70 / Schnitzer Steel Industries, Inc. Form 10-K 2021 Note 3 - Recent Accounting Pronouncements The Company does not expect that its adoption in the future of any recently issued accounting pronouncements will have a material impact on its consolidated financial statements. Note 4 - Inventories Inventories consisted of the following as of August 31 (in thousands): 2021 2020 Processed and unprocessed scrap metal $ 164,960 $ 63,058 Semi-finished goods 7,671 6,909 Finished goods 39,368 44,476 Supplies 44,428 42,826 Inventories $ 256,427 $ 157,269 Note 5 - Leases The Company’s operating leases for real property underlying certain auto parts stores, metals recycling facilities, and administrative offices generally have non-cancellable lease terms of 5 to 10 years, and the significant majority contain multiple renewal options for a further 5 to 20 years. Renewal options which the Company is reasonably certain to exercise are included in the measurement of lease term. The Company’s finance leases and other operating leases involve primarily transportation equipment assets, have non-cancellable lease terms of less than 10 years and usually do not include renewal options. The Company’s fiscal 2021 total lease cost was $30 million, consisting primarily of operating lease expense of $24 million and shortterm lease expense of $5 million. The Company’s fiscal 2020 total lease cost was $28 million, consisting primarily of operating lease expense of $23 million and short-term lease expense of $4 million. The other components of the Company’s total lease cost for each of fiscal 2021 and 2020, including finance lease amortization and interest expense, variable lease expense, and sublease income, were not material both individually and in aggregate. The substantial majority of the Company’s total lease cost for each of fiscal 2021 and 2020 is presented within cost of goods sold in the Consolidated Statements of Operations. Rent expense was $27 million for fiscal 2019. Finance lease assets and liabilities consisted of the following as of August 31 (in thousands): Balance Sheet Classification 2021 2020 Assets: Finance lease right-of-use assets(1) Property, plant and equipment, net $ 5,422 $ 6,274 Liabilities: Finance lease liabilities - current Short-term borrowings $ 1,464 $ 1,341 Finance lease liabilities - noncurrent Long-term debt, net of current maturities 5,127 6,167 Total finance lease liabilities $ 6,591 $ 7,508 (1) Presented net of accumulated amortization of $2 million and $1 million as of August 31, 2021 and 2020, respectively. The weighted average remaining lease terms and weighted average discount rates for the Company’s leases as of August 31: 2021 2020 Weighted Average Remaining Lease Term (Years) Weighted Average Discount Rate Weighted Average Remaining Lease Term (Years) Weighted Average Discount Rate Operating leases 9.7 3.37% 10.2 3.37% Finance leases 5.2 7.78% 6.0 8.22%
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