Forward-Looking Statements Forward-Looking Statements This section contains "safe harbor" statements under the Private Securities Litigation Reform Act of 1995, cautioning that future-looking statements are subject to risks and uncertainties that could cause actual results to differ materially, with no obligation to update these statements - Forward-looking statements cover topics such as the impact of equipment upgrades, pricing, volumes, profitability, acquisitions, supply chain disruptions, inflation, and interest rates9 - Key risks that could affect results include environmental cleanup costs (e.g., Portland Harbor), economic cyclicality, inflation, interest rate fluctuations, supply and demand volatility, and cybersecurity incidents11 PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the quarterly period ended November 30, 2024, including Balance Sheets, Statements of Operations, Comprehensive Income, Equity, Cash Flows, and notes, reporting a net loss of $36.9 million, a significant increase from the $17.8 million loss in the prior-year period Unaudited Condensed Consolidated Balance Sheets The balance sheet as of November 30, 2024, shows a slight decrease in total assets to $1.51 billion from $1.53 billion, an increase in total liabilities to $927.9 million from $908.0 million primarily due to long-term debt, and a decrease in total equity from $625.7 million to $582.9 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Nov 30, 2024 | Aug 31, 2024 | | :--- | :--- | :--- | | Total current assets | $588,264 | $609,127 | | Total assets | $1,510,794 | $1,533,769 | | Total current liabilities | $291,654 | $316,570 | | Long-term debt, net | $439,872 | $409,082 | | Total liabilities | $927,887 | $908,029 | | Total equity | $582,907 | $625,740 | Unaudited Condensed Consolidated Statements of Operations For the three months ended November 30, 2024, the company reported a net loss of $36.9 million, or $(1.30) per diluted share, compared to a net loss of $17.8 million, or $(0.64) per diluted share, for the same period in 2023, with revenues slightly decreasing by 2.4% and operating loss widening Statement of Operations Summary (in thousands, except per share amounts) | Metric | Q1 FY2025 (3-mos ended Nov 30, 2024) | Q1 FY2024 (3-mos ended Nov 30, 2023) | | :--- | :--- | :--- | | Revenues | $656,537 | $672,897 | | Operating income (loss) | $(24,912) | $(22,987) | | Net income (loss) | $(36,929) | $(17,799) | | Net income (loss) attributable to Radius shareholders | $(37,173) | $(17,964) | | Diluted loss per share | $(1.30) | $(0.64) | Unaudited Condensed Consolidated Statements of Cash Flows For the first three months of fiscal 2025, net cash used in operating activities was $1.9 million, investing activities used $11.8 million due to lower capital expenditures, and financing activities provided $23.4 million primarily from net borrowings of long-term debt Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 FY2025 (3-mos ended Nov 30, 2024) | Q1 FY2024 (3-mos ended Nov 30, 2023) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(1,905) | $(1,299) | | Net cash used in investing activities | $(11,779) | $(24,199) | | Net cash provided by (used in) financing activities | $23,354 | $23,816 | | Net change in cash and cash equivalents | $9,671 | $(1,624) | Notes to the Unaudited Condensed Consolidated Financial Statements The notes provide detailed explanations of accounting policies and specific financial statement items, including the company's single reportable segment, significant environmental liabilities for the Portland Harbor Superfund site, disaggregation of revenue, and details on debt facilities and recent amendments - The company operates as a single, functionally based, integrated operating and reportable segment32 - As of November 30, 2024, the company had accrued environmental liabilities of $66 million, including contingencies for the Portland Harbor Superfund site where the EPA's estimated total remedy cost is $1.7 billion, with the company's specific liability remaining uncertain and potentially material535770 - On January 3, 2025, the company amended its credit agreement, extending for two additional fiscal quarters the temporary replacement of its fixed charge coverage ratio covenant with an interest coverage ratio and an asset coverage ratio108112 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 FY2025 financial results, noting that softer market conditions for finished steel and ferrous products led to a wider net loss, partially offset by stronger nonferrous metal prices and productivity initiatives that lowered SG&A expenses by 10%, while debt increased to fund working capital and capital expenditures Q1 FY2025 vs Q1 FY2024 Performance Highlights | Metric | Q1 FY2025 | Q1 FY2024 | | :--- | :--- | :--- | | Diluted Loss Per Share | $(1.30) | $(0.64) | | Adjusted Diluted Loss Per Share | $(1.33) | $(0.64) | | Net Loss | $37 million | $18 million | | Adjusted EBITDA | Break-even | $1 million | - Financial performance was negatively impacted by a 7% decrease in average net selling prices for finished steel and a 5% decrease for ferrous products, partially offset by a 12% increase in average net selling prices for nonferrous products130140 - Productivity and cost reduction initiatives led to a 10% decrease in SG&A expense compared to the prior year quarter, substantially offsetting the impact of softer market conditions130142 Results of Operations Total revenues for Q1 FY2025 decreased 2% year-over-year to $656.5 million, driven by lower average selling prices and reduced sales volumes for ferrous, nonferrous, and finished steel products, leading to a contracted gross margin and a widened net loss of $37 million Revenue and Volume Changes (Q1 FY2025 vs Q1 FY2024) | Category | Revenue Change | Volume Change | | :--- | :--- | :--- | | Ferrous | -6% | -4% | | Nonferrous | +8% | -2% | | Steel | -10% | -3% | - The prior year quarter (Q1 FY2024) included a nonrecurring insurance recovery gain of $4 million related to the Everett Facility shredder fire, which was absent in the current quarter141 Liquidity and Capital Resources The company's primary liquidity sources are cash from operations and credit facilities, with net cash used in operations at $2 million in Q1 FY2025, total debt increasing to $445 million to fund working capital and capital expenditures, and a credit agreement amendment in January 2025 to extend temporary covenant relief - Total debt increased to $445 million as of November 30, 2024, with debt, net of cash, at $430 million147 - Capital expenditures for Q1 FY2025 were $12 million, compared to $25 million in the prior year period, with the company planning to invest approximately $60 million in capital expenditures for the full fiscal year 2025154167 - A quarterly dividend of $0.1875 per common share was paid on November 26, 2024172 Item 3. Quantitative and Qualitative Disclosures about Market Risk The company is exposed to commodity price, interest rate, credit, and foreign currency exchange rate risks, actively managing commodity price risk by adjusting scrap metal purchase prices and credit risk through letters of credit and credit insurance, with no material changes to interest rate risk - The company is exposed to commodity price risk from variations in metal prices; a hypothetical 10% decrease in the estimated selling price of inventory would not have had a material impact on its Net Realizable Value (NRV) as of November 30, 2024191 - To mitigate credit risk, 22% of the accounts receivable balance was covered by letters of credit as of November 30, 2024, down from 28% at August 31, 2024195 Item 4. Controls and Procedures Based on an evaluation as of November 30, 2024, the company's CEO and CFO concluded that disclosure controls and procedures were effective at a reasonable assurance level, with no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of November 30, 2024198 - No material changes to internal control over financial reporting occurred during the quarter ended November 30, 2024199 PART II. OTHER INFORMATION Item 1. Legal Proceedings This section refers to the company's Annual Report on Form 10-K and Note 4 of this 10-Q for information on legal proceedings, including the Portland Harbor Superfund site and litigation related to the Oakland facility - Information regarding legal proceedings is incorporated by reference from the FY2024 Form 10-K and Note 4 of this Form 10-Q201 Item 1A. Risk Factors The company states that there have been 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, 2024 - No material changes to risk factors were identified since the last Annual Report on Form 10-K202 Item 5. Other Information This section discloses that on January 3, 2025, the company entered into a fifth amendment to its credit agreement, extending the temporary replacement of a key financial covenant through August 31, 2025, and confirms no directors or officers adopted or modified a Rule 10b5-1 trading plan during the quarter - On January 3, 2025, the company amended its credit agreement to extend temporary covenant relief and make adjustments to the calculation of EBITDA204205 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including new long-term incentive and restricted stock unit award agreements, the CEO's bonus program, and certifications by the CEO and CFO as required by the Sarbanes-Oxley Act - Exhibits filed include management compensation plans and Sarbanes-Oxley certifications208 Signatures Signatures The report was signed on January 8, 2025, by Tamara L. Lundgren, Chairman, President and Chief Executive Officer, and Stefano R. Gaggini, Senior Vice President and Chief Financial Officer - The Form 10-Q was duly authorized and signed by the CEO and CFO on January 8, 2025211
SCHNITZER STEEL(SCHN) - 2025 Q1 - Quarterly Report