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 50 retail self-service auto parts stores, 54 metals recycling facilities, and an electric arc furnace ("EAF") steel mill.

Use of Non-GAAP Financial Measures

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

Diluted earnings per share from continuing operations attributable to SSI shareholders in the third quarter of fiscal 2022 was $2.52, compared to $2.16 per share in the prior year quarter.

Adjusted diluted earnings per share from continuing operations attributable to SSI shareholders in the third quarter of fiscal 2022 was $2.59, compared to $2.20 per share in the prior year quarter.

Net income in the third quarter of fiscal 2022 was $76 million, compared to $65 million in the prior year quarter.

Adjusted EBITDA in the third quarter of fiscal 2022 was $119 million, compared to $97 million in the prior year quarter.

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

For the first nine months of fiscal 2022, net cash provided by operating activities was $58 million, compared to $51 million in the prior year comparable period.

Debt was $322 million as of May 31, 2022, compared to $75 million as of August 31, 2021, which increase was primarily due to increased borrowings from our credit facilities to fund the acquisition of the assets of the Columbus Recycling and Encore Recycling businesses and higher net working capital needs.

Debt, net of cash, was $306 million as of May 31, 2022, compared to $47 million as of August 31, 2021.

Repurchase of 444 thousand shares of Class A common stock totaling $18 million in the first nine months of fiscal 2022, compared to none in the prior year comparable period.

Selected Financial Measures and Operating Statistics

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

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

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

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

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

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

Cars purchased by auto parts stores only.

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

May not foot due to rounding.

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

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.

Sources and Uses of Cash

Net cash used in investing activities was $262 million in the first nine months of fiscal 2022, compared to $76 million in the first nine months of fiscal 2021.

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

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

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, 2021.

We maintain stand-by letters of credit to provide support for certain obligations, including workers' compensation and performance bonds. As of May 31, 2022, we had $9 million outstanding under these arrangements.

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

Net borrowings (repayments) of debt

Borrowings from long-term debt $ 895,175 $ 445,829 Repayments of long-term debt

Net borrowings (repayments) of debt $ 239,735 $ 49,019

Following are reconciliations of net income to adjusted EBITDA (in thousands):

Charges related to legal settlements in the three and nine months ended May 31, 2022 and 2021 relate to a claim with a utility provider for past charges.

Charges related to legal settlements in the three and nine months ended May 31, 2022 and 2021 relate to a claim with a utility provider for past charges.

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