COMMERCIAL METALS Co
For the period ended Feb 29, 2024. Filed Mar 26, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Feb 29, 2024 · Filed Mar 26, 2024
CMC$62.28+0.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-11-30; filed 2024-01-08.
0000022444-24-000017
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-02-29; filed 2024-03-26.
0000022444-24-000069
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 127 previous paragraphs and 125 current paragraphs.
88 unchanged; 31 reworded; 6 added; 8 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 6 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
The effective income tax rates for the three and six months ended February 29, 2024 were 26.6% and 23.3%, respectively, compared to 23.6% and 23.1%, respectively, in the corresponding periods. The increase for the three months ended February 29, 2024, compared with the corresponding period, is due to multiple factors of which no single item was material. The effective income tax rate remained relatively flat for the six months ended February 29, 2024 when compared to the corresponding period.
Current report
Net sales from external customers in our North America Steel Group segment decreased 1% and 3% during the three and six months ended February 29, 2024, respectively, compared to the corresponding periods. The decreases primarily resulted from a reduction in steel products average selling prices per ton of 8% and 10% during the three and six months ended February 29, 2024, respectively, compared to the corresponding periods, and reductions in downstream products average selling prices per ton, compared to the corresponding periods, in both cases due to increased competitive pricing in our key markets. These reductions in net sales from external customers driven by lower average selling prices were partially offset by increased shipments of raw materials and steel products in both periods presented due to strong construction activity and demand in our end-use markets.
Current report
Adjusted EBITDA decreased $8.6 million, or 32%, for the three months ended February 29, 2024, compared to the corresponding period, and decreased $9.2 million, or 16%, for the six months ended February 29, 2024, compared to the corresponding period. The decreases in adjusted EBITDA for the three and six months ended February 29, 2024, compared to the corresponding periods, were primarily a result of the decline in net sales from external customers for CMC Construction Services and our Tensar operations as described above, which impacted fixed cost leverage, and more than offset the positive contribution from the acquired CMC Anchoring Systems operations.
Current report
Adjusted EBITDA loss for Corporate and Other increased $18.9 million and $10.2 million during the three and six months ended February 29, 2024, respectively, compared to the corresponding periods. The increase in adjusted EBITDA loss during each period is partially due to the recognition of $17.7 million of other revenue from our New Markets Tax Credit (“NMTC”) transactions during the three and six months ended February 28, 2023, with no such transactions in the three and six months ended February 29, 2024. Additionally, there were $4.1 million and $6.6 million of increased professional services expenses during the three and six months ended February 29, 2024, compared to the respective corresponding periods. These increases to adjusted EBITDA loss were offset by $3.9 million and $7.7 million of increased interest income on short-term investments during the three and six months ended February 29, 2024, respectively, compared to 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 six months ended February 29, 2024.
Current report
In January 2024, our Board authorized an increase of $500.0 million to the existing share repurchase program. We had remaining authorization to repurchase $510.4 million of shares of CMC common stock at February 29, 2024. See Note 11, 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.
Current report
•our ability to successfully manage leadership transitions;
Removed paragraphs (8)
Previous report
The effective income tax rate for the three months ended November 30, 2023 was 21.6% compared to 22.7% in the corresponding period. The decrease is primarily due to a tax benefit driven by an international restructuring transaction during the three months ended November 30, 2023.
Previous report
Net sales from external customers in our North America Steel Group segment decreased 4% during the three months ended November 30, 2023, compared to the corresponding period. The decrease primarily resulted from reduced average selling prices of 5% for raw materials and 13% for steel products during the three months ended November 30, 2023, compared to the corresponding period, resulting from increased import pressures in the U.S. In contrast, downstream product average selling prices remained flat. The overall reduction in net sales from external customers due to these changes in average selling prices was partially offset by year-over-year increased shipments of raw materials and steel products due to continued strong demand in our end-use markets, which outpaced year-over-year decreased shipments of downstream products.
Previous report
Adjusted EBITDA for the three months ended November 30, 2023 remained relatively flat compared to the corresponding period. The acquired CMC Anchoring Systems operations contributed $2.4 million of adjusted EBITDA during the first quarter of 2024, with no such activity in the corresponding period. This increase was offset by a $1.6 million decrease in adjusted EBITDA from CMC Construction Services' operations, which fluctuated in line with the decrease in net sales from external customers described above, and a $1.3 million decrease in adjusted EBITDA from the reduction in average selling prices of Galvabar® products, which decreased faster than the corresponding input costs.
Previous report
Corporate and Other reported an adjusted EBITDA loss of $31.0 million for the three months ended November 30, 2023 compared to an adjusted EBITDA loss of $39.7 million in the corresponding period. One contributing factor to the decrease in adjusted EBITDA loss was a $4.2 million pension plan settlement charge recorded during the three months ended November 30, 2022, with no such settlement charge in the three months ended November 30, 2023. Additionally, labor-related expenses decreased by $3.7 million during the three months ended November 30, 2023, compared to the corresponding period.
Previous report
As of November 30, 2023, our undiscounted purchase obligations were approximately $740 million due in the next twelve months and $340 million due thereafter under purchase orders and "take or pay" arrangements. These purchase obligations include all enforceable, legally binding agreements to purchase goods or services that specify all significant terms, regardless of the duration of the agreement, and exclude agreements with variable terms for which we are unable to estimate the minimum amounts. The "take or pay" arrangements are multi-year commitments with minimum annual purchase requirements and are entered into primarily for purchases of commodities used in operations such as electrodes and natural gas.
Previous report
Of the purchase obligations due within the twelve months following November 30, 2023, approximately 22% were for consumable production inputs, such as alloys, 20% were for capital expenditures in connection with normal business operations, 19% were for commodities and 15% were for the construction of our fourth micro mill. Of the purchase obligations due thereafter, 71% were for commodities and 6% were for the construction of our fourth micro mill. The remainder of the purchase obligations are for goods and services in the normal course of business.
Previous report
Operating lease liabilities due in the twelve months following November 30, 2023 were approximately $35.5 million and $129.7 million due thereafter. Finance lease liabilities due in the twelve months following November 30, 2023 were approximately $30.0 million and $73.3 million due thereafter. Additionally, leases that have not yet commenced, primarily for vehicles, with aggregate fixed payments over their terms, were approximately $17.1 million, with $8.5 million to commence in 2024 and $8.6 million to commence in 2025.
Previous report
•our ability to manage the transition to a new chief executive officer;
Reworded paragraphs (31)
Previous wording
Any reference in this Form 10-Q to the "corresponding period" or "comparable period" relates to the three month period ended November 30, 2022. Any reference in this Form 10-Q to a year refers to the fiscal year ended August 31st of that year, unless otherwise noted.
Current wording
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, 2023. Any reference in this Form 10-Q to a year refers to the fiscal year ended August 31st of that year, unless otherwise noted.
Previous wording
During the first quarter of 2024, we changed our reportable segments to reflect a change in the manner in which our business is managed. Based on recent changes to our organizational structure, the evolution of our solutions offerings outside of traditional steel products, the growing importance of non-steel solutions to our financial results and future outlook and how our chief operating decision maker, our President and Chief Executive Officer, reviews operating results and makes decisions about resource allocation, CMC now has three reportable segments that represent the primary businesses reported in our condensed consolidated financial statements: North America Steel Group, Europe Steel Group and Emerging Businesses Group. See the section titled "Results of Operations Summary" below for more information regarding our reportable segments. As a result of this change, certain prior year amounts have been recast to conform to the current year presentation. Throughout this Form 10-Q, unless otherwise indicated, amounts and activity reflect reclassifications related to the Company's change in reportable segments.
Current wording
During the first quarter of 2024, we changed our reportable segments to reflect a change in the manner in which our business is managed. Based on changes to our organizational structure, the evolution of our solutions offerings outside of traditional steel products, the growing importance of non-steel solutions to our financial results and future outlook and how our chief operating decision maker, our President and Chief Executive Officer, reviews operating results and makes decisions about resource allocation, the Company now hasthree reportable segments that represent the primary businesses reported in our condensed consolidated financial statements: North America Steel Group, Europe Steel Group and Emerging Businesses Group. See the section titled "Results of Operations Summary" below for more information regarding our reportable segments. As a result of this change, certain prior year amounts have been recast to conform to the current year presentation. Throughout this Form 10-Q, unless otherwise indicated, amounts and activity reflect reclassifications related to the Company's change in reportable segments.
Previous wording
Effective September 1, 2023, Peter R. Matt, our then President, assumed the role of President and Chief Executive Officer, immediately following the retirement of Barbara R. Smith, our then Chief Executive Officer and Chairman of the Board of Directors. Mr. Matt has served as our President since April 9, 2023 and continues to serve as a member of the Board of Directors, which he joined in June 2020. Ms. Smith was appointed Executive Chairman of the Board of Directors, effective September 1, 2023. The transition from Ms. Smith to Mr. Matt followed the Company's formal succession planning process.
Current wording
Effective September 1, 2023, Peter R. Matt, our then President, assumed the role of President and Chief Executive Officer, immediately following the retirement of Barbara R. Smith, our then Chief Executive Officer and Chairman of the Board of Directors (the "Board"). Mr. Matt has served as our President since April 9, 2023 and continues to serve as a member of the Board, which he joined in June 2020. Ms. Smith was appointed Executive Chairman of the Board, effective September 1, 2023. The transition from Ms. Smith to Mr. Matt followed the Company's formal succession planning process.
Previous wording
During the fourth quarter of 2023, our third micro mill was placed into service. Initial commercial production of rebar commenced during commissioning, prior to the startup of merchant bar production that will commence in early calendar year 2024. This micro mill is the first in the world 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, allows us to more efficiently meet underlying West Coast and Pacific Northwest demand for steel products.
Current wording
During the fourth quarter of 2023, our third micro mill was placed into service. The new facility, located in Mesa, Arizona, allows us to more efficiently meet underlying West Coast and Pacific Northwest demand for steel products. Designed to produce both rebar and merchant bar, this micro mill is the first in the world to produce merchant bar quality products through a continuous production process. Initial commercial production of rebar commenced during commissioning, prior to the startup of merchant bar production, which commenced during the second quarter of 2024. The merchant bar products produced at this facility will consist of a wide variety of shapes and sizes of long steel, and, combined with rebar production, the capacity of this micro mill is approximately 40% greater than that of the other micro mills we have constructed. The micro mill 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. Additionally, this micro mill is the Company’s first micro mill to utilize Q-ONE technology on an EAF, which provides energy efficiencies and precise electrical control during production, creating a stable and consistent output.
Previous wording
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 downstream fabrication plants.
Current wording
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 downstream fabrication plants. Site improvements and foundations for the micro mill are nearing completion. We expect this micro mill to be commissioned in late calendar 2025.
Previous wording
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 months ended November 30, 2023 or 2022. Our Europe Steel Group segment has not experienced an interruption in energy supply and was able to identify alternate sources for a limited number of materials previously procured through Russia. However, the Russian invasion of Ukraine has led to economic slowdowns in Europe, including significant volatility in commodity prices and credit markets, as well as reductions in demand and supply chain interruptions, and has contributed to global inflation. We will continue to monitor disruptions in supply of energy and materials and the indirect effects on our operations of inflationary pressures, reductions in demand, foreign exchange rate fluctuations, commodity pricing, potential cybersecurity risks and sanctions resulting from the invasion.
Current wording
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 29, 2024 or February 28, 2023. Our Europe Steel Group segment has not experienced an interruption in energy supply and was able to identify alternate sources for a limited number of materials previously procured through Russia. However, the Russian invasion of Ukraine has led to economic slowdowns in Europe, including significant volatility in commodity prices and credit markets, as well as reductions in demand and supply chain interruptions, and has contributed to global inflation. We will continue to monitor disruptions in supply of energy and materials and the indirect effects on our operations of inflationary pressures, reductions in demand, foreign exchange rate fluctuations, commodity pricing, potential cybersecurity risks and sanctions resulting from the invasion.
Previous wording
CMC is an innovative solutions provider helping build a stronger, safer and more sustainable world. Through an extensive manufacturing network principally located in the U.S. and Central Europe, we offer products and technologies to meet the critical reinforcement needs of the global construction sector. CMC’s solutions support construction across a wide variety of applications, including infrastructure, non-residential, residential, industrial and energy generation and transmission. Our operations are conducted through three reportable segments: North America Steel Group, Europe Steel Group and Emerging Businesses Group.
Current wording
CMC is an innovative solutions provider helping build a stronger, safer and more sustainable world. Through an extensive manufacturing network principally located in the U.S. and Central Europe, the Company offers products and technologies to meet the critical reinforcement needs of the global construction sector. CMC’s solutions support construction across a wide variety of applications, including infrastructure, non-residential, residential, industrial and energy generation and transmission. Our operations are conducted through three reportable segments: North America Steel Group, Europe Steel Group and Emerging Businesses Group.
Previous wording
The North America Steel Group segment is primarily composed of a vertically integrated network of recycling facilities, steel mills and fabrication operations located in the U.S.
Current wording
The North America Steel Group segment is composed of a vertically integrated network of recycling facilities, steel mills and fabrication operations located in the U.S.
Previous wording
The Europe Steel Group segment is primarily composed of a vertically integrated network of recycling facilities, an EAF mini mill and fabrication operations located in Poland.
Current wording
The Europe Steel Group segment is composed of a vertically integrated network of recycling facilities, an EAF mini mill and fabrication operations located in Poland.
Previous wording
Our Emerging Businesses Group segment provides construction-related solutions and value-added products with strong, underlying growth fundamentals to serve domestic and international markets that are adjacent to those served by our vertically integrated operations in the North America Steel Group segment and the Europe Steel Group segment. The Emerging Businesses Group segment's portfolio consists of CMC Construction Services TM products (collectively referred to as "construction products"), Tensar® products (collectively referred to as "ground stabilization products") and CMC Impact Metals TM, CMC Anchoring Systems and performance reinforcing steel products (collectively referred to as "downstream products" in the context of the Emerging Businesses Group segment).
Current wording
Our Emerging Businesses Group segment provides construction-related solutions and value-added products with strong, underlying growth fundamentals to serve domestic and international markets that are adjacent to those served by our vertically integrated operations in the North America Steel Group segment and the Europe Steel Group segment. The Emerging Businesses Group segment's portfolio consists of CMC Construction Services TM products (collectively referred to as "construction products"), Tensar® products and solutions (collectively referred to as "ground stabilization solutions") and CMC Impact Metals TM, CMC Anchoring Systems and performance reinforcing steel products (collectively referred to as "downstream products" in the context of the Emerging Businesses Group segment).
Previous wording
•Tensar® operations sell geogrids and Geopier® foundation systems. Geogrids are polymer-based products used for ground stabilization, soil reinforcement and asphalt optimization in construction applications, including roadways, public infrastructure and industrial facilities. Geopier® foundation systems are ground improvement solutions that increase the load-bearing characteristics of ground structures and working surfaces and can be applied in soil types and construction situations in which traditional support methods are impractical or would make a project infeasible.
Current wording
•Tensar® operations sell geogrids and Geopier® foundation systems. Geogrids are polymer-based products used for ground stabilization, soil reinforcement and asphalt optimization in construction applications, including roadways, public infrastructure and industrial facilities. Geopier® foundation systems are rammed aggregate pier and other foundation solutions that increase the load-bearing characteristics of ground structures and working surfaces and can be applied in soil types and construction situations in which traditional support methods are impractical or would make a project infeasible.
Previous wording
•CMC Impact Metals TM operations manufacture high-strength steel products, such as high-strength bar for the truck trailer industry, special bar quality steel for the energy market and armor plate for military vehicles.
Current wording
•CMC Impact Metals TM operations manufacture heat-treated, high-strength steel products, such as high-strength bar for the truck trailer industry, special bar quality steel for the energy market and armor plate for military vehicles.
Previous wording
•CMC Anchoring Systems' operations supply a custom engineered line of anchor cages, bolts and fasteners that are fabricated principally from rebar and are used primarily to secure high voltage electrical transmission poles to concrete foundations.
Current wording
•CMC Anchoring Systems' operations supply custom engineered anchor cages, bolts and fasteners that are fabricated principally from rebar and are used primarily to secure high voltage electrical transmission poles to concrete foundations.
Previous wording
When evaluating our results for the period, we compare net sales, in the aggregate and for each of our reportable segments, in the current period to net sales in the corresponding period. Specifically, for the North America Steel Group segment and the Europe Steel Group segment 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 as these are the two variables that typically have the greatest impact on our net sales for those reportable segments. Of the products evaluated by changes in average selling price per ton and tons shipped within the North America Steel Group and Europe Steel Group segments, 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, steel fence posts and wire mesh. The evaluation of average selling price per ton and tons shipped for downstream products exclude post-tension cable, which is not measured on a per ton basis.
Current wording
When evaluating our results for the period, we compare net sales, in the aggregate and for each of our reportable segments, in the current period to net sales in the corresponding period. Specifically, for the North America Steel Group segment and the Europe Steel Group segment 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 as these are the two variables that typically have the greatest impact on our net sales for those reportable segments. Of the products evaluated by changes in average selling price per ton and tons shipped within the North America Steel Group and Europe Steel Group segments, raw materials include ferrous and nonferrous scrap, steel products include rebar, merchant bar and other steel products, such as billets and wire rod, and downstream products include fabricated rebar, steel fence posts and wire mesh. The evaluation of average selling price per ton and tons shipped for downstream products exclude post-tension cable, which is not measured on a per ton basis.
Previous wording
Adjusted EBITDA is used by management to compare and evaluate the period-over-period underlying business operational performance of our reportable 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 in the North America Steel Group and Europe Steel Group segments 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 North America Steel Group and Europe Steel Group segments' 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 North America Steel Group and Europe Steel Group segments' 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.
Current wording
Adjusted EBITDA is used by management to compare and evaluate the period-over-period underlying business operational performance of our reportable 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 in the North America Steel Group and Europe Steel Group segments is a consistent area of focus for our Company and industry. Metal margin is a metric used by management to monitor the results of our vertically integrated organization. For our steel products, metal margin is the difference between the average selling price per ton of rebar, merchant bar and other steel products and the cost of ferrous scrap per ton utilized by our steel mills to produce these products. An increase or decrease in input costs can impact profitability of these products when there is no corresponding change in selling prices. The metal margin for our North America Steel Group and Europe Steel Group segments' 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 North America Steel Group and Europe Steel Group segments' 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.
Previous wording
Net sales decreased $224.3 million, or 10%, for the three months ended November 30, 2023, compared to the corresponding period. See discussions below, labeled North America Steel Group, Europe Steel Group and Emerging Businesses Group within our Segment Operating Data section, for further information on our period-over-period net sales results.
Current wording
Net sales decreased $169.7 million, or 8%, for the three months ended February 29, 2024, compared to the corresponding period, and decreased $394.0 million, or 9%, for the six months ended February 29, 2024, compared to the corresponding period. See discussions below, labeled North America Steel Group, Europe Steel Group and Emerging Businesses Group within our Segment Operating Data section, for further information on our period-over-period net sales results.
Previous wording
During the three months ended November 30, 2023, we achieved net earnings of $176.3 million compared to net earnings of $261.8 million during the corresponding period. The change in net earnings in the three months ended November 30, 2023, compared to the corresponding period, was due to compression in steel products metal margins in both our North America Steel Group segment and Europe Steel Group segment, driven by decreases in steel products average selling prices, while the cost of ferrous scrap utilized per ton remained relatively flat. This change in net earnings also reflects $66.3 million of government assistance recognized in the Europe Steel Group segment during the three months ended November 30, 2023, compared to $9.5 million of government assistance recognized in the corresponding period.
Current wording
During the three and six months ended February 29, 2024, we achieved net earnings of $85.8 million and $262.1 million, respectively, compared to net earnings of $179.8 million and $441.6 million, respectively, during the corresponding periods. The change in net earnings in the three and six months ended February 29, 2024, compared to the corresponding periods, was primarily due to compression in steel products metal margins in both our North America Steel Group segment and Europe Steel Group segment, driven by decreases in steel products average selling prices, while the cost of ferrous scrap utilized per ton increased. The year-over-year change in net earnings includes $66.3 million of government assistance recognized in the Europe Steel Group segment during the six months ended February 29, 2024, compared to $9.5 million of government assistance recognized in the corresponding period.
Previous wording
Selling, general and administrative ("SG&A") expenses increased $6.2 million during the three months ended November 30, 2023, compared to the corresponding period. Contributing to the period-over-period increase was $3.8 million of incremental SG&A expenses from the 2023 acquisitions in the three months ended November 30, 2023, compared to the expenses recorded during the corresponding period. Additionally, labor-related expenses increased $1.7 million during the three months ended November 30, 2023, compared to the corresponding period, and information technology expenses increased $1.5 million during the three months ended November 30, 2023, compared to the corresponding period. These increases were offset, in part, by a $4.2 million pension plan settlement charge in the corresponding period, with no such settlement charge in the three months ended November 30, 2023. All remaining fluctuations in SG&A expenses were individually immaterial.
Current wording
Selling, general and administrative ("SG&A") expenses increased $16.6 million and $22.8 million during the three and six months ended February 29, 2024, respectively, compared to the corresponding periods. Contributing to the period-over-period increases were $2.9 million and $6.6 million of incremental SG&A expenses from the 2023 acquisitions in the three and six months ended February 29, 2024, respectively, compared to the expenses recorded during the corresponding periods. Additionally, as compared to the respective corresponding periods, the three and six months ended February 29, 2024 included $4.2 million and $4.4 million of increased benefit restoration plan expenses and $2.9 million and $3.0 million of increased professional services expenses. The increase in SG&A expenses during the six months ended February 29, 2024 was offset, in part, by a $4.2 million pension plan settlement charge in the six months ended February 28, 2023, with no such settlement charge in the six months ended February 29, 2024. The remaining fluctuations in SG&A expenses during the three and six months ended February 29, 2024, compared to the corresponding periods, were due to multiple factors of which no single category was material.
Previous wording
Interest expense decreased by $1.3 million during the three months ended November 30, 2023, compared to the corresponding period. A lower average balance of long-term debt outstanding during the first quarter of 2024 compared to the first quarter of 2023 drove a $4.7 million decrease in interest expense, partially offset by a $3.4 million reduction in capitalized interest during the three months ended November 30, 2023, compared to the corresponding period.
Current wording
Interest expense increased by $1.9 million during the three months ended February 29, 2024, compared to the corresponding period, and remained relatively flat during the six months ended February 29, 2024, compared to the corresponding period. While quarter-over-quarter interest expense decreased by $2.7 million due to a lower average balance of long-term debt outstanding during the second quarter of 2024 compared to the corresponding period, this decrease was offset by a $4.2 million reduction in capitalized interest during the three months ended February 29, 2024, compared to the corresponding period.
Previous wording
The operational data by product category presented in the North America Steel Group and Europe Steel Group tables below is calculated using averages, and therefore, it is not meaningful to quantify the effect that any individual metric had on segment net sales or adjusted EBITDA. See Note 13, Segment Information, in Part I, Item 1, Financial Statements, of this Form 10-Q for more information on our reportable segments.
Current wording
The operational data by product category presented in the North America Steel Group and Europe Steel Group tables below is calculated using averages during each period presented. See Note 13, Segment Information, in Part I, Item 1, Financial Statements, of this Form 10-Q for more information on our reportable segments.
Previous wording
During the three months ended November 30, 2023, we achieved adjusted EBITDA of $266.8 million compared to adjusted EBITDA of $349.8 million during the corresponding period. The decrease in adjusted EBITDA during the three months ended November 30, 2023 was primarily due to a 21% erosion of steel products metal margin per ton as compared to the corresponding period, while downstream products margin over scrap per ton remained relatively flat. The decrease in steel products metal margin per ton was mainly driven by the decreased steel products average selling prices mentioned above, as well as the slight increase in the cost of ferrous scrap utilized per ton.
Current wording
During the three and six months ended February 29, 2024, we achieved adjusted EBITDA of $222.3 million and $489.1 million, respectively, compared to adjusted EBITDA of $274.2 million and $624.0 million, during the respective corresponding periods. The decrease in adjusted EBITDA during the three and six months ended February 29, 2024 was primarily due to an 18% and a 20% erosion of steel products metal margin per ton, respectively, compared to the corresponding periods, and 9% and 6% decreases in downstream products margin over scrap per ton, respectively, compared to the corresponding periods. The decreased margins resulted from the decreased steel products and downstream products average selling prices per ton mentioned above, combined with increases in the cost of ferrous scrap during both periods.
Previous wording
Net sales from external customers in our Europe Steel Group segment decreased $161.3 million, or 42%, during the three months ended November 30, 2023, compared to the corresponding period. The decrease was primarily due to a reduction in steel products average selling price per ton of 20% during the three months ended November 30, 2023, compared to the corresponding period, and a 27% decrease in steel products shipment volumes during the three months ended November 30, 2023, compared to the corresponding period. The reduced steel products average selling price and slowdown in demand compared to the corresponding period were driven by the indirect impacts of macroeconomic factors affecting the overall global business climate, such as inflation and rising interest rates, which resulted in consumer uncertainties and delayed construction starts across our end markets. During the first quarter of 2024, overall, the U.S. dollar weakened compared to the Polish zloty. Using actual results for the first quarter of 2024, measured at the comparable period's average currency rates, foreign currency translation would result in a decrease in net sales from external customers of approximately $25.7 million for the three months ended November 30, 2023.
Current wording
Net sales from external customers in our Europe Steel Group segment decreased $145.1 million, or 43%, and $306.4 million, or 42%, during the three and six months ended February 29, 2024, respectively, compared to the corresponding periods. The decreases were primarily due to reductions in steel products shipment volumes of 37% and 32% during the three and six months ended February 29, 2024, respectively, compared to the corresponding periods, and reductions in steel products average selling prices per ton of 11% and 16% during the three and six months ended February 29, 2024, respectively, compared to the corresponding periods. The slowdown in demand and reduced steel products average selling prices per ton were driven by the indirect impacts of macroeconomic factors affecting the business climate in European end markets, such as inflation and rising interest rates, which resulted in lower construction and industrial activity. During both the three and six months ended February 29, 2024, overall, the U.S. dollar weakened compared to the Polish zloty. Using actual results for the three and six months ended February 29, 2024, measured at the comparable periods' average currency rates, foreign currency translation would result in decreases in net sales from external customers of approximately $18.0 million and $43.7 million for the three and six months ended February 29, 2024, respectively.
Previous wording
Adjusted EBITDA for the three months ended November 30, 2023 decreased $22.3 million compared to the corresponding period. Steel products metal margin per ton decreased $158, or 37%, during the three months ended November 30, 2023, compared to the corresponding period, due to the sharp decline in steel products average selling prices described above, while the cost of ferrous scrap utilized per ton remained flat. Offsetting the impact of the decrease in steel products metal margin per ton, results during the first quarter of 2024 benefited from government assistance programs established to offset the rising costs of electricity and natural gas and the indirect costs of rising carbon emission rights included in energy costs. The government assistance recognized under the programs during the first quarter of 2024 was $66.3 million, compared to $9.5 million of government assistance recognized in the first quarter of 2023. Using actual results for the first quarter of 2024, measured at the comparable period's average currency rates, foreign currency translation would result in a decrease in adjusted EBITDA of approximately $4.9 million for the three months ended November 30, 2023.
Current wording
Adjusted EBITDA for the three and six months ended February 29, 2024 decreased $20.1 million and $42.4 million, respectively, compared to the corresponding periods. The adjusted EBITDA loss of $8.6 million in the three months ended February 29, 2024 resulted primarily from a decrease in steel products metal margin per ton of $88, or 24%, during the three months ended February 29, 2024, compared to the corresponding period. Steel products metal margin per ton also decreased $127, or 32%, during the six months ended February 29, 2024, compared to the corresponding period. Both decreases were a result of the declines in steel products average selling prices described above, while the cost of ferrous scrap utilized per ton remained relatively flat. Adjusted EBITDA for the three and six months ended February 29, 2024 was also negatively impacted by lower shipment volumes compared to the corresponding periods, as described above. Offsetting the impact of the decrease in steel products metal margin per ton, results during the six months ended February 29, 2024 benefited from government assistance programs established to offset the rising costs of electricity and natural gas and the indirect costs of rising carbon emission rights included in energy costs. The government assistance recognized under the programs during the six months ended February 29, 2024 was $66.3 million, compared to $9.5 million of government assistance recognized in the six months ended February 28, 2023. Using actual results for the three and six months ended February 29, 2024, measured at the comparable periods' average currency rates, foreign currency translation would result in an immaterial change to adjusted EBITDA loss during the three months ended February 29, 2024 and a decrease in adjusted EBITDA of approximately $4.1 million for the six months ended February 29, 2024.
Previous wording
Net sales from external customers in our Emerging Businesses Group segment increased $6.7 million, or 4%, for the three months ended November 30, 2023, compared to the corresponding period. The acquired CMC Anchoring Systems operations contributed to the year-over-year change by providing $12.7 million of net sales from external customers in the first quarter of 2024, with no such activity 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 on the acquisition of CMC Anchoring Systems. This increase was offset, in part, by a $5.8 million, or 7%, decrease in net sales from CMC Construction Services' operations, primarily due to the timing of significant precipitation in key markets, which delayed project starts during the three months ended November 30, 2023.
Current wording
Net sales from external customers in our Emerging Businesses Group segment increased $2.4 million, or 2%, for the three months ended February 29, 2024, compared to the corresponding period, and increased $9.1 million, or 3%, for the six months ended February 29, 2024, compared to the corresponding period. The acquired CMC Anchoring Systems operations contributed to the year-over-year changes by providing $12.0 million and $24.7 million of net sales from external customers in the three and six months ended February 29, 2024, respectively, with no such activity in the corresponding periods. See Note 2, Changes in Business, in Part I, Item 1, Financial Statements, of this Form 10-Q for more information on the acquisition of CMC Anchoring Systems. These increases were offset, in part, by decreases in net sales from CMC Construction Services' operations for the three and six months ended February 29, 2024, respectively, compared to the corresponding periods, primarily resulting from job site delays caused by weather disruptions. Our Tensar operations also experienced reduced net sales for the three and six months ended February 29, 2024, compared to the corresponding periods, due to weather-related shipment disruptions in the U.S. and economic conditions in international markets.
Previous wording
We have a diverse and generally stable customer base, and regularly maintain a substantial amount of accounts receivable. We actively monitor our accounts receivable and, based on market conditions and customers' financial condition, record allowances when we believe accounts are uncollectible. We use credit insurance internationally to mitigate the risk of customer insolvency. We estimate that the amount of credit-insured or financially assured receivables was approximately 13% of total trade receivables at November 30, 2023.
Current wording
We have a diverse and generally stable customer base, and regularly maintain a substantial amount of accounts receivable. We actively monitor our accounts receivable and, based on market conditions and customers' financial condition, record allowances when we believe accounts are uncollectible. We use credit insurance internationally to mitigate the risk of customer insolvency. We estimate that the amount of credit-insured or financially assured receivables was approximately 11% of total trade receivables at February 29, 2024.
Previous wording
We continually review our capital resources to determine whether we can meet our short and long-term goals. We anticipate our current cash balances, cash flows from operations and available sources of liquidity will be sufficient to maintain operations, make necessary capital expenditures, pay dividends and opportunistically repurchase shares for at least the next twelve months. Additionally, we expect our long-term liquidity position will be sufficient to meet our long-term liquidity needs with cash flows from operations and financing arrangements. However, in the event of changes in business conditions or other developments, including a sustained market deterioration, unanticipated regulatory developments, significant acquisitions, competitive pressures, or to the extent our liquidity needs prove to be greater than expected or cash generated from operations is less than anticipated, we may need additional liquidity. To the extent we elect to finance our long-term liquidity needs, we believe that the potential financing capital available to us in the future will be sufficient.
Current wording
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, invest in the development of new micro mills, pay dividends, fund potential expenditures in connection with litigation or other legal proceedings 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.
Previous wording
Net cash flows from operating activities were $261.1 million and $372.4 million for the three months ended November 30, 2023 and 2022, respectively. Contributing to the change was a decrease in net earnings of $85.5 million year-over-year. Additionally, there was a $45.6 million year-over-year net decrease in cash provided by operating assets and liabilities. Cash provided by accounts receivable decreased by $59.4 million year-over-year, in line with the fluctuations in net sales from external customers described in the Segment Operating Data section, above. The cash provided by accounts receivable was offset, in part, by remaining fluctuations in cash used by inventory and accounts payable, accrued expenses and other payables year-over-year, which were primarily driven by the declining scrap price environment in the first quarter of 2023, compared to the minor fluctuations in working capital cash flows during a relatively stable scrap price environment in the first quarter of 2024.
Current wording
Net cash flows from operating activities were $350.0 million and $558.9 million for the six months ended February 29, 2024 and February 28, 2023, respectively. Contributing to the change was a decrease in net earnings of $179.5 million year-over-year and a $25.0 million decrease in deferred income taxes and other long-term taxes. Additionally, there was a $49.0 million year-over-year net increase in cash used by operating assets and liabilities. Cash used by inventory increased year-over-year due to both greater inventory volumes and prices during a higher scrap price environment in the second quarter of 2024 compared to the corresponding period, offset, in part, by a year-over-year decrease in cash used by accounts payable, accrued expenses and other payables. These reductions to cash flows from operating activities were offset, in part, by $35.1 million of additional depreciation and amortization expense year-over-year, primarily attributable to our third micro mill being placed into service during the fourth quarter of 2023.
Previous wording
Net cash flows used by investing activities were $66.5 million and $195.6 million for the three months ended November 30, 2023 and 2022, respectively. The fluctuation in net cash flows used by investing activities was driven by a $63.7 million decrease in cash used by acquisitions during the three months ended November 30, 2023, compared to the corresponding period, along with a $66.1 million reduction of capital expenditures during the three months ended November 30, 2023, compared to 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 acquisitions completed during the corresponding period.
Current wording
Net cash flows used by investing activities were $158.5 million and $352.6 million for the six months ended February 29, 2024 and February 28, 2023, respectively. The fluctuation in net cash flows used by investing activities was driven by a $65.2 million decrease in cash used by acquisitions during the six months ended February 29, 2024, compared to the corresponding period, along with a $128.5 million reduction of capital expenditures during the six months ended February 29, 2024, compared to 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 acquisitions completed during the corresponding period.
Previous wording
Net cash flows used by financing activities were $84.0 million and $273.8 million for the three months ended November 30, 2023 and 2022, respectively. The $189.8 million decrease in net cash flows used by financing activities during the three months ended November 30, 2023, compared to the corresponding period, included a $145.4 million decrease in repayments of long-term debt, a $20.7 million decrease in treasury stock acquired under the share repurchase program and a $17.8 million decrease in net proceeds from our Polish accounts receivable facility. See Note 7, Credit Arrangements, in Part I, Item 1, Financial Statements, of this Form 10-Q for more information regarding our Polish accounts receivable facility and Note 11, 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.
Current wording
Net cash flows used by financing activities were $147.8 million and $283.7 million for the six months ended February 29, 2024 and February 28, 2023, respectively. The $135.9 million decrease in net cash flows used by financing activities during the six months ended February 29, 2024, compared to the corresponding period, included a $143.1 million decrease in repayments of long-term debt, offset, in part, by a $10.0 million increase in treasury stock acquired under the share repurchase program and a $4.7 million increase in net repayments under our Polish accounts receivable facility. See Note 11, 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 and Note 7, Credit Arrangements, in Part I, Item 1, Financial Statements, of this Form 10-Q for more information regarding our Polish accounts receivable facility.
Previous wording
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. Interest payable on our long-term debt was $43.5 million due in the twelve months following November 30, 2023 and $377.4 million due thereafter. Additionally, we have a U.S. federal repatriation tax obligation resulting from the repatriation tax provisions of the Tax Cuts and Jobs Act ("TCJA"), of which $4.2 million was due in the twelve months following November 30, 2023 and $12.5 million due thereafter.
Current wording
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. The amount and composition of our material cash commitments have not changed materially since those disclosed in the 2023 Form 10-K.
Previous wording
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 12, Commitments and Contingencies, in Part I, Item 1, Financial Statements, of this Form 10-Q for more information.
Current wording
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. See Note 12, Commitments and Contingencies, in Part I, Item 1, Financial Statements, of this Form 10-Q for more information on pending litigation and other matters.