UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the Quarterly Period Ended
or
For the Transition Period from __________ to __________
Commission File Number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
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).
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 |
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Non-accelerated filer |
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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
The registrant had
RADIUS RECYCLING, INC.
FORM 10-Q
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS
Statements and information included in this Quarterly Report on Form 10-Q by Radius Recycling, 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,” “Radius Recycling,” and “Radius” refer to Radius Recycling, 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 our proposed Merger (as defined below) with Toyota Tsusho America, Inc. (“TAI”), a U.S. subsidiary of Toyota Tsusho Corporation (“TTC”); 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 Company’s outlook, growth initiatives, or expected results or objectives, including pricing, margins, volumes, and profitability; completion of acquisitions and integration of acquired businesses; the progression and impact of investments in processing and manufacturing technology improvements and information technology systems; the impact of sanctions and tariffs, quotas, and other trade actions and import restrictions; 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 pandemics, epidemics, or other public health emergencies; 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 and Part II of this Quarterly Report on Form 10-Q. Examples of these risks include: the completion of the Merger is subject to various risks and uncertainties related to, among other things, its terms, timing, structure, benefits, costs and completion; the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement (as defined below); the disruption of management’s attention from the Company’s ongoing business operations due to the Merger; the effect of the announcement of the Merger on the Company’s relationships with its customers, third-party suppliers, industrial vendors and other third parties, as well as its operating results and business generally; the potential difficulties in employee retention as a result of the Merger; the Merger Agreement may be terminated in circumstances that may require the Company to pay TAI a termination fee; the fact that, if the Merger is completed, shareholders will forgo the opportunity to realize the potential long-term value of the successful execution of the Company’s current strategy as an independent company; required approvals to complete the Merger by our shareholders and the receipt of certain regulatory approvals, to the extent required, and the timing and conditions for such approvals; the stock price of the Company may decline significantly if the merger is not completed; the possibility that TAI could, at a later date, engage in unspecified transactions, including restructuring efforts, special dividends or the sale of some or all of the Company’s assets to one or more purchasers, that could conceivably produce a higher aggregate value than that available to shareholders in the Merger; the inability to consummate the Merger within the anticipated time period, or at all, due to any reason, including the failure to satisfy the closing conditions to the Merger; 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 and other projects, including investments in processing and manufacturing technology improvements and information technology systems; the cyclicality and impact of general economic conditions; the impact of inflation and interest rate 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
3
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; restrictions on our business and financial covenants under the agreement governing our bank credit facilities; potential limitations on our ability to access capital resources and existing credit facilities; the impact of impairment of goodwill and assets other than goodwill; the impact of pandemics, epidemics, or other public health emergencies; 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; the impact of consolidation in the steel industry; product liability claims; the impact of legal proceedings and legal compliance; the 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; the impact of increasing attention to environmental, social, and governance matters; translation risks associated with fluctuation in foreign exchange rates; the impact of hedging transactions; 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.
4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
RADIUS RECYCLING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except per share amounts)
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February 28, 2025 |
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August 31, 2024 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowance for credit losses of $ |
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Inventories |
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Refundable income taxes |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment, net of accumulated depreciation of $ |
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Operating lease right-of-use assets |
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Investments in joint ventures |
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Goodwill |
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Intangibles, net of accumulated amortization of $ |
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Deferred income taxes |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Equity |
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Current liabilities: |
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Short-term borrowings |
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$ |
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$ |
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Accounts payable |
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Accrued payroll and related liabilities |
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Environmental liabilities |
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Operating lease liabilities |
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Accrued income taxes |
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Other accrued liabilities |
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Total current liabilities |
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Deferred income taxes |
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Long-term debt, net of current maturities |
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Environmental liabilities, net of current portion |
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Operating lease liabilities, net of current maturities |
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Other long-term liabilities |
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Total liabilities |
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Radius Recycling, Inc. (“Radius”) shareholders’ equity: |
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Preferred stock – |
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Class A common stock – |
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Class B common stock – |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive income (loss) |
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( |
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( |
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Total Radius shareholders’ equity |
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Noncontrolling interests |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.
5
RADIUS RECYCLING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
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Three Months Ended |
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Six Months Ended |
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February 28, |
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February 29, |
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February 28, |
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February 29, |
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2025 |
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2024 |
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2025 |
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2024 |
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Revenues |
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$ |
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$ |
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$ |
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$ |
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Operating expense: |
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Cost of goods sold |
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Selling, general and administrative |
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(Income) from joint ventures |
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( |
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( |
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( |
) |
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( |
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Asset impairment charges |
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— |
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Restructuring charges and other exit-related activities |
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Operating income (loss) |
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( |
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( |
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( |
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( |
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Interest expense |
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( |
) |
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( |
) |
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( |
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( |
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Other income (expense), net |
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( |
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( |
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Income (loss) from continuing operations before income taxes |
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( |
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( |
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( |
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( |
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Income tax (expense) benefit |
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( |
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Income (loss) from continuing operations |
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( |
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( |
) |
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( |
) |
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( |
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Income (loss) from discontinued operations, net of tax |
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— |
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( |
) |
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— |
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( |
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Net income (loss) |
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( |
) |
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( |
) |
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( |
) |
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( |
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Net (income) loss attributable to noncontrolling interests |
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( |
) |
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( |
) |
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( |
) |
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Net income (loss) attributable to Radius shareholders |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Net income (loss) per share attributable to Radius shareholders: |
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Basic: |
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Income (loss) per share from continuing operations |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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$ |
( |
) |
Income (loss) loss per share |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Diluted: |
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Income (loss) per share from continuing operations |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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$ |
( |
) |
Income (loss) per share |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
Weighted average number of common shares: |
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Basic |
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Diluted |
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The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.
6
RADIUS RECYCLING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, in thousands)
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Three Months Ended |
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Six Months Ended |
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February 28, |
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February 29, |
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February 28, |
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February 29, |
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2025 |
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2024 |
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2025 |
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2024 |
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Net income (loss) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
Other comprehensive income (loss), net of tax: |
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Foreign currency translation adjustments |
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( |
) |
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( |
) |
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( |
) |
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( |
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Cash flow hedges, net |
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( |
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Pension obligations, net |
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( |
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Total other comprehensive income (loss), net of tax |
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( |
) |
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( |
) |
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( |
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Comprehensive income (loss) |
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( |
) |
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( |
) |
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( |
) |
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( |
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Less comprehensive (income) loss attributable to noncontrolling interests |
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( |
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( |
) |
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( |
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Comprehensive income (loss) attributable to Radius shareholders |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.
7
RADIUS RECYCLING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited, in thousands, except per share amounts)
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Common Stock |
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Accumulated |
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Class A |
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Class B |
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Additional |
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Other |
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Total Radius |
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Three Months ended February 29, 2024 |
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Shares |
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Amount |
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Shares |
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Amount |
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Paid-in |
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Retained |
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Comprehensive |
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Shareholders’ |
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Noncontrolling |
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Total |
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Balance as of December 1, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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Net income (loss) |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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( |
) |
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( |
) |
Other comprehensive income (loss), net of tax |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Distributions to noncontrolling interests |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Issuance of restricted stock |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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— |
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— |
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Restricted stock withheld for taxes |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
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— |
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( |
) |
Share-based compensation cost |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Dividends ($ |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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— |
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( |
) |
Balance as of February 29, 2024 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
|
$ |
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$ |
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$ |
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Common Stock |
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Accumulated |
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Class A |
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Class B |
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Additional |
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Other |
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Total Radius |
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Three Months ended February 28, 2025 |
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Shares |
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Amount |
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Shares |
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Amount |
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Paid-in |
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Retained |
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Comprehensive |
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Shareholders’ |
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Noncontrolling |
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Total |
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Balance as of December 1, 2024 |
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$ |
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|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Other comprehensive income (loss), net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Issuance of restricted stock |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Restricted stock withheld for taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Share-based compensation cost |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Dividends ($ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance as of February 28, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.
8
RADIUS RECYCLING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited, in thousands, except per share amounts)
|
|
Common Stock |
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
|
Class A |
|
|
Class B |
|
|
Additional |
|
|
|
|
|
Other |
|
|
Total Radius |
|
|
|
|
|
|
|
||||||||||||||||
Six Months Ended February 29, 2024 |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Paid-in |
|
|
Retained |
|
|
Comprehensive |
|
|
Shareholders’ |
|
|
Noncontrolling |
|
|
Total |
|
||||||||||
Balance as of September 1, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Other comprehensive income (loss), net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Issuance of restricted stock |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Restricted stock withheld for taxes |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Share-based compensation cost |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Dividends ($ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance as of February 29, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
|
|
Common Stock |
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
|
Class A |
|
|
Class B |
|
|
Additional |
|
|
|
|
|
Other |
|
|
Total Radius |
|
|
|
|
|
|
|
||||||||||||||||
Six Months ended February 28, 2025 |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Paid-in |
|
|
Retained |
|
|
Comprehensive |
|
|
Shareholders’ |
|
|
Noncontrolling |
|
|
Total |
|
||||||||||
Balance as of September 1, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Other comprehensive income (loss), net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Issuance of restricted stock |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Restricted stock withheld for taxes |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Share-based compensation cost |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Dividends ($ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance as of February 28, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.
9
RADIUS RECYCLING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
|
|
Six Months Ended |
|
|||||
|
|
February 28, |
|
|
February 29, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: |
|
|
|
|
|
|
||
Asset impairment charges |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Inventory write-downs |
|
|
|
|
|
— |
|
|
Deferred income taxes |
|
|
( |
) |
|
|
( |
) |
Undistributed equity in earnings of joint ventures |
|
|
( |
) |
|
|
( |
) |
Share-based compensation expense |
|
|
|
|
|
|
||
(Gain) loss on disposal of assets, net |
|
|
( |
) |
|
|
( |
) |
Other (gain) loss, net |
|
|
|
|
|
|
||
Changes in assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
( |
) |
|
Inventories |
|
|
|
|
|
( |
) |
|
Income taxes |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Other long-term assets |
|
|
( |
) |
|
|
( |
) |
Operating lease assets and liabilities |
|
|
|
|
|
( |
) |
|
Accounts payable |
|
|
( |
) |
|
|
( |
) |
Accrued payroll and related liabilities |
|
|
( |
) |
|
|
( |
) |
Other accrued liabilities |
|
|
( |
) |
|
|
|
|
Environmental liabilities |
|
|
( |
) |
|
|
( |
) |
Other long-term liabilities |
|
|
|
|
|
|
||
Distributed equity in earnings of joint ventures |
|
|
|
|
|
|
||
Net cash provided by (used in) operating activities |
|
|
|
|
|
( |
) |
|
Cash flows from investing activities: |
|
|
|
|
|
|
||
Capital expenditures |
|
|
( |
) |
|
|
( |
) |
Proceeds from insurance and sale of assets |
|
|
|
|
|
|
||
Purchase of investments |
|
|
— |
|
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Borrowings from long-term debt |
|
|
|
|
|
|
||
Repayment of long-term debt |
|
|
( |
) |
|
|
( |
) |
Payment of debt issuance costs |
|
|
( |
) |
|
|
— |
|
Taxes paid related to net share settlement of share-based payment awards |
|
|
( |
) |
|
|
( |
) |
Distributions to noncontrolling interests |
|
|
( |
) |
|
|
( |
) |
Dividends paid |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
||
Effect of exchange rate changes on cash |
|
|
( |
) |
|
|
( |
) |
Net change in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Cash and cash equivalents as of beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents as of end of period |
|
$ |
|
|
$ |
|
||
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.
10
RADIUS RECYCLING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
|
|
Six Months Ended |
|
|||||
|
|
February 28, |
|
|
February 29, |
|
||
|
|
2025 |
|
|
2024 |
|
||
SUPPLEMENTAL DISCLOSURES: |
|
|
|
|
|
|
||
Cash paid (received) during the period for: |
|
|
|
|
|
|
||
Interest |
|
$ |
|
|
$ |
|
||
Income taxes, net |
|
$ |
( |
) |
|
$ |
|
|
Schedule of noncash investing and financing transactions: |
|
|
|
|
|
|
||
Purchases of property, plant and equipment included in liabilities |
|
$ |
|
|
$ |
|
||
The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.
11
RADIUS RECYCLING, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
PAGE |
13 |
|
|
|
15 |
|
|
|
15 |
|
|
|
15 |
|
|
|
20 |
|
|
|
21 |
|
|
|
22 |
|
|
|
23 |
|
|
|
23 |
|
|
|
24 |
|
|
|
24 |
|
|
|
24 |
|
|
|
25 |
12
RADIUS RECYCLING, 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 Radius Recycling, 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 accompanying Unaudited Condensed Consolidated Financial Statements are presented in U.S. Dollars. 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. Certain prior year amounts have been reclassified to conform with current year presentation. 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, 2024. The results for the three and six months ended February 28, 2025 and February 29, 2024 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 operating and reportable segment.
Merger with Toyota Tsusho America, Inc.
On March 13, 2025, the Company, Toyota Tsusho America, Inc., a New York corporation (“TAI”), and TAI Merger Corporation, a Delaware corporation and a wholly owned subsidiary of TAI (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which, on the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation in the Merger as a wholly owned subsidiary of TAI. The Board of Directors of the Company has approved the Merger Agreement and the transactions contemplated thereby, including the Merger. Refer to Note 13 - Subsequent Events, for more detailed information regarding the Merger.
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 payments in excess of funds on deposit of $
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.
13
RADIUS RECYCLING, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 $
Prepaid Expenses
The Company’s prepaid expenses, reported within prepaid expenses and other current assets in the Unaudited Condensed Consolidated Balance Sheets, totaled $
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, advances to a supplier of metals recycling equipment, short-term certificates of deposit, capitalized implementation costs for cloud computing arrangements, major spare parts and equipment, assets held for sale, equity investments, 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 under various insurance policies, or from a Qualified Settlement Fund holding settlement amounts deposited by certain insurers of claims against the Company related to the Portland Harbor Superfund site. The receivables are 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, or if recovery of the loss by the Company from a Qualified Settlement Fund is probable. Receivables from insurers as of each reporting date relate to environmental claims, workers’ compensation claims, and third-party claims. As of both February 28, 2025 and August 31, 2024, receivables from insurers totaled $
Other assets as of February 28, 2025 and August 31, 2024 included $
Other assets as of February 28, 2025 and August 31, 2024 included $
Other assets as of February 28, 2025 and August 31, 2024 also included $
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.
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. The repair and replacement of most property that
14
RADIUS RECYCLING, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
experienced physical loss or damage, primarily buildings and improvements, was substantially completed by the end of fiscal 2023. The Company filed insurance claims for the property that experienced physical loss or damage and business income losses resulting from the matter. During the first half of fiscal 2024, the Company recognized a $
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents, accounts receivable, and derivative financial instruments. 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 $
Recent Accounting Pronouncements
In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2024-03 (“ASU 2024-03”), Disaggregation of Income Statement Expenses, requiring additional disclosure of the nature of expenses included in the income statement. The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. The provisions in ASU 2024-03 are effective for the Company’s fiscal 2028, and interim periods within the Company’s fiscal 2029 and are applied prospectively. Early adoption and retrospective application of the new standard are permitted. As the provisions only apply to disclosures, the Company does not expect adoption to have a material impact on its consolidated financial statements.
Note 2 - Inventories
Inventories consisted of the following (in thousands):
|
|
February 28, 2025 |
|
|
August 31, 2024 |
|
||
Processed and unprocessed scrap metal |
|
$ |
|
|
$ |
|
||
Semi-finished goods |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Supplies |
|
|
|
|
|
|
||
Inventories |
|
$ |
|
|
$ |
|
||
Note 3 - Goodwill
As of both February 28, 2025 and August 31, 2024, the balance of the Company’s goodwill was $
Note 4 - 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.
15
RADIUS RECYCLING, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Changes in the Company’s environmental liabilities for the six months ended February 28, 2025 were as follows (in thousands):
Balance as of |
|
|
|
|
|
Payments and |
|
|
Balance as of |
|
|
Short-Term |
|
|
Long-Term |
|
||||||
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||
As of February 28, 2025 and August 31, 2024, the Company had environmental liabilities of $
Portland Harbor
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.
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 $
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 $
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
16
RADIUS RECYCLING, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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
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.
The Company has joined with approximately
In November 2024, the EPA issued a Special Notice Letter under Section 122(e) of CERCLA to the Company and certain other parties requesting a proposal to undertake remedial action at Portland Harbor. Negotiations with the EPA are expected to continue as remedial design work progresses.
The Company’s environmental liabilities as of each of February 28, 2025 and August 31, 2024 included $
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 $
17
RADIUS RECYCLING, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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
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, remediation, and mitigation for or settlement of natural resource damages claims in connection with Portland Harbor although there are no assurances that those policies will cover all the costs which the Company may incur. 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 settlements with certain insurers of claims against them related to Portland Harbor, continue to seek settlements with other insurers, and formed two QSFs which became operative in fiscal 2020 and fiscal 2023, respectively, 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 QSFs may not cover all of the costs which the Company may incur. Each QSF is an unconsolidated variable interest entity (“VIE”) with no primary beneficiary. Two managers unrelated to each other, one appointed by the Company and one appointed by MMGL, share equally the power to direct the activities of each VIE that most significantly impact its economic performance. The Company’s appointee to co-manage each VIE is an executive officer of the Company. Neither MMGL nor its appointee to co-manage each VIE is a related party of the Company for the purpose of the primary beneficiary assessment or otherwise.
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. The Company believes that, pursuant to its insurance policies and agreements with other third parties, it will be reimbursed for the costs it incurs for required source control evaluation and remediation work; however, the Company’s insurance policies and agreements with other third parties may not cover all the costs which the Company incurs. As of both February 28, 2025 and August 31, 2024, the Company had an insurance receivable in the same amount as the environmental reserve for such source control work.
Other Legacy Environmental Loss Contingencies
The Company’s environmental loss contingencies as of February 28, 2025 and August 31, 2024, 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.
18
RADIUS RECYCLING, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In fiscal 2018, the Company accrued $
In addition, the Company’s loss contingencies as of February 28, 2025 and August 31, 2024 included $
In addition, the Company’s loss contingencies as of each of February 28, 2025 and August 31, 2024 included $
In addition, the Company is a PRP related to environmental matters in connection with a facility previously used for disposal of automobile shredder residue by a wholly-owned subsidiary. Investigation and remediation activities have been conducted under the oversight of the applicable state regulatory agency and are on-going. On December 4, 2020, the Company and two other PRPs entered into a final Administrative Order with the state agency, and another PRP was served with a unilateral order. Remediation discussions among the state agency, the Company and other PRPs pursuant to such order are ongoing as of February 2025. It is reasonably possible that the Company may recognize a liability in connection with this matter at the time such 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 remediation plans for soil, groundwater and vapor conditions.
Summary - Environmental Contingencies
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.
19
RADIUS RECYCLING, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Contingencies – Other
On May 6, 2022, The Athletics Investment Group LLC (“A’s”) filed an action in the Superior Court of the State of California, County of Alameda against the Bay Area Air Quality Management District (“BAAQMD”) as Respondent and the Company as Real Party in Interest (the “BAAQMD Case”) alleging that the BAAQMD has failed to properly regulate the Company’s Oakland shredder facility under the federal and California Clean Air Acts and seeking an order requiring the BAAQMD to revoke the Company’s Permit to Operate for the Oakland facility. On June 3, 2022, the BAAQMD removed this action to the United States District Court, Northern District of California where the A’s had previously filed an action against the Company on July 7, 2021 raising substantially similar issues under the federal Clean Air Act’s citizen suit provision alleging violations by the Oakland facility of the federal Clean Air Act and permit conditions and seeking declaratory and injunctive relief (the “CAA Case”). The A’s recently disclosed that they were also seeking up to approximately $
On June 28, 2024, the Alameda County Criminal Grand Jury returned an indictment against the Company and
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 5 - Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss), net of tax, comprise the following (in thousands):
|
|
Three Months ended February 28, 2025 |
|
|
Three Months ended February 29, 2024 |
|
||||||||||||||||||||||||||
|
|
Foreign Currency |
|
|
Cash Flow Hedges, Net |
|
|
Pension Obligations, |
|
|
Total |
|
|
Foreign Currency |
|
|
Cash Flow Hedges, Net |
|
|
Pension Obligations, |
|
|
Total |
|
||||||||
Balances - December 1 (Beginning of period) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income (loss) before reclassifications |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||||
Income tax benefit (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||||
Other comprehensive income (loss) before reclassifications, net of tax |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||||
Amounts reclassified from accumulated other comprehensive income (loss) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||||
Income tax (benefit) expense |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Amounts reclassified from accumulated other comprehensive income (loss), net of tax |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||||
Net periodic other comprehensive income (loss) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||||
Balances - February 28 and 29, respectively (End of period) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
20
RADIUS RECYCLING, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
Six Months ended February 28, 2025 |
|
|
Six Months Ended February 29, 2024 |
|
||||||||||||||||||||||||||
|
|
Foreign Currency |
|
|
Cash Flow Hedges, Net |
|
|
Pension Obligations, |
|
|
Total |
|
|
Foreign Currency |
|
|
Cash Flow Hedges, Net |
|
|
Pension Obligations, |
|
|
Total |
|
||||||||
Balances - September 1 (Beginning of period) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income (loss) before reclassifications |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||||
Income tax (expense) benefit |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|||
Other comprehensive income (loss) before reclassifications, net of tax |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||||
Amounts reclassified from accumulated other comprehensive income (loss) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||
Amounts reclassified from accumulated other comprehensive income (loss), net of tax |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||
Net periodic other comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|||
Balances - February 28 and 29, respectively (End of period) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
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 6 - Revenue
Disaggregation of Revenues
The table below illustrates the Company’s revenues disaggregated by major product and sales destination (in thousands):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
February 28, |
|
|
February 29, |
|
|
February 28, |
|
|
February 29, |
|
||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Major product information: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Ferrous revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Nonferrous revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Steel revenues(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Retail and other revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Revenues based on sales destination: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Domestic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
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 February 28, 2025 and August 31, 2024, receivables from contracts with customers, net of an allowance for credit losses, represented substantially all of total accounts receivable reported in the Unaudited Condensed Consolidated Balance Sheets as of each reporting date.
21
RADIUS RECYCLING, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 $
In the first quarter of fiscal 2025, the Compensation Committee of the Company’s Board of Directors granted
Of the RSUs granted in the first quarter of fiscal 2025,
The PSUs granted in the first quarter of fiscal 2025 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
Approximately half of the PSUs granted during the first quarter of fiscal 2025 vest based on the Company’s relative TSR metric over an approximately
|
|
Percentage |
Expected share price volatility (Radius) |
|
|
Expected share price volatility (Peer group) |
|
|
Expected correlation to peer group companies |
|
|
Risk-free rate of return |
|
The estimated aggregate fair value of the TSR-based PSUs at the date of grant was $
Approximately half of the PSUs granted during the first quarter of fiscal 2025 vest based on the Company’s volume growth for the
The Company accrues compensation cost for the PSUs related to volume growth 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. If, upon reassessment, it is no longer probable that the actual performance results will exceed the stated target performance
22
RADIUS RECYCLING, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
conditions, or 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.
PSUs 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, 2027.
In the second quarter of fiscal 2025, the Company granted deferred stock units (“DSUs”) to each of its non-employee directors under the Company’s 2024 Plan. Each DSU gives the director the right to receive
Note 8 - Derivative Financial Instruments
Interest Rate Swaps
The Company is exposed to interest rate risk on its debt and may enter interest rate swap contracts to effectively manage the impact of interest rate changes on its outstanding debt, which has predominantly floating interest rates. The Company does not enter interest rate swap transactions for trading or speculative purposes.
In fiscal 2023, the Company entered three pay-fixed interest rate swap transactions, each with a different major financial institution counterparty and designated as a cash flow hedge, to hedge the variability in interest cash flows associated with the Company’s variable-rate loans under its bank revolving credit facilities. The interest rate swaps involve the receipt of variable-rate amounts from the counterparty in exchange for the Company making fixed-rate payments over the life of the agreement without exchange of the underlying notional amount. These contracts mature in August 2026. As of both February 28, 2025 and August 31, 2024, the total notional amount of these interest rate swaps was $
The fair value of derivative instruments in the Unaudited Condensed Consolidated Balance Sheet as of February 28, 2025 and August 31, 2024 is as follows (in thousands):
|
Balance Sheet Location |
|
February 28, 2025 |
|
|
August 31, 2024 |
|
||
Interest rate swap contracts |
Other accrued liabilities |
|
$ |
|
|
$ |
|
||
Interest rate swap contracts |
Other long-term liabilities |
|
$ |
|
|
$ |
|
||
See Note 5 - Accumulated Other Comprehensive Income (Loss) for tabular presentation of the effects of interest rate swap derivative cash flow hedges on other comprehensive income. All related cash flow hedge amounts reclassified from accumulated other comprehensive income (“AOCI”) were recorded in interest expense on the Unaudited Condensed Consolidated Statement of Operations for the three and six months ended February 28, 2025, which reclassified amounts totaled less than $
Note 9 - Income Taxes
Effective Tax Rate
The Company’s effective tax rate from continuing operations for the second quarter and the first six months of fiscal 2025 was a benefit on pre-tax loss of
23
RADIUS RECYCLING, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
intra-period allocation of the estimated annual tax provision, as well as the recognition of a valuation allowance against deferred tax assets in the Company’s Puerto Rico tax jurisdiction.
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 and weighs all positive and negative evidence to determine if valuation allowances against deferred tax assets are required. The Company continues to maintain a valuation allowance against its deferred tax assets in the Company’s U.S. federal, state and foreign tax jurisdictions.
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 2021 to 2024 remain subject to examination under the statute of limitations.
The following table sets forth the information used to compute basic and diluted net income (loss) per share attributable to Radius shareholders (in thousands):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
February 28, |
|
|
February 29, |
|
|
February 28, |
|
|
February 29, |
|
||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Income (loss) from continuing operations |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net (income) loss attributable to noncontrolling interests |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Income (loss) from continuing operations attributable to Radius shareholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Income (loss) from discontinued operations, net of tax |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Net income (loss) attributable to Radius shareholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Computation of shares: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding, basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Incremental common shares attributable to dilutive performance share awards, RSUs and DSUs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Weighted average common shares outstanding, diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common stock equivalent shares of
The Company purchases recycled metal from one of its joint venture operations at prices that approximate fair market value. These purchases totaled $
Note 12 - Debt
Debt consisted of the following as of February 28, 2025 and August 31, 2024 (in thousands):
|
|
February 28, 2025 |
|
|
August 31, 2024 |
|
||
Bank revolving credit facilities, interest primarily at SOFR or LIBOR plus a spread |
|
$ |
|
|
$ |
|
||
Finance lease liabilities |
|
|
|
|
|
|
||
Other debt obligations |
|
|
|
|
|
|
||
Total debt |
|
|
|
|
|
|
||
Less current maturities |
|
|
( |
) |
|
|
( |
) |
Debt, net of current maturities |
|
$ |
|
|
$ |
|
||
24
RADIUS RECYCLING, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company’s senior secured revolving credit facilities provide for $
The applicable interest rates under the facility are based, at the Company’s option, on either the Secured Overnight Financing Rate (“SOFR”) (or the Term Canadian Overnight Repo Rate Average “CORRA” for C$ loans), plus a spread of between
As of February 28, 2025 and August 31, 2024, borrowings outstanding under the credit facilities were $
The credit agreement contains various representations and warranties, events of default, and financial and other customary covenants which limit (subject to certain exceptions) the Company’s 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 the business, engage in transactions with affiliates, and enter into restrictive agreements, including agreements that restrict the ability of the subsidiaries to make distributions. The financial covenants under the Amended Credit Agreement include (a) a consolidated fixed charge coverage ratio of no less than
As of February 28, 2025, the Company was in compliance with the applicable financial covenants under the Amended Credit Agreement. While the Company expects to remain in compliance with the financial covenants under the credit agreement, the Company may not be able to do so in the event market conditions do not improve, or other factors have a significant adverse impact on its results of operations and financial position. If the Company does not maintain compliance with its financial covenants and is unable to obtain an amendment or waiver from its 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 the Amended Credit Agreement and acceleration of the amounts owed under the agreement.
Note 13 - Subsequent Events
On
On the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), and as a result of the Merger, each share of common stock of the Company (“Radius Common Stock”) that is issued and outstanding
25
RADIUS RECYCLING, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
immediately prior to the Effective Time (other than any shares of Class B common stock of the Company for which dissenters’ rights have been properly exercised and perfected and not withdrawn) will be converted into the right to receive $
In addition, pursuant to the Merger Agreement, as of the Effective Time, (i) each Company RSU Award (as defined in the Merger Agreement) (or a portion thereof) that is outstanding immediately prior to the Effective Time will, to the extent not vested, automatically become fully vested and be cancelled and converted into the right to receive an amount in cash equal to the sum of (x) the product of (A) Merger Consideration and (B) the total number of shares of Radius Common Stock subject to such Company RSU Award (or portion thereof) immediately prior to the Effective Time, and (y) any accrued and unpaid dividends or dividend equivalent rights corresponding to such Company RSU Award, (ii) each Company PSU Award (as defined in the Merger Agreement) (or portion thereof) that is outstanding immediately prior to the Effective Time will, to the extent not vested, automatically become fully vested and be cancelled and converted into the right to receive an amount in cash equal to the product of (x) the Merger Consideration and (y) the total number of shares of Radius Common Stock subject to such Company PSU Award (or portion thereof) immediately prior to the Effective Time, calculated based on the greater of (A) actual performance, calculated with the applicable performance period running through the last day of the Company’s most recently completed quarter prior to the Effective Time and (B) deemed target level performance, and (iii) each Company DSU Award (as defined in the Merger Agreement) (or portion thereof) that is outstanding immediately prior to the Effective Time will, to the extent not vested, automatically become fully vested and be cancelled, and converted into the right to receive an amount in cash equal to the sum of (x) the product of (A) the Merger Consideration and (B) the total number of shares of Radius Common Stock subject to such Company DSU Award (or portion thereof), and (y) any accrued and unpaid dividends or dividend equivalent rights corresponding to such Company DSU Award.
The Company, TAI and Merger Sub have made customary representations, warranties and covenants in the Merger Agreement, including, among others, covenants that (i) the Company will conduct its and its subsidiaries’ business in the ordinary course of business consistent with past practice in all material respects during the interim period between the execution of the Merger Agreement and the Effective Time, (ii) the Company will not engage in certain types of transactions or take certain actions outside the ordinary course during such period without the prior consent of TAI, (iii) the Company will cause a meeting of the holders of Radius Common Stock to be held to consider approval of the Merger, and (iv) subject to certain customary exceptions, the Board of Directors of the Company will recommend that holders of Radius Common Stock vote in favor of the Merger. The Company has also made certain additional customary covenants, including, among others, covenants not to: (A) solicit or knowingly encourage any inquiries with respect to certain alternative business combination transactions or (B) subject to certain exceptions designed to allow the Board of Directors of the Company to fulfill its fiduciary duties to the Company’s shareholders, engage in any discussions concerning, or provide confidential information to, any person relating to certain alternative business combination transactions.
Consummation of the Merger is subject to certain customary conditions, including (i) the adoption of the Merger by the holders of a majority of the outstanding shares of Radius Common Stock, (ii) the absence of any law prohibiting or order preventing the consummation of the Merger, (iii) the receipt of certain regulatory approvals, to the extent required, (iv) the receipt of Committee on Foreign Investment in the United States (“CFIUS”) approval without the imposition of certain conditions set forth in the Merger Agreement and (v) compliance in all material respects on the part of each of the Company, TAI and Merger Sub with such party’s covenants under the Merger Agreement. The obligation of each party to consummate the Merger is also conditioned upon the other party’s representations and warranties being true and correct (subject to certain materiality exceptions).
Subject to the satisfaction of such closing conditions, the Company anticipates the Merger and the other transactions contemplated by the Merger Agreement to close in the second half of calendar year 2025. Following completion of the Merger, the Company's common stock will no longer be publicly listed.
The Merger Agreement contains certain customary termination rights for the Company and TAI, including the Company’s right to terminate the Merger Agreement to accept a “Superior Proposal” (as defined in the Merger Agreement) subject to compliance with certain procedures specified in the Merger Agreement. Upon termination of the Merger Agreement under certain specified circumstances, the Company will be required to pay TAI a termination fee of $
26
RADIUS RECYCLING, 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 and six months ended February 28, 2025 and February 29, 2024. 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, 2024, 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, Radius Recycling, 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, 53 metals recycling facilities, and an electric arc furnace (“EAF”) steel mill. Our internal organizational and reporting structure includes a single operating and reportable segment.
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.
27
RADIUS RECYCLING, INC.
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. The spread between selling prices for processed metal and the cost of purchased scrap metal (metal spread) is subject to a number of factors, including differences in the market conditions between the domestic regions where scrap metal is acquired and the areas in the world to which the processed metals are sold, market volatility from the time the selling price is agreed upon with the customer until the time the scrap metal is purchased, changes in the availability of scrap metal including the volume generated by source and grade, and changes in transportation costs. 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.
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, trade actions, including tariffs, sanctions, and any retaliation by affected countries, as well as 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. For further information regarding the potential impact of uncertainty in global markets including the impact of tariffs and other trade actions on our business and results of operations, see Part II, Item 1A. Risk Factors of this report.
Merger with TAI
On March 13, 2025, we entered into a Merger Agreement with Toyota Tsusho America, Inc. (“TAI”), a U.S. subsidiary of Toyota Tsusho Corporation (“TTC”) and TAI Merger Corporation, a wholly owned subsidiary of TAI (“Merger Sub”), pursuant to which, on the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation in the Merger as a wholly owned subsidiary of TAI. Upon the Effective Time, and as a result of the Merger, each share of Radius Common Stock that is issued and outstanding immediately prior to the Effective Time (other than any shares of Class B common stock of the Company for which dissenters’ rights have been properly exercised and perfected and not withdrawn) will be converted into the right to receive $30.00 in cash without interest, and less any applicable withholding taxes. The transaction has been unanimously approved by the Company’s Board of Directors and is expected to close in the second half of calendar year 2025, with the closing and timing thereof subject to certain customary closing conditions. See Note 13 - Subsequent Events in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report for more information.
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. The repair and replacement of most property that experienced physical loss or damage, primarily buildings and improvements, was substantially completed by the end of fiscal 2023. We have insurance that was 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 filed insurance claims, which were subject to deductibles and various conditions, exclusions, and limits, for the property damage or loss and business income losses resulting from the matter. During the first half of fiscal 2024, we recognized an additional $6 million insurance receivable and related insurance recovery gain, reported within cost of goods sold on the Unaudited Condensed Consolidated Statements of Operations, $2 million of which was recognized in the second quarter of fiscal 2024. All insurance proceeds and recovery gains in connection with our claims had been received and recognized, respectively, as of August 31, 2024.
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
28
RADIUS RECYCLING, INC.
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 income before results from discontinued operations, interest expense, income taxes, depreciation and amortization, restructuring charges and other exit-related activities, charges for legacy environmental matters (net of recoveries), amortization of capitalized cloud computing implementation costs, asset impairment charges, business development costs not related to ongoing operations including pre-acquisition and merger expenses, and other items which are not related to underlying business operational performance. 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.
29
RADIUS RECYCLING, INC.
Financial Highlights of Results of Operations for the Second Quarter of Fiscal 2025
Compared to the prior year quarter, financial performance in the second quarter of fiscal 2025 was impacted by softer market conditions for recycled ferrous metal and finished steel, leading to lower average net selling prices and compression of metal spreads. Average net selling prices for our ferrous products were 14% lower compared to the prior year quarter, due in part to elevated levels of Chinese steel exports. During the second quarter of fiscal 2025, domestic and export market conditions diverged, with domestic ferrous scrap prices rebounding significantly as a result of domestic mill restocking, further supported by the impact of particularly adverse winter weather conditions on already tight supply flows. The increase in domestic scrap prices led to a temporary compression of spreads on export shipments contracted before the price surge occurred. For the second quarter of fiscal 2025, average net selling prices for our finished steel products were 9% lower than the prior year quarter, which contributed to lower metal spreads. Stronger nonferrous global demand led to higher average net selling prices for our nonferrous products in the second quarter of fiscal 2025 compared to the prior year quarter. Contributions from productivity and cost reduction initiatives implemented throughout fiscal 2024 helped to offset the impact of the softer market conditions and were the primary drivers of the 12% reduction in selling, general and administrative (“SG&A”) expense in the second quarter of fiscal 2025 compared to the prior year quarter.
The following items further highlight selected liquidity and capital structure metrics:
See the reconciliations of adjusted diluted earnings per share from continuing operations attributable to Radius shareholders, adjusted EBITDA, and debt, net of cash in Non-GAAP Financial Measures at the end of this Item 2.
30
RADIUS RECYCLING, INC.
Results of Operations
Selected Financial Measures and Operating Statistics
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
($ in thousands, except for prices and per share amounts) |
|
February 28, 2025 |
|
|
February 29, 2024 |
|
|
% |
|
|
February 28, 2025 |
|
|
February 29, 2024 |
|
|
% |
|
||||||
Ferrous revenues |
|
$ |
318,955 |
|
|
$ |
316,097 |
|
|
|
1 |
% |
|
$ |
646,059 |
|
|
$ |
664,994 |
|
|
|
(3 |
)% |
Nonferrous revenues |
|
|
179,012 |
|
|
|
164,481 |
|
|
|
9 |
% |
|
|
361,061 |
|
|
|
333,775 |
|
|
|
8 |
% |
Steel revenues(1) |
|
|
104,114 |
|
|
|
100,721 |
|
|
|
3 |
% |
|
|
205,965 |
|
|
|
214,252 |
|
|
|
(4 |
)% |
Retail and other revenues |
|
|
40,427 |
|
|
|
39,760 |
|
|
|
2 |
% |
|
|
85,960 |
|
|
|
80,935 |
|
|
|
6 |
% |
Total revenues |
|
|
642,508 |
|
|
|
621,059 |
|
|
|
3 |
% |
|
|
1,299,045 |
|
|
|
1,293,956 |
|
|
|
(— |
)% |
Cost of goods sold |
|
|
615,011 |
|
|
|
580,996 |
|
|
|
6 |
% |
|
|
1,238,143 |
|
|
|
1,214,416 |
|
|
|
2 |
% |
Gross margin (total revenues less cost of goods sold) |
|
$ |
27,497 |
|
|
$ |
40,063 |
|
|
|
(31 |
)% |
|
$ |
60,902 |
|
|
$ |
79,540 |
|
|
|
(23 |
)% |
Gross margin (%) |
|
|
4.3 |
% |
|
|
6.5 |
% |
|
|
(34 |
)% |
|
|
4.7 |
% |
|
|
6.1 |
% |
|
|
(23 |
)% |
Selling, general and administrative expense |
|
$ |
54,943 |
|
|
$ |
62,160 |
|
|
|
(12 |
)% |
|
$ |
111,627 |
|
|
$ |
125,262 |
|
|
|
(11 |
)% |
Diluted income (loss) per share from continuing operations attributable to Radius shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Reported |
|
$ |
(1.15 |
) |
|
$ |
(1.19 |
) |
|
|
(3 |
)% |
|
$ |
(2.45 |
) |
|
$ |
(1.83 |
) |
|
|
34 |
% |
Adjusted(2) |
|
$ |
(0.99 |
) |
|
$ |
(1.04 |
) |
|
|
(5 |
)% |
|
$ |
(2.32 |
) |
|
$ |
(1.68 |
) |
|
|
38 |
% |
Net income (loss) |
|
$ |
(32,965 |
) |
|
$ |
(34,010 |
) |
|
|
(3 |
)% |
|
$ |
(69,894 |
) |
|
$ |
(51,808 |
) |
|
|
35 |
% |
Adjusted EBITDA(2) |
|
$ |
(480 |
) |
|
$ |
2,796 |
|
|
(NM) |
|
|
$ |
(452 |
) |
|
$ |
3,858 |
|
|
(NM) |
|
||
Average ferrous recycled metal sales prices ($/LT)(3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Domestic |
|
$ |
353 |
|
|
$ |
391 |
|
|
|
(10 |
)% |
|
$ |
343 |
|
|
$ |
366 |
|
|
|
(6 |
)% |
Foreign |
|
$ |
321 |
|
|
$ |
381 |
|
|
|
(16 |
)% |
|
$ |
330 |
|
|
$ |
369 |
|
|
|
(11 |
)% |
Average |
|
$ |
330 |
|
|
$ |
384 |
|
|
|
(14 |
)% |
|
$ |
334 |
|
|
$ |
368 |
|
|
|
(9 |
)% |
Ferrous volumes (LT, in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Domestic(4) |
|
|
468 |
|
|
|
483 |
|
|
|
(3 |
)% |
|
|
945 |
|
|
|
1,018 |
|
|
|
(7 |
)% |
Foreign |
|
|
626 |
|
|
|
497 |
|
|
|
26 |
% |
|
|
1,255 |
|
|
|
1,114 |
|
|
|
13 |
% |
Total ferrous volumes (LT, in thousands)(4)(8) |
|
|
1,094 |
|
|
|
980 |
|
|
|
12 |
% |
|
|
2,200 |
|
|
|
2,132 |
|
|
|
3 |
% |
Average nonferrous sales price ($/pound)(3)(5) |
|
$ |
1.03 |
|
|
$ |
0.94 |
|
|
|
10 |
% |
|
$ |
1.02 |
|
|
$ |
0.93 |
|
|
|
10 |
% |
Nonferrous volumes (pounds, in thousands)(4)(5) |
|
|
174,323 |
|
|
|
176,477 |
|
|
|
(1 |
)% |
|
|
351,578 |
|
|
|
358,205 |
|
|
|
(2 |
)% |
Finished steel average sales price ($/ST)(3) |
|
$ |
756 |
|
|
$ |
832 |
|
|
|
(9 |
)% |
|
$ |
765 |
|
|
$ |
832 |
|
|
|
(8 |
)% |
Finished steel sales volumes (ST, in thousands) |
|
|
131 |
|
|
|
114 |
|
|
|
15 |
% |
|
|
256 |
|
|
|
243 |
|
|
|
5 |
% |
Cars purchased (in thousands)(6) |
|
|
60 |
|
|
|
67 |
|
|
|
(10 |
)% |
|
|
116 |
|
|
|
131 |
|
|
|
(11 |
)% |
Number of auto parts stores at period end |
|
|
50 |
|
|
|
50 |
|
|
|
(— |
)% |
|
|
50 |
|
|
|
50 |
|
|
|
(— |
)% |
Rolling mill utilization(7) |
|
|
88 |
% |
|
|
81 |
% |
|
|
9 |
% |
|
|
84 |
% |
|
|
88 |
% |
|
|
(5 |
)% |
NM = Not Meaningful
LT = Long Ton, which is equivalent to 2,240 pounds. ST = Short Ton, which is equivalent to 2,000 pounds.
31
RADIUS RECYCLING, INC.
Revenues
Revenues in the second quarter of fiscal 2025 increased 3% compared to the prior year quarter and remained flat in the first six months compared to the prior year period. In the second quarter and first six months of fiscal 2025, global nonferrous demand was stronger, leading to a 10% increase in average net selling prices for our nonferrous products compared to the prior year periods. In the second quarter and first six months of fiscal 2025, the average net selling prices for our ferrous products decreased 14% and 9%, respectively, compared to the prior year periods, including as a result of continued elevated levels of Chinese steel exports. Amid continuing tight supply conditions for scrap metal due to low levels of U.S. manufacturing activity and lower end-of-life vehicle turnover, our ferrous sales volumes in the second quarter and first six months of fiscal 2025 were 12% and 3% higher, respectively, compared to the prior year periods, primarily due to timing of shipments. Finished steel average selling prices in the second quarter and first six months of fiscal 2025 were 9% and 8% lower, respectively, compared to the prior year periods. Finished steel sales volumes increased 15% and 5%, respectively, compared to the prior year periods when demand for wire rod products was softer.
Operating Performance
Net loss in the second quarter and first six months of fiscal 2025 was $33 million and $70 million, respectively, compared to $34 million and $52 million, respectively, in the comparable prior year periods. Adjusted EBITDA in both the second quarter and the first six months of fiscal 2025 was break-even compared to $3 million and $4 million, respectively in the corresponding prior year periods. Ferrous metal spreads decreased compared to the prior year periods, driven primarily by the decrease in average net selling prices for our ferrous products. The combination of lower finished steel sales prices and higher conversion costs resulted in lower contribution from finished steel compared to the prior year periods. Our results in the second quarter and first six months of fiscal 2025 also reflected a $3 million gain on the sale of certain real property assets. The prior year quarter and first six months included nonrecurring insurance recovery gains of $2 million and $6 million, respectively, related to the Everett Facility shredder fire, which was fully resolved in fiscal 2024.
In the second quarter and first six months of fiscal 2025, we benefited from the full quarterly run rate of the savings associated with our productivity and cost reduction measures implemented since the beginning of fiscal 2024. SG&A expense in the second quarter and first six months of fiscal 2025 decreased 12% and 11%, respectively, compared to the prior year periods reflecting benefits from the cost reduction measures which more than offset the impact of inflation. In addition, SG&A in the first six months of fiscal 2025 included a $2 million insurance recovery gain related to a legacy environmental matter.
See the reconciliation of adjusted EBITDA in Non-GAAP Financial Measures at the end of this Item 2.
Interest Expense
Interest expense was $9 million and $18 million, respectively, for the second quarter and first six months of fiscal 2025, compared to $6 million and $11 million, respectively, for the same periods in the prior year. The increase in interest expense was primarily due to increased average borrowings, as well as higher interest rates on amounts outstanding under our bank credit facilities, compared to the prior year periods.
Income Tax
The effective tax rate from continuing operations for the second quarter and first six months of fiscal 2025 was a benefit on pre-tax loss of 11.5% and 0.7%, respectively, compared to a expense on pre-tax loss of 3.6% and a benefit on pre-tax loss of 14.8%, respectively, for the comparable prior year periods. Our effective tax rate from continuing operations for the second quarter of fiscal 2025 was lower than the U.S. federal statutory rate of 21% primarily due to the aggregate effect of the Company’s financial performance including an increase in our valuation allowance against deferred tax assets in the U.S. tax jurisdiction and the impact of intra-period allocation of the estimated annual tax provision. For the second quarter of fiscal 2024, our effective tax rate from continuing operations was significantly different than the U.S. federal statutory rate of 21% primarily due to the aggregate effect of the Company’s financial performance, permanent differences from non-deductible expenses, and unrecognized tax benefits on intra-period allocation of the estimated annual tax provision, as well as the recognition of a valuation allowance against deferred tax assets in our Puerto Rico tax jurisdiction.
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.
32
RADIUS RECYCLING, INC.
Sources and Uses of Cash
We had cash balances of $5 million and $6 million as of February 28, 2025 and August 31, 2024, 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 February 28, 2025, debt was $430 million compared to $415 million as of August 31, 2024, and debt, net of cash, was $424 million as of February 28, 2025, compared to $409 million as of August 31, 2024. The increase in debt was primarily due to increased borrowings from our credit facilities mainly to fund working capital needs and capital expenditures. See the reconciliation of debt, net of cash, in Non-GAAP Financial Measures at the end of this Item 2.
Operating Activities
Net cash provided by operating activities in the first six months of fiscal 2025 was $18 million, compared to net cash used in operating activities of $56 million in the first six months of fiscal 2024.
Sources of cash in the first six months of fiscal 2025 included a $33 million decrease in accounts receivable primarily reflecting the impact of changes in product selling prices and the timing of sales and collections and a $19 million decrease in inventories primarily due to timing of purchases and sales. Uses of cash in the first six months of fiscal 2025 included a $6 million decrease in accounts payable primarily due to the timing of purchases and payments.
Sources of cash in the first six months of fiscal 2024 included a $13 million decrease in prepaid expenses and other current assets primarily due to a decrease in prepaid insurance premiums. Uses of cash in the first six months of fiscal 2024 included a $30 million increase in inventories primarily due to delay of certain bulk shipments at period-end, a $15 million increase in accounts receivable primarily due to the timing of sales and collections, and a $9 million decrease in accrued payroll and related liabilities primarily due to the payment of incentive compensation in the first quarter of fiscal 2024 previously accrued under our fiscal 2023 plans.
Investing Activities
Net cash used in investing activities was $19 million in the first six months of fiscal 2025, compared to $44 million in the first six months of fiscal 2024.
Cash used in investing activities in the first six months of fiscal 2025 included capital expenditures of $23 million to upgrade our equipment and infrastructure and for investments in advanced metals recovery technology, information technology systems, and environmental and safety-related assets, compared to $40 million in the prior year period.
Financing Activities
Net cash provided by financing activities in the first six months of fiscal 2025 was $1 million, compared to $108 million in the first six months of fiscal 2024.
Cash flows from financing activities in the first six months of fiscal 2025 included $15 million in net borrowings of debt, compared to $124 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 six months of fiscal 2025 and 2024 included $11 million in each period for the payment of dividends.
Debt
Our senior secured revolving credit facilities provide for revolving loans of $800 million and C$15 million, which mature in August 2027. On January 3, 2025, we and certain of our subsidiaries entered into the Fifth Amendment (the “Fifth Amendment”) to our Third Amended and Restated Credit Agreement, dated as of April 6, 2016, by and among the Company, as the U.S. Borrower, Schnitzer Steel Canada, Ltd., as the Canadian Borrower, the subsidiaries of the Company party thereto (the “Guarantors”), Bank of America N.A., as administrative agent and the other lenders party thereto (as amended prior to the Fifth Amendment, the “Existing Credit Agreement”, the Existing Credit Agreement, as amended pursuant to the Fifth Amendment, the “Amended Credit Agreement”). The principal change to the Existing Credit Agreement effected by the Fifth Amendment is to extend for two additional fiscal quarters the replacement of the maintenance covenant previously requiring compliance with a minimum permitted fixed charge coverage ratio, as described below. Such replacement had previously been scheduled to extend through February 28, 2025 and will now extend through the fiscal quarter ending August 31, 2025.
33
RADIUS RECYCLING, INC.
The applicable interest rates under the facility are based, at our option, on either the Secured Overnight Financing Rate (“SOFR”) (or the Term Canadian Overnight Repo Rate Average “CORRA” for C$ loans), plus a spread of between 1.50% and 2.50%, 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 0.50% and 1.50% 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 0.350% based on a pricing grid tied to our ratio of consolidated net funded debt to EBITDA.
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, accounts receivable, and most other personal property and equity interests held by the Company and the Guarantors in their respective subsidiaries.
We had borrowings outstanding under our credit facilities of $410 million as of February 28, 2025 and $394 million as of August 31, 2024. The weighted average interest rate on amounts outstanding under our credit facilities was 6.9% and 8.0% as of February 28, 2025 and August 31, 2024, 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 Amended Credit Agreement include (a) a consolidated fixed charge coverage ratio of no less than 1.50 to 1.00, defined as the four-quarter rolling sum of consolidated EBITDA less defined maintenance capital expenditures and certain environmental expenditures divided by consolidated fixed charges which, for the fiscal quarters ending May 31, 2024 through August 31, 2025, has been temporarily replaced with (i) a minimum consolidated interest coverage ratio of 2.00 to 1.00 for the fiscal quarter ending May 31, 2024, and 1.25 to 1.00 for each of the fiscal quarters ending February 28, 2025 through August 31, 2025, and (ii) a minimum consolidated asset coverage ratio of no less than 1.00 to 1.00 for each of the fiscal quarters ending May 31, 2024 through August 31, 2025, and (b) a consolidated leverage ratio of no more than 0.55 to 1.00, defined as consolidated funded indebtedness divided by the sum of consolidated net worth and consolidated funded indebtedness.
As of February 28, 2025, we were in compliance with the applicable financial covenants under our Amended Credit Agreement. The consolidated interest coverage ratio was required to be no less than 1.25 to 1.00 and was 1.56 to 1.00 as of February 28, 2025. The consolidated asset coverage ratio was required to be no less than 1.00 to 1.00 and was 1.17 to 1.00 as of February 28, 2025. The consolidated leverage ratio was required to be no more than 0.55 to 1.00 and was 0.44 to 1.00 as of February 28, 2025.
While we 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 or other 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 $12 million as of each of February 28, 2025 and August 31, 2024, 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.
34
RADIUS RECYCLING, INC.
Capital Expenditures
Capital expenditures totaled $23 million for the first six months of fiscal 2025, compared to $40 million for the prior year period. We currently plan to invest approximately $60 million in capital expenditures in fiscal 2025. 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, infrastructure, and information technology systems, and for environmental and safety-related assets, using cash generated from operations and available credit facilities. Supply chain disruptions 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 six months of fiscal 2025, and we currently plan to invest approximately $20 million for such projects in fiscal 2025. 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 4 - 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 Qualified Settlement Funds (“QSFs”) 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 QSFs 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.
Dividends
On January 7, 2025, our Board of Directors declared a dividend for the second quarter of fiscal 2025 of $0.1875 per common share, which equates to an annual cash dividend of $0.75 per common share. The dividend was paid on February 18, 2025.
Share Repurchase Program
As of February 28, 2025, 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 second quarter of fiscal 2025. The repurchase of shares of our Class A common stock is restricted under the terms of the Merger Agreement. As a result, we do not anticipate repurchases of shares of our Class A common stock during the pendency of the Merger.
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.
35
RADIUS RECYCLING, INC.
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, investments and acquisitions, joint ventures, debt service requirements, environmental obligations, share repurchases, and other contingencies. However, in the event market conditions fail to improve, we are unable to realize the benefits of our operational and cost savings initiatives, or other negative factors occur, 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, 2024.
We maintain stand-by letters of credit to provide support for certain obligations, including workers’ compensation and performance bonds. As of February 28, 2025, we had $7 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, 2024.
Recently Issued Accounting Standards
For a description of recent accounting pronouncements that may have an impact on our financial condition, results of operations, or cash flows, see “Recent Accounting Pronouncements” in Note 1 - Summary of Significant Accounting Policies in the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.
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):
|
|
February 28, 2025 |
|
|
August 31, 2024 |
|
||
Short-term borrowings |
|
$ |
5,480 |
|
|
$ |
5,688 |
|
Long-term debt, net of current maturities |
|
|
424,424 |
|
|
|
409,082 |
|
Total debt |
|
|
429,904 |
|
|
|
414,770 |
|
Less cash and cash equivalents |
|
|
5,437 |
|
|
|
5,552 |
|
Total debt, net of cash |
|
$ |
424,467 |
|
|
$ |
409,218 |
|
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):
|
|
Six Months Ended |
|
|||||
|
|
February 28, |
|
|
February 29, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Borrowings from long-term debt |
|
$ |
388,747 |
|
|
$ |
389,692 |
|
Repayments of long-term debt |
|
|
(373,432 |
) |
|
|
(265,910 |
) |
Net borrowings (repayments) of debt |
|
$ |
15,315 |
|
|
$ |
123,782 |
|
36
RADIUS RECYCLING, INC.
Adjusted EBITDA, adjusted selling, general, and administrative expense, adjusted loss from continuing operations attributable to Radius shareholders, and adjusted diluted (loss) earnings per share from continuing operations attributable to Radius shareholders
Management believes that providing these non-GAAP financial measures adds a meaningful presentation of our results from business operations excluding adjustments for restructuring charges and other exit-related activities, asset impairment charges, amortization of capitalized cloud computing implementation costs, charges for legacy environmental matters (net of recoveries), business development costs not related to ongoing operations including pre-acquisition and merger 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 to adjusted EBITDA and adjusted selling, general, and administrative expense (in thousands):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
February 28, |
|
|
February 29, |
|
|
February 28, |
|
|
February 29, |
|
||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Reconciliation of adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
(32,965 |
) |
|
$ |
(34,010 |
) |
|
$ |
(69,894 |
) |
|
$ |
(51,808 |
) |
Loss from discontinued operations, net of tax |
|
|
— |
|
|
|
31 |
|
|
|
— |
|
|
|
33 |
|
Interest expense |
|
|
8,771 |
|
|
|
5,803 |
|
|
|
17,633 |
|
|
|
10,613 |
|
Income tax expense (benefit) |
|
|
(4,277 |
) |
|
|
1,195 |
|
|
|
(486 |
) |
|
|
(8,975 |
) |
Depreciation and amortization |
|
|
24,032 |
|
|
|
24,311 |
|
|
|
48,066 |
|
|
|
47,782 |
|
Business development costs |
|
|
2,541 |
|
|
|
140 |
|
|
|
2,551 |
|
|
|
230 |
|
Restructuring charges and other exit-related activities |
|
|
1,422 |
|
|
|
3,175 |
|
|
|
3,319 |
|
|
|
3,210 |
|
Charges (recoveries) for legacy environmental matters, net(1) |
|
|
(244 |
) |
|
|
156 |
|
|
|
(2,328 |
) |
|
|
479 |
|
Amortization of cloud computing software costs(2) |
|
|
240 |
|
|
|
247 |
|
|
|
503 |
|
|
|
327 |
|
Asset impairment charges |
|
|
— |
|
|
|
1,748 |
|
|
|
184 |
|
|
|
1,967 |
|
Adjusted EBITDA |
|
$ |
(480 |
) |
|
$ |
2,796 |
|
|
$ |
(452 |
) |
|
$ |
3,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative expense: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
As reported |
|
$ |
54,943 |
|
|
$ |
62,160 |
|
|
$ |
111,627 |
|
|
$ |
125,262 |
|
(Charges) recoveries for legacy environmental matters, net(1) |
|
|
244 |
|
|
|
(156 |
) |
|
|
2,328 |
|
|
|
(479 |
) |
Business development costs |
|
|
(2,541 |
) |
|
|
(140 |
) |
|
|
(2,551 |
) |
|
|
(230 |
) |
Adjusted |
|
$ |
52,646 |
|
|
$ |
61,864 |
|
|
$ |
111,404 |
|
|
$ |
124,553 |
|
37
RADIUS RECYCLING, INC.
Following are reconciliations of adjusted net loss from continuing operations attributable to Radius shareholders and adjusted diluted loss per share from continuing operations attributable to Radius shareholders (in thousands, except per share data):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
February 28, |
|
|
February 29, |
|
|
February 28, |
|
|
February 29, |
|
||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Income (loss) from continuing operations attributable to Radius shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
As reported |
|
$ |
(32,977 |
) |
|
$ |
(33,948 |
) |
|
$ |
(70,150 |
) |
|
$ |
(51,910 |
) |
Business development costs |
|
|
2,541 |
|
|
|
140 |
|
|
|
2,551 |
|
|
|
230 |
|
Restructuring charges and other exit-related activities |
|
|
1,422 |
|
|
|
3,175 |
|
|
|
3,319 |
|
|
|
3,210 |
|
Charges (recoveries) for legacy environmental matters, net(1) |
|
|
(244 |
) |
|
|
156 |
|
|
|
(2,328 |
) |
|
|
479 |
|
Asset impairment charges |
|
|
— |
|
|
|
1,748 |
|
|
|
184 |
|
|
|
1,967 |
|
Income tax expense (benefit) allocated to adjustments(2) |
|
|
832 |
|
|
|
(938 |
) |
|
|
(103 |
) |
|
|
(1,675 |
) |
Adjusted |
|
$ |
(28,426 |
) |
|
$ |
(29,667 |
) |
|
$ |
(66,527 |
) |
|
$ |
(47,699 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted income (loss) per share from continuing operations attributable to Radius shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
As reported |
|
$ |
(1.15 |
) |
|
$ |
(1.19 |
) |
|
$ |
(2.45 |
) |
|
$ |
(1.83 |
) |
Business development costs, per share |
|
|
0.09 |
|
|
|
— |
|
|
|
0.09 |
|
|
|
0.01 |
|
Restructuring charges and other exit-related activities, per share |
|
|
0.05 |
|
|
|
0.11 |
|
|
|
0.12 |
|
|
|
0.11 |
|
Charges (recoveries) for legacy environmental matters, net, per share(1) |
|
|
(0.01 |
) |
|
|
0.01 |
|
|
|
(0.08 |
) |
|
|
0.02 |
|
Asset impairment charges, per share |
|
|
— |
|
|
|
0.06 |
|
|
|
— |
|
|
|
0.07 |
|
Income tax expense (benefit) allocated to adjustments, per share(2) |
|
|
0.03 |
|
|
|
(0.03 |
) |
|
|
— |
|
|
|
(0.06 |
) |
Adjusted(3) |
|
$ |
(0.99 |
) |
|
$ |
(1.04 |
) |
|
$ |
(2.32 |
) |
|
$ |
(1.68 |
) |
38
RADIUS RECYCLING, 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 February 28, 2025.
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, 2024.
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. 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 February 28, 2025 and August 31, 2024, 17% and 28%, respectively, of our accounts receivable balance was covered by letters of credit, and the amount of past due receivables was not material.
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.
39
RADIUS RECYCLING, 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. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of February 28, 2025, 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 February 28, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
40
RADIUS RECYCLING, 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, 2024 and Note 4 - 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, 2024, except for the following:
Changing conditions in global markets including the impact of sanctions and tariffs, quotas, and other trade actions and import restrictions may adversely affect our operating results, financial condition, and cash flows
We generate a substantial portion of our revenues from sales to customers located outside the U.S., including countries in Asia, the Mediterranean region, and North, Central, and South America. In each of the last three fiscal years, exports comprised approximately 54% to 61% of our ferrous sales volumes and 56% to 57% of our nonferrous sales volumes. Our ability to sell our products profitably, or at all, into international markets is subject to a number of risks including adverse impacts of political, economic, military, terrorist, or major pandemic events; labor and social issues; legal and regulatory requirements or limitations imposed by foreign governments including quotas, tariffs, or other trade barriers, sanctions, adverse tax law changes, nationalization, currency restrictions, or import restrictions for certain types of products we export; and disruptions or delays in shipments caused by customs compliance or other actions of government agencies. Economic and geopolitical instability, including as a result of military conflict, could give rise to turmoil in markets that could have an impact on our business. The occurrence of such events and conditions may adversely affect our operating results, financial condition, and cash flows. For example, tariffs and import license requirements and quotas have been in place for several years in multiple jurisdictions, including China. Our ability to navigate these tariffs and restrictions is critical to our business and any changes or expansion in these tariffs and restrictions could adversely impact our business or results of operations. In addition, changing conditions in global markets may contribute to concentration in one or more of our country destinations. For example, in fiscal 2024, Bangladesh, Turkey and India comprised 85% of our ferrous export sales. We also import various materials from countries subject to tariffs, including recycled metals from our Canadian operations, recycled metals from unrelated suppliers, and certain non-trade goods, as well as purchase foreign-sourced goods from domestic distributors.
In March 2018, the U.S. imposed a 25% tariff on certain imported steel products and a 10% tariff on certain imported aluminum products under Section 232 of the Trade Expansion Act of 1962, as well as duties in various ranges on imports from China under Section 301 of the Trade Act of 1974. Those duties remain in effect. Since January 2025, there have been a number of tariffs, both threatened and imposed, including an additional 20% tariff on Chinese-origin goods, and another 34% tariff to become effective, making the total tariff 54% on China. Various other tariffs on imports from all countries ranging from 10% to 49% have been announced, with a temporary exclusion for goods that enter the United States as qualifying goods under the U.S. Mexico Canada Free Trade Agreement, which includes our recycled metal imports from Canada. Additionally, there has been an expansion of the Section 232 steel and aluminum tariffs to countries and products that had previously been excluded, a broad scope of derivative products, and the increase of the aluminum tariff to 25%. These tariffs have the potential of increasing our costs for foreign-origin trade and non-trade material.
Additionally, these tariffs, along with other U.S. trade actions, have triggered retaliatory actions by certain affected countries, and other foreign governments may impose trade measures, including reciprocal tariffs, on other U.S. goods in the future. These tariffs and other trade actions could result in a decrease in international steel demand and negatively impact demand for our exported products, which would adversely impact our business.
Given the uncertainty regarding the scope and duration of these trade actions by the U.S. and other countries, the impact of the trade actions on our operations or results remains uncertain, but this impact could be material.
Risk Factors Relating to the Merger
We may not complete the pending transaction with TAI within the time frame we anticipate or at all, which could have an adverse effect on our business, financial results, operations and/or the market price of our common stock.
On March 13, 2025, we entered into the Merger Agreement, with TAI and Merger Sub pursuant to which, on the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation in the Merger as a wholly owned subsidiary of TAI.
41
RADIUS RECYCLING, INC.
Consummation of the Merger is subject to certain customary conditions, including (i) the adoption of the Merger by the holders of a majority of the outstanding shares of Radius Common Stock, (ii) the absence of any law prohibiting or order preventing the consummation of the Merger, (iii) the receipt of certain regulatory approvals, to the extent required, (iv) the receipt of CFIUS approval without the imposition of certain conditions set forth in the Merger Agreement and (v) compliance in all material respects on the part of each of the Company, TAI and Merger Sub with such party’s covenants under the Merger Agreement. The obligation of each party to consummate the Merger is also conditioned upon the other party’s representations and warranties being true and correct (subject to certain materiality exceptions), and upon no “Company Material Adverse Effect” (as defined in the Merger Agreement) having occurred with respect to the Company since the signing of the Merger Agreement. In addition, we and TAI have certain customary termination rights pursuant to the Merger Agreement, including our right to terminate the Merger Agreement to accept a “Superior Proposal” (as defined in the Merger Agreement) subject to compliance with certain procedures specified in the Merger Agreement. As a result, we cannot assure you that all of the various closing conditions will be satisfied and that the Merger with TAI will be completed, or that, if completed, it will be exactly on the terms set forth in the Merger Agreement or within the expected time frame.
If the Merger is not completed within the expected time frame or at all, we may be subject to a number of material risks. The price of our common stock may decline to the extent that current market prices of our common stock reflect a market assumption that the Merger will be completed. We could also be required to pay TAI a termination fee of $27.2 million if the Merger Agreement is terminated under specific circumstances set forth in the Merger Agreement. The failure to complete the Merger also may result in negative publicity, a decline in investor confidence, stockholder litigation being brought against us, adverse impacts to our relationships with our existing and prospective employees, customers, regulators, third-party suppliers, industrial vendors and other business partners, us being unable to recruit prospective employees or to retain and motivate existing employees, and adverse financial impacts due to costs incurred in connection with the Merger. We may also be required to devote significant time and resources to litigation related to any failure to complete the Merger or related to any enforcement proceeding commenced against us to perform our obligations under the Merger Agreement.
The pendency of the Merger with TAI could adversely affect our business, financial results, operations and/or the market price of our common stock.
Our efforts to complete the Merger could cause substantial disruptions in, and create uncertainty surrounding, our business, which may materially adversely affect our results of operation and our business. Uncertainty as to whether the Merger will be completed may affect our ability to recruit prospective employees or to retain and motivate existing employees. Employee retention may be particularly challenging while the Merger is pending because employees may experience uncertainty about their roles following consummation of the Merger. Our management’s and certain of our employees’ attention is being directed toward the completion of the Merger and thus is being diverted to some extent from our day-to-day operations.
Uncertainty as to our future could adversely affect our business and our relationship with customers, regulators, third-party suppliers, industrial vendors and other business partners. For example, customers, third-party suppliers, industrial vendors and other counterparties may defer decisions concerning working with us or seek to change existing business relationships with us. Changes to or termination of existing business relationships could adversely affect our results of operations and financial condition, as well as the market price of our common stock. The adverse effects of the pendency of the Merger could be exacerbated by any delays in completion of the Merger or termination of the Merger Agreement.
While the Merger Agreement is in effect, we are subject to restrictions on our business activities.
While the Merger Agreement is in effect, we are subject to restrictions on our business activities, generally requiring us to conduct our business in the ordinary course of business consistent with past practice in all material respects, and subjecting us to a variety of specified restrictions absent TAI’s prior consent. Subject to certain exceptions, these limitations include, among other things, restrictions on our ability to acquire other businesses and assets, dispose of our assets, make investments, enter into certain contracts, repurchase or issue securities, pay dividends that are inconsistent with our past practice, make capital expenditures, take certain actions relating to intellectual property, amend our organizational documents, and incur indebtedness. Furthermore, we are limited in our ability to solicit other acquisition proposals during the pendency of the Merger. These restrictions could prevent us from pursuing strategic business opportunities, taking actions with respect to our business that we may consider advantageous and responding effectively and/or timely to competitive pressures and industry developments, and may, as a result, materially and adversely affect our business, results of operations and financial condition, which in turn could materially and adversely affect the price of our common stock.
42
RADIUS RECYCLING, INC.
In certain instances, the Merger Agreement requires us to pay a termination fee to TAI, which could require us to use available cash that would have otherwise been available for general corporate purposes.
Under the terms of the Merger Agreement, we may be required to pay TAI a termination fee of $27.2 million if the Merger Agreement is terminated under specific circumstances described in the Merger Agreement, including, but not limited to, a termination of the Merger Agreement by TAI in response to a “Change of Recommendation” (as defined in the Merger Agreement) of our Board of Directors or a termination of the Merger Agreement by us to accept a “Superior Proposal” (as defined in the Merger Agreement). If the Merger Agreement is terminated under such circumstances, the termination fee we may be required to pay under the Merger Agreement may require us to use available cash that would have otherwise been available for general corporate purposes and other uses. For these and other reasons, termination of the Merger Agreement could materially and adversely affect our business operations and financial condition, which in turn could materially and adversely affect the price of our common stock.
We have incurred, and will continue to incur, direct and indirect costs as a result of the pending transaction with TAI.
We have incurred, and will continue to incur, significant costs and expenses, including fees for professional services and other transaction costs, in connection with the pending Merger. We must pay substantially all of these costs and expenses whether or not the Merger is completed. We also could be subject to litigation related to the proposed Merger, which could prevent or delay the consummation of the Merger and result in significant costs and expenses.
There are a number of factors beyond our control that could affect the total amount or the timing of these costs and expenses.
If the Merger is completed, our business and shareholders would be exposed to additional risks.
The amount of cash per share to be paid under the Merger Agreement is fixed and will not be adjusted for changes in our business, assets, liabilities, prospects, outlook, financial condition or operating results or in the event of any change in the market price of, analyst estimates of, or projections relating to, our common stock.
The exchange of our common stock for the all-cash per share merger consideration under the Merger Agreement generally will be a taxable transaction to any stockholder that is treated as a U.S. taxpayer.
If the Merger is completed, our shareholders will forego the opportunity to realize the potential long-term value of the successful execution of our current strategy as an independent company. It is also possible that TAI could, at a later date, engage in unspecified transactions, including restructuring efforts, special dividends or the sale of some or all of our assets to one or more purchasers, that could conceivably produce a higher aggregate value than that available to shareholders in the Merger.
ITEM 5. OTHER INFORMATION
During the three months ended February 28, 2025,
43
RADIUS RECYCLING, INC.
ITEM 6. EXHIBITS
Exhibit Number |
|
Exhibit Description |
|
|
|
2.1 |
|
|
|
|
|
10.1* |
|
|
|
|
|
10.2* |
|
|
|
|
|
10.3 |
|
|
|
|
|
31.1 |
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2 |
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.1 |
|
|
|
|
|
32.2 |
|
|
|
|
|
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 With Embedded Linkbase Documents |
|
|
|
104 |
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* Management contract or compensatory plan or arrangement.
44
RADIUS RECYCLING, 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.
|
|
|
|
RADIUS RECYCLING, INC. |
||
|
|
|
|
(Registrant) |
||
|
|
|
|
|
|
|
Date: |
|
April 4, 2025 |
|
By: |
|
/s/ Tamara L. Lundgren |
|
|
|
|
|
|
Tamara L. Lundgren |
|
|
|
|
|
|
Chairman, President and Chief Executive Officer |
|
|
|
|
|
|
|
Date: |
|
April 4, 2025 |
|
By: |
|
/s/ Stefano R. Gaggini |
|
|
|
|
|
|
Stefano R. Gaggini |
|
|
|
|
|
|
Senior Vice President and Chief Financial Officer |
45