UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 20222023
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)
| | | | | |
Delaware | 75-0725338 |
(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)
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | | | | | | | |
Title of Each Class | | Trading Symbol(s) | | Name of Each Exchange on Which Registered |
Common Stock, $0.01 par value | | CMC | | New York Stock Exchange |
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 ("Exchange Act") 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 every Interactive Data File required to be submitted 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 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 | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | 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 ☒
As of March 22, 2022, 121,495,8682023, 117,117,307 shares of the registrant's common stock, par value $0.01 per share, were outstanding.
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
TABLE OF CONTENTS
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 February 28, | | Six Months Ended February 28, | | Three Months Ended February 28, | | Six Months Ended February 28, |
(in thousands, except share and per share data) | (in thousands, except share and per share data) | | 2022 | | 2021 | | 2022 | | 2021 | (in thousands, except share and per share data) | | 2023 | | 2022 | | 2023 | | 2022 |
Net sales | Net sales | | $ | 2,008,888 | | | $ | 1,462,270 | | | $ | 3,990,689 | | | $ | 2,854,073 | | Net sales | | $ | 2,018,003 | | | $ | 2,008,888 | | | $ | 4,245,316 | | | $ | 3,990,689 | |
Costs and operating expenses (income): | Costs and operating expenses (income): | | Costs and operating expenses (income): | |
Cost of goods sold | Cost of goods sold | | 1,614,965 | | | 1,228,343 | | | 3,201,375 | | | 2,403,162 | | Cost of goods sold | | 1,621,763 | | | 1,614,965 | | | 3,341,177 | | | 3,201,375 | |
Selling, general and administrative expenses | Selling, general and administrative expenses | | 127,985 | | | 120,829 | | | 251,563 | | | 234,525 | | Selling, general and administrative expenses | | 150,427 | | | 127,985 | | | 306,550 | | | 251,563 | |
Loss on debt extinguishment | | 16,052 | | | 16,841 | | | 16,052 | | | 16,841 | | |
Interest expense | Interest expense | | 12,011 | | | 14,021 | | | 23,046 | | | 28,280 | | Interest expense | | 9,945 | | | 12,011 | | | 22,990 | | | 23,046 | |
Asset impairments | Asset impairments | | 1,228 | | | 474 | | | 1,228 | | | 4,068 | | Asset impairments | | 36 | | | 1,228 | | | 45 | | | 1,228 | |
Gain on sale of assets | | (273,099) | | | (5,412) | | | (274,082) | | | (5,481) | | |
Loss on debt extinguishment | | Loss on debt extinguishment | | 27 | | | 16,052 | | | 178 | | | 16,052 | |
Loss (gain) on sale of assets | | Loss (gain) on sale of assets | | 315 | | | (273,099) | | | 387 | | | (274,082) | |
| | 1,499,142 | | | 1,375,096 | | | 3,219,182 | | | 2,681,395 | | | 1,782,513 | | | 1,499,142 | | | 3,671,327 | | | 3,219,182 | |
Earnings from continuing operations before income taxes | | 509,746 | | | 87,174 | | | 771,507 | | | 172,678 | | |
Earnings before income taxes | | Earnings before income taxes | | 235,490 | | | 509,746 | | | 573,989 | | | 771,507 | |
Income taxes | Income taxes | | 126,432 | | | 20,941 | | | 155,304 | | | 42,534 | | Income taxes | | 55,641 | | | 126,432 | | | 132,366 | | | 155,304 | |
Earnings from continuing operations | | 383,314 | | | 66,233 | | | 616,203 | | | 130,144 | | |
| Earnings from discontinued operations before income taxes | | — | | | 197 | | | — | | | 447 | | |
Income taxes | | — | | | 73 | | | — | | | 141 | | |
Earnings from discontinued operations | | — | | | 124 | | | — | | | 306 | | |
| Net earnings | Net earnings | | $ | 383,314 | | | $ | 66,357 | | | $ | 616,203 | | | $ | 130,450 | | Net earnings | | $ | 179,849 | | | $ | 383,314 | | | $ | 441,623 | | | $ | 616,203 | |
| Basic earnings per share (1) | | |
Earnings from continuing operations | | $ | 3.16 | | | $ | 0.55 | | | $ | 5.08 | | | $ | 1.08 | | |
Earnings from discontinued operations | | — | | | — | | | — | | | — | | |
Net earnings | | $ | 3.16 | | | $ | 0.55 | | | $ | 5.08 | | | $ | 1.09 | | |
| Diluted earnings per share (1) | | |
Earnings from continuing operations | | $ | 3.12 | | | $ | 0.54 | | | $ | 5.02 | | | $ | 1.07 | | |
Earnings from discontinued operations | | — | | | — | | | — | | | — | | |
Net earnings | | $ | 3.12 | | | $ | 0.55 | | | $ | 5.02 | | | $ | 1.07 | | |
Earnings per share: | | Earnings per share: | |
Basic | | Basic | | $ | 1.53 | | | $ | 3.16 | | | $ | 3.77 | | | $ | 5.08 | |
Diluted | | Diluted | | $ | 1.51 | | | $ | 3.12 | | | $ | 3.71 | | | $ | 5.02 | |
| Average basic shares outstanding | Average basic shares outstanding | | 121,458,196 | | | 120,345,432 | | | 121,293,030 | | | 120,052,459 | | Average basic shares outstanding | | 117,224,517 | | | 121,458,196 | | | 117,249,266 | | | 121,293,030 | |
Average diluted shares outstanding | Average diluted shares outstanding | | 122,852,410 | | | 121,751,859 | | | 122,747,981 | | | 121,672,194 | | Average diluted shares outstanding | | 118,723,259 | | | 122,852,410 | | | 118,985,098 | | | 122,747,981 | |
See notes to condensed consolidated financial statements.
_________________
(1) Earnings Per Share ("EPS") is calculated independently for each component and may not sum to Net EPS due to rounding.
| COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) | COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) | COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) |
| | Three Months Ended February 28, | | Six Months Ended February 28, | | Three Months Ended February 28, | | Six Months Ended February 28, |
(in thousands) | (in thousands) | | 2022 | | 2021 | | 2022 | | 2021 | (in thousands) | | 2023 | | 2022 | | 2023 | | 2022 |
Net earnings | Net earnings | | $ | 383,314 | | | $ | 66,357 | | | $ | 616,203 | | | $ | 130,450 | | Net earnings | | $ | 179,849 | | | $ | 383,314 | | | $ | 441,623 | | | $ | 616,203 | |
Other comprehensive income (loss), net of income taxes: | Other comprehensive income (loss), net of income taxes: | | Other comprehensive income (loss), net of income taxes: | |
| Foreign currency translation adjustment after reclassification | | (14,461) | | | 1,465 | | | (54,149) | | | (6,923) | | |
Foreign currency translation | | Foreign currency translation | | 11,628 | | | (14,461) | | | 53,057 | | | (54,149) | |
Derivatives: | Derivatives: | | Derivatives: | |
Unrealized holding gain | | 33,197 | | | 7,723 | | | 55,451 | | | 8,887 | | |
Net unrealized holding gain | | Net unrealized holding gain | | 23,957 | | | 33,197 | | | 92,002 | | | 55,451 | |
Reclassification for realized gain | Reclassification for realized gain | | (5,277) | | | (259) | | | (8,346) | | | (313) | | Reclassification for realized gain | | (863) | | | (5,277) | | | (7,833) | | | (8,346) | |
Net unrealized gain on derivatives | Net unrealized gain on derivatives | | 27,920 | | | 7,464 | | | 47,105 | | | 8,574 | | Net unrealized gain on derivatives | | 23,094 | | | 27,920 | | | 84,169 | | | 47,105 | |
| Defined benefit plans loss after amortization of prior service costs and net actuarial losses | | (6) | | | (14) | | | (12) | | | (27) | | |
Defined benefit plans gain (loss) after amortization of prior service costs | | Defined benefit plans gain (loss) after amortization of prior service costs | | (37) | | | (6) | | | 1,721 | | | (12) | |
Total other comprehensive income (loss), net of income taxes | Total other comprehensive income (loss), net of income taxes | | 13,453 | | | 8,915 | | | (7,056) | | | 1,624 | | Total other comprehensive income (loss), net of income taxes | | 34,685 | | | 13,453 | | | 138,947 | | | (7,056) | |
Comprehensive income | Comprehensive income | | $ | 396,767 | | | $ | 75,272 | | | $ | 609,147 | | | $ | 132,074 | | Comprehensive income | | $ | 214,534 | | | $ | 396,767 | | | $ | 580,570 | | | $ | 609,147 | |
See notes to condensed consolidated financial statements.
| 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 and per share data) | (in thousands, except share and per share data) | | February 28, 2022 | | August 31, 2021 | (in thousands, except share and per share data) | | February 28, 2023 | | August 31, 2022 |
Assets | Assets | | | | | Assets | | | | |
Current assets: | Current assets: | | Current assets: | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 846,587 | | | $ | 497,745 | | Cash and cash equivalents | | $ | 603,966 | | | $ | 672,596 | |
Restricted cash | | 153,113 | | | 3,384 | | |
Accounts receivable (less allowance for doubtful accounts of $5,446 and $5,553) | | 1,153,868 | | | 1,105,580 | | |
| Accounts receivable (less allowance for doubtful accounts of $4,928 and $4,990) | | Accounts receivable (less allowance for doubtful accounts of $4,928 and $4,990) | | 1,263,547 | | | 1,358,907 | |
Inventories, net | Inventories, net | | 1,142,446 | | | 935,387 | | Inventories, net | | 1,144,268 | | | 1,169,696 | |
Prepaid and other current assets | Prepaid and other current assets | | 192,096 | | | 169,649 | | Prepaid and other current assets | | 266,365 | | | 240,269 | |
Assets held for sale | | 2,138 | | | 25,083 | | |
| Total current assets | Total current assets | | 3,490,248 | | | 2,736,828 | | Total current assets | | 3,278,146 | | | 3,441,468 | |
Property, plant and equipment, net | Property, plant and equipment, net | | 1,649,264 | | | 1,566,123 | | Property, plant and equipment, net | | 2,159,730 | | | 1,910,871 | |
Intangible assets, net | | Intangible assets, net | | 248,723 | | | 257,409 | |
Goodwill | Goodwill | | 65,775 | | | 66,137 | | Goodwill | | 278,711 | | | 249,009 | |
Other noncurrent assets | Other noncurrent assets | | 298,933 | | | 269,583 | | Other noncurrent assets | | 519,541 | | | 378,270 | |
Total assets | Total assets | | $ | 5,504,220 | | | $ | 4,638,671 | | Total assets | | $ | 6,484,851 | | | $ | 6,237,027 | |
Liabilities and stockholders' equity | Liabilities and stockholders' equity | | | | | Liabilities and stockholders' equity | | | | |
Current liabilities: | Current liabilities: | | Current liabilities: | |
Accounts payable | Accounts payable | | $ | 414,025 | | | $ | 450,723 | | Accounts payable | | $ | 422,814 | | | $ | 428,055 | |
Accrued expenses and other payables | Accrued expenses and other payables | | 383,622 | | | 475,384 | | Accrued expenses and other payables | | 378,572 | | | 540,136 | |
Current maturities of long-term debt and short-term borrowings | Current maturities of long-term debt and short-term borrowings | | 27,554 | | | 54,366 | | Current maturities of long-term debt and short-term borrowings | | 264,762 | | | 388,796 | |
Total current liabilities | Total current liabilities | | 825,201 | | | 980,473 | | Total current liabilities | | 1,066,148 | | | 1,356,987 | |
Deferred income taxes | Deferred income taxes | | 146,179 | | | 112,067 | | Deferred income taxes | | 303,367 | | | 250,302 | |
Other noncurrent liabilities | Other noncurrent liabilities | | 217,138 | | | 235,607 | | Other noncurrent liabilities | | 232,415 | | | 230,060 | |
Long-term debt | Long-term debt | | 1,445,755 | | | 1,015,415 | | Long-term debt | | 1,099,728 | | | 1,113,249 | |
Total liabilities | Total liabilities | | 2,634,273 | | | 2,343,562 | | Total liabilities | | 2,701,658 | | | 2,950,598 | |
Commitments and contingencies (Note 13) | | 0 | | 0 | |
Commitments and contingencies (Note 14) | | Commitments and contingencies (Note 14) | |
Stockholders' equity: | Stockholders' equity: | | Stockholders' equity: | |
Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued 129,060,664 shares; outstanding 121,495,868 and 120,586,589 shares | | 1,290 | | | 1,290 | | |
Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued 129,060,664 shares; outstanding 117,205,307 and 117,496,053 shares | | Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued 129,060,664 shares; outstanding 117,205,307 and 117,496,053 shares | | 1,290 | | | 1,290 | |
Additional paid-in capital | Additional paid-in capital | | 366,162 | | | 368,064 | | Additional paid-in capital | | 374,440 | | | 382,767 | |
Accumulated other comprehensive loss | | (91,876) | | | (84,820) | | |
Accumulated other comprehensive income (loss) | | Accumulated other comprehensive income (loss) | | 24,496 | | | (114,451) | |
Retained earnings | Retained earnings | | 2,745,117 | | | 2,162,925 | | Retained earnings | | 3,716,537 | | | 3,312,438 | |
Less treasury stock 7,564,796 and 8,474,075 shares at cost | | (150,978) | | | (152,582) | | |
Less treasury stock 11,855,357 and 11,564,611 shares at cost | | Less treasury stock 11,855,357 and 11,564,611 shares at cost | | (333,802) | | | (295,847) | |
Stockholders' equity | Stockholders' equity | | 2,869,715 | | | 2,294,877 | | Stockholders' equity | | 3,782,961 | | | 3,286,197 | |
Stockholders' equity attributable to non-controlling interests | Stockholders' equity attributable to non-controlling interests | | 232 | | | 232 | | Stockholders' equity attributable to non-controlling interests | | 232 | | | 232 | |
Total stockholders' equity | Total stockholders' equity | | 2,869,947 | | | 2,295,109 | | Total stockholders' equity | | 3,783,193 | | | 3,286,429 | |
Total liabilities and stockholders' equity | Total liabilities and stockholders' equity | | $ | 5,504,220 | | | $ | 4,638,671 | | Total liabilities and stockholders' equity | | $ | 6,484,851 | | | $ | 6,237,027 | |
See notes to condensed consolidated financial statements.
| 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) |
| | | Six Months Ended February 28, | | | Six Months Ended February 28, |
(in thousands) | (in thousands) | | 2022 | | 2021 | (in thousands) | | 2023 | | 2022 |
Cash flows from (used by) operating activities: | Cash flows from (used by) operating activities: | | | | | Cash flows from (used by) operating activities: | | | | |
Net earnings | Net earnings | | $ | 616,203 | | | $ | 130,450 | | Net earnings | | $ | 441,623 | | | $ | 616,203 | |
Adjustments to reconcile net earnings to cash flows from (used by) operating activities: | | |
Adjustments to reconcile net earnings to cash flows from operating activities: | | Adjustments to reconcile net earnings to cash flows from operating activities: | |
Depreciation and amortization | Depreciation and amortization | | 82,360 | | | 83,372 | | Depreciation and amortization | | 102,399 | | | 82,360 | |
Stock-based compensation | Stock-based compensation | | 25,870 | | | 21,758 | | Stock-based compensation | | 33,624 | | | 25,870 | |
Deferred income taxes and other long-term taxes | Deferred income taxes and other long-term taxes | | 34,980 | | | (8,129) | | Deferred income taxes and other long-term taxes | | 26,930 | | | 34,980 | |
Write-down of inventory | | Write-down of inventory | | 5,532 | | | 123 | |
Net loss (gain) on disposals of assets | | Net loss (gain) on disposals of assets | | 387 | | | (274,082) | |
Loss on debt extinguishment | Loss on debt extinguishment | | 16,052 | | | 16,841 | | Loss on debt extinguishment | | 178 | | | 16,052 | |
Asset impairments | Asset impairments | | 1,228 | | | 4,068 | | Asset impairments | | 45 | | | 1,228 | |
Other | Other | | 835 | | | (105) | | Other | | 4,006 | | | 712 | |
Amortization of acquired unfavorable contract backlog | | — | | | (3,032) | | |
Net gain on disposals of assets and other | | (274,082) | | | (5,481) | | |
Changes in operating assets and liabilities | | (449,078) | | | (238,539) | | |
Settlement of New Markets Tax Credit transaction | | Settlement of New Markets Tax Credit transaction | | (17,659) | | | — | |
Changes in operating assets and liabilities, net of acquisitions | | Changes in operating assets and liabilities, net of acquisitions | | (38,158) | | | (449,078) | |
Net cash flows from operating activities | Net cash flows from operating activities | | 54,368 | | | 1,203 | | Net cash flows from operating activities | | 558,907 | | | 54,368 | |
| Cash flows from (used by) investing activities: | Cash flows from (used by) investing activities: | | | | | Cash flows from (used by) investing activities: | | | | |
Capital expenditures | | Capital expenditures | | (289,251) | | | (191,562) | |
Acquisitions, net of cash acquired | | Acquisitions, net of cash acquired | | (65,153) | | | — | |
Proceeds from insurance | | Proceeds from insurance | | 2,456 | | | 3,081 | |
Proceeds from the sale of property, plant and equipment and other | Proceeds from the sale of property, plant and equipment and other | | 309,563 | | | 20,338 | | Proceeds from the sale of property, plant and equipment and other | | 531 | | | 309,563 | |
Capital expenditures | | (191,562) | | | (87,688) | | |
Proceeds from insurance | | 3,081 | | | — | | |
| Other | | Other | | (1,185) | | | — | |
| Net cash flows from (used by) investing activities | Net cash flows from (used by) investing activities | | 121,082 | | | (67,350) | | Net cash flows from (used by) investing activities | | (352,602) | | | 121,082 | |
| Cash flows from (used by) financing activities: | Cash flows from (used by) financing activities: | | | | | Cash flows from (used by) financing activities: | | | | |
Proceeds from issuance of long-term debt, net | Proceeds from issuance of long-term debt, net | | 740,403 | | | 296,250 | | Proceeds from issuance of long-term debt, net | | — | | | 740,403 | |
Repayments of long-term debt | Repayments of long-term debt | | (313,174) | | | (357,792) | | Repayments of long-term debt | | (160,263) | | | (313,174) | |
Debt issuance costs | | Debt issuance costs | | (1,800) | | | (2,977) | |
Debt extinguishment costs | Debt extinguishment costs | | (13,642) | | | (13,051) | | Debt extinguishment costs | | (96) | | | (13,642) | |
Debt issuance costs | | (2,977) | | | (1,124) | | |
Proceeds from accounts receivable facilities | Proceeds from accounts receivable facilities | | 190,730 | | | 8,848 | | Proceeds from accounts receivable facilities | | 74,963 | | | 190,730 | |
Repayments under accounts receivable facilities | Repayments under accounts receivable facilities | | (215,196) | | | (8,848) | | Repayments under accounts receivable facilities | | (77,843) | | | (215,196) | |
Treasury stock acquired | | Treasury stock acquired | | (66,323) | | | (17,010) | |
Tax withholdings related to share settlements, net of purchase plans | | Tax withholdings related to share settlements, net of purchase plans | | (14,789) | | | (10,719) | |
Dividends | Dividends | | (34,011) | | | (28,833) | | Dividends | | (37,524) | | | (34,011) | |
Treasury stock acquired | | (17,010) | | | — | | |
Stock issued under incentive and purchase plans, net of forfeitures | | (10,719) | | | (4,536) | | |
Contribution from non-controlling interest | | — | | | 19 | | |
| Net cash flows from (used by) financing activities | Net cash flows from (used by) financing activities | | 324,404 | | | (109,067) | | Net cash flows from (used by) financing activities | | (283,675) | | | 324,404 | |
Effect of exchange rate changes on cash | Effect of exchange rate changes on cash | | (1,283) | | | (419) | | Effect of exchange rate changes on cash | | 6,545 | | | (1,283) | |
Increase (decrease) in cash, restricted cash and cash equivalents | Increase (decrease) in cash, restricted cash and cash equivalents | | 498,571 | | | (175,633) | | Increase (decrease) in cash, restricted cash and cash equivalents | | (70,825) | | | 498,571 | |
Cash, restricted cash and cash equivalents at beginning of period | Cash, restricted cash and cash equivalents at beginning of period | | 501,129 | | | 544,964 | | Cash, restricted cash and cash equivalents at beginning of period | | 679,243 | | | 501,129 | |
Cash, restricted cash and cash equivalents at end of period | Cash, restricted cash and cash equivalents at end of period | | $ | 999,700 | | | $ | 369,331 | | Cash, restricted cash and cash equivalents at end of period | | $ | 608,418 | | | $ | 999,700 | |
See notes to condensed consolidated financial statements. | Supplemental information: | Supplemental information: | | Six Months Ended February 28, | Supplemental information: | | Six Months Ended February 28, |
(in thousands) | (in thousands) | | 2022 | | 2021 | (in thousands) | | 2023 | | 2022 |
Cash paid for income taxes | Cash paid for income taxes | | $ | 133,194 | | | $ | 48,757 | | Cash paid for income taxes | | $ | 114,585 | | | $ | 133,194 | |
Cash paid for interest | Cash paid for interest | | 24,916 | | | 34,094 | | Cash paid for interest | | 35,036 | | | 24,916 | |
| Noncash activities: | Noncash activities: | | Noncash activities: | |
Liabilities related to additions of property, plant and equipment | Liabilities related to additions of property, plant and equipment | | 35,781 | | | 16,252 | | Liabilities related to additions of property, plant and equipment | | $ | 51,239 | | | $ | 35,781 | |
Right of use assets obtained in exchange for operating leases | | Right of use assets obtained in exchange for operating leases | | 19,327 | | | 19,009 | |
Right of use assets obtained in exchange for finance leases | | Right of use assets obtained in exchange for finance leases | | 24,275 | | | 6,716 | |
| Cash and cash equivalents | Cash and cash equivalents | | $ | 846,587 | | | $ | 367,347 | | Cash and cash equivalents | | $ | 603,966 | | | $ | 846,587 | |
Restricted cash | Restricted cash | | 153,113 | | | 1,984 | | Restricted cash | | 4,452 | | | 153,113 | |
Total cash, restricted cash and cash equivalents | Total cash, restricted cash and cash equivalents | | $ | 999,700 | | | $ | 369,331 | | Total cash, restricted cash and cash equivalents | | $ | 608,418 | | | $ | 999,700 | |
| 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) |
| | Three Months Ended February 28, 2022 | | Three Months Ended February 28, 2023 |
| | Common Stock | | | Treasury Stock | | | | Common Stock | | | Treasury Stock | | |
(in thousands, except share and per share data) | (in thousands, except share and per share data) | Number of Shares | Amount | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Number of Shares | Amount | Non-controlling Interest | Total | (in thousands, except share and per share data) | Number of Shares | Amount | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Number of Shares | Amount | Non-controlling Interest | Total |
Balance, December 1, 2021 | 129,060,664 | | $ | 1,290 | | $ | 357,413 | | $ | (105,329) | | $ | 2,378,789 | | (7,580,725) | | $ | (146,206) | | $ | 232 | | $ | 2,486,189 | | |
Balance, December 1, 2022 | | Balance, December 1, 2022 | 129,060,664 | | $ | 1,290 | | $ | 361,199 | | $ | (10,189) | | $ | 3,555,425 | | (11,769,027) | | $ | (323,722) | | $ | 232 | | $ | 3,584,235 | |
Net earnings | Net earnings | | 383,314 | | | 383,314 | | Net earnings | | 179,849 | | | 179,849 | |
Other comprehensive income | Other comprehensive income | | 13,453 | | | 13,453 | | Other comprehensive income | | 34,685 | | | 34,685 | |
Dividends ($0.14 per share) | | (16,986) | | | (16,986) | | |
Dividends ($0.16 per share) | | Dividends ($0.16 per share) | | (18,737) | | | (18,737) | |
Treasury stock acquired | Treasury stock acquired | | (335,500) | | (11,699) | | | (11,699) | | Treasury stock acquired | | (330,000) | | (17,174) | | | (17,174) | |
Issuance of stock under incentive and purchase plans, net of forfeitures | | (1,275) | | | 351,429 | | 6,927 | | | 5,652 | | |
Issuance of stock under incentive and purchase plans, net of shares withheld for taxes | | Issuance of stock under incentive and purchase plans, net of shares withheld for taxes | | 1,630 | | | 243,670 | | 7,094 | | | 8,724 | |
Stock-based compensation | Stock-based compensation | | 10,024 | | | 10,024 | | Stock-based compensation | | 11,611 | | | 11,611 | |
Balance, February 28, 2022 | 129,060,664 | | $ | 1,290 | | $ | 366,162 | | $ | (91,876) | | $ | 2,745,117 | | (7,564,796) | | $ | (150,978) | | $ | 232 | | $ | 2,869,947 | | |
| Balance, February 28, 2023 | | Balance, February 28, 2023 | 129,060,664 | | $ | 1,290 | | $ | 374,440 | | $ | 24,496 | | $ | 3,716,537 | | (11,855,357) | | $ | (333,802) | | $ | 232 | | $ | 3,783,193 | |
| | | Six Months Ended February 28, 2022 | | Six Months Ended February 28, 2023 |
| | Common Stock | | | Treasury Stock | | | | Common Stock | | | Treasury Stock | | |
(in thousands, except share and per share data) | (in thousands, except share and per share data) | Number of Shares | Amount | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Number of Shares | Amount | Non-controlling Interest | Total | (in thousands, except share and per share data) | Number of Shares | Amount | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Number of Shares | Amount | Non-controlling Interest | Total |
Balance, September 1, 2021 | 129,060,664 | | $ | 1,290 | | $ | 368,064 | | $ | (84,820) | | $ | 2,162,925 | | (8,474,075) | | $ | (152,582) | | $ | 232 | | $ | 2,295,109 | | |
Balance, September 1, 2022 | | Balance, September 1, 2022 | 129,060,664 | | $ | 1,290 | | $ | 382,767 | | $ | (114,451) | | $ | 3,312,438 | | (11,564,611) | | $ | (295,847) | | $ | 232 | | $ | 3,286,429 | |
Net earnings | Net earnings | | 616,203 | | | 616,203 | | Net earnings | | 441,623 | | | 441,623 | |
Other comprehensive loss | | (7,056) | | | (7,056) | | |
Dividends ($0.28 per share) | | (34,011) | | | (34,011) | | |
Other comprehensive income | | Other comprehensive income | | 138,947 | | | 138,947 | |
Dividends ($0.32 per share) | | Dividends ($0.32 per share) | | (37,524) | | | (37,524) | |
Treasury stock acquired | Treasury stock acquired | | (495,000) | | (17,010) | | | (17,010) | | Treasury stock acquired | | (1,605,452) | | (66,323) | | | (66,323) | |
Issuance of stock under incentive and purchase plans, net of forfeitures | | (29,333) | | | 1,404,279 | | 18,614 | | | (10,719) | | |
Issuance of stock under incentive and purchase plans, net of shares withheld for taxes | | Issuance of stock under incentive and purchase plans, net of shares withheld for taxes | | (43,157) | | | 1,314,706 | | 28,368 | | | (14,789) | |
Stock-based compensation | Stock-based compensation | | 18,340 | | | 18,340 | | Stock-based compensation | | 25,138 | | | 25,138 | |
| Reclassification of share-based liability awards | Reclassification of share-based liability awards | | 9,091 | | | 9,091 | | Reclassification of share-based liability awards | | 9,692 | | | 9,692 | |
Balance, February 28, 2022 | 129,060,664 | | $ | 1,290 | | $ | 366,162 | | $ | (91,876) | | $ | 2,745,117 | | (7,564,796) | | $ | (150,978) | | $ | 232 | | $ | 2,869,947 | | |
Balance, February 28, 2023 | | Balance, February 28, 2023 | 129,060,664 | | $ | 1,290 | | $ | 374,440 | | $ | 24,496 | | $ | 3,716,537 | | (11,855,357) | | $ | (333,802) | | $ | 232 | | $ | 3,783,193 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended February 28, 2021 |
| Common Stock | | | | Treasury Stock | | |
(in thousands, except share and per share data) | Number of Shares | Amount | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Number of Shares | Amount | Non-controlling Interest | Total |
Balance, December 1, 2020 | 129,060,664 | | $ | 1,290 | | $ | 348,816 | | $ | (111,055) | | $ | 1,857,513 | | (8,992,643) | | $ | (161,877) | | $ | 212 | | $ | 1,934,899 | |
Net earnings | | | | | 66,357 | | | | | 66,357 | |
Other comprehensive income | | | | 8,915 | | | | | | 8,915 | |
Dividends ($0.12 per share) | | | | | (14,427) | | | | | (14,427) | |
Issuance of stock under incentive and purchase plans, net of forfeitures | | | (2,120) | | | | 440,194 | | 7,925 | | | 5,805 | |
Stock-based compensation | | | 7,924 | | | | | | | 7,924 | |
Contribution of non-controlling interest | | | | | | | | 19 | | 19 | |
| | | | | | | | | |
Balance, February 28, 2021 | 129,060,664 | | $ | 1,290 | | $ | 354,620 | | $ | (102,140) | | $ | 1,909,443 | | (8,552,449) | | $ | (153,952) | | $ | 231 | | $ | 2,009,492 | |
| | | | | | | | | |
| Six Months Ended February 28, 2021 |
| Common Stock | | | | Treasury Stock | | |
(in thousands, except share and per share data) | Number of Shares | Amount | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Number of Shares | Amount | Non-controlling Interest | Total |
Balance, September 1, 2020 | 129,060,664 | | $ | 1,290 | | $ | 358,912 | | $ | (103,764) | | $ | 1,807,826 | | (9,839,759) | | $ | (175,063) | | $ | 212 | | $ | 1,889,413 | |
Net earnings | | | | | 130,450 | | | | | 130,450 | |
Other comprehensive income | | | | 1,624 | | | | | | 1,624 | |
Dividends ($0.24 per share) | | | | | (28,833) | | | | | (28,833) | |
Issuance of stock under incentive and purchase plans, net of forfeitures | | | (25,647) | | | | 1,287,310 | | 21,111 | | | (4,536) | |
Stock-based compensation | | | 15,935 | | | | | | | 15,935 | |
Contribution of non-controlling interest | | | | | | | | 19 | | 19 | |
Reclassification of share-based liability awards | | | 5,420 | | | | | | | 5,420 | |
Balance, February 28, 2021 | 129,060,664 | | $ | 1,290 | | $ | 354,620 | | $ | (102,140) | | $ | 1,909,443 | | (8,552,449) | | $ | (153,952) | | $ | 231 | | $ | 2,009,492 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended February 28, 2022 |
| Common Stock | | | | Treasury Stock | | |
(in thousands, except share and per share data) | Number of Shares | Amount | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Number of Shares | Amount | Non-controlling Interest | Total |
Balance, December 1, 2021 | 129,060,664 | | $ | 1,290 | | $ | 357,413 | | $ | (105,329) | | $ | 2,378,789 | | (7,580,725) | | $ | (146,206) | | $ | 232 | | $ | 2,486,189 | |
Net earnings | | | | | 383,314 | | | | | 383,314 | |
Other comprehensive income | | | | 13,453 | | | | | | 13,453 | |
Dividends ($0.14 per share) | | | | | (16,986) | | | | | (16,986) | |
Treasury stock acquired | | | | | | (335,500) | | (11,699) | | | (11,699) | |
Issuance of stock under incentive and purchase plans, net of shares withheld for taxes | | | (1,275) | | | | 351,429 | | 6,927 | | | 5,652 | |
Stock-based compensation | | | 10,024 | | | | | | | 10,024 | |
| | | | | | | | | |
| | | | | | | | | |
Balance, February 28, 2022 | 129,060,664 | | $ | 1,290 | | $ | 366,162 | | $ | (91,876) | | $ | 2,745,117 | | (7,564,796) | | $ | (150,978) | | $ | 232 | | $ | 2,869,947 | |
| | | | | | | | | |
| Six Months Ended February 28, 2022 |
| Common Stock | | | | Treasury Stock | | |
(in thousands, except share and per share data) | Number of Shares | Amount | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Number of Shares | Amount | Non-controlling Interest | Total |
Balance, September 1, 2021 | 129,060,664 | | $ | 1,290 | | $ | 368,064 | | $ | (84,820) | | $ | 2,162,925 | | (8,474,075) | | $ | (152,582) | | $ | 232 | | $ | 2,295,109 | |
Net earnings | | | | | 616,203 | | | | | 616,203 | |
Other comprehensive loss | | | | (7,056) | | | | | | (7,056) | |
Dividends ($0.28 per share) | | | | | (34,011) | | | | | (34,011) | |
Treasury stock acquired | | | | | | (495,000) | | (17,010) | | | (17,010) | |
Issuance of stock under incentive and purchase plans, net of shares withheld for taxes | | | (29,333) | | | | 1,404,279 | | 18,614 | | | (10,719) | |
Stock-based compensation | | | 18,340 | | | | | | | 18,340 | |
| | | | | | | | | |
Reclassification of share-based liability awards | | | 9,091 | | | | | | | 9,091 | |
Balance, February 28, 2022 | 129,060,664 | | $ | 1,290 | | $ | 366,162 | | $ | (91,876) | | $ | 2,745,117 | | (7,564,796) | | $ | (150,978) | | $ | 232 | | $ | 2,869,947 | |
See notes to condensed consolidated financial statements.
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. ACCOUNTING POLICIES
Basis of Presentation
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 year ended August 31, 20212022 (the "2021"2022 Form 10-K") filed by Commercial Metals Company ("CMC," and together with its consolidated subsidiaries, the "Company") with the Securities and Exchange Commission (the "SEC") and include all normal recurring adjustments necessary to present fairly the condensed consolidated balance sheets and the condensed consolidated statements of earnings, comprehensive income, cash flows and stockholders' equity for the periods indicated. These notes should be read in conjunction with the consolidated financial statements and notes included in the 20212022 Form 10-K. The results of operations for the three and six month periods are not necessarily indicative of the results to be expected for the full fiscal year. Any reference in this Form 10-Q to the "corresponding period" or "comparable period" relates to the relevant three or six month period ended February 28, 2021.
2022, as applicable. Any reference in this Form 10-Q to a year refers to the fiscal year ended August 31st of that year, unless otherwise noted.
Recently Issued Accounting Pronouncements
In October 2021, the Financial Accounting Standards Board issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 requires that an acquirer recognize and measure contract assets and liabilities acquired in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This standard is effective for annual periods beginning after December 15, 2022, including interim periods therein, with early adoption permitted. The guidance will be applied prospectively to acquisitions occurring on or after the effective date. The Company will continue to evaluate the impact of this guidance, which will depend on the contract assets and liabilities acquired in future business combinations.
In November 2021, the Financial Accounting Standards Board issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities About Government Assistance. ASU 2021-10 aims to increase the transparency of government assistance through the disclosure of the types of assistance, an entity's accounting for the assistance and the effect of the assistance on an entity's financial statements. This standard is effective for annual periods beginning after December 15, 2021, with early adoption permitted. The Company will continue to evaluate the impact of this guidance based on government assistance received.
NOTE 2. CHANGES IN BUSINESS
PendingTensar Acquisition
On December 3, 2021,April 25, 2022 (the "Tensar Acquisition Date"), the Company signed a definitive agreement to acquirecompleted the acquisition of TAC Acquisition Corp. ("Tensar"), a portfolio company of Castle Harlan Inc.’s fund, Castle Harlan Partners V, L.P., and a leading global provider of engineered solutions for subgrade reinforcement and soil stabilization used in road, infrastructure and commercial construction projects.. The transaction is expected to close during the third quarter of 2022, and is subject to the satisfaction or waiver of customary closing conditions, including customary regulatory review. Upon closing, the Company will pay atotal cash purchase price, net of $19.6 million cash acquired, was approximately $550.0$550 million, subject to customary purchase price adjustments.adjustments, and was funded through domestic cash on-hand. The transaction is not contingent on any financing arrangements.acquired operations in North America are presented within the Company's North America reportable segment, and the remaining acquired operations are presented within the Company's Europe reportable segment.
Facility ClosureThe table below presents the preliminary fair values and Dispositionmeasurement period adjustments that were allocated to Tensar's assets and liabilities as of the Tensar Acquisition Date:
In October 2019, the Company closed the melting operations at its Rancho Cucamonga facility, which was part of the North America segment, and in August 2020, the Company announced plans to sell the facility. Additionally, in September 2021, the Company ceased operations at a rebar fabrication facility adjacent to the Rancho Cucamonga facility. Due to these closures, the Company recorded $5.4 million and $13.4 million of | | | | | | | | | | | | |
(in thousands) | | Estimated Fair Value as Previously Reported(1) | | | | |
Cash and cash equivalents | | $ | 19,551 | | | | | |
Accounts receivable | | 37,741 | | | | | |
Inventories | | 39,462 | | | | | |
Prepaid and other current assets | | 12,528 | | | | | |
Defined benefit pension plan | | 14,620 | | | | | |
Property, plant and equipment | | 85,983 | | | | | |
Intangible assets | | 260,500 | | | | | |
Goodwill | | 186,805 | | | | | |
Other noncurrent assets | | 19,660 | | | | | |
Accounts payable | | (12,134) | | | | | |
Accrued expenses and other payables | | (23,725) | | | | | |
Current maturities of long-term debt | | (3,277) | | | | | |
Deferred income taxes | | (45,055) | | | | | |
Other noncurrent liabilities | | (16,347) | | | | | |
Long-term debt | | (4,312) | | | | | |
Total assets acquired and liabilities assumed | | $ | 572,000 | | | | | |
(1) As previously reported in the three and2022 Form 10-K. No measurement period adjustments occurred during the six months ended February 28, 2021 related to asset impairments, severance, pension curtailment, environmental obligations and vendor agreement terminations. Expenses2023.
recordedPro Forma Supplemental Information
Supplemental information on an unaudited pro forma basis is presented below as if the acquisition of Tensar occurred on September 1, 2020. The pro forma financial information is presented for comparative purposes only, based on certain factually supported estimates and assumptions, which the Company believes to be reasonable, but not necessarily indicative of future results of operations or the results that would have been reported if the acquisition had been completed on September 1, 2020. These results were not used as part of management's analysis of the financial results and performance of the Company. The pro forma adjustments do not reflect anticipated synergies, but rather include the recurring income statement effects of fair value adjustments, such as depreciation and amortization. Further adjustments were made to remove the impact of Tensar's prior management fees, acquisition and integration expenses and interest on debt not assumed in the acquisition. The resulting tax effects of the business combination are also reflected below.
| | | | | | | | | | | | | | |
(in thousands) | | Three Months Ended February 28, 2022 | | Six Months Ended February 28, 2022 |
Pro forma net sales | | $ | 2,059,294 | | | $ | 4,102,962 | |
Pro forma net earnings | | 383,256 | | | 623,633 | |
The pro forma results presented above include, but are not limited to, adjustments to remove the impact of $3.2 million of acquisition and integration expenses from the six months ended February 28, 2022, with no such impact on the three months ended February 28, 2022. Results also reflect increased amortization expense from revalued intangible assets of $3.1 million and $6.2 million in the three and six months ended February 28, 2022, were immaterial. The closures did not meet the criteria for discontinued operations.respectively.
AsAdvanced Steel Recovery Acquisition
On September 15, 2022, the Company completed the acquisition of August 31, 2021,Advanced Steel Recovery, LLC ("ASR"), a supplier of recycled ferrous metals located in Southern California. ASR's primary operations include processing and brokering capabilities that source material for sale into both the associated assetsdomestic and export markets and are presented within the Company's North America reportable segment. The ASR acquisition is not material to the Company's financial position as of February 28, 2023 or results of operations for the Rancho Cucamongathree and six months ended February 28, 2023, and therefore, pro forma operating results and other disclosures for the acquisition are not presented.
Kodiak Acquisition
On November 14, 2022, the Company completed the acquisition of a Galveston, Texas area metals recycling facility and the adjacent rebar fabrication facility ("the Rancho Cucamonga facilities"related assets (collectively, "Kodiak"), comprised of property, plant from Kodiak Resources, Inc. and equipment, net, met the criteria for classification as held for sale. As such, the Company classified $24.9 millionKodiak Properties, L.L.C. Kodiak's operating results are presented within assets held for sale in the Company's consolidated balance sheetsNorth America reportable segment. The Kodiak acquisition is not material to the Company's financial position as of August 31, 2021.February 28, 2023 or results of operations for the three and six months ended February 28, 2023, and therefore, pro forma operating results and other disclosures for the acquisition are not presented.
Facility Disposition
On September 29, 2021, the Company entered into a definitive agreement to sell the assets associated with its Rancho Cucamonga melting operations and adjacent rebar fabrication facility ("the Rancho Cucamonga facilities.facilities"), which were part of the North America segment. On December 28, 2021, the sale of the Rancho Cucamonga facilities was completed for gross proceeds of $313.0 million. A portion of the gross proceeds amounting to $39.0 million werewas set aside in a restricted cash account to facilitate the purchase of like-kind assets. In January 2022, the Company used $7.5 million of the restricted cash on a purchase of a like-kind asset. The remaining balance of $31.5 million was included in restricted cash as of February 28, 2022.
NOTE 3. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following tables reflect the changes in accumulated other comprehensive income (loss) ("AOCI"):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended February 28, 2023 |
(in thousands) | | Foreign Currency Translation | | Derivatives | | Defined Benefit Obligation | | Total AOCI |
Balance, December 1, 2022 | | $ | (204,468) | | | $ | 199,317 | | | $ | (5,038) | | | $ | (10,189) | |
Other comprehensive income (loss) before reclassifications | | 11,628 | | | 29,341 | | | (66) | | | 40,903 | |
Reclassification for gain (1) | | — | | | (1,070) | | | — | | | (1,070) | |
Income tax (expense) benefit | | — | | | (5,177) | | | 29 | | | (5,148) | |
Net other comprehensive income (loss) | | 11,628 | | | 23,094 | | | (37) | | | 34,685 | |
Balance, February 28, 2023 | | $ | (192,840) | | | $ | 222,411 | | | $ | (5,075) | | | $ | 24,496 | |
| | | | | | | | |
| | Six Months Ended February 28, 2023 |
(in thousands) | | Foreign Currency Translation | | Derivatives | | Defined Benefit Obligation | | Total AOCI |
Balance, September 1, 2022 | | $ | (245,897) | | | $ | 138,242 | | | $ | (6,796) | | | $ | (114,451) | |
Other comprehensive income before reclassifications | | 53,057 | | | 113,228 | | | 1,679 | | | 167,964 | |
Reclassification for gain (1) | | — | | | (9,736) | | | — | | | (9,736) | |
Income tax (expense) benefit | | — | | | (19,323) | | | 42 | | | (19,281) | |
Net other comprehensive income | | 53,057 | | | 84,169 | | | 1,721 | | | 138,947 | |
Balance, February 28, 2023 | | $ | (192,840) | | | $ | 222,411 | | | $ | (5,075) | | | $ | 24,496 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | Three Months Ended February 28, 2022 |
(in thousands) | | Foreign Currency Translation | | Derivatives | | Defined Benefit Obligation | | Total AOCI |
Balance, December 1, 2021 | | $ | (145,368) | | | $ | 40,966 | | | $ | (927) | | | $ | (105,329) | |
Other comprehensive income (loss) before reclassifications | | (14,461) | | | 41,044 | | | (8) | | | 26,575 | |
Reclassification for gain (1) | | — | | | (6,536) | | | — | | | (6,536) | |
Income tax (expense) benefit | | — | | | (6,588) | | | 2 | | | (6,586) | |
Net other comprehensive income (loss) | | (14,461) | | | 27,920 | | | (6) | | | 13,453 | |
Balance, February 28, 2022 | | $ | (159,829) | | | $ | 68,886 | | | $ | (933) | | | $ | (91,876) | |
| | | | | | | | |
| | Six Months Ended February 28, 2022 |
(in thousands) | | Foreign Currency Translation | | Derivatives | | Defined Benefit Obligation | | Total AOCI |
Balance, September 1, 2021 | | $ | (105,680) | | | $ | 21,781 | | | $ | (921) | | | $ | (84,820) | |
Other comprehensive income (loss) before reclassifications | | (54,149) | | | 68,518 | | | (16) | | | 14,353 | |
Reclassification for gain (1) | | — | | | (10,325) | | | — | | | (10,325) | |
Income tax (expense) benefit | | — | | | (11,088) | | | 4 | | | (11,084) | |
Net other comprehensive income (loss) | | (54,149) | | | 47,105 | | | (12) | | | (7,056) | |
Balance, February 28, 2022 | | $ | (159,829) | | | $ | 68,886 | | | $ | (933) | | | $ | (91,876) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended February 28, 2021 |
(in thousands) | | Foreign Currency Translation | | Derivatives | | Defined Benefit Obligation | | Total AOCI |
Balance, December 1, 2020 | | $ | (96,321) | | | $ | (10,224) | | | $ | (4,510) | | | $ | (111,055) | |
Other comprehensive income (loss) before reclassifications | | 1,465 | | | 9,535 | | | (14) | | | 10,986 | |
Reclassification for gain (1) | | — | | | (320) | | | — | | | (320) | |
Income tax expense | | — | | | (1,751) | | | — | | | (1,751) | |
Net other comprehensive income (loss) | | 1,465 | | | 7,464 | | | (14) | | | 8,915 | |
Balance, February 28, 2021 | | $ | (94,856) | | | $ | (2,760) | | | $ | (4,524) | | | $ | (102,140) | |
| | | | | | | | |
| | Six Months Ended February 28, 2021 |
(in thousands) | | Foreign Currency Translation | | Derivatives | | Defined Benefit Obligation | | Total AOCI |
Balance, September 1, 2020 | | $ | (87,933) | | | $ | (11,334) | | | $ | (4,497) | | | $ | (103,764) | |
Other comprehensive income (loss) before reclassifications | | (6,923) | | | 10,972 | | | (34) | | | 4,015 | |
Reclassification for gain (1) | | — | | | (387) | | | — | | | (387) | |
Income tax (expense) benefit | | — | | | (2,011) | | | 7 | | | (2,004) | |
Net other comprehensive income (loss) | | (6,923) | | | 8,574 | | | (27) | | | 1,624 | |
Balance, February 28, 2021 | | $ | (94,856) | | | $ | (2,760) | | | $ | (4,524) | | | $ | (102,140) | |
_________________
(1) Reclassifications for gains on derivatives included in net earnings are recorded in cost of goods sold in the condensed consolidated statements of earnings.
NOTE 4. REVENUE RECOGNITION
Revenue related to raw materials, steel products and construction-related solutions in the North America and Europe segments and downstream products in the Europe segment is recognized at a point in time concurrent with the transfer of control, which usually occurs, depending on shipping terms, upon shipment or customer receipt. See Note 15, Operating Segments, for further information about disaggregated revenue by the Company's major product lines.
Each fabricateddownstream product contract sold by the North America segment represents a single performance obligation. Revenue from contracts where the Company provides fabricated product and installation services is recognized over time using an input measure, andmeasure; these contracts represented 7% of net sales in the North America segment in both the three and six months ended February 28, 2023, and 8% and 9% of net sales in the North America segment in the three and six months ended February 28, 2022, respectively, andrespectively. Revenue from contracts where the Company does not provide installation services is recognized over time using an output measure; these contracts represented 11% and 12% of net sales in the North America segment in the three and six months ended February 28, 2021, respectively. Revenue from contracts where the Company does not provide installation services is recognized over time using an output measure,2023, respectively, and these contracts represented 8% and 9% of net sales in the North America segment in the three and six months ended February 28, 2022, respectively, and 9% of net sales in the North America segment in the three and six months ended February 28, 2021. Remaining net sales in the North America segment were recognized at a point in time concurrent with the transfer of control, or as amounts were billed to the customer under an available practical expedient.respectively.
The following table provides information about assets and liabilities from contracts with customers:
| (in thousands) | (in thousands) | | February 28, 2022 | | August 31, 2021 | (in thousands) | | February 28, 2023 | | August 31, 2022 |
Contract assets (included in accounts receivable) | Contract assets (included in accounts receivable) | | $ | 61,884 | | | $ | 64,168 | | Contract assets (included in accounts receivable) | | $ | 68,589 | | | $ | 73,037 | |
Contract liabilities (included in accrued expenses and other payables) | Contract liabilities (included in accrued expenses and other payables) | | 25,302 | | | 23,948 | | Contract liabilities (included in accrued expenses and other payables) | | 30,230 | | | 27,567 | |
The amount of revenue reclassified from August 31, 20212022 contract liabilities during the six months ended February 28, 20222023 was approximately $16.8$20.7 million.
Remaining Performance Obligations
Remaining performance obligations represent the transaction price of fabricated product contracts where revenue is recognized using an input or output measure for which work has not yet been performed. As of February 28, 2022, $805.9 million was2023, revenue totaling $1.0 billion has been allocated to remaining performance obligations in the North America segment related to those contracts.contracts where revenue is recognized using an input or output measure. Of this amount, the Company estimates that approximately 79% of the remaining performance obligations will be recognized in the twelve months after February 28, 2023, and the remainder will be recognized during the subsequent twelve months. The duration of all other contracts in the North America and Europe segments are typically less than one year.
NOTE 5. INVENTORIES, NET
The majority of the Company's inventories are in the form of semi-finished and finished goods.steel products. Under the Company’s vertically integrated business model, steel products are sold to external customers in various stages, from semi-finished billets through fabricated steel, leading these categories to be combined. As such, atcombined as finished goods.
The components of inventories were as follows:
| | | | | | | | | | | | | | |
(in thousands) | | February 28, 2023 | | August 31, 2022 |
Raw materials | | $ | 299,911 | | | $ | 271,756 | |
Work in process | | 5,628 | | | 9,446 | |
Finished goods | | 838,729 | | | 888,494 | |
Total | | $ | 1,144,268 | | | $ | 1,169,696 | |
Inventory write-downs were $1.0 million and $5.5 million during the three and six months ended February 28, 20222023, respectively, and August 31, 2021, workwere primarily recorded in process inventoriesthe Europe segment. Inventory write-downs were immaterial. At February 28, 2022 and August 31, 2021,immaterial in the Company's raw materials inventories were $319.2 million and $286.1 million, respectively.corresponding periods.
NOTE 6. GOODWILL AND OTHER INTANGIBLES
Goodwill by reportable segment at February 28, 2022 is detailed in the following table: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
(in thousands) | | North America | | Europe | | Consolidated |
Goodwill, gross (1) | | $ | 71,941 | | | $ | 4,014 | | | $ | 75,955 | |
Accumulated impairment (1) | | (10,036) | | | (144) | | | (10,180) | |
Goodwill, net (1) | | $ | 61,905 | | | $ | 3,870 | | | $ | 65,775 | |
_________________ | | | | | | | | | | | | | | | | | | | | |
(in thousands) | | North America | | Europe | | Consolidated |
Goodwill, gross | | | | | | |
Balance, September 1, 2022 | | $ | 216,059 | | | $ | 43,115 | | | $ | 259,174 | |
Acquisitions | | 29,503 | | | — | | | 29,503 | |
Foreign currency translation | | — | | | 207 | | | 207 | |
Balance, February 28, 2023 | | 245,562 | | | 43,322 | | | 288,884 | |
| | | | | | |
Accumulated impairment | | | | | | |
Balance, September 1, 2022 | | (10,036) | | | (129) | | | (10,165) | |
Foreign currency translation | | — | | | (8) | | | (8) | |
Balance, February 28, 2023 | | (10,036) | | | (137) | | | (10,173) | |
| | | | | | |
Goodwill, net | | | | | | |
Balance, September 1, 2022 | | 206,023 | | | 42,986 | | | 249,009 | |
Acquisitions | | 29,503 | | | — | | | 29,503 | |
Foreign currency translation | | — | | | 199 | | | 199 | |
Balance, February 28, 2023 | | $ | 235,526 | | | $ | 43,185 | | | $ | 278,711 | |
(1) The change
Intangible assets subject to amortization are detailed in balance from August 31, 2021 was immaterial.the following table:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | February 28, 2023 | | August 31, 2022 |
(in thousands) | | Useful Lives in Years | | Gross Carrying Amount | | Accumulated Amortization | | Net | | Gross Carrying Amount | | Accumulated Amortization | | Net |
Developed technologies | | 1 to 15 | | $ | 148,406 | | | $ | 15,816 | | | $ | 132,590 | | | $ | 147,040 | | | $ | 6,485 | | | $ | 140,555 | |
Customer relationships | | 12 to 17 | | 53,323 | | | 4,243 | | | 49,080 | | | 53,115 | | | 2,116 | | | 50,999 | |
Perpetual lease rights | | 79 | | 5,550 | | | 868 | | | 4,682 | | | 3,584 | | | 744 | | | 2,840 | |
Patents | | 5 to 7.5 | | 7,203 | | | 5,083 | | | 2,120 | | | 7,203 | | | 4,596 | | | 2,607 | |
Trade names | | 5 to 15 | | 3,241 | | | 945 | | | 2,296 | | | 3,212 | | | 764 | | | 2,448 | |
Non-compete agreements | | 5 to 7 | | 2,300 | | | 1,313 | | | 987 | | | 3,050 | | | 1,135 | | | 1,915 | |
Other | | 15 | | 101 | | | 101 | | | — | | | 101 | | | 99 | | | 2 | |
Total | | | | $ | 220,124 | | | $ | 28,369 | | | $ | 191,755 | | | $ | 217,305 | | | $ | 15,939 | | | $ | 201,366 | |
The total gross carrying amounts offoreign currency translation adjustments related to the Company's intangible assets subject to amortization were $20.2 million and $21.7 million, and the total net carrying amounts were $8.7 million and $10.1 million at February 28, 2022 and August 31, 2021, respectively. These assets were included in other noncurrent assets on the Company's condensed consolidated balance sheets. Amortization expense from continuing operations related to suchimmaterial for all periods presented above.
Other indefinite-lived intangible assets was immaterial forconsist of the three and six months ended February 28, 2022 and 2021. Excluding goodwill,following:
| | | | | | | | | | | | | | |
(in thousands) | | February 28, 2023 | | August 31, 2022 |
Trade names | | $ | 53,818 | | | $ | 53,633 | |
In-process research and development | | 2,400 | | | 2,400 | |
Non-compete agreements | | 750 | | | 750 | |
Total | | $ | 56,968 | | | $ | 56,783 | |
The change in the Company did not have any significantbalance of intangible assets with indefinite lives atfrom August 31, 2022 to February 28, 2022.
NOTE 7. LEASES
The following table presents the components of the total leased assets and lease liabilities and their classification in the Company's condensed consolidated balance sheets:
| | | | | | | | | | | | | | | | | | | | |
(in thousands) | | Classification in Condensed Consolidated Balance Sheets | | February 28, 2022 | | August 31, 2021 |
Assets: | | | | | | |
Operating assets | | Other noncurrent assets | | $ | 113,446 | | | $ | 112,202 | |
Finance assets | | Property, plant and equipment, net | | 54,793 | | | 55,308 | |
Total leased assets | | | | $ | 168,239 | | | $ | 167,510 | |
| | | | | | |
Liabilities: | | | | | | |
Operating lease liabilities: | | | | | | |
Current | | Accrued expenses and other payables | | $ | 28,229 | | | $ | 26,433 | |
Long-term | | Other noncurrent liabilities | | 93,272 | | | 93,409 | |
Total operating lease liabilities | | | | 121,501 | | | 119,842 | |
Finance lease liabilities: | | | | | | |
Current | | Current maturities of long-term debt and short-term borrowings | | 16,639 | | | 16,040 | |
Long-term | | Long-term debt | | 33,762 | | | 36,104 | |
Total finance lease liabilities | | | | 50,401 | | | 52,144 | |
Total lease liabilities | | | | $ | 171,902 | | | $ | 171,986 | |
The components of lease expense were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended February 28, | | Six Months Ended February 28, |
(in thousands) | | 2022 | | 2021 | | 2022 | | 2021 |
Operating lease expense | | $ | 8,748 | | | $ | 8,651 | | | $ | 17,332 | | | $ | 17,373 | |
Finance lease expense: | | | | | | | | |
Amortization of assets | | 3,219 | | | 3,219 | | | 6,454 | | | 6,458 | |
Interest on lease liabilities | | 498 | | | 563 | | | 1,012 | | | 1,118 | |
Total finance lease expense | | 3,717 | | | 3,782 | | | 7,466 | | | 7,576 | |
Variable and short-term lease expense | | 4,989 | | | 4,324 | | | 10,151 | | | 9,286 | |
Total lease expense | | $ | 17,454 | | | $ | 16,757 | | | $ | 34,949 | | | $ | 34,235 | |
The weighted average remaining lease term and discount rate for operating and finance leases are presented in the following table: | | | | | | | | | | | | | | |
| | February 28, 2022 | | August 31, 2021 |
Weighted average remaining lease term (years) | | | | |
Operating leases | | 5.8 | | 6.2 |
Finance leases | | 3.3 | | 3.6 |
| | | | |
Weighted average discount rate | | | | |
Operating leases | | 4.262 | % | | 4.451 | % |
Finance leases | | 3.903 | % | | 4.079 | % |
2023 was due to foreign currency translation adjustments.
Cash flowAmortization expense for intangible assets was $6.2 million and other information related to leases is included$12.3 million in the following table:
| | | | | | | | | | | | | | |
| | Six Months Ended February 28, |
(in thousands) | | 2022 | | 2021 |
Cash paid for amounts included in the measurement of lease liabilities: | | | | |
Operating cash outflows from operating leases | | $ | 17,720 | | | $ | 17,812 | |
Operating cash outflows from finance leases | | 1,019 | | | 1,125 | |
Financing cash outflows from finance leases | | 8,445 | | | 7,761 | |
| | | | |
Right of use assets obtained in exchange for lease obligations: | | | | |
Operating leases | | $ | 19,009 | | | $ | 20,249 | |
Finance leases | | 6,716 | | | 8,784 | |
Future maturities of lease liabilities atthree and six months ended February 28, 2022 are presented2023, respectively, of which $4.7 million and $9.3 million, respectively, was recorded in cost of goods sold and $1.5 million and $3.0 million, respectively, was recorded in selling, general and administrative expenses in the following table:condensed consolidated statements of earnings. The Company recorded immaterial amortization expense for intangible assets in the three and six months ended February 28, 2022. Estimated amounts of amortization expense for intangible assets for the next five years are as follows:
| | | | | | | | | | | | | | |
(in thousands) | | Operating Leases | | Finance Leases |
Year 1 | | $ | 32,908 | | | $ | 18,354 | |
Year 2 | | 27,741 | | | 15,949 | |
Year 3 | | 22,178 | | | 12,047 | |
Year 4 | | 17,363 | | | 5,232 | |
Year 5 | | 11,850 | | | 1,719 | |
Thereafter | | 26,761 | | | 410 | |
Total lease payments | | 138,801 | | | 53,711 | |
Less imputed interest | | (17,300) | | | (3,310) | |
Present value of lease liabilities | | $ | 121,501 | | | $ | 50,401 | |
| | | | | | | | |
| | (in thousands) |
Remainder of 2023 | | $ | 12,244 | |
2024 | | 23,734 | |
2025 | | 22,004 | |
2026 | | 20,792 | |
2027 | | 20,684 | |
NOTE 8.7. CREDIT ARRANGEMENTS
Long-term debt was as follows:
| (in thousands) | (in thousands) | | Weighted Average Interest Rate as of February 28, 2022 | | February 28, 2022 | | August 31, 2021 | (in thousands) | | Weighted Average Interest Rate as of February 28, 2023 | | February 28, 2023 | | August 31, 2022 |
2032 Notes | 2032 Notes | | 4.375% | | $ | 300,000 | | | $ | — | | 2032 Notes | | 4.375% | | $ | 300,000 | | | $ | 300,000 | |
2031 Notes | 2031 Notes | | 3.875% | | 300,000 | | | 300,000 | | 2031 Notes | | 3.875% | | 300,000 | | | 300,000 | |
2030 Notes | 2030 Notes | | 4.125% | | 300,000 | | | — | | 2030 Notes | | 4.125% | | 300,000 | | | 300,000 | |
2027 Notes | | 5.375% | | — | | | 300,000 | | |
| 2023 Notes | 2023 Notes | | 4.875% | | 330,000 | | | 330,000 | | 2023 Notes | | 4.875% | | 214,059 | | | 330,000 | |
Series 2022 Bonds, due 2047 | Series 2022 Bonds, due 2047 | | 4.000% | | 145,060 | | | — | | Series 2022 Bonds, due 2047 | | 4.000% | | 145,060 | | | 145,060 | |
Poland Term Loan | Poland Term Loan | | 4.780% | | 40,923 | | | 49,726 | | Poland Term Loan | | — | | — | | | 32,439 | |
Short-term borrowings | Short-term borrowings | | 2.750% | | — | | | 26,560 | | Short-term borrowings | | — | | 22,804 | | | 26,390 | |
Other | Other | | 5.100% | | 19,492 | | | 19,492 | | Other | | 4.600% | | 21,057 | | | 21,278 | |
Finance leases | Finance leases | | 50,401 | | | 52,144 | | Finance leases | | 4.658% | | 72,559 | | | 58,536 | |
Total debt | Total debt | | 1,485,876 | | | 1,077,922 | | Total debt | | 1,375,539 | | | 1,513,703 | |
Less unamortized debt issuance costs | Less unamortized debt issuance costs | | (17,503) | | | (8,141) | | Less unamortized debt issuance costs | | (15,792) | | | (16,496) | |
Plus unamortized bond premium | Plus unamortized bond premium | | 4,936 | | | — | | Plus unamortized bond premium | | 4,743 | | | 4,838 | |
Total amounts outstanding | Total amounts outstanding | | 1,473,309 | | | 1,069,781 | | Total amounts outstanding | | 1,364,490 | | | 1,502,045 | |
| Less current maturities of long-term debt and short-term borrowings | Less current maturities of long-term debt and short-term borrowings | | (27,554) | | | (54,366) | | Less current maturities of long-term debt and short-term borrowings | | (264,762) | | | (388,796) | |
Long-term debt | Long-term debt | | $ | 1,445,755 | | | $ | 1,015,415 | | Long-term debt | | $ | 1,099,728 | | | $ | 1,113,249 | |
The Company's credit arrangements require compliance with certain non-financial and financial covenants, including an interest coverage ratio and a debt to capitalization ratio. At February 28, 2022,2023, the Company was in compliance with all financial covenants contained in its credit arrangements.
Capitalized interest, resulting primarily from the construction of the Company's third micro mill, was $5.4 million and $10.0 million during the three and six months ended February 28, 2023, respectively, compared to $2.6 million and $4.2 million, respectively, during the corresponding periods.
Senior Notes Activity
In JanuaryMay 2013, the Company issued $330.0 million of 4.875% Senior Notes due May 2023 (the "2023 Notes"). As of August 31, 2022, the 2023 Notes were included in current maturities of long-term debt and short-term borrowings in the consolidated balance sheet. In November 2022, the Company issued $300.0repurchased $115.9 million of 4.125% Senior Notes due January 2030 (the "2030 Notes") and $300.0 million of 4.375% Senior Notes due March 2032 (the "2032 Notes"). Aggregate issuance costs associated with the 2030 Notes and 2032 Notes were approximately $9.4 million. Interest on the 2030 Notes is payable semiannually on January 15 and July 15. Interest on the 2032 Notes is payable semiannually on March 15 and September 15.
In July 2017, the Company issued $300.0 million of 5.375% Senior Notes due July 2027 (the “2027 Notes”). In February 2022, the Company redeemed all of the 2027 Notes and recognized a $16.1 million loss on debt extinguishment.
Series 2022 Bonds
In February 2022, the Company announced the issuance of $145.1 million in original aggregate principal amount of tax-exempt bonds (the “Series 2022 Bonds”) by the Industrial Development Authority2023 Notes through a cash tender offer and recognized an immaterial loss on debt extinguishment. The remaining balance of the County$214.1 million was included in current maturities of Maricopa (the "MCIDA"). The Series 2022 Bonds were priced to yield 3.5%long-term debt and provided gross proceeds of $150.0 million. The proceeds were loaned to the Company pursuant to a loan agreement between the Company and the MCIDA, and will be used to fund a portion of the acquisition, construction, equipping and/or operation, as applicable, of the Company’s third micro mill, to be located in Mesa, Arizona. Proceeds from the Series 2022 Bonds are being held in a trust account and will be disbursed as qualified expenditures are made for the construction of the micro mill. As of February 28, 2022, $31.0 million of proceeds were disbursed from the trust account. Remaining proceeds from the Series 2022 Bonds were recorded as restricted cashshort-term borrowings in the condensed consolidated balance sheet as of February 28, 2022.2023.
Issuance costs associated with the Series 2022 Bonds were $3.1 million. The Series 2022 Bonds accrue interest at 4.0%, payable semiannually, and have a maturity date in October 2047.
Credit Facilities
In October 2022, the Company entered into a Sixth Amended and Restated Credit Agreement (as amended, the "Credit Agreement") with a revolving credit facility (the "Revolver") of $600.0 million and a maturity date in October 2027, replacing the Fifth Amended and Restated Credit Agreement with a revolving credit facility of $400.0 million and a maturity date in March 2026. The maximum availability under the Revolver can be increased to $850.0 million with bank approval. The Credit Agreement also provides for a delayed draw senior secured term loan facility with a maximum principal amount of $200.0 million (the “Term Loan”). The Term Loan is coterminous with the Revolver. As of February 28, 2023, the Company had no amounts drawn under the Term Loan. The Company's obligations under the Credit Agreement are secured by its North America inventory. The Credit Agreement's capacity includes a $50.0 million sub-limit for the issuance of stand-by letters of credit. The Company had no amounts drawn under its $400.0 millionthe Revolver or the previous revolving credit facility (the "Revolver") at February 28, 20222023 or August 31, 2021.2022. The availability under the Revolver and the previous revolving credit facility, as applicable, was reduced by outstanding stand-by letters of credit totaling $1.4of $0.9 million and $3.0$1.4 million at February 28, 20222023 and August 31, 2021,2022, respectively.
TheIn November 2022, the Company has a Term Loanrepaid the outstanding principal on its term loan facility (the "Poland Term Loan") through its subsidiary, CMC Poland Sp. z.o.o. ("CMCP"). At February 28, 2022,2023, there was no amount outstanding or available, compared to PLN 171.4152.4 million, or $40.9$32.4 million, was outstanding compared to the maximum amountand available under the facility PLN 190.5 million, or $49.7 million, which was outstanding as of August 31, 2021.2022.
The Company also has credit facilities in Poland through its subsidiary, CMCP. At February 28, 20222023 and August 31, 2021,2022, CMCP's credit facilities totaled PLN 300.0 million, or $71.6$67.4 million and $78.3$63.9 million, respectively. There were 0no amounts outstanding under these facilities as of February 28, 20222023 or August 31, 2021.2022. 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 $4.1$14.6 million and $5.7$1.0 million at February 28, 20222023 and August 31, 2021,2022, respectively.
Accounts Receivable Facilities
In November 2022, the Company terminated its $150.0 million U.S. trade accounts receivable facility. The Company had no advance payments outstanding under its U.S. trade accounts receivablethis facility at February 28, 2022 or August 31, 2021.2022.
The Poland accounts receivable facility had a limit of PLN 288.0 million, or $68.8$64.7 million and $61.3 million, at February 28, 2022.2023 and August 31, 2022, respectively. The Company had 0PLN 101.4 million, or $22.8 million, advance payments outstanding under the Poland accounts receivable facility at February 28, 2022,2023, compared to PLN 101.7124.0 million, or $26.6$26.4 million, advance payments outstanding at August 31, 2021.2022.
NOTE 8. NEW MARKETS TAX CREDIT TRANSACTIONS
During 2016 and 2017, the Company entered into three New Markets Tax Credit (“NMTC”) transactions with U.S. Bancorp Community Development Corporation, a Minnesota corporation ("USBCDC"). The NMTC transactions related to the construction and equipping of Contentsthe micro mill in Durant, Oklahoma, as well as a rebar spooler and automated T-post shop located on the same site. As of August 31, 2022, $17.7 million of USBCDC’s contributions were classified as accrued expenses and other payables in the consolidated balance sheet and $9.5 million of USBCDC’s contributions were classified as other noncurrent liabilities in the consolidated balance sheet, in each case representing deferred revenue to the Company. During December 2022, the seven-year recapture period on the first NMTC transaction, the USBCDC Investment Fund 156, ended, and therefore, the corresponding $17.7 million USBCDC capital contribution was recognized in net sales during the three and six months ended February 28, 2023. See Note 10, New Markets Tax Credit Transactions, to the consolidated financial statements in the 2022 Form 10-K for discussion related to the Company's NMTC transactions.
NOTE 9. DERIVATIVES
The Company's global operations and product lines expose it to risks from fluctuations in metal commodity prices, foreign currency exchange rates, interest rates and natural gas, electricity and other energy prices. 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 net earnings due to price volatility in these commodities, (ii) foreign currency forward contracts that match the expected settlements for purchases and sales denominated in foreign currencies and (iii) natural gas and electricity commodity derivatives to mitigate the risk related to price volatility of these commodities.
The Company considers the total notional value of its futures and forward contracts as the best measure of the volume of derivative transactions. At February 28, 2023, the notional values of the Company's foreign currency and commodity contract commitments were $371.5 million and $453.6 million, respectively. At August 31, 2022, the notional values of the Company's foreign currency and commodity contract commitments were $324.5$253.5 million and $243.2 million, respectively. At August 31, 2021, the notional values of the Company's foreign currency and commodity contract commitments were $389.5 million and $213.4$205.1 million, respectively.
The following table provides information regarding the Company's commodity contract commitments at February 28, 2022:2023: | | | | | | | | | | | | | | | | | |
Commodity | | Long/Short | | Total |
Aluminum | | Long | | 3,6752,750 | | MT |
Aluminum | | Short | | 2,150675 | | MT |
Copper | | Long | | 4311,123 | | MT |
Copper | | Short | | 9,6629,321 | | MT |
Electricity | | Long | | 1,767,0003,405,000 | | MW(h) |
Natural Gas | | Long | | 4,890,2004,910,400 | | MMBtu |
_________________
MT = Metric Ton
MW(h) = Megawatt hour
MMBtu = Metric Million British thermal unit
The Company designates only those contracts which closely match the terms of the underlying transaction as hedges for accounting purposes. Certain foreign currency and commodity contracts were not designated as hedges for accounting purposes, although management believes they are essential economic hedges.
The following table summarizes the location and amounts of the fair value of the Company's derivative instruments and hedged items recognized in the condensed consolidated balance sheets:
| | | | | | | | | | | | | | | | | | | | |
(in thousands) | | Primary Location | | February 28, 2023 | | August 31, 2022 |
Derivative assets: | | | | | | |
Commodity | | Prepaid and other current assets | | $ | 13,826 | | | $ | 26,180 | |
Commodity | | Other noncurrent assets | | 268,203 | | | 134,667 | |
Foreign exchange | | Prepaid and other current assets | | 5,099 | | | 1,296 | |
Derivative liabilities: | | | | | | |
Commodity | | Accrued expenses and other payables | | $ | 6,248 | | | $ | 1,110 | |
Commodity | | Other noncurrent liabilities | | 1,778 | | | 150 | |
Foreign exchange | | Accrued expenses and other payables | | 3,616 | | | 3,126 | |
The following tables summarize activities related to the Company's derivative instruments and hedged items recognized in the condensed consolidated statements of earnings. All other activity related to the Company's derivative instruments and hedged items was immaterial for the periods presented.
| | | Three Months Ended February 28, | | Six Months Ended February 28, | | Three Months Ended February 28, | | Six Months Ended February 28, |
Gain (Loss) on Derivatives Not Designated as Hedging Instruments (in thousands) | Gain (Loss) on Derivatives Not Designated as Hedging Instruments (in thousands) | | Primary Location | | 2022 | | 2021 | | 2022 | | 2021 | Gain (Loss) on Derivatives Not Designated as Hedging Instruments (in thousands) | | Primary Location | | 2023 | | 2022 | | 2023 | | 2022 |
Commodity | Commodity | | Cost of goods sold | | $ | (2,214) | | | $ | (11,025) | | | $ | 532 | | | $ | (16,614) | | Commodity | | Cost of goods sold | | $ | (5,995) | | | $ | (2,214) | | | $ | (9,080) | | | $ | 532 | |
Foreign exchange | Foreign exchange | | SG&A expenses | | (1,048) | | | (125) | | | (9,043) | | | (1,990) | | Foreign exchange | | SG&A expenses | | 2,947 | | | (1,048) | | | 6,409 | | | (9,043) | |
| Effective Portion of Derivatives Designated as Cash Flow Hedging Instruments Recognized in Accumulated Other Comprehensive Loss (in thousands) | | Three Months Ended February 28, | | Six Months Ended February 28, | |
Effective Portion of Derivatives Designated as Cash Flow Hedging Instruments Recognized in Accumulated Other Comprehensive Income (Loss) (in thousands) | | Effective Portion of Derivatives Designated as Cash Flow Hedging Instruments Recognized in Accumulated Other Comprehensive Income (Loss) (in thousands) | | Three Months Ended February 28, | | Six Months Ended February 28, |
| | | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 | | 2023 | | 2022 |
Commodity | Commodity | | $ | 33,190 | | | $ | 7,723 | | | $ | 55,365 | | | $ | 8,887 | | Commodity | | $ | 23,950 | | | $ | 33,190 | | | $ | 91,989 | | | $ | 55,365 | |
|
The Company's natural gas andderivatives accounted for as cash flow hedging instruments have maturities extending to February 2026. The Company's electricity commodity derivatives accounted for as cash flow hedging instruments have maturities extending to February 2025 and December 2030, respectively.2034. Included in the AOCI balance as of February 28, 20222023 was an estimated net gain of $7.7$7.5 million
from cash flow hedging instruments that is expected to be reclassified into net earnings within the next twelve months.months following February 28, 2023. See Note 10, Fair Value, for the fair value of the Company's derivative instruments recorded in the condensed consolidated balance sheets.
NOTE 10. FAIR VALUE
The Company has established a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into 3three 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 within theNote 1, Nature of Operations and Summary of Significant Accounting Policies, footnoteto the consolidated financial statements in the 20212022 Form 10-K.
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) | (in thousands) | | February 28, 2022 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | (in thousands) | | February 28, 2023 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets: | Assets: | | | | | | | | | Assets: | | | | | | | | |
Investment deposit accounts (1) | Investment deposit accounts (1) | | $ | 809,220 | | | $ | 809,220 | | | $ | — | | | $ | — | | Investment deposit accounts (1) | | $ | 540,516 | | | $ | 540,516 | | | $ | — | | | $ | — | |
Commodity derivative assets (2) | Commodity derivative assets (2) | | 82,672 | | | 3,793 | | | — | | | 78,879 | | Commodity derivative assets (2) | | 282,029 | | | 1,187 | | | — | | | 280,842 | |
Foreign exchange derivative assets (2) | Foreign exchange derivative assets (2) | | 1,983 | | | — | | | 1,983 | | | — | | Foreign exchange derivative assets (2) | | 5,099 | | | — | | | 5,099 | | | — | |
Liabilities: | Liabilities: | | Liabilities: | |
Commodity derivative liabilities (2) | Commodity derivative liabilities (2) | | 2,043 | | | 2,043 | | | — | | | — | | Commodity derivative liabilities (2) | | 8,026 | | | 8,026 | | | — | | | — | |
Foreign exchange derivative liabilities (2) | Foreign exchange derivative liabilities (2) | | 8,104 | | | — | | | 8,104 | | | — | | Foreign exchange derivative liabilities (2) | | 3,616 | | | — | | | 3,616 | | | — | |
| | | | | | Fair Value Measurements at Reporting Date Using | | | | | Fair Value Measurements at Reporting Date Using |
(in thousands) | (in thousands) | | August 31, 2021 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | (in thousands) | | August 31, 2022 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets: | Assets: | | | | | | | | | Assets: | | | | | | | | |
Investment deposit accounts (1) | Investment deposit accounts (1) | | $ | 441,297 | | | $ | 441,297 | | | $ | — | | | $ | — | | Investment deposit accounts (1) | | $ | 572,384 | | | $ | 572,384 | | | $ | — | | | $ | — | |
Commodity derivative assets (2) | Commodity derivative assets (2) | | 27,323 | | | 910 | | | — | | | 26,413 | | Commodity derivative assets (2) | | 160,847 | | | 17,347 | | | — | | | 143,500 | |
Foreign exchange derivative assets (2) | Foreign exchange derivative assets (2) | | 2,537 | | | — | | | 2,537 | | | — | | Foreign exchange derivative assets (2) | | 1,296 | | | — | | | 1,296 | | | — | |
Liabilities: | Liabilities: | | Liabilities: | |
Commodity derivative liabilities (2) | Commodity derivative liabilities (2) | | 1,352 | | | 1,352 | | | — | | | — | | Commodity derivative liabilities (2) | | 1,260 | | | 1,260 | | | — | | | — | |
Foreign exchange derivative liabilities (2) | Foreign exchange derivative liabilities (2) | | 1,880 | | | — | | | 1,880 | | | — | | Foreign exchange derivative liabilities (2) | | 3,126 | | | — | | | 3,126 | | | — | |
_________________
(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. Derivatives classified as Level 3 are described below. Further discussion regarding the Company's use of derivative instruments is included in Note 9, Derivatives.
As of August 31, 2022, the Company had one Level 3 commodity derivative. The Company entered into its second and third Level 3 commodity derivatives in September 2022 and January 2023, respectively, with the same counterparty as the first Level 3 commodity derivative. Both the second and third Level 3 commodity derivatives will begin to settle in January 2025.
The fair value estimateestimates of the Level 3 commodity derivative isderivatives are based on an internally developed discounted cash flow modelmodels primarily utilizing unobservable inputs infor which there is little or no market data. The Company forecasts future energy rates using a range of historical prices ("floating rate"). The floating rate is the only significant unobservable input used in the Company's discounted cash flow model.models. The following table summarizes the floating rate used to measure the fair value of the Level 3 commodity derivativederivatives at February 28, 20222023 and 2021:August 31, 2022:
| | | | | | | | | | | | | | | | | | | | |
| | Floating rate (PLN) |
February 28, | | Low | | High | | Average |
2022 | | 271.87 | | | 815.64 | | | 451.69 | |
2021 | | 151.74 | | | 264.53 | | | 221.74 | |
| | | | | | | | | | | | | | | | | | | | |
| | Floating rate (PLN) |
| | Low | | High | | Average |
February 28, 2023 | | 575.51 | | | 1,298.53 | | | 793.65 | |
August 31, 2022 | | 460.11 | | | 1,298.53 | | | 717.22 | |
Below is a reconciliation of the beginning and ending balances of the Level 3 commodity derivativederivatives recognized in the condensed consolidated statements of comprehensive income. The fluctuation in energy rates over time causes volatility in the
fair value estimateestimates and is the primary reason for unrealized gains included in other comprehensive income ("OCI") in the three and six months ended February 28, 20222023 and 2021.2022.
| | | | | | | | |
(in thousands) | | Three Months Ended February 28, 2023 |
Balance, December 1, 2022 | | $ | 241,466 | |
Total gains, realized and unrealized: | | |
Unrealized holding gain before reclassification (1) | | 40,085 | |
Reclassification for gain included in net earnings (2) | | (709) | |
Balance, February 28, 2023 | | $ | 280,842 | |
| | |
(in thousands) | | Six Months Ended February 28, 2023 |
Balance, September 1, 2022 | | $ | 143,500 | |
Total gains, realized and unrealized: | | |
Unrealized holding gain before reclassification (1) | | 144,282 | |
Reclassification for gain included in net earnings (2) | | (6,940) | |
Balance, February 28, 2023 | | $ | 280,842 | |
| | |
(in thousands) | | Three Months Ended February 28, 2022 |
Balance, December 1, 2021 | | $ | 47,892 | |
| | |
Total gains, realized and unrealizedunrealized: | | |
Unrealized holding gain before reclassification (1) | | 36,630 | |
Reclassification for gain included in net earnings (2) | | (5,643) | |
Balance, February 28, 2022 | | $ | 78,879 | |
| | |
(in thousands) | | Six Months Ended February 28, 2022 |
Balance, September 1, 2021 | | $ | 26,413 | |
| | |
Total gains, realized and unrealizedunrealized: | | |
Unrealized holding gain before reclassification (1) | | 61,838 | |
Reclassification for gain included in net earnings (2) | | (9,372) | |
Balance, February 28, 2022 | | $ | 78,879 | |
| | |
(in thousands) | | Three Months Ended February 28, 2021 |
Balance, December 1, 2020 | | $ | (13,614) | |
| | |
Total gains, realized and unrealized | | |
Unrealized holding gain before reclassification (1)
| | 9,582 | |
Reclassification for gain included in net earnings (2)
| | (253) | |
Balance, February 28, 2021 | | $ | (4,285) | |
| | |
(in thousands) | | Six Months Ended February 28, 2021 |
Balance, September 1, 2020 | | $ | (15,007) | |
| | |
Total losses, realized and unrealized | | |
Unrealized holding gain before reclassification (1)
| | 10,975 | |
Reclassification for gain included in net earnings (2)
| | (253) | |
Balance, February 28, 2021 | | $ | (4,285) | |
________________
(1) Unrealized holding gains, net of foreign currency translation, less amounts reclassified are included in OCI in the condensed consolidated statements of comprehensive income.
(2) Gains included in net earnings are recorded in cost of goods sold in the condensed consolidated statements of earnings.
There were no material, non-recurring fair value remeasurements during the three and six months ended February 28, 20222023 or 2021.2022.
The carrying values of the Company's short-term items, including documentary letters of credit and notes payable, approximate fair value.
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 onin the condensed consolidated balance sheets were as follows:
| | | | February 28, 2022 | | August 31, 2021 | | | February 28, 2023 | | August 31, 2022 |
(in thousands) | (in thousands) | | Fair Value Hierarchy | | Carrying Value | | Fair Value | | Carrying Value | | Fair Value | (in thousands) | | Fair Value Hierarchy | | Carrying Value | | Fair Value | | Carrying Value | | Fair Value |
2032 Notes (1) | 2032 Notes (1) | | Level 2 | | $ | 300,000 | | | $ | 289,962 | | | $ | — | | | $ | — | | 2032 Notes (1) | | Level 2 | | $ | 300,000 | | | $ | 259,629 | | | $ | 300,000 | | | $ | 256,488 | |
2031 Notes (1) | 2031 Notes (1) | | Level 2 | | 300,000 | | | 282,312 | | | 300,000 | | | 306,279 | | 2031 Notes (1) | | Level 2 | | 300,000 | | | 254,403 | | | 300,000 | | | 249,888 | |
2030 Notes (1) | 2030 Notes (1) | | Level 2 | | 300,000 | | | 291,018 | | | — | | | — | | 2030 Notes (1) | | Level 2 | | 300,000 | | | 263,439 | | | 300,000 | | | 263,372 | |
2027 Notes (1) | | Level 2 | | — | | | — | | | 300,000 | | | 316,839 | | |
2023 Notes (1) | 2023 Notes (1) | | Level 2 | | 330,000 | | | 337,055 | | | 330,000 | | | 348,071 | | 2023 Notes (1) | | Level 2 | | 214,059 | | | 213,710 | | | 330,000 | | | 330,182 | |
Series 2022 Bonds, due 2047 (1) | Series 2022 Bonds, due 2047 (1) | | Level 2 | | 145,060 | | | 150,430 | | | — | | | — | | Series 2022 Bonds, due 2047 (1) | | Level 2 | | 145,060 | | | 120,324 | | | 145,060 | | | 126,652 | |
Poland Term Loan (2) | Poland Term Loan (2) | | Level 2 | | 40,923 | | | 40,923 | | | 49,726 | | | 49,726 | | Poland Term Loan (2) | | Level 2 | | — | | | — | | | 32,439 | | | 32,439 | |
Short-term borrowings (2) | Short-term borrowings (2) | | Level 2 | | — | | | — | | | 26,560 | | | 26,560 | | Short-term borrowings (2) | | Level 2 | | 22,804 | | | 22,804 | | | 26,390 | | | 26,390 | |
|
_________________
(1) The fair values of the notes and the Series 2022 Bonds were determined based on indicated market values.
(2) The Poland Term Loan and short-term borrowings contain variable interest rates, and as a result, the carrying values approximate fair value.
NOTE 11. STOCK-BASED COMPENSATION PLANS
The Company's stock-based compensation plans are described in Note 13,14, Stock-Based Compensation Plans, to the consolidated financial statements in the 20212022 Form 10-K. In general, restricted stock units vest ratably over a period of three years. Subject to the achievement of performance targets established by the Compensation Committee of CMC's Board of Directors, performance stock units vest after a period of three years.
During the six months ended February 28, 20222023 and 2021,2022, the Company granted the following awards under its stock-based compensation plans:
| | | February 28, 2022 | | February 28, 2021 | | February 28, 2023 | | February 28, 2022 |
(in thousands, except share and per share data) | | Shares Granted | | Weighted Average Grant Date Fair Value | | Shares Granted | | Weighted Average Grant Date Fair Value | |
(in thousands, except per share data) | | (in thousands, except per share data) | | Shares Granted | | Weighted Average Grant Date Fair Value | | Shares Granted | | Weighted Average Grant Date Fair Value |
Equity method | Equity method | | 1,440 | | | $ | 27.95 | | | 1,512 | | | $ | 20.51 | | Equity method | | 1,392 | | | $ | 36.47 | | | 1,440 | | | $ | 27.95 | |
Liability method | Liability method | | 261 | | | N/A | | 324 | | | N/A | Liability method | | 242 | | | N/A | | 261 | | | N/A |
The Company recorded immaterial mark-to-market adjustments on liability awards for the three and six months ended February 28, 20222023 and 2021.2022. At February 28, 2022,2023, the Company had outstanding 591,483514,417 equivalent shares accounted for under the liability method. The Company expects 561,908488,696 equivalent shares to vest.
The following table summarizes total stock-based compensation expense, including fair value remeasurements, which was primarily included in selling, general and administrative expenses onin the Company's condensed consolidated statements of earnings: | | | Three Months Ended February 28, | | Six Months Ended February 28, | | Three Months Ended February 28, | | Six Months Ended February 28, |
(in thousands) | (in thousands) | | 2022 | | 2021 | | 2022 | | 2021 | (in thousands) | | 2023 | | 2022 | | 2023 | | 2022 |
Stock-based compensation expense | Stock-based compensation expense | | $ | 16,251 | | | $ | 12,696 | | | $ | 25,870 | | | $ | 21,758 | | Stock-based compensation expense | | $ | 16,949 | | | $ | 16,251 | | | $ | 33,624 | | | $ | 25,870 | |
NOTE 12. EMPLOYEES' RETIREMENT PLANS
In October 2022, the Company terminated its U.S. Pension Plan (as defined in Note 15, Employees' Retirement Plans, to the consolidated financial statements in the 2022 Form 10-K). As part of the termination, the Company made a contribution of $4.1 million. Plan assets were liquidated to purchase annuity contracts with an insurance company for all participants. The Company recognized a $4.2 million settlement charge as a result of the termination, including an immaterial non-cash charge for unrecognized losses within accumulated other comprehensive income as of the termination date. The $4.2 million settlement charge was recognized within selling, general and administrative expenses in the condensed consolidated statement of earnings during the six months ended February 28, 2023. No benefit obligation or plan assets related to the U.S. Pension Plan remain.
See Note 15, Employees' Retirement Plans, to the consolidated financial statements in the 2022 Form 10-K for information on the Company's remaining defined benefit pension plan (the "U.K. Pension Plan," as defined in Note 15, Employees' Retirement
Plans, to the consolidated financial statements in the 2022 Form 10-K), defined contribution 401(k) retirement plan and Benefit Restoration Plan ("BRP").
NOTE 12.13. STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE
Basic EPSearnings per share ("EPS") is computed based on the weighted average shares of common stock outstanding during the period. Restricted stock is included in the number of shares of common stock issued and outstanding but omitted from the basic EPS calculation until the shares vest. Diluted EPS is computed based on the weighted average shares of common stock plus the effect of dilutive securities outstanding during the period using the treasury stock method. The effect of dilutive securities includes the impact of outstanding stock-based incentive awards and shares purchased by employees through participation in the Company's employee stock purchase plan.
The calculations of basic and diluted EPS from continuing operations were as follows:
| | | Three Months Ended February 28, | | Six Months Ended February 28, | | Three Months Ended February 28, | | Six Months Ended February 28, |
(in thousands, except share and per share data) | (in thousands, except share and per share data) | | 2022 | | 2021 | | 2022 | | 2021 | (in thousands, except share and per share data) | | 2023 | | 2022 | | 2023 | | 2022 |
Earnings from continuing operations | | $ | 383,314 | | | $ | 66,233 | | | $ | 616,203 | | | $ | 130,144 | | |
Net earnings | | Net earnings | | $ | 179,849 | | | $ | 383,314 | | | $ | 441,623 | | | $ | 616,203 | |
| Average basic shares outstanding | Average basic shares outstanding | | 121,458,196 | | | 120,345,432 | | | 121,293,030 | | | 120,052,459 | | Average basic shares outstanding | | 117,224,517 | | | 121,458,196 | | | 117,249,266 | | | 121,293,030 | |
Effect of dilutive securities | Effect of dilutive securities | | 1,394,214 | | | 1,406,427 | | | 1,454,951 | | | 1,619,735 | | Effect of dilutive securities | | 1,498,742 | | | 1,394,214 | | | 1,735,832 | | | 1,454,951 | |
Average diluted shares outstanding | Average diluted shares outstanding | | 122,852,410 | | | 121,751,859 | | | 122,747,981 | | | 121,672,194 | | Average diluted shares outstanding | | 118,723,259 | | | 122,852,410 | | | 118,985,098 | | | 122,747,981 | |
| Earnings per share from continuing operations: | | |
Earnings per share: | | Earnings per share: | |
Basic | Basic | | $ | 3.16 | | | $ | 0.55 | | | $ | 5.08 | | | $ | 1.08 | | Basic | | $ | 1.53 | | | $ | 3.16 | | | $ | 3.77 | | | $ | 5.08 | |
Diluted | Diluted | | $ | 3.12 | | | $ | 0.54 | | | $ | 5.02 | | | $ | 1.07 | | Diluted | | $ | 1.51 | | | $ | 3.12 | | | $ | 3.71 | | | $ | 5.02 | |
Anti-dilutive shares not included above were immaterial for all periods presented.
Restricted stock is included in the number of shares of common stock issued and outstanding, but omitted from the basic EPS calculation until the shares vest.
In October 2021, CMC'sthe Company's Board of Directors authorized a share repurchase program under which CMCthe Company may repurchase up to $350.0 million of shares of CMC common stock. During the three and six months ended February 28, 2022,2023, the Company repurchased 335,500330,000 and 495,0001,605,452 shares of CMC common stock, respectively, at an average purchase price of $34.85$52.04 and $34.34$41.31 per share, respectively. CMCThe Company had remaining authorization to repurchase $333.0$121.8 million of shares of CMC common stock at February 28, 2022.2023.
NOTE 13.14. COMMITMENTS AND CONTINGENCIES
In the ordinary course of conducting its business, the Company becomes involved in litigation, administrative proceedings and governmental investigations, including environmental matters. At February 28, 20222023 and August 31, 2021,2022, the amounts accrued for cleanup and remediation costs at certain sites in response to statutes enforced by the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA") were immaterial. Total accrued environmental liabilities, including CERCLA sites, were $4.3$5.6 million and $7.1$5.3 million at February 28, 20222023 and August 31, 2021,2022, respectively, of which $2.2 million and $2.3$2.0 million were classified as other long-termnoncurrent liabilities atas of February 28, 20222023 and August 31, 2021, respectively.2022. These amounts have not been discounted to their present values. Due to evolving remediation technology, changing regulations, possible third-party contributions, the inherent uncertainties of the estimation process and other factors, amounts accrued could vary significantly from amounts paid.
NOTE 14. BUSINESS15. OPERATING SEGMENTS
The Company structures its business into 2two reportable segments: North America and Europe. See Note 1, Nature of Operations and Summary of Significant Accounting Policies, to the consolidated financial statements in the 20212022 Form 10-K and Note 2, Changes in Business, for more information about the reportable segments, including the types of products and services from which each reportable segment derives its net sales. Corporate and Other contains earnings or losses on assets and liabilities related to the Company's Benefit Restoration PlanBRP assets and short-term investments, expenses of the Company's corporate headquarters, interest expense related to its long-term debt, other revenue resulting from the Company's NMTC transactions and intercompany eliminations.
The following is a summary of certain financial information from continuing operations by reportable segment and Corporate and Other:
| | | Three Months Ended February 28, 2022 | | Three Months Ended February 28, 2023 |
(in thousands) | (in thousands) | | North America | | Europe | | Corporate and Other | | Continuing Operations | (in thousands) | | North America | | Europe | | Corporate and Other | | Total |
Net sales | Net sales | | $ | 1,614,224 | | | $ | 395,758 | | | $ | (1,094) | | | $ | 2,008,888 | | Net sales | | $ | 1,640,933 | | | $ | 355,633 | | | $ | 21,437 | | | $ | 2,018,003 | |
Adjusted EBITDA | Adjusted EBITDA | | 535,463 | | | 81,149 | | | (52,493) | | | 564,119 | | Adjusted EBITDA | | 299,311 | | | 12,949 | | | (15,573) | | | 296,687 | |
| | | Six Months Ended February 28, 2022 | | Six Months Ended February 28, 2023 |
(in thousands) | (in thousands) | | North America | | Europe | | Corporate and Other | | Continuing Operations | (in thousands) | | North America | | Europe | | Corporate and Other | | Total |
Net sales | Net sales | | $ | 3,267,846 | | | $ | 724,814 | | | $ | (1,971) | | | $ | 3,990,689 | | Net sales | | $ | 3,457,832 | | | $ | 762,146 | | | $ | 25,338 | | | $ | 4,245,316 | |
Adjusted EBITDA | Adjusted EBITDA | | 803,987 | | | 160,981 | | | (86,827) | | | 878,141 | | Adjusted EBITDA | | 677,267 | | | 77,454 | | | (55,298) | | | 699,423 | |
Total assets at February 28, 2022 | | 3,553,719 | | | 823,127 | | | 1,127,374 | | | 5,504,220 | | |
Total assets at February 28, 2023 | | Total assets at February 28, 2023 | | 4,660,107 | | | 1,253,468 | | | 571,276 | | | 6,484,851 | |
| | | Three Months Ended February 28, 2021 | | Three Months Ended February 28, 2022 |
(in thousands) | (in thousands) | | North America | | Europe | | Corporate and Other | | Continuing Operations | (in thousands) | | North America | | Europe | | Corporate and Other | | Total |
Net sales | Net sales | | $ | 1,257,486 | | | $ | 202,066 | | | $ | 2,718 | | | $ | 1,462,270 | | Net sales | | $ | 1,614,224 | | | $ | 395,758 | | | $ | (1,094) | | | $ | 2,008,888 | |
Adjusted EBITDA | Adjusted EBITDA | | 171,612 | | | 16,107 | | | (45,986) | | | 141,733 | | Adjusted EBITDA | | 535,463 | | | 81,149 | | | (52,493) | | | 564,119 | |
| | | Six Months Ended February 28, 2021 | | Six Months Ended February 28, 2022 |
(in thousands) | (in thousands) | | North America | | Europe | | Corporate and Other | | Continuing Operations | (in thousands) | | North America | | Europe | | Corporate and Other | | Total |
Net sales | Net sales | | $ | 2,452,499 | | | $ | 396,662 | | | $ | 4,912 | | | $ | 2,854,073 | | Net sales | | $ | 3,267,846 | | | $ | 724,814 | | | $ | (1,971) | | | $ | 3,990,689 | |
Adjusted EBITDA | Adjusted EBITDA | | 327,246 | | | 30,577 | | | (72,457) | | | 285,366 | | Adjusted EBITDA | | 803,987 | | | 160,981 | | | (86,827) | | | 878,141 | |
Total assets at August 31, 2021 | | 3,221,465 | | | 729,766 | | | 687,440 | | | 4,638,671 | | |
Total assets at August 31, 2022 | | Total assets at August 31, 2022 | | 4,467,314 | | | 1,056,101 | | | 713,612 | | | 6,237,027 | |
The following table presents a reconciliation of net earnings from continuing operations to adjusted EBITDA from continuing operations:EBITDA: | | | | Three Months Ended February 28, | | Six Months Ended February 28, | | | Three Months Ended February 28, | | Six Months Ended February 28, |
(in thousands) | (in thousands) | | 2022 | | 2021 | | 2022 | | 2021 | (in thousands) | | 2023 | | 2022 | | 2023 | | 2022 |
Earnings from continuing operations | | $ | 383,314 | | | $ | 66,233 | | | $ | 616,203 | | | $ | 130,144 | | |
Net earnings | | Net earnings | | $ | 179,849 | | | $ | 383,314 | | | $ | 441,623 | | | $ | 616,203 | |
Interest expense | Interest expense | | 12,011 | | | 14,021 | | | 23,046 | | | 28,280 | | Interest expense | | 9,945 | | | 12,011 | | | 22,990 | | | 23,046 | |
Income taxes | Income taxes | | 126,432 | | | 20,941 | | | 155,304 | | | 42,534 | | Income taxes | | 55,641 | | | 126,432 | | | 132,366 | | | 155,304 | |
Depreciation and amortization | Depreciation and amortization | | 41,134 | | | 41,573 | | | 82,360 | | | 83,372 | | Depreciation and amortization | | 51,216 | | | 41,134 | | | 102,399 | | | 82,360 | |
Asset impairments | Asset impairments | | 1,228 | | | 474 | | | 1,228 | | | 4,068 | | Asset impairments | | 36 | | | 1,228 | | | 45 | | | 1,228 | |
Amortization of acquired unfavorable contract backlog | | — | | | (1,509) | | | — | | | (3,032) | | |
Adjusted EBITDA from continuing operations | | $ | 564,119 | | | $ | 141,733 | | | $ | 878,141 | | | $ | 285,366 | | |
Adjusted EBITDA | | Adjusted EBITDA | | $ | 296,687 | | | $ | 564,119 | | | $ | 699,423 | | | $ | 878,141 | |
Disaggregation of Revenue
The following tables display revenue by reportable segment and Corporate and Other from external customers, disaggregated by major product:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended February 28, 2023 |
(in thousands) | | North America | | Europe | | Corporate and Other | | Total |
Major product: | | | | | | | | |
Raw materials | | $ | 315,711 | | | $ | 4,894 | | | $ | — | | | $ | 320,605 | |
Steel products | | 630,724 | | | 272,607 | | | — | | | 903,331 | |
Downstream products | | 539,173 | | | 50,128 | | | — | | | 589,301 | |
Construction-related solutions | | 122,464 | | | 17,380 | | | — | | | 139,844 | |
Other(1) | | 31,921 | | | 9,930 | | | 23,071 | | | 64,922 | |
Net sales from external customers | | 1,639,993 | | | 354,939 | | | 23,071 | | | 2,018,003 | |
Intersegment net sales, eliminated on consolidation | | 940 | | | 694 | | | (1,634) | | | — | |
Net sales | | $ | 1,640,933 | | | $ | 355,633 | | | $ | 21,437 | | | $ | 2,018,003 | |
| | | | | | | | |
| | Six Months Ended February 28, 2023 |
(in thousands) | | North America | | Europe | | Corporate and Other | | Total |
Major product: | | | | | | | | |
Raw materials | | $ | 608,031 | | | $ | 9,761 | | | $ | — | | | $ | 617,792 | |
Steel products | | 1,336,186 | | | 584,543 | | | — | | | 1,920,729 | |
Downstream products | | 1,181,107 | | | 109,710 | | | — | | | 1,290,817 | |
Construction-related solutions | | 264,836 | | | 36,826 | | | — | | | 301,662 | |
Other(1) | | 65,081 | | | 20,048 | | | 29,187 | | | 114,316 | |
Net sales from external customers | | 3,455,241 | | | 760,888 | | | 29,187 | | | 4,245,316 | |
Intersegment net sales, eliminated on consolidation | | 2,591 | | | 1,258 | | | (3,849) | | | — | |
Net sales | | $ | 3,457,832 | | | $ | 762,146 | | | $ | 25,338 | | | $ | 4,245,316 | |
(1) Other revenue during the three and six months ended February 28, 2023 includes $17.7 million derived from the Company's NMTC transactions. See Note 8, New Markets Tax Credit Transactions, for further information.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended February 28, 2022 |
(in thousands) | | North America | | Europe | | Corporate and Other | | Total |
Major product: | | | | | | | | |
Raw materials | | $ | 366,941 | | | $ | 5,864 | | | $ | — | | | $ | 372,805 | |
Steel products | | 666,047 | | | 320,414 | | | — | | | 986,461 | |
Downstream products | | 459,753 | | | 59,541 | | | — | | | 519,294 | |
Other | | 121,483 | | | 9,530 | | | (685) | | | 130,328 | |
Net sales from external customers | | 1,614,224 | | | 395,349 | | | (685) | | | 2,008,888 | |
Intersegment net sales, eliminated on consolidation | | — | | | 409 | | | (409) | | | — | |
Net sales | | $ | 1,614,224 | | | $ | 395,758 | | | $ | (1,094) | | | $ | 2,008,888 | |
| | | | | | | | |
| | Six Months Ended February 28, 2022 |
(in thousands) | | North America | | Europe | | Corporate and Other | | Total |
Major product: | | | | | | | | |
Raw materials | | $ | 720,033 | | | $ | 12,824 | | | $ | — | | | $ | 732,857 | |
Steel products | | 1,341,089 | | | 563,559 | | | — | | | 1,904,648 | |
Downstream products | | 974,149 | | | 129,613 | | | — | | | 1,103,762 | |
Other | | 232,575 | | | 17,915 | | | (1,068) | | | 249,422 | |
Net sales from external customers | | 3,267,846 | | | 723,911 | | | (1,068) | | | 3,990,689 | |
Intersegment net sales, eliminated on consolidation | | — | | | 903 | | | (903) | | | — | |
Net sales | | $ | 3,267,846 | | | $ | 724,814 | | | $ | (1,971) | | | $ | 3,990,689 | |
| | | Three Months Ended February 28, 2021 | | Three Months Ended February 28, 2022 |
(in thousands) | (in thousands) | | North America | | Europe | | Corporate and Other | | Total | (in thousands) | | North America | | Europe | | Corporate and Other | | Total |
Major product: | Major product: | | | | | | | | | Major product: | | | | | | | | |
Raw materials | Raw materials | | $ | 255,012 | | | $ | 4,775 | | | $ | — | | | $ | 259,787 | | Raw materials | | $ | 366,941 | | | $ | 5,864 | | | $ | — | | | $ | 372,805 | |
Steel products | Steel products | | 514,201 | | | 157,482 | | | — | | | 671,683 | | Steel products | | 666,047 | | | 320,414 | | | — | | | 986,461 | |
Downstream products | Downstream products | | 400,397 | | | 33,762 | | | — | | | 434,159 | | Downstream products | | 459,753 | | | 59,541 | | | — | | | 519,294 | |
Construction-related solutions | | Construction-related solutions | | 83,638 | | | — | | | — | | | 83,638 | |
Other | Other | | 87,876 | | | 5,540 | | | 3,225 | | | 96,641 | | Other | | 37,845 | | | 9,530 | | | (685) | | | 46,690 | |
Net sales from external customers | Net sales from external customers | | 1,257,486 | | | 201,559 | | | 3,225 | | | 1,462,270 | | Net sales from external customers | | 1,614,224 | | | 395,349 | | | (685) | | | 2,008,888 | |
Intersegment net sales, eliminated on consolidation | Intersegment net sales, eliminated on consolidation | | — | | | 507 | | | (507) | | | — | | Intersegment net sales, eliminated on consolidation | | — | | | 409 | | | (409) | | | — | |
Net sales | Net sales | | $ | 1,257,486 | | | $ | 202,066 | | | $ | 2,718 | | | $ | 1,462,270 | | Net sales | | $ | 1,614,224 | | | $ | 395,758 | | | $ | (1,094) | | | $ | 2,008,888 | |
| | | Six Months Ended February 28, 2021 | | Six Months Ended February 28, 2022 |
(in thousands) | (in thousands) | | North America | | Europe | | Corporate and Other | | Total | (in thousands) | | North America | | Europe | | Corporate and Other | | Total |
Major product: | Major product: | | | | | | | | | Major product: | | | | | | | | |
Raw materials | Raw materials | | $ | 465,249 | | | $ | 7,605 | | | $ | — | | | $ | 472,854 | | Raw materials | | $ | 720,033 | | | $ | 12,824 | | | $ | — | | | $ | 732,857 | |
Steel products | Steel products | | 971,858 | | | 308,937 | | | — | | | 1,280,795 | | Steel products | | 1,341,089 | | | 563,559 | | | — | | | 1,904,648 | |
Downstream products | Downstream products | | 837,426 | | | 68,235 | | | — | | | 905,661 | | Downstream products | | 974,149 | | | 129,613 | | | — | | | 1,103,762 | |
Construction-related solutions | | Construction-related solutions | | 166,137 | | | — | | | — | | | 166,137 | |
Other | Other | | 177,966 | | | 10,967 | | | 5,830 | | | 194,763 | | Other | | 66,438 | | | 17,915 | | | (1,068) | | | 83,285 | |
Net sales from external customers | Net sales from external customers | | 2,452,499 | | | 395,744 | | | 5,830 | | | 2,854,073 | | Net sales from external customers | | 3,267,846 | | | 723,911 | | | (1,068) | | | 3,990,689 | |
Intersegment net sales, eliminated on consolidation | Intersegment net sales, eliminated on consolidation | | — | | | 918 | | | (918) | | | — | | Intersegment net sales, eliminated on consolidation | | — | | | 903 | | | (903) | | | — | |
Net sales | Net sales | | $ | 2,452,499 | | | $ | 396,662 | | | $ | 4,912 | | | $ | 2,854,073 | | Net sales | | $ | 3,267,846 | | | $ | 724,814 | | | $ | (1,971) | | | $ | 3,990,689 | |
NOTE 16. SUBSEQUENT EVENTS
On March 3, 2023, the Company completed the acquisition of all the assets of Roane Metals Group, LLC ("Roane"), a supplier of recycled metals with two facilities located in eastern Tennessee. The majority of volumes processed by Roane relate to obsolete ferrous scrap metals expected to be consumed by the Company's steel mill operations. The Roane acquisition is not material to the Company's financial position as of February 28, 2023 or results of operations for the three and six months ended February 28, 2023, and therefore, pro forma operating results and other disclosures for the acquisition are not presented.
22
On March 17, 2023, the Company completed the acquisition of Tendon Systems, LLC ("Tendon"), a leading provider of post-tensioning, barrier cable and concrete restoration solutions to the southeastern U.S. The Tendon acquisition is not material to the Company's financial position as of February 28, 2023 or results of operations for the three and six months ended February 28, 2023, and therefore, pro forma operating results and other disclosures for the acquisition are not presented.
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 condensed consolidated financial statements and the notes thereto, which are included in this Quarterly Report on Form 10-Q (this "Form 10-Q"), and our consolidated financial statements and the notes thereto, which are included in our Annual Report on Form 10-K for the year ended August 31, 20212022 (the "2021"2022 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 Form 10-Q was filed with the Securities and Exchange Commission ("SEC") or, with respect 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 Item 2 of this Form 10-Q and in the sections entitled "Risk Factors" in Part I, Item 1A of our 20212022 Form 10-K and Part II, Item 1A of this Form 10-Q. 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.
Any reference in this Form 10-Q to the "corresponding period" or "comparable period" relates to the relevant three or six month period ended February 28, 2021.2022. Any reference in this Form 10-Q to a year refers to the fiscal year ended August 31st of that year, unless otherwise noted.
BUSINESS CONDITIONS AND DEVELOPMENTS
Tensar Acquisition
On April 25, 2022, we completed the acquisition of TAC Acquisition Corp. ("Tensar") for approximately $550 million, net of cash acquired. Through its patented foundation systems, Tensar produces ground stabilization and soil reinforcement solutions that complement our existing concrete reinforcement product lines and broaden our ability to address multiple early phases of commercial and infrastructure construction, including subgrade, foundation and structures. End customers for these products include commercial, industrial and residential site developers, mining and oil and gas companies, transportation authorities, coastal and waterway authorities and waste management companies. The acquired operations within North America are presented within our North America reportable segment and the remaining acquired operations are presented within our Europe reportable segment. See Note 2, Changes in Business, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information about the Tensar acquisition.
Advanced Steel Recovery Acquisition
On September 15, 2022, we completed the acquisition of Advanced Steel Recovery, LLC ("ASR"), a supplier of recycled ferrous metals located in Southern California. ASR's primary operations include processing and brokering capabilities that source material for sale into both the domestic and export markets and are presented within our North America reportable segment.
Kodiak Acquisition
On November 14, 2022, we completed the acquisition of a Galveston, Texas area metals recycling facility and related assets (collectively, "Kodiak") from Kodiak Resources, Inc. and Kodiak Properties, L.L.C. Kodiak's operating results are presented within our North America reportable segment.
Capital Expenditures
In September 2021, we began the construction of a third micro mill. This micro mill will be the first in the world with the capability to produce merchant bar quality products through a continuous production process and will employ the latest technology in electric arc furnace ("EAF") power supply systems which will allow us to directly connect the EAF and the ladle furnace to renewable energy sources such as solar and wind. The new facility, located in Mesa, Arizona, will replace the rebar capacity at our Rancho Cucamonga, California mill, which was sold during fiscal 2022, and will allow us to more efficiently meet West Coast demand for steel products. We expect this micro mill to be commissioned in spring of 2023. For further details on the sale of the Rancho Cucamonga, California mill, refer to Note 2, Changes in Business, in Part I, Item 1, Financial Statements, of this Form 10-Q.
In December 2022, we announced that our planned fourth micro mill will be located in Berkeley County, West Virginia. This new micro mill will be geographically situated to serve the Northeast, Mid-Atlantic and Mid-Western U.S. markets and will enhance our steel production capabilities by achieving synergies within the existing network of mills and downstream fabrication plants. We expect this micro mill to be commissioned in late calendar 2025.
Senior Notes Activity
In November 2022, we repurchased $115.9 million in aggregate principal amount of the 4.875% Senior Notes due 2023 (the “2023 Notes”) through a cash tender offer. The remaining $214.1 million of outstanding principal on the 2023 Notes is due on
May 15, 2023 and was included in current maturities of long-term debt and short-term borrowings in the condensed consolidated balance sheet as of February 28, 2023.
Russian Invasion of Ukraine
The Russian invasion of Ukraine did not have a direct material adverse impact on our business, financial condition or results of operations during the three or six months ended February 28, 2023 or 2022. Our Europe segment has not had an interruption in energy supply and was able to identify alternate sources for a limited number of materials previously procured through Russia. However, we will continue to monitor disruptions in supply of energy and materials and the indirect effects on our operations of inflationary pressures, foreign exchange rate fluctuations, commodity pricing, potential cybersecurity risks and sanctions resulting from the invasion.
See Part I, Item 1A, Risk Factors, of our 2022 Form 10-K and Part II, Item 1A, Risk Factors, of this Form 10-Q, for further discussion related to the above business conditions and developments.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There have been no material changes to our critical accounting policies and estimates as set forth in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, included in our 20212022 Form 10-K.
RESULTS OF OPERATIONS SUMMARY
Business Overview
As aOur vertically integrated organization, westeel-related operations manufacture, recycle and fabricate steel and metal products and provide related materials and services through a network of facilities that includes seven electric arc furnace ("EAF")EAF mini mills, two EAF micro mills, one rerolling mill, steel fabrication and processing plants, construction-related product warehouses and metal recycling facilities in the United States and Poland. Through our Tensar operations, CMC is a leading global provider of innovative ground and soil stabilization solutions selling into more than 80 national markets through two major product lines: Tensar® geogrids and Geopier® foundation systems. Our operations are conducted through two reportable segments: North America and Europe.
Key Performance Indicators
When consideringevaluating our results for the period, we evaluate our operating performance by comparingcompare net sales, in the aggregate and for both of our segments, in the current period to net sales in the corresponding period. In doing so, we focus on changes in average selling price per ton and tons shipped compared to the prior period for each of our vertically integrated product categories (raw materials, steel products and downstream products) as these are the two variables that typically have the greatest impact on our results of operations. We group our products into three categories: raw materials, steel products and downstream products.net sales. Raw materials include ferrous and nonferrous scrap, steel products include rebar, merchant and other steel products, such as billets and wire rod, and downstream products include fabricated rebar and steel fence post.
Key Performance Indicatorsposts.
Adjusted EBITDA from continuing operations ("adjusted EBITDA") is used by management to compare and evaluate the period-over-period underlying business operational performance of our segments. Adjusted EBITDA is the sum of the Company's earnings from continuing operations before interest expense, income taxes, depreciation and amortization and impairment expense. Although there are many factors that can impact a segment’s adjusted EBITDA and, therefore, our overall earnings, changes in metal margins of our steel products metal margin and downstream products margin over scrap costs period-over-period areis a consistent areasarea of focus for our Company and industry. Steel products metalMetal margin and downstream products margin over scrap costs are metricsis a metric used by management to monitor the results of our vertically integrated organization. SteelFor our steel products, metal margin is the difference between the average selling price per ton of rebar, merchant and other steel products and the cost of ferrous scrap per ton utilized by our steel mills to produce these products. An increase or decrease in input costs can impact profitability of these products when there is no corresponding change in selling prices due to competitive pressures on prices.
Downstream products The metal margin over scrap costsfor our downstream products is the difference between the average selling price per ton of fabricated rebar and steel fence post products and the scrap input costs to produce these products. The majority of our downstream products selling prices per ton are fixed at the beginning of a project and these projects last one to two years on average. Because the selling price generally remains fixed over the life of a project, changes in input costs over the life of the project can significantly impact profitability.
Impact of COVID-19
The impact ofFinancial Results Overview
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended February 28, | | Six Months Ended February 28, |
(in thousands, except per share data) | | 2023 | | 2022 | | 2023 | | 2022 |
Net sales | | $ | 2,018,003 | | | $ | 2,008,888 | | | $ | 4,245,316 | | | $ | 3,990,689 | |
Net earnings | | 179,849 | | | 383,314 | | | 441,623 | | | 616,203 | |
Diluted earnings per share | | $ | 1.51 | | | $ | 3.12 | | | $ | 3.71 | | | $ | 5.02 | |
Net sales remained relatively flat for the COVID-19 pandemic ("COVID-19"three months ended February 28, 2023, compared to the corresponding period, and increased $254.6 million, or "pandemic") on6%, for the six months ended February 28, 2023, compared to the corresponding period. Net sales in our operations was limitedNorth America segment increased in the six months ended February 28, 2023, as compared to the corresponding period, primarily due to a year-over-year increase in downstream products average selling prices, which more than offset a year-over-year decrease in raw materials average selling prices. Net sales in our Europe segment also increased during the six months ended February 28, 20222023, as compared to the corresponding period, due to a greater volume of shipments of steel products, which mitigated a reduction in steel products average selling prices. The acquired Tensar operations also contributed to the period-over-period changes by providing $51.4 million and 2021. We continue to evaluate the nature and extent of future impacts of the evolving pandemic on our operations and are complying with applicable federal, state and local law and considering relevant guidance, including the guidelines of the U.S. Centers for Disease Control and other authorities, to prioritize the health and safety of our employees, families, suppliers, customers and communities. Given the dynamic and uncertain nature and duration of the pandemic, we cannot reasonably estimate the long-term impact of COVID-19 on our business, results of operations and overall financial performance at this time.
Financial Results Overview
The following discussion of our results of operations is based on our continuing operations.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended February 28, | | Six Months Ended February 28, |
(in thousands, except per share data) | | 2022 | | 2021 | | 2022 | | 2021 |
Net sales | | $ | 2,008,888 | | | $ | 1,462,270 | | | $ | 3,990,689 | | | $ | 2,854,073 | |
Earnings from continuing operations | | 383,314 | | | 66,233 | | | 616,203 | | | 130,144 | |
Diluted earnings per share | | $ | 3.12 | | | $ | 0.54 | | | $ | 5.02 | | | $ | 1.07 | |
Net$113.0 million in net sales forduring the three and six months ended February 28, 2022 increased $546.6 million, or 37%, and $1.1 billion, or 40%,2023, respectively, compared towith no such activity in the corresponding periods. The growth in net sales is largely attributable to rising selling prices across all major product lines in both of our segments for the three and six months ended February 28, 2022, compared to the corresponding periods. Continued strong demand from robust construction activity in all of our North America and Europe end-use markets was the primary driver for the increase in average selling prices.
During the three and six months ended February 28, 2022,2023, we achieved net earnings from continuing operationsof $179.8 million and $441.6 million, respectively, compared to net earnings of $383.3 million and $616.2 million, respectively.respectively, during the corresponding periods. Included in net earnings from continuing operations during the three and six months ended February 28, 2022 was a $273.3 million gain on the sale of the Rancho Cucamonga facilities. See Note 2, Changes in Business, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information on the sale of the Rancho Cucamonga facilities. Earnings from continuing operations, less the gain on the sale of the Rancho Cucamonga facilities, increased 66% and 163% duringThe remaining change in net earnings in the three and six months ended February 28, 2022, respectively,2023, compared to the corresponding periods. These increases wereperiods, was an increase driven by the significant expansion of steel products metal margin per ton in both of our segments and raw materialsdownstream products margin over purchase costscrap per ton in our North America segment. Selling prices forsegment, partially offset by steel products and raw materials outpaced the rising input costs of ferrous scrap utilizedmetal margin compression in our steel mill operations and the price paid to purchase ferrous and nonferrous scrap in our scrap metal recycling operations, as well as increases in the cost of freight, energy and other steelmaking inputs.Europe segment.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $7.2$22.4 million and $17.0$55.0 million forduring the three and six months ended February 28, 2022, respectively, compared to the corresponding periods. The increases were driven in part by increases in expenses related to labor, professional services and travel of $1.5 million, $2.2 million and $1.0 million during the three months ended February 28, 2022, respectively, and $5.1 million, $4.9 million and $2.3 million during the six months ended February 28, 2022,2023, respectively, compared to the corresponding periods. Contributing to the year-over-year increaseperiod-over-period increases were $22.0 million and $43.9 million of selling, general and administrative expenses from Tensar operations' commercial and engineering support in professional servicesthe three and six months ended February 28, 2023, respectively, with no such expenses duringin the corresponding periods. Additionally, the six months ended February 28, 2022 were $3.22023 included a $4.2 million of acquisition-related costs incurred during the first quarter of 2022,pension plan settlement charge, with no such costssettlement charge in the corresponding period. See Note 12, Employees' Retirement Plans, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information on the pension plan termination activity.
Interest Expense
Interest expense decreased $2.0 million and $5.2by $2.1 million during the three months ended February 28, 2023, compared to the corresponding period, and remained flat during the six months ended February 28, 2022, respectively,2023, compared to the corresponding periods. The decreases were drivenperiod. Contributing to the quarter-over-quarter decrease in part by the lower interest expense on the $300.0 million of 3.875% Senior Notes due 2031, which were outstanding during the three and six months ended February 28, 2022, compared to the interest expense on the $350.02023 was a $2.8 million of 5.750% Senior Notes due 2026, which were outstanding during the corresponding periods before their redemptionincrease in February 2021. Additionally, total capitalized interest, of $2.6 million and $4.2 million was recorded during the three and six months ended February 28, 2022, respectively. Total capitalized interest increased $1.9 million and $3.0 million during the three and six months ended February 28, 2022, compared to the corresponding periods, due toperiod, resulting from the construction of the Company's third micro mill, to be located in Mesa, Arizona.mill.
Income Taxes
The effective income tax rates from continuing operations for the three and six months ended February 28, 20222023 were 23.6% and 23.1%, respectively, compared to 24.8% and 20.1%, respectively, compared to 24.0% and 24.6% in the corresponding periods. The decrease in the effective income tax rate from continuing operations remained relatively flat for the three months ended February 28, 2022 when2023, compared with the corresponding period, ending February 28, 2021.is due to multiple factors of which no single item was material. The decreaseincrease in the effective income tax rate for the six months ended February 28, 20222023, compared with the corresponding period, is primarily due to the recognition of a capital losstax benefit on a tax restructuring transaction during the first quarter of fiscal 2022.2022 that did not recur in 2023.
SEGMENT OPERATING DATA
Unless otherwise indicated, all dollar amounts below are from continuing operations and calculated before income taxes. See Note 14, Business Segments, for more information. The operational data by product category presented in the tables below reflects activity from sales of raw materials, steel products and downstream products, as applicable, which comprise the majority of sales in North America and Europe. The data is calculated using averages, and therefore, it is not meaningful to quantify the effect that any individual componentmetric had on the segment's net sales or adjusted EBITDA. See Note 15, Operating Segments, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information on our reportable segments.
North America | | | | Three Months Ended February 28, | | Six Months Ended February 28, | | | Three Months Ended February 28, | | Six Months Ended February 28, |
(in thousands) | | 2022 | | 2021 | | 2022 | | 2021 | |
(in thousands, except per ton amounts) | | (in thousands, except per ton amounts) | | 2023 | | 2022 | | 2023 | | 2022 |
Net sales | Net sales | | $ | 1,614,224 | | | $ | 1,257,486 | | | $ | 3,267,846 | | | $ | 2,452,499 | | Net sales | | $ | 1,640,933 | | | $ | 1,614,224 | | | $ | 3,457,832 | | | $ | 3,267,846 | |
Adjusted EBITDA | Adjusted EBITDA | | 535,463 | | | 171,612 | | | 803,987 | | | 327,246 | | Adjusted EBITDA | | 299,311 | | | 535,463 | | | 677,267 | | | 803,987 | |
| External tons shipped (in thousands) | | |
External tons shipped | | External tons shipped | |
Raw materials | Raw materials | | 329 | | | 302 | | | 663 | | | 632 | | Raw materials | | 321 | | | 329 | | | 637 | | | 663 | |
Rebar | Rebar | | 407 | | | 472 | | | 849 | | | 958 | | Rebar | | 425 | | | 407 | | | 886 | | | 849 | |
Merchant and other | Merchant and other | | 245 | | | 268 | | | 502 | | | 532 | | Merchant and other | | 236 | | | 245 | | | 479 | | | 502 | |
Steel products | Steel products | | 652 | | | 740 | | | 1,351 | | | 1,490 | | Steel products | | 661 | | | 652 | | | 1,365 | | | 1,351 | |
Downstream products | Downstream products | | 327 | | | 343 | | | 727 | | | 714 | | Downstream products | | 311 | | | 327 | | | 693 | | | 727 | |
| Average selling price (per ton) | Average selling price (per ton) | | Average selling price (per ton) | |
Raw materials | | Raw materials | | $ | 868 | | | $ | 1,103 | | | $ | 846 | | | $ | 1,068 | |
Steel products | Steel products | | $ | 1,041 | | | $ | 695 | | | $ | 1,007 | | | $ | 653 | | Steel products | | 985 | | | 1,041 | | | 1,003 | | | 1,007 | |
Downstream products | Downstream products | | 1,169 | | | 929 | | | 1,126 | | | 931 | | Downstream products | | 1,418 | | | 1,169 | | | 1,408 | | | 1,126 | |
| Cost of raw materials per ton | | Cost of raw materials per ton | | $ | 639 | | | $ | 834 | | | $ | 618 | | | $ | 800 | |
Cost of ferrous scrap utilized per ton | Cost of ferrous scrap utilized per ton | | $ | 436 | | | $ | 344 | | | $ | 432 | | | $ | 304 | | Cost of ferrous scrap utilized per ton | | 346 | | | 436 | | | 335 | | | 432 | |
Steel products metal margin per ton | Steel products metal margin per ton | | 605 | | | 351 | | | 575 | | | 349 | | Steel products metal margin per ton | | 639 | | | 605 | | | 668 | | | 575 | |
Net sales for the three and six months ended February 28, 2022 increased $356.7 million, or 28%, and $815.3 million, or 33%, respectively, compared to the corresponding periods. The increase in net sales duringour North America segment remained relatively flat for the three months ended February 28, 2022 was primarily due to average selling price increases of 30% for raw materials, 50% for steel products and 26% for downstream products2023, compared to the corresponding period. Similarly, duringperiod, and increased $190.0 million, or 6%, for the six months ended February 28, 2022, we experienced average selling price increases of 46% for raw materials, 54% for steel products and 21% for downstream products2023, compared to the corresponding period. The rise inWhile average selling prices is supported by strengthened demand in our end-use markets due to greater construction and industrial activity compared to the corresponding periods. While shipment volumes of raw materials and downstream products remained relatively flatincreased 21% and 25%, respectively, during the three and six months ended February 28, 2022,2023, compared to the corresponding periods, shipments of steel products declined 12% and 9%, respectively. The decreasesraw materials average selling prices decreased 21% in shipments inboth the three and six months ended February 28, 2022 was a result of planned maintenance activities during the second quarter of 2022, coupled with stronger than normal shipment levels during2023, compared to the corresponding periods.
Adjusted EBITDA The period-over-period increases in average selling prices for downstream products, many of which are fixed at the beginning of the project, reflected the increased input costs from rising scrap and energy prices during late 2021 and 2022 when the contracts were entered into. The increased net sales resulting from shipments of these higher priced downstream products contracts were partially offset by the impact from the period-over-period reductions in raw materials average selling prices caused by the decrease in ferrous scrap prices during the three and six months ended February 28, 2022 increased $363.92023, compared to the corresponding periods. Net sales were impacted to a lesser extent by volumes, which remained relatively flat across all product lines during the three and six months ended February 28, 2023, compared to the corresponding periods. Although volumes during the second quarter of 2023 were negatively impacted by weather-related conditions, including significant precipitation in key markets, there was no impact on volumes from the planned maintenance that occurred during the second quarter of 2023, compared to the impact on volumes from the planned maintenance that occurred during the second quarter of 2022. The acquired Tensar operations also contributed $34.0 million and $476.7$76.1 million of net sales during the three and six months ended February 28, 2023, respectively, with no such activity in the corresponding periods.
During the three and six months ended February 28, 2023, we achieved adjusted EBITDA of $299.3 million and $677.3 million, respectively, compared to adjusted EBITDA of $535.5 million and $804.0 million, respectively, during the corresponding periods. Included in adjusted EBITDA during the three and six months ended February 28, 2022 was a $273.3 million gain on the sale of the Rancho Cucamonga facilities. See Note 2, Changes in Business, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information about the sale of the Rancho Cucamonga facilities. The remaining growth in the remaining adjusted EBITDA during the three and six months ended February 28, 2022 was primarily due2023, compared to expansion ofthe corresponding periods, resulted from increased steel products metal margin per ton and raw materialssignificant expansion in downstream products margin over purchase costscrap per ton, compared toton. The growth in margins in our vertically integrated business model is a result of the corresponding periods. Although ferrous and nonferrous scrap prices increased and inflationary pressures caused an increase in the cost of freight, energy and other steelmaking inputs, theconsistent average selling priceprices for steel products and raw materials increased at a greater rate year-over-year. Adjusted EBITDA included non-cash stock compensation expense of $4.0 million and $6.7 millionincreases in average selling prices for downstream products discussed above, paired with the declining scrap price environment during the three and six months ended February 28, 2022, respectively, and $3.82023, compared to the corresponding periods. Additionally, the acquired Tensar operations provided adjusted EBITDA of $7.4 million and $7.1$15.5 million forduring the three and six months ended February 28, 2023, respectively, with no such activity in the corresponding periods.
Europe | | | | Three Months Ended February 28, | | Six Months Ended February 28, | | | Three Months Ended February 28, | | Six Months Ended February 28, |
(in thousands) | | 2022 | | 2021 | | 2022 | | 2021 | |
(in thousands, except per ton amounts) | | (in thousands, except per ton amounts) | | 2023 | | 2022 | | 2023 | | 2022 |
Net sales | Net sales | | $ | 395,758 | | | $ | 202,066 | | | $ | 724,814 | | | $ | 396,662 | | Net sales | | $ | 355,633 | | | $ | 395,758 | | | $ | 762,146 | | | $ | 724,814 | |
Adjusted EBITDA | Adjusted EBITDA | | 81,149 | | | 16,107 | | | 160,981 | | | 30,577 | | Adjusted EBITDA | | 12,949 | | | 81,149 | | | 77,454 | | | 160,981 | |
| External tons shipped (in thousands) | | |
External tons shipped | | External tons shipped | |
Rebar | Rebar | | 172 | | | 78 | | | 275 | | | 206 | | Rebar | | 183 | | | 172 | | | 387 | | | 275 | |
Merchant and other | Merchant and other | | 278 | | | 275 | | | 540 | | | 544 | | Merchant and other | | 253 | | | 278 | | | 522 | | | 540 | |
Steel products | Steel products | | 450 | | | 353 | | | 815 | | | 750 | | Steel products | | 436 | | | 450 | | | 909 | | | 815 | |
| Average selling price (per ton) | Average selling price (per ton) | | Average selling price (per ton) | |
Steel products | Steel products | | $ | 851 | | | $ | 532 | | | $ | 859 | | | $ | 495 | | Steel products | | $ | 756 | | | $ | 851 | | | $ | 775 | | | $ | 859 | |
| Cost of ferrous scrap utilized per ton | Cost of ferrous scrap utilized per ton | | $ | 444 | | | $ | 328 | | | $ | 439 | | | $ | 296 | | Cost of ferrous scrap utilized per ton | | $ | 389 | | | $ | 444 | | | $ | 377 | | | $ | 439 | |
Steel products metal margin per ton | Steel products metal margin per ton | | 407 | | | 204 | | | 420 | | | 199 | | Steel products metal margin per ton | | 367 | | | 407 | | | 398 | | | 420 | |
Net sales in our Europe segment decreased $40.1 million, or 10%, during the three months ended February 28, 2023, compared to the corresponding period, and increased $37.3 million, or 5%, during the six months ended February 28, 2023, compared to the corresponding period. Volumes remained strong during the three months ended February 28, 2023, though the $95 per ton decrease in steel products average selling price yielded a decrease in net sales during the three months ended February 28, 2023, compared to the corresponding period. During the six months ended February 28, 2023, volumes rose 12%, exceeding the impact of an $84 per ton decrease in steel products average selling price, compared to the corresponding period. These decreases in steel products average selling prices were driven by a low pricing environment across Europe. Shipment levels were supported by our optimized cost structure, which positioned us to competitively price our steel products, coupled with our historical investment in operations, which provided the capacity to meet customer demand. Net sales from the acquired Tensar operations partially mitigated the impact from year-over-year decreases in steel products average selling prices by providing $17.4 million and $36.9 million in net sales during the three and six months ended February 28, 2023, respectively, with no such activity in the corresponding periods. Net sales for the three and six months ended February 28, 2022 increased $193.7 million, or 96%, and $328.2 million, or 83%, respectively, compared to the corresponding periods. The increases were driven largely by the increases in steel products average selling prices of $319 per ton, or 60%, and $364 per ton, or 74%, during the three and six months ended February 28, 2022, respectively, compared to the corresponding periods. Increased demand for steel products from both construction and industrial end markets supported the increases in average selling prices. Additionally, shipments of steel products increased 27% and 9% during the three and six months ended February 28, 2022, respectively, compared to the corresponding periods. The growth in shipments of steel products during the three and six months ended February 28, 2022 was due in part to the absence of a maintenance program that was completed during the second quarter of 2021, reducing shipments during the corresponding periods, coupled with the increased demand for steel products described above. Net sales for the three and six months ended February 28, 20222023 were impacted by unfavorable foreign currency translation adjustments of $35.2$30.5 million and $48.7$110.1 million, respectively, due to the increase in the average value of the U.S. dollar relative to the Polish zloty, compared to favorableunfavorable foreign currency translation adjustments of $8.3$35.2 million and $13.0$48.7 million, respectively, during the corresponding periods.
Adjusted EBITDA for the three and six months ended February 28, 2022 increased $65.02023 decreased $68.2 million, or 404%84%, and $130.4$83.5 million, or 426%52%, respectively, compared to the corresponding periods. The primary driver of the increases in adjusted EBITDA was an expansion in steel products metal margin per ton, which increased 100% during the three months ended February 28, 2022, compared to the corresponding period, and increased 111% during the six months ended February 28, 2022, compared to the corresponding period. During the three and six months ended February 28, 2022,While the cost of ferrous scrap utilized decreased $55 per ton increased 35% and 48%, respectively, compared to the corresponding periods, and inflationary pressures caused increases to the cost of freight, energy and other steelmaking inputs. However, the growth in average selling prices for steel products outpaced these increased costs in each period. Also offsetting the increased cost of energy were realized gains of $5.6 million and $9.4 million$62 per ton during the three and six months ended February 28, 2022,2023, respectively, from a commodity derivative designated as a cash flow hedging instrument, compared to immaterial gains recordedthe corresponding periods, the declines in steel products average selling prices described above outpaced falling scrap costs, resulting in decreases in steel products metal margin per ton of $40 and $22 during the three and six months ended February 28, 2023, respectively, compared to the corresponding periods. In addition to the change in steel products metal margin per ton, increased costs of electricity and natural gas of $71 per ton and $57 per ton during the three and six months ended February 28, 2023, respectively, compared to the corresponding periods, further contributed to the decrease in adjusted EBITDA. During the six months ended February 28, 2023, we received a $9.5 million energy credit, which helped mitigate higher energy costs by reducing cost of goods sold, but to a lesser extent than the $15.5 million energy credit received in the comparable period. Results also benefited from $1.5
million and $4.8 million of adjusted EBITDA provided by the acquired Tensar operations during the three and six months ended February 28, 2023, respectively, with no such activity in the corresponding periods. Additionally, in the first quarter of 2022, we received a $15.5 million energy credit that was recorded as a reduction to cost of goods sold, with no similar credit received in the corresponding period. Adjusted EBITDA for the three and six months ended February 28, 20222023 included unfavorable foreign currency exchange rate impactstranslation adjustments of $1.0 million and $14.5 million, respectively, compared to unfavorable foreign currency translation adjustments of $7.3 million and $10.3 million, respectively, compared to immaterial foreign currency translation adjustments during the corresponding periods. Adjusted EBITDA included non-cash stock compensation expense of $1.1 million and $2.6 million for the three and six months ended February 28, 2022, respectively, and $0.7 million and $1.4 million for the corresponding periods.
Corporate and Other
Corporate and Other reported adjusted EBITDA losslosses of $52.5$15.6 million and $86.8$55.3 million for the three and six months ended February 28, 2022,2023, respectively, compared to adjusted EBITDA losslosses of $46.0$52.5 million and $72.5$86.8 million in the corresponding periods. Contributingperiods, respectively. During the three and six months ended February 28, 2023, we recognized $17.7 million in other revenue from our New Markets Tax Credit (“NMTC”) transactions, which was a primary driver of the decrease in adjusted EBITDA losses during the three and six months ended February 28, 2023, compared to the increasescorresponding periods. See Note 8, New Markets Tax Credit Transactions, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information. Also contributing to the decreases in adjusted EBITDA losslosses were $5.7$16.1 million and $9.9 million increases in labor-related expensesdebt extinguishment costs incurred during the three and six months ended February 28, 2022, respectively, compared to the corresponding periods, and $3.2 million of acquisition-related costs incurredimmaterial activity in the first quarter of 2022, with no such costs in the corresponding period. Additionally, adjusted EBITDA included non-cash stock compensation expense of $11.2 million and $16.6 million for the three and six months ended February 28, 2022,2023, as well as $6.1 million and $12.5 million of additional gains on short-term investments and benefit restoration plan assets during the three and six months ended February 28, 2023, respectively, compared to $8.2 million and $13.3 million for the corresponding periods. In contrast to these reductions to adjusted EBITDA loss, during the six months ended February 28, 2023 we recognized a $6.3 million increase in non-cash stock compensation expense, compared to the corresponding period, and a $4.2 million pension plan settlement charge, with no such settlement charge in the corresponding period. See Note 12, Employees' Retirement Plans, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information on the pension plan termination activity.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Liquidity and Capital Resources
Our cashCash flows from operating activities are our principal sources of liquidity and result primarily from sales of raw materials, steel products, downstream products and related materials and services, as described in Part I, Item 1, Business, of our 20212022 Form 10-K and Note 2, Changes in Business, in Part I, Item 1, Financial Statements, of this Form 10-Q.
We have a diverse and generally stable customer base, and regularly maintain a substantial amount of accounts receivable. We record allowances for theactively monitor our accounts receivable we estimate will not be collectedand, based on market conditions and customers' financial condition, and other factors. Historically, theserecord allowances have not been material.when we believe accounts are uncollectible. We use credit insurance 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 18%17% of total trade receivables at February 28, 2022.2023.
We use futures or forward contracts to mitigate the risks from fluctuations in commodity prices, foreign currency exchange rates, interest rates and natural gas, electricity and other energy prices. See Note 9, Derivatives, in Part I, Item 1, Financial Statements, of this Form 10-Q, for further information.
The table below reflects our sources, facilities and availability of liquidity at February 28, 2022.2023. See Note 8,7, Credit Arrangements, in Part I, Item 1, Financial Statements, of this Form 10-Q, for additional information.
| (in thousands) | (in thousands) | | Liquidity Sources and Facilities | | Availability | (in thousands) | | Liquidity Sources and Facilities | | Availability |
Cash and cash equivalents | Cash and cash equivalents | | $ | 846,587 | | | $ | 846,587 | | Cash and cash equivalents | | $ | 603,966 | | | $ | 603,966 | |
Notes due from 2023 to 2032 | Notes due from 2023 to 2032 | | 1,230,000 | | | * | Notes due from 2023 to 2032 | | 1,114,059 | | | (1) |
Revolver | Revolver | | 400,000 | | | 398,604 | | Revolver | | 600,000 | | | 599,087 | |
U.S. accounts receivable facility | | 150,000 | | | 150,000 | | |
Series 2022 Bonds, due 2047 ** | | 145,060 | | | — | | |
Term Loan | | Term Loan | | 200,000 | | | 200,000 | |
Series 2022 Bonds, due 2047 | | Series 2022 Bonds, due 2047 | | 145,060 | | | — | |
Poland credit facilities | Poland credit facilities | | 71,614 | | | 67,560 | | Poland credit facilities | | 67,443 | | | 52,816 | |
Poland accounts receivable facility | Poland accounts receivable facility | | 68,750 | | | 68,750 | | Poland accounts receivable facility | | 64,745 | | | 41,941 | |
Poland Term Loan | | 40,923 | | | — | | |
| Other | | Other | | 4,086 | | | 1,202 | |
_________________
*(1) We believe we have access to additional financing and refinancing, if needed, although we can make no assurances as to the form or terms of such financing.
**See Note 8, Credit Arrangements, for additional information regarding the restrictions on the proceeds from the Series 2022 Bonds.
We are continually reviewingreview our capital resources to determine whether we can meet our short and long-term goals. Our cash and cash equivalents position remains strong at $846.6 million as of February 28, 2022. We anticipate our current cash balances, cash flows from operations and available sources of liquidity will be sufficient to maintain operations, make necessary capital expenditures, acquire Tensar duringrepay current maturities of long-term debt, including the third quarter$214.1 million outstanding principal amount of 2022,the 2023 Notes, pay dividends and opportunistically repurchase shares for at least the next twelve months. Additionally, we expect our long-term liquidity position will be sufficient to meet our long-term liquidity needs with cash flows from operations and financing arrangements. However, in the event of changes in business conditions or other developments, including a sustained market deterioration, unanticipated regulatory developments, significant acquisitions, competitive pressures, or to the extent our liquidity needs prove to be greater than expected or cash generated from operations is less than anticipated, we may need additional liquidity. To the extent we elect to finance our long-term liquidity needs, we believe that the potential financing capital available to us in the future is sufficient to fund such long-term liquidity needs.will be sufficient.
28We estimate that our 2023 capital spending will range from $550 million to $600 million. We regularly assess our capital spending based on current and expected results and the amount is subject to change.
Our credit arrangements require compliance with certain non-financial and financial covenants, including an interest coverage ratio and a debt to capitalization ratio. At February 28, 2023, we believe we were in compliance with all covenants contained in our credit arrangements.
As of February 28, 20222023 and August 31, 2021,2022, we had no off-balance sheet arrangements that may have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Cash Flows
Operating Activities
Net cash flows from operating activities were $558.9 million and $54.4 million for the six months ended February 28, 2023 and 2022, compared to net cash flows from operating activities of $1.2 million for the six months ended February 28, 2021. Net earnings increased by $485.8 million year-over-year, including an increase in net gain on disposals of assets and other of $268.6 million, offset by a $210.5respectively. The $410.9 million year-over-year net increasedecrease in cash used by operating assets and liabilities ("working capital"). Thewas due in part to a decreased scrap price environment during the six months ended February 28, 2023, compared to increased scrap prices in the six months ended February 28, 2022, which reduced cash used by inventory purchases by $268.9 million year-over-year. Additionally, cash provided by accounts receivable increased by $182.2 million year-over-year, primarily as a result of the decrease in accounts receivable as of February 28, 2023, compared to August 31, 2022, due to higher sales during the fourth quarter of 2022 compared to the three months ended February 28, 2023. These cash flows from operating assets and liabilities were offset by a year-over-year increase in cash used by working capital was due in part to rising scrap prices and greater inventory levels, which corresponded with an increase in accounts payable, accrued expenses and other payables of $49.9 million. Additional activity offsetting the increase in cash flows from operating activities was $17.7 million of non-cash other revenue resulting from the six months ended February 28, 2022, compared to the corresponding period. Additionally, the growth in sales period-over-period led to a rise in accounts receivablesettlement of our NMTC transactions during the six months ended February 28, 2022,2023 and a $15.9 million reduction in loss on debt extinguishment during the six months ended February 28, 2023, compared to the corresponding period. Operating working capital days, which representsSee Note 8, New Markets Tax Credit Transactions, in Part I, Item 1, Financial Statements, of this Form 10-Q, for further information on the number of days to convert accounts receivable and inventory, less accounts payable, into net sales, were consistent year-over-year.Company's NMTC transactions.
Investing Activities
Net cash flows used by investing activities were $352.6 million for the six months ended February 28, 2023, compared to net cash flows from investing activities wereof $121.1 million for the six months ended February 28, 2022, compared to2022. The fluctuation in net cash flows used by investing activities of $67.4 million for the six months ended February 28, 2021. The $188.4 million increase in net cash flows from investing activities was primarily causeddriven by the proceeds from the sale of the Rancho Cucamonga facilities offset by anduring the six months ended February 28, 2022, compared to immaterial proceeds from the sale of assets in the six months ended February 28, 2023. Also contributing to the increase in cash flows used by investing activities were $97.7 million of additional capital expenditures as a result ofin the six months ended February 28, 2023, compared to the corresponding period, primarily from the construction of our third and fourth micro mill locatedmills, and $65.2 million of acquisitions during the six months ended February 28, 2023, with no such acquisitions in Mesa, Arizona.the corresponding period. See Note 2, Changes in Business, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information onabout the sale of the Rancho Cucamonga facilities.
We estimate that our 2022 capital spending will range from $475 million to $525 million. We regularly assess our capital spending based onfacilities and current and expected results and the amount is subject to change.
In December 2021, we announced the signing of a definitive agreement to acquire TAC Acquisition Corp. (“Tensar”), a portfolio company of Castle Harlan Inc.’s fund, Castle Harlan Partners V, L.P., for a cash purchase price of approximately $550.0 million, subject to customary purchase price adjustments. We anticipate that the transaction will close during the third quarter of 2022. See Note 2, Changes in Business, for more information about the pending acquisition.
In addition, in January 2022, we announced the plan to construct a fourth micro mill geographically situated primarily to serve the Northeast, Mid-Atlantic, and Mid-Western United States markets. Following the site selection and receipt of state and local incentives, permitting, and other necessary approvals, the construction of the planned mill is expected to take roughly two years.period acquisitions.
Financing Activities
Net cash flows used by financing activities were $283.7 million for the six months ended February 28, 2023, compared to net cash flows from financing activities wereof $324.4 million for the six months ended February 28, 2022, compared to2022. The $608.1 million increase in net cash flows used by financing activities was largely driven by net repayments of $109.1long-term debt of $160.3 million forduring the six months ended February 28, 2021. The $433.5 million increase in net cash flows from financing activities was a result of many actions, including2023, compared to net proceeds from issuance of long-term debt of $427.2 million during the six months ended February 28, 2022, compared to net long-term debt repayments of $61.52022. Additionally, there was a $49.3 million increase in treasury stock acquired under the share repurchase program during the six months ended February 28, 2021.2023, compared to the corresponding period. Offsetting thethese additional cash flows from long-term debt,outflows was a decrease in net repayments underof our Polish accounts receivable facilities increased $24.5of $21.6 million
during the six months ended February 28, 2022,2023, as compared to the corresponding period. See Note 8,7, Credit Arrangements, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information regarding our credit arrangements. Additionally, compared to the corresponding period, we increased dividend payments by $5.2 million, increased stock issued under incentivearrangements and purchase plans, net of forfeitures, by $6.2 million and acquired $17.0 million of treasury stock under the share repurchase program which was authorized in October 2021. See Note 12,13, Stockholders' Equity and Earnings per Share, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information on the share repurchase program.
CONTRACTUAL OBLIGATIONS
Our material cash commitments from known contractual and other obligations primarily consist of obligations for long-term debt and related interest, leases for properties and equipment and purchase obligations as part of normal operations. See Note 8,7, Credit Arrangements, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information regarding scheduled maturities of our long-term debt. See Note 7, Leases, for additional information on leases.
Our undiscounted purchase obligations due in the twelve months following February 28, 20222023 were approximately $870 million and August 31, 2021 were $854.8approximately $310 million and $638.5 million, respectively, with $196.4 million and $228.0 million due thereafter, respectively. The increase in short-termthereafter. Of the purchase obligations was primarily due to construction of our third micro mill in Mesa, Arizona, purchases of inventory and other planned maintenance andthe twelve months following February 28, 2023, approximately 29% were for commodities, 19% were for consumable production inputs, such as alloys, 17% were for capital expenditures in connection with normal business operations. The decrease in long-term purchase obligations is a result of a decrease in commitments for commodities used in operations such as electrodes and natural gas, and certain capital expenditure obligations17% were for the construction of our third and fourth micro mill whichmills. Of the purchase obligations due thereafter, 72% were fulfilled duringfor commodities and 18% were for the sixconstruction of our fourth micro mill.
Operating lease obligations in the twelve months endedfollowing February 28, 2022.2023 were approximately $39.8 million and $138.7 million due thereafter. Additionally, leases that have not yet commenced, primarily for vehicles, with aggregate fixed payments over their terms, were approximately $14.1 million, with $10.5 million to commence in 2023 and $3.6 million to commence in 2024.
Other Commercial Commitments
We maintain stand-by letters of credit to provide support for certain transactions that governmental agencies, our insurance providers and suppliers request. At February 28, 2022,2023, we had committed $24.4$21.4 million under these arrangements, of which $1.4$0.9 million reduced availability under the Revolver.Revolver (as defined in Note 7, Credit Arrangements, in Part I, Item 1, Financial Statements, of this Form 10-Q).
CONTINGENCIES
We may incur settlements, fines, penalties or judgments due toIn the ordinary course of conducting our involvementbusiness, we become involved in litigation, administrative proceedings and governmental investigations, including environmental matters. We may incur settlements, fines, penalties or judgments because of some of 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 we believe a material 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 materially affect,have a material adverse effect, individually or in the aggregate, on our results of operations, cash flows or financial condition. See Note 13,14, Commitments and Contingencies, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information.
FORWARD-LOOKING STATEMENTS
This 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 impact of the Russian invasion of Ukraine, the effects of ongoing trade actions, the effects of continued pressure on the liquidity of our customers, potential synergies and organic growth provided by acquisitions and strategic investments, demand for our products, shipment volumes, metal margins, the effect of COVID-19 and related governmental and economic responses thereto, the ability to operate our steel mills at full capacity, future availability and cost of supplies of raw materials and energy for our operations, share repurchases, legal proceedings, the undistributed earnings of our non-U.S. subsidiaries, U.S. non-residential construction activity, international trade, the impact of the Russian invasion of Ukraine, capital expenditures, tax credits, our liquidity and our ability to satisfy future liquidity requirements, the proposed Tensar acquisition and the timing thereof, estimated contractual obligations, the expected capabilities and benefits of new facilities, the timeline for execution of our growth plan, and our expectations or beliefs concerning future events. The statements in this report that are not historical statements, are forward-looking statements. These forward-looking statements can generally be identified by phrases such as we or our management "expects," "anticipates," "believes,
"believes," "estimates," "future," "intends," "may," "plans to," "ought," "could," "will," "should," "likely," "appears," "projects," "forecasts," "outlook" or other similar words or phrases, as well as by discussions of strategy, plans or intentions.
Our forward-looking statements are based on management's expectations and beliefs as of the time this Form 10-Q iswas filed with the SEC or, with respect to any document incorporated by reference, 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 any other changes. Important factors that could cause actual results to differ materially from our expectations, among others, include those described in Part I, Item 1A, Risk Factors, of our 2021 Form 10-K and Part II, Item 1A, Risk Factors of this Form 10-Q, as well as the following:
•changes in economic conditions which affect demand for our products or construction activity generally, and the impact of 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 or reducing the profitability of our downstream contracts due to rising commodity pricing;
•impacts from COVID-19 on the economy, demand for our products, global supply chain and on our operations, including the responses of governmental authorities to contain COVID-19 and the impact of various COVID-19 vaccines;
•excess capacity in our industry, particularly in China, and product availability from competing steel mills and other steel suppliers including import quantities and pricing;
•the impact of the Russian invasion of Ukraine on the global economy, inflation, energy supplies and raw materials, which is uncertain, but may prove to negatively impact our business and operations;
•increased attention to environmental, social and governance ("ESG") matters, including any targets or other ESG or environmental justice initiatives;
•operating and startup risks, as well as market risks associated with the commissioning of new projects could prevent us from realizing anticipated benefits and could result in a loss of all or a substantial part of our investments;
•impacts from global public health epidemics, including the COVID-19 pandemic, on the economy, demand for our products, global supply chain and on our operations;
•compliance with and changes in existing and future laws, regulations and other legal requirements and judicial decisions that govern our business, including increased environmental regulations associated with climate change and greenhouse gas emissions;
•involvement in various environmental matters that may result in fines, penalties or judgments;
•evolving remediation technology, changing regulations, possible third-party contributions, the inherent uncertainties of the estimation process and other factors that may impact amounts accrued for environmental liabilities;
•potential limitations in our or our customers' abilities to access credit and non-compliance ofwith their contractual obligations, including payment obligations;
•activity in repurchasing shares of our common stock under our share repurchase program;
•financial and non-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 realize any or all of the anticipated synergies or other benefits of acquisitions;
•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;
•operating and startup risks, as well as market risks associated with the commissioning of new projects could prevent us from realizing anticipated benefits and could result in a loss of all or a substantial part of our investments;
•lower than expected future levels of revenues and higher than expected future costs;
•failure or inability to implement growth strategies in a timely manner;
•the impact of goodwill or other indefinite lived intangible asset impairment charges;
•the impact of long-lived asset impairment charges;
•currency fluctuations;
•global factors, such as trade measures, military conflicts and political uncertainties, including changes to current trade regulations, such as Section 232 trade tariffs and quotas, tax legislation and other regulations which might adversely impact our business;
•availability and pricing 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 security;
•our ability to make necessary capital expenditures;
•availability and pricing of raw materials and other items over which we exert little influence, including scrap metal, energy and insurance;
•unexpected equipment failures;
•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; and
•civil unrest, protests and riots.
You should referRefer to the "Risk Factors" disclosed in the sections entitled "Risk Factors" in Part I, Item 1A of our periodic2022 Form 10-K and current reports filed with the SECPart II, Item 1A of this Form 10-Q for specific information regarding additional risks whichthat would cause actual results to be significantly differentdiffer from those expressed or implied by these forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other important factors that could cause actual results, performance or our achievements, or industry results, to differ materially from historical results, any future results, or performance or achievements expressed or implied by such forward-looking statements. Accordingly, readers of this Form 10-Q are cautioned not to place undue reliance on any forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the six months ended February 28, 2022,2023, the U.S. dollar equivalent of the Company's total gross foreign currency exchange contract commitments decreased $65.0increased $118.0 million, or 17%47%, compared to August 31, 2021.2022. This decreaseincrease was primarily due to forward contracts denominated in Polish zloty with a U.S. dollar functional currency, which decreased $95.0increased $146.8 million, partially offset by forward contracts denominated in euros with a Polish zloty functional currency, which increased $28.5decreased $30.7 million compared to August 31, 2021.2022.
During the six months ended February 28, 2023, the Company's total commodity contract commitments increased $248.5 million, or 121%, compared to August 31, 2022, of which $240.5 million relates to the Company's electricity commodity commitments.
There were no other material changes to the information set forth in Item 7A, Quantitative and Qualitative Disclosures about Market Risk, included in our 20212022 Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure 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 Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q, and they have concluded that as of that date, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
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 ourthe quarter ended February 28, 20222023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For information regarding our legal proceedings, refer to Note 13,14, Commitments and Contingencies, to our condensed consolidated financial statements included in Part I, Item 1, Financial Statements, of this Form 10-Q.
With respect to administrative or judicial proceedings arising under any federal, state or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment, we have determined that we will disclose any such proceeding to which a governmental authority is a party if we reasonably believe such proceeding could result in monetary sanctions, exclusive of interest and costs, of at least $1.0 million. We believe that this threshold is reasonably designed to result in disclosure of environmental proceedings that are material to our business or financial condition. Applying this threshold, there were no environmental matters to disclose for this period.
ITEM 1A. RISK FACTORS
Except as set forth below, there were no material changes to the risk factors previously disclosed in Part I, Item 1A, Risk Factors, of our 20212022 Form 10-K:10-K.
The impactOperating and startup risks, as well as market risks associated with the commissioning of the Russian invasionour third and fourth micro mills could prevent us from realizing anticipated benefits and could result in a loss of Ukraine on the global economy, energy supplies and raw materials is uncertain, but may prove to negatively impactall or a substantial part of our business and operations.investments.
The shortWe anticipate our third micro mill will be commissioned in spring of 2023, and long-term implications of Russia’s invasion of Ukraineour fourth micro mill is expected to be commissioned in late calendar 2025. Although we have successfully commissioned and operated similar facilities, there are difficult to predict at this time. We continue to monitor any adverse impact thattechnological, operational, market and start-up risks associated with the outbreak of war in Ukraineconstruction and the subsequent institution of sanctions against Russia by the United States and several European and Asian countries may have on the global economy in general, on our business and operations and on the businesses and operationscommissioning of our suppliersthird and customers. For example, a prolonged conflict may result in increasedfourth micro mills. Construction of our micro mills is subject to changing market conditions, delays, inflation escalating energy prices and constrained availability, and thus increasing costs,cost overruns, work stoppages, labor shortages, weather interferences, supply chain delays, changes required by governmental authorities, delays or the inability to acquire required permits or licenses, any of raw materials. Further, if the conflict intensifies or expands beyond Ukraine, itwhich could have an adverse impact on our operationsoperational and financial results. Further, although we believe these facilities should each be capable of consistently producing high-quality products in Poland. Wesufficient quantities and at costs that will continue to monitor this fluid situation and develop contingency plans as necessary to address any disruptions tocompare favorably with other similar steel manufacturing facilities, there can be no assurance that these expectations will be achieved. If we encounter cost overruns, system or process difficulties during or after startup or quality control restrictions with either or both facilities, our business operations as they develop. Tocapital costs could increase materially, the extentexpected benefits from the war in Ukraine may adversely affect our business as discussed above, it may also have the effect of heightening manydevelopment of the other risks described in Part I, Item 1Aapplicable facilities could be diminished or lost, and we could lose all or a substantial portion of our 2021 Form 10-K, such as those relatinginvestments. We could also encounter commodity market risk if, during a sustained period, the cost to data security, supply chain, volatility in prices of scrap and other inputs, and market conditions, any of which could negatively affect our business and financial condition.manufacture is greater than projected.
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 about purchases of equity securities registered by the Company pursuant to Section 12 of the Exchange Act as amended, made by the Company or any affiliated purchasers during the quarter ended February 28, 2022.2023.
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Issuer Purchases of Equity Securities(1) |
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 As of the End of Period |
December 1, 2021 - December 31, 2021 | | 121,000 | | | $ | 33.34 | | | 121,000 | | | $ | 340,658,218 | |
January 1, 2022 - January 31, 2022 | | 110,000 | | | 36.05 | | | 110,000 | | | 336,692,716 | |
February 1, 2022 - February 28, 2022 | | 104,500 | | | 35.35 | | | 104,500 | | | 332,998,974 | |
| | 335,500 | | | | | 335,500 | | | |
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Issuer Purchases of Equity Securities(1) |
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 as of the End of Period |
December 1, 2022 - December 31, 2022 | | 115,500 | | | $ | 48.81 | | | 115,500 | | | $ | 133,342,213 | |
January 1, 2023 - January 31, 2023 | | 110,000 | | | 52.08 | | | 110,000 | | | 127,612,978 | |
February 1, 2023 - February 28, 2023 | | 104,500 | | | 55.57 | | | 104,500 | | | 121,805,666 | |
| | 330,000 | | | | | 330,000 | | | |
_________________
(1) On October 13, 2021, the Company announced that the Board of Directors authorized a share repurchase program under which the Company may repurchase up to $350.0 million of the Company's outstanding 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. See Note
12, 13, Stockholders' Equity and Earnings per Share, to our condensed consolidated financial statements included in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information on the share repurchase program.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
As previously disclosed, on February 15, 2023, in connection with Peter R. Matt’s appointment as President of the Company, Mr. Matt and the Company entered into that certain Terms and Conditions of Employment (the “Employment Agreement”) and that certain Commercial Metals Company Amended and Restated Executive Employment Continuity Agreement (the “EECA”), with each of the Employment Agreement and the EECA being effective as of April 1, 2023. On March 20, 2023, the Company and Mr. Matt entered into amendments to each of the Employment Agreement and the EECA to amend the respective effective dates of the Employment Agreement and the EECA from April 1, 2023 to April 9, 2023. Additionally, certain provisions of the Employment Agreement were amended to reflect the new effective date of April 9, 2023. Except as provided herein, all other terms and conditions of the Employment Agreement and the EECA remain in full force and effect.
ITEM 6. EXHIBITS
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, certain long-term debt instruments are omitted because the total amount of securities authorized thereunder does not exceed 10% of the total assets of Commercial Metals Company and its subsidiaries on a consolidated basis. Commercial Metals Company agrees to furnish copies of such instruments to the SEC upon its request.
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2.1† | | | | | | |
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101.INS | Inline XBRL Instance Document (filed herewith). | | | | | |
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101.SCH | Inline XBRL Taxonomy Extension Schema Document (filed herewith). | | | | | |
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101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith). | | | | | |
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101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith). | | | | | |
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101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith). | | | | | |
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101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith). | | | | | |
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104 | Cover Page Interactive Data File (formatted as Inline XBRL document and included in Exhibit 101). | | | | | |
† Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5), and Commercial Metals Company agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.
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.
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| COMMERCIAL METALS COMPANY |
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March 23, 20222023 | /s/ Paul J. Lawrence |
| Paul J. Lawrence |
| Senior Vice President and Chief Financial Officer |
| (Duly authorized officer and principal financial officer of the registrant) |