CMC 10-Q Quarterly Report Nov. 30, 2022

COMMERCIAL METALS CO

10-Qs and 10-Ks

10-Q	Quarter ended Feb. 28, 2025
10-Q	Quarter ended Nov. 30, 2024
10-K	Fiscal year ended Aug. 31, 2024
10-Q	Quarter ended May 31, 2024
10-Q	Quarter ended Feb. 29, 2024
10-Q	Quarter ended Nov. 30, 2023
10-K	Fiscal year ended Aug. 31, 2023
10-Q	Quarter ended May 31, 2023
10-Q	Quarter ended Feb. 28, 2023
10-Q	Quarter ended Nov. 30, 2022
10-K	Fiscal year ended Aug. 31, 2022
10-Q	Quarter ended May 31, 2022
10-Q	Quarter ended Feb. 28, 2022
10-Q	Quarter ended Nov. 30, 2021
10-K	Fiscal year ended Aug. 31, 2021
10-Q	Quarter ended May 31, 2021
10-Q	Quarter ended Feb. 28, 2021
10-Q	Quarter ended Nov. 30, 2020
10-K	Fiscal year ended Aug. 31, 2020
10-Q	Quarter ended May 31, 2020
10-Q	Quarter ended Feb. 29, 2020
10-Q	Quarter ended Nov. 30, 2019
10-K	Fiscal year ended Aug. 31, 2019
10-Q	Quarter ended May 31, 2019
10-Q	Quarter ended Feb. 28, 2019
10-Q	Quarter ended Nov. 30, 2018
10-K	Fiscal year ended Aug. 31, 2018
10-Q	Quarter ended May 31, 2018
10-Q	Quarter ended Feb. 28, 2018
10-Q	Quarter ended Nov. 30, 2017
10-K	Fiscal year ended Aug. 31, 2017
10-Q	Quarter ended May 31, 2017
10-Q	Quarter ended Feb. 28, 2017
10-Q	Quarter ended Nov. 30, 2016
10-K	Fiscal year ended Aug. 31, 2016
10-Q	Quarter ended May 31, 2016
10-Q	Quarter ended Feb. 29, 2016
10-Q	Quarter ended Nov. 30, 2015
10-K	Fiscal year ended Aug. 31, 2015
10-Q	Quarter ended May 31, 2015
10-Q	Quarter ended Feb. 28, 2015
10-Q	Quarter ended Jan. 9, 2015
10-K	Fiscal year ended Aug. 31, 2014
10-Q	Quarter ended May 31, 2014
10-Q	Quarter ended Feb. 28, 2014
10-Q	Quarter ended Nov. 30, 2013
10-K	Fiscal year ended Aug. 31, 2013
10-Q	Quarter ended May 31, 2013
10-Q	Quarter ended Feb. 28, 2013
10-Q	Quarter ended Nov. 30, 2012
10-K	Fiscal year ended Aug. 31, 2012
10-Q	Quarter ended May 31, 2012
10-Q	Quarter ended Feb. 29, 2012
10-Q	Quarter ended Nov. 30, 2011
10-K	Fiscal year ended Aug. 31, 2011
10-Q	Quarter ended May 31, 2011
10-Q	Quarter ended Feb. 28, 2011
10-Q	Quarter ended Nov. 30, 2010
10-K	Fiscal year ended Aug. 31, 2010
10-Q	Quarter ended May 31, 2010
10-Q	Quarter ended Feb. 28, 2010
10-Q	Quarter ended Nov. 30, 2009

PROXIES

DEF 14A	Filed on Nov. 26, 2024
DEF 14A	Filed on Nov. 21, 2023
DEF 14A	Filed on Nov. 22, 2022
DEF 14A	Filed on Nov. 23, 2021
DEF 14A	Filed on Nov. 23, 2020
DEF 14A	Filed on Nov. 25, 2019
DEF 14A	Filed on Nov. 26, 2018
DEF 14A	Filed on Nov. 27, 2017
DEF 14A	Filed on Nov. 28, 2016
DEF 14A	Filed on Nov. 30, 2015
DEF 14A	Filed on Dec. 1, 2014
DEF 14A	Filed on Dec. 17, 2013
DEF 14A	Filed on Dec. 10, 2012
DEF 14A	Filed on Dec. 6, 2010

cmc-20221130

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2022-11-30 0000022444

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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 November 30, 2022

☐ 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 January 6, 2023, 117,122,667 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			3

Item 1. Financial Statements			3
Condensed Consolidated Statements of Earnings (Unaudited) - Three months ended November 30, 2022 and 2021			3
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - Three months ended November 30, 2022 and 2021			4
Condensed Consolidated Balance Sheets (Unaudited) - November 30, 2022 and August 31, 2022			5
Condensed Consolidated Statements of Cash Flows (Unaudited) - Three months ended November 30, 2022 and 2021			6
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - Three months ended November 30, 2022 and 2021			7
Notes to Condensed Consolidated Financial Statements (Unaudited)			8
Note 1. Accounting Policies			8
Note 2 . Changes in Business			9
Note 3 . Accumulated Other Comprehensive Income (Loss)			10
Note 4 . Revenue Recognition			10
Note 5 . Inventories, Net			11
Note 6 . Goodwill and Other Intangibles			12
Note 7. Credit Arrangements			13
Note 8. Derivatives			14
Note 9. Fair Value			15
Note 10. Stock-Based Compensation Plans			18
Note 11. Employees' Retirement Plans			18
Note 12. Stockholders' Equity and Earnings Per Share			19
Note 13. Commitments and Contingencies			19
Note 14. Operating Segments			20
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3. Quantitative and Qualitative Disclosures About Market Risk			30
Item 4. Controls and Procedures			31

PART II — OTHER INFORMATION			32

Item 1. Legal Proceedings			32
Item 1A. Risk Factors			32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			32
Item 3. Defaults Upon Senior Securities			32
Item 4. Mine Safety Disclosures			32
Item 5. Other Information			32
Item 6. Exhibits			33
Signature			34

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
	Three Months Ended November 30,
(in thousands, except share and per share data)	2022		2021
Net sales	$	2,227,313	$	1,981,801
Costs and operating expenses:
Cost of goods sold	1,719,414		1,586,410
Selling, general and administrative expenses	156,355		122,595
Interest expense	13,045		11,035


	1,888,814		1,720,040
Earnings before income taxes	338,499		261,761
Income taxes	76,725		28,872
Net earnings	$	261,774	$	232,889

Earnings per share:
Basic	$	2.23	$	1.92
Diluted	$	2.20	$	1.90

Average basic shares outstanding	117,273,743		121,129,679
Average diluted shares outstanding	118,925,442		122,797,738

See notes to condensed consolidated financial statements.

Table of Contents


COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
	Three Months Ended November 30,
(in thousands)	2022		2021
Net earnings	$	261,774	$	232,889
Other comprehensive income (loss), net of income taxes:



Foreign currency translation	41,429		( 39,688 )
Derivatives:
Net unrealized holding gain	68,045		22,254
Reclassification for realized gain	( 6,970 )		( 3,069 )
Net unrealized gain on derivatives	61,075		19,185



Defined benefit plans gain (loss) after amortization of prior service costs	1,758		( 6 )
Total other comprehensive income (loss), net of income taxes	104,262		( 20,509 )
Comprehensive income	$	366,036	$	212,380

See notes to condensed consolidated financial statements.

Table of Contents


COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share and per share data)	November 30, 2022		August 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	582,069	$	672,596
Accounts receivable (less allowance for doubtful accounts of $ 4,901 and $ 4,990 )	1,287,286		1,358,907
Inventories, net	1,102,774		1,169,696
Prepaid and other current assets	251,985		240,269

Total current assets	3,224,114		3,441,468
Property, plant and equipment, net	2,028,955		1,910,871
Intangible assets, net	251,819		257,409
Goodwill	277,453		249,009
Other noncurrent assets	491,626		378,270
Total assets	$	6,273,967	$	6,237,027
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	396,560	$	428,055
Accrued expenses and other payables	441,586		540,136
Current maturities of long-term debt and short-term borrowings	239,406		388,796
Total current liabilities	1,077,552		1,356,987
Deferred income taxes	283,754		250,302
Other noncurrent liabilities	235,280		230,060
Long-term debt	1,093,146		1,113,249
Total liabilities	2,689,732		2,950,598
Commitments and contingencies (Note 13)
Stockholders' equity:
Common stock, par value $ 0.01 per share; authorized 200,000,000 shares; issued 129,060,664 shares; outstanding 117,291,637 and 117,496,053 shares	1,290		1,290
Additional paid-in capital	361,199		382,767
Accumulated other comprehensive loss	( 10,189 )		( 114,451 )
Retained earnings	3,555,425		3,312,438
Less treasury stock 11,769,027 and 11,564,611 shares at cost	( 323,722 )		( 295,847 )
Stockholders' equity	3,584,003		3,286,197
Stockholders' equity attributable to non-controlling interests	232		232
Total stockholders' equity	3,584,235		3,286,429
Total liabilities and stockholders' equity	$	6,273,967	$	6,237,027

See notes to condensed consolidated financial statements.

Table of Contents


COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
	Three Months Ended November 30,
(in thousands)	2022		2021
Cash flows from (used by) operating activities:
Net earnings	$	261,774	$	232,889
Adjustments to reconcile net earnings to cash flows from operating activities:
Depreciation and amortization	51,183		41,226
Deferred income taxes and other long-term taxes	16,744		( 5,099 )
Stock-based compensation	16,675		9,619
Other	5,967		( 583 )

Changes in operating assets and liabilities, net of acquisitions	20,027		( 252,273 )
Net cash flows from operating activities	372,370		25,779

Cash flows from (used by) investing activities:
Capital expenditures	( 133,052 )		( 70,150 )
Acquisitions, net of cash acquired	( 63,745 )		—
Proceeds from insurance	1,460		—
Proceeds from the sale of property, plant and equipment and other	303		1,418
Other	( 516 )		—


Net cash flows used by investing activities	( 195,550 )		( 68,732 )

Cash flows from (used by) financing activities:

Repayments of long-term debt	( 154,631 )		( 6,556 )
Debt issuance costs	( 1,800 )		—
Debt extinguishment costs	( 69 )		—
Repayments under accounts receivable facilities	( 25,914 )		( 144,706 )
Proceeds from accounts receivable facilities	49		150,664
Treasury stock acquired	( 49,149 )		( 5,311 )
Tax withholdings related to share settlements, net of purchase plans	( 23,513 )		( 16,371 )
Dividends	( 18,787 )		( 17,025 )

Net cash flows used by financing activities	( 273,814 )		( 39,305 )
Effect of exchange rate changes on cash	5,139		( 550 )
Decrease in cash, restricted cash and cash equivalents	( 91,855 )		( 82,808 )
Cash, restricted cash and cash equivalents at beginning of period	679,243		501,129
Cash, restricted cash and cash equivalents at end of period	$	587,388	$	418,321

See notes to condensed consolidated financial statements.


Supplemental information:	Three Months Ended November 30,
(in thousands)	2022		2021
Cash paid for income taxes	$	15,694	$	15,296
Cash paid for interest	22,201		8,794

Noncash activities:
Liabilities related to additions of property, plant and equipment	$	47,429	$	45,788
Right of use assets obtained in exchange for operating leases	16,492		15,912
Right of use assets obtained in exchange for finance leases	10,104		1,002

Cash and cash equivalents	$	582,069	$	415,055
Restricted cash (included in Prepaid and other current assets)	5,319		3,266
Total cash, restricted cash and cash equivalents	$	587,388	$	418,321

Table of Contents


COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
	Three Months Ended November 30, 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, 2022	129,060,664	$	1,290	$	382,767	$	( 114,451 )	$	3,312,438	( 11,564,611 )	$	( 295,847 )	$	232	$	3,286,429
Net earnings								261,774							261,774
Other comprehensive income						104,262									104,262
Dividends ($ 0.16 per share)								( 18,787 )							( 18,787 )
Treasury stock acquired										( 1,275,452 )	( 49,149 )				( 49,149 )
Tax withholdings related to share settlements, net of purchase plans				( 44,787 )						1,071,036	21,274				( 23,513 )
Stock-based compensation				13,527											13,527
Reclassification of share-based liability awards				9,692											9,692
Balance, November 30, 2022	129,060,664	$	1,290	$	361,199	$	( 10,189 )	$	3,555,425	( 11,769,027 )	$	( 323,722 )	$	232	$	3,584,235


	Three Months Ended November 30, 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, 2021	129,060,664	$	1,290	$	368,064	$	( 84,820 )	$	2,162,925	( 8,474,075 )	$	( 152,582 )	$	232	$	2,295,109
Net earnings								232,889							232,889
Other comprehensive loss						( 20,509 )									( 20,509 )
Dividends ($ 0.14 per share)								( 17,025 )							( 17,025 )
Treasury stock acquired										( 159,500 )	( 5,311 )				( 5,311 )
Tax withholdings related to share settlements, net of purchase plans				( 28,058 )						1,052,850	11,687				( 16,371 )
Stock-based compensation				8,316											8,316

Reclassification of share-based liability awards				9,091											9,091
Balance, November 30, 2021	129,060,664	$	1,290	$	357,413	$	( 105,329 )	$	2,378,789	( 7,580,725 )	$	( 146,206 )	$	232	$	2,486,189

See notes to condensed consolidated financial statements.

Table of Contents

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, 2022 (the "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 2022 Form 10-K. The results of operations for the three month period 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 three month period ended November 30, 2021. Any reference in this Form 10-Q to a year refers to the fiscal year ended August 31st of that year, unless otherwise noted.

Table of Contents

NOTE 2. CHANGES IN BUSINESS

Tensar Acquisition

On April 25, 2022 (the "Tensar Acquisition Date"), the Company completed the acquisition of TAC Acquisition Corp. ("Tensar"). The total cash purchase price, net of $ 19.6 million cash acquired, was approximately $ 550 million, subject to customary purchase price adjustments, and was funded through domestic cash on-hand. The 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.

The table below presents the preliminary fair values and measurement period adjustments that were allocated to Tensar's assets and liabilities as of the Tensar Acquisition Date:


(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 2022 Form 10-K. No measurement period adjustments occurred during the three months ended November 30, 2022.

Pro 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 November 30, 2021
Pro forma net sales	$	2,043,668
Pro forma net earnings	240,377

Table of Contents

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 three months ended November 30, 2021. Results also reflect increased amortization expense from revalued intangible assets of $ 3.1 million in the three months ended November 30, 2021.

Advanced Steel Recovery Acquisition

On September 15, 2022, the Company 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 the Company's North America reportable segment. The ASR acquisition is not material to the Company's November 30, 2022 financial position or results of operations, 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, TX 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 the Company's North America reportable segment. The Kodiak acquisition is not material to the Company's November 30, 2022 financial position or results of operations, and therefore, pro forma operating results and other disclosures for the acquisition are not presented.

NOTE 3. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables reflect the changes in accumulated other comprehensive income (loss) ("AOCI"):


	Three Months Ended November 30, 2022
(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	41,429		83,887		1,745		127,061
Reclassification for gain (1)	—		( 8,666 )		—		( 8,666 )
Income tax (expense) benefit	—		( 14,146 )		13		( 14,133 )
Net other comprehensive income	41,429		61,075		1,758		104,262
Balance, November 30, 2022	$	( 204,468 )	$	199,317	$	( 5,038 )	$	( 10,189 )



	Three Months Ended November 30, 2021
(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	( 39,688 )		27,474		( 8 )		( 12,222 )
Reclassification for gain (1)	—		( 3,789 )		—		( 3,789 )
Income tax (expense) benefit	—		( 4,500 )		2		( 4,498 )
Net other comprehensive income (loss)	( 39,688 )		19,185		( 6 )		( 20,509 )
Balance, November 30, 2021	$	( 145,368 )	$	40,966	$	( 927 )	$	( 105,329 )

__________________________________

(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

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usually occurs, depending on shipping terms, upon shipment or customer receipt. See Note 14, Operating Segments, for further information about disaggregated revenue by the Company's major product lines.

Each downstream 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, and these contracts represented 8 % and 9 % of net sales in the North America segment in the three months ended November 30, 2022 and 2021, respectively. Revenue from contracts where the Company does not provide installation services is recognized over time using an output measure, and these contracts represented 12 % and 9 % of net sales in the North America segment in the three months ended November 30, 2022 and 2021, respectively.

The following table provides information about assets and liabilities from contracts with customers:


(in thousands)	November 30, 2022		August 31, 2022
Contract assets (included in accounts receivable)	$	76,390	$	73,037
Contract liabilities (included in accrued expenses and other payables)	28,005		27,567

The amount of revenue reclassified from August 31, 2022 contract liabilities during the three months ended November 30, 2022 was approximately $ 11.6 million.

Remaining Performance Obligations

As of November 30, 2022, revenue totaling $ 1.0 billion has been allocated to remaining performance obligations in the North America segment related to contracts where revenue is recognized using an input or output measure. Of this amount, the Company estimates that approximately 81 % of the remaining performance obligations will be recognized in the twelve months after November 30, 2022, 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 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 finished goods.

The components of inventories were as follows:


(in thousands)	November 30, 2022		August 31, 2022
Raw materials	$	255,569	$	271,756
Work in process	9,578		9,446
Finished goods	837,627		888,494
Total	$	1,102,774	$	1,169,696

Inventory write-downs were $ 4.5 million during the three months ended November 30, 2022 and immaterial in the corresponding period.

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NOTE 6. GOODWILL AND OTHER INTANGIBLES

Goodwill by reportable segment is detailed in the following table:


(in thousands)	North America		Europe		Consolidated
Goodwill, gross
Balance at September 1, 2022	$	216,059	$	43,115	$	259,174
Acquisitions	28,891		—		28,891
Foreign currency translation	—		( 442 )		( 442 )
Balance at November 30, 2022	244,950		42,673		287,623

Accumulated impairment
Balance at September 1, 2022	( 10,036 )		( 129 )		( 10,165 )
Foreign currency translation	—		( 5 )		( 5 )
Balance at November 30, 2022	( 10,036 )		( 134 )		( 10,170 )

Goodwill, net
Balance at September 1, 2022	206,023		42,986		249,009
Acquisitions	28,891		—		28,891
Foreign currency translation	—		( 447 )		( 447 )
Balance at November 30, 2022	$	234,914	$	42,539	$	277,453

Intangible assets subject to amortization are detailed in the following table:


		November 30, 2022						August 31, 2022
(in thousands)	Weighted Average Useful Lives in Years	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Developed technologies	1 to 12	$	147,400	$	11,128	$	136,272	$	147,040	$	6,485	$	140,555
Customer relationships	12 to 17	53,145		3,186		49,959		53,115		2,116		50,999
Perpetual lease rights	80	3,752		790		2,962		3,584		744		2,840
Patents	5 to 15	7,347		4,841		2,506		7,203		4,596		2,607
Trade names	5 to 15	3,210		853		2,357		3,212		764		2,448
Non-compete agreements	5 to 7	2,300		1,224		1,076		3,050		1,135		1,915
Other	15	101		100		1		101		99		2
Total		$	217,255	$	22,122	$	195,133	$	217,305	$	15,939	$	201,366

The foreign currency translation adjustments related to the intangible assets subject to amortization were immaterial for all periods presented above.

The gross carrying amount of the Company's intangible assets with indefinite lives was $ 56.7 million and $ 56.8 million as of November 30, 2022 and August 31, 2022, respectively. The change in the balance from August 31, 2022 to November 30, 2022 was due to foreign currency translation adjustments. Intangible assets with indefinite lives consist primarily of trade names with gross carrying amounts of $ 53.5 million and $ 53.6 million at November 30, 2022 and August 31, 2022, respectively, and in-process research and development with a gross carrying amount of $ 2.4 million at both November 30, 2022 and August 31, 2022.

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Amortization expense for intangible assets was $ 6.1 million in the three months ended November 30, 2022, of which $ 4.6 million was recorded in cost of goods sold and $ 1.5 million was recorded in selling, general and administrative expenses in the condensed consolidated statements of earnings. The Company recorded immaterial amortization expense for intangible assets in the three months ended November 30, 2021. Estimated amounts of amortization expense for intangible assets for the next five years are as follows:


	(in thousands)
Remainder of 2023	$	18,307
2024	23,604
2025	21,868
2026	20,662
2027	20,555

NOTE 7. CREDIT ARRANGEMENTS

Long-term debt was as follows:


(in thousands)	Weighted Average Interest Rate as of November 30, 2022	November 30, 2022		August 31, 2022
2032 Notes	4.375 %	$	300,000	$	300,000
2031 Notes	3.875 %	300,000		300,000
2030 Notes	4.125 %	300,000		300,000

2023 Notes	4.875 %	214,059		330,000
Series 2022 Bonds, due 2047	4.000 %	145,060		145,060
Poland Term Loan	—	—		32,439
Short-term borrowings	—	—		26,390
Other	4.550 %	21,097		21,278
Finance leases		63,862		58,536
Total debt		1,344,078		1,513,703
Less unamortized debt issuance costs		( 16,317 )		( 16,496 )
Plus unamortized bond premium		4,791		4,838
Total amounts outstanding		1,332,552		1,502,045


Less current maturities of long-term debt and short-term borrowings		( 239,406 )		( 388,796 )
Long-term debt		$	1,093,146	$	1,113,249

The Company's credit arrangements require compliance with certain covenants, including an interest coverage ratio and a debt to capitalization ratio. At November 30, 2022, the Company was in compliance with all financial covenants in its credit arrangements.

Senior Notes Activity

In May 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 repurchased $ 115.9 million in aggregate principal amount of the 2023 Notes through a cash tender offer and recognized an immaterial loss on debt extinguishment. The remaining balance of $ 214.1 million was included in current maturities of long-term debt and short-term borrowings in the condensed consolidated balance sheet as of November 30, 2022.

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 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

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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 November 30, 2022, 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 the Revolver or the previous revolving credit facility at November 30, 2022 or August 31, 2022. The availability under the Revolver and the previous revolving credit facility, as applicable, was reduced by outstanding stand-by letters of credit of $ 1.4 million at both November 30, 2022 and August 31, 2022.

The Company has a Term Loan facility (the "Poland Term Loan") through its subsidiary, CMC Poland Sp. z.o.o. ("CMCP"). At November 30, 2022, there was no amount outstanding, compared to PLN 152.4 million, or $ 32.4 million outstanding as of August 31, 2022.

The Company also has credit facilities in Poland through CMCP. At November 30, 2022 and August 31, 2022, CMCP's credit facilities totaled PLN 300.0 million, or $ 66.9 million and $ 63.9 million, respectively. There were no amounts outstanding under these facilities as of November 30, 2022 or August 31, 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 $ 14.6 million and $ 1.0 million at November 30, 2022 and August 31, 2022, respectively.

Accounts Receivable Facilities

On November 9, 2022 the Company terminated its $ 150.0 million U.S. trade accounts receivable facility. The Company had no advance payments outstanding under this facility at August 31, 2022.

The Poland accounts receivable facility had a limit of PLN 288.0 million, or $ 64.2 million and $ 61.3 million, at November 30, 2022 and August 31, 2022, respectively. The Company had no advance payments outstanding under the Poland accounts receivable facility at November 30, 2022, compared to PLN 124.0 million, or $ 26.4 million, advance payments outstanding at August 31, 2022.

NOTE 8. 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.

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The Company considers the total notional value of its futures and forward contracts as the best measure of the volume of derivative transactions. At November 30, 2022, the notional values of the Company's foreign currency and commodity contract commitments were $ 294.9 million and $ 378.4 million, respectively. At August 31, 2022, the notional values of the Company's foreign currency and commodity contract commitments were $ 253.5 million and $ 205.1 million, respectively.

The following table provides information regarding the Company's commodity contract commitments at November 30, 2022:

Commodity

Long/Short

Total

Aluminum

Long

2,025

Aluminum

Short

1,425

Copper

Long

374

Copper

Short

8,550

Electricity

Long

3,051,000

MW(h)

Natural Gas

Long

5,230,350

MMBtu

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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 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 November 30,
Gain (Loss) on Derivatives Not Designated as Hedging Instruments (in thousands)	Primary Location	2022		2021
Commodity	Cost of goods sold	$	( 3,085 )	$	2,746
Foreign exchange	SG&A expenses	3,462		( 7,995 )


Effective Portion of Derivatives Designated as Cash Flow Hedging Instruments Recognized in Accumulated Other Comprehensive Loss (in thousands)	Three Months Ended November 30,
	2022		2021
Commodity	$	68,039	$	22,175

The Company's natural gas and electricity commodity derivatives accounted for as cash flow hedging instruments have maturities extending to November 2025 and December 2034, respective ly. Included in the AOCI balance as of November 30, 2022 was an estimated net gain of $ 15.3 million from cash flow hedging instruments that is expected to be reclassified into earnings within the next twelve months. See Note 9, Fair Value, for the fair value of the Company's derivative instruments recorded in the condensed consol idated balance sheets.

NOTE 9. FAIR VALUE

The Company has established a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels. These levels are determined based on the lowest level input that is significant to the fair value measurement. Levels within the hierarchy are defined within Note 1, Nature of Operations and Summary of Significant Accounting Policies, to the consolidated financial statements in the 2022 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:

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			Fair Value Measurements at Reporting Date Using
(in thousands)	November 30, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Investment deposit accounts (1)	$	492,405	$	492,405	$	—	$	—
Commodity derivative assets (2)	248,261		6,795		—		241,466
Foreign exchange derivative assets (2)	2,748		—		2,748		—
Liabilities:
Commodity derivative liabilities (2)	4,417		4,417		—		—
Foreign exchange derivative liabilities (2)	1,934		—		1,934		—


			Fair Value Measurements at Reporting Date Using
(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:
Investment deposit accounts (1)	$	572,384	$	572,384	$	—	$	—
Commodity derivative assets (2)	160,847		17,347		—		143,500
Foreign exchange derivative assets (2)	1,296		—		1,296		—
Liabilities:
Commodity derivative liabilities (2)	1,260		1,260		—		—
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 8, Derivatives.

As of August 31, 2022, the Company had one Level 3 commodity derivative. In September 2022, the Company entered into a second Level 3 commodity derivative with the same counterparty. The second Level 3 commodity derivative will begin to settle in January 2025. The fair value estimates of the Level 3 commodity derivatives are based on internally developed discounted cash flow models primarily utilizing unobservable inputs for 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 models. The following table summarizes the floating rate used to measure the fair value of the commodity derivatives at November 30, 2022 and 2021:


	Floating rate (PLN)
November 30,	Low	High	Average
2022	532.66	1,298.53	786.58
2021	252.79	540.39	348.99

Below is a reconciliation of the beginning and ending balances of the Level 3 commodity derivatives recognized in the condensed consolidated statements of comprehensive income. The fluctuation in energy rates over time causes volatility in the fair value estimate and is the primary reason for unrealized gains included in other comprehensive income ("OCI") in the three months ended November 30, 2022 and 2021.

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(in thousands)	Three Months Ended November 30, 2022
Balance, September 1, 2022	$	143,500
Total gains, realized and unrealized:
Unrealized holding gain before reclassification (1)	104,197
Reclassification for gain included in net earnings (2)	( 6,231 )
Balance, November 30, 2022	$	241,466








(in thousands)	Three Months Ended November 30, 2021
Balance, September 1, 2021	$	26,413
Total gains, realized and unrealized:
Unrealized holding gain before reclassification (1)	25,208
Reclassification for gain included in net earnings (2)	( 3,729 )
Balance, November 30, 2021	$	47,892

__________________________________

(1) Unrealized holding gain, net of foreign currency translation, less amounts reclassified are included in OCI in the 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 months ended November 30, 2022 or 2021.

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 in the condensed consolidated balance sheets were as follows:


		November 30, 2022				August 31, 2022
(in thousands)	Fair Value Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value
2032 Notes (1)	Level 2	$	300,000	$	255,005	$	300,000	$	256,488
2031 Notes (1)	Level 2	300,000		252,169		300,000		249,888
2030 Notes (1)	Level 2	300,000		261,675		300,000		263,372
2023 Notes (1)	Level 2	214,059		214,316		330,000		330,182
Series 2022 Bonds, due 2047 (1)	Level 2	145,060		115,768		145,060		126,652
Poland Term Loan (2)	Level 2	—		—		32,439		32,439
Short-term borrowings (2)	Level 2	—		—		26,390		26,390

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(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.

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NOTE 10. STOCK-BASED COMPENSATION PLANS

The Company's stock-based compensation plans are described in Note 14, Stock-Based Compensation Plans, to the consolidated financial statements in the 2022 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 three months ended November 30, 2022 and 2021, the Company granted the following awards under its stock-based compensation plans:


	November 30, 2022			November 30, 2021
(in thousands, except share and per share data)	Shares Granted	Weighted Average Grant Date Fair Value		Shares Granted	Weighted Average Grant Date Fair Value
Equity method	1,424	$	35.78	1,407	$	27.77
Liability method	242	N/A		261	N/A

The Company recorded immaterial mark-to-market adjustments on liability awards for the three months ended November 30, 2022 and 2021. At November 30, 2022, the Company had outstanding 518,470 equivalent shares accounted for under the liability method. The Company expects 492,546 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 in the Company's condensed consolidated statements of earnings:


	Three Months Ended November 30,
(in thousands)	2022		2021
Stock-based compensation expense	$	16,675	$	9,619

NOTE 11. EMPLOYEES' RETIREMENT PLANS

During the quarter ended November 30, 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. No benefit obligation or plan assets related to the U.S. Pension Plan remain as of November 30, 2022. 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 three months ended November 30, 2022.

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.

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NOTE 12. STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE

Basic earnings 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 were as follows:


	Three Months Ended November 30,
(in thousands, except share and per share data)	2022		2021
Net earnings	$	261,774	$	232,889

Average basic shares outstanding	117,273,743		121,129,679
Effect of dilutive securities	1,651,699		1,668,059
Average diluted shares outstanding	118,925,442		122,797,738

Earnings per share:
Basic	$	2.23	$	1.92
Diluted	$	2.20	$	1.90

Anti-dilutive shares not included above were immaterial for all periods presented.

In October 2021, CMC's Board of Directors authorized a share repurchase program under which CMC may repurchase up to $ 350.0 million of shares of common stock. During the three months ended November 30, 2022, the Company repurchased 1,275,452 shares of CMC common stock, at an average purchase price of $ 38.53 per share. CMC had remaining authorization to repurchase $ 139.0 million of shares of common stock at November 30, 2022.

NOTE 13. 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 November 30, 2022 and August 31, 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 $ 5.1 million and $ 5.3 million at November 30, 2022 and August 31, 2022, respectively, of which $ 2.1 million and $ 2.0 million were classified as other noncurrent liabilities as of November 30, 2022 and August 31, 2022, respectively. 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.

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NOTE 14. OPERATING SEGMENTS

The Company structures its business into two 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 2022 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 Plan assets and short-term investments, expenses of the Company's corporate headquarters, interest expense related to its long-term debt and intercompany eliminations.

The following is a summary of certain financial information by reportable segment and Corporate and Other:


	Three Months Ended November 30, 2022
(in thousands)	North America		Europe		Corporate and Other		Total
Net sales	$	1,816,899	$	406,513	$	3,901	$	2,227,313
Adjusted EBITDA	377,956		64,505		( 39,725 )		402,736





Total assets at November 30, 2022	4,568,633		1,171,324		534,010		6,273,967


	Three Months Ended November 30, 2021
(in thousands)	North America		Europe		Corporate and Other		Total
Net sales	$	1,653,622	$	329,056	$	( 877 )	$	1,981,801
Adjusted EBITDA	268,524		79,832		( 34,334 )		314,022





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 to adjusted EBITDA:


	Three Months Ended November 30,
(in thousands)	2022		2021
Net earnings	$	261,774	$	232,889
Interest expense	13,045		11,035
Income taxes	76,725		28,872
Depreciation and amortization	51,183		41,226
Asset impairments	9		—

Adjusted EBITDA	$	402,736	$	314,022

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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 November 30, 2022
(in thousands)	North America		Europe		Corporate and Other		Total
Major product:
Raw materials	$	292,320	$	4,867	$	—	$	297,187
Steel products	705,462		311,936		—		1,017,398
Downstream products	641,934		59,582		—		701,516
Construction-related solutions	142,372		19,446		—		161,818
Other	33,160		10,118		6,116		49,394
Net sales from external customers	1,815,248		405,949		6,116		2,227,313
Intersegment net sales, eliminated on consolidation	1,651		564		( 2,215 )		—
Net sales	$	1,816,899	$	406,513	$	3,901	$	2,227,313


	Three Months Ended November 30, 2021
(in thousands)	North America		Europe		Corporate and Other		Total
Major product:
Raw materials	$	353,092	$	6,960	$	—	$	360,052
Steel products	675,042		243,145		—		918,187
Downstream products	514,396		70,072		—		584,468
Construction-related solutions	82,499		—		—		82,499
Other	28,593		8,385		( 383 )		36,595
Net sales from external customers	1,653,622		328,562		( 383 )		1,981,801
Intersegment net sales, eliminated on consolidation	—		494		( 494 )		—
Net sales	$	1,653,622	$	329,056	$	( 877 )	$	1,981,801

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, 2022 (the "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 2022 Form 10-K. We do not undertake any obligation to update, amend or clarify any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or otherwise, except as required by law.

Any reference in this Form 10-Q to the "corresponding period" or "comparable period" relates to the three month period ended November 30, 2021. Any reference in this Form 10-Q to a year refers to the fiscal year ended August 31st of that year, unless otherwise noted.

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BUSINESS CONDITIONS AND DEVELOPMENTS

Tensar Acquisition

On April 25, 2022 (the "Tensar Acquisition Date"), 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, TX 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 January 2022, we announced the plan to construct a fourth micro mill geographically situated with the intention of primarily serving the Northeast, Mid-Atlantic and Mid-Western U.S. markets, and on December 8, 2022 we announced it will be located in Berkeley County, West Virginia. This new micro mill will enhance our steel production capabilities in the U.S. and create meaningful synergies within the existing network of mills and downstream fabrication plants. The construction and commissioning of the planned mill is expected to take approximately two years.

In August 2020, we announced 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 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 allow us to more efficiently meet West Coast demand for steel products. We began construction of the third micro mill in 2021 and expect this micro mill to be commissioned in spring 2023.

Senior Notes Activity

In November 2022, we repurchased $115.9 million in aggregate principal amount of the 4.875% Senior Notes due 2023 (“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 this amount was included in current maturities of long-term debt and short-term borrowings in the condensed consolidated balance sheet as of November 30, 2022.

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 months ended November 30, 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.

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See Part I, Item 1A, Risk Factors, of our 2022 Form 10-K for further discussion related to the above business conditions.

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 2022 Form 10-K.

RESULTS OF OPERATIONS SUMMARY

Business Overview

Our vertically integrated steel-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") 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 evaluating our results for the period, we compare 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 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 posts.

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 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 and downstream products period-over-period is a consistent area of focus for our Company and industry. Metal margin is a metric used by management to monitor the results of our vertically integrated organization. For 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. The metal margin for 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.

Financial Results Overview

The following discussion of our results of operations is based on our continuing operations.


	Three Months Ended November 30,
(in thousands, except per share data)	2022		2021
Net sales	$	2,227,313	$	1,981,801
Net earnings	261,774		232,889
Diluted earnings per share	$	2.20	$	1.90

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Net sales for the three months ended November 30, 2022 increased $245.5 million, or 12%, compared to the corresponding period. Net sales in our North America segment increased in the three months ended November 30, 2022, as compared to the corresponding period, primarily due to year-over-year increases in steel products average selling prices and downstream products average selling prices. Net sales in our Europe segment also increased due to higher shipments of steel products in the three months ended November 30, 2022, compared to the corresponding period. The acquired Tensar operations also contributed to the year-over-year change by providing $61.6 million in net sales during the three months ended November 30, 2022, with no such activity in the corresponding period.

During the three months ended November 30, 2022, we achieved net earnings of $261.8 million, which increased $28.9 million, or 12%, compared to the corresponding period. This increase was driven by the significant expansion of steel products metal margins per ton in our North America segment, which resulted from a combination of rising selling prices for steel products and lower input costs of ferrous scrap utilized.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $33.8 million for the three months ended November 30, 2022, compared to the corresponding period. Contributing to the increase was $22.0 million of selling, general and administrative expenses from Tensar operations' commercial and engineering support in the three months ended November 30, 2022, with no such expenses in the corresponding period. The remaining increase in selling, general and administrative expenses in the three months ended November 30, 2022 was a result of many factors, including $7.0 million of increased stock compensation, a $4.2 million pension plan settlement charge, with no such settlement charge in the corresponding period, $3.9 million of increased professional services and $1.6 million of increased travel-related costs. See Note 11, Employees' Retirement Plans, in Part I, Item 1 of this Form 10-Q for more information on the pension plan termination activity. These costs were partially offset by a $7.0 million decrease in labor-related expenses.

Interest Expense

Interest expense increased by $2.0 million during the three months ended November 30, 2022, compared to the corresponding period. Capitalized interest was $4.6 million during the three months ended November 30, 2022, compared to $1.5 million during the corresponding period. The increase in capitalized interest was due to construction of the Company's third micro mill in Mesa, Arizona. Offsetting the impact of increased capitalized interest was an increase in long-term debt interest expense of $3.9 million during the three months ended November 30, 2022, compared to the corresponding period, due to the additional long-term debt outstanding.

Income Taxes

The effective income tax rate for the three months ended November 30, 2022 was 22.7% compared to 11.0% in the corresponding period. The increase is primarily due to the recognition of a tax benefit on a tax restructuring transaction during the three months ended November 30, 2021 that did not recur in the three months ended November 30, 2022.

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SEGMENT OPERATING DATA

Unless otherwise indicated, all dollar amounts below are calculated before income taxes. See Note 14, Operating Segments, in Part I, Item 1, Financial Statements, of this Form 10-Q, 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 metric had on the segment's net sales or adjusted EBITDA.

North America


	Three Months Ended November 30,
(in thousands, except per ton amounts)	2022		2021
Net sales	$	1,816,899	$	1,653,622
Adjusted EBITDA	377,956		268,524

External tons shipped (in thousands)
Raw materials	316		334
Rebar	461		442
Merchant and other	243		257
Steel products	704		699
Downstream products	382		400

Average selling price (per ton)
Raw materials	$	824	$	1,034
Steel products	1,020		976
Downstream products	1,399		1,092

Cost of raw materials per ton	$	598	$	766
Cost of ferrous scrap utilized per ton	325		428
Steel products metal margin per ton	695		548

Net sales for the three months ended November 30, 2022 increased $163.3 million, or 10%, compared to the corresponding period. These results benefited from increased average selling prices of 5% for steel products and 28% for downstream products, and were offset, in part, by a 20% decrease in raw materials average selling prices compared to the corresponding period. The year-over-year increases in average selling prices for steel products and downstream products were driven by continued strong demand across all of our end-use markets. During the three months ended November 30, 2022, downstream bidding activity improved and led to growth in backlog levels compared to the corresponding period, which were awarded at the improved price levels described above. Volumes remained relatively flat during the three months ended November 30, 2022, compared to the corresponding period, as the construction industry demand was constrained, in part, due to availability of labor at construction sites in certain geographies. The acquired Tensar operations also contributed to the year-over-year change by providing $42.1 million in net sales during the three months ended November 30, 2022, with no such activity in the corresponding period.

Adjusted EBITDA for the three months ended November 30, 2022 increased $109.4 million, or 41%, compared to the corresponding period. In our vertically integrated business model, the increases in average selling prices for both steel products and downstream products, paired with falling scrap prices, led to significant expansion in the steel products metal margin per ton and downstream products margin over scrap per ton. These expanded margins, coupled with the continued steady demand discussed above, overcame the inflation that we faced during the period and drove the year-over-year growth in adjusted EBITDA. Also contributing to the year-over-year change was $8.1 million of adjusted EBITDA provided by the acquired Tensar operations during the three months ended November 30, 2022, with no such activity in the corresponding period. Adjusted EBITDA included non-cash stock compensation expense of $4.1 million and $2.7 million for the three months ended November 30, 2022 and 2021, respectively.

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Europe


	Three Months Ended November 30,
(in thousands, except per ton amounts)	2022		2021
Net sales	$	406,513	$	329,056
Adjusted EBITDA	64,505		79,832

External tons shipped (in thousands)
Rebar	204		103
Merchant and other	269		262
Steel products	473		365

Average selling price (per ton)
Steel products	$	792	$	869

Cost of ferrous scrap utilized per ton	$	366	$	434
Steel products metal margin per ton	426		435

Net sales for the three months ended November 30, 2022 increased $77.5 million, or 24%, compared to the corresponding period. The 30% increase in shipments of steel products overcame the impact of a $77 per ton year-over-year decrease in steel products average selling prices, which was driven by a low pricing environment across Europe. Scheduled maintenance, which decreased shipments in the comparable period, did not impact volumes in the three months ended November 30, 2022. Rising shipment levels were also 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. The acquired Tensar operations also contributed to the year-over-year change by providing $19.5 million in net sales during the three months ended November 30, 2022, with no such activity in the corresponding period. Net sales for the three months ended November 30, 2022 were impacted by an unfavorable foreign currency translation adjustment of $79.6 million, due to the increase in the average value of the U.S. dollar relative to the Polish zloty, compared to an unfavorable foreign currency translation adjustment of $13.5 million, during the corresponding period.

Adjusted EBITDA for the three months ended November 30, 2022 was $64.5 million, compared to $79.8 million in the corresponding period. While the cost of ferrous scrap utilized decreased $68 per ton year-over-year, the decline in average selling prices slightly outpaced it resulting in a modest decrease in steel products metal margin per ton. During the three months ended November 30, 2022 we received a $9.5 million energy credit, which helped mitigate higher energy costs by reducing cost of goods sold, but was $6.0 million lower than the energy credit received in the comparable period. Also contributing to the year-over-year change was $3.3 million of adjusted EBITDA provided by the acquired Tensar operations during the three months ended November 30, 2022, with no such activity in the corresponding period. Adjusted EBITDA for the three months ended November 30, 2022 included an unfavorable foreign currency exchange rate impact of $13.5 million, compared to unfavorable foreign currency translation adjustment of $3.0 million during the corresponding period. Adjusted EBITDA included non-cash stock compensation expense of $1.9 million and $1.5 million for the three months ended November 30, 2022 and 2021, respectively.

Corporate and Other

Corporate and Other reported an adjusted EBITDA loss of $39.7 million for the three months ended November 30, 2022, compared to an adjusted EBITDA loss of $34.3 million in the corresponding period. The year-over-year increase in adjusted EBITDA loss was driven primarily by a $5.3 million increase in non-cash stock compensation expense and a $4.2 million pension plan settlement charge, with no such settlement charge in the corresponding period. See Note 11, Employees' Retirement Plans, in Part I, Item 1 of this Form 10-Q for more information on the pension plan termination activity. These increases were offset, in part, by a $6.5 million increase in other revenue, driven by short-term investments and gains on benefit restoration plan ("BRP") assets.

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LIQUIDITY AND CAPITAL RESOURCES

Sources of Liquidity and Capital Resources

Our cash 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 2022 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 actively monitor our accounts receivable and, based on market conditions and customers' financial condition, record allowances 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 14% of total trade receivables at November 30, 2022.

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 8, 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 November 30, 2022. See Note 7, Credit Arrangements, in Part I, Item 1, Financial Statements, of this Form 10-Q, for additional information.


(in thousands)	Liquidity Sources and Facilities		Availability
Cash and cash equivalents	$	582,069	$	582,069
Notes due from 2023 to 2032	1,114,059		(1)
Revolver	600,000		598,587
Term Loan	200,000		200,000
Series 2022 Bonds, due 2047	145,060		—
Poland credit facilities	66,851		52,296
Poland accounts receivable facility	64,177		64,177

Other	4,026		1,206

__________________________________

(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.

We continually review our capital resources to determine whether we can meet our short and long-term goals. 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, repay current maturities of long-term debt, including our $214.1 million outstanding principal amount of 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 will be sufficient.

We estimate that our 2023 capital spending will range from $500 million to $550 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 November 30, 2022, we believe we were in compliance with all covenants contained in our credit arrangements.

As of November 30, 2022 and August 31, 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.

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Cash Flows

Operating Activities

Net cash flows from operating activities were $372.4 million for the three months ended November 30, 2022, compared to net cash flows from operating activities of $25.8 million for the corresponding period. Net earnings increased by $28.9 million year-over-year. A $272.3 million year-over-year net increase in cash provided by operating assets and liabilities was due in part to falling scrap prices, which resulted in decreased inventory valuation, compared to increasing scrap prices in the three months ended November 30, 2021. Additionally, accounts payable, accrued expenses and other payables decreased by $46.9 million and accounts receivable decreased as a result of the falling steel product selling prices during the three months ended November 30, 2022, as compared to the corresponding period.

Investing Activities

Net cash flows used by investing activities were $195.6 million for the three months ended November 30, 2022, compared to net cash flows used by investing activities of $68.7 million for the three months ended November 30, 2021. The $126.8 million increase in net cash flows used by investing activities was primarily driven by capital expenditures and acquisitions. Net cash flows used by investing activities rose due to $62.9 million of additional capital expenditures as compared to the corresponding period, primarily from the construction of our third micro mill, and approximately $63.7 million attributable to the acquisitions of Advanced Steel Recovery and Kodiak, compared to no acquisitions in the corresponding period. See Note 2, Changes in Business, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information about these acquisitions.

Financing Activities

Net cash flows used by financing activities were $273.8 million for the three months ended November 30, 2022, compared to net cash flows used by financing activities of $39.3 million for the three months ended November 30, 2021. The $234.5 million increase in net cash flows used by financing activities was primarily due to increased net repayments of long-term debt of $148.1 million during the three months ended November 30, 2022, as compared to the corresponding period, primarily related to the partial repayment of the 2023 Notes. Also contributing to the increase in net cash flows used by financing activities were increased net repayments of our Polish accounts receivable facilities of $31.4 million during the three months ended November 30, 2022, as compared to the corresponding period. See Note 7, Credit Arrangements, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information regarding our credit arrangements. Additionally, there was a $43.8 million increase in treasury stock acquired under the share repurchase program. See Note 12, 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 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.

Our undiscounted purchase obligations due in the twelve months following November 30, 2022 were approximately $889.2 million with $219.8 million due thereafter. Of the purchase obligations due in the twelve months following November 30, 2022, approximately 22% were for capital expenditures in connection with normal business operations, 21% for the construction of our third micro mill, 20% for commodities, and 17% for consumable production inputs, such as alloys. Of the purchase obligations due thereafter, 85% were for commodities and 3% were for the construction of our third micro mill. Operating lease obligations in the twelve months following November 30, 2022 were $38.2 million with $134.7 million due thereafter. Additionally, leases that have not yet commenced, primarily for vehicles, with aggregate fixed payments over their terms, were approximately $16.3 million, with $8.9 million to commence in 2023 and $7.4 million 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 requ est. At November 30, 2022, we had committed $21.7 million under these arrangements, of which $1.4 million reduced availability under the Revolver (as defined in Note 7, Credit Arrangements, in Part I, Item 1, Financial Statements, of this Form 10-Q).

CONTINGENCIES

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In the ordinary course of conducting our business, 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 a loss is probable, and we can reasonably estimate the amount of the loss. We evaluate the measurement of recorded liabilities each reporting period based on the current facts and circumstances specific to each matter. The ultimate losses incurred upon final resolution of litigation-related loss contingencies may differ materially from the estimated liability recorded at a particular balance sheet date. Changes in estimates are recorded in earnings in the period in which such changes occur. We do not believe that any currently pending legal proceedings to which we are a party will have a material adverse effect, individually or in the aggregate, on our results of operations, cash flows or financial condition. See Note 13, 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, metal margins, 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, construction activity, international trade, capital expenditures, tax credits, our liquidity and our ability to satisfy future liquidity requirements, 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," "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 is 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 include those described in Part I, Item 1A, Risk Factors, of our 2022 Form 10-K 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;

• 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;

• 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;

• 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;

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• potential limitations in our or our customers' abilities to access credit and non-compliance of their contractual obligations, including payment obligations;

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

• financial covenants and restrictions on the operation of our business contained in agreements governing our debt;

• our ability to successfully identify, consummate and integrate acquisitions and 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;

• impact of goodwill or other indefinite lived intangible asset impairment charges;

• 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;

• 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;

• 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 refer to the "Risk Factors" disclosed in our periodic and current reports filed with the SEC for specific information regarding additional risks which would cause actual results to be significantly different 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 three months ended November 30, 2022, the U.S. dollar equivalent of the Company's total gross foreign currency exchange contract commitments increased $41.4 million, or 16%, compared to August 31, 2022. This increase was primarily due to forward contracts denominated in Polish zloty with a U.S. dollar functional currency, which increased $80.5 million, partially offset by forward contracts denominated in euros with a Polish zloty functional currency, which decreased $38.6 million compared to August 31, 2022.

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There were no other material changes to the information set forth in Item 7A, Quantitative and Qualitative Disclosures about Market Risk, included in our 2022 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 defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our quarter ended November 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For information regarding our legal proceedings, refer to Note 13, 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

There were no material changes to the risk factors previously disclosed in Part I, Item 1A, Risk Factors, of our 2022 Form 10-K.

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 made by the Company or any affiliated purchasers during the quarter ended November 30, 2022.


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
September 1, 2022 - September 30, 2022	771,402	$	37.42	771,402	$	159,265,967
October 1, 2022 - October 31, 2022	388,550	38.38		388,550	144,354,898
November 1, 2022 - November 30, 2022	115,500	46.54		115,500	138,979,449
	1,275,452			1,275,452

__________________________________

(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, 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.

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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.

2.1†

Agreement and Plan of Merger, dated as of December 3, 2021, by and among Commercial Metals Company, Tahoe Merger Sub Inc., TAC Acquisition Corp. and Castle Harlan Inc. (filed as Exhibit 2.1 to Commercial Metals Company's Current Report on Form 8-K filed December 7, 2021 and incorporated herein by reference).

3.1(a)

Restated Certificate of Incorporation dated March 2, 1989 (filed as Exhibit 3(i) to Commercial Metals Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2009 and incorporated herein by reference).

3.1(b)

Certificate of Amendment of Restated Certificate of Incorporation dated February 1, 1994 (filed as Exhibit 3(i)(a) to Commercial Metals Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2009 and incorporated herein by reference).

3.1(c)

Certificate of Amendment of Restated Certificate of Incorporation dated February 17, 1995 (filed as Exhibit 3(i)(b) to Commercial Metals Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2009 and incorporated herein by reference).

3.1(d)

Certificate of Amendment of Restated Certificate of Incorporation dated January 30, 2004 (filed as Exhibit 3(i)(d) to Commercial Metals Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 2004 and incorporated herein by reference).

3.1(e)

Certificate of Amendment of Restated Certificate of Incorporation dated January 26, 2006 (filed as Exhibit 3(i) to Commercial Metals Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 2006 and incorporated herein by reference).

3.1(f)

Certificate of Designation, Preferences and Rights of Series A Preferred Stock (filed as Exhibit 2 to Commercial Metals Company's Form 8-A filed August 3, 1999 and incorporated herein by reference).

3.2

Amended and Restated Bylaws (filed as Exhibit 3.1 to Commercial Metals Company's Current Report on Form 8-K dated June 21, 2022 and incorporated herein by reference).

10.1

Consulting Agreement, dated as of October 14, 2022, by and between Tracy L. Porter and Commercial Metals Company (filed herewith).

10.2

Sixth Amended and Restated Credit Agreement, dated October 26, 2022, by and among Commercial Metals Company, CMC International Finance, a société à responsabilité limitée, the lenders party thereto and Bank of America, N.A., as Administrative Agent (filed herewith).

31.1

Certification of Barbara R. Smith, President and Chief Executive Officer of Commercial Metals Company, pursuant to Section 302 to the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2

Certification of Paul J. Lawrence, Senior Vice President and Chief Financial Officer of Commercial Metals Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1

Certification of Barbara R. Smith, President and Chief Executive Officer of Commercial Metals Company, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

32.2

Certification of Paul J. Lawrence, Senior Vice President and Chief Financial Officer of Commercial Metals Company, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

101.INS

Inline XBRL Instance Document (filed herewith).

101.SCH

Inline XBRL Taxonomy Extension Schema Document (filed herewith).

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith).

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).

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.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			COMMERCIAL METALS COMPANY

January 9, 2023			/s/ Paul J. Lawrence
			Paul J. Lawrence
			Senior Vice President and Chief Financial Officer
			(Duly authorized officer and principal financial officer of the registrant)

TABLE OF CONTENTS

Part I. Financial Informationprint Item 1. Financial Statementsprint Note 1. Accounting Policiesprint Note 2. Changes in Businessprint Note 3. Accumulated Other Comprehensive Income (loss)print Note 4. Revenue Recognitionprint Note 5. Inventories, Netprint Note 6. Goodwill and Other Intangiblesprint Note 7. Credit Arrangementsprint Note 8. Derivativesprint Note 9. Fair Valueprint Note 10. Stock-based Compensation Plansprint Note 11. Employees' Retirement Plansprint Note 12. Stockholders' Equity and Earnings Per Shareprint Note 13. Commitments and Contingenciesprint Note 14. Operating Segmentsprint Item 2. Management's Discussion and Analysis Of Financial Condition and Results Of Operationsprint Item 3. Quantitative and Qualitative Disclosures About Market Riskprint Item 4. Controls and Proceduresprint Part II. Other Informationprint Item 1. Legal Proceedingsprint Item 1A. Risk Factorsprint Item 2. Unregistered Sales Of Equity Securities and Use Of Proceedsprint Item 3. Defaults Upon Senior Securitiesprint Item 4. Mine Safety Disclosuresprint Item 5. Other Informationprint Item 6. Exhibitsprint

Exhibits

Customer name	Ticker
Carpenter Technology Corporation	CRS
The Timken Company	TKR

Supplier name	Ticker
Honeywell International Inc.	HON
Canaan Inc.	CAN
Norfolk Southern Corporation	NSC
Intercontinental Exchange, Inc.	ICE
Ecolab Inc.	ECL
Norfolk Southern Corporation	NSC
Parker-Hannifin Corporation	PH
Nucor Corporation	NUE

CMC 10-Q Quarter ended Nov. 30, 2022

Exhibits