SCHN 2021 Form 10-K

74 / Schnitzer Steel Industries, Inc. Form 10-K 2021 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. As of August 31, 2021, the financial covenants under the credit agreement included (a) a consolidated fixed charge coverage ratio, defined as the four-quarter rolling sum of consolidated EBITDA less defined maintenance capital expenditures and certain environmental expenditures divided by consolidated fixed charges and (b) a consolidated leverage ratio, defined as consolidated funded indebtedness divided by the sum of consolidated net worth and consolidated funded indebtedness. The Company’s obligations under the credit agreement are guaranteed by substantially all of its subsidiaries. The credit facilities and the related guarantees are secured by senior first priority liens on certain of the Company’s and its subsidiaries’ assets, including equipment, inventory, and accounts receivable. Other debt obligations, which totaled $8 million and $7 million as of August 31, 2021 and 2020, respectively, primarily relate to an equipment purchase, 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 obligation is treated as a partial financing of the purchase price by the equipment vendor. Monthly payments commence when the equipment is placed in service and continue for a period of four years thereafter. Principal payments on the Company’s bank revolving credit facilities and other debt obligations during the next five fiscal years and thereafter are as follows (in thousands): Year Ending August 31, Credit Facilities Other Debt Obligations 2022 $ — $ 2,158 2023 60,000 2,385 2024 — 1,724 2025 — 1,809 2026 — 216 Thereafter — 70 Total $ 60,000 $ 8,362 See Note 5 - Leases for additional disclosure on finance lease obligations, including payments during the next five fiscal years and thereafter. The Company maintains stand-by letters of credit to provide for certain obligations including workers’ compensation and performance bonds. The Company had $8 million and $10 million outstanding under these arrangements as of August 31, 2021 and 2020, respectively. Note 9 - Commitments and Contingencies Contingencies - Environmental Changes in the Company’s environmental liabilities for the years ended August 31, 2021 and 2020 were as follows (in thousands): Balance as of September 1, 2019 Liabilities Established (Released), Net Payments and Other Ending Balance August 31, 2020 Liabilities Established (Released), Net Payments and Other Ending Balance August 31, 2021 Current Liability Noncurrent Liability $ 51,799 $ 5,713 $ (4,048) $ 53,464 $ 28,761 $ (5,097) $ 77,128 $ 24,743 $ 52,385 As of August 31, 2021 and 2020, the Company had environmental liabilities of $77 million and $53 million, respectively, for the potential remediation of locations where it has conducted business or has environmental liabilities from historical or recent activities. The liabilities relate to the investigation and potential future remediation of contaminated sediments and riverbanks, soil contamination, groundwater contamination, storm water runoff issues, and other natural resource damages. Except for Portland Harbor and certain liabilities discussed under “Other Legacy Environmental Loss Contingencies” below, such liabilities were not individually material at any site. 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 (the “Site”).

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