FORWARD-LOOKING STATEMENTS This section outlines statements regarding future events, expectations, and strategies, including the proposed merger, and identifies associated risks and uncertainties - Forward-looking statements cover future events, expectations, intentions, beliefs, and strategies, including the proposed merger with Toyota Tsusho America, Inc. (TAI)9 - Risks and uncertainties that could cause actual results to differ materially include merger-related risks, equipment issues, economic conditions, supply chain disruptions, and environmental liabilities1112 PART I. FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and related notes for the reporting period Item 1. Financial Statements (Unaudited) This section provides the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income (loss), equity, and cash flows, along with detailed notes explaining significant accounting policies and specific financial items Unaudited Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | Metric | May 31, 2025 | August 31, 2024 | Change | | :-------------------------------- | :----------- | :-------------- | :----- | | Total Assets | $1,472,198 | $1,533,769 | (4.0%) | | Total Liabilities | $944,085 | $908,029 | 4.0% | | Total Equity | $528,113 | $625,740 | (15.6%) | | Cash and cash equivalents | $16,214 | $5,552 | 192.0% | | Accounts receivable, net | $239,095 | $258,157 | (7.4%) | | Inventories | $272,957 | $293,932 | (7.2%) | | Long-term debt, net of current maturities | $449,010 | $409,082 | 9.8% | | Retained earnings | $502,913 | $606,417 | (17.1%) | Unaudited Condensed Consolidated Statements of Operations This section reports the company's revenues, expenses, and net income or loss over specific periods Condensed Consolidated Statements of Operations (in thousands, except per share) | Metric | 3 Months Ended May 31, 2025 | 3 Months Ended May 31, 2024 | 9 Months Ended May 31, 2025 | 9 Months Ended May 31, 2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenues | $726,991 | $673,920 | $2,026,036 | $1,967,876 | | Cost of goods sold | $677,444 | $628,390 | $1,915,587 | $1,842,806 | | Selling, general and administrative | $56,350 | $62,100 | $167,977 | $187,362 | | Goodwill impairment charges | $— | $215,941 | $— | $215,941 | | Operating income (loss) | $(7,203) | $(235,486) | $(60,795) | $(285,191) | | Net income (loss) attributable to Radius shareholders | $(16,964) | $(198,390) | $(87,114) | $(250,333) | | Basic EPS | $(0.59) | $(6.97) | $(3.04) | $(8.82) | Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) This section details the company's comprehensive income or loss, including net income and other comprehensive income items Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | 3 Months Ended May 31, 2025 | 3 Months Ended May 31, 2024 | 9 Months Ended May 31, 2025 | 9 Months Ended May 31, 2024 | | :-------------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) | $(16,406) | $(198,511) | $(86,300) | $(250,320) | | Foreign currency translation adjustments | $3,013 | $(308) | $(942) | $(890) | | Total other comprehensive income (loss), net of tax | $3,100 | $616 | $(259) | $615 | | Comprehensive income (loss) attributable to Radius shareholders | $(13,864) | $(197,774) | $(87,373) | $(249,718) | Unaudited Condensed Consolidated Statements of Equity This section outlines changes in the company's equity accounts, including retained earnings and total shareholders' equity Condensed Consolidated Statements of Equity (in thousands) | Metric | Balance as of March 1, 2025 | Balance as of May 31, 2025 | Balance as of September 1, 2024 | Balance as of May 31, 2025 | | :------------------------------------ | :-------------------------- | :------------------------- | :-------------------------- | :------------------------- | | Retained Earnings (3 months) | $525,365 | $502,913 | N/A | N/A | | Retained Earnings (9 months) | N/A | N/A | $606,417 | $502,913 | | Total Radius Shareholders' Equity (3 months) | $542,716 | $525,609 | N/A | N/A | | Total Radius Shareholders' Equity (9 months) | N/A | N/A | $623,112 | $525,609 | | Net income (loss) attributable to Radius shareholders (3 months) | N/A | $(16,964) | N/A | N/A | | Net income (loss) attributable to Radius shareholders (9 months) | N/A | N/A | N/A | $(87,114) | | Dividends paid (3 months) | N/A | $(5,488) | N/A | N/A | | Dividends paid (9 months) | N/A | N/A | N/A | $(16,390) | Unaudited Condensed Consolidated Statements of Cash Flows This section reports the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | 9 Months Ended May 31, 2025 | 9 Months Ended May 31, 2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Net cash provided by (used in) operating activities | $21,229 | $(57,218) | | Net cash used in investing activities | $(29,072) | $(59,429) | | Net cash provided by (used in) financing activities | $18,482 | $135,760 | | Net change in cash and cash equivalents | $10,662 | $19,157 | | Cash and cash equivalents as of end of period | $16,214 | $25,189 | Notes to the Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations of the company's significant accounting policies and specific financial statement items Note 1 - Summary of Significant Accounting Policies This note describes the company's primary business operations, the proposed merger with TAI, and key accounting principles applied - The Company operates as a single operating and reportable segment, focusing on acquiring and recycling scrap metal and producing finished steel products3839 - On March 13, 2025, the Company entered into a Merger Agreement with Toyota Tsusho America, Inc. (TAI), under which Radius Recycling will become a wholly-owned subsidiary of TAI40 - Receivables from insurers for environmental claims totaled $14 million as of May 31, 2025, and $13 million as of August 31, 202448 Note 2 - Inventories This note details the composition and valuation of the company's inventory, including scrap metal, semi-finished, and finished goods Inventories (in thousands) | Category | May 31, 2025 | August 31, 2024 | | :-------------------------- | :----------- | :-------------- | | Processed and unprocessed scrap metal | $123,073 | $137,013 | | Semi-finished goods | $12,111 | $14,846 | | Finished goods | $63,713 | $72,225 | | Supplies | $74,060 | $69,848 | | Total Inventories | $272,957 | $293,932 | Note 3 - Goodwill This note provides information on the company's goodwill balance and any impairment charges recognized during the period - Goodwill balance remained $13 million as of May 31, 2025, all allocated to one recycling services operation6265 - A goodwill impairment charge of $216 million was recognized in the third quarter of fiscal 2024 for three reporting units (two regional metals recycling operations and the auto parts stores network)576364 Note 4 - Commitments and Contingencies This note outlines the company's environmental liabilities, legal proceedings, and other significant commitments Environmental Liabilities (in thousands) | Metric | September 1, 2024 | May 31, 2025 | | :-------------------------- | :---------------- | :----------- | | Balance of Liabilities | $65,649 | $64,593 | | Short-Term Liabilities | N/A | $12,993 | | Long-Term Liabilities | N/A | $51,600 | - The Company has environmental liabilities of $65 million as of May 31, 2025, primarily for potential remediation at locations where it has conducted business, including $5 million related to the Portland Harbor Superfund site6879 - An indictment against the Company and two employees for environmental regulatory violations related to an August 2023 scrap metal fire was dismissed on May 23, 202595 Note 5 - Accumulated Other Comprehensive Income (Loss) This note details the changes in the company's accumulated other comprehensive income or loss during the reporting periods Changes in Accumulated Other Comprehensive Income (Loss) (in thousands) | Metric | 3 Months Ended May 31, 2025 | 3 Months Ended May 31, 2024 | 9 Months Ended May 31, 2025 | 9 Months Ended May 31, 2024 | | :-------------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Balances - March 1 (Beginning of period) | $(43,531) | $(39,684) | N/A | N/A | | Balances - September 1 (Beginning of period) | N/A | N/A | $(40,172) | $(39,683) | | Net periodic other comprehensive income (loss) | $3,100 | $616 | $(259) | $615 | | Balances - May 31 (End of period) | $(40,431) | $(39,068) | $(40,431) | $(39,068) | Note 6 - Revenue This note disaggregates the company's revenues by major product categories and sales destinations, highlighting period-over-period changes Revenues by Major Product and Sales Destination (in thousands) | Category | 3 Months Ended May 31, 2025 | 3 Months Ended May 31, 2024 | 9 Months Ended May 31, 2025 | 9 Months Ended May 31, 2024 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Ferrous revenues | $320,746 | $334,425 | $966,805 | $999,419 | | Nonferrous revenues | $229,428 | $184,127 | $590,489 | $517,902 | | Steel revenues | $125,935 | $108,259 | $331,900 | $322,511 | | Retail and other revenues | $50,882 | $47,109 | $136,842 | $128,044 | | Total revenues | $726,991 | $673,920 | $2,026,036 | $1,967,876 | | Foreign sales | $340,718 | $348,503 | $1,032,275 | $1,023,799 | | Domestic sales | $386,273 | $325,417 | $993,761 | $944,077 | - Total revenues increased 8% for the three months and 3% for the nine months ended May 31, 2025, compared to prior year periods100 Note 7 - Share-Based Compensation This note describes the company's share-based compensation plans, including RSU, PSU, and DSU grants to employees and directors - In Q1 fiscal 2025, the Company granted 446,993 RSUs and 340,454 PSUs to key employees and officers under the 2024 Omnibus Incentive Plan103 - PSUs are based on relative Total Shareholder Return (TSR) and volume growth metrics over an approximately three-year performance period106108 - In Q2 fiscal 2025, 57,642 DSUs were granted to non-employee directors, vesting on the day before the 2025 annual meeting111 Note 8 - Derivative Financial Instruments This note explains the company's use of derivative financial instruments, specifically interest rate swaps, to manage interest rate risk - The Company uses pay-fixed interest rate swap contracts, designated as cash flow hedges, to manage variability in interest cash flows on variable-rate loans113 - The total notional amount of interest rate swaps was $150 million as of May 31, 2025, and August 31, 2024116 - Reclassified cash flow hedge amounts to interest expense were less than $1 million for the three and nine months ended May 31, 2025117 Note 9 - Income Taxes This note provides details on the company's effective tax rate and the factors influencing its income tax expense or benefit Effective Tax Rate from Continuing Operations | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | 3 Months Ended May 31 | 2.0% | 18.3% | | 9 Months Ended May 31 | 0.9% | 17.6% | - The effective tax rate was lower than the U.S. federal statutory rate of 21% primarily due to an increase in the valuation allowance against deferred tax assets in the U.S. tax jurisdiction118119 Note 10 - Net Income (Loss) Per Share This note presents the calculation of basic and diluted net income or loss per share attributable to Radius shareholders Net Income (Loss) Per Share Attributable to Radius Shareholders (in thousands, except per share) | Metric | 3 Months Ended May 31, 2025 | 3 Months Ended May 31, 2024 | 9 Months Ended May 31, 2025 | 9 Months Ended May 31, 2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) attributable to Radius shareholders | $(16,964) | $(198,390) | $(87,114) | $(250,333) | | Basic EPS | $(0.59) | $(6.97) | $(3.04) | $(8.82) | | Diluted EPS | $(0.59) | $(6.97) | $(3.04) | $(8.82) | | Weighted average common shares outstanding, basic | 28,700 | 28,479 | 28,652 | 28,385 | Note 11 - Related Party Transactions This note discloses transactions with related parties, specifically recycled metal purchases from a joint venture Recycled Metal Purchases from Joint Venture (in thousands) | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | 3 Months Ended May 31 | $5,000 | $5,000 | | 9 Months Ended May 31 | $13,000 | $13,000 | Note 12 - Debt This note details the company's debt structure, including revolving credit facilities, finance lease liabilities, and other obligations Debt (in thousands) | Category | May 31, 2025 | August 31, 2024 | | :------------------------------------------ | :----------- | :-------------- | | Bank revolving credit facilities | $435,000 | $393,612 | | Finance lease liabilities | $7,319 | $9,042 | | Other debt obligations | $12,094 | $12,116 | | Total debt | $454,413 | $414,770 | - On June 16, 2025, the Company amended its credit agreement, reducing revolving commitments from $800 million to $625 million and extending the suspension of the minimum permitted fixed charge coverage ratio covenant125186 - The weighted average interest rate on outstanding credit facilities decreased from 8.0% as of August 31, 2024, to 7.0% as of May 31, 2025128190 Note 13 - Merger with TAI This note provides an update on the merger agreement with TAI, including terms, shareholder approval, and expected closing timeline - On March 13, 2025, the Company entered into a Merger Agreement with TAI, where Radius Recycling will become a wholly-owned subsidiary of TAI131 - Each share of Radius Common Stock will be converted into the right to receive $30.00 in cash (Merger Consideration)132 - The merger was approved by shareholders on June 5, 2025, and is expected to close in the second half of calendar year 2025, subject to remaining regulatory approvals139140141 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations for the three and nine months ended May 31, 2025, compared to the prior year periods, highlighting key drivers, market conditions, and the impact of strategic initiatives and corporate events General This section provides an overview of Radius Recycling's business model, operations, and key factors influencing its financial performance - Radius Recycling is a vertically integrated recycler of ferrous and nonferrous metal and a manufacturer of finished steel products145 - The Company operates 50 retail self-service auto parts stores, 53 metals recycling facilities, and an electric arc furnace (EAF) steel mill145 - Results depend on demand and prices for recycled metal, raw material supply, operating leverage from higher volumes, and efficient metal extraction150 Merger with TAI This section provides an update on the proposed merger with TAI, including the acquisition terms and approval status - The Company entered a Merger Agreement with TAI on March 13, 2025, to be acquired for $30.00 per share in cash152 - The merger has been approved by the Board of Directors and shareholders and is expected to close in the second half of calendar year 2025, subject to customary closing conditions152 Everett Facility Shredder Fire This section details the resolution of property damage and business income insurance claims related to the December 2021 fire at the Everett facility - Repairs and replacement of property damaged by the December 2021 fire at the Everett facility were substantially completed by the end of fiscal 2023153 - All insurance claims for property damage and business income losses related to the fire were fully settled and recognized by August 31, 2024, including a $7 million gain in Q3 fiscal 2024153 Use of Non-GAAP Financial Measures This section explains the company's use of non-GAAP financial measures, such as adjusted EBITDA, to provide additional insights into performance - Non-GAAP financial measures like Adjusted EBITDA are used to provide a meaningful presentation of operating and financial performance, excluding items not related to underlying business operations155 - Adjusted EBITDA excludes items such as restructuring charges, impairment charges, amortization of cloud computing costs, legacy environmental charges, and business development costs155 Financial Highlights of Results of Operations for the Third Quarter of Fiscal 2025 This section summarizes key financial performance indicators for the third quarter of fiscal 2025, highlighting drivers of improvement - Significant financial performance improvement in Q3 fiscal 2025 was driven by stronger nonferrous market conditions, higher finished steel sales volumes, and productivity initiatives160 Financial Highlights (in thousands, except per share) | Metric | 3 Months Ended May 31, 2025 | 3 Months Ended May 31, 2024 | Change | | :------------------------------------------ | :-------------------------- | :-------------------------- | :----- | | Diluted loss per share from continuing operations | $(0.59) | $(6.97) | (92%) | | Adjusted diluted loss per share from continuing operations | $(0.39) | $(0.59) | (34%) | | Net loss | $(16,000) | $(199,000) | (92%) | | Adjusted EBITDA | $22,000 | $9,000 | 155% | - Nonferrous sales volumes hit a record high, up 17% YoY, with average net selling prices 6% higher. Finished steel sales volumes increased 20% YoY160 Results of Operations This section provides a detailed analysis of the company's revenues, gross margin, expenses, and net income for the reporting periods Selected Financial Measures and Operating Statistics (in thousands, except prices and per share amounts) | Metric | 3 Months Ended May 31, 2025 | 3 Months Ended May 31, 2024 | 9 Months Ended May 31, 2025 | 9 Months Ended May 31, 2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total revenues | $726,991 | $673,920 | $2,026,036 | $1,967,876 | | Gross margin | $49,547 | $45,530 | $110,449 | $125,070 | | Selling, general and administrative expense | $56,350 | $62,100 | $167,977 | $187,362 | | Net income (loss) | $(16,406) | $(198,511) | $(86,300) | $(250,320) | | Adjusted EBITDA | $22,014 | $8,618 | $21,562 | $12,475 | | Average nonferrous sales price ($/pound) | $1.10 | $1.04 | $1.05 | $0.97 | | Nonferrous volumes (pounds, in thousands) | 215,253 | 183,230 | 566,831 | 541,435 | | Finished steel sales volumes (ST, in thousands) | 151 | 126 | 407 | 369 | - Nonferrous sales volumes increased 17% in Q3 and 5% in the first nine months of fiscal 2025, with average net selling prices up 6% and 8% respectively170 - SG&A expense decreased 9% in Q3 and 10% in the first nine months of fiscal 2025, reflecting benefits from cost reduction measures172 Liquidity and Capital Resources This section discusses the company's cash position, debt levels, operating cash flows, capital expenditures, and dividend policy Liquidity and Debt Metrics (in thousands) | Metric | May 31, 2025 | August 31, 2024 | | :-------------------------- | :----------- | :-------------- | | Cash balances | $16,000 | $6,000 | | Debt | $454,000 | $415,000 | | Debt, net of cash | $438,000 | $409,000 | - Net cash provided by operating activities was $21 million in the first nine months of fiscal 2025, compared to net cash used of $57 million in the prior year179 - Capital expenditures totaled $34 million for the first nine months of fiscal 2025, with a plan to invest approximately $60 million in fiscal 2025, including $14 million for environmental projects183196197 - The Company declared a quarterly dividend of $0.1875 per common share, equating to an annual cash dividend of $0.75 per common share199 Contractual Obligations This section confirms no material changes to contractual obligations since the last annual report and notes outstanding letters of credit - No material changes to contractual obligations since the last Annual Report on Form 10-K204 - The Company maintains $9 million outstanding under stand-by letters of credit204 Critical Accounting Estimates This section confirms no material changes to critical accounting estimates since the last annual report - No material changes to critical accounting estimates since the last Annual Report on Form 10-K205 Recently Issued Accounting Standards This section discusses the impact of recently issued accounting standards, specifically ASU 2024-03, on the company's financial statements - ASU 2024-03, Disaggregation of Income Statement Expenses, is effective for the Company's fiscal 2028 and is not expected to have a material impact on consolidated financial statements60206 Non-GAAP Financial Measures This section provides reconciliations and definitions for non-GAAP financial measures, including debt net of cash and adjusted EBITDA Debt, Net of Cash (in thousands) | Metric | May 31, 2025 | August 31, 2024 | | :-------------------------- | :----------- | :-------------- | | Total debt | $454,413 | $414,770 | | Less cash and cash equivalents | $16,214 | $5,552 | | Total debt, net of cash | $438,199 | $409,218 | Net Borrowings (Repayments) of Debt (in thousands) | Period | 9 Months Ended May 31, 2025 | 9 Months Ended May 31, 2024 | | :-------------------------- | :-------------------------- | :-------------------------- | | Borrowings from long-term debt | $611,836 | $579,500 | | Repayments of long-term debt | $(572,026) | $(421,414) | | Net borrowings (repayments) of debt | $39,810 | $158,086 | Adjusted EBITDA (in thousands) | Metric | 3 Months Ended May 31, 2025 | 3 Months Ended May 31, 2024 | 9 Months Ended May 31, 2025 | 9 Months Ended May 31, 2024 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) | $(16,406) | $(198,511) | $(86,300) | $(250,320) | | Interest expense | $9,131 | $7,368 | $26,764 | $17,981 | | Income tax expense (benefit) | $(328) | $(44,551) | $(814) | $(53,526) | | Depreciation and amortization | $23,683 | $24,406 | $71,749 | $72,188 | | Goodwill impairment charges | $— | $215,941 | $— | $215,941 | | Adjusted EBITDA | $22,014 | $8,618 | $21,562 | $12,475 | Item 3. Quantitative and Qualitative Disclosures about Market Risk This section discusses the Company's exposure to market risks, including commodity price risk (ferrous and nonferrous metals, finished steel), interest rate risk, and credit risk. The Company manages these risks through various strategies, such as adjusting purchase prices, using letters of credit, and monitoring credit limits - The Company is exposed to commodity price risk from variations in market prices for ferrous and nonferrous metals and finished steel products218 - Credit risk is managed through letters of credit for exports, deposits for nonferrous sales, credit limits, and credit insurance, with 24% of accounts receivable covered by letters of credit as of May 31, 2025220222 - Foreign currency exchange rate risk is mainly associated with sales transactions and accounts receivable denominated in USD by the Canadian subsidiary223 Item 4. Controls and Procedures The Company's management, including the CEO and CFO, concluded that its disclosure controls and procedures were effective at a reasonable assurance level as of May 31, 2025. There were no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were effective at a reasonable assurance level as of May 31, 2025225 - No material changes in internal control over financial reporting occurred during the quarter ended May 31, 2025226 PART II. OTHER INFORMATION This part includes disclosures on legal proceedings, risk factors, other information, and a list of exhibits Item 1. Legal Proceedings Information regarding reportable legal proceedings is incorporated by reference from the Annual Report on Form 10-K for fiscal year ended August 31, 2024, and Note 4 of this Quarterly Report, which details environmental and other legal contingencies - Legal proceedings information is incorporated by reference from the Annual Report on Form 10-K and Note 4 of this report229 Item 1A. Risk Factors There have been no material changes or new risk factors identified since the filing of the Annual Report on Form 10-K for the year ended August 31, 2024, except for those disclosed in the Quarterly Report for the period ended February 28, 2025 - No material changes or new risk factors identified since the last Annual Report on Form 10-K, except for those in the Q1 fiscal 2025 10-Q230 Item 5. Other Information During the three months ended May 31, 2025, none of the Company's directors or officers adopted, terminated, or modified any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No directors or officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended May 31, 2025231 Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including the Merger Agreement, certifications from the CEO and CFO, and XBRL-related documents - Exhibits include the Agreement and Plan of Merger with TAI, CEO and CFO certifications, and Inline XBRL documents234 SIGNATURES This section formally attests to the accuracy of the report, signed by the company's principal executive and financial officers - The report is signed by Tamara L. Lundgren (Chairman, President, and CEO) and Stefano R. Gaggini (SVP and CFO) on July 1, 2025237
Radius Recycling(RDUS) - 2025 Q3 - Quarterly Report