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Published: 2023-03-23 12:12:27 ET
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cmc-20230228
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM 10-Q 
___________________________________
☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 2023
OR
☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to            
Commission file number 1-4304
___________________________________
COMMERCIAL METALS COMPANY
(Exact Name of Registrant as Specified in Its Charter)
cmc-20230228_g1.jpg 
Delaware75-0725338
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification Number)
6565 N. MacArthur Blvd., Irving, Texas 75039
(Address of Principal Executive Offices) (Zip Code)
(214) 689-4300
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, $0.01 par valueCMCNew York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 ("Exchange Act") during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer ☐
Non-accelerated filer  ☐Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 
Yes  ☐    No  ☒
As of March 22, 2023, 117,117,307 shares of the registrant's common stock, par value $0.01 per share, were outstanding.


COMMERCIAL METALS COMPANY AND SUBSIDIARIES
TABLE OF CONTENTS
 



2
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Three Months Ended February 28,Six Months Ended February 28,
(in thousands, except share and per share data)2023202220232022
Net sales$2,018,003 $2,008,888 $4,245,316 $3,990,689 
Costs and operating expenses (income):
Cost of goods sold1,621,763 1,614,965 3,341,177 3,201,375 
Selling, general and administrative expenses150,427 127,985 306,550 251,563 
Interest expense9,945 12,011 22,990 23,046 
Asset impairments36 1,228 45 1,228 
Loss on debt extinguishment27 16,052 178 16,052 
Loss (gain) on sale of assets
315 (273,099)387 (274,082)
1,782,513 1,499,142 3,671,327 3,219,182 
Earnings before income taxes235,490 509,746 573,989 771,507 
Income taxes55,641 126,432 132,366 155,304 
Net earnings$179,849 $383,314 $441,623 $616,203 
Earnings per share:
Basic$1.53 $3.16 $3.77 $5.08 
Diluted$1.51 $3.12 $3.71 $5.02 
Average basic shares outstanding117,224,517 121,458,196 117,249,266 121,293,030 
Average diluted shares outstanding118,723,259 122,852,410 118,985,098 122,747,981 
See notes to condensed consolidated financial statements.


3
Table of Contents
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended February 28,Six Months Ended February 28,
(in thousands)2023202220232022
Net earnings$179,849 $383,314 $441,623 $616,203 
Other comprehensive income (loss), net of income taxes:
Foreign currency translation11,628 (14,461)53,057 (54,149)
Derivatives:
Net unrealized holding gain
23,957 33,197 92,002 55,451 
Reclassification for realized gain
(863)(5,277)(7,833)(8,346)
Net unrealized gain on derivatives
23,094 27,920 84,169 47,105 
Defined benefit plans gain (loss) after amortization of prior service costs
(37)(6)1,721 (12)
Total other comprehensive income (loss), net of income taxes
34,685 13,453 138,947 (7,056)
Comprehensive income
$214,534 $396,767 $580,570 $609,147 
See notes to condensed consolidated financial statements.
4
Table of Contents
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share and per share data)February 28, 2023August 31, 2022
Assets
Current assets:
Cash and cash equivalents$603,966 $672,596 
Accounts receivable (less allowance for doubtful accounts of $4,928 and $4,990)
1,263,547 1,358,907 
Inventories, net1,144,268 1,169,696 
Prepaid and other current assets266,365 240,269 
Total current assets3,278,146 3,441,468 
Property, plant and equipment, net2,159,730 1,910,871 
Intangible assets, net248,723 257,409 
Goodwill278,711 249,009 
Other noncurrent assets519,541 378,270 
Total assets$6,484,851 $6,237,027 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable$422,814 $428,055 
Accrued expenses and other payables378,572 540,136 
Current maturities of long-term debt and short-term borrowings264,762 388,796 
Total current liabilities1,066,148 1,356,987 
Deferred income taxes303,367 250,302 
Other noncurrent liabilities232,415 230,060 
Long-term debt1,099,728 1,113,249 
Total liabilities2,701,658 2,950,598 
Commitments and contingencies (Note 14)
Stockholders' equity:
Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued 129,060,664 shares; outstanding 117,205,307 and 117,496,053 shares
1,290 1,290 
Additional paid-in capital374,440 382,767 
Accumulated other comprehensive income (loss)24,496 (114,451)
Retained earnings3,716,537 3,312,438 
Less treasury stock 11,855,357 and 11,564,611 shares at cost
(333,802)(295,847)
Stockholders' equity3,782,961 3,286,197 
Stockholders' equity attributable to non-controlling interests232 232 
Total stockholders' equity3,783,193 3,286,429 
Total liabilities and stockholders' equity$6,484,851 $6,237,027 
See notes to condensed consolidated financial statements.
5
Table of Contents
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 Six Months Ended February 28,
(in thousands)20232022
Cash flows from (used by) operating activities:
Net earnings$441,623 $616,203 
Adjustments to reconcile net earnings to cash flows from operating activities:
Depreciation and amortization102,399 82,360 
Stock-based compensation33,624 25,870 
Deferred income taxes and other long-term taxes26,930 34,980 
Write-down of inventory5,532 123 
Net loss (gain) on disposals of assets387 (274,082)
Loss on debt extinguishment178 16,052 
Asset impairments45 1,228 
Other4,006 712 
Settlement of New Markets Tax Credit transaction(17,659)— 
Changes in operating assets and liabilities, net of acquisitions(38,158)(449,078)
Net cash flows from operating activities
558,907 54,368 
Cash flows from (used by) investing activities:
Capital expenditures(289,251)(191,562)
Acquisitions, net of cash acquired(65,153)— 
Proceeds from insurance2,456 3,081 
Proceeds from the sale of property, plant and equipment and other531 309,563 
Other(1,185)— 
Net cash flows from (used by) investing activities
(352,602)121,082 
Cash flows from (used by) financing activities:
Proceeds from issuance of long-term debt, net— 740,403 
Repayments of long-term debt(160,263)(313,174)
Debt issuance costs(1,800)(2,977)
Debt extinguishment costs(96)(13,642)
Proceeds from accounts receivable facilities74,963 190,730 
Repayments under accounts receivable facilities(77,843)(215,196)
Treasury stock acquired(66,323)(17,010)
Tax withholdings related to share settlements, net of purchase plans(14,789)(10,719)
Dividends(37,524)(34,011)
Net cash flows from (used by) financing activities
(283,675)324,404 
Effect of exchange rate changes on cash6,545 (1,283)
Increase (decrease) in cash, restricted cash and cash equivalents
(70,825)498,571 
Cash, restricted cash and cash equivalents at beginning of period679,243 501,129 
Cash, restricted cash and cash equivalents at end of period$608,418 $999,700 
See notes to condensed consolidated financial statements.
Supplemental information:Six Months Ended February 28,
(in thousands)20232022
Cash paid for income taxes$114,585 $133,194 
Cash paid for interest35,036 24,916 
Noncash activities:
Liabilities related to additions of property, plant and equipment$51,239 $35,781 
Right of use assets obtained in exchange for operating leases19,327 19,009 
Right of use assets obtained in exchange for finance leases24,275 6,716 
Cash and cash equivalents$603,966 $846,587 
Restricted cash4,452 153,113 
Total cash, restricted cash and cash equivalents$608,418 $999,700 
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
Three Months Ended February 28, 2023
 Common Stock Treasury Stock 
(in thousands, except share and per share data)Number of
Shares		AmountAdditional Paid-In
Capital		Accumulated
Other Comprehensive
Income (Loss)		Retained
Earnings		Number of
Shares		Amount Non-controlling
Interest		Total
Balance, December 1, 2022129,060,664 $1,290 $361,199 $(10,189)$3,555,425 (11,769,027)$(323,722)$232 $3,584,235 
Net earnings179,849 179,849 
Other comprehensive income34,685 34,685 
Dividends ($0.16 per share)
(18,737)(18,737)
Treasury stock acquired(330,000)(17,174)(17,174)
Issuance of stock under incentive and purchase plans, net of shares withheld for taxes1,630 243,670 7,094 8,724 
Stock-based compensation11,611 11,611 
Balance, February 28, 2023129,060,664 $1,290 $374,440 $24,496 $3,716,537 (11,855,357)$(333,802)$232 $3,783,193 
Six Months Ended February 28, 2023
 Common Stock Treasury Stock 
(in thousands, except share and per share data)Number of
Shares		AmountAdditional Paid-In
Capital		Accumulated
Other Comprehensive
Income (Loss)		Retained
Earnings		Number of
Shares		AmountNon-controlling
Interest		Total
Balance, September 1, 2022129,060,664 $1,290 $382,767 $(114,451)$3,312,438 (11,564,611)$(295,847)$232 $3,286,429 
Net earnings441,623 441,623 
Other comprehensive income138,947 138,947 
Dividends ($0.32 per share)
(37,524)(37,524)
Treasury stock acquired(1,605,452)(66,323)(66,323)
Issuance of stock under incentive and purchase plans, net of shares withheld for taxes(43,157)1,314,706 28,368 (14,789)
Stock-based compensation25,138 25,138 
Reclassification of share-based liability awards9,692 9,692 
Balance, February 28, 2023129,060,664 $1,290 $374,440 $24,496 $3,716,537 (11,855,357)$(333,802)$232 $3,783,193 
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Three Months Ended February 28, 2022
 Common Stock Treasury Stock 
(in thousands, except share and per share data)Number of
Shares		AmountAdditional Paid-In
Capital		Accumulated
Other Comprehensive
Income (Loss)		Retained
Earnings		Number of
Shares		AmountNon-controlling
Interest		Total
Balance, December 1, 2021129,060,664 $1,290 $357,413 $(105,329)$2,378,789 (7,580,725)$(146,206)$232 $2,486,189 
Net earnings383,314 383,314 
Other comprehensive income13,453 13,453 
Dividends ($0.14 per share)
(16,986)(16,986)
Treasury stock acquired(335,500)(11,699)(11,699)
Issuance of stock under incentive and purchase plans, net of shares withheld for taxes(1,275)351,429 6,927 5,652 
Stock-based compensation10,024 10,024 
Balance, February 28, 2022129,060,664 $1,290 $366,162 $(91,876)$2,745,117 (7,564,796)$(150,978)$232 $2,869,947 
Six Months Ended February 28, 2022
 Common Stock Treasury Stock 
(in thousands, except share and per share data)Number of
Shares		AmountAdditional Paid-In
Capital		Accumulated
Other Comprehensive
Loss		Retained
Earnings		Number of
Shares		AmountNon-controlling
Interest		Total
Balance, September 1, 2021129,060,664 $1,290 $368,064 $(84,820)$2,162,925 (8,474,075)$(152,582)$232 $2,295,109 
Net earnings616,203 616,203 
Other comprehensive loss(7,056)(7,056)
Dividends ($0.28 per share)
(34,011)(34,011)
Treasury stock acquired(495,000)(17,010)(17,010)
Issuance of stock under incentive and purchase plans, net of shares withheld for taxes(29,333)1,404,279 18,614 (10,719)
Stock-based compensation18,340 18,340 
Reclassification of share-based liability awards9,091 9,091 
Balance, February 28, 2022129,060,664 $1,290 $366,162 $(91,876)$2,745,117 (7,564,796)$(150,978)$232 $2,869,947 
See notes to condensed consolidated financial statements.

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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") on a basis consistent with that used in the Annual Report on Form 10-K for the year ended August 31, 2022 (the "2022 Form 10-K") filed by Commercial Metals Company ("CMC," and together with its consolidated subsidiaries, the "Company") with the Securities and Exchange Commission (the "SEC") and include all normal recurring adjustments necessary to present fairly the condensed consolidated balance sheets and the condensed consolidated statements of earnings, comprehensive income, cash flows and stockholders' equity for the periods indicated. These notes should be read in conjunction with the consolidated financial statements and notes included in the 2022 Form 10-K. The results of operations for the three and six month periods are not necessarily indicative of the results to be expected for the full fiscal year. Any reference in this Form 10-Q to the "corresponding period" or "comparable period" relates to the three or six month period ended February 28, 2022, as applicable. Any reference in this Form 10-Q to a year refers to the fiscal year ended August 31st of that year, unless otherwise noted.
NOTE 2. CHANGES IN BUSINESS

Tensar Acquisition

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

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

(in thousands)
Estimated Fair Value as Previously Reported(1)
Cash and cash equivalents$19,551 
Accounts receivable37,741 
Inventories39,462 
Prepaid and other current assets12,528 
Defined benefit pension plan14,620 
Property, plant and equipment85,983 
Intangible assets260,500 
Goodwill186,805 
Other noncurrent assets19,660 
Accounts payable(12,134)
Accrued expenses and other payables(23,725)
Current maturities of long-term debt(3,277)
Deferred income taxes(45,055)
Other noncurrent liabilities(16,347)
Long-term debt(4,312)
Total assets acquired and liabilities assumed$572,000 
__________________________________
(1) As previously reported in the 2022 Form 10-K. No measurement period adjustments occurred during the six months ended February 28, 2023.
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Pro Forma Supplemental Information

Supplemental information on an unaudited pro forma basis is presented below as if the acquisition of Tensar occurred on September 1, 2020. The pro forma financial information is presented for comparative purposes only, based on certain factually supported estimates and assumptions, which the Company believes to be reasonable, but not necessarily indicative of future results of operations or the results that would have been reported if the acquisition had been completed on September 1, 2020. These results were not used as part of management's analysis of the financial results and performance of the Company. The pro forma adjustments do not reflect anticipated synergies, but rather include the recurring income statement effects of fair value adjustments, such as depreciation and amortization. Further adjustments were made to remove the impact of Tensar's prior management fees, acquisition and integration expenses and interest on debt not assumed in the acquisition. The resulting tax effects of the business combination are also reflected below.
(in thousands)Three Months Ended February 28, 2022Six Months Ended February 28, 2022
Pro forma net sales$2,059,294 $4,102,962 
Pro forma net earnings383,256 623,633 

The pro forma results presented above include, but are not limited to, adjustments to remove the impact of $3.2 million of acquisition and integration expenses from the six months ended February 28, 2022, with no such impact on the three months ended February 28, 2022. Results also reflect increased amortization expense from revalued intangible assets of $3.1 million and $6.2 million in the three and six months ended February 28, 2022, respectively.

Advanced Steel Recovery Acquisition

On September 15, 2022, the Company completed the acquisition of Advanced Steel Recovery, LLC ("ASR"), a supplier of recycled ferrous metals located in Southern California. ASR's primary operations include processing and brokering capabilities that source material for sale into both the domestic and export markets and are presented within the Company's North America reportable segment. The ASR acquisition is not material to the Company's financial position as of February 28, 2023 or results of operations for the three and six months ended February 28, 2023, and therefore, pro forma operating results and other disclosures for the acquisition are not presented.

Kodiak Acquisition

On November 14, 2022, the Company completed the acquisition of a Galveston, Texas area metals recycling facility and related assets (collectively, "Kodiak") from Kodiak Resources, Inc. and Kodiak Properties, L.L.C. Kodiak's operating results are presented within the Company's North America reportable segment. The Kodiak acquisition is not material to the Company's financial position as of February 28, 2023 or results of operations for the three and six months ended February 28, 2023, and therefore, pro forma operating results and other disclosures for the acquisition are not presented.

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 adjacent rebar fabrication facility ("the Rancho Cucamonga facilities"), which were part of the North America segment. On December 28, 2021, the sale of the Rancho Cucamonga facilities was completed for gross proceeds of $313.0 million. A portion of the gross proceeds amounting to $39.0 million was set aside in a restricted cash account to facilitate the purchase of like-kind assets. In January 2022, the Company used $7.5 million of the restricted cash on a purchase of a like-kind asset. The remaining balance of $31.5 million was included in restricted cash as of February 28, 2022.
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NOTE 3. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables reflect the changes in accumulated other comprehensive income (loss) ("AOCI"):
Three Months Ended February 28, 2023
(in thousands)Foreign Currency TranslationDerivativesDefined Benefit ObligationTotal AOCI
Balance, December 1, 2022$(204,468)$199,317 $(5,038)$(10,189)
Other comprehensive income (loss) before reclassifications
11,628 29,341 (66)40,903 
Reclassification for gain (1)
— (1,070)— (1,070)
Income tax (expense) benefit
— (5,177)29 (5,148)
Net other comprehensive income (loss)
11,628 23,094 (37)34,685 
Balance, February 28, 2023$(192,840)$222,411 $(5,075)$24,496 
Six Months Ended February 28, 2023
(in thousands)Foreign Currency TranslationDerivativesDefined Benefit ObligationTotal AOCI
Balance, September 1, 2022$(245,897)$138,242 $(6,796)$(114,451)
Other comprehensive income before reclassifications
53,057 113,228 1,679 167,964 
Reclassification for gain (1)
— (9,736)— (9,736)
Income tax (expense) benefit
— (19,323)42 (19,281)
Net other comprehensive income
53,057 84,169 1,721 138,947 
Balance, February 28, 2023$(192,840)$222,411 $(5,075)$24,496 
Three Months Ended February 28, 2022
(in thousands)Foreign Currency TranslationDerivativesDefined Benefit ObligationTotal AOCI
Balance, December 1, 2021$(145,368)$40,966 $(927)$(105,329)
Other comprehensive income (loss) before reclassifications
(14,461)41,044 (8)26,575 
Reclassification for gain (1)
— (6,536)— (6,536)
Income tax (expense) benefit
— (6,588)2 (6,586)
Net other comprehensive income (loss)
(14,461)27,920 (6)13,453 
Balance, February 28, 2022$(159,829)$68,886 $(933)$(91,876)
Six Months Ended February 28, 2022
(in thousands)Foreign Currency TranslationDerivativesDefined Benefit ObligationTotal AOCI
Balance, September 1, 2021$(105,680)$21,781 $(921)$(84,820)
Other comprehensive income (loss) before reclassifications
(54,149)68,518 (16)14,353 
Reclassification for gain (1)
— (10,325)— (10,325)
Income tax (expense) benefit
— (11,088)4 (11,084)
Net other comprehensive income (loss)
(54,149)47,105 (12)(7,056)
Balance, February 28, 2022$(159,829)$68,886 $(933)$(91,876)
__________________________________
(1) Reclassifications for gains on derivatives included in net earnings are recorded in cost of goods sold in the condensed consolidated statements of earnings.

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NOTE 4. REVENUE RECOGNITION

Revenue related to raw materials, steel products and construction-related solutions in the North America and Europe segments and downstream products in the Europe segment is recognized at a point in time concurrent with the transfer of control, which usually occurs, depending on shipping terms, upon shipment or customer receipt. See Note 15, Operating Segments, for further information about disaggregated revenue by the Company's major product lines.

Each downstream product contract sold by the North America segment represents a single performance obligation. Revenue from contracts where the Company provides fabricated product and installation services is recognized over time using an input measure; these contracts represented 7% of net sales in the North America segment in both the three and six months ended February 28, 2023, and 8% and 9% of net sales in the North America segment in the three and six months ended February 28, 2022, respectively. Revenue from contracts where the Company does not provide installation services is recognized over time using an output measure; these contracts represented 11% and 12% of net sales in the North America segment in the three and six months ended February 28, 2023, respectively, and 8% and 9% of net sales in the North America segment in the three and six months ended February 28, 2022, respectively.

The following table provides information about assets and liabilities from contracts with customers:
(in thousands)February 28, 2023August 31, 2022
Contract assets (included in accounts receivable)$68,589 $73,037 
Contract liabilities (included in accrued expenses and other payables)30,230 27,567 

The amount of revenue reclassified from August 31, 2022 contract liabilities during the six months ended February 28, 2023 was approximately $20.7 million.

Remaining Performance Obligations

As of February 28, 2023, revenue totaling $1.0 billion has been allocated to remaining performance obligations in the North America segment related to contracts where revenue is recognized using an input or output measure. Of this amount, the Company estimates that approximately 79% of the remaining performance obligations will be recognized in the twelve months after February 28, 2023, and the remainder will be recognized during the subsequent twelve months. The duration of all other contracts in the North America and Europe segments are typically less than one year.
NOTE 5. INVENTORIES, NET

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

The components of inventories were as follows:
(in thousands)February 28, 2023August 31, 2022
Raw materials$299,911 $271,756 
Work in process5,628 9,446 
Finished goods838,729 888,494 
Total$1,144,268 $1,169,696 

Inventory write-downs were $1.0 million and $5.5 million during the three and six months ended February 28, 2023, respectively, and were primarily recorded in the Europe segment. Inventory write-downs were immaterial in the corresponding periods.
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NOTE 6. GOODWILL AND OTHER INTANGIBLES

Goodwill by reportable segment is detailed in the following table:
(in thousands)North AmericaEuropeConsolidated
Goodwill, gross
Balance, September 1, 2022$216,059 $43,115 $259,174 
Acquisitions29,503 — 29,503 
Foreign currency translation— 207 207 
Balance, February 28, 2023245,562 43,322 288,884 
Accumulated impairment
Balance, September 1, 2022(10,036)(129)(10,165)
Foreign currency translation— (8)(8)
Balance, February 28, 2023(10,036)(137)(10,173)
Goodwill, net
Balance, September 1, 2022206,023 42,986 249,009 
Acquisitions29,503 — 29,503 
Foreign currency translation— 199 199 
Balance, February 28, 2023$235,526 $43,185 $278,711 

Intangible assets subject to amortization are detailed in the following table:
 February 28, 2023August 31, 2022
(in thousands) Useful Lives in YearsGross
Carrying Amount		Accumulated AmortizationNetGross
Carrying Amount		Accumulated AmortizationNet
Developed technologies
1 to 15
$148,406 $15,816 $132,590 $147,040 $6,485 $140,555 
Customer relationships
12 to 17
53,323 4,243 49,080 53,115 2,116 50,999 
Perpetual lease rights
79
5,550 868 4,682 3,584 744 2,840 
Patents
5 to 7.5
7,203 5,083 2,120 7,203 4,596 2,607 
Trade names
 5 to 15
3,241 945 2,296 3,212 764 2,448 
Non-compete agreements
5 to 7
2,300 1,313 987 3,050 1,135 1,915 
Other
15
101 101 — 101 99 2 
Total$220,124 $28,369 $191,755 $217,305 $15,939 $201,366 

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

Other indefinite-lived intangible assets consist of the following:
(in thousands)February 28, 2023August 31, 2022
Trade names$53,818 $53,633 
In-process research and development2,400 2,400 
Non-compete agreements750 750 
Total$56,968 $56,783 

The change in the balance of intangible assets with indefinite lives from August 31, 2022 to February 28, 2023 was due to foreign currency translation adjustments.

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Amortization expense for intangible assets was $6.2 million and $12.3 million in the three and six months ended February 28, 2023, respectively, of which $4.7 million and $9.3 million, respectively, was recorded in cost of goods sold and $1.5 million and $3.0 million, respectively, was recorded in selling, general and administrative expenses in the condensed consolidated statements of earnings. The Company recorded immaterial amortization expense for intangible assets in the three and six months ended February 28, 2022. Estimated amounts of amortization expense for intangible assets for the next five years are as follows:
(in thousands)
Remainder of 2023
$12,244 
202423,734 
202522,004 
202620,792 
202720,684 
NOTE 7. CREDIT ARRANGEMENTS

Long-term debt was as follows: 
(in thousands)Weighted Average Interest Rate as of February 28, 2023February 28, 2023August 31, 2022
2032 Notes4.375%$300,000 $300,000 
2031 Notes3.875%300,000 300,000 
2030 Notes4.125%300,000 300,000 
2023 Notes4.875%214,059 330,000 
Series 2022 Bonds, due 20474.000%145,060 145,060 
Poland Term Loan—— 32,439 
Short-term borrowings—22,804 26,390 
Other4.600%21,057 21,278 
Finance leases4.658%72,559 58,536 
Total debt1,375,539 1,513,703 
Less unamortized debt issuance costs(15,792)(16,496)
Plus unamortized bond premium4,743 4,838 
Total amounts outstanding1,364,490 1,502,045 
Less current maturities of long-term debt and short-term borrowings(264,762)(388,796)
Long-term debt$1,099,728 $1,113,249 

The Company's credit arrangements require compliance with certain covenants, including an interest coverage ratio and a debt to capitalization ratio. At February 28, 2023, the Company was in compliance with all financial covenants in its credit arrangements.

Capitalized interest, resulting primarily from the construction of the Company's third micro mill, was $5.4 million and $10.0 million during the three and six months ended February 28, 2023, respectively, compared to $2.6 million and $4.2 million, respectively, during the corresponding periods.

Senior Notes Activity

In May 2013, the Company issued $330.0 million of 4.875% Senior Notes due May 2023 (the "2023 Notes"). As of August 31, 2022, the 2023 Notes were included in current maturities of long-term debt and short-term borrowings in the consolidated balance sheet. In November 2022, the Company repurchased $115.9 million in aggregate principal amount of the 2023 Notes through a cash tender offer and recognized an immaterial loss on debt extinguishment. The remaining balance of $214.1 million was included in current maturities of long-term debt and short-term borrowings in the condensed consolidated balance sheet as of February 28, 2023.

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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 February 28, 2023, the Company had no amounts drawn under the Term Loan. The Company's obligations under the Credit Agreement are secured by its North America inventory. The Credit Agreement's capacity includes a $50.0 million sub-limit for the issuance of stand-by letters of credit. The Company had no amounts drawn under the Revolver or the previous revolving credit facility at February 28, 2023 or August 31, 2022. The availability under the Revolver and the previous revolving credit facility, as applicable, was reduced by outstanding stand-by letters of credit of $0.9 million and $1.4 million at February 28, 2023 and August 31, 2022, respectively.

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 February 28, 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 CMCP. At February 28, 2023 and August 31, 2022, CMCP's credit facilities totaled PLN 300.0 million, or $67.4 million and $63.9 million, respectively. There were no amounts outstanding under these facilities as of February 28, 2023 or August 31, 2022. The available balance of these credit facilities was reduced by outstanding stand-by letters of credit, guarantees and/or other financial assurance instruments, which totaled $14.6 million and $1.0 million at February 28, 2023 and August 31, 2022, respectively.

Accounts Receivable Facilities

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

The Poland accounts receivable facility had a limit of PLN 288.0 million, or $64.7 million and $61.3 million, at February 28, 2023 and August 31, 2022, respectively. The Company had PLN 101.4 million, or $22.8 million, advance payments outstanding under the Poland accounts receivable facility at February 28, 2023, compared to PLN 124.0 million, or $26.4 million, advance payments outstanding at August 31, 2022.

NOTE 8. 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 related 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. As of August 31, 2022, $17.7 million of USBCDC’s contributions were classified as accrued expenses and other payables in the consolidated balance sheet and $9.5 million of USBCDC’s contributions were classified as other noncurrent liabilities in the consolidated balance sheet, in each case representing deferred revenue to the Company. During December 2022, the seven-year recapture 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 three and six months ended February 28, 2023. See Note 10, New Markets Tax Credit Transactions, to the consolidated financial statements in the 2022 Form 10-K for discussion related to the Company's NMTC transactions.
NOTE 9. DERIVATIVES

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

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The Company considers the total notional value of its futures and forward contracts as the best measure of the volume of derivative transactions. At February 28, 2023, the notional values of the Company's foreign currency and commodity contract commitments were $371.5 million and $453.6 million, respectively. At August 31, 2022, the notional values of the Company's foreign currency and commodity contract commitments were $253.5 million and $205.1 million, respectively.

The following table provides information regarding the Company's commodity contract commitments at February 28, 2023:
CommodityLong/Short   Total
AluminumLong2,750  MT
AluminumShort675  MT
CopperLong1,123  MT
CopperShort9,321  MT
ElectricityLong3,405,000 MW(h)
Natural GasLong4,910,400 MMBtu
__________________________________
MT = Metric Ton
MW(h) = Megawatt hour
MMBtu = Metric Million British thermal unit

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

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

(in thousands)Primary LocationFebruary 28, 2023August 31, 2022
Derivative assets:
CommodityPrepaid and other current assets$13,826 $26,180 
CommodityOther noncurrent assets268,203 134,667 
Foreign exchangePrepaid and other current assets5,099 1,296 
Derivative liabilities:
CommodityAccrued expenses and other payables$6,248 $1,110 
CommodityOther noncurrent liabilities1,778 150 
Foreign exchangeAccrued expenses and other payables3,616 3,126 

The following tables summarize activities related to the Company's derivative instruments and hedged items recognized in the condensed consolidated statements of earnings. All other activity related to the Company's derivative instruments and hedged items was immaterial for the periods presented.
Three Months Ended February 28,Six Months Ended February 28,
Gain (Loss) on Derivatives Not Designated as Hedging Instruments (in thousands)Primary Location2023202220232022
CommodityCost of goods sold$(5,995)$(2,214)$(9,080)$532 
Foreign exchangeSG&A expenses2,947 (1,048)6,409 (9,043)

Effective Portion of Derivatives Designated as Cash Flow Hedging Instruments Recognized in Accumulated Other Comprehensive Income (Loss) (in thousands)Three Months Ended February 28,Six Months Ended February 28,
2023202220232022
Commodity$23,950 $33,190 $91,989 $55,365 

The Company's natural gas derivatives accounted for as cash flow hedging instruments have maturities extending to February 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 February 28, 2023 was an estimated net gain of $7.5 million
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from cash flow hedging instruments that is expected to be reclassified into net earnings within the twelve months following February 28, 2023. See Note 10, Fair Value, for the fair value of the Company's derivative instruments recorded in the condensed consolidated balance sheets.
NOTE 10. FAIR VALUE

The Company has established a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels. These levels are determined based on the lowest level input that is significant to the fair value measurement. Levels within the hierarchy are defined within Note 1, Nature of Operations and Summary of Significant Accounting Policies, to the consolidated financial statements in the 2022 Form 10-K.

The following tables summarize information regarding the Company's financial assets and financial liabilities that were measured at fair value on a recurring basis:
  Fair Value Measurements at Reporting Date Using
(in thousands)February 28, 2023Quoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable Inputs
(Level 3)
Assets:
Investment deposit accounts (1)
$540,516 $540,516 $— $— 
Commodity derivative assets (2)
282,029 1,187 — 280,842 
Foreign exchange derivative assets (2)
5,099 — 5,099 — 
Liabilities:
Commodity derivative liabilities (2)
8,026 8,026 — — 
Foreign exchange derivative liabilities (2)
3,616 — 3,616 — 
  Fair Value Measurements at Reporting Date Using
(in thousands)August 31, 2022Quoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable Inputs
(Level 3)
Assets:
Investment deposit accounts (1)
$572,384 $572,384 $— $— 
Commodity derivative assets (2)
160,847 17,347 — 143,500 
Foreign exchange derivative assets (2)
1,296 — 1,296 — 
Liabilities:
Commodity derivative liabilities (2)
1,260 1,260 — — 
Foreign exchange derivative liabilities (2)
3,126 — 3,126 — 
__________________________________
(1) Investment deposit accounts are short-term in nature, and the value is determined by principal plus interest. The investment portfolio mix can change each period based on the Company's assessment of investment options.
(2) Derivative assets and liabilities classified as Level 1 are commodity futures contracts valued based on quoted market prices in the London Metal Exchange or New York Mercantile Exchange. Amounts in Level 2 are based on broker quotes in the over-the-counter market. Derivatives classified as Level 3 are described below. Further discussion regarding the Company's use of derivative instruments is included in Note 9, 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 estimates of the Level 3 commodity derivatives are based on internally developed discounted cash flow models primarily utilizing unobservable inputs for which there is little or no market data. The Company forecasts future energy rates using a range of historical prices ("floating rate"). The floating rate is the only significant unobservable input used in the Company's discounted cash flow models. The following table summarizes the floating rate used to measure the fair value of the Level 3 commodity derivatives at February 28, 2023 and August 31, 2022:
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Floating rate (PLN)
LowHighAverage
February 28, 2023575.51 1,298.53 793.65 
August 31, 2022460.11 1,298.53 717.22 
Below is a reconciliation of the beginning and ending balances of the Level 3 commodity derivatives recognized in the condensed consolidated statements of comprehensive income. The fluctuation in energy rates over time causes volatility in the fair value estimates and is the primary reason for unrealized gains included in other comprehensive income ("OCI") in the three and six months ended February 28, 2023 and 2022.                                     
(in thousands)Three Months Ended February 28, 2023
Balance, December 1, 2022$241,466 
Total gains, realized and unrealized:
Unrealized holding gain before reclassification (1)
40,085 
Reclassification for gain included in net earnings (2)
(709)
Balance, February 28, 2023$280,842 
(in thousands)Six Months Ended February 28, 2023
Balance, September 1, 2022$143,500 
Total gains, realized and unrealized:
Unrealized holding gain before reclassification (1)
144,282 
Reclassification for gain included in net earnings (2)
(6,940)
Balance, February 28, 2023$280,842 
(in thousands)Three Months Ended February 28, 2022
Balance, December 1, 2021$47,892 
Total gains, realized and unrealized:
Unrealized holding gain before reclassification (1)
36,630 
Reclassification for gain included in net earnings (2)
(5,643)
Balance, February 28, 2022$78,879 
(in thousands)Six Months Ended February 28, 2022
Balance, September 1, 2021$26,413 
Total gains, realized and unrealized:
Unrealized holding gain before reclassification (1)
61,838 
Reclassification for gain included in net earnings (2)
(9,372)
Balance, February 28, 2022$78,879 
__________________________________
(1) Unrealized holding gains, net of foreign currency translation, less amounts reclassified are included in OCI in the condensed consolidated statements of comprehensive income.
(2) Gains included in net earnings are recorded in cost of goods sold in the condensed consolidated statements of earnings.

There were no material, non-recurring fair value remeasurements during the three and six months ended February 28, 2023 or 2022.

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

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The carrying values and estimated fair values of the Company's financial assets and liabilities that are not required to be measured at fair value in the condensed consolidated balance sheets were as follows:
 February 28, 2023August 31, 2022
(in thousands)Fair Value HierarchyCarrying ValueFair ValueCarrying ValueFair Value
2032 Notes (1)
Level 2$300,000 $259,629 $300,000 $256,488 
2031 Notes (1)
Level 2300,000 254,403 300,000 249,888 
2030 Notes (1)
Level 2300,000 263,439 300,000 263,372 
2023 Notes (1)
Level 2214,059 213,710 330,000 330,182 
Series 2022 Bonds, due 2047 (1)
Level 2145,060 120,324 145,060 126,652 
Poland Term Loan (2)
Level 2— — 32,439 32,439 
Short-term borrowings (2)
Level 222,804 22,804 26,390 26,390 
__________________________________
(1) The fair values of the notes and the Series 2022 Bonds were determined based on indicated market values.
(2) The Poland Term Loan and short-term borrowings contain variable interest rates, and as a result, the carrying values approximate fair value.
NOTE 11. STOCK-BASED COMPENSATION PLANS

The Company's stock-based compensation plans are described in Note 14, Stock-Based Compensation Plans, to the consolidated financial statements in the 2022 Form 10-K. In general, restricted stock units vest ratably over a period of three years. Subject to the achievement of performance targets established by the Compensation Committee of CMC's Board of Directors, performance stock units vest after a period of three years.

During the six months ended February 28, 2023 and 2022, the Company granted the following awards under its stock-based compensation plans:
February 28, 2023February 28, 2022
(in thousands, except per share data)Shares GrantedWeighted Average Grant Date Fair ValueShares GrantedWeighted Average Grant Date Fair Value
Equity method1,392 $36.47 1,440 $27.95 
Liability method242 N/A261 N/A

The Company recorded immaterial mark-to-market adjustments on liability awards for the three and six months ended February 28, 2023 and 2022. At February 28, 2023, the Company had outstanding 514,417 equivalent shares accounted for under the liability method. The Company expects 488,696 equivalent shares to vest.

The following table summarizes total stock-based compensation expense, including fair value remeasurements, which was primarily included in selling, general and administrative expenses in the Company's condensed consolidated statements of earnings:
Three Months Ended February 28,Six Months Ended February 28,
(in thousands)2023202220232022
Stock-based compensation expense$16,949 $16,251 $33,624 $25,870 

NOTE 12. EMPLOYEES' RETIREMENT PLANS

In October 2022, the Company terminated its U.S. Pension Plan (as defined in Note 15, Employees' Retirement Plans, to the consolidated financial statements in the 2022 Form 10-K). 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 accumulated other comprehensive income as of the termination date. The $4.2 million settlement charge was recognized within selling, general and administrative expenses in the condensed consolidated statement of earnings during the six months ended February 28, 2023. No benefit obligation or plan assets related to the U.S. Pension Plan remain.

See Note 15, Employees' Retirement Plans, to the consolidated financial statements in the 2022 Form 10-K for information on the Company's remaining defined benefit pension plan (the "U.K. Pension Plan," as defined in Note 15, Employees' Retirement
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Plans, to the consolidated financial statements in the 2022 Form 10-K), defined contribution 401(k) retirement plan and Benefit Restoration Plan ("BRP").
NOTE 13. STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE

Basic earnings per share ("EPS") is computed based on the weighted average shares of common stock outstanding during the period. 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: 
Three Months Ended February 28,Six Months Ended February 28,
(in thousands, except share and per share data)2023202220232022
Net earnings$179,849 $383,314 $441,623 $616,203 
Average basic shares outstanding117,224,517 121,458,196 117,249,266 121,293,030 
Effect of dilutive securities1,498,742 1,394,214 1,735,832 1,454,951 
Average diluted shares outstanding118,723,259 122,852,410 118,985,098 122,747,981 
Earnings per share:
Basic$1.53 $3.16 $3.77 $5.08 
Diluted$1.51 $3.12 $3.71 $5.02 

Anti-dilutive shares not included above were immaterial for all periods presented.
In October 2021, the Company's Board of Directors authorized a share repurchase program under which the Company may repurchase up to $350.0 million of shares of CMC common stock. During the three and six months ended February 28, 2023, the Company repurchased 330,000 and 1,605,452 shares of CMC common stock, respectively, at an average purchase price of $52.04 and $41.31 per share, respectively. The Company had remaining authorization to repurchase $121.8 million of shares of CMC common stock at February 28, 2023.
NOTE 14. 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 February 28, 2023 and August 31, 2022, the amounts accrued for cleanup and remediation costs at certain sites in response to statutes enforced by the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA") were immaterial. Total accrued environmental liabilities, including CERCLA sites, were $5.6 million and $5.3 million at February 28, 2023 and August 31, 2022, respectively, of which $2.0 million were classified as other noncurrent liabilities as of February 28, 2023 and August 31, 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.
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NOTE 15. OPERATING SEGMENTS

The Company structures its business into two reportable segments: North America and Europe. See Note 1, Nature of Operations and Summary of Significant Accounting Policies, to the consolidated financial statements in the 2022 Form 10-K and Note 2, Changes in Business, 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.

The following is a summary of certain financial information by reportable segment and Corporate and Other:
Three Months Ended February 28, 2023
(in thousands)North AmericaEuropeCorporate and OtherTotal
Net sales$1,640,933 $355,633 $21,437 $2,018,003 
Adjusted EBITDA299,311 12,949 (15,573)296,687 
Six Months Ended February 28, 2023
(in thousands)North AmericaEuropeCorporate and OtherTotal
Net sales$3,457,832 $762,146 $25,338 $4,245,316 
Adjusted EBITDA677,267 77,454 (55,298)699,423 
Total assets at February 28, 20234,660,107 1,253,468 571,276 6,484,851 
Three Months Ended February 28, 2022
(in thousands)North AmericaEuropeCorporate and OtherTotal
Net sales$1,614,224 $395,758 $(1,094)$2,008,888 
Adjusted EBITDA535,463 81,149 (52,493)564,119 
Six Months Ended February 28, 2022
(in thousands)North AmericaEuropeCorporate and OtherTotal
Net sales$3,267,846 $724,814 $(1,971)$3,990,689 
Adjusted EBITDA803,987 160,981 (86,827)878,141 
Total assets at August 31, 20224,467,314 1,056,101 713,612 6,237,027 

The following table presents a reconciliation of net earnings to adjusted EBITDA:
 Three Months Ended February 28,Six Months Ended February 28,
(in thousands)2023202220232022
Net earnings$179,849 $383,314 $441,623 $616,203 
Interest expense9,945 12,011 22,990 23,046 
Income taxes55,641 126,432 132,366 155,304 
Depreciation and amortization51,216 41,134 102,399 82,360 
Asset impairments36 1,228 45 1,228 
Adjusted EBITDA$296,687 $564,119 $699,423 $878,141 
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Disaggregation of Revenue

The following tables display revenue by reportable segment and Corporate and Other from external customers, disaggregated by major product:
Three Months Ended February 28, 2023
(in thousands)North AmericaEuropeCorporate and OtherTotal
Major product:
Raw materials$315,711 $4,894 $— $320,605 
Steel products630,724 272,607 — 903,331 
Downstream products539,173 50,128 — 589,301 
Construction-related solutions122,464 17,380 — 139,844 
Other(1)
31,921 9,930 23,071 64,922 
Net sales from external customers1,639,993 354,939 23,071 2,018,003 
Intersegment net sales, eliminated on consolidation940 694 (1,634)— 
Net sales$1,640,933 $355,633 $21,437 $2,018,003 
Six Months Ended February 28, 2023
(in thousands)North AmericaEuropeCorporate and OtherTotal
Major product:
Raw materials$608,031 $9,761 $— $617,792 
Steel products1,336,186 584,543 — 1,920,729 
Downstream products1,181,107 109,710 — 1,290,817 
Construction-related solutions264,836 36,826 — 301,662 
Other(1)
65,081 20,048 29,187 114,316 
Net sales from external customers3,455,241 760,888 29,187 4,245,316 
Intersegment net sales, eliminated on consolidation2,591 1,258 (3,849)— 
Net sales$3,457,832 $762,146 $25,338 $4,245,316 
_______________________________
(1) Other revenue during the three and six months ended February 28, 2023 includes $17.7 million derived from the Company's NMTC transactions. See Note 8, New Markets Tax Credit Transactions, for further information.
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Three Months Ended February 28, 2022
(in thousands)North AmericaEuropeCorporate and OtherTotal
Major product:
Raw materials$366,941 $5,864 $— $372,805 
Steel products666,047 320,414 — 986,461 
Downstream products459,753 59,541 — 519,294 
Construction-related solutions83,638 — — 83,638 
Other37,845 9,530 (685)46,690 
Net sales from external customers1,614,224 395,349 (685)2,008,888 
Intersegment net sales, eliminated on consolidation— 409 (409)— 
Net sales$1,614,224 $395,758 $(1,094)$2,008,888 
Six Months Ended February 28, 2022
(in thousands)North AmericaEuropeCorporate and OtherTotal
Major product:
Raw materials$720,033 $12,824 $— $732,857 
Steel products1,341,089 563,559 — 1,904,648 
Downstream products974,149 129,613 — 1,103,762 
Construction-related solutions166,137 — — 166,137 
Other66,438 17,915 (1,068)83,285 
Net sales from external customers3,267,846 723,911 (1,068)3,990,689 
Intersegment net sales, eliminated on consolidation— 903 (903)— 
Net sales$3,267,846 $724,814 $(1,971)$3,990,689 

NOTE 16. SUBSEQUENT EVENTS

On March 3, 2023, the Company completed the acquisition of all 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 expected to be consumed by the Company's steel mill operations. The Roane acquisition is not material to the Company's financial position as of February 28, 2023 or results of operations for the three and six months ended February 28, 2023, and therefore, pro forma operating results and other disclosures for the acquisition are not presented.

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. The Tendon acquisition is not material to the Company's financial position as of February 28, 2023 or results of operations for the three and six months ended February 28, 2023, and therefore, pro forma operating results and other disclosures for the acquisition are not presented.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In the following discussion, references to "we," "us," "our" or the "Company" mean Commercial Metals Company ("CMC") and its consolidated subsidiaries, unless the context otherwise requires. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the notes thereto, which are included in this Quarterly Report on Form 10-Q (this "Form 10-Q"), and our consolidated financial statements and the notes thereto, which are included in our Annual Report on Form 10-K for the year ended August 31, 2022 (the "2022 Form 10-K"). This discussion contains or incorporates by reference "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not historical facts, but rather are based on expectations, estimates, assumptions and projections about our industry, business and future financial results, based on information available at the time this Form 10-Q was filed with the Securities and Exchange Commission ("SEC") or, with respect to any document incorporated by reference, available at the time that such
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document was prepared. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those identified in the section entitled "Forward-Looking Statements" at the end of Item 2 of this Form 10-Q and in the sections entitled "Risk Factors" in Part I, Item 1A of our 2022 Form 10-K and Part II, Item 1A of this Form 10-Q. We do not undertake any obligation to update, amend or clarify any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or otherwise, except as required by law.

Any reference in this Form 10-Q to the "corresponding period" or "comparable period" relates to the relevant three or six month period ended February 28, 2022. Any reference in this Form 10-Q to a year refers to the fiscal year ended August 31st of that year, unless otherwise noted.
BUSINESS CONDITIONS AND DEVELOPMENTS

Tensar Acquisition

On April 25, 2022, 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. See Note 2, Changes in Business, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information about the Tensar acquisition.

Advanced Steel Recovery Acquisition

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 and are presented within our North America reportable segment.

Kodiak Acquisition

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. Kodiak's operating results are presented within our North America reportable segment.

Capital Expenditures

In September 2021, we began the construction of a third micro mill. 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 will employ the latest technology in electric arc furnace ("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, will replace the rebar capacity at our Rancho Cucamonga, California mill, which was sold during fiscal 2022, and will allow us to more efficiently meet West Coast demand for steel products. We expect this micro mill to be commissioned in spring of 2023. For further details on the sale of the Rancho Cucamonga, California mill, refer to Note 2, Changes in Business, in Part I, Item 1, Financial Statements, of this Form 10-Q.

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. We expect this micro mill to be commissioned in late calendar 2025.

Senior Notes Activity

In November 2022, we repurchased $115.9 million in aggregate principal amount of the 4.875% Senior Notes due 2023 (the “2023 Notes”) through a cash tender offer. The remaining $214.1 million of outstanding principal on the 2023 Notes is due on
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May 15, 2023 and was included in current maturities of long-term debt and short-term borrowings in the condensed consolidated balance sheet as of February 28, 2023.

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 the three or six months ended February 28, 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, we will continue to monitor disruptions in supply of energy and materials and the indirect effects on our operations of inflationary pressures, foreign exchange rate fluctuations, commodity pricing, potential cybersecurity risks and sanctions resulting from the invasion.

See Part I, Item 1A, Risk Factors, of our 2022 Form 10-K and Part II, Item 1A, Risk Factors, of this Form 10-Q, for further discussion related to the above business conditions and developments.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no material changes to our critical accounting policies and estimates as set forth in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, included in our 2022 Form 10-K.

RESULTS OF OPERATIONS SUMMARY

Business Overview

Our vertically integrated steel-related operations manufacture, recycle and fabricate steel and metal products and provide related materials and services through a network of facilities that includes seven EAF mini mills, two EAF micro mills, one rerolling mill, steel fabrication and processing plants, construction-related product warehouses and metal recycling facilities in the United States and Poland. Through our Tensar operations, CMC is a leading global provider of innovative ground and soil stabilization solutions selling into more than 80 national markets through two major product lines: Tensar® geogrids and Geopier® foundation systems. Our operations are conducted through two reportable segments: North America and Europe.

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. 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 and other steel products, such as billets and wire rod, and downstream products 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 the Company's earnings before interest expense, income taxes, depreciation and amortization and impairment expense. Although there are many factors that can impact a segment’s adjusted EBITDA and, therefore, our overall earnings, changes in metal margins 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 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. 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.
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Financial Results Overview
 Three Months Ended February 28,Six Months Ended February 28,
(in thousands, except per share data)2023202220232022
Net sales$2,018,003 $2,008,888 $4,245,316 $3,990,689 
Net earnings179,849 383,314 441,623 616,203 
Diluted earnings per share$1.51 $3.12 $3.71 $5.02 

Net sales remained relatively flat for the three months ended February 28, 2023, compared to the corresponding period, and increased $254.6 million, or 6%, for the six months ended February 28, 2023, compared to the corresponding period. Net sales in our North America segment increased in the six months ended February 28, 2023, as compared to the corresponding period, primarily due to a year-over-year increase in downstream products average selling prices, which more than offset a year-over-year decrease in raw materials average selling prices. Net sales in our Europe segment also increased during the six months ended February 28, 2023, as compared to the corresponding period, due to a greater volume of shipments of steel products, which mitigated a reduction in steel products average selling prices. The acquired Tensar operations also contributed to the period-over-period changes by providing $51.4 million and $113.0 million in net sales during the three and six months ended February 28, 2023, respectively, with no such activity in the corresponding periods.

During the three and six months ended February 28, 2023, we achieved net earnings of $179.8 million and $441.6 million, respectively, compared to net earnings of $383.3 million and $616.2 million, respectively, during the corresponding periods. Included in net earnings during the three and six months ended February 28, 2022 was a $273.3 million gain on the sale of the Rancho Cucamonga facilities. See Note 2, Changes in Business, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information on the sale of the Rancho Cucamonga facilities. The remaining change in net earnings in the three and six months ended February 28, 2023, compared to the corresponding periods, was an increase driven by the expansion of steel products metal margin and downstream products margin over scrap per ton in our North America segment, partially offset by steel products metal margin compression in our Europe segment.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $22.4 million and $55.0 million during the three and six months ended February 28, 2023, respectively, compared to the corresponding periods. Contributing to the period-over-period increases were $22.0 million and $43.9 million of selling, general and administrative expenses from Tensar operations' commercial and engineering support in the three and six months ended February 28, 2023, respectively, with no such expenses in the corresponding periods. Additionally, the six months ended February 28, 2023 included a $4.2 million pension plan settlement charge, with no such settlement charge in the corresponding period. See Note 12, Employees' Retirement Plans, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information on the pension plan termination activity.

Interest Expense

Interest expense decreased by $2.1 million during the three months ended February 28, 2023, compared to the corresponding period, and remained flat during the six months ended February 28, 2023, compared to the corresponding period. Contributing to the quarter-over-quarter decrease in interest expense during the three months ended February 28, 2023 was a $2.8 million increase in capitalized interest, compared to the corresponding period, resulting from the construction of the Company's third micro mill.

Income Taxes

The effective income tax rates for the three and six months ended February 28, 2023 were 23.6% and 23.1%, respectively, compared to 24.8% and 20.1%, respectively, in the corresponding periods. The decrease in the effective income tax rate for the three months ended February 28, 2023, compared with the corresponding period, is due to multiple factors of which no single item was material. The increase in the effective income tax rate for the six months ended February 28, 2023, compared with the corresponding period, is primarily due to the recognition of a tax benefit on a tax restructuring transaction during the first quarter of 2022 that did not recur in 2023.
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SEGMENT OPERATING DATA

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. See Note 15, Operating Segments, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information on our reportable segments.

North America
 Three Months Ended February 28,Six Months Ended February 28,
(in thousands, except per ton amounts)2023202220232022
Net sales$1,640,933 $1,614,224 $3,457,832 $3,267,846 
Adjusted EBITDA299,311 535,463 677,267 803,987 
External tons shipped
Raw materials321 329 637 663 
Rebar425 407 886 849 
Merchant and other236 245 479 502 
Steel products661 652 1,365 1,351 
Downstream products311 327 693 727 
Average selling price (per ton)
Raw materials$868 $1,103 $846 $1,068 
Steel products985 1,041 1,003 1,007 
Downstream products1,418 1,169 1,408 1,126 
Cost of raw materials per ton$639 $834 $618 $800 
Cost of ferrous scrap utilized per ton346 436 335 432 
Steel products metal margin per ton639 605 668 575 

Net sales in our North America segment remained relatively flat for the three months ended February 28, 2023, compared to the corresponding period, and increased $190.0 million, or 6%, for the six months ended February 28, 2023, compared to the corresponding period. While average selling prices of downstream products increased 21% and 25%, respectively, during the three and six months ended February 28, 2023, compared to the corresponding periods, raw materials average selling prices decreased 21% in both the three and six months ended February 28, 2023, compared to the corresponding periods. The period-over-period 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 late 2021 and 2022 when the contracts were entered into. The increased net sales resulting from shipments of these higher priced downstream products contracts were partially offset by the impact from the period-over-period reductions in raw materials average selling prices caused by the decrease in ferrous scrap prices during the three and six months ended February 28, 2023, compared to the corresponding periods. Net sales were impacted to a lesser extent by volumes, which remained relatively flat across all product lines during the three and six months ended February 28, 2023, compared to the corresponding periods. Although volumes during the second quarter of 2023 were negatively impacted by weather-related conditions, including significant precipitation in key markets, there was no impact on volumes from the planned maintenance that occurred during the second quarter of 2023, compared to the impact on volumes from the planned maintenance that occurred during the second quarter of 2022. The acquired Tensar operations also contributed $34.0 million and $76.1 million of net sales during the three and six months ended February 28, 2023, respectively, with no such activity in the corresponding periods.

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During the three and six months ended February 28, 2023, we achieved adjusted EBITDA of $299.3 million and $677.3 million, respectively, compared to adjusted EBITDA of $535.5 million and $804.0 million, respectively, during the corresponding periods. Included in adjusted EBITDA during the three and six months ended February 28, 2022 was a $273.3 million gain on the sale of the Rancho Cucamonga facilities. See Note 2, Changes in Business, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information about the sale of the Rancho Cucamonga facilities. The growth in the remaining adjusted EBITDA during the three and six months ended February 28, 2023, compared to the corresponding periods, resulted from increased steel products metal margin per ton and significant expansion in downstream products margin over scrap per ton. The growth in margins in our vertically integrated business model is a result of the consistent average selling prices for steel products and increases in average selling prices for downstream products discussed above, paired with the declining scrap price environment during the three and six months ended February 28, 2023, compared to the corresponding periods. Additionally, the acquired Tensar operations provided adjusted EBITDA of $7.4 million and $15.5 million during the three and six months ended February 28, 2023, respectively, with no such activity in the corresponding periods.

Europe
 Three Months Ended February 28,Six Months Ended February 28,
(in thousands, except per ton amounts)2023202220232022
Net sales$355,633 $395,758 $762,146 $724,814 
Adjusted EBITDA12,949 81,149 77,454 160,981 
External tons shipped
Rebar183 172 387 275 
Merchant and other253 278 522 540 
Steel products436 450 909 815 
Average selling price (per ton)
Steel products$756 $851 $775 $859 
Cost of ferrous scrap utilized per ton$389 $444 $377 $439 
Steel products metal margin per ton367 407 398 420 

Net sales in our Europe segment decreased $40.1 million, or 10%, during the three months ended February 28, 2023, compared to the corresponding period, and increased $37.3 million, or 5%, during the six months ended February 28, 2023, compared to the corresponding period. Volumes remained strong during the three months ended February 28, 2023, though the $95 per ton decrease in steel products average selling price yielded a decrease in net sales during the three months ended February 28, 2023, compared to the corresponding period. During the six months ended February 28, 2023, volumes rose 12%, exceeding the impact of an $84 per ton decrease in steel products average selling price, compared to the corresponding period. These decreases in steel products average selling prices were driven by a low pricing environment across Europe. Shipment levels were supported by our optimized cost structure, which positioned us to competitively price our steel products, coupled with our historical investment in operations, which provided the capacity to meet customer demand. Net sales from the acquired Tensar operations partially mitigated the impact from year-over-year decreases in steel products average selling prices by providing $17.4 million and $36.9 million in net sales during the three and six months ended February 28, 2023, respectively, with no such activity in the corresponding periods. Net sales for the three and six months ended February 28, 2023 were impacted by unfavorable foreign currency translation adjustments of $30.5 million and $110.1 million, respectively, due to the increase in the average value of the U.S. dollar relative to the Polish zloty, compared to unfavorable foreign currency translation adjustments of $35.2 million and $48.7 million, respectively, during the corresponding periods.

Adjusted EBITDA for the three and six months ended February 28, 2023 decreased $68.2 million, or 84%, and $83.5 million, or 52%, respectively, compared to the corresponding periods. While the cost of ferrous scrap utilized decreased $55 per ton and $62 per ton during the three and six months ended February 28, 2023, respectively, compared to the corresponding periods, the declines in steel products average selling prices described above outpaced falling scrap costs, resulting in decreases in steel products metal margin per ton of $40 and $22 during the three and six months ended February 28, 2023, respectively, compared to the corresponding periods. In addition to the change in steel products metal margin per ton, increased costs of electricity and natural gas of $71 per ton and $57 per ton during the three and six months ended February 28, 2023, respectively, compared to the corresponding periods, further contributed to the decrease in adjusted EBITDA. During the six months ended February 28, 2023, we received a $9.5 million energy credit, which helped mitigate higher energy costs by reducing cost of goods sold, but to a lesser extent than the $15.5 million energy credit received in the comparable period. Results also benefited from $1.5
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million and $4.8 million of adjusted EBITDA provided by the acquired Tensar operations during the three and six months ended February 28, 2023, respectively, with no such activity in the corresponding periods. Adjusted EBITDA for the three and six months ended February 28, 2023 included unfavorable foreign currency translation adjustments of $1.0 million and $14.5 million, respectively, compared to unfavorable foreign currency translation adjustments of $7.3 million and $10.3 million, respectively, during the corresponding periods.

Corporate and Other

Corporate and Other reported adjusted EBITDA losses of $15.6 million and $55.3 million for the three and six months ended February 28, 2023, respectively, compared to adjusted EBITDA losses of $52.5 million and $86.8 million in the corresponding periods, respectively. During the three and six months ended February 28, 2023, we recognized $17.7 million in other revenue from our New Markets Tax Credit (“NMTC”) transactions, which was a primary driver of the decrease in adjusted EBITDA losses during the three and six months ended February 28, 2023, compared to the corresponding periods. See Note 8, New Markets Tax Credit Transactions, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information. Also contributing to the decreases in adjusted EBITDA losses were $16.1 million in debt extinguishment costs incurred during the three and six months ended February 28, 2022, compared to immaterial activity in the three and six months ended February 28, 2023, as well as $6.1 million and $12.5 million of additional gains on short-term investments and benefit restoration plan assets during the three and six months ended February 28, 2023, respectively, compared to the corresponding periods. In contrast to these reductions to adjusted EBITDA loss, during the six months ended February 28, 2023 we recognized a $6.3 million increase in non-cash stock compensation expense, compared to the corresponding period, and a $4.2 million pension plan settlement charge, with no such settlement charge in the corresponding period. See Note 12, Employees' Retirement Plans, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information on the pension plan termination activity.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Liquidity and Capital Resources

Cash flows from operating activities are our principal sources of liquidity and result primarily from sales of raw materials, steel products, downstream products and related materials and services, as described in Part I, Item 1, Business, of our 2022 Form 10-K and Note 2, Changes in Business, in Part I, Item 1, Financial Statements, of this Form 10-Q.

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 receivables (and those covered by export letters of credit) was approximately 17% of total trade receivables at February 28, 2023.

We use futures or forward contracts to mitigate the risks from fluctuations in commodity prices, foreign currency exchange rates, interest rates and natural gas, electricity and other energy prices. See Note 9, Derivatives, in Part I, Item 1, Financial Statements, of this Form 10-Q, for further information.

The table below reflects our sources, facilities and availability of liquidity at February 28, 2023. See Note 7, Credit Arrangements, in Part I, Item 1, Financial Statements, of this Form 10-Q, for additional information.
(in thousands)Liquidity Sources and FacilitiesAvailability
Cash and cash equivalents$603,966 $603,966 
Notes due from 2023 to 20321,114,059 
(1)
Revolver600,000 599,087 
Term Loan200,000 200,000 
Series 2022 Bonds, due 2047145,060 — 
Poland credit facilities67,443 52,816 
Poland accounts receivable facility64,745 41,941 
Other4,086 1,202 
__________________________________
(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.

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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, repay current maturities of long-term debt, including the $214.1 million outstanding principal amount of the 2023 Notes, 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 will be sufficient.

We estimate that our 2023 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.

Our credit arrangements require compliance with certain non-financial and financial covenants, including an interest coverage ratio and a debt to capitalization ratio. At February 28, 2023, we believe we were in compliance with all covenants contained in our credit arrangements.

As of February 28, 2023 and August 31, 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.

Cash Flows

Operating Activities
Net cash flows from operating activities were $558.9 million and $54.4 million for the six months ended February 28, 2023 and 2022, respectively. The $410.9 million year-over-year net decrease in cash used by operating assets and liabilities was due in part to a decreased scrap price environment during the six months ended February 28, 2023, compared to increased scrap prices in the six months ended February 28, 2022, which reduced cash used by inventory purchases by $268.9 million year-over-year. Additionally, cash provided by accounts receivable increased by $182.2 million year-over-year, primarily as a result of the decrease in accounts receivable as of February 28, 2023, compared to August 31, 2022, due to higher sales during the fourth quarter of 2022 compared to the three months ended February 28, 2023. These cash flows from operating assets and liabilities were offset by a year-over-year increase in cash used by in accounts payable, accrued expenses and other payables of $49.9 million. Additional activity offsetting the increase in cash flows from operating activities was $17.7 million of non-cash other revenue resulting from the settlement of our NMTC transactions during the six months ended February 28, 2023 and a $15.9 million reduction in loss on debt extinguishment during the six months ended February 28, 2023, compared to the corresponding period. See Note 8, New Markets Tax Credit Transactions, in Part I, Item 1, Financial Statements, of this Form 10-Q, for further information on the Company's NMTC transactions.

Investing Activities
Net cash flows used by investing activities were $352.6 million for the six months ended February 28, 2023, compared to net cash flows from investing activities of $121.1 million for the six months ended February 28, 2022. The fluctuation in net cash flows used by investing activities was primarily driven by the proceeds from the sale of the Rancho Cucamonga facilities during the six months ended February 28, 2022, compared to immaterial proceeds from the sale of assets in the six months ended February 28, 2023. Also contributing to the increase in cash flows used by investing activities were $97.7 million of additional capital expenditures in the six months ended February 28, 2023, compared to the corresponding period, primarily from the construction of our third and fourth micro mills, and $65.2 million of acquisitions during the six months ended February 28, 2023, with no such acquisitions in the corresponding period. See Note 2, Changes in Business, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information about the sale of the Rancho Cucamonga facilities and current period acquisitions.

Financing Activities
Net cash flows used by financing activities were $283.7 million for the six months ended February 28, 2023, compared to net cash flows from financing activities of $324.4 million for the six months ended February 28, 2022. The $608.1 million increase in net cash flows used by financing activities was largely driven by net repayments of long-term debt of $160.3 million during the six months ended February 28, 2023, compared to net proceeds from issuance of long-term debt of $427.2 million during the six months ended February 28, 2022. Additionally, there was a $49.3 million increase in treasury stock acquired under the share repurchase program during the six months ended February 28, 2023, compared to the corresponding period. Offsetting these additional cash outflows was a decrease in net repayments of our Polish accounts receivable facilities of $21.6 million
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during the six months ended February 28, 2023, as compared to the corresponding period. See Note 7, Credit Arrangements, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information regarding our credit arrangements and Note 13, Stockholders' Equity and Earnings per Share, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information on the share repurchase program.

CONTRACTUAL OBLIGATIONS
Our material cash commitments from known contractual and other obligations primarily consist of obligations for long-term debt and related interest, leases for properties and equipment and purchase obligations as part of normal operations. See Note 7, Credit Arrangements, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information regarding scheduled maturities of our long-term debt.
Our undiscounted purchase obligations due in the twelve months following February 28, 2023 were approximately $870 million and approximately $310 million due thereafter. Of the purchase obligations due in the twelve months following February 28, 2023, approximately 29% were for commodities, 19% were for consumable production inputs, such as alloys, 17% were for capital expenditures in connection with normal business operations and 17% were for the construction of our third and fourth micro mills. Of the purchase obligations due thereafter, 72% were for commodities and 18% were for the construction of our fourth micro mill.
Operating lease obligations in the twelve months following February 28, 2023 were approximately $39.8 million and $138.7 million due thereafter. Additionally, leases that have not yet commenced, primarily for vehicles, with aggregate fixed payments over their terms, were approximately $14.1 million, with $10.5 million to commence in 2023 and $3.6 million to commence in 2024.

Other Commercial Commitments

We maintain stand-by letters of credit to provide support for certain transactions that governmental agencies, our insurance providers and suppliers request. At February 28, 2023, we had committed $21.4 million under these arrangements, of which $0.9 million reduced availability under the Revolver (as defined in Note 7, Credit Arrangements, in Part I, Item 1, Financial Statements, of this Form 10-Q).
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 14, Commitments and Contingencies, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information.
FORWARD-LOOKING STATEMENTS

This Form 10-Q contains or incorporates by reference a number of "forward-looking statements" within the meaning of the federal securities laws with respect to general economic conditions, key macro-economic drivers that impact our business, the 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 effect of COVID-19 and related governmental and economic responses thereto, the ability to operate our steel mills at full capacity, future availability and cost of supplies of raw materials and energy for our operations, share repurchases, legal proceedings, 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. The statements in this report that are not historical statements, are forward-looking statements. These forward-looking statements can generally be identified by phrases such as we or our management "expects," "anticipates,"
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"believes," "estimates," "future," "intends," "may," "plans to," "ought," "could," "will," "should," "likely," "appears," "projects," "forecasts," "outlook" or other similar words or phrases, as well as by discussions of strategy, plans or intentions.

Our forward-looking statements are based on management's expectations and beliefs as of the time this Form 10-Q was 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, among others, include the following:

•changes in economic conditions which affect demand for our products or construction activity generally, and the impact of such changes on the highly cyclical steel industry;
•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;
•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, which is uncertain, but may prove to negatively impact our business and operations;
•increased attention to environmental, social and governance ("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 epidemics, including the COVID-19 pandemic, 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;
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•our ability to hire and retain key executives and other employees;
•competition from other materials or from competitors that have a lower cost structure or access to greater financial resources;
•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 the sections entitled "Risk Factors" in Part I, Item 1A of our 2022 Form 10-K and Part II, Item 1A of this Form 10-Q for specific information regarding additional risks that would cause actual results to differ from those expressed or implied by these forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other important factors that could cause actual results, performance or our achievements, or industry results, to differ materially from historical results, any future results, or performance or achievements expressed or implied by such forward-looking statements. Accordingly, readers of this Form 10-Q are cautioned not to place undue reliance on any forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the six months ended February 28, 2023, the U.S. dollar equivalent of the Company's total gross foreign currency exchange contract commitments increased $118.0 million, or 47%, compared to August 31, 2022. This increase was primarily due to forward contracts denominated in Polish zloty with a U.S. dollar functional currency, which increased $146.8 million, partially offset by forward contracts denominated in euros with a Polish zloty functional currency, which decreased $30.7 million compared to August 31, 2022.

During the six months ended February 28, 2023, the Company's total commodity contract commitments increased $248.5 million, or 121%, compared to August 31, 2022, of which $240.5 million relates to the Company's electricity commodity commitments.

There were no other material changes to the information set forth in Item 7A, Quantitative and Qualitative Disclosures about Market Risk, included in our 2022 Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. This term refers to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within required time periods, and includes controls and procedures designed to ensure that such information is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q, and they have concluded that as of that date, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended February 28, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS

For information regarding our legal proceedings, refer to Note 14, Commitments and Contingencies, in Part I, Item 1, Financial Statements, of this Form 10-Q.

With respect to administrative or judicial proceedings arising under any federal, state or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment, we have determined that we will disclose any such proceeding to which a governmental authority is a party if we reasonably believe such proceeding could result in monetary sanctions, exclusive of interest and costs, of at least $1.0 million. We believe that this threshold is reasonably designed to result in disclosure of environmental proceedings that are material to our business or financial condition. Applying this threshold, there were no environmental matters to disclose for this period.
ITEM 1A. RISK FACTORS

Except as set forth below, there were no material changes to the risk factors previously disclosed in Part I, Item 1A, Risk Factors, of our 2022 Form 10-K.

Operating and startup risks, as well as market risks associated with the commissioning of our third and fourth micro mills could prevent us from realizing anticipated benefits and could result in a loss of all or a substantial part of our investments.

We anticipate our third micro mill will be commissioned in spring of 2023, and our fourth micro mill is expected to be commissioned in late calendar 2025. 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 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.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table provides information about purchases of equity securities registered by the Company pursuant to Section 12 of the Exchange Act made by the Company or any affiliated purchasers during the quarter ended February 28, 2023.
Issuer Purchases of Equity Securities(1)
PeriodTotal Number of Shares PurchasedAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsApproximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs as of the End of Period
December 1, 2022 - December 31, 2022115,500 $48.81 115,500 $133,342,213 
January 1, 2023 - January 31, 2023110,000 52.08 110,000 127,612,978 
February 1, 2023 - February 28, 2023104,500 55.57 104,500 121,805,666 
330,000 330,000 
__________________________________
(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
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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 13, Stockholders' Equity and Earnings per Share, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information on the share repurchase program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.
ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.
ITEM 5. OTHER INFORMATION

As previously disclosed, on February 15, 2023, in connection with Peter R. Matt’s appointment as President of the Company, Mr. Matt and the Company entered into that certain Terms and Conditions of Employment (the “Employment Agreement”) and that certain Commercial Metals Company Amended and Restated Executive Employment Continuity Agreement (the “EECA”), with each of the Employment Agreement and the EECA being effective as of April 1, 2023. On March 20, 2023, the Company and Mr. Matt entered into amendments to each of the Employment Agreement and the EECA to amend the respective effective dates of the Employment Agreement and the EECA from April 1, 2023 to April 9, 2023. Additionally, certain provisions of the Employment Agreement were amended to reflect the new effective date of April 9, 2023. Except as provided herein, all other terms and conditions of the Employment Agreement and the EECA remain in full force and effect.

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ITEM 6. EXHIBITS
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, certain long-term debt instruments are omitted because the total amount of securities authorized thereunder does not exceed 10% of the total assets of Commercial Metals Company and its subsidiaries on a consolidated basis. Commercial Metals Company agrees to furnish copies of such instruments to the SEC upon its request.
2.1†
3.1(a)
3.1(b)
3.1(c)
3.1(d)
3.1(e)
3.1(f)
3.2
10.1
10.2
31.1
31.2
32.1
32.2
101.INSInline XBRL Instance Document (filed herewith).
101.SCHInline XBRL Taxonomy Extension Schema Document (filed herewith).
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).
101.LABInline XBRL Taxonomy Extension Label Linkbase Document (filed herewith).
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).
104
Cover Page Interactive Data File (formatted as Inline XBRL document and included in Exhibit 101).
† Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5), and Commercial Metals Company agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
COMMERCIAL METALS COMPANY
March 23, 2023/s/ Paul J. Lawrence
Paul J. Lawrence
Senior Vice President and Chief Financial Officer
(Duly authorized officer and principal financial officer of the registrant)

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