SCHNITZER STEEL(SCHN) - 2024 Q2 - Quarterly Report

Forward-Looking Statements This section outlines forward-looking statements regarding future events, financial outlooks, and growth initiatives, subject to various risks and uncertainties - This report contains forward-looking statements regarding future events, financial outlooks, growth initiatives, market trends, and capital expenditures[9][10] - These statements are subject to various risks and uncertainties, including economic conditions, environmental costs, market volatility, and supply chain disruptions, which may cause actual results to differ materially[11][12] PART I. FINANCIAL INFORMATION This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, equity, and cash flows, along with accompanying notes Unaudited Condensed Consolidated Balance Sheets This subsection provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | Feb 29, 2024 | Aug 31, 2023 | | :--- | :--- | :--- | | Total Assets | $1,745,529 | $1,715,949 | | Total Liabilities | $898,063 | $804,290 | | Total Equity | $847,466 | $911,659 | Unaudited Condensed Consolidated Statements of Operations This subsection presents the company's revenues, operating results, and net income or loss for the reported periods Condensed Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $621,059 | $755,953 | $1,293,956 | $1,354,683 | | Operating (loss) income | $(26,718) | $8,542 | $(49,705) | $(7,769) | | Net (loss) income | $(34,010) | $4,272 | $(51,808) | $(13,284) | | Diluted (loss) income per share | $(1.19) | $0.15 | $(1.83) | $(0.48) | Unaudited Condensed Consolidated Statements of Comprehensive Loss This subsection details the company's comprehensive loss, including net loss and other comprehensive income or loss items Condensed Consolidated Statements of Comprehensive (Loss) Income (in thousands) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Net (loss) income | $(34,010) | $4,272 | $(51,808) | $(13,284) | | Comprehensive (loss) income | $(33,592) | $2,969 | $(51,809) | $(16,800) | Unaudited Condensed Consolidated Statements of Equity This subsection outlines changes in the company's total equity, reflecting net loss and dividend payments - Total Radius shareholders' equity decreased from $908.2 million to $844.4 million as of February 29, 2024, primarily due to a net loss of $51.9 million and $10.7 million in dividend payments[27] Unaudited Condensed Consolidated Statements of Cash Flows This subsection summarizes the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended Feb 29, 2024 | Six Months Ended Feb 28, 2023 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(56,393) | $25,692 | | Net cash used in investing activities | $(43,658) | $(98,387) | | Net cash provided by financing activities | $107,596 | $40,415 | | Net increase (decrease) in cash and cash equivalents | $7,530 | $(32,344) | Notes to the Unaudited Condensed Consolidated Financial Statements This subsection provides additional details and explanations for the financial statements, including corporate name change, credit covenant compliance, environmental liabilities, and debt levels - The company changed its corporate name from Schnitzer Steel Industries, Inc. to Radius Recycling, Inc. on January 30, 2024[37] - The company anticipates potential non-compliance with credit agreement financial covenants if challenging market conditions and compressed margins persist[36] - Total environmental liabilities were $66 million as of February 29, 2024, with $6 million related to the Portland Harbor Superfund site, for which full cost estimation is not possible and could be material[72][88][89] - Total debt increased to $374 million as of February 29, 2024, from $249 million as of August 31, 2023, with revolving credit facility borrowings rising to $355 million from $230 million[126] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a significant year-over-year decline in Q2 FY2024 operating results due to lower sales volumes and compressed margins, leading to a net loss and prompting cost reduction initiatives Q2 FY2024 Financial Highlights vs. Q2 FY2023 | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Diluted loss per share from continuing operations | $(1.19) | $0.14 | | Adjusted diluted loss per share from continuing operations | $(1.04) | $0.14 | | Net loss (income) | $(34 million) | $4 million | | Adjusted EBITDA | $3 million | $32 million | - Q2 FY2024 ferrous sales volumes decreased 22% year-over-year due to tight scrap supply, with average ferrous selling prices increasing 5% and nonferrous prices decreasing 5%[151][156] - The company is implementing new cost-saving measures targeting $40 million in annual benefits, in addition to $30 million from Q1 initiatives, through headcount reductions and expense decreases[164] - Management warns of potential non-compliance with credit agreement financial covenants if market conditions do not improve or cost-saving initiatives are not fully realized[187] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section outlines the company's primary market risks, including commodity price, interest rate, credit, and foreign currency exchange risks, and the strategies employed for their management - The company manages commodity price risk from fluctuating ferrous and nonferrous metal prices by adjusting purchase prices in response to selling price changes[214] - Credit risk is managed using methods like letters of credit, which covered 28% of accounts receivable as of February 29, 2024, a decrease from 38% at August 31, 2023[216][218] - Foreign currency exchange risk primarily stems from U.S. Dollar denominated sales by the Canadian subsidiary[219] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of February 29, 2024, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of February 29, 2024[221] - No material changes to internal control over financial reporting occurred during the quarter[222] PART II. OTHER INFORMATION This part provides additional information, including legal proceedings, risk factors, recent appointments, and a list of exhibits Item 1. Legal Proceedings This section incorporates by reference information on legal proceedings from previous SEC filings and Note 5, detailing commitments and contingencies including environmental matters - Information regarding legal proceedings is incorporated by reference from the FY2023 Form 10-K, Q1 FY2024 Form 10-Q, and Note 5 of this report[225] Item 1A. Risk Factors The company reports no material changes to its risk factors since the filing of its Annual Report on Form 10-K for the fiscal year ended August 31, 2023 - There have been no material changes to the company's risk factors since the last Annual Report on Form 10-K was filed[226] Item 5. Other Information This section discloses the appointment of Erika Kelley as Vice President and Chief Accounting Officer and confirms no Rule 10b5-1 trading arrangement modifications by directors or officers - On April 1, 2024, the Board appointed Erika Kelley as the company's Vice President and Chief Accounting Officer, effective April 8, 2024[228] - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement during the second quarter of fiscal 2024[227] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, compensatory plan details, and required Sarbanes-Oxley certifications - The exhibits filed with this report include updated corporate governance documents, compensatory plan details, and required Sarbanes-Oxley certifications[233]