SCHNITZER STEEL INDUSTRIES, INC. 35 / Schnitzer Steel Industries, Inc. Form 10-K 2017 operating margins per ferrous ton sold at AMR compared to fiscal 2015 despite lower average net selling prices and sales volumes. SG&A expense in fiscal 2016 decreased by $16 million, or 13%, compared to fiscal 2015 primarily resulting from reduced employee-related expenses. In the second quarter of fiscal 2016, we identified a triggering event requiring an interim impairment test of goodwill allocated to our reporting units. The impairment test resulted in a non-cash goodwill impairment charge of $9 million at a reporting unit within the AMR operating segment. We also recorded non-cash impairment charges and accelerated depreciation on certain long- lived and other assets at AMR of $16 million primarily related to certain regional metals recycling operations and used auto parts store locations and certain recycling equipment assets which were previously idled. In the second quarter of fiscal 2015, we identified a triggering event requiring an interim impairment test of goodwill which resulted in a non-cash goodwill impairment charge of $141 million. We also recorded non-cash impairment charges and accelerated depreciation on certain long-lived and other assets at AMR of $44 million primarily in connection with certain strategic actions we undertook to improve our operating performance which included reducing shredding capacity and closing auto parts stores. Cascade Steel and Scrap For the Year Ended August 31, % Increase / (Decrease) ($ in thousands, except for price) 2017 2016 2015 2017 vs 2016 2016 vs 2015 Steel revenues (1) $ 280,767 $ 269,905 $ 375,037 4% (28)% Recycling revenues (2) 58,853 34,127 60,076 72% (43)% Total segment revenues 339,620 304,032 435,113 12% (30)% Cost of goods sold 322,013 283,006 402,374 14% (30)% Selling, general and administrative expense 14,321 12,571 12,998 14% (3)% (Income) from joint ventures (1,456) (433) (794) 236% (45)% Other asset impairment charges (recoveries), net (533) 4,192 — NM NM Segment operating income $ 5,275 $ 4,696 $ 20,535 12% (77)% Finished steel average sales price ($/ST) (3) $ 534 $ 522 $ 639 2% (18)% Finished steel products sold (ST, in thousands) 496 488 540 2% (10)% Rolling mill utilization (4) 83% 63% 73% 32% (14)% _____________________________ ST = Short Ton, equivalent to 2,000 pounds (1) Steel revenues include primarily sales of finished steel products, semi-finished goods (billets) and manufacturing scrap. (2) Recycling revenues include primarily sales of ferrous and nonferrous recycled scrap metal to export markets. (3) Price information is shown after netting the cost of freight incurred to deliver the product to the customer. (4) Rolling mill utilization for fiscal 2017 is based on effective annual production capacity under current conditions of 580 thousand tons of finished steel products, reflecting a decrease in the effective finished steel production capacity resulting from the decommissioning of the older rolling mill during the first quarter of fiscal 2017. Fiscal 2017 compared with fiscal 2016 CSS Segment Revenues Revenues in fiscal 2017 increased by $36 million, or 12%, compared to fiscal 2016 primarily due to increased export sales of ferrous recycled scrap metal, higher average selling prices for our finished steel products reflecting the impact of higher steel- making raw material costs, and higher sales volumes for finished steel products due to stronger demand in the West Coast markets. CSS Segment Operating Income Operating income for fiscal 2017 was just over $5 million, compared to operating income of just under $5 million in the prior year. Adjusted operating income in fiscal 2017 was $5 million, compared to adjusted operating income of $9 million in fiscal 2016. Adjusted results in fiscal 2017 exclude a net recovery on previously impaired assets of $1 million. Adjusted results in fiscal 2016 exclude other asset impairment charges of $4 million. See the reconciliation of CSS adjusted operating income in Non- GAAP Financial Measures at the end of this Item 7.