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

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

(Exact Name of Registrant as Specified in Its Charter)

 

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

(Address of Principal Executive Offices) (Zip Code)

(Registrant's Telephone Number, Including Area Code)

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.

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 June 21, 2023, 116,786,346 shares of the registrant's common stock, par value $0.01 per share, were outstanding.

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 nine month periods ended May 31, 2023 are not necessarily indicative of the results to be expected for the full fiscal year. Any reference in this Form 10-Q to the "corresponding period" or "comparable period" relates to the three or nine month period ended May 31, 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.

On April 25, 2022 (the "Tensar Acquisition Date"), the Company completed the acquisition of TAC Acquisition Corp. ("Tensar"). The total cash purchase price, net of $19.6 million cash acquired, was approximately $550 million, and was funded through domestic cash on-hand. The 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 fair values and measurement period adjustments that were allocated to Tensar's assets and liabilities as of the Tensar Acquisition Date:

__________________________________

(1) As previously reported in the 2022 Form 10-K. No measurement period adjustments occurred during the nine months ended May 31, 2023.

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

The pro forma results presented above include, but are not limited to, adjustments to remove the impact of $4.5 million and $7.6 million of acquisition and integration expenses from the three and nine months ended May 31, 2022, respectively, and $2.2 million of increased cost of goods sold from both the three and nine months ended May 31, 2022 as a result of the revaluation of inventory. Results also reflect increased amortization expense from revalued intangible assets of $1.9 million and $8.1 million in the three and nine months ended May 31, 2022, respectively.

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

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

On March 3, 2023, the Company completed the acquisition of all of the assets of Roane Metals Group, LLC ("Roane"), a supplier of recycled metals with two facilities located in eastern Tennessee. The majority of volumes processed by Roane relate to obsolete ferrous scrap metals to be consumed by the Company's steel mill operations.

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

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

The acquisitions of ASR, Kodiak, Roane, Tendon and BOSTD (the "2023 Acquisitions") are not material individually, or in the aggregate, to the Company's financial position as of May 31, 2023 or results of operations for the three or nine months ended May 31, 2023, and therefore, pro forma operating results and other disclosures for the 2023 Acquisitions are not presented. Operating results for the 2023 Acquisitions are presented within the Company's North America reportable segment.

On September 29, 2021, the Company entered into a definitive agreement to sell the assets associated with its Rancho Cucamonga melting operations and an adjacent rebar fabrication facility ("the Rancho Cucamonga facilities"), 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 for the purchase of a like-kind asset, resulting in a balance of $31.5 million recorded in restricted cash as of May 31, 2022.

In June 2022, the Company used an additional $14.5 million of the restricted cash for the purchase of a like-kind asset before the remaining balance was released from restrictions per the terms of the sale agreement during July 2022.

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

__________________________________

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

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 nine months ended May 31, 2023, and 7% and 8% of net sales in the North America segment in the three and nine months ended May 31, 2022, respectively. Revenue from contracts where the Company does not provide installation services is recognized over time using an output measure; these contracts represented 10% and 11% of net sales in the North America segment in the three and nine months ended May 31, 2023, respectively, and 8% of net sales in the North America segment in both the three and nine months ended May 31, 2022.

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

The amount of revenue reclassified from August 31, 2022 contract liabilities during the nine months ended May 31, 2023 was approximately $23.4 million.

As of May 31, 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 78% of the remaining performance obligations will be recognized in the twelve months after May 31, 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.

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:

Inventory write-downs were $3.4 million and $8.9 million during the three and nine months ended May 31, 2023, respectively, and were primarily recorded in the Europe segment. Inventory write-downs were immaterial in the corresponding periods.

Goodwill by reportable segment is detailed in the following table:

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

The acquired assets from the Tendon acquisition included an intangible asset for customer relationships with a fair value of $8.9 million. The fair value of the intangible asset for customer relationships was calculated using an income approach, under the with-and-without method, which considers opportunity costs associated with lost profits in the absence of the existing customer base. The intangible asset for customer relationships was assigned a useful life of five years. See Note 2, Changes in Business, for additional information on the acquisition of Tendon.

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

Other indefinite-lived intangible assets consisted of the following:

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

Amortization expense for intangible assets was $6.6 million and $18.9 million in the three and nine months ended May 31, 2023, respectively, of which $4.7 million and $14.0 million, respectively, was recorded in cost of goods sold and $1.9 million and $4.9 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 nine months ended May 31, 2022. Estimated amounts of amortization expense for intangible assets for the next five years are as follows:

Long-term debt was as follows: