Investor Presentation February 2019 Nasdaq: SCHN Safe Harbor - - PowerPoint PPT Presentation

Investor Presentation

February 2019

Nasdaq: SCHN

2

Safe Harbor

SAFE HARBOR

Statements and information included in this presentation by Schnitzer Steel Industries, Inc. (the “Company”) 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,” “Company,” “Schnitzer,” and “SSI” refer to the Company and its consolidated subsidiaries. Forward-looking statements in this presentation include statements regarding future events or our expectations, intentions, beliefs and strategies regarding the future, which may include statements regarding trends, cyclicality and changes in the markets we sell into; the Company’s outlook, growth initiatives or expected results or objectives, including pricing, margins, sales volumes and profitability; strategic direction or goals; targets; changes to manufacturing and production processes; 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 and the impact of federal tax reform; the impact of tariffs, quotas and other trade actions; the realization of deferred tax assets; planned capital expenditures; liquidity positions; ability to generate cash from continuing operations; the potential impact of adopting new accounting pronouncements; obligations under our retirement plans; benefits, savings or additional costs from business realignment, cost containment and productivity improvement programs; 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”

• f Part I of our most recent Annual Report on Form 10-K, as supplemented by our subsequently filed Quarterly Reports on Form 10-Q. Examples of these risks and uncertainties include: potential

environmental cleanup costs related to the Portland Harbor Superfund site or other locations; the cyclicality and impact of general economic conditions; changing conditions in global markets including the impact of tariffs, quotas and other trade actions; volatile supply and demand conditions affecting prices and volumes in the markets for both our products and raw materials we purchase; imbalances in supply and demand conditions in the global steel industry; the impact of goodwill impairment charges; the impact of long-lived asset and equity investment impairment charges; inability to achieve or sustain the benefits from productivity, cost savings and restructuring initiatives; difficulties associated with acquisitions and integration of acquired businesses; customer fulfillment of their contractual obligations; increases in the relative value of the U.S. dollar; the impact of foreign currency fluctuations; potential limitations on our ability to access capital resources and existing credit facilities; restrictions on our business and financial covenants under our bank credit agreement; the impact of consolidation in the steel industry; inability to realize expected benefits from investments in technology; freight rates and the availability of transportation; the impact of equipment upgrades, equipment failures and facility damage on production; product liability claims; the impact of legal proceedings and legal compliance; the adverse 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; environmental compliance costs and potential environmental liabilities; inability to obtain or renew business licenses and permits or renew facility leases; compliance with climate change and greenhouse gas emission laws and regulations; reliance on employees subject to collective bargaining agreements; and the impact of the underfunded status of multiemployer plans in which we participate.

NON-GAAP FINANCIAL MEASURES

This presentation contains certain non-GAAP financial measures as defined under SEC rules. Reconciliations of the non-GAAP financial measures contained in this presentation to the most directly comparable U.S. GAAP measure are provided in the Appendix. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, the most directly comparable U.S. GAAP measures.

3

Company Overview

• Sourcing Scrap

─ 51 auto parts stores purchase more than 400,000 salvage vehicles annually ─ 44 metals recycling facilities collect obsolete machinery and equipment, railroad cars and tracks, automobiles, home appliances, consumer goods, manufacturing, construction and demolition metal

• Processing Scrap Metal (Ferrous and Nonferrous)

─ 3.7 million long tons of ferrous* and 572 million pounds of nonferrous metal annually for use in steel and other manufacturing globally

• Electric Arc Furnace (EAF) Producer of Finished Steel and Recycled Metals

─ Steel manufacturing facility in Oregon with effective annual production capacity of 580 thousand tons ─ Long product producer of rebar and wire rod from recycled scrap for construction markets on the West Coast and Western Canada ─ Also includes metals recycling and deep water export operation in Portland, OR with 4 metals recycling yards, selling externally and delivering to our steel mill approx. 0.6 million long tons of ferrous* metal annually

Schnitzer Steel Industries, Inc. (SSI) is a leading North American Auto and Metals Recycler and West Coast Steel Manufacturer

• 4.3 million long tons of ferrous metal processed annually by SSI*
• 7 deep water ports on East and West Coasts, Hawaii and Puerto Rico serve domestic and

global steel manufacturers

• Integrated operating platform includes auto parts stores with approximately 5 million annual

retail visits

• Steel manufacturing operations produce finished steel products

Cascade Steel & Scrap (CSS)

Company data based on fiscal 2018 *Total SSI volumes are 4.3 million long tons of ferrous in fiscal 2018, including volumes sold externally by AMR and CSS, and delivered to our steel mill for finished steel production.

Auto and Metals Recycling (AMR)

4

Geographic Platform Enables Worldwide Access

Sourcing scrap through 95 auto parts and metals recycling facilities in North America and providing processed recycled metals to customers around the world

Asia EAME Americas

Northwest 15 AMR 5 CSS Northeast 11 AMR Southwest and Hawaii 29 AMR Midwest and South 17 AMR Southeast and Puerto Rico 19 AMR

Schnitzer export facilities Export destinations CSS Steel Mill

(1) Europe, Africa and Middle East (2) Domestic includes CSS, brokerage and other FY18 Ferrous Sales Volume Destinations

5

3,289 3,628 4,299 FY16 FY17 FY18

SSI Volumes

Ferrous (000s LT)

FY18 Financial Highlights

$28 $54 $147

FY16 FY17 FY18 Consolidated Adjusted Operating Income

($M)

+429% +429% Note: For a reconciliation to U.S. GAAP of adjusted operating income and adjusted EPS from continuing operations, see appendix. *FY18 adjusted EPS includes discrete income tax benefits of $1.58 from the release of valuation allowances on deferred tax assets and tax reform.

$0.69 $1.53 $5.39 FY16 FY17 FY18

Adjusted EPS*

+678% +678%

$166 $138 $103 FY16 FY17 FY18

Net Debt ($M)

• 38%
• 38%

510 585 636 FY16 FY17 FY18

SSI Volumes

Nonferrous (M LB) +25% +25%

$99 $100 $160 FY16 FY17 FY18

Operating Cash Flow ($M)

+61% +61% +31% +31%

Strategic initiatives to increase volumes and expand margins, supported by positive market conditions, have been delivering steady growth

6

First Quarter Fiscal 2019 Highlights

Consolidated Financial Performance AMR Volume Growth Strong CSS Performance

 Adjusted EPS from Continuing Operations of $0.58, the second highest first quarter performance since fiscal ‘11  Consolidated Adjusted Operating Income of $23 million  Targeting $35 million in annual productivity initiatives

• Includes $25 million of new initiatives and $10 million of productivity

improvements announced 4Q18

New Productivity Initiatives

 CSS Operating Income of $12 million, best Q1 operating income since fiscal ‘08

• Includes adverse $1 million impact of external gas pipeline interruption

 Expect further investments in nonferrous processing technology during fiscal ‘19  Repurchased 150,000 shares in 1Q19 and paid 99th consecutive quarterly dividend

Focused Capital Allocation

Note: For a reconciliation to U.S. GAAP of adjusted operating income and adjusted EPS from continuing operations, see appendix.

 Ferrous sales volumes up YoY by 15%  Nonferrous sales volumes up YoY by 18%

7

Aluminum vs. Zorba Market Price Trends Iron Ore & Met Coal Price Trends

($/ton)

Ferrous Market Price Trends

($/ton)

Metal Market Trends

1Q18 1Q18 1Q19 1Q19 1Q18 1Q19

36% decrease in exports from 2016 36% decrease in exports from 2016

Chinese Steel Export & Utilization Trends

Sources: Platts, Argus, AMM.com, Worldsteel.org, OECD CFR price includes loading and transportation costs to the destination port; FOB price only includes loading and transportation costs to the named location. *Aluminum based on 3 Mo LME Aluminum, and Aluminum Scrap Zorba is CIF China prices. **Trailing 12 months ended November 30, 2018

8

• 500

1,000 1,500 2,000 2,500 3,000 South Korea China Turkey Taiwan Mexico Canada Vietnam Bangladesh Malaysia Indonesia

U.S. Ferrous Scrap Exports (000s tons)

• Steel scrap consumption has outpaced crude steel

production growth in a number of key countries in 1H of CY18

• US ferrous scrap exports have steadily increased,

demonstrating broad-based and growing demand – The 10 countries on the top right represent 75% of total U.S. ferrous scrap exports for the 2018 period

• While China is not a significant destination for US scrap

exports, projected growth of EAF share of steel-making capacity provides support for future scrap demand growth in the country

Long-Term Drivers of Scrap Demand

Sources: United States International Trade Commission, BIR, World Steel Association, Barclays Research

Ferrous Scrap Consumption Jan - Jun Crude Steel Production Jan - Jun 2018 2017 % Change % Change China 87.7 62.2 +41.0 +6.0 EU-28 48.0 48.1

• 0.3

+1.6 USA 23.7 22.8 +3.9 +2.9 Japan 18.5 17.9 +3.6 +1.3 Turkey 15.9 15.1 +4.9 +3.7 South Korea 15.0 15.5

• 3.2

+3.7 Russia 11.4 10.3 +11.1 +3.2

40 80 120 160 2015 2017 2025F

Chinese EAF Steel Production Crude Steel Production (Mt) Scrap Consumption vs. Crude Steel Production (Mt)

China expected to increase EAF capacity by >100Mt from 2015 to 2025 January - October CY18 CY16 Total US ferrous scrap exports increased 21% from Jan – Oct 2018 YoY

9

Nonferrous Volumes & Destinations

Note: LFQ is Last Four Quarters

39% 46% 15% 34% 38% 28% 40% 27% 33%

Domestic China All others

SSI Total Nonferrous Volumes by Destination

FY17 FY18 1Q19

SSI Total LFQ 1Q19 Nonferrous Product Mix by Volume

Nonferrous Other Nonferrous from shredder production

Demonstrated ability to diversify sales destinations

• 73% of nonferrous volumes in 1Q19 to destinations
• ther than China
• Our global reach allows us to pivot to destinations

with greatest demand

Changing trade dynamics are shifting demand for nonferrous products and impacting prices

• Demand for nonferrous products from countries ex-

China is increasing as production shifts to new markets

Balanced nonferrous product mix and customer base

• Approximately 1/3 of sales volumes related to zorba
• Remainder consists of multiple nonferrous products

FY17 FY18 1Q19 FY17 FY18 1Q19

10

• SSI ferrous volumes – long-term organic growth

target of 5 million tons, reflecting retained capacity

• Continue to utilize analytics to expand customer

base and increase supply flows

• Further optimize logistics to expand market

access and reach

Grow Profitable Volumes Productivity Initiatives Roll Out New Technology & Expand Product Optionality

AMR Strategic Priorities

• Roll out of advanced nonferrous processing

technology in 2019/2020 to increase throughput, lower processing costs, improve recovery rates and create products with the metallic content sought by our customers

• Targeting $35 million in annual productivity

initiatives

• Includes $25 million of new initiatives and

$10 million of productivity improvements announced 4Q18

• $27 million AMR, $5 million CSS and $3

million Corporate

Operational Excellence Environmental Stewardship Strategic Priorities Strong Balance Sheet

11

$400 $600 $800 Apr‐17 May‐17 Jun‐17 Jul‐17 Aug‐17 Sep‐17 Oct‐17 Nov‐17 Dec‐17 Jan‐18 Feb‐18 Mar‐18 Apr‐18 May‐18 Jun‐18 Jul‐18 Jul‐18 Aug‐18 Sep‐18 Oct‐18 Nov‐18 Dec‐18

Domestic rebar* Import rebar*

US Imports of Rebar Products

(000s of tons)

Rebar Market Price Trends

($/ST)

Finished Steel Market Trends

Sources: Platts, US Census Bureau, SBB *Domestic and import prices based on US Midwest and Houston import prices, respectively.

1Q18

Historical Rebar and Domestic Scrap Prices

($/ST)

Average 1Q19 domestic rebar market prices were up $149/short ton, or 27%, YoY

• Increases in selling prices outpaced the increase in

the cost of steelmaking raw materials

• Continued limited volumes of rebar imports

Rebar prices in the range of FY11 levels

• Rebar to scrap spread remains higher than previous

peak in 1Q16 Average US weekly capacity utilization in Q4 of CY18 at ~80%, the highest quarterly average rate since 2008

1Q19

Announcement of Section 232 tariffs with temporary exemptions U.S. Department of Commerce initiated Section 232 investigation

Fiscal Year

Tariffs and other duties are reflected in import price index starting Sept 1 2018

12

797 919

$292 $306

$250 $270 $290 $310 $330 $350 $370 $390

1Q18 1Q19

Fe Volumes 000s LT Average Selling Price $/LT, net of freight

129 153

$0.73 $0.59

1Q18 1Q19

NFe Volumes M Lbs Average Selling Price $/Lb, net of freight

$44 $25 $35 $41 $43 $25 $33 $40

1Q18 1Q19 LFQ 1Q18 LFQ 1Q19

AMR Volume & Operating Trends

Adjusted Operating Income Per Ferrous Ton

(in $)

• 42%

YoY

• 42%

YoY Note: For a reconciliation to U.S. GAAP of adjusted operating income, including quarterly estimated impact of average inventory accounting, see appendix. LFQ is Last Four Quarters +17% YoY +17% YoY Volumes +15% YoY Volumes +15% YoY Volumes +18% YoY Volumes +18% YoY

Ferrous Volumes and Average Prices Nonferrous Volumes and Average Prices AMR achieved adjusted operating income of $23M in 1Q19

• Adjusted operating income per ferrous ton of $25
• Ferrous and nonferrous sales volumes were up YoY 15%

and 18%, respectively

• Average ferrous net selling prices were up YoY 5% and

nonferrous prices were down YoY 19%

• Margin compression in 1Q19 resulted from the significant

decline in nonferrous selling prices outpacing the reduction in purchase costs for raw materials, partially offset by the

• perating leverage benefit from higher volumes

Adjusted Operating Income per Ton Adjusted Operating Income per Ton Excluding Estimated Average Inventory Accounting

13

127 119 1Q18 1Q19

$8 $12

1Q18 1Q19 LFQ 1Q18 LFQ 1Q19

$15 $42

$599 $747

1Q18 1Q19

CSS Volume & Operating Trends

CSS achieved significant operating performance improvement in 1Q19 YoY

• Operating income of $12 million, an increase of 41% YoY
• Selling prices up 25% YoY reflecting reduced pressure from

imports and impact of higher raw material costs

• Finished steel sales volumes lower by 6% YoY due to lower

production

–

Temporary disruption to major external natural gas pipeline

–

Downtime related to implementation of mill equipment upgrades aimed at improving productivity Finished Steel Sales Volumes

(000s ST)

Average Finished Steel Sales Prices*

($/ST)

CSS Adjusted Operating Income

($ Millions)

Note: For a reconciliation to U.S. GAAP of adjusted operating income (loss), see appendix. Amounts may not add due to rounding. LFQ is Last Four Quarters *Average selling prices are net of freight +25% YoY +25% YoY

• 6% YoY
• 6% YoY

+$4M YoY +$4M YoY +26M YoY +26M YoY

14

• LFQ 1Q19 net debt to adj. EBITDA ratio of 0.8x
• 1Q19 net leverage ratio of 19%

Capital Structure

Note: Net debt is total debt, net of cash. For a reconciliation to U.S. GAAP of net debt, net debt leverage to adjusted EBITDA, and net debt to net capital ratio, see appendix.

• Demonstrated ability to generate operating cash flow

through the cycle

• Amended $700M credit facility provides additional

financial flexibility; maturity date extended to 2023 Cash Flows & Liquidity Strong Balance Sheet

• Capital expenditures, dividends, share repurchases,

transactional growth Capital Allocation Priorities

$39 $141 $145 $99 $100 $160

FY13 FY14 FY15 FY16 FY17 FY18

$368 $294 $205 $166 $138 $103 $157

FY13 FY14 FY15 FY16 FY17 FY18 1Q19

Net Debt

($ Millions)

Operating Cash Flows

($ Millions)

3.6 x 2.6 x 2.5 x 2.0 x 1.3 x 0.5 x 0.8 x FY13 FY14 FY15 FY16 FY17 FY18 1Q19 LFQ Net Debt to Adjusted EBITDA

15

Building on a Foundation of Sustainability

(1) Statistics based on FY18 (2) Comparisons are YoY, FY17 to FY18

Schnitzer Steel’s latest Sustainability Report for FY17 & FY18 can be found at http://www.schnitzersteel.com/sustainability.aspx

424 thousand end-of-life vehicles purchased 519 thousand tons of finished steel produced from recycled scrap 4.3 million tons of ferrous scrap metal recycled 636 million pounds of nonferrous scrap metal recycled

OUR RECYCLED PRODUCTS (1)

>4.8 million recycled parts sold

OUR IMPACT (2)

Integrity, Ethics and Compliance Safety, Health and Wellness Diversity, Inclusion and Cultural Awareness Community Engagement and Partnerships Environmental Performance and Protection

79% of electricity from hydro & other renewables 60% of water is reused 7% reduction in normalized energy use 6% reduction in normalized emissions 3% reduction in normalized disposed waste

Q&A

APPENDIX

18

Non-GAAP Financial Measures

This presentation contains performance based on adjusted net income and adjusted diluted earnings per share from continuing operations attributable to SSI; adjusted consolidated, AMR and CSS operating income (loss); adjusted EBITDA; net debt, net capital, net debt leverage ratio, and net debt to adjusted EBITDA ratio; and adjusted operating income excluding estimated average inventory accounting, which are non-GAAP financial measures as defined under SEC rules. As required by SEC rules, the Company has provided reconciliations of these measures for each period discussed to the most directly comparable U.S. GAAP measure. Management believes that providing these non-GAAP financial measures provides a meaningful presentation of our results from business operations excluding adjustments for other asset impairment charges net of recoveries, restructuring charges and other exit-related activities, recoveries related to the resale or modification of certain previously contracted shipments, and the income tax expense (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. Adjusted operating results in fiscal 2015 excluded the impact from the resale or modification of the terms, each at significantly lower prices due to sharp declines in selling prices, of certain previously contracted bulk shipments for delivery during fiscal 2015. Recoveries resulting from settlements with the original contract parties, which began in the third quarter of fiscal 2016 and concluded in the first quarter of fiscal 2018, are reported within selling, general and administrative expense in the quarterly statements of income and are also excluded from these measures. Further, management believes that debt, net of cash is a useful measure for investors because, as cash and cash equivalents can be used, among other things, to repay indebtedness, netting this against total debt is a useful measure of our leverage. Management believes that the ratio of total debt to total capital, both net of cash and cash equivalents, is also a useful measure of our leverage. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, the most directly comparable U.S. GAAP measures. Further, management believes that:

• Adjusted EBITDA is a useful measure of the Company’s financial performance and liquidity;
• Net Debt to Adjusted EBITDA Ratio is a useful measure of the Company’s liquidity; and
• Adjusted operating income excluding estimated impacts of average inventory accounting is a useful indicator of the Company’s financial

performance because it excludes the impact of the rapid changes in purchase prices compared to our cost of goods sold which adjusts more slowly due to use of average inventory accounting and provides a measure of operating performance excluding the differential. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, the most directly comparable U.S. GAAP measures.

19 The following is a reconciliation of each of these measures to the most directly comparable U.S. GAAP measure:

Non-GAAP Financial Measures

Consolidated Operating Income ($ in thousands) 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 2018 2017 Operating income $ 22,689 $ 37,973 $ 51,234 $ 33,358 $ 26,423 $ 22,108 $ 19,147 $ 14,171 $ 587 $ 148,988 $ 56,013 Other asset impairment charges (recoveries), net 63 532 (1,465) - (88) (74) (1,044) - 401 (1,021) (717) Restructuring charges and other exit-related activities 202 (922) 70 91 100 90 93 (494) 201 (661) (109) Contract resale or modification, net of recoveries

• - - - (417) (417) (171) (417) (139) (417) (1,144)

Consolidated adjusted operating income(1) $ 22,954 $ 37,583 $ 49,839 $ 33,449 $ 26,018 $ 21,707 $ 18,025 $ 13,260 $ 1,050 $ 146,889 $ 54,043 AMR Operating Income ($ in thousands) 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 2018 2017 Operating income $ 23,017 $ 33,836 $ 54,980 $ 45,132 $ 35,172 $ 23,992 $ 29,520 $ 25,288 $ 12,606 $ 169,120 $ 91,405 Other asset impairment charges (recoveries), net 63 532 (1,465) - - 860 (1,044) - - (933) (184) Contract resale or modification, net of recoveries

• - - - (417) (417) (171) (417) (139) (417) (1,144)

Adjusted AMR operating income(1) $ 23,080 $ 34,368 $ 53,515 $ 45,132 $ 34,755 $ 24,435 $ 28,305 $ 24,871 $ 12,467 $ 167,770 $ 90,077 CSS Operating Income (Loss) ($ in thousands) 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 2018 2017 Operating income (loss) $ 11,918 $ 13,604 $ 10,793 $ 5,413 $ 8,476 $ 8,019 $ 1,163 $ (1,279) $ (2,628) $ 38,286 $ 5,275 Other asset impairment charges (recoveries), net

• - - - (88) (934) - - 401 (88) (533)

Adjusted CSS operating income (loss)(1) $ 11,918 $ 13,604 $ 10,793 $ 5,413 $ 8,388 $ 7,085 $ 1,163 $ (1,279) $ (2,227) $ 38,198 $ 4,742 (1) May not foot due to rounding. Quarter Fiscal Year(1) Quarter Fiscal Year(1) Quarter Fiscal Year(1)

20 The following is a reconciliation of each of these measures to the most directly comparable U.S. GAAP measure:

Non-GAAP Financial Measures

Net Income from Continuing Operations Attributable to SSI (in thousands) 1Q19 4Q18 3Q18 2Q18 1Q18 2018 Net income from continuing operations attributable to SSI $ 16,260 $ 59,396 $ 37,458 $ 40,852 $ 18,399 $ 156,105 Other asset impairment charges (recoveries), net 63 532 (1,465) - (88) (1,021) Restructuring charges and other exit-related activities 202 (922) 70 91 100 (661) Contract resale or modification, net of recoveries

• - - - (417) (417)

Income tax expense (benefit) allocated to adjustments(1) (60) (171) 86 (41) 131 5 Adjusted net income from continuing operations attributable to SSI(2) $ 16,465 $ 58,835 $ 36,149 $ 40,902 $ 18,125 $ 154,011 Diluted EPS from Continuing Operations Attributable to SSI ($ per share) 1Q19 4Q18 3Q18 2Q18 1Q18 2018 Net income per share attributable to SSI $ 0.57 $ 2.09 $ 1.31 $ 1.42 $ 0.64 $ 5.47 Income (loss) per share from discontinued operations attributable to SSI (0.00) 0.01 - 0.01 - 0.01 Net income per share from continuing operations attributable to SSI(2) $ 0.57 $ 2.08 $ 1.31 $ 1.42 $ 0.64 $ 5.46 Other asset impairment charges (recoveries), net 0.00 0.02 (0.05) - - (0.04) Restructuring charges and other exit-related activities 0.01 (0.03) - - - (0.02) Contract resale or modification, net of recoveries

• - - - (0.01) (0.01)

Income tax expense (benefit) allocated to adjustments(1) (0.00) (0.01) - - - - Adjusted diluted EPS from continuing operations attributable to SSI(2) $ 0.58 $ 2.06 $ 1.26 $ 1.42 $ 0.63 $ 5.39 (2) May not foot due to rounding (1) Income tax allocated to adjustments reconciling reported and adjusted net income from continuing operations attributable to SSI and diluted earnings per share from continuing operations attributable to SSI is determined based on a tax provision calculated with and without the adjustments. Quarter Fiscal Year(1) Quarter Fiscal Year(1)

21

Non-GAAP Financial Measures

Adjusted EBITDA

• Adjusted EBITDA – Earnings before interest, taxes, depreciation, amortization, goodwill impairments and other asset

impairments net of recoveries, restructuring charges and other exit-related activities, net income attributable to noncontrolling interests, discontinued operations, and contract resale or modification, net of recoveries.

• The following is a reconciliation of net income attributable to SSI and Adjusted EBITDA:

1Q19 4Q18 3Q18 2Q18 1Q18 $ 16,188 $ 59,669 $ 37,402 $ 41,016 $ 18,364 Plus net income attributable to noncontrolling interests 430 532 1,046 903 857 Plus interest expense 1,906 2,160 2,483 2,281 2,059 Plus tax expense (benefit) 4,116 (23,620) 10,650 (10,577) 5,957 Plus depreciation & amortization 13,297 12,663 12,327 12,160 12,522 Plus other asset impairment charges (recoveries), net 63 532 (1,465) - (88) Plus restructuring charges and other exit-related activities 202 (922) 70 91 100 Plus (gain) loss from discontinued operations, net of tax 72 (273) 56 (164) 35 Plus contract resale or modification, net of recoveries

• - - - (417)

$ 36,274 $ 50,741 $ 62,569 $ 45,710 $ 39,389 Adjusted EBITDA (in thousands) Net Income attributable to SSI Total Adjusted EBITDA Quarter

22

Non-GAAP Financial Measures

Net Debt Leverage Ratio

• Debt, net of cash is the difference between (i) the sum of long-term debt and short-term debt (i.e., total debt) and (ii) cash and

cash equivalents.

• The leverage ratio of net debt to net capital is the net debt as a percentage of net debt plus total equity.
• The following is a reconciliation of the net debt leverage ratio:

Leverage Ratio 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 ($ in thousands) 11/30/2018 8/31/2018 5/31/2018 2/28/2018 11/30/2017 8/31/2017 5/31/2017 2/28/2017 11/30/2016 Total debt $ 168,550 $ 107,376 $ 172,691 $ 210,824 $ 184,882 $ 145,124 $ 184,443 $ 209,477 $ 187,645 Less cash (11,216) (4,723) (10,090) (15,007) (9,194) (7,287) (15,209) (9,830) (8,100) Net debt $ 157,334 $ 102,653 $ 162,601 $ 195,817 $ 175,688 $ 137,837 $ 169,234 $ 199,647 $ 179,545 Total debt $ 168,550 $ 107,376 $ 172,691 $ 210,824 $ 184,882 $ 145,124 $ 184,443 $ 209,477 $ 187,645 Total equity 675,983 670,110 619,562 587,096 551,617 537,493 517,558 502,684 494,067 Total capital $ 844,533 $ 777,486 $ 792,253 $ 797,920 $ 736,499 $ 682,617 $ 702,001 $ 712,161 $ 681,712 Less cash (11,216) (4,723) (10,090) (15,007) (9,194) (7,287) (15,209) (9,830) (8,100) Net capital $ 833,317 $ 772,763 $ 782,163 $ 782,913 $ 727,305 $ 675,330 $ 686,792 $ 702,331 $ 673,612 Total debt to capital ratio 20.0% 13.8% 21.8% 26.4% 25.1% 21.3% 26.3% 29.4% 27.5% Impact excluding cash from both total debt and total capital

• 1.1%
• .5%
• 1.0%
• 1.4%
• .9%
• .8%
• 1.6%
• 1.0%
• .9%

Net debt leverage ratio 18.9% 13.3% 20.8% 25.0% 24.2% 20.4% 24.6% 28.4% 26.7%

23

Non-GAAP Financial Measures

Net Debt to Adjusted EBITDA Ratio

• The following is a reconciliation of cash flows from operating activities to adjusted EBITDA; debt to debt, net of cash; the debt to

cash flows from operating activities ratio; and the net debt to adjusted EBITDA ratio:

Net Debt to Adjusted EBITDA Ratio LFQ ($ in thousands) 1Q19 2018 2017 2016 2015 2014 Cash flows from operating activities $ 163,660 $ 159,676 $ 100,370 $ 99,240 $ 144,628 $ 141,252 Exit-related gains, asset impairments and accelerated depreciation, net 977 1,000 407 (1,790) (6,502) (566) Write-off of debt issuance costs

• - - (768) - -

Inventory write-down

• (38) - (710) (3,031) -

Deferred income taxes 39,453 37,995 (2,278) (507) 1,988 3,815 Undistributed equity in earnings of joint ventures 1,988 1,953 3,674 819 1,490 1,196 Share-based compensation expense (21,365) (18,965) (10,847) (10,437) (10,481) (14,506) Excess tax benefit from share-based payment arrangements

• - - - 343 194

Gain (loss) on disposal of assets (260) (56) (448) 465 2,875 1,126 Unrealized foreign exchange gain (loss), net (303) 104 (361) 109 1,909 (240) Bad debt (expense) recoveries, net (336) (323) (126) (131) 264 (449) Change in current assets and current liabilities 24,825 34,081 10,666 (19,317) (76,736) (39,011) Changes in other operating assets and liabilities (1,876) (6,987) (4,958) (405) 2,252 (2,550) Interest expense 8,830 8,983 8,081 8,889 9,191 10,595 Tax expense (benefit) (19,431) (17,590) 1,322 735 (12,615) 2,583 Restructuring charges and other exit-related activities (963) (661) (109) 6,782 13,008 6,830 Loss (gain) from discontinued operations, net of tax (309) (346) 390 1,348 7,227 2,809 Depreciation and amortization from discontinued operations

• - - - (821) (1,335)

Contract resale or modification, net of recoveries

• (417) (1,144) (694) 6,928 -

Adjusted EBITDA $ 194,890 $ 198,409 $ 104,639 $ 83,628 $ 81,917 $ 111,743 Debt 168,550 107,376 145,124 192,518 228,156 319,365 Cash and cash equivalents 11,216 (4,723) (7,287) (26,819) (22,755) (25,672) Net debt $ 157,334 $ 102,653 $ 137,837 $ 165,699 $ 205,401 $ 293,693 Debt to cash flows from operating activities ratio 1.0 0.7 1.4 1.9 1.6 2.3 Net debt to adjusted EBITDA ratio 0.8 0.5 1.3 2.0 2.5 2.6 Fiscal Year

24

Non-GAAP Financial Measures

• Estimated Effect of Average Inventory Accounting – We account for the cost of our inventory using the average cost method. In

periods of rising or falling selling prices for our products, we seek to adjust the purchase price paid for raw materials. However, the cost of our inventory changes more slowly than the purchase prices due to the effect of the average cost method. As a result, changes in the average inventory cost recorded through our cost of goods sold lag the changes in purchase prices, thus generally impacting our operating results positively in periods of rising market prices and negatively in periods of falling market prices.

• The following is a presentation of the estimated impact of average inventory accounting during the comparable periods:

Adjusted Operating Income Excluding Estimated Average Inventory Accounting

AMR Adjusted Operating Income Excluding LFQ Estimated Average Inventory Accounting Impact ($ in thousands, except per ton) 1Q19 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 2018 2017 Adjusted operating income $156,095 $ 23,080 $ 34,368 $ 53,515 $ 45,132 $ 34,755 $ 24,435 $ 28,305 $ 24,871 $ 12,467 $167,770 $ 90,077 Estimated average inventory accounting impact 3,882 (43) (2,224) 1,558 4,591 163 2,854 (793) 4,065 (1,698) 4,088 4,428 Adjusted operating income excluding estimated average inventory accounting(1) $152,213 $ 23,123 $ 36,592 $ 51,957 $ 40,541 $ 34,592 $ 21,581 $ 29,098 $ 20,806 $ 14,165 $163,682 $ 85,649 Ferrous volumes (000s LT) 3,830 919 1,032 983 896 797 864 825 739 717 3,708 3,145 Adjusted operating income per ton $ 41 $ 25 $ 33 $ 54 $ 50 $ 44 $ 28 $ 34 $ 34 $ 17 $ 45 $ 29 Adjusted operating income per ton excluding estimated average inventory accounting $ 40 $ 25 $ 35 $ 53 $ 45 $ 43 $ 25 $ 35 $ 28 $ 20 $ 44 $ 27 Consolidated Adjusted Operating Income Excluding LFQ Estimated Average Inventory Accounting Impact (in thousands) 1Q19 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 2018 2017 Consolidated adjusted operating income $143,825 $ 22,954 $ 37,583 $ 49,839 $ 33,449 $ 26,018 $ 21,707 $ 18,025 $ 13,260 $ 1,050 $146,889 $ 54,043 AMR estimated average inventory accounting impact 3,882 (43) (2,224) 1,558 4,591 163 2,854 (793) 4,065 (1,698) 4,088 4,428 Adjusted operating income excluding estimated average inventory accounting(1) $139,943 $ 22,997 $ 39,807 $ 48,281 $ 28,858 $ 25,855 $ 18,853 $ 18,818 $ 9,195 $ 2,748 $142,801 $ 49,615 (1) May not foot due to rounding. Quarter Fiscal Year(1) Quarter Fiscal Year(1)

25 The following provides recast values of segment data for AMR and CSS following the completed reorganization in 4Q17:

Historical Segment Data

Recast Segment Financials ($000s) Auto and Metals Recycling 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 2018 2017 Reported operating income $ 23,017 $ 33,836 $ 54,980 $ 45,132 $ 35,172 $ 23,992 $ 29,520 $ 25,288 $ 12,606 $ 169,120 $ 91,405 Adjusted operating income $ 23,080 $ 34,368 $ 53,515 $ 45,132 $ 34,755 $ 24,435 $ 28,305 $ 24,871 $ 12,467 $ 167,770 $ 90,077 Cascade Steel and Scrap 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 2018 2017 Reported operating income (loss) $ 11,918 $ 13,604 $ 10,793 $ 5,413 $ 8,476 $ 8,019 $ 1,163 $ (1,280) $ (2,628) $ 38,286 $ 5,275 Adjusted operating income (loss) $ 11,918 $ 13,604 $ 10,793 $ 5,413 $ 8,388 $ 7,085 $ 1,163 $ (1,280) $ (2,227) $ 38,198 $ 4,742 Consolidated 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 2018 2017 Reported operating income $ 22,689 $ 37,973 $ 51,234 $ 33,358 $ 26,423 $ 22,108 $ 19,147 $ 14,171 $ 587 $ 148,988 $ 56,013 Adjusted operating income $ 22,954 $ 37,583 $ 49,839 $ 33,449 $ 26,018 $ 21,707 $ 18,025 $ 13,260 $ 1,050 $ 146,889 $ 54,043 Recast Segment Volumes Auto and Metals Recycling 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 2018 2017 Ferrous volumes (000s LT)(2) 919 1,032 983 896 797 864 825 739 717 3,708 3,145 Nonferrous volumes (000s LB)(2) 152,869 166,976 146,043 129,549 129,137 150,343 150,356 114,275 125,817 571,705 540,791 Car purchase volumes (000s) 94 105 109 102 108 113 108 96 94 424 411 Cascade Steel and Scrap 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 2018 2017 Finished steel volumes (ST) 119,204 127,010 140,221 124,711 127,220 147,431 141,221 105,989 100,875 519,162 495,516 SSI Total Volumes(3) 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 2018 2017 Ferrous volumes (000s LT) 1,080 1,206 1,119 1,062 912 991 951 852 834 4,299 3,628 Nonferrous volumes (000s LB) 166,977 188,359 162,667 144,024 141,046 164,342 161,832 122,554 136,057 636,096 584,785 (1) May not foot due to rounding. (2) Includes transfers to CSS. (3) Ferrous and nonferrous volumes sold externally by AMR and CSS and delivered to our steel mill for finished steel production. Quarter Fiscal Year(1) Quarter Fiscal Year(1)

26 The following provides recast values of segment data for AMR and CSS following the completed reorganization in 4Q17:

Historical Segment Operating Statistics

Fiscal Year(5) Fiscal Year(5) 1Q19 1Q18 2Q18 3Q18 4Q18 2018 1Q17 2Q17 3Q17 4Q17 2017 Auto and Metals Recycling Ferrous selling prices ($/LT)(1) Domestic $ 290 $ 259 $ 278 $ 314 $ 303 $ 291 $ 169 $ 237 $ 263 $ 257 $ 236 Export $ 314 $ 306 $ 327 $ 347 $ 328 $ 328 $ 203 $ 252 $ 255 $ 263 $ 244 Average $ 306 $ 292 $ 314 $ 337 $ 321 $ 317 $ 194 $ 247 $ 258 $ 262 $ 242 Ferrous sales volume (000s LT) Domestic 340 238 240 293 315 1,085 197 221 291 239 948 Export 579 559 657 690 717 2,623 520 518 534 625 2,197 Total 919 797 896 983 1,032 3,708 717 739 825 864 3,145 Nonferrous average price ($/LB)(1)(2) $ 0.59 $ 0.73 $ 0.72 $ 0.74 $ 0.69 $ 0.72 $ 0.58 $ 0.64 $ 0.65 $ 0.64 $ 0.63 Nonferrous sales volume (M LB)(2) 153 129 130 146 167 572 126 114 150 150 541 Car purchase volume (000s)(3) 94 108 102 109 105 424 94 96 108 113 411 Auto stores at end of quarter 51 53 53 53 52 52 52 52 53 53 53 Cascade Steel and Scrap Finished steel average sales price ($/ST)(1) $ 747 $ 599 $ 619 $ 703 $ 741 $ 666 $ 492 $ 517 $ 545 $ 565 $ 534 Sales volume (000s ST) Rebar 81 84 80 92 81 337 74 69 84 96 324 Coiled products 37 41 43 47 44 175 24 34 55 48 161 Merchant bar and other

• 2 2 2 2 8

3 2 2 3 11 Finished steel products sold(5) 119 127 125 140 127 519 101 106 141 147 496 Rolling mill utilization(4) 87% 95% 83% 91% 83% 88% 65% 89% 85% 95% 83% (1) Price information is shown after a reduction for the cost of freight incurred to deliver the product to the customer. (2) Excludes PGM metals in catalytic converters. (3) Cars purchased by auto stores only. (4) Rolling mill utilization is based on effective annual production capacity under current conditions of 580 thousand tons of finished steel products. (5) May not foot due to rounding. (Unaudited)