Company Quick10K Filing
Commercial Metals
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 119 $1,817
10-Q 2020-01-07 Quarter: 2019-11-30
10-K 2019-10-23 Annual: 2019-08-31
10-Q 2019-06-27 Quarter: 2019-05-31
10-Q 2019-03-26 Quarter: 2019-02-28
10-Q 2019-01-08 Quarter: 2018-11-30
10-K 2018-10-25 Annual: 2018-08-31
10-Q 2018-06-27 Quarter: 2018-05-31
10-Q 2018-03-26 Quarter: 2018-02-28
10-Q 2018-01-08 Quarter: 2017-11-30
10-K 2017-10-26 Annual: 2017-08-31
10-Q 2017-06-28 Quarter: 2017-05-31
10-Q 2017-03-28 Quarter: 2017-02-28
10-Q 2017-01-09 Quarter: 2016-11-30
10-K 2016-10-31 Annual: 2016-08-31
10-Q 2016-06-29 Quarter: 2016-05-31
10-Q 2016-03-29 Quarter: 2016-02-29
10-Q 2016-01-08 Quarter: 2015-11-30
10-K 2015-10-30 Annual: 2015-08-31
10-Q 2015-06-29 Quarter: 2015-05-31
10-Q 2015-03-31 Quarter: 2015-02-28
10-Q 2015-01-09 Quarter: 2015-01-09
10-K 2014-10-30 Annual: 2014-08-31
10-Q 2014-07-01 Quarter: 2014-05-31
10-Q 2014-03-31 Quarter: 2014-02-28
10-Q 2014-01-09 Quarter: 2013-11-30
10-K 2013-10-28 Annual: 2013-08-31
10-Q 2013-04-01 Quarter: 2013-02-28
10-Q 2013-01-09 Quarter: 2012-11-30
10-K 2012-10-30 Annual: 2012-08-31
10-Q 2012-06-29 Quarter: 2012-05-31
10-Q 2012-04-06 Quarter: 2012-02-29
10-Q 2012-01-09 Quarter: 2011-11-30
10-K 2011-10-31 Annual: 2011-08-31
10-Q 2011-07-08 Quarter: 2011-05-31
10-Q 2011-04-08 Quarter: 2011-02-28
10-Q 2011-01-07 Quarter: 2010-11-30
10-K 2010-10-29 Annual: 2010-08-31
10-Q 2010-07-09 Quarter: 2010-05-31
10-Q 2010-04-08 Quarter: 2010-02-28
10-Q 2010-01-08 Quarter: 2009-11-30
8-K 2020-02-04 Officers
8-K 2020-01-08 Officers, Shareholder Vote
8-K 2020-01-06 Earnings, Exhibits
8-K 2020-01-02 Other Events, Exhibits
8-K 2019-10-23
8-K 2019-10-22 Officers
8-K 2019-10-22
8-K 2019-09-20 Amend Bylaw, Exhibits
8-K 2019-08-13 Officers
8-K 2019-07-02 Officers, Exhibits
8-K 2019-06-20 Earnings, Exhibits
8-K 2019-06-19 Other Events, Exhibits
8-K 2019-03-21 Earnings, Exhibits
8-K 2019-03-20 Other Events, Exhibits
8-K 2019-01-09 Shareholder Vote
8-K 2019-01-07 Earnings, Exhibits
8-K 2019-01-02 Other Events, Exhibits
8-K 2018-12-13 Regulation FD, Exhibits
8-K 2018-11-05 M&A, Off-BS Arrangement, Regulation FD, Exhibits
8-K 2018-10-25 Earnings, Exhibits
8-K 2018-10-23 Other Events, Exhibits
8-K 2018-08-31 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-06-21 Earnings, Exhibits
8-K 2018-06-20 Other Events, Exhibits
8-K 2018-05-03 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-04-19 Enter Agreement, Other Events, Exhibits
8-K 2018-04-19 Regulation FD, Other Events, Exhibits
8-K 2018-04-01 Officers, Exhibits
8-K 2018-03-22 Earnings, Exhibits
8-K 2018-03-21 Other Events, Exhibits
8-K 2018-02-21 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-01-09 Officers, Shareholder Vote
8-K 2018-01-03 Earnings, Exhibits
8-K 2018-01-02 Other Events, Exhibits
8-K 2017-12-29 Enter Agreement, Off-BS Arrangement, Regulation FD, Other Events, Exhibits
CMC 2019-11-30
Part I. Financial Information
Item 1. Financial Statements
Note 1. Accounting Policies
Note 2. Changes in Business
Note 3. Accumulated Other Comprehensive Income (Loss)
Note 4. Revenue Recognition
Note 5. Inventories, Net
Note 6. Goodwill and Other Intangibles
Note 7. Leases
Note 8. Credit Arrangements
Note 9. Derivatives
Note 10. Fair Value
Note 11. Stock-Based Compensation Plans
Note 12. Stockholders' Equity and Earnings per Share
Note 13. Commitments and Contingencies
Note 14. Business Segments
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 cmc-11302019xex311.htm
EX-31.2 cmc-11302019xex312.htm
EX-32.1 cmc-11302019xex321.htm
EX-32.2 cmc-11302019xex322.htm

Commercial Metals Earnings 2019-11-30

CMC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
X 2,621 11,291 6,979 14,464 1,689 1,005 1,386 4,284 12% 3.1 9%
CRS 2,244 3,188 1,668 2,380 445 167 364 2,767 19% 7.6 5%
WOR 2,219 2,511 1,562 3,760 480 163 340 2,880 13% 8.5 7%
GGB 2,145 51,281 25,342 0 0 0 0 2,139 0%
CMC 1,817 3,767 2,203 5,594 734 164 442 3,002 13% 6.8 4%
ROCK 1,272 907 277 1,011 231 59 102 1,190 23% 11.7 6%
MTL 833 317,625 550,820 0 0 0 0 833 0%
AKS 722 4,687 4,211 6,791 0 206 581 2,626 0% 4.5 4%
SXC 574 2,082 1,360 1,532 40 38 148 1,324 3% 9.0 2%
SXCP 531 1,634 1,038 908 32 52 224 1,348 4% 6.0 3%

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM 10-Q 
___________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to            
Commission file number 1-4304
___________________________________
COMMERCIAL METALS COMPANY
(Exact Name of Registrant as Specified in Its Charter)
___________________________________ 
Delaware
75-0725338
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification Number)
6565 N. MacArthur Blvd.
Irving, Texas 75039
(Address of Principal Executive Offices) (Zip Code)
(214) 689-4300
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Trading Symbol(s)
 
Name of Each Exchange on Which Registered
Common Stock, $0.01 par value
 
CMC
 
New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 ("Exchange Act") during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer 
Non-accelerated filer 
Smaller reporting company
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of January 6, 2020, 118,650,173 shares of the registrant's common stock, par value $0.01 per share, were outstanding.



COMMERCIAL METALS COMPANY AND SUBSIDIARIES
TABLE OF CONTENTS

 
 
 
 
 
 
 
 

2




PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
 
 
Three Months Ended November 30,
(in thousands, except share data)
 
2019
 
2018
Net sales
 
$
1,384,708


$
1,277,342

Costs and expenses:
 



Cost of goods sold
 
1,146,514


1,118,433

Selling, general and administrative expenses
 
111,529


117,217

Interest expense
 
16,578

 
16,663

 
 
1,274,621


1,252,313

 
 
 
 
 
Earnings from continuing operations before income taxes
 
110,087


25,029

Income taxes
 
27,332


5,609

Earnings from continuing operations
 
82,755


19,420

 
 





Earnings from discontinued operations before income taxes
 
895

 
457

Income taxes
 
302

 
135

Earnings from discontinued operations
 
593

 
322

 
 





Net earnings
 
$
83,348

 
$
19,742

 
 



Basic earnings per share*
 



Earnings from continuing operations
 
$
0.70


$
0.17

Earnings from discontinued operations
 
0.01



Net earnings
 
$
0.70


$
0.17

 
 



Diluted earnings per share*
 



Earnings from continuing operations
 
$
0.69


$
0.16

Earnings from discontinued operations
 



Net earnings
 
$
0.70


$
0.17

 
 





Average basic shares outstanding
 
118,370,191


117,387,038

Average diluted shares outstanding
 
119,773,538


118,682,473

See notes to condensed consolidated financial statements.
 _________________
*Earnings Per Share ("EPS") is calculated independently for each component and may not sum to Net EPS due to rounding.


3





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

 
Three Months Ended November 30,
(in thousands)
 
2019
 
2018
Net earnings
 
$
83,348

 
$
19,742

Other comprehensive income, net of income taxes:
 
 
 
 
Foreign currency translation adjustment
 
6,924

 
(9,657
)
Reclassification for translation loss realized upon liquidation of investment in foreign entity
 

 
(99
)
Foreign currency translation adjustment
 
6,924

 
(9,756
)
Net unrealized gain (loss) on derivatives:
 
 
 
 
Unrealized holding gain (loss)
 
714

 
(35
)
Reclassification for loss included in net earnings
 
(89
)
 
(42
)
Net unrealized gain (loss) on derivatives
 
625

 
(77
)
Defined benefit obligation:
 
 
 
 
Amortization of prior services
 
(8
)
 
(7
)
Reclassification for settlement losses
 

 
1,316

Defined benefit obligation
 
(8
)
 
1,309

Other comprehensive income (loss)
 
7,541

 
(8,524
)
Comprehensive income
 
$
90,889

 
$
11,218

See notes to condensed consolidated financial statements.

4




COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share data)
 
November 30, 2019
 
August 31, 2019
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
224,797

 
$
192,461

Accounts receivable (less allowance for doubtful accounts of $8,348 and $8,403)
 
961,458

 
1,016,088

Inventories, net
 
649,681

 
692,368

Other current assets
 
178,647

 
179,088

Total current assets
 
2,014,583

 
2,080,005

Property, plant and equipment, net
 
1,504,308

 
1,500,971

Goodwill
 
64,178

 
64,138

Other noncurrent assets
 
225,282

 
113,657

Total assets
 
$
3,808,351

 
$
3,758,771

Liabilities and stockholders' equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
243,857

 
$
288,005

Accrued expenses and other payables
 
317,455

 
353,786

Acquired unfavorable contract backlog
 
26,935

 
35,360

Current maturities of long-term debt and short-term borrowings
 
13,717

 
17,439

Total current liabilities
 
601,964

 
694,590

Deferred income taxes
 
107,069

 
79,290

Other noncurrent liabilities
 
218,178

 
133,620

Long-term debt
 
1,179,443

 
1,227,214

Total liabilities
 
2,106,654

 
2,134,714

Commitments and contingencies (Note 13)
 

 

Stockholders' equity:
 
 
 
 
Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued 129,060,664 shares; outstanding 118,649,865 and 117,924,938 shares
 
1,290

 
1,290

Additional paid-in capital
 
347,192

 
358,668

Accumulated other comprehensive loss
 
(116,585
)
 
(124,126
)
Retained earnings
 
1,654,489

 
1,585,379

Less treasury stock, 10,410,799 and 11,135,726 shares at cost
 
(184,885
)
 
(197,350
)
Stockholders' equity
 
1,701,501

 
1,623,861

Stockholders' equity attributable to noncontrolling interests
 
196

 
196

Total stockholders' equity
 
1,701,697

 
1,624,057

Total liabilities and stockholders' equity
 
$
3,808,351

 
$
3,758,771

See notes to condensed consolidated financial statements.

5




COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 
Three Months Ended November 30,
(in thousands)
 
2019
 
2018
Cash flows from (used by) operating activities:
 
 
 
 
Net earnings
 
$
83,348

 
$
19,742

Adjustments to reconcile net earnings to cash flows from (used by) operating activities:
 
 
 
 
Depreciation and amortization
 
40,947

 
35,182

Deferred income taxes
 
27,939

 
(352
)
Amortization of acquired unfavorable contract backlog
 
(8,331
)
 
(11,332
)
Stock-based compensation
 
8,269

 
4,217

Net gain on disposals of subsidiaries, assets and other
 
(6,733
)
 
(1,271
)
Other
 
1,175

 
45

Changes in operating assets and liabilities
 
(196
)
 
(36,333
)
Beneficial interest in securitized accounts receivable
 

 
(367,521
)
Net cash flows from (used by) operating activities
 
146,418

 
(357,623
)
 
 
 
 
 
Cash flows from (used by) investing activities:
 
 
 
 
Capital expenditures
 
(45,559
)
 
(37,914
)
Proceeds from the sale of property, plant and equipment
 
9,651

 
1,953

Proceeds from insurance, sale of discontinued operations and other
 
784

 
5,798

Acquisitions, net of cash acquired
 

 
(694,802
)
Beneficial interest in securitized accounts receivable
 

 
367,521

Net cash flows used by investing activities:
 
(35,124
)
 
(357,444
)
 
 
 
 
 
Cash flows from (used by) financing activities:
 
 
 
 
Proceeds from issuance of long-term debt
 

 
180,000

Repayments of long-term debt
 
(53,298
)
 
(7,175
)
Proceeds from accounts receivable programs
 
27,050

 
33,439

Repayments under accounts receivable programs
 
(31,057
)
 
(45,586
)
Dividends
 
(14,238
)
 
(14,116
)
Stock issued under incentive and purchase plans, net of forfeitures
 
(7,817
)
 
(6,220
)
Net cash flows from (used by) financing activities
 
(79,360
)
 
140,342

Effect of exchange rate changes on cash
 
196

 
(353
)
Increase (decrease) in cash, restricted cash and cash equivalents
 
32,130

 
(575,078
)
Cash, restricted cash and cash equivalents at beginning of period
 
193,729

 
632,615

Cash, restricted cash and cash equivalents at end of period
 
$
225,859

 
$
57,537

See notes to condensed consolidated financial statements.


Supplemental information:
 
Three Months Ended November 30,
(in thousands)
 
2019
 
2018
Cash paid for income taxes
 
$
2,119

 
$
4,879

Cash paid for interest
 
20,031

 
19,807

 
 
 
 
 
Noncash activities:
 
 
 
 
Liabilities related to additions of property, plant and equipment
 
17,569

 
19,676

 
 
 
 
 
Cash and cash equivalents
 
$
224,797

 
$
52,352

Restricted cash
 
1,062

 
5,185

Total cash, restricted cash and cash equivalents
 
$
225,859

 
$
57,537



6




COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
 
Three Months Ended November 30, 2019
 
Common Stock
Additional
Accumulated
Other
 
Treasury Stock
 Non-
 
(in thousands, except share data)
Number of
Shares
Amount
Paid-In
Capital
Comprehensive
Loss
Retained
Earnings
Number of
Shares
Amount
controlling
Interests
Total
Balance, September 1, 2019
129,060,664

$
1,290

$
358,668

$
(124,126
)
$
1,585,379

(11,135,726
)
$
(197,350
)
$
196

$
1,624,057

Net earnings
 
 
 
 
83,348

 
 
 
83,348

Other comprehensive income
 
 
 
7,541

 
 
 
 
7,541

Dividends ($0.12 per share)
 
 
 
 
(14,238
)
 
 
 
(14,238
)
Issuance of stock under incentive and purchase plans, net of forfeitures
 
 
(20,282
)
 
 
724,927

12,465

 
(7,817
)
Stock-based compensation
 
 
8,806

 
 
 
 
 
8,806

Balance, November 30, 2019
129,060,664

$
1,290

$
347,192

$
(116,585
)
$
1,654,489

(10,410,799
)
$
(184,885
)
$
196

$
1,701,697


 
Three Months Ended November 30, 2018
 
Common Stock
Additional
Accumulated
Other
 
Treasury Stock
 Non-
 
(in thousands, except share data)
Number of
Shares
Amount
Paid-In
Capital
Comprehensive
Loss
Retained
Earnings
Number of
Shares
Amount
controlling
Interests
Total
Balance, September 1, 2018
129,060,664

$
1,290

$
352,674

$
(93,677
)
$
1,446,495

(12,045,106
)
$
(213,385
)
$
186

$
1,493,583

Net earnings
 
 
 
 
19,742

 
 
 
19,742

Other comprehensive loss
 
 
 
(8,524
)
 
 
 
 
(8,524
)
Dividends ($0.12 per share)
 
 
 
 
(14,116
)
 
 
 
(14,116
)
Issuance of stock under incentive and purchase plans, net of forfeitures
 
 
(17,090
)
 
 
618,643

10,870

 
(6,220
)
Stock-based compensation
 
 
7,309

 
 
 
 
 
7,309

Adoption of ASC 606 adjustment
 
 
 
 
(2,747
)
 
 
 
(2,747
)
Balance, November 30, 2018
129,060,664

$
1,290

$
342,893

$
(102,201
)
$
1,449,374

(11,426,463
)
$
(202,515
)
$
186

$
1,489,027

See notes to condensed consolidated financial statements.

7





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, 2019 ("2019 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 included in the 2019 Form 10-K. The results of operations for the three month period are not necessarily indicative of the results to be expected for the full fiscal year.

Recently Adopted Accounting Pronouncements

On September 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), as amended, (“ASU 2016-02”), using the modified retrospective transition approach. ASU 2016-02 requires a lessee to recognize a right-of-use ("ROU") asset and a lease liability on its balance sheet for all leases with terms longer than twelve months. The Company’s financial statements for periods prior to September 1, 2019 were not modified for the application of this ASU. Upon adoption of ASU 2016-02, the Company recorded the following amounts associated with operating leases in its condensed consolidated balance sheet at September 1, 2019: $113.4 million of ROU assets, in other noncurrent assets, $30.9 million in accrued expenses and other payables and $84.9 million in other noncurrent liabilities. There was no impact to the opening balance of retained earnings as a result of implementing ASU 2016-02. The Company elected the package of three practical expedients available under the ASU. Additionally, the Company implemented appropriate changes to internal processes and controls to support recognition, subsequent measurement and disclosures.

The Company's leases are primarily for office space, land and equipment. The Company determines if an arrangement is a lease at inception of a contract if the terms state the Company has the right to direct the use of and obtain substantially all the economic benefits from a specific asset identified in the contract. The ROU assets represent the Company's right to use the underlying assets for the lease term and its lease liabilities represent the obligation to make lease payments arising from the leases. ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments to be made over the lease term. Certain of the Company's lease agreements contain options to extend the lease. The Company evaluates these options on a lease-by-lease basis, and, if the Company determines it is reasonably certain to be exercised, the lease term includes the extension. The Company uses its incremental borrowing rate at lease commencement to determine the present value of lease payments, and lease expense is recognized on a straight-line basis over the lease term. The incremental borrowing rate is the rate of interest the Company could borrow on a collateralized basis over a similar term with similar payments. The Company does not record leases with an initial term of twelve months or less (“short-term leases”) in its condensed consolidated balance sheets.

Certain of the Company's lease agreements include payments for certain variable costs not determinable upon lease commencement including mileage, utilities, fuel and inflation adjustments. These variable lease payments are recognized in cost of goods sold and selling, general and administrative expenses, but are not included in the ROU asset or lease liability balances. The Company's lease agreements do not contain any material residual value guarantees, restrictions or covenants.
NOTE 2. CHANGES IN BUSINESS

Acquisition

On November 5, 2018 (the "Acquisition Date"), the Company completed the acquisition of 33 rebar fabrication facilities in the United States ("U.S."), as well as four electric arc furnace ("EAF") mini mills located in Knoxville, Tennessee; Jacksonville, Florida; Sayreville, New Jersey and Rancho Cucamonga, California from Gerdau S.A., hereinafter collectively referred to as the "Acquired Businesses." The total cash purchase price, including working capital adjustments, was $701.2 million, and was funded through a combination of domestic cash on-hand and borrowings under a term loan (the "Term Loan").


8




The purchase price paid was allocated between the acquired mills and fabrication facilities. The results of operations of the Acquired Businesses are reflected in the Company’s condensed consolidated financial statements from the Acquisition Date. The purchase price was allocated among assets acquired and liabilities assumed at fair value and was finalized on November 5, 2019. There were no changes during the quarter ended November 30, 2019 from the amounts disclosed in Note 3, Acquisition, to the consolidated financial statements in the 2019 Form 10-K.

Pro Forma Supplemental Information

Supplemental information on an unaudited pro forma basis is presented below as if the acquisition of the Acquired Businesses (the "Acquisition") occurred on September 1, 2017. The pro forma financial information is presented for comparative purposes only, based on significant 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, 2017. These results were not used as part of management analysis of the financial results and performance of the Company or the Acquired Businesses. These results are adjusted, where possible, for transaction and integration-related costs.
 
 
Three Months Ended November 30,
(in thousands)
 
2018
 
2017*
Pro forma net sales
 
$
1,557,032

 
$
1,417,583

Pro forma net earnings (loss)
 
38,059

 
(4,749
)
_________________ 
*Non-recurring acquisition and integration costs of approximately $43.3 million incurred have been included in pro forma net earnings for the three months ended November 30, 2017.

Facility Closure

In October 2019, the Company decided to close the melting operations at its Rancho Cucamonga facility. Due to this decision, the Company recorded $6.3 million of expense in the three months ended November 30, 2019 related to severance, pension curtailment and vendor agreement terminations. At November 30, 2019, the remaining liability to be paid related to these expenses was $3.9 million and was included in accrued expenses and other payables on the Company's condensed consolidated balance sheets.
NOTE 3. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables reflect the changes in accumulated other comprehensive income (loss) ("AOCI"):
 
 
Three Months Ended November 30, 2019
(in thousands)
 
Foreign Currency Translation
 
Unrealized Gain (Loss) on Derivatives
 
Defined Benefit Obligation
 
Total AOCI
Balance, August 31, 2019
 
$
(121,498
)
 
$
1,106

 
$
(3,734
)
 
$
(124,126
)
Other comprehensive income (loss) before reclassifications
 
6,924

 
882

 
(10
)
 
7,796

Amounts reclassified from AOCI
 

 
(110
)
 

 
(110
)
Income taxes
 

 
(147
)
 
2

 
(145
)
Net other comprehensive income (loss)
 
6,924

 
625

 
(8
)
 
7,541

Balance, November 30, 2019
 
$
(114,574
)
 
$
1,731

 
$
(3,742
)
 
$
(116,585
)
 
 
Three Months Ended November 30, 2018
(in thousands)
 
Foreign Currency Translation
 
Unrealized Gain (Loss) on Derivatives
 
Defined Benefit Obligation
 
Total AOCI
Balance, August 31, 2018
 
$
(92,637
)
 
$
1,356

 
$
(2,396
)
 
$
(93,677
)
Other comprehensive income (loss) before reclassifications
 
(9,657
)
 
(52
)
 
(11
)
 
(9,720
)
Amounts reclassified from AOCI
 
(99
)
 
(42
)
 
1,666

 
1,525

Income taxes
 

 
17

 
(346
)
 
(329
)
Net other comprehensive income (loss)
 
(9,756
)
 
(77
)
 
1,309

 
(8,524
)
Balance, November 30, 2018
 
$
(102,393
)
 
$
1,279

 
$
(1,087
)
 
$
(102,201
)


9





Items reclassified out of AOCI were immaterial for the three months ended November 30, 2019 and 2018. Thus, the corresponding line items in the condensed consolidated statements of earnings to which the items were reclassified are not presented.
NOTE 4. REVENUE RECOGNITION

In the Americas Mills, Americas Recycling, and International Mill segments, revenue is recognized at a point in time concurrent with the transfer of control, which usually occurs, depending on shipping terms, upon shipment or customer receipt.

In the Americas Fabrication segment, each contract represents a single performance obligation. Revenue is either recognized over time or equal to billing under an available practical expedient. For contracts where the Company provides fabricated product and installation services, revenue is recognized over time using an input method. For the three months ended November 30, 2019, these contracts represent approximately 26% of net sales in the Americas Fabrication segment. For these contracts, the measure of progress is based on contract costs incurred to date compared to total estimated contract costs, which provides a reasonable depiction of the Company’s progress towards satisfaction of the performance obligation as there is a direct relationship between costs incurred by the Company and the transfer of the fabricated product and installation services. Revenue from contracts where the Company does not provide installation services is recognized over time using an output method. For the three months ended November 30, 2019, these contracts represent approximately 23% of net sales in the Americas Fabrication segment. For these contracts, the Company uses tons shipped compared to total estimated tons, which provides a reasonable depiction of the transfer of contract value to the customer, as there is a direct relationship between the units shipped by the Company and the transfer of the fabricated product. Significant judgment is required to evaluate total estimated costs used in the input method and total estimated tons in the output method. If estimated total consolidated costs on any contract are greater than the net contract revenues, the Company recognizes the entire estimated loss in the period the loss becomes known. The cumulative effect of revisions to estimates related to net contract revenues, costs to complete or total planned quantity is recorded in the period in which such revisions are identified. The Company does not exercise significant judgment in determining the transaction price. For the three months ended November 30, 2019, the remaining 51% of net sales in the Americas Fabrication segment is recognized as amounts are billed to the customer.

Payment terms and conditions vary by contract type, although the Company generally requires customers to pay within 30 days of invoice date. The timing of revenue recognition for certain Americas Fabrication contracts, as described above, differ from the timing of invoicing to customers. The Company records an asset when revenue is recognized prior to invoicing and a liability when revenue is recognized after invoicing. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined the contracts do not include a significant financing component.

The following table provides information about assets and liabilities from contracts with customers.
(in thousands)
 
November 30, 2019
 
August 31, 2019
Contract assets (included in other current assets)
 
$
89,507

 
$
103,805

Contract liabilities (included in accrued expenses and other payables)
 
34,037

 
37,165


The amount of revenue reclassified from August 31, 2019 contract liabilities during the three months ended November 30, 2019 was approximately $14.5 million.

Remaining Performance Obligations

As of November 30, 2019, $799.1 million has been allocated to remaining performance obligations in the Americas Fabrication segment, excluding those contracts where revenue is recognized equal to billing. Of this amount, the Company estimates the remaining performance obligations will be recognized as revenue as follows: 40% in the first twelve months, 48% in the following twelve months, and 12% thereafter. The duration of contracts in the Americas Mills, Americas Recycling, and International Mill segments are typically less than one year.


10




Disaggregation of Revenue

The following tables display revenue by reportable segment from external customers, disaggregated by major source. The Company believes disaggregating by these categories depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.
 
 
Three Months Ended November 30, 2019
(in thousands)
 
Americas Recycling
 
Americas Mills
 
Americas Fabrication
 
International Mill
 
Corporate and Other
 
Total
Steel products
 
$
115

 
$
441,163

 
$
499,727

 
$
157,944

 
$

 
$
1,098,949

Ferrous scrap
 
58,302

 
6,748

 

 
212

 

 
65,262

Nonferrous scrap
 
113,218

 
3,355

 

 
1,993

 

 
118,566

Construction materials
 

 

 
67,466

 

 

 
67,466

Other
 
516

 
22,926

 
3,184

 
4,891

 
2,948

 
34,465

Total
 
$
172,151

 
$
474,192

 
$
570,377

 
$
165,040

 
$
2,948

 
$
1,384,708

 
 
Three Months Ended November 30, 2018
(in thousands)
 
Americas Recycling
 
Americas Mills
 
Americas Fabrication
 
International Mill
 
Corporate and Other
 
Total
Steel products
 
$
239

 
$
347,965

 
$
374,807

 
$
217,770

 
$

 
$
940,781

Ferrous scrap
 
111,654

 
9,142

 

 
275

 

 
121,071

Nonferrous scrap
 
128,075

 
3,180

 

 
2,941

 

 
134,196

Construction materials
 

 

 
57,171

 

 

 
57,171

Other
 
213

 
13,384

 
2,580

 
5,687

 
2,259

 
24,123

Total
 
$
240,181

 
$
373,671

 
$
434,558

 
$
226,673

 
$
2,259

 
$
1,277,342


NOTE 5. INVENTORIES, NET

The majority of the Company's inventories are in the form of semi-finished and finished goods. Under the Company’s business model, products are sold to external customers in various stages, from semi-finished billets through fabricated steel, leading these categories to be combined. As such, at November 30, 2019 and August 31, 2019, work in process inventories were immaterial. At November 30, 2019 and August 31, 2019, the Company's raw materials inventories were $129.5 million and $143.7 million, respectively.
NOTE 6. GOODWILL AND OTHER INTANGIBLES

Goodwill by reportable segment at November 30, 2019 is detailed in the following table:
(in thousands)
 
Americas Recycling
 
Americas Mills
 
Americas Fabrication
 
International Mill
 
Consolidated
Goodwill, gross*
 
$
9,543

 
$
4,970

 
$
57,428

 
$
2,426

 
$
74,367

Accumulated impairment losses*
 
(9,543
)
 

 
(493
)
 
(153
)
 
(10,189
)
Goodwill, net*
 
$

 
$
4,970

 
$
56,935

 
$
2,273

 
$
64,178

_________________ 
* The change in balance from August 31, 2019 was immaterial.

The total gross carrying amounts of the Company's intangible assets subject to amortization were $21.0 million and $20.8 million, and the total net carrying amount was $12.8 million and $13.3 million at November 30, 2019 and August 31, 2019, respectively. These assets were included in other noncurrent assets on the Company's condensed consolidated balance sheets. Intangible amortization expense from continuing operations related to such intangible assets was $0.5 million for the three months ended November 30, 2019 and 2018. Excluding goodwill, the Company did not have any significant intangible assets with indefinite lives at November 30, 2019.


11





In connection with the Acquisition, the Company recorded an unfavorable contract backlog liability of $110.2 million. At November 30, 2019 and August 31, 2019, the net carrying amount of the liability was $26.9 million and $35.4 million, respectively. Amortization of the unfavorable contract backlog for the three months ended November 30, 2019 and 2018 was $8.3 million and $11.3 million, respectively, and was recorded as an increase to net sales in the Company’s condensed consolidated statements of earnings.

NOTE 7. LEASES

The following table presents the components of the total leased assets and lease liabilities and their classification in the Company's condensed consolidated balance sheet at November 30, 2019:
(in thousands)
 
Classification in Condensed Consolidated Balance Sheet
 
November 30, 2019
Assets:
 
 
 
 
Operating assets
 
Other noncurrent assets
 
$
111,230

Finance assets
 
Property, plant and equipment, net
 
39,226

Total leased assets
 
 
 
150,456

 
 
 
 
 
Liabilities:
 
 
 
 
Operating lease liabilities:
 
 
 
 
Current
 
Accrued expenses and other payables
 
28,614

Long-term
 
Other noncurrent liabilities
 
84,843

Total operating lease liabilities
 
 
 
113,457

Finance lease liabilities:
 
 
 
 
Current
 
Current maturities of long-term debt and short-term borrowings
 
11,878

Long-term
 
Long-term debt
 
27,835

Total finance lease liabilities
 
 
 
39,713

Total lease liabilities
 
 
 
$
153,170



The components of lease cost were as follows:
(in thousands)
 
Three Months Ended November 30, 2019
Operating lease expense
 
$
8,790

Finance lease expense:
 
 
Amortization of assets
 
2,165

Interest on lease liabilities
 
401

Total finance lease expense
 
2,566

Variable and short term-lease expense
 
3,933

Total lease expense
 
$
15,289


The weighted-average remaining lease term and discount rate for operating and finance leases are presented in the following table:
 
 
November 30, 2019
Weighted-average remaining lease term (years)
 
 
Operating leases
 
5.3

Finance leases
 
3.9

 
 
 
Weighted-average discount rate
 
 
Operating leases
 
3.769
%
Finance leases
 
4.222
%



12




Cash flow and other information related to leases is included in the following table:
(in thousands)
 
Three Months Ended November 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
 
 
Operating cash outflows from operating leases
 
$
8,746

Operating cash outflows from finance leases
 
336

Financing cash outflows from finance leases
 
3,298

 
 
 
ROU assets obtained in exchange for lease obligations:
 
 
Operating leases
 
6,369

Finance leases
 
5,312


Maturities of lease liabilities at November 30, 2019 are presented in the following table:
(in thousands)
 
Operating Leases
 
Finance Leases
Year 1
 
$
32,436

 
$
13,300

Year 2
 
27,186

 
10,712

Year 3
 
21,872

 
8,260

Year 4
 
17,542

 
6,488

Year 5
 
9,494

 
4,124

Thereafter
 
18,342

 
267

Total lease payments
 
126,872

 
43,151

Less: Imputed interest
 
13,415

 
3,438

Present value of lease liabilities
 
$
113,457

 
$
39,713



Future maturities of lease liabilities at August 31, 2019, prior to adoption of ASU 2016-02, are presented in the following table:
 
 
 
 
Twelve Months Ended August 31,
 
 
(in thousands)
 
Total
 
2020
 
2021
 
2022
 
2023
 
2024
 
Thereafter
Capital lease obligations
 
$
41,331

 
13,104

 
10,004

 
7,758

 
5,831

 
3,904

 
730

Long-term non-cancelable operating leases
 
$
124,817

 
34,511

 
27,383

 
22,074

 
17,433

 
10,478

 
12,938




13




NOTE 8. CREDIT ARRANGEMENTS

Long-term debt at November 30, 2019 and August 31, 2019 was as follows: 
(in thousands)
 
Weighted Average Interest Rate at November 30, 2019
 
November 30, 2019
 
August 31, 2019
2027 Notes
 
5.375%
 
$
300,000

 
$
300,000

2026 Notes
 
5.750%
 
350,000

 
350,000

2023 Notes
 
4.875%
 
330,000

 
330,000

Term Loan
 
3.624%
 
160,125

 
210,125

Short-term borrowings
 
2.403%
 

 
3,929

Finance leases
 
 
 
39,713