COMMERCIAL METALS Co

Previous wording

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, 2024 (the "2024 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 United States ("U.S.") Securities and Exchange Commission (the "SEC") or, with respect to any document incorporated by reference, available at the time that such 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 section entitled "Risk Factors" in Part I, Item 1A of our 2024 Form 10-K. 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.

Current wording

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, 2024 (the "2024 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 United States ("U.S.") Securities and Exchange Commission (the "SEC") or, with respect to any document incorporated by reference, available at the time that such 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 2024 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.

Previous wording

Any reference in this Form 10-Q to the "corresponding period" or "comparable period" relates to the relevant three month period ended November 30, 2023. Any reference in this Form 10-Q to a year refers to the fiscal year ended August 31st of that year, unless otherwise stated.

Current wording

Any reference in this Form 10-Q to the "corresponding period" relates to the relevant three or six month period ended February 29, 2024. Any reference in this Form 10-Q to a year refers to the fiscal year ended August 31st of that year, unless otherwise stated.

Previous wording

In 2024, we implemented our Transform, Advance and Grow ("TAG") operational and commercial excellence program, which is a key component of our long-term strategic growth plan. Through a disciplined and structured approach, execution of the TAG program is intended to enhance the value of our operations through sustained margin enhancement, reduced working capital needs and greater invested capital efficiency. We have begun executing the first wave of initiatives related to the TAG program, and we expect our efforts will drive financial benefits in 2025.

Current wording

In 2024, we implemented our Transform, Advance and Grow ("TAG") operational and commercial excellence program, which is a key component of our long-term strategic growth plan. Through a disciplined and structured approach, execution of the TAG program is intended to enhance the value of our operations through sustained margin enhancement, reduced working capital needs and greater invested capital efficiency. We have begun executing the first wave of initiatives related to the TAG program, and it is positively contributing to 2025 performance.

Previous wording

During the fourth quarter of 2023, our third micro mill was placed into service, and ramp up of the third micro mill continued in the first quarter of 2025. The new facility, located in Mesa, Arizona, allows us to 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 prior to the startup of merchant bar production, which commenced during the second quarter of 2024. The merchant bar products produced at this facility 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 was designed with the latest technology in electric arc furnace ("EAF") power supply systems, which allows 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.

Current wording

During the fourth quarter of 2023, our third micro mill was placed into service, and ramp up of the third micro mill continued in the first half of 2025. The new facility, located in Mesa, Arizona, allows us to 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. Rebar production and merchant bar production commenced during the fourth quarter of 2023 and second quarter of 2024, respectively. The merchant bar products produced at this facility 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 was designed with the latest technology in electric arc furnace ("EAF") power supply systems, which allows 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 be supported by our existing network of downstream fabrication plants. Site improvements and foundation work for the micro mill are complete, large portions of supporting infrastructure have been installed and equipment installation is underway. We expect an operational start-up in late calendar 2025.

Current wording

In December 2022, we announced that our planned fourth micro mill will be 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 be supported by our existing network of downstream fabrication plants. Site improvements, foundation work and large portions of supporting infrastructure for the micro mill are complete, and the construction of structural components for multiple process buildings and equipment is underway. We expect commissioning to start 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, 2024 or 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, reductions in demand, supply chain interruptions and higher 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 28, 2025 or February 29, 2024. 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, reductions in demand, supply chain interruptions and higher 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

See Part I, Item 1A, Risk Factors, of our 2024 Form 10-K for further discussion related to the above business conditions and developments.

Current wording

See sections entitled "Risk Factors" in Part I, Item 1A of our 2024 Form 10-K and Part II, Item 1A of this Form 10-Q for further discussion related to the above business conditions and developments.

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 bar and other steel products, such as billets and wire rod, and downstream products include fabricated rebar, steel fence posts and wire mesh. The evaluations 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 and the Europe Steel Group segments, 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 evaluations 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 or losses 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 or losses, 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 are a consistent area of focus for our Company and industry. Metal margin is a metric used by management to monitor the results of ourvertically 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. The metal margin for the North America Steel Group and Europe Steel Group segments' downstream products is the difference between the average selling price per ton of our downstream products and the scrap input costs to produce these products. An increase or decrease in input costs can impact profitability of steel products and downstream products when there is no corresponding change in selling prices. The majority of the 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 or losses 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 or losses, 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 are a consistent area of focus for our Company and industry. Metal margin is a metric used by management to monitor the results of ourvertically 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. The metal margin for the North America Steel Group and Europe Steel Group segments' downstream products is the difference between the average selling price per ton of our downstream products and the scrap input costs to produce these products. An increase or decrease in input costs can impact profitability of steel products and downstream products when there is no corresponding change in selling prices. The majority of the 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. The selling price generally remains fixed over the life of a project; therefore, changes in input costs over the life of the project can significantly impact profitability.

Previous wording

Net sales decreased $93.4 million, or 5%, for the three months ended November 30, 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.

Current wording

Net sales decreased $93.9 million, or 5%, for the three months ended February 28, 2025, compared to the corresponding period, and decreased $187.4 million, or 5%, for the six months ended February 28, 2025, 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, 2024, we incurred a net loss of $175.7 million compared to net earnings of $176.3 million during the corresponding period. The year-over-year change was primarily due to an approximately $265.0 million litigation expense, net of estimated tax, due to a contingent litigation-related loss recorded during the three months ended November 30, 2024. For more information about the contingent litigation-related loss, see Note 12, Commitments and Contingencies.

Current wording

During the three and six months ended February 28, 2025, we achieved net earnings of $25.5 million and incurred a net loss of $150.2 million, respectively, compared to net earnings of $85.8 million and $262.1 million, respectively, during the corresponding periods. The change in net earnings in the three months ended February 28, 2025, compared to the corresponding period, was due to compression in steel and downstream products metal margins in our North America Steel Group segment. The year-over-year decrease in net earnings was primarily due to an approximately $268.0 million litigation expense, net of estimated tax, due to a contingent litigation-related loss, andcompression in steel and downstream products metal margins in our North America Steel Group segmentin the six months ended February 28, 2025, compared to the corresponding period.

Previous wording

Selling, general and administrative ("SG&A") expenses increased $15.3 million during the three months ended November 30, 2024, compared to the corresponding period. Contributing to the period-over-period increase during the three months ended November 30, 2024 was $8.7 million of increased employee-related expenses and $6.9 million of increased legal expenses. The remaining fluctuation in SG&A expenses during the three months ended November 30, 2024, compared to the corresponding period, was due to multiple factors of which no single category was material.

Current wording

Selling, general and administrative ("SG&A") expenses remained relatively flat during the three months ended February 28, 2025, compared to the corresponding period, and increased $15.4 million during the six months ended February 28, 2025, compared to the corresponding period. Contributing to the period-over-period increase was $12.1 million of incremental labor-related expenses and $5.4 million of additional legal expenses in the six months ended February 28, 2025, compared to the corresponding period.

Previous wording

Interest expense remained relatively flat during the three months ended November 30, 2024, compared to the corresponding period.

Current wording

Interest expense remained relatively flat during the three and six months ended February 28, 2025, compared to the corresponding periods.

Previous wording

A $350.0 million litigation expense associated with the Pacific Steel Group ("PSG") litigation was accrued during the three months ended November 30, 2024. For more information about the contingent litigation-related loss, see Note 12, Commitments and Contingencies.

Current wording

Litigation expense related to the Pacific Steel Group ("PSG") litigation of $4.7 million and $354.7 million was recorded during the three and six months ended February 28, 2025, respectively. For more information about the contingent litigation-related loss, see Note 12, Commitments and Contingencies.

Previous wording

Adjusted EBITDA decreased $78.6 million, or 29%, during the three months ended November 30, 2024, compared to the corresponding period. The year-over-year decrease in adjusted EBITDA was caused by metal margin compression for both steel products and downstream products. The cost of ferrous scrap utilized per ton, the largest single driver of cost of goods sold for both steel products and downstream products, decreased$20 year-over-year. However, average selling prices per ton for steel products and downstream products decreased$80 and$130, respectively, year-over-year, resulting in metal margin compression.

Current wording

During the three and six months ended February 28, 2025, we achieved adjusted EBITDA of $128.8 million and $317.0 million, respectively, compared to adjusted EBITDA of $222.3 million and $489.1 million, during the respective corresponding periods. The decreases in adjusted EBITDA during the three and six months ended February 28, 2025, compared to the corresponding periods, was primarily due to a 10% erosion of steel and downstream products metal margins over scrap per ton. The cost of ferrous scrap utilized per ton, the largest single driver of cost of goods sold for both steel and downstream products, decreased $41 and $31, respectively, during the three and six months ended February 28, 2025, compared to the corresponding periods. However, these decreases did not keep pace with the declines in average selling prices per ton for steel and downstream products, resulting in metal margin compression, as compared to the corresponding periods.

Previous wording

Adjusted EBITDA decreased $13.1 million, or 34%, during the three months ended November 30, 2024, compared to the corresponding period. In thethree months ended November 30, 2024, the Europe Steel Group received $44.1 million in government assistance related to a program established to offset the indirect costs of carbon emission rights included in energy costs, compared to $27.7 million received related to this program in thethree months ended November 30, 2023. In thethree months ended November 30, 2023, the Europe Steel Group also received $38.6 million in government assistance related to a program established to offset the rising costs of electricity and natural gas. The $22.2 million decrease in government assistance received in thethree months ended November 30, 2024, compared to the corresponding period, was partially offset by a year-over-year decrease in conversion costs. The effect of foreign currency translation was immaterial for the three months ended November 30, 2024.

Current wording

Adjusted EBITDA increased $9.4 million during the three months ended February 28, 2025, compared to the corresponding period, and decreased $3.7 million during the six months ended February 28, 2025, compared to the corresponding period. During the three months ended February 28, 2025, steel products shipment volumes rose 13%, while steel products metal margin per ton remained relatively flat and conversion costs were lower, compared to the corresponding period. During the six months ended February 28, 2025, government assistance of $48.1 million, compared to $66.3 million in the corresponding period, was recognized related to 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 $18.2 million decrease in government assistance received in the six months ended February 28, 2025, compared to the corresponding period, offset the benefit from the year-over-year decrease in conversion costs. The effect of foreign currency translation on adjusted EBITDA was immaterial for the three and six months ended February 28, 2025.

Previous wording

Net sales to external customers in our Emerging Businesses Group segment decreased $7.8 million, or 4%, during the three months ended November 30, 2024, compared to the corresponding period. For the three months ended November 30, 2024, results were negatively impacted by an increased sales mix of lower value products and project delays within CMC's Tensar division, which are now expected to commence later in 2025. Additionally, CMC Impact Metals experienced a decline in net sales to external customers due to a decrease in shipment volumes related to a slowing truck and trailer market for the three months ended November 30, 2024, compared to the corresponding period. These decreases were partially offset by a 31% year-over-year increase in shipment volumes of our performance reinforcing steel offerings for the three months ended November 30, 2024, compared to the corresponding period.

Current wording

Net sales to external customers in our Emerging Businesses Group segment were relatively flat during the three and six months ended February 28, 2025, compared to the corresponding periods. For the three and six months ended February 28, 2025, our performance reinforcing steel offerings experienced 86% and 48% increases in shipment volumes, respectively, compared to the corresponding periods, due to increased demand. However, the increases in net sales to external customers from our performance reinforcing steel offerings were offset by decreases in net sales to external customers by CMC Impact Metals due to decreases in shipment volumes related to a slowing truck and trailer market for the three and six months ended February 28, 2025, compared to the corresponding periods.

Previous wording

Corporate and Other adjusted EBITDA loss increased$355.3 million during the three months ended November 30, 2024, compared to the corresponding period. The increase in adjusted EBITDA loss during the three months ended November 30, 2024 was primarily due to the $350.0 million contingent litigation-related loss associated with the PSG litigation that was accrued during the three months ended November 30, 2024. The remaining fluctuations in Corporate and Other adjusted EBITDA loss during the three months ended November 30, 2024, compared to the corresponding period, were due to multiple factors of which no single category was material. For more information about the contingent litigation-related loss, see Note 12, Commitments and Contingencies.

Current wording

Corporate and Other adjusted EBITDA loss remained relatively flat during the three months ended February 28, 2025, compared to the corresponding period, and increased $355.6 million during the six months ended February 28, 2025, compared to the corresponding period. The increase in adjusted EBITDA loss during the six months ended February 28, 2025 was due to a $354.7 million contingent litigation-related loss related to the PSG litigation. For more information about the contingent litigation-related loss, see Note 12, Commitments and Contingencies.

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 12% of total receivables at November 30, 2024.

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 14% of total receivables at February 28, 2025.

Previous wording

We aim to execute a capital allocation strategy that prioritizes both value-accretive growth and competitive cash returns to stockholders. We estimate that our 2025 capital spending will range from $630 million to $680 million. We regularly assess our capital spending based on current and expected results and the amount is subject to change.

Current wording

We aim to execute a capital allocation strategy that prioritizes both value-accretive growth and competitive cash returns to stockholders. We estimate that our 2025 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.

Previous wording

In January 2024, our Board authorized an increase of $500.0 million to the existing share repurchase program. During the three months ended November 30, 2024 and 2023, we repurchased $50.4 million and $28.4 million, respectively, of shares of CMC common stock. We had remaining authorization to repurchase $353.4 million of shares of CMC common stock at November 30, 2024. See Note 11, Stockholders' Equity and Earnings (Loss) per Share, in Part I, Item 1, Financial Statements, of this Form 10-Q for more information on the share repurchase program.

Current wording

During the six months ended February 28, 2025 and February 29, 2024, we repurchased $98.4 million and $76.3 million, respectively, of shares of CMC common stock. Under the share repurchase program, we had remaining authorization to repurchase $305.3 million of shares of CMC common stock at February 28, 2025. See Note 11, Stockholders' Equity and Earnings (Loss) per Share, in Part I, Item 1, Financial Statements, of this Form 10-Q, and Note 15, Capital Stock, to the consolidated financial statements in the 2024 Form 10-K, for more information on the share repurchase program.

Previous wording

During the three months ended November 30, 2024 and 2023, we paid $20.6 million and $18.7 million, respectively, of cash dividends to our stockholders.

Current wording

During the six months ended February 28, 2025 and February 29, 2024, we paid $41.0 million and $37.4 million, respectively, of cash dividends to our stockholders.

Previous wording

As described in Note 12, Commitments and Contingencies, on November 5, 2024, a jury returned a verdict in favor of PSG in the amount of $110.0 million, which the United States District Court for the Northern District of California (the “Northern District Court”), in entering its judgment on the verdict, subsequently trebled as a matter of law. PSG will also be entitled to petition for and recover its attorneys' fees, costs and post-judgment interest. We are confident that we conducted our business appropriately and intend to vigorously pursue all reasonably available avenues to have the verdict and judgment overturned. Nonetheless, unless the verdict and judgment are overturned or the judgment is significantly reduced, the losses incurred in connection with this litigation would have a material adverse effect on our liquidity and financial condition.

Current wording

As described in Note 12, Commitments and Contingencies, on November 5, 2024, a jury returned a verdict in favor of PSG in the amount of $110.0 million, which the U.S. District Court for the Northern District of California (the “Northern District Court”), in entering its judgment on the verdict, subsequently trebled as a matter of law. PSG will also be entitled to petition for and recover its attorneys' fees, costs and post-judgment interest. We are confident that we conducted our business appropriately and intend to vigorously pursue all reasonably available avenues to have the verdict and judgment overturned. Nonetheless, unless the verdict and judgment are overturned or the judgment is significantly reduced, the losses incurred in connection with this litigation would have a material adverse effect on our liquidity and financial condition.

Previous wording

Net cash flows from operating activities were $213.0 million and $261.1 million for the three months ended November 30, 2024 and 2023, respectively. Contributing to the year-over-year decrease was a $352.0 million decrease in net earnings, mainly due to a $350.0 million litigation expense associated with the PSG litigation that was accrued during thethree months ended November 30, 2024, and a $98.3 million decrease in deferred income taxes and other long-term taxes. Additionally, there was a $51.8 million year-over-year net increase in cash from operating assets and liabilities due to a year-over-year increase in cash from other accrued expenses and payables of $44.1 million, primarily due to reduced payroll-related cash outflows, and an increase in cash collections of accounts receivable of $23.4 million. Cash from accounts receivable increased year-over-year, in line with the fluctuations in net sales to external customers described in the Segment Operating Data section. These working capital fluctuations were offset, in part, by increases in cash used by other operating assets and liabilities. See Note 12, Commitments and Contingencies for more information about the contingent litigation-related loss.

Current wording

Net cash flows from operating activities were $245.5 million and $350.0 million for the six months ended February 28, 2025 and February 29, 2024, respectively. Contributing to the year-over-year change was a decrease in net earnings, excluding the impacts of non-cash items such as thecontingent litigation-related loss recorded during thesix months ended February 28, 2025. Also, there was a $45.9 million year-over-year net decrease in cash used by operating assets and liabilities primarily driven by a $91.1 million year-over-year decrease in cash used by inventorydue to both lower inventory volumes and a lower scrap price environment in the second quarter of 2025, compared to the second quarter of 2024. This decrease was partially offset by a year-over-year decrease in cash provided by accounts receivable of $58.1 million, which was in line with the fluctuations in net sales to external customers described in the Segment Operating Data section. See the section titled "Results of Operations Summary" above for more information regarding the changes in net earnings. See Note 12, Commitments and Contingencies for more information about the contingent litigation-related loss.

Previous wording

Net cash flows used by investing activities were $113.5 million and $66.5 million for the three months ended November 30, 2024 and 2023, respectively. The year-over-year increase was primarily due to $51.2 million of incremental capital expenditures driven by the construction of our fourth micro mill.

Current wording

Net cash flows used by investing activities were $175.1 million and $158.5 million for the six months ended February 28, 2025 and February 29, 2024, respectively. The year-over-year increase was primarily due to $43.7 million of incremental capital expenditures driven by the construction of our fourth micro mill, which was partially offset by $25.0 million of government assistance pursuant to an agreement with the West Virginia Economic Development Authority. See Note 1, Nature of Operations and Accounting Policies, in Part I, Item 1, Financial Statements, of this Form 10-Q for more information regarding the government assistance received during 2025 related to the construction of our fourth micro mill.

Previous wording

Net cash flows used by financing activities were $101.5 million and $84.0 million for the three months ended November 30, 2024 and 2023, respectively. The increase in net cash flows used by financing activities during the three months ended November 30, 2024, compared to the corresponding period, included a $22.0 million increase in treasury stock acquired under the share repurchase program, partially offset by an $8.1 million decrease in net repayments under 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 (Loss) 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 $169.9 million and $147.8 million for the six months ended February 28, 2025 and February 29, 2024, respectively. The increase in net cash flows used by financing activities during the six months ended February 28, 2025, compared to the corresponding period, included a $22.1 million increase in treasury stock acquired under the share repurchase program and a $3.6 million increase in dividends paid, partially offset by a $7.6 million decrease in net repayments under 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. See Note 11, Stockholders' Equity and Earnings (Loss) per Share, in Part I, Item 1, Financial Statements, of this Form 10-Q, and Note 15, Capital Stock, to the consolidated financial statements in the 2024 Form 10-K, for more information on the share repurchase program.

Previous wording

We maintain stand-by letters of credit to provide support for certain transactions that governmental agencies, our insurance providers and suppliers require. At November 30, 2024, we had committed $47.0 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).

Current wording

We maintain stand-by letters of credit to provide support for certain transactions that governmental agencies, our insurance providers and suppliers require. At February 28, 2025, we had committed $35.4 million under these arrangements, of which $1.0 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).

Previous wording

In the ordinary course of conducting our business, we become involved in litigation, administrative proceedings and governmental investigations, including environmental matters. We have in the past, and may in the future, incur settlements, fines, penalties or judgments in connection with 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. For example, during the three months ended November 30, 2024, we recorded a $350.0 million contingent litigation-related loss, which is the Company's current estimate of potential costs to be incurred with respect to the PSG litigation. 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.

Current wording

In the ordinary course of conducting our business, we become involved in litigation, administrative proceedings and governmental investigations, including environmental matters. We have in the past, and may in the future, incur settlements, fines, penalties or judgments in connection with 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. For example, in the six months ended February 28, 2025, the Company reported $354.7 million of litigation expense in the condensed consolidated statement of earnings (loss), which amount represents the Company's estimate based on its understanding of the PSG judgment, PSG's attorneys' fees and other related costs, including post-judgment interest. This amount was classified as a current liability in the condensed consolidated balance sheet as of February 28, 2025 because the timing of the potential payment is uncertain. 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.

Previous wording

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 growth provided by acquisitions and strategic investments, demand for our products, shipment volumes, metal margins, the ability to operate our steel mills at full capacity, future availability and cost of supplies of raw materials and energy for our operations, growth rates in certain reportable segments, product margins within our Emerging Businesses Group segment, share repurchases, legal proceedings, construction activity, international trade, the impact of geopolitical conditions, 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 anticipated benefits and timeline for execution of our growth plan and initatives 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," "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.

Current wording

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 growth provided by acquisitions and strategic investments, demand for our products, shipment volumes, metal margins, the ability to operate our steel mills at full capacity, future availability and cost of supplies of raw materials and energy for our operations, growth rates in certain reportable segments, product margins within our Emerging Businesses Group segment, share repurchases, legal proceedings, construction activity, international trade, the impact of geopolitical conditions, 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 anticipated benefits and timeline for execution of our growth plan and initiatives 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," "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.

Previous wording

Refer to the "Risk Factors" disclosed in the section entitled "Risk Factors" in Part I, Item 1A of our 2024 Form 10-K 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.

Current wording

Refer to the "Risk Factors" disclosed in the sections entitled "Risk Factors" in Part I, Item 1A of our 2024 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.