NOTE 2. CHANGES IN BUSINESS

Pending Acquisition

On December 29, 2017, the Company entered into a definitive purchase agreement to acquire certain U.S. rebar steel mill and fabrication assets from Gerdau S.A. (the "Business"), a producer of long and specialty steel products in the Americas for a cash purchase price of $600.0 million, subject to customary purchase price adjustments. The acquisition includes 33 rebar fabrication facilities in the U.S. as well as steel mills located in Knoxville, Tennessee; Jacksonville, Florida; Sayreville, New Jersey and Rancho Cucamonga, California, with annual melt capacity of 2.7 million tons, bringing the Company’s global melt capacity to approximately 7.2 million tons at the close of the transaction. The closing of the transaction is expected before calendar year-end 2018 and is subject to the satisfaction or waiver of customary closing conditions, including customary regulatory review.

The Company expects to fund the purchase price for the acquisition, including related fees and expenses, with proceeds from the offering of the 2026 Notes (as defined in Note 7, Credit Arrangements), together with the proceeds from the incurrence of a new term loan under the Company's existing Credit Agreement (as defined in Note 7, Credit Arrangements) and cash on hand.

Dispositions and Businesses Held for Sale

During the third quarter of fiscal 2018, the Company sold substantially all of the assets of its structural steel fabrication operations, which were part of the Americas Fabrication segment. This disposition did not meet the criteria for discontinued operations. As a result of the disposition, during the nine months ended May 31, 2018, the Company recognized impairment charges of $13.0 million, of which $0.9 million was recognized during the third quarter of fiscal 2018. The assets and liabilities related to these operations were included as assets and liabilities of businesses held for sale & discontinued operations in the condensed consolidated balance sheet at August 31, 2017, and consisted of the following:



(in thousands)	August 31, 2017*
Assets:
Accounts receivable	$	38,279
Inventories	10,676
Other current assets	77
Assets of businesses held for sale & discontinued operations	$	49,032

Liabilities:
Accounts payable-trade	$	13,108
Accrued expenses and other payables	16,785
Liabilities of businesses held for sale & discontinued operations	$	29,893

_________________

* At August 31, 2017, $8.8 million of property, plant, and equipment, net of accumulated depreciation and amortization was included in other noncurrent assets on the consolidated balance sheets.

Discontinued Operations

In June 2017, the Company announced a plan to exit its International Marketing and Distribution segment, including its trading operations in the U.S., Asia, and Australia. As an initial step in this plan, on August 31, 2017, the Company completed the sale of its raw materials business, CMC Cometals. Additionally, during the second quarter of fiscal 2018, the remaining operations related to the Company's steel trading business in the U.S. and Asia were substantially wound down. Finally, during the third quarter of fiscal 2018, the Company sold certain assets and liabilities of its Australian steel trading business, resulting in an overall transaction loss, including selling costs, of $5.3 million. Such loss was primarily due to impairment charges related to accumulated foreign currency translation, $4.2 million of which the Company recorded during fiscal 2017. The results of these activities are included in discontinued operations in the unaudited condensed consolidated statements of earnings for all periods presented. With the conclusion of operations in this segment, any activities carried out within the segment are no longer of ongoing significance; accordingly, segment data with respect to International Marketing and Distribution activities will no longer be reported. See Note 14, Business Segments, for further discussion of the exit of the International Marketing and Distribution segment.

The major classes of line items constituting earnings from discontinued operations in the unaudited condensed consolidated statements of earnings, which primarily relate to International Marketing and Distribution activities, are presented in the table below.



	Three Months Ended May 31,						Nine Months Ended May 31,
(in thousands)	2018			2017			2018			2017
Net sales	$	3,262		$	337,903		$	304,384		$	847,338
Costs and expenses:
Cost of goods sold	4,233			312,917			276,371			784,836
Selling, general and administrative expenses	2,418			15,740			23,078			42,919
Interest expense	—			(79		)	(86		)	(104		)
Earnings (loss) before income taxes	(3,389		)	9,325			5,021			19,687
Income taxes (benefit)	(1,029		)	1,626			2,052			4,059
Earnings (loss) from discontinued operations	$	(2,360	)	$	7,699		$	2,969		$	15,628

There were no material operating or investing non-cash items for discontinued operations for the nine months ended May 31, 2018 and 2017.

Components of the International Marketing and Distribution segment meeting the criteria for discontinued operations have been re-classified as assets and liabilities of business held for sale & discontinued operations in the unaudited condensed consolidated balance sheets for all periods presented, the major components of which are presented in the table below.



(in thousands)	May 31, 2018		August 31, 2017*
Assets:
Accounts receivable	$	6,954	$	106,905
Inventories, net	—		141,135
Other current assets	4,111		38
Property, plant and equipment, net	217		—
Assets of businesses held for sale & discontinued operations	$	11,282	$	248,078

Liabilities:
Accounts payable-trade	$	—	$	42,563
Accrued expenses and other payables	2,843		15,372
Liabilities of businesses held for sale & discontinued operations	$	2,843	$	57,935

_________________

* Property, plant, and equipment, net of accumulated depreciation and amortization of $0.8 million at August 31, 2017 was included in other noncurrent assets on the unaudited condensed consolidated balance sheets.