10-Q

[<u>**Table of Contents**</u>](#toc_page)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

**FORM** 10-Q

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

For the Quarterly Period Ended November 30, 2022

or

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

For the Transition Period from __________ to __________

Commission File Number 000-22496

![img6121234_0.jpg](img6121234_0.jpg)

SCHNITZER STEEL INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

---

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

---

**(**503**)** 224-9900

(Registrant's telephone number, including area code)

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

---

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

---

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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

Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant had 27,165,180 shares of Class A common stock, par value of $1.00 per share, and 200,000 shares of Class B common stock, par value of $1.00 per share, outstanding as of January 3, 2023.

------

S**CHNITZER STEEL INDUSTRIES, INC.**

**FORM 10-Q**

**TABLE OF** **CONTENTS**

---

| | |
|:---|:---|
|  | **PAGE** |
| [<u>FORWARD-LOOKING STATEMENTS</u>](#forwardlooking_statements) | 3 |
| [<u>PART I. FINANCIAL INFORMATION</u>](#part_i_financial_information) |  |
| [<u>Item 1. Financial Statements (Unaudited)</u>](#item_1_financial_statements_unaudited) | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;[<u>Unaudited Condensed Consolidated Balance Sheets as of November 30, 2022 and August 31, 2022</u>](#condensed_consolidated_balance_sheets) | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;[<u>Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended November 30, 2022 and 2021</u>](#condensed_consolidated_statements_operat) | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;[<u>Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three Months Ended November 30, 2022 and 2021</u>](#condensed_consolidated_statements_compre) | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;[<u>Unaudited Condensed Consolidated Statements of Equity for the Three Months Ended November 30, 2022 and 2021</u>](#condensed_consolidated_statements_equity) | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;[<u>Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended November 30, 2022 and 2021</u>](#condensed_consolidated_statements_of_cf) | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;[<u>Notes to the Unaudited Condensed Consolidated Financial Statements</u>](#notes_to_consolidated) | 10 |
| [<u>Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations</u>](#item_2_managements_discussion_analysis_f) | 23 |
| [<u>Item 3. Quantitative and Qualitative Disclosures about Market Risk</u>](#item_3_quantitative_qualitative_disclosu) | 37 |
| [<u>Item 4. Controls and Procedures</u>](#item_4_controls_procedures) | 38 |
| [<u>PART II. OTHER INFORMATION</u>](#part_ii_or_information) |  |
| [<u>Item 1. Legal Proceedings</u>](#item_1_legal_proceedings) | 39 |
| [<u>Item 1A. Risk Factors</u>](#item_1a_risk_factors) | 39 |
| [<u>Item 5. Other Information</u>](#item_5_other_information) | 39 |
| [<u>Item 6. Exhibits</u>](#item_6_exhibits) | 40 |
| [<u>SIGNATURES</u>](#signatures) | 41 |

---

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[<u>**Table of Contents**</u>](#toc_page)

**FORWARD-LOOKING STATEMENTS**

**Statements and information included in this Quarterly Report on Form 10-Q by Schnitzer Steel Industries, Inc. that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Except as noted herein or as the context may otherwise require, all references to "we," "our," "us," "the Company," and "SSI" refer to Schnitzer Steel Industries, Inc. and its consolidated subsidiaries.**

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

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

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

------

[<u>**Table of Contents**</u>](#toc_page)

**PART I. FINANCIAL INFORMATION**

**ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)**

**SCHNITZER STEEL INDUSTRIES, INC.**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

(Unaudited, in thousands, except per share amounts)

(Currency - U.S. Dollar)

---

| | | |
|:---|:---|:---|
|  | **November 30, 2022** | **August 31, 2022** |
| **Assets** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents | $3539 | $43803 |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net of allowance for credit losses of $1,531<br> and $1,566 | 218189 | 237654 |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventories | 345198 | 315189 |
| &nbsp;&nbsp;&nbsp;&nbsp;Refundable income taxes | 1642 | 1696 |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 65996 | 73044 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 634564 | 671386 |
| Property, plant and equipment, net of accumulated depreciation of $867,979 and $855,032 | 682738 | 664120 |
| Operating lease right-of-use assets | 117806 | 122413 |
| Investments in joint ventures | 11246 | 12841 |
| Goodwill | 270349 | 255198 |
| Intangibles, net of accumulated amortization of $8,281 and $7,256 | 35440 | 26155 |
| Deferred income taxes | 23105 | 24598 |
| Other assets | 47371 | 49886 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $1822619 | $1826597 |
| **Liabilities and Equity** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Short-term borrowings | $6379 | $6041 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 185170 | 217689 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued payroll and related liabilities | 30581 | 59702 |
| &nbsp;&nbsp;&nbsp;&nbsp;Environmental liabilities | 10919 | 13031 |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating lease liabilities | 21538 | 21660 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued income taxes | 4190 | 3856 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other accrued liabilities | 50230 | 59594 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 309007 | 381573 |
| Deferred income taxes | 57028 | 63328 |
| Long-term debt, net of current maturities | 351200 | 242521 |
| Environmental liabilities, net of current portion | 55066 | 55469 |
| Operating lease liabilities, net of current maturities | 97536 | 101651 |
| Other long-term liabilities | 24278 | 23581 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 894115 | 868123 |
| Commitments and contingencies (Note 5) |  |  |
| Schnitzer Steel Industries, Inc. ("SSI") shareholders' equity: |  |  |
| &nbsp;&nbsp;&nbsp;Preferred stock – 20,000 shares $1.00 par value authorized, none issued |  |  |
| &nbsp;&nbsp;&nbsp;Class A common stock – 75,000 shares $1.00 par value authorized,<br> 27,165 and 26,747 shares issued and outstanding | 27165 | 26747 |
| &nbsp;&nbsp;&nbsp;Class B common stock – 25,000 shares $1.00 par value authorized,<br> 200 and 200 shares issued and outstanding | 200 | 200 |
| &nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in capital | 18582 | 22975 |
| &nbsp;&nbsp;&nbsp;&nbsp;Retained earnings | 918094 | 941146 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive loss | (39302) | (37089) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total SSI shareholders' equity | 924739 | 953979 |
| Noncontrolling interests | 3765 | 4495 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total equity | 928504 | 958474 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and equity | $1822619 | $1826597 |

---

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

------

[<u>**Table of Contents**</u>](#toc_page)

**SCHNITZER STEEL INDUSTRIES, INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

(Unaudited, in thousands, except per share amounts)

(Currency - U.S. Dollar)

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended November 30,** | **Three Months Ended November 30,** |
|  | **2022** | **2021** |
| Revenues | $598730 | $798118 |
| Operating expense: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cost of goods sold | 550011 | 683244 |
| &nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative | 64228 | 55267 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Income) from joint ventures | (790) | (236) |
| &nbsp;&nbsp;&nbsp;&nbsp;Restructuring charges and other exit-related activities | 1592 | 22 |
| Operating (loss) income | (16311) | 59821 |
| Interest expense | (3324) | (1372) |
| Other loss, net | (3884) | (47) |
| (Loss) income from continuing operations before income taxes | (23519) | 58402 |
| Income tax benefit (expense) | 6032 | (11097) |
| (Loss) income from continuing operations | (17487) | 47305 |
| Loss from discontinued operations, net of tax | (69) | (29) |
| Net (loss) income | (17556) | 47276 |
| Net income attributable to noncontrolling interests | (232) | (1077) |
| Net (loss) income attributable to SSI shareholders | $(17788) | $46199 |
| Net (loss) income per share attributable to SSI shareholders: |  |  |
| Basic: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Loss) income per share from continuing operations | $(0.64) | $1.64 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net (loss) income per share | $(0.64) | $1.64 |
| Diluted: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Loss) income per share from continuing operations | $(0.64) | $1.55 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net (loss) income per share | $(0.64) | $1.55 |
| Weighted average number of common shares: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic | 27723 | 28159 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted | 27723 | 29885 |

---

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

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[<u>**Table of Contents**</u>](#toc_page)

**SCHNITZER STEEL INDUSTRIES, INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME**

(Unaudited, in thousands)

(Currency - U.S. Dollar)

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended November 30,** | **Three Months Ended November 30,** |
|  | **2022** | **2021** |
| Net (loss) income | $(17556) | $47276 |
| Other comprehensive (loss) income, net of tax: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Foreign currency translation adjustments | (2246) | (1115) |
| &nbsp;&nbsp;&nbsp;&nbsp;Pension obligations, net | 33 | 390 |
| Total other comprehensive loss, net of tax | (2213) | (725) |
| Comprehensive (loss) income | (19769) | 46551 |
| &nbsp;&nbsp;&nbsp;&nbsp;Less comprehensive income attributable to noncontrolling interests | (232) | (1077) |
| Comprehensive (loss) income attributable to SSI shareholders | $(20001) | $45474 |

---

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

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[<u>**Table of Contents**</u>](#toc_page)

**SCHNITZER STEEL INDUSTRIES, INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF EQUITY**

(Unaudited, in thousands, except per share amounts)

(Currency - U.S. Dollar)

---

| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Common Stock** | **Common Stock** | **Common Stock** | **Common Stock** |  |  | **Accumulated** |  |  |  |
|  | **Class A** | **Class A** | **Class B** | **Class B** | **Additional** |  | **Other** | **Total SSI** |  |  |
| **Three Months Ended November 30, 2021** | **Shares** | **Amount** | **Shares** | **Amount** | **Paid-in <br>Capital** | **Retained <br>Earnings** | **Comprehensive<br>Loss** | **Shareholders'<br>Equity** | **Noncontrolling<br>Interests** | **Total <br>Equity** |
| Balance as of September 1, 2021 | 27332 | $27332 | 200 | $200 | $49074 | $793712 | $(34554) | $835764 | $4015 | $839779 |
| Net income |  |  |  |  |  | 46199 |  | 46199 | 1077 | 47276 |
| Other comprehensive loss, net of tax |  |  |  |  |  |  | (725) | (725) |  | (725) |
| Distributions to noncontrolling interests |  |  |  |  |  |  |  |  | (1026) | (1026) |
| Issuance of restricted stock | 470 | 470 |  |  | (470) |  |  |  |  |  |
| Restricted stock withheld for taxes | (178) | (178) |  |  | (9399) |  |  | (9577) |  | (9577) |
| Share-based compensation cost |  |  |  |  | 4436 |  |  | 4436 |  | 4436 |
| Dividends ($0.1875 per common share) |  |  |  |  |  | (5407) |  | (5407) |  | (5407) |
| Balance as of November 30, 2021 | 27624 | $27624 | 200 | $200 | $43641 | $834504 | $(35279) | $870690 | $4066 | $874756 |

---

---

| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Common Stock** | **Common Stock** | **Common Stock** | **Common Stock** |  |  | **Accumulated** |  |  |  |
|  | **Class A** | **Class A** | **Class B** | **Class B** | **Additional** |  | **Other** | **Total SSI** |  |  |
| **Three Months Ended November 30, 2022** | **Shares** | **Amount** | **Shares** | **Amount** | **Paid-in<br>Capital** | **Retained<br>Earnings** | **Comprehensive<br>Loss** | **Shareholders'<br>Equity** | **Noncontrolling<br>Interests** | **Total<br>Equity** |
| Balance as of September 1, 2022 | 26747 | $26747 | 200 | $200 | $22975 | $941146 | $(37089) | $953979 | $4495 | $958474 |
| Net (loss) income |  |  |  |  |  | (17788) |  | (17788) | 232 | (17556) |
| Other comprehensive loss, net of tax |  |  |  |  |  |  | (2213) | (2213) |  | (2213) |
| Distributions to noncontrolling interests |  |  |  |  |  |  |  |  | (962) | (962) |
| Issuance of restricted stock | 672 | 672 |  |  | (672) |  |  |  |  |  |
| Restricted stock withheld for taxes | (254) | (254) |  |  | (6553) |  |  | (6807) |  | (6807) |
| Share-based compensation cost |  |  |  |  | 2832 |  |  | 2832 |  | 2832 |
| Dividends ($0.1875 per common share) |  |  |  |  |  | (5264) |  | (5264) |  | (5264) |
| Balance as of November 30, 2022 | 27165 | $27165 | 200 | $200 | $18582 | $918094 | $(39302) | $924739 | $3765 | $928504 |

---

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

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[<u>**Table of Contents**</u>](#toc_page)

**SCHNITZER STEEL INDUSTRIES, INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

(Unaudited, in thousands)

(Currency - U.S. Dollar)

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended November 30,** | **Three Months Ended November 30,** |
|  | **2022** | **2021** |
| Cash flows from operating activities: |  |  |
| Net (loss) income | $(17556) | $47276 |
| Adjustments to reconcile net (loss) income to cash provided by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Asset impairment charges | 4000 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Exit-related asset impairments | 143 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 21451 | 17220 |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventory write-downs | 575 | 192 |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes | (5741) | 11227 |
| &nbsp;&nbsp;&nbsp;&nbsp;Undistributed equity in earnings of joint ventures | (790) | (236) |
| &nbsp;&nbsp;&nbsp;&nbsp;Share-based compensation expense | 2816 | 4392 |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss on disposal of assets, net | 300 | 307 |
| &nbsp;&nbsp;&nbsp;&nbsp;Unrealized foreign exchange loss (gain), net | 141 | (10) |
| &nbsp;&nbsp;&nbsp;&nbsp;Credit loss, net | (18) | (4) |
| Changes in assets and liabilities, net of acquisitions: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | 16925 | (68490) |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventories | (27846) | (45581) |
| &nbsp;&nbsp;&nbsp;&nbsp;Income taxes | (293) | (59) |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 1839 | 546 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other long-term assets | (1212) | (488) |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating lease assets and liabilities | 313 | (337) |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | (18692) | 20509 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued payroll and related liabilities | (28902) | (38642) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other accrued liabilities | (8709) | 21327 |
| &nbsp;&nbsp;&nbsp;&nbsp;Environmental liabilities | (2452) | (3628) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other long-term liabilities | 1556 | 210 |
| Net cash used in operating activities | (62152) | (34269) |
| Cash flows from investing activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Capital expenditures | (47520) | (39719) |
| &nbsp;&nbsp;&nbsp;&nbsp;Acquisitions, net of acquired cash | (26902) | (113939) |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from insurance and sale of assets | 2219 | 10643 |
| Net cash used in investing activities | (72203) | (143015) |
| Cash flows from financing activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Borrowings from long-term debt | 186356 | 271091 |
| &nbsp;&nbsp;&nbsp;&nbsp;Repayment of long-term debt | (78781) | (86314) |
| &nbsp;&nbsp;&nbsp;&nbsp;Payment of debt issuance costs | (135) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Taxes paid related to net share settlement of share-based payment awards | (6807) | (9577) |
| &nbsp;&nbsp;&nbsp;&nbsp;Distributions to noncontrolling interests | (962) | (1026) |
| &nbsp;&nbsp;&nbsp;&nbsp;Dividends paid | (5540) | (5568) |
| Net cash provided by financing activities | 94131 | 168606 |
| Effect of exchange rate changes on cash | (40) | (59) |
| Net decrease in cash and cash equivalents | (40264) | (8737) |
| Cash and cash equivalents as of beginning of period | 43803 | 27818 |
| Cash and cash equivalents as of end of period | $3539 | $19081 |

---

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

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[<u>**Table of Contents**</u>](#table_contents)

**SCHNITZER STEEL INDUSTRIES, INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

(Unaudited, in thousands)

(Currency - U.S. Dollar)

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended November 30,** | **Three Months Ended November 30,** |
|  | **2022** | **2021** |
| SUPPLEMENTAL DISCLOSURES: |  |  |
| Cash paid during the period for: |  |  |
| &nbsp;&nbsp;&nbsp;Interest | $2703 | $611 |
| &nbsp;&nbsp;&nbsp;Income taxes (refunded), net | $(16) | $(80) |
| Schedule of noncash investing and financing transactions: |  |  |
| &nbsp;&nbsp;&nbsp;Purchases of property, plant and equipment included in liabilities | $17134 | $12417 |

---

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

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[<u>**Table of Contents**</u>](#toc_page)

SCHNITZER STEEL INDUSTRIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

**Note 1 - Summary of Significant Accounting Policies** 

**Basis of Presentation** 

The accompanying Unaudited Condensed Consolidated Financial Statements of Schnitzer Steel Industries, Inc. and its majority-owned and wholly-owned subsidiaries (the "Company") have been prepared pursuant to generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information and the rules and regulations of the United States Securities and Exchange Commission (the "SEC") for Form 10-Q, including Article 10 of Regulation S-X. The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. Certain information and note disclosures normally included in annual financial statements have been condensed or omitted pursuant to the rules and regulations of the SEC. In the opinion of management, all normal, recurring adjustments considered necessary for a fair statement have been included. Management suggests that these Unaudited Condensed Consolidated Financial Statements be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2022. The results for the three months ended November 30, 2022 and 2021 are not necessarily indicative of the results of operations for the entire fiscal year.

**Segment Reporting**

The Company acquires and recycles ferrous and nonferrous scrap metal for sale to foreign and domestic metal producers, processors, and brokers, and it procures salvaged vehicles and sells serviceable used auto parts from these vehicles through a network of self-service auto parts stores. Most of these auto parts stores supply the Company's shredding facilities with auto bodies that are processed into saleable recycled metal products. In addition to the sale of recycled metal products processed at its facilities, the Company provides a variety of recycling and related services. The Company also produces a range of finished steel long products at its electric arc furnace ("EAF") steel mill using recycled ferrous metal sourced internally from its recycling and joint venture operations and other raw materials.

The accounting standards for reporting information about operating segments define an operating segment as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses for which discrete financial information is available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance. The Company's internal organizational and reporting structure reflects a functionally based, integrated model and includes a single operating and reportable segment.

**Cash and Cash Equivalents**

Cash and cash equivalents include short-term securities that are not restricted by third parties and have an original maturity date of 90 days or less. Included in accounts payable are book overdrafts representing outstanding checks in excess of funds on deposit of $52 million and $56 million as of November 30, 2022 and August 31, 2022, respectively.

**Accounts Receivable, net**

Accounts receivable represent amounts primarily due from customers on product and other sales. These accounts receivable, which are reduced by an allowance for credit losses, are recorded at the invoiced amount and do not bear interest. The Company extends credit to customers under contracts containing customary and explicit payment terms, and payment is generally required within 30 to 60 days of shipment. Nonferrous export sales typically require a deposit prior to shipment. Historically, almost all of the Company's ferrous export sales have been made with letters of credit. Ferrous and nonferrous metal sales to domestic customers and finished steel sales are generally made on open account, and a portion of these sales are covered by credit insurance.

The Company evaluates the collectibility of its accounts receivable based on a combination of factors, including whether sales were made pursuant to letters of credit or required deposits prior to shipment, the aging of customer receivable balances, the financial condition of the Company's customers, historical collection rates, and economic trends. Management uses this evaluation to estimate the amount of customer receivables that may not be collected in the future and records a provision for expected credit losses. Accounts are written off when all efforts to collect have been exhausted.

Also included in accounts receivable are short-term advances to scrap metal suppliers used as a mechanism to acquire unprocessed scrap metal. The advances are generally repaid with scrap metal, as opposed to cash. Repayments of advances with scrap metal are treated as noncash operating activities in the Unaudited Condensed Consolidated Statements of Cash Flows and totaled $3 million for each of the three months ended November 30, 2022 and 2021.

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[<u>**Table of Contents**</u>](#table_contents)

SCHNITZER STEEL INDUSTRIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

**Prepaid Expenses**

The Company's prepaid expenses, reported within prepaid expenses and other current assets in the Unaudited Condensed Consolidated Balance Sheets, totaled $36 million and $43 million as of November 30, 2022 and August 31, 2022, respectively, and consisted primarily of deposits on capital projects, prepaid services, prepaid insurance, and prepaid property taxes.

**Other Assets**

The Company's other assets, exclusive of prepaid expenses and assets relating to certain employee benefit plans, consisted primarily of receivables from insurers, capitalized implementation costs for cloud computing arrangements, cash held in a client trust account relating to a legal settlement, two equity investments, major spare parts and equipment, debt issuance costs, and notes and other contractual receivables. Other assets are reported within either prepaid expenses and other current assets or other assets in the Unaudited Condensed Consolidated Balance Sheets based on their expected use either during or beyond the current operating cycle of one year from the reporting date.

Receivables from insurers represent the portion of insured losses expected to be recovered from the Company's insurers. The receivable is recorded at an amount not to exceed the recorded loss and only if the terms of legally enforceable insurance contracts support that the insurance recovery will not be disputed and is deemed collectible. Receivables from insurers totaled $27 million and $28 million as of November 30, 2022 and August 31, 2022, respectively. As of November 30, 2022, receivables from insurers comprised primarily $10 million relating to property loss and damage and other claims in connection with the December 2021 fire at the Company's shredder facility in Everett, Massachusetts, $6 million relating to environmental claims, $6 million relating to third-party claims, and $4 million relating to workers' compensation claims. As of August 31, 2022, receivables from insurers comprised primarily $10 million relating to property loss and damage and other claims in connection with the December 2021 fire at the Company's shredder facility in Everett, Massachusetts, $7 million relating to environmental claims, $6 million relating to third-party claims, and $4 million relating to workers' compensation claims. See "Accounting for Impacts of Involuntary Events" below in this Note for further discussion of receivables and advance payments from insurers relating to property damage and business interruption claims.

Other assets as of each of November 30, 2022 and August 31, 2022 also included approximately $7 million in connection with cash deposited into a client trust account in the second quarter of fiscal 2021 to fund the remediation of a site, a portion of which was previously leased to and operated by an indirect, wholly-owned subsidiary. The cash was deposited into the client trust account by other potentially liable parties in connection with settlement of a lawsuit relating to allocation of the remediation costs, including agreement by the Company's subsidiary to perform certain remedial actions. See "Other Legacy Environmental Loss Contingencies" within "Contingencies – Environmental" in Note 5 - Commitments and Contingencies for further discussion of this matter.

The Company invested $6 million in the equity of a privately-held U.S. waste and recycling entity in fiscal 2017, and in May 2022, the Company invested $5 million in the equity of an unrelated privately-held Canadian recycling technology entity. In August 2022, the privately-held U.S. waste and recycling entity merged with a publicly-traded U.S. entity. As a result of the merger, the Company's investment is held in equity units of a subsidiary of the publicly-traded entity, which equity units are not publicly traded but are exchangeable for shares of the publicly traded entity. The timing and magnitude of exchange is solely at the discretion of the publicly traded entity. The Company's influence over the operating and financial policies of each entity is not significant, and, thus, the investments are accounted for under the guidance for investments in equity securities. The equity investments do not have readily determinable fair values and, therefore, are carried at cost and adjusted for impairments and observable price changes. In the first quarter of fiscal 2023, the Company identified an impairment indicator for its investment in the U.S. waste and recycling entity and, based on its fair value measurement incorporating observable trading prices of the publicly-traded entity and unobservable inputs, recognized a $4 million impairment in other loss, net on the Unaudited Condensed Consolidated Statement of Operations. The Company has not recorded any impairments or upward or downward adjustments to the carrying value of its investment in the Canadian recycling technology entity since its acquisition. Both investments are reported within other assets in the Unaudited Condensed Consolidated Balance Sheets. As of November 30, 2022 and August 31, 2022, the aggregate carrying value of the investments was $7 million and $11 million, respectively.

**Accounting for Impacts of Involuntary Events**

Assets destroyed or damaged as a result of involuntary events are written off or reduced in carrying value to their salvage value. When recovery of all or a portion of the amount of property damage loss or other covered expenses through insurance proceeds is demonstrated to be probable, a receivable is recorded and offsets the loss or expense up to the amount of the total loss or expense. No gain is recorded until all contingencies related to the insurance claim have been resolved.

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[<u>**Table of Contents**</u>](#table_contents)

SCHNITZER STEEL INDUSTRIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On May 22, 2021, the Company experienced a fire at its steel mill in McMinnville, Oregon. Direct physical loss or damage to property from the incident was limited to the mill's melt shop, with no bodily injuries and no physical loss or damage to other buildings or equipment. As a result of the fire, the rolling mill production ceased in early June 2021. In August 2021, the steel mill began ramping up operations following the substantial completion of replacement and repairs of property and equipment in the melt shop that had been lost or damaged by the fire. The Company experienced the loss of business income during the shutdown of the steel mill and the subsequent ramp-up phase, which was substantially completed during the second quarter of fiscal 2022. The Company filed initial insurance claims for the physical loss and damage experienced at the mill's melt shop and business income losses resulting from the matter. As of August 31, 2021, prepaid expenses and other current assets included an initial $10 million insurance receivable recognized in fiscal 2021, primarily offsetting applicable losses including capital purchases of $10 million that had been incurred by the Company as of August 31, 2021. In fiscal 2022, the Company increased the amount of this insurance receivable to $25 million and recognized a related $15 million insurance recovery gain within cost of goods sold, $3 million of which was recognized in the first quarter of fiscal 2022 and included within the Unaudited Condensed Consolidated Statements of Operations, reflecting recovery of applicable losses incurred as a result of the fire to date. In addition, during fiscal 2022, the Company received advance payments from insurers totaling approximately $30 million towards the Company's 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 November 30, 2022 and August 31, 2022.

On December 8, 2021, the Company experienced a fire at its metals recycling facility in Everett, Massachusetts. Direct physical loss or damage to property from the incident was limited to the facility's shredder building and equipment, with no bodily injuries and no physical loss or damage to property reported at other buildings or equipment. As a result of the fire, shredding operations ceased, while all non-shredding operations at the facility continued, including torching, shearing, separating, and sorting purchased non-shreddable recycled ferrous metals. On January 28, 2022, shredding operations at the facility began ramping up following the replacement and repairs to shredder equipment that had been damaged. Completion of the remainder of repair and replacement of property that experienced physical loss or damage, primarily buildings and improvements, will occur over a longer period and impacts on business income may continue. In addition, shredding operations temporarily ceased at the facility on June 18, 2022 and, following discussions with the Massachusetts Department of Environmental Protection and the Massachusetts Attorney General's office, the Company installed a temporary emission capture system and controls that allowed for the resumption of shredding operations on November 11, 2022 and for continued operation during the repair and replacement of the shredder enclosure building. Non-shredding operations at the facility continued during this period. The Company filed initial insurance claims for the property that experienced physical loss or damage and anticipated business income losses resulting from the matter. In fiscal 2022, after the fire, the Company recognized an aggregate $17 million insurance receivable and related insurance recovery gain, reported within prepaid expenses and other current assets and cost of goods sold, respectively, reflecting recovery of costs including impairment charges of $7 million related to the carrying value of plant and equipment assets lost in or damaged by the fire and initial capital purchases, non-capitalizable repair and replacement costs, and other applicable losses totaling $10 million that had been incurred by the Company as of August 31, 2022. Also, during fiscal 2022, the Company received advance payments from insurers totaling approximately $7 million towards the Company's claims, and not reflecting any final or full settlement of claims with the insurers, which amount reduced the insurance receivable to $10 million as of November 30, 2022 and August 31, 2022.

**Investments in Joint Ventures**

As of August 31, 2022, the Company had two 50%-owned joint venture interests which were accounted for under the equity method of accounting. On November 7, 2022, the Company sold its ownership interest in one of the 50%-owned joint ventures for approximately $2 million. No gain or loss was recognized as a result of the sale.

**Business Acquisitions**

The Company recognizes the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date. Contingent purchase consideration is recorded at fair value at the date of acquisition. Any excess purchase price over the fair value of the net assets acquired is recorded as goodwill. Within one year from the date of acquisition, the Company may update the value allocated to the assets acquired and liabilities assumed and the resulting goodwill balance as a result of information received regarding the valuation of such assets and liabilities that was not available at the time of purchase. Measuring assets and liabilities at fair value requires the Company to determine the price that would be paid by a third-party market participant based on the highest and best use of the assets or interests acquired. Acquisition costs are expensed as incurred. See Note 3 - Business Acquisitions for further detail.

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[<u>**Table of Contents**</u>](#table_contents)

SCHNITZER STEEL INDUSTRIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

**Concentration of Credit Risk**

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. The majority of cash and cash equivalents is maintained with major financial institutions. Balances with these and certain other institutions exceeded the Federal Deposit Insurance Corporation insured amount of $250 thousand as of November 30, 2022. Concentration of credit risk with respect to accounts receivable is limited because a large number of geographically diverse customers make up the Company's customer base. The Company controls credit risk through credit approvals, credit limits, credit insurance, letters of credit or other collateral, cash deposits, and monitoring procedures.

**Recent Accounting Pronouncements** 

The Company does not expect that its adoption in the future of any recently issued accounting pronouncements will have a material impact on its consolidated financial statements.

**Note 2 - Inventories** 

Inventories consisted of the following (in thousands):

---

| | | |
|:---|:---|:---|
|  | **November 30, 2022** | **August 31, 2022** |
| Processed and unprocessed scrap metal | $203432 | $166368 |
| Semi-finished goods | 12706 | 20009 |
| Finished goods | 69848 | 72625 |
| Supplies | 59212 | 56187 |
| Inventories | $345198 | $315189 |

---

**Note 3 - Business Acquisitions**

**Fiscal 2023 Business Acquisition**

On November 18, 2022, the Company used cash on hand and borrowings under existing credit facilities to acquire the operating assets of ScrapSource, a recycling services company that provides solutions for industrial companies that generate scrap metal from their manufacturing process. The acquired business expands the Company's national recycling services operations, giving rise to expected benefits supporting the amount of acquired goodwill. 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 total purchase consideration was approximately $25 million. As of the date of this report, measurement of the fair values of assets acquired and liabilities assumed is still preliminary and subject to change based on the completion of valuation procedures.

The following table summarizes the provisional fair values of assets acquired and liabilities assumed by the Company as of the November 18, 2022 acquisition date (in thousands):

---

| | |
|:---|:---|
| Operating lease right-of-use assets | $466 |
| Goodwill(1) | 14759 |
| Other intangible assets(2) | 10310 |
| &nbsp;&nbsp;&nbsp;Total assets acquired | 25535 |
| Operating lease liability | 466 |
| &nbsp;&nbsp;&nbsp;Total liabilities assumed | 466 |
| Net assets acquired | $25069 |

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(1)All of the provisional amount of acquired goodwill is tax deductible.

(2)Acquired other intangible assets comprise supplier relationships, customer relationships, and non-compete agreements with estimated useful lives of 5 to 6 years.

The results of operations for the acquired ScrapSource business beginning as of the November 18, 2022 acquisition date are included in the accompanying financial statements. For the three months ended November 30, 2022, the revenues and net income contributed by the acquired ScrapSource business and reported in the Unaudited Condensed Consolidated Statements of Operations were not material to the financial statements taken as a whole.

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[<u>**Table of Contents**</u>](#table_contents)

SCHNITZER STEEL INDUSTRIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

**Fiscal 2022 Business Acquisitions**

On October 1, 2021, the Company completed the acquisition of eight metals recycling facilities across Mississippi, Tennessee, and Kentucky from Columbus Recycling, a provider of recycled ferrous and nonferrous metal products and recycling services. The total purchase consideration of $117 million was allocated to the assets acquired and liabilities assumed based on their respective estimated fair values on the date of the acquisition. The $65 million excess of the total purchase consideration over the fair value of the identifiable net assets acquired was recorded as 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.

On April 29, 2022, the Company completed the acquisition of two 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 total purchase consideration of $64 million was allocated to the assets acquired and liabilities assumed based on their respective estimated fair values on the date of the acquisition. The $21 million excess of the total purchase consideration over the fair value of the identifiable net assets acquired was recorded as goodwill. 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.

**Unaudited Pro Forma Information**

The following unaudited pro forma information presents the effect on the consolidated financial results of the Company of the Columbus Recycling and Encore Recycling businesses acquired during fiscal 2022 as though the businesses had been acquired as of the beginning of fiscal 2021 (in thousands):

---

| | |
|:---|:---|
|  | **Three Months Ended November 30,** |
|  | **2021** |
| Revenues | $840500 |
| Net income | $53000 |
| Net income attributable to SSI shareholders | $51500 |

---

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

For each of the three months ended November 30, 2022 and 2021, the unaudited pro forma amounts of revenues and net income of the acquired ScrapSource business were not material to the financial statements taken as a whole and, therefore, are not included in the unaudited pro forma information presented above.

The information included in the unaudited pro forma amounts is derived from historical information obtained from the sellers of the businesses. These unaudited pro forma results are not necessarily indicative of what actual results would have been had these acquisitions occurred as of the beginning of fiscal 2021. In addition, the unaudited 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 4 - Goodwill**

The Company evaluates goodwill for impairment annually on July 1 and upon the occurrence of certain triggering events or substantive changes in circumstances that indicate that the fair value of goodwill may be impaired. There were no triggering events identified during the first three months of fiscal 2023 requiring an interim goodwill impairment test, and the Company did not record a goodwill impairment charge in any of the periods presented.

Impairment of goodwill is tested at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment (referred to as a "component"). A component of an operating segment is required to be identified as a reporting unit if the component is a business for which discrete financial information is available and segment management regularly reviews its operating results. The Company most recently performed the quantitative impairment test for goodwill carried by two of its reporting units, consisting of a regional metals recycling operation and its network of auto parts stores, as of July 1, 2022. For the metals recycling and autos reporting units subject to the quantitative impairment test, the estimated fair value of the reporting unit exceeded its carrying amount by approximately 32% and 44%, respectively, as of July 1, 2022.

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[<u>**Table of Contents**</u>](#table_contents)

SCHNITZER STEEL INDUSTRIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The determination of fair value of the reporting units used to perform the impairment test requires judgment and involves significant estimates and assumptions about the expected future cash flows and the impact of market conditions on those assumptions. Future events and changing market conditions may impact management's assumptions used to estimate the reporting units' fair value. Although the Company believes the assumptions used in testing its reporting units' goodwill for impairment are reasonable, a lack of recovery or further deterioration in market conditions from current levels, a trend of weaker than anticipated financial performance for the reporting units with allocated goodwill, a decline in the Company's share price from current levels for a sustained period of time, or an increase in the weighted average cost of capital, among other factors, could significantly impact the Company's impairment analysis and may result in future goodwill impairment charges that, if incurred, could have a material adverse effect on its financial condition and results of operations.

The gross change in the carrying amount of goodwill for the three months ended November 30, 2022 was as follows (in thousands):

---

| | |
|:---|:---|
|  | **Goodwill** |
| August 31, 2022 | $255198 |
| Additions(1) | 14759 |
| Measurement period adjustments(2) | 805 |
| Foreign currency translation adjustment | (413) |
| November 30, 2022 | $270349 |

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(1)Additions to goodwill relate entirely to the ScrapSource business acquired on November 18, 2022. See Note 3 - Business Acquisitions.

(2)Measurement period adjustments relate to the acquired Encore Recycling business.

**Note 5 - Commitments and Contingencies**

**Contingencies - Environmental**

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

Changes in the Company's environmental liabilities for the three months ended November 30, 2022 were as follows (in thousands):

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Balance as of<br>September 1, 2022** | **Liabilities<br>Established<br>(Released), Net** | **Payments and<br>Other** | **Balance as of<br>November 30, 2022** | **Short-Term** | **Long-Term** |
| $68500 | $920 | $(3435) | $65985 | $10919 | $55066 |

---

As of November 30, 2022 and August 31, 2022, the Company had environmental liabilities of $66 million and $69 million, respectively, for the potential remediation of locations where it has conducted business or has environmental liabilities from historical or recent activities. These liabilities relate to the investigation and 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. Except for Portland Harbor and certain liabilities discussed under "Other Legacy Environmental Loss Contingencies" below, such liabilities were not individually material at any site.

<u>Portland Harbor</u>

In December 2000, the Company was notified by the United States Environmental Protection Agency ("EPA") under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") that it is one of the potentially responsible parties ("PRPs") that own or operate or formerly owned or operated sites which are part of or adjacent to the Portland Harbor Superfund site ("Portland Harbor").

The precise nature and extent of cleanup of any specific areas within Portland Harbor, the parties to be involved, the timing of any specific remedial action and the allocation of the costs for any cleanup among responsible parties have not yet been determined. The process of site investigation, remedy selection, identification of additional PRPs, and allocation of costs has been underway for a number of years, but significant uncertainties remain. It is unclear to what extent the Company will be liable for environmental costs or third-party contribution or damage claims with respect to Portland Harbor.

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[<u>**Table of Contents**</u>](#table_contents)

SCHNITZER STEEL INDUSTRIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

From 2000 to 2017, the EPA oversaw a remedial investigation/feasibility study ("RI/FS") at Portland Harbor. The Company was not among the parties that performed the RI/FS, but it contributed to the costs through an interim settlement with the performing parties. The performing parties have indicated that they incurred more than $155 million in that effort.

In January 2017, the EPA issued a Record of Decision ("ROD") that identified the selected remedy for Portland Harbor. The EPA has estimated the total cost of the selected remedy at $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 Portland Harbor. 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 three 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 Portland Harbor 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 new baseline 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 Portland Harbor 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 Portland Harbor. While certain PRPs executed consent agreements for remedial design work, because of the EPA's refusal to date to modify the remedy to reflect the most current data on Portland Harbor conditions and because of concerns with the terms of the consent agreement, the Company elected not to enter into a consent agreement. In April 2020, the EPA issued a unilateral administrative order ("UAO") to the Company and MMGL, LLC ("MMGL"), an unaffiliated company, for the remedial design work in a portion of Portland Harbor designated as the River Mile 3.5 East Project Area. As required by the UAO, the Company notified the EPA of its intent to comply while reserving all of its sufficient cause defenses. Failure to comply with a UAO, without sufficient cause, could subject the Company to significant penalties or treble damages. Pursuant to the optimized remedial design timeline set forth in the UAO, the EPA's expected schedule for completion of the remedial design work was four years. At the time it issued the UAO in April 2020, the EPA 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 Portland Harbor as between the respondents or with respect to any third party. As of November 30, 2022 and August 31, 2022, the Company had $3 million in environmental reserves related to this matter. The Company has insurance policies and a Qualified Settlement Fund ("QSF") pursuant to which the Company is being reimbursed for the costs it has incurred for remedial design. See further discussion of the QSF below in this Note. As of both November 30, 2022 and August 31, 2022, the Company had insurance and other receivables in the same amount as the environmental reserves for such remedial design work under the UAO. See "Other Assets" in Note 1 - Summary of Significant Accounting Policies for further discussion of insurance and other related receivables. 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, the EPA announced that 100 percent of Portland Harbor's areas requiring active cleanup are in the remedial design phase of the process.

Except for certain early action projects in which the Company is not involved, remediation activities at Portland Harbor are not expected to commence for a number of years. Moreover, those activities are expected to be sequenced, and the order and timing of such sequencing has not been determined. In addition, as noted above, the ROD does not determine the allocation of costs among PRPs.

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[<u>**Table of Contents**</u>](#table_contents)

SCHNITZER STEEL INDUSTRIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company has joined with approximately 100 other PRPs, including the RI/FS performing parties, in a voluntary process to establish an allocation of costs at Portland Harbor, including the costs incurred in the RI/FS, ongoing remedial design costs, and future remedial action costs. The Company expects the next major stage of the allocation process to proceed in parallel with the remedial design process.

In addition to the remedial action process overseen by the EPA, the Portland Harbor Natural Resource Trustee Council ("Trustee Council") is assessing natural resource damages at Portland Harbor. In 2008, the Trustee Council invited the Company and other PRPs to participate in funding and implementing the Natural Resource Injury Assessment for Portland Harbor. The Company and other participating PRPs ultimately agreed to fund the first two phases of the three-phase assessment, which included the development of the Natural Resource Damage Assessment Plan ("AP") and implementation of the AP to develop information sufficient to facilitate early settlements between the Trustee Council and Phase 2 participants and the identification of restoration projects to be funded by the settlements. In late May 2018, the Trustee Council published notice of its intent to proceed with Phase 3, which will involve the full implementation of the AP and the final injury and damage determination. The Company is proceeding with the process established by the Trustee Council regarding early settlements under Phase 2. The Company has established an environmental reserve of approximately $2.3 million for this alleged natural resource damages liability as it continues to work with the Trustee Council to finalize an early settlement. As of each of November 30, 2022 and August 31, 2022, the Company had a receivable in the same amount as the environmental reserve. See "Other Assets" in Note 1 - Summary of Significant Accounting Policies for further discussion of insurance and other related receivables.

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 Portland Harbor and recovery of assessment costs related to natural resources damages from releases at and from Portland Harbor 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.

The Company's environmental liabilities as of each of November 30, 2022 and August 31, 2022 included $6 million relating to the Portland Harbor matters described above.

Because the final remedial actions have not yet been designed and there has not been a determination of the allocation among the PRPs of costs of the investigations or remedial action costs, the Company believes it is not possible to reasonably estimate the amount or range of costs which it is likely to or which it is reasonably possible that it will incur in connection with Portland Harbor, although such costs could be material to the Company's financial position, results of operations, cash flows, and liquidity. Among the facts being evaluated are detailed information on the history of ownership of and the nature of the uses of and activities and operations performed on each property within Portland Harbor, which are factors that will play a substantial role in determining the allocation of investigation and remedy costs among the PRPs.

The Company has insurance policies that it believes will provide reimbursement for costs it incurs for defense, remedial design, remedial action, and mitigation for or settlement of natural resource damages claims in connection with Portland Harbor. Most of these policies jointly insure the Company and MMGL, as the successor to a former subsidiary of the Company. The Company and MMGL have negotiated the settlement with certain insurers of claims against them related to Portland Harbor, continue to seek settlements with other insurers, and formed a QSF which became operative in 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 Portland Harbor. 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.

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[<u>**Table of Contents**</u>](#table_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 investigations for any other sites because the extent of contamination, required source control work, and the Company's responsibility for the contamination and source control work, in each case if any, have not yet been determined. 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 November 30, 2022 and August 31, 2022, the Company had an insurance receivable in the same amount as the environmental reserve for such source control work.

<u>Other Legacy Environmental Loss Contingencies</u>

The Company's environmental loss contingencies as of November 30, 2022 and August 31, 2022, other than Portland Harbor, include actual or possible investigation and remediation costs from historical contamination at sites currently or formerly owned or formerly operated by the Company or at other sites where the Company may have responsibility for such costs due to past disposal or other activities ("legacy environmental loss contingencies"). These legacy environmental loss contingencies relate to the potential remediation of waterways and soil and groundwater contamination and may also involve natural resource damages, governmental fines and penalties, and claims by third parties for personal injury and property damage. The Company has been notified that it is or may be a potentially responsible party at certain of these sites, and investigation and remediation activities are ongoing or may be required in the future. The Company recognizes a liability for such matters when the loss is probable and can be reasonably estimated. When investigation, allocation, and remediation activities are ongoing or where the Company has not yet been identified as having responsibility or the contamination has not yet been identified, it is reasonably possible that the Company may need to recognize additional liabilities in connection with such sites but the Company cannot currently reasonably estimate the possible loss or range of loss absent additional information or developments. Such additional liabilities, individually or in the aggregate, may have a material adverse effect on the Company's results of operations, financial condition, or cash flows.

In fiscal 2018, the Company accrued $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 each of November 30, 2022 and August 31, 2022, the Company had $4 million accrued for this matter. It is reasonably possible that the Company may recognize additional liabilities in connection with this matter at the time such losses are probable and can be reasonably estimated. The Company previously estimated a range of reasonably possible losses related to this matter in excess of current accruals at between zero and $28 million based on a range of remedial alternatives and subject to development and approval by regulators of specific remedy implementation plans. However, subsequent to the development of those remedial alternatives, the Company performed additional investigative activities under new state requirements that are likely to impact the required remedial actions and associated cost estimates, 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 November 30, 2022 and August 31, 2022 included $7 million and $8 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 and funding for wellhead treatment facilities. In the first quarter of fiscal 2023, the Company accrued an incremental $1 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's subsidiary has also been working with state and local officials with respect to the protection of public and private water supplies. 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. 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 plans for soil and groundwater conditions and completion and operation of the wellhead treatment facilities.

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[<u>**Table of Contents**</u>](#table_contents)

SCHNITZER STEEL INDUSTRIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In addition, the Company's loss contingencies as of each of November 30, 2022 and August 31, 2022 included $7 million 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 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 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.

**<u>Summary - Environmental Contingencies</u>**

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.

**Note 6 - Accumulated Other Comprehensive Loss**

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

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Three Months Ended November 30, 2022** | **Three Months Ended November 30, 2022** | **Three Months Ended November 30, 2022** | **Three Months Ended November 30, 2021** | **Three Months Ended November 30, 2021** | **Three Months Ended November 30, 2021** |
|  | **Foreign Currency<br>Translation<br>Adjustments** | **Pension Obligations,<br>Net** | **Total** | **Foreign Currency<br>Translation<br>Adjustments** | **Pension Obligations,<br>Net** | **Total** |
| Balances - September 1 (Beginning of period) | $(34679) | $(2410) | $(37089) | $(31609) | $(2945) | $(34554) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other comprehensive (loss) income before reclassifications | (2246) | (34) | (2280) | (1115) | 451 | (664) |
| &nbsp;&nbsp;&nbsp;&nbsp;Income tax benefit (expense) |  | 8 | 8 |  | (101) | (101) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other comprehensive (loss) income before reclassifications, net of tax | (2246) | (26) | (2272) | (1115) | 350 | (765) |
| &nbsp;&nbsp;&nbsp;&nbsp;Amounts reclassified from accumulated other comprehensive loss |  | 76 | 76 |  | 52 | 52 |
| &nbsp;&nbsp;&nbsp;&nbsp;Income tax benefit |  | (17) | (17) |  | (12) | (12) |
| &nbsp;&nbsp;&nbsp;&nbsp;Amounts reclassified from accumulated other comprehensive loss, net of tax |  | 59 | 59 |  | 40 | 40 |
| Net periodic other comprehensive (loss) income | (2246) | 33 | (2213) | (1115) | 390 | (725) |
| Balances - November 30 (End of period) | $(36925) | $(2377) | $(39302) | $(32724) | $(2555) | $(35279) |

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[<u>**Table of Contents**</u>](#table_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 in all periods presented.

**Note 7 - Revenue**

**Disaggregation of Revenues** 

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

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended November 30,** | **Three Months Ended November 30,** |
|  | **2022** | **2021** |
| Major product information: |  |  |
| &nbsp;&nbsp;&nbsp;Ferrous revenues | $261729 | $465856 |
| &nbsp;&nbsp;&nbsp;Nonferrous revenues | 177675 | 194429 |
| &nbsp;&nbsp;&nbsp;Steel revenues(1) | 124515 | 103238 |
| &nbsp;&nbsp;&nbsp;Retail and other revenues | 34811 | 34595 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenues | $598730 | $798118 |
| Revenues based on sales destination: |  |  |
| &nbsp;&nbsp;&nbsp;Foreign | $272684 | $471173 |
| &nbsp;&nbsp;&nbsp;Domestic | 326046 | 326945 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenues | $598730 | $798118 |

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(1)Steel revenues include predominantly sales of finished steel products, in addition to sales of 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 November 30, 2022 and August 31, 2022, receivables from contracts with customers, net of an allowance for credit losses, totaled $212 million and $230 million, respectively, representing 97% of total accounts receivable reported in the Unaudited Condensed Consolidated Balance 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 metal and finished steel sales contracts, are reported within accounts payable in the Unaudited Condensed Consolidated Balance Sheets and totaled $6 million and $8 million as of November 30, 2022 and August 31, 2022, 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. The substantial majority of outstanding contract liabilities are reclassified to revenues within three months of the reporting date as a result of satisfying performance obligations.

**Note 8 - Share-Based Compensation** 

In the first quarter of fiscal 2023, 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 213,080 restricted stock units ("RSUs") and 211,046 performance share awards to the Company's key employees and officers under the Company's 1993 Amended and Restated Stock Incentive Plan.

The RSUs have a five-year term and vest 20% per year commencing October 31, 2023. The aggregate fair value of all the RSUs granted was based on the market closing price of the underlying Class A common stock on the grant date and totaled $7 million. The compensation expense associated with the RSUs is recognized over the requisite service period of the awards, net of forfeitures, which for participants who were retirement eligible as of the grant date or who will become retirement eligible during the five-year term of the awards is the longer of two years or the period ending on the date retirement eligibility is achieved.

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[<u>**Table of Contents**</u>](#table_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 2023, the performance metrics are the Company's recycled metal volume growth and its return on capital employed ("ROCE"). Award share payouts depend on the extent to which the performance goals have been 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 an initial payout factor based on recycled metal volume growth and ROCE, which ranges from a threshold of 50% to a maximum of 200%. The final payout factor is then determined by applying the TSR modifier to the initial payout factor within a certain range, with a maximum increase or decrease of 20%.

Half of the performance share awards granted by the Company during the first quarter of fiscal 2023 were based on the Company's recycled metal volume growth metric and half were based on its ROCE metric, in each case subject to a TSR modifier with performance measured over a three-year period consisting of the Company's 2023, 2024, and 2025 fiscal years. The Company estimated the fair value of performance share awards granted in the first quarter of fiscal 2023 using a Monte-Carlo simulation model utilizing several key assumptions, including the following:

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| | |
|:---|:---|
|  | **Percentage** |
| Expected share price volatility (SSI) | 56.1% |
| Expected share price volatility (Peer group) | 60.5% |
| Expected correlation to peer group companies | 48.1% |
| Risk-free rate of return | 4.16% |

---

The estimated aggregate fair value of these performance share awards at the date of grant was $7 million. The Company accrues compensation cost for 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 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 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, 2025.

**Note 9 - Income Taxes**

**Effective Tax Rate** 

The Company's effective tax rate from continuing operations for the first quarter of fiscal 2023 was a benefit on pre-tax loss of 25.6% compared to an expense on pre-tax income of 19.0% for the comparable prior year period. The Company's effective tax rate from continuing operations for the first quarter of fiscal 2023 was higher than the U.S. federal statutory rate of 21% primarily due to discrete tax benefits resulting from vesting of share-based awards in the quarter, as well as the impact of permanent differences from non-deductible expenses on the projected annual effective tax rate applied to the quarterly results. For the first quarter of fiscal 2022, the Company's effective tax rate from continuing operations was lower than the U.S. federal statutory rate of 21% primarily due to discrete tax benefits resulting from vesting of share-based awards in the quarter, which more than offsets 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.

**Valuation Allowances**

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

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[<u>**Table of Contents**</u>](#table_contents)

SCHNITZER STEEL INDUSTRIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 2022 remain subject to examination under the statute of limitations.

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

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

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended November 30,** | **Three Months Ended November 30,** |
|  | **2022** | **2021** |
| (Loss) income from continuing operations | $(17487) | $47305 |
| Net income attributable to noncontrolling interests | (232) | (1077) |
| (Loss) income from continuing operations attributable to SSI shareholders | $(17719) | $46228 |
| Loss from discontinued operations, net of tax | (69) | (29) |
| Net (loss) income attributable to SSI shareholders | $(17788) | $46199 |
| Computation of shares: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Weighted average common shares outstanding, basic | 27723 | 28159 |
| &nbsp;&nbsp;&nbsp;&nbsp;Incremental common shares attributable to dilutive performance share awards, restricted stock units and deferred stock units |  | 1726 |
| &nbsp;&nbsp;&nbsp;&nbsp;Weighted average common shares outstanding, diluted | 27723 | 29885 |

---

Common stock equivalent shares of 1,084,867 and 89,068 were considered antidilutive and were excluded from the calculation of diluted net (loss) income per share for the three months ended November 30, 2022 and 2021, respectively.

**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 $4 million and $6 million for the three months ended November, 2022 and 2021, 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 months ended November 30, 2022 and 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, 2022, and the Unaudited Condensed Consolidated Financial Statements and the related Notes thereto included in Part I, Item 1 of this report.

**General**

Founded in 1906, Schnitzer Steel Industries, Inc. is one of North America's largest recyclers of ferrous and nonferrous metal, including end-of-life vehicles, and a manufacturer of finished steel products. As a vertically integrated organization, we offer a range of products and services to meet global demand through our network that includes 51 retail self-service auto parts stores, 54 metals recycling facilities, and an electric arc furnace ("EAF") steel mill.

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

We operate seven deepwater port locations, six of which are equipped with large-scale shredders. Our deepwater port facilities on both the East and West Coasts of the U.S. (in Everett, Massachusetts; Providence, Rhode Island; Oakland, California; Tacoma, Washington; and Portland, Oregon) and access to public deepwater port facilities (in Kapolei, Hawaii and Salinas, Puerto Rico) allow us to ship bulk cargoes of processed recycled ferrous metal to steel manufacturers located in Europe, Africa, the Middle East, Asia, North America, Central America, and South America. Our exports of nonferrous recycled metal are shipped in containers through various public docks to specialty steelmakers, foundries, aluminum sheet and ingot manufacturers, copper refineries and smelters, brass and bronze ingot manufacturers, wire and cable producers, wholesalers, and other recycled metal processors globally. We also transport both ferrous and nonferrous metals by truck, rail, and barge in order to transfer scrap metal between our facilities for further processing, to load shipments at our export facilities, and to meet regional domestic demand.

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

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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 metal and finished steel products, the supply of scrap metal in our domestic markets, varying demand for used auto parts from our self-service retail stores, the efficiency of our supply chain, and variations in production and other operating costs. Certain of these factors are influenced, to a degree, by the impact of seasonal changes including severe weather conditions, which can impact the timing of shipments and inhibit construction activity utilizing our products, scrap metal collection and production levels at our facilities, and retail admissions and parts sales at our auto parts stores. Further, sanctions, trade actions, and licensing, product quality, and inspection requirements can impact the level of profitability on sales of our products and, in certain cases, impede or restrict our ability to sell to certain export markets or require us to direct our sales to alternative market destinations, which can cause our quarterly operating results to fluctuate.

**Steel Mill Fire**

On May 22, 2021, we experienced a fire at our steel mill in McMinnville, Oregon. Direct physical loss or damage to property from the incident was limited to the mill's melt shop, with no bodily injuries and no physical loss or damage to other buildings or equipment. The rolling mill production ceased in early June 2021. In August 2021, our steel mill began ramping up operations following the substantial completion of replacement and repairs of property and equipment in the melt shop that had been lost or damaged by the fire. We experienced the loss of business income during the shutdown of the steel mill and the subsequent ramp-up phase which was substantially completed during the second quarter of fiscal 2022. We have insurance that we believe is fully applicable to the losses and have filed 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 our assets in this matter is $1 million, while the deductible for lost business income is 10 times the Average Daily Gross Earnings which would have been earned had no interruption occurred, calculated subject to judgments and uncertainties. As of August 31, 2021, prepaid expenses and other current assets included an initial $10 million insurance receivable recognized in fiscal 2021, primarily offsetting applicable losses including capital purchases of $10 million that we had incurred as of August 31, 2021. In fiscal 2022, we increased the amount of this insurance receivable to $25 million and recognized a related $15 million insurance recovery gain within cost of goods sold, $3 million of which was recognized in the first quarter of fiscal 2022 and included within the Unaudited Condensed Consolidated Statements of Operations, reflecting recovery of applicable losses incurred as a result of the fire to date. In addition, during 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 on the Unaudited Condensed Consolidated Balance Sheets as of November 30, 2022 and August 31, 2022. These amounts do not reflect potential additional recoveries of business income losses resulting from this matter that may be recognized in the future when settlements of the business interruption claims are resolved.

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SCHNITZER STEEL INDUSTRIES, INC.

**Everett Facility Shredder Fire**

On December 8, 2021, we experienced a fire at our metals recycling facility in Everett, Massachusetts. Direct physical loss or damage to property from the incident was limited to the facility's shredder building and equipment, with no bodily injuries and no physical loss or damage to property reported at other buildings or equipment. As a result of the fire, shredding operations ceased, while all non-shredding operations at the facility continued, including torching, shearing, separating, and sorting purchased non-shreddable recycled ferrous metals. On January 28, 2022, shredding operations at the facility began ramping up following the replacement and repairs to shredder equipment that had been damaged. Completion of the remainder of repair and replacement of property that experienced physical loss or damage, primarily buildings and improvements, will occur over a longer period and impacts on business income may continue. For example, shredding operations temporarily ceased at the facility on June 18, 2022 and, following discussions with the Massachusetts Department of Environmental Protection and the Massachusetts Attorney General's office, we installed a temporary emission capture system and controls that allowed for us to resume shredding operations on November 11, 2022 and continue shredding operations while the repair and replacement of the shredder enclosure building is completed. Non-shredding operations at the facility continued during this period. We have insurance that we believe is fully applicable to the losses, including but not limited to the costs of installing the temporary capture and controls system and any associated loss of business income, and have filed 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 and the restart of production activities. In fiscal 2022, after the fire, we recognized an aggregate $17 million insurance receivable and related insurance recovery gain, reported within prepaid expenses and other current assets and within cost of goods sold, respectively, reflecting recovery of applicable losses including impairment charges of $7 million related to the carrying value of plant and equipment assets damaged by the fire and initial capital purchases and other costs totaling $10 million that we had incurred as of August 31, 2022. Also during 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 $10 million as of November 30, 2022 and August, 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.

**Coronavirus Disease 2019 ("COVID-19")** 

We continue to monitor the impact of COVID-19 on all aspects of our business. Following the onset of COVID-19 and its negative effects on our business, most prominently reflected in our fiscal 2020 results, global economic conditions improved beginning in fiscal 2021 and continued to improve through most of fiscal 2022. However, there are ongoing global impacts resulting directly or indirectly from the pandemic including labor shortages, logistical challenges, and increases in costs for certain goods and services including due to the impact of inflation, which have negatively impacted our sales volumes, operating costs, and financial results to varying degrees. The ongoing effects of the COVID-19 pandemic could negatively impact our results of operations, cash flows, and financial position in the future.

**Use of Non-GAAP Financial Measures**

In this management's discussion and analysis, we use supplemental measures of our performance, liquidity, and capital structure which are derived from our consolidated financial information, but which are not presented in our consolidated financial statements prepared in accordance with GAAP. We believe that providing these non-GAAP financial measures adds a meaningful presentation of our operating and financial performance, liquidity, and capital structure. For example, we use adjusted EBITDA as one of the measures to compare and evaluate financial performance. Adjusted EBITDA is the sum of our net (loss) income before results from discontinued operations, interest expense, income taxes, depreciation and amortization, asset impairment charges, restructuring charges and other exit-related activities, charges for legacy environmental matters (net of recoveries), business development costs not related to ongoing operations including pre-acquisition expenses, and other items which are not related to underlying business operational performance.

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SCHNITZER STEEL INDUSTRIES, INC.

See the reconciliations of supplemental financial measures, including adjusted EBITDA, in Non-GAAP Financial Measures at the end of this Item 2.

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

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SCHNITZER STEEL INDUSTRIES, INC.

**Financial Highlights of Results of Operations for the First Quarter of Fiscal 2023**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Diluted loss per share from continuing operations attributable to SSI shareholders in the first quarter of fiscal 2023 was $(0.64), compared to earnings per share of $1.55 in the prior year quarter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Adjusted diluted loss per share from continuing operations attributable to SSI shareholders in the first quarter of fiscal 2023 was ($0.44), compared to adjusted diluted earnings per share of $1.58 in the prior year quarter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Net loss in the first quarter of fiscal 2023 was $18 million, compared to net income of $47 million in the prior year quarter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Adjusted EBITDA in the first quarter of fiscal 2023 was $8 million, compared to $78 million in the prior year quarter.

Market conditions for recycled metals were weaker in the first quarter of fiscal 2023 compared to the prior year quarter, leading to significantly lower average net selling prices for our ferrous and nonferrous products and a significant compression in metal spreads. In the first quarter of fiscal 2023, the average net selling prices for our ferrous and nonferrous products decreased by 24% and 14%, respectively, and ferrous sales volumes decreased by 26%, compared to the prior year quarter. The reduction in ferrous sales volumes was primarily due to disruptions related to an extended shredder outage at our Everett metals recycling facility and a regulatory issue limiting operations at our shredder facility in California, both of which were resolved by mid-November, tight supply flows in the lower price environment, and the delay of several bulk shipments to December 2022, partially offset by the impact on our quarterly sales volumes of business acquisitions completed during the first and third quarters of fiscal 2022. Market conditions for our finished steel products were robust in the first quarter of fiscal 2023, with finished steel average selling prices increasing 4% compared to the prior year quarter which contributed to expanded metal spreads, while finished steel sales volumes increased 19%, in part due to the impact on the prior year quarterly volumes of the ramp up of steel mill operations following the May 2021 fire. Our results in the first quarter of fiscal 2023 also reflected an unfavorable impact from average inventory accounting compared to a favorable impact in the prior year quarter, lower year-over-year platinum group metals (PGM) prices, an impairment charge related to an equity investment, and the impact of inflation. We achieved a benefit of approximately $14 million from productivity and cost reduction initiatives, including from measures announced in October 2022 and implemented during the first quarter of fiscal 2023, which helped to partially offset the effects of inflationary pressure on operating costs.

Selling, general, and administrative ("SG&A") expense in the first quarter of fiscal 2023 increased by 16% compared to the prior year quarter primarily due to higher employee-related, professional services, and travel expenses, partially from higher costs resulting from our acquisitions and other growth-related initiatives, increased legacy environmental charges, and the impact of inflation.

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•For the first three months of fiscal 2023, net cash used in operating activities was $62 million, in part reflecting an increase in net working capital due to higher inventories as a result of the delay of several bulk shipments to December 2022, compared to $34 million in the prior year comparable period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Debt was $358 million as of November 30, 2022, compared to $249 million as of August 31, 2022, as a result of increased borrowings from our credit facilities primarily to fund higher net working capital needs, capital expenditures, and the acquisition of the ScrapSource business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Debt, net of cash, was $354 million as of November 30, 2022, compared to $205 million as of August 31, 2022.

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

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SCHNITZER STEEL INDUSTRIES, INC.

**Results of Operations**

**Selected Financial Measures and Operating Statistics** 

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| | | | |
|:---|:---|:---|:---|
|  | **Three Months Ended November 30,** | **Three Months Ended November 30,** | **Three Months Ended November 30,** |
| **($ in thousands, except for prices and per share amounts)** | **2022** | **2021** | **%** |
| Ferrous revenues | $261729 | $465856 | (44)% |
| Nonferrous revenues | 177675 | 194429 | (9)% |
| Steel revenues(1) | 124515 | 103238 | 21% |
| Retail and other revenues | 34811 | 34595 | 1% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenues | 598730 | 798118 | (25)% |
| Cost of goods sold | 550011 | 683244 | (20)% |
| Gross margin (total revenues less cost of goods sold) | $48719 | $114874 | (58)% |
| Gross margin (%) | 8.1% | 14.4% | (44)% |
| Selling, general and administrative expense | $64228 | $55267 | 16% |
| Diluted (loss) earnings per share from continuing operations attributable to SSI shareholders: |  |  |  |
| &nbsp;&nbsp;&nbsp;Reported | $(0.64) | $1.55 | NM |
| &nbsp;&nbsp;&nbsp;Adjusted(2) | $(0.44) | $1.58 | NM |
| Net (loss) income | $(17556) | $47276 | NM |
| Adjusted EBITDA(2) | $8362 | $78086 | (89)% |
| Average ferrous recycled metal sales prices ($/LT)(3): |  |  |  |
| &nbsp;&nbsp;&nbsp;Domestic | $313 | $431 | (27)% |
| &nbsp;&nbsp;&nbsp;Foreign | $356 | $450 | (21)% |
| &nbsp;&nbsp;&nbsp;Average | $340 | $446 | (24)% |
| Ferrous volumes (LT, in thousands): |  |  |  |
| &nbsp;&nbsp;&nbsp;Domestic(4) | 432 | 430 | (—)% |
| &nbsp;&nbsp;&nbsp;Foreign | 418 | 718 | (42)% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total ferrous volumes (LT, in thousands)(4)(8) | 851 | 1148 | (26)% |
| Average nonferrous sales price ($/pound)(3)(5) | $0.90 | $1.05 | (14)% |
| Nonferrous volumes (pounds, in thousands)(4)(5) | 162720 | 153227 | 6% |
| Finished steel average sales price ($/ST)(3) | $1015 | $979 | 4% |
| Finished steel sales volumes (ST, in thousands) | 118 | 99 | 19% |
| Cars purchased (in thousands)(6) | 69 | 80 | (14)% |
| Number of auto parts stores at period end | 51 | 50 | 2% |
| Rolling mill utilization(7) | 81% | 78% | 4% |

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NM = Not Meaningful

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

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

(2)See the reconciliations of Non-GAAP Financial Measures at the end of this Item 2.

(3)Price information is shown after netting the cost of freight incurred to deliver the product to the customer.

(4)Ferrous and nonferrous volumes sold externally and delivered to our steel mill for finished steel production.

(5)Average sales price and volume information excludes PGMs in catalytic converters.

(6)Cars purchased by auto parts stores only.

(7)Rolling mill utilization is based on effective annual production capacity under current conditions of 580 thousand tons of finished steel products.

(8)May not foot due to rounding.

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SCHNITZER STEEL INDUSTRIES, INC.

**Revenues** 

Revenues in the first quarter of fiscal 2023 decreased by 25% compared to the prior year quarter primarily due to significantly lower average net selling prices for our ferrous and nonferrous products driven by weaker market conditions for recycled metals globally. In the first quarter of fiscal 2023, the average net selling prices for our ferrous and nonferrous products decreased by 24% and 14%, respectively, compared to the prior year quarter. Ferrous sales volumes in the first quarter of fiscal 2023 decreased by 26% compared to the prior year quarter primarily due to extended operational disruptions at our Everett and Oakland metals recycling facilities that were resolved by mid-November, tight supply flows in the lower price environment, and the delay of several bulk shipments to December 2022, partially offset by the impact on our quarterly sales volumes of our fiscal 2022 business acquisitions. Our ferrous and nonferrous sales volumes in the first quarter of fiscal 2023 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 for our finished steel products were robust in the first quarter of fiscal 2023, with finished steel average selling prices increasing 4% compared to the prior year quarter, while finished steel sales volumes increased 19%, in part due to the impact on the prior year quarterly volumes of the ramp up of steel mill operations following the May 2021 fire.

**Operating Performance** 

Net loss in the first quarter of fiscal 2023 was $18 million, compared to net income of $47 million in the prior year quarter. Adjusted EBITDA in the first quarter of fiscal 2023 was $8 million, compared to $78 million in the prior year quarter. The lower price environment for recycled metals, as well as significantly decreased ferrous sales volumes primarily due to the extended operational disruptions, tight supply flows, and several bulk shipment delays, had a significant adverse impact on our operating margins and overall operating results in the first quarter of fiscal 2023. Ferrous metal spreads in the first quarter of fiscal 2023 decreased by approximately 20%, and average net selling prices for our nonferrous joint products that are recovered from the shredding process, comprising primarily zorba, decreased by approximately 10%, compared to the prior year quarter. Finished steel metal spreads and sales volumes were significantly higher in the first quarter of fiscal 2023, benefiting operating results compared to the prior year quarter. Our results in the first quarter of fiscal 2023 also reflected an unfavorable impact from average inventory accounting compared to a favorable impact in the prior year quarter, lower year-over-year PGM prices, an impairment charge related to an equity investment, and the impact of inflation.

SG&A expense in the first quarter of fiscal 2023 increased by 16% compared to the prior year quarter primarily due to higher employee-related, professional services, and travel expenses, partially resulting from our acquisitions and other growth-related initiatives, increased legacy environmental charges, and the impact of inflation. These higher expenses in the first quarter of fiscal 2023 were partially offset by benefits from productivity and cost reduction initiatives when compared to the prior year quarter.

In October 2022, we announced and began implementing productivity and cost reduction initiatives with a targeted annual benefit of approximately $40 million, the vast majority of which is expected to be achieved in fiscal 2023. In addition, in January 2023, we announced incremental initiatives aiming to reduce SG&A costs by approximately $20 million annually, of which approximately two-thirds is expected to be achieved in fiscal 2023. These initiatives aim to improve profitability through a combination of increased yields, efficiencies in processing, procurement, and pricing, and reduced costs including from headcount reductions, decreased lease costs, professional and outside services, and implementation of operational efficiencies. In the first quarter of fiscal 2023, we achieved a benefit from these initiatives, and others implemented during fiscal 2022, of approximately $14 million, which helped to partially offset the effects of inflationary pressure on operating costs.

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

**Income Tax** 

The effective tax rate from continuing operations for the first quarter of fiscal 2023 was a benefit on pre-tax loss of 25.6% compared to an expense on pre-tax income of 19.0% for the comparable prior year quarter. Our effective tax rate from continuing operations for the first quarter of fiscal 2023 was higher than the U.S. federal statutory rate of 21% primarily due to discrete tax benefits resulting from vesting of share-based awards in the quarter, as well as the impact of permanent differences from non-deductible expenses on the projected annual effective tax rate applied to the quarterly results. For the first quarter of fiscal 2022, the effective tax rate from continuing operations was lower than the U.S. federal statutory rate primarily due to discrete tax benefits resulting from vesting of share-based awards in the quarter, which more than offset 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.

**Liquidity and Capital Resources**

We rely on cash provided by operating activities as a primary source of liquidity, supplemented by current cash on hand and borrowings under our existing credit facilities.

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SCHNITZER STEEL INDUSTRIES, INC.

**Sources and Uses of Cash**

We had cash balances of $4 million and $44 million as of November 30, 2022 and August 31, 2022, respectively. Cash balances are intended to be used primarily for working capital, capital expenditures, dividends, share repurchases, investments, and acquisitions. We use excess cash on hand to reduce amounts outstanding under our credit facilities. As of November 30, 2022, debt was $358 million compared to $249 million as of August 31, 2022, and debt, net of cash, was $354 million as of November 30, 2022, compared to $205 million as of August 31, 2022, which increases were primarily due to increased borrowings from our credit facilities to fund higher net working capital needs, capital expenditures, and the acquisition of the ScrapSource business on November 18, 2022. See the reconciliation of debt, net of cash, in Non-GAAP Financial Measures at the end of this Item 2.

<u>Operating Activities</u>

Net cash used in operating activities in the first three months of fiscal 2023 was $62 million, compared to $34 million in the first three months of fiscal 2022.

Uses of cash in the first three months of fiscal 2023 included a $29 million decrease in accrued payroll and related liabilities primarily due to the payment of incentive compensation previously accrued under our fiscal 2022 plans, a $28 million increase in inventory primarily due to the delay of several bulk shipments to December 2022, and a $19 million decrease in accounts payable due to the timing of purchases and payments. Sources of cash in the first three months of fiscal 2023 included a $17 million decrease in accounts receivable primarily due to a decrease in selling prices for recycled metals and the timing of sales and collections.

Uses of cash in the first three months of fiscal 2022 included a $68 million increase in accounts receivable primarily due to higher selling prices and higher sales volumes for recycled metals, as well as the timing of sales and collections, a $46 million increase in inventories due to higher raw material purchase costs and the timing of purchases and sales, and a $39 million decrease in accrued payroll and related liabilities primarily due to the payment of incentive compensation previously accrued under our fiscal 2021 plans. Sources of cash in the first three months of fiscal 2022 included a $21 million increase in other accrued liabilities primarily reflecting the portion of advance payments from insurance carriers received in the period towards our claims arising from the May 2021 steel mill fire deemed attributable to operating activities, and a $21 million increase in accounts payable primarily due to higher raw material purchase prices and the timing of purchases and payments. The sources and uses of cash related to operating activities described above also reflect higher net working capital needs in the first quarter 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.

<u>Investing Activities</u>

Net cash used in investing activities was $72 million in the first three months of fiscal 2023, compared to $143 million in the first three months of fiscal 2022.

Cash used in investing activities in the first three months of fiscal 2023 included $25 million paid to acquire the assets of the ScrapSource business on November 18, 2022. We funded the acquisition using cash on hand and borrowings under our existing credit facilities. See Note 3 - Business Acquisitions in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further detail. Cash used in investing activities also included capital expenditures of $48 million to upgrade our equipment and infrastructure and for investments in advanced metals recovery technology and environmental and safety-related assets, compared to $40 million in the prior year period.

Cash used in investing activities in the first three months of fiscal 2022 included $114 million paid to acquire the assets of the Columbus Recycling business on October 1, 2021. We funded the acquisition using cash on hand and borrowings under our existing credit facilities. See Note 3 - Business Acquisitions in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report for further detail. Cash flows from investing activities in the first three months of fiscal 2022 also included proceeds of $10 million 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 steel mill fire.

<u>Financing Activities</u>

Net cash provided by financing activities in the first three months of fiscal 2023 was $94 million, compared to $169 million in the first three months of fiscal 2022.

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SCHNITZER STEEL INDUSTRIES, INC.

Cash flows from financing activities in the first three months of fiscal 2023 included $108 million in net borrowings of debt, compared to $185 million in the prior year period (refer to Non-GAAP Financial Measures at the end of this Item 2). Uses of cash in the first three months of fiscal 2023 and 2022 included $7 million and $10 million, respectively, for payment of employee tax withholdings resulting from vesting of share-based awards and $6 million in each period for the payment of dividends.

**Debt**

Our senior secured revolving credit facilities, which provide for revolving loans of $800 million and C$15 million, mature in August 2027 pursuant to a credit agreement with Bank of America, N.A., as administrative agent, and other lenders party thereto. Interest rates on outstanding indebtedness under the credit agreement are based, at our option, on either the Secured Overnight Financing Rate ("SOFR") (or the Canadian Dollar Offered Rate, "CDOR" for C$ loans), plus a spread of between 1.25% and 2.00%, with the amount of the spread based on a pricing grid tied to our ratio of consolidated net funded debt to EBITDA (as defined by the credit agreement), or the greater of (a) the prime rate, (b) the federal funds rate plus 0.50% or (c) the daily rate equal to Term SOFR plus 1.00%, in each case, plus a spread of between 0.25% and 1.00% based on a pricing grid tied to our consolidated net funded debt to EBITDA ratio. In addition, commitment fees are payable on the unused portion of the credit facilities at rates between 0.175% and 0.30% based on a pricing grid tied to our ratio of consolidated net funded debt to EBITDA.

Under the credit agreement, we may establish one or more key performance indicators ("KPIs") to measure our performance with respect to certain of our environmental, social and governance targets. Subject to the terms and conditions of the credit agreement, we may propose to amend the credit agreement to modify (i) the pricing spread and (ii) the commitment fee rate. Such modifications would be tied to our performance against the KPIs and would allow for (i) the pricing spread to be increased or decreased by no more than (a) 0.025% per KPI and (b) 0.05% for all KPIs, and (ii) the commitment fee rate to be increased or decreased by no more than 0.005% for all KPIs. Such adjustments would be determined on an annual basis and would not be cumulative.

We had borrowings outstanding under our credit facilities of $338 million as of November 30, 2022 and $230 million as of August 31, 2022. The weighted average interest rate on amounts outstanding under our credit facilities was 5.34% and 3.65% as of November 30, 2022 and August 31, 2022, respectively.

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

As of November 30, 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 1.50 to 1.00 and was 5.02 to 1.00 as of November 30, 2022. The consolidated leverage ratio was required to be no more than 0.55 to 1.00 and was 0.28 to 1.00 as of November 30, 2022.

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.

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SCHNITZER STEEL INDUSTRIES, INC.

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 $13 million as of each of November 30, 2022 and August 31, 2022, respectively, primarily relate to equipment purchases, the contract consideration for which includes an obligation to make future monthly payments to the vendor in the form of licensing fees. For accounting purposes, such obligations are treated as a partial financing of the purchase price by the equipment vendor. Monthly payments commence when the equipment is placed in service and achieves specified minimum operating metrics, with payments continuing for a period of four years thereafter.

**Capital Expenditures**

Capital expenditures totaled $48 million for the first three months of fiscal 2023, compared to $40 million for the prior year period. Capital expenditures in the first three months of fiscal 2023 included approximately $10 million for investments in growth. We currently plan to invest in the range of $130 million to $140 million in capital expenditures in fiscal 2023, which range excludes capital expenditures associated with the ongoing repair and replacement of the shredder enclosure building damaged by the fire at our Everett facility, as these expenditures are expected to be substantially recovered through insurance. These capital expenditures include investments in growth, including new nonferrous processing technologies, and to support volume initiatives as well as post-acquisition and other growth projects, and investments to upgrade our equipment and infrastructure and for environmental and safety-related assets, using cash generated from operations and available credit facilities. Supply chain disruptions, including those created directly or indirectly by the COVID-19 pandemic, have contributed to some delays in construction activities and equipment deliveries related to our capital projects, and to the time required to obtain permits from government agencies, resulting in the deferral of certain capital expenditures. Given the continually evolving nature of such disruptions and other factors impacting the timing of project completion, the extent to which forecasted capital expenditures could be deferred is uncertain.

**Environmental Compliance**

Building on our commitment to recycling and operating our business in an environmentally responsible manner, we continue to invest in facilities that improve our environmental presence in the communities in which we operate. As part of our capital expenditures discussed in the prior paragraph, we invested approximately $6 million in capital expenditures for environmental projects in the first three months of fiscal 2023, and we currently plan to invest in the range of $40 million to $50 million for such projects in fiscal 2023. These projects include investments in equipment to ensure ongoing compliance with air quality and other environmental regulations and storm water systems.

We have been identified by the United States Environmental Protection Agency as one of the potentially responsible parties that own or operate or formerly owned or operated sites which are part of or adjacent to the Portland Harbor Superfund site ("Portland Harbor"). See Note 5 - Commitments and Contingencies in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report for a discussion of this matter, as well as other legacy environmental loss contingencies. We believe it is not possible to reasonably estimate the amount or range of costs which we are likely to or which it is reasonably possible that we will incur in connection with Portland Harbor, although such costs could be material to our financial position, results of operations, cash flows, and liquidity. We have insurance policies and a Qualified Settlement Fund ("QSF") that we believe will provide reimbursement for costs we incur for defense, remediation, and mitigation for natural resource damages claims in connection with Portland Harbor, although there are no assurances that those policies and the QSF will cover all of the costs which we may incur. Significant cash outflows in the future related to Portland Harbor, as well as related to other legacy environmental loss contingencies, could reduce the amounts available for borrowing that could otherwise be used for working capital, capital expenditures, dividends, share repurchases, investments, and acquisitions and could result in our failure to maintain compliance with certain covenants in our debt agreements, and could adversely impact our liquidity.

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SCHNITZER STEEL INDUSTRIES, INC.

**Dividends**

On October 24, 2022, our Board of Directors declared a dividend for the first quarter of fiscal 2023 of $0.1875 per common share, which equates to an annual cash dividend of $0.75 per common share. The dividend was paid on November 29, 2022.

**Share Repurchase Program**

As of November 30, 2022, pursuant to our board-authorized share repurchase programs, we had remaining authorization to repurchase up to 2.8 million shares of our Class A common stock when we deem such repurchases to be appropriate. We may repurchase our common stock for a variety of reasons, such as to optimize our capital structure and to offset dilution related to share-based compensation arrangements. We consider several factors in determining whether to make share repurchases including, among other things, our cash needs, the availability of funding, our future business plans, and the market price of our stock. We did not repurchase any of our common stock during the first quarter of fiscal 2023 or 2022.

**Assessment of Liquidity and Capital Resources**

Historically, our available cash resources, internally generated funds, credit facilities, and equity offerings have financed our acquisitions, capital expenditures, working capital, and other financing needs.

We generally believe our current cash resources, internally generated funds, existing credit facilities, and access to the capital markets will provide adequate short-term and long-term liquidity needs for working capital, capital expenditures, dividends, 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.

**Contractual Obligations**

There were no material changes related to contractual obligations and commitments from the information provided in our Annual Report on Form 10-K for the fiscal year ended August 31, 2022.

We maintain stand-by letters of credit to provide support for certain obligations, including workers' compensation and performance bonds. As of November 30, 2022, we had $8 million outstanding under these arrangements.

**Critical Accounting Estimates**

There were no material changes to our critical accounting estimates as described in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our Annual Report on Form 10-K for the year ended August 31, 2022.

**Recently Issued Accounting Standards**

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

**Non-GAAP Financial Measures**

**Debt, net of cash**

Debt, net of cash is the difference between (i) the sum of long-term debt and short-term borrowings (i.e., total debt) and (ii) cash and cash equivalents. We believe that presenting debt, net of cash is useful to investors as a measure of our leverage, as cash and cash equivalents can be used, among other things, to repay indebtedness.

The following is a reconciliation of debt, net of cash (in thousands):

---

| | | |
|:---|:---|:---|
|  | **November 30, 2022** | **August 31, 2022** |
| Short-term borrowings | $6379 | $6041 |
| Long-term debt, net of current maturities | 351200 | 242521 |
| &nbsp;&nbsp;&nbsp;Total debt | 357579 | 248562 |
| Less cash and cash equivalents | 3539 | 43803 |
| &nbsp;&nbsp;&nbsp;Total debt, net of cash | $354040 | $204759 |

---

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[<u>**Table of Contents**</u>](#table_contents)

SCHNITZER STEEL INDUSTRIES, INC.

**Net borrowings (repayments) of debt**

Net borrowings (repayments) of debt is the sum of borrowings from long-term debt and repayments of long-term debt. We present this amount as the net change in our borrowings (repayments) for the period because we believe it is useful for investors as a meaningful presentation of the change in debt.

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

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended November 30,** | **Three Months Ended November 30,** |
|  | **2022** | **2021** |
| Borrowings from long-term debt | $186356 | $271091 |
| Repayments of long-term debt | (78781) | (86314) |
| &nbsp;&nbsp;&nbsp;Net borrowings (repayments) of debt | $107575 | $184777 |

---

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[<u>**Table of Contents**</u>](#table_contents)

SCHNITZER STEEL INDUSTRIES, INC.

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

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

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

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended November 30,** | **Three Months Ended November 30,** |
|  | **2022** | **2021** |
| <u>Reconciliation of adjusted EBITDA:</u> |  |  |
| Net (loss) income | $(17556) | $47276 |
| Loss from discontinued operations, net of tax | 69 | 29 |
| Interest expense | 3324 | 1372 |
| Income tax (benefit) expense | (6032) | 11097 |
| Depreciation and amortization | 21451 | 17220 |
| Asset impairment charges(1) | 4000 |  |
| Restructuring charges and other exit-related activities | 1592 | 22 |
| Charges for legacy environmental matters, net(2) | 1279 | 456 |
| Business development costs | 235 | 614 |
| Adjusted EBITDA | $8362 | $78086 |
| <u>Selling, general and administrative expense:</u> |  |  |
| As reported | $64228 | $55267 |
| Charges for legacy environmental matters, net(2) | (1279) | (456) |
| Business development costs | (235) | (614) |
| Adjusted | $62714 | $54197 |

---

------

(1)For the first quarter of fiscal 2023, asset impairment charges included $4 million reported within "Other loss, net" on the Unaudited Condensed Consolidated Statement of Operations.

(2)Legal and environmental charges, net of recoveries, for legacy environmental matters including those related to the Portland Harbor Superfund site and to other legacy environmental loss contingencies. See Note 5 - Commitments and Contingencies, "Portland Harbor" and "Other Legacy Environmental Loss Contingencies" in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.

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[<u>**Table of Contents**</u>](#table_contents)

SCHNITZER STEEL INDUSTRIES, INC.

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

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended November 30,** | **Three Months Ended November 30,** |
|  | **2022** | **2021** |
| <u>(Loss) income from continuing operations attributable to SSI shareholders:</u> |  |  |
| As reported | $(17719) | $46228 |
| Asset impairment charges(1) | 4000 |  |
| Restructuring charges and other exit-related activities | 1592 | 22 |
| Charges for legacy environmental matters, net(2) | 1279 | 456 |
| Business development costs | 235 | 614 |
| Income tax benefit allocated to adjustments(3) | (1714) | (249) |
| Adjusted | $(12327) | $47071 |
| <u>Diluted (loss) earnings per share from continuing operations attributable to SSI shareholders:</u> |  |  |
| As reported | $(0.64) | $1.55 |
| Asset impairment charges, per share(1) | 0.14 |  |
| Restructuring charges and other exit-related activities, per share | 0.06 |  |
| Charges for legacy environmental matters, net, per share(2) | 0.05 | 0.02 |
| Business development costs, per share | 0.01 | 0.02 |
| Income tax benefit allocated to adjustments, per share(3) | (0.06) | (0.01) |
| Adjusted | $(0.44) | $1.58 |

---

------

(1)For the first quarter of fiscal 2023, asset impairment charges included $4 million ($0.14 per share) reported within "Other loss, net" on the Unaudited Condensed Consolidated Statement of Operations.

(2)Legal and environmental charges, net of recoveries, for legacy environmental matters including those related to the Portland Harbor Superfund site and to other legacy environmental loss contingencies. See Note 5 - Commitments and Contingencies, "Portland Harbor" and "Other Legacy Environmental Loss Contingencies" in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.

(3)Income tax allocated to the aggregate adjustments reconciling reported and adjusted (loss) income from continuing operations attributable to SSI shareholders and diluted (loss) earnings per share from continuing operations attributable to SSI shareholders is determined based on a tax provision calculated with and without the adjustments.

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[<u>**Table of Contents**</u>](#toc_page)

SCHNITZER STEEL INDUSTRIES, INC.

**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

**Commodity Price Risk**

We are exposed to commodity price risk, mainly associated with variations in the market price for ferrous and nonferrous metals, including scrap metal, finished steel products, auto bodies and other commodities. The timing and magnitude of industry cycles are difficult to predict and are impacted by general economic conditions as well as other factors including political and military events. We respond to increases and decreases in forward selling prices by adjusting purchase prices. We actively manage our exposure to commodity price risk and monitor the actual and expected spread between forward selling prices and purchase costs and processing and shipping expense. Sales contracts are based on prices negotiated with our customers, and generally orders are placed 30 to 60 days ahead of the shipment date. However, financial results may be negatively impacted when forward selling prices fall more quickly than we can adjust purchase prices or when customers fail to meet their contractual obligations. We assess the net realizable value of inventory ("NRV") each quarter based upon contracted sales orders and estimated future selling prices. Based on contracted sales and estimates of future selling prices, a 10% decrease in the estimated selling price of inventory would not have had a material NRV impact as of November 30, 2022.

**Interest Rate Risk**

There have been no material changes to our disclosure regarding interest rate risk set forth in Item 7A. Quantitative and Qualitative Disclosures About Market Risk included in our Annual Report on Form 10-K for the year ended August 31, 2022.

**Credit Risk**

Credit risk relates to the risk of loss that might occur as a result of non-performance by counterparties of their contractual obligations to take delivery of scrap metal and finished steel products and to make financial settlements of these obligations, or to provide sufficient quantities of scrap metal or payment to settle advances, loans and other contractual receivables in connection with demolition and scrap extraction projects. We manage our exposure to credit risk through a variety of methods, including shipping ferrous scrap metal exports under letters of credit, collection of deposits prior to shipment for certain nonferrous export customers, establishment of credit limits for certain sales on open terms, credit insurance and designation of collateral and financial guarantees securing advances, loans, and other contractual receivables. Due in part to the effects 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 November 30, 2022 and August 31, 2022, 34% and 24%, respectively, of our accounts receivable balance was covered by letters of credit. Of the remaining balance, 94% and 99% was less than 60 days past due as of November 30, 2022 and August 31, 2022, respectively.

**Foreign Currency Exchange Rate Risk**

We are exposed to foreign currency exchange rate risk, mainly associated with sales transactions and related accounts receivable denominated in the U.S. Dollar by our Canadian subsidiary with a functional currency of the Canadian Dollar. In certain instances, we may use derivatives to manage some portion of this risk. As of November 30, 2022 and August 31, 2022, we did not have any derivative contracts.

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SCHNITZER STEEL INDUSTRIES, INC.

**ITEM 4. CONTROLS AND PROCEDURES**

**Disclosure Controls and Procedures**

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives. Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, has completed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Consistent with guidance issued by the Securities and Exchange Commission that an assessment of internal controls over financial reporting of a recently acquired business may be omitted from management's evaluation of disclosure controls and procedures, management is excluding an assessment of the internal controls of the acquired Encore Recycling business, which we acquired on April 29, 2022, and the ScrapSource business, which we acquired on November 18, 2022, from its evaluation of the effectiveness of our disclosure controls and procedures. Together, the Encore Recycling and ScrapSource businesses represented approximately 5% of our consolidated total assets and 3% of our consolidated total revenues as of and for the three months ended November 30, 2022. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of November 30, 2022, our disclosure controls and procedures were effective at the reasonable assurance level.

**Changes in Internal Control Over Financial Reporting**

There was no change in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended November 30, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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SCHNITZER STEEL INDUSTRIES, INC.

**PART II. OTHER INFORMATION**

**ITEM 1. LEGAL PROCEEDINGS**

Information regarding reportable legal proceedings is contained in Part I, "Item 3. Legal Proceedings" in our Annual Report on Form 10-K for the fiscal year ended August 31, 2022 and Note 5 - Commitments and Contingencies in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, incorporated by reference herein.

**ITEM 1A. RISK FACTORS**

There have been no material changes to our risk factors reported or new risk factors identified since the filing of our Annual Report on Form 10-K for the year ended August 31, 2022.

**ITEM 5. OTHER INFORMATION**

None.

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SCHNITZER STEEL INDUSTRIES, INC.

**ITEM 6. EXHIBITS** 

---

| | |
|:---|:---|
| Exhibit Number | Exhibit Description |
| &nbsp;&nbsp;&nbsp;&nbsp;10.1\* | [<u>Form of Long-Term Incentive Award Agreement under the 1993 Stock Incentive Plan used for awards granted in fiscal 2023.</u>](schn-ex10_1.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;10.2\* | [<u>Fiscal 2023 Annual Performance Bonus Program for the Chief Executive Officer.</u>](schn-ex10_2.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;31.1 | [<u>Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</u>](schn-ex31_1.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;31.2 | [<u>Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</u>](schn-ex31_2.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;32.1 | [<u>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.</u>](schn-ex32_1.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;32.2 | [<u>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.</u>](schn-ex32_2.htm) |
| 101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.  |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |

---

\* Management contract or compensatory plan or arrangement.

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SCHNITZER STEEL INDUSTRIES, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

---

| | | | |
|:---|:---|:---|:---|
|  |  | SCHNITZER STEEL INDUSTRIES, INC. | SCHNITZER STEEL INDUSTRIES, INC. |
|  |  | (Registrant) | (Registrant) |
| Date: | January 5, 2023 | By: | /s/ Tamara L. Lundgren |
|  |  |  | Tamara L. Lundgren |
|  |  |  | Chairman, President and Chief Executive Officer |
| Date: | January 5, 2023 | By: | /s/ Stefano R. Gaggini |
|  |  |  | Stefano R. Gaggini |
|  |  |  | Senior Vice President and Chief Financial Officer |

---

------

## Exhibit 10.1

Exhibit 10.1

**SCHNITZER STEEL INDUSTRIES, INC.**

**<u>LONG-TERM INCENTIVE AWARD AGREEMENT</u>**

**(FY2023-FY2025 Performance Period)**

On November 11, 2022, the Compensation Committee (the "Committee") of the Board of Directors (the "Board") of Schnitzer Steel Industries, Inc. (the "Company") authorized and granted a performance-based award to _________________ ("Recipient") pursuant to Section 10 of the Company's 1993 Stock Incentive Plan (the "Plan"). By accepting this award, Recipient agrees to all of the terms and conditions of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>Award</u>. Subject to the terms and conditions of this Agreement, the Company shall issue to the Recipient the number of shares of Class A Common Stock of the Company ("Performance Shares") determined under this Agreement based on (a) the performance of the Company during the 3-year period from September 1, 2022 to August 31, 2025 (the "Performance Period") as described in Section 2, (b) Recipient's continued employment during the Performance Period as described in Section 3, and (c) Recipient's not engaging in actions prohibited by Section 4. Recipient's "Volume Growth Target Share Amount" for purposes of this Agreement is _______ shares and Recipient's "ROCE Target Share Amount" for purposes of this Agreement is _______ shares. This award does not include a dividend equivalent cash payment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Performance Conditions</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <u>Payout Formula</u>. Subject to adjustment under Sections 3, 4, 5, 6, 7 and 8, the number of Performance Shares to be issued to Recipient shall be equal to the sum of (a) the Volume Growth Payout Shares, plus (b) the ROCE Payout Shares. The "Volume Growth Payout Shares" shall be equal to the Volume Growth Payout Factor as determined under Section 2.2 below and as modified by the TSR Modifier under Section 2.4 below, multiplied by the Volume Growth Target Share Amount. The "ROCE Payout Shares" shall be equal to the ROCE Payout Factor as determined under Section 2.3 below and as modified by the TSR Modifier under Section 2.4 below, multiplied by the ROCE Target Share Amount.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 <u>Volume Growth Payout Factor</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2.1 The "Volume Growth Payout Factor" for each fiscal year shall be determined under the table below based on Average Volume Growth of the Company for the Performance Period.

---

| | |
|:---|:---|
| &nbsp;&nbsp; <br>**Average**<br>**Volume Growth** | &nbsp;&nbsp; <br>**Volume Growth Payout Factor** |
| &nbsp;&nbsp;less than ___ % | &nbsp;&nbsp;0% |
| &nbsp;&nbsp;___% | &nbsp;&nbsp;50% |
| &nbsp;&nbsp;___% | &nbsp;&nbsp;100% |
| &nbsp;&nbsp;____% or more | &nbsp;&nbsp;200% |

---

If the Average Volume Growth is between any two data points set forth in the first column of the above table, the Volume Growth Payout Factor shall be determined by interpolation between the corresponding data points in the second column of the table as follows: the difference between the Average Volume Growth and the lower data point shall be divided by the difference between the higher data point and the lower data point, the resulting fraction shall be multiplied by the difference between the two corresponding data points in the second column of

86380256.1 0068163-00004

------

the table, and the resulting product shall be added to the lower corresponding data point in the second column of the table, with the resulting sum being the Volume Growth Payout Factor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2.2 The Company's "Average Volume Growth" for the Performance Period shall be equal to the average of the Volume Growth determined for each of the three fiscal years of the Performance Period. The "Volume Growth" for any fiscal year shall be equal to the number of thousands of long tons of ferrous and nonferrous metal sales, inclusive of ferrous tons transferred to the Company's steel mill, by the Company for the fiscal year expressed as a percentage change from the prior fiscal year baseline amount. Volume Growth for a fiscal year can be negative.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 <u>ROCE Payout Factor</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3.1 The "ROCE Payout Factor" shall be determined under the table below based on the Average ROCE of the Company for the Performance Period.

---

| | |
|:---|:---|
| &nbsp;&nbsp; <br>**Average**<br>**ROCE** | &nbsp;&nbsp; <br>**ROCE Payout** <br>**Factor** |
| &nbsp;&nbsp;less than ___ % | &nbsp;&nbsp;0% |
| &nbsp;&nbsp;___% | &nbsp;&nbsp;50% |
| &nbsp;&nbsp;___% | &nbsp;&nbsp;100% |
| &nbsp;&nbsp;____% or more | &nbsp;&nbsp;200% |

---

If the Average ROCE is between any two data points set forth in the first column of the above table, the ROCE Payout Factor shall be determined by interpolation between the corresponding data points in the second column of the table as follows: the difference between the Average ROCE and the lower data point shall be divided by the difference between the higher data point and the lower data point, the resulting fraction shall be multiplied by the difference between the two corresponding data points in the second column of the table, and the resulting product shall be added to the lower corresponding data point in the second column of the table, with the resulting sum being the ROCE Payout Factor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3.2 The Company's "Average ROCE" for the Performance Period shall be equal to the average of the ROCEs determined for each of the three fiscal years of the Performance Period. The "ROCE" for any fiscal year shall be equal to Adjusted Net Income for that fiscal year divided by Average Adjusted Capital for that fiscal year, expressed as a percentage and rounded to the nearest hundredth of a percentage point. "Adjusted Net Income" for any fiscal year shall mean the net income attributable to SSI for that fiscal year as set forth in the audited consolidated statement of operations of the Company and its subsidiaries for the fiscal year, and as adjusted in accordance with Section 2.5 below, increased by interest expense for that fiscal year, as set forth in the audited consolidated statement of operations of the Company and its subsidiaries for the fiscal year, adjusted to exclude the impact of the associated income tax determined in accordance with Section 2.5.10. "Average Adjusted Capital" for any fiscal year shall mean the average of five (5) numbers consisting of the Adjusted Capital as of the last day of the fiscal year and as of the last day of the four preceding fiscal quarters. "Adjusted Capital" as of any date shall mean (i) the Company's total assets, as adjusted in accordance with Section 2.5 below, minus (ii) the Company's total liabilities other than debt for borrowed money and finance lease liabilities, in each case as set forth in the consolidated balance sheet of the Company and its subsidiaries as of the applicable date or otherwise determined from the Company's accounting records on a consistent basis.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4 <u>TSR Modifier</u>

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4.1 In order to determine the final number of Performance Shares to be issued to the Recipient, each of (a) the Volume Growth Payout Factor as determined in Section 2.2 above, and (b) the ROCE Payout Factor as determined in Section 2.3 above shall be modified by the TSR Modifier. The "TSR Modifier" is an adjustment to the number of Performance Shares based on the Average TSR Percentile Rank of the Company for the Performance Period as follows:

---

| | |
|:---|:---|
| &nbsp;&nbsp; <br>**Average**<br>**TSR Percentile Rank** | &nbsp;&nbsp; <br>**TSR Modifier<br>Adjustment** |
| &nbsp;&nbsp;75% or more | &nbsp;&nbsp;+20% |
| &nbsp;&nbsp;50% | &nbsp;&nbsp;0% |
| &nbsp;&nbsp;25% or less | &nbsp;&nbsp;-20% |

---

If the Company's Average TSR Percentile Rank is between any two data points set forth in the first column of the above table, the TSR Modifier shall be determined by interpolation between the corresponding data points in the second column of the table as follows: the difference between the Company's Average TSR Percentile Rank and the lower data point shall be divided by the difference between the higher data point and the lower data point, the resulting fraction shall be multiplied by the difference between the two corresponding data points in the second column of the table, and the resulting product shall be added to the lower corresponding data point in the second column of the table, with the resulting sum being the TSR Modifier.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4.2 The Company's "Average TSR Percentile Rank" for the Performance Period shall be equal to the average of the TSR Percentile Ranks determined for each of the three fiscal years of the Performance Period. To determine the Company's "TSR Percentile Rank" for any fiscal year the TSR of the Company and each of the Peer Group Companies for that fiscal year shall be calculated, and the Peer Group Companies shall be ranked based on their respective TSR's from lowest to highest. If the Company's TSR is equal to the TSR of any other Peer Group Company, the Company's TSR Percentile Rank shall be equal to the number of Peer Group Companies with a lower TSR divided by the number that is one less than the total number of Peer Group Companies, with the resulting amount expressed as a percentage and rounded to the nearest tenth of a percentage point. If the Company's TSR is between the TSRs of any two Peer Group Companies, the TSR Percentile Ranks of those two Peer Group Companies shall be determined as set forth in the preceding sentence, and the Company's TSR Percentile Rank shall be interpolated as follows. The excess of the Company's TSR over the TSR of the lower Peer Group Company shall be divided by the excess of the TSR of the higher Peer Group Company over the TSR of the lower Peer Group Company. The resulting fraction shall be multiplied by the difference between the TSR Percentile Ranks of the two Peer Group Companies. The product of that calculation shall be added to the TSR Percentile Rank of the lower Peer Group Company, and the resulting sum (rounded to the nearest tenth of a percentage point) shall be the Company's TSR Percentile Rank. The intent of this definition of TSR Percentile Rank is to produce the same result as calculated using the PERCENTRANK.INC function in Microsoft Excel to determine the rank of the Company's TSR within the array consisting of the TSRs of the Peer Group Companies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4.3 The "Peer Group Companies" are ATI Inc. (formerly Allegheny Technologies Incorporated), Century Aluminum Company, Cleveland-Cliffs Inc., Coeur Mining, Inc., Commercial Metals Company, Gerdau S.A., Hecla Mining Company, Minerals Technologies Inc., Nucor Corporation, Sims Metal Management Limited, Steel Dynamics, Inc., Suncoke Energy, Inc. and United States Steel Corporation. If prior to the end of any fiscal year in the Performance Period, the common stock of any Peer Group Company ceases to be publicly traded for any reason, then such company shall no longer be considered a Peer Group Company for that fiscal year.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4.4 Except as provided below for the first fiscal year of the Performance Period, the "TSR" for the Company and each Peer Group Company for any fiscal year shall be calculated by (1) assuming that $100 is invested in the common stock of the company at a price equal to the average of the closing market prices of the stock for the twenty trading day period ending on the last trading day of the prior fiscal year, (2) assuming that for each dividend paid on the stock during the fiscal year, the amount equal to the dividend paid on the assumed number of shares held is reinvested in additional shares at a price equal to the closing market price of the stock on the ex-dividend date for the dividend, and (3) determining the final dollar value of the total assumed number of shares based on the average of the closing market prices of the stock for the twenty trading day period ending on the last trading day of the fiscal year. The "TSR" shall then equal the amount determined by subtracting $100 from the foregoing final dollar value, dividing the result by 100 and expressing the resulting fraction as a percentage. For the first fiscal year of the Performance Period, the fiscal year shall be deemed to be the period from the date of this Agreement to August 31, 2023, and the TSR calculation for each company shall be further modified by assuming that $100 is invested in the common stock of the company at a price equal to the closing market price of the stock on the date of this Agreement. For Sims Metal Management Limited, all calculations shall be in Australian dollars. For Gerdau S.A., all calculations shall be in Brazilian reals.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5 <u>Adjustments</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5.1 <u>Change in Accounting Principle</u>. If the Company implements a change in accounting principle during the Performance Period either as a result of issuance of new accounting standards or otherwise, and the effect of the accounting change was not reflected in the Company's business plan at the time of approval of this award, then the Adjusted Net Income and Adjusted Capital for each affected period shall be adjusted to eliminate the impact of the change in accounting principle.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5.2 <u>Restructuring Charges</u>. Adjusted Net Income for each fiscal year of the Performance Period and Adjusted Capital as of each quarter end used in calculating Average Adjusted Capital for any fiscal year of the Performance Period shall be adjusted to eliminate the impact of any restructuring charges and exit-related activities as set forth in the audited consolidated statement of operations of the Company and its subsidiaries for the applicable period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5.3 <u>Impairments</u>. Adjusted Net Income for each fiscal year of the Performance Period and Adjusted Capital as of each quarter end used in calculating Average Adjusted Capital for any fiscal year of the Performance Period shall be adjusted to eliminate the impact of any charges, and reversal of charges, taken by the Company during the applicable period for impairment of goodwill or other assets as set forth in the audited consolidated statement of operations of the Company and its subsidiaries for the applicable period, as well as to add back to Adjusted Capital the amount of goodwill allocated to any business sold by the Company during the applicable period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5.4 <u>Acquisition Impacts</u>. Adjusted Net Income and Volume Growth for the last fiscal year of the Performance Period and Adjusted Capital as of each quarter end in the last fiscal year of the Performance Period shall be adjusted to eliminate any impact of business acquisitions or business combinations completed or reviewed (including incremental costs incurred solely as a result of the transaction, whether or not consummated) during that fiscal year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5.5 <u>Certain Environmental Accruals and Expenses</u>. Adjusted Capital as of each quarter end used in calculating Average Adjusted Capital for any fiscal year of the Performance Period and Adjusted Net Income for each fiscal year during the Performance Period shall be adjusted to eliminate the impact of any changes in environmental liabilities recorded for investigation and remediation costs and natural resource or other damage claims and any fines, penalties, indemnities, fees, costs and other expenses incurred in connection with or resulting from the Portland Harbor Superfund Site and the other environmental matters listed as

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adjustments in the Company's Fiscal 2023 Operating Targets Environmental Adjustments document dated November 11, 2022, which document is available for review from the Company's Legal Division (net of any insurance or other reimbursements thereof).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5.6 <u>Net Realizable Value Charges</u>. Adjusted Net Income for each fiscal year during the Performance Period shall be adjusted to eliminate any charges to reduce the recorded value of any inventory to net realizable value in connection with significant macroeconomic events.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5.7 <u>Electric Vehicle ("EV") Battery Ventures</u>. Adjusted Net Income for each fiscal year of the Performance Period and Adjusted Capital as of each quarter end used in calculating Average Adjusted Capital for any fiscal year of the Performance Period shall be adjusted to eliminate the impact of any contributions from EV battery recycling ventures, including pre-startup business development charges.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5.8 <u>Tax Reform</u>. Adjusted Net Income for each fiscal year during the Performance Period and Adjusted Capital as of each quarter end used in calculating Average Adjusted Capital for any fiscal year of the Performance Period shall be adjusted to eliminate the impact resulting from major changes in federal or state tax laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5.9 <u>Environmental Laws</u>. Adjusted Net Income for each fiscal year during the Performance Period and Adjusted Capital as of each quarter end used in calculating Average Adjusted Capital for any fiscal year of the Performance Period shall be adjusted to eliminate the impact of new or amendments to, or changes in interpretations of existing, environmental laws, regulations or standards, on capital expenditures (including the non-capitalizable portion thereof), implementation costs thereof and any related fines and penalties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5.10 <u>Tax Impacts</u>. All adjustments to Adjusted Net Income for the items listed in Sections 2.5.1 to 2.5.9 in any fiscal year shall be net of the discrete income tax impacts associated with each of the adjustments as certified by the Audit Committee based on the recommendation of the Chief Financial Officer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <u>Employment Condition</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <u>Full Payout</u>. In order to receive the full number of Performance Shares determined under Section 2, Recipient must be employed by the Company on the October 31 immediately following the end of the Performance Period (the "Vesting Date"). For purposes of Sections 3 and 4, all references to the "Company" shall include the Company and its subsidiaries.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 <u>Retirement; Termination Without Cause After 12 Months</u>. If Recipient's employment with the Company is terminated at any time prior to the Vesting Date because of retirement (as defined in paragraph 6(a)(iv)(D) of the Plan), or if Recipient's employment is terminated by the Company without Cause (as defined below) after the end of the 12<sup>th</sup> month of the Performance Period and prior to the Vesting Date, Recipient shall, subject to Section 4.1, be entitled to receive a pro-rated award to be paid following completion of the Performance Period. The number of Performance Shares to be issued as a pro-rated award under this Section 3.2 shall be determined by multiplying the number of Performance Shares determined under Section 2 by a fraction, the numerator of which is the number of days Recipient was employed by the Company since the beginning of the Performance Period and the denominator of which is the number of days in the period from the beginning of the Performance Period to the Vesting Date. Any obligation of the Company to issue a pro-rated award under this Section 3.2 shall be subject to and conditioned upon the execution and delivery by Recipient no later than the Vesting Date of a Release of Claims in such form as may be requested by the Company. For purposes of this Section 3.2, "Cause" shall mean (a) the conviction (including a plea of guilty or nolo contendere) of Recipient of a felony involving theft or moral turpitude or relating to the business of the Company, other than a felony predicated on Recipient's vicarious liability, (b) Recipient's continued failure or refusal to perform with reasonable competence and in good faith any of the lawful duties assigned by (or any lawful directions of) the

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Company that are commensurate with Recipient's position with the Company (not resulting from any illness, sickness or physical or mental incapacity), which continues after the Company has given notice thereof (and a reasonable opportunity to cure) to Recipient, (c) deception, fraud, misrepresentation or dishonesty by Recipient in connection with Recipient's employment with the Company, (d) any incident materially compromising Recipient's reputation or ability to represent the Company with the public, (e) any willful misconduct by Recipient that substantially impairs the Company's business or reputation, or (f) any other willful misconduct by Recipient that is clearly inconsistent with Recipient's position or responsibilities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 <u>Death or Disability</u>. If Recipient's employment with the Company is terminated at any time prior to the Vesting Date because of death or disability, Recipient shall be entitled to receive a pro-rated award to be paid as soon as reasonably practicable following such event. The term "disability" means a medically determinable physical or mental condition of Recipient resulting from bodily injury, disease, or mental disorder which is likely to continue for the remainder of Recipient's life and which renders Recipient incapable of performing the job assigned to Recipient by the Company or any substantially equivalent replacement job. For purposes of calculating the pro-rated award under this Section 3.3, the Volume Growth Payout Factor, the ROCE Payout Factor and the TSR Modifier shall both be calculated as if the Performance Period ended on the last day of the Company's most recently completed fiscal quarter prior to the date of death or disability. For this purpose, the TSR for the Company and each Peer Group Company for any partial fiscal year shall be determined based on the closing market prices of its stock for the twenty trading day period ending on the last day of the most recently completed fiscal quarter prior to the date of death or disability, before determining the Company's TSR Percentile Rank for that partial fiscal year, and the Average TSR Percentile Rank shall be determined by averaging however many full and partial fiscal years for which a TSR Percentile Rank shall have been determined. For this purpose, the Adjusted Net Income for any partial fiscal year shall be annualized (e.g., multiplied by 4/3 if the partial period is three quarters) and the Average Adjusted Capital shall be determined based on the average of Adjusted Capital as of the last day of only those quarters that have been completed, before determining the ROCE for that partial fiscal year, and the Average ROCE shall be determined by averaging however many full and partial fiscal years for which a ROCE shall have been determined. The number of Performance Shares to be issued as a pro-rated award under this Section 3.3 shall be determined by multiplying the number of Performance Shares determined after applying the modifications described in the preceding sentences by a fraction, the numerator of which is the number of days Recipient was employed by the Company since the beginning of the Performance Period and the denominator of which is the number of days in the period from the beginning of the Performance Period to the Vesting Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4 <u>Other Terminations</u>. If Recipient's employment by the Company is terminated at any time prior to the Vesting Date and neither Section 3.2 nor Section 3.3 applies to such termination, Recipient shall not be entitled to receive any Performance Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. <u>Non-Competition</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <u>Consequences of Violation</u>. If the Company determines that Recipient has engaged in an action prohibited by Section 4.2 below, then:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.1 Recipient shall immediately forfeit all rights under this Agreement to receive any unissued Performance Shares; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.2 If Performance Shares were issued to Recipient following completion of the Performance Period, and the Company's determination of a violation occurs on or before the first anniversary of the Vesting Date, Recipient shall repay to the Company (a) the number of shares of Common Stock issued to Recipient under this Agreement (the "Forfeited Shares"), plus (b) the amount of cash equal to the withholding taxes paid by withholding shares of Common Stock from Recipient as provided in Section 7. If any Forfeited

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Shares are sold by Recipient prior to the Company's demand for repayment, Recipient shall repay to the Company 100% of the proceeds of such sale or sales. The Company may, in its sole discretion, reduce the amount to be repaid by Recipient to take into account the tax consequences of such repayment for Recipient.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <u>Prohibited Actions</u>. The consequences described in Section 4.1 shall apply if during Recipient's employment with the Company, or at any time during the period of one year following termination of such employment, Recipient, directly or indirectly, owns, manages, controls, or participates in the ownership, management or control of, or is employed by, consults for, or is connected in any manner with:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.1 any business that (a) is engaged in the steel manufacturing business, (b) produces any of the same steel products as Cascade Steel Rolling Mills, Inc. ("Cascade Steel"), and (c) competes with Cascade Steel for sales to customers in California, Oregon, Washington, Nevada, British Columbia or Alberta;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.2 any business that (a) is engaged in the metals recycling business or the self-service used auto parts business, and (b) operates a metal recycling collection or processing facility or a self-service used auto parts store within 250 miles of any of the Company's facilities or stores;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. <u>Company Sale</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 If a Company Sale (as defined below) occurs before the Vesting Date, Recipient shall be entitled to receive an award payout no later than the earlier of fifteen (15) days following such event or the last day on which the Performance Shares could be issued so that Recipient may participate as a shareholder in receiving proceeds from the Company Sale. The amount of the award payout under this Section 5.1 shall be the greater of (a) the sum of the Volume Growth Target Share Amount and the ROCE Target Share Amount, or (b) the amount determined using a Volume Growth Payout Factor and a ROCE Payout Factor, each as modified by the TSR Modifier and calculated as if the Performance Period ended on the last day of the Company's most recently completed fiscal quarter prior to the date of the Company Sale. For this purpose, the TSR for the Company and each Peer Group Company for any partial fiscal year shall be determined based on the closing market prices of its stock for the twenty trading day period ending on the last day of the most recently completed fiscal quarter prior to the date of the Company Sale, before determining the Company's TSR Percentile Rank for that partial fiscal year, and the Average TSR Percentile Rank shall be determined by averaging however many full and partial fiscal years for which a TSR Percentile Rank shall have been determined. For this purpose, the Adjusted Net Income for any partial fiscal year shall be annualized (e.g., multiplied by 4/3 if the partial period is three quarters) and the Average Adjusted Capital shall be determined based on the average of Adjusted Capital as of the last day of only those quarters that have been completed, before determining the ROCE for that partial fiscal year, and the Average ROCE shall be determined by averaging however many full and partial fiscal years for which a ROCE shall have been determined. For this purpose, the number of thousands of long tons of ferrous and nonferrous metal sales, inclusive of ferrous tons transferred to the Company's steel mill, used to calculate Volume Growth for any partial fiscal year shall be annualized (e.g., multiplied by 4/3 if the partial period is three quarters) before determining the Volume Growth for that partial fiscal year, and the Average Volume Growth shall be determined by averaging however many full and partial fiscal years for which a Volume Growth shall have been determined.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 For purposes of this Agreement, a "Company Sale" shall mean the occurrence of any of the following events:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2.1 any consolidation, merger or plan of share exchange involving the Company (a "Merger") in which the Company is not the continuing or surviving corporation or pursuant to which outstanding shares of Class A Common Stock would be converted into cash, other securities or other property; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2.2 any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. <u>Certification and Payment</u>. As soon as practicable following the completion of the audit of the Company's consolidated financial statements for the final fiscal year of the Performance Period, the Company shall calculate the Volume Growth Payout Factor, the ROCE Payout Factor, the TSR Modifier and the corresponding numbers of Performance Shares issuable to Recipient. This calculation shall be submitted to the Committee. No later than the Vesting Date the Committee shall certify in writing (which may consist of approved minutes of a Committee meeting) the levels of Volume Growth attained by the Company for each fiscal year of the Performance Period, the levels of ROCE attained by the Company for each fiscal year of the Performance Period, the levels of TSR and TSR Percentile Rank attained by the Company for each fiscal year of the Performance Period, the Tax Impacts applied in calculating ROCE in each fiscal year and the number of Performance Shares issuable to Recipient based on the Company's performance. Subject to applicable tax withholding, the number of Performance Shares so certified shall be issued to Recipient as soon as practicable following the Vesting Date, but no Performance Shares shall be issued prior to certification. No fractional shares shall be issued and the number of Performance Shares deliverable shall be rounded to the nearest whole share. In the event of the death or disability of Recipient as described in Section 3.3 or a Company Sale as described in Section 5, each of which requires an award payout earlier than the Vesting Date, a similar calculation and certification process shall be followed within the time frames required by those sections.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. <u>Tax Withholding</u>. Recipient acknowledges that, on the date the Performance Shares are issued to Recipient (the "Payment Date"), the Value (as defined below) on that date of the Performance Shares will be treated as ordinary compensation income for federal and state income and FICA tax purposes, and that the Company will be required to withhold taxes on these income amounts. To satisfy the required minimum withholding amount, the Company shall withhold the number of Performance Shares having a Value equal to the minimum withholding amount. For purposes of this Section 7, the "Value" of a Performance Share shall be equal to the closing market price for Class A Common Stock on the last trading day preceding the Payment Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. <u>Changes in Capital Structure</u>. If the outstanding Class A Common Stock of the Company is hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any stock split, combination of shares or dividend payable in shares, recapitalization or reclassification, appropriate adjustment shall be made by the Committee in the number and kind of shares subject to this Agreement so that the Recipient's proportionate interest before and after the occurrence of the event is maintained.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. <u>Approvals</u>. The obligations of the Company under this Agreement are subject to the approval of state, federal or foreign authorities or agencies with jurisdiction in the matter. The Company will use its reasonable best efforts to take steps required by state, federal or foreign law or applicable regulations, including rules and regulations of the Securities and Exchange Commission and any stock exchange on which the Company's shares may then be listed, in connection with the award evidenced by this Agreement. The foregoing notwithstanding, the Company shall not be obligated to deliver Class A Common Stock under this Agreement if such delivery would violate or result in a violation of applicable state or federal securities laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. <u>No Right to Employment</u>. Nothing contained in this Agreement shall confer upon Recipient any right to be employed by the Company or to continue to provide services to the Company or to interfere in any way with the right of the Company to terminate Recipient's services at any time for any reason, with or without cause.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. <u>Recoupment Policy</u>. The Recipient acknowledges and agrees that the Performance Shares shall be subject to the Company's Executive Officer Incentive Compensation Recovery Policy, as the same may be amended from time to time or any replacement policy thereto, or as may be required by any applicable law (including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act and implementing rules and regulations thereunder).

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12. <u>Miscellaneous</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1 <u>Entire Agreement</u>. This Agreement constitutes the entire agreement of the parties with regard to the subjects hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.2 <u>Notices</u>. Any notice required or permitted under this Agreement shall be in writing and shall be deemed sufficient when delivered personally to the party to whom it is addressed or when deposited into the United States Mail as registered or certified mail, return receipt requested, postage prepaid, addressed to the Company, Attention: Corporate Secretary, at its principal executive offices or to Recipient at the address of Recipient in the Company's records, or at such other address as such party may designate by ten (10) days' advance written notice to the other party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.3 <u>Assignment; Rights and Benefits</u>. Recipient shall not assign this Agreement or any rights hereunder to any other party or parties without the prior written consent of the Company. The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company's successors and assigns and, subject to the foregoing restriction on assignment, be binding upon Recipient's heirs, executors, administrators, successors and assigns.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.4 <u>Further Action</u>. The parties agree to execute such instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.5 <u>Applicable Law; Attorneys' Fees</u>. The terms and conditions of this Agreement shall be governed by the laws of the State of Oregon. In the event either party institutes litigation hereunder, the prevailing party shall be entitled to reasonable attorneys' fees to be set by the trial court and, upon any appeal, the appellate court.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.6 <u>Severability</u>. Each provision of this Agreement will be treated as a separate and independent clause and unenforceability of any one clause will in no way impact the enforceability of any other clause. Should any of the provisions of this Agreement be found to be unreasonable or invalid by a court of competent jurisdiction, such provision will be enforceable to the maximum extent enforceable by the law of that jurisdiction.

SCHNITZER STEEL INDUSTRIES, INC.

By

Title

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## Exhibit 10.2

Exhibit 10.2

**Fiscal 2023 Annual Performance Bonus Program**

**for the President & Chief Executive Officer**

The Amended and Restated Employment Agreement between the Company and Tamara L. Lundgren provides for an annual cash bonus under a bonus program to be developed by the Compensation and Human Resources Committee (the "Committee"), with bonuses payable based on Company financial performance and achievement of management objectives as determined by the Committee at the beginning of each fiscal year. The annual bonus program for Ms. Lundgren for fiscal 2023 has two components. The first component consists of an award with a cash payout based on achievement of Company financial performance targets established by the Committee. The second component consists of an award with a cash payout based on the achievement of management objectives established by the Committee. The two components of the annual performance bonus program shall operate independently, and the Committee shall make determinations with respect to the second component without regard to the outcomes under the first component.

**Company Financial Performance Targets**

 **Calculation of Financial Performance Targets.** For fiscal 2023, the Company's financial performance targets shall be the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") and earnings per share ("EPS"). The Committee shall specify the weight to be assigned to each target. The cash payout to the participant under this component of the bonus program shall be determined based on the level of achievement of the performance target. The Committee has established performance targets for EBITDA and EPS and corresponding payouts as a percentage of the participant's target amount. Payouts begin at a positive level of EBITDA and EPS.

 **Participant's Target Amount.** The target amount for the Company financial performance component shall be 75% of Ms. Lundgren's annual base salary as in effect on August 31, 2023, with the maximum bonus under this target not to exceed three times her target amount under this component.

**EBITDA.** The EBITDA goal for fiscal 2023 shall be based on the Adjusted EBITDA for that year. Adjusted EBITDA for fiscal 2023 shall mean the Company's earnings before interest, taxes, depreciation and amortization for that fiscal year before extraordinary items and the cumulative effects of changes in accounting principles, if any, as set forth in the audited consolidated financial statements of the Company and its subsidiaries for that fiscal year, adjusted to eliminate the impact of such other items as the Committee shall specify.

**EPS.** The EPS goal for fiscal 2023 shall be based on the Adjusted EPS for that year. Adjusted EPS for fiscal 2023 shall mean the Company's diluted earnings per share attributable to SSI for that fiscal year before extraordinary items and the cumulative effects of changes in accounting principles, if any, as set forth in the audited consolidated financial statements of the Company and its subsidiaries for that fiscal year, adjusted to eliminate the impact of such other items as the Committee shall specify.

 **Change in Accounting Principle.** If the Company implements a change in accounting principle during fiscal 2023 either as a result of issuance of new accounting standards or otherwise, and the effect of the accounting change was not reflected in the Company's business plan at the time of approval of this award, then EBITDA and EPS shall be adjusted to eliminate the impact of the change in accounting principle.

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**Management Objectives**

The second component of the annual bonus program is based on the achievement of the management objectives determined by the Committee. The Committee shall establish the management objectives and specify the weight to be assigned to each objective. Following the end of the fiscal year, the Committee shall evaluate Ms. Lundgren's performance against the management objectives, determine the extent to which each objective has been met and determine the amount of the bonus to be paid. The target bonus amount for this component of the bonus program shall be 75% of Ms. Lundgren's annual base salary as in effect on August 31, 2023, and the maximum bonus under this component may not exceed three times her target amount under this component.

**General Provisions**

**Certification.** Following the end of fiscal 2023 and prior to the payment of any bonus, the Committee shall certify in writing the level of attainment of each performance target for the year and the calculation of the bonus amount. The bonus payout shall be made in cash as soon as practicable after October 31, 2023 following certification by the Committee.

**Conditions to Payment.** Subject to the terms of her employment agreement and change in control agreement, Ms. Lundgren must be employed by the Company on August 31, 2023 to receive the annual bonus.

**Negative Discretion.** The Committee reserves the right in its sole discretion to reduce the bonus payout for Ms. Lundgren from the amounts determined as set forth above prior to payment on such terms as the Committee may determine.

**Recoupment Policy.** All bonuses or incentive awards paid or payable under this plan or program are subject to the terms and conditions of the Company's Executive Officer Incentive Compensation Recovery Policy, as the same may be amended from time to time or any replacement policy thereto, or as may be required by any applicable law (including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act and implementing rules and regulations thereunder).

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## Exhibit 31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Tamara L. Lundgren, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Schnitzer Steel Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

January 5, 2023

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| |
|:---|
| /s/ Tamara L. Lundgren |
| Tamara L. Lundgren<br>Chairman, President and Chief Executive Officer |

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## Exhibit 31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Stefano Gaggini, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Schnitzer Steel Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

January 5, 2023

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| |
|:---|
| /s/ Stefano Gaggini |
| Stefano Gaggini<br>Senior Vice President and Chief Financial Officer |

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## Exhibit 32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Schnitzer Steel Industries, Inc. (the "Company") on Form 10-Q for the quarter ended November 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Chairman, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

January 5, 2023

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| |
|:---|
| /s/ Tamara L. Lundgren |
| Tamara L. Lundgren<br>Chairman, President and Chief Executive Officer |

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## Exhibit 32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Schnitzer Steel Industries, Inc. (the "Company") on Form 10-Q for the quarter ended November 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Senior Vice President and Chief Financial Officer, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

January 5, 2023

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| |
|:---|
| /s/ Stefano Gaggini |
| Stefano Gaggini<br>Senior Vice President and Chief Financial Officer<br>|

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