A N N U A L
R E P O R T
2 0 2 3
B U I L D I N G O U R V I S I O N
By reducing our impact on the
environment, we see a future
of clean air and blue skies.
A stronger, more sustainable
future lies just over the
horizon. We know. We’re
helping build it.
Strength is our foundation:
steel, stability, integrity.
Our new brand identity represents the visual expression of our evolving
vision and our commitment to meet the challenges of a new era.
A Y E A R O F G R O W T H A N D T R A N S I T I O N
At CMC, we never stand still. We’re always
embracing new challenges, testing the limits,
rethinking what’s possible. In our experience,
it’s how we grow. This year is no exception.
From building new micro mills that bolster
our ability to serve current markets to
acquiring new companies that expand the
range of products and services we offer,
CMC is aggressively fulfilling our vision
of becoming a more complete provider of
construction solutions. True leaders never
stop moving forward.
F I N A N C I A L H I G H L I G H T S 2 0 2 3
(in thousands, except share and per share data)
Year Ended August 31
Net sales
Net earnings
Adjusted earnings1
Diluted earnings per share
Adjusted earnings per diluted share1
Adjusted EBITDA1
Core EBITDA1
Net working capital
Cash dividends per share
Cash dividends paid
Stockholders’ equity
Stockholders’ equity attributable to CMC per share
Total assets
2023
2022
$ 8,799,533
$ 8,913,481
859,760
1,217,262
877,099
1,001,873
7.25
7.40
9.95
8.19
1,384,704
1,745,806
1,459,520
1,552,847
2,300,441
2,084,481
0.64
74,936
0.56
67,749
4,120,873
3,286,197
35.37
27.97
6,639,094
6,237,027
Average diluted shares outstanding
118,606,271
122,372,386
1 For a reconciliation of non-GAAP financial measures, see the supplemental information
posted to the investor relations section of our website at www.cmc.com
CMC is an innovative
the critical reinforcement
solutions provider helping
needs of the global
build a stronger, safer and
construction sector.
more sustainable world.
CMC’s solutions support
Through an extensive
construction across a wide
manufacturing network
variety of applications,
principally located in the
including infrastructure,
United States and Central
non-residential, residential,
Europe, CMC offers products
industrial and energy
and technologies to meet
generation and transmission.
C O N T E N T S
4
6
Letter to Stockholders
Company Overview
8 CMC Brand Promise
10
12
14
16
18
20
21
Adding Value
Expanding our Commitment
to a Greener Tomorrow
A Foundation for Success
2023 Results
Selected Financial Data
Board & Executive Management
10-K
Inside back cover
Corporate Information
3
2023
Letter To Stockholders
Recently, Commercial Metals
Company became CMC, with a
new name and a refreshed look
that ties our organization to its
strong legacy and broadens our
horizons beyond metals. Our new
brand mirrors the Company’s
strategic evolution into what we
are today: a leading construction
solutions provider with a growing
commercial portfolio spanning
multiple platforms.
Our new identity reflects
our broader aspirations for
the future, with expanded
capabilities across steel and
non-steel materials that enhance
CMC’s value to its customers.
It also recognizes change, both
the transformation that has
already occurred and that which
we expect as we implement our
strategic growth plan.
Of course, as we evolve, some
things at CMC will never change
– including our commitment
to customers and putting them
at the center of all we do, our
pledge to maintain the culture
that makes our company special,
our vow to provide employees
with a safe, rewarding, and
team-oriented workplace, and
our obligation to the environment
and the communities in which
we live and work.
Consolidated
Core EBITDA
$1.46
B I L L I O N
Keeping the Bar High
Stockholders will recall that in
2022, our previous fiscal year, CMC
broke most Company profitability
records. We are pleased to report
that in fiscal 2023 we kept the bar
high. CMC generated consolidated
core EBITDA of $1.46 billion, in
comparison to $1.55 billion the
prior year.
This is in addition to a
remarkable top and bottom
line expansion over the past
two years. In both fiscal 2022
and 2023, CMC’s core EBITDA
was nearly double any previous
record and was more than four
times higher than the annual
average during the decade
leading up to our strategic
transformation. These results
highlight the impact of the
thoughtful and decisive actions
that we took over the last several
years, which have enabled us to
significantly grow our Company,
remake our industry, and set us
on a path for continued success.
Fiscal 2023’s strong financial
performance translated into
an annual return on invested
capital of 18%. This is well in
excess of CMC’s cost of capital
and an unmistakable indicator
of the value we are creating
for our stockholders. Our solid
results, and the value being
generated, are made possible by
the tremendous contributions of
CMC’s over 13,000 employees.
Investing in Our Future
While CMC has significantly
increased its sustainable “through-
the-cycle” earnings capability
over the last five years, we believe
there’s more to come. We are
Annual
Return
on Invested
Capital
18%
“Inbothfiscal2022and2023,CMC’scoreEBITDAwasnearlydoubleanyprevious
record,andwasmorethanfourtimeshigherthantheannualaverageduringthe
decadeleadinguptoourstrategictransformation.”
investing for future growth by
adding capabilities that strengthen
our core business and broaden our
ability to serve key end markets,
which will make CMC an even
more valuable partner to our
customers. These investments
include attractive organic projects
that extend our footprint, lower
operating costs, and optimize our
network, and strategic acquisitions
that increase CMC’s commercial
reach and expand our portfolio
of solutions.
Our largest organic initiatives
are two state-of-the-art micro
mills, one in Arizona that is now
ramping-up production and one
in West Virginia that recently
commenced construction. Our
new Arizona micro mill is the first
in the world capable of producing
both rebar and merchant bar on a
continuous basis and will extend
CMC’s merchant bar footprint
across the entire Southern U.S. The
breakthrough technology utilized in
the Arizona plant continues CMC’s
legacy of innovation: CMC was
the first company in the world to
successfully construct and operate
a micro mill and the first company
to introduce spooled rebar to the
North American market.
The inorganic component of
our growth strategy is focused
on adding adjacent products
and services to our portfolio
that complement our existing
offerings, reinforce core
operations, and elevate CMC’s
customer value proposition.
We see a long, value-accretive
growth runway ahead from
enhancing our ability to serve the
customer groups we know well
in end markets where we have
deep experience. To execute
on this vision, we completed
six strategic acquisitions last
year, valued at $235 million.
The most notable acquisitions
were Tendon Systems and
EDSCO Fasteners, which provide
complementary solutions to
CMC’s commercial portfolio.
We also more fully integrated
our Tensar platform, which we
acquired in fiscal 2022.
The Road Ahead
Over the last several years, the
federal government and U.S.
companies have collectively
announced a massive wave of
investment, some of which is
already underway. Their goals,
among others, are to improve
our nation’s transportation
infrastructure, re-shore vital
manufacturing, convert the
automotive industry to electric
battery technology, and upgrade
the electric transmission grid
to facilitate the transition to
renewable energy. As of this
writing, we estimate private
projects totaling over $640 billion
have been announced, supported
by over $300 billion in public
funding. These figures exclude
the local infrastructure that will
be needed to support these new
facilities, which also presents a
significant opportunity for CMC.
These powerful structural trends,
occurring simultaneously, are
unlike anything we have seen
in decades, and we expect
they will support domestic
construction activity for several
years to come. This, in turn,
should meaningfully benefit
rebar consumption and provide
a tailwind for CMC’s growing
selection of engineered solutions
and value-add product lines.
To benefit fully from this
encouraging long-term outlook,
we are focused on maximizing
CMC’s sustainable “through-the-
cycle” margins by controlling
the controllables. This includes
prudent capital investment in
attractive markets and solutions,
as well as optimizing existing
resources. Our commercial
excellence program seeks
to fully leverage the value of
the construction solutions
portfolio we have assembled
and to identify additional areas
of opportunity. We are also
continuing to optimize our
operational network to improve
flexibility, cost position, and
customer service capabilities.
Taken together, we expect the
favorable long-term demand
outlook, coupled with our growth-
oriented capital allocation
strategy and the successful
optimization of CMC’s
commercial and operational
efforts, will generate continued
meaningful value for you, our
stockholders.
P E T E R R . M A T T
President and Chief Executive Officer
B A R B A R A R . S M I T H
Executive Chairman of the Board
N O V E M B E R 2 1 ,
2 0 2 3
Barbara R. Smith
Executive Chairman
of the Board
Peter R. Matt
President and
Chief Executive Officer
4
5
OPTION - 2 PAGES Company Overview
Global Footprint
Our products are found in structures located all over the
world. In order to serve this global market, CMC maintains
facilities across the U.S., Europe and Asia. The blue shaded
countries represent locations where we have a presence.
CMC’s business consists of 212 facilities
across our operations and divisions.
CMC LOCATIONS
N O R T H
A M E R I C A
E U R O P E
P R O D U C T I O N L O C A T I O N S
43
RECYCLING
OPERATIONS
12
RECYCLING
OPERATIONS
10
MILL
OPERATIONS
58
DOWNSTREAM
OPERATIONS
2
TENSAR
OPERATIONS
1
5
2
MILL
OPERATIONS
DOWNSTREAM
OPERATIONS
TENSAR
OPERATIONS
M A R K E T P O S I T I O N S
#1 REBAR
#1 REBAR
#1 FENCEPOST
#1 WIRE MESH
#1 REBAR
FABRICATION
#3 MERCHANT BAR
#2 WIRE ROD
#1 MERCHANT BAR
80%
of finished steel
shipments are
into markets with
#1 position.
95%
of finished steel
shipments are
into markets with
#1 or #2 position.
6
End Markets
Our vertical integration business model
is unique and has revolutionized how the
steel industry operates today
M
E
O
G
A
C O N S T R U C T I O N
DOWNSTREAM
OPERATIONS
GEOGRID AND
GEOPIERS
MILL
OPERATIONS
RECYCLING
OPERATIONS
STEEL VALUE
CHAIN
AG Agriculture
OEM Original Equipment
Manufacturer
TENSAR
7
CMC creates better ways to build the world we all live in.
More than a century ago, we were founded as a recycling company.
Today, we remain as committed as ever to developing innovative solutions
that strengthen and reinforce a wide range of industries.
Beyond the many products and services we provide, CMC offers
something even more important: confidence. With our partners, it’s the
peace of mind that comes with knowing they can trust us to help solve their
toughest challenges—and in the process create a stronger, safer, more
sustainable world. And with our employees, it’s the culture that welcomes
new challenges, takes pride in conquering them, and truly believes...
i t ’s w h a t ’s i n s i d e t h a t c o u n t s .
8
9
At CMC, we’re all about building, and we are also developing our own company
into a better resource for the customers who depend on us. It’s why we’re
broadening our offerings beyond steel to become a more complete provider
of innovative construction solutions. This strategy is apparent in acquisitions
we’ve made in recent years. These include Tensar, who designs and develops
proprietary solutions for soil stabilization, EDSCO Fasteners, a maker of high-
quality anchor systems for transmission towers and wind turbines, and
Tendon Systems, a supplier of post-tension cabling systems used in concrete
construction. By improving our ability to provide new and better construction
solutions to our partners, CMC is continually advancing our mission to help
to build a better world.
addingvalue
S I D E
Acquiring three strategically positioned scrap
recycling companies ensures the secure and
cost-effective supply of ferrous scrap to CMC’s
steelmaking operations.These acquisitions
include the two plants located in Tennessee,
one in California, and one in Texas.
10
e
r
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t
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CMC rebar lies at the hear t of Am e r i c a ’s c r i t i c a l i n f r a s t r u c t u r e .
Our new anchoring systems keep transmission towers well-grounded.
Tensar geogrid lays the ground work for durable roads and more.
Modern structures demand modern
concrete reinforcement solutions.
Geopier provides an enhanced solid
foundation in even soft or loose soil.
11
3
L
B
A
EN E W
E R
S
A
E
R
C
N
I
:
L
A
O
G
0
3
0
2
E E L E CTRICITY U
S
83%
A C H I E V E D
A
G
E
1
2
P
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R
C
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T
A
G
E P
OINTS
E
EASE E N
R
C
E
D
:
L
A
O
G
0
3
0
2
R G Y C ONSUMPTIO
88%
A C H I E V E D
N
I
N
T
E
N
S
I
T
Y
5
P
E
R
C
E
N
T
The debut of CMC’s advanced micro mill in Mesa, Arizona, enhances our
ability to manufacture steel products cleanly—and deliver them quickly.
e to st a r t b u i l ding a m
ore
s
tim
t
s
e
b
e
h
T
•
.
5
1
9
y. We started in 1
u
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t
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t
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re is toda
expanding
o u r c o m m i t m e n t t o a g r e e n e r t o m o r r o w
R A I S I N G T H E [ M E R C H A N T] B A R
AZ2 is more than an advancement
in technology. It is an important
step forward for CMC in other ways
too. AZ2 is the first micro mill
to produce merchant bar—as well
as rebar—using an advanced
continuous production process.
This plant has the capability to
seamlessly adjust production
of rebar and merchant bar to
match market demand, and should
unlock additional value through
optimization with CMC’s first micro
mill which is co-located onsite.
What’s more, the plant’s strategic
location improves access to the
western United States, reducing
both shipping time and costs.
When it comes to environmental respon-
sibility, CMC has been ahead of the times
from the very beginning. More than a century
ago, our company was founded as a small
scrap recycling operation, repurposing metal
others considered waste. Since that time,
CMC has continued to pioneer new methods
and technology to manufacture steel more
cleanly and efficiently. This year, we took
another leap forward, becoming the first
North American steel manufacturer to
employ “Q-One” technology, giving us the
ability to directly power our new AZ2 micro
mill using renewable solar and wind sources.
CMC also announced the construction of our
fourth micro mill in Berkeley County, West
Virginia. These advanced micro mills allow
CMC to produce steel yielding among the
lowest greenhouse gas (GHG) emissions
of any facility in the industry.
C
L: RE D U
A
O
G
0
3
0
2
E G H G E MISSION
S I
N
T
E
N
S
I
T
Y
B
Y
2
0
%
59%
A C H I E V E D
E W A T E R WITHDRA
W
RE A S
C
E
: D
L
A
O
G
0
3
0
2
0%
A C H I E V E D
A
L
I
N
T
E
N
S
I
T
Y
B
Y
-
8
%
These figures represent
progress as of fiscal 2023 as
compared to 2019 baseline.
12
13
“ It’s the people that deliver on the strategy, they
deliver to our customers, they deliver the results.”
–BarbaraSmith
MESA,AZ
May 2023,
Modern Steelmaker class
A great building can only be constructed on a solid foundation. The same can be said for a great company—
only a company’s foundation is formed by the people who work there. At CMC, our impressive results in recent
years can largely be credited to our people—the over 13,000 employees who embrace the goals set forth
by management and work hard each day to achieve them. On the shop floor. At the recycling yards. In the
administrative offices. Out in the field. Our employees are thinkers, doers and innovators—people who thrive
on challenges because they have what it takes to conquer them. And it’s on their unrelenting commitment to
deliver for our customers that CMC will continue to build our success.
a foundation
F O R S U C C E S S
I N V E S T I N G I N O U R P E O P L E
The infrastructure of tomorrow
Mesa Community College near
Following the graduation of
will be built with steel—only
the company’s AZ2 micro mill.
its first class in March of
steel made more efficiently
This program offers individuals
2022, the Modern Steelmaker
and sustainably than ever.
the opportunity to learn all
Program has proven effective
This effort will take new
aspects of the steelmaking
in both improving retention
facilities, new methods—
process in preparation for
and attracting prospective
and most importantly, a new
employment at one of CMC’s
new employees. Based on
generation of steelmakers.
mills—even paying for their
this success, in 2023 CMC
With this in mind, CMC created
participation. Combining
expanded the program to
a groundbreaking program
classroom instruction with a
additional mills across the
to attract and develop
hands-on apprenticeship, the
United States.
prospective employees.
12-month program equips
In 2021, CMC launched the
Modern Steelmaker Program at
students with both the technical
knowledge and “soft skills”
they’ll need to excel in the
steelmaking industry.
14
DURANT,OK
2023 Modern
Steelmaker class
1415 2023 Results
We believe that smart decisions that
business—supported by CMC
remarkable results— the kind of results
build on a legacy of success, a growing
management and the tremendous
CMC is proud to have achieved this
portfolio of innovative solutions, and a
efforts put forth by our employees
year and the kind we will strive to
responsible approach to doing
each day—will inevitably produce
continue to deliver in the years to come.
Return on Invested Capital
Stockholder Equity Per Share
Core EBITDA
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0
1,400
1,200
1,000
800
600
400
200
0
25.5%
17.9%
14.8%
10.6%
11.6%
8.6%
35.37
27.97
19.03
15.85
12.76
13.77
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0
2018
2019
2020
2021
2022
2023
2018
2019
2020
2021
2022
2023
Net Earnings
Net Earnings Per Diluted Share
1,217
860
9.95
7.25
10.00
8.00
6.00
4.00
2.00
1.17
1.66
3.38
2.32
413
280
139
198
2018
2019
2020
2021
2022
2023
0
2018
2019
2020
2021
2022
2023
2000
1500
1000
500
0
300
250
200
150
100
50
0
1,553
1,460
814
650
412
501
2018
2019
2020
2021
2022
2023
Core EBITDA Per Ton of Finished Steel
FROM CONTINUING OPERATIONS
254
239
131
110
95
87
2018
2019
2020
2021
2022
2023
Core EBITDA Less Capex
FROM CONTINUING OPERATIONS
($ IN MILLIONS)
1,103
853
630
463
363
238
2018
2019
2020
2021
2022
2023
Net Debt to EBITDA
2.5x
2.0x
0.9x
0.8x
0.5x
0.4x
2018
2019
2020
2021
2022
2023
1,200
1,000
800
600
400
200
0
300
250
200
150
100
50
0
S A L E S B Y S E G M E N T
C A P I T A L D E P L O Y M E N T
16%
EUROPE
84%
NORTH
AMERICA
$606,665
$234,717
$176,342
$389,756
$1,407 million
of capital deployed
in fiscal 2023
Business
Reinvestment
Majority of
spending related
to major organic
growth projects
Strategic
M&A
Expanded
capabilities
and solutions
portfolio
Shareholder
Distributions
Combination
of dividends
and buybacks
Debt
Repayment
Outlays primarily consist
of repayment of senior
notes at maturity with
cash, no remaining
maturities until 2030
16
17
($ IN MILLIONS)($ IN MILLIONS)($ IN MILLIONS)($ IN MILLIONS)($ IN MILLIONS)FROM CONTINUING OPERATIONS($ IN MILLIONS)
S E L E C T E D F I N A N C I A L D A T A 2 0 2 3
S E L E C T E D F I N A N C I A L D A T A 2 0 2 3
(in thousands, except share and per share data and ratios)
(in thousands, except share and per share data and ratios)
(in thousands, except share and per share data and ratios)
(in thousands, except share and per share data and ratios)
Year Ended August 31
Year Ended August 31
O P E R A T I O N S
O P E R A T I O N S
Net sales1
Net sales1
Earnings from continuing operations
Earnings from continuing operations
Earnings before income taxes
Earnings before income taxes
Income taxes
Income taxes
Net earnings attributable to CMC
Net earnings attributable to CMC
Effective tax rate
Effective tax rate
Interest expense1
Interest expense1
Depreciation, amortization and impairment charges
Depreciation, amortization and impairment charges
Adjusted EBITDA from continuing operations2
Adjusted EBITDA from continuing operations2
B A L A N C E S H E E T I N F O R M A T I O N
B A L A N C E S H E E T I N F O R M A T I O N
Cash and cash equivalents
Cash and cash equivalents
Accounts receivable
Accounts receivable
Inventories
Inventories
Total current assets
Total current assets
Property, plant and equipment
Property, plant and equipment
Original cost
Original cost
Net of depreciation and amortization
Net of depreciation and amortization
Capital expenditures
Capital expenditures
Total assets
Total assets
Total current liabilities
Total current liabilities
Net working capital
Net working capital
Long-term debt3
Long-term debt3
Long-term deferred income tax liability
Long-term deferred income tax liability
Total stockholders’ equity attributable to CMC
Total stockholders’ equity attributable to CMC
Return on beginning stockholders’ equity attributable to CMC
Return on beginning stockholders’ equity attributable to CMC
Stockholders’ equity attributable to CMC per share
Stockholders’ equity attributable to CMC per share
859,760
859,760
1,121,967
1,121,967
262,207
262,207
859,760
859,760
23.4%
23.4%
40,127
40,127
222,610
222,610
1,384,704
1,384,704
592,332
592,332
1,240,217
1,240,217
1,035,582
1,035,582
3,144,155
3,144,155
4,533,827
4,533,827
2,409,360
2,409,360
606,665
606,665
6,639,094
6,639,094
843,714
843,714
2,300,441
2,300,441
1,114,284
1,114,284
306,801
306,801
4,120,873
4,120,873
26.0%
26.0%
35.37
35.37
7.25
7.25
0.64
0.64
74,936
74,936
118,606,271
118,606,271
13,022
13,022
2,014
2,014
S H A R E I N F O R M A T I O N
S H A R E I N F O R M A T I O N
Diluted earnings per share
Diluted earnings per share
Cash dividends per share of common stock
Cash dividends per share of common stock
Total cash dividends paid
Total cash dividends paid
Average diluted common shares
Average diluted common shares
O T H E R D A T A
O T H E R D A T A
Number of employees at year-end
Number of employees at year-end
Stockholders of record at year-end
Stockholders of record at year-end
1 Excludes divisions classified as discontinued operations
1 Excludes divisions classified as discontinued operations
2 Adjusted EBITDA from continuing operations = earnings
2 Adjusted EBITDA from continuing operations = earnings
from continuing operations before net earnings attributable
from continuing operations before net earnings attributable
to noncontrolling interests, interest expense, income taxes,
to noncontrolling interests, interest expense, income taxes,
depreciation, amortization and impairment charges
depreciation, amortization and impairment charges
3 Excludes current maturities of long-term debt
3 Excludes current maturities of long-term debt
18
18
For a reconciliation of non-GAAP financial measures to the most directly
For a reconciliation of non-GAAP financial measures to the most directly
comparable GAAP financial measures, see the supplemental information
comparable GAAP financial measures, see the supplemental information
posted to the investor relations section of our website at www.cmc.com.
posted to the investor relations section of our website at www.cmc.com.
2023
2023
2022
2022
2021
2021
2020
2020
2019
2019
$ 8,799,533
$ 8,799,533
$ 8,913,481
$ 8,913,481
$ 6,729,760
$ 6,729,760
$ 5,476,486
$ 5,476,486
$ 5,829,002
$ 5,829,002
1,217,262
1,217,262
1,515,147
1,515,147
297,885
297,885
1,217,262
1,217,262
19.7%
19.7%
50,709
50,709
179,950
179,950
1,745,806
1,745,806
672,596
672,596
1,358,907
1,358,907
1,169,696
1,169,696
3,441,468
3,441,468
3,884,893
3,884,893
1,910,871
1,910,871
449,988
449,988
6,237,027
6,237,027
1,356,987
1,356,987
2,084,481
2,084,481
1,113,249
1,113,249
250,302
250,302
3,286,197
3,286,197
53.0%
53.0%
27.97
27.97
9.95
9.95
0.56
0.56
67,749
67,749
412,865
412,865
534,018
534,018
121,153
121,153
412,865
412,865
22.7%
22.7%
51,904
51,904
174,397
174,397
754,284
754,284
497,745
497,745
1,105,580
1,105,580
935,387
935,387
2,736,828
2,736,828
3,498,757
3,498,757
1,566,123
1,566,123
184,165
184,165
4,638,671
4,638,671
980,473
980,473
1,756,355
1,756,355
1,015,415
1,015,415
112,067
112,067
2,294,877
2,294,877
21.9%
21.9%
19.03
19.03
3.38
3.38
0.48
0.48
57,766
57,766
278,302
278,302
372,685
372,685
93,182
93,182
279,503
279,503
25.0%
25.0%
61,837
61,837
173,369
173,369
576,608
576,608
542,103
542,103
880,728
880,728
625,393
625,393
2,214,103
2,214,103
3,399,086
3,399,086
1,571,067
1,571,067
187,618
187,618
4,081,728
4,081,728
745,263
745,263
1,468,840
1,468,840
1,065,536
1,065,536
130,810
130,810
1,889,201
1,889,201
17.2%
17.2%
15.85
15.85
2.32
2.32
0.48
0.48
57,056
57,056
198,779
198,779
267,932
267,932
69,839
69,839
198,093
198,093
26.1%
26.1%
71,373
71,373
159,055
159,055
424,085
424,085
192,461
192,461
1,016,088
1,016,088
692,368
692,368
2,080,005
2,080,005
3,196,585
3,196,585
1,500,971
1,500,971
138,836
138,836
3,758,771
3,758,771
694,590
694,590
1,385,415
1,385,415
1,227,214
1,227,214
79,290
79,290
1,623,861
1,623,861
13.3%
13.3%
13.77
13.77
1.66
1.66
0.48
0.48
56,537
56,537
122,372,386
122,372,386
121,983,497
121,983,497
120,309,621
120,309,621
119,124,628
119,124,628
12,483
12,483
2,151
2,151
11,089
11,089
2,294
2,294
11,297
11,297
2,500
2,500
11,524
11,524
2,731
2,731
19
19
B O A R D O F D I R E C T O R S
Barbara R. Smith
Peter R. Matt
Executive Chairman
of the Board
President and Chief
Executive Officer
of CMC
Vicki L. Avril-Groves
Lisa M. Barton
Gary E. McCullough
Retired – Former
President and Chief
Executive Officer,
IPSCO Tubulars, Inc.
President and Chief
Operating Officer,
Alliant Energy Corp.
Retired – Former Chief
Chief Executive Officer,
ARI Packaging, Inc.
John R. McPherson
Sarah E. Raiss
Charles L. Szews
Robert S. Wetherbee
Former Executive Vice
President And Chief
Financial & Strategy
Officer, Vulcan Materials
Company
Retired – Former
Executive Vice President,
Corporate Services,
TransCanada
Corporation
Retired – Former
President and Chief
Executive Officer,
Oshkosh Corporation
Board Chair and
Chief Executive Officer,
ATI Inc.
E X E C U T I V E M A N A G E M E N T
Peter R. Matt
President and
Chief Executive Officer
Jody Absher
Mike Doucet
Jennifer Durbin
Ty Garrison
Senior Vice President,
Chief Legal Officer
and Corporate Secretary
Senior Vice President,
Emerging Businesses
Group
Senior Vice President,
Chief Human Resources
and Communications
Officer
Senior Vice President,
Operational and
Commercial Excellence
Paul Lawrence
Senior Vice President
and Chief Financial
Officer
Steve Simpson
Chris Westrick
Senior Vice President,
North America Steel
Group
Vice President, Strategy,
Government Affairs
and Sustainability
20
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 2023
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-4304
Commercial Metals Company
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
75-0725338
(I.R.S. Employer Identification No.)
6565 N. MacArthur Blvd., Irving, Texas 75039
(Address of Principal Executive Office) (Zip Code)
(214) 689-4300
(Registrant's Telephone Number, Including Area Code)
Title of Each Class
Common Stock, $0.01 par value
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol(s)
CMC
Name of Each Exchange on Which
Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
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 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 þ No o
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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting
company,"
Act.
Large accelerated filer ☑
Non-accelerated filer ☐
"emerging
company"
Exchange
growth
and
the
of
12b-2
in
Rule
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 has filed a report on and attestation to its management's assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
The aggregate market value of the Company's common stock on February 28, 2023 held by non-affiliates of the registrant based on the
closing price per share on February 28, 2023 on the New York Stock Exchange was approximately $6.0 billion.
As of October 11, 2023, 116,905,168 shares of the registrant's common stock, par value $0.01 per share, were outstanding.
Portions of the definitive proxy statement for the 2024 annual meeting of stockholders are incorporated by reference into Part III.
DOCUMENTS INCORPORATED BY REFERENCE:
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
TABLE OF CONTENTS
PART I
Item 1: Business
Item 1A: Risk Factors
Item 1B: Unresolved Staff Comments
Item 2: Properties
Item 3: Legal Proceedings
Item 4: Mine Safety Disclosures
PART II
Item 5: Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6: Intentionally Omitted
Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A: Quantitative and Qualitative Disclosures about Market Risk
Item 8: Financial Statements and Supplementary Data
Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A: Controls and Procedures
Item 9B: Other Information
Item 9C: Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10: Directors, Executive Officers and Corporate Governance
Item 11: Executive Compensation
Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13: Certain Relationships and Related Transactions and Director Independence
Item 14: Principal Accountant Fees and Services
PART IV
Item 15: Exhibits and Financial Statement Schedules
Signatures
1
1
9
20
21
22
22
23
23
23
38
40
83
83
84
84
84
84
84
84
84
84
85
85
90
ITEM 1. BUSINESS
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
PART I
This Annual Report on Form 10-K (hereinafter referred to as the "Annual Report") contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the Private Securities Litigation Reform Act of 1995. Actual
results, performance or achievements could differ materially from those projected in the forward-looking statements as a result
of a number of risks, uncertainties and other factors. For a discussion of important factors that could cause our results,
performance or achievements to differ materially from any future results, performance or achievements expressed or implied by
our forward-looking statements, please refer to Part I, Item 1A, Risk Factors and Part II, Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations in this Annual Report.
References in this Annual Report to "CMC," "the Company," "we," "our" and "us" refer to Commercial Metals Company and
its subsidiaries unless otherwise indicated.
OVERVIEW
Founded in 1915 as a single scrap yard in Dallas, Texas, CMC is an innovative solutions provider helping build a stronger, safer
and more sustainable world. Through an extensive manufacturing network principally located in the United States ("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. Our operations are conducted through two operating and
reportable segments: North America and Europe.
At CMC, we believe "it’s what’s inside that counts." This reflects the nature of our products, which are found in critical
infrastructure worldwide, and also applies to our culture and employees. We provide differentiating value for our customers
through our industry-leading customer service with a low cost, high-quality production process, and operate under the guiding
principles of placing the customer at the core of all we do, staying committed to our employees, giving back to our communities
and creating value for our investors. From our inception, our business model has been strategically built on sustainable
principles, including recycling metals, manufacturing products from approximately 98% recycled material using energy-
efficient technology and employing closed-loop water recycling processes. As we have evolved, our products have expanded to
include diverse and innovative solutions for our customers, while continuing our commitment to sustainability.
We maintain our corporate office at 6565 North MacArthur Boulevard, Irving, Texas 75039. Our telephone number is
(214) 689-4300, and our website is http://www.cmc.com. Our fiscal year ends August 31st, and any reference in this Annual
Report to a year refers to the fiscal year ended August 31st of that year, unless otherwise noted. Any reference in this Annual
Report to a ton refers to the U.S. short ton, a unit of weight equal to 2,000 pounds.
Our Annual Report, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to these reports are
made available free of charge through the Investors section of our website as soon as reasonably practicable after such material
is electronically filed with, or furnished to, the U.S. Securities and Exchange Commission (the "SEC"). The information
contained on our website or available by hyperlink from our website is not incorporated into this Annual Report or other
documents we file with, or furnish to, the SEC.
Business Developments
The following business developments summarize our recent synergistic acquisitions and capital expenditures that we expect
will strategically position us for long-term growth in new and existing customer markets.
2023 Acquisitions
On September 15, 2022, we completed the acquisition of Advanced Steel Recovery, LLC ("ASR"), a supplier of recycled
ferrous metals located in Southern California. ASR's primary operations include processing and brokering capabilities that
source material for sale into both the domestic and export markets.
1
On November 14, 2022, we 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, we 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. The majority of volumes processed by Roane relate to obsolete
ferrous scrap metals to be consumed by our steel mill operations.
On March 17, 2023, we 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, we 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 our
Tensar operations under a contract manufacturing arrangement.
On July 12, 2023, we 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.
Operating results for ASR, Kodiak, Roane, Tendon, BOSTD and EDSCO (collectively, the "2023 Acquisitions") are presented
within the Company's North America reportable segment. For further details, refer to Note 2, Changes in Business, in Part II,
Item 8 of this Annual Report.
Tensar Acquisition
On April 25, 2022 (the "Tensar Acquisition Date"), we completed the acquisition of TAC Acquisition Corp. ("Tensar") for
approximately $550 million, net of cash acquired. Through its patented foundation systems, Tensar produces ground
stabilization and soil reinforcement solutions that complement our existing concrete reinforcement product lines and broaden
our ability to address multiple early phases of commercial and infrastructure construction, including subgrade, foundation and
structures. End customers for these products include commercial, industrial and residential site developers, mining and oil and
gas companies, transportation authorities, coastal and waterway authorities and waste management companies, among others.
The acquired operations within North America are presented within our North America reportable segment and the remaining
acquired operations are presented within our Europe reportable segment. For further details, refer to Note 2, Changes in
Business, in Part II, Item 8 of this Annual Report.
Capital Expenditures
During the fourth quarter of 2023, our third micro mill was placed into service. Initial commercial production of rebar
commenced during startup, prior to commissioning merchant bar production. This micro mill will be the first in the world with
the capability to produce merchant bar quality products through a continuous production process and employs the latest
technology in EAF power supply systems, which will allow us to directly connect the electric arc furnace ("EAF") and the ladle
furnace to renewable energy sources such as solar and wind. The new facility, located in Mesa, Arizona, replaced the rebar
capacity at our Rancho Cucamonga, California mill, which was sold during 2022, and allows us to more efficiently meet West
Coast demand for steel products. For further details on the sale of the Rancho Cucamonga, California mill, refer to Note 2,
Changes in Business, in Part II, Item 8 of this Annual Report.
In December 2022, we announced that our planned fourth micro mill will be located in Berkeley County, West Virginia. This
new micro mill will be geographically situated with the intention of primarily serving the Northeast, Mid-Atlantic and Mid-
Western U.S. markets and will enhance our steel production capabilities by achieving synergies within the existing network of
mills and downstream fabrication plants.
In July 2021, we completed the construction of and commissioned a third rolling line at our mini mill in Poland. The third
rolling line takes advantage of historical excess melting capacity in Poland, expands our overall rolling capacity and allows the
rolling lines to now operate independently for each steel product produced by the mini mill (rebar, merchant bar and wire rod).
2
Segments
The following chart summarizes net sales by major product category for each segment:
NORTH AMERICA SEGMENT
Our North America segment provides a diverse offering of products and solutions to support the construction sector. Composed
primarily of a vertically integrated network of recycling facilities, steel mills and fabrication operations, our strategy in North
America is to optimize our vertically integrated value chain to maximize profitability while providing industry-leading
customer service. To execute our strategy, we seek to (i) obtain inputs at the lowest possible cost, including materials procured
from our recycling facilities, which are operated to provide low-cost scrap to our steel mills, (ii) operate modern, efficient EAF
steel mills and (iii) enhance operational efficiency by utilizing our fabrication operations to optimize our steel mill volumes and
obtain the highest possible selling prices to maximize metal margin. Furthermore, we provide construction-related solutions to
serve markets that are complementary to those served by our vertically integrated operations. We strive to maximize cash flow
generation through increased productivity, high-capacity utilization and optimal product mix. To remain competitive, we
regularly make substantial capital expenditures. We have invested approximately 90%, 92% and 73% of total capital
expenditures in our North America segment during 2023, 2022 and 2021, respectively. For logistics, we utilize a fleet of trucks
we own or lease as well as private haulers, railcars, export containers and barges.
Our 43 scrap metal recycling facilities, primarily located in the southeast and central U.S., process ferrous and nonferrous scrap
metals. These facilities purchase processed and unprocessed ferrous and nonferrous metals from a variety of sources including
manufacturing and industrial plants, metal fabrication plants, electric utilities, machine shops, factories, refineries, shipyards,
demolition businesses, automobile salvage firms, wrecking companies and retail individuals. Our recycling facilities utilize
specialized equipment to efficiently process large volumes of ferrous material, including seven large machines capable of
shredding obsolete automobiles or other sources of scrap metal. Certain facilities also have nonferrous downstream separation
equipment, including extensive equipment at three of our facilities that reclaim metal from insulated copper wire, to allow us to
capture more metal content. With the exception of precious metals, our scrap metal processing facilities recycle and process
almost all types of metal. We sell ferrous and nonferrous scrap metals (collectively referred to as "raw materials") to steel mills
and foundries, aluminum sheet and ingot manufacturers, brass and bronze ingot makers, copper refineries and mills, secondary
lead smelters, specialty steel mills, high temperature alloy manufacturers and other consumers. Raw materials margin per ton is
defined as the difference between the selling prices for processed and recycled ferrous and nonferrous scrap metals and the
price paid to purchase obsolete and industrial scrap.
3
Consolidated Net Sales15%17%17%32%33%34%29%25%27%8%7%6%12%14%12%4%4%4%North America raw materialsNorth America steel productsNorth America downstream productsNorth America construction-related solutions and otherEurope steel productsEurope construction-related solutions and other202320222021 Our steel mill operations consist of six EAF mini mills, three EAF micro mills and one rerolling mill. Our steel mills
manufacture finished long steel products including 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"). Each EAF
mini mill consists of:
•
•
•
•
•
•
•
a melt shop with an EAF;
continuous casting equipment that shapes molten metal into billets;
a reheating furnace that prepares billets for rolling;
a rolling line that forms products from heated billets;
a mechanical cooling bed that receives hot products from the rolling line;
finishing facilities that shear, straighten, bundle and prepare products for shipping; and
supporting facilities such as maintenance, warehouse and office areas.
Our EAF micro mills utilize similar equipment and processes as described above; however, these facilities utilize unique
continuous process technology where metal flows uninterrupted from melting to casting to rolling. Our rerolling mill does not
utilize a melt shop; the rerolling process begins by reheating billets to roll into finished steel products. CMC has three facilities
capable of producing spooled rebar. The estimated annual capacity for our steel mills, included in Part I, Item 2, Properties, of
this Annual Report assumes a typical product mix and is not necessarily indicative of the expected production volumes or
shipments in any fiscal year. Descriptions of mill capacity, particularly rolling capacity, are highly dependent on the specific
product mix manufactured. Our mills roll many different types and sizes of products depending on market conditions, including
pricing and demand.
Ferrous scrap is the primary raw material used by our steel mills and is subject to significant price fluctuations. We believe the
supply of ferrous scrap available to us is adequate to meet our future needs. Our mills consume large amounts of electricity and
natural gas. We have not had any significant curtailments, and we believe that energy supplies are adequate. The supply and
demand of regional and national energy, and the extent of applicable regulatory oversight of rates charged by providers, affect
the prices we pay for electricity and natural gas. Our mills ship to a broad range of customers and end markets across the U.S.
The primary end markets are construction and fabricating industries, metals service centers, original equipment manufacturers
and agricultural, energy and petrochemical industries. In addition, our CMC Impact Metals 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. Due to the nature of our steel products, we do not have a long lead time between order
receipt and delivery. We generally fill orders for steel products from inventory or with products near completion. As a result,
we do not believe our steel products backlog is a significant factor in the evaluation of our North America operations.
Our fabrication operations include 55 facilities engaged in various aspects of steel fabrication; 51 of these facilities engage in
general fabrication of reinforcing steel and four of these facilities fabricate steel fence posts. Fabricated rebar operations shear,
bend, weld and fabricate steel and offer 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). Fabricated rebar is used to reinforce
concrete primarily in the construction of commercial and non-commercial buildings, hospitals, convention centers, industrial
plants, power plants, highways, bridges, arenas, stadiums and dams, and is generally sold in response to a competitive bid
solicitation. Many of the resulting projects are fixed price over the life of the project. We also provide installation services of
fabricated rebar in certain markets. We obtain steel for our fabrication operations primarily from our own steel mills, and the
demand created by our fabrication operations optimizes the production from our steel mills. Our steel fence posts have many
applications, including residential and commercial landscaping and agricultural and livestock containment. Additionally, we
have three facilities that supply post-tension cable for use in a variety of projects, such as slab-on-grade foundations, bridges,
buildings, parking structures and rock-and-soil anchors. The fabrication and post-tension cable offerings are collectively
referred to as "downstream products." Downstream products backlog, defined as the total value of unfulfilled orders, was $1.7
billion at August 31, 2023.
In addition, our North America segment also has facilities that provide construction-related solutions to serve markets that are
complementary to those served by our vertically integrated operations. Our Tensar operations sell Tensar® 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. Additional
offerings include permanent and bio-degradable rolled mats for the control of soil erosion and sedimentation. 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. Our Construction Services business sells and rents construction-related products
4
and equipment to concrete installers and other businesses in the construction industry. Additionally, we have facilities that
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.
EUROPE SEGMENT
Our Europe segment is composed primarily of a vertically integrated network of recycling facilities, an EAF mini mill and
fabrication operations located in Poland, as well as facilities that provide construction-related solutions. Our strategy in Europe
is to optimize profitability of the products manufactured by our mini mill, and we execute this strategy in the same way in our
Europe segment as we do in our North America segment.
Our 12 scrap metal recycling facilities, located throughout Poland, process ferrous scrap metals for use as a raw material for our
mini mill. These facilities provide material almost exclusively to our mini mill and operate in order to lower the cost of scrap
used by our mini mill. The equipment utilized at these facilities is similar to our North America recycling operations and
includes one large capacity scrap metal shredder similar to the largest shredder we operate in North America. Nonferrous scrap
metal is not material to this segment’s operations.
Our mini mill is a significant manufacturer of steel products including rebar, merchant bar and wire rod in Central Europe and
includes three rolling lines. The first rolling line is designed to allow efficient and flexible production of a range of medium
section merchant bar products. The second rolling line is dedicated primarily to rebar production. The third rolling line is
designed to produce high grade wire rod. Our mini mill sells steel products primarily to fabricators, manufacturers, distributors
and construction companies, mostly to customers located within Poland. However, the mini mill also exports steel products to
the Czech Republic, Germany, Hungary, Slovakia and other countries. Ferrous metal, the principal raw material used by our
mini mill, electricity, natural gas and other necessary raw materials for the steel manufacturing process are generally readily
available, although they can be subject to significant price fluctuations. Our mini mill generally fills orders for steel products
from inventory or with products near completion. As a result, we do not believe that our steel products backlog is a significant
factor in evaluating the operations of our Europe segment.
Our fabrication operations consist of five steel fabrication facilities located in Poland which produce downstream products,
primarily fabricated rebar and wire mesh. These facilities obtain rebar and wire rod primarily from the mini mill. Three of the
facilities are similar to the facilities operated by our North America segment and sell fabricated rebar primarily to contractors
for incorporation into construction projects. In addition to fabricated rebar, we sell other downstream products including
fabricated mesh, assembled rebar cages and other fabricated rebar by-products. We operate two other fabrication facilities in
Poland that produce welded steel mesh, cold rolled wire rod and cold rolled rebar. These facilities also offer wire mesh to
customers, which include metals service centers and construction contractors. We are among the largest manufacturers of wire
mesh in Poland. In addition to sales of downstream products in the Polish market, we also export our downstream products to
neighboring countries such as the Czech Republic and Germany. The downstream products backlog is not a significant factor in
evaluating the operations of our Europe segment.
Our Europe segment also offers construction-related solutions through our Tensar operations. The Tensar operations within our
Europe segment have similar operations, products and end customers as the Tensar operations within our North America
segment.
SEASONALITY
Our facilities primarily serve customers in the construction industry. Due to the increase in construction activities during the
spring and summer months, our net sales are generally higher in our third and fourth quarters than in our first and second
quarters.
COMPETITION
Our North America recycling operations compete with scrap metal processors and primary nonferrous metal producers. The
nonferrous recycling industry is highly fragmented in the U.S.; however, we believe our recycling operations are among the
largest engaged in the recycling of nonferrous metals in the U.S. We are also a major regional processor of ferrous metal. For
both nonferrous metals and ferrous metals, we compete primarily on the quality and price of our products. Our Europe
recycling facilities operate to provide raw materials almost exclusively to our mini mill in Poland.
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We produce a significant percentage of the total U.S. output of rebar and merchant bar through our EAF steel mills. Domestic
and international competitors include local, regional, national and international manufacturers and suppliers of steel. We
compete primarily on the services we provide to our customers and on the quality and price of our products. In the U.S., we
believe we are the largest manufacturer and fabricator of rebar, the largest manufacturer of steel fence posts and among the
largest manufacturers of merchant bar and wire rod. In Poland, we believe we are the largest producer of rebar and merchant
bars for the products we produce and the second largest producer of wire rod.
Furthermore, the global steel industry is cyclical and highly competitive, consisting of domestic and international producers for
all major product lines across our North America and Europe segments. Global steelmaking capacity greatly exceeds demand
for steel products in some regions around the world, and this overcapacity results in competition from steel imports into the
regions we operate. Our global strategy and differentiating customer service allow us to navigate the risks arising from
overproduction. Additionally, trade enforcement laws, such as the tariffs and quotas enforced by Section 232 of the U.S. Trade
Expansion Act of 1962 ("Section 232"), have supported domestic production and reduced unfairly priced steel imports.
However, these restrictions may be temporary and import competition continues to be a significant threat facing the steel
industry.
Competitive Advantage
CMC's diverse product offerings support a wide variety of applications and position us as a global solutions provider to the
construction industry, capable of addressing multiple phases of construction. We believe our vertically integrated
manufacturing platform provides an advantageous cost structure and maximizes the results of our steel-related operations. Our
recycling and fabrication operations are designed to support our steel mills. Our recycling operations provide scrap metal to our
steel mills, which in turn use the scrap metal to produce and supply steel required by our fabrication operations. As our
recycling facilities are generally located near our steel mills, we can ensure a secure supply of low-cost raw materials, and our
fabrication facilities provide a significant and consistent source of demand as well as forward visibility into end customer
demand. This is a strategic advantage when imports increase as our steel mills can continue to supply our fabricators. Contract
pricing that is utilized for these operations helps to stabilize short-term volatility.
Our operational footprint also provides a competitive advantage in North America and Europe. Our steel mills and fabrication
operations in North America and Europe are well-positioned geographically with steel mill locations in some of the highest
demand locations for rebar and merchant bar consumption. In North America we operate a network of operations that stretch
from the East Coast to the West Coast and can reach every major metro area in the U.S. Demand for our products in the U.S. is
highest in the Sun Belt region where most of our steel mills are located, which positions us to capitalize on growth in this region
as well as benefit from a longer construction season. Our mini mill in Poland also provides strategic benefits as it is well
positioned to serve neighboring European economies.
See Part I, Item 1A, Risk Factors, of this Annual Report for more information on competitive factors described above.
Sustainability
Sustainability is embedded in our business model and remains central to our mission. For over 50 years, we have manufactured
steel using recycled scrap metal and EAF technology, which is more efficient and environmentally friendly than traditional
blast furnace technology, using less energy than the industry average and producing significantly less carbon dioxide per ton of
steel we melt. We play a key role in returning our primary input, ferrous scrap, into the economy in the form of rebar, merchant
bar, wire rod and fence post for use in a wide variety of applications. In 2023, recycled content made up approximately 98% of
the raw materials used in our manufactured finished steel. Additionally, approximately 89% of all co-products and waste
streams from our steel mills are recycled or turned into other products. Our Tensar® geogrid technology is also inherently
sustainable, as its use in construction projects can extend road service life, conserve water resources, control soil erosion,
reduce consumption of aggregate and much more.
Increasingly, our customers are prioritizing sustainable business practices in and through their supply chains. In 2023, our
vertically integrated manufacturing process kept more than 10.8 million tons of scrap metal out of landfills. Our process
includes five primary steps:
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1. Locally source, purchase and process scrap metal as feedstock, which allows us to
lower emissions and put more waste to beneficial use.
2. Melt the recycled scrap metal into new steel in our mills using our modern, efficient
EAFs, which consume less energy and reduce greenhouse gas ("GHG") emissions compared
to traditional blast furnace technology.
3. Roll the new steel into finished long steel products, including rebar, merchant bar, light
structural shapes and other special sections, wire rod and semi-finished billets for rerolling.
4. Fabricate the finished products into custom shapes and lengths for end use by our
customers.
5. Reclaim end-of-life steel material as feedstock for new steel products, thereby starting
our cycle of steel production once again.
We continue to invest in new technologies and processes to reduce our impact on the environment, including our newly
commissioned micro mill located in Mesa, Arizona, which employs the latest technology in EAF power supply systems and is
able to directly connect the EAF and the ladle furnace to renewable energy sources such as solar and wind.
Our commitment to pursuing our reduction targets keeps us on track to remain one of the most sustainable steel manufacturers
in the world. In 2020, we established the following goals to increase our use of renewable energy and reduce our energy
consumption, GHG emissions and water withdrawal by 2030, compared to a 2019 baseline:
•
•
•
•
20% reduction in combined Scope 1 and Scope 2 GHG emissions
12% increase in renewable energy usage
5% reduction in total energy consumption intensity
8% reduction in water withdrawal intensity
Information relating to our environmental, social and governance ("ESG") commitments to operating responsibly is available
on the ESG section of our website, www.esg.cmc.com. The information contained in, or referred to on, our website is not
deemed to be incorporated into this Annual Report unless otherwise expressly noted.
ENVIRONMENTAL MATTERS
A significant factor in our business is our compliance with environmental laws and regulations. Compliance with and changes
to various environmental requirements and environmental risks applicable to our industry may adversely affect our business,
results of operations and financial condition.
Under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA" or "Superfund") and
analogous state statutes, we may occasionally be required to cleanup or take remedial action with regard to (or pay for cleanup
or remedial action with regard to) sites we operate or formerly operated. If we are found to have arranged for treatment or
disposal of hazardous substances at a site, we could be named as a potentially responsible party ("PRP") and responsible for
both the costs of cleanup as well as for associated natural resource damages at such site. The U.S. Environmental Protection
Agency ("EPA"), or equivalent state agency, has named us as a PRP at several federal Superfund sites or similar state sites. In
some cases, these agencies allege that we are a PRP because we sold scrap metals to, or otherwise disposed of materials at, the
site. With respect to the sale of scrap metals, we contend that an arm's length sale of valuable scrap metal for use as a raw
material in a manufacturing process that we do not control should not constitute "an arrangement for disposal or treatment of
hazardous substances" as defined under federal law. Subject to the satisfaction of certain conditions, the Superfund Recycling
Equity Act provides legitimate sellers of scrap metal for recycling with some relief from Superfund liability under federal law.
Despite Congress' clarification of the intent of the federal law, some state laws and environmental agencies still seek to impose
liability on the basis of such arm's length sale constituting "an arrangement for disposal or treatment of hazardous substances."
We believe efforts to impose such liability are contrary to public policy objectives and legislation encouraging recycling and
promoting the use of recycled materials, and we continue to support clarification of state laws and regulations consistent with
Congress' action.
New federal, state and local laws and regulations, as well as foreign laws, with respect to our foreign operations, and the
varying interpretations of such laws by regulatory agencies and the judiciary impact how much money we spend on
environmental compliance. In addition, uncertainty regarding adequate control levels, testing and sampling procedures, new
pollution control technology and cost benefit analysis based on market conditions impact our future expenditures that are
necessary to comply with environmental laws and rules. We cannot predict the total amount of capital expenditures or increases
in operating costs or other expenses that may be required as a result of environmental compliance. We also do not know if we
can pass such costs on to our customers through product price increases. During 2023, we incurred environmental costs,
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including disposal, permits, license fees, tests, studies, remediation, consultant fees and environmental personnel expense of
approximately $49.3 million. In addition, we spent approximately $5.8 million on capital expenditures for environmental
projects in 2023. We believe that our facilities are in material compliance with currently applicable environmental laws and
regulations. We anticipate capital expenditures for new environmental projects during 2024 to be approximately $11.0 million.
For more information on our compliance with environmental laws and regulations, see Part I, Item 1A, Risk Factors — Risks
Related to the Regulatory Environment, in this Annual Report.
EMPLOYEES AND WORKFORCE CULTURE
Our employees are our most important asset and are fundamental to our success. We recognize that our employees bring diverse
backgrounds and unique skill sets, and we have fostered a culture that challenges conventional thinking, promotes teamwork,
requires accountability and rewards success. At the heart of our culture are our core values of Integrity, Safety, Collaboration
and Excellence. These core values are reinforced daily through our actions and in meetings with employees and serve as a
compass for our behaviors and decisions.
The following table presents the approximate headcount of employees within each reportable segment and Corporate and Other
as of August 31, 2023:
Segment
North America
Europe
Corporate and Other
Total
Number of Employees
9,373
3,238
411
13,022
Approximately 14% and 29% of the employees in our North America and Europe segments, respectively, belong to unions. We
believe that we have good relations with the union representatives that represent our employees and are focused on providing
safe and productive workplace environments for our employees.
Ethics and Compliance
At CMC, we believe "it’s what’s inside that counts." It is fundamental to our success that both our leaders and employees
observe the highest ethical standards of business conduct in their interactions with our customers, suppliers, communities,
investors and each other. We empower our employees to make the right decisions and have established the CMC Code of
Conduct and Business Ethics (the "Code") to help our employees understand company policies and guide their actions.
Employees are required to complete training to reinforce their continued understanding of and compliance with the Code.
Additionally, to foster and maintain our culture of ethical conduct and integrity, we provide confidential channels for employees
to report known and suspected violations of applicable laws, the Code, our policies or our internal controls, and receive a
response to such reports.
Employee Health and Safety
The safety of every employee is, and has always been, our top priority. We strive to provide a safe working environment where
facilities achieve zero work-related injuries or illnesses. In pursuit of our goal of zero incidents, we embrace a total safety
culture that encourages our employees to recognize potentially unsafe situations and use our Proactive Safety Program to report
concerns and work together to remove potential hazards from the work environment before incidents occur. Additionally, our
Global Health and Safety Policy sets the standard for our facilities based on best practices that often exceed regulatory
requirements and all of our employees are provided with the training necessary to safely and effectively perform their
responsibilities.
Our Safety Management System includes our policies, incident management process, data dashboards and safety action plans
based on observed behaviors related to health and safety. We periodically issue employee Safety Perception Surveys at various
locations and across business groups to identify any discrepancies between management and employee perspectives on the
safety of our working conditions. Additionally, we participate in industry association meetings to share expertise and best
practices. These surveys and meetings facilitate important discussions that ultimately help further develop our health and safety
management systems.
Our commitment to safety has resulted in the achievement of a total recordable incident rate ("TRIR") of 1.3 in 2023 and 1.5 in
each of 2022 and 2021. While industry data is not available at the time of this report for 2023 or 2022, the industry average
TRIR for iron and steel mills and ferroalloy manufacturing (North America Industry Classification code 3311), which is based
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on information provided by the U.S. Bureau of Labor Statistics, was 2.8 in 2021. TRIR is defined as OSHA recordable
incidents per 200,000 hours worked. In addition to TRIR, we also measure our near miss frequency rate, which we believe is
critical to incident avoidance and supports our superior safety rating in the industry.
Diversity, Equity and Inclusion
We believe having a diverse workforce strengthens our business; because of this, we aim to build a welcoming and inclusive
work environment. CMC is committed to providing equal employment opportunities to all employees and applicants for
employment without regard to race, color, religion, sex, age, physical or mental disability, national origin, citizenship, military
or veteran status, sexual orientation, gender identity and/or expression. Our talent acquisition strategies include partnerships
with organizations that reach veterans and women, and we release job postings in multiple languages to access a wide, diverse
range of candidates. Through our Essentials of Management training, we require all employees who manage people or lead
teams to learn about diversity issues, and we also reflect our values of diversity and inclusion in our employee handbook and
the Code.
Talent Development and Retention
We invest in training and resources to support our employees in reaching their full potential and to build internal capabilities,
and are committed to providing a safe, welcoming and stimulating work environment to attract and retain talent. In addition to
our internally developed technical, safety and leadership training available to all employees, new employees in commercial and
operational positions complete rotational programs during onboarding to gain technical experience across the business. We also
conduct periodic surveys and other initiatives with employees, which provide invaluable information about how employees
perceive our onboarding, employee training, development and culture and allow us to further enhance the training and resources
we offer.
ITEM 1A. RISK FACTORS
There are inherent risks and uncertainties associated with our business that could adversely affect our business, results of
operations and financial condition. Set forth below are descriptions of those risks and uncertainties that we currently believe to
be material, but the risks and uncertainties described below are not the only risks and uncertainties that could adversely affect
our business, results of operations and financial condition. If any of these risks actually occur, our business, results of
operations and financial condition could be materially adversely affected.
RISKS RELATED TO OUR BUSINESS
Scrap and other inputs for our business are subject to significant price fluctuations and limited availability, which may
adversely affect our business, results of operations and financial condition.
At any given time, we may be unable to obtain an adequate supply of critical raw materials at a price and on other terms
acceptable to us. We depend on ferrous scrap, the primary raw material used by our steel mills, and other inputs such as
graphite electrodes and alloys for our steel mill operations. The price of scrap and other inputs has historically been subject to
significant fluctuation, and we may not be able to adjust our product prices to recover the costs of rapid increases in raw
material prices, especially over the short-term and in our fixed price contracts. The profitability of our operations would be
adversely affected if we are unable to pass increased raw material and input costs on to our customers.
The purchase prices for automobile bodies and various other grades of obsolete and industrial scrap, as well as the selling prices
for processed and recycled scrap metals we utilize in our own manufacturing process or resell to others, are highly volatile. A
prolonged period of low scrap prices or a fall in scrap prices could impair our ability to obtain, process, sell and consume
recycled material, which could have a material adverse effect on our business, results of operations and financial condition. Our
ability to respond to changing recycled metal selling prices may be limited by competitive or other factors during periods of low
scrap prices, when the supply of scrap may decline considerably, as scrap generators hold onto their scrap in the hope of getting
higher prices later. Conversely, increased foreign demand for scrap due to economic expansion in countries such as China,
India, Brazil and Turkey can result in an outflow of available domestic scrap as well as higher scrap prices that cannot always
be passed on to domestic scrap consumers or consumers of our steel products, further reducing the available domestic scrap
flows and margins, all of which could adversely affect our sales and profitability.
The availability of raw materials may also be negatively affected by new laws and regulations, allocations by suppliers,
interruptions in production, accidents or natural disasters, changes in exchange rates, global price fluctuations and the
availability and cost of transportation. If we are unable to obtain adequate and timely deliveries of our required raw materials,
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we may be unable to timely manufacture significant quantities of our products.
We are vulnerable to the economic conditions in the regions in which our operations are concentrated.
Economic downturns in the U.S., United Kingdom (the "U.K."), Central Europe and China, or decisions by governments that
have an impact on the level and pace of overall economic activity in one of these regions, could adversely affect demand for our
products and, consequently, our sales and profitability. As a result, our financial results are substantially dependent upon the
overall economic conditions in these areas.
We rely on the availability of large amounts of electricity and natural gas. Disruptions in delivery or substantial
increases in energy costs, including crude oil prices, could adversely affect our business, results of operations and
financial condition.
Our EAF mills melt steel scrap and use natural gas to heat steel billets for rolling into finished steel products. As large
consumers of electricity and gas, often the largest in the geographic area where our mills are located, we must have dependable
delivery of electricity and natural gas in order to operate. Accordingly, we are at risk in the event of an energy disruption.
Prolonged black-outs or brown-outs or disruptions caused by natural disasters such as hurricanes would substantially disrupt
our production. While we have not suffered prolonged production delays due to our inability to access electricity or natural gas,
several of our competitors have experienced such occurrences. Prolonged substantial increases in energy costs would have an
adverse effect on the costs of operating our mills and would negatively impact our profitability unless we were able to fully
pass through the additional expense to our customers. Our finished steel products are typically delivered by truck. Rapid
increases in the price of fuel attributable to increases in crude oil prices would increase our costs and adversely affect many of
our customers' financial results, which in turn could result in reduced margins and declining demand for our products.
We may encounter labor disputes and shortages for skilled labor and/or qualified employees in operational positions,
which could adversely impact our operations.
Our employees contribute to developing and meeting our business goals and objectives, and we depend on a qualified labor
force for the manufacture of our products. The impact of labor shortages and increased competition for available workers may
increase our costs or impede our ability to optimally staff our facilities and could have an adverse impact on our results of
operations, financial condition and cash flows. In addition, an ongoing labor shortage may result in increased expenses related
to hiring and retention of qualified employees. As our experienced employees retire and we lose their institutional knowledge,
we may encounter challenges and may have difficulty replacing them with employees of comparable skill and efficiency.
Additionally, as of August 31, 2023, 14% and 29% of the employees in our North America and Europe segments, respectively,
belong to unions. While believe that we have good relations with the union representatives, there can be no assurance that any
future labor negotiations will prove successful, which may result in a significant increase in the cost of labor, or may break
down and result in the disruption of our business or operations.
The loss of, or inability to hire, key employees may adversely affect our ability to successfully manage our operations
and meet our strategic objectives.
Our future success depends, in large part, on the continued service of our officers and other key employees and our ability to
continue to attract and retain additional highly qualified personnel. These employees are integral to our success based on their
expertise and knowledge of our business and products. We compete for such personnel with other companies, including public
and private company competitors who may periodically offer more favorable terms of employment. The loss or interruption of
the services of a number of our key employees could reduce our ability to effectively manage our operations should we be
unable to find appropriate replacement personnel in a timely manner should the need arise. For example, as part of the
Company's succession plan, Peter R. Matt became our Chief Executive Officer effective September 1, 2023. Failure to
successfully execute this leadership transition and retain key employees could negatively impact our business and results of
operations.
Our business, financial condition and results of operations may be adversely impacted by the effects of inflation.
Inflation has the potential to adversely affect our business, financial condition and results of operations by increasing our
overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers.
Other inflationary pressures could affect wages, energy prices, the cost and availability of components and raw materials and
other inputs and our ability to meet customer demand. Inflation may further exacerbate other risk factors, including supply
chain disruptions, risks related to international operations and the recruitment and retention of qualified employees.
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We may have difficulty competing with companies that have a lower cost structure or access to greater financial
resources.
We compete with regional, national and foreign manufacturers and traders. Consolidation among participants in the steel
manufacturing and recycling industries has resulted in fewer competitors, and several of our competitors are significantly larger
than us and have greater financial resources and more diverse businesses than us. Some of our foreign competitors may be able
to pursue business opportunities without regard to certain laws and regulations with which we must comply, such as
environmental regulations. These companies may have a lower cost structure and more operating flexibility, and consequently
they may be able to offer better prices and more services than we can. There is no assurance that we will be able to compete
successfully with these companies. Any of these factors could have a material adverse effect on our business, results of
operations and financial condition.
Operating and startup risks, as well as market risks associated with the commissioning of our micro mills, could prevent
us from realizing anticipated benefits and could result in a loss of all or a substantial part of our investments.
Although we have successfully commissioned and operated similar facilities, there are technological, operational, market and
start-up risks associated with the construction and commissioning of our third and fourth micro mills. Construction of our micro
mills is subject to changing market conditions, delays, inflation and cost overruns, work stoppages, labor shortages, weather
interferences, supply chain delays, changes required by governmental authorities, delays or the inability to acquire required
permits or licenses, any of which could have an adverse impact on our operational and financial results. Further, although we
believe these facilities should each be capable of consistently producing high-quality products in sufficient quantities and at
costs that will compare favorably with other similar steel manufacturing facilities, there can be no assurance that these
expectations will be achieved. If we encounter cost overruns, system or process difficulties during commissioning or after
startup or quality control restrictions with either or both facilities, our capital costs could increase materially, the expected
benefits from the development of the applicable facilities could be diminished or lost, and we could lose all or a substantial
portion of our investments. We could also encounter commodity market risk if, during a sustained period, the cost to
manufacture is greater than projected or the market prices for steel products decline.
Our mills require continual capital investments that we may not be able to sustain.
We must make regular substantial capital investments in our steel mills to maintain the mills, lower production costs and remain
competitive. We cannot be certain that we will have sufficient internally generated cash or acceptable external financing to
make necessary substantial capital expenditures in the future. The availability of external financing depends on many factors
outside of our control, including capital market conditions and the overall performance of the economy. If funding is
insufficient, we may be unable to develop or enhance our mills, take advantage of business opportunities and respond to
competitive pressures.
Unexpected equipment failures may lead to production curtailments or shutdowns, which may adversely affect our
business, results of operations and financial condition.
Interruptions in our production capabilities would adversely affect our production costs, products available for sale and earnings
for the affected period. Our manufacturing processes are dependent upon critical pieces of steelmaking equipment, such as our
furnaces, continuous casters and rolling equipment, as well as electrical equipment, such as transformers. This equipment may,
on occasion, be out of service as a result of unanticipated failures. We have experienced, and may in the future experience,
material plant shutdowns or periods of reduced production as a result of such equipment failures. In addition to equipment
failures, our facilities are also subject to the risk of catastrophic loss due to unanticipated events such as fires, explosions or
violent weather conditions.
Information technology interruptions and breaches in data security could adversely impact our business, results of
operations and financial condition.
We rely on computers, information and communications technology and related systems and networks in order to operate our
business, including to store sensitive data such as intellectual property, our own proprietary business information and that of our
customers, suppliers and business partners and personally identifiable information of our employees. Increased global
information technology security requirements, vulnerabilities, threats and a rise in sophisticated and targeted cyber attacks,
which may be heightened in times of hostilities or war, computer viruses, phishing attacks, social engineering schemes,
malicious code, ransomware attacks, acts of terrorism and physical or electronic security breaches, including breaches by
computer hackers, cyber-terrorists and/or unauthorized access to or disclosure of our and/or our employees’ or customers’ data
pose a risk to the security of our systems, networks and the confidentiality, availability and integrity of our data. Our systems
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and networks are also subject to damage or interruption from power outages, natural disasters, telecommunications failures,
intentional or inadvertent user misuse, employee error, operator negligence and other similar events. Any of these or other
events could result in system interruption, the disclosure, modification or destruction of proprietary and other key information,
corruption of data, legal claims or proceedings, government enforcement actions, civil or criminal penalties, increased cyber
security protection and remediation costs, production delays or disruptions to operations including processing transactions and
reporting financial results and could adversely impact our reputation and our operating results. We have taken steps to address
these concerns and have implemented internal control and security measures to protect our systems and networks from security
breaches; however, measures that the Company takes to avoid, detect, mitigate or recover from material incidents, may be
insufficient, circumvented, or may become ineffective and there can be no assurance that a system or network failure, or
security breach, will not impact our business, results of operations and financial condition. As cyber security threats continue to
evolve and become more sophisticated, we may be required to incur significant costs and invest additional resources to protect
against and, if required, remediate the damage caused by such disruptions or system failures in the future.
Increasing attention to ESG matters, including any targets or other ESG or environmental justice initiatives, could
result in additional costs or risks or adverse impacts on our business.
Our business faces increasing scrutiny related to ESG issues, including environmental stewardship, supply chain management,
climate change, diversity and inclusion, workplace conduct, human rights, philanthropy and support for local communities.
Implementation of our environmental and sustainability initiatives, including the goals set forth in our annual sustainability
report requires certain financial expenditures and employee resources, and the implementation of certain ESG practices or
disclosures. If we fail to meet applicable standards or expectations with respect to these issues, including the expectations we
establish for our business, our reputation and brand could be damaged, and our business, financial condition and results of
operations could be adversely impacted. Investors, stakeholders and other interested parties are also increasingly focused on
issues related to environmental justice and ESG in general. This may result in increased scrutiny, protests and negative publicity
with respect to our business and operations, which could in turn result in the cancellation or delay of projects, the revocation of
permits, termination of contracts, lawsuits, regulatory action and policy change that may adversely affect our business strategy,
increase our costs, or adversely affect our reputation and performance.
We are subject to litigation, potential liability claims and contract disputes, and may become subject to additional
litigation, claims and disputes in the future, any of which could adversely affect our business, results of operations and
financial condition.
We are involved in various litigation matters, including regulatory proceedings, administrative proceedings, governmental
investigations, environmental matters and construction contract disputes. The nature of our operations also exposes us to
possible litigation claims in the future. Furthermore, the manufacture and sale of our products as well as the use of our products
in a wide variety of commercial and industrial applications expose us to potential product liability and related claims. In the
event that a product of ours fails to perform as expected, regardless of fault, or is used in an unexpected manner, and such
failure or use results in, or is alleged to result in, bodily injury and/or property damage or other losses, we may be subject to
product liability and product quality claims.
Because of the uncertain nature of litigation and insurance coverage decisions, we cannot predict the outcome of these matters.
These matters could have a material adverse effect on our reputation, business, results of operations and financial condition.
Litigation is very costly, and the costs associated with prosecuting and defending litigation matters could have a material
adverse effect on our business, results of operations and financial condition. Although we are unable to precisely estimate the
ultimate dollar amount of exposure to loss in connection with litigation matters, we make accruals as warranted. However, the
amounts that we accrue could vary significantly from the amounts we actually pay, due to inherent uncertainties, including the
inherent uncertainties of the estimation process, the uncertainties involved in litigation and other factors. See Part I, Item 3,
Legal Proceedings of this Annual Report for a description of our current material legal proceedings.
Potential limitations on our ability to access credit, or the ability of our customers and suppliers to access credit, may
adversely affect our business, results of operations and financial condition.
If our access to credit is limited or impaired, our business, results of operations and financial condition could be adversely
impacted. Our senior unsecured notes are rated by Standard & Poor's Corporation, Moody's Investors Service and Fitch Group,
Inc. In determining our credit ratings, the rating agencies consider a number of both quantitative and qualitative factors. These
factors include earnings (loss), fixed charges such as interest, cash flows, total debt outstanding, off-balance sheet obligations
and other commitments, total capitalization and various ratios calculated from these factors. The rating agencies also consider
predictability of cash flows, business strategy and diversity, industry conditions and contingencies. Any downgrades in our
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credit ratings may make raising capital more difficult, increase the cost and affect the terms of future borrowings, affect the
terms under which we purchase goods and services and limit our ability to take advantage of potential business opportunities.
We could also be adversely affected if our banks refused to honor their contractual commitments or cease lending.
We are also exposed to risks associated with the creditworthiness of our customers and suppliers. In certain markets, we have
experienced a consolidation among those entities to whom we sell. This consolidation has resulted in an increased credit risk
spread among fewer customers, often without a corresponding strengthening of their financial status. If the availability of credit
to fund or support the continuation and expansion of our customers' business operations is curtailed or if the cost of that credit is
increased, the resulting inability of our customers or of their customers to either access credit or absorb the increased cost of
that credit could adversely affect our business by reducing our sales or by increasing our exposure to losses from uncollectible
customer accounts. The consequences of such adverse effects could include the interruption of production at the facilities of our
customers, the reduction, delay or cancellation of customer orders, delays or interruptions of the supply of raw materials we
purchase and bankruptcy of customers, suppliers or other creditors. Any of these events may adversely affect our business,
results of operations and financial condition.
The impact of the Russian invasion of Ukraine on the global economy, energy supplies and raw materials is uncertain,
but may continue to negatively impact our business and operations.
Since early 2022, Russia and Ukraine have been engaged in active armed conflict. We continue to monitor the adverse impact
that the outbreak of war in Ukraine and the subsequent institution of sanctions against Russia by the U.S. and several European
and Asian countries may continue to have on the global economy in general, on our business and operations and on the
businesses and operations of our suppliers and customers. The ongoing conflict in Ukraine has led to market disruptions,
including significant volatility in commodity prices and credit markets, as well as reductions in demand and supply chain
interruptions, and contributed to global inflation. Further, if the conflict intensifies or expands beyond Ukraine, it could
continue to have an adverse, indirect impact on our operations in Poland. The Russian invasion of Ukraine did not have a direct
material adverse impact on our business, financial condition or results of operations during 2023 or 2022. However, we will
continue to monitor this fluid situation and develop contingency plans as necessary to address any disruptions to our business
operations. To the extent the war in Ukraine may continue to adversely affect our business as discussed above, it may also have
the effect of heightening many of the other risks described in this “Risk Factors” section, such as those relating to data security,
supply chain, volatility in prices of scrap, energy and other inputs, and market conditions, any of which could negatively affect
our business, results of operations and financial condition.
The potential impact of our customers' non-compliance with existing commercial contracts and commitments, due to
insolvency or for any other reason, may adversely affect our business, results of operations and financial condition.
From time to time in the past, some of our customers have sought to renegotiate or cancel their existing purchase commitments
with us. In addition, some of our customers have breached previously agreed upon contracts to buy our products by refusing
delivery of the products.
Where appropriate, we have and expect to in the future pursue litigation to recover our damages resulting from customer
contract defaults and bankruptcy filings. We use credit assessments in the U.S. and credit insurance in Poland to mitigate the
risk of customer insolvency. However, a large number of our customers defaulting on existing contractual obligations to
purchase our products could have a material adverse effect on our business, results of operations and financial condition.
The agreements governing our notes and our other debt contain financial covenants and impose restrictions on our
business.
The indentures governing our 4.125% Senior Notes due 2030, our 3.875% Senior Notes due 2031 and our 4.375% Senior Notes
due 2032 contain restrictions on our ability to create liens, sell assets, enter into sale and leaseback transactions and
consummate transactions causing a change of control such as a merger or consolidation. In addition to these restrictions, our
Credit Agreement, as defined in Note 8, Credit Arrangements, in Part II, Item 8 of this Annual Report, contains covenants that
restrict our ability to, among other things, enter into transactions with affiliates and guarantee the debt of some of our
subsidiaries. Our Credit Agreement and U.S. Facility, as defined in Note 8, Credit Arrangements, in Part II, Item 8 of this
Annual Report also require that we meet certain financial tests and maintain certain financial ratios, including maximum debt to
capitalization and interest coverage ratios. The loan agreement related to the Series 2022 Bonds, as defined in Note 8, Credit
Arrangements, in Part II, Item 8 of this Annual Report, also restricts our ability to, among other things, enter into certain sale
and leaseback transactions, incur certain liens and take certain actions that would adversely affect the tax-exempt status of the
Series 2022 Bonds.
13
Other agreements that we may enter into in the future may contain covenants imposing significant restrictions on our business
that are similar to, or in addition to, the covenants under our existing agreements. These restrictions may affect our ability to
operate our business and may limit our ability to take advantage of potential business opportunities as they arise.
Our ability to comply with these covenants may be affected by events beyond our control, including prevailing economic,
financial and industry conditions. The breach of any of these covenants could result in a default under the indentures governing
our notes or under our other debt agreements. An event of default under our debt agreements would permit our lenders to
declare all amounts borrowed from them to be due and payable, together with accrued and unpaid interest. If we were unable to
repay debt to our secured lenders or if we incur additional secured debt in the future, these lenders could proceed against the
collateral securing such debt. In addition, acceleration of our other indebtedness may cause us to be unable to make interest
payments on our notes.
We may not be able to successfully identify, consummate or integrate acquisitions, and acquisitions may adversely affect
our financial leverage.
Part of our business strategy includes pursuing synergistic acquisitions. We have expanded, and plan to continue to expand, our
business by making strategic acquisitions and regularly seeking suitable acquisition targets to enhance our growth. We may
fund such acquisitions using cash on hand, drawing under our credit facility or accessing the capital markets. To the extent we
finance such acquisitions with additional debt, the incurrence of such debt may result in a significant increase in our interest
expense and financial leverage, which could be further exacerbated by volatility in the debt capital markets. Further, an increase
in our leverage could lead to deterioration in our credit ratings.
The pursuit of acquisitions may pose certain risks to us. We may not be able to identify acquisition candidates that fit our
criteria for growth and profitability. Even if we are able to identify such candidates, we may not be able to acquire them on
terms or financing satisfactory to us. We will incur expenses and dedicate attention and resources associated with the review of
acquisition opportunities, whether or not we consummate such acquisitions.
Additionally, even if we are able to acquire suitable targets on agreeable terms, we may not be able to successfully integrate
their operations with ours. Achieving the anticipated benefits of any acquisition will depend in significant part upon whether we
integrate such acquired businesses in an efficient and effective manner. We may not be able to achieve the anticipated operating
and cost synergies or long-term strategic benefits of our acquisitions within the anticipated timing or at all. For example,
elimination of duplicative costs may not be fully achieved or may take longer than anticipated. The benefits from any
acquisition may be offset by the costs incurred in integrating the businesses and operations. We may also assume liabilities in
connection with acquisitions to which we would not otherwise be exposed. An inability to realize any or all of the anticipated
synergies or other benefits of an acquisition as well as any delays that may be encountered in the integration process, which
may delay the timing of such synergies or other benefits, could have an adverse effect on our business, results of operations and
financial condition.
Goodwill or other indefinite-lived intangible asset impairment charges in the future could have a material adverse effect
on our business, results of operations and financial condition.
We review the recoverability of goodwill and other indefinite-lived intangible assets annually as of the first day of our fourth
quarter, and whenever events or circumstances indicate that the carrying value of a reporting unit, including goodwill, or an
indefinite-lived intangible asset may not be recoverable.
To evaluate goodwill and other indefinite-lived intangible assets for impairment, we may use qualitative assessments to
determine whether it is more likely than not that the fair value of a reporting unit, including goodwill, or an indefinite-lived
intangible asset is less than its carrying amount. The qualitative assessments require assumptions to be made regarding multiple
factors, including the current operating environment, historical and future financial performance and industry and market
conditions. If an initial qualitative assessment identifies that it is more likely than not that the carrying value of a reporting unit
exceeds its estimated fair value, additional quantitative testing is performed. Alternatively, the Company may elect to bypass
the qualitative assessment and instead perform a quantitative impairment test to calculate the fair value of the reporting unit in
comparison to its associated carrying value.
The quantitative impairment tests require us to make an estimate of the fair value of our reporting units and indefinite-lived
intangible assets. An impairment could be recorded as a result of changes in assumptions, estimates or circumstances, some of
which are beyond our control. Factors which could result in an impairment include, but are not limited to: (i) reduced demand
for our products; (ii) our cost of capital; (iii) higher material prices; (iv) slower growth rates in our industry; and (v) changes in
the market based discount rates. Since a number of factors may influence determinations of fair value of goodwill and
14
indefinite-lived intangible assets, we are unable to predict whether impairments will occur in the future, and there can be no
assurance that continued conditions will not result in future impairments. The future occurrence of a potential indicator of
impairment could include matters such as (i) a decrease in expected net earnings; (ii) adverse equity market conditions; (iii) a
decline in current market multiples; (iv) a decline in our common stock price; (v) a significant adverse change in legal factors or
the general business climate; (vi) an adverse action or assessment by a regulator; (vii) a significant downturn in residential or
non-residential construction markets in the U.S.; and (viii) levels of imported steel into the U.S. Any such impairment would
result in us recognizing a non-cash charge in our consolidated statements of earnings, which could adversely affect our
business, results of operations and financial condition.
Impairment of long-lived assets in the future could have a material adverse effect on our business, results of operations
and financial condition.
We have a significant amount of property, plant and equipment, finite-lived intangible assets and right-of-use ("ROU") assets
that may be subject to impairment testing. Long-lived assets are subject to an impairment assessment when certain triggering
events or circumstances indicate that their carrying value may be impaired. If the net carrying value of the asset or group of
assets exceeds our estimate of future undiscounted cash flows of the operations related to the asset, the excess of the net
carrying value over estimated fair value is charged to impairment loss in the consolidated statements of earnings. The primary
factors that affect estimates of future cash flows for these long-lived asset groups are (i) management's raw material price
outlook; (ii) market demand; (iii) working capital changes; (iv) capital expenditures; and (v) selling, general and administrative
("SG&A") expenses. There can be no assurance that continued market conditions, demand for our products, facility utilization
levels or other factors will not result in future impairment charges.
Competition from other materials may have a material adverse effect on our business, results of operations and
financial condition.
In many applications, steel competes with other materials, such as aluminum and plastics (particularly in the automobile
industry), cement, composites, glass and wood. Increased use of, or additional substitutes for, steel products could adversely
affect future market prices and demand for steel products.
Our operations present significant risk of injury or death.
The industrial activities conducted at our facilities present significant risk of serious injury or death to our employees,
customers or other visitors to our operations. Notwithstanding our safety precautions, including our material compliance with
federal, state and local employee health and safety regulations, we may be unable to avoid material liabilities for injuries or
deaths. We maintain workers' compensation insurance to address the risk of incurring material liabilities for injuries or deaths,
but there can be no assurance that the insurance coverage will be adequate or will continue to be available on the terms
acceptable to us, or at all, which could result in material liabilities to us for any injuries or deaths.
Our business, financial condition, results of operations, cash flows, liquidity and stock price may be adversely affected
by global public health epidemics.
Pandemics, epidemics, widespread illness or other health issues, including the COVID-19 pandemic ("COVID-19"), that
interfere with the ability of our employees, suppliers, customers, financing sources or others to conduct business, or negatively
affect consumer confidence or the global economy, could adversely affect our business, financial condition, results of
operations, cash flows, liquidity and stock price.
Despite the limited impact of COVID-19 on our operations to date, a resurgence of COVID-19 or any other public health crisis
may negatively impact our operations, supply chain, transportation networks and customers, which may compress our margins,
including as a result of preventative and precautionary measures that we, other businesses and governments are taking. Any
economic downturn resulting from the widespread public health impacts of COVID-19 or any future public health crisis could
adversely affect demand for our products and contribute to volatile supply and demand conditions affecting prices and volumes
in the markets for our products and raw materials.
Fluctuations in the value of the U.S. dollar relative to other currencies may adversely affect our business, results of
operations and financial condition.
Fluctuations in the value of the U.S. dollar, including, in particular, the increased strength of the U.S. dollar as compared to
Turkey's lira, China's renminbi or the euro, may adversely affect our business, results of operations and financial condition. A
strong U.S. dollar makes imported metal products less expensive, resulting in more imports of steel products into the U.S. by
15
our foreign competitors, while a weak U.S. dollar may have the opposite impact on imports. With the exception of exports of
nonferrous scrap metal by the recycling facilities in our North America segment, we have not recently been a significant
exporter of metal products. Economic difficulties in some large steel-producing regions of the world, resulting in lower local
demand for steel products, have historically encouraged greater steel exports to the U.S. at depressed prices which can be
exacerbated by a strong U.S. dollar. As a result, our products that are made in the U.S. may become relatively more expensive
as compared to imported steel, which has had, and in the future could have, a negative impact on our business, results of
operations and financial condition.
Operating internationally carries risks and uncertainties which could adversely affect our business, results of operations
and financial condition.
We have significant recycling and fabrication facilities and a mini mill in Poland as well as Tensar facilities in China and
England. Our Europe segment, which comprises our international operations, generated approximately 16% of 2023
consolidated net sales. Our stability, growth and profitability are subject to a number of risks inherent in doing business
internationally in addition to the currency exchange risk and operating risks discussed above, including:
•
•
•
•
•
•
political, military, terrorist or major pandemic events;
differences in demand, production and energy costs;
local labor and social issues;
legal and regulatory requirements or limitations imposed by foreign governments (particularly those with significant steel
consumption or steel-related production including Turkey, China, Brazil, Russia and India), including quotas, tariffs or
other protectionist trade barriers, adverse tax law changes, nationalization or currency restrictions;
disruptions or delays in shipments caused by customs compliance or government agencies; and
potential difficulties in staffing and managing local operations.
These factors may adversely affect our business, results of operations and financial condition.
Hedging transactions may expose us to losses or limit our potential gains.
Our product lines and global operations expose us to risks associated with fluctuations in foreign currency exchange rates,
commodity prices and interest rates. As part of our risk management program, we sometimes use financial instruments,
including metals commodity futures, natural gas, electricity and other energy forward contracts, freight forward contracts,
foreign currency exchange forward contracts and interest rate swap contracts. While intended to reduce the effects of
fluctuations in these prices and rates, these transactions may limit our potential gains or expose us to losses. If our
counterparties to such transactions or the sponsors of the exchanges through which these transactions are offered, such as the
London Metal Exchange, fail to honor their obligations due to financial distress, we would be exposed to potential losses or the
inability to recover anticipated gains from these transactions.
We enter into the foreign currency exchange forward contracts as economic hedges of trade commitments or anticipated
commitments denominated in currencies other than the functional currency to mitigate the effects of changes in currency rates.
These foreign exchange commitments are dependent on timely performance by our counterparties. Their failure to perform
could result in us having to close these hedges without the anticipated underlying transaction and could result in losses if
foreign currency exchange rates have changed.
There can be no assurance that we will repurchase shares of our common stock at all or in any particular amounts.
The stock markets in general have experienced substantial price and trading fluctuations, which have resulted in volatility in the
market prices of securities that often are unrelated or disproportionate to changes in operating performance. These broad market
fluctuations may adversely affect the trading price of our common stock. Price volatility over a given period may also cause the
average price at which we repurchase our own common stock to exceed the stock's price at a given point in time. In addition,
significant changes in the trading price of our common stock and our ability to access capital on terms favorable to us could
impact our ability to repurchase shares of our common stock. The timing and amount of any repurchases will be determined by
the Company's management based on its evaluation of market conditions, capital allocation alternatives and other factors
beyond our control. Our share repurchase program may be modified, suspended, extended or terminated by the Company at any
time and without notice. See Note 15, Capital Stock, in Part II, Item 8 of this Annual Report for additional information on our
share repurchase program.
16
RISKS RELATED TO OUR INDUSTRY
Our industry and the industries we serve are vulnerable to global economic conditions.
Metals industries and commodity products have historically been vulnerable to significant declines in consumption, global
overcapacity and depressed product pricing during prolonged periods of economic downturn. Our business supports cyclical
industries such as commercial, government and residential construction, energy, metals service center, petrochemical and
original equipment manufacturing. We may experience significant fluctuations in demand for our products from these industries
based on global or regional economic conditions, energy prices, consumer demand and decisions by governments to fund
infrastructure projects such as highways, schools, energy plants and airports. Commercial and infrastructure construction
activities related to the residential housing market, such as shopping centers, schools and roads, could be adversely impacted by
a prolonged slump in new housing construction. Our business, results of operations and financial condition are adversely
affected when the industries we serve suffer a prolonged downturn or anemic growth. Because we do not have unlimited
backlogs, our business, results of operations and financial condition are promptly affected by short-term economic fluctuations.
We are unable to predict the duration of current economic conditions that are contributing to current demand for our products.
Future economic downturns or a prolonged period of slow growth or economic stagnation could materially adversely affect our
business, results of operations and financial condition.
Excess capacity and over-production by foreign producers in the steel industry as well as the startup of new steelmaking
capacity in the U.S. could result in lower domestic steel prices, which would adversely affect our sales, margins and
profitability.
Global steelmaking capacity exceeds demand for steel products in some regions around the world. Rather than reducing
employment by rationalizing capacity with consumption, steel manufacturers in these countries (often with local government
assistance or subsidies in various forms) have traditionally periodically exported steel at prices significantly below their home
market prices, which prices may not reflect their costs of production or capital. For example, steel production in China, the
world's largest producer and consumer of steel, has continued to exceed Chinese demand. This excess capacity in China has
resulted in a further increase in imports of artificially low-priced steel and steel products to the U.S. and world steel markets. A
continuation of this trend or a significant decrease in China's rate of economic expansion could result in increasing steel imports
from China. Excessive imports of steel into the U.S. have exerted, and may continue to exert, downward pressure on U.S. steel
prices, which negatively affects our ability to increase our sales, margins and profitability. The excess capacity may create
downward pressure on our steel prices and lead to reduced sales volumes as imports absorb market share that would otherwise
be filled by domestic supply, all of which would adversely affect our sales, margins and profitability and could subject us to
possible renegotiation of contracts or increases in bad debt. Excess capacity has also led to greater protectionism as is evident in
raw material and finished product border tariffs put in place by China, Brazil and other countries.
We believe the downward pressure on, and periodically depressed levels of, U.S. steel prices in some recent years have been
further exacerbated by imports of steel involving dumping and subsidy abuses by foreign steel producers. While some tariffs
and quotas are periodically put into effect for certain steel products imported from a number of countries that have been found
to have been unfairly pricing steel imports to the U.S., there is no assurance that tariffs and quotas will always be levied, even if
otherwise justified, and even when imposed many of these are short-lived or ineffective.
On March 8, 2018, the President signed a proclamation imposing a 25% tariff or quota limits on all imported steel products for
an indefinite period of time under Section 232. The tariff or quota limits are imposed on all steel imports with the exception of
steel imports originating from Australia, Canada and Mexico. During 2022, the current administration converted the tariff on
steel imports from the European Union, U.K. and Japan to a tariff rate quota. When the Section 232 or other import tariffs,
quotas or duties expire or if others are further relaxed or repealed, or if relatively higher U.S. steel prices make it attractive for
foreign steelmakers to export their steel products to the U.S., despite the presence of import tariffs, quotas or duties, the
resurgence of substantial imports of foreign steel could create downward pressure on U.S. steel prices.
The adverse effects of excess capacity and over-production by foreign producers could be exacerbated by the startup of new
steelmaking capacity in the U.S. Any of these adverse effects could have a material adverse effect on our business, results of
operations and financial condition.
17
Rapid and significant changes in the price of metals could adversely impact our business, results of operations and
financial condition.
Prices for most metals in which we deal have experienced increased volatility over the last several years, and such increased
price volatility impacts us in several ways. While our downstream products may benefit from metal margin expansion as
rapidly decreasing input costs for previously contracted fixed price work declines, our steel products would likely experience
reduced metal margin and may be forced to liquidate high-cost inventory at reduced metal margins or losses until prices
stabilize. Sudden increases in input costs could have the opposite effect in each case. Overall, we believe that rapid substantial
price changes are not to our industry's benefit. Our customer and supplier base would be impacted due to uncertainty as to
future prices. A reluctance to purchase inventory in the face of extreme price decreases or to sell quickly during a period of
rapid price increases would likely reduce our volume of business. Marginal industry participants or speculators may attempt to
participate to an unhealthy extent during a period of rapid price escalation with a substantial risk of contract default if prices
suddenly reverse. Risks of default in contract performance by customers or suppliers as well as an increased risk of bad debts
and customer credit exposure could increase during periods of rapid and substantial price changes.
Physical impacts of climate change could have a material adverse effect on our costs and results of operations.
The physical impacts of climate change may result in, among other things, increasing temperatures and an increase in extreme
weather events such as droughts, wildfires, thunderstorms, snow or ice storms, earthquakes, floods, hurricanes and rising sea
levels. Extreme weather conditions and natural disasters may increase our costs, limit the availability of materials, cause
damage to our facilities or result in a prolonged disruption to our operations, and any damage resulting from extreme weather
may not be fully insured.
Many of our facilities are located near coastal areas or waterways where rising sea levels or flooding could disrupt our
operations or adversely impact our facilities. Additionally, two of our micro mills are located in an arid desert climate, where
drought may restrict available water supplies and increase the risk of wildfires. Furthermore, major changes in weather patterns,
periods of extended inclement weather or associated flooding may inhibit construction activity utilizing our products, result in
project cancellations, delay or hinder shipments of our products to customers or reduce scrap metal inflows to our recycling
facilities or disrupt the availability of electricity to our facilities. Any such events could have a material adverse effect on our
costs or results of operations.
RISKS RELATED TO THE REGULATORY ENVIRONMENT
Compliance with and changes in environmental laws and regulations and remediation requirements could result in
substantially increased capital obligations and operating costs; violations of environmental laws and regulations could
result in costs that have a material adverse effect on our business, results of operations and financial condition.
Existing environmental laws or regulations, as currently interpreted or reinterpreted in the future, and future laws and
regulations, may have a material adverse effect on our business, results of operations and financial condition. Compliance with
environmental laws and regulations is a significant factor in our business. We are subject to local, state, federal and
international environmental laws and regulations concerning, among other matters, waste disposal, air emissions, waste and
storm water effluent and disposal and employee health. Federal and state regulatory agencies can impose administrative, civil
and criminal penalties and may seek injunctive relief impacting continuing operations for non-compliance with environmental
requirements.
New facilities that we may build, especially steel mills, are required to obtain several environmental permits before significant
construction or commencement of operations. Delays in obtaining permits or unanticipated conditions in such permits could
delay the project or increase construction costs or operating expenses. Our manufacturing and recycling operations produce
significant amounts of by-products, some of which are handled as industrial waste or hazardous waste. For example, our EAF
mills generate electric arc furnace dust ("EAF dust"), which the EPA and other regulatory authorities classify as hazardous
waste. EAF dust and other industrial waste and hazardous waste require special handling, recycling or disposal.
In addition, the primary feed materials for the shredders operated by our recycling facilities are automobile hulks and obsolete
household appliances. Approximately 20% of the weight of an automobile hull consists of material known as shredder fluff.
After the segregation of ferrous and saleable nonferrous metals, shredder fluff remains. We, along with others in the recycling
industry, interpret federal regulations to require shredder fluff to meet certain criteria and pass a toxic leaching test to avoid
classification as a hazardous waste. We also endeavor to remove hazardous contaminants from the feed material prior to
shredding. As a result, we believe the shredder fluff we generate is not normally considered or properly classified as hazardous
18
waste. If the laws, regulations or testing methods change with regard to EAF dust or shredder fluff or other by-products, we
may incur additional significant costs.
Changes to National Ambient Air Quality Standards ("NAAQS") or other requirements on our air emissions could make it more
difficult to obtain new permits or to modify existing permits and could require changes to our operations or emissions control
equipment. Such difficulties and changes could result in operational delays and capital and ongoing compliance expenditures.
These regulations can also increase our costs of energy, primarily electricity, which we use extensively in the steelmaking
process. Moreover, in July 2021, the EPA issued a public statement regarding Clean Air Act violations at metal recycling
facilities that operate auto and scrap metal shredders, noting that noncompliant shredders can have an impact on overburdened
communities, and in August 2023, the EPA released federal enforcement priorities, which affirmed the EPA’s continued focus
on reducing air toxins. The EPA uses alerts such as this to signal its intention to focus enforcement activity on a particular
industry sector.
Legal requirements are changing frequently and are subject to interpretation. New laws, regulations and changing
interpretations by regulatory authorities, together with uncertainty regarding adequate pollution control levels, testing and
sampling procedures, new pollution control technology and cost/benefit analysis based on market conditions along with
changing interpretations, stricter enforcement and expanding scope of regulation to emerging contaminants are all factors that
may increase our future expenditures to comply with environmental requirements. Accordingly, we are unable to predict the
ultimate cost of future compliance with these requirements or their effect on our operations. We cannot predict whether such
costs would be able to be passed on to customers through product price increases. Competitors in various regions or countries
where environmental regulation is less restrictive, subject to different interpretation or generally not enforced, may enjoy a
competitive advantage.
We may also be required to conduct additional cleanup (and pay for associated natural resource damages) at sites where we
have already participated in remediation efforts or take remediation action with regard to sites formerly used in connection with
our operations. We may be required to pay for a portion or all of the costs of cleanup or remediation at sites we never owned or
on which we never operated if we are found to have arranged for treatment or disposal of hazardous substances on the sites. In
cases of joint and several liability, we may be obligated to pay a disproportionate share of cleanup costs if other responsible
parties are financially insolvent.
Increased regulation associated with climate change could impose significant additional costs on both our steelmaking
and metals recycling operations.
Energy used by our steelmaking operations is a significant input and the largest contributor to our GHG emissions and there is
growing belief that consumption of energy derived from fossil fuels is a major contributor to climate change. The U.S.
government and various governmental agencies have introduced or are contemplating regulatory changes in response to the
potential impact of climate change, including legislation regarding carbon emission pricing, GHG emissions and renewable
energy targets. International treaties or agreements may also result in increasing regulation of GHG emissions, including the
introduction of carbon emissions trading mechanisms. Therefore, any such regulation regarding climate change and GHG
emissions could impose significant costs on our steelmaking and metals recycling operations and on the operations of our
customers and suppliers, including increased energy, capital equipment, environmental monitoring and reporting and other
costs in order to comply with current or future laws or regulations and limitations imposed on our operations. The potential
costs of "allowances," "offsets" or "credits" that may be part of potential cap-and-trade programs or similar future regulatory
measures are still uncertain. Any adopted future climate change and GHG regulations could negatively impact our ability (and
that of our customers and suppliers) to compete with companies situated in areas not subject to such limitations. From a
medium and long-term perspective, as a result of these regulatory initiatives, we may see an increase in costs relating to our
assets that emit significant amounts of GHGs. Additionally, although we are focused on water conservation and reuse in our
operations, steel manufacturing is a water intensive industry. There may be an increase in costs to respond to future water laws
and regulations, and operations in areas with limited water availability may be impacted if droughts become more frequent or
severe.
Regulatory initiatives in these areas will be either voluntary or mandatory and may impact our operations directly or through
our suppliers or customers. Until the timing, scope and extent of any future regulation becomes known, we cannot predict the
effect on our business, results of operations or financial condition, but such effect could be materially adverse to our business,
results of operations and financial condition.
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We are subject to governmental regulatory and compliance risks that expose us to potential litigation and disputes
regarding violations, which could adversely affect our business, results of operations and financial condition.
As noted above, existing laws or regulations, as currently interpreted or reinterpreted in the future, and future laws and
regulations, may have a material adverse effect on our business, results of operations and financial condition. See the risk factor
"Compliance with and changes in environmental laws and regulations and remediation requirements could result in
substantially increased capital obligations and operating costs; violations of environmental laws and regulations could result in
costs that have a material adverse effect on our business, results of operations and financial condition" of this Annual Report for
a description of such risks relating to environmental laws and regulations. In addition to such environmental laws and
regulations, complex foreign and U.S. laws and regulations that apply to our international operations, including without
limitation the Foreign Corrupt Practices Act and similar laws in other countries, which generally prohibit companies and those
acting on their behalf from making improper payments to foreign government officials for the purpose of obtaining or retaining
business, regulations related to import-export controls, the Office of Foreign Assets Control sanctions program and antiboycott
provisions, may increase our cost of doing business in international jurisdictions and expose us and our employees to elevated
risk. While we believe that we have adopted appropriate risk management and compliance programs, the nature of our
operations means that legal and compliance risks will continue to exist. A negative outcome in an unusual or significant legal
proceeding or compliance investigation could adversely affect our business, results of operations and financial condition.
We are involved, and may in the future become involved, in various environmental matters that may result in fines,
penalties or judgments being assessed against us or liability imposed upon us which we cannot presently estimate or
reasonably foresee, and which may have a material impact on our business, results of operations and financial
condition.
Under CERCLA or similar state statutes, we may have obligations to conduct investigation and remediation activities
associated with alleged releases of hazardous substances or to reimburse the EPA (or state agencies as applicable) for such
activities and to pay for natural resource damages associated with alleged releases. We have been named a PRP at several
federal and state Superfund sites because the EPA or an equivalent state agency contends that we and other potentially
responsible scrap metal suppliers are liable for the cleanup of those sites as a result of having sold scrap metal to unrelated
manufacturers for recycling as a raw material in the manufacture of new products. We are involved in litigation or
administrative proceedings with regard to several of these sites in which we are contesting, or at the appropriate time may
contest, our liability. In addition, we have received information requests with regard to other sites which may be under
consideration by the EPA as potential CERCLA sites.
We are presently participating in PRP organizations at several sites, which are paying for certain remediation expenses.
Although we are unable to precisely estimate the ultimate dollar amount of exposure to loss in connection with various
environmental matters or the effect on our consolidated financial position, we make accruals as warranted. In addition, although
we do not believe that a reasonably possible range of loss in excess of amounts accrued for pending lawsuits, claims or
proceedings would be material to our financial statements, additional developments may occur, and due to inherent
uncertainties, including evolving remediation technology, changing regulations, possible third-party contributions, the inherent
uncertainties of the estimation process, the uncertainties involved in litigation and other factors, the amounts we ultimately are
required to pay could vary significantly from the amounts we accrue, and this could have a material adverse effect on our
business, results of operations and financial condition.
Changes in tax legislation and regulations in the jurisdictions in which we operate may adversely affect our financial
condition or results of operations.
We are subject to taxation at the federal, state and local levels in the U.S., Poland, the U.K. and other countries and jurisdictions
in which we operate, including income taxes, sales taxes, value-added (“VAT”) taxes and similar taxes and assessments. New
tax legislative initiatives may be proposed from time to time which may impact our effective tax rate and which could adversely
affect our tax positions or tax liabilities. Our future effective tax rate could be adversely affected by, among other things,
changes in the composition of earnings in jurisdictions with differing tax rates, changes in statutory rates and other legislative
changes, changes in interpretations of existing tax laws, or changes in determinations regarding the jurisdictions in which we
are subject to tax. From time to time, U.S. federal, state and local and foreign governments make substantive changes to tax
rules and their application, which could result in materially higher taxes than would be incurred under existing tax law and
which could adversely affect our financial condition or results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
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ITEM 2. PROPERTIES
The following table describes our principal properties as of August 31, 2023. These properties are either owned by us and not
subject to any significant encumbrances or are leased by us. We consider all properties to be appropriately utilized, suitable and
adequate to meet the requirements of our present and foreseeable future operations. Refer to Part I, Item 1, Business included in
this Annual Report for a discussion of the nature of our operations.
Segment and Operation
Location
North America
Recycling facilities
(1)
Steel mills
Mini mill
Mini mill
Mini mill
Mini mill
Mini mill
Mini mill
Micro mill
Two micro mills
Rerolling mill
Fabrication facilities
CMC Impact Metals
Construction Services
Post-tension cable facilities
Tensar facilities
Europe
Recycling facilities
Steel mini mill
Fabrication facilities
Tensar facilities
Birmingham, Alabama
Cayce, South Carolina
Jacksonville, Florida
Knoxville, Tennessee
Sayreville, New Jersey
Seguin, Texas
Durant, Oklahoma
Mesa, Arizona
Magnolia, Arkansas
(2)
(3)
(4)
(5)
(6)
Twelve locations in Poland(7)
Zawiercie, Poland
Five locations in Poland(7)
(6)
Site
Acreage
Owned
Site Acreage
Leased
Approximate
Building Square
Footage
Capacity
(Millions of
Tons)(8)
5.1
6.1
772
88
1,650,000
71
142
619
72
116
661
402
273
123
1
—
—
—
—
—
4
—
—
580,000
760,000
460,000
460,000
380,000
870,000
290,000
780,000
280,000
752
40
3,000,000
2.1
112
35
3
18
104
524
24
16
—
51
8
20
4
—
—
—
300,000
450,000
120,000
400,000
160,000
2,950,000
260,000
310,000
0.5
1.6
0.4
__________________________________
(1) Consists of 43 recycling facilities, with 17 locations in Texas, seven locations in South Carolina, four locations in Florida,
three locations in Tennessee, two locations in each of Alabama, Georgia, Missouri and North Carolina and one location in
each of California, Kansas, Louisiana and Oklahoma. The recycling facilities associated with the North America segment
are not individually material.
(2) Consists of 55 fabrication facilities, with 12 locations in Texas, five locations in Florida, three locations in each of
California and Illinois, two locations in each of Arizona, Colorado, Georgia, Hawaii, Missouri, Nevada, New Jersey, North
Carolina, Oklahoma, South Carolina, Tennessee, Utah and Virginia and one location in each of Alabama, Kentucky,
Louisiana, New Mexico, Ohio and Washington. The fabrication facilities associated with the North America segment are
not individually material.
(3) Consists of two CMC Impact Metals facilities, with one location in Alabama and one location in Pennsylvania. The CMC
Impact Metals facilities are not individually material.
(4) Consists of 24 Construction Services facilities, with 18 locations in Texas, five locations in Louisiana and one location in
Oklahoma. The Construction Services facilities are not individually material.
(5) Consists of three post-tension cable facilities, with two locations in Georgia and one location in California. The post-tension
cable facilities are not individually material.
21
(6) Consists of two Tensar facilities within the North America segment, located in Georgia and Oklahoma, and two facilities
within the Europe segment, located in China and England. The Tensar facilities are not individually material.
(7) The recycling facilities and fabrication facilities associated with the Europe segment are not individually material.
(8) Refer to Part 1, Item 1, Business, of this Annual Report for information about the calculation of capacity for our steel mills.
The extent to which we utilize our capacity varies by property and is highly dependent on the specific product mix
manufactured. Our product mix is determined in response to market conditions, including pricing and demand. We believe our
capacity levels are adequate for present and anticipated future needs, and our facilities are capable of producing increased
volumes.
In addition to the owned facilities described above, we own 208 acres of land in Berkeley County, West Virginia, the site of the
Company's planned fourth micro mill.
In addition to the leased facilities described above, we lease the 105,916 square foot office space occupied by our corporate
headquarters in Irving, Texas. Generally, our leases expire on various dates over the next ten years, with the exception of the
leased facilities in our Europe segment. Several of the leases have renewal options. We have generally been able to renew
leases prior to their expiration. We estimate our minimum annual rental obligation for our real estate operating leases in effect
at August 31, 2023, to be paid during 2024, to be approximately $10.8 million.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in legal and regulatory proceedings, lawsuits, claims and investigations (including those related to
environmental laws and regulations) associated with the normal conduct of its businesses and operations. It is not possible to
predict the outcome of the pending actions, and, as with any litigation, it is possible that these actions could be decided
unfavorably to the Company. We believe that there are meritorious defenses to these actions and that these actions will not have
a material adverse effect upon our results of operations, cash flows or financial condition, and, where appropriate, these actions
are being vigorously contested.
We are the subject of civil actions regarding environmental law compliance, or have received notices from the EPA or state
agencies with similar responsibility, that we and numerous other parties are considered a PRP and may be obligated under
CERCLA, or similar state statutes, to pay for the cost of remedial investigation, feasibility studies and ultimately remediation to
correct alleged releases of hazardous substances at nine locations. The actions and notices refer to the following locations, none
of which involve real estate we ever owned or upon which we ever conducted operations: the Sapp Battery site in Cottondale,
Florida, the Interstate Lead Company site in Leeds, Alabama, the Peak Oil site in Tampa, Florida, the R&H Oil site in San
Antonio, Texas, the SoGreen/Parramore site in Tifton, Georgia, the Jensen Drive site in Houston, Texas, the Chemetco site in
Hartford, Illinois, the Ward Transformer site in Raleigh, North Carolina and the Bailey Metal Processors, Inc. site in Brady,
Texas. We may contest our designation as a PRP with regard to certain sites, while at other sites we are participating with other
named PRPs in agreements or negotiations that have resulted or that we expect will result in agreements to remediate the sites.
During 2010, we acquired a 70% interest in the real property at Jensen Drive as part of the remediation of that site. We have
periodically received information requests from government environmental agencies with regard to other sites that are
apparently under consideration for designation as listed sites under CERCLA or similar state statutes. Often, we do not receive
any further communication with regard to these sites, and as of the date of this Annual Report, we do not know if any of these
inquiries will ultimately result in a demand for payment from us.
We believe that adequate provisions have been made in the financial statements for the potential impact of any loss in
connection with the above-described legal proceedings and environmental matters. Management believes that the outcome of
the proceedings mentioned, and other miscellaneous litigation and proceedings now pending, will not have a material adverse
effect on our business, results of operations or financial condition.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
22
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
MARKET, STOCKHOLDERS AND DIVIDENDS
Our common stock is traded on the New York Stock Exchange under the symbol CMC. The number of stockholders of record
of CMC common stock at October 11, 2023 was 2,014.
We paid quarterly dividends in 2023 at the rate of $0.16 per share of CMC common stock, compared to quarterly dividends
paid in 2022 at the rate of $0.14 per share of CMC common stock. On October 10, 2023, the Board of Directors declared
CMC's 236th quarterly cash dividend. The dividend was declared at the rate of $0.16 per share of CMC common stock and is
payable on November 9, 2023 to stockholders of record as of the close of business on October 26, 2023. While the Board of
Directors currently intends to continue regular quarterly cash dividend payments, the Board of Directors’ determination with
respect to any future dividends will depend upon our profitability and financial condition, contractual restrictions, restrictions
imposed by applicable law and other factors that the Board of Directors deems relevant at the time of such determination. Based
on its evaluation of these factors, the Board of Directors may determine not to declare a dividend, or to declare dividends at
rates that are less than currently anticipated.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
The following table provides information about purchases of equity securities registered by the Company pursuant to Section
12 of the Exchange Act, as amended, made by the Company or any affiliated purchasers during the quarter ended August 31,
2023.
Issuer Purchases of Equity Securities(1)
Period
June 1, 2023 - June 30, 2023
July 1, 2023 - July 31, 2023
August 1, 2023 - August 31, 2023
Total Number of
Shares Purchased
Average Price Paid
Per Share
115,500 $
110,000
126,500
352,000
47.43
54.75
55.86
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
Approximate Dollar
Value of Shares that
May Yet Be
Purchased Under the
Plans or Programs as
of the End of Period
115,500 $
99,811,582
110,000
126,500
352,000
93,788,687
86,722,118
__________________________________
(1) On October 13, 2021, the Company announced that the Board of Directors authorized a share repurchase program under
which the Company may repurchase up to $350.0 million of the Company's outstanding common stock. The share
repurchase program does not require the Company to purchase any dollar amount or number of shares of CMC common
stock and may be modified, suspended, extended or terminated by the Company at any time without prior notice. See Note
15, Capital Stock, in Part II, Item 8 of this Annual Report for more information on the share repurchase program.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction
with our consolidated financial statements and the accompanying notes contained in this Annual Report.
Our discussion and analysis of fiscal year 2023 compared to fiscal year 2022 is included herein. Our discussion and analysis of
fiscal year 2022 compared to fiscal year 2021 can be found in Part II, Item 7, Management’s Discussion and Analysis of
Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the year ended August 31, 2022, which
was filed with the SEC on October 13, 2022.
Any reference in this Annual Report to a "year-over-year" change relates to the relevant comparison between activity from each
twelve month period ended August 31, 2023 and 2022.
23
OVERVIEW
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. Our
operations are conducted through two reportable segments: North America and Europe. See Part I, Item 1, Business for further
information regarding our business and reportable segments.
Key Performance Indicators
When evaluating our results for the period, we compare net sales, in the aggregate and for both of our segments, in the current
period to net sales in the corresponding period of the prior year. In doing so, we focus on changes in average selling price per
ton and tons shipped compared to the prior period for each of our vertically integrated product categories (raw materials, steel
products and downstream products) as these are the two variables that typically have the greatest impact on our net sales. Raw
materials include ferrous and nonferrous scrap, steel products include rebar, merchant bar and other steel products, such as
billets and wire rod, and downstream products primarily include fabricated rebar and steel fence posts.
Adjusted EBITDA is used by management to compare and evaluate the period-over-period underlying business operational
performance of our segments. Adjusted EBITDA is the sum of earnings before interest expense, income taxes, depreciation and
amortization and impairment expense. Although there are many factors that can impact a segment’s adjusted EBITDA and,
therefore, our overall earnings, changes in metal margin of our steel products and downstream products period-over-period is a
consistent area of focus for our Company and industry. Metal margin is a metric used by management to monitor the results of
our vertically integrated organization. For our steel products, metal margin is the difference between the average selling price
per ton of rebar, merchant bar and other steel products and the cost of ferrous scrap per ton utilized by our steel mills to produce
these products. An increase or decrease in input costs can impact profitability of these products when there is no corresponding
change in selling prices due to competitive pressures. The metal margin for our downstream products is the difference between
the average selling price per ton of fabricated rebar and steel fence post products and the scrap input costs to produce these
products. The majority of our downstream products selling prices per ton are fixed at the beginning of a project and these
projects last one to two years on average. Because the selling price generally remains fixed over the life of a project, changes in
input costs over the life of the project can significantly impact profitability.
BUSINESS CONDITIONS AND DEVELOPMENTS
2023 Acquisitions
On September 15, 2022, we completed the acquisition of Advanced Steel Recovery, LLC ("ASR"), a supplier of recycled
ferrous metals located in Southern California. ASR's primary operations include processing and brokering capabilities that
source material for sale into both the domestic and export markets.
On November 14, 2022, we 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, we 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. The majority of volumes processed by Roane relate to obsolete
ferrous scrap metals to be consumed by our steel mill operations.
On March 17, 2023, we 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, we 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 our
Tensar operations under a contract manufacturing arrangement.
On July 12, 2023, we 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.
24
The acquisitions of ASR, Kodiak, Roane, Tendon, BOSTD and EDSCO (collectively, the "2023 Acquisitions") are not
significant individually, or in the aggregate, to our financial position as of August 31, 2023 or results of operations for the year
ended August 31, 2023. Operating results for the 2023 Acquisitions are presented within our North America reportable
segment.
Tensar Acquisition
On April 25, 2022 (the "Tensar Acquisition Date"), we completed the acquisition of TAC Acquisition Corp. ("Tensar") for
approximately $550 million, net of cash acquired. Through its patented foundation systems, Tensar produces ground
stabilization and soil reinforcement solutions that complement our existing concrete reinforcement product lines and broaden
our ability to address multiple early phases of commercial and infrastructure construction, including subgrade, foundation and
structures. End customers for these products include commercial, industrial and residential site developers, mining and oil and
gas companies, transportation authorities, coastal and waterway authorities and waste management companies. The acquired
operations within North America are presented within our North America reportable segment, and the remaining acquired
operations are presented within our Europe reportable segment, in each case since the Tensar Acquisition Date. See Note 2,
Changes in Business, in Part II, Item 8 of this Annual Report for more information about the Tensar acquisition.
Capital Expenditures
During the fourth quarter of 2023, our third micro mill was placed into service. Initial commercial production of rebar
commenced during commissioning, prior to the startup of merchant bar production that will occur in 2024. This micro mill will
be the first in the world with the capability to produce merchant bar quality products through a continuous production process
and employs the latest technology in EAF power supply systems, which will allow us to directly connect the EAF and the ladle
furnace to renewable energy sources such as solar and wind. The new facility, located in Mesa, Arizona, replaces the rebar
capacity at our Rancho Cucamonga, California mill, which was sold during 2022, and allows us to more efficiently meet West
Coast demand for steel products. For further details on the sale of the Rancho Cucamonga, California mill, refer to Note 2,
Changes in Business, in Part II, Item 8 of this Annual Report.
In December 2022, we announced that our planned fourth micro mill will be located in Berkeley County, West Virginia. This
new micro mill will be geographically situated to serve the Northeast, Mid-Atlantic and Mid-Western U.S. markets and will
enhance our steel production capabilities by achieving synergies within the existing network of mills and downstream
fabrication plants.
In July 2021, we completed the construction of and commissioned a third rolling line at our mini mill in Poland. The third
rolling line takes advantage of historical excess melting capacity in Poland, expands our overall rolling capacity and allows the
rolling lines to now operate independently for each steel product produced by the mini mill (rebar, merchant bar and wire rod).
Chief Executive Officer Transition
Effective September 1, 2023, our Board of Directors appointed Peter R. Matt, our then President, as President and Chief
Executive Officer, immediately following the retirement of Barbara R. Smith, our then Chief Executive Officer and Chairman
of the Board of Directors. Mr. Matt has served as our President since April 9, 2023 and will continue as a member of the Board
of Directors, which he joined in June 2020. Ms. Smith was appointed Executive Chairman of the Board of Directors, effective
September 1, 2023. The transition from Ms. Smith to Mr. Matt followed our formal succession planning process.
Russian Invasion of Ukraine
The Russian invasion of Ukraine did not have a direct material adverse impact on our business, financial condition or results of
operations during 2023 or 2022. Our Europe segment has not had an interruption in energy supply and was able to identify
alternate sources for a limited number of materials previously procured through Russia. However, the Russian invasion of
Ukraine has been an indirect contributor to the deterioration of the economic conditions in Europe, among other
macroeconomic factors, and we will continue to monitor disruptions in supply of energy and materials and the indirect effects
on our operations of inflationary pressures, reductions in demand, foreign exchange rate fluctuations, commodity pricing,
potential cybersecurity risks and sanctions resulting from the invasion.
See Part I, Item 1A, Risk Factors, in this Annual Report for further discussion related to the above business conditions and
developments.
25
RESULTS OF OPERATIONS SUMMARY
(in thousands, except per share data)
Net sales
Net earnings
Diluted earnings per share
2023 Compared to 2022
Year Ended August 31,
2023
2022
$ 8,799,533 $ 8,913,481
859,760
1,217,262
7.25
9.95
Net sales during 2023 remained relatively flat, compared to 2022. See discussions below, labeled North America and Europe
within our Segments section, for further information on our year-over-year net sales results.
During 2023, we achieved net earnings of $859.8 million, a decrease of $357.5 million, or 29%, compared to 2022. Included in
net earnings during 2022 was a $273.3 million gain on the sale of the Rancho Cucamonga facilities. The remaining year-over-
year change in net earnings was primarily due to compression in steel products metal margins in our Europe segment during
2023, contrasted by significant expansion in downstream products metal margins over scrap in our North America segment
during 2023 compared to 2022. See Note 2, Changes in Business, in Part II, Item 8 of this Annual Report for more information
on the sale of the Rancho Cucamonga facilities.
Selling, General and Administrative Expenses
SG&A expenses increased $98.6 million in 2023 compared to 2022. Contributing to the year-over-year increase was $60.5
million of incremental SG&A expenses from Tensar operations' commercial and engineering support incurred during the twelve
months ended August 31, 2023, compared to the expenses recorded in the period following the Tensar Acquisition Date to
August 31, 2022, as well as $12.8 million of SG&A expenses from the 2023 Acquisitions, with no such expenses in 2022. The
remaining increase in SG&A expenses in 2023 compared to 2022 was due primarily to an $11.1 million increase in professional
services expenses, a $10.7 million increase in expenses for our benefit restoration plan ("BRP") and a $4.2 million pension plan
settlement charge, with no such settlement charge in the corresponding period. These fluctuations were partially offset by a
$16.6 million decrease in labor-related expenses during 2023 compared to 2022. See Note 2, Changes in Business, in Part II,
Item 8 of this Annual Report for more information about the Tensar acquisition and the 2023 Acquisitions and Note 14,
Employees' Retirement Plans, in Part II, Item 8 of this Annual Report for more information on the pension plan termination
activity.
Interest Expense
Interest expense decreased $10.6 million in 2023 compared to 2022, which can be attributed primarily to an increase in
capitalized interest of $9.6 million in 2023 compared to 2022 due to construction of our third micro mill, as well as lower
average interest rates on the long-term debt outstanding during 2023 compared to 2022.
Income Taxes
Our effective income tax rate for 2023 was 23.4% compared to 19.7% for 2022. The year-over-year increase was primarily due
to a tax benefit recorded during 2022 from a capital loss on a restructuring transaction that did not recur in 2023, as well as a
reduction in research and development tax credits in 2023 compared to 2022. See Note 12, Income Tax, in Part II, Item 8 of this
Annual Report for further discussion of our effective tax rate.
SEGMENTS
All amounts are computed and presented in a manner that is consistent with the basis in which we internally disaggregate
financial information for the purpose of making operating decisions. See Note 19, Operating Segments, in Part II, Item 8 of this
Annual Report for further information on how we evaluate financial performance of our segments. The operational data by
product category presented in the tables below reflects activity from sales of raw materials, steel products and downstream
products, as applicable, which comprise the majority of sales in North America and Europe. The data is calculated using
averages, and therefore, it is not meaningful to quantify the effect that any individual metric had on the segment's net sales or
adjusted EBITDA.
26
2023 Compared to 2022
North America
(in thousands, except per ton amounts)
Net sales
Adjusted EBITDA
External tons shipped
Raw materials
Rebar
Merchant bar and other
Steel products
Downstream products
Average selling price per ton
Raw materials
Steel products
Downstream products
Cost of ferrous scrap utilized per ton
Steel products metal margin per ton
Year Ended August 31,
2023
2022
$ 7,347,020 $ 7,298,632
1,454,754
1,553,858
1,390
1,967
943
2,910
1,466
$
840 $
978
1,426
$
349 $
629
1,375
1,805
1,025
2,830
1,558
1,073
1,060
1,217
431
629
Net sales in our North America segment remained relatively flat in 2023 compared to 2022. While downstream products
average selling prices experienced a significant increase of $209 per ton, or 17%, year-over-year, this fluctuation was offset by
decreases in steel products average selling prices and raw materials average selling prices due to a falling scrap price
environment. The increases in average selling prices for downstream products, many of which are fixed at the beginning of the
project, reflected the increased input costs from rising scrap and energy prices during 2022 when we entered into the contracts.
The acquired Tensar operations also contributed an incremental $105.1 million of net sales in 2023 compared to 2022 following
the Tensar Acquisition Date. Further, the 2023 Acquisitions contributed $159.7 million to the increase in net sales in 2023.
During 2023 we achieved adjusted EBITDA of $1.5 billion compared to $1.6 billion in 2022. Included in adjusted EBITDA
during 2022 was a $273.3 million non-recurring gain on the sale of the Rancho Cucamonga facilities. The remaining year-over-
year change was an increase in adjusted EBITDA due to significant expansion in downstream products margin over scrap per
ton, driven by a combination of the high downstream products average selling prices mentioned above and sharp decreases in
the cost of ferrous scrap utilized per ton. Additionally, the acquired Tensar operations provided incremental adjusted EBITDA
of $32.1 million in 2023 compared to 2022 following the Tensar Acquisition Date. Further, the 2023 Acquisitions contributed
$14.3 million to adjusted EBITDA in 2023. See Note 2, Changes in Business, in Part II, Item 8 of this Annual Report for more
information about the sale of the Rancho Cucamonga facilities.
27
Europe
(in thousands, except per ton amounts)
Net sales
Adjusted EBITDA
External tons shipped
Rebar
Merchant bar and other
Steel products
Average selling price per ton
Steel products
Cost of ferrous scrap utilized per ton
Steel products metal margin per ton
Year Ended August 31,
2023
2022
$ 1,416,704 $ 1,621,642
61,353
346,051
684
1,043
1,727
622
1,097
1,719
$
$
749 $
896
395 $
354
463
433
Net sales in the Europe segment decreased $204.9 million, or 13%, in 2023 compared to 2022. This decrease was primarily due
to a $147 per ton, or 16%, year-over-year decrease in steel products average selling price, while volumes remained relatively
flat year-over-year, as well as unfavorable impacts of foreign currency translation. The decrease in steel products average
selling price was driven by the indirect impacts of macroeconomic factors affecting the overall business climate in Europe, such
as inflation and rising interest rates, which resulted in consumer uncertainties and delayed construction starts across our
European end markets near the end of 2023. The acquired Tensar operations provided $58.2 million of incremental net sales
during 2023 compared to the net sales in 2022 following the Tensar Acquisition Date. During 2023, overall, the U.S. dollar
strengthened compared to the currencies of our Europe operations, such as the Polish zloty, euro and British pound. Using
actual results for 2023 and using the prior year's average currency rates for 2022, foreign currency translation would result in an
increase in net sales of approximately $71.6 million.
Adjusted EBITDA decreased $284.7 million, or 82%, in 2023 compared to 2022, primarily driven by a contraction in steel
products metal margin per ton, increased energy costs used in production and unfavorable impacts of foreign currency
translation. Steel products metal margin per ton decreased $79 per ton, or 18%, in 2023 compared to 2022, due to the decline in
steel products average selling prices described above, which outpaced the decrease in cost of ferrous scrap utilized. In addition
to the change in steel products metal margin per ton, our Europe segment continues to face an environment of heightened
energy costs. The cost of energy increased $51 per ton during 2023 compared to 2022, net of the benefit from our electricity
commodity derivative, which resulted in an $11.8 million realized gain in 2023, recorded as a reduction to cost of goods sold,
compared to a $21.7 million realized gain in 2022. See Note 10, Derivatives, in Part II, Item 8 of this Annual Report for further
information on the electricity commodity derivative. Finally, using actual results for 2023 and using the prior year's average
currency rates for 2022, foreign currency translation would result in an increase in adjusted EBITDA of approximately $17.8
million. Offsetting these reductions to adjusted EBITDA, the acquired Tensar operations provided $11.5 million of incremental
adjusted EBITDA during 2023 compared to the adjusted EBITDA in 2022 following the Tensar Acquisition Date.
Corporate and Other
(in thousands)
Adjusted EBITDA loss
Year Ended August 31,
2023
2022
$
(131,403) $
(154,103)
Corporate and Other adjusted EBITDA loss decreased by $22.7 million in 2023 compared to 2022. Contributing to the year-
over-year decrease in adjusted EBITDA loss was $18.9 million of increased interest income on short-term investments,
compared to 2022, $17.7 million in other revenue from our New Markets Tax Credit (“NMTC”) transactions, with no such
activity in 2022, and $16.1 million in debt extinguishment costs incurred during 2022, compared to immaterial activity in 2023.
In contrast to these reductions to adjusted EBITDA loss, during 2023 compared to 2022 we incurred $12.1 million of increased
labor-related expenses, $10.6 million of increased professional services expenses and $3.0 million of increased information
technology expenses. Additionally, in 2023 we recognized a $4.2 million pension plan settlement charge, with no such
28
settlement charge in 2022. See Note 9, New Markets Tax Credit Transactions, in Part II, Item 8 of this Annual Report, for more
information on the NMTC transactions and Note 14, Employees' Retirement Plans, in Part II, Item 8 of this Annual Report, for
more information on the pension plan termination activity.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Liquidity and Capital Resources
Our cash flows from operating activities are our principal sources of liquidity and result primarily from sales of raw materials,
steel products, downstream products and related materials and services, as described in Part I, Item 1, Business, of this Annual
Report. Historically, our North America operations have generated the majority of our cash. At August 31, 2023, cash and cash
equivalents of $24.9 million were held by our non-U.S. subsidiaries. We use futures or forward contracts to mitigate the risks
from fluctuations in metal commodity prices, foreign currency exchange rates, interest rates and natural gas, electricity and
other energy commodity prices. See Note 10, Derivatives, in Part II, Item 8 of this Annual Report for further information.
We have a diverse and generally stable customer base, and regularly maintain a substantial amount of accounts receivable. We
actively monitor our accounts receivable and, based on market conditions and customers' financial condition, record allowances
when we believe accounts are uncollectible. We use credit insurance internationally to mitigate the risk of customer insolvency.
We estimate that the amount of credit-insured or financially assured receivables was approximately 14% of total receivables at
August 31, 2023.
The table below reflects our sources, facilities and availability of liquidity as of August 31, 2023. See Note 8, Credit
Arrangements, in Part II, Item 8 of this Annual Report for additional information.
(in thousands)
Cash and cash equivalents
Notes due from 2030 to 2032
Revolver
Term Loan
Series 2022 Bonds, due 2047
Poland credit facilities
Poland accounts receivable facility
Total Facility
Availability
$
592,332 $
900,000
600,000
200,000
145,060
145,437
69,810
592,332
(1)
599,057
200,000
—
129,159
61,391
__________________________________
(1) We believe we have access to additional financing and refinancing, if needed, although we can make no assurances as to the
form or terms of such financing.
We continually review our capital resources to determine whether we can meet our short and long-term goals. We anticipate our
current cash balances, cash flows from operations and available sources of liquidity will be sufficient to maintain operations,
make necessary capital expenditures, pay dividends and opportunistically repurchase shares for at least the next twelve months.
Additionally, we expect our long-term liquidity position will be sufficient to meet our long-term liquidity needs with cash flows
from operations and financing arrangements. However, in the event of changes in business conditions or other developments,
including a sustained market deterioration, unanticipated regulatory developments, significant acquisitions, competitive
pressures, or to the extent our liquidity needs prove to be greater than expected or cash generated from operations is less than
anticipated, we may need additional liquidity. To the extent we elect to finance our long-term liquidity needs, we believe that
the potential financing capital available to us in the future is sufficient.
We estimate that our 2024 capital spending will range from $550 million to $600 million. We regularly assess our capital
spending based on current and expected results and the amount is subject to change.
As of August 31, 2023 and 2022, we had no off-balance sheet arrangements that may have a current or future material effect on
our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
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2023 Compared to 2022
Operating Activities
Net cash flows from operating activities were $1.3 billion and $700.3 million in 2023 and 2022, respectively. The increase in
net cash flows from operating activities was largely due to a decreased scrap price environment during 2023 compared to
increased scrap prices in 2022. The decrease in scrap prices reduced cash used by inventory purchases by $432.2 million year-
over-year and led to lower steel products average selling prices during 2023 compared to 2022, which contributed to an increase
in cash flows from accounts receivable of $432.7 million year-over-year. These fluctuations were partially offset by a year-
over-year increase in cash used by accounts payable, accrued expenses and other payables of $178.0 million due, in part, to the
declining scrap price environment mentioned above and a reduction in accrued labor-related expenses during 2023 compared to
2022. Additional offsets to the increase in cash flows from operating activities were a $34.3 million decrease in cash flows from
deferred income taxes and other long-term taxes and a $15.9 million reduction in loss on debt extinguishment during 2023
compared to 2022. Additionally, we recorded $17.7 million of non-cash other revenue from the settlement of NMTC
transactions during 2023, with no such transactions in 2022. See Note 12, Income Tax, in Part II, Item 8 of this Annual Report
for more information on the change in deferred taxes and Note 9, New Markets Tax Credit Transactions in Part II, Item 8 of this
Annual Report for more information on the NMTC transactions.
Investing Activities
Net cash flows used by investing activities were $835.2 million and $684.7 million in 2023 and 2022, respectively, an increase
of $150.5 million. The fluctuation in net cash flows used by investing activities was largely driven by $156.7 million of
additional capital expenditures in 2023 compared to 2022, primarily for the construction of our third and fourth micro mills,
along with the proceeds from the sale of the Rancho Cucamonga facilities during 2022 compared to immaterial proceeds from
the sale of assets in 2023. These fluctuations in cash flows used by investing activities were offset, in part, by a $317.7 million
decrease in acquisitions during 2023 compared to 2022. See Note 2, Changes in Business, in Part II, Item 8 of this Annual
Report, for more information about the sale of the Rancho Cucamonga facilities and our acquisitions completed in 2023 and
2022.
Financing Activities
Net cash flows used by financing activities were $599.5 million in 2023, compared to net cash flows from financing activities
of $165.3 million in 2022. The $764.8 million increase in net cash flows used by financing activities was largely driven by net
repayments of long-term debt of $389.8 million during 2023, compared to net proceeds from long-term debt of $414.8 million
during 2022. Additionally, net repayments under our accounts receivable facilities were $19.0 million during 2023 compared to
net proceeds of $6.3 million during 2022, resulting in an increase in cash flows used by financing activities of $25.3 million in
2023. Partially offsetting these cash flows used by financing activities was a $60.5 million decrease in treasury stock acquired
under the share repurchase program during 2023 compared to 2022. See Note 8, Credit Arrangements in Part II, Item 8 of this
Annual Report for more information regarding our credit arrangements and accounts receivable facility and Note 15, Capital
Stock in Part II, Item 8 of this Annual Report for more information on the share repurchase program.
Contractual Obligations and Commitments
Our material cash commitments from known contractual and other obligations primarily consist of obligations for long-term
debt and related interest, leases for properties and equipment and purchase obligations as part of normal operations. See Note 8,
Credit Arrangements, in Part II, Item 8 of this Annual Report for more information regarding scheduled maturities of our long-
term debt. See Note 7, Leases, in Part II, Item 8 of this Annual Report for additional information on leases. Interest payable on
our long-term debt was $43.5 million due in the twelve months following August 31, 2023 and $386.8 million due thereafter.
Additionally, we have a U.S. federal repatriation tax obligation resulting from the repatriation tax provisions of the Tax Cuts
and Jobs Act ("TCJA"), of which $4.2 million was due in the twelve months following August 31, 2023 and $12.5 million due
thereafter.
As of August 31, 2023, our undiscounted purchase obligations were approximately $800 million due in the next twelve months
and $340 million due thereafter under purchase orders and "take or pay" arrangements. These purchase obligations include all
enforceable, legally binding agreements to purchase goods or services that specify all significant terms, regardless of the
duration of the agreement, and exclude agreements with variable terms for which we are unable to estimate the minimum
amounts. The "take or pay" arrangements are multi-year commitments with minimum annual purchase requirements and are
entered into primarily for purchases of commodities used in operations such as electrodes and natural gas.
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Of the purchase obligations due within the twelve months following August 31, 2023, approximately 23% were for consumable
production inputs, such as alloys, 20% were for capital expenditures in connection with normal business operations, 19% were
for commodities and 14% were for the construction of our fourth micro mill. Of the purchase obligations due thereafter, 75%
were for commodities and 10% were for the construction of our fourth micro mill. The remainder of the purchase obligations
are for goods and services in the normal course of business.
We provide certain eligible employees benefits pursuant to our nonqualified BRP equal to amounts that would have been
available under our tax qualified plans under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
but for limitations of ERISA, tax laws and regulations. We did not include estimated payments related to the BRP in the above
description of contractual obligations and commitments. Refer to Note 14, Employees' Retirement Plans, in Part II, Item 8 of
this Annual Report for more information on the BRP.
Other Commercial Commitments
We maintain stand-by letters of credit to provide support for certain transactions that governmental agencies, our insurance
providers and suppliers require. At August 31, 2023, we had committed $21.8 million under these arrangements, of which $0.9
million reduced availability under the Revolver (as defined in Note 8, Credit Arrangements, in Part II, Item 8 of this Annual
Report).
CONTINGENCIES
In the ordinary course of conducting our business, we become involved in litigation, administrative proceedings and
governmental investigations, including environmental matters. We may incur settlements, fines, penalties or judgments because
of some of these matters. Liabilities and costs associated with litigation-related loss contingencies require estimates and
judgments based on our knowledge of the facts and circumstances surrounding each matter and the advice of our legal counsel.
We record liabilities for litigation-related losses when a loss is probable and we can reasonably estimate the amount of the loss.
We evaluate the measurement of recorded liabilities each reporting period based on the current facts and circumstances specific
to each matter. The ultimate losses incurred upon final resolution of litigation-related loss contingencies may differ materially
from the estimated liability recorded at a particular balance sheet date. Changes in estimates are recorded in earnings in the
period in which such changes occur. We do not believe that any currently pending legal proceedings to which we are a party
will have a material adverse effect, individually or in the aggregate, on our results of operations, cash flows or financial
condition. See Note 17, Commitments and Contingencies, in Part II, Item 8 of this Annual Report for more information.
Environmental and Other Matters
The information set forth in Note 17, Commitments and Contingencies, in Part II, Item 8 of this Annual Report is hereby
incorporated by reference.
General
We are subject to federal, state and local pollution control laws and regulations in all locations where we have operating
facilities. We anticipate that compliance with these laws and regulations will involve continuing capital expenditures and
operating costs.
Metals recycling was our original business, and it has been one of our core businesses for over a century. In the present era of
conservation of natural resources and ecological concerns, we are committed to sound ecological and business conduct. Certain
governmental regulations regarding environmental concerns, however well-intentioned, may expose us and our industry to
potentially significant risks. We believe that recycled materials are commodities that are diverted by recyclers, such as us, from
the solid waste streams because of their inherent value. They are identified, purchased, sorted, processed and sold in accordance
with carefully established industry specifications.
We incurred environmental expenses of approximately $49.3 million, $44.2 million and $49.8 million for 2023, 2022 and 2021,
respectively. The expenses included the cost of disposal, environmental personnel at various divisions, permit and license fees,
accruals and payments for studies, tests, assessments, remediation, consultant fees, baghouse dust removal and various other
expenses. In addition, during 2023, we spent approximately $5.8 million in capital expenditures related to costs directly
associated with environmental compliance. Our accrued environmental liabilities were $4.5 million and $5.3 million as of
August 31, 2023 and 2022, respectively, of which $2.0 million were classified as other noncurrent liabilities as of both
August 31, 2023 and 2022.
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Solid and Hazardous Waste
We generate wastes, including hazardous wastes, that are subject to the Federal Resource Conservation and Recovery Act and
comparable state and local statutes where we operate. These statutes, regulations and laws may limit our disposal options with
respect to certain wastes.
We currently own or lease, and in the past we have owned or leased, properties for use in our operations. Although we have
used operating and disposal practices that were industry standard at the time, wastes may have been disposed of or released on
or under the properties or on or under locations where such wastes have been taken for disposal in a manner that is now
understood to pose a contamination threat. We are currently involved in the investigation and remediation of several such
properties, and we have been named as a PRP at a number of contaminated sites, none of which involve real estate we ever
owned or upon which we have ever conducted operations.
State and federal laws applicable to wastes and contaminated properties have gradually become more strict over time. There is
no guarantee that the EPA or individual states will not adopt more stringent requirements for the handling of, or make changes
to the exemptions upon which we rely for, the wastes that we generate. Similarly, some materials which are not currently
classified as waste may be deemed solid or hazardous waste in the future. Under new laws, we could be required to remediate
properties impacted by previously disposed wastes. Any such change could result in an increase in our costs to manage and
dispose of waste which could have a material adverse effect on our business, results of our operations and financial condition.
Superfund
The EPA, or an equivalent state agency, has notified us that we are considered a PRP at several sites, none of which involve
real estate we ever owned or upon which we have ever conducted operations. We may be obligated under CERCLA, or similar
state statutes, to conduct remedial investigation, feasibility studies, remediation and/or removal of alleged releases of hazardous
substances or to reimburse the EPA or third parties for such activities and pay costs for associated damages to natural resources.
We are involved in litigation or administrative proceedings with regard to several of these sites in which we are contesting, or at
the appropriate time may contest, our liability. In addition, we have received information requests with regard to other sites
which may be under consideration by the EPA as potential CERCLA sites. Because of various factors, including the ambiguity
of the regulations, the difficulty of identifying the responsible parties for any particular site, the complexity of determining the
relative liability among them, the uncertainty as to the most desirable remediation techniques and the amount of damages and
cleanup costs, and the extended time periods over which such costs may be incurred, we cannot reasonably estimate our
ultimate costs of compliance with CERCLA. Based on currently available information, which is in many cases preliminary and
incomplete, we had immaterial amounts accrued as of both August 31, 2023 and 2022, in connection with CERCLA sites. We
have accrued for these liabilities based upon our best estimates. The amounts paid and the expenses incurred on these sites for
2023, 2022 and 2021 were not material. Historically, the amounts that we have ultimately paid for such remediation activities
have not been material.
We believe that adequate provisions have been made in the consolidated financial statements for the potential impact of these
contingencies, and that the outcomes of the suits and proceedings described above, and other miscellaneous litigation and
proceedings now pending, will not have a material adverse effect on our business, results of operations or financial condition.
Clean Water Regulation
The Clean Water Act ("CWA") imposes restrictions and strict controls regarding the discharge of wastes into waters of the
U.S., a term broadly defined, or into publicly owned treatment works. These controls have become more stringent over time,
and it is probable that additional restrictions will be imposed in the future. Permits must generally be obtained to discharge
pollutants into federal waters or into publicly owned treatment works and comparable permits may be required at the state level.
The CWA and many state statutes provide for civil, criminal and administrative penalties for unauthorized discharges of
pollutants. In addition, the EPA's regulations and comparable state statutes may require us to obtain permits to discharge storm
water runoff. In the event of an unauthorized discharge or non-compliance with permit requirements, we may be liable for
penalties, costs and injunctive relief.
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Clean Air Act
Our operations are subject to regulations at the federal, state and local level for the control of emissions from sources of air
pollution. New and modified sources of air pollutants are often required to obtain permits prior to commencing construction,
modification or operations. Major sources of air pollutants are subject to more stringent requirements, including the potential
need for additional permits and to increase scrutiny in the context of enforcement. The EPA has been implementing its
stationary emission control program through expanded enforcement of the New Source Review Program. Under this program,
new or modified sources may be required to construct emission sources using what is referred to as the Best Available Control
Technology, or in any areas that are not meeting NAAQS, using methods that satisfy requirements for the Lowest Achievable
Emission Rate. Additionally, the EPA has implemented, and is continuing to implement, new, more stringent standards for
NAAQS, including fine particulate matter. Compliance with new standards could require additional expenditures.
Climate Change
The potential impacts of climate change on our business and results of operations and potential future climate change
regulations in the jurisdictions in which we operate are highly uncertain. See the risk factors entitled "Increased regulation
associated with climate change could impose significant additional costs on both our steelmaking and metals recycling
operations" and "Physical impacts of climate change could have a material adverse effect on our costs and results of operations"
in Part I, Item 1A, Risk Factors, of this Annual Report.
DIVIDENDS
We paid quarterly dividends in 2023 at the rate of $0.16 per share of CMC common stock, compared to quarterly dividends
paid in 2022 at the rate of $0.14 per share of CMC common stock. On October 10, 2023, the Board of Directors declared
CMC's 236th quarterly cash dividend. The dividend was declared at the rate of $0.16 per share of CMC common stock and is
payable on November 9, 2023 to stockholders of record as of the close of business on October 26, 2023.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preceding discussion and analysis of our financial condition and results of operations is based upon our consolidated
financial statements, which have been prepared in accordance with accounting principles generally accepted in the United
States. The preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent liabilities. We evaluate the
appropriateness of these estimates and assumptions, including those related to revenue recognition, income taxes, inventory
cost, acquisitions, goodwill and other intangible assets, long-lived assets, derivative instruments and contingencies, on an
ongoing basis. Estimates and assumptions are based on historical experience and on various other assumptions that we believe
to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources. Accordingly, actual results in future periods could differ
materially from these estimates. Judgments and estimates related to critical accounting policies used in the preparation of the
consolidated financial statements include the following:
Revenue Recognition
Revenue from contracts where the Company provides fabricated rebar and installation services is recognized over time using an
input method based on costs incurred compared to total estimated costs. Revenue from contracts where the Company does not
provide installation services is recognized over time using an output method based on tons shipped compared to total estimated
tons. Significant judgment is required to evaluate total estimated costs used in the input method and total estimated tons in the
output method. If total estimated costs on any contract are greater than the net contract revenues, the Company recognizes the
entire estimated loss in the period the loss becomes known. The cumulative effect of revisions to estimates related to net
contract revenues, costs to complete or total planned quantity is recorded in the period in which such revisions are identified.
The Company does not exercise significant judgment in determining the transaction price. See Note 4, Revenue Recognition, in
Part II, Item 8 of this Annual Report for further details.
Income Taxes
We periodically assess the likelihood of realizing our deferred tax assets and maintain a valuation allowance to reduce certain
deferred tax assets to amounts that we believe are more likely than not to be realized. We base our judgment of the
recoverability of our deferred tax assets primarily on historical earnings, our estimate of current and expected future earnings,
prudent and feasible tax planning strategies and current and future ownership changes. At August 31, 2023 and 2022, we had a
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valuation allowance of $280.5 million and $268.5 million, respectively, against our deferred tax assets. Of these amounts, $13.3
million and $8.4 million at August 31, 2023 and 2022, respectively, relate to net operating loss and credit carryforwards in
certain state jurisdictions that are subject to estimation. The remaining valuation allowance primarily relates to net operating
loss carryforwards in certain foreign jurisdictions, which the Company does not expect to realize.
Inventory Cost
We state inventories at the lower of cost or net realizable value, which is defined as estimated selling prices in the ordinary
course of business, less reasonably predictable costs of completion, disposal and transportation. Adjustments to inventory may
be due to changes in price levels, assumptions about market conditions, obsolescence, damage, physical deterioration and other
causes. Any adjustments required to reduce the carrying value of inventory to net realizable value are recorded as a charge to
cost of goods sold within the consolidated statements of earnings. In fiscal 2023, we recorded $10.7 million of inventory write-
downs within our Europe segment resulting from changes in future demand and market conditions impacting the vertically
integrated operations in Poland. A hypothetical 10% decrease to the estimated selling prices used in the calculation of net
realizable value of inventory within these operations in Poland would have resulted in a $5.0 million increase to the inventory
write-downs recorded as of August 31, 2023.
Acquisitions
The Company accounts for business combinations under the acquisition method of accounting, which requires assets acquired
and liabilities assumed to be recorded at their estimated fair value at the date of acquisition. The fair value is estimated by the
Company using valuation techniques and Level 3 inputs, including expected future cash flows and discount rates. The excess of
purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed, if any, is recorded as
goodwill. Determining the fair value of assets acquired and liabilities assumed involves the use of significant estimates and
assumptions. See Note 2, Changes in Business, in Part II, Item 8 of this Annual Report for more information about acquisitions.
Goodwill and Other Intangible Assets
Goodwill and indefinite-lived intangible assets are tested for impairment annually as of the first day of the Company’s fourth
quarter (the "annual impairment test date"), or more frequently whenever events or circumstances indicate that the carrying
value may not be recoverable. Goodwill is tested at the reporting unit level, which represents an operating segment or one level
below an operating segment. When evaluating goodwill and other indefinite-lived intangible assets for impairment, the
Company may first assess qualitative factors in determining whether it is more likely than not that the respective fair value is
less than its carrying amount. The qualitative evaluation is an assessment of multiple factors, including the current operating
environment, financial performance and market considerations. The Company may elect to bypass this qualitative assessment
for some or all of its reporting units or other indefinite-lived intangible assets and perform a quantitative test, based on
management's judgment. If the Company chooses to bypass the qualitative assessment, it performs a quantitative test by
comparing the fair value of the reporting units or indefinite-lived intangible assets to their respective carrying amounts and
records an impairment charge if the carrying amount exceeds the fair value; however, the loss recognized, if any, will not
exceed the total amount of the intangible asset or the goodwill allocated to a reporting unit.
When assessing the recoverability of goodwill using a quantitative approach we use an income and a market approach to
calculate the fair value of the reporting unit. To calculate the fair value of a reporting unit using the income approach,
management uses a discounted cash flow model, which includes a number of significant assumptions and estimates regarding
future cash flows such as discount rates, volumes, prices, capital expenditures and the impact of current market conditions. The
market approach estimates fair value based on market multiples of earnings derived from comparable publicly traded
companies with similar operating and investment characteristics as the reporting unit. The estimates used during a quantitative
approach to test goodwill could be materially impacted by adverse changes in market conditions.
For 2023 and 2022, the annual goodwill impairment analyses did not result in impairment charges. As of the 2023 annual
impairment test date, the Company had goodwill of $342.1 million related to four reporting units within the North America
segment and two reporting units within the Europe segment. Three reporting units, which comprised $46.0 million of goodwill
within the North America operating segment and $3.8 million of goodwill within the Europe segment as of the 2023 annual
impairment test date, were tested for impairment using a qualitative approach. Management determined it was more likely than
not that the fair values of the reporting units which were tested using a qualitative approach exceeded their respective carrying
values.
The remaining three reporting units were tested for impairment using a quantitative approach. The fair values of two reporting
units within the North America segment with $252.3 million of goodwill as of the 2023 annual impairment test date exceeded
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their carrying values by greater than 20%. The fair value of the reporting unit within the Europe segment with $40.0 million of
goodwill as of the 2023 annual impairment test date exceeded its carrying value by greater than 10%. The Company believes
the fair values of the reporting units tested using a quantitative approach are substantially in excess of their carrying values. An
increase or decrease of 1% to the discount rate or terminal growth rate used in the quantitative impairment tests for these
reporting units would not result in impairment charges. The difference in the value of goodwill between the 2023 annual
impairment test date and August 31, 2023 was due to the acquisition of EDSCO and foreign currency translation adjustments.
As of the 2023 annual impairment test date, the Company had $57.1 million of indefinite-lived intangible assets, of which $53.8
million were tested for impairment using a quantitative approach. To perform the quantitative impairment tests, the Company
used an income approach to calculate the fair value of each intangible asset using a relief from royalty method. Significant
inputs to measure the fair value of the indefinite-lived intangible assets included projected revenue growth rates, royalty rates
and discount rates. The fair values of the indefinite-lived intangible assets within the North America segment with carrying
values of $39.1 million as of the 2023 annual impairment test date exceeded their carrying values in excess of 30%. The fair
values of the indefinite-lived intangible assets within the Europe segment with carrying values of $10.0 million and $4.7 million
as of the 2023 annual impairment test date exceeded their carrying values in excess of 20% and 10%, respectively. The
difference in the value of indefinite-lived intangible assets between the 2023 annual impairment test date and August 31, 2023
was due to foreign currency translation adjustments. Based on the Company’s annual impairment testing of the indefinite-lived
intangible assets, we concluded it was more likely than not that their fair values exceeded the respective carrying values.
Based on the results of impairment tests performed in 2023, management does not believe that it is reasonably likely that our
reporting units or indefinite-lived intangible assets will fail their respective impairment tests in the near term. See Note 6,
Goodwill and Other Intangible Assets, in Part II, Item 8 of this Annual Report for additional information.
Long-Lived Assets
We evaluate the carrying value of property, plant and equipment and finite-lived intangible assets whenever a change in
circumstances indicates that the net carrying value may not be recoverable from the entity-specific undiscounted future cash
flows expected to result from our use of and eventual disposition of a long-lived asset or asset group. Events or circumstances
that could trigger an impairment review of a long-lived asset or asset group include, but are not limited to: (i) a significant
decrease in the market price of the asset, (ii) a significant adverse change in the extent or manner that the asset is used or in its
physical condition, (iii) a significant adverse change in legal factors or in the business climate that could affect the value of the
asset, (iv) an accumulation of costs significantly in excess of original expectation for the acquisition or construction of the asset,
(v) a current period operating or cash flow loss combined with a history of operating or cash flow losses or a forecast of
continuing losses associated with the use of the asset and (vi) a more-likely-than-not expectation that the asset will be sold or
disposed of significantly before the end of its previously estimated useful life. If an impairment exists, the net carrying values
are reduced to fair values. We estimate the fair values of these long-lived assets by performing a discounted future cash flow
analysis for the remaining useful life of the asset, or the remaining useful life of the primary asset in the case of an asset group.
An individual asset within an asset group is not impaired below its estimated fair value.
Our operations are capital intensive. The estimates of undiscounted future cash flows used during an impairment review of a
long-lived asset or asset group require judgments and assumptions of future cash flows that are expected to arise as a direct
result of the use and eventual disposition of the asset or asset group. If these assets were for sale, our estimates of their values
could be significantly different because of market conditions, specific transaction terms and a buyer's perspective on future cash
flows.
During 2023, historical and current period operating losses were determined to be triggering events for three long-lived asset
groups associated with downstream fabricated rebar operations. We reviewed the undiscounted future cash flows for the long-
lived asset groups for recoverability, which indicated that the net carrying values of certain ROU assets included in one long-
lived asset group (consisting of $4.0 million of ROU assets and $0.5 million of equipment) were not recoverable. As such, we
evaluated the ROU assets within the applicable long-lived asset group for impairment by comparing the estimated fair values of
such ROU assets to their net carrying values, which resulted in a non-cash impairment of $3.5 million during the fourth quarter
of 2023, included in asset impairments in the consolidated statement of earnings.
Derivative Financial Instruments
Our global operations and product lines expose us to risks from fluctuations in metal commodity prices, foreign currency
exchange rates, interest rates and natural gas, electricity and other energy prices. To limit the impact of these exposures, we
enter into derivative instruments. We do not enter into derivative financial instruments for speculative purposes. We evaluate
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the fair value of our derivative financial instruments using an established fair value hierarchy as stated in Note 1, Nature of
Operations and Summary of Significant Accounting Policies, in Part II, Item 8 of this Annual Report.
The Company has three Level 3 commodity derivatives which are bilateral agreements with a counterparty. The fair value
estimates of the Level 3 commodity derivatives are based on an internally developed discounted cash flow model primarily
utilizing unobservable inputs for which there is little or no market data. The company determined the Level 3 fair value inputs
as provided for under ASC 820, consisting of information obtained from relevant published indexes and external sources along
with management’s own assumptions. Fluctuations in the information used to forecast future energy rates may cause volatility
in the fair value estimate and in the unrealized gains and losses in other comprehensive income. See Note 11, Fair Value, in Part
II, Item 8 of this Annual Report for more information on the Level 3 commodity derivatives.
Contingencies
In the ordinary course of conducting our business, we become involved in litigation, administrative proceedings and
governmental investigations, including environmental matters. We may incur settlements, fines, penalties or judgments in
connection with some of these matters. While we are unable to estimate the ultimate dollar amount of exposure or loss in
connection with these matters, we make accruals when a loss is probable and the amount can be reasonably estimated. The
amounts we accrue could vary substantially from amounts we pay due to several factors including the following: evolving
remediation technology, changing regulations, possible third-party contributions, the inherent uncertainties of the estimation
process and the uncertainties involved in litigation. We believe that we have adequately provided for these contingencies in our
consolidated financial statements. We also believe that the outcomes will not materially affect our results of operations, our
financial position or our cash flows.
Other Accounting Policies and New Accounting Pronouncements
See Note 1, Nature of Operations and Summary of Significant Accounting Policies, in Part II, Item 8 of this Annual Report.
FORWARD-LOOKING STATEMENTS
This Annual Report contains "forward-looking statements" within the meaning of the federal securities laws. The statements in
this report that are not historical statements are forward-looking statements and address activities, events or developments that
may occur in the future, including (without limitation) such matters as activities related to general economic conditions, key
macro-economic drivers that impact our business, the effects of ongoing trade actions, the effects of continued pressure on the
liquidity of our customers, potential synergies and organic growth provided by acquisitions and strategic investments, demand
for our products, shipment volumes, metal margins, the ability to operate our steel mills at full capacity, future availability and
cost of supplies of raw materials and energy for our operations, share repurchases, legal proceedings, construction activity,
international trade, the impact of the Russian invasion of Ukraine, capital expenditures, tax credits, our liquidity and our ability
to satisfy future liquidity requirements, estimated contractual obligations, the expected capabilities and benefits of new
facilities, the timeline for execution of our growth plan and our expectations or beliefs concerning future events. These forward-
looking statements can generally be identified by phrases such as we or our management "expects," "anticipates," "believes,"
"estimates," "future," "intends," "may," "plans to," "ought," "could," "will," "should," "likely," "appears," "projects,"
"forecasts," "outlook" or other similar words or phrases, as well as by discussions of strategy, plans or intentions.
Our forward-looking statements are based on management's expectations and beliefs as of the time this Annual Report is filed
with the SEC or, with respect to any document incorporated by reference, as of the time such document was prepared. Although
we believe that our expectations are reasonable, we can give no assurance that these expectations will prove to have been
correct, and actual results may vary materially. Except as required by law, we undertake no obligation to update, amend or
clarify any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events,
new information or circumstances or any other changes. Important factors that could cause actual results to differ materially
from our expectations include those described in Part I, Item 1A, Risk Factors and Part II, Item 7, Management's Discussion
and Analysis of Financial Condition and Results of Operations of this Annual Report as well as the following:
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changes in economic conditions which affect demand for our products or construction activity generally, and the impact
of such changes on the highly cyclical steel industry;
rapid and significant changes in the price of metals, potentially impairing our inventory values due to declines in
commodity prices or reducing the profitability of our downstream contracts due to rising commodity pricing;
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excess capacity in our industry, particularly in China, and product availability from competing steel mills and other steel
suppliers including import quantities and pricing;
the impact of the Russian invasion of Ukraine on the global economy, inflation, energy supplies and raw materials;
increased attention to ESG matters, including any targets or other ESG or environmental justice initiatives;
operating and startup risks, as well as market risks associated with the commissioning of new projects could prevent us
from realizing anticipated benefits and could result in a loss of all or a substantial part of our investments;
impacts from global public health crises on the economy, demand for our products, global supply chain and on our
operations;
compliance with and changes in existing and future laws, regulations and other legal requirements and judicial decisions
that govern our business, including increased environmental regulations associated with climate change and greenhouse
gas emissions;
involvement in various environmental matters that may result in fines, penalties or judgments;
evolving remediation technology, changing regulations, possible third-party contributions, the inherent uncertainties of
the estimation process and other factors that may impact amounts accrued for environmental liabilities;
potential limitations in our or our customers' abilities to access credit and non-compliance with their contractual
obligations, including payment obligations;
activity in repurchasing shares of our common stock under our share repurchase program;
financial and non-financial covenants and restrictions on the operation of our business contained in agreements governing
our debt;
our ability to successfully identify, consummate and integrate acquisitions and realize any or all of the anticipated
synergies or other benefits of acquisitions;
the effects that acquisitions may have on our financial leverage;
risks associated with acquisitions generally, such as the inability to obtain, or delays in obtaining, required approvals
under applicable antitrust legislation and other regulatory and third-party consents and approvals;
lower than expected future levels of revenues and higher than expected future costs;
failure or inability to implement growth strategies in a timely manner;
the impact of goodwill or other indefinite-lived intangible asset impairment charges;
the impact of long-lived asset impairment charges;
currency fluctuations;
global factors, such as trade measures, military conflicts and political uncertainties, including changes to current trade
regulations, such as Section 232 trade tariffs and quotas, tax legislation and other regulations which might adversely
impact our business;
availability and pricing of electricity, electrodes and natural gas for mill operations;
our ability to hire and retain key executives and other employees;
our ability to manage the transition to a new chief executive officer;
competition from other materials or from competitors that have a lower cost structure or access to greater financial
resources;
37
•
•
•
•
•
•
•
•
information technology interruptions and breaches in security;
our ability to make necessary capital expenditures;
availability and pricing of raw materials and other items over which we exert little influence, including scrap metal,
energy and insurance;
unexpected equipment failures;
losses or limited potential gains due to hedging transactions;
litigation claims and settlements, court decisions, regulatory rulings and legal compliance risks;
risk of injury or death to employees, customers or other visitors to our operations; and
civil unrest, protests and riots.
Refer to the "Risk Factors" disclosed in our periodic and current reports filed with the SEC for information regarding additional
risks which would cause actual results to be significantly different from those expressed or implied by these forward-looking
statements. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other important
factors that could cause actual results, performance or our achievements, or industry results, to differ materially from historical
results, any future results, or performance or achievements expressed or implied by such forward-looking statements.
Accordingly, readers of this Annual Report are cautioned not to place undue reliance on any forward-looking statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Approach to Mitigating Market Risk
See Note 10, Derivatives, in Part II, Item 8 of this Annual Report for disclosure regarding our approach to mitigating market
risk and for summarized market risk information by year. Also, see Note 1, Nature of Operations and Summary of Significant
Accounting Policies, in Part II, Item 8 of this Annual Report for additional information. We utilized foreign currency exchange
forward contracts and commodity futures contracts during 2023 in accordance with our risk management program. None of the
instruments were entered into for speculative purposes.
Foreign Currency Exchange Forward Contracts
Our global operations expose us to risks from fluctuations in foreign currency exchange rates. The Polish zloty ("PLN") to the
United States dollar ("USD") exchange rate is considered to be a material foreign currency exchange rate risk exposure. We
enter into currency exchange forward contracts as economic hedges of trade commitments denominated in currencies other than
our reporting currency or the functional currency of our subsidiaries, including commitments denominated in PLN, USD, the
euro ("EUR") and the Canadian dollar ("CAD").
The fair value of our foreign currency exchange forward contract commitments as of August 31, 2023 were as follows:
Foreign Currency
Functional Currency
Type
PLN
PLN
USD
USD
USD
Amount
(in thousands)
417,086
7,180
1,164
1,913
115,636
Type
EUR
USD
CAD
EUR
PLN
Amount
(in thousands)
91,162
1,660
1,556
1,789
488,393
Range of
Hedge Rates (1)
4.44 — 5.33
4.00 — 4.49
0.74 — 0.76
1.06 — 1.09
0.24 — 0.24
Total Contract Fair Value
(in thousands)
$
$
(932)
(41)
13
35
257
(668)
__________________________________
(1) Most foreign currency exchange forward contracts mature within one year. The range of hedge rates represents functional
to foreign currency conversion rates.
Commodity Futures Contracts
Our product lines expose us to risks from fluctuations in metal commodity prices and natural gas, electricity and other energy
commodity prices. We base pricing in some of our sales and purchase contracts on metal commodity futures exchange quotes,
38
which we determine at the beginning of the contract. Due to the volatility of the metal commodity indexes, we enter into metal
commodity futures contracts for copper and aluminum. These futures contracts mitigate the risk of unanticipated declines in
gross margin due to the price volatility of the underlying commodities. We also enter into energy derivatives to mitigate the risk
of unanticipated declines in gross margin due to the price volatility of electricity and natural gas.
The fair value of our commodity futures contract commitments and energy derivatives as of August 31, 2023 were as follows:
Commodity
Aluminum
Aluminum
Copper
Copper
Electricity
Natural Gas New York Mercantile Exchange Long 5,270,500 MMBtu
Exchange
London Metal Exchange
London Metal Exchange
New York Mercantile Exchange Long
New York Mercantile Exchange Short
N/A(2)
$ 2,176.95 — $ 2,284.00 $
$ 2,154.00 — $ 2,196.25
$ 369.40 — $ 383.75
$ 362.35 — $ 412.90
Long 3,312,000 MW(h) PLN 239.29 — 744.64
5.75
3.45 — $
$
Total Contract
Volumes
2,850 MT
1,400 MT
147 MT
8,459 MT
Long/
Short
Long
Short
Range or
Amount of Hedge
Rates per unit
Total Contract
Fair Value(1)
(in thousands)
(23)
(33)
19
271
194,425
(3,039)
$ 191,620
__________________________________
MT = Metric ton
MW(h) = Megawatt hour
MMBtu = Metric Million British thermal unit
(1) All commodity futures contract commitments mature within one year, except for the electricity and natural gas contract
commitments, which have maturity dates extending to December 31, 2034 and August 31, 2026, respectively.
(2) There is no exchange for the electricity derivatives as they are bilateral agreements with a counterparty.
39
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Earnings for the years ended August 31, 2023, 2022 and 2021
Consolidated Statements of Comprehensive Income for the years ended August 31, 2023, 2022 and 2021
Consolidated Balance Sheets as of August 31, 2023 and 2022
Consolidated Statements of Cash Flows for the years ended August 31, 2023, 2022 and 2021
Consolidated Statements of Stockholders' Equity for the years ended August 31, 2023, 2022 and 2021
Notes to Consolidated Financial Statements
Note 1. Nature of Operations and Summary of Significant Accounting Policies
Note 2. Changes in Business
Note 3. Accumulated Other Comprehensive Income (Loss)
Note 4. Revenue Recognition
Note 5. Inventories
Note 6. Goodwill and Other Intangible Assets
Note 7. Leases
Note 8. Credit Arrangements
Note 9. New Markets Tax Credit Transactions
Note 10. Derivatives
Note 11. Fair Value
Note 12. Income Tax
Note 13. Stock-Based Compensation Plans
Note 14. Employees' Retirement Plans
Note 15. Capital Stock
Note 16. Earnings Per Share
Note 17. Commitments and Contingencies
Note 18. Accrued Expenses and Other Payables
Note 19. Operating Segments
41
44
45
46
47
49
50
50
55
57
57
58
59
61
63
65
66
67
69
72
73
79
79
79
80
80
40
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Commercial Metals Company
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Commercial Metals Company and subsidiaries (the
“Company”) as of August 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained,
in all material respects, effective internal control over financial reporting as of August 31, 2023, based on criteria established in
Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended August 31, 2023, of the Company and our report
dated October 12, 2023, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Dallas, Texas
October 12, 2023
41
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Commercial Metals Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Commercial Metals Company and subsidiaries (the
"Company") as of August 31, 2023 and 2022, the related consolidated statements of earnings, comprehensive income,
stockholders' equity, and cash flows, for each of the three years in the period ended August 31, 2023, and the related notes and
the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of August 31, 2023 and 2022, and
the results of its operations and its cash flows for each of the three years in the period ended August 31, 2023, in conformity
with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of August 31, 2023, based on criteria established in
Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated October 12, 2023, expressed an unqualified opinion on the Company's internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Goodwill — Annual impairment test for two Reporting Units within the North America Segment and one Reporting
Unit within the Europe Segment – Refer to Notes 1 and 6 to the Financial Statements
Critical Audit Matter Description
Goodwill is tested for impairment at the reporting unit level annually as of the first day of the Company’s fourth quarter and
whenever events or circumstances indicate that the carrying value may not be recoverable. As of the 2023 annual impairment
test date, the Company had goodwill of $342.1 million, of which $252.3 million related to two reporting units within the North
America segment and $40.0 million related to one reporting unit within the Europe segment. The Company’s goodwill
impairment assessment involves comparing the fair value of each reporting unit to its carrying value. The Company estimates
the fair value of its reporting units using a weighting of fair values derived from the income and market approaches. The
determination of fair value using the income approach is based on the present value of estimated future cash flows, which
requires management to make significant estimates and assumptions of revenue growth rates and operating margins, and
selection of the discount rate. The determination of the fair value using the market approach requires management to make
significant assumptions related to market multiples of earnings derived from comparable publicly traded companies with similar
operating and investment characteristics as the reporting unit.
42
Based on the results of the Company’s annual impairment testing, no impairment was recognized as the fair value of the
Company’s reporting units exceeded their carrying value.
We identified the Company’s goodwill impairment assessment as of the first day of the Company’s fourth quarter for the
$292.3 million of goodwill related to two reporting units within the North America segment and one reporting unit within the
Europe segment as a critical audit matter because of the significant estimates and assumptions used by management to estimate
the fair value of these reporting units. This required a high degree of auditor judgment and an increased extent of effort,
including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of
management’s estimates and assumptions of future cash flows based on estimates of revenue growth rates and operating
margins and selection of the discount rate for the income approach, and multiples of earnings for the market approach.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the annual goodwill impairment assessment for two reporting units within the North America
segment and one reporting unit within the Europe segment included the following, among others:
• We tested the effectiveness of controls over the goodwill impairment assessment, including management’s controls
over forecasts of future cash flows based on estimates of revenue growth rates and operating margins and the selection
of the discount rate for the income approach, and determination of multiples of earnings for the market approach.
• We evaluated the reasonableness of management’s forecasts of future cash flows based on revenue growth rates and
operating margins by comparing the forecasts to (1) historical revenues and operating margins and (2) forecasted
information included in industry reports.
• With the assistance of our fair value specialists:
◦ We evaluated the reasonableness of the valuation methodologies.
◦ We evaluated the reasonableness of the discount rates used in the income approach by developing an
independent range of estimated discount rates and comparing that range to the discount rates used in the
Company’s valuation.
◦ We evaluated the multiples of earnings used in the market approach, including testing the underlying source
information and mathematical accuracy of the calculations.
/s/ Deloitte & Touche LLP
Dallas, Texas
October 12, 2023
We have served as the Company's auditor since 1959.
43
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except share and per share data)
Net sales
Costs and operating expenses (income):
Cost of goods sold
Selling, general and administrative expenses
Interest expense
Asset impairments
Loss (gain) on sale of assets
Loss on debt extinguishment
Net costs and operating expenses
Earnings before income taxes
Income taxes
Net earnings
Earnings per share:
Basic
Diluted
Average basic shares outstanding
Average diluted shares outstanding
Year Ended August 31,
2023
8,799,533 $
2022
8,913,481 $
2021
6,729,760
$
6,987,618
7,057,085
5,623,903
643,535
40,127
3,780
2,327
179
7,677,566
1,121,967
262,207
544,984
50,709
4,926
(275,422)
16,052
7,398,334
1,515,147
297,885
$
859,760 $
1,217,262 $
505,117
51,904
6,784
(8,807)
16,841
6,195,742
534,018
121,153
412,865
$
7.34 $
10.09 $
7.25
9.95
3.43
3.38
117,077,703
120,648,090
120,338,357
118,606,271
122,372,386
121,983,497
See notes to consolidated financial statements.
44
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net earnings
Other comprehensive income (loss), net of income taxes:
Foreign currency translation
Derivatives:
Net unrealized holding gain
Reclassification for realized gain
Year Ended August 31,
2023
2022
2021
$ 859,760 $ 1,217,262 $ 412,865
119,852
(140,217)
(17,747)
6,395
138,634
35,492
(9,380)
(22,173)
(2,377)
Net unrealized holding gain (reclassification for realized gain) on derivatives
(2,985) 116,461
33,115
Defined benefit pension plans:
Net gain (loss)
Reclassification for settlement losses and other
Defined benefit pension plans gain (loss) after amortization of prior service
costs and net actuarial losses
Total other comprehensive income (loss), net of income taxes
Comprehensive income
(7,985)
(5,898)
3,523
1,791
23
53
(6,194)
(5,875)
3,576
110,673
(29,631)
18,944
$ 970,433 $ 1,187,631 $ 431,809
See notes to consolidated financial statements.
45
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
August 31,
2023
2022
$
592,332 $
1,240,217
1,035,582
276,024
3,144,155
160,067
1,071,102
3,089,007
213,651
4,533,827
(2,124,467)
2,409,360
259,161
385,821
440,597
6,639,094 $
672,596
1,358,907
1,169,696
240,269
3,441,468
155,237
799,715
2,440,910
489,031
3,884,893
(1,974,022)
1,910,871
257,409
249,009
378,270
6,237,027
$
$
364,390 $
438,811
40,513
843,714
306,801
253,181
1,114,284
2,517,980
428,055
540,136
388,796
1,356,987
250,302
230,060
1,113,249
2,950,598
(3,778)
1,290
394,672
1,290
382,767
(114,451)
3,312,438
4,097,262
(295,847)
(368,573)
3,286,197
4,120,873
232
241
3,286,429
4,121,114
6,237,027
6,639,094 $
See notes to consolidated financial statements.
$
(in thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable (less allowance for doubtful accounts of $4,135 and $4,990)
Inventories
Prepaid and other current assets
Total current assets
Property, plant and equipment:
Land
Buildings and improvements
Equipment
Construction in process
Less accumulated depreciation and amortization
Property, plant and equipment, net
Intangible assets, net
Goodwill
Other noncurrent assets
Total assets
Liabilities and stockholders' equity
Current liabilities:
Accounts payable
Accrued expenses and other payables
Current maturities of long-term debt and short-term borrowings
Total current liabilities
Deferred income taxes
Other noncurrent liabilities
Long-term debt
Total liabilities
Commitments and contingencies (Note 17)
Stockholders' equity:
Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued
129,060,664 shares; outstanding 116,515,427 and 117,496,053 shares
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Less treasury stock, 12,545,237 and 11,564,611 shares at cost
Stockholders' equity
Stockholders' equity attributable to non-controlling interests
Total stockholders' equity
Total liabilities and stockholders' equity
46
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended August 31,
2023
2022
2021
$
859,760 $ 1,217,262 $
412,865
218,830
60,529
51,919
11,286
3,780
2,327
179
4,471
—
(17,659)
175,102
177,024
(174,120)
(29,325)
1,344,103
(606,665)
(234,717)
5,000
2,456
1,006
(2,307)
(835,227)
175,024
46,978
86,175
464
4,926
(275,422)
16,052
2,089
—
—
(257,607)
(255,175)
3,899
(64,356)
700,309
(449,988)
(552,449)
—
3,081
315,148
(507)
(684,715)
167,613
43,677
(39,873)
384
6,784
(8,807)
16,841
157
(6,035)
—
(228,026)
(316,316)
194,801
(15,591)
228,474
(184,165)
(1,888)
—
—
26,424
(2,500)
(162,129)
—
(389,756)
(1,800)
(97)
330,061
(349,015)
(101,406)
(12,539)
(74,936)
743,391
(328,594)
(3,064)
(13,642)
440,236
(433,936)
(161,880)
(9,457)
(67,749)
309,279
(368,527)
(2,830)
(13,128)
296,586
(269,858)
—
(3,166)
(57,766)
20
(109,390)
(790)
(43,835)
544,964
501,129
See notes to consolidated financial statements.
(599,479)
7,077
(83,526)
679,243
595,717 $
178,114
501,129
679,243 $
—
165,305
(2,785)
$
9
(in thousands)
Cash flows from (used by) operating activities:
Net earnings
Adjustments to reconcile net earnings to net cash flows from operating
activities:
Depreciation and amortization
Stock-based compensation
Deferred income taxes and other long-term taxes
Write-down of inventory
Asset impairments
Net loss (gain) on sales of assets
Loss on debt extinguishment
Other
Amortization of acquired unfavorable contract backlog
Settlement of New Markets Tax Credit transaction
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable
Inventories
Accounts payable, accrued expenses and other payables
Other operating assets and liabilities
Net cash flows from operating activities
Cash flows from (used by) investing activities:
Capital expenditures
Acquisitions, net of cash acquired
Proceeds from government grants related to property, plant and equipment
Proceeds from insurance
Proceeds from the sale of property, plant and equipment and other
Other
Net cash flows used by investing activities
Cash flows from (used by) financing activities:
Proceeds from issuance of long-term debt, net
Repayments of long-term debt
Debt issuance costs
Debt extinguishment costs
Proceeds from accounts receivable facilities
Repayments under accounts receivable facilities
Treasury stock acquired
Tax withholdings related to share settlements, net of purchase plans
Dividends
Contribution from non-controlling interest
Net cash flows from (used by) financing activities
Effect of exchange rate changes on cash
Increase (decrease) in cash and cash equivalents
Cash, restricted cash and cash equivalents at beginning of period
Cash, restricted cash and cash equivalents at end of period
47
(in thousands)
Supplemental information:
Cash paid for income taxes
Cash paid for interest
Noncash activities:
Liabilities related to additions of property, plant and equipment
Cash and cash equivalents
Restricted cash
Total cash, restricted cash and cash equivalents
Year Ended August 31,
2023
2022
2021
199,883 $
64,431
229,316 $
47,329
140,950
58,325
31,379 $
55,648 $
39,899
592,332 $
3,385
595,717 $
672,596 $
6,647
679,243 $
497,745
3,384
501,129
$
$
$
$
48
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
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
Interests
Total
Balance, September 1, 2020
129,060,664
$1,290
$358,912
($103,764) $1,807,826
(9,839,759) ($175,063)
$212
$1,889,413
Net earnings
Other comprehensive income
Dividends ($0.48 per share)
Issuance of stock under incentive and
purchase plans, net of shares withheld
for taxes
Stock-based compensation
Contribution of non-controlling interest
Reclassification of share-based liability
awards
18,944
412,865
(57,766)
1,365,684
22,481
412,865
18,944
(57,766)
(3,166)
29,380
20
5,419
20
(25,647)
29,380
5,419
Balance at August 31, 2021
129,060,664
$1,290
$368,064
($84,820) $2,162,925
(8,474,075) ($152,582)
$232
$2,295,109
Net earnings
Other comprehensive loss
Dividends ($0.56 per share)
Treasury stock acquired
Issuance of stock under incentive and
purchase plans, net of shares withheld
for taxes
Stock-based compensation
Reclassification of share-based liability
awards
(29,631)
1,217,262
(67,749)
(4,496,628) (161,880)
1,406,092
18,615
1,217,262
(29,631)
(67,749)
(161,880)
(9,457)
33,684
9,091
(28,072)
33,684
9,091
Balance at August 31, 2022
129,060,664
$1,290
$382,767
($114,451) $3,312,438
(11,564,611) ($295,847)
$232
$3,286,429
Net earnings
Other comprehensive income
Dividends ($0.64 per share)
Treasury stock acquired
Issuance of stock under incentive and
purchase plans, net of shares withheld
for taxes
Stock-based compensation
Contribution of non-controlling interest
Reclassification of share-based liability
awards
110,673
859,760
(74,936)
(2,309,452) (101,406)
1,328,826
28,680
859,760
110,673
(74,936)
(101,406)
(12,539)
43,434
9
9
9,690
(41,219)
43,434
9,690
Balance at August 31, 2023
129,060,664
$1,290
$394,672
($3,778) $4,097,262
(12,545,237) ($368,573)
$241
$4,121,114
See notes to consolidated financial statements.
49
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 United States ("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.
The Company has two reportable segments: North America and Europe.
North America
The North America segment provides a diverse offering of products and solutions to support the construction industry. The
North America segment is primarily composed of a vertically integrated network of recycling facilities, steel mills and
fabrication operations located in the U.S., as well as facilities that provide construction-related solutions to serve markets that
are complementary to our vertically integrated operations. The recycling facilities process ferrous and nonferrous scrap metals
(collectively known as "raw materials") for use by manufacturers of new metal products. The steel mills manufacture finished
long steel products including reinforcing bar ("rebar"), merchant bar, light structural and other special sections as well as semi-
finished billets for rerolling and forging applications (collectively known as "steel products"). The fabrication operations
primarily manufacture fabricated rebar and steel fence posts (collectively known as "downstream products"). The general
strategy in North America 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 segment's
products are sold primarily to steel mills and foundries, construction, fabrication and other manufacturing industries.
Europe
The Europe segment is primarily composed of a vertically integrated network of recycling facilities, an electric arc furnace
("EAF") mini mill and fabrication operations located in Poland. The steel products manufactured by this segment include rebar,
merchant bar and wire rod as well as semi-finished billets. In addition, the downstream products manufactured by this segment's
fabrication operations include fabricated rebar, fabricated mesh, assembled rebar cages and other fabricated rebar by-products.
In addition, the Europe segment also has facilities that provide construction-related solutions, such as Tensar products, to serve
complementary markets to our vertically integrated operations. The Europe segment's products are sold primarily to fabricators,
manufacturers, distributors and construction companies.
Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned and majority owned
subsidiaries and certain variable interest entities ("VIEs") for which the Company is the primary beneficiary. Intercompany
account balances and transactions have been eliminated.
Use of Estimates
The preparation of the Company's consolidated financial statements in accordance with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and
reported amounts of net sales and expenses during the reporting period. Significant items subject to such estimates and
assumptions include revenue recognition, income taxes, carrying value of inventory, acquisitions, goodwill, long-lived assets,
derivative instruments and contingencies. Actual results could differ significantly from these estimates and assumptions.
50
Cash and Cash Equivalents
Cash and cash equivalents include cash on deposit and short-term, highly-liquid investments with original maturities of three
months or less at the date of purchase.
Revenue Recognition and Allowance for Doubtful Accounts
Revenue is recognized when control of the promised goods or services is transferred to the customer in an amount that reflects
the consideration received or expected to be received in exchange for those goods or services. The Company's performance
obligations arise from (i) sales of raw materials, steel products, downstream products and construction-related solutions and (ii)
installation services performed by its fabrication operations. The shipment of products to customers is considered a fulfillment
activity and amounts billed to customers for shipping and freight are included in net sales, and the related costs are included in
cost of goods sold. Net sales are presented net of taxes. 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 usually occurs, depending on shipping terms, upon shipment or
customer receipt. Revenue related to steel fence posts and other downstream products in the North America segment not
discussed below is recognized equal to billing under an available practical expedient.
Each fabricated rebar contract sold by the North America segment represents a single performance obligation and revenue is
recognized over time. For contracts where the Company provides fabricated rebar and installation services, revenue is
recognized over time using an input measure of progress based on contract costs incurred to date compared to total estimated
contract costs ("input measure"). This input measure provides a reasonable depiction of the Company’s progress towards
satisfaction of the performance obligation as there is a direct relationship between costs incurred by the Company and the
transfer of the fabricated rebar and installation services. Revenue from fabricated rebar contracts where the Company does not
provide installation services is recognized over time using an output measure of progress based on tons shipped compared to
total estimated tons ("output measure"). This output measure provides a reasonable depiction of the transfer of contract value to
the customer, as there is a direct relationship between the units shipped by the Company and the transfer of the fabricated rebar.
If total estimated costs on any contract are greater than the net contract revenues, the Company recognizes the entire estimated
loss in the period the loss becomes known. The cumulative effect of revisions to estimates related to net contract revenues, costs
to complete or total planned quantity is recorded in the period in which such revisions are identified.
The timing of revenue recognition may differ from the timing of invoicing to customers. The Company records an asset when
revenue is recognized prior to invoicing and a liability when revenue is recognized subsequent to invoicing. Payment terms and
conditions vary by contract type, although the Company generally requires customers to pay 30 days after the Company
satisfies the performance obligations. In instances where the timing of revenue recognition differs from the timing of invoicing,
the Company has determined the contracts do not include a significant financing component.
The Company maintains an allowance for doubtful accounts for the accounts receivable we estimate will not be collected based
on market conditions, customers' financial condition and other factors. Historically, these allowances have not been material.
The Company reviews and sets credit limits for each customer. The Europe segment uses credit insurance to ensure payment in
accordance with the terms of sale. Generally, collateral is not required. Approximately 14% and 16% of total receivables at
August 31, 2023 and 2022, respectively, were financially assured.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined by the weighted average cost method.
Adjustments to inventory may be due to changes in price levels, assumptions about market conditions, obsolescence, damage,
physical deterioration and other causes. Adjustments required to reduce the carrying value of inventory to net realizable value
are recorded as a charge to cost of goods sold within the consolidated statements of earnings.
Elements of cost in finished goods inventory in addition to the cost of material include depreciation, utilities, consumable
production inputs, maintenance, production, wages and transportation costs. Additionally, the costs of departments that support
production, including materials management and quality control, are allocated to inventory.
51
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Maintenance is expensed as incurred. Leasehold improvements are
amortized over the shorter of their estimated useful lives or the lease term. Depreciation and amortization are recorded on a
straight-line basis over the following estimated useful lives:
Buildings
Land improvements
Leasehold improvements
Equipment
7
3
3
3
to
to
to
to
40
25
15
25
years
years
years
years
The Company evaluates impairment of its property, plant and equipment whenever events or changes in circumstances indicate
that the carrying value may not be recoverable. For each asset or group of assets held for use with indicators of impairment, the
Company compares the sum of the estimated future cash flows generated by the asset or group of assets with its associated net
carrying value. If the net carrying value of the asset or group of assets exceeds estimated undiscounted future cash flows, the
excess of the net carrying value over estimated fair value is charged to impairment loss. Properties held for sale are reported at
the lower of their carrying amount or their estimated sales price, less estimated costs to sell.
During 2023, historical and current period operating losses were determined to be triggering events for three long-lived asset
groups associated with downstream fabricated rebar operations. The Company reviewed the undiscounted future cash flows for
the long-lived asset groups for recoverability, which indicated that the net carrying values of certain right-of-use ("ROU")
assets included in one long-lived asset group were not recoverable. Therefore, such ROU assets were evaluated for impairment
by comparing the estimated fair values of the ROU assets to their net carrying values, which resulted in a non-cash impairment
of $3.5 million during the fourth quarter of 2023, included in asset impairments in the consolidated statement of earnings.
Leases
The Company's leases are primarily for real property and equipment. The Company determines if an arrangement is a lease at
inception of a contract if the terms state the Company has the right to direct the use of, and obtain substantially all the economic
benefits from, a specific asset identified in the contract. The ROU assets represent the Company's right to use the underlying
assets for the lease term, and the lease liabilities represent the obligation to make lease payments arising from the leases. The
Company's ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments
to be made over the lease term. Certain of the Company's lease agreements contain options to extend the lease. The Company
evaluates these options on a lease-by-lease basis, and if the Company determines it is reasonably certain to be exercised, the
lease term includes the extension. The Company uses its incremental borrowing rate at lease commencement to determine the
present value of lease payments, and lease expense is recognized on a straight-line basis over the lease term. The incremental
borrowing rate is the rate of interest the Company could borrow on a collateralized basis over a similar term with similar
payments. The Company does not include leases with an initial term of twelve months or less in the ROU asset or lease liability
balances.
Certain of the Company's lease agreements include payments for certain variable costs not determinable upon lease
commencement, including mileage, utilities, fuel and inflation adjustments. These variable lease payments are recognized in
cost of goods sold and selling, general and administrative ("SG&A") expenses, but are not included in the ROU asset or lease
liability balances. The Company's lease agreements do not contain any material residual value guarantees, restrictions or
covenants.
Government Assistance
Government assistance, including non-monetary grants, herein collectively referred to as grants, are not recognized until there is
reasonable assurance that the Company will comply with the conditions of the grant and the Company will receive the grant.
Generally, government grants fall into two categories: grants related to assets and grants related to income.
Grants related to assets are government grants for the purchase, construction or other acquisition of long-lived assets. The
Company accounts for grants related to assets by deducting the grant in arriving at the carrying amount of the asset on the
consolidated balance sheets. Non-monetary grants are recognized at fair value. The Company recognizes the grant in profit or
loss over the life of the depreciable asset as a reduction to depreciation expense. Grants related to non-depreciable assets may
require the fulfillment of certain obligations and, in such cases, would be recognized in profit or loss over the periods that bear
52
the cost of meeting the obligations. As an example, a grant of land that is conditional upon constructing a building on the site is
recognized as a reduction to depreciation expense over the life of the building.
Grants related to income are any grants that are not considered grants related to assets, such as grants to compensate for certain
expenses. Grants related to income are recognized in profit or loss on a systematic basis upon meeting the recognition criteria
specified in the grants and during the periods when the expenses the grants intend to compensate for are incurred.
During 2023 and 2022, the Company was awarded $9.5 million and $15.5 million, respectively, in government grants related to
income as part of the compensation scheme for energy-intensive sectors and sub-sectors established by the Energy Regulatory
Office in Poland (the "Poland Compensation Scheme Act" or "PCSA"). The purpose of the PCSA in each year was to provide
aid to energy-intensive companies to offset indirect costs of rising carbon emission rights included in energy costs. The amount
of government assistance awarded by the PCSA in each year was dependent upon the Company meeting certain electricity
consumption thresholds and the number of other applicants. The government assistance recognized in 2023 and 2022 under the
PCSA is not subject to recapture. The PCSA grants are recognized in the Europe segment and were recorded as a reduction to
cost of goods sold in the Company's consolidated statements of earnings.
During 2023, the Company was awarded $4.3 million in government grants related to income as part of the 2022 Polish state
aid program for rising electricity and natural gas prices (the "2022 Energy Aid Program"). The 2022 Energy Aid Program was
established by the Polish Ministry of Development and Technology to mitigate the effects of sudden increases in electricity and
natural gas prices in Poland for companies who met required energy intensity and sectorial conditions and experienced certain
financial metrics in calendar year 2022 compared to the prior year. The full amount of the Company's 2022 Energy Aid
Program grant was received in 2023 and is not subject to recapture. The 2022 Energy Aid Program grant was recognized in the
Europe segment and recorded as a reduction to cost of goods sold in the Company's consolidated statement of earnings.
During 2023, the Company entered into an agreement with the West Virginia Economic Development Authority (the
"WVEDA") to permanently finance a portion of the costs to construct the Company's fourth micro mill, which is under
development in Berkeley County, West Virginia. Under this agreement, the Company can receive up to $75.0 million in the
aggregate of disbursements in the form of a forgivable loan for eligible costs incurred from June 21, 2023 through June 20,
2027 (the "Completion Date"). Eligible costs include the acquisition of land and buildings, the acquisition and installation of
machinery and equipment and necessary construction costs. The Company anticipates receiving disbursements over this period
upon achieving certain capital investment and employment thresholds. Amounts received under the agreement are subject to
recapture in the event that the Company fails to achieve certain minimum investment and employment thresholds prior to the
Completion Date. The Company has determined that amounts received under the agreement are grants related to assets. During
2023, the Company received $5.0 million in cumulative benefits from the WVEDA as a result of meeting certain investment
thresholds; amounts received were recognized in the North America segment and reduced construction in process in the
Company's consolidated balance sheet as of August 31, 2023.
Goodwill and Other Intangible Assets
Goodwill and other indefinite-lived intangible assets are tested for impairment annually as of the first day of the Company's
fourth quarter, or more frequently if events or circumstances indicate that impairment may be possible. To evaluate goodwill
and other indefinite-lived intangible assets for impairment, the Company may use qualitative assessments to determine whether
it is more likely than not that the fair value of a reporting unit, including goodwill, or an indefinite-lived intangible asset is less
than its carrying amount. The qualitative assessments consider multiple factors, including the current operating environment,
historical and future financial performance and industry and market conditions. If an initial qualitative assessment identifies that
it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, additional quantitative
testing is performed. The Company may elect to bypass the qualitative assessment and instead perform a quantitative
impairment test to calculate the fair value of the reporting unit in comparison to its associated carrying value.
The Company's reporting units represent an operating segment or one level below an operating segment. When performing a
quantitative impairment test, the Company estimates the fair value of its reporting units using a weighting of fair values derived
from the income and market approaches. Under the income approach, the Company determines the fair value of a reporting unit
based on the present value of estimated future cash flows. Cash flow projections are based on management's estimates of
revenue growth rates and operating margins, taking into account industry and market conditions. The discount rate is based on a
weighted average cost of capital adjusted for the relevant risk associated with the characteristics of the reporting unit. The
market approach estimates fair value based on market multiples of earnings derived from comparable publicly traded
companies with similar operating and investment characteristics as the reporting unit. If the carrying amount of a reporting unit
exceeds its fair value, an impairment loss is indicated in the amount that the carrying value exceeds the fair value of the
reporting unit, not to exceed the goodwill value for the reporting unit.
53
When estimating the fair value of indefinite-lived intangible assets using a quantitative approach, the Company uses an income
approach to calculate the fair value of the indefinite-lived intangible assets using a relief from royalty method. Significant
inputs to measure the fair value of the indefinite-lived intangible assets include projected revenue growth rates, royalty rates and
discount rates.
Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives and are tested for
impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment
charges are recorded on finite-lived intangible assets when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets' carrying amounts.
Contingencies
The Company accrues for claims and litigation, including environmental investigation and remediation costs, when they are
both probable and the amount can be reasonably estimated. Environmental costs are based upon estimates regarding the sites
for which the Company will be responsible, the scope and cost of work to be performed at each site, the portion of costs that
will be shared with other parties and the timing of remediation. Where timing and amounts cannot be reasonably determined, a
range is estimated and the lower end of the range is recorded.
Stock-Based Compensation
The Company recognizes stock-based equity and liability awards at fair value. The fair value of each stock-based equity award
is estimated at the grant date using either the Black-Scholes or Monte Carlo pricing model. Total compensation cost of the
stock-based equity award is amortized over the requisite service period using the accelerated method of amortization for grants
with graded vesting or the straight-line method for grants with cliff vesting. Stock-based liability awards are measured at fair
value at the end of each reporting period and will fluctuate based on the price of CMC common stock and performance relative
to the targets.
Income Taxes
CMC and its U.S. subsidiaries file a consolidated federal income tax return. Deferred income taxes are provided for temporary
differences between financial statement and income tax bases of assets and liabilities. The principal differences are described in
Note 12, Income Tax. Benefits from income tax credits are reflected currently in earnings. The Company records income tax
positions based on a more likely than not threshold that the tax positions will be sustained on examination by the taxing
authorities having full knowledge of all relevant information. The Company classifies interest and any statutory penalties
recognized on a tax position as income tax expense.
Foreign Currencies
The functional currency of the Company's foreign operations is the local currency of each respective country. Translation
adjustments are reported as a component of accumulated other comprehensive income or loss. Transactions denominated in
currencies other than the functional currency yielded a loss of $12.1 million in 2023, a gain of $9.6 million in 2022 and an
immaterial gain in 2021.
Derivative Financial Instruments
The Company recognizes derivatives as either assets or liabilities in the consolidated balance sheets and measures those
instruments at fair value. Derivatives that are not designated as hedges are adjusted to fair value through net earnings. Changes
in the fair value of derivatives that are designated as hedges are recognized depending on the nature of the hedge. In the case of
fair value hedges, changes are recognized as an offset against the change in fair value of the hedged balance sheet item. When
the derivative is designated as a cash flow hedge and is highly effective, changes are recognized in other comprehensive
income.
When a derivative instrument is sold, terminated, exercised or expires, the gain or loss is recorded in the consolidated statement
of earnings for fair value hedges, and the cumulative unrealized gain or loss, which had been recognized in the statement of
comprehensive income, is reclassified to the consolidated statement of earnings for cash flow hedges. Additionally, when
hedged items are sold or extinguished, or the anticipated transaction being hedged is no longer expected to occur, the Company
recognizes the gain or loss on the designated hedged financial instrument.
54
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. Level 1 represents unadjusted quoted prices in active markets for identical assets and liabilities. Level 2
represents quoted prices for similar assets and liabilities in active markets (other than those included in Level 1) which are
observable, either directly or indirectly. Level 3 represents valuations derived from valuation techniques in which one or more
significant inputs or significant value drivers are unobservable.
Recently Issued and Adopted Accounting Pronouncements
In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-08,
Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.
ASU 2021-08 requires that an acquirer recognize and measure contract assets and liabilities acquired in a business combination
in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This standard is effective for annual
periods beginning after December 15, 2022, including interim periods therein, with early adoption permitted. The guidance will
be applied prospectively to acquisitions occurring on or after the effective date. The Company will continue to evaluate the
impact of this guidance, which will depend on the contract assets and liabilities acquired in future business combinations.
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities
About Government Assistance. ASU 2021-10 aims to increase the transparency of government assistance through the
disclosure of the types of assistance, an entity's accounting for the assistance and the effect of the assistance on an entity's
financial statements. The Company adopted this standard on a prospective basis for the annual period beginning September 1,
2022.
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. The majority of volumes processed by Roane relate
to obsolete ferrous scrap metals to be consumed by the Company's steel mill operations.
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.
The acquisitions of ASR, Kodiak, Roane, Tendon, BOSTD and EDSCO (collectively, the "2023 Acquisitions") are not material
individually, or in the aggregate, to the Company's financial position as of August 31, 2023 or results of operations for the year
ended August 31, 2023, and therefore, pro forma operating results and other disclosures for the 2023 Acquisitions are not
presented. Operating results for the 2023 Acquisitions are presented within the Company's North America reportable segment.
55
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, and was funded
through domestic cash on-hand.
The results of operations from Tensar were reflected in the Company’s consolidated financial statements from the Tensar
Acquisition Date. Tensar's net sales and earnings before income taxes included in the Company's consolidated statement of
earnings and consolidated statement of comprehensive income in 2022 were $102.1 million and $3.2 million, respectively.
The table below presents the fair values that were allocated to Tensar's assets and liabilities as of the Tensar Acquisition Date:
(in thousands)
Cash and cash equivalents
Accounts receivable
Inventories
Prepaid and other current assets
Defined benefit pension plan
Property, plant and equipment
Intangible assets
Goodwill
Other noncurrent assets
Accounts payable
Accrued expenses and other payables
Current maturities of long-term debt
Deferred income taxes
Other noncurrent liabilities
Long-term debt
Total assets acquired and liabilities assumed
Pro Forma Supplemental Information
Fair Value
19,551
37,741
39,462
12,528
14,620
85,983
260,500
186,805
19,660
(12,134)
(23,725)
(3,277)
(45,055)
(16,347)
(4,312)
572,000
$
$
Supplemental information on an unaudited pro forma basis is presented below as if the acquisition of Tensar occurred on
September 1, 2020. The pro forma financial information is presented for comparative purposes only, based on certain factually
supported estimates and assumptions, which the Company believes to be reasonable, but not necessarily indicative of future
results of operations or the results that would have been reported if the acquisition had been completed on September 1, 2020.
These results were not used as part of management's analysis of the financial results and performance of the Company. The pro
forma adjustments do not reflect anticipated synergies, but rather include the nonrecurring impact of additional cost of sales
from revalued inventory and the recurring income statement effects of fair value adjustments, such as depreciation and
amortization. Further adjustments were made to remove the impact of Tensar's prior management fees, acquisition and
integration expenses and interest on debt not assumed in the acquisition. The resulting tax effects of the business combination
are also reflected below.
(in thousands)
Pro forma net sales
Pro forma net earnings
Year Ended August 31,
2022
2021
$
9,064,322 $
6,957,903
1,238,174
416,904
The pro forma results presented above include, but are not limited to, adjustments to remove the impact of $8.7 million of
acquisition and integration expenses from 2022 and reapportion $1.0 million of those costs incurred following the Tensar
Acquisition Date to 2021, as well as reallocate $8.7 million of increased cost of goods sold in 2022 to 2021 as a result of the
revaluation of inventory. The pro forma results also reflect increased amortization expense from acquired intangible assets of
$8.1 million in 2022 and $12.4 million in 2021.
56
Facility Disposition
On September 29, 2021, the Company entered into a definitive agreement to sell the assets associated with its Rancho
Cucamonga melting operations and an adjacent rebar fabrication facility ("the Rancho Cucamonga facilities"). On December
28, 2021, the sale of the Rancho Cucamonga facilities was completed for gross proceeds of $313.0 million, of which
$22.0 million was used to purchase like-kind assets in 2022 per the terms of the sale agreement. Due to these closures, the
Company recorded $13.8 million of expenses in 2021 related to asset impairments, severance, environmental obligations and
vendor agreement terminations. The closures did not meet the criteria for discontinued operations.
NOTE 3. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss) ("AOCI") was comprised of the following:
(in thousands)
Balance, September 1, 2020
Other comprehensive income (loss) before reclassifications(1)
Reclassification for gain(2)
Net other comprehensive income (loss)
Balance at August 31, 2021
Other comprehensive income (loss) before reclassifications(1)
Reclassification for gain(2)
Net other comprehensive income (loss)
Balance at August 31, 2022
Other comprehensive income (loss) before reclassifications(1)
Reclassification for (gain) loss(2)
Net other comprehensive income (loss)
Foreign
Currency
Translation
Derivatives
Defined Benefit
Pension Plans
Total AOCI
$
(87,933) $
(11,334) $
(4,497) $
(103,764)
(17,747)
35,492
—
(2,377)
(17,747)
(105,680)
33,115
21,781
3,576
—
3,576
21,321
(2,377)
18,944
(921)
(84,820)
(140,217)
138,634
(5,875)
—
(22,173)
—
(140,217)
(245,897)
119,852
—
119,852
116,461
138,242
6,395
(9,380)
(2,985)
(7,458)
(22,173)
(29,631)
(5,875)
(6,796)
(114,451)
(7,985)
118,262
1,791
(7,589)
(6,194)
110,673
Balance at August 31, 2023
$
(126,045) $
135,257 $
(12,990) $
(3,778)
__________________________________
(1) Other comprehensive income before reclassifications from derivatives is presented net of income tax expense of $1.1
million, $33.0 million and $6.7 million for 2023, 2022 and 2021, respectively. Other comprehensive income (loss) before
reclassifications from defined benefit pension plans is presented net of income tax expense (benefit) of $(3.9 million),
$(2.6 million) and $0.9 million for 2023, 2022 and 2021, respectively.
(2) Reclassifications for gains from derivatives included in net earnings are primarily recorded in cost of goods sold in the
consolidated statements of earnings and are presented net of income tax expense of $2.2 million, $5.3 million and $0.4
million, for 2023, 2022 and 2021, respectively. Reclassifications for losses from defined benefit pension plans included in
net earnings are recorded in SG&A expenses in the consolidated statement of earnings and are presented net of immaterial
income tax benefits for all periods presented.
NOTE 4. REVENUE RECOGNITION
Revenue from Contracts with Customers
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
usually occurs, depending on shipping terms, upon shipment or customer receipt. Revenue related to steel fence posts and other
downstream products in the North America segment not discussed below is recognized equal to billing under an available
practical expedient. See Note 19, Operating Segments, for further information about disaggregated revenue by our major
product lines.
Each fabricated rebar contract sold by the North America segment represents a single performance obligation. Revenue from
contracts where the Company provides fabricated rebar and installation services is recognized over time using an input
measure, and these contracts represented 7%, 8% and 10% of net sales in the North America segment in 2023, 2022 and 2021,
respectively. Revenue from fabricated rebar contracts where the Company does not provide installation services is recognized
over time using an output measure, and these contracts represented 11% of net sales in the North America segment in 2023, and
9% in 2022 and 2021.
57
The following table provides information about assets and liabilities from contracts with customers:
(in thousands)
Contract assets (included in accounts receivable)
Contract liabilities (included in accrued expenses and other payables)
August 31, 2023
August 31, 2022
$
67,641 $
28,377
73,037
27,567
The entire contract liability as of August 31, 2022 was recognized in 2023.
Remaining Performance Obligations
As of August 31, 2023, revenue totaling $920.9 million 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 80% of the remaining performance obligations will be recognized during 2024 and the
remainder will be recognized during 2025. The duration of all other contracts in the North America and Europe segments are
typically less than one year.
NOTE 5. INVENTORIES
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)
Raw materials
Work in process
Finished goods
Total
August 31, 2023
August 31, 2022
$
$
261,619 $
6,844
767,119
271,756
9,446
888,494
1,035,582 $
1,169,696
Inventory write-downs were $11.3 million for 2023, and were primarily recorded in the Europe segment. Inventory write-
downs were immaterial for 2022 and 2021.
58
NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill by reportable segment is detailed in the following table:
(in thousands)
Goodwill, gross:
Balance, September 1, 2021
Acquisitions
Foreign currency translation
Balance at August 31, 2022
Acquisitions
Foreign currency translation
Balance at August 31, 2023
Accumulated impairment:
Balance, September 1, 2021
Foreign currency translation
Balance at August 31, 2022
Foreign currency translation
Balance at August 31, 2023
Goodwill, net:
Balance, September 1, 2021
Acquisitions
Foreign currency translation
Balance at August 31, 2022
Acquisitions
Foreign currency translation
Balance at August 31, 2023
North America
Europe
Consolidated
$
71,941 $
4,390 $
144,118
—
216,059
135,382
—
351,441
(10,036)
—
(10,036)
—
(10,036)
61,905
144,118
—
206,023
135,382
—
42,687
(3,962)
43,115
—
1,446
44,561
(158)
29
(129)
(16)
(145)
4,232
42,687
(3,933)
42,986
—
1,430
$
341,405 $
44,416 $
76,331
186,805
(3,962)
259,174
135,382
1,446
396,002
(10,194)
29
(10,165)
(16)
(10,181)
66,137
186,805
(3,933)
249,009
135,382
1,430
385,821
The change in goodwill within the North America segment from August 31, 2022 to August 31, 2023 was due to the 2023
Acquisitions. See Note 2, Changes in Business, for information on the 2023 Acquisitions.
During 2023, 2022 and 2021, the annual goodwill impairment analyses, which are performed as of the first day of the
Company's fourth quarter (the "annual impairment test date"), did not result in any impairment charges. For the year ended
August 31, 2023, the Company performed qualitative tests for three reporting units consisting of $49.8 million of goodwill as of
the 2023 annual impairment test date and quantitative tests for three reporting units consisting of $292.3 million of goodwill as
of the 2023 annual impairment test date. The difference in the balance of goodwill between the 2023 annual impairment test
date and August 31, 2023 was due to the acquisition of EDSCO and foreign currency translation adjustments. The results of the
qualitative and 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)
Trade names
In-process research and development
Non-compete agreements
Total
August 31, 2023
August 31, 2022
$
$
54,056 $
2,400
750
57,206 $
53,633
2,400
750
56,783
59
During 2023 and 2022, the Company did not record any indefinite-lived intangible asset impairment charges. As of the 2023
annual impairment test date, the Company had $57.1 million of indefinite-lived intangible assets, of which $53.8 million were
tested for impairment using a quantitative approach. Based on the quantitative tests performed, the Company concluded it to be
more likely than not that the estimated fair values of the indefinite-lived intangible assets were greater than their respective
carrying values. The change in the balance of intangible assets with indefinite lives from August 31, 2022 to August 31, 2023
and from the 2023 annual impairment test date to August 31, 2023 was due to foreign currency translation adjustments.
Other intangible assets subject to amortization are detailed in the following table:
(in thousands)
Developed technologies
Customer relationships
Patents
Perpetual lease rights
Trade names
Non-compete agreements
Other
Total
August 31, 2023
August 31, 2022
Gross
Carrying
Amount
Accumulated
Amortization
Net
Gross
Carrying
Amount
Accumulated
Amortization
Net
$ 150,445 $ 25,228 $ 125,217 $ 147,040 $
6,485 $ 140,555
74,582
7,203
5,984
3,287
2,300
224
7,606
5,570
910
1,129
1,502
125
66,976
53,115
1,633
5,074
2,158
798
99
7,203
3,584
3,212
3,050
101
2,116
4,596
744
764
1,135
99
50,999
2,607
2,840
2,448
1,915
2
$ 244,025 $ 42,070 $ 201,955 $ 217,305 $ 15,939 $ 201,366
The acquired assets from the Tendon and EDSCO acquisitions included intangible assets for customer relationships with fair
values of $8.9 million and $12.0 million, respectively. The fair value of the intangible assets for customer relationships were
each calculated using an income approach, under the with-and-without method, which considers opportunity costs associated
with lost profits in the absence of the existing customer bases. The intangible assets for customer relationships were assigned
useful lives of five years. See Note 2, Changes in Business, for additional information on the Tendon and EDSCO acquisitions.
The foreign currency translation adjustments related to the intangible assets subject to amortization were immaterial for all
periods presented above.
Amortization expense for intangible assets was $25.9 million and $10.0 million in 2023 and 2022, respectively, of which
$18.7 million and $6.4 million, respectively, was recorded in cost of goods sold and $7.2 million and $3.6 million, respectively,
was recorded in SG&A expenses in the consolidated statements of earnings. Amortization expense for intangible assets was
$2.1 million in 2021, all of which was recorded in SG&A expenses in the consolidated statement of earnings. Estimated
amortization expense for the next five years is as follows:
Year Ended August 31,
2024
2025
2026
2027
2028
$
(in thousands)
28,195
26,464
25,250
25,142
23,484
60
NOTE 7. LEASES
The following table presents the components of the total leased assets and lease liabilities and their classification in the
Company's consolidated balance sheets:
(in thousands)
Assets:
Operating assets
Finance assets
Total leased assets
Classification in Consolidated Balance Sheets
August 31, 2023
August 31, 2022
Other noncurrent assets
Property, plant and equipment, net
$
$
160,767 $
104,537
265,304 $
138,937
63,702
202,639
Liabilities:
Operating lease liabilities:
Current
Long-term
Total operating lease liabilities
Finance lease liabilities:
Current
Long-term
Total finance lease liabilities
Total lease liabilities
Accrued expenses and other payables
$
34,445 $
Other noncurrent liabilities
Current maturities of long-term debt and
short-term borrowings
Long-term debt
129,800
164,245
28,037
67,433
95,470
$
259,715 $
The components of lease cost were as follows:
(in thousands)
Operating lease expense
Finance lease expense:
Amortization of assets
Interest on lease liabilities
Total finance lease expense
Variable and short-term lease expense
Total lease expense
$
$
Year Ended August 31,
2023
2022
2021
40,093 $
35,111 $
16,574
3,642
20,216
20,810
13,302
2,105
15,407
20,856
81,119 $
71,374 $
31,792
111,150
142,942
19,340
39,196
58,536
201,478
32,752
13,050
2,213
15,263
20,096
68,111
The weighted average remaining lease terms and discount rates for operating and finance leases are presented in the following
table:
August 31, 2023
August 31, 2022
Weighted average remaining lease term (years):
Operating leases
Finance leases
Weighted average discount rate:
Operating leases
Finance leases
5.6
4.1
4.730 %
4.926 %
5.3
3.4
4.076 %
4.125 %
61
Cash flow and other information related to leases is included in the following table:
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Year Ended August 31,
2023
2022
2021
Operating cash outflows from operating leases
Operating cash outflows from finance leases
Financing cash outflows from finance leases
$
40,645 $
35,697 $
3,642
22,837
2,093
17,821
ROU assets obtained in exchange for lease obligations:
Operating leases
Finance leases
$
55,588 $
59,035 $
59,499
24,333
31,686
2,228
16,016
25,888
18,006
Future maturities of lease liabilities at August 31, 2023 are presented in the following table:
(in thousands)
Operating Leases
Finance Leases
$
41,430 $
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Less imputed interest
36,446
31,278
24,579
16,449
41,843
192,025
(27,780)
164,245 $
32,051
25,859
19,394
16,086
9,104
3,239
105,733
(10,263)
95,470
Present value of lease liabilities
$
As of August 31, 2023, the Company has additional leases that have not yet commenced, primarily for vehicles, with aggregate
fixed payments over their terms of approximately $10.6 million, with $7.9 million to commence in 2024 and $2.7 million to
commence in 2025. These leases have noncancellable terms of 4 to 6 years.
62
NOTE 8. CREDIT ARRANGEMENTS
Long-term debt was as follows:
(in thousands)
2023 Notes
2030 Notes
2031 Notes
2032 Notes
Series 2022 Bonds, due 2047
Poland Term Loan
Short-term borrowings
Other
Finance leases
Total debt
Less unamortized debt issuance costs
Plus unamortized bond premium
Total amounts outstanding
Less current maturities of long-term debt and short-term
borrowings
Long-term debt
Weighted Average
Interest Rate as of
August 31, 2023
Year Ended August 31,
2023
2022
4.875%
4.125%
3.875%
4.375%
4.000%
—
(1)
4.547%
4.926%
$
— $
300,000
300,000
300,000
145,060
—
8,419
16,042
95,470
330,000
300,000
300,000
300,000
145,060
32,439
26,390
21,278
58,536
1,164,991
1,513,703
(14,840)
(16,496)
4,646
4,838
1,154,797
1,502,045
(40,513)
(388,796)
$
1,114,284 $
1,113,249
__________________________________
(1) The weighted average interest rate of short-term borrowings was 7.800% and 7.260% as of August 31, 2023 and 2022,
respectively.
Senior Notes
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. On May 15, 2023, the Company repaid
the remaining $214.1 million outstanding aggregate principal amount of the 2023 Notes, plus interest, at maturity.
In January 2022, the Company issued $300.0 million of 4.125% Senior Notes due January 2030 (the "2030 Notes") and
$300.0 million of 4.375% Senior Notes due March 2032 (the "2032 Notes"). Aggregate issuance costs associated with the 2030
Notes and 2032 Notes were approximately $9.4 million. Interest on the 2030 Notes is payable semiannually on January 15 and
July 15. Interest on the 2032 Notes is payable semiannually on March 15 and September 15.
In February 2021, the Company issued $300.0 million of 3.875% Senior Notes due February 2031 (the "2031 Notes") and
accepted for purchase all of the previously outstanding $350.0 million of 5.750% Senior Notes due April 2026 (the "2026
Notes") through a cash tender offer. Issuance costs associated with the 2031 Notes and loss on debt extinguishment recognized
related to the retirement of the 2026 Notes were $4.9 million and $16.8 million, respectively, in 2021. Interest on the 2031
Notes is payable semiannually on February 15 and August 15.
Series 2022 Bonds
In February 2022, the Company announced the issuance of $145.1 million in original aggregate principal amount of tax-exempt
bonds (the "Series 2022 Bonds") by the Industrial Development Authority of the County of Maricopa (the "MCIDA"). The
Series 2022 Bonds were priced to yield 3.5% and provided gross proceeds of $150.0 million. The proceeds were loaned to the
Company pursuant to a loan agreement between the Company and the MCIDA. During 2022, the full amount of the proceeds
was used to fund a portion of the acquisition, construction and equipping of the Company’s third micro mill.
Issuance costs associated with the Series 2022 Bonds were $3.1 million. The Series 2022 Bonds accrue interest at 4.0%,
payable semiannually on April 15 and October 15, and have a maturity date in October 2047.
63
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 a 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
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 August 31, 2023, the Company had
no amounts drawn under the Term Loan. The Company's obligations under the Credit Agreement are collateralized 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 August 31, 2023 or
2022. The availability under the Revolver and the previous revolving credit facility, as applicable, was reduced by outstanding
stand-by letters of credit of $0.9 million and $1.4 million at August 31, 2023 and 2022, respectively.
Under the Credit Agreement, the Company is required to comply with certain covenants, including covenants to maintain: (i) an
interest coverage ratio (consolidated EBITDA to consolidated interest expense, as each is defined in the Credit Agreement) of
not less than 2.50 to 1.00 and (ii) a debt to capitalization ratio (consolidated funded debt to total capitalization, as each is
defined in the Credit Agreement) that does not exceed 0.60 to 1.00. Loans under the Credit Agreement bear interest based on
the Eurocurrency rate, a base rate, or the Secured Overnight Financing Rate ("SOFR"). At August 31, 2023, the Company was
in compliance with all financial covenants contained in its credit arrangements. At August 31, 2023, the Company's interest
coverage ratio was 34.79 to 1.00 and the Company's debt to capitalization ratio was 0.22 to 1.00.
In November 2022, the Company repaid the outstanding principal on its term loan facility (the "Poland Term Loan") through its
subsidiary, CMC Poland Sp. z.o.o. ("CMCP"). At August 31, 2023, there was no amount outstanding or available, compared to
PLN 152.4 million, or $32.4 million, outstanding and available under the facility as of August 31, 2022.
The Company also has credit facilities in Poland, through its subsidiary, CMCP, available to support working capital, short-
term cash needs, letters of credit, financial assurance and other trade finance-related matters. In 2023, the Company amended
certain terms of its credit facilities in Poland through CMCP, increasing the total credit facilities from PLN 300.0 million, or
$63.9 million, at August 31, 2022, to PLN 600.0 million, or $145.4 million, at August 31, 2023. The facilities have an
expiration date in April 2026. CMCP had no borrowings or repayments under its credit facilities in 2023 and 2022, and at
August 31, 2023 and 2022, no amounts were outstanding under these facilities. 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
$16.3 million and $1.0 million at August 31, 2023 and 2022, respectively.
The scheduled maturities of the Company's long-term debt, excluding obligations related to finance leases, are included in the
table below. See Note 7, Leases, for scheduled maturities of finance leases.
Year Ended August 31,
2024
2025
2026
2027
2028
Thereafter
Total long-term debt, excluding finance leases
Less unamortized debt issuance costs
Plus unamortized bond premium
Total long-term debt outstanding, excluding finance leases
(in thousands)
$
4,057
1,877
1,789
1,782
1,795
1,049,802
1,061,102
(14,840)
4,646
$
1,050,908
The Company capitalized $21.5 million, $11.9 million and $2.8 million of interest in the cost of property, plant and equipment
during 2023, 2022 and 2021, respectively.
Accounts Receivable Facilities
The Company's subsidiary in Poland, CMCP, transfers trade accounts receivable to financial institutions without recourse (the
"Poland Facility"). The Poland Facility has a facility limit of PLN 288.0 million, or $69.8 million and $61.3 million as of
64
August 31, 2023 and August 31, 2022, respectively. Advances taken under the Poland Facility incur interest based on the
Warsaw Interbank Offered Rate ("WIBOR") plus a margin. The transfer of receivables under the Poland Facility does not
qualify to be accounted for as sales. Therefore, any advances outstanding under this program are recorded as debt on the
Company's consolidated balance sheets. The Company had PLN 34.7 million, or $8.4 million, advance payments outstanding
under the Poland Facility at August 31, 2023 compared to PLN 124.0 million, or $26.4 million, at August 31, 2022.
In addition to the Poland Facility, the Company also had a $150.0 million U.S. trade accounts receivable facility under which
CMC contributed, and certain of its subsidiaries transferred without recourse, certain eligible trade accounts receivable to CMC
Receivables, Inc. ("CMCRV"), a wholly-owned subsidiary of CMC. The Company had no advance payments outstanding under
this facility at August 31, 2022. In November 2022, the Company terminated its U.S. trade accounts receivable facility.
NOTE 9. NEW MARKETS TAX CREDIT TRANSACTIONS
During 2016 and 2017, the Company entered into three New Markets Tax Credit ("NMTC") transactions with U.S. Bancorp
Community Development Corporation, a Minnesota corporation ("USBCDC"). The NMTC transactions relate to the
construction and equipping of the micro mill in Durant, Oklahoma, as well as a rebar spooler and automated T-post shop
located on the same site.
The transactions qualified through the New Markets Tax Credit program provided for in the Community Renewal Tax Relief
Act of 2000 (the "NMTC Program"), as the micro mill, spooler and T-post shop are located in an eligible zone designated by
the Internal Revenue Service ("IRS") and are considered eligible business activities for the NMTC Program. Under the NMTC
Program, an investor that makes a capital investment, which, in turn, together with leverage loan sources, is used to make a
Qualifying Equity Investment ("QEI") in an entity that (i) qualifies as a Community Development Entity ("CDE"), (ii) has
applied for and been granted an allocation of a portion of the total federal funds available to fund the credits (an "NMTC
Allocation") and (iii) uses a minimum specified portion of the QEI to make a Qualified Low Income Community Investment up
to the maximum amount of the CDE’s NMTC Allocation will be entitled to claim, over a period of seven years, federal
nonrefundable tax credits in an amount equal to 39% of the QEI amount. NMTCs are subject to 100% recapture for a period of
seven years as provided in the Internal Revenue Code.
In general, the three NMTC transactions were structured similarly. USBCDC made a capital contribution to an investment fund
and Commonwealth Acquisition Holdings, Inc., a wholly-owned subsidiary of the Company (“Commonwealth”), made a loan
to the investment fund. The investment fund used the proceeds from the capital contribution and the loan to make a QEI into a
CDE, which, in turn, makes loans of the QEIs to the operating subsidiaries of the Company with terms similar to the loans by
Commonwealth.
The following table summarizes the key terms and conditions for each of the three NMTC transactions ($ in millions):
Project
Micro
mill
Spooler
T-post
shop
USBCDC
Capital
Contribution
Commonwealth
Loan
$17.7
$35.3
6.7
5.0
14.0
10.4
Commonwealth
Loan Rate /
Maturity
1.08% /
December 24,
2045
1.39% / July 26,
2042
Investment Fund(s)
QEI to CDE
CDE Loan
USBCDC Investment Fund 156, LLC
$51.5
$50.7
Twain Investment Fund 249, LLC
20.0
19.4
1.16% / March
23, 2047
Twain Investment Fund 219, LLC
Twain Investment Fund 222, LLC
15.0
14.7
By its capital contributions to the investment funds (exclusive of Twain Investment Fund 222) (collectively, the "Funds"),
USBCDC is entitled to substantially all the benefits derived from the NMTCs. These transactions include a put/call provision
whereby the Company may be obligated or entitled to repurchase USBCDC’s interest in the Funds at the end of a seven-year
period, in the case of the USBCDC Investment Fund 156, LLC and Twain Investment Fund 249, LLC or an eight-year period,
in the case of Twain Investment Fund 219, LLC (each of such periods, an "Exercise Period").
As of August 31, 2022, $17.7 million and $9.5 million of USBCDC’s contributions, which represented deferred revenue to the
Company, were included in accrued expenses and other payables and other noncurrent liabilities in the consolidated balance
sheet, respectively. During December 2022, the Exercise Period on the first NMTC transaction, the USBCDC Investment Fund
156, ended, and therefore, the corresponding $17.7 million USBCDC capital contribution was recognized in net sales during the
year ended August 31, 2023. The Exercise Period on the Twain Investment Fund 249 will end on July 26, 2024, and therefore,
65
the corresponding $6.7 million USBCDC capital contribution was reclassified to accrued expenses and other payables in the
Company's consolidated balance sheet as of August 31, 2023. The $2.8 million of USBCDC capital contribution for Twain
Investment Fund 219 remained in other noncurrent liabilities in the consolidated balance sheet as of August 31, 2023.
Additionally, the $2.2 million of capital contributions to Twain Investment Fund 222 resulted in a $2.1 million QEI, which was
classified as long-term debt in the Company's consolidated balance sheet as of August 31, 2022, and will mature in March
2024. The obligation represents the Company's maximum exposure to loss and was reclassified to current maturities of long-
term debt and short-term borrowings as of August 31, 2023.
The Company believes USBCDC will exercise the put options following the end of the respective remaining Exercise Periods.
The value attributed to the put/call is immaterial. The Company is required to follow various regulations and contractual
provisions that apply to the NMTC transactions. Non-compliance with applicable requirements could result in unrealized
projected tax benefits and, therefore, could require the Company to indemnify USBCDC for any loss or recapture of NMTCs
related to the financing until the Company's obligation to deliver tax benefits is relieved. The Company does not anticipate any
credit recaptures will be required in connection with these transactions. The Company has determined that the Funds are VIEs,
of which the Company is the primary beneficiary and has consolidated them in accordance with ASC Topic 810, Consolidation.
Direct costs incurred in structuring the transactions were deferred and are recognized as expense over each Exercise Period.
Incremental costs to maintain the structures during the compliance periods are recognized as incurred.
NOTE 10. DERIVATIVES
The Company's global operations and product lines expose it to risks from fluctuations in metal commodity prices, foreign
currency exchange rates, interest rates and natural gas, electricity and other energy prices. One objective of the Company's risk
management program is to mitigate these risks using derivative instruments. The Company enters into (i) metal commodity
futures and forward contracts to mitigate the risk of unanticipated changes in net earnings due to price volatility in these
commodities, (ii) foreign currency forward contracts that match the expected settlements for purchases and sales denominated
in foreign currencies and (iii) natural gas and electricity commodity derivatives to mitigate the risk related to price volatility of
these commodities.
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 Company considers the total notional value of its futures and forward contracts as the best measure of the volume of
derivative transactions. At August 31, 2023 and 2022, the notional values of the Company's commodity contract commitments
were $456.4 million and $205.1 million, respectively. The increase in the notional value of the Company’s commodity contract
commitments from August 31, 2022 to August 31, 2023 was due to the Company entering into additional Level 3 commodity
derivative contracts as described in Note 11, Fair Value. At August 31, 2023 and 2022, the notional values of the Company's
foreign currency contract commitments were $221.4 million and $253.5 million, respectively.
The following table provides information regarding the Company's commodity contract commitments as of August 31, 2023:
Commodity
Aluminum
Aluminum
Copper
Copper
Electricity
Natural Gas
__________________________________
MT = Metric ton
MW(h) = Megawatt hour
MMBtu = Metric Million British thermal unit
Position
Total
Long
Short
Long
Short
Long
Long
2,850
MT
1,400
MT
147
MT
8,459
MT
3,312,000 MW(h)
5,270,500 MMBtu
66
The following table summarizes the location and fair value amounts of the Company's derivative instruments reported in the
consolidated balance sheets:
(in thousands)
Derivative assets:
Commodity
Commodity
Foreign exchange
Derivative liabilities:
Commodity
Commodity
Foreign exchange
Primary Location
August 31, 2023
August 31, 2022
Prepaid and other current assets
$
11,427 $
Other noncurrent assets
Prepaid and other current assets
184,261
1,898
Accrued expenses and other payables
$
2,983 $
Other noncurrent liabilities
Accrued expenses and other payables
1,085
2,566
26,180
134,667
1,296
1,110
150
3,126
The following table summarizes activities related to the Company's derivatives not designated as cash flow hedging instruments
recognized in the 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.
Gain (Loss) on Derivatives Not Designated as Hedging Instruments
(in thousands)
Commodity
Foreign exchange
Primary Location
2023
2022
2021
Cost of goods sold $
(3,028) $
15,862 $
(18,035)
SG&A expenses
12,265
(6,547)
(3,674)
Year Ended August 31,
The following table summarizes activities related to the Company's derivatives designated as cash flow hedging instruments
recognized in the consolidated statements of comprehensive income and 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, Net of Income
Taxes (in thousands)
Year Ended August 31,
Amount of Gain Reclassified from AOCI into
Earnings on Derivatives (in thousands)
Year Ended August 31,
2023
2022
2021
Primary Location
2023
2022
2021
Commodity
$
6,367 $ 138,534 $
35,392 Cost of goods sold
$
11,325 $
27,267 $
2,378
Foreign exchange
28
100
100 SG&A expenses
244
244
555
The Company's natural gas derivatives accounted for as cash flow hedging instruments have maturities extending to August
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 August 31, 2023 was an estimated net gain of $8.2 million
from cash flow hedging instruments that is expected to be reclassified into earnings within the next twelve months following
August 31, 2023. See Note 11, Fair Value, for the fair value of the Company's derivative instruments recorded in the
consolidated balance sheets.
NOTE 11. 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. See Note 1, Nature of Operations and Summary of Significant Accounting Policies, for definitions of the three
levels within the hierarchy.
67
The following tables summarize information regarding the Company's financial assets and financial liabilities that were
measured at fair value on a recurring basis:
(in thousands)
As of August 31, 2023:
Assets:
Investment deposit accounts (1)
Commodity derivative assets (2)
Foreign exchange derivative assets (2)
Liabilities:
Commodity derivative liabilities (2)
Foreign exchange derivative liabilities (2)
As of August 31, 2022:
Assets:
Investment deposit accounts (1)
Commodity derivative assets (2)
Foreign exchange derivative assets (2)
Liabilities:
Commodity derivative liabilities (2)
Foreign exchange derivative liabilities (2)
Fair Value Measurements at Reporting Date Using
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
508,227 $
508,227 $
— $
195,689
1,898
4,068
2,566
1,264
—
4,068
—
—
1,898
—
2,566
$
572,384 $
572,384 $
— $
160,847
1,296
1,260
3,126
17,347
—
1,260
—
—
1,296
—
3,126
—
194,425
—
—
—
—
143,500
—
—
—
__________________________________
(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 the New York Mercantile Exchange. Amounts in Level 2 are based on broker quotes in
the over-the-counter market. Derivatives classified as Level 3 are described below. Further discussion regarding the
Company's use of derivative instruments is included in Note 10, Derivatives.
As of August 31, 2022, the Company had one Level 3 commodity derivative. The Company entered into its second and third
Level 3 commodity derivatives in September 2022 and January 2023, respectively, with the same counterparty as the first Level
3 commodity derivative. Both the second and third Level 3 commodity derivatives will begin to settle in January 2025.
The fair value estimate of the Level 3 commodity derivatives are based on internally developed discounted cash flow models
primarily utilizing unobservable inputs in 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 floating rates used to measure the fair value of
the Level 3 commodity derivatives during 2023 and 2022, which are applied uniformly across each of our Level 3 commodity
derivatives:
Year Ended August 31,
2023
2022
Floating Rate (PLN)
Low
High
Average
480
460
855
1,299
630
717
68
Below is a reconciliation of the beginning and ending balances of the Level 3 commodity derivatives recognized in the
consolidated statements of comprehensive income. Amounts presented are before income taxes. The fluctuation in energy rates
over time may cause volatility in the fair value estimate and is the primary reason for the unrealized gains in other
comprehensive income in 2023, 2022 and 2021.
(in thousands)
Balance at September 1, 2020
Unrealized holding gain(1)
Reclassification for gain included in net earnings(2)
Balance at August 31, 2021
Unrealized holding gain(1)
Reclassification for gain included in net earnings(2)
Balance at August 31, 2022
Unrealized holding gain(1)
Reclassification for gain included in net earnings(2)
Balance at August 31, 2023
Level 3 Commodity
Derivatives
(15,007)
43,798
(2,378)
26,413
138,760
(21,673)
143,500
62,706
(11,781)
194,425
$
$
__________________________________
(1) Unrealized holding gains, net of foreign currency translation, less amounts reclassified are included in net unrealized
holding gain (reclassification for realized gain) on derivatives in the consolidated statements of comprehensive income.
(2) Gains included in net earnings are recorded in cost of goods sold in the consolidated statements of earnings.
There were no material non-recurring fair value remeasurements in 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 $900.9 million, respectively, at August 31, 2023, and $1.4 billion and $1.2 billion,
respectively, at August 31, 2022. 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.
NOTE 12. INCOME TAX
The components of earnings before income taxes were as follows:
(in thousands)
United States
Foreign
Total
Year Ended August 31,
2023
2022
2021
$ 1,095,099 $ 1,197,769 $
413,616
26,868
317,378
120,402
$ 1,121,967 $ 1,515,147 $
534,018
69
The income taxes (benefit) included in the consolidated statements of earnings were as follows:
(in thousands)
Current:
United States
Foreign
State and local
Current taxes
Deferred:
United States
Foreign
State and local
Deferred taxes
Total income taxes
Year Ended August 31,
2023
2022
2021
$
168,399 $
122,334 $
113,696
6,089
32,916
63,912
20,228
25,642
19,458
207,404
206,474
158,796
46,008
81,162
(10,563)
(847)
(3,388)
(2,512)
9,642
54,803
13,637
91,411
(24,568)
(37,643)
$
262,207 $
297,885 $
121,153
A reconciliation of the federal statutory rate to the Company's effective income tax rate, including material items impacting the
effective income tax rate, is as follows:
(in thousands)
Income tax expense at statutory rate
State and local taxes (1)(2)
Research and development credit(2)
Foreign tax impairment on valuation of subsidiaries (3)
Change in valuation allowance
Global intangible low-taxed income (4)(5)
Capital loss(6)
Nontaxable foreign interest (3)
Other
Income tax expense
Effective income tax rate
Year Ended August 31,
2023
2022
2021
$
235,613
$
318,181
$
112,144
33,621
(7,986)
(7,334)
6,471
(1,967)
—
—
3,789
26,753
(13,102)
—
(447)
685
(34,736)
3
548
(3,838)
(1,289)
(29,866)
37,092
17,263
—
(14,617)
4,264
$
262,207
$
297,885
$
121,153
23.4 %
19.7 %
22.7 %
__________________________________
(1) State and local taxes in 2021 includes a $19.9 million benefit related to the release of certain state valuation allowances.
(2) 2023 and 2022 include impacts of uncertain tax positions.
(3) Fully offset by a valuation allowance.
(4) Amounts are net of adjustments resulting from differences between prior year estimates and amounts included in tax
returns.
(5) 2021 includes the tax effect of a gain recognized in connection with a global tax restructuring.
(6) Resulted from a tax restructuring transaction.
The Company plans to repatriate the current and future earnings from material jurisdictions within the Europe segment and
recorded an immaterial amount of tax expense related to such future distributions. The Company considers all undistributed
earnings of its non-U.S. subsidiaries prior to August 31, 2019 to be indefinitely reinvested and has not recorded deferred tax
liabilities on such earnings.
70
The income tax effects of significant temporary differences giving rise to deferred tax assets and liabilities were as follows:
(in thousands)
Deferred tax assets:
Net operating losses and credits
Capitalized research and development
ROU operating lease liabilities
Deferred compensation and employee benefits
Reserves and other accrued expenses
Other
Total deferred tax assets
Valuation allowance for deferred tax assets
Deferred tax assets, net
Deferred tax liabilities:
Property, plant and equipment
Intangible assets
ROU operating lease assets
Derivatives
Other
Total deferred tax liabilities
Net deferred tax liabilities
August 31,
2023
2022
$
298,624 $
300,787
45,669
39,984
33,491
16,510
21,750
—
33,398
39,095
11,730
17,253
456,028
402,263
(280,463)
(268,547)
175,565
133,716
(351,900)
(261,638)
(44,168)
(38,801)
(35,992)
(11,453)
(482,314)
$
(306,749) $
(48,558)
(32,444)
(27,324)
(14,054)
(384,018)
(250,302)
Net operating losses giving rise to deferred tax assets consist of $348.4 million of state net operating losses, $21.3 million of
U.S. federal net operating losses and $946.6 million of foreign net operating losses that expire in varying amounts beginning in
2024 (with certain amounts having indefinite carryforward periods). These assets will be reduced as income tax expense is
recognized in future periods.
The Company maintains a valuation allowance to reduce certain deferred tax assets to amounts that are more likely than not to
be realized. The Company's valuation allowances primarily relate to net operating loss and credit carryforwards in certain state
and foreign jurisdictions for which utilization is uncertain.
A reconciliation of the beginning and ending amounts of unrecognized income tax benefits is as follows:
(in thousands)
Balance at September 1,
Change for tax positions of current year
Change for tax positions of prior years
Reductions due to lapse of statute of limitations
Balance at August 31, (1)
2023
2022
2021
$
29,747 $
14,792
(374)
—
5,531 $
17,461
6,755
—
$
44,165 $
29,747 $
8,652
—
—
(3,121)
5,531
__________________________________
(1) The full balance of unrecognized income tax benefits in each year, if recognized, would have impacted the Company’s
effective income tax rate at the end of each respective year.
Accrued interest and penalties related to uncertain tax positions were not material in any period presented.
The Company files income tax returns in the U.S. and multiple foreign jurisdictions with varying statutes of limitations. In the
normal course of business, the Company and its subsidiaries are subject to examination by various taxing authorities. The
following is a summary of all fiscal years that are open to examination.
U.S. Federal — 2020 and forward
U.S. States — 2019 and forward
Foreign — 2018 and forward
71
NOTE 13. STOCK-BASED COMPENSATION PLANS
The Company's stock-based compensation plans provide for the issuance of incentive and nonqualified stock options, restricted
stock awards and performance-based awards. The Compensation Committee of the Board of Directors (the "Compensation
Committee") approves all awards that are granted under the Company's stock-based compensation plans. Stock-based
compensation expense for 2023, 2022 and 2021 of $60.5 million, $47.0 million and $43.7 million, respectively, was primarily
included in SG&A expenses on the Company's consolidated statements of earnings. Total tax benefits recognized in the
consolidated statements of earnings related to stock-based compensation expense were $14.2 million, $9.3 million and $9.9
million for the years ended August 31, 2023, 2022 and 2021, respectively. As of August 31, 2023, total unrecognized
compensation cost related to unvested stock-based compensation arrangements was $22.6 million, which is expected to be
recognized over a weighted average period of 1.8 years.
The following table summarizes the total awards granted:
2023 grants
2022 grants
2021 grants
Restricted Stock
Awards/Units
Performance
Awards
633,898
652,951
847,872
335,746
328,734
406,098
As of August 31, 2023, the Company had 3,704,585 shares of common stock available for future grants.
Restricted Stock Units
Restricted stock units issued under the Company's stock-based compensation plans may not be sold, transferred, pledged or
assigned until service-based restrictions lapse. The restricted stock units generally vest and are converted to shares of the
Company's common stock in three equal installments on each of the first three anniversaries of the date of grant. Generally,
upon termination of employment, restricted stock units that have not vested are forfeited. Other than awards granted to certain
executives, which continue to vest following qualifying retirement, a pro-rata portion of the unvested restricted stock awarded
will vest and become payable upon death, disability or qualifying retirement.
The estimated fair value of the restricted stock units is based on the closing price of the Company's common stock on the date
of grant, discounted for the expected dividend yield through the vesting period. Compensation cost related to the restricted
stock units is recognized ratably over the service period and is included in equity on the Company's consolidated balance sheets.
Performance Stock Units
Performance stock units issued under the Company's stock-based compensation plans may not be sold, transferred, pledged or
assigned until service-based restrictions lapse and any performance objectives have been attained as established by the
Compensation Committee. Recipients of these awards generally must be actively employed by and providing services to the
Company on the last day of the performance period in order to receive an award payout. Other than awards granted to certain
executives, which continue to vest following qualifying retirement, a pro-rata portion of the performance stock units will vest
and become payable at the end of the performance period upon death, disability or qualifying retirement.
Compensation cost for performance stock units is accrued based on the probable outcome of specified performance conditions,
net of estimated forfeitures. The Company accrues compensation cost if it is probable that the performance conditions will be
met. The Company reassesses the probability of meeting the specified performance conditions at the end of each reporting
period and adjusts compensation cost, as necessary, based on the probability of achieving the performance conditions. If the
performance conditions are not met at the end of the performance period, the Company reverses the related compensation cost.
Performance targets established by the Compensation Committee for performance stock units awarded in 2023, 2022 and 2021
were weighted 75% based on the Company's cumulative EBITDA targets and positive return on invested capital for the fiscal
year in which the awards were granted and the succeeding two fiscal years, as approved by the Board of Directors in the
respective year's business plan, and 25% based on a three-year relative total stockholder return metric. Performance stock units
awarded will be settled in shares of the Company's common stock. Award payouts range from a threshold of 50% to a
maximum of 200% for each portion of the target awards. The performance stock units awarded in 2023 and 2022 associated
with the cumulative EBITDA targets have been classified as liability awards because the final EBITDA target will not be set
until the third year of the performance period. Consequently, these awards were included in accrued expenses and other
payables on the Company's consolidated balance sheets. The fair value of these performance stock units is remeasured each
72
reporting period and is recognized ratably over the service period. The performance stock units associated with the total
stockholder return metric were valued at fair value on the date of grant using the Monte Carlo pricing model and were included
in equity on the Company's consolidated balance sheets.
Information for restricted stock units and performance stock units is as follows:
Outstanding as of August 31, 2020
Granted
Vested
Forfeited
Outstanding as of August 31, 2021
Granted
Vested
Forfeited
Outstanding as of August 31, 2022
Granted
Vested
Forfeited
Outstanding as of August 31, 2023
Number
Weighted Average
Fair Value
2,245,637 $
1,519,153
(1,451,846)
(122,149)
2,190,795
1,466,628
(1,617,943)
(45,850)
1,993,630
1,438,695
(1,621,002)
(33,732)
1,777,591 $
18.79
20.49
17.62
20.19
20.67
28.16
18.84
23.57
27.59
36.88
25.32
36.65
37.01
The total fair value of shares vested during 2023, 2022 and 2021 was $41.0 million, $30.5 million and $25.6 million,
respectively.
The Company granted 269,052 and 261,275 equivalent shares of restricted stock units and performance stock units accounted
for as liability awards during 2023 and 2022, respectively. As of August 31, 2023, the Company had 541,202 equivalent shares
of awards outstanding and expects 514,142 equivalent shares to vest.
Stock Purchase Plan
Almost all U.S. resident employees may participate in the Company's employee stock purchase plan. Each eligible employee
may purchase up to 500 shares annually. The Board of Directors established a 15% purchase discount based on market prices
on specified dates for 2023, 2022 and 2021. Yearly activity of the stock purchase plan was as follows:
Shares subscribed
Price per share
Shares purchased
Price per share
Year Ended August 31,
2023
2022
2021
272,980
279,370
41.31 $
29.90 $
248,080
313,790
347,510
17.14
292,690
29.90 $
17.14 $
18.80
$
$
Shares available for future issuance
745,754
NOTE 14. EMPLOYEES' RETIREMENT PLANS
Substantially all employees in the U.S. are covered by a defined contribution 401(k) retirement plan. The tax qualified defined
contribution plan is maintained, and contributions are made, in accordance with the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). The Company also provides certain eligible executives benefits pursuant to its Benefit
Restoration Plan ("BRP") equal to amounts that would have been available under the tax qualified ERISA plan, but were
subject to the limitations of ERISA, tax laws and regulations. Company expenses for these plans, a portion of which are
discretionary, totaled $40.4 million, $34.0 million and $47.0 million for 2023, 2022 and 2021, respectively, of which
$14.3 million, $7.2 million and $25.5 million was recorded in SG&A expenses during 2023, 2022 and 2021, respectively, and
$26.1 million, $26.8 million and $21.5 million was recorded in cost of goods sold during 2023, 2022 and 2021, respectively, in
the Company's consolidated statements of earnings.
73
The deferred compensation liability under the BRP was $48.2 million and $43.1 million at August 31, 2023 and 2022,
respectively, of which $41.1 million and $40.0 million, respectively, was included in other noncurrent liabilities, and $7.1
million and $3.1 million, respectively, was included in accrued expenses and other payables on the Company's consolidated
balance sheets. Though under no obligation to fund the BRP, the Company has segregated assets in a trust with a value of $60.1
million and $57.9 million at August 31, 2023 and 2022, respectively, and such assets were included in other noncurrent assets
on the Company's consolidated balance sheets. The net holding gain on these segregated assets was $5.0 million in 2023,
compared to a net holding loss of $7.1 million and a net holding gain of $10.1 million in 2022 and 2021, respectively, and was
included in net sales in the Company's consolidated statements of earnings.
U.K. Pension Plan
Following the acquisition of Tensar, the Company assumed the TGL Pension Plan in the United Kingdom (the "U.K.") (the
"U.K. Pension Plan"), a defined benefit pension plan. The U.K. Pension Plan provides retirement benefit payments for
participating retired employees and their spouses, and was closed to new participants prior to the acquisition of Tensar. Upon
acquisition, the excess of projected U.K. Pension Plan assets over the U.K. Pension Plan benefit obligation was recognized as
an asset on the Company's consolidated balance sheet and previously existing deferred actuarial gains and losses and
unrecognized service costs or benefits were eliminated. The Company’s funding policy for the U.K. Pension Plan is to
contribute annually the amount necessary to provide for benefits based on accrued service and meet at least the minimum
contributions required by applicable regulations.
U.S. Pension Plan
In 2019, the Company acquired a partially funded defined benefit pension plan (the "U.S. Pension Plan"), which was closed to
new participants prior to the acquisition. In October 2022, the Company terminated its U.S. Pension Plan. As part of the
termination, the Company made a contribution of $4.1 million. Plan assets were liquidated to purchase annuity contracts with
an insurance company for all participants. The Company recognized a $4.2 million settlement charge as a result of the
termination, including an immaterial non-cash charge for unrecognized losses within AOCI as of the termination date. The
$4.2 million settlement charge was recognized within SG&A expenses in the consolidated statement of earnings during the year
ended August 31, 2023. No benefit obligation or plan assets related to the U.S. Pension Plan remain.
74
The following tables include a reconciliation of the beginning and ending balances of the pension benefit obligation and the fair
value of plan assets resulting from the U.K. Pension Plan and the U.S. Pension Plan and the related amounts recognized in the
Company’s consolidated balance sheets as of August 31, 2023 and 2022:
(in thousands)
Benefit obligation at beginning of year
Acquisition
Interest cost
Actuarial gain
Benefits paid
Foreign currency translation
Benefit obligation at end of year
Fair value of plan assets at beginning of year
Acquisition
Actual loss on plan assets
Employer contributions
Benefits paid
Foreign currency translation
Fair value of plan assets at end of year
Funded status at end of year (net asset (liability) recognized in the consolidated balance
sheets as of August 31,)
Amounts recognized in AOCI as of August 31,
Net actuarial loss
(in thousands)
Benefit obligation at beginning of year
Interest cost
Actuarial gain
Benefits paid
Settlement
Benefit obligation at end of year
Fair value of plan assets at beginning of year
Actuarial gain
Actual loss on plan assets
Administrative expenses
Employer contributions
Benefits paid
Settlement
Fair value of plan assets at end of year
Funded status at end of year (net liability recognized in the consolidated balance sheets as of
August 31,)
Amounts recognized in AOCI as of August 31,
Net actuarial loss
75
U.K. Pension Plan
2023
2022
52,042 $
—
2,261
(5,354)
(2,529)
4,480
50,900 $
60,454 $
—
(13,533)
297
(2,529)
4,833
—
68,966
635
(11,107)
(942)
(5,510)
52,042
—
83,586
(15,718)
73
(942)
(6,545)
49,522 $
60,454
(1,378) $
8,412
16,477 $
5,666
U.S. Pension Plan
2023
2022
26,568 $
—
(47)
(466)
(26,055)
— $
24,440 $
(47)
(1,966)
—
4,094
(466)
(26,055)
— $
33,687
709
(6,010)
(1,818)
—
26,568
34,126
—
(7,407)
(461)
—
(1,818)
—
24,440
— $
(2,128)
— $
2,278
$
$
$
$
$
$
$
$
$
$
$
$
Weighted average assumptions used to determine benefit obligations are detailed below:
Effective discount rate for benefit obligations
U.K. Pension Plan
U.S. Pension Plan
2023
2022
2022
5.3 %
4.3 %
4.7 %
The pension accumulated benefit obligation represents the actuarial present value of benefits based on employee service and
compensation as of the measurement date and does not include an assumption about future compensation levels.
Net periodic benefit costs (gains) are recorded in SG&A expenses within the consolidated statements of earnings. Components
of net periodic benefit costs (gains) and other supplemental information are detailed below:
(in thousands)
Interest cost
Expected return on plan assets
Total net periodic benefit gain
U.K. Pension Plan
Year Ended August 31,
2023
2022
$
$
2,261 $
(2,589)
(328) $
635
(1,067)
(432)
Other changes in plan assets and benefit obligations recognized in other comprehensive
income
Net actuarial loss arising during measurement period
$
10,811 $
5,666
(in thousands)
Expected administrative expenses
Interest cost
Expected return on plan assets
Settlement
U.S. Pension Plan
Year Ended August 31,
2023
2022
2021
$
— $
—
—
4,245
50 $
709
290
724
(1,579)
(1,493)
—
—
(479)
Total net periodic benefit (gain) cost
$
4,245 $
(820) $
Other changes in plan assets and benefit obligations recognized in other
comprehensive income
Net actuarial (gain) loss arising during measurement period
$
(2,278) $
3,388 $
(4,344)
Weighted average assumptions used to determine net periodic benefit cost are detailed below:
Effective rate for interest on benefit obligations
Expected long-term rate of return
Effective rate for interest on benefit obligations
Expected long-term rate of return
U.K Pension Plan
2023
2022
4.3 %
4.6 %
2.9 %
4.0 %
U.S. Pension Plan
2022
2021
2.2 %
5.0 %
2.1 %
5.0 %
The Company determines the discount rates used to measure liabilities as of the August 31 measurement date, which is also the
date used for the related annual measurement assumptions. The discount rates reflect the current rate at which the associated
liabilities could be effectively settled at the end of the year. For the U.K. Pension Plan, the Company sets its discount rate by
76
reference to a corporate bond yield curve derived from AA rated U.K. corporate bonds. The single equivalent discount rate is
derived as equivalent to applying the full yield curve approach to each future year's projected benefit cash flow. For the U.S.
Pension Plan, the Company used the full yield curve approach and set its rates to reflect the yield of a portfolio of high-quality
corporate bonds that would produce cash flows sufficient in timing and amount to settle projected future benefits.
The expected return assumptions are based on the strategic asset allocation of each plan and long-term capital market return
expectations. For the U.K. Pension Plan, the interest cost calculation is determined by applying the single equivalent discount
rate to the discounted value of the year-by-year projected benefit payments. For the U.S. Pension Plan, the Company measured
interest cost using the full yield curve approach. The interest cost calculation was determined by applying duration-specific spot
rates to the year-by-year projected benefit payments. Neither the single equivalent discount rate nor the full yield curve
approach affect the measurement of the total benefit obligations.
The Company plans to make immaterial contributions to the U.K. Pension Plan in 2024. Future contributions will depend on
market conditions, interest rates and other factors.
Plan Assets
Plan assets consist primarily of public equity, corporate and government bonds. The principal investment objectives are to
achieve, over the long term, a return on the plan assets which is consistent with the assumptions made by the plan actuaries in
determining the funding of the plans, to ensure that sufficient liquid assets are available to meet benefit payments as they fall
due and to consider the interest of the Company in relation to the size and volatility of the Company's contribution
requirements. Each asset class has broadly diversified characteristics. Asset and benefit obligation forecasting studies are
conducted periodically, generally every two to three years, or when significant changes have occurred in market conditions,
benefits, participant demographics or funded status.
The U.K. Pension Plan's weighted average target allocation ranges and actual allocations as a percentage of plan assets,
including the notional exposure of future contracts by asset categories, are detailed below:
Fixed income securities
Equity securities
Cash and other
Total
Investment Valuation
Pension Assets
Target Percent
85.0%
—
10.0
to
to
to
90.0%
5.0
15.0
2023
88.2%
—
11.8
100%
2022
71.4%
12.4
16.2
100%
Investments are stated at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability at
the measurement date.
Fixed income securities are valued at the yields currently available on comparable securities of issues with similar credit
ratings. Investments in equity securities traded on a national securities exchange are valued at the last reported sales price on the
final business day of the year.
Purchases and sales of securities are recorded as of the trade date. Realized gains and losses on sales of securities are
determined based on average cost. Interest income is recognized on the accrual basis. Dividend income is recognized on the ex-
dividend date.
Non-interest bearing cash is valued at cost, which approximates fair value.
Fair Value Measurements
The following table sets forth the fair value of the plan assets by asset class for the U.K. Pension Plan as of August 31, 2023
and 2022. Level 1 assets consist of cash and cash equivalents. Level 2 assets include funds invested in bonds and fixed income
securities. Level 3 assets are measured at fair value using significant unobservable inputs and consist primarily of Secured
Finance and Multistrategy Funds that invest in debt, loan and structured financial instruments in both public and private secured
finance markets.
77
(in thousands)
As of August 31, 2023:
Fixed income securities
Cash and other
Fair value of U.K. Pension Plan assets
As of August 31, 2022:
Fixed income securities
Equity securities
Cash and other
Fair value of U.K. Pension Plan assets
$
$
$
$
Fair Value at Measurement Date Using
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Total
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
43,654 $
5,868
49,522
— $
376
40,497 $
5,356
43,160 $
— $
35,849 $
7,514
9,780
60,454
—
530
7,514
7,676
3,157
136
7,311
—
1,574
The changes in U.K. Pension Plan Level 3 assets related to actual return on plan assets, sales, transfers and foreign currency
translation were immaterial from the Tensar Acquisition Date to August 31, 2022. The following table provides a reconciliation
of U.K. Pension Plan Level 3 assets from August 31, 2022 to August 31, 2023:
(in thousands)
Balance at August 31, 2022
Sales
Actual return on plan assets:
Assets held as of the reporting date
Assets sold during the year
Transfers out of Level 3
Foreign currency translation
Balance at August 31, 2023
Level 3 Plan Assets
8,885
(4,997)
134
256
(1,541)
556
3,293
$
$
The following table sets forth the fair value of the plan assets by asset class for the U.S. Pension Plan as of the August 31, 2022
measurement date. All securities were traded on a national securities exchange and therefore were Level 1 assets in the fair
value hierarchy.
(in thousands)
Fixed income securities
Cash and other
Fair value of U.S. Pension Plan assets
Future Pension Benefit Payments
August 31, 2022
23,958
482
24,440
$
$
The following table provides the estimated aggregate pension benefit payments that are payable from the U.K Pension Plan to
participants in future years:
(in thousands)
2024
2025
2026
2027
2028
2029 through 2033
$
U.K. Pension Plan
2,697
2,764
2,834
2,905
2,977
16,041
78
NOTE 15. CAPITAL STOCK
Treasury Stock
In October 2021, the Board of Directors authorized a new share repurchase program under which CMC may repurchase up to
$350.0 million of shares of common stock (the "2021 share repurchase program"). The 2021 share repurchase program replaces
the previously existing $100.0 million program announced on October 27, 2014, which was terminated by the Board of
Directors in connection with the approval of the 2021 share repurchase program. The 2021 share repurchase program does not
require the Company to acquire any dollar amount or number of shares of common stock and may be modified, suspended,
extended or terminated at any time without prior notice. During 2021, the Company did not purchase any shares of common
stock. During 2023 and 2022, the Company repurchased 2,309,452 and 4,496,628 shares of CMC common stock, respectively,
at an average purchase price of $43.91 and $36.00 per share, respectively. CMC had remaining authorization to purchase
$86.7 million of common stock at August 31, 2023.
Preferred Stock
The Company has 2,000,000 shares of preferred stock, par value of $1.00 per share, authorized. The Company may issue
preferred stock in series, and the shares of each series may have such rights and preferences as are fixed by the Board of
Directors when authorizing the issuance of that particular series. There are no shares of preferred stock outstanding.
NOTE 16. EARNINGS PER SHARE
Basic earnings per share ("EPS") is computed based on the weighted average shares of common stock outstanding during the
period. Restricted stock is included in the number of shares of common stock issued and outstanding, but omitted from the basic
EPS calculation until the shares vest. Diluted EPS is computed based on the weighted average shares of common stock plus the
effect of dilutive securities outstanding during the period using the treasury stock method. The effect of dilutive securities
includes the impact of outstanding stock-based incentive awards and shares purchased by employees through participation in
the Company's employee stock purchase plan.
The calculations of basic and diluted EPS were as follows:
(in thousands, except share and per share data)
Net earnings
Average basic shares outstanding
Effect of dilutive securities
Average diluted shares outstanding
Earnings per share:
Basic
Diluted
Year Ended August 31,
2023
859,760 $ 1,217,262 $
2022
2021
412,865
$
117,077,703
120,648,090
120,338,357
1,528,568
1,724,296
1,645,140
118,606,271
122,372,386
121,983,497
$
7.34 $
10.09 $
7.25
9.95
3.43
3.38
Anti-dilutive shares not included in the table above were immaterial for all periods presented.
NOTE 17. 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 August 31, 2023 and 2022, the amounts accrued for cleanup
and remediation costs at certain sites in response to notices, actions and agreements under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (“CERCLA”) were immaterial. Total accrued environmental liabilities,
including CERCLA sites, were $4.5 million and $5.3 million as of August 31, 2023 and 2022, respectively, of which $2.0
million was classified as other noncurrent liabilities at both August 31, 2023 and 2022. 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.
79
NOTE 18. ACCRUED EXPENSES AND OTHER PAYABLES
Significant accrued expenses and other payables were as follows:
(in thousands)
Salaries and incentive compensation
Worker's compensation and general liability insurance
Taxes other than income taxes
Utilities
NOTE 19. OPERATING SEGMENTS
Year Ended August 31,
2023
2022
$
133,242 $
187,586
41,512
39,433
20,695
40,529
72,874
28,063
The Company's operating segments engage in business activities from which they may earn revenues and incur expenses and
for which discrete financial information is available. Operating results for the operating segments are regularly reviewed by the
Company's Chief Operating Decision Maker ("CODM") to manage the business, make decisions about resources to be allocated
to the segments and to assess performance. As of August 31, 2023, the Company's CODM was identified as the President, the
Chief Executive Officer, the Senior Vice President and Chief Financial Officer and the Senior Vice President Operations.
The Company structures its business into the following two reportable segments: North America and Europe. See Note 1,
Nature of Operations and Summary of Significant 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 BRP assets and short-term investments, expenses
of the Company's corporate headquarters, interest expense related to long-term debt, other revenue resulting from the
Company's NMTC transactions and intercompany eliminations. Certain corporate administrative expenses are allocated to the
segments based upon the nature of the expense.
The CODM uses adjusted EBITDA to evaluate segment performance and allocate resources. Adjusted EBITDA is the sum of
the Company's earnings before interest expense, income taxes, depreciation and amortization expense and impairment expense.
80
The following table summarizes certain financial information by reportable segment and Corporate and Other:
(in thousands)
2023
Net sales
Adjusted EBITDA
Interest expense(1)
Capital expenditures
Depreciation and amortization
Asset impairments
Total assets
2022
Net sales
Adjusted EBITDA
Interest expense(1)
Capital expenditures
Depreciation and amortization
Asset impairments
Total assets
2021
Net sales
Adjusted EBITDA
Interest expense(1)
Capital expenditures
Depreciation and amortization
Asset impairments
Total assets
North America
Europe
Corporate and
Other
Total
$ 7,347,020 $ 1,416,704 $
35,809 $ 8,799,533
1,454,754
116,650
548,218
170,266
3,733
61,353
1,978
45,295
39,457
47
(131,403) 1,384,704
(78,501)
40,127
13,152
9,107
—
606,665
218,830
3,780
5,006,458
1,096,153
536,483
6,639,094
$ 7,298,632 $ 1,621,642 $
(6,793) $ 8,913,481
1,553,858
346,051
(154,103) 1,745,806
26,798
415,157
135,322
4,915
3,819
27,783
31,250
11
20,092
7,048
8,452
—
50,709
449,988
175,024
4,926
4,467,314
1,056,101
713,612
6,237,027
$ 5,670,976 $ 1,049,059 $
9,725 $ 6,729,760
746,594
25,131
134,932
132,192
6,360
148,258
(140,568)
754,284
476
44,002
27,516
424
26,297
5,231
7,905
—
51,904
184,165
167,613
6,784
3,221,465
729,766
687,440
4,638,671
__________________________________
(1) Includes intercompany interest expense in the segments, which is eliminated within Corporate and Other.
The following table presents a reconciliation of earnings to adjusted EBITDA:
(in thousands)
Net earnings
Interest expense
Income taxes
Depreciation and amortization
Asset impairments
Amortization of acquired unfavorable contract backlog
Adjusted EBITDA
Year Ended August 31,
2023
2022
2021
$
859,760 $ 1,217,262 $
412,865
40,127
262,207
218,830
3,780
—
50,709
297,885
175,024
4,926
—
51,904
121,153
167,613
6,784
(6,035)
$ 1,384,704 $ 1,745,806 $
754,284
81
The following tables display revenue by reportable segment and Corporate and Other from external customers, disaggregated
by major product:
(in thousands)
Major product:
Raw materials
Steel products
Downstream products
Construction-related solutions
Other(1)
Net sales from external customers
Year Ended August 31, 2023
North America
Europe
Corporate and
Other
Total
$ 1,322,781 $
20,034 $
— $ 1,342,815
2,785,266
1,068,946
2,517,908
200,196
587,573
132,651
79,836
39,649
7,346,179
1,408,661
—
—
—
44,693
44,693
3,854,212
2,718,104
667,409
216,993
8,799,533
Intersegment net sales, eliminated on consolidation
841
8,043
(8,884)
—
Net sales
$ 7,347,020 $ 1,416,704 $
35,809 $ 8,799,533
_______________________________
(1) Other revenue during the year ended August 31, 2023 includes $17.7 million derived from the Company's NMTC
transactions. See Note 9, New Markets Tax Credit Transactions, for further information.
(in thousands)
Major product:
Raw materials
Steel products
Downstream products
Construction-related solutions
Other
Year Ended August 31, 2022
North America
Europe
Corporate and
Other
Total
$ 1,504,107 $
25,259 $
— $ 1,529,366
2,955,121
1,235,691
2,245,734
292,136
453,517
138,164
27,279
39,206
—
—
—
4,190,812
2,537,870
480,796
(2,733)
174,637
Net sales from external customers
7,296,643
1,619,571
(2,733)
8,913,481
Intersegment net sales, eliminated on consolidation
1,989
2,071
(4,060)
—
Net sales
$ 7,298,632 $ 1,621,642 $
(6,793) $ 8,913,481
(in thousands)
Major product:
Raw materials
Steel products
Downstream products
Construction-related solutions
Other
Year Ended August 31, 2021
North America
Europe
Corporate and
Other
Total
$ 1,162,997 $
19,841 $
— $ 1,182,838
2,289,975
1,814,192
289,644
114,168
808,662
192,175
—
26,567
—
—
—
11,539
11,539
3,098,637
2,006,367
289,644
152,274
6,729,760
Net sales from external customers
5,670,976
1,047,245
Intersegment net sales, eliminated on consolidation
—
1,814
(1,814)
—
Net sales
$ 5,670,976 $ 1,049,059 $
9,725 $ 6,729,760
82
The following table presents net sales by geographic area:
(in thousands)
Geographic area:
United States
Poland
China
Other
Net sales
Year Ended August 31,
2023
2022
2021
$ 6,894,990 $ 6,793,023 $ 5,295,447
941,806
217,779
744,958
1,078,986
246,679
794,793
793,075
156,101
485,137
$ 8,799,533 $ 8,913,481 $ 6,729,760
The following table presents long-lived assets, net of accumulated depreciation and amortization, by geographic area:
(in thousands)
Geographic area:
United States
Poland
Other
Total long-lived assets, net
2023
August 31,
2022
2021
$ 2,343,606 $ 1,858,269 $ 1,473,745
209,966
39,704
180,350
35,199
225,582
23
$ 2,593,276 $ 2,073,818 $ 1,699,350
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management,
including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure
controls and procedures as required by Rules 13a-15(b) and 15d-15(b) under the Exchange Act as of the end of the period
covered by this report. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures.
Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control
objectives. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these
disclosure controls and procedures were effective at the reasonable assurance level as of August 31, 2023.
Management's Report on Internal Control Over Financial Reporting. Management is responsible for establishing and
maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal
control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial
reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally
accepted in the United States of America.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the
risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or
procedures may deteriorate over time.
Management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness
of our internal control over financial reporting as of August 31, 2023 based on the guidelines established in Internal Control-
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on the results of our evaluation, our management concluded that our internal control over financial reporting was
effective as of August 31, 2023.
CMC's internal control over financial reporting as of August 31, 2023 has been audited by Deloitte & Touche LLP, an
independent registered public accounting firm, as stated in its report which is included in Part II, Item 8 of this Annual Report.
83
Changes in Internal Control Over Financial Reporting. No change to our internal control over financial reporting occurred
during the quarter ended August 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
ITEM 9B. OTHER INFORMATION
During the three months ended August 31, 2023, none of the Company’s directors or executive officers adopted or terminated a
“Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of
Regulation S-K.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
We will file a definitive proxy statement for our 2024 annual meeting of stockholders (such proxy statement, the “2024 Proxy
Statement”) with the SEC, pursuant to Regulation 14A of the Exchange Act, not later than 120 days after the end of the fiscal
year covered by this Annual Report. Accordingly, certain information required by Part III has been omitted under General
Instruction G(3) to Form 10-K. Only those sections of the 2024 Proxy Statement that specifically address the items set forth
herein are incorporated by reference.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required in response to this Item 10 is incorporated herein by reference to the 2024 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required in response to this Item 11 is incorporated herein by reference to the 2024 Proxy Statement, except for
the information required by Item 402(v) of Regulation S-K, which is specifically not incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required in response to this Item 12 is incorporated herein by reference to the 2024 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required in response to this Item 13 is incorporated herein by reference to the 2024 Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required in response to this Item 14 about our principal accountant, Deloitte & Touche LLP (PCAOB ID No.
34), is incorporated herein by reference to the 2024 Proxy Statement.
84
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) The following documents are filed as a part of this Annual Report:
1. All financial statements are included in Item 8 above.
2. Financial statement schedule: The following financial statement schedule is attached to this Annual Report.
Schedule II — Valuation and Qualifying Accounts
All other financial statement schedules have been omitted because they are not applicable, they are not required or the required
information is shown in the financial statements or notes thereto.
3. Exhibits:
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, certain long-term debt instruments are omitted because the total amount of
securities authorized thereunder does not exceed 10% of the total assets of CMC and its subsidiaries on a consolidated basis.
The Company agrees to furnish copies of such instruments to the SEC upon its request.
EXHIBIT
NO.
2(a)†
3(i)(a)
3(i)(b)
3(i)(c)
3(i)(d)
3(i)(e)
3(i)(f)
3(ii)
4(i)(a)
4(i)(b)
DESCRIPTION
Agreement and Plan of Merger dated December 3, 2021, by and among Commercial Metals Company,
Tahoe Merger Sub Inc., TAC Acquisition Corp. and Castle Harlan Inc. (filed as Exhibit 2.1 to Commercial
Metals Company's Current Report on Form 8-K filed December 7, 2021 and incorporated herein by
reference).
Restated Certificate of Incorporation dated March 2, 1989 (filed as Exhibit 3(i) to Commercial Metals
Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2009 and incorporated herein
by reference).
Certificate of Amendment of Restated Certificate of Incorporation dated February 1, 1994 (filed as
Exhibit 3(i)(a) to Commercial Metals Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 2009 and incorporated herein by reference).
Certificate of Amendment of Restated Certificate of Incorporation dated February 17, 1995 (filed as
Exhibit 3(i)(b) to Commercial Metals Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 2009 and incorporated herein by reference).
Certificate of Amendment of Restated Certificate of Incorporation dated January 30, 2004 (filed as Exhibit
3(i)(d) to Commercial Metals Company's Quarterly Report on Form 10-Q for the quarter ended February 29,
2004 and incorporated herein by reference).
Certificate of Amendment of Restated Certificate of Incorporation dated January 26, 2006 (filed as
Exhibit 3(i) to Commercial Metals Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 2006 and incorporated herein by reference).
Certificate of Designation, Preferences and Rights of Series A Preferred Stock (filed as Exhibit 2 to
Commercial Metals Company's Form 8-A filed August 3, 1999 and incorporated herein by reference).
Amended and Restated Bylaws (filed as Exhibit 3.1 to Commercial Metals Company's Current Report on
Form 8-K dated June 21, 2022 and incorporated herein by reference).
Indenture, dated May 6, 2013, by and between Commercial Metals Company and U.S. Bank National
Association, as trustee (filed as Exhibit 4.1 to Commercial Metals Company's Registration Statement on
Form S-3 filed May 6, 2013 and incorporated herein by reference).
Fourth Supplemental Indenture, dated February 2, 2021, by and among Commercial Metals Company and
U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to Commercial Metals Company's Current
Report on Form 8-K dated February 2, 2021 and incorporated herein by reference).
85
4(i)(c)
4(i)(d)
4(i)(e)
4(i)(f)
4(i)(g)
4(ii)(a)
10(i)(a)
10(i)(b)
10(i)(c)
10(ii)(a)*
10(ii)(b)*
10(ii)(c)*
10(ii)(d)*
10(ii)(e)*
10(ii)(f)*
10(ii)(g)*
Form of 3.875% Senior Note due 2031 (filed as Exhibit 4.2 to Commercial Metals Company's Current
Report on Form 8-K dated February 2, 2021 and incorporated herein by reference).
Fifth Supplemental Indenture, dated January 28, 2022, by and between Commercial Metals Company and
U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to Commercial Metals Company’s Current
Report on Form 8-K dated January 28, 2022 and incorporated herein by reference).
Form of 4.125% Senior Note due 2030 (filed as Exhibit 4.3 to Commercial Metals Company’s Current
Report on Form 8-K dated January 28, 2022 and incorporated herein by reference).
Sixth Supplemental Indenture, dated January 28, 2022, by and between Commercial Metals Company and
U.S. Bank National Association, as trustee (filed as Exhibit 4.2 to Commercial Metals Company’s Current
Report on Form 8-K dated January 28, 2022 and incorporated herein by reference).
Form of 4.375% Senior Note due 2032 (filed as Exhibit 4.4 to Commercial Metals Company’s Current
Report on Form 8-K dated January 28, 2022 and incorporated herein by reference).
The description of Commercial Metals Company's Common Stock (filed as Exhibit 4(ii)(a) to Commercial
Metals Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2022 and incorporated
herein by reference).
Purchase and Sale Agreement and Joint Escrow Instructions, dated September 29, 2021, by and among
TAMCO, CMC Steel Fabricators, Inc., as sellers, and BTC III Acquisitions LLC, as buyer (filed as exhibit
10.1 to Commercial Metals Company's Current Report on Form 8-K filed September 30, 2021 and
incorporated herein by reference).
Loan Agreement, dated February 1, 2022, between the Industrial Development Authority of the County of
Maricopa and Commercial Metals Company (filed as Exhibit 10.1 to Commercial Metals Company’s
Current Report on Form 8-K dated February 22, 2022 and incorporated herein by reference).
Sixth Amended and Restated Credit Agreement, dated October 26, 2022, by and among Commercial Metals
Company, CMC International Finance, a société à responsabilité limitée, the lenders party thereto and Bank
of America, N.A., as Administrative Agent (filed as Exhibit 10.2 to Commercial Metals Company’s
Quarterly Report on Form 10-Q for the quarter ended November 30, 2022 and incorporated herein by
reference).
Commercial Metals Company Employee Stock Purchase Plan as Amended and Restated effective January 1,
2020 (filed as Exhibit 10.1 to Commercial Metals Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 2020 and incorporated herein by reference).
Form of Amended and Restated Executive Employment Continuity Agreement (filed as Exhibit 10(iii)(b) to
Commercial Metals Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2020 and
incorporated herein by reference).
Terms and Conditions of Employment, dated May 3, 2011, by and between Barbara R. Smith and
Commercial Metals Company (filed as Exhibit 10.3 to Commercial Metals Company's Quarterly Report on
Form 10-Q for the quarter ended May 31, 2011 and incorporated herein by reference).
Amendment to Terms and Conditions of Employment, dated May 29, 2015, by and between Barbara R.
Smith and Commercial Metals Company (filed as Exhibit 10(iii)(d) to Commercial Metals Company's
Annual Report on Form 10-K for the fiscal year ended August 31, 2020 and incorporated herein by
reference).
Second Amendment to Terms and Conditions of Employment, dated January 18, 2016, by and between
Barbara R. Smith and Commercial Metals Company (filed as Exhibit 99.1 to Commercial Metals Company's
Current Report on Form 8-K filed January 19, 2016 and incorporated herein by reference).
Third Amendment to Terms and Conditions of Employment, dated November 28, 2016, by and between
Barbara R. Smith and Commercial Metals Company (filed as Exhibit 99.1 to Commercial Metals Company's
Current Report on Form 8-K filed November 29, 2016 and incorporated herein by reference).
Fourth Amendment to Terms and Conditions of Employment, dated August 31, 2017, by and between
Barbara R. Smith and Commercial Metals Company (filed as Exhibit 10.1 to Commercial Metals Company's
Current Report on Form 8-K filed September 1, 2017 and incorporated herein by reference).
10(ii)(h)*
Fifth Amendment to Terms and Conditions of Employment, dated July 10, 2023, by and between Barbara R.
Smith and Commercial Metals Company (filed herewith).
86
10(ii)(i)*
10(ii)(j)*
10(ii)(k)*
10(ii)(l)*
10(ii)(m)*
10(ii)(n)*
10(ii)(o)*
10(ii)(p)*
10(ii)(q)*
10(ii)(r)*
10(ii)(s)*
10(ii)(t)*
10(ii)(u)*
10(ii)(v)*
Amended and Restated Employment Agreement, dated effective as of November 4, 2021, by and between
Ty L. Garrison and Commercial Metals Company (filed as Exhibit 10.3 to Commercial Metals Company’s
Quarterly Report on Form 10-Q the quarter ended November 30, 2021 and incorporated herein by
reference).
Commercial Metals Company 2013 Long-Term Equity Incentive Plan as Amended and Restated effective
November 19, 2019 (filed as Exhibit 10.2 to Commercial Metals Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 2020 and incorporated herein by reference).
Commercial Metals Company 2013 Cash Incentive Plan effective November 21, 2017 (filed as Appendix A
to Commercial Metals Company’s Definitive Proxy Statement on Schedule 14A filed November 27, 2017
and incorporated herein by reference).
Terms and Conditions of Stock Award, Employment and Separation dated August 13, 2019, by and between
Paul J. Lawrence and Commercial Metals Company (filed as Exhibit 10(iii)(m) to Commercial Metals
Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2020 and incorporated herein
by reference).
Amendment to Terms and Conditions of Stock Award, Employment and Separation, dated as effective
November 4, 2021, by and between Paul J. Lawrence and Commercial Metals Company (filed as Exhibit
10.4 to Commercial Metals Company’s Quarterly Report on Form 10-Q the quarter ended November 30,
2021 and incorporated herein by reference ).
Terms and Conditions of Employment, dated June 16, 2020, by and between Jody Absher and Commercial
Metals Company (filed as Exhibit 10(iii)(n) to Commercial Metals Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 2020 and incorporated herein by reference).
Terms and Conditions of Employment, dated June 16, 2020, by and between Jennifer J. Durbin and
Commercial Metals Company (filed as Exhibit 10(iii)(o) to Commercial Metals Company's Annual Report
on Form 10-K for the fiscal year ended August 31, 2020 and incorporated herein by reference).
Form of Restricted Stock Unit Award Agreement (filed as Exhibit 10.3 to Commercial Metals Company's
Quarterly Report on Form 10-Q for the quarter ended May 31, 2020 and incorporated herein by reference).
Terms and Conditions of Employment, dated February 15, 2023, by and between Peter R. Matt and
Commercial Metals Company (filed as Exhibit 10.1 to Commercial Metals Company’s Quarterly Report on
Form 10-Q for the quarter ended February 28, 2023 and incorporated herein by reference).
Amendment No. 1 to Terms and Conditions of Employment, dated March 20, 2023, by and between Peter R.
Matt and Commercial Metals Company (filed as Exhibit 10.2 to Commercial Metals Company’s Quarterly
Report on Form 10-Q for the quarter ended February 28, 2023 and incorporated herein by reference).
Amendment No. 2 to Terms and Conditions of Employment, dated July 10, 2023, by and between Peter R.
Matt and Commercial Metals Company (filed herewith).
Form of Performance Award Agreement (filed as Exhibit 10.4 to Commercial Metals Company's Quarterly
Report on Form 10-Q for the quarter ended May 31, 2020 and incorporated herein by reference).
Form of Non-Employee Director Restricted Stock Award Agreement (filed as Exhibit 10.5 to Commercial
Metals Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2020 and incorporated
herein by reference).
Form of Non-Employee Director Restricted Stock Unit Award Agreement (filed as Exhibit 10.6 to
Commercial Metals Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2020 and
incorporated herein by reference).
10(ii)(w)
Form of Director and Officer Indemnification Agreement (filed herewith).
19
21
23
31(a)
31(b)
Statement of Company Policy on Insider Trading and Anti-Hedging (filed herewith).
Subsidiaries of Commercial Metals Company (filed herewith).
Consent of Deloitte & Touche LLP (filed herewith).
Certification of Peter R. Matt, President and Chief Executive Officer of Commercial Metals Company,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
Certification of Paul J. Lawrence, Senior Vice President and Chief Financial Officer of Commercial Metals
Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
87
32(a)
32(b)
97
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Certification of Peter R. Matt, President and Chief Executive Officer of Commercial Metals Company,
pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(furnished herewith).
Certification of Paul J. Lawrence, Senior Vice President and Chief Financial Officer of Commercial Metals
Company, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (furnished herewith).
Compensation Recovery Policy (filed herewith).
Inline XBRL Instance Document (filed herewith).
Inline XBRL Taxonomy Extension Schema Document (filed herewith).
Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).
Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).
Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith).
Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).
Cover Page Interactive Data File (formatted as Inline XBRL document and included in Exhibit 101).
* Denotes management contract or compensatory plan.
† Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5),
and the Company agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.
88
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
Additions
Deductions
Description (in thousands)
Year Ended August 31, 2023
Balance at
Beginning of
Period
Charged to
Costs and
Expenses
Charged to
Other
Accounts (1)
Charged to
Costs and
Expenses
Charged to
Other
Accounts (2)
Balance at
End of
Period
Allowance for doubtful accounts
$ 4,990 $
463 $
157 $
— $
(1,475) $
4,135
Deferred tax valuation allowance
$ 268,547 $ 16,514 $
— $
(4,598) $
— $ 280,463
Year Ended August 31, 2022
Allowance for doubtful accounts
$ 5,553 $
300 $
193 $
— $
(1,056) $
4,990
Deferred tax valuation allowance
$ 278,099 $
3,328 $
— $ (12,880) $
— $ 268,547
Year Ended August 31, 2021
Allowance for doubtful accounts
$ 9,597 $
(1,429) $
138 $
— $
(2,753) $
5,553
Deferred tax valuation allowance
$ 281,849 $ 20,058 $
— $ (23,808) $
— $ 278,099
__________________________________
(1) Recoveries and translation adjustments.
(2) Uncollectible accounts charged to the allowance.
89
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
COMMERCIAL METALS COMPANY
By
/s/ Peter R. Matt
Peter R. Matt
President and Chief Executive Officer
Date: October 12, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated:
/s/ Peter R. Matt
Peter R. Matt, October 12, 2023
President, Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Sarah E. Raiss
Sarah E. Raiss, October 12, 2023
Lead Director
/s/ Barbara R. Smith
Barbara R. Smith, October 12, 2023
Executive Chairman of the Board
/s/ Charles L. Szews
Charles L. Szews, October 12, 2023
Director
/s/ Vicki L. Avril-Groves
/s/ Robert S. Wetherbee
Vicki L. Avril-Groves, October 12, 2023
Director
Robert S. Wetherbee, October 12, 2023
Director
/s/ Lisa M. Barton
Lisa M. Barton, October 12, 2023
Director
/s/ Paul J. Lawrence
Paul J. Lawrence, October 12, 2023
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Gary E. McCullough
/s/ Lindsay L. Sloan
Gary E. McCullough, October 12, 2023
Director
/s/ John R. McPherson
John R. McPherson, October 12, 2023
Director
Lindsay L. Sloan, October 12, 2023
Vice President and Chief Accounting Officer
(Principal Accounting Officer)
90
C O R P O R A T E I N F O R M A T I O N
Corporate Headquarters
COMMERCIAL METALS COMPANY
6565 N. MacArthur Blvd.
Suite 800
Irving, Texas 75039
214.689.4300
WEBSITE
www.cmc.com
Stock Exchange Listing
New York Stock
Exchange Symbol:
CMC
Executive Certifications
Commercial Metals Company has
included, as Exhibit 31 to its 2023
Annual Report on Form 10-K filed
with the Securities and Exchange
Commission, certificates of the
principal executive officer and principal
financial officer of the Company regard-
ing the quality of the Company’s public
disclosure as required by Section
302 of the Sarbanes-Oxley Act. The
Company has also submitted to the
New York Stock Exchange (NYSE) a
certificate of the CEO certifying that
he is not aware of any violation by
the Company of NYSE corporate
governance listing standards.
Annual Meeting of
Stockholders
WHEN
Wednesday, January 10, 2024
10:00 A.M., Central Standard Time
WHERE
CMC Hall at the
Company’s Headquarters
6565 North MacArthur Boulevard,
9th Floor
Irving, Texas 75039
RECORD DATE
November 13, 2023
Form 10-K
Copies of CMC’s annual report on
Form 10-K are available from:
CORPORATE SECRETARY
Commercial Metals Company
P.O. Box 1046
Dallas, Texas 75221-1046
Independent Registered
Public Accounting Firm
Deloitte & Touche LLP
Dallas, Texas
Comparison of 5 -Year Cumulative Total Return
Among Commercial Metals Company, the S&P 500 Index and the S&P 500 Steel Index
Stockholder Services
Stockholder inquiries should be
addressed to our Transfer Agent:
BROADRIDGE CORPORATE ISSUER
SOLUTIONS, INC.
1155 Long Island Avenue
Attn: IWS
Edgewood, New York 11717
877.830.4928
or email to
shareholder@broadridge.com
or online at
www.shareholder.broadridge.com
Investor Relations
Additional corporate information
is available from our website at
www.cmc.com.
This annual report to stockholders
contains “forward-looking statements”
within the meaning of the federal secu-
rities laws, with respect to economic
conditions, our financial condition,
results of operations, cash flows and
business, and our expectations or
beliefs concerning future events. See
the discussion of risk factors in Part I
Item 1A, and the discussion of forward
looking statements in Part II Item 7, of
our accompanying Annual Report on
Form 10-K, each of which is incorporat-
ed herein by reference.
$350
$300
$250
$200
$150
$100
$50
$0
The graph and chart to the left compare the cumulative total return
on Commercial Metals Company’s common stock with the cumulative
total return on the Standard & Poor’s (“S&P”) 500 Index and the
S&P 500 Steel Index from August 31, 2018 through August 31, 2023. The
comparison assumes $100 was invested in our common stock and in
each index on August 31, 2018, and that dividends were reinvested.
Copyright© 2023 Standard & Poor’s, a division of S&P Global.
All rights reserved.
8/18
8/19
8/20
8/21
8/22
8/23
The stock price performance included in this graph is not necessarily
indicative of future stock price performance.
8/18
8/19
8/20
8/21
8/22
8/23
Commercial
Metals Company
100.00
74.51 101.82
162.27
204.67
288.08
CommercialMetalsCompany
S&P 500
100.00
102.92 125.50
164.61
146.13
169.43
S&P 500 Steel
100.00
80.59
77.57
205.86
236.66
291.76
S&P500
S&P500Steel
6565 N. MacArthur Blvd.
Suite 800
Irving, Texas 75039
214.689.4300
cmc.com