COMMERCIAL METALS CO
10-Qs and 10-Ks
PROXIES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM
10-Q
___________________________________
For the quarterly period ended
May 31, 2022
OR
For the transition period from to
Commission file number
1-4304
___________________________________
(
Exact Name of Registrant as Specified in Its Charter
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| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) | ||||
(Address of Principal Executive Offices) (Zip Code)
(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 | ||||||||||||
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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.
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| Non-accelerated filer | ☐ | Smaller reporting company |
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| Emerging growth company |
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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
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No
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As of June 21, 2022,
120,490,407
shares of the registrant's common stock, par value $0.01 per share, were outstanding.
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
TABLE OF CONTENTS
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2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
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| Three Months Ended May 31, | Nine Months Ended May 31, | |||||||||||||||||||||||||
| (in thousands, except share and per share data) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Net sales | $ |
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$ |
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$ |
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$ |
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| Costs and operating expenses (income): | ||||||||||||||||||||||||||
| Cost of goods sold |
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| Selling, general and administrative expenses |
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| Interest expense |
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| Loss on debt extinguishment |
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| Asset impairments |
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| Gain on sale of assets |
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| Net costs and operating expenses |
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| Earnings before income taxes |
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| Income taxes |
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| Net earnings | $ |
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$ |
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$ |
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$ |
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| Earnings per share: | ||||||||||||||||||||||||||
| Basic | $ |
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$ |
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$ |
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$ |
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| Diluted | $ |
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$ |
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$ |
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$ |
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| Average basic shares outstanding |
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| Average diluted shares outstanding |
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3
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
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| Three Months Ended May 31, | Nine Months Ended May 31, | |||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Net earnings | $ |
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$ |
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$ |
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$ |
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| Other comprehensive income (loss), net of income taxes: | ||||||||||||||||||||||||||
| Foreign currency translation adjustment after reclassification |
(
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(
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| Derivatives: | ||||||||||||||||||||||||||
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Unrealized holding gain
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Reclassification for realized gain
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(
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Net unrealized gain on derivatives
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| Defined benefit plans loss after amortization of prior service costs and net actuarial losses |
(
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(
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(
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(
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Total other comprehensive income (loss), net of income taxes
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(
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Comprehensive income
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$ |
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$ |
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$ |
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$ |
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See notes to condensed consolidated financial statements.
4
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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| (in thousands, except share and per share data) | May 31, 2022 | August 31, 2021 | ||||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ |
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$ |
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| Restricted cash |
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Accounts receivable (less allowance for doubtful accounts of $
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| Inventories, net |
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| Prepaid and other current assets |
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| Assets held for sale |
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| Total current assets |
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| Property, plant and equipment, net |
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| Intangible assets, net |
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| Goodwill |
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| Other noncurrent assets |
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| Total assets | $ |
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$ |
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| Liabilities and stockholders' equity | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ |
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$ |
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| Accrued expenses and other payables |
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| Current maturities of long-term debt and short-term borrowings |
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| Total current liabilities |
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| Deferred income taxes |
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| Other noncurrent liabilities |
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| Long-term debt |
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| Total liabilities |
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| Commitments and contingencies (Note 15) |
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| Stockholders' equity: | ||||||||||||||
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Common stock, par value $
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| Additional paid-in capital |
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| Accumulated other comprehensive loss |
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(
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| Retained earnings |
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Less treasury stock
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(
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(
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| Stockholders' equity |
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| Stockholders' equity attributable to non-controlling interests |
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| Total stockholders' equity |
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| Total liabilities and stockholders' equity | $ |
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$ |
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See notes to condensed consolidated financial statements.
5
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
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| Nine Months Ended May 31, | ||||||||||||||
| (in thousands) | 2022 | 2021 | ||||||||||||
| Cash flows from (used by) operating activities: | ||||||||||||||
| Net earnings | $ |
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$ |
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| Adjustments to reconcile net earnings to cash flows from (used by) operating activities: | ||||||||||||||
| Depreciation and amortization |
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| Deferred income taxes and other long-term taxes |
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| Stock-based compensation |
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| Loss on debt extinguishment |
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| Asset impairments |
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| Other |
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| Amortization of acquired unfavorable contract backlog |
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| Net gain on disposals of assets |
(
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(
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| Changes in operating assets and liabilities |
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(
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Net cash flows from operating activities
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| Cash flows from (used by) investing activities: | ||||||||||||||
| Acquisitions, net of cash acquired |
(
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| Proceeds from the sale of property, plant and equipment and other |
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| Capital expenditures |
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(
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| Proceeds from insurance |
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| Other |
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Net cash flows used by investing activities
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(
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(
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| Cash flows from (used by) financing activities: | ||||||||||||||
| Proceeds from issuance of long-term debt, net |
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| Repayments of long-term debt |
(
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(
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| Debt extinguishment costs |
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| Debt issuance costs |
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| Proceeds from accounts receivable facilities |
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| Repayments under accounts receivable facilities |
(
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| Treasury stock acquired |
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| Dividends |
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(
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| Stock issued under incentive and purchase plans, net of forfeitures |
(
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(
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| Contribution from non-controlling interest |
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Net cash flows from (used by) financing activities
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(
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| Effect of exchange rate changes on cash |
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Increase (decrease) in cash, restricted cash and cash equivalents
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(
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| Cash, restricted cash and cash equivalents at beginning of period |
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| Cash, restricted cash and cash equivalents at end of period | $ |
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$ |
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See notes to condensed consolidated financial statements.
| Supplemental information: | Nine Months Ended May 31, | |||||||||||||
| (in thousands) | 2022 | 2021 | ||||||||||||
| Cash paid for income taxes | $ |
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$ |
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| Cash paid for interest |
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| Noncash activities: | ||||||||||||||
| Liabilities related to additions of property, plant and equipment | $ |
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$ |
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| Cash and cash equivalents | $ |
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$ |
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| Restricted cash |
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| Total cash, restricted cash and cash equivalents | $ |
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$ |
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6
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) |
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| Three Months Ended May 31, 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, March 1, 2022 |
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$ |
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$ |
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$ |
(
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$ |
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(
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$ |
(
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$ |
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$ |
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| Net earnings |
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| Other comprehensive income |
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Dividends ($
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(
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(
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| Treasury stock acquired |
(
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(
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(
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| Issuance of stock under incentive and purchase plans, net of forfeitures |
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| Stock-based compensation |
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| Balance, May 31, 2022 |
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$ |
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$ |
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$ |
(
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$ |
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(
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$ |
(
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$ |
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$ |
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| Nine Months Ended May 31, 2022 | |||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | ||||||||||||||||||||||||||||
| (in thousands, except share and per share data) |
Number of
Shares |
Amount |
Additional Paid-In
Capital |
Accumulated
Other Comprehensive Loss |
Retained
Earnings |
Number of
Shares |
Amount |
Non-controlling
Interest |
Total | ||||||||||||||||||||
| Balance, September 1, 2021 |
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$ |
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$ |
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$ |
(
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$ |
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(
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$ |
(
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$ |
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$ |
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| Net earnings |
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| Other comprehensive loss |
(
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(
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Dividends ($
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(
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(
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| Treasury stock acquired |
(
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(
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(
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| Issuance of stock under incentive and purchase plans, net of forfeitures |
(
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(
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| Stock-based compensation |
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| Reclassification of share-based liability awards |
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| Balance, May 31, 2022 |
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$ |
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$ |
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$ |
(
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$ |
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(
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$ |
(
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$ |
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$ |
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7
| Three Months Ended May 31, 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, March 1, 2021 |
|
$ |
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$ |
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$ |
(
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$ |
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(
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$ |
(
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$ |
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$ |
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| Net earnings |
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| Other comprehensive income |
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Dividends ($
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(
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(
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| Issuance of stock under incentive and purchase plans, net of forfeitures |
(
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| Stock-based compensation |
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| Balance, May 31, 2021 |
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$ |
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$ |
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$ |
(
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$ |
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(
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$ |
(
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$ |
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$ |
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| Nine Months Ended May 31, 2021 | |||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | ||||||||||||||||||||||||||||
| (in thousands, except share and per share data) |
Number of
Shares |
Amount |
Additional Paid-In
Capital |
Accumulated
Other Comprehensive Loss |
Retained
Earnings |
Number of
Shares |
Amount |
Non-controlling
Interest |
Total | ||||||||||||||||||||
| Balance, September 1, 2020 |
|
$ |
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$ |
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$ |
(
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$ |
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(
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$ |
(
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$ |
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$ |
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| Net earnings |
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| Other comprehensive income |
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Dividends ($
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(
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(
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| Issuance of stock under incentive and purchase plans, net of forfeitures |
(
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(
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| Stock-based compensation |
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| Contribution of non-controlling interest |
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| Reclassification of share-based liability awards |
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| Balance, May 31, 2021 |
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$ |
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$ |
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$ |
(
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$ |
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(
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$ |
(
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$ |
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$ |
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See notes to condensed consolidated financial statements.
8
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, 2021 (the "2021 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 2021 Form 10-K. The results of operations for the three and nine month periods are not necessarily indicative of the results to be expected for the full fiscal year. Any reference in this Form 10-Q to the "corresponding period" relates to the relevant three or nine month period ended May 31, 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.
Recently Issued Accounting Pronouncements
NOTE 2.
ACQUISITION
On April 25, 2022 (the "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.
Tensar is a leading global provider of innovative ground stabilization and soil reinforcement solutions through two major product lines: Tensar® geogrids and Geopier® foundation systems, which are complementary to the Company's existing concrete reinforcement product lines within North America and Europe. Geogrids are polymer-based products used for ground stabilization, soil reinforcement, and asphalt optimization in construction applications, including roadways, public infrastructure, and industrial facilities. Geopier foundation systems are ground improvement solutions that increase the load-bearing characteristics of ground structures and working surfaces and can be applied in soil types and construction situations in which traditional support methods are impractical or would make a project infeasible.
Tensar’s end customers include commercial, industrial and residential site developers, mining and oil and gas companies, transportation authorities, coastal and waterway authorities and waste management companies
.
Tensar serves customers in more than 80 national markets through its manufacturing facilities, the largest of which are located in Morrow, Georgia and Blackburn, England. The acquired operations in North America are presented within our North America reportable segment, and the remaining acquired operations are presented within our Europe reportable segment.
9
The Company accounts for business combinations by recognizing the assets acquired and liabilities assumed at the Acquisition Date fair value. In valuing acquired assets and liabilities, fair value estimates were determined using Level 3 inputs, including expected future cash flows and discount rates. While the Company uses its best estimates and assumptions as a part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the Acquisition Date, the Company’s estimates are inherently uncertain and subject to refinement. The results of operations of Tensar are reflected in the Company’s condensed consolidated financial statements from the Acquisition Date. The financial statements are not retrospectively adjusted for any adjustments that occur during the allowable one-year measurement period (the "Measurement Period"). Rather, any adjustments to provisional amounts identified during the Measurement Period will be recorded in the reporting period in which the adjustment is determined.
The table below presents the preliminary fair value that was allocated to Tensar's assets and liabilities based upon fair values as determined by the Company as of the Acquisition Date:
| (in thousands) | Estimated Fair Value | |||||||
| Cash and cash equivalents | $ |
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| Accounts receivable |
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| Inventories |
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| Prepaid and other current assets |
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| Defined benefit pension plan |
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| Property, plant and equipment |
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| Intangible assets |
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| Goodwill |
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| Other noncurrent assets |
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| Accounts payable |
(
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| Accrued expenses and other payables |
(
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| Current maturities of long-term debt |
(
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| Deferred income taxes |
(
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| Other noncurrent liabilities |
(
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| Long-term debt |
(
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| Total assets acquired and liabilities assumed | $ |
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Inventories
The acquired inventory is comprised of finished goods, work in process and raw materials. The fair value of finished goods was calculated as the estimated selling price, adjusted for the selling costs, economic rents for use of intangibles assets involved with the disposal process and a reasonable profit margin. The fair value of work in process was calculated as the estimated selling price, adjusted for estimated costs to complete manufacturing, estimated selling costs and a reasonable profit margin. The fair value of raw materials approximates the historical carrying value or was calculated based on the estimated replacement cost. The portion of the total purchase accounting inventory adjustment recognized during the three and nine months ended May 31, 2022 was $
2.2
million, which was reflected as cost of goods sold as the related inventory was sold.
Defined Benefit Pension Plan
The Company recognized a net asset of $
14.6
million, representing the overfunded status of the acquired defined benefit pension plan. See Note 13, Employees' Retirement Plans, for more information on the acquired plan.
Property, Plant and Equipment
The fair value of real property was calculated using the cost approach for buildings and improvements and the sales comparison approach for land. The fair value of personal property was calculated using the cost approach. The cost approach measures the value by estimating the cost to acquire or construct comparable assets and adjusts for age and condition. The Company assigned real property a useful life ranging from
5
to
25
years and personal property a useful life ranging from
1
to
15
years.
10
Goodwill
Goodwill from acquisitions represents the excess of the purchase price over the fair value of net assets acquired. The factors contributing to the amount of goodwill are based on strategic and synergistic benefits that are expected to be realized from the acquisition, due in part to the complementing markets for engineered construction ground reinforcement and concrete reinforcement. For the period ended May 31, 2022, the Company added $
187.9
million of goodwill related to the Tensar acquisition. The recognized goodwill is not deductible for tax purposes.
Intangible Assets
The acquired intangible assets consist of:
| (in thousands, except life in years) | Life in Years | Preliminary Fair Value | ||||||||||||
| Developed technologies |
|
$ |
|
|||||||||||
| Trade names |
|
|
||||||||||||
| Customer relationships |
|
|
||||||||||||
| In-process research and development | Indefinite |
|
||||||||||||
The fair value of developed technology was calculated using the income approach under the excess earnings method and considers selling and marketing and research and development costs, which were allocated based on patent lifecycles.
The fair value of trade names was calculated using the income approach, under the relief from royalty method. The relief from royalty method considers revenue derived from the corporate and product-specific trade names, the strength and relevance of the trade names in the marketplace and management’s plans to utilize the trade names going forward.
The fair value of customer relationships was calculated using the income approach, under the with-and-without method. The with-and-without method considers opportunity costs associated with lost profits in the absence of the existing customer base.
The fair value of in-process research and development was calculated using the cost approach and considers development costs, profit mark-up and opportunity cost.
Deferred Income Taxes
Deferred income tax liabilities include the expected future U.S. federal, state and foreign tax consequences associated with temporary differences between the preliminary fair values of the assets acquired and liabilities assumed and the respective tax bases. Tax rates utilized in calculating the deferred tax liabilities represent the appropriate tax rate for each respective jurisdiction. Deferred tax liabilities may be adjusted during the Measurement Period as the Company finalizes tax returns for periods prior to the Acquisition Date.
Other Assets Acquired and Liabilities Assumed
The Company used historical carrying values for trade accounts receivable and payables, as well as certain other current and noncurrent assets and liabilities, as their carrying values represented the fair value of those items as of the Acquisition Date.
Financial Results
The following table summarizes the financial results of Tensar from the Acquisition Date through the end of the third quarter of fiscal 2022 that are included in the Company’s condensed consolidated statement of earnings and condensed consolidated statement of comprehensive income.
| (in thousands) | From the Acquisition Date to May 31, 2022 | |||||||
| Net sales | $ |
|
||||||
| Earnings before income taxes |
|
|||||||
11
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 nonrecurring impact of additional cost of sales from revalued inventory and 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.
| Three Months Ended May 31, | Nine Months Ended May 31, | |||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Pro forma net sales | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Pro forma net earnings |
|
|
|
|
||||||||||||||||||||||
The pro forma results presented above include, but are not limited to, adjustments to remove the impact of $
4.5
million and $
7.6
million of acquisition and integration expenses from the three and nine months ended May 31, 2022, respectively. Results also reflect increased amortization expense from revalued intangible assets of $
1.9
million and $
8.1
million in the three and nine months ended May 31, 2022, respectively, and $
3.1
million and $
9.3
million in the three and nine months ended May 31, 2021, respectively. The three and nine months ended May 31, 2022 include adjustments to remove $
2.2
million of increased cost of goods sold as a result of the revaluation of inventory, which similarly resulted in an $
8.7
million increase to cost of goods sold in the nine months ended May 31, 2021.
NOTE 3. CHANGES IN BUSINESS
Facility Closure and Disposition
In October 2019, the Company closed the melting operations at its Rancho Cucamonga facility, which was part of the North America segment, and in August 2020, the Company announced plans to sell the facility. Additionally, in September 2021, the Company ceased operations at a rebar fabrication facility adjacent to the Rancho Cucamonga facility. Due to these closures, the Company recorded $
13.4
million of expenses in the nine months ended May 31, 2021, all of which were recorded in the first two quarters of 2021, related to asset impairments, severance, pension curtailment, environmental obligations and vendor agreement terminations. Expenses recorded in the three and nine months ended May 31, 2022 were immaterial. The closures did not meet the criteria for discontinued operations.
As of August 31, 2021, the associated assets of the Rancho Cucamonga facility and the adjacent rebar fabrication facility ("the Rancho Cucamonga facilities"), comprised of property, plant and equipment, net, met the criteria for classification as held for sale. As such, the Company classified $
24.9
million within assets held for sale in the Company's consolidated balance sheet as of August 31, 2021.
On September 29, 2021, the Company entered into a definitive agreement to sell the assets associated with the Rancho Cucamonga facilities. On December 28, 2021, the sale of the Rancho Cucamonga facilities was completed for gross proceeds of $
313.0
million. A portion of the gross proceeds amounting to $
39.0
million were set aside in a restricted cash account to facilitate the purchase of like-kind assets. In January 2022, the Company used $
7.5
million of the restricted cash on a purchase of a like-kind asset. The remaining balance of $
31.5
million was included in restricted cash as of May 31, 2022.
12
NOTE 4. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following tables reflect the changes in accumulated other comprehensive income (loss) ("AOCI"):
| Three Months Ended May 31, 2022 | ||||||||||||||||||||||||||
| (in thousands) | Foreign Currency Translation | Derivatives | Defined Benefit Obligation | Total AOCI | ||||||||||||||||||||||
| Balance, March 1, 2022 | $ |
(
|
$ |
|
$ |
(
|
$ |
(
|
||||||||||||||||||
|
Other comprehensive income (loss) before reclassifications
|
(
|
|
(
|
|
||||||||||||||||||||||
|
Reclassification for gain
(1)
|
|
(
|
|
(
|
||||||||||||||||||||||
|
Income tax (expense) benefit
|
|
(
|
|
(
|
||||||||||||||||||||||
|
Net other comprehensive income (loss)
|
(
|
|
(
|
|
||||||||||||||||||||||
| Balance, May 31, 2022 | $ |
(
|
$ |
|
$ |
(
|
$ |
(
|
||||||||||||||||||
| Nine Months Ended May 31, 2022 | ||||||||||||||||||||||||||
| (in thousands) | Foreign Currency Translation | Derivatives | Defined Benefit Obligation | Total AOCI | ||||||||||||||||||||||
| Balance, September 1, 2021 | $ |
(
|
$ |
|
$ |
(
|
$ |
(
|
||||||||||||||||||
|
Other comprehensive income (loss) before reclassifications
|
(
|
|
(
|
|
||||||||||||||||||||||
|
Reclassification for gain
(1)
|
|
(
|
|
(
|
||||||||||||||||||||||
|
Income tax (expense) benefit
|
|
(
|
|
(
|
||||||||||||||||||||||
|
Net other comprehensive income (loss)
|
(
|
|
(
|
(
|
||||||||||||||||||||||
| Balance, May 31, 2022 | $ |
(
|
$ |
|
$ |
(
|
$ |
(
|
||||||||||||||||||
| Three Months Ended May 31, 2021 | ||||||||||||||||||||||||||
| (in thousands) | Foreign Currency Translation | Derivatives | Defined Benefit Obligation | Total AOCI | ||||||||||||||||||||||
| Balance, March 1, 2021 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
||||||||||||||||||
|
Other comprehensive income (loss) before reclassifications
|
|
|
(
|
|
||||||||||||||||||||||
|
Reclassification for gain
(1)
|
|
(
|
|
(
|
||||||||||||||||||||||
|
Income tax expense
|
|
(
|
|
(
|
||||||||||||||||||||||
|
Net other comprehensive income (loss)
|
|
|
(
|
|
||||||||||||||||||||||
| Balance, May 31, 2021 | $ |
(
|
$ |
|
$ |
(
|
$ |
(
|
||||||||||||||||||
| Nine Months Ended May 31, 2021 | ||||||||||||||||||||||||||
| (in thousands) | Foreign Currency Translation | Derivatives | Defined Benefit Obligation | Total AOCI | ||||||||||||||||||||||
| Balance, September 1, 2020 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
||||||||||||||||||
|
Other comprehensive income (loss) before reclassifications
|
|
|
(
|
|
||||||||||||||||||||||
|
Reclassification for gain
(1)
|
|
(
|
|
(
|
||||||||||||||||||||||
|
Income tax (expense) benefit
|
|
(
|
|
(
|
||||||||||||||||||||||
|
Net other comprehensive income (loss)
|
|
|
(
|
|
||||||||||||||||||||||
| Balance, May 31, 2021 | $ |
(
|
$ |
|
$ |
(
|
$ |
(
|
||||||||||||||||||
_________________
(1) Reclassifications for gains on derivatives included in net earnings are recorded in cost of goods sold in the condensed consolidated statements of earnings.
13
NOTE 5. REVENUE RECOGNITION
Each fabricated 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
7
% and
8
% of net sales in the North America segment in the three and nine months ended May 31, 2022, respectively, and
7
% and
10
% of net sales in the North America segment in the three and nine months ended May 31, 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
8
% of net sales in the North America segment in both the three and nine months ended May 31, 2022, and
9
% of net sales in the North America segment in both the three and nine months ended May 31, 2021. Remaining net sales in the North America segment were recognized at a point in time concurrent with the transfer of control, or as amounts were billed to the customer under an available practical expedient.
The following table provides information about assets and liabilities from contracts with customers:
| (in thousands) | May 31, 2022 | August 31, 2021 | ||||||||||||
| Contract assets (included in accounts receivable) | $ |
|
$ |
|
||||||||||
| Contract liabilities (included in accrued expenses and other payables) |
|
|
||||||||||||
The amount of revenue reclassified from August 31, 2021 contract liabilities during the nine months ended May 31, 2022 was approximately $
19.7
million.
Remaining Performance Obligations
Remaining performance obligations represent the transaction price of fabricated product contracts where revenue is recognized using an input or output measure for which work has not yet been performed. As of May 31, 2022, $
962.2
million was allocated to remaining performance obligations in the North America segment related to those contracts.
NOTE 6. 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) | May 31, 2022 | August 31, 2021 | ||||||||||||
| Raw materials | $ |
|
$ |
|
||||||||||
| Work in process |
|
|
||||||||||||
| Finished goods |
|
|
||||||||||||
| Total | $ |
|
$ |
|
||||||||||
14
NOTE 7. 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, 2021 | $ |
|
$ |
|
$ |
|
||||||||||||||
| Foreign currency translation |
|
(
|
(
|
|||||||||||||||||
| Acquisition |
|
|
|
|||||||||||||||||
| Balance at May 31, 2022 |
|
|
|
|||||||||||||||||
| Accumulated impairment | ||||||||||||||||||||
| Balance at September 1, 2021 |
(
|
(
|
(
|
|||||||||||||||||
| Foreign currency translation |
|
|
|
|||||||||||||||||
| Balance at May 31, 2022 |
(
|
(
|
(
|
|||||||||||||||||
| Goodwill, net | ||||||||||||||||||||
| Balance at September 1, 2021 |
|
|
|
|||||||||||||||||
| Foreign currency translation |
|
(
|
(
|
|||||||||||||||||
| Acquisition |
|
|
|
|||||||||||||||||
| Balance at May 31, 2022 | $ |
|
$ |
|
$ |
|
||||||||||||||
Other intangible assets subject to amortization are detailed in the following table:
| May 31, 2022 | August 31, 2021 | ||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Weighted Average Useful Lives |
Gross
Carrying Amount |
Accumulated Amortization | Net |
Gross
Carrying Amount |
Accumulated Amortization | Net | ||||||||||||||||||||||||||||||||||
| Patents |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||
| Customer relationships |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Perpetual lease rights |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Non-compete agreements |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Other |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Due to acquisition of Tensar: | |||||||||||||||||||||||||||||||||||||||||
| Developed technologies |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Customer relationships |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Trade names |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||||
Intangible assets with indefinite lives resulting from the acquisition of Tensar include trade names and in-process research and development with gross carrying amounts of $
54.7
million and $
2.4
million, respectively, at May 31, 2022. The Company did not have any significant intangible assets with indefinite lives at August 31, 2021.
Estimated amounts of amortization expense for the next five fiscal years are as follows:
| (in thousands) | ||||||||
| Remainder of 2022 | $ |
|
||||||
| 2023 |
|
|||||||
| 2024 |
|
|||||||
| 2025 |
|
|||||||
| 2026 |
|
|||||||
15
NOTE 8. LEASES
The following table presents the components of the total leased assets and lease liabilities and their classification in the Company's condensed consolidated balance sheets:
| (in thousands) | Classification in Condensed Consolidated Balance Sheets | May 31, 2022 | August 31, 2021 | |||||||||||||||||
| Assets: | ||||||||||||||||||||
| Operating assets | Other noncurrent assets | $ |
|
$ |
|
|||||||||||||||
| Finance assets | Property, plant and equipment, net |
|
|
|||||||||||||||||
| Total leased assets | $ |
|
$ |
|
||||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Operating lease liabilities: | ||||||||||||||||||||
| Current | $ |
|
$ |
|
||||||||||||||||
| Long-term |
|
|
||||||||||||||||||
| Total operating lease liabilities |
|
|
||||||||||||||||||
| Finance lease liabilities: | ||||||||||||||||||||
| Current | Current maturities of long-term debt and short-term borrowings |
|
|
|||||||||||||||||
| Long-term | Long-term debt |
|
|
|||||||||||||||||
| Total finance lease liabilities |
|
|
||||||||||||||||||
| Total lease liabilities | $ |
|
$ |
|
||||||||||||||||
The components of lease expense were as follows:
| Three Months Ended May 31, | Nine Months Ended May 31, | |||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Operating lease expense | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Finance lease expense: | ||||||||||||||||||||||||||
| Amortization of assets |
|
|
|
|
||||||||||||||||||||||
| Interest on lease liabilities |
|
|
|
|
||||||||||||||||||||||
| Total finance lease expense |
|
|
|
|
||||||||||||||||||||||
| Variable and short-term lease expense |
|
|
|
|
||||||||||||||||||||||
| Total lease expense | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
The weighted average remaining lease term and discount rate for operating and finance leases are presented in the following table:
| May 31, 2022 | August 31, 2021 | |||||||||||||
| Weighted average remaining lease term (years): | ||||||||||||||
| Operating leases |
|
|
||||||||||||
| Finance leases |
|
|
||||||||||||
| Weighted average discount rate: | ||||||||||||||
| Operating leases |
|
% |
|
% | ||||||||||
| Finance leases |
|
% |
|
% | ||||||||||
16
Cash flow and other information related to leases is included in the following table:
| Nine Months Ended May 31, | ||||||||||||||
| (in thousands) | 2022 | 2021 | ||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||
| Operating cash outflows from operating leases | $ |
|
$ |
|
||||||||||
| Operating cash outflows from finance leases |
|
|
||||||||||||
| Financing cash outflows from finance leases |
|
|
||||||||||||
| Right of use assets obtained in exchange for lease obligations: | ||||||||||||||
| Operating leases | $ |
|
$ |
|
||||||||||
| Finance leases |
|
|
||||||||||||
Future maturities of lease liabilities at May 31, 2022 are presented in the following table:
| (in thousands) | Operating Leases | Finance Leases | ||||||||||||
| Year 1 | $ |
|
$ |
|
||||||||||
| Year 2 |
|
|
||||||||||||
| Year 3 |
|
|
||||||||||||
| Year 4 |
|
|
||||||||||||
| Year 5 |
|
|
||||||||||||
| Thereafter |
|
|
||||||||||||
| Total lease payments |
|
|
||||||||||||
| Less imputed interest |
(
|
(
|
||||||||||||
| Present value of lease liabilities | $ |
|
$ |
|
||||||||||
NOTE 9. CREDIT ARRANGEMENTS
Long-term debt was as follows:
| (in thousands) | Weighted Average Interest Rate as of May 31, 2022 | May 31, 2022 | August 31, 2021 | |||||||||||||||||
| 2032 Notes |
|
$ |
|
$ |
|
|||||||||||||||
| 2031 Notes |
|
|
|
|||||||||||||||||
| 2030 Notes |
|
|
|
|||||||||||||||||
| 2027 Notes |
|
|
|
|||||||||||||||||
| 2023 Notes |
|
|
|
|||||||||||||||||
| Series 2022 Bonds, due 2047 |
|
|
|
|||||||||||||||||
| Poland Term Loan |
|
|
|
|||||||||||||||||
| Short-term borrowings |
|
|
|
|||||||||||||||||
| Other |
|
|
|
|||||||||||||||||
| Finance leases |
|
|
||||||||||||||||||
| Total debt |
|
|
||||||||||||||||||
| Less unamortized debt issuance costs |
(
|
(
|
||||||||||||||||||
| Plus unamortized bond premium |
|
|
||||||||||||||||||
| Total amounts outstanding |
|
|
||||||||||||||||||
| Less current maturities of long-term debt and short-term borrowings |
(
|
(
|
||||||||||||||||||
| Long-term debt | $ |
|
$ |
|
||||||||||||||||
17
The Company's credit arrangements require compliance with certain non-financial and financial covenants, including an interest coverage ratio and a debt to capitalization ratio. At May 31, 2022, the Company believes it was in compliance with all covenants contained in its credit arrangements.
Senior Notes Activity
In January 2022, the Company issued $
300.0
million of
4.125
% Senior Notes due January 2030 (the "2030 Notes") and $
300.0
million of
4.375
% Senior Notes due March 2032 (the "2032 Notes"). Aggregate issuance costs associated with the 2030 Notes and 2032 Notes were approximately $
9.4
million. Interest on the 2030 Notes is payable semiannually on January 15 and July 15. Interest on the 2032 Notes is payable semiannually on March 15 and September 15.
In July 2017, the Company issued $
300.0
million of
5.375
% Senior Notes due July 2027 (the "2027 Notes"). In February 2022, the Company redeemed all of the 2027 Notes and recognized a $
16.1
million loss on debt extinguishment.
In May 2013, the Company issued $
330.0
million of
4.875
% Senior Notes due May 2023 (the "2023 Notes"). Accordingly, the 2023 Notes have been included within current maturities of long-term debt and short-term borrowings in the condensed consolidated balance sheet as of May 31, 2022.
Series 2022 Bonds
In February 2022, the Company announced the issuance of $
145.1
million in original aggregate principal amount of tax-exempt bonds (the “Series 2022 Bonds”) by the Industrial Development Authority of the County of Maricopa (the "MCIDA"). The Series 2022 Bonds were priced to yield
3.5
% and provided gross proceeds of $
150.0
million. The proceeds were loaned to the Company pursuant to a loan agreement between the Company and the MCIDA and will be used to fund a portion of the acquisition, construction, equipping and/or operation, as applicable, of the Company’s third micro mill, which is under construction in Mesa, Arizona. Proceeds from the Series 2022 Bonds are being held in a trust account and will be disbursed as qualified expenditures are made for the construction of the micro mill. As of May 31, 2022, $
58.0
million of proceeds were disbursed from the trust account. Remaining proceeds from the Series 2022 Bonds were recorded as restricted cash in the condensed consolidated balance sheet as of May 31, 2022.
Issuance costs associated with the Series 2022 Bonds were $
3.1
million. The Series 2022 Bonds accrue interest at
4.0
%, payable semiannually, and have a maturity date in October 2047.
Credit Facilities
The Company had
no
amounts drawn under its $
400.0
million revolving credit facility (the "Revolver") at May 31, 2022 or August 31, 2021. The availability under the Revolver was reduced by outstanding stand-by letters of credit totaling $
1.4
million and $
3.0
million at May 31, 2022 and August 31, 2021, respectively.
The Company has a Term Loan facility (the "Poland Term Loan") through its subsidiary, CMC Poland Sp. z.o.o. ("CMCP"). At May 31, 2022, PLN
161.9
million, or $
37.9
million, was outstanding, compared to the maximum amount available under the facility, PLN
190.5
million, or $
49.7
million, which was outstanding as of August 31, 2021.
The Company also has credit facilities in Poland through its subsidiary, CMCP. At May 31, 2022 and August 31, 2021, CMCP's credit facilities totaled PLN
300.0
million, or $
70.3
million and $
78.3
million, respectively. There were
no
amounts outstanding under these facilities as of May 31, 2022 or August 31, 2021. 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 $
0.9
million and $
5.7
million at May 31, 2022 and August 31, 2021, respectively.
Accounts Receivable Facilities
The Company had no advance payments outstanding under its U.S. trade accounts receivable facility at May 31, 2022 or August 31, 2021.
18
NOTE 10. 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.
At May 31, 2022, the notional values of the Company's foreign currency and commodity contract commitments were $
377.2
million and $
228.8
million, respectively. At August 31, 2021, the notional values of the Company's foreign currency and commodity contract commitments were $
389.5
million and $
213.4
million, respectively.
The following table provides information regarding the Company's commodity contract commitments at May 31, 2022:
| Commodity | Long/Short | Total | |||||||||||||||
| Aluminum | Long |
|
MT | ||||||||||||||
| Aluminum | Short |
|
MT | ||||||||||||||
| Copper | Long |
|
MT | ||||||||||||||
| Copper | Short |
|
MT | ||||||||||||||
| Electricity | Long |
|
MW(h) | ||||||||||||||
| Natural Gas | Long |
|
MMBtu | ||||||||||||||
_________________
MT = Metric Ton
MW(h) = Megawatt hour
MMBtu = Metric Million British thermal unit
The Company designates only those contracts which closely match the terms of the underlying transaction as hedges for accounting purposes. Certain foreign currency and commodity contracts were not designated as hedges for accounting purposes, although management believes they are essential economic hedges.
The following 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 May 31, | Nine Months Ended May 31, | |||||||||||||||||||||||||||||||
| Gain (Loss) on Derivatives Not Designated as Hedging Instruments (in thousands) | Primary Location | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||
| Commodity | Cost of goods sold | $ |
|
$ |
(
|
$ |
|
$ |
(
|
|||||||||||||||||||||||
| Foreign exchange | SG&A expenses |
|
|
(
|
|
|||||||||||||||||||||||||||
| Effective Portion of Derivatives Designated as Cash Flow Hedging Instruments Recognized in Accumulated Other Comprehensive Loss (in thousands) | Three Months Ended May 31, | Nine Months Ended May 31, | ||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Commodity | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
19
NOTE 11. FAIR VALUE
The following tables summarize information regarding the Company's financial assets and financial liabilities that were measured at fair value on a recurring basis:
| Fair Value Measurements at Reporting Date Using | ||||||||||||||||||||||||||
| (in thousands) | May 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)
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
|
Commodity derivative assets
(2)
|
|
|
|
|
||||||||||||||||||||||
|
Foreign exchange derivative assets
(2)
|
|
|
|
|
||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
|
Commodity derivative liabilities
(2)
|
|
|
|
|
||||||||||||||||||||||
|
Foreign exchange derivative liabilities
(2)
|
|
|
|
|
||||||||||||||||||||||
| Fair Value Measurements at Reporting Date Using | ||||||||||||||||||||||||||
| (in thousands) | August 31, 2021 |
Quoted Prices in
Active Markets for Identical Assets (Level 1) |
Significant Other
Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
|
Investment deposit accounts
(1)
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
|
Commodity derivative assets
(2)
|
|
|
|
|
||||||||||||||||||||||
|
Foreign exchange derivative assets
(2)
|
|
|
|
|
||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
|
Commodity derivative liabilities
(2)
|
|
|
|
|
||||||||||||||||||||||
|
Foreign exchange derivative liabilities
(2)
|
|
|
|
|
||||||||||||||||||||||
_________________
(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 10, Derivatives.
The fair value estimate of the Level 3 commodity derivative is based on an internally developed discounted cash flow model 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 model. The following table summarizes the floating rate used to measure the fair value of the commodity derivative at May 31, 2022 and 2021:
| Floating rate (PLN) | ||||||||||||||||||||
| May 31, | Low | High | Average | |||||||||||||||||
| 2022 |
|
|
|
|||||||||||||||||
| 2021 |
|
|
|
|||||||||||||||||
20
fair value estimate
and is the primary reason for unrealized gains
included in other comprehensive income ("OCI") in the three and nine months ended May 31, 2022 and 2021.
| (in thousands) | Three Months Ended May 31, 2022 | |||||||
| Balance, March 1, 2022 | $ |
|
||||||
|
Total gains, realized and unrealized:
|
||||||||
|
Unrealized holding gain before reclassification
(1)
|
|
|||||||
|
Reclassification for gain included in net earnings
(2)
|
(
|
|||||||
| Balance, May 31, 2022 | $ |
|
||||||
| (in thousands) | Nine Months Ended May 31, 2022 | |||||||
| Balance, September 1, 2021 | $ |
|
||||||
|
Total gains, realized and unrealized:
|
||||||||
|
Unrealized holding gain before reclassification
(1)
|
|
|||||||
|
Reclassification for gain included in net earnings
(2)
|
(
|
|||||||
| Balance, May 31, 2022 | $ |
|
||||||
| (in thousands) | Three Months Ended May 31, 2021 | |||||||
| Balance, March 1, 2021 | $ |
(
|
||||||
| Total gains, realized and unrealized: | ||||||||
|
Unrealized holding gain before reclassification
(1)
|
|
|||||||
|
Reclassification for gain included in net earnings
(2)
|
(
|
|||||||
| Balance, May 31, 2021 | $ |
|
||||||
| (in thousands) | Nine Months Ended May 31, 2021 | |||||||
| Balance, September 1, 2020 | $ |
(
|
||||||
| Total gains, realized and unrealized: | ||||||||
|
Unrealized holding gain before reclassification
(1)
|
|
|||||||
|
Reclassification for gain included in net earnings
(2)
|
(
|
|||||||
| Balance, May 31, 2021 | $ |
|
||||||
________________
(1) Unrealized holding gains, less amounts reclassified, are included in OCI in the condensed consolidated statements of comprehensive income.
(2) Gains included in net earnings are recorded in cost of goods sold in the condensed consolidated statements of earnings.
There were no material, non-recurring fair value remeasurements during the three and nine months ended May 31, 2022 or 2021.
The carrying values of the Company's short-term items, including documentary letters of credit and notes payable, approximate fair value.
21
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:
| May 31, 2022 | August 31, 2021 | |||||||||||||||||||||||||||||||
| (in thousands) | Fair Value Hierarchy | Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||||||||||||||||
|
2032 Notes
(1)
|
Level 2 | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
|
2031 Notes
(1)
|
Level 2 |
|
|
|
|
|||||||||||||||||||||||||||
|
2030 Notes
(1)
|
Level 2 |
|
|
|
|
|||||||||||||||||||||||||||
|
2027 Notes
(1)
|
Level 2 |
|
|
|
|
|||||||||||||||||||||||||||
|
2023 Notes
(1)
|
Level 2 |
|
|
|
|
|||||||||||||||||||||||||||
|
Series 2022 Bonds, due 2047
(1)
|
Level 2 |
|
|
|
|
|||||||||||||||||||||||||||
|
Poland Term Loan
(2)
|
Level 2 |
|
|
|
|
|||||||||||||||||||||||||||
|
Short-term borrowings
(2)
|
Level 2 |
|
|
|
|
|||||||||||||||||||||||||||
_________________
(1) The fair values of the notes and the Series 2022 Bonds were determined based on indicated market values.
(2) The Poland Term Loan and short-term borrowings contain variable interest rates, and as a result, the carrying values approximate fair value.
NOTE 12. STOCK-BASED COMPENSATION PLANS
The Company's stock-based compensation plans are described in Note 13, Stock-Based Compensation Plans, to the consolidated financial statements in the 2021 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 nine months ended May 31, 2022 and 2021, the Company granted the following awards under its stock-based compensation plans:
| May 31, 2022 | May 31, 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 |
|
$ |
|
|
$ |
|
||||||||||||||||||||
| Liability method |
|
N/A |
|
N/A | ||||||||||||||||||||||
The Company recorded
immaterial
mark-to-market adjustments on liability awards for the three and nine months ended May 31, 2022, and recorded expense of $
3.2
million and $
5.0
million for the three and nine months in the corresponding periods. At May 31, 2022, the Company had outstanding
591,483
equivalent shares accounted for under the liability method. The Company expects
561,908
equivalent shares to vest.
| Three Months Ended May 31, | Nine Months Ended May 31, | |||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Stock-based compensation expense | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
NOTE 13. EMPLOYEES' RETIREMENT PLANS
Following the acquisition of Tensar, the Company assumed the TGL Pension Plan in the United Kingdom ("U.K.") ("U.K. Pension Plan"), a defined benefit pension plan. The U.K. Pension Plan provides retirement benefit payments for participating retired employees and their spouses, and was closed to new entrants prior to the acquisition. The Company’s funding policy for the U.K. Pension Plan is to contribute annually the amount necessary to provide for benefits based on accrued service and to contribute at least the minimum required by applicable regulations.
22
See Note 14, Employees' Retirement Plans, to the consolidated financial statements in the 2021 Form 10-K for information on the Company's other defined benefit pension plan and defined contribution retirement plan.
Net periodic benefit costs for the Company's defined benefit plans are recorded in selling, general and administrative expenses within the condensed consolidated statements of earnings. Net periodic pension expense was immaterial for the three and nine months ended May 31, 2022 and 2021.
NOTE 14. 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. 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 May 31, | Nine Months Ended May 31, | |||||||||||||||||||||||||
| (in thousands, except share and per share data) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Net earnings | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Average basic shares outstanding |
|
|
|
|
||||||||||||||||||||||
| Effect of dilutive securities |
|
|
|
|
||||||||||||||||||||||
| Average diluted shares outstanding |
|
|
|
|
||||||||||||||||||||||
| Earnings per share: | ||||||||||||||||||||||||||
| Basic | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Diluted | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
Anti-dilutive shares not included above were immaterial for all periods presented.
Restricted stock is included in the number of shares of common stock issued and outstanding, but omitted from the basic EPS calculation until the shares vest.
23
NOTE 16. BUSINESS 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 2021 Form 10-K and Note 2, Acquisition, 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 May 31, 2022 | ||||||||||||||||||||||||||
| (in thousands) | North America | Europe | Corporate and Other | Total | ||||||||||||||||||||||
| Net sales | $ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||
| Adjusted EBITDA |
|
|
(
|
|
||||||||||||||||||||||
| Nine Months Ended May 31, 2022 | ||||||||||||||||||||||||||
| (in thousands) | North America | Europe | Corporate and Other | Total | ||||||||||||||||||||||
| Net sales | $ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||
| Adjusted EBITDA |
|
|
(
|
|
||||||||||||||||||||||
| Total assets at May 31, 2022 |
|
|
|
|
||||||||||||||||||||||
| Three Months Ended May 31, 2021 | ||||||||||||||||||||||||||
| (in thousands) | North America | Europe | Corporate and Other | Total | ||||||||||||||||||||||
| Net sales | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Adjusted EBITDA |
|
|
(
|
|
||||||||||||||||||||||
| Nine Months Ended May 31, 2021 | ||||||||||||||||||||||||||
| (in thousands) | North America | Europe | Corporate and Other | Total | ||||||||||||||||||||||
| Net sales | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Adjusted EBITDA |
|
|
(
|
|
||||||||||||||||||||||
| Total assets at August 31, 2021 |
|
|
|
|
||||||||||||||||||||||
| Three Months Ended May 31, | Nine Months Ended May 31, | |||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Net earnings | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Interest expense |
|
|
|
|
||||||||||||||||||||||
| Income taxes |
|
|
|
|
||||||||||||||||||||||
| Depreciation and amortization |
|
|
|
|
||||||||||||||||||||||
| Asset impairments |
|
|
|
|
||||||||||||||||||||||
| Amortization of acquired unfavorable contract backlog |
|
(
|
|
(
|
||||||||||||||||||||||
| Adjusted EBITDA | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
Disaggregation of Revenue
24
| Three Months Ended May 31, 2022 | ||||||||||||||||||||||||||
| (in thousands) | North America | Europe | Corporate and Other | Total | ||||||||||||||||||||||
| Major product: | ||||||||||||||||||||||||||
| Raw materials | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Steel products |
|
|
|
|
||||||||||||||||||||||
| Downstream products |
|
|
|
|
||||||||||||||||||||||
| Construction-related solutions |
|
|
|
|
||||||||||||||||||||||
| Other |
|
|
(
|
|
||||||||||||||||||||||
| Net sales from external customers |
|
|
(
|
|
||||||||||||||||||||||
| Intersegment net sales, eliminated on consolidation |
|
|
(
|
|
||||||||||||||||||||||
| Net sales | $ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||
| Nine Months Ended May 31, 2022 | ||||||||||||||||||||||||||
| (in thousands) | North America | Europe | Corporate and Other | Total | ||||||||||||||||||||||
| Major product: | ||||||||||||||||||||||||||
| Raw materials | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Steel products |
|
|
|
|
||||||||||||||||||||||
| Downstream products |
|
|
|
|
||||||||||||||||||||||
| Construction-related solutions |
|
|
|
|
||||||||||||||||||||||
| Other |
|
|
(
|
|
||||||||||||||||||||||
| Net sales from external customers |
|
|
(
|
|
||||||||||||||||||||||
| Intersegment net sales, eliminated on consolidation |
|
|
(
|
|
||||||||||||||||||||||
| Net sales | $ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||
25
| Three Months Ended May 31, 2021 | ||||||||||||||||||||||||||
| (in thousands) | North America | Europe | Corporate and Other | Total | ||||||||||||||||||||||
| Major product: | ||||||||||||||||||||||||||
| Raw materials | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Steel products |
|
|
|
|
||||||||||||||||||||||
| Downstream products |
|
|
|
|
||||||||||||||||||||||
| Construction-related solutions |
|
|
|
|
||||||||||||||||||||||
| Other |
|
|
|
|
||||||||||||||||||||||
| Net sales from external customers |
|
|
|
|
||||||||||||||||||||||
| Intersegment net sales, eliminated on consolidation |
|
|
(
|
|
||||||||||||||||||||||
| Net sales | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Nine Months Ended May 31, 2021 | ||||||||||||||||||||||||||
| (in thousands) | North America | Europe | Corporate and Other | Total | ||||||||||||||||||||||
| Major product: | ||||||||||||||||||||||||||
| Raw materials | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Steel products |
|
|
|
|
||||||||||||||||||||||
| Downstream products |
|
|
|
|
||||||||||||||||||||||
| Construction-related solutions |
|
|
|
|
||||||||||||||||||||||
| Other |
|
|
|
|
||||||||||||||||||||||
| Net sales from external customers |
|
|
|
|
||||||||||||||||||||||
| Intersegment net sales, eliminated on consolidation |
|
|
(
|
|
||||||||||||||||||||||
| Net sales | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
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, 2021 (the "2021 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 2021 Form 10-K and Part II, Item 1A of this Form 10-Q. We do not undertake any obligation to update, amend or clarify any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or otherwise, except as required by law.
Any reference in this Form 10-Q to the "corresponding period" relates to the relevant three or nine month period ended May 31, 2021.
26
BUSINESS CONDITIONS
Acquisition
On April 25, 2022 (the "Acquisition Date"), the Company 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 the Company’s existing concrete reinforcement product lines. 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, Acquisition, for more information about the Tensar acquisition.
Russian Invasion of Ukraine
The Russian invasion of Ukraine has not had a direct material adverse impact on our business, financial condition or results of operations during the nine months ended May 31, 2022. Our Europe segment identified alternate sources for a limited number of materials previously procured through Russia and has not had an interruption in energy supply; therefore, we do not believe there will be resulting disruptions in supply that would impede production meeting demand. However, we will continue to monitor the indirect effects on our operations of inflationary pressures, foreign exchange rate fluctuations, commodity pricing, potential cybersecurity risks and sanctions resulting from the invasion.
COVID-19
The impact of the COVID-19 pandemic ("COVID-19" or "pandemic") on our operations was limited during the nine months ended May 31, 2022 and 2021. We continue to evaluate the nature and extent of future impacts of the evolving pandemic on our operations and are complying with applicable U.S. federal, state and local law and considering relevant guidance, including the guidelines of the U.S. Centers for Disease Control and other authorities, to prioritize the health and safety of our employees, families, suppliers, customers and communities. Given the dynamic and uncertain nature and duration of the pandemic, we cannot reasonably estimate the long-term impact of COVID-19 on our business, results of operations and overall financial performance at this time.
See Part I, Item 1A, Risk Factors, of our 2021 Form 10-K and Part II, Item 1A, Risk Factors of this Form 10-Q 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
2021
Form 10-K.
27
RESULTS OF OPERATIONS SUMMARY
Business Overview
As a vertically integrated organization, we 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 division, we are a leading global provider of innovative ground and soil stabilization solutions selling into more than 80 national markets through its two major product lines: Tensar® geogrids and Geopier® foundation systems. Our operations are conducted through two reportable segments: North America and Europe.
When considering our results for the period, we evaluate our operating performance by comparing 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 for each of our vertically integrated product categories (raw materials, steel products and downstream products) as these are the two variables that typically have the greatest impact on our results of operations. Raw materials include ferrous and nonferrous scrap, steel products include rebar, merchant and other steel products, such as billets and wire rod, and downstream products include fabricated rebar and steel fence post.
Key Performance Indicators
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 steel products metal margin and downstream products margin over scrap costs period-over-period are consistent areas of focus for our Company and industry. Steel products metal margin and downstream products margin over scrap costs are metrics used by management to monitor the results of our vertically integrated organization. Steel products metal margin is the difference between the average selling price per ton of rebar, merchant and other steel products and the cost of ferrous scrap per ton utilized by our steel mills to produce these products. An increase or decrease in input costs can impact profitability of these products when there is no corresponding change in selling prices due to competitive pressures on prices. Downstream products margin over scrap costs 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
| Three Months Ended May 31, | Nine Months Ended May 31, | |||||||||||||||||||||||||
| (in thousands, except per share data) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Net sales | $ | 2,515,727 | $ | 1,845,041 | $ | 6,506,416 | $ | 4,699,114 | ||||||||||||||||||
| Net earnings | 312,429 | 130,408 | 928,632 | 260,552 | ||||||||||||||||||||||
| Diluted earnings per share | $ | 2.54 | $ | 1.07 | $ | 7.55 | $ | 2.14 | ||||||||||||||||||
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Net sales for the three and nine months ended May 31, 2022 increased $670.7 million, or 36%, and $1.8 billion, or 38%, respectively, compared to the corresponding periods. The growth in net sales is largely attributable to rising selling prices across all major product lines in both of our segments for the three and nine months ended May 31, 2022, compared to the corresponding periods. Continued strong demand from robust construction activity in all of our North America and Europe end-use markets was the primary driver for the increase in average selling prices.
During the three and nine months ended May 31, 2022, we achieved net earnings of $312.4 million and $928.6 million, respectively. Included in net earnings during the nine months ended May 31, 2022 was a $273.3 million gain on the sale of the Rancho Cucamonga facilities. See Note 3, Changes in Business, for more information on the sale of the Rancho Cucamonga facilities. Net earnings, less the gain on the sale of the Rancho Cucamonga facilities in the year-to-date period, increased 140% and 152% during the three and nine months ended May 31, 2022, respectively, compared to the corresponding periods. These increases were driven by the significant expansion of steel products metal margin per ton in both of our segments and raw materials margin over purchase cost per ton in our North America segment. Selling prices for steel products and raw materials outpaced the rising input costs of ferrous scrap utilized in our steel mill operations and the price paid to purchase ferrous and nonferrous scrap in our scrap metal recycling operations, as well as increases in the cost of freight, energy and other steelmaking inputs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $5.2 million and $22.2 million for the three and nine months ended May 31, 2022, respectively, compared to the corresponding periods. Contributing to the increases in both periods were $11.4 million of selling, general and administrative expenses from Tensar's operations and $4.5 million and $7.6 million of acquisition and integration expenses in the three and nine months ended May 31, 2022, respectively, with no such expenses in the corresponding periods. Partially offsetting the aforementioned increases in selling, general and administrative expenses during the three months ended May 31, 2022 was a $6.4 million decrease in quarter-over-quarter labor-related expenses and $5.2 million of reduced expenses resulting from lower benefit restoration plan ("BRP") liabilities at May 31, 2022, compared to the corresponding period. The remaining change in selling, general and administrative expenses during the nine months ended May 31, 2022 was a result of many factors, including $6.1 million of increased labor-related expenses, $3.6 million of increased travel-related costs and $12.5 million of reduced expenses resulting from lower BRP liabilities at May 31, 2022, compared to the corresponding period.
Interest Expense
Interest expense remained relatively flat during the three months ended May 31, 2022, compared to the corresponding period, and decreased by $3.8 million during the nine months ended May 31, 2022, compared to the corresponding period. Capitalized interest was $3.6 million and $7.8 million during the three and nine months ended May 31, 2022, respectively, compared to $0.7 million and $1.8 million during the corresponding periods, respectively. The increase in capitalized interest was due to the Company's third micro mill, which is under construction in Mesa, Arizona. Offsetting the impact of increased capitalized interest was an increase in long-term debt interest expense of $4.3 million and $2.3 million during the three and nine months ended May 31, 2022, respectively, compared to the corresponding periods, due to the additional long-term debt outstanding at May 31, 2022 compared to May 31, 2021.
Income Taxes
The effective income tax rates for the three and nine months ended May 31, 2022 were 22.9% and 21.1%, respectively, compared to 22.6% and 23.7% in the corresponding periods. The effective income tax rate remained relatively flat for the three months ended May 31, 2022 when compared with the corresponding period. The decrease for the nine months ended May 31, 2022 is primarily due to the recognition of a capital loss on a tax restructuring transaction during the first quarter of fiscal 2022.
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SEGMENT OPERATING DATA
Unless otherwise indicated, all dollar amounts below are calculated before income taxes. See Note 16, Business Segments, for more information. The operational data presented in the tables below by product category 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 May 31, | Nine Months Ended May 31, | |||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Net sales | $ | 2,033,150 | $ | 1,558,068 | $ | 5,300,996 | $ | 4,010,567 | ||||||||||||||||||
| Adjusted EBITDA | 379,355 | 207,330 | 1,183,342 | 534,576 | ||||||||||||||||||||||
| External tons shipped (in thousands) | ||||||||||||||||||||||||||
| Raw materials | 353 | 368 | 1,016 | 1,000 | ||||||||||||||||||||||
| Rebar | 505 | 500 | 1,354 | 1,458 | ||||||||||||||||||||||
| Merchant and other | 274 | 289 | 776 | 821 | ||||||||||||||||||||||
| Steel products | 779 | 789 | 2,130 | 2,279 | ||||||||||||||||||||||
| Downstream products | 399 | 408 | 1,126 | 1,122 | ||||||||||||||||||||||
| Average selling price (per ton) | ||||||||||||||||||||||||||
| Raw materials | $ | 1,207 | $ | 949 | $ | 1,116 | $ | 813 | ||||||||||||||||||
| Steel products | 1,110 | 794 | 1,045 | 702 | ||||||||||||||||||||||
| Downstream products | 1,244 | 963 | 1,168 | 943 | ||||||||||||||||||||||
| Cost of raw materials per ton | $ | 908 | $ | 697 | $ | 837 | $ | 597 | ||||||||||||||||||
| Cost of ferrous scrap utilized per ton | 472 | 369 | 446 | 327 | ||||||||||||||||||||||
| Steel products metal margin per ton | 638 | 425 | 599 | 375 | ||||||||||||||||||||||
Net sales for the three and nine months ended May 31, 2022 increased $475.1 million, or 30%, and $1.3 billion, or 32%, respectively, compared to the corresponding periods. These results benefited from increased selling prices of 27% for raw materials, 40% for steel products and 29% for downstream products during the three months ended May 31, 2022, compared to the corresponding period. Similarly, during the nine months ended May 31, 2022, average selling prices rose 37% for raw materials, 49% for steel products and 24% for downstream products, compared to the corresponding period. The period-over-period increases in average selling prices were primarily a result of a rising scrap price environment and strong demand across all of our end-use markets. Volumes remained relatively flat during both the three and nine months ended May 31, 2022, compared to the corresponding periods, as the strong demand was offset in part by the impacts of constrained labor at construction sites in certain geographies and planned maintenance activities at certain of our facilities.
Adjusted EBITDA for the three and nine months ended May 31, 2022 increased $172.0 million, or 83%, and $648.8 million, or 121%, respectively, compared to the corresponding periods. Included in adjusted EBITDA during the nine months ended May 31, 2022 was a $273.3 million gain on the sale of the Rancho Cucamonga facilities. The remaining growth in adjusted EBITDA during the three and nine months ended May 31, 2022 was primarily due to expansion of steel products metal margin per ton and raw materials margin over purchase cost per ton, compared to the corresponding periods. Although ferrous and nonferrous scrap prices increased and inflationary pressures caused an increase in the cost of freight, energy and other steelmaking inputs, the average selling price for steel products and raw materials increased at a greater rate year-over-year. Adjusted EBITDA included non-cash stock compensation expense of $3.8 million and $10.5 million for the three and nine months ended May 31, 2022, respectively, and $3.4 million and $10.5 million for the corresponding periods.
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Europe
| Three Months Ended May 31, | Nine Months Ended May 31, | |||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Net sales | $ | 484,564 | $ | 284,107 | $ | 1,209,378 | $ | 680,769 | ||||||||||||||||||
| Adjusted EBITDA | 120,974 | 50,005 | 281,955 | 80,582 | ||||||||||||||||||||||
| External tons shipped (in thousands) | ||||||||||||||||||||||||||
| Rebar | 170 | 141 | 445 | 347 | ||||||||||||||||||||||
| Merchant and other | 306 | 263 | 846 | 807 | ||||||||||||||||||||||
| Steel products | 476 | 404 | 1,291 | 1,154 | ||||||||||||||||||||||
| Average selling price (per ton) | ||||||||||||||||||||||||||
| Steel products | $ | 967 | $ | 664 | $ | 898 | $ | 552 | ||||||||||||||||||
| Cost of ferrous scrap utilized per ton | $ | 530 | $ | 376 | $ | 472 | $ | 324 | ||||||||||||||||||
| Steel products metal margin per ton | 437 | 288 | 426 | 228 | ||||||||||||||||||||||
Net sales for the three and nine months ended May 31, 2022 increased $200.5 million, or 71%, and $528.6 million, or 78%, respectively, compared to the corresponding periods. The increases were driven largely by the increases in steel products average selling prices of $303 per ton, or 46%, and $346 per ton, or 63%, during the three and nine months ended May 31, 2022, respectively, compared to the corresponding periods. Increased demand for steel products from both construction and industrial end markets supported the increases in average selling prices, as well as the increases in shipments of steel products of 18% and 12% during the three and nine months ended May 31, 2022, respectively, compared to the corresponding periods. Along with the increased capacity from our third rolling line in Poland, which was commissioned in late 2021, steel products supply disruptions across Europe caused by the Russian invasion of Ukraine contributed to the increase in shipment volumes in the three and nine months ended May 31, 2022. Net sales for the three and nine months ended May 31, 2022 were impacted by unfavorable foreign currency translation adjustments of $66.9 million and $115.6 million, respectively, due to the increase in the average value of the U.S. dollar relative to the Polish zloty, compared to favorable foreign currency translation adjustments of $22.6 million and $35.6 million, respectively, during the corresponding periods.
Adjusted EBITDA for the three and nine months ended May 31, 2022 increased $71.0 million, or 142%, and $201.4 million, or 250%, compared to the corresponding periods. The primary drivers of the increases in adjusted EBITDA were the expansion in steel products metal margin per ton, which increased 52% and 87%, respectively, during the three and nine months ended May 31, 2022, compared to the corresponding periods, and the volume increases mentioned above. The increases in steel products metal margin per ton were supplemented by additional increases on margins of fabricated rebar and wire mesh. During the three and nine months ended May 31, 2022, the cost of ferrous scrap utilized per ton increased 41% and 46%, respectively, compared to the corresponding periods, and inflationary pressures caused increases in the cost of freight, energy and other steelmaking inputs. However, the growth in average selling prices for steel products outpaced these increased costs in each period. Also offsetting the increased costs were realized gains of $4.8 million and $14.1 million during the three and nine months ended May 31, 2022, respectively, from an energy derivative designated as a cash flow hedging instrument, compared to immaterial gains recorded in the corresponding periods. Additionally, in the first quarter of 2022, we received a $15.5 million energy credit that was recorded as a reduction to cost of goods sold, with no similar credit received in the corresponding period. Adjusted EBITDA for the three and nine months ended May 31, 2022 included unfavorable foreign currency exchange rate impacts of $17.2 million and $27.5 million, respectively, compared to favorable foreign currency translation adjustments of $4.1 million and $5.1 million, respectively, during the corresponding periods. Adjusted EBITDA included non-cash stock compensation expense of $0.5 million and $3.1 million for the three and nine months ended May 31, 2022, respectively, and $0.8 million and $2.2 million, respectively, during the corresponding periods.
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Corporate and Other
Corporate and Other reported adjusted EBITDA loss of $35.0 million and $121.9 million for the three and nine months ended May 31, 2022, respectively, compared to $36.2 million and $108.7 million, respectively, in the corresponding periods. While quarter-over-quarter results remained flat, the increase in the adjusted EBITDA loss during the nine months ended May 31, 2022 was primarily due to $7.6 million of year-to-date acquisition and integration expenses associated with the acquisition of Tensar, with no such costs in the corresponding period, and $8.7 million of additional labor-related expenses, compared to the corresponding period. Additionally, adjusted EBITDA included non-cash stock compensation expense of $7.7 million and $24.3 million for the three and nine months ended May 31, 2022, respectively, compared to $9.6 million and $22.9 million for the corresponding periods.
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 2021 Form 10-K and Note 2, Acquisition
.
We have a diverse and generally stable customer base, and regularly maintain a substantial amount of accounts receivable. We record allowances for the accounts receivable we estimate will not be collected based on market conditions, customers' financial condition and other factors. Historically, these allowances have not been material. 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 17% of total trade receivables at May 31, 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 10, Derivatives, for further information.
The table below reflects our sources, facilities and availability of liquidity at May 31, 2022. See Note 9, Credit Arrangements, for additional information.
| (in thousands) | Liquidity Sources and Facilities | Availability | ||||||||||||
| Cash and cash equivalents | $ | 410,265 | $ | 410,265 | ||||||||||
| Notes due from 2023 to 2032 | 1,230,000 | * | ||||||||||||
| Revolver | 400,000 | 398,604 | ||||||||||||
| U.S. accounts receivable facility | 150,000 | 150,000 | ||||||||||||
| Series 2022 Bonds, due 2047 ** | 145,060 | — | ||||||||||||
| Poland credit facilities | 70,269 | 69,371 | ||||||||||||
| Poland accounts receivable facility | 67,458 | 4,831 | ||||||||||||
| Poland Term Loan | 37,923 | — | ||||||||||||
| Other | 4,258 | 1,511 | ||||||||||||
_________________
*We believe we have access to additional financing and refinancing, if needed, although we can make no assurances as to the form or terms of such financing.
**See Note 9, Credit Arrangements, for additional information regarding the restrictions on the proceeds from the Series 2022 Bonds.
We are continually reviewing 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, pay dividends and opportunistically repurchase shares for at least the next twelve months. Additionally, we expect our long-term liquidity position will be sufficient to meet our long-term liquidity needs with cash flows from operations and financing arrangements. However, in the event of changes in business conditions or other developments, including a sustained market deterioration, unanticipated regulatory developments, significant acquisitions, competitive pressures, or to the extent our liquidity needs prove to be greater than expected or cash generated from operations is less than anticipated, we may need additional liquidity. To the extent we elect to finance our long-term liquidity needs, we believe that the potential financing capital available to us in the future is sufficient.
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As of May 31, 2022 and August 31, 2021, we had no off-balance sheet arrangements that may have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Cash Flows
Operating Activities
Net cash flows from operating activities were $241.7 million for the nine months ended May 31, 2022, compared to net cash flows from operating activities of $94.2 million for the nine months ended May 31, 2021. Net earnings increased by $668.1 million year-over-year, including an increase in net gain on disposals of assets and other of $266.7 million, primarily attributable to the sale of the Rancho Cucamonga facilities. This increase in net cash flows from operating activities was offset by a $343.4 million year-over-year net increase in cash used by operating assets and liabilities ("working capital"). The increase in cash used by working capital was due in part to rising scrap prices and greater inventory levels, which corresponded with an increase in accounts payable, accrued expenses and other payables in the nine months ended May 31, 2022, compared to the corresponding period. Additionally, the growth in sales period-over-period led to a rise in accounts receivable during the nine months ended May 31, 2022, compared to the corresponding period. Operating working capital days, which represents the number of days to convert accounts receivable and inventory, less accounts payable, into net sales, rose one day year-over-year.
Investing Activities
Net cash flows used by investing activities were $528.7 million for the nine months ended May 31, 2022, compared to net cash flows used by investing activities of $104.0 million for the nine months ended May 31, 2021. The $424.7 million increase in net cash flows used by investing activities was primarily caused by the acquisition of Tensar for a cash purchase price of approximately $550 million, net of cash acquired. See Note 2, Acquisition, for more information about the acquisition. Additionally, net cash flows used by investing activities rose due to increased capital expenditures from the construction of our third micro mill located in Mesa, Arizona. These cash outflows were offset in part by proceeds from the sale of the Rancho Cucamonga facilities. See Note 3, Changes in Business, for more information on the sale of the Rancho Cucamonga facilities.
We estimate that our 2022 capital spending will range from $475 million to $500 million. We regularly assess our capital spending based on current and expected results and the amount is subject to change.
In addition, in January 2022, we announced the plan to construct a fourth micro mill geographically situated primarily to serve the Northeast, Mid-Atlantic and Mid-Western United States markets. Following the site selection and receipt of state and local incentives, permitting and other necessary approvals, the construction of the planned mill is expected to take roughly two years.
Financing Activities
Net cash flows from financing activities were $324.3 million for the nine months ended May 31, 2022, compared to net cash flows used by financing activities of $88.2 million for the nine months ended May 31, 2021. The $412.4 million increase in net cash flows from financing activities was a result of many actions, including net proceeds from long-term debt of $420.7 million during the nine months ended May 31, 2022, compared to net long-term debt repayments of $52.7 million during the nine months ended May 31, 2021. Net borrowings under our accounts receivable facilities increased $9.4 million during the nine months ended May 31, 2022, compared to the corresponding period. See Note 9, Credit Arrangements, for more information regarding our credit arrangements. Partially offsetting these cash flows from financing activities were $55.6 million of treasury stock repurchased under the share repurchase program, $7.7 million in increased dividend payments and a $6.3 million increase attributable to stock issued under incentive and purchase plans, net of forfeitures. See Note 14, Stockholders' Equity and Earnings per Share, for more information on the share repurchase program.
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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 9, Credit Arrangements, for more information regarding scheduled maturities of our long-term debt. See Note 8, Leases, for additional information on leases.
Our undiscounted purchase obligations due in the twelve months following May 31, 2022 and August 31, 2021 were $897.9 million and $638.5 million, respectively, with $170.3 million and $228.0 million due thereafter, respectively. The increase in short-term purchase obligations was primarily due to construction of our third micro mill in Mesa, Arizona, purchases of inventory and other planned maintenance and capital expenditures in connection with normal business operations. The decrease in long-term purchase obligations is a result of a decrease in commitments for commodities used in operations, such as electrodes and natural gas, and certain capital expenditure obligations for the construction of our third micro mill which were fulfilled during the nine months ended May 31, 2022.
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 May 31, 2022, we had committed $21.5 million under these arrangements, of which $1.4 million reduced availability under the Revolver.
CONTINGENCIES
We may incur settlements, fines, penalties or judgments due to our involvement in litigation, administrative proceedings and governmental investigations, including environmental matters. Liabilities and costs associated with litigation-related loss contingencies require estimates and judgments based on our knowledge of the facts and circumstances surrounding each matter and the advice of our legal counsel. We record liabilities for litigation-related losses when we believe a material loss is probable and we can reasonably estimate the amount of the loss. We evaluate the measurement of recorded liabilities each reporting period based on the current facts and circumstances specific to each matter. The ultimate losses incurred upon final resolution of litigation-related loss contingencies may differ materially from the estimated liability recorded at a particular balance sheet date. Changes in estimates are recorded in earnings in the period in which such changes occur. We do not believe that any currently pending legal proceedings to which we are a party will materially affect, individually or in the aggregate, our results of operations, cash flows or financial condition. See Note 15, Commitments and Contingencies, for more information.
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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 effect of COVID-19 and related governmental and economic responses thereto, the ability to operate our steel mills at full capacity, future availability and cost of supplies of raw materials and energy for our operations, share repurchases, legal proceedings, the undistributed earnings of our non-U.S. subsidiaries, U.S. non-residential construction activity, international trade, capital expenditures, 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 2021 Form 10-K and Part II, Item 1A, Risk Factors of this Quarterly Report on Form 10-Q, as well as the following:
•
changes in economic conditions which affect demand for our products or construction activity generally, and the impact of such changes on the highly cyclical steel industry;
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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;
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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;
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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, energy supplies and raw materials, which is uncertain, but may prove to negatively impact our business and operations;
•
compliance with and changes in existing and future laws, regulations and other legal requirements and judicial decisions that govern our business, including increased environmental regulations associated with climate change and greenhouse gas emissions;
•
involvement in various environmental matters that may result in fines, penalties or judgments;
•
evolving remediation technology, changing regulations, possible third-party contributions, the inherent uncertainties of the estimation process and other factors that may impact amounts accrued for environmental liabilities;
•
potential limitations in our or our customers' abilities to access credit and non-compliance 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 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;
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•
failure or inability to implement growth strategies in a timely manner;
•
impact of goodwill 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;
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competition from other materials or from competitors that have a lower cost structure or access to greater financial resources;
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information technology interruptions and breaches in security;
•
ability to make necessary capital expenditures;
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availability and pricing of raw materials and other items over which we exert little influence, including scrap metal, energy and insurance;
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unexpected equipment failures;
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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 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 nine months ended May 31, 2022, the U.S. dollar equivalent of the Company's total gross foreign currency exchange contract commitments decreased $12.3 million, or 3%, compared to August 31, 2021. This decrease was primarily due to forward contracts denominated in Polish zloty with a U.S. dollar functional currency, which decreased $122.6 million, partially offset by forward contracts denominated in euros with a Polish zloty functional currency, which increased $112.0 million compared to August 31, 2021.
There were no other material changes to the information set forth in Item 7A, Quantitative and Qualitative Disclosures about Market Risk, included in our 2021 Form 10-K.
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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
Except for the acquisition of Tensar as described below, 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 May 31, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
On April 25, 2022, we completed the acquisition of Tensar. Tensar represented approximately 1% of the Company's net sales during the three months ended May 31, 2022 and 11% of total assets as of May 31, 2022. We are currently integrating Tensar into our operations and internal control processes. Pursuant to the Securities and Exchange Commission's guidance that an assessment of an acquired business may be omitted from the scope of an assessment for a period not to exceed one year from the date of acquisition, we excluded Tensar from the scope of our assessment of our internal controls over financial reporting as of May 31, 2022.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For information regarding our legal proceedings, refer to Note 15, Commitments and Contingencies, to our condensed consolidated financial statements included in Part I, Item 1, Financial Statements, of this Form 10-Q.
With respect to administrative or judicial proceedings arising under any federal, state or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment, we have determined that we will disclose any such proceeding to which a governmental authority is a party if we reasonably believe such proceeding could result in monetary sanctions, exclusive of interest and costs, of at least $1.0 million. We believe that this threshold is reasonably designed to result in disclosure of environmental proceedings that are material to our business or financial condition. Applying this threshold, there were no environmental matters to disclose for this period.
ITEM 1A. RISK FACTORS
Except as set forth below, there were no material changes to the risk factors previously disclosed in Part I, Item 1A, Risk Factors, of our 2021 Form 10-K:
The impact of the Russian invasion of Ukraine on the global economy, energy supplies and raw materials is uncertain, but may prove to negatively impact our business and operations.
The short and long-term implications of Russia’s invasion of Ukraine are difficult to predict at this time. We continue to monitor any adverse impact that the outbreak of war in Ukraine and the subsequent institution of sanctions against Russia by the United States and several European and Asian countries may have on the global economy in general, on our business and operations and on the businesses and operations of our suppliers and customers. For example, a prolonged conflict may result in increased inflation, escalating energy prices and constrained availability, and thus increasing costs, of raw materials. Further, if the conflict intensifies or expands beyond Ukraine, it could have an adverse impact on our operations in Poland. We will continue to monitor this fluid situation and develop contingency plans as necessary to address any disruptions to our business operations as they develop. To the extent the war in Ukraine may adversely affect our business as discussed above, it may also have the effect of heightening many of the other risks described in Part I, Item 1A of our 2021 Form 10-K, such as those relating to data security, supply chain, volatility in prices of scrap and other inputs, and market conditions, any of which could negatively affect our business and financial condition.
Following the Tensar acquisition, we may be subject to new and increased business and economic risks.
In connection with the Tensar acquisition, we expanded our scope of products and acquired international manufacturing facilities in new geographical territories where we have limited experience in owning and operating assets. As a result, this expansion poses new risks and uncertainties and increases our exposure to certain existing risks and uncertainties. The failure to meet the challenges involved in operating and integrating the Tensar business and to realize the anticipated benefits of the acquisition could cause an interruption of, or a loss of momentum in, our activities and could adversely affect our results of operations.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table provides information about purchases of equity securities registered by the Company pursuant to Section 12 of the Exchange Act, as amended, made by the Company or any affiliated purchasers during the quarter ended May 31, 2022.
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|
Issuer Purchases of Equity Securities
(1)
|
||||||||||||||||||||||||||
| Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs as of the End of Period | ||||||||||||||||||||||
| March 1, 2022 - March 31, 2022 | 126,800 | $ | 40.16 | 126,800 | $ | 327,907,153 | ||||||||||||||||||||
| April 1, 2022 - April 30, 2022 | 122,256 | 42.15 | 122,256 | 322,754,443 | ||||||||||||||||||||||
| May 1, 2022 - May 31, 2022 | 757,331 | 37.42 | 757,331 | 294,411,671 | ||||||||||||||||||||||
| 1,006,387 | 1,006,387 | |||||||||||||||||||||||||
_________________
(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 14, 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† | |||||
| 3.1(a) | |||||
| 3.1(b) | |||||
| 3.1(c) | |||||
| 3.1(d) | |||||
| 3.1(e) | |||||
| 3.1(f) | |||||
| 3.2 | |||||
| 31.1 | |||||
| 31.2 | |||||
| 32.1 | |||||
| 32.2 | |||||
| 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 | |||||
| June 22, 2022 | /s/ Paul J. Lawrence | ||||
| Paul J. Lawrence | |||||
| Senior Vice President and Chief Financial Officer | |||||
| (Duly authorized officer and principal financial officer of the registrant) | |||||
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TABLE OF CONTENTS
Part I. Financial InformationprintItem 1. Financial StatementsprintNote 1. Accounting PoliciesprintNote 2. AcquisitionprintNote 3. Changes in BusinessprintNote 4. Accumulated Other Comprehensive Income (loss)printNote 5. Revenue RecognitionprintNote 6. Inventories, NetprintNote 7. Goodwill and Other IntangiblesprintNote 8. LeasesprintNote 9. Credit ArrangementsprintNote 10. DerivativesprintNote 11. Fair ValueprintNote 12. Stock-based Compensation PlansprintNote 13. Employees' Retirement PlansprintNote 14. Stockholders' Equity and Earnings Per ShareprintNote 15. Commitments and ContingenciesprintNote 16. Business SegmentsprintItem 2. Management's Discussion and Analysis Of Financial Condition and Results Of OperationsprintItem 3. Quantitative and Qualitative Disclosures About Market RiskprintItem 4. Controls and ProceduresprintPart II. Other InformationprintItem 1. Legal ProceedingsprintItem 1A. Risk FactorsprintItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsprintItem 3. Defaults Upon Senior SecuritiesprintItem 4. Mine Safety DisclosuresprintItem 5. Other InformationprintItem 6. Exhibitsprint