UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q 

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2017February 28, 2018
OR
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to            
Commission file number 1-4304

COMMERCIAL METALS COMPANY
(Exact Name of Registrant as Specified in Its Charter)

 
Delaware75-0725338
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification Number)
6565 N. MacArthur Blvd.
Irving, Texas 75039
(Address of Principal Executive Offices) (Zip Code)
(214) 689-4300
(Registrant's Telephone Number, Including Area Code)
 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)
Smaller reporting company ¨
 
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of June 26, 2017,March 22, 2018, 115,790,392117,004,438 shares of the registrant's common stock, par value $0.01 per share, were outstanding.

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
TABLE OF CONTENTS

  
  
  
  

2




PART I.FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
 Three Months Ended May 31, Nine Months Ended May 31, Three Months Ended February 28, Six Months Ended February 28,
(in thousands, except share data) 2017 2016 2017 2016 2018 2017 2018 2017
Net sales $1,382,616
 $1,227,390
 $3,607,300

$3,401,946
 $1,054,268
 $862,298
 $2,130,801

$1,715,226
Costs and expenses:     


     


Cost of goods sold 1,209,195
 1,051,910
 3,142,697

2,934,028
 927,101
 725,051
 1,860,617

1,461,590
Selling, general and administrative expenses 108,803
 114,841
 324,789

310,667
 108,477
 94,044
 204,587

188,969
Interest expense 12,368
 14,737
 38,108
 49,666
 7,181
 12,439
 13,792
 25,764
Loss on debt extinguishment 
 115
 
 11,480
 1,330,366
 1,181,603
 3,505,594

3,305,841
 1,042,759
 831,534
 2,078,996

1,676,323
                
Earnings from continuing operations before income taxes 52,250
 45,787
 101,706

96,105
 11,509
 30,764
 51,805

38,903
Income taxes 12,641
 10,676
 25,284

24,512
 1,728
 7,772
 10,153

10,225
Earnings from continuing operations 39,609
 35,111
 76,422

71,593
 9,781
 22,992
 41,652

28,678
     




     




Loss from discontinued operations before income taxes (benefit) (351) (15,785) (542)
(16,803)
Earnings from discontinued operations before income taxes (benefit) 290
 9,591
 8,410

10,362
Income taxes (benefit) (8) (2) 7

(103) (98) 2,251
 3,082

2,433
Loss from discontinued operations (343) (15,783) (549)
(16,700)
Earnings from discontinued operations 388
 7,340
 5,328

7,929
     




     




Net earnings 39,266
 19,328
 75,873
 54,893
 $10,169
 $30,332
 $46,980
 $36,607
Less net earnings attributable to noncontrolling interests 
 
 
 
Net earnings attributable to CMC $39,266
 $19,328
 $75,873

$54,893
     


     


Basic earnings (loss) per share attributable to CMC:     


Basic earnings per share attributable to CMC*     


Earnings from continuing operations $0.34
 $0.31
 $0.66

$0.62
 $0.08
 $0.20
 $0.36

$0.25
Loss from discontinued operations 
 (0.14) 

(0.14)
Earnings from discontinued operations 
 0.06
 0.05

0.07
Net earnings $0.34
 $0.17
 $0.66

$0.48
 $0.09
 $0.26
 $0.40

$0.32
     


     


Diluted earnings (loss) per share attributable to CMC:     


Diluted earnings per share attributable to CMC*     


Earnings from continuing operations $0.34
 $0.30
 $0.65

$0.61
 $0.08
 $0.20
 $0.35

$0.25
Loss from discontinued operations 
 (0.13) 

(0.14)
Earnings from discontinued operations 
 0.06
 0.05

0.07
Net earnings $0.34
 $0.17
 $0.65

$0.47
 $0.09
 $0.26
 $0.40

$0.31
     




     




Cash dividends per share $0.12
 $0.12
 $0.36

$0.36
 $0.12
 $0.12
 $0.24

$0.24
Average basic shares outstanding 115,886,372
 114,677,109
 115,574,289

115,373,736
 116,808,838
 115,736,369
 116,524,630

115,415,662
Average diluted shares outstanding 117,205,369
 115,995,515
 117,087,341

116,758,716
 118,269,721
 117,120,208
 118,149,815

117,007,958
See notes to unaudited condensed consolidated financial statements.

* EPS is calculated independently for each component and may not sum to Net Earnings EPS due to rounding


3





COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

 Three Months Ended May 31, Nine Months Ended May 31, Three Months Ended February 28, Six Months Ended February 28,
(in thousands) 2017 2016 2017 2016 2018 2017 2018 2017
Net earnings attributable to CMC $39,266
 $19,328
 $75,873
 $54,893
 $10,169
 $30,332
 $46,980
 $36,607
Other comprehensive income (loss), net of income taxes:     
 
     
 
Foreign currency translation adjustment:        
Foreign currency translation adjustment during the period 27,109
 3,817
 15,129
 (13,967)
Reclassification for translation loss realized upon liquidation of investment in foreign entity 968
 
 968
 
Foreign currency translation adjustment 28,077
 3,817
 16,097
 (13,967) 11,943
 9,551
 14,778
 (11,980)
Net unrealized gain (loss) on derivatives:     

 

     

 

Unrealized holding gain (loss) 254
 (16) 696
 469
Reclassification for (gain) loss included in net earnings (333) 32
 (853) (142)
Net unrealized gain (loss) on derivatives (79) 16
 (157) 327
Unrealized holding gain 14
 310
 25
 442
Reclassification for gain included in net earnings (74) (330) (180) (520)
Net unrealized loss on derivatives (60) (20) (155) (78)
Defined benefit obligation:     

 

     

 

Amortization of prior services (9) (2) (27) (5) (7) (9) (13) (18)
Reclassification for settlement losses 
 
 437
 
Defined benefit obligation (9) (2) (27) (5) (7) (9) 424
 (18)
Other comprehensive income (loss) 27,989
 3,831
 15,913
 (13,645) 11,876
 9,522
 15,047
 (12,076)
Comprehensive income $67,255
 $23,159
 $91,786
 $41,248
 $22,045
 $39,854
 $62,027
 $24,531
See notes to unaudited condensed consolidated financial statements.

4




COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share data) May 31, 2017 August 31, 2016 February 28, 2018 August 31, 2017
Assets        
Current assets:        
Cash and cash equivalents $275,778
 $517,544
 $195,184
 $252,595
Accounts receivable (less allowance for doubtful accounts of $4,986 and $6,427) 869,970
 765,784
Accounts receivable (less allowance for doubtful accounts of $4,524 and $4,146) 634,721
 561,411
Inventories, net 798,013
 652,754
 523,409
 462,648
Other current assets 108,248
 112,043
 118,437
 140,136
Assets of businesses held for sale & discontinued operations 176,287
 297,110
Total current assets 2,052,009
 2,048,125
 1,648,038
 1,713,900
Property, plant and equipment:        
Land 82,137
 70,291
 110,053
 81,570
Buildings and improvements 512,843
 487,305
 603,379
 512,715
Equipment 1,717,576
 1,655,909
 1,903,905
 1,720,299
Construction in process 218,724
 111,156
 54,587
 258,109

 2,531,280
 2,324,661
 2,671,924
 2,572,693
Less accumulated depreciation and amortization (1,514,405) (1,429,612) (1,588,722) (1,521,016)

 1,016,875
 895,049
 1,083,202
 1,051,677
Goodwill 66,764
 66,373
 64,504
 64,915
Other noncurrent assets 138,951
 121,322
 114,736
 144,639
Total assets $3,274,599
 $3,130,869
 $2,910,480
 $2,975,131
Liabilities and stockholders' equity        
Current liabilities:        
Accounts payable-trade $345,974
 $243,532
 $247,586
 $226,456
Accounts payable-documentary letters of credit 566
 5
Accrued expenses and other payables 258,288
 264,112
 213,220
 274,972
Current maturities of long-term debt 311,654
 313,469
 18,958
 19,182
Liabilities of businesses held for sale & discontinued operations 50,561
 87,828
Total current liabilities 916,482
 821,118
 530,325
 608,438
Deferred income taxes 61,492
 63,021
 18,929
 49,160
Other long-term liabilities 126,864
 121,351
 109,919
 111,023
Long-term debt 751,676
 757,948
 799,834
 805,580
Total liabilities 1,856,514
 1,763,438
 1,459,007
 1,574,201
Commitments and contingencies (Note 14) 
 
Commitments and contingencies (Note 13) 
 
Stockholders' equity:        
Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued 129,060,664 shares; outstanding 115,788,992 and 114,635,596 shares, respectively 1,290
 1,290
Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued 129,060,664 shares; outstanding 116,825,668 and 115,793,736 shares 1,290
 1,290
Additional paid-in capital 338,548
 358,745
 349,454
 349,258
Accumulated other comprehensive loss (97,001) (112,914) (66,466) (81,513)
Retained earnings 1,407,242
 1,372,988
 1,382,791
 1,363,806
Less treasury stock, 13,271,672 and 14,425,068 shares at cost (232,167) (252,837)
Less treasury stock, 12,234,996 and 13,266,928 shares at cost (215,782) (232,084)
Stockholders' equity attributable to CMC 1,417,912
 1,367,272
 1,451,287
 1,400,757
Stockholders' equity attributable to noncontrolling interests 173
 159
 186
 173
Total stockholders' equity 1,418,085
 1,367,431
 1,451,473
 1,400,930
Total liabilities and stockholders' equity $3,274,599
 $3,130,869
 $2,910,480
 $2,975,131
See notes to unaudited condensed consolidated financial statements.

5




COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 Nine Months Ended May 31, Six Months Ended February 28,
(in thousands) 2017 2016 2018 2017
Cash flows from (used by) operating activities:        
Net earnings $75,873
 $54,893
 $46,980
 $36,607
Adjustments to reconcile net earnings to cash flows from (used by) operating activities:        
Depreciation and amortization 93,049
 95,423
 66,316
 60,789
Stock-based compensation 19,716
 19,889
 13,338
 16,156
Asset impairment 12,774
 553
Deferred income taxes & other long-term taxes (9,420) (9,380)
Provision for losses on receivables, net 2,048
 1,381
Write-down of inventories 1,296
 1,205
Net (gain) loss on disposals of assets and other 518
 (195)
Amortization of interest rate swaps termination gain (5,698) (5,698) 
 (3,798)
Deferred income taxes (2,538) 9,744
Write-down of inventories 1,820
 9,567
Provision for losses on receivables, net 856
 3,748
Asset impairment 622
 15,842
Net gain on disposals of assets and other (343) (1,802)
Loss on debt extinguishment 
 11,480
Tax benefit from stock plans 
 (666)
Changes in operating assets and liabilities:    
Accounts receivable (86,668) 146,166
Proceeds (payments) on sales of accounts receivable programs, net (4,327) 1,473
Inventories (134,720) 205,717
Accounts payable, accrued expenses and other payables 83,355
 (64,676)
Changes in other operating assets and liabilities (22,083) 5,768
Changes in operating assets and liabilities (85,063) (91,335)
Net cash flows from operating activities 18,914
 506,868
 48,787
 11,983
        
Cash flows from (used by) investing activities:        
Capital expenditures (162,082) (104,481) (101,028) (90,808)
Proceeds from settlement of life insurance policies 25,000
 
Decrease in restricted cash, net 13,996
 21,033
Acquisitions (54,425) 
 (6,980) (25,366)
Decrease (increase) in restricted cash, net 7,492
 (49,094)
Proceeds from the sale of subsidiaries 7,406
 524
Proceeds from the sale of property, plant and equipment and other 1,884
 3,470
 631
 700
Net cash flows used by investing activities (207,131) (150,105) (60,975) (93,917)
        
Cash flows from (used by) financing activities:        
Cash dividends (41,619) (41,586) (27,995) (27,726)
Repayments on long-term debt (8,775) (208,605) (10,106) (6,148)
Stock issued under incentive and purchase plans, net of forfeitures (5,516) (6,036) (7,394) (5,408)
Proceeds from New Markets Tax Credit transactions 2,141
 
Contribution from noncontrolling interests 13
 13
Increase (decrease) in documentary letters of credit, net 569
 (40,145) 10
 (5)
Contribution from noncontrolling interests 14
 29
Short-term borrowings, net change 
 (20,090)
Treasury stock acquired 
 (30,595)
Debt extinguishment costs 
 (11,127)
Tax benefit from stock plans 
 666
Decrease in restricted cash 
 1
Net cash flows used by financing activities (53,186) (357,488) (45,472) (39,274)
Effect of exchange rate changes on cash (363) (743) 249
 (790)
Decrease in cash and cash equivalents (241,766) (1,468) (57,411) (121,998)
Cash and cash equivalents at beginning of year 517,544
 485,323
 252,595
 517,544
Cash and cash equivalents at end of period $275,778
 $483,855
 $195,184
 $395,546
        
Supplemental information:        
Noncash activities:        
Liabilities related to additions of property, plant and equipment $31,024
 $18,066
 $30,374
 $35,184
See notes to unaudited condensed consolidated financial statements.

6




COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
Common StockAdditionalAccumulated
Other
 Treasury Stock Non- Common StockAdditionalAccumulated
Other
 Treasury Stock Non- 
(in thousands, except share data)Number of
Shares
AmountPaid-In
Capital
Comprehensive
Loss
Retained
Earnings
Number of
Shares
Amountcontrolling
Interests
TotalNumber of
Shares
AmountPaid-In
Capital
Comprehensive
Loss
Retained
Earnings
Number of
Shares
Amountcontrolling
Interests
Total
Balance, September 1, 2015129,060,664
$1,290
$365,863
$(113,535)$1,373,568
(13,425,326)$(245,961)$149
$1,381,374
Balance, September 1, 2016129,060,664
$1,290
$358,745
$(112,914)$1,372,988
(14,425,068)$(252,837)$159
$1,367,431
Net earnings  54,893
   54,893
  36,607
   36,607
Other comprehensive loss  (13,645)   (13,645)  (12,076)   (12,076)
Cash dividends ($0.36 per share)  (41,586)  (41,586)
Cash dividends ($0.24 per share)  (27,726)  (27,726)
Treasury stock acquired  (2,255,069)(30,595) (30,595)  


 
Issuance of stock under incentive and purchase plans, net of forfeitures  (29,599) 1,246,329
23,563
 (6,036)  (26,255) 1,143,176
20,498
 (5,757)
Stock-based compensation  15,327
    
15,327
  7,187
    
7,187
Tax benefit from stock plans  666
    
666
  

    

Contribution of noncontrolling interest  19
   10
29
  

   13
13
Reclassification of share-based liability awards  3,035
   3,035
  1,780
   1,780
Balance, May 31, 2016129,060,664
$1,290
$355,311
$(127,180)$1,386,875
(14,434,066)$(252,993)$159
$1,363,462
Reclassification of share-based equity awards  (5,439)   (5,439)
Balance, February 28, 2017129,060,664
$1,290
$336,018
$(124,990)$1,381,869
(13,281,892)$(232,339)$172
$1,362,020
        
Common StockAdditionalAccumulated
Other
 Treasury Stock Non- Common StockAdditionalAccumulated
Other
 Treasury Stock Non- 
(in thousands, except share data)Number of
Shares
AmountPaid-In
Capital
Comprehensive
Loss
Retained
Earnings
Number of
Shares
Amountcontrolling
Interests
TotalNumber of
Shares
AmountPaid-In
Capital
Comprehensive
Loss
Retained
Earnings
Number of
Shares
Amountcontrolling
Interests
Total
Balance, September 1, 2016129,060,664
$1,290
$358,745
$(112,914)$1,372,988
(14,425,068)$(252,837)$159
$1,367,431
Balance, September 1, 2017129,060,664
$1,290
$349,258
$(81,513)$1,363,806
(13,266,928)$(232,084)$173
$1,400,930
Net earnings  75,873
  75,873
  46,980
  46,980
Other comprehensive income  15,913
   15,913
  15,047
   15,047
Cash dividends ($0.36 per share)  (41,619)   (41,619)
Cash dividends ($0.24 per share)  (27,995)   (27,995)
Issuance of stock under incentive and purchase plans, net of forfeitures  (26,269) 1,153,396
20,670
 (5,599)  (23,695) 1,031,932
16,302
 (7,393)
Stock-based compensation  9,731
    9,731
  8,643
    8,643
Contribution of noncontrolling interest  

   14
14
  

   13
13
Reclassification of share-based liability awards  1,780
   1,780
  15,248
   15,248
Reclassification of share-based equity awards  (5,439)   (5,439)  

   
Balance, May 31, 2017129,060,664
$1,290
$338,548
$(97,001)$1,407,242
(13,271,672)$(232,167)$173
$1,418,085
Balance, February 28, 2018129,060,664
$1,290
$349,454
$(66,466)$1,382,791
(12,234,996)$(215,782)$186
$1,451,473
See notes to unaudited condensed consolidated financial statements.

7





COMMERCIAL METALS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. ACCOUNTING POLICIES

Accounting Principles
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") on a basis consistent with that used in the Annual Report on Form 10-K for the fiscal year ended August 31, 20162017 ("2017 Form 10-K") filed by Commercial Metals Company ("CMC," and together with its consolidated subsidiaries, the "Company") with the Securities and Exchange Commission ("SEC") and include all normal recurring adjustments necessary to present fairly the unaudited condensed consolidated balance sheets and the unaudited condensed consolidated statements of earnings, comprehensive income (loss), cash flows and stockholders' equity for the periods indicated. These notes should be read in conjunction with the audited consolidated financial statements included in the Annual Report on2017 Form 10-K for the fiscal year ended August 31, 2016.10-K. The results of operations for the three and ninesix month periods are not necessarily indicative of the results to be expected for the full year.

Recently Adopted Accounting Pronouncements

In the second quarter of fiscal 2017, the Company adopted Accounting Standards Update ("ASU") 2016-09, Compensation - Stock Compensation (Topic 718), issued by the Financial Accounting Standards Board (the "FASB") requiring that the Company recognize all excess tax benefits and tax deficiencies as an income tax expense or benefit when stock awards vest or are settled. Additionally, the guidance allows for an increase in the threshold for net share settlement up to the maximum statutory rate in employees’ applicable jurisdictions without triggering liability classification. The adoption of this guidance had an immaterial impact on income taxes on the Company’s unaudited condensed consolidated statements of earnings for the three and nine months ended May 31, 2017. Additionally, the Company has elected to continue to estimate forfeitures. As such, this adoption has no cumulative effect on retained earnings. The Company elected to apply the presentation requirements for cash flows related to excess tax benefits prospectively, which had an immaterial impact on both net cash from operating activities and net cash used in financing activities for the nine months ended May 31, 2017. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact on any of the periods presented on the Company’s consolidated statements of cash flows since such cash flows have historically been presented as a financing activity.

In the first quarter of fiscal 2017, the Company adopted ASU 2015-16, Business Combinations (Topic 805), issued by the FASB requiring the acquirer in a business combination to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The guidance was adopted on a prospective basis and did not have an impact on the Company's consolidated financial statements.

In the first quarter of fiscal 2017, the Company adopted ASU 2015-05, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), issued by the FASB requiring an entity to account for fees paid in a cloud computing arrangement as a license of internal-use software. The guidance was adopted on a prospective basis and did not have an impact on the Company's consolidated financial statements.

In the first quarter of fiscal 2017, the Company adopted ASU 2015-02, Consolidation (Topic 810), issued by the FASB modifying the evaluation of whether limited partnerships and similar legal entities are voting interest entities ("VIEs"). The guidance was adopted on a retrospective basis and did not have an impact on the Company's consolidated financial statements.

In the first quarter of fiscal 2017, the Company adopted ASU 2015-01, Income Statement - Extraordinary and Unusual Items (Subtopic 225-20), issued by the FASB eliminating the concept of extraordinary items. Under this guidance, an entity is no longer allowed to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations. The guidance was adopted on a prospective basis and did not have an impact on the Company's consolidated financial statements.

In the first quarter of fiscal 2017, the Company adopted ASU 2014-13, Consolidation (Topic 810), issued by the FASB providing a measurement alternative to the existing fair value measurement guidance. When the measurement alternative is elected, the financial assets and liabilities are measured using the more observable of the fair value of the financial assets and the fair value of the financial liabilities. The guidance was adopted on a retrospective basis and did not have an impact on the Company's consolidated financial statements.


8




In the first quarter of fiscal 2017, the Company adopted ASU 2014-12, Compensation - Stock Compensation (Topic 718), issued by the FASB requiring entities to account for a performance target as a performance condition if the target affects vesting and could be achieved after the requisite service period. The guidance was followed by the Company prior to its adoption and therefore had no impact on the Company's consolidated financial statements upon adoption.year.

Recently Issued Accounting Pronouncements

In JanuaryAugust 2017, the FASBFinancial Accounting Standards Board ("FASB") issued ASU 2017-04, Intangibles - GoodwillAccounting Standards Update ("ASU") 2017-12, Derivatives and Other: Simplifying the Test for Goodwill ImpairmentHedging (Topic 805)815). The standardASU better aligns accounting rules with a company's risk management activities; better reflects economic results of hedging in financial statements; and simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. This guidance is effective for annual periods or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The standard must be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company plans to early adopt the standard in the fourth quarter of fiscal 2017. The adoption of this guidance is not expected to have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations: Clarifying the Definition of a Business. The standard clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.hedge accounting treatment. For public companies, this standard is effective for annual periods beginning after December 15, 2017,2018, including interim periods within those periods. The standard must be applied prospectivelyto hedging relationships existing on or after the effective date. Early applicationdate of adoption, and the effect of adoption should be reflected as of the amendments is allowed with certain restrictions.beginning of the fiscal year of adoption. The Company is currently evaluating the effect thatimpact of this standard will haveguidance on its consolidated financial statements as well as determining the Company's planned adoption date.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), requiring that the statement of cash flows explain the change in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This guidance is effective for fiscal years, and interim reporting periods therein, beginning after December 15, 2017 with early adoption permitted.and will be effective for the Company beginning September 1, 2018, at which point the Company plans to adopt the standard. The provisions of this guidance are to be applied using a retrospective approach, which requires application of the guidance for all periods presented. The Company is currently evaluating the impact of this guidance on its consolidated financial statements as well as determining the Company's planned adoption date.statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), requiringand has modified the standard thereafter. The standard requires a lessee to recognize a right-of-use asset and a lease liability on its balance sheet for all leases with terms of twelve months or longer. This guidance is effective for fiscal years, and interim reporting periods therein, beginning after December 15, 2018 and will be effective for the Company beginning September 1, 2019, at which point the Company plans to adopt the standard. The provisions of this guidance are to be applied using a modified retrospective approach, with elective reliefs, which requires application of the guidance for all periods presented. The Company is currently evaluatinghas a project plan in place to address the effects of ASU 2016-02 and any modifications thereafter, including evaluation of the impact of this guidance on internal processes, internal controls, and its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), and has modified the standard thereafter. Under the standard, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for annual and interim reporting periods beginning after December 15, 2017 and will be effective for the Company beginning September 1, 2018, at which point the Company plans to adopt the standard. The standard permits the use of either the retrospective or cumulative effect transition method. The Company currently expects to adopt the standard using the modified retrospective approach.method. The Company believes there will not be a material impact on its statement of financial position, results of operations or cash flows in its Americas Mills, Americas Recycling or International Mill segments. The Company is still in the processUpon adoption of examining contract specific termsASU 2014-09, for certain contracts within the Americas Fabrication segment.segment in which revenue is currently recognized over time on a percentage of completion basis using a cost-to-cost measure of progress, the measure of progress will change to an output measure to align with the pattern of transfer of control on these contracts. In addition, the standard includes expanded disclosure requirements, which the Company continues to analyze. As part of the overall evaluation of the standard, the Company is also identifying and preparing to implement changes to its accounting policies, practices, and internal controls over financial reporting to support the standard both in the transition period as well as on an on-going basis.


8




NOTE 2. CHANGES IN BUSINESS

AcquisitionsPending Acquisition

On December 12, 2016,29, 2017, the Company completedentered into a definitive purchase agreement to acquire certain U.S. rebar steel mill and fabrication assets from Gerdau S.A., a producer of long and specialty steel products in the Americas for a cash purchase price of $600.0 million, subject to customary purchase price adjustments. The acquisition includes 33 rebar fabrication facilities in the U.S. as well as steel mills located in Knoxville, Tennessee; Jacksonville, Florida; Sayreville, New Jersey and Rancho Cucamonga, California, with annual melt capacity of 2.7 million tons, bringing the Company’s global melt capacity to approximately 7.2 million tons at the close of the transaction. The closing of the transaction is expected before calendar year-end 2018 and is subject to the satisfaction or waiver of customary closing conditions, including customary regulatory review.

The Company expects to fund the purchase price for the acquisition with cash on hand, term loans, borrowings under the Credit Agreement (as defined in Note 7 to these unaudited condensed consolidated financial statements) or another credit facility, or the proceeds from an offering of one or more series of debt securities.

Businesses Held for Sale

On March 1, 2018, the Company entered into a definitive agreement to sell substantially all of the assets of Continental Concrete Structures, Inc. ("CCS")its structural steel fabrication operations, which are part of the Americas Fabrication segment. This disposition does not meet the criteria for discontinued operations. The assets and liabilities related to these operations are included as assets and liabilities of businesses held for sale & discontinued operations in the unaudited condensed consolidated balance sheets for all periods presented, the major components of which are presented in the table below.

(in thousands) February 28, 2018 August 31, 2017*
Assets:    
Accounts receivable $38,846
 $38,279
Inventories, net 8,311
 10,676
Other current assets 35
 77
Assets of businesses held for sale & discontinued operations $47,192
 $49,032
     
Liabilities:    
Accounts payable-trade $15,667
 $13,108
Accrued expenses and other payables 10,424
 16,785
Liabilities of businesses held for sale & discontinued operations $26,091
 $29,893

* At August 31, 2017, $8.8 million of property, plant, and equipment, net of accumulated depreciation and amortization is included in other noncurrent assets on the unaudited condensed consolidated balance sheets.

Discontinued Operations

In June 2017, the Company announced a plan to exit its International Marketing and Distribution segment, including its trading operations in the U.S., a fabricatorAsia, and Australia. As an initial step in this plan, on August 31, 2017, the Company completed the sale of post-tensioning cable andits raw materials business, CMC Cometals. Additionally, during the second quarter of fiscal 2018, the remaining operations related products for commercial and public construction projects with a facility in Alpharetta, Georgia. In addition, CCS provides professional design and value engineering services to the construction industry throughout North America. This acquisition complementsCompany's steel trading business in the Company’s current rebar fabrication businessU.S. and continuesAsia were substantially wound down. Finally, on March 1, 2018, the Company sold certain assets and liabilities of its Australian steel trading business. The results of these activities are included in discontinued operations in the consolidated statements of earnings for all periods presented. With the conclusion of operations in this segment, any activities carried out within the segment are no longer of ongoing significance; accordingly, segment data with respect to International Marketing and Distribution activities will no longer be reported. See Note 14, Business Segments, for further discussion of the exit of the International Marketing and Distribution segment.

The major classes of line items constituting earnings from discontinued operations in the unaudited condensed consolidated statements of earnings, which primarily relate to International Marketing and Distribution activities, are presented in the table below.


9




its strategy of creating value for customers. The operating results of this facility are included in the Americas Fabrication reporting segment.
  Three Months Ended February 28, Six Months Ended February 28,
(in thousands) 2018 2017 2018 2017
Net sales $139,011
 $287,323
 $301,122
 $509,436
Costs and expenses:        
Cost of goods sold 130,687
 265,380
 272,138
 471,919
Selling, general and administrative expenses 8,034
 12,350
 20,660
 27,180
Interest expense 
 2
 (86) (25)
Earnings before income taxes 290
 9,591
 8,410
 10,362
Income taxes (benefit) (98) 2,251
 3,082
 2,433
Earnings from discontinued operations $388
 $7,340
 $5,328
 $7,929

On January 9, 2017, the Company completed the purchaseComponents of substantially all of the assets of Associated Steel Workers, Limited ("ASW"), a steel fabrication facility in Kapolei, Hawaii. This acquisition continues the vertical integration model of the Company by extending its geographic reach, establishing a fabrication operation in Hawaii and expanding its presence in the Hawaiian market. The operating results of this facility are included in the Americas Fabrication reporting segment.

On March 6, 2017, the Company completed the purchase of certain assets from OmniSource Corporation, a wholly-owned subsidiary of Steel Dynamics, Inc., consisting of seven recycling facilities located in the southeast United States (the "Recycling Assets"), which are in close proximity to CMC’s minimill in Cayce, South Carolina. These facilities provide synergies with CMC's other operations in the region. The operating results of these facilities are included in the Americas Recycling reporting segment.

The acquisitions of CCS, ASW and the Recycling Assets are not material, individually or in the aggregate, to the Company's financial position or results of operations; therefore, pro forma operating results for the acquisitions are not presented since the results would not be significantly different than reported results.

Discontinued Operations

During the first quarter of fiscal 2015, the Company decided to exit and sell its steel distribution business in Australia and determined that the decision to exit this business met the definition of a discontinued operation. As a result, this business has been presented as a discontinued operation for all periods presented. The Australian steel distribution business was previously included in the International Marketing and Distribution reporting segment.

Financial informationsegment meeting the criteria for discontinued operations washave been re-classified as follows:assets and liabilities of business held for sale & discontinued operations in the unaudited condensed consolidated balance sheets for all periods presented, the major components of which are presented in the table below.

  Three Months Ended May 31, Nine Months Ended May 31,
(in thousands) 2017 2016 2017 2016
Net sales $
 $12,321
 $(22) $33,828
Loss from discontinued operations before income taxes (benefit) (351) (15,785) (542) (16,803)
(in thousands) February 28, 2018 August 31, 2017*
Assets:    
Accounts receivable $72,723
 $106,905
Inventories, net 49,106
 141,135
Other current assets 6,934
 38
Property, plant and equipment, net of accumulated depreciation and amortization 332
 
Assets of businesses held for sale & discontinued operations $129,095
 $248,078
     
Liabilities:    
Accounts payable-trade $11,947
 $42,563
Accrued expenses and other payables 12,523
 15,372
Liabilities of businesses held for sale & discontinued operations $24,470
 $57,935
     

* Property, plant, and equipment, net of accumulated depreciation and amortization of $0.8 million at August 31, 2017 is included in other noncurrent assets on the unaudited condensed consolidated balance sheets.

There were no material operating or investing non-cash items for discontinued operations for the six months ended February 28, 2018 and 2017.


10




NOTE 3. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables reflect the changes in accumulated other comprehensive income (loss) ("AOCI"):
  Three Months Ended May 31, 2017
(in thousands) Foreign Currency Translation Unrealized Gain (Loss) on Derivatives Defined Benefit Obligation Total AOCI
Balance, February 28, 2017 $(124,235) $2,108
 $(2,863) $(124,990)
Other comprehensive income before reclassifications 27,109
 368
 
 27,477
Amounts reclassified from AOCI 968
 (459) (11) 498
Income taxes 
 12
 2
 14
Net other comprehensive income (loss) 28,077
 (79) (9) 27,989
Balance, May 31, 2017 $(96,158) $2,029
 $(2,872) $(97,001)


10




 Nine Months Ended May 31, 2017 Three Months Ended February 28, 2018
(in thousands) Foreign Currency Translation Unrealized Gain (Loss) on Derivatives Defined Benefit Obligation Total AOCI Foreign Currency Translation Unrealized Gain (Loss) on Derivatives Defined Benefit Obligation Total AOCI
Balance, August 31, 2016 $(112,255) $2,186
 $(2,845) $(112,914)
Balance, November 30, 2017 $(77,943) $1,492
 $(1,891) $(78,342)
Other comprehensive income before reclassifications 15,129
 926
 
 16,055
 11,943
 18
 
 11,961
Amounts reclassified from AOCI 968
 (1,090) (33) (155) 
 (97) (9) (106)
Income taxes 
 7
 6
 13
 
 19
 2
 21
Net other comprehensive income (loss) 16,097
 (157) (27) 15,913
 11,943
 (60) (7) 11,876
Balance, May 31, 2017 $(96,158) $2,029
 $(2,872) $(97,001)
Balance, February 28, 2018 $(66,000) $1,432
 $(1,898) $(66,466)

 Three Months Ended May 31, 2016 Six Months Ended February 28, 2018
(in thousands) Foreign Currency Translation Unrealized Gain (Loss) on Derivatives Defined Benefit Obligation Total AOCI Foreign Currency Translation Unrealized Gain (Loss) on Derivatives Defined Benefit Obligation Total AOCI
Balance, February 29, 2016 $(130,865) $2,616
 $(2,762) $(131,011)
Other comprehensive income (loss) before reclassifications 3,817
 (16) 
 3,801
Balance, August 31, 2017 $(80,778) $1,587
 $(2,322) $(81,513)
Other comprehensive income before reclassifications 14,778
 31
 
 14,809
Amounts reclassified from AOCI 
 21
 (2) 19
 
 (243) 656
 413
Income taxes 
 11
 
 11
 
 57
 (232) (175)
Net other comprehensive income (loss) 3,817
 16
 (2) 3,831
 14,778
 (155) 424
 15,047
Balance, May 31, 2016 $(127,048) $2,632
 $(2,764) $(127,180)
Balance, February 28, 2018 $(66,000) $1,432
 $(1,898) $(66,466)

  Nine Months Ended May 31, 2016
(in thousands) Foreign Currency Translation Unrealized Gain (Loss) on Derivatives Defined Benefit Obligation Total AOCI
Balance, August 31, 2015 $(113,081) $2,305
 $(2,759) $(113,535)
Other comprehensive income (loss) before reclassifications (13,967) 543
 
 (13,424)
Amounts reclassified from AOCI 
 (230) (6) (236)
Income taxes 
 14
 1
 15
Net other comprehensive income (loss) (13,967) 327
 (5) (13,645)
Balance, May 31, 2016 $(127,048) $2,632
 $(2,764) $(127,180)
  Three Months Ended February 28, 2017
(in thousands) Foreign Currency Translation Unrealized Gain (Loss) on Derivatives Defined Benefit Obligation Total AOCI
Balance, November 30, 2016 $(133,786) $2,128
 $(2,854) $(134,512)
Other comprehensive income before reclassifications 9,551
 310
 
 9,861
Amounts reclassified from AOCI 
 (330) (9) (339)
Net other comprehensive income (loss) 9,551
 (20) (9) 9,522
Balance, February 28, 2017 $(124,235) $2,108
 $(2,863) $(124,990)
  Six Months Ended February 28, 2017
(in thousands) Foreign Currency Translation Unrealized Gain (Loss) on Derivatives Defined Benefit Obligation Total AOCI
Balance, August 31, 2016 $(112,255) $2,186
 $(2,845) $(112,914)
Other comprehensive income (loss) before reclassifications (11,980) 442
 
 (11,538)
Amounts reclassified from AOCI 
 (520) (18) (538)
Net other comprehensive loss (11,980) (78) (18) (12,076)
Balance, February 28, 2017 $(124,235) $2,108
 $(2,863) $(124,990)


11




The significant itemsItems reclassified out of AOCI were not material for the three and six months ended February 28, 2018 and 2017, thus the corresponding line items in the unaudited condensed consolidated statements of earnings to which the items were reclassified were as follows:are not presented.
    Three Months Ended May 31, Nine Months Ended May 31,
Components of AOCI (in thousands) Location 2017 2016 2017 2016
Foreign currency translation adjustment:          
Translation loss realized upon liquidation of investment in foreign entity SG&A expenses $968
 $
 $968
 $
Unrealized gain (loss) on derivatives: 
     

  
Commodity Cost of goods sold $94
 $(263) $(31) $(373)
Foreign exchange Net sales 124
 (168) 368
 (561)
Foreign exchange Cost of goods sold 19
 223
 (25) 641
Foreign exchange SG&A expenses 88
 53
 378
 123
Interest rate Interest expense 134
 134
 400
 400
    459
 (21) 1,090
 230
Income tax effect Income taxes (126) (11) (237) (88)
Net of income taxes   $333
 $(32) $853
 $142
Defined benefit obligation: 
        
Amortization of prior services SG&A expenses $11
 $2
 $33
 $6
Income tax effect Income taxes (2) 
 (6) (1)
Net of income taxes 
 $9
 $2
 $27
 $5
Amounts in parentheses reduce earnings.

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NOTE 4. SALES OF ACCOUNTS RECEIVABLE

DuringFor added flexibility with the fourth quarter of fiscal 2016,Company's liquidity, we may sell certain trade accounts receivable both in the U.S. and internationally. CMC entered intohas a fifth amended $200.0 million U.S. sale of trade accounts receivable program which expires onin August 15, 2019. Under the program, CMC contributes, and severalcertain of its subsidiaries sell without recourse, certain eligible trade accounts receivable to CMC Receivables, Inc. ("CMCRV"), a wholly-owned subsidiary of CMC. CMCRV is structured to be a bankruptcy-remote entity formed for the sole purpose of buying and selling trade accounts receivable generated by CMC.the Company. CMCRV sells the trade accounts receivable in their entirety to two financial institutions. Under the amended U.S. sale of trade accounts receivable program, with the consent of both CMCRV and the program's administrative agent, the amount advanced by the financial institutions can be increased to a maximum of $300.0 million for all trade accounts receivable sold. The remaining portion of the purchase price of the trade accounts receivable takes the form of subordinated notes from the respective financial institutions. These notes will be satisfied from the ultimate collection of the trade accounts receivable after payment of certain fees and other costs. The Company accounts for sales of the trade accounts receivable as true sales, and the trade accounts receivable balances that are sold are removed from the consolidated balance sheets. The cash advances received are reflected as cash provided byfrom operating activities on the Company's unaudited condensed consolidated statements of cash flows. Additionally, the U.S. sale of trade accounts receivable program contains certain cross-default provisions whereby a termination event could occur if the Company defaultsdefaulted under certain of its credit arrangements. The covenants contained in the receivables purchase agreement are consistent with the Credit Agreement described in Note 7, Credit Arrangements.

At May 31, 2017February 28, 2018 and August 31, 2016,2017, under its U.S. sale of trade accounts receivable program, the Company had sold $307.3
$246.7 million and $215.9$226.9 million of trade accounts receivable, respectively, to the financial institutions, withinstitutions. At February 28, 2018, the Company had no advance payments outstanding.outstanding on the sale of its U.S. trade accounts receivable. At August 31, 2017, the Company had $90.0 million in advance payments outstanding on the sale of its U.S. trade accounts receivable.

In addition to the U.S. sale of trade accounts receivable program described above, the Company's international subsidiaries in Poland sell, and previously in Australia have sold, trade accounts receivable to financial institutions without recourse. These arrangements constitute true sales, and once the trade accounts receivable are sold, they are no longer available to the Company's creditors in the event of bankruptcy and are removed from the consolidated balance sheets. The Polish program has a facility limit of 220.0 million Polish zloty ("PLN") ($59.164.2 million as of May 31, 2017)February 28, 2018) and allows the Company's Polish subsidiaries to obtain an advance of up to 90% of eligible trade accounts receivable sold under the terms of the arrangement. Under the Polish and Australian programs, the cash advances received were reflected as cash provided byfrom operating activities on the Company's unaudited condensed consolidated statements of cash flows. In October 2016,During the first quarter of fiscal 2017, the Company's existing Australian program expired, and the Company did not enter into a new program.

At MayFebruary 28, 2018 and August 31, 2017, under its Polish program, the Company had sold $64.2$91.3 million and $79.5 million of trade accounts receivable, respectively, to the third-party financial institution. At both February 28, 2018 and August 31, 2016, under its Polish and Australian programs,2017, the Company had sold $85.7 millionno advance payments outstanding on the sales of its Polish trade accounts receivable to third-party financial institutions. At May 31, 2017 and August 31, 2016, $3.9 million and $8.3 million in advance payments had been received, respectively.receivable.

During the ninesix months ended May 31,February 28, 2018 and 2017, and 2016, cash proceeds from the U.S. and international sale of trade accounts receivable programs were $246.0$1.4 million and $280.7$178.8 million, respectively, and cash payments to the owners of trade accounts receivable were $250.3$91.4 million and $279.2$183.9 million, respectively. For a nominal servicing fee, the Company is responsible for servicing the trade accounts receivable for the U.S. and Australian programs.program. Discounts on U.S. and international sales of trade accounts receivable were $0.2 million and $0.7$0.5 million for the three and ninesix months ended May 31, 2017,February 28, 2018, respectively, and $0.4$0.2 million and $1.2$0.4 million for the three and ninesix months ended May 31, 2016,February 28, 2017, respectively, and are included in selling, general and administrative expenses in the Company's unaudited condensed consolidated statements of earnings.

As of May 31, 2017February 28, 2018 and August 31, 2016,2017, the deferred purchase price on the Company's U.S. and international sale of trade accounts receivable programs iswas included in accounts receivable on the Company's unaudited condensed consolidated balance sheets. The following tables summarize the activity of the deferred purchase price receivables for the U.S. and international sale of trade accounts receivable programs.



12




 Three Months Ended May 31, 2017 Three Months Ended February 28, 2018
(in thousands) Total U.S. Poland Total U.S.* Poland
Beginning balance $312,446
 $258,719
 $53,727
 $293,376
 $221,034
 $72,342
Transfers of accounts receivable 777,104
 671,429
 105,675
 689,004
 551,757
 137,247
Collections (725,336) (626,182) (99,154) (646,168) (527,907) (118,261)
Ending balance $364,214
 $303,966
 $60,248
 $336,212
 $244,884
 $91,328
*Includes the sale of trade accounts receivable activities related to the U.S.-based operations of International Marketing and Distribution that are in discontinued operations, including transfers of trade accounts receivable of $40.6 million and collections of $105.8 million for the three months ended February 28, 2018.

  Six Months Ended February 28, 2018
(in thousands) Total U.S.* Poland
Beginning balance $215,123
 $135,623
 $79,500
Transfers of accounts receivable 1,345,646
 1,087,650
 257,996
Collections (1,224,557) (978,389) (246,168)
Ending balance $336,212
 $244,884
 $91,328
*Includes the sale of trade accounts receivable activities related to the U.S.-based operations of International Marketing and Distribution that are in discontinued operations, including transfers of trade accounts receivable of $136.7 million and collections of $196.0 million for the six months ended February 28, 2018.

  Three Months Ended February 28, 2017
(in thousands) Total U.S.*  Poland
Beginning balance $261,521
 $215,717
  $45,804
Transfers of accounts receivable 643,478
 561,010
  82,468
Collections (592,553) (518,008)  (74,545)
Ending balance $312,446
 $258,719
  $53,727
*Includes the sale of trade accounts receivable activities related to the U.S.-based operations of International Marketing and Distribution that are in discontinued operations, including transfers of trade accounts receivable of $128.8 million and collections of $104.5 million for the three months ended February 28, 2017.
  Six Months Ended February 28, 2017
(in thousands) Total U.S.* Australia** Poland
Beginning balance $289,748
 $212,762
 $26,662
 $50,324
Transfers of accounts receivable 1,200,442
 1,031,155
 16,914
 152,373
Collections (1,143,827) (985,198) (9,659) (148,970)
     Program termination (33,917) 
 (33,917) 
Ending balance $312,446
 $258,719
 $
 $53,727
 _________________ 
* Includes the sale of trade accounts receivable activities related to the U.S.-based operations of International Marketing and Distribution that are in discontinued operations, including transfers of trade accounts receivable of $221.3 million and collections of $201.9 million for the six months ended February 28, 2017.
**All Australia trade accounts receivable activities are related to discontinued operations as of February 28, 2017.


13





  Nine Months Ended May 31, 2017
(in thousands) Total U.S. Australia* Poland
Beginning balance $289,748
 $212,762
 $26,662
 $50,324
Transfers of accounts receivable 1,977,546
 1,702,584
 16,914
 258,048
Collections (1,869,163) (1,611,380) (9,659) (248,124)
     Program termination (33,917) 
 (33,917) 
Ending balance $364,214
 $303,966
 $
 $60,248

 _________________ 
* Includes collections of $3.7 million and program termination of $1.6 million related to discontinued operations and businesses sold.
  Three Months Ended May 31, 2016
(in thousands) Total U.S. Australia** Poland
Beginning balance $231,874
 $193,035
 $13,383
 $25,456
Transfers of accounts receivable 636,929
 513,169
 47,110
 76,650
Collections (608,292) (498,529) (41,522) (68,241)
Ending balance $260,511
 $207,675
 $18,971
 $33,865
_________________
** Includes transfers of accounts receivable of $13.6 million and collections of $12.3 million related to discontinued operations and businesses held for sale.
  Nine Months Ended May 31, 2016
(in thousands) Total U.S. Australia*** Poland
Beginning balance $339,547
 $269,778
 $18,038
 $51,731
Transfers of accounts receivable 1,763,122
 1,432,592
 130,440
 200,090
Collections (1,842,158) (1,494,695) (129,507) (217,956)
Ending balance $260,511
 $207,675
 $18,971
 $33,865
 _________________ 
*** Includes transfers of accounts receivable of $37.0 million and collections of $49.1 million related to discontinued operations and businesses held for sale.
NOTE 5. INVENTORIES, NET

As of May 31, 2017 and August 31, 2016, inventories were stated at the lower of cost or net realizable value. The Company determines inventory cost for its Americas Recycling, Americas Mills, Americas Fabrication and International Mill segments using the weighted average cost method. The Company determines inventory cost for its International Marketing and Distribution segment using the specific identification method. At May 31, 2017, 64% of the Company's total net inventories were valued using the weighted average cost method and 36% of the Company's total net inventories were valued using the specification identification method.

The majority of the Company's inventories are in the form of semi-finished and finished goods. The Company’s business model with the exception of the International Marketing and Distribution segment, is such that products are sold to external customers in various stages, from semi-finished billets through fabricated steel, leading these categories to be combined. Inventories in the International Marketing and Distribution segment are sold as finished goods. As such, work in process inventories were not material at May 31, 2017February 28, 2018 and August 31, 2016.2017. At May 31, 2017February 28, 2018 and August 31, 2016, $141.22017, $156.4 million and $77.9$116.8 million, respectively, of the Company's inventories were in the form of raw materials.

14





NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS

The following table details the changes in the carrying amount of goodwill by reportable segment:
   Americas International  
(in thousands) Recycling Mills Fabrication Mill Marketing and Distribution Consolidated
Goodwill, gross            
Balance at August 31, 2016 $9,751
 $4,970
 $57,637
 $2,432
 $1,982
 $76,772
 Acquisitions 
 
 306
 
 
 306
 Foreign currency translation 
 
 
 123
 (30) 93
Balance at May 31, 2017 $9,751
 $4,970
 $57,943
 $2,555
 $1,952
 $77,171
             
Accumulated impairment losses            
Balance at August 31, 2016 $(9,751) $
 $(493) $(155) $
 $(10,399)
 Foreign currency translation 
 
 
 (8) 
 (8)
Balance at May 31, 2017 $(9,751) $
 $(493) $(163) $
 $(10,407)
              
Goodwill, net            
Balance at August 31, 2016 $
 $4,970
 $57,144
 $2,277
 $1,982
 $66,373
 Acquisitions 
 
 306
 
 
 306
 Foreign currency translation 
 
 
 115
 (30) 85
Balance at May 31, 2017 $
 $4,970
 $57,450
 $2,392
 $1,952
 $66,764
(in thousands) Americas Recycling Americas Mills Americas Fabrication International Mill Corporate and Other* Consolidated
Goodwill, gross            
Balance at August 31, 2017 $9,751
 $4,970
 $57,943
 $2,664
 $1,982
 $77,310
 Acquisitions 
 
 
 
 
 
 Foreign currency translation 
 
 
 110
 
 110
 Impairment 
 
 (514) 
 
 (514)
 Reclassification to assets of discontinued operations 
 
 
 
 (1,982) (1,982)
Balance at February 28, 2018 $9,751
 $4,970
 $57,429
 $2,774
 $
 $74,924
             
Accumulated impairment losses            
Balance at August 31, 2017 $(9,751) $
 $(493) $(169) $(1,982) $(12,395)
 Foreign currency translation 
 
 
 (7) 
 (7)
 Reclassification to assets of discontinued operations 
 
 
 
 1,982
 1,982
Balance at February 28, 2018 $(9,751) $
 $(493) $(176) $
 $(10,420)
              
Goodwill, net            
Balance at August 31, 2017 $
 $4,970
 $57,450
 $2,495
 $
 $64,915
 Acquisitions 
 
 
 
 
 
 Foreign currency translation 
 
 
 103
 
 103
 Impairment 
 
 (514) 
 
 (514)
Balance at February 28, 2018 $
 $4,970
 $56,936
 $2,598
 $
 $64,504

* Other relates to goodwill for the International Marketing and Distribution segment which was moved to discontinued operations during the three months ended February 28, 2018.

The total gross carrying amounts of the Company's intangible assets that are subject to amortization were $20.5$21.5 million and $18.6$19.7 million at May 31, 2017February 28, 2018 and August 31, 2016,2017, respectively, and are included in other noncurrent assets on the Company's unaudited condensed consolidated balance sheets. As part of the Company's purchase of substantially all of the assets of MMFX Technologies Corporation ("MMFX") during the first fiscal quarter of 2018, the Company acquired patents which were assigned a value of $7.0 million with a useful life of 7.5 years. See Note 2, Changes in Business, to the unaudited condensed consolidated financial statements included in the November 30, 2017 Quarterly Report on Form 10-Q for more information with respect to the MMFX acquisition. Intangible amortization expense from continuing operations was $0.9$0.6 million and $1.9$1.1 million for the three and ninesix months ended May 31, 2017,February 28, 2018, respectively, and $1.0$0.7 million and $3.1$0.9 million for the three and ninesix months ended May 31, 2016,February 28, 2017, respectively. The three and six months ended February 28, 2018 include goodwill impairment charges of $0.5 million related to the Company's sale of its structural steel fabrication assets as discussed in Note 2, Changes in Business. See Note 9, Fair Value, for further discussion related to the impairment. Excluding goodwill, there arewere no significant intangible assets with indefinite lives.lives as of February 28, 2018.

14




NOTE 7. CREDIT ARRANGEMENTS

Long-term debt was as follows:
(in thousands) Weighted Average
Interest Rate as of February 28, 2018
 February 28, 2018 August 31, 2017
2027 Notes 5.375% $300,000
 $300,000
2023 Notes 4.875% 330,000
 330,000
2022 Term Loan 2.909% 146,250
 150,000
Other, including equipment notes   49,608
 52,077
Total debt   825,858
 832,077
     Less debt issuance costs   7,066
 7,315
Total amounts outstanding   818,792
 824,762
     Less current maturities   18,958
 19,182
Long-term debt   $799,834
 $805,580

In July 2017, the Company issued $300.0 million of 5.375% Senior Notes due July 2027 (the "2027 Notes"). Interest on the 2027 Notes is payable semiannually.

In May 2013, the Company issued $330.0 million of 4.875% Senior Notes due May 2023 (the "2023 Notes"). Interest on the 2023 Notes is payable semiannually.

The Company has a fourth amended$350.0 million revolving credit facility pursuant to the Fourth Amended and restated credit agreementRestated Credit Agreement (the "Credit Agreement") forand a revolving credit facilitysenior secured term loan in the maximum principal amount of $350.0$150.0 million (the "2022 Term Loan"), each with a maturity date in June 2022. The 2022 Term Loan was drawn upon on July 13, 2017. The Company is required to make quarterly payments on the 2022 Term Loan equal to 1.25% of June 26, 2019.the original principal amount.  The maximum availability under the Credit Agreement, together with the 2022 Term Loan, can be increased to $500.0$750.0 million with bank approval. The Company's obligation under itsthe Credit Agreement is collateralized by its U.S. inventory.inventory and U.S. fabrication receivables. The Credit Agreement's capacity includes $50.0 million for the issuance of stand-by letters of creditcredit.

On December 29, 2017, the Company entered into a fourth amendment to the Credit Agreement that provides a senior secured term loan B facility in the maximum principal amount of up to $600.0 million (the "Term Loan B Facility"). The Term Loan B Facility is available to fund all or a portion of the purchase price of the pending acquisition of certain assets of Gerdau S.A. (the "Contemplated Acquisition") and wasto pay certain fees and expenses in connection therewith. On February 21, 2018, the Company entered into a Fifth Amendment to the Fourth Amended and Restated Credit Agreement. This fifth amendment amends the Credit Agreement to provide for a coterminous delayed draw term loan A facility in the maximum aggregate principal amount of up to $200.0 million (the "2018 Term Loan"), the proceeds of which are required to be used to (i) finance the Contemplated Acquisition, (ii) repay certain existing indebtedness of Gerdau S.A. and its subsidiaries, and (iii) pay transaction fees and expenses related thereto. Once drawn, the Company is required to make quarterly payments on the 2018 Term Loan equal to 1.25% of the original principal amount. The 2018 Term Loan has a maturity date of June 2022. In connection with the 2018 Term Loan, the commitments under the Term Loan B Facility were reduced by outstanding stand-by letters of credit which totaled $3.0from $600.0 million at both May 31, 2017 and August 31, 2016. to $400.0 million.

The Company had no amounts drawn under the Credit Agreement at May 31, 2017February 28, 2018 and August 31, 2016.2017. The availability under the Credit Agreement was reduced by outstanding letters of credit of $3.3 million and $3.0 million at February 28, 2018 and August 31, 2017, respectively.

Under the Credit Agreement, the Company is required to comply with certain financial and non-financial covenants, including covenants to maintain: (i) an interest coverage ratio (consolidated EBITDA to consolidated interest expense, as each isas defined in the Credit Agreement) of not less than 2.50 to 1.00 and (ii) a debt to capitalization ratio (consolidated funded debt to total capitalization, as each isas defined in the Credit Agreement) that does not exceed 0.60 to 1.00. At May 31, 2017,February 28, 2018, the Company's interest coverage ratio was 5.987.63 to 1.00, and the Company's debt to capitalization ratio was 0.430.36 to 1.00. In addition, beginning on the date three months prior to each maturity date of the Company's 2017 Notes and 2018 Notes, as defined below, and each day thereafter that the 2017 Notes and the 2018 Notes are outstanding, the Company will be required to maintain liquidity of at least $150.0 million in excess of each of the outstanding aggregate principal amounts of the 2017 Notes and 2018 Notes. At May 31, 2017, the Company had sufficient liquidity and was in compliance with this covenant. Loans under the Credit Agreement bear interest based on the Eurocurrency rate, a base rate, or the London Interbank Offered Rate ("LIBOR").

In May 2013, the Company issued $330.0 million of 4.875% Senior Notes due May 2023 (the "2023 Notes"). Interest on the 2023 Notes is payable semiannually.


15




In August 2008, the Company issued $500.0 million of 7.35% senior unsecured notes due in AugustAt February 28, 2018, (the "2018 Notes"). During the third quarter of fiscal 2010, the Company entered into hedging transactions which reduced the Company's effective interest rate on these notes to 6.40% per annum. Interest on these notes is payable semiannually. In February 2016, the Company accepted for purchase approximately $100.2 million of the outstanding principal amount of its 2018 Notes through a cash tender offer. The Company recognized expenses of approximately $6.1 million related to the early extinguishment of this debt, which are included in loss on debt extinguishment in the unaudited condensed consolidated statements of earnings for the three and nine months ended May 31, 2016.

In July 2007, the Company issued $400.0 million of 6.50% senior unsecured notes due in July 2017 (the "2017 Notes"). During the third quarter of fiscal 2011, the Company entered into hedging transactions which reduced the Company's effective interest rate on these notes to 5.74% per annum. Interest on these notes is payable semiannually. In February 2016, the Company accepted for purchase $100.0 million of the outstanding principal amount of its 2017 Notes though a cash tender offer. The Company recognized expenses of approximately $5.4 million related to the early extinguishment of this debt, which are included in loss on debt extinguishment in the unaudited condensed consolidated statements of earnings for the three and nine months ended May 31, 2016.

During fiscal 2012, the Company terminated its existing interest rate swap transactions and received cash proceeds of approximately $52.7 million, net of customary finance charges. The resulting gain was deferred and is being amortized as a reduction to interest expense over the remaining term of the respective debt tranches. At May 31, 2017 and August 31, 2016, the unamortized amounts were $5.9 million and $11.6 million, respectively. Amortization of the deferred gain for each of the three and nine months ended May 31, 2017 and 2016 was $1.9 million and $5.7 million, respectively.

At May 31, 2017, the Company was in compliance with all covenants contained in its debt agreements.

Long-term debt, including the deferred gain from the termination of the interest rate swaps, was as follows:
15


(in thousands) Weighted Average
Interest Rate as of May 31, 2017
 May 31, 2017 August 31, 2016
2023 Notes 4.875% $330,000
 $330,000
2018 Notes 6.40% 405,406
 408,874
2017 Notes 5.74% 300,372
 302,601
Other, including equipment notes   30,984
 34,166
Total debt   1,066,762
 1,075,641
     Less debt issuance costs   3,432
 4,224
Total amounts outstanding   1,063,330
 1,071,417
     Less current maturities   311,654
 313,469
Long-term debt   $751,676
 $757,948


The Company has uncommitted credit facilities available from U.S. and international banks. In general, these credit facilities are used to support trade letters of credit (including accounts payable settled under bankers' acceptances), foreign exchange transactions and short-term advances which are priced at market rates.

At both May 31, 2017February 28, 2018 and August 31, 2016,2017, CMC Poland Sp. z.o.o. ("CMCP") had uncommitted credit facilities with several banks of PLN 175225 million ($47.065.7 million) and PLN 175.0 million as($49.1 million), respectively. As of May 31, 2017). TheFebruary 28, 2018, the uncommitted credit facilities as of May 31, 2017 have expiration dates ranging from November 2017March 2018 to MarchNovember 2018, which CMCP intends to renew upon expiration. At May 31, 2017February 28, 2018 and August 31, 2016,2017, no amounts were outstanding under these facilities. The available balance of these credit facilities was reduced by outstanding stand-by letters of credit, guarantees, and/or other financial assurance instruments, which totaled $1.5$2.8 million and $1.3 million at both May 31, 2017February 28, 2018 and August 31, 2016.2017, respectively. During the ninesix months ended May 31,February 28, 2018 and 2017, and 2016, CMCP had no borrowings and no repayments under its uncommitted credit facilities.

The Company capitalized $2.9$3.0 million and $6.6$6.8 million of interest in the cost of property, plant and equipment during the three and ninesix months ended May 31, 2017,February 28, 2018, respectively, and $0.6$2.1 million and $1.6$3.7 million for the three and ninesix months ended May 31, 2016,February 28, 2017, respectively. Cash paid for interest during the three and ninesix months ended May 31, 2017February 28, 2018 was $8.3$10.8 million and $41.4$20.2 million, respectively, and $9.1$24.7 million and $50.0$33.1 million during the three and ninesix months ended May 31, 2016,February 28, 2017, respectively.

16




NOTE 8. NEW MARKETS TAX CREDIT TRANSACTIONS

The Company, through its wholly-owned subsidiary, CMC Steel Oklahoma, LLC ("CMC Steel OK"), is in the process of constructing a minimill with an expected commissioning date in late calendar year 2017. Additionally, the Company, through its wholly-owned subsidiary, CMC Post Oklahoma, LLC ("CMC Post OK"), is in the process of constructing a T-post shop with an expected commissioning date in the summer of 2018. Both projects are located in Durant, Oklahoma. In connection with these projects, the Company entered into transactions that qualified through the New Markets Tax Credit program provided for in the Community Renewal Tax Relief Act of 2000 (the "NMTC Program"), as the minimill and T-post shop will be located in a zone designated by the IRS as eligible for the NMTC Program and are considered eligible business activities for the NMTC Program. Under the NMTC Program, an investor that makes a capital investment, which, in turn, together with leverage loan sources, is used to make a Qualifying Equity Investment (a "QEI") in an entity that (a) qualifies as a Community Development Entity ("CDE"), (b) has applied for and been granted an allocation of a portion of the total federal funds available to fund the credits (an "NMTC Allocation") and (c) uses a minimum specified portion of the QEI to make a Qualified Low Income Community Investment up to the maximum amount of the CDE’s NMTC Allocation will be entitled to claim, over a period of seven years, federal nonrefundable tax credits in an amount equal to 39% of the QEI amount (an "NMTC"). NMTCs are subject to 100% recapture for a period of seven years (the "Recapture Period") as provided in the Internal Revenue Code.

Minimill NMTC Transaction

In the second quarter of fiscal 2016, certain of the Company's subsidiaries entered into an NMTC transaction with U.S. Bancorp Community Development Corporation, a Minnesota corporation ("USBCDC"), related to the development, construction and equipping of a new minimill in Durant, Oklahoma (the "Minimill Project"). To effect the transaction, USBCDC made a $17.7 million capital contribution ("the USBCDC Equity") to USBCDC Investment Fund 156, LLC, a Missouri limited liability company (the "Investment Fund"). Additionally, Commonwealth Acquisition Holdings, Inc., a wholly-owned subsidiary of the Company ("Commonwealth"), made a $35.3 million loan to the Investment Fund at an interest rate of approximately 1.08% per year with a maturity date of December 24, 2045 (the "Commonwealth Mill Loan"). The Investment Fund used $51.5 million of the proceeds received from the Commonwealth Mill Loan and the USBCDC Equity to make QEIs into CDEs, which, in turn, used $50.7 million of the QEIs to make loans to CMC Steel OK with terms similar to the Commonwealth Mill Loan and as partial financing for the Minimill Project. The proceeds of the loans from the CDEs were recorded as restricted cash and included in other current assets in the accompanying unaudited condensed consolidated balance sheets. In connection with this NMTC transaction, CMC Steel OK spent $21.0 million for qualified construction, development, and equipping activities for the Minimill Project during the nine months ended May 31, 2017. The balance remaining in restricted cash was $0.7 million at May 31, 2017.

Post Shop NMTC Transaction

In the third quarter of fiscal 2017, certain of the Company's subsidiaries entered into a second NMTC transaction with USBCDC, related to the development, construction and equipping of a new T-post shop in Durant, Oklahoma (the "Post Shop Project"). To effect the transaction, USBCDC made capital contributions to Twain Investment Fund 219, LLC (the "Fund 219"), and Twain Investment Fund 222 (the "Fund 222"), both Missouri limited liability companies, in the amounts of $2.8 million (the "USBCDC Fund 219 Equity") and $2.2 million (the "USBCDC Fund 222 Equity"), respectively. Additionally, Commonwealth made a $10.4 million loan to Fund 219 at an interest rate of approximately 1.16% per year with a maturity date of March 23, 2047 (the "Commonwealth Post Shop Loan"). Fund 219 used $12.8 million of the proceeds received from the Commonwealth Post Shop Loan and the USBCDC Fund 219 Equity to make a QEI into a CDE, which, in turn, used $12.6 million of the QEI to make a loan to CMC Post OK with terms similar to the Commonwealth Post Shop Loan and as partial financing for the Post Shop Project. Additionally, Fund 222 used $2.2 million of the proceeds received from the USBCDC Fund 222 Equity to make a QEI into a CDE, which, in turn, used $2.1 million of the QEI to make a loan to CMC Post OK. The proceeds of the loans from the CDEs were recorded as restricted cash and included in other current assets in the accompanying unaudited condensed consolidated balance sheet. In connection with this NMTC transaction, CMC Post OK spent $0.8 million for qualified construction, development, and equipping activities for the Post Shop Project during the nine months ended May 31, 2017. The balance remaining in restricted cash was $13.3 million at May 31, 2017.

Variable Interest Entities

By virtue of its capital contributions to the Investment Fund and the Fund 219, USBCDC is entitled to substantially all of the benefits derived from the NMTCs. These transactions include a put/call provision whereby the Company may be obligated or entitled to repurchase USBCDC’s interest in the Investment Fund and the Fund 219 at the end of the Recapture Period. The Company believes USBCDC will exercise the put options in 2022 and 2025, respectively, following the end of the respective Recapture Periods. The value attributed to the put/call is de minimis. The Company is required to be in compliance with various regulations and contractual provisions that apply to the NMTC transactions. Non-compliance with applicable requirements could

17




result in unrealized projected tax benefits and, therefore, could require the Company to indemnify USBCDC for any loss or recapture of NMTCs related to the financing until such time as the Company's obligation to deliver tax benefits is relieved. The Company does not anticipate any credit recaptures will be required in connection with these transactions.

The Company has determined that the Investment Fund and Fund 219 are variable interest entities ("VIEs"), of which the Company is the primary beneficiary and has consolidated them in accordance with Accounting Standards Codification Topic 810, Consolidation. USBCDC’s contributions are included in other long-term liabilities in the accompanying unaudited condensed consolidated balance sheets. Direct costs incurred in structuring the transactions were deferred and are recognized as expense over each seven year recapture period. Incremental costs to maintain the structures during the compliance periods are recognized as incurred.

The Company has determined that Fund 222 is a VIE, of which the Company is not the primary beneficiary and has therefore treated the QEI of $2.1 million from Fund 222 as debt. The debt is included in long-term debt in the accompanying unaudited condensed consolidated balance sheet as of May 31, 2017.
NOTE 9.8. DERIVATIVES AND RISK MANAGEMENT

The Company's global operations and product lines expose it to risks from fluctuations in metal commodity prices, foreign currency exchange rates, natural gas prices and interest rates. One objective of the Company's risk management program is to mitigate these risks using derivative instruments. The Company enters into (i) metal commodity futures and forward contracts to mitigate the risk of unanticipated changes in gross margin due to the volatility of the commodities' prices, and (ii) foreign currency forward contracts that match the expected settlements for purchases and sales denominated in foreign currencies and (iii) natural gas forward contracts to mitigate the risk of unanticipated changes in operating cost due to the volatility of natural gas prices.currencies.

At May 31, 2017,February 28, 2018, the notional values of the Company's foreign currency contract commitments and its commodity contract commitments were $262.8300.9 million and $36.9$55.3 million, respectively. At May 31, 2016,February 28, 2017, the notional values of the Company's foreign currency contract commitments and its commodity contract commitments were $290.0$256.4 million and $23.0$36.3 million, respectively.

The following table provides information regarding the Company's commodity contract commitments as of May 31, 2017:February 28, 2018:
Commodity Long/Short Total
Aluminum Long 1,9252,650
 MT
Aluminum Short 25
 MT
Copper Long 5551,009
 MT
Copper Short 5,250
 MT
ZincLong75,999
 MT
 _________________
MT = Metric Ton

The Company designates only those contracts which closely match the terms of the underlying transaction as hedges for accounting purposes. These hedges resulted in substantially no ineffectiveness in the Company's unaudited condensed consolidated statements of earnings, and there were no components excluded from the assessment of hedge effectiveness for the three and ninesix months ended May 31, 2017February 28, 2018 and May 31, 2016.February 28, 2017. Certain foreign currency and commodity contracts were not designated as hedges for accounting purposes, although management believes they are essential economic hedges.


1816




The following tables summarize activities related to the Company's derivative instruments and hedged items recognized in the unaudited condensed consolidated statements of earnings: 
 Three Months Ended May 31, Nine Months Ended May 31, Three Months Ended February 28, Six Months Ended February 28,
Derivatives Not Designated as Hedging Instruments (in thousands) Location 2017 2016 2017 2016 Location 2018 2017 2018 2017
Commodity Cost of goods sold $1,654
 $224
 $(3,121) $2,172
 Cost of goods sold $(2) $(146) $573
 $(4,775)
Foreign exchange Net sales (2) 
 (2) (4) Cost of goods sold (31) (25) (50) (33)
Foreign exchange Cost of goods sold (5) (9) (38) 72
 SG&A expenses (1,729) (678) 651
 3,371
Foreign exchange SG&A expenses (1,076) (6,304) 2,295
 9,410
Gain (loss) before income taxes $571
 $(6,089) $(866) $11,650
 $(1,762) $(849) $1,174
 $(1,437)

The Company's fair value hedges are designated for accounting purposes with the gains or losses on the hedged items offsetting the gains or losses on the related derivative transactions. Hedged items relate to firm commitments on commercial sales and purchases and capital expenditures.
 Location of gain (loss) recognized in income on derivatives Amount of gain (loss) recognized in income on derivatives for the three months ended May 31, Location of gain (loss) recognized in income on related hedged items Amount of gain (loss) recognized in income on related hedge items for the three months ended May 31, Location of gain (loss) recognized in income on derivatives Amount of gain (loss) recognized in income on derivatives for the three months ended February 28, Location of gain (loss) recognized in income on related hedged items Amount of gain (loss) recognized in income on related hedge items for the three months ended February 28,
 2017 2016  2017 2016  2018 2017  2018 2017
Foreign exchange Net sales $(102) $(122) Net sales $102
 $122
 Net sales $8
 $66
 Net sales $(8) $(66)
Foreign exchange Cost of goods sold 1,042
 901
 Cost of goods sold (1,042) (901) Cost of goods sold (1,323) (1,693) Cost of goods sold 1,323
 1,693
Gain (loss) before income taxes $940
 $779
  $(940) $(779) $(1,315) $(1,627)  $1,315
 $1,627


 Location of gain (loss) recognized in income on derivatives Amount of gain (loss) recognized in income on derivatives for the nine months ended May 31, Location of gain (loss) recognized in income on related hedged items Amount of gain (loss) recognized in income on related hedge items for the nine months ended May 31, Location of gain (loss) recognized in income on derivatives Amount of gain (loss) recognized in income on derivatives for the six months ended February 28, Location of gain (loss) recognized in income on related hedged items Amount of gain (loss) recognized in income on related hedge items for the six months ended February 28,
 2017 2016  2017 2016  2018 2017  2018 2017
Foreign exchange Net sales $(58) $(39) Net sales $58
 $39
 Net sales $(229) $44
 Net sales $229
 $(44)
Foreign exchange Cost of goods sold 435
 90
 Cost of goods sold (435) (90) Cost of goods sold 2,025
 (607) Cost of goods sold (2,025) 607
Gain (loss) before income taxes $377
 $51
  $(377) $(51) $1,796
 $(563)  $(1,796) $563


Effective Portion of Derivatives Designated as Cash Flow Hedging Instruments Recognized in AOCI (Loss) (in thousands) Three Months Ended May 31, Nine Months Ended May 31,
2017 2016 2017 2016
Effective Portion of Derivatives Designated as Cash Flow Hedging Instruments Recognized in AOCI (in thousands) Three Months Ended February 28, Six Months Ended February 28,
2018 2017 2018 2017
Commodity $(9) $(56) $208
 $(280) $
 $118
 $
 $217
Foreign exchange 263
 40
 488
 749
 14
 192
 25
 225
Gain (loss), net of income taxes $254
 $(16) $696
 $469
 $14
 $310
 $25
 $442

Refer to Note 3, Accumulated Other Comprehensive Income (Loss), of the unaudited condensed consolidated financial statements included in this quarterly reportQuarterly Report on Form 10-Q for the effective portion of derivatives designated as cash flow hedging instruments reclassified from AOCI.

The Company enters into derivative agreements that include provisions to allow the set-off of certain amounts. Derivative instruments are presented on a gross basis on the Company's unaudited condensed consolidated balance sheets. The asset and liability balances in the tables below reflect the gross amounts of derivative instruments at May 31, 2017February 28, 2018 and August 31, 20162017. The fair value of the Company's derivative instruments on the unaudited condensed consolidated balance sheets was as follows: 


1917




Derivative Assets (in thousands) May 31, 2017 August 31, 2016 February 28, 2018 August 31, 2017
Commodity — designated for hedge accounting $13
 $4
Commodity — not designated for hedge accounting 324
 584
 $1,070
 $767
Foreign exchange — designated for hedge accounting 606
 1,398
 936
 81
Foreign exchange — not designated for hedge accounting 2,374
 750
 2,851
 1,286
Derivative assets (other current assets)* $3,317
 $2,736
 $4,857
 $2,134
 
Derivative Liabilities (in thousands) May 31, 2017 August 31, 2016 February 28, 2018 August 31, 2017
Commodity — designated for hedge accounting $
 $5
Commodity — not designated for hedge accounting 238
 117
 $289
 $3,251
Foreign exchange — designated for hedge accounting 101
 902
 671
 1,549
Foreign exchange — not designated for hedge accounting 1,805
 1,161
 868
 3,710
Derivative liabilities (accrued expenses and other payables)* $2,144
 $2,185
 $1,828
 $8,510
 _________________ 
* Derivative assets and liabilities do not include the hedged items designated as fair value hedges.

As of May 31, 2017February 28, 2018, all of the Company's derivative instruments designated to hedge exposure to the variability in future cash flows of the forecasted transactions will mature within twelve months. All of the instruments are highly liquid and were not entered into for trading purposes.


20
18




NOTE 10.9. FAIR VALUE

The Company has established a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels. These levels are determined based on the lowest level input that is significant to the fair value measurement. Levels within the hierarchy are defined as follows:

Level 1 - Unadjusted quoted prices in active markets for identical assets and liabilities;

Level 2 - Quoted prices for similar assets and liabilities in active markets (other than those included in Level 1) which are observable, either directly or indirectly; and

Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The following tables summarize information regarding the Company's financial assets and financial liabilities that were measured at fair value on a recurring basis:
   Fair Value Measurements at Reporting Date Using   Fair Value Measurements at Reporting Date Using
(in thousands) May 31, 2017 Quoted Prices in
Active Markets  for
Identical Assets
(Level 1)
 Significant  Other
Observable Inputs
(Level 2)
 Significant
Unobservable  Inputs
(Level 3)
 February 28, 2018 Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 Significant Other
Observable Inputs
(Level 2)
 Significant
Unobservable  Inputs
(Level 3)
Assets:                
Investment deposit accounts (1)
 $230,025
 $230,025
 $
 $
 $144,904
 $144,904
 $
 $
Commodity derivative assets (2)
 337
 324
 13
 
 1,070
 1,070
 

 
Foreign exchange derivative assets (2)
 2,980
 
 2,980
 
 3,787
 
 3,787
 
Liabilities:                
Commodity derivative liabilities (2)
 238
 238
 
 
 289
 289
 
 
Foreign exchange derivative liabilities (2)
 1,906
 
 1,906
 
 1,539
 
 1,539
 

   Fair Value Measurements at Reporting Date Using   Fair Value Measurements at Reporting Date Using
(in thousands) August 31, 2016 Quoted Prices in
Active Markets  for
Identical Assets
(Level 1)
 Significant  Other
Observable  Inputs
(Level 2)
 Significant
Unobservable  Inputs
(Level 3)
 August 31, 2017 Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 Significant Other
Observable Inputs
(Level 2)
 Significant
Unobservable  Inputs
(Level 3)
Assets:                
Investment deposit accounts (1)
 $278,759
 $278,759
 $
 $
 $43,553
 $43,553
 $
 $
Commodity derivative assets (2)
 588
 584
 4
 
 767
 767
 
 
Foreign exchange derivative assets (2)
 2,148
 
 2,148
 
 1,367
 
 1,367
 
Liabilities:                
Commodity derivative liabilities (2)
 122
 117
 5
 
 3,251
 3,251
 
 
Foreign exchange derivative liabilities (2)
 2,063
 
 2,063
 
 5,259
 
 5,259
 
 _________________ 
(1) Investment deposit accounts are short-term in nature, and the value is determined by principal plus interest. The investment portfolio mix can change each period based on the Company's assessment of investment options.

(2) Derivative assets and liabilities classified as Level 1 are commodity futures contracts valued based on quoted market prices in the London Metal Exchange or New York Mercantile Exchange. Amounts in Level 2 are based on broker quotes in the over-the-counter market. Further discussion regarding the Company's use of derivative instruments and the classification of the assets and liabilities is included in Note 9,8, Derivatives and Risk Management.


21




There were no material non-recurring fair value remeasurements duringIn connection with the three and nine months ended May 31, 2017. On June 10, 2016,sale of assets related to the Company, through its wholly-owned Australian subsidiary, G.A.M. Steel Pty. Ltd., signed a definitive asset sale agreement to sell its remainingCompany's structural steel distribution assets located in Australia. For the third quarter of fiscal 2016,fabrication operations, the Company recorded an impairment charge of $15.8$12.1 million including the impact of an approximate $13.5 million accumulated foreign currency translation loss, on this remaining component of the Australian steel distribution business that was classified as held for sale at May 31, 2016 and as discontinued operations during the three and nine months ended May 31, 2016. After considerationsecond quarter of the impairment charge, the fair value, less costs to sell, of this component was $10.4 million at May 31, 2016.fiscal 2018. The signed definitive asset sale agreement (Level 3)2) was the basis for the determination of fair value of this component.these operations. There were no other material non-recurring fair value measurementsremeasurements during the three and ninesix months ended May 31, 2016.February 28, 2018 and 2017.


19




The carrying values of the Company's short-term items, including the deferred purchase price of accounts receivable, documentary letters of credit and notes payable, approximate fair value due to their short-term nature.

The carrying values and estimated fair values of the Company's financial assets and liabilities that are not required to be measured at fair value on the unaudited condensed consolidated balance sheets were as follows:
 May 31, 2017 August 31, 2016 February 28, 2018 August 31, 2017
(in thousands) Fair Value Hierarchy Carrying Value Fair Value Carrying Value Fair Value Fair Value Hierarchy Carrying Value Fair Value Carrying Value Fair Value
2027 Notes (1)
 Level 2 $300,000
 $303,600
 $300,000
 $314,286
2023 Notes (1)
 Level 2 $330,000
 $333,630
 $330,000
 $332,010
 Level 2 330,000
 339,847
 330,000
 340,052
2018 Notes (1)
 Level 2 405,406
 424,007
 408,874
 432,303
2017 Notes (1)
 Level 2 300,372
 301,230
 302,601
 311,250
2022 Term Loan (2)
 Level 2 146,250
 146,250
 150,000
 150,000
_________________
(1) The fair value of the notes is determined based on indicated market values.
(2) The 2022 Term Loan contains variable interest rates and its carrying value approximates fair value.
NOTE 11.10. INCOME TAX

On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act ("TCJA") which, among other provisions, reduced the federal corporate tax rate to 21.0% effective January 1, 2018. Due to the Company’s August 31st fiscal year end, this provision will result in a blended statutory U.S. tax rate of 25.7% for fiscal 2018 and a 21.0% statutory U.S. tax rate beginning September 1, 2018.

Accounting Standards Codification ("ASC") 740 requires the change in tax law to be accounted for in the period of enactment. Due to complexities involved in accounting for the TCJA, the Securities and Exchange Commission's Staff Accounting Bulletin ("SAB") 118 provides a measurement period, which should not extend beyond one year from the date of enactment, to complete the accounting under ASC 740. The Company recognized additional income tax expense of $10.6 million during the three months ended February 28, 2018 for the effects of those provisions of the TCJA for which amounts are reasonably estimable, including (i) recognition of the one-time toll charge on certain undistributed earnings of non-U.S. subsidiaries with associated foreign tax credits, in order to transition from a worldwide system with deferral to a territorial-style tax system, and (ii) the remeasurement of the Company’s deferred tax balances as of February 28, 2018 to the lower statutory rates. These provisions of the TCJA, as well as a 100% bonus depreciation for qualified assets acquired and placed in service after September 27, 2017, resulted in a $52.3 million reduction to the Company’s net deferred tax liabilities. The impacts of the legislation on the Company’s tax expense and/or the Company’s deferred tax balances may differ from these estimates, possibly materially, and may be adjusted accordingly over the SAB 118 measurement period.

The Company’s current analysis of the following provisions of the TCJA resulted in minimal or no impact on the Company’s financial statements, and as a result, the Company did not record any associated tax expense or benefit as of February 28, 2018: (i) the new tax on global intangible low-taxed income, (ii) the new tax on foreign-derived intangible income, (iii) the base erosion anti-abuse tax, (iv) deductibility limitations on performance-based compensation, (v) deductibility limitations on business interest under Section 163(j) and (vi) deductibility limitations on meal and entertainment related expenses. The Company will continue to evaluate the effect of these provisions and adjust its financial statements if necessary as new information becomes available.

The Company's effective income tax rate from continuing operations for the three and ninesix months ended May 31, 2017February 28, 2018 was 24.2%15.0% and 24.9%19.6%, respectively, compared with 23.3%25.3% and 25.5%26.3% for the three and ninesix months ended May 31, 2016,February 28, 2017, respectively. The effective tax rate is determined by computing the estimated annual effective tax rate, adjusted for discrete items, if any, which are taken into account in the appropriate period. Several factors determine the Company's effective tax rate, including the mix and amount of global earnings, the impact of loss companies for which no tax benefit is available due to valuation allowances, audit related adjustments, and the impact of permanent tax adjustments.

20





For the three and ninesix months ended May 31, 2017 and 2016,February 28, 2018, the Company's effective tax rate was lower than the blended U.S. statutory income tax rate of 25.7%. The statutory rate for fiscal 2018 was revised during the current reporting period due to the TCJA discussed above. Items that impacted the effective tax rate included:

i.the one-time toll charge on certain undistributed earnings of non-U.S. subsidiaries with associated foreign tax credits as a result of the TCJA;
ii.the remeasurement of the Company’s deferred tax balances to the applicable reduced statutory income tax rates as a result of the TCJA;
iii.a permanent tax benefit related to a worthless stock deduction from the reorganization and exit of the steel trading business headquartered in the United Kingdom;
iv.the proportion of the Company's global income from operations in jurisdictions with lower statutory tax rates than the U.S., including Poland, which has a statutory income tax rate of 19%;
v.a permanent tax benefit recorded under ASU 2016-09 for stock awards that vested during the first and second quarters of fiscal 2018; and
vi.a non-taxable gain on assets related to the Company's non-qualified Benefits Restoration Plan ("BRP").

For the three and six months ended February 28, 2017, the Company's effective tax rate was lower than the U.S. statutory income tax rate of 35%. Items that impacted the effective tax rate included:

i.the proportion of the Company's global income from operations in jurisdictions with lower statutory tax rates than the U.S., including Poland, which has a statutory income tax rate of 19%,;
ii.a permanent tax benefit under Section 199 of the Internal Revenue Code related to domestic production activity,activity;
iii.a non-taxable gain on assets related to the Company's non-qualified Benefits Restoration Plan,BRP; and
iv.losses from operations in certain jurisdictions in which the Company maintains a valuation allowance, thus providing no benefit for such losses.

In addition,For the Company recorded athree months ended February 28, 2018, the Company's income tax benefit from discontinued operations was immaterial. For the six months ended February 28, 2018, the Company’s effective income tax rate from discontinued operations of 36.6% was greater than the blended U.S. statutory income tax rate of 25.7% primarily as a result of a favorable adjustment related to its IRS examstate taxes imposed on income earned by the Company’s steel trading operations headquartered in fiscal 2016, further impacting the rate in fiscal 2016.U.S.

The Company’s tax expense related to discontinued operations is not material with respect toFor each of the three and ninesix months ended May 31,February 28, 2017, and 2016.the Company’s effective income tax rate from discontinued operations of 23.5% was less than the U.S. statutory income tax rate of 35% primarily due to pre-tax income earned in foreign jurisdictions that benefit from group loss sharing provisions. Such losses, which carry a full valuation allowance, are utilized to absorb current period income earned in foreign jurisdictions; thus, there is no associated tax expense or benefit.

The Company made net cash payments of $28.2$7.7 million and $36.0$11.8 million for income taxes during the ninesix months ended May 31,February 28, 2018 and 2017, and 2016, respectively.

As of May 31, 2017February 28, 2018 and August 31, 2016,2017, the reserve for unrecognized income tax benefits related to the accounting for uncertainty in income taxes was $9.3 million, and $9.5 million, exclusive of interest and penalties.


22




The Company's policy classifies interest recognized on an underpayment of income taxes and any statutory penalties recognized on a tax position as income tax expense. For the three and ninesix months ended May 31, 2017February 28, 2018, the Company recorded immaterial amounts of accrued interest and penalties on unrecognized income tax benefits.

During the twelve months ending May 31, 2018,February 28, 2019, it is reasonably possible that the statute of limitations pertaining to positions taken by the Company in prior year income tax returns may lapse or that income tax audits in various taxing jurisdictions could be finalized. As a result, the total amount of unrecognized income tax benefits may decrease by approximately $9.3 million, which would reduce the provision for income taxes by $9.3 million.


21




The Company files income tax returns in the United StatesU.S. and multiple foreign jurisdictions with varying statutes of limitations. In the normal course of business, CMC and its subsidiaries are subject to examination by various taxing authorities. The following is a summary of tax years subject to examination:

U.S. Federal — 2012 and forward, with the exception of the R&D credit matter discussed below
U.S. States — 2009 and forward
Foreign — 20092011 and forward

During the fiscal year ended August 31, 2016, the Company completed an IRS exam for the years 2009 through 2011 and received confirmation from the United States Congress Joint Committee on Taxation that all matters were settled with the exception of R&D credits, which are still under review. In addition, the Company is under examination by certain state revenue authorities for the years 2009 through 2015. Management believes the Company's recorded income tax liabilities as of May 31, 2017February 28, 2018 sufficiently reflect the anticipated outcome of these examinations.

NOTE 12.11. STOCK-BASED COMPENSATION PLANS

The Company's stock-based compensation plans are described, and informational disclosures provided, in Note 16,15, Stock-Based Compensation Plans, to the audited consolidated financial statements in the Company's Annual Report on2017 Form 10-K for the fiscal year ended August 31, 2016.10-K. In general, the restricted stock units granted during fiscal 20172018 vest ratably over a period of three years. However, certain restricted stock units granted during fiscal 20172018 cliff vest after a period of three years. Subject to the achievement of performance targets established by the Compensation Committee of CMC's Board of Directors, the performance stock units granted during fiscal 20172018 will vest after a period of three years.

During the ninesix months ended May 31,February 28, 2018 and 2017, and 2016, the Company granted the following awards under its stock-based compensation plans:
 2017 2016 2018 2017
(in thousands, except per share data) Shares Granted Weighted Average Grant Date Fair Value Shares Granted Weighted Average Grant Date Fair Value Shares Granted Weighted Average Grant Date Fair Value Shares Granted Weighted Average Grant Date Fair Value
Equity Method 916
 $16.04
 1,613
 $15.83
 1,201
 $20.71
 916
 $16.04
Liability Method 915
 N/A
 465
 N/A
 323
 N/A
 915
 N/A

During the three and six months ended February 28, 2018, the Company recorded expense of $1.4 million and $1.7 million for mark-to-market adjustments on liability awards, compared to expense of $0.8 million and $4.7 million recorded for the three and six months ended February 28, 2017, which includes the impact of the modification of certain restricted stock and performance stock units that occurred during the first quarter of fiscal 2017, certain restricted stock units and performance stock units that were previously accounted for under the equity method were modified to allow optionality related to the net share settlement feature, which resulted in accounting for these awards under the liability method. The fair value of liability awards is remeasured each reporting period and is recognized ratably over the service period. During the three and nine months ended May 31, 2017, the Company recorded income of $2.0 million and expense of $2.7 million as a result of the modification and the impact of the change in stock value on liability-treated awards, compared to immaterial mark-to-market adjustments for the three and nine months ended May 31, 2016.2017. As of May 31, 2017,February 28, 2018, the Company had 2.1 million777 thousand equivalent shares accounted for under the liability method outstanding. The Company expects 2.0 million741 thousand equivalent shares to vest.

The following table summarizes total stock-based compensation expense, including fair value remeasurements, which is mainly included in selling, general and administrative expenses on the Company's unaudited condensed consolidated statements of earnings:
 Three Months Ended May 31, Nine Months Ended May 31, Three Months Ended February 28, Six Months Ended February 28,
(in thousands) 2017 2016 2017 2016 2018 2017 2018 2017
Stock-based compensation expense $3,560
 $6,783
 $19,716
 $19,889
 $8,557
 $7,911
 $13,338
 $16,156

2322





NOTE 13.12. STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE ATTRIBUTABLE TO CMC

The calculations of basic and diluted earnings per share from continuing operations for the three and ninesix months ended May 31,February 28, 2018 and February 28, 2017 and May 31, 2016 were as follows: 
 Three Months Ended May 31, Nine Months Ended May 31, Three Months Ended February 28, Six Months Ended February 28,
(in thousands, except share data) 2017 2016 2017 2016 2018 2017 2018 2017
Earnings from continuing operations attributable to CMC $39,609
 $35,111
 $76,422
 $71,593
 $9,781
 $22,992
 $41,652
 $28,678
                
Basic earnings per share:                
Shares outstanding for basic earnings per share 115,886,372
 114,677,109
 115,574,289
 115,373,736
 116,808,838
 115,736,369
 116,524,630
 115,415,662
                
Basic earnings per share attributable to CMC $0.34
 $0.31
 $0.66
 $0.62
 $0.08
 $0.20
 $0.36
 $0.25
                
Diluted earnings per share:                
Shares outstanding for basic earnings per share 115,886,372
 114,677,109
 115,574,289
 115,373,736
 116,808,838
 115,736,369
 116,524,630
 115,415,662
Effect of dilutive securities:                
Stock-based incentive/purchase plans 1,318,997
 1,318,406
 1,513,052
 1,384,980
 1,460,883
 1,383,839
 1,625,185
 1,592,296
Shares outstanding for diluted earnings per share 117,205,369
 115,995,515
 117,087,341
 116,758,716
 118,269,721
 117,120,208
 118,149,815
 117,007,958
                
Diluted earnings per share attributable to CMC $0.34
 $0.30
 $0.65
 $0.61
 $0.08
 $0.20
 $0.35
 $0.25
        
Anti-dilutive shares not included above 
 295,107
 
 295,107
  
CMC had no shares that were anti-dilutive for all periods presented.

CMC's restricted stock is included in the number of shares of common stock issued and outstanding, but is omitted from the basic earnings per share calculation until the shares vest.
During the first quarter of fiscal 2015, CMC's Board of Directors authorized a share repurchase program under which CMC may repurchase up to $100.0 million of shares of CMC common stock. During the six months ended February 28, 2018 and 2017, CMC did not purchaserepurchase any shares of CMC common stock during the three and nine months ended May 31, 2017 and three months ended May 31, 2016. During the nine months ended May 31, 2016, CMC purchased 2.3 million shares of CMC common stock at an average purchase price of $13.57 per share.stock. CMC had remaining authorization to purchaserepurchase $27.6 million shares of common stock at May 31, 2017.February 28, 2018.
NOTE 14.13. COMMITMENTS AND CONTINGENCIES

Purchase Obligations

The Company regularly enters into future purchase commitments for materials, supplies, services and fixed assets related to ongoing operations. Approximately 76% of these purchase obligations are for inventory items to be sold in the ordinary course of business. Purchase obligations include all enforceable, legally binding agreements to purchase goods or services that specify all significant terms, regardless of the duration of the agreement. Agreements with variable terms are excluded because management is unable to estimate the minimum amounts. Another significant obligation relates to capital expenditures. These future purchase commitments are summarized below:
Twelve Months Ending May 31, (in thousands)
2018 $762,998
2019 88,483
2020 53,444
2021 32,266
2022 7,210
Thereafter 9,721
Total $954,122


24




Legal and Environmental Matters

In the ordinary course of conducting its business, the Company becomes involved in litigation, administrative proceedings and governmental investigations, including environmental matters. See Note 19,18, Commitments and Contingencies, to the audited consolidated financial statements in the Company's Annual Report2017 Form 10-K.

On April 28, 2016, the Company was served with a lawsuit filed by Ector County, Texas and the State of Texas by and through the Texas Commission on Form 10-KEnvironmental Quality ("TCEQ") alleging violations of the Texas Solid Waste Disposal Act, the Texas Water Code, the Texas Clean Air Act, and TCEQ rules on spill prevention and control. The Plaintiffs amended their petition in February 2017 to include violations of TCEQ rules on recycling and storm water permits. The Plaintiffs further amended their petition in April 2017, broadening their allegations. The lawsuit, filed in the 201st Judicial District Court of Travis County, Texas, alleged improper disposal of solid waste and unauthorized outdoor burning activity at the Company’s recycling facility located in Odessa, Texas. The lawsuit sought a penalty for each day of alleged violation under the fiscal year ended August 31, 2016.Texas Health & Safety Code, the Texas Water Code, or the Texas Administrative Code. The parties agreed to a mediated settlement on December 1, 2017, which will be binding upon the entry of an Agreed Final Judgment, subject to the formal approval process of the State of Texas. Under the mediated settlement, the Company will pay $1.1 million, net of insurance recoveries. The Company denies any wrongdoing in connection with the alleged claims, and the settlement does not contain an admission of liability from the Company.
The Company has received notices from the U.S. Environmental Protection Agency ("EPA") or state agencies with similar responsibility that it is considered a potentially responsible party at several sites none(none of which are owned by the Company,Company) and may be obligated under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA") or similar state statute to conduct remedial investigations, feasibility studies, remediation and/or removal of alleged releases of hazardous substances or to reimburse the EPA for such activities. The Company is involved in litigation or administrative

23




proceedings with regard to several of these sites in which the Company is contesting, or at the appropriate time may contest, its liability at the sites. In addition, the Company has received information requests with regard to other sites which may be under consideration by the EPA as potential CERCLA sites. Some of these environmental matters or other proceedings may result in fines, penalties or judgments being assessed against the Company. At both May 31, 2017February 28, 2018 and August 31, 2016,2017, the Company had accrued $0.7 million for estimated cleanup and remediation costs in connection with CERCLA sites. The estimation process is based on currently available information, which is in many cases preliminary and incomplete. TotalAs of both February 28, 2018 and August 31, 2017, total environmental liabilities, including with respect to CERCLA sites, were $4.0$4.3 million, and $3.3 million as of May 31, 2017 and August 31, 2016, respectively, of which $2.1 million was classified as other long-term liabilities as of both May 31, 2017 and August 31, 2016.liabilities. These amounts have not been discounted to their present values. Due to evolving remediation technology, changing regulations, possible third-party contributions, the inherent shortcomings of the estimation process and other factors, amounts accrued could vary significantly from amounts paid. Historically, the amounts the Company has ultimately paid for such remediation activities have not been material.
Management believes that adequate provisions have been made in the Company's unaudited condensed consolidated financial statements for the potential impact of these contingencies and that the outcomes of the suits and proceedings described above, and other miscellaneous litigation and proceedings now pending, will not have a material adverse effect on the business, results of operations or financial condition of the Company.
NOTE 15.14. BUSINESS SEGMENTS

The Company's operating segments engage in business activities from which they may earn revenues and incur expenses and for which discrete financial information is available. Operating results for the operating segments are regularly reviewed by the Company's chief operating decision maker to make decisions about resources to be allocated to the segments and to assess performance. The Company's chief operating decision maker is identified as the Chief Executive Officer. Operating segments are aggregated for reporting purposes when the operating segments are identified as similar in accordance with the basic principles and aggregation criteria in the accounting standards. The Company's reporting segments are based primarily on product lines and secondarily on geographic area. The reporting segments have different lines of management responsibility as each business requires different marketing strategies and management expertise.

The Company structures its business into the following fivefour reporting segments: Americas Recycling, Americas Mills, Americas Fabrication, International Mill and International Marketing and Distribution.Mill. See Note 1, Nature of Operations, of the audited consolidated financial statements included in the Company's Annual Report on2017 Form 10-K for the fiscal year ended August 31, 2016, for more information about the reporting segments, including the types of products and services from which each reporting segment derives its net sales. During the second quarter of fiscal 2018, the Company substantially completed the exit of the International Marketing and Distribution segment. See Note 2, Changes in Business, for further information. Certain components of the International Marketing and Distribution segment which were wound down in prior periods, including the Company's steel trading operations based in the United Kingdom, did not meet the criteria for discontinued operations and are included in continuing operations for all periods presented. Such activities are included in the results of Corporate and Other, and are immaterial for the three and six months ended February 28, 2018. Corporate and Other also contains net earnings or losses on benefit restoration planassets and liabilities related to the BRP assets and short-term investments as well as expenses of the Company's corporate headquarters and interest expense related to its long-term debt.

The financial information presented for the International Marketing and Distribution segment excludes the operations of the Australian steel distribution business. This operation has been classified as discontinued operations in the consolidated statements of earnings. See Note 2, Changes in Business, to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, for more information.

The Company uses adjusted operating profit (loss) from continuing operations to compare and evaluate the financial performance of its segments. Adjusted operating profit (loss) is the sum of the Company's earnings from continuing operations before interest expense, income taxes interest expense and discounts on sales of accounts receivable. Intersegment sales are generally priced at prevailing market prices. Certain corporate administrative expenses are allocated to the segments based upon the nature of the expense. The accounting policies of the segments are the same as those described in Note 2, Summary of Significant Accounting Policies, of the audited consolidated financial statements included in the Company's Annual Report on2017 Form 10-K for the fiscal year ended August 31, 2016.

10-K.

2524




The following is a summary of certain financial information from continuing operations by reportable segment:
 Three Months Ended May 31, 2017
 Americas International       Three Months Ended February 28, 2018
(in thousands) Recycling Mills Fabrication Mill Marketing and Distribution Corporate Eliminations Continuing Operations Americas Recycling Americas Mills Americas Fabrication International Mill Corporate and Other Eliminations Continuing Operations
Net sales-unaffiliated customers $247,896
 $243,934
 $377,188
 $167,399
 $344,290
 $1,909
 $
 $1,382,616
 $265,432
 $262,703
 $310,199
 $211,484
 $4,450
 $
 $1,054,268
Intersegment sales 46,270
 183,342
 2,788
 230
 2,823
 
 (235,453) 
 55,195
 163,184
 2,774
 281
 
 (221,434) 
Net sales 294,166
 427,276
 379,976
 167,629
 347,113
 1,909
 (235,453) 1,382,616
 320,627
 425,887
 312,973
 211,765
 4,450
 (221,434) 1,054,268
Adjusted operating profit (loss) from continuing operations 9,286
 50,734
 1,808
 12,953
 10,164
 (20,880) 783
 64,848
 12,238
 31,536
 (27,117) 24,490
 (22,361) 100
 18,886
                              
 Nine Months Ended May 31, 2017 Six Months Ended February 28, 2018
 Americas International      
(in thousands) Recycling Mills Fabrication Mill Marketing and Distribution Corporate Eliminations Continuing Operations Americas Recycling Americas Mills Americas Fabrication International Mill Corporate and Other Eliminations Continuing Operations
Net sales-unaffiliated customers $590,760
 $667,872
 $1,013,847
 $435,714
 $891,606
 $7,501
 $
 $3,607,300
 $539,769
 $509,436
 $640,751
 $431,696
 $9,149
 $
 $2,130,801
Intersegment sales 103,442
 483,162
 8,355
 621
 5,962
 
 (601,542) 
 100,199
 329,969
 5,001
 546
 
 (435,715) 
Net sales 694,202
 1,151,034
 1,022,202
 436,335
 897,568
 7,501
 (601,542) 3,607,300
 639,968
 839,405
 645,752
 432,242
 9,149
 (435,715) 2,130,801
Adjusted operating profit (loss) from continuing operations 11,954
 139,002
 9,025
 32,356
 15,341
 (67,210) 3
 140,471
 22,230
 72,300
 (31,900) 47,927
 (43,034) (1,472) 66,051
Total assets as of May 31, 2017* 282,042
 919,923
 706,319
 431,284
 637,953
 871,040
 (574,398) 3,274,163
                
Total assets as of February 28, 2018* 298,470
 1,032,112
 671,142
 511,140
 695,856
 (441,740) 2,766,980
 Three Months Ended May 31, 2016              
 Americas International       Three Months Ended February 28, 2017
(in thousands) Recycling Mills Fabrication Mill Marketing and Distribution Corporate Eliminations Continuing Operations Americas Recycling Americas Mills Americas Fabrication International Mill Corporate and Other Eliminations Continuing Operations
Net sales-unaffiliated customers $156,352
 $227,736
 $382,607
 $141,043
 $315,067
 $4,585
 $
 $1,227,390
 $188,502
 $220,607
 $301,382
 $134,472
 $17,335
 $
 $862,298
Intersegment sales 26,125
 168,745
 2,473
 395
 4,537
 
 (202,275) 
 34,826
 155,986
 2,444
 180
 
 (193,436) 
Net sales 182,477
 396,481
 385,080
 141,438
 319,604
 4,585
 (202,275) 1,227,390
 223,328
 376,593
 303,826
 134,652
 17,335
 (193,436) 862,298
Adjusted operating profit (loss) from continuing operations (1,978) 54,976
 22,794
 5,467
 892
 (22,542) 1,331
 60,940
 7,788
 51,319
 507
 9,484
 (25,112) (582) 43,404
                              
 Nine Months Ended May 31, 2016 Six Months Ended February 28, 2017
 Americas International      
 Recycling Mills Fabrication Mill Marketing and Distribution Corporate Eliminations Continuing Operations
(in thousands) Americas Recycling Americas Mills Americas Fabrication International Mill Corporate and Other Eliminations Continuing Operations
Net sales-unaffiliated customers $430,829
 $634,926
 $1,096,049
 $368,949
 $867,084
 $4,109
 $
 $3,401,946
 $342,864
 $423,938
 $636,659
 $269,004
 $42,761
 $
 $1,715,226
Intersegment sales 79,201
 482,516
 7,489
 395
 12,433
 
 (582,034) 
 57,172
 299,820
 5,566
 391
 641
 (363,590) 
Net sales 510,030
 1,117,442
 1,103,538
 369,344
 879,517
 4,109
 (582,034) 3,401,946
 400,036
 723,758
 642,225
 269,395
 43,402
 (363,590) 1,715,226
Adjusted operating profit (loss) from continuing operations (16,171) 164,739
 58,964
 10,189
 (3,570) (69,415) 2,233
 146,969
 2,734
 88,268
 7,218
 19,546
 (51,895) (795) 65,076
Total assets as of August 31, 2016* 188,873
 798,481
 659,165
 372,492
 564,068
 1,034,053
 (493,050) 3,124,082
Total assets as of August 31, 2017* 240,371
 933,022
 683,609
 464,428
 687,984
 (327,883) 2,681,531
 _________________ 
* Excludes total assets from discontinued operations of $0.4$143.5 million at May 31, 2017February 28, 2018 and $6.8$293.6 million at August 31, 2016.

26




2017.

Reconciliations of earnings from continuing operations to adjusted operating profit from continuing operations are provided below:
 Three Months Ended May 31, Nine Months Ended May 31, Three Months Ended February 28, Six Months Ended February 28,
(in thousands) 2017 2016 2017 2016 2018 2017 2018 2017
Earnings from continuing operations $39,609
 $35,111
 $76,422

$71,593
 $9,781
 $22,992
 $41,652

$28,678
Income taxes 12,641
 10,676
 25,284

24,512
 1,728
 7,772
 10,153

10,225
Interest expense 12,368
 14,737
 38,108

49,666
 7,181
 12,439
 13,792

25,764
Discounts on sales of accounts receivable 230
 416
 657

1,198
 196
 201
 454

409
Adjusted operating profit from continuing operations $64,848
 $60,940
 $140,471

$146,969
 $18,886
 $43,404
 $66,051

$65,076

25



NOTE 16. SUBSEQUENT EVENTS


On June 13, 2017, the Company announced its plan to exit its International Marketing and Distribution segment. As an initial step in this plan, on June 12, 2017, the Company entered into a definitive agreement to sell its raw materials trading business headquartered in the U.S. ("CMC Cometals"). The transaction is expected to close in the fourth quarter of fiscal 2017 and is subject to the satisfaction or waiver of customary closing conditions, including, without limitation, approval of regulatory authorities. The purchase agreement also contains customary representations, warranties, covenants, including covenants not to compete and non-solicitation covenants, indemnities and termination rights. In addition, the Company announced its plan to pursue a sale of its steel trading business headquartered in the U.S., as well as a restructuring and sale of the remaining trading operations located in Asia and Australia. CMC Cometals is expected to be classified in discontinued operations beginning in the fourth quarter of fiscal 2017. The remainder of the International Marketing and Distribution segment is expected to be classified in discontinued operations either upon meeting the criteria to be classified as held for sale or upon the wind-down of each operation.

On June 23, 2017, the Company entered into a second amendment to its fourth amended and restated credit agreement (the “Amended Credit Agreement”), to, among other things, extend the maturity of the Credit Agreement to June 23, 2022 and provide for a senior secured term loan in the maximum principal amount of $150.0 million (the "Term Loan"). The Term Loan will mature in June 2022, will generally bear interest on the same terms and conditions of the Credit Agreement, and can be drawn upon only once during its term and only during the first 270 days of the term. The Company intends to use the proceeds of the Term Loan for general corporate purposes, including, without limitation, funding the repayment of the Company’s outstanding 2017 Notes.

On June 23, 2017, the Company entered into a third amendment to the Amended Credit Agreement to further amend the Credit Agreement to permit, among other things, the disposal of the International Marketing and Distribution segment, as described above.

On June 26, 2017, the Company announced a cash tender offer (the "Tender Offer") to purchase up to $300.0 million of its remaining $399.8 million of 7.35% Senior Notes due August 2018. The Tender Offer is expected to close in July 2017. In addition, the Company announced its plan to issue $300.0 million of Senior Notes due 2027 (the "2027 Notes"). The offering is expected to close in July 2017. The Company intends to use the net proceeds from the issuance of the 2027 Notes to fund the repurchase of a portion of the Company’s outstanding 2018 Notes in the Tender Offer and to redeem from available cash any remaining 2018 Notes that are not tendered following the Tender Offer's expiration, in each case together with accrued interest and expenses related thereto.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In the following discussion, references to "we," "us," "our" or the "Company" mean Commercial Metals Company ("CMC") and its consolidated subsidiaries, unless the context otherwise requires. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto, which are included in this Quarterly Report on Form 10-Q, and our audited consolidated financial statements and the notes thereto, which are included in our Annual Report on Form 10-K for the fiscal year ended August 31, 20162017 (the "2017 Form 10-K"). This discussion contains or incorporates by reference "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not historical facts, but rather are based on expectations, estimates, assumptions and projections about our industry, business and future financial results, based on information available at the time this Quarterly Report on Form 10-Q is filed with the Securities and Exchange Commission ("SEC") or, with respect

27





to any document incorporated by reference, available at the time that such document was prepared. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those identified in the section entitled "Forward-Looking Statements" at the end of this Item 2 of this Quarterly Report on Form 10-Q and in the section entitled "Risk Factors" in Item 1A of our Annual Report onthe 2017 Form 10-K for the fiscal year ended August 31, 2016.10-K. We do not undertake any obligation to update, amend or clarify any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or otherwise, except as required by law.
CRITICAL ACCOUNTING POLICIES

In the second quarter of fiscal 2017, we adopted Accounting Standards Update ("ASU") 2016-09, Compensation - Stock Compensation (Topic 718), issued by the Financial Accounting Standards Board (the "FASB") requiring recognition of all excess tax benefits and tax deficiencies as an income tax expense or benefit when stock awards vest or are settled. Additionally, the guidance allows for an increase in the threshold for net share settlement up to the maximum statutory rate in employees’ applicable jurisdictions without triggering liability classification. The adoption of this guidance had an immaterial impact on income taxes on our consolidated statements of earnings for the three and nine months ended May 31, 2017. Additionally, we elected to continue to estimate forfeitures. As such, this adoption has no cumulative effect on retained earnings. We elected to apply the presentation requirements for cash flows related to excess tax benefits prospectively, which had an immaterial impact on both net cash from operating activities and net cash used in financing activities for the nine months ended May 31, 2017. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact on any of the periods presented on our consolidated statements of cash flows since such cash flows have historically been presented as a financing activity.

There have been no other material changes to our critical accounting policies as set forth in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report onthe 2017 Form 10-K for the fiscal year ended August 31, 2016.10-K.
RESULTS OF OPERATIONS SUMMARY

Business Overview

As a vertically integrated organization, we manufacture, recycle, manufacture and market steel and metal products, related materials and services through a network including metal recyclingof facilities steelthat includes four electric arc furnace ("EAF") mini mills, two EAF micro mills, a rerolling mill, steel fabrication and processing facilities,plants, construction-related product warehouses, and marketing and distribution officesmetal recycling facilities in the United States ("U.S.") and in strategic international markets.Poland. Our operations are conducted through fivethe following business segments: Americas Recycling, Americas Mills, Americas Fabrication, and International MillMill. See Note 2, Changes in Business, and Note 14, Business Segments, for additional information regarding our exit of the International Marketing and Distribution.Distribution segment.

Financial Results Overview

The following discussion of our results of operations is based on our continuing operations and excludes any results of our discontinued operations. In the table below, we have included financial measures that were not derived in accordance with accounting principles generally accepted in the United StatesU.S. ("GAAP"). Refer to the information and reconciliations of adjusted operating profit from continuing operations and adjusted EBITDA from continuing operations, each to earnings from continuing operations, in Non-GAAPthe section entitled "Non-GAAP Financial MeasuresMeasures" at the end of this Item 2.2 of this Quarterly Report on Form 10-Q.
 Three Months Ended May 31, Nine Months Ended May 31, Three Months Ended February 28, Six Months Ended February 28,
(in thousands, except per share data) 2017 2016 2017 2016 2018 2017 2018 2017
Net sales* $1,382,616
 $1,227,390
 $3,607,300
 $3,401,946
 $1,054,268
 $862,298
 $2,130,801
 $1,715,226
Earnings from continuing operations 39,609
 35,111
 76,422
 71,593
 9,781
 22,992
 41,652
 28,678
Adjusted operating profit from continuing operations+ 64,848
 60,940
 140,471
 146,969
 18,886
 43,404
 66,051
 65,076
Adjusted EBITDA from continuing operations+ 96,947
 92,483
 233,407
 241,271
 64,876
 73,651
 144,143
 125,640
Adjusted earnings from continuing operations+ 31,018
 22,992
 67,198
 28,678
Diluted net earnings per share attributable to CMC 0.34
 0.17
 0.65
 0.47
 0.09
 0.26
 0.40
 0.31
 _________________ 
* Excludes divisions classified as discontinued operations.
+ Non-GAAP financial measure.

Net sales for the three and nine months ended May 31, 2017 increased $155.2 million, or 13%, and $205.4 million, or 6%, respectively, compared to the corresponding periods in fiscal 2016 primarily due to increasing ferrous scrap prices throughout

2826




Net sales from continuing operations for the three and six months ended February 28, 2018 increased 22% and 24%, respectively, compared to the same periods for fiscal 2017, improved demand2017. The increase in net sales is largely attributable to increased global investment in infrastructure, spurred by improvement in the construction and energy marketssectors, which has led to an environment of increased pricing of raw materials, including scrap prices. This increase in scrap prices has favorably impacted quarter-over-quarter and increasingyear-over-year average selling prices in Poland due to lower rebar imports. Increasing ferrous scrap prices and improved demand were the primary drivers in the increase to our Americas Recycling, segment's net sales and adjusted operating profit, which were up $111.7 million and $11.3 million, respectively, for the third fiscal quarter of 2017 and $184.2 million and $28.1 million, respectively, during the first nine months of fiscal 2017, in each case compared to the corresponding period in fiscal 2016. Average selling prices for our Americas Mills, and International Mill segments. Our Americas Fabrication segment, during the third quarter of fiscal 2017 increased, which resulted in increases in net sales of $30.8 million and $33.6 million for the three and nine months ended May 31, 2017, respectively. However, thehowever, has been adversely impacted by this increase in scrap prices, outpacedas projects coming out of our backlog at lower selling prices are not keeping pace with increased input and production costs.

During the increasesecond quarter of fiscal 2018, our EAF micro mill in Durant, Oklahoma was placed into service and limited commercial production commenced, the average selling price forresults of which are included in our Americas Mills segment, which resulted in margin compression forsegment.

We have incurred certain costs throughout fiscal 2018 related to the three and nine months ended May 31, 2017. Additionally, significant importspending acquisition of low costcertain rebar led to a decline in average selling price for our Americas Fabrication segment and resulted in a decline in metal margins for both the three and nine months ended May 31, 2017. While Americas Mills and Americas Fabrication segments had margin compression, our vertical integration strategy performed as improved marginsassets of Gerdau S.A. Such costs have been reflected in the Americas Recycling segment offset the margin compressionquarter and year-to-date results of the previously mentioned segments. Additionally, our International Mill segment saw increased average selling prices, which drove net salesCorporate and adjusted operating profit up $26.2 million and $7.5 million, respectively, during the third fiscalOther segment. Our second quarter of 2017 and $67.0 million and $22.2 million, respectively, duringfiscal 2018 results also reflect the first nine months of fiscal 2017, in each case compared toestimated discrete impact that the corresponding period in fiscal 2016.TCJA will have on our net earnings.

Selling, General and Administrative Expenses

Selling, general and administrative expenses from continuing operations decreased $6.0increased $14.4 million for the three months ended May 31, 2017February 28, 2018 and increased $14.1$15.6 million for the ninesix months ended May 31, 2017,February 28, 2018, in each case compared to the corresponding periods in fiscal 2016.2017. The decreasethree and six months ended February 28, 2018 include impairment charges of $12.0 million and $12.1 million, respectively, primarily related to the sale of our structural steel fabrication operations, as discussed in Note 2, Changes in Business, to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Additionally, there were increases in professional services related expenses, primarily as a result of acquisition-related activities, for the three and six months ended May 31, 2017February 28, 2018 of $5.6 million and $7.1 million, respectively. Partially offsetting these increased expenses for the three and six months ended February 28, 2018 was primarily due to a $3.2 million decrease in employee-related expenses of which $2.7$0.5 million related to mark-to-market adjustment expenses associated with our outstanding equity awards accounted for as liability awards, and a $2.8 million decrease in non-qualified benefit restoration plan expenses. The increase for the nine months ended May 31, 2017 was primarily due to a $7.0 million increase in employee-related expenses, of which $2.5 million related to mark-to-market adjustment expenses associated with our outstanding equity awards accounted for as liability awards, a $4.7 million, increase in professional service expenses, and a $4.1 million increase in non-qualified benefit restoration plan expenses.respectively.

Interest Expense

Interest expense for the three and ninesix months ended May 31, 2017February 28, 2018 decreased $2.4$5.3 million and $11.6$12.0 million, respectively, compared to the three and ninesix months ended May 31, 2016.February 28, 2017. The effectsdecrease was due to a $9.2 million reduction resulting from the refinancing activities that occurred during fiscal 2017, in addition to a year-over-year increase of increases$3.0 million in capitalized interest duecosts, primarily related to construction of the steel minimillour micro mill in Durant, Oklahoma decreased interest expense by $2.3 millionOklahoma.

Income Taxes

The provisions of the recently enacted TCJA, discussed in Note 10, Income Tax, to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, require a one-time U.S. toll charge related to undistributed earnings of non-U.S. subsidiaries. While this toll charge generally reduces the U.S. tax burden on future distributions from non-U.S. subsidiaries, other global income tax considerations, such as non-US income and $5.1 million, respectively,withholding taxes, are relevant as it pertains to the taxation of earnings in our non-U.S. subsidiaries. With respect to such earnings, we intend to indefinitely reinvest all undistributed earnings of our non-U.S. subsidiaries.

Our effective income tax rate from continuing operations for the three and ninesix months ended May 31, 2017,February 28, 2018 was 15.0% and 19.6%, respectively, compared towith 25.3% and 26.3% for the three and ninesix months ended May 31, 2016. Additionally, interest expenseFebruary 28, 2017, respectively. The decrease in our effective income tax rate from continuing operations is largely attributable to the remeasurement of the Company’s deferred tax balances to the applicable reduced statutory income tax rates as a result of the TCJA, a permanent tax benefit related to a reorganization of certain international operations and a permanent tax benefit recorded under ASU 2016-09 for stock awards that vested during the nine months ended May 31, 2017 decreased $6.4 million compared to the corresponding period in the prior fiscal year due to the partial repayment of long-term notes in thefirst and second quarterquarters of fiscal 2016.2018. See Note 7, Credit Arrangements,10, Income Tax, to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, for additional information regardingfurther discussion of the repayment of long-term notes.

Income Taxes

Our effective income tax rate from continuing operations for the three and nine months ended May 31, 2017 was 24.2% and 24.9%, respectively, compared with 23.3% and 25.5% for the three and nine months ended May 31, 2016, respectively. The increase in our effective income tax rate from continuing operations for the three months ended May 31, 2017 is primarily attributable to the discrete benefits recorded during the third quarter of fiscal year 2016, which reduced the effective tax rate for the three months ended May 31, 2016.TCJA. Our effective income tax rates canwere also be impacted by state and local taxes as well as by earnings or losses from foreign jurisdictions. State and local taxes are generally consistent over time, while the composition of domestic and foreign earnings can create larger fluctuations in our effective tax rate.

We intend to indefinitely reinvest all undistributed earnings of our non-U.S. subsidiaries. Although not expected, if a repatriation occurs in the future, we would be required to provide for income taxes on repatriated earnings from our non-U.S. subsidiaries. Determination of the amount of any unrecognized deferred income tax liability related to the undistributed earnings of our non-U.S. subsidiaries is a complex, hypothetical calculation which requires evaluation of numerous possible methods to effect any future repatriation to the U.S. and is therefore impracticable to present in this Quarterly Report on Form 10-Q.

2927




SEGMENT OPERATING DATA

Unless otherwise indicated, all dollar amounts below are from continuing operations and calculated before income taxes. Financial results for our reportable segments are consistent with the basis and manner in which we internally disaggregate financial information for the purpose of making operating decisions. See Note 15,14, Business Segments, to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. The operational data presented in the tables below is calculated using averages; and therefore, it is not meaningful to quantify the effect that any individual component had on the segment's net sales or adjusted operating profit.

Americas Recycling
 Three Months Ended May 31, Nine Months Ended May 31, Three Months Ended February 28, Six Months Ended February 28,
(in thousands) 2017 2016 2017 2016 2018 2017 2018 2017
Net sales $294,166
 $182,477
 $694,202
 $510,030
 $320,627
 $223,328
 $639,968
 $400,036
Adjusted operating profit (loss) 9,286
 (1,978) 11,954
 (16,171)
Adjusted operating profit 12,238
 7,788
 22,230
 2,734
Average selling price (per short ton)                
Ferrous $264
 $210
 $236
 $182
 $285
 $245
 $271
 $216
Nonferrous 2,017
 1,708
 1,969
 1,710
 2,345
 2,057
 2,275
 1,940
Short tons shipped (in thousands)                
Ferrous 590
 423
 1,416
 1,191
 560
 421
 1,149
 826
Nonferrous 61
 49
 163
 149
 63
 53
 129
 102
Total 651
 472
 1,579
 1,340
 623
 474
 1,278
 928

Net sales for the three and ninesix months ended May 31, 2017February 28, 2018 increased $111.7$97.3 million, or 61%44%, and $184.2$239.9 million, or 36%60%, respectively, compared to the corresponding periods in fiscal 2016.2017. The increase in net sales for the three months ended May 31, 2017February 28, 2018 was due to increases in average ferrous and nonferrous selling prices of $54$40 and $309$288 per short ton, respectively, coupled with increases in ferrous and nonferrous tons shipped of 33% and 19%, respectively, in each case compared to the corresponding period in fiscal 2017. The increase in net sales for the six months ended February 28, 2018 was due to increases in average ferrous and nonferrous selling prices of $55 and $335 per short ton, respectively, coupled with increases in ferrous and nonferrous tons shipped of 39% and 24%26%, respectively, in each case compared to the corresponding period in fiscal 2016. Net sales for the nine months ended May 31, 2017 were positively impacted by2017. The quarter-over-quarter and year-over-year increases in average ferrous and nonferrous selling prices of $54 and $259 per short ton, respectively, coupled with 19% and 9% increases in ferrous and nonferrous tons shipped, respectively, in each case compared to the corresponding period in the prior fiscal year. The improvements in ferrous and nonferrous tons shipped resulted from strong scrap demand due to increased domestic steel mill capacity utilization, along withan improved pricing environment across many commodities, and an increase in our internal capacity as a result of our acquisition of seven recycling facilities during the third quarter of fiscal 2017. Refer to Note 2, Changes in Business,2017, which accounted for further information regardingapproximately 75% of the acquisition of recycling facilities.total year-over-year increase.

Adjusted operating profit increased $11.3 million and $28.1 million for the three and nine months ended May 31, 2017, respectively, compared to the corresponding periods in fiscal 2016. Adjusted operating profit for the three and six months ended May 31, 2017 increasedFebruary 28, 2018 was $12.2 million and $22.2 million, respectively, compared to adjusted operating profit of $7.8 million and $2.7 million for the three and six months ended February 28, 2017. On a quarterly basis, the year-over-year change was primarily due to the increase in ferrousa 10% and nonferrous tons shipped discussed above, coupled with a 5% and 8%26% increase in average ferrous and nonferrous metal margin,margins, respectively, compared to the three months ended May 31, 2016. During the nine months ended May 31, 2017, the increase in ferrous and nonferrous tons shipped discussed above and the 10% and 14% increase in the average ferrous and nonferrous metal margin, respectively, resulted in the increase in adjusted operating profit, in each case compared to the corresponding period in fiscal 2016.2017. The increasesimprovement in averageadjusted operating profit for the six months ended February 28, 2018 as compared to the same period in fiscal 2017 was primarily due to an 18% increase in ferrous metal margin formargin. For both periodic comparisons, the improved shipping volumes, primarily ferrous shipments, also contributed to the improved adjusted operating profit. For the three and ninesix months ended May 31, 2017February 28, 2018, repairs and maintenance cost per ton shipped were 22% higher, mostly driven by the timing of routine maintenance, which was more than offset by decreases in per ton shipped freight expenses, and employee-related costs, due to the increaseefficiency and cost control measures in average ferrous and nonferrous selling prices discussed above outpacing the increasethis segment, in average ferrous and nonferrous material costs. During the three and nine months ended May 31, 2017, labor and employee benefit expenses decreased 15% and 13% per short ton, respectively,each case, compared to the corresponding periods infirst six months of fiscal 2016 due to the increases in tons shipped discussed above. Adjusted operating loss for the nine months ended May 31, 2016 included a positive insurance settlement of $2.5 million.2017.


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Americas Mills
 Three Months Ended May 31, Nine Months Ended May 31, Three Months Ended February 28, Six Months Ended February 28,
(in thousands) 2017 2016 2017 2016 2018 2017 2018 2017
Net sales $427,276
 $396,481
 $1,151,034
 $1,117,442
 $425,887
 $376,593
 $839,405
 $723,758
Adjusted operating profit 50,734
 54,976
 139,002
 164,739
 31,536
 51,319
 72,300
 88,268
Average price (per short ton)                
Finished goods selling price $549
 $510
 $531
 $532
Total sales 540
 501
 522
 522
 $571
 $524
 $561
 $511
Cost of ferrous scrap utilized 266
 213
 239
 197
 288
 245
 272
 223
Metal margin 274
 288
 283
 325
 283
 279
 289
 288
Short tons (in thousands)        
Melted 670
 628
 1,941
 1,845
Rolled 626
 627
 1,846
 1,758
Shipped 722
 724
 2,015
 1,972

In our Americas Mills segment we include our five domestic steel mills, (four commonly referred to as "minimills," one of which utilizes continuous process technology, and one re-rolling mill), our minimill currently under construction in Oklahoma, and the recycling locations which directly support the steel mills.
Short tons (in thousands)        
Melted 663
 656
 1,318
 1,271
Rolled 598
 631
 1,200
 1,220
Shipped 684
 658
 1,361
 1,293

Net sales for the three and ninesix months ended May 31, 2017February 28, 2018 increased $30.8$49.3 million, or 8%13%, and $33.6$115.6 million, or 3%16%, respectively, compared to the corresponding periodsperiod in fiscal 2016.2017. The increase in net sales for the three and six months ended May 31, 2017February 28, 2018 was due to an increase in average selling price of $39$47 and $50 per short ton, respectively, largely driven by selling price increases in response to the increased scrap prices described above. Also contributing to increased net sales were 4% and 5% increases in tons shipped in the three and six months ended February 28, 2018, respectively, compared to the corresponding period in fiscal 2016. Net sales for2017, as a result of improved demand from both the nine months ended May 31, 2017 increased due to a 2% increase in tons shipped compared to the nine months ended May 31, 2016 due to stronger end market demand.service center industry and construction spending.

Adjusted operating profit for the three and ninesix months ended May 31, 2017February 28, 2018 decreased $4.2$19.8 million and $25.7$16.0 million, respectively, compared to the corresponding period in fiscal 2017. Adjusted operating profit for the three and six months ended February 28, 2018 includes start-up costs related to our new micro mill in Durant, Oklahoma of approximately $8.6 million and $11.6 million, respectively. Other items adversely impacting adjusted operating profit during the second quarter and the first six months of fiscal 2018, compared to the same periods in fiscal 2016. During the three2017, were increases in manufacturing costs due to inflationary pressures for electrodes, alloys, and nine months ended May 31, 2017, average metal margin decreased $14 per short ton and $42 per short ton, respectively, as average selling prices lagged ferrous scrap cost increases. Additionally,higher utility costs due to extreme cold weather in certain of our locations during the three and nine months ended May 31, 2017, expenses related to the constructionsecond fiscal quarter of the new minimill in Oklahoma increased $2.9 million and $7.3 million, respectively, compared to the corresponding periods in fiscal 2016. Partially offsetting margin compression during the nine months ended May 31, 2017 was a $3.3 million decrease in repairs and maintenance expenses due to variances in the timing and amounts of routine maintenance and equipment enhancements conducted in the normal course of business.2018.

Americas Fabrication
 Three Months Ended May 31, Nine Months Ended May 31, Three Months Ended February 28, Six Months Ended February 28,
(in thousands) 2017 2016 2017 2016 2018 2017 2018 2017
Net sales $379,976
 $385,080
 $1,022,202
 $1,103,538
 $312,973
 $303,826
 $645,752
 $642,225
Adjusted operating profit 1,808
 22,794
 9,025
 58,964
Adjusted operating (loss) profit (27,117) 507
 (31,900) 7,218
Average selling price (excluding stock and buyout sales) (per short ton)        
Rebar $741
 $789
 $737
 $819
Structural 2,049
 2,136
 2,136
 2,244
Post 848
 849
 840
 858
Average selling price (excluding stock and buyout sales) (per short ton)        
Rebar and other $799
 $756
 $788
 $769
Short tons shipped (in thousands)        
Rebar 275
 270
 749
 744
Structural 7
 10
 19
 24
Post 28
 30
 68
 73
Short tons shipped (in thousands)        
Rebar and other 241
 253
 506
 526


31




Net sales for the three and ninesix months ended May 31, 2017 decreased $5.1February 28, 2018 increased $9.1 million, or 1%3%, and $81.3$3.5 million, or 7%1%, respectively, compared to the corresponding periods in fiscal 2016.2017. The decreaseincrease in net sales for the three months and six months ended May 31, 2017February 28, 2018 was primarily due to decreasesimprovements in the average selling prices of our primary product lines, coupled with a 30% decreaseoffset by reduced shipments, in structural shipments. For the nine months ended May 31, 2017, the decline in net sales was due to decreases in the average selling prices for our primary product lines, coupled with a 21% and 7% decrease in structural and post tons shipped, respectively,each case, compared to the corresponding period in fiscal 2016. Aggressive competition spurred by significant imports of low cost rebar over the past few quarters negatively impacted the average composite selling price of projects running through our fabrication backlog during2017.

For the three and ninesix months ended May 31, 2017.

AdjustedFebruary 28, 2018, adjusted operating profit for the three and nine months ended May 31, 2017 decreased $21.0loss was $27.1 million and $49.9$31.9 million, respectively, compared to adjusted operating profit of $0.5 million and $7.2 million in the corresponding periods in fiscal 2016. The decreases2017. Included in adjusted operating profitloss for the three and ninesix months ended May 31, 2017 were primarily dueFebruary 28, 2018 was an impairment charge of approximately $12.1 million related to decreasesthe pending sale of our structural steel fabrication business, which is expected to close during the third quarter of fiscal 2018. Also impacting the period-over-period change for both the three and six months ended February 28, 2018, was a

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9% and 16% reduction, respectively, in average compositerebar fabrication metal margin, of 22%driven by the lag in our fabrication project backlog whereby sales prices were not keeping pace with increasing raw material costs. In addition, shipments in the current fiscal year quarter and 18%, respectively, as the average composite selling price decreased fasteryear-to-date periods were lower than the decrease in average composite material cost, compared to the corresponding periods in the prior year, contributing to the adjusted operating loss in both respective periods as compared to similar periods in the prior fiscal year. This segment benefited from a $2.4 million gain on the sale of fixed assets during the first quarter of fiscal 2016.

International Mill
 Three Months Ended May 31, Nine Months Ended May 31, Three Months Ended February 28, Six Months Ended February 28,
(in thousands) 2017 2016 2017 2016 2018 2017 2018 2017
Net sales $167,629
 $141,438
 $436,335
 $369,344
 $211,765
 $134,652
 $432,242
 $269,395
Adjusted operating profit 12,953
 5,467
 32,356
 10,189
 24,490
 9,484
 47,927
 19,546
Average price (per short ton)                
Total sales $443
 $378
 $415
 $382
 $578
 $402
 $546
 $399
Cost of ferrous scrap utilized 253
 187
 229
 190
 324
 229
 311
 215
Metal margin 190
 191
 186
 192
 254
 173
 235
 184
Short tons (in thousands)                
Melted 380
 289
 1,066
 970
 393
 332
 748
 686
Rolled 326
 296
 948
 895
 321
 309
 657
 622
Shipped 354
 353
 983
 913
 346
 313
 746
 629

Net sales for the three and ninesix months ended May 31, 2017February 28, 2018 increased $26.2$77.1 million, or 19%57%, and $67.0$162.8 million, or 18%60%, respectively, compared to the corresponding periods in fiscal 2016.2017. Increased construction activity in Europe has created strong market demand throughout the region, resulting in an increase in average selling prices of 44% and 37% for the three and six months ended February 28, 2018, respectively. The increase in net sales for the three and six months ended May 31, 2017 was primarily due to a 17% increase in average selling price. The increase in net sales for the nine months ended May 31, 2017 was primarily due to a 9% increase in average selling price and an 8% increase in tons shipped. Increased demand due to lower rebar imports resulted in the increases in average selling prices for the three and nine months ended May 31, 2017, compared to the corresponding periods in fiscal 2016. Strong demand in the construction sector drove the increase in tons shipped, primarily merchant products, for the nine months ended May 31, 2017, compared to the nine months ended May 31, 2016. Additionally, the increases in net sales for the three and nine months ended May 31, 2017 reflect unfavorableFebruary 28, 2018 also reflects favorable foreign currency fluctuationtranslation impacts of approximately $3.4$35.0 million and $11.5$53.7 million, respectively, due to the strengtheningweakening of the U.S. dollar in relation to the Polish zloty.

Adjusted operating profit for the three and ninesix months ended May 31, 2017February 28, 2018 increased $7.5$15.0 million and $22.2$28.4 million, respectively, compared to the corresponding periods in fiscal 2016.2017. The increases in adjusted operating profit for the three and ninesix months ended May 31, 2017February 28, 2018 resulted from the increases of 47% and 28%, respectively, in tons shipped discussed above and a change in product mix that favored higheraverage metal margin merchant shipments during the three and nine months ended May 31, 2017 compared to the corresponding periods in fiscal 2016.2017. Metal margin expansion occurred across all product lines during the first half of fiscal 2018, as increased selling prices have outpaced average cost increases, particularly for higher-margin merchant products. Partially offsetting these increases in adjusted operating profit were increases in per ton employee-related costs of 26% and 12% for the three and six months ended February 28, 2018, respectively, as compared to the same period in fiscal 2017. Additionally, changes in the U.S. dollar relative to other currencies did not have a material impact on the changePolish zloty resulted in increases of approximately $3.6 million and $5.5 million of this segment's adjusted operating profit for the three and ninesix months ended May 31, 2017.February 28, 2018, respectively.


32Corporate and Other




International MarketingCorporate adjusted operating loss decreased $2.8 million and Distribution
  Three Months Ended May 31, Nine Months Ended May 31,
(in thousands) 2017 2016 2017 2016
Net sales $347,113
 $319,604
 $897,568
 $879,517
Adjusted operating profit (loss) 10,164
 892
 15,341
 (3,570)

Net sales$8.9 million for the three and ninesix months ended May 31, 2017 increased $27.5 million, or 9%, and $18.1 million, or 2%,February 28, 2018, respectively, compared to the corresponding periods in fiscal 2016. The increase in net sales2017. Such decreases for the three and ninesix months ended May 31, 2017 wasFebruary 28, 2018 were primarily due to increases in volumes sold and average selling prices in our steel trading business headquartered in the U.S. driven by increased demand from the oil and gas industry, an increase in volumes sold in our raw materials trading business headquartered in the U.S. primarily due to the introduction of new products into the portfolio, and an increase in volumes sold in Australia due to strong demand from our distributor and construction end users. These increases were partially offset by a decrease in volumes sold for our operations in the United Kingdom as a result of our decision to exit the United Kingdom steel trading business in the fourth quarter of fiscal 2016. Furthermore, our raw materials trading business headquartered in the U.S. experienced a decline in average selling prices as a result of a $2.1 million and $2.3 million reduction, respectively, in depreciation expense, and a $1.2 million and $8.8 million decrease, respectively, in volumes sold of a high value product within the portfolio, which partially offset the previously mentioned increaseemployee-related expenses, in volumes sold. Changes in the U.S. dollar relativeeach case compared to other currencies did not have a material impact on the change in this segment's net sales for the three and ninesix months ended May 31,February 28, 2017.

Adjusted operating profit for the three and nine months ended May 31, 2017 was $10.2 million and $15.3 million, respectively, compared to adjusted operating profit of $0.9 million for the three months ended May 31, 2016 and adjusted operating loss of $3.6 million for the nine months ended May 31, 2016. The changes in adjusted operating profit were primarily due to improved margins for our steel trading business headquartered in the U.S. as a result of improvements within the energy market throughout fiscal 2017. Changes in the U.S. dollar relative to other currencies did not have a material impact on the change in this segment's Additionally, adjusted operating profit for the three and ninesix months ended May 31,February 28, 2018 was positively impacted by net favorable market increases of $3.0 million and $2.6 million, respectively, related to our BRP assets and liabilities, compared to the three and six months ended February 28, 2017. Partially offsetting the reduced costs were increases during the three and six months ended February 28, 2018 of $5.7 million and $7.9 million, respectively, in professional services that are primarily a result of acquisition-related activities, as compared to the three and six months ended February 28, 2017.

On June 13, 2017, we announcedAlso impacting our planyear-over-year change in adjusted operating profit was the impact of prior year operating results of certain operations related to exit our former International Marketing and Distribution segment. segment which did not meet the criteria for discontinued operations, and are now included in our results of Corporate and Other, as discussed in Note 14, Business Segments. These results had an immaterial impact on adjusted operating profit for the three and six months ended February 28, 2018. For the three and six months ended February 28, 2017, these operations had adjusted operating losses totaling $2.1 million and $2.9 million, respectively.

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DISCONTINUED OPERATIONS DATA

See Note 16, Subsequent Events,2, Changes in Business, to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further information.

Corporate

Corporate adjusted operating loss decreased $1.7 million and $2.2 million for the three and nine months ended May 31, 2017, respectively, compared to the corresponding periods in fiscal 2016. The change in adjusted operating loss for the three months ended May 31, 2017 was primarily due to decreases in mark-to-market adjustment expenses of $2.7 million associated with our outstanding equity awards accounted for as liability awards. The change in adjusted operating loss for the nine months ended May 31, 2017 was primarily due to an $11.5 million loss on debt extinguishment incurred in the second quarter of fiscal 2016, partially offset by increases in mark-to-market adjustment expenses of $2.5 million associated with our outstanding equity awards accounted for as liability awards and in professional service expenses of $4.0 million.

DISCONTINUED OPERATIONS DATA

In the first quarter of fiscal 2015, we decided to exit our steel distribution business in Australia, which met the definition of ainformation regarding discontinued operation. As a result, our steel distribution business in Australia has been presented as a discontinued operation for all periods. During the fourth quarter of fiscal 2015, the Company completed the sale of six locations that were a part of the Australian steel distribution business and ceased all operations at three other locations that were part of the Australian steel distribution business. During the fourth quarter of fiscal 2016, the Company completed the sale of one remaining location. Our Australian steel distribution business was previously included in the International Marketing and Distribution segment.operations.
OUTLOOK

We anticipate stabilityIn the U.S., the recent tax reform legislation should provide confidence in the key macro-economic driversunderlying growth of the economy, while the President's recent proclamations under Section 232 of the Trade Expansion Act of 1962, as amended, providing for additional import duties for steel mill and aluminum products, effective March 23, 2018, on the basis of national security, should ensure that impactwe face a level playing field against imported rebar and merchant bar products. At our businessInternational Mill, we anticipate that the very strong market conditions will continue in Poland. We have well positioned CMC to take advantage of these markets for the remaindersecond half of our fiscal 2017, including continued strong demand in both the U.S. and Polish markets and also historically low steel margins in the U.S. We continue to be optimistic that the ongoing trade actions taken in both the U.S. and Poland, once finalized, will provide some relief from unfairly priced rebar imports that have impacted our markets.2018.

33We are completing the exit of our International Marketing and Distribution business and plan to utilize the proceeds to both strengthen our balance sheet as well as invest in our core steel manufacturing segments. We anticipate our Durant, Oklahoma facility will operate near its 350,000 tons per year capacity by the end of fiscal 2018, and we are working on our integration plans for the announced acquisition of certain U.S. rebar steel mill and fabrication assets from Gerdau S.A. We look forward to completing the closing conditions over the coming months and when the transaction closes, we see significant opportunity for cost synergies and value creation for our customers and shareholders.




LIQUIDITY AND CAPITAL RESOURCES

See Note 7, Credit Arrangements, to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.

While we believe the lending institutions participating in our credit arrangements are financially capable, it is important to note that the banking and capital markets periodically experience volatility that may limit our ability to raise capital.capital in a cost efficient manner. Additionally, our financing costs associated with raising capital may be affected by changes to our credit rating made by any rating agency may impact our ability to raise capital and our financing costs.agency.

The table below reflects our sources, facilities and availability of liquidity as of May 31, 2017:February 28, 2018:
(in thousands) Total Facility Availability Total Facility Availability
Cash and cash equivalents $275,778
 $275,778
 $195,184
 $195,184
Notes due from 2023 to 2027 630,000
 *
Revolving credit facility 350,000
 346,983
 350,000
 346,728
U.S. receivables sale facility 200,000
 176,293
 200,000
 147,765
2022 Term Loan 146,250
 
International accounts receivable sales facilities 53,771
 49,829
 58,401
 58,401
Bank credit facilities — uncommitted 47,049
 45,588
 65,701
 62,910
Notes due from 2017 to 2023 1,029,818
 *
Other, including equipment notes 30,984
 *
 49,608
 *
 _________________
* We believe we have access to additional financing and refinancing, if needed.

Sources of Liquidity and Capital Resources

As of May 31, 2017, we had $300.0 million of 6.50% Senior Notes due July 2017 (the "2017 Notes"), $399.8 million of 7.35% Senior Notes due August 2018 (the "2018 Notes") and $330.0 million of 4.875% Senior Notes due May 2023 (the "2023 Notes" and together with the 2017 Notes and the 2018 Notes, the "Notes"). The Notes require interest only payments until maturity. We expect cash on hand and cash generated from operations to be sufficient to meet all interest and principal payments due within the next twelve months, and we believe we will be able to obtain additional financing or to refinance the Notes when they mature. On June 26, 2017, we announced a cash tender offer to purchase up to $300.0 million of our remaining 2018 Notes. Additionally, we announced our plan to issue $300.0 million of Senior Notes due 2027.months. See Note 16, Subsequent Events,7, Credit Arrangements, to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further information.

At both May 31, 2017 and August 31, 2016, CMC Poland Sp. z.o.o. ("CMCP") had uncommitted credit facilities with several banks of Polish zloty ("PLN") 175 million ($47.0 million as of May 31, 2017). As of May 31, 2017, the uncommitted credit facilities have expiration dates ranging from November 2017 to March 2018, which CMCP intends to renew upon expiration. At May 31, 2017 and August 31, 2016, no amounts were outstanding under these facilities. The available balance of these credit facilities was reduced by outstanding stand-by letters of credit, which totaled $1.5 million at both May 31, 2017 and August 31, 2016. During the nine months ended May 31, 2017 and 2016, CMCP had no borrowings or repayments under its uncommitted credit facilities.

With bank approval, the maximum availability under our $350.0 million revolving credit facility (the "Credit Agreement") can be increased to $500.0 million. Our obligation under the Credit Agreement is collateralized by our U.S. inventory. The Credit Agreement's capacity includes $50.0 million for the issuance of stand-by letters of credit and was reduced by outstanding stand-by letters of credit, which totaled $3.0 million at both May 31, 2017 and August 31, 2016. The Company had no amounts drawn under its revolving credit facilities at May 31, 2017 and August 31, 2016. On June 23, 2017, we entered into second and third amendments to our Credit Agreement, to, among other things, extend the maturity of the Credit Agreement by five years to 2022 and provide for a senior secured term loan in the maximum principal amount of $150.0 million. See Note 16, Subsequent Events, to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further information.


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Under the Credit Agreement, we are required to comply with certain financial and non-financial covenants, including covenants to maintain: (i) aninformation regarding such interest coverage ratio (consolidated EBITDA to consolidated interest expense, as each is defined in the Credit Agreement) of not less than 2.50 to 1.00 and (ii) a debt to capitalization ratio (consolidated funded debt to total capitalization, as each is defined in the Credit Agreement) that does not exceed 0.60 to 1.00. At May 31, 2017, our interest coverage ratio was 5.98 to 1.00 and our debt to capitalization ratio was 0.43 to 1.00. In addition, beginning on the date three months prior to each maturity date of the 2017 Notes and the 2018 Notes and each day thereafter that the 2017 Notes and the 2018 Notes are outstanding, we will be required to maintain liquidity of at least $150.0 million in excess of each of the outstanding aggregate principal amounts of the 2017 Notes and 2018 Notes. At May 31, 2017, we had sufficient liquidity and were in compliance with this covenant. Loans under the Credit Agreement bear interest based on the Eurocurrency rate, a base rate, or the LIBOR rate.

At May 31, 2017, we were in compliance with all of the covenants contained in our debt agreements.payment obligations.

Our foreign operations generated approximately 27%24% of our net sales during the thirdsecond quarter of fiscal 2017,2018, and as a result, our foreign operations had cash and cash equivalents of approximately $62.5$42.2 million at May 31, 2017.February 28, 2018. See the "Income Taxes" section under "Results of Operations Summary" within this Part I, Item 2 of this Quarterly Report on Form 10-Q for further discussion regarding our undistributed earnings of our non-U.S. subsidiaries. Historically, our U.S. operations have generated the

31




majority of our cash, which has been used to fund the cash needs of our U.S. operations as well as our foreign operations. Additionally, our U.S. operations have access to the $350.0 million credit facility described abovein Note 7, Credit Arrangements, to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, and the $200.0 million sale of accounts receivable program described below. We intend to indefinitely reinvest all undistributed earnings of our non-U.S. subsidiaries. If a repatriation of earnings occurs in the future, we would be required to provide for income taxes on dividends from our non-U.S. subsidiaries. Determination of the unrecognized deferred income tax liability related to the undistributed earnings of our non-U.S. subsidiaries is not practicable because of the complexities with its hypothetical calculation.

We regularly maintain a substantial amount of accounts receivable. We actively monitor our accounts receivable and, based on market conditions and customers' financial condition, we record allowances as soon as we believe accounts are uncollectible. Continued pressure on the liquidity of our customers could result in additional allowances as we make our assessments in the future. We use credit insurance both in the U.S. and internationally to mitigate the risk of customer insolvency. We estimate that the amount of credit insured receivables (and those covered by export letters of credit) was approximately 32%21% of total receivables at May 31, 2017.February 28, 2018.

For added flexibility, we may sell certain accounts receivable both in the U.S. and internationally. See Note 4, Sales of Accounts Receivable, to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further information. Our U.S. sale of accounts receivable program contains certain cross-default provisions whereby a termination event could occur if we default under certain of our credit arrangements. Additionally, our U.S. sale of accounts receivable program contains covenants that are consistent with the covenants contained in the Credit Agreement.

We utilize documentary letter of credit programs whereby we assign certain trade accounts payable associated with trading transactions entered into by our marketing and distribution divisions. These letters of credit allow for payment at a future date and are used as an additional source of working capital financing. These letters of credit are issued under uncommitted lines of credit, which areAgreement (as defined in additionNote 7, Credit Arrangements) to and separate from our contractually committed credit facility and are notthe unaudited condensed consolidated financial statements included in our overall liquidity analysis. We did not have any material amounts of documentary letters of credit outstanding at May 31, 2017 and August 31, 2016, respectively. The amount of documentary letters of credit outstanding during the period can fluctuate as a result of the level of activity and volume of materials purchased during the period as well as a result of their length and timing to maturity.this Quarterly Report on Form 10-Q.

Stock Repurchase Program

During the first quarter of fiscal 2015, CMC's Board of Directors authorized a share repurchase program under which we may repurchase up to $100.0 million of shares of CMC common stock. As of May 31, 2017,February 28, 2018, the approximate value of shares of CMC common stock that may yet be purchased under this program is $27.6 million. We intend tomay repurchase shares from time to time for cash in the open market or privately-negotiated transactions in accordance with applicable federal securities laws. The timing and the amount of repurchases, if any, are determined by management based on an evaluation of market conditions, capital allocation alternatives and other factors. The share repurchase program does not require us to purchase any dollar amount or number of shares of CMC common stock and may be modified, suspended, extended or terminated at any time without prior notice. We did not purchase any shares of CMC common stock during the three and ninesix months ended May 31, 2017 or three months ended May 31, 2016. During the nine months ended May 31, 2016, we purchased 2.3 million shares of CMC common stock at an average purchase price of $13.57 per share.February 28, 2018 and 2017.

AcquisitionsPending Acquisition

On December 12, 2016,29, 2017, we completedentered into a definitive purchase agreement to acquire certain U.S. rebar steel mill and fabrication assets from Gerdau S.A., see Note 2, Changes in Business, to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further information. The Company expects to fund the purchase price for the acquisition with cash on hand, term loans, borrowings under the Credit Agreement (as defined in Note 7 to these condensed unaudited financial statements) or another credit facility, or the proceeds from an offering of substantiallyone or more series of debt securities.

In connection with our entry into the purchase agreement, on December 29, 2017, we entered into a commitment letter with Bank of America, Merrill Lynch, Pierce, Fenner & Smith Incorporated and certain other commitment parties named therein (the “Commitment Parties”), pursuant to which the Commitment Parties agreed to provide a senior secured term loan B facility in the aggregate principal amount of up to $600.0 million to fund all or a portion of the assets of Continental Concrete Structures, Inc. ("CCS"), a fabricator of post-tensioning cablepurchase price for the acquisition and related products for commercialpay certain fees and public construction projects with a facility

35




expenses in Alpharetta, Georgia.connection therewith (the “Term Loan B Facility”). In addition, CCS provides professional design and value engineering serviceson February 21, 2018, we entered into a Fifth Amendment to the construction industry throughout North America. This acquisition complements our current rebar fabrication business and continues our strategy of creating valueCredit Agreement to provide for customers. The operating results of thisan incremental coterminous delayed draw term loan A facility are included in the Americas Fabrication reporting segment.

On January 9, 2017, we completedaggregate principal amount of up to $200.0 million (the “2018 Term Loan”), the purchaseproceeds of substantially all of the assets of Associated Steel Workers, Limited ("ASW"), a steel fabrication facility in Kapolei, Hawaii. This acquisition continues the vertical integration model of the Company by extending our geographic reach, establishing a fabrication operation in Hawaii and expanding our presence in the Hawaiian market. The operating results of this facility are included in the Americas Fabrication reporting segment.

On March 6, 2017, we completed the purchase of certain assets from OmniSource Corporation, a wholly owned subsidiary of Steel Dynamics, Inc., consisting of seven recycling facilities located in the southeast United States, which are in close proximityrequired to our minimill in Cayce, South Carolina. These facilities provide synergies with our other operations in the region. The operating results of these facilities will be included in the Americas Recycling reporting segment.

These acquisitions were funded through internally generated cash and did not have a material effect on our financial position or results of operations. We regularly review potential acquisitions. We believe available cash resources, bank financing or the issuance of debt or equity could be used to finance future acquisitions. There can be no assurance we will enterfund the Contemplated Acquisition, repay certain existing indebtedness of Gerdau S.A. in connection with the acquisition and pay transaction fees and expenses related thereto. As a result of the entry into new acquisitions.the 2018 Term Loan, the aggregate principal amount of the commitments under the Term Loan B Facility were subsequently reduced from $600.0 million to $400.0 million.

Operating Cash Flow and Capital Expenditures

Operating Activities
Our cash flows from operating activities result primarily from the sale of steel and related products, and to a lesser extent, sales of nonferrous metal products and other raw materials used in steel manufacturing. We have a diverse and generally stable customer base. From time to time, we use futures or forward contracts to mitigate the risks from fluctuations in metal commodity prices, foreign currency exchange rates, natural gas prices and interest rates. See Note 9,8, Derivatives and Risk Management, to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further information.


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Net cash flows from operating activities decreased $488.0increased $36.8 million for the ninesix months ended May 31, 2017,February 28, 2018, compared to the ninesix months ended May 31, 2016, primarily dueFebruary 28, 2017. Year-over-year cash flows from operating activities increased as a result of improved earnings after taking into consideration the non-cash charges, as compared to the six months ended February 28, 2017. Our cash flows from changes in operating assets and liabilities (“("working capital”capital") from cyclical increases in commodity pricing and demand, as well asincluded a decrease in$90.0 million repayment of advance payments outstanding on our sale of trade accounts receivable program that was outstanding at August 31, 2017, which was largely offset by increased net earnings, after giving effect to non-cash items. An increase in working capital forinflows related to the nine months ended May 31, 2017 was a usage of cash of $164.4 million. In general, commodity pricing and volume increases across most of our businesses are the primary driversexit of the working capital change. DaysInternational Marketing and Distribution segment during the first half of fiscal 2018. For continuing operations, days sales outstanding remained flat at 57improved by 2 days and days sales in inventory deterioratedimproved by three7 days duringcompared to the ninesix months ended May 31,February 28, 2017.

Investing Activities
Net cash flows used by investing activities increased $57.0decreased $32.9 million for the ninesix months ended May 31, 2017 primarilyFebruary 28, 2018 as compared to the six months ended February 28, 2017. The reduction in net cash outflows was largely due to $54.4proceeds of $25.0 million from the settlement of certain life insurance policies received during the second quarter of fiscal 2018. Additional items impacting year-over-year changes in cash used by investing activities include decreased cash outflows in fiscal 2018 of $18.4 million related to acquisitions, and increased outflows for acquisitions,capital spending in fiscal 2018 of $10.2 million, primarily related to our new micro mill in Durant, Oklahoma, in each case compared to none during the ninesix months ended May 31, 2016. See Note 2, Changes in Business, to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding acquisitions occurring during the first nine months of fiscalFebruary 28, 2017.

We expect our total capital expenditures for fiscal 20172018 to be between $250$175 million and $300$225 million. We have commitments forexpect that our capital expenditures related to the construction of the Oklahoma minimill of $81.7 million, which we expect to fundspending will be funded from internally generated capital. We regularly assess our capital spending and reevaluate our requirements based on current and expected results.

Financing Activities
Net year-over-year cash flows used by financing activities decreased $304.3during fiscal 2018 increased by $6.2 million forcompared to the ninesix months ended May 31, 2017February 28, 2017. The increase was primarily due to $200.2increased outflows of $4.0 million inrelated to repayments of long-termlong term debt completed during fiscal 2018, including required minimum principal payments associated with the nine months ended May 31, 2016. See2022 Term Loan (as defined in Note 7, Credit Arrangements to thethese unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding repayments on long-term debt occurring during the first nine months of fiscal 2016. Also contributing to the decrease was the repayment of short-term borrowings of $20.1 million and purchases of CMC common stock of $30.6 million during the first nine months of fiscal 2016 while no such activity occurred during the first nine months of 2017. Further, cash used by documentary letters of credit decreased $40.7 million during the nine months ended May 31, 2017 compared to the corresponding period in fiscal 2016.statements). We regularly evaluate the use of our cash in efforts to maximize total shareholder return, including debt repayment, capital deployment, share repurchases and dividends.


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We anticipate our current cash balances, cash flows from operations and our available credit sources of liquidity will be sufficient to meet our cash requirements, including our scheduled debt repayments, payments for our contractual obligations, capital expenditures, working capital needs, share repurchases, dividends and other prudent uses of our capital, such as future acquisitions. However, in the event of sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate steps to obtain sufficient additional funds.

CONTRACTUAL OBLIGATIONS

Our contractualThere were no material changes to our obligations increased approximately $122.0 million to $2.2 billion at May 31,and commitments from the information provided in the 2017 from $2.1 billion at August 31, 2016. This increase was primarily related to a $204.6 million increase in unconditional purchase obligations partially offset by a $77.3 million reduction in operating leases and interest on long-term debt.Form 10-K. Our estimated contractual obligations for the twelve months ending May 31, 2018February 28, 2019 are approximately $1.2 billion$508.8 million and primarily constituteconsist of expenditures incurred in connection with normal revenue producing activities as well as repayments of long-term debt due in July 2017.activities.

Other Commercial Commitments

We maintain stand-by letters of credit to provide support for certain transactions that our insurance providers and suppliers request. At May 31, 2017,February 28, 2018, we had committed $24.7$25.1 million under these arrangements.arrangements, of which $3.3 million reduced availability under the Credit Agreement.
OFF-BALANCE SHEET ARRANGEMENTS

For added flexibility, we may sell certain trade accounts receivable both in the U.S. and internationally. We utilize proceeds from the sales of the trade accounts receivables as an alternative to short-term borrowings, effectively managing our overall borrowing costs and providing an additional source of working capital. We account for sales of the trade accounts receivables as true sales and the trade accounts receivable balances that are sold are removed from the unaudited condensed consolidated balance sheets. The cash advances received are reflected as cash provided by operating activities on our unaudited condensed consolidated statements of cash flows. See Note 4, Sales of Accounts Receivable, to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.


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CONTINGENCIES

See Note 14,13, Commitments and Contingencies, to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further information.

In the ordinary course of conducting our business, we become involved in litigation, administrative proceedings and governmental investigations, including with respect to environmental matters. We may incur settlements, fines, penalties or judgments in connection with these matters. Liabilities and costs associated with litigation-related loss contingencies require estimates and judgments based on our knowledge of the facts and circumstances surrounding each matter and the advice of our legal counsel. We record liabilities for litigation-related losses when a loss is probable and we can reasonably estimate the amount of the loss. We evaluate the measurement of recorded liabilities each reporting period based on the current facts and circumstances specific to each matter. The ultimate losses incurred upon final resolution of litigation-related loss contingencies may differ materially from the estimated liability recorded at a particular balance sheet date. Changes in estimates are recorded in earnings in the period in which such changes occur. We do not believe that any currently pending legal proceedings to which we are a party will have a material adverse effect, individually or in the aggregate, on our results of operations, cash flows or financial condition.

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NON-GAAP FINANCIAL MEASURES

Adjusted Operating Profit from Continuing Operations

Adjusted operating profit from continuing operations is the sum of our earnings from continuing operations before interest expense, income taxes interest expense and discounts on sales of accounts receivable. Adjusted operating profit from continuing operations should not be considered as an alternative to earnings from continuing operations or net earnings, as determined by GAAP. However, we believe that adjusted operating profit from continuing operations provides relevant and useful information, which is often used by analysts, creditors and other interested parties as it allows: (i) a supplemental measure of our ongoing core performance and (ii) the assessment of period-to-period performance trends. Management uses adjusted operating profit from continuing operations to evaluate our financial performance. For added flexibility, we may sell certain trade accounts receivable both in the U.S. and internationally. We consider sales of accounts receivable as an alternative source of liquidity to finance our operations, and we believe that removing these costs provides a clearer perspective of our operating performance. Adjusted operating profit from continuing operations may be inconsistent with similar measures presented by other companies.

Reconciliations of earnings from continuing operations to adjusted operating profit from continuing operations are provided below:
 Three Months Ended May 31, Nine Months Ended May 31, Three Months Ended February 28, Six Months Ended February 28,
(in thousands) 2017 2016 2017 2016 2018 2017 2018 2017
Earnings from continuing operations $39,609
 $35,111
 $76,422
 $71,593
 $9,781
 $22,992
 $41,652
 $28,678
Income taxes 12,641
 10,676
 25,284
 24,512
 1,728
 7,772
 10,153
 10,225
Interest expense 12,368
 14,737
 38,108
 49,666
 7,181
 12,439
 13,792
 25,764
Discounts on sales of accounts receivable 230
 416
 657
 1,198
 196
 201
 454
 409
Adjusted operating profit from continuing operations $64,848
 $60,940
 $140,471
 $146,969
 $18,886
 $43,404
 $66,051
 $65,076

Adjusted EBITDA from Continuing Operations

Adjusted EBITDA from continuing operations is the sum of earnings from continuing operations before net earnings attributable to noncontrolling interests, interest expense and income taxes. It also excludes our largest recurring non-cash charge, depreciation and amortization, as well as long-lived asset and goodwill impairment charges, which are also non-cash.non-cash charges. Adjusted EBITDA from continuing operations should not be considered as an alternative to earnings from continuing operations or net earnings, or as a better measure of liquidity than net cash flows from operating activities, as determined by GAAP. However, we believe that adjusted EBITDA from continuing operations provides relevant and useful information, which is often used by analysts, creditors and other interested parties as it allows: (i) comparison of our earnings to those of our competitors; (ii) a supplemental measure of our ongoing core performance; and (iii) the assessment of period-to-period performance trends. Additionally, adjusted EBITDA from continuing operations is the target benchmark for our annual and long-term cash incentive performance plans for management. Adjusted EBITDA from continuing operations may be inconsistent with similar measures presented by other companies.

There were no net earnings attributable to noncontrolling interests during the three and ninesix months ended May 31, 2017February 28, 2018 and 2016.2017.

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Reconciliations of earnings from continuing operations to adjusted EBITDA from continuing operations are provided below:
 Three Months Ended May 31, Nine Months Ended May 31, Three Months Ended February 28, Six Months Ended February 28,
(in thousands) 2017 2016 2017 2016 2018 2017 2018 2017
Earnings from continuing operations $39,609
 $35,111
 $76,422
 $71,593
 $9,781
 $22,992
 $41,652
 $28,678
Interest expense 12,368
 14,737
 38,108
 49,666
 7,181
 12,439
 13,792
 25,764
Income taxes 12,641
 10,676
 25,284
 24,512
 1,728
 7,772
 10,153
 10,225
Depreciation and amortization 32,259
 31,883
 93,044
 95,424
 34,050
 30,357
 65,949
 60,494
Impairment charges 70
 76
 549
 76
 12,136
 91
 12,597
 479
Adjusted EBITDA from continuing operations $96,947
 $92,483
 $233,407
 $241,271
 $64,876
 $73,651
 $144,143
 $125,640

Adjusted Earnings from Continuing Operations

Adjusted earnings from continuing operations is a non-GAAP financial measure that is equal to earnings from continuing operations before acquisition and integration costs, mill operational start-up costs, certain material impairment losses, gains and losses related to debt restructuring, loss on debt extinguishment and severance expenses, including the estimated income tax effects thereof. Additionally, we adjust adjusted earnings from continuing operations for the effects of the TCJA. Adjusted earnings from continuing operations should not be considered as an alternative to earnings from continuing operations or any other performance measure derived in accordance with GAAP. However, we believe that adjusted earnings from continuing operations provides relevant and useful information to investors as it allows: (i) a supplemental measure of our ongoing core performance and (ii) the assessment of period-to-period performance trends. Management uses adjusted earnings from continuing operations to evaluate our financial performance. Adjusted earnings from continuing operations may be inconsistent with similar measures presented by other companies. Adjusted earnings from continuing operations per diluted share is defined as adjusted earnings from continuing operations on a diluted per share basis.

A reconciliation of earnings from continuing operations to adjusted earnings from continuing operations is provided below:
  Three Months Ended Six Months Ended
(in thousands, except per share amounts) 2/28/2018 2/28/2017 2/28/2018 2/28/2017
         
Earnings from continuing operations $9,781
 $22,992
 $41,652
 $28,678
         
Acquisition and integration related costs 5,905
 
 9,625
 
Mill operational start-up costs 8,651
 
 11,560
 
Asset impairments 12,136
 
 12,136
 
Total adjustments (pre-tax) $26,692
 $
 $33,321
 $
         
Related tax effects on adjustments $(6,855) $
 $(9,175) $
TCJA impact 10,600
 
 10,600
 
International reorganization (9,200) 
 (9,200) 
Total tax impact $(5,455) $
 $(7,775) $
         
Adjusted earnings from continuing operations $31,018
 $22,992
 $67,198
 $28,678
         
Adjusted earnings from continuing operations per diluted share $0.26
 $0.20
 $0.57
 $0.25



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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains or incorporates by reference a number of "forward-looking statements" within the meaning of the federal securities laws, with respect to general economic conditions, key macro-economic drivers that impact our business, the effects of ongoing trade actions, the effects of continued pressure on the liquidity of our customers, potential synergies provided by our recent acquisitions, demand for our products, steel margins, the ability to operate our mills at full capacity, future supplies of raw materials and energy for our operations, share repurchases, legal proceedings, renewing the credit facilities of our Polish subsidiary, the reinvestment of undistributed earnings of our non-U.S. subsidiaries, U.S. non-residential construction activity, international trade, capital expenditures, our liquidity and our ability to satisfy future liquidity requirements, our new Oklahoma micro mill, estimated contractual obligations, the planned acquisition of substantially all of the U.S. rebar fabrication facilities and the steel mini mills located in or around Rancho Cucamonga, California, Jacksonville, Florida, Sayreville, New Jersey and Knoxville, Tennessee currently owned by Gerdau S.A. and certain of its subsidiaries (collectively, the “Business”) and the timing and financing thereof, the ability to obtain regulatory approvals and meet other closing conditions for the planned acquisition of the Business, and our expectations or beliefs concerning future events. These forward-looking statements can generally be identified by phrases such as we or our management "expects," "anticipates," "believes," "estimates," "intends," "plans to," "ought," "could," "will," "should," "likely," "appears," "projects," "forecasts," "outlook" or other similar words or phrases. There are inherent risks and uncertainties in any forward-looking statements. We caution readers not to place undue reliance on any forward-looking statements.

Our forward-looking statements are based on management's expectations and beliefs as of the time this Quarterly Report on Form 10-Q is filed with the SEC or, with respect to any document incorporated by reference into this Quarterly Report on Form 10-Q, as of the time such document was prepared. Although we believe that our expectations are reasonable, we can give no assurance that these expectations will prove to have been correct, and actual results may vary materially. Except as required by law, we undertake no obligation to update, amend or clarify any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or otherwise.any other changes. Some of the important factors that could cause actual results to differ materially from our expectations include the following:

changes in economic conditions including the ongoing recovery from the last recession, continued sovereign debt problems in the Euro-zone andwhich affect demand for our products or construction activity or lack thereof,generally, and theirthe impact in aof such changes on the highly cyclical steel industry;

rapid and significant changes in the price of metals, potentially impairing our inventory values due to declines in commodity prices;

excess capacity in our industry, particularly in China, and product availability from competing steel mills and other steel suppliers including import quantities and pricing;

compliance with and changes in environmental laws and regulations, including increased regulation associated with climate change and greenhouse gas emissions;

involvement in various environmental matters that may result in fines, penalties or judgments;

potential limitations in our or our customers' abilities to access credit and non-compliance by our customers with our existing commercial contracts and commitments;

contracts;
activity in repurchasing shares of our common stock under our repurchase program;

financial covenants and restrictions on the operation of our business contained in agreements governing our debt;
our ability to successfully identify, consummate, and integrate acquisitions and the effects that acquisitions may have on our financial leverage;
risks associated with acquisitions generally, such as the inability to obtain, or delays in obtaining, required approvals under applicable antitrust legislation and other regulatory and third party consents and approvals;
potential volatility in the capital markets and its impact on the ability to complete the proposed financing necessary to pay the purchase price for the Business;
failure to retain key management and employees of the Business;
issues or delays in the successful integration of the Business’ operations with those of the Company, including the inability to substantially increase utilization of the Business' steel mini mills, and incurring or experiencing unanticipated costs and/or delays or difficulties;
difficulties or delays in the successful transition of the Business to the information technology systems of the Company as well as risks associated with other integration or transition of the operations, systems and personnel of the Business;

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future levels of revenues being lower than expected and costs being higher than expected;
failure or inability to implement growth strategies in a timely manner;
unfavorable reaction to the acquisition of the Business by customers, competitors, suppliers and employees;
impact of goodwill impairment charges;
impact of long-lived asset impairment charges;
currency fluctuations;

global factors, including political uncertainties and military conflicts;

availability of electricity, electrodes and natural gas for mill operations;

our ability to hire and retain key executives and other employees;

competition from other materials or from competitors that have a lower cost structure or access to greater financial resources;

information technology interruptions and breaches in data security;

ability to make necessary capital expenditures to fund our mills;

expenditures;
availability and pricing of raw materials and other items over which we exert little influence, including scrap metal, energy, insurance and insurance;

supply prices;
unexpected equipment failures;

our ability to realize the anticipated benefits of our investment in our new micro mill in Durant, Oklahoma;
losses or limited potential gains due to hedging transactions;

litigation claims and settlements, court decisions, regulatory rulings and legal compliance risks;

risk of injury or death to employees, customers or other visitors to our operations;

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impacts from the TCJA;
increased costs related to health care reform legislation; and

those factors listed under Part I, Item 1A, Risk Factors, included in the 2017 Form 10-K.
You should refer to the “Risk Factors” section of this Form 10-Q and our Annual Reportperiodic and current reports filed with the SEC for specific risks which would cause actual results to be significantly different from those expressed or implied by these forward-looking statements. It is not possible to identify all of the risks, uncertainties and other factors that may affect future results. In light of these risks and uncertainties, the forward-looking events and circumstances discussed herein may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. Accordingly, readers of this Form 10-Q are cautioned not to place undue reliance on Form 10-K for the fiscal year ended August 31, 2016.forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The U.S. dollar equivalent of the Company's total gross foreign currency exchange contract commitments increased $4.5$0.5 million or 2% compared to August 31, 2016.2017. Forward contracts denominated in the British poundPolish zloty with a U.S. dollar functional currency and forward contracts denominated in the U.S. dollarEuro with a Thai bahtPolish zloty functional currency decreased $42.3$26.0 million and $15.8$40.4 million, respectively, compared to August 31, 2016.2017. Partially offsetting these decreases, forward contracts denominated in Polish zloty and the Australian dollardollars with a U.S. dollar functional currency and forward contracts denominated in the U.S. dollar with the Australian dollar functional currency increased $33.2$52.3 million $22.8 million and $12.0 million, respectively, compared to August 31, 2016.2017.

The Company's total commodity contract commitments increased $17.1decreased $4.0 million, or 87%7%, compared to August 31, 2016. This increase was primarily due to short copper contracts, which increased $15.4 million compared to August 31, 2016.2017.

There were no other material changes to the information set forth in Item 7A, Quantitative and Qualitative Disclosures about Market Risk, included in the Company's Annual Report on2017 Form 10-K for the fiscal year ended August 31, 2016.10-K.

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ITEM 4. CONTROLS AND PROCEDURES
The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. This term refers to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within required time periods, and includes controls and procedures designed to ensure that such information is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and our Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q, and they have concluded that as of that date, our disclosure controls and procedures were effective.
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our fiscal quarter ended May 31, 2017February 28, 2018 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4038




PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS

The Company is a defendant in lawsuits associated with the normal conduct of its businesses and operations. It is not possible to predict the outcome of the pending actions, and, as with any litigation, it is possible that these actions could be decided unfavorably to the Company. We believe that there are meritorious defenses to these actions and that these actions will not have a material adverse effect upon our results of operations, cash flows or financial condition, and, where appropriate, these actions are being vigorously contested.

On April 28, 2016, we were served with a lawsuit filed by Ector County, Texas and the State of Texas by and through the Texas Commission on Environmental Quality ("TCEQ") alleging violations of the Texas Solid Waste Disposal Act, the Texas Water Code, the Texas Clean Air Act, and TCEQ rules on spill prevention and control. The Plaintiffs amended their petition in February 2017 to include violations of TCEQ rules on recycling and storm water permits. The Plaintiffs further amended their petition in April 2017, broadening their allegations. The lawsuit, filed in the 201st Judicial District Court of Travis County, Texas, alleged improper disposal of solid waste and unauthorized outdoor burning activity at the Company’s recycling facility located in Odessa, Texas. The lawsuit sought a penalty for each day of alleged violation under the Texas Health & Safety Code, the Texas Water Code, or the Texas Administrative Code. The parties agreed to a mediated settlement on December 1, 2017, which will be binding upon the entry of an Agreed Final Judgment, subject to the formal approval process of the State of Texas. Under the mediated settlement, the Company will pay $1.1 million, net of insurance recoveries. The Company denies any wrongdoing in connection with the alleged claims, and the settlement does not contain an admission of liability from the Company.

We are subject to laws and regulations relating to protection of the environment. It is not possible to quantify with certainty the potential impact of actions relating to environmental matters, particularly remediation and other compliance efforts that our subsidiaries may undertake in the future. We believe, however, compliance with current environmental protection laws (before taking into account estimated recoveries from third parties) will not have a material adverse effect upon our results of operations, cash flows or financial condition.
ITEM 1A. RISK FACTORS

ThereExcept as set forth below, there have been no material changes to the risk factors previously disclosed in Part I, Item 1A, Risk Factors, of the Company's Annual Report2017 Form 10-K.

Recently enacted U.S. tax legislation may adversely affect our business, results of operations, financial condition and cash flow.

On December 22, 2017, the President signed into law Public Law No. 115-97, commonly referred to as the TCJA, following its passage by the United States Congress. The TCJA makes significant changes to U.S. federal income tax laws, including changing the corporate tax rate to a flat 21% rate, introducing a capital investment deduction in certain circumstances, placing certain limitations on Form 10-Kthe interest deduction, modifying the rules regarding the usability of certain net operating losses, and making extensive changes to the U.S. international tax system. We continue to analyze the effects of this new legislation on our business, results of operations, financial condition and cash flow. The final impact of these new rules is uncertain and could be adverse.

Excess capacity and over-production by foreign producers in our industry could increase the level of steel imports into the U.S., resulting in lower domestic prices, which would adversely affect our sales, margins and profitability.

Global steel-making capacity exceeds demand for steel products in some regions around the world. Rather than reducing employment by rationalizing capacity with consumption, steel manufacturers in these countries (often with local government assistance or subsidies in various forms) have traditionally periodically exported steel at prices significantly below their home market prices, which prices may not reflect their costs of production or capital. For example, steel production in China, the world's largest producer and consumer of steel, has continued to exceed Chinese demand. This rising excess capacity in China has resulted in a further increase in imports of artificially low-priced steel and steel products to the U.S. and world steel markets. A continuation of this trend or a significant decrease in China's rate of economic expansion could result in increasing steel imports from China. Excessive imports of steel into the U.S. have exerted, and may continue to exert, downward pressure on U.S. steel prices, which negatively affects our ability to increase our sales, margins, and profitability. The excess capacity may create downward pressure on our steel prices and lead to reduced sales volumes as imports absorb market share that would otherwise be filled by domestic supply, all of which would adversely affect our sales, margins and profitability and could subject us to possible renegotiation of contracts or increases in bad debt.

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We believe the downward pressure on, and periodically depressed levels of, U.S. steel prices in some recent years have been further exacerbated by imports of steel involving dumping and subsidy abuses by foreign steel producers. While some tariffs and quotas are periodically put into effect for certain steel products imported from a number of countries that have been found to have been unfairly pricing steel imports to the U.S., there is no assurance that tariffs and quotas will always be levied, even if otherwise justified, and even when imposed many of these are short-lived and/or ineffective. For example, on March 8, 2018, President Trump signed a proclamation imposing a 25% tariff on all imported steel products for an indefinite amount of time under Section 232 of the Trade Expansion Act of 1962. The tariff will be imposed on all steel imports with the exception of steel imported from Canada, Mexico and Australia, and the administration is considering exemption requests from other countries. We expect that this tariff, while in effect, will discourage steel imports from non-exempt countries. However, we do not yet have sufficient information to evaluate in detail the possible impact of this tariff on our operations or results. When this or other tariffs or duties expire or if others are further relaxed or repealed, or if relatively higher U.S. steel prices make it attractive for foreign steelmakers to export their steel products to the U.S., despite the presence of duties or tariffs, the resurgence of substantial imports of foreign steel could create downward pressure on U.S. steel prices.

Excess capacity has also led to greater protectionism as is evident in raw material and finished product border tariffs put in place by China, Brazil and other countries. Such protectionism could have a material adverse effect on our business, results of operations and financial condition.

Risks Related to the Pending Acquisition of Assets from Gerdau S.A.

We may not be able to successfully or timely complete the pending acquisition of assets from Gerdau S.A.

On December 29, 2017, we entered into a definitive purchase agreement to acquire certain U.S. rebar steel mill and fabrication assets from Gerdau S.A., a producer of long and specialty steel products in the Americas for a cash purchase price of $600.0 million, subject to customary purchase price adjustments. We expect the acquisition to close before the end of calendar year 2018, subject to customary closing conditions. However, there can be no assurance that the acquisition will be completed or on what terms it may be completed.

There are a number of risks and uncertainties relating to the acquisition. For example, the acquisition may not be completed, or may not be completed in the time frame, on the terms or in the manner currently anticipated, as a result of a number of factors, including, among other things, the failure to satisfy one or more of the conditions to closing. There can be no assurance that the conditions to closing of the acquisition of the acquired businesses will be satisfied or waived or that other events will not intervene to delay or result in the failure to close such acquisition.

The consummation of the acquisition is subject to, among other things, review and approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”). On March 16, 2018, we received a request for additional information and documentary material, often referred to as a “second request,” from the United States Federal Trade Commission (“FTC”) pursuant to the HSR Act. Issuance of a second request is a standard part of the regulatory approval process for transactions similar to the acquisition. The effect of the second request is to extend the waiting period under the HSR Act until 30 days after all parties to the purchase agreement have substantially complied with the second request, unless the waiting period is terminated earlier by the FTC or the parties voluntarily extend the time for closing.

In addition, both we and the sellers have the ability to terminate the purchase agreement under certain circumstances. Failure to complete the acquisition would prevent us from realizing the anticipated benefits of such acquisition. We would also remain liable for significant transaction costs, including legal, accounting and financial advisory fees, and we could become liable to the sellers if the purchase agreement is terminated under certain circumstances for a termination fee equal to $40.0 million. In addition, the market price of our common stock may reflect various market assumptions as to whether the acquisition will be completed. Consequently, the completion of, the failure to complete, or any delay in the closing of the acquisition could result in a significant change in the market price of our common stock.
We may not generate sufficient financing to fund the purchase price for the fiscal year ended August 31, 2016.acquisition.

We expect to fund the purchase price for the acquisition with cash on hand, term loans, borrowings under the revolving credit facility under the Credit Agreement or another credit facility and/or proceeds from an offering of one or more debt securities. In connection with our entry into the purchase agreement, on December 29, 2017, we entered into a commitment letter with the Commitment Parties, pursuant to which the Commitment Parties agreed to provide the Term Loan B Facility in the aggregate principal amount of up to $600.0 million to fund all or a portion of the purchase price for the acquisition and pay certain fees and expenses in connection therewith. In addition, on February 21, 2018, we entered into a Fifth Amendment to our Credit Agreement

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to provide for the 2018 Term Loan to allow us to borrow up to $200.0 million, the proceeds of which are required to be used to fund the acquisition, repay certain existing indebtedness of the sellers in connection with the acquisition and pay transaction fees and expenses related thereto. As a result of the entry into the 2018 Term Loan, the aggregate principal amount of the commitments under the Term Loan B Facility were subsequently reduced from $600.0 million to $400.0 million.

There can be no assurance that the foregoing transactions, or any other financing transactions that we may pursue, will generate sufficient funds to finance the acquisition. The obligations of the Commitment Parties to provide financing under the Term Loan B Facility and the obligations of the lenders under the 2018 Term Loan are each subject to a number of customary conditions, and we cannot assure you that we will be able to satisfy the conditions under the Term Loan B Facility or the 2018 Term Loan. The closing of the acquisition is not conditioned on our ability to obtain sufficient financing to consummate the acquisition.

We have incurred significant transaction costs in connection with the acquisition that could adversely affect our results of operations.

Whether or not we complete the acquisition, we have incurred, and will continue to incur, significant transaction costs in connection with the acquisition, including payment of certain fees and expenses incurred in connection with the acquisition. We also expect we will incur fees and expenses with any related financing transactions. Additional unanticipated costs may be incurred in the integration process. These could adversely affect our results of operations in the period in which such expenses are recorded or our cash flow in the period in which any related costs are actually paid. Furthermore, we may incur material severance expenses and restructuring charges in connection with the acquisition, which may adversely affect our operating results following the closing of such acquisition in which such expenses are recorded or our cash flow in the period in which any related costs are actually paid. A delay in closing, or a failure to complete the acquisition, could have a negative impact on our business and on the trading price of shares of our common stock.

We may fail to realize all of the anticipated benefits of the acquisition or those benefits may take longer to realize than expected. We may also encounter significant difficulties in integrating the acquired businesses.

Our ability to realize the anticipated benefits of the acquisition will depend, to a large extent, on our ability to integrate the acquired businesses, which is a complex, costly and time-consuming process. The nature of a carve-out acquisition makes it inherently more difficult to assume operations upon closing of the acquisition and to integrate activities, as certain systems, processes and employees may not all be transferred with the acquired businesses to support such activities. As a result, we will be required to devote significant management attention and resources to integrate our business practices and operations with those of the acquired businesses. The integration process may disrupt our business and, if implemented ineffectively, could restrict the realization of the full expected benefits. The failure to meet the challenges involved in the integration process and to realize the anticipated benefits of the acquired businesses could cause an interruption of, or a loss of momentum in, our operations and could adversely affect our business, financial condition and results of operations.

In addition, the integration of the acquired businesses may result in material unanticipated problems, expenses, liabilities, competitive responses and loss of customers and other business relationships. Additional integration challenges include:

diversion of management’s attention to integration matters;

difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from the acquisition;

difficulties in the integration of operations and systems;

difficulties in conforming standards, controls, procedures and accounting and other policies, business cultures and compensation structures;

difficulties in the assimilation of employees;

difficulties in managing the expanded operations of a significantly larger and more complex company;

challenges in attracting and retaining key personnel;

the impact of potential liabilities we may be inheriting from the acquired businesses; and

coordinating a geographically dispersed organization.

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Many of these factors will be outside of our control and any one of them could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy, which could adversely affect our business, financial condition and results of operations and result in us becoming subject to litigation. In addition, even if the acquired businesses are integrated successfully, the full anticipated benefits of the acquisition may not be realized, including the synergies, cost savings or sales or growth opportunities that are anticipated. These benefits may not be achieved within the anticipated time frame, or at all. Further, additional unanticipated costs may be incurred in the integration process. All of these factors could cause reductions in our earnings per share, decrease or delay the expected accretive effect of the acquisition and negatively impact the price of shares of our common stock. As a result, it cannot be assured that the acquisition will result in the realization of the full anticipated benefits and potential synergies.

The pendency of the acquisition could adversely affect our business, financial results and operations.

The announcement and pendency of the acquisition could cause disruptions and create uncertainty surrounding our business and affect our relationships with our customers and employees. In addition, we have diverted, and will continue to divert, significant management resources to complete the acquisition, which could have a negative impact on our ability to manage existing operations or pursue alternative strategic transactions, which could adversely affect our business, financial condition and results of operations.

If the acquisition is completed, the acquired businesses may underperform relative to our expectations.

Following completion of the acquisition, we may not be able to maintain the growth rate, levels of revenue, earnings or operating efficiency that we and the acquired businesses have achieved or might achieve separately. Our failure to do so could have a material adverse effect on our financial condition and results of operations. The business and financial performance of the acquired businesses are subject to certain risks and uncertainties.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table provides information aboutThere were no purchases by the Company during the quarter ended May 31, 2017 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act.

Issuer Purchases of Equity Securities

Act during the quarter ended February 28, 2018.
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
March 1, 2017 - March 31, 2017 
 
 
 $27,598,706
April 1, 2017 - April 30, 2017 
 
 
 27,598,706
May 1, 2017 - May 31, 2017 
 
 
 27,598,706
Total 
   
  
 _________________ 
(1)
During the first quarter of fiscal 2015, the Company announced that CMC's Board of Directors had authorized a share repurchase program under which the Company may repurchase up to $100.0 million of shares of CMC common stock. The share repurchase program does not require the Company to purchase any dollar amount or number of shares of CMC common stock and may be modified, suspended, extended or terminated by the Company at any time without prior notice.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.
ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.
ITEM 5. OTHER INFORMATION

Not applicable.Discontinued Operations

The other information presented below is being filed as a result of the retrospective presentation and disclosure requirements for discontinued operations. The Company will be required to reflect these changes in presentation and disclosure for all periods presented in future filings with the SEC. The summarized information below includes changes to the Company’s results from continuing operations for the fiscal years ended August 31, 2017, 2016 and 2015, due to the Company's decision to sell certain assets and liabilities of its Australian steel trading business and wind down the Company's steel trading business in the U.S. and Asia. The results of these activities are included in discontinued operations. See Note 2, Changes in Business, to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information. This information is intended to assist investors in making comparisons of the Company’s historical financial information with future financial information. The reported financial information set forth below has been revised to conform to the current presentation.

The below Condensed Consolidated Statements of Earnings for the fiscal years ended August 31, 2017, 2016 and 2015 were adjusted to reflect the revised presentation of our operating results due to the Company’s decision to classify the Company's steel trading business in the U.S., Australia, and Asia as discontinued operations.

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  Year Ended August 31,
(in thousands, except share data) 2017 2016 2015
Net sales $3,844,069
 $3,596,068
 $4,452,026
Costs and expenses:      
Cost of goods sold 3,322,711
 3,021,862
 3,893,113
Selling, general and administrative expenses 387,354
 383,748
 381,078
Loss on debt extinguishment 22,672
 11,480
 
Impairment of assets 1,730
 40,028
 9,839
Interest expense 44,151
 62,973
 73,316
  3,778,618
 3,520,092
 4,357,346
Earnings from continuing operations before income taxes 65,451
 75,976
 94,680
Income taxes 15,276
 13,976
 36,097
Earnings from continuing operations 50,175
 62,000
 58,583
       
Earnings (loss) from discontinued operations before income taxes (9,840) (8,735) 31,171
Income taxes (benefit) (5,996) (1,497) 10,311
Earnings (loss) from discontinued operations (3,844) (7,238) 20,860
       
Net earnings $46,332
 $54,762
 $79,443
       
Basic earnings (loss) per share attributable to CMC:      
Earnings from continuing operations $0.43
 $0.54
 $0.50
Earnings (loss) from discontinued operations (0.03) (0.06) 0.18
Net earnings $0.40
 $0.48
 $0.68
       
Diluted earnings (loss) per share attributable to CMC*:      
Earnings from continuing operations $0.43
 $0.53
 $0.50
Earnings (loss) from discontinued operations (0.03) (0.06) 0.18
Net earnings $0.39
 $0.47
 $0.67

*EPS is calculated independently for each component and may not sum to Net Earnings EPS due to rounding.

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ITEM 6.EXHIBITS

2.1
3.1(a)
  
3.1(b)
  
3.1(c)
  
3.1(d)
  
3.1(e)
  
3.1(f)
  
3.2
10.1
10.2
  
31.1
  
31.2
  
32.1
  
32.2
101The following financial information from Commercial Metals Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Earnings (Unaudited), (ii) the Condensed Consolidated Statements of Comprehensive Income (Unaudited), (iii) the Condensed Consolidated Balance Sheets (Unaudited), (iv) the Condensed Consolidated Statements of Cash Flows (Unaudited), (v) the Condensed Consolidated Statements of Stockholders' Equity (Unaudited) and (vi) the Notes to Condensed Consolidated Financial Statements (Unaudited) (submitted electronically herewith).


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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
COMMERCIAL METALS COMPANY
June 28, 2017/s/ Mary Lindsey
Mary Lindsey
Vice President and Chief Financial Officer
(Duly authorized officer and principal financial officer of the registrant)





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INDEX TO EXHIBITS

3.1(a)Restated Certificate of Incorporation dated March 2, 1989 (filed as Exhibit 3(i) to Commercial Metals Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2009 and incorporated herein by reference).
3.1(b)Certificate of Amendment of Restated Certificate of Incorporation dated February 1, 1994 (filed as Exhibit 3(i)(a) to Commercial Metals Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2009 and incorporated herein by reference).
3.1(c)Certificate of Amendment of Restated Certificate of Incorporation dated February 17, 1995 (filed as Exhibit 3(i)(b) to Commercial Metals Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2009 and incorporated herein by reference).
3.1(d)Certificate of Amendment of Restated Certificate of Incorporation dated January 30, 2004 (filed as Exhibit 3(i)(d) to Commercial Metals Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 2004 and incorporated herein by reference).
3.1(e)Certificate of Amendment of Restated Certificate of Incorporation dated January 26, 2006 (filed as Exhibit 3(i) to Commercial Metals Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 2006 and incorporated herein by reference).
3.1(f)Certificate of Designation, Preferences and Rights of Series A Preferred Stock (filed as Exhibit 2 to Commercial Metals Company's Form 8-A filed August 3, 1999 and incorporated herein by reference).
3.2Third Amended and Restated Bylaws (filed as Exhibit 3(ii) to Commercial Metals Company's Annual Report on Form 10-K for the year ended August 31, 2015 and incorporated herein by reference).
31.1Certification of Joseph Alvarado, Chief Executive Officer of Commercial Metals Company, pursuant to Section 302 to the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2Certification of Mary Lindsey, Vice President and Chief Financial Officer of Commercial Metals Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1Certification of Joseph Alvarado, Chief Executive Officer of Commercial Metals Company, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2Certification of Mary Lindsey, Vice President and Chief Financial Officer of Commercial Metals Company, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
  
101
The following financial information from Commercial Metals Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2017,February 28, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Earnings (Unaudited), (ii) the Condensed Consolidated Statements of Comprehensive Income (Unaudited), (iii) the Condensed Consolidated Balance Sheets (Unaudited), (iv) the Condensed Consolidated Statements of Cash Flows (Unaudited), (v) the Condensed Consolidated Statements of Stockholders' Equity (Unaudited) and (vi) the Notes to Condensed Consolidated Financial Statements (Unaudited) (submitted electronically herewith).


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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
COMMERCIAL METALS COMPANY
March 26, 2018/s/ Mary A. Lindsey
Mary A. Lindsey
Senior Vice President and Chief Financial Officer
(Duly authorized officer and principal financial officer of the registrant)





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