COMMERCIAL METALS Co [CMC] Filings

10-Q 1 cmc-20221130.htm 10-Q cmc-20221130

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________________________

FORM 10-Q

___________________________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-4304

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COMMERCIAL METALS COMPANY

(Exact Name of Registrant as Specified in Its Charter)


Delaware			75-0725338
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification Number)

6565 N. MacArthur Blvd., Irving, Texas 75039

(Address of Principal Executive Offices) (Zip Code)

(214) 689-4300

(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, $0.01 par value

CMC

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 ("Exchange Act") during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of January 6, 2023, 117,122,667 shares of the registrant's common stock, par value $0.01 per share, were outstanding.

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

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PART I — FINANCIAL INFORMATION			3

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

PART II — OTHER INFORMATION			32

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

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


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


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

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

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

See notes to condensed consolidated financial statements.

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



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



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

See notes to condensed consolidated financial statements.

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

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

See notes to condensed consolidated financial statements.

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

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

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


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

Cash flows from (used by) financing activities:

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

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

See notes to condensed consolidated financial statements.


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

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

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

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


	Three Months Ended November 30, 2021
	Common Stock									Treasury Stock
(in thousands, except share and per share data)	Number of Shares	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Number of Shares	Amount		Non-controlling Interest		Total
Balance, September 1, 2021	129,060,664	$	1,290	$	368,064	$	(84,820)	$	2,162,925	(8,474,075)	$	(152,582)	$	232	$	2,295,109
Net earnings								232,889							232,889
Other comprehensive loss						(20,509)									(20,509)
Dividends ($0.14 per share)								(17,025)							(17,025)
Treasury stock acquired										(159,500)	(5,311)				(5,311)
Tax withholdings related to share settlements, net of purchase plans				(28,058)						1,052,850	11,687				(16,371)
Stock-based compensation				8,316											8,316

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

See notes to condensed consolidated financial statements.

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COMMERCIAL METALS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") on a basis consistent with that used in the Annual Report on Form 10-K for the year ended August 31, 2022 (the "2022 Form 10-K") filed by Commercial Metals Company ("CMC," and together with its consolidated subsidiaries, the "Company") with the Securities and Exchange Commission (the "SEC") and include all normal recurring adjustments necessary to present fairly the condensed consolidated balance sheets and the condensed consolidated statements of earnings, comprehensive income, cash flows and stockholders' equity for the periods indicated. These notes should be read in conjunction with the consolidated financial statements and notes included in the 2022 Form 10-K. The results of operations for the three month period are not necessarily indicative of the results to be expected for the full fiscal year. Any reference in this Form 10-Q to the "corresponding period" or "comparable period" relates to the three month period ended November 30, 2021. Any reference in this Form 10-Q to a year refers to the fiscal year ended August 31st of that year, unless otherwise noted.

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NOTE 2. CHANGES IN BUSINESS

Tensar Acquisition

On April 25, 2022 (the "Tensar Acquisition Date"), the Company completed the acquisition of TAC Acquisition Corp. ("Tensar"). The total cash purchase price, net of $19.6 million cash acquired, was approximately $550 million, subject to customary purchase price adjustments, and was funded through domestic cash on-hand. The acquired operations in North America are presented within the Company's North America reportable segment, and the remaining acquired operations are presented within the Company's Europe reportable segment.

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


(in thousands)	Estimated Fair Value as Previously Reported(1)
Cash and cash equivalents	$	19,551
Accounts receivable	37,741
Inventories	39,462
Prepaid and other current assets	12,528
Defined benefit pension plan	14,620
Property, plant and equipment	85,983
Intangible assets	260,500
Goodwill	186,805
Other noncurrent assets	19,660
Accounts payable	(12,134)
Accrued expenses and other payables	(23,725)
Current maturities of long-term debt	(3,277)
Deferred income taxes	(45,055)
Other noncurrent liabilities	(16,347)
Long-term debt	(4,312)
Total assets acquired and liabilities assumed	$	572,000

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(1) As previously reported in the 2022 Form 10-K. No measurement period adjustments occurred during the three months ended November 30, 2022.

Pro Forma Supplemental Information

Supplemental information on an unaudited pro forma basis is presented below as if the acquisition of Tensar occurred on September 1, 2020. The pro forma financial information is presented for comparative purposes only, based on certain factually supported estimates and assumptions, which the Company believes to be reasonable, but not necessarily indicative of future results of operations or the results that would have been reported if the acquisition had been completed on September 1, 2020. These results were not used as part of management's analysis of the financial results and performance of the Company. The pro forma adjustments do not reflect anticipated synergies, but rather include the recurring income statement effects of fair value adjustments, such as depreciation and amortization. Further adjustments were made to remove the impact of Tensar's prior management fees, acquisition and integration expenses and interest on debt not assumed in the acquisition. The resulting tax effects of the business combination are also reflected below.


(in thousands)	Three Months Ended November 30, 2021
Pro forma net sales	$	2,043,668
Pro forma net earnings	240,377

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The pro forma results presented above include, but are not limited to, adjustments to remove the impact of $3.2 million of acquisition and integration expenses from the three months ended November 30, 2021. Results also reflect increased amortization expense from revalued intangible assets of $3.1 million in the three months ended November 30, 2021.

Advanced Steel Recovery Acquisition

On September 15, 2022, the Company completed the acquisition of Advanced Steel Recovery, LLC ("ASR"), a supplier of recycled ferrous metals located in Southern California. ASR's primary operations include processing and brokering capabilities that source material for sale into both the domestic and export markets and are presented within the Company's North America reportable segment. The ASR acquisition is not material to the Company's November 30, 2022 financial position or results of operations, and therefore, pro forma operating results and other disclosures for the acquisition are not presented.

Kodiak Acquisition

On November 14, 2022, the Company completed the acquisition of a Galveston, TX area metals recycling facility and related assets (collectively, "Kodiak") from Kodiak Resources, Inc. and Kodiak Properties, L.L.C. Kodiak's operating results are presented within the Company's North America reportable segment. The Kodiak acquisition is not material to the Company's November 30, 2022 financial position or results of operations, and therefore, pro forma operating results and other disclosures for the acquisition are not presented.

NOTE 3. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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


	Three Months Ended November 30, 2022
(in thousands)	Foreign Currency Translation		Derivatives		Defined Benefit Obligation		Total AOCI
Balance, September 1, 2022	$	(245,897)	$	138,242	$	(6,796)	$	(114,451)
Other comprehensive income before reclassifications	41,429		83,887		1,745		127,061
Reclassification for gain (1)	—		(8,666)		—		(8,666)
Income tax (expense) benefit	—		(14,146)		13		(14,133)
Net other comprehensive income	41,429		61,075		1,758		104,262
Balance, November 30, 2022	$	(204,468)	$	199,317	$	(5,038)	$	(10,189)



	Three Months Ended November 30, 2021
(in thousands)	Foreign Currency Translation		Derivatives		Defined Benefit Obligation		Total AOCI
Balance, September 1, 2021	$	(105,680)	$	21,781	$	(921)	$	(84,820)
Other comprehensive income (loss) before reclassifications	(39,688)		27,474		(8)		(12,222)
Reclassification for gain (1)	—		(3,789)		—		(3,789)
Income tax (expense) benefit	—		(4,500)		2		(4,498)
Net other comprehensive income (loss)	(39,688)		19,185		(6)		(20,509)
Balance, November 30, 2021	$	(145,368)	$	40,966	$	(927)	$	(105,329)

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(1) Reclassifications for gains on derivatives included in net earnings are recorded in cost of goods sold in the condensed consolidated statements of earnings.

NOTE 4. REVENUE RECOGNITION

Revenue related to raw materials, steel products and construction-related solutions in the North America and Europe segments and downstream products in the Europe segment is recognized at a point in time concurrent with the transfer of control, which

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

Each downstream product contract sold by the North America segment represents a single performance obligation. Revenue from contracts where the Company provides fabricated product and installation services is recognized over time using an input measure, and these contracts represented 8% and 9% of net sales in the North America segment in the three months ended November 30, 2022 and 2021, respectively. Revenue from contracts where the Company does not provide installation services is recognized over time using an output measure, and these contracts represented 12% and 9% of net sales in the North America segment in the three months ended November 30, 2022 and 2021, respectively.

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


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

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

Remaining Performance Obligations

As of November 30, 2022, revenue totaling $1.0 billion has been allocated to remaining performance obligations in the North America segment related to contracts where revenue is recognized using an input or output measure. Of this amount, the Company estimates that approximately 81% of the remaining performance obligations will be recognized in the twelve months after November 30, 2022, and the remainder will be recognized during the subsequent twelve months. The duration of all other contracts in the North America and Europe segments are typically less than one year.

NOTE 5. INVENTORIES, NET

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

The components of inventories were as follows:


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

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

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NOTE 6. GOODWILL AND OTHER INTANGIBLES

Goodwill by reportable segment is detailed in the following table:


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

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

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

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


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

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

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

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


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

NOTE 7. CREDIT ARRANGEMENTS

Long-term debt was as follows:


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

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


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

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

Senior Notes Activity

In May 2013, the Company issued $330.0 million of 4.875% Senior Notes due May 2023 (the "2023 Notes"). As of August 31, 2022, the 2023 Notes were included in current maturities of long-term debt and short-term borrowings in the consolidated balance sheet. In November 2022, the Company repurchased $115.9 million in aggregate principal amount of the 2023 Notes through a cash tender offer and recognized an immaterial loss on debt extinguishment. The remaining balance of $214.1 million was included in current maturities of long-term debt and short-term borrowings in the condensed consolidated balance sheet as of November 30, 2022.

Credit Facilities

In October 2022, the Company entered into a Sixth Amended and Restated Credit Agreement (as amended, the "Credit Agreement") with a revolving credit facility (the "Revolver") of $600.0 million and maturity date in October 2027, replacing the Fifth Amended and Restated Credit Agreement with a revolving credit facility of $400.0 million and a maturity date in

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March 2026. The maximum availability under the Revolver can be increased to $850.0 million with bank approval. The Credit Agreement also provides for a delayed draw senior secured term loan facility with a maximum principal amount of $200.0 million (the “Term Loan”). The Term Loan is coterminous with the Revolver. As of November 30, 2022, the Company had no amounts drawn under the Term Loan. The Company's obligations under the Credit Agreement are secured by its North America inventory. The Credit Agreement's capacity includes a $50.0 million sub-limit for the issuance of stand-by letters of credit. The Company had no amounts drawn under the Revolver or the previous revolving credit facility at November 30, 2022 or August 31, 2022. The availability under the Revolver and the previous revolving credit facility, as applicable, was reduced by outstanding stand-by letters of credit of $1.4 million at both November 30, 2022 and August 31, 2022.

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

The Company also has credit facilities in Poland through CMCP. At November 30, 2022 and August 31, 2022, CMCP's credit facilities totaled PLN 300.0 million, or $66.9 million and $63.9 million, respectively. There were no amounts outstanding under these facilities as of November 30, 2022 or August 31, 2022. The available balance of these credit facilities was reduced by outstanding stand-by letters of credit, guarantees and/or other financial assurance instruments, which totaled $14.6 million and $1.0 million at November 30, 2022 and August 31, 2022, respectively.

Accounts Receivable Facilities

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

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

NOTE 8. DERIVATIVES

The Company's global operations and product lines expose it to risks from fluctuations in metal commodity prices, foreign currency exchange rates, interest rates and natural gas, electricity and other energy prices. One objective of the Company's risk management program is to mitigate these risks using derivative instruments. The Company enters into (i) metal commodity futures and forward contracts to mitigate the risk of unanticipated changes in net earnings due to price volatility in these commodities, (ii) foreign currency forward contracts that match the expected settlements for purchases and sales denominated in foreign currencies and (iii) natural gas and electricity commodity derivatives to mitigate the risk related to price volatility of these commodities.

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

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

Commodity

Long/Short

Total

Aluminum

Long

2,025

Aluminum

Short

1,425

Copper

Long

374

Copper

Short

8,550

Electricity

Long

3,051,000

MW(h)

Natural Gas

Long

5,230,350

MMBtu

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MT = Metric Ton

MW(h) = Megawatt hour

MMBtu = Metric Million British thermal unit

The Company designates only those contracts which closely match the terms of the underlying transaction as hedges for accounting purposes. Certain foreign currency and commodity contracts were not designated as hedges for accounting purposes, although management believes they are essential economic hedges.

The following tables summarize activities related to the Company's derivative instruments and hedged items recognized in the condensed consolidated statements of earnings. All other activity related to the Company's derivative instruments and hedged items was immaterial for the periods presented.


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


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

The Company's natural gas and electricity commodity derivatives accounted for as cash flow hedging instruments have maturities extending to November 2025 and December 2034, respectively. Included in the AOCI balance as of November 30, 2022 was an estimated net gain of $15.3 million from cash flow hedging instruments that is expected to be reclassified into earnings within the next twelve months. See Note 9, Fair Value, for the fair value of the Company's derivative instruments recorded in the condensed 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 2022 Form 10-K.

The following tables summarize information regarding the Company's financial assets and financial liabilities that were measured at fair value on a recurring basis:

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


			Fair Value Measurements at Reporting Date Using
(in thousands)	August 31, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Investment deposit accounts (1)	$	572,384	$	572,384	$	—	$	—
Commodity derivative assets (2)	160,847		17,347		—		143,500
Foreign exchange derivative assets (2)	1,296		—		1,296		—
Liabilities:
Commodity derivative liabilities (2)	1,260		1,260		—		—
Foreign exchange derivative liabilities (2)	3,126		—		3,126		—

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(1) Investment deposit accounts are short-term in nature, and the value is determined by principal plus interest. The investment portfolio mix can change each period based on the Company's assessment of investment options.

(2) Derivative assets and liabilities classified as Level 1 are commodity futures contracts valued based on quoted market prices in the London Metal Exchange or New York Mercantile Exchange. Amounts in Level 2 are based on broker quotes in the over-the-counter market. Derivatives classified as Level 3 are described below. Further discussion regarding the Company's use of derivative instruments is included in Note 8, Derivatives.

As of August 31, 2022, the Company had one Level 3 commodity derivative. In September 2022, the Company entered into a second Level 3 commodity derivative with the same counterparty. The second Level 3 commodity derivative will begin to settle in January 2025. The fair value estimates of the Level 3 commodity derivatives are based on internally developed discounted cash flow models primarily utilizing unobservable inputs for which there is little or no market data. The Company forecasts future energy rates using a range of historical prices ("floating rate"). The floating rate is the only significant unobservable input used in the Company's discounted cash flow models. The following table summarizes the floating rate used to measure the fair value of the commodity derivatives at November 30, 2022 and 2021:


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

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

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(in thousands)						Three Months Ended November 30, 2022
Balance, September 1, 2022						$