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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, 2023
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)
CMC-LOGO_RGB-Primary_300px_wide cropped to 300 x 100.jpg
 
Delaware75-0725338
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification Number)
6565 N. MacArthur Blvd., Irving, Texas 75039
(Address of Principal Executive Offices) (Zip Code)
(214) 689-4300
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, $0.01 par valueCMCNew 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 filerAccelerated 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 5, 2024, 116,387,828 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 and per share data)20232022
Net sales$2,003,051 $2,227,313 
Costs and operating expenses:
Cost of goods sold1,604,068 1,719,414 
Selling, general and administrative expenses162,532 156,355 
Interest expense11,756 13,045 
Net costs and operating expenses1,778,356 1,888,814 
Earnings before income taxes224,695 338,499 
Income taxes48,422 76,725 
Net earnings$176,273 $261,774 
Earnings per share:
Basic$1.51 $2.23 
Diluted1.49 2.20 
Average basic shares outstanding116,771,939 117,273,743 
Average diluted shares outstanding118,354,913 118,925,442 
See notes to condensed consolidated financial statements.


3

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended November 30,
(in thousands)20232022
Net earnings$176,273 $261,774 
Other comprehensive income (loss), net of income taxes:
Foreign currency translation adjustments23,493 41,429 
Derivatives:
Net unrealized holding gain (loss)
(42,945)68,045 
Reclassification for realized gain
(1,499)(6,970)
Net unrealized gain (loss) on derivatives
(44,444)61,075 
Defined benefit plans gain (loss) after amortization of prior service costs
(9)1,758 
Total other comprehensive income (loss), net of income taxes
(20,960)104,262 
Comprehensive income
$155,313 $366,036 
See notes to condensed consolidated financial statements.
4

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share and per share data)November 30, 2023August 31, 2023
Assets
Current assets:
Cash and cash equivalents$704,603 $592,332 
Accounts receivable (less allowance for doubtful accounts of $4,408 and $4,135)
1,216,352 1,240,217 
Inventories, net1,028,686 1,035,582 
Prepaid and other current assets294,186 276,024 
Total current assets3,243,827 3,144,155 
Property, plant and equipment, net2,423,684 2,409,360 
Intangible assets, net252,299 259,161 
Goodwill382,688 385,821 
Other noncurrent assets392,671 440,597 
Total assets$6,695,169 $6,639,094 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable$343,831 $364,390 
Accrued expenses and other payables409,126 438,811 
Current maturities of long-term debt and short-term borrowings33,998 40,513 
Total current liabilities786,955 843,714 
Deferred income taxes317,518 306,801 
Other noncurrent liabilities240,247 253,181 
Long-term debt1,120,472 1,114,284 
Total liabilities2,465,192 2,517,980 
Commitments and contingencies (Note 12)
Stockholders' equity:
Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued 129,060,664 shares; outstanding 116,708,224 and 116,515,427 shares
1,290 1,290 
Additional paid-in capital377,533 394,672 
Accumulated other comprehensive loss(24,738)(3,778)
Retained earnings4,254,787 4,097,262 
Less treasury stock 12,352,440 and 12,545,237 shares at cost
(379,136)(368,573)
Stockholders' equity4,229,736 4,120,873 
Stockholders' equity attributable to non-controlling interests241 241 
Total stockholders' equity4,229,977 4,121,114 
Total liabilities and stockholders' equity$6,695,169 $6,639,094 
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)20232022
Cash flows from (used by) operating activities:
Net earnings$176,273 $261,774 
Adjustments to reconcile net earnings to cash flows from operating activities:
Depreciation and amortization69,186 51,183 
Deferred income taxes and other long-term taxes21,343 16,744 
Write-down of inventory10,655 4,527 
Stock-based compensation8,059 16,675 
Other1,102 1,440 
Changes in operating assets and liabilities, net of acquisitions(25,558)20,027 
Net cash flows from operating activities
261,060 372,370 
Cash flows from (used by) investing activities:
Capital expenditures(66,991)(133,052)
Acquisitions, net of cash acquired (63,745)
Other518 1,247 
Net cash flows used by investing activities
(66,473)(195,550)
Cash flows from (used by) financing activities:
Repayments of long-term debt(9,276)(154,631)
Debt issuance costs (1,800)
Debt extinguishment costs (69)
Proceeds from accounts receivable facilities9,421 49 
Repayments under accounts receivable facilities(17,471)(25,914)
Treasury stock acquired(28,408)(49,149)
Tax withholdings related to share settlements, net of purchase plans(19,535)(23,513)
Dividends(18,748)(18,787)
Net cash flows used by financing activities
(84,017)(273,814)
Effect of exchange rate changes on cash819 5,139 
Increase (decrease) in cash, restricted cash and cash equivalents
111,389 (91,855)
Cash, restricted cash and cash equivalents at beginning of period595,717 679,243 
Cash, restricted cash and cash equivalents at end of period$707,106 $587,388 
See notes to condensed consolidated financial statements.
Supplemental information:Three Months Ended November 30,
(in thousands)20232022
Cash paid for income taxes$1,398 $15,694 
Cash paid for interest10,888 22,201 
Noncash activities:
Liabilities related to additions of property, plant and equipment$17,828 $47,429 
Right of use assets obtained in exchange for operating leases9,197 16,492 
Right of use assets obtained in exchange for finance leases16,978 10,104 
Cash and cash equivalents$704,603 $582,069 
Restricted cash2,503 5,319 
Total cash, restricted cash and cash equivalents$707,106 $587,388 
6

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
Three Months Ended November 30, 2023
 Common Stock Treasury Stock 
(in thousands, except share and per share data)Number of
Shares
AmountAdditional Paid-In
Capital
Accumulated
Other Comprehensive
Loss
Retained
Earnings
Number of
Shares
Amount Non-controlling
Interest
Total
Balance, September 1, 2023129,060,664 $1,290 $394,672 ($3,778)$4,097,262 (12,545,237)($368,573)$241 $4,121,114 
Net earnings176,273 176,273 
Other comprehensive loss(20,960)(20,960)
Dividends ($0.16 per share)
(18,748)(18,748)
Treasury stock acquired(621,643)(28,408)(28,408)
Issuance of stock under incentive and purchase plans, net of shares withheld for taxes(37,380)814,440 17,845 (19,535)
Stock-based compensation9,040 9,040 
Reclassification of share-based liability awards11,201 11,201 
Balance, November 30, 2023129,060,664 $1,290 $377,533 ($24,738)$4,254,787 (12,352,440)($379,136)$241 $4,229,977 
Three Months Ended November 30, 2022
 Common Stock Treasury Stock 
(in thousands, except share and per share data)Number of
Shares
AmountAdditional Paid-In
Capital
Accumulated
Other Comprehensive
Income (Loss)
Retained
Earnings
Number of
Shares
AmountNon-controlling
Interest
Total
Balance, September 1, 2022129,060,664 $1,290 $382,767 ($114,451)$3,312,438 (11,564,611)($295,847)$232 $3,286,429 
Net earnings261,774 261,774 
Other comprehensive income104,262 104,262 
Dividends ($0.16 per share)
(18,787)(18,787)
Treasury stock acquired(1,275,452)(49,149)(49,149)
Issuance of stock under incentive and purchase plans, net of shares withheld for taxes(44,787)1,071,036 21,274 (23,513)
Stock-based compensation13,527 13,527 
Reclassification of share-based liability awards9,692 9,692 
Balance, November 30, 2022129,060,664 $1,290 $361,199 ($10,189)$3,555,425 (11,769,027)($323,722)$232 $3,584,235 
See notes to condensed consolidated financial statements.

7

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. NATURE OF OPERATIONS AND 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, 2023 (the "2023 Form 10-K") filed by Commercial Metals Company ("CMC," and together with its consolidated subsidiaries, the "Company") with the United States ("U.S.") 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 2023 Form 10-K. The results of operations for the three month period ended November 30, 2023 are not necessarily indicative of the results to be expected for the full fiscal year. Any reference in this Form 10-Q to the "corresponding period" or "comparable period" relates to the three month period ended November 30, 2022. Any reference in this Form 10-Q to a year refers to the fiscal year ended August 31st of that year, unless otherwise noted.

Nature of Operations

CMC is an innovative solutions provider helping build a stronger, safer and more sustainable world. Through an extensive manufacturing network principally located in the U.S. and Central Europe, we offer products and technologies to meet the critical reinforcement needs of the global construction sector. CMC’s solutions support construction across a wide variety of applications, including infrastructure, non-residential, residential, industrial and energy generation and transmission.

During the first quarter of 2024, CMC changed its reportable segments to reflect a change in the manner in which the business is managed. Based on recent changes to CMC’s organizational structure, the evolution of CMC’s solutions offerings outside of traditional steel products, the growing importance of non-steel solutions to CMC’s financial results and future outlook and how CMC's chief operating decision maker ("CODM"), the President and Chief Executive Officer, reviews operating results and makes decisions about resource allocation, CMC now has three reportable segments: North America Steel Group, Europe Steel Group and Emerging Businesses Group.

North America Steel Group

The North America Steel Group segment is primarily composed of a vertically integrated network of recycling facilities, steel mills and fabrication operations located in the U.S. The recycling facilities process ferrous and nonferrous scrap metals (collectively referred to as "raw materials") for use by manufacturers of new metal products. The steel mill operations consist of six electric arc furnace ("EAF") mini mills, three EAF micro mills and one rerolling mill. The steel mills manufacture finished long steel products including reinforcing bar ("rebar"), merchant bar, light structural and other special sections and wire rod, as well as semi-finished billets for rerolling and forging applications (collectively referred to as "steel products"). The fabrication operations primarily fabricate rebar and steel fence posts and offer post-tension cable products (collectively referred to as "downstream products" in the context of the North America Steel Group segment). The general strategy in the North America Steel Group segment is to optimize the Company's vertically integrated value chain to maximize profitability by obtaining the lowest possible input costs and highest possible selling prices. The Company operates the recycling facilities to provide low-cost scrap to the steel mills and the fabrication operations to optimize the steel mill volumes. The North America Steel Group segment's products are sold primarily to steel mills and foundries, construction, fabrication and other manufacturing industries.

Europe Steel Group

The Europe Steel Group segment is primarily composed of a vertically integrated network of recycling facilities, an EAF mini mill and fabrication operations located in Poland. The scrap metal recycling facilities process ferrous scrap metals for use almost exclusively by the mini mill. The steel products manufactured by the mini mill include rebar, merchant bar and wire rod as well as semi-finished billets. The products manufactured by this segment's fabrication operations include fabricated rebar, wire mesh, assembled rebar cages and other fabricated rebar by-products (collectively referred to as "downstream products" in the context of the Europe Steel Group segment). The strategy in the Europe Steel Group segment is to optimize profitability of the products manufactured by the mini mill, and this strategy is executed the same way in the Europe Steel Group segment as it
8

is in the North America Steel Group segment. The Europe Steel Group segment's products are sold primarily to fabricators, manufacturers, distributors and construction companies.

Emerging Businesses Group

The strategy in the Emerging Businesses Group segment is to provide construction-related solutions and value-added products with strong, underlying growth fundamentals to serve domestic and international markets that are adjacent to those served by the vertically integrated operations in the North America Steel Group segment and the Europe Steel Group segment. To execute this strategy, CMC (i) develops proprietary products and solutions that deliver high value to customers by reducing costs and construction time, (ii) provides concrete-related construction products, equipment, and services and (iii) produces reinforcing steel products with increased strength, durability and corrosion resistance to support sustainable concrete construction.

The Emerging Businesses Group segment's portfolio consists of CMC Construction ServicesTM products (collectively referred to as "construction products"), Tensar® products (collectively referred to as "ground stabilization products") and CMC Impact MetalsTM, CMC Anchoring Systems and performance reinforcing steel products (collectively referred to as "downstream products" in the context of the Emerging Businesses Group segment).

CMC Construction ServicesTM operations sell and rent products and equipment used to execute construction projects. Primary customers include concrete installers and other businesses in the construction industry.
Tensar® operations sell geogrids and Geopier® foundation systems. 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.
CMC Impact MetalsTM operations manufacture high-strength steel products, such as high-strength bar for the truck trailer industry, special bar quality steel for the energy market and armor plate for military vehicles.
CMC Anchoring Systems' operations supply a custom engineered line of anchor cages, bolts and fasteners that are fabricated principally from rebar and are used primarily to secure high voltage electrical transmission poles to concrete foundations.
CMC's group of performance reinforcing steel offerings include innovative products such as Galvabar® (galvanized rebar with a zinc alloy coating that provides corrosion protection and post-fabrication formability), ChromX® (designed for high-strength capabilities, corrosion resistance and a service life of more than 100 years) and CryoSteel® (a cryogenic reinforcing steel that exceeds minimum performance requirements for strength and ductility at extremely low temperatures).

As a result of the change in reportable segments, certain prior year amounts have been recast to conform to the current year presentation. Throughout this Form 10-Q, unless otherwise indicated, amounts and activity reflect reclassifications related to the Company's change in reportable segments. The change in reportable segments had no impact on the Company’s consolidated balance sheets and the consolidated statements of earnings, comprehensive income, cash flows and stockholders’ equity previously reported.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). ASU 2023-07 requires, among other updates, enhanced disclosures about significant segment expenses that are regularly provided to the CODM, as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption. Early adoption is permitted. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 requires enhanced annual disclosures regarding the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 and may be adopted on a prospective or retrospective basis. Early adoption is permitted. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
9

NOTE 2. CHANGES IN BUSINESS

2023 Acquisitions

On September 15, 2022, the Company completed the acquisition of Advanced Steel Recovery, LLC ("ASR"), a supplier of recycled ferrous metals located in Southern California. ASR's primary operations include processing and brokering capabilities that source material for sale into both the domestic and export markets.

On November 14, 2022, the Company completed the acquisition of a Galveston, Texas area metals recycling facility and related assets (collectively, "Kodiak") from Kodiak Resources, Inc. and Kodiak Properties, L.L.C.

On March 3, 2023, the Company completed the acquisition of all of the assets of Roane Metals Group, LLC ("Roane"), a supplier of recycled metals with two facilities located in eastern Tennessee.

On March 17, 2023, the Company completed the acquisition of Tendon Systems, LLC ("Tendon"), a leading provider of post-tensioning, barrier cable and concrete restoration solutions to the southeastern U.S.

On May 1, 2023, the Company completed the acquisition of all of the assets of BOSTD America, LLC ("BOSTD"), a geogrid manufacturing facility located in Blackwell, Oklahoma. Prior to the acquisition, BOSTD produced several product lines for the Company's Tensar operations under a contract manufacturing arrangement.

On July 12, 2023, the Company completed the acquisition of EDSCO Fasteners, LLC ("EDSCO"), a leading provider of anchoring solutions for the electrical transmission market, with four manufacturing facilities located in North Carolina, Tennessee, Texas and Utah. Following the acquisition, EDSCO was rebranded as CMC Anchoring Systems.

The acquisitions of ASR, Kodiak, Roane, Tendon, BOSTD and EDSCO (the "2023 acquisitions") were not material individually, or in the aggregate, to the Company's financial position or results of operations, and therefore, pro forma operating results and other disclosures are not presented.

Operating results for the acquired operations of ASR, Kodiak, Roane and Tendon are presented within the Company's North America Steel Group segment. Operating results for BOSTD and CMC Anchoring Systems are presented within the Company's Emerging Businesses Group segment.
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, 2023
(in thousands)Foreign Currency TranslationDerivativesDefined Benefit Pension PlansTotal AOCI
Balance, September 1, 2023$(126,045)$135,257 $(12,990)$(3,778)
Other comprehensive income (loss) before reclassifications(1)
23,493 (42,945)(9)(19,461)
Reclassification for gain (2)
 (1,499) (1,499)
Net other comprehensive income (loss)
23,493 (44,444)(9)(20,960)
Balance, November 30, 2023$(102,552)$90,813 $(12,999)$(24,738)
Three Months Ended November 30, 2022
(in thousands)Foreign Currency TranslationDerivativesDefined Benefit Pension PlansTotal AOCI
Balance, September 1, 2022$(245,897)$138,242 $(6,796)$(114,451)
Other comprehensive income before reclassifications(1)
41,429 68,045 1,756 111,230 
Reclassification for (gain) loss (2)
 (6,970)2 (6,968)
Net other comprehensive income
41,429 61,075 1,758 104,262 
Balance, November 30, 2022$(204,468)$199,317 $(5,038)$(10,189)
10

__________________________________
(1) Other comprehensive income (loss) before reclassifications from derivatives is presented net of income tax benefit (expense) of $10.1 million and $(15.8) million for the three months ended November 30, 2023 and 2022, respectively. Other comprehensive income (loss) before reclassifications from defined benefit pension plans is presented net of immaterial tax benefits for each period presented.
(2) Reclassifications for gains from derivatives included in net earnings are primarily recorded in cost of goods sold in the condensed consolidated statements of earnings and are presented net of tax expenses of $0.3 million and $1.7 million, for the three months ended November 30, 2023 and 2022, respectively. Reclassifications for the loss from defined benefit pension plans included in net earnings is recorded in selling, general and administrative ("SG&A") expenses in the condensed consolidated statements of earnings and is presented net of an immaterial income tax benefit for the three months ended November 30, 2022.
NOTE 4. REVENUE RECOGNITION

The majority of the Company's 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. See Note 13, Segment Information, for further information about disaggregated revenue by the Company's major product lines.

Certain revenues from the Company's downstream products in the North America Steel Group segment are not recognized at a point in time. Revenue resulting from sales of fabricated rebar in the North America Steel Group segment is recognized over time, as discussed below. Revenue resulting from sales of steel fence posts and other downstream products in the North America Steel Group segment is recognized equal to billing under an available practical expedient.

Each of the North America Steel Group segment's fabricated rebar contracts represent a single performance obligation. Revenue from certain fabricated rebar contracts for which the Company provides fabricated product and installation services is recognized over time using an input measure. These contracts represented 9% and 8% of net sales in the North America Steel Group segment in the three months ended November 30, 2023 and 2022, respectively. Revenue from fabricated rebar contracts where the Company does not provide installation services is recognized over time using an output measure. These contracts represented 11% and 13% of net sales in the North America Steel Group segment in the three months ended November 30, 2023 and 2022, respectively.

The following table provides information about assets and liabilities from contracts with customers recognized over time:
(in thousands)November 30, 2023August 31, 2023
Contract assets (included in accounts receivable)$66,118 $67,641 
Contract liabilities (included in accrued expenses and other payables)26,967 28,377 

The amount of revenue reclassified from August 31, 2023 contract liabilities during the three months ended November 30, 2023 was approximately $16.2 million.

Remaining Performance Obligations

As of November 30, 2023, revenue totaling $840.6 million has been allocated to remaining performance obligations in the North America Steel Group segment related to contracts for which revenue is recognized using an input or output measure. Of this amount, the Company estimates that approximately 81% of the remaining performance obligations will be recognized in the twelve months after November 30, 2023, and the remainder will be recognized during the subsequent twelve months. The duration of all other contracts in the North America Steel Group, Europe Steel Group and Emerging Businesses Group segments are typically less than one year.
11

NOTE 5. INVENTORIES, NET

The majority of the Company's inventories are in the form of semi-finished and finished steel products. Under the Company’s vertically integrated business models in the North America Steel Group segment and the Europe Steel Group segment, steel products are sold to external customers in various stages, from semi-finished billets through fabricated steel, leading these categories to be combined as finished goods.

The components of inventories were as follows:
(in thousands)November 30, 2023August 31, 2023
Raw materials$284,583 $261,619 
Work in process7,846 6,844 
Finished goods736,257 767,119 
Total$1,028,686 $1,035,582 

Inventory write-downs were $10.7 million and $4.5 million during the three months ended November 30, 2023 and 2022, respectively, and were primarily recorded in the Europe Steel Group segment.
NOTE 6. GOODWILL AND OTHER INTANGIBLES

Goodwill by reportable segment is detailed in the table below. During the first quarter of 2024, CMC changed its reportable segments as described in Note 1, Nature of Operations and Accounting Policies. Concurrent with the change in reportable segments, the Company reassigned goodwill to the updated reporting units using a relative fair value approach, shown below:

(in thousands)North AmericaEuropeNorth America Steel GroupEurope Steel GroupEmerging Businesses GroupConsolidated
Goodwill, gross
Balance, September 1, 2023$351,441 $44,561 $ $ $ $396,002 
Segment reassignment(351,441)(44,561)126,915 4,075 265,012  
Acquisition adjustments(1)
— — — — (3,250)(3,250)
Foreign currency translation   128 (6)122 
Balance, November 30, 2023  126,915 4,203 261,756 392,874 
Accumulated impairment
Balance, September 1, 2023(10,036)(145)   (10,181)
Segment reassignment10,036 145 (9,542)(146)(493) 
Foreign currency translation   (5) (5)
Balance, November 30, 2023  (9,542)(151)(493)(10,186)
Goodwill, net
Balance, September 1, 2023341,405 44,416    385,821 
Segment reassignment(341,405)(44,416)117,373 3,929 264,519  
Acquisition adjustments(1)
— — — — (3,250)(3,250)
Foreign currency translation   123 (6)117 
Balance, November 30, 2023$ $ $117,373 $4,052 $261,263 $382,688 
__________________________________
(1) Measurement period adjustments related to the 2023 acquisitions which impacted the amount of goodwill originally reported.

The Company evaluated impairment indicators for the previous reporting units immediately prior to the change in reportable segments described above and concluded there were no indicators of impairment. Immediately after the change in reportable segments, the Company performed qualitative tests for five reporting units consisting of $285.0 million of goodwill and quantitative tests for three reporting units consisting of $100.8 million of goodwill. The results of the qualitative and
12

quantitative tests indicated it was more likely than not that the fair value of all reporting units with goodwill exceeded their carrying values.

Other indefinite-lived intangible assets consisted of the following:
(in thousands)November 30, 2023August 31, 2023
Trade names$54,092 $54,056 
In-process research and development2,400 2,400 
Non-compete agreements750 750 
Total$57,242 $57,206 

The change in the balance of intangible assets with indefinite lives from August 31, 2023 to November 30, 2023 was due to foreign currency translation adjustments.

Other intangible assets subject to amortization are detailed in the following table:
 November 30, 2023August 31, 2023
(in thousands)Gross
Carrying Amount
Accumulated AmortizationNetGross
Carrying Amount
Accumulated AmortizationNet
Developed technologies$150,900 $29,912 $120,988 $150,445 $25,228 $125,217 
Customer relationships74,607 10,026 64,581 74,582 7,606 66,976 
Patents7,203 5,814 1,389 7,203 5,570 1,633 
Perpetual lease rights6,172 957 5,215 5,984 910 5,074 
Trade names3,300 1,218 2,082 3,287 1,129 2,158 
Non-compete agreements2,300 1,591 709 2,300 1,502 798 
Other223 130 93 224 125 99 
Total$244,705 $49,648 $195,057 $244,025 $42,070 $201,955 

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

Amortization expense for intangible assets was $7.5 million and $6.1 million in the three months ended November 30, 2023 and 2022, respectively, of which $4.7 million and $4.6 million, respectively, was recorded in cost of goods sold and $2.8 million and $1.5 million, respectively, was recorded in SG&A expenses in the condensed consolidated statements of earnings. Estimated amounts of amortization expense for intangible assets for the next five years are as follows:
(in thousands)
Remainder of 2024
$20,898 
202526,362 
202625,138 
202725,041 
202823,031 
13

NOTE 7. CREDIT ARRANGEMENTS

Long-term debt was as follows: 
(in thousands)Weighted Average Interest Rate as of November 30, 2023November 30, 2023August 31, 2023
2030 Notes4.125%$300,000 $300,000 
2031 Notes3.875%300,000 300,000 
2032 Notes4.375%300,000 300,000 
Series 2022 Bonds, due 20474.000%145,060 145,060 
Short-term borrowings
(1)
 8,419 
Other4.547%15,859 16,042 
Finance leases5.037%103,350 95,470 
Total debt1,164,269 1,164,991 
Less unamortized debt issuance costs(14,397)(14,840)
Plus unamortized bond premium4,598 4,646 
Total amounts outstanding1,154,470 1,154,797 
Less current maturities of long-term debt and short-term borrowings(33,998)(40,513)
Long-term debt$1,120,472 $1,114,284 
__________________________________
(1) The weighted average interest rate of short-term borrowings as of August 31, 2023 was 7.800%.

The Company's credit arrangements require compliance with certain covenants, including an interest coverage ratio and a debt to capitalization ratio. At November 30, 2023, the Company was in compliance with all financial covenants in its credit arrangements.

Capitalized interest was $1.2 million and $4.6 million during the three months ended November 30, 2023 and 2022, respectively.

Credit Facilities

The Company has a Sixth Amended and Restated Credit Agreement (the "Credit Agreement") with a revolving credit facility (the "Revolver") of $600.0 million. The Company had no amounts drawn under the Revolver at November 30, 2023 or August 31, 2023. The availability under the Revolver was reduced by outstanding stand-by letters of credit totaling $0.9 million at each of November 30, 2023 and August 31, 2023. The Credit Agreement also provided for a delayed draw senior secured term loan facility with a maximum principal amount of $200.0 million, which expired undrawn in October 2023, in accordance with its terms.

The Company also has credit facilities in Poland through its subsidiary, CMC Poland Sp. z.o.o. ("CMCP"). At November 30, 2023 and August 31, 2023, CMCP's credit facilities totaled PLN 600.0 million, or $150.0 million and $145.4 million, respectively. There were no amounts outstanding under these facilities as of November 30, 2023 or August 31, 2023. The available balance of these credit facilities was reduced by outstanding stand-by letters of credit, guarantees and/or other financial assurance instruments, which totaled $1.4 million and $16.3 million at November 30, 2023 and August 31, 2023, respectively.

Accounts Receivable Facility

The Poland accounts receivable facility had a limit of PLN 288.0 million, or $72.0 million and $69.8 million, at November 30, 2023 and August 31, 2023, respectively. The Company had no amounts outstanding under the Poland accounts receivable facility at November 30, 2023, compared to PLN 34.7 million, or $8.4 million, advance payments outstanding at August 31, 2023.
14

NOTE 8. DERIVATIVES

At November 30, 2023 and August 31, 2023, the notional values of the Company's commodity contract commitments were $481.0 million and $456.4 million, respectively. At November 30, 2023 and August 31, 2023, the notional values of the Company's foreign currency contract commitments were $284.9 million and $221.4 million, respectively.

The following table provides information regarding the Company's commodity contract commitments at November 30, 2023:
CommodityPosition   Total
AluminumLong2,525  MT
AluminumShort1,150  MT
CopperLong612  MT
CopperShort10,433  MT
ElectricityLong3,257,000 MW(h)
Natural GasLong5,150,550 MMBtu
__________________________________
MT = Metric ton
MW(h) = Megawatt hour
MMBtu = Metric Million British thermal unit

The following table summarizes the location and amounts of the fair value of the Company's derivative instruments reported in the condensed consolidated balance sheets:

(in thousands)Primary LocationNovember 30, 2023August 31, 2023
Derivative assets:
CommodityPrepaid and other current assets$9,025 $11,427 
CommodityOther noncurrent assets135,939 184,261 
Foreign exchangePrepaid and other current assets9,916 1,898 
Derivative liabilities:
CommodityAccrued expenses and other payables$6,066 $2,983 
CommodityOther noncurrent liabilities1,003 1,085 
Foreign exchangeAccrued expenses and other payables5,868 2,566 

The following table summarizes activities related to the Company's derivatives not designated as cash flow hedging instruments recognized in the condensed consolidated statements of earnings. All other activity related to the Company's derivatives not designated as cash flow hedging instruments was immaterial for the periods presented.
Three Months Ended November 30,
Gain (Loss) on Derivatives Not Designated as Hedging Instruments (in thousands)Primary Location20232022
CommodityCost of goods sold$(72)$(3,085)
Foreign exchangeSG&A expenses3,539 3,462 

The following table summarizes activities related to the Company's derivatives designated as cash flow hedging instruments recognized in the condensed consolidated statements of comprehensive income and condensed consolidated statements of earnings, respectively. Amounts presented do not include the effects of foreign currency translation adjustments.

Effective Portion of Derivatives Designated as Cash Flow Hedging Instruments Recognized in Other Comprehensive Income (Loss), Net of Income Taxes (in thousands)Amount of Gain Reclassified from AOCI into Earnings on Derivatives (in thousands)
Three Months Ended November 30,Three Months Ended November 30,
20232022Primary Location20232022
Commodity$(42,952)$68,039 Cost of goods sold$1,765 $8,605 
Foreign exchange7 6 SG&A expenses61 61 
15


The Company's natural gas commodity derivatives accounted for as cash flow hedging instruments have maturities extending to November 2026. The Company's electricity commodity derivatives accounted for as cash flow hedging instruments have maturities extending to December 2034. Included in the AOCI balance as of November 30, 2023 was an estimated net gain of $5.4 million from cash flow hedging instruments that is expected to be reclassified into net earnings within the twelve months following November 30, 2023. Cash flows associated with the cash flow hedging instruments are recorded as a component of cash flows from operating activities in the condensed consolidated statements of cash flows. See Note 9, Fair Value, for the fair value of the Company's derivative instruments recorded in the condensed consolidated balance sheets.
NOTE 9. FAIR VALUE

The Company has established a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels. These levels are determined based on the lowest level input that is significant to the fair value measurement. Levels within the hierarchy are defined within Note 1, Nature of Operations and Summary of Significant Accounting Policies, to the consolidated financial statements in the 2023 Form 10-K.

The following table summarizes 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)TotalQuoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
As of November 30, 2023:
Assets:
Investment deposit accounts (1)
$553,443 $553,443 $ $ 
Commodity derivative assets (2)
144,964 607  144,357 
Foreign exchange derivative assets (2)
9,916  9,916  
Liabilities:
Commodity derivative liabilities (2)
7,069 7,069   
Foreign exchange derivative liabilities (2)
5,868  5,868  
As of August 31, 2023:
Assets:
Investment deposit accounts (1)
$508,227 $508,227 $ $ 
Commodity derivative assets (2)
195,689 1,264  194,425 
Foreign exchange derivative assets (2)
1,898  1,898  
Liabilities:
Commodity derivative liabilities (2)
4,068 4,068   
Foreign exchange derivative liabilities (2)
2,566  2,566  
__________________________________
(1) Investment deposit accounts are short-term in nature, and the value is determined by principal plus interest. The investment portfolio mix can change each period based on the Company's assessment of investment options.
(2) Derivative assets and liabilities classified as Level 1 are commodity futures contracts valued based on quoted market prices in the London Metal Exchange or New York Mercantile Exchange. Amounts in Level 2 are based on broker quotes in the over-the-counter market. Derivatives classified as Level 3 are described below. Further discussion regarding the Company's use of derivative instruments is included in Note 8, Derivatives.

16

The fair value estimate of the Level 3 commodity derivatives are based on internally developed discounted cash flow models primarily utilizing unobservable inputs for which there is little or no market data. The Company forecasts future energy rates using a range of historical prices (the "floating rate"). The floating rate is the only significant unobservable input used in the Company's discounted cash flow models. Significantly higher or lower floating rates could have resulted in a material difference in our fair value measurement. The following table summarizes the range of floating rates used to measure the fair value of the Level 3 commodity derivatives at November 30, 2023 and August 31, 2023, which are applied uniformly across each of our Level 3 commodity derivatives:
Floating rate (PLN)
LowHighAverage
November 30, 2023424 807 551 
August 31, 2023480 855 630 

Below is a reconciliation of the beginning and ending balances of the Level 3 commodity derivatives recognized in the condensed consolidated statements of comprehensive income. The fluctuation in energy rates over time causes volatility in the fair value estimates and is the primary reason for unrealized losses and gains included in other comprehensive income ("OCI") in the three months ended November 30, 2023 and 2022, respectively.                                     
(in thousands)Three Months Ended November 30, 2023
Balance, September 1, 2023$194,425 
Total activity, realized and unrealized:
Unrealized holding loss before reclassification (1)
(47,277)
Reclassification for gain included in net earnings (2)
(2,791)
Balance, November 30, 2023$144,357 
(in thousands)Three Months Ended November 30, 2022
Balance, September 1, 2022$143,500 
Total activity, realized and unrealized:
Unrealized holding gain before reclassification (1)
104,197 
Reclassification for gain included in net earnings (2)
(6,231)
Balance, November 30, 2022$241,466 
__________________________________
(1) Unrealized holding gain (loss), net of foreign currency translation, less amounts reclassified are included in net unrealized gain (loss) on derivatives 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 months ended November 30, 2023 or 2022.

The carrying values of the Company's short-term items, including documentary letters of credit and notes payable, approximate fair value.

The carrying value and fair value of the Company's long-term debt, including current maturities, excluding other borrowings and finance leases, was $1.0 billion and $900.7 million, respectively, at November 30, 2023, and $1.0 billion and $900.9 million, respectively, at August 31, 2023. The Company estimates these fair values based on Level 2 of the fair value hierarchy using indicated market values. The Company's other borrowings contain variable interest rates, and as a result, their carrying values approximate fair values.
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NOTE 10. 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 2023 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.

Information for restricted stock units and performance stock units accounted for as equity awards is as follows:
SharesWeighted Average
Fair Value
Outstanding as of August 31, 2023
1,777,591 $37.01 
Granted1,060,992 47.68 
Vested(1,218,683)37.80 
Forfeited(14,436)39.02 
Outstanding as of November 30, 2023
1,605,464 $43.45 
SharesWeighted Average
Fair Value
Outstanding as of August 31, 2022
1,993,630 $27.59 
Granted1,423,909 35.78 
Vested(1,611,934)25.13 
Forfeited(2,259)31.00 
Outstanding as of November 30, 2022
1,803,346 $36.26 

The Company granted 188,453 and 242,267 equivalent shares of restricted stock units and performance stock units accounted for as liability awards during the three months ended November 30, 2023 and 2022, respectively. At November 30, 2023, the Company had outstanding 463,334 equivalent shares accounted for under the liability method. The Company expects 440,167 equivalent shares to vest.

The following table summarizes total stock-based compensation expense, including fair value remeasurements, which was primarily included in SG&A expenses in the Company's condensed consolidated statements of earnings:
Three Months Ended November 30,
(in thousands)20232022
Stock-based compensation expense$8,059 $16,675 
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NOTE 11. STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE

The Company's calculation of basic earnings per share ("EPS") and diluted EPS are described in Note 16, Earnings Per Share, to the consolidated financial statements in the 2023 Form 10-K.

The calculations of basic and diluted EPS were as follows: 
Three Months Ended November 30,
(in thousands, except share and per share data)20232022
Net earnings$176,273 $261,774 
Average basic shares outstanding116,771,939 117,273,743 
Effect of dilutive securities1,582,974 1,651,699 
Average diluted shares outstanding118,354,913 118,925,442 
Earnings per share:
Basic$1.51 $2.23 
Diluted1.49 2.20 

For all periods presented above, the Company had immaterial anti-dilutive shares, which were not included in the computation of average diluted shares outstanding.
In October 2021, the Company's Board of Directors authorized a share repurchase program under which the Company may repurchase up to $350.0 million of shares of CMC common stock. During the three months ended November 30, 2023, the Company repurchased 621,643 shares of CMC common stock, at an average purchase price of $45.70 per share. The Company had remaining authorization to repurchase $58.3 million of shares of CMC common stock at November 30, 2023.
NOTE 12. COMMITMENTS AND CONTINGENCIES

In the ordinary course of conducting its business, the Company becomes involved in litigation, administrative proceedings and governmental investigations, including environmental matters. At November 30, 2023 and August 31, 2023, the amounts accrued for cleanup and remediation costs at certain sites in response to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA") and analogous state and local statutes were immaterial. Total accrued environmental liabilities, including CERCLA sites, were $3.7 million and $4.5 million at November 30, 2023 and August 31, 2023, respectively, of which $1.7 million and $2.0 million were classified as other noncurrent liabilities as of November 30, 2023 and August 31, 2023, respectively. These amounts have not been discounted to their present values. Due to evolving remediation technology, changing regulations, possible third-party contributions, the inherent uncertainties of the estimation process and other factors, amounts accrued could vary significantly from amounts paid.
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NOTE 13. SEGMENT INFORMATION

The Company structures its business into three reportable segments: North America Steel Group, Europe Steel Group and Emerging Businesses Group. See Note 1, Nature of Operations and Accounting Policies, 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 long-term debt and intercompany eliminations. Prior period balances in the tables below have been recast to reflect current period presentation, as described in Note 1, Nature of Operations and Accounting Policies.

The following is a summary of certain financial information by reportable segment and Corporate and Other.
Three Months Ended November 30, 2023
(in thousands)North America Steel GroupEurope Steel GroupEmerging Businesses GroupCorporate and OtherTotal
Net sales from external customers$1,592,650 $225,175 $177,239 $7,987 $2,003,051 
Adjusted EBITDA266,820 38,942 30,862 (30,987)305,637 
Total assets at November 30, 2023
4,142,370 838,019 847,744 867,036 6,695,169 
Three Months Ended November 30, 2022
(in thousands)North America Steel GroupEurope Steel GroupEmerging Businesses GroupCorporate and OtherTotal
Net sales from external customers$1,664,161 $386,503 $170,534 $6,115 $2,227,313 
Adjusted EBITDA349,787 61,248 31,427 (39,726)402,736 
Total assets at August 31, 20234,166,521 927,468 874,330 670,775 6,639,094 

The following table presents a reconciliation of net earnings to adjusted EBITDA:
 Three Months Ended November 30,
(in thousands)20232022
Net earnings$176,273 $261,774 
Interest expense11,756 13,045 
Income taxes48,422 76,725 
Depreciation and amortization69,186 51,183 
Asset impairments 9 
Adjusted EBITDA$305,637 $402,736 
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Disaggregation of Revenue

The following tables display revenue by reportable segment and Corporate and Other from external customers, disaggregated by major product:
Three Months Ended November 30, 2023
(in thousands)North America Steel GroupEurope Steel GroupEmerging Businesses GroupCorporate and OtherTotal
Major product:
Raw materials$313,655 $3,714 $ $ $317,369 
Steel products657,760 175,532   833,292 
Downstream products577,002 38,628 37,546  653,176 
Construction products  77,759  77,759 
Ground stabilization products  57,323  57,323 
Other44,233 7,301 4,611 7,987 64,132 
Net sales from external customers1,592,650 225,175 177,239 7,987 2,003,051 
Intersegment net sales, eliminated on consolidation19,637 576 4,787 (25,000)— 
Net sales$1,612,287 $225,751 $182,026 $(17,013)$2,003,051 

Three Months Ended November 30, 2022
(in thousands)North America Steel GroupEurope Steel GroupEmerging Businesses GroupCorporate and OtherTotal
Major product:
Raw materials$293,320 $4,867 $ $ $298,187 
Steel products703,594 311,936   1,015,530 
Downstream products618,967 59,582 24,808  703,357 
Construction products  83,567  83,567 
Ground stabilization products  59,079  59,079 
Other48,280 10,118 3,080 6,115 67,593 
Net sales from external customers1,664,161 386,503 170,534 6,115 2,227,313 
Intersegment net sales, eliminated on consolidation25,854 532 8,778 (35,164)— 
Net sales$1,690,015 $387,035 $179,312 $(29,049)$2,227,313 
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, 2023 (the "2023 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 United States ("U.S.") Securities and Exchange Commission (the "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 section entitled "Risk Factors" in Part I, Item 1A of our 2023 Form 10-K. We do not undertake any obligation to update, amend or clarify any forward-looking statements to reflect changed
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assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or otherwise, except as required by law.

Any reference in this Form 10-Q to the "corresponding period" or "comparable period" relates to the three month period ended November 30, 2022. Any reference in this Form 10-Q to a year refers to the fiscal year ended August 31st of that year, unless otherwise noted.
BUSINESS CONDITIONS AND DEVELOPMENTS

Change in Reportable Segments

During the first quarter of 2024, we changed our reportable segments to reflect a change in the manner in which our business is managed. Based on recent changes to our organizational structure, the evolution of our solutions o