Related Party Transactions

6 Months Ended

Feb. 28, 2013

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

The Company purchases recycled metal from its joint venture operations at prices that approximate fair market value. These purchases totaled $6 million and $13 million for the three months ended February 28, 2013 and February 29, 2012, respectively, and $12 million and $23 million for the six months ended February 28, 2013 and February 29, 2012, respectively. Advances to these joint ventures were $1 million for the three months ended February 28, 2013 and February 29, 2012, and $1 million and less than $1 million for the six months ended February 28, 2013 and February 29, 2012, respectively. The Company owed $1 million and $2 million to joint ventures as of February 28, 2013 and August 31, 2012, respectively.

In connection with the acquisition of the metals recycling business assets of Amix Salvage & Sales Ltd. in March 2011, the Company entered into a series of agreements to obtain barging and other services and lease property with entities owned by the minority shareholder of the Company’s subsidiary that operates its MRB facilities in Vancouver, British Columbia and Alberta, Canada. The Company paid $2 million, primarily for barging services, under these agreements for the three months ended February 28, 2013, and February 29, 2012, and $4 million and $5 million for the six months ended February 28, 2013 and February 29, 2012, respectively. Amounts payable to entities affiliated with this minority shareholder were less than $1 million as of February 28, 2013 and August 31, 2012. As of March 8, 2013, Amix Salvage & Sales Ltd. and affiliated entities are no longer a related party due to the purchase of all of the outstanding noncontrolling interest as discussed in Note 18 - Subsequent Event.

In connection with the acquisition of a metals recycling business in fiscal 2011, the Company entered into an agreement with the selling parties, one of which is an employee of the Company, whereby the selling parties agreed to indemnify the Company for property improvements in excess of a contractually defined threshold on property owned by the selling parties and leased to the Company. The Company recognized an amount receivable from the selling parties of $1 million as of August 31, 2012 under the agreement, for which payment was received in the first quarter of fiscal 2013. 

Thomas D. Klauer, Jr., President of the Company’s Auto Parts Business, is the sole shareholder of a corporation that is the 25% minority partner in a partnership in which the Company is the 75% partner and which operates five self-service stores in Northern California. Mr. Klauer’s 25% share of the profits of this partnership totaled less than $1 million for the three months ended February 28, 2013 and February 29, 2012, and $1 million for the six months ended February 28, 2013 and February 29, 2012. The partnership leases properties from entities in which Mr. Klauer has ownership interests under agreements that expire in December 2015 with options to renew the leases, upon expiration, for multiple five-year periods. The rent paid by the partnership to the entities in which Mr. Klauer has ownership interests was less than $1 million for the three months ended February 28, 2013 and February 29, 2012, and less than $1 million for the six months ended February 28, 2013 and February 29, 2012.

Certain members of the Schnitzer family own significant interests in, or are related to owners of, MMGL Corp (“MMGL”, formerly known as Schnitzer Investment Corp.), which is engaged in the real estate business and was a subsidiary of the Company prior to 1989. MMGL is considered a related party for financial reporting purposes. The Company and MMGL are both potentially responsible parties with respect to Portland Harbor, which has been designated as a Superfund site since December 2000. The Company and MMGL have worked together in response to Portland Harbor matters, and the Company has paid all of the legal and consulting fees for the joint defense, in part due to its environmental indemnity obligation to MMGL with respect to the Portland scrap metal operations property. The Company and MMGL have agreed to an equitable cost sharing arrangement with respect to defense costs under which MMGL will pay 50% of the legal and consulting costs, net of insurance recoveries. The amounts receivable from (payable to) MMGL vary from period to period because of the timing of incurring legal and consulting fees, payments for cost reimbursements and insurance recoveries. Amounts receivable from MMGL under this agreement were less than $1 million as of February 28, 2013 and August 31, 2012.