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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM 10-Q
___________________________________
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2020
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-4304
___________________________________
COMMERCIAL METALS COMPANY
(Exact Name of Registrant as Specified in Its Charter)
___________________________________

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

6565 N. MacArthur Blvd.
Irving, Texas 75039
(Address of Principal Executive Offices) (Zip Code)
(214) 689-4300
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class |  | Trading Symbol(s) |  | Name of Each Exchange on Which Registered
Common Stock, $0.01 par value |  | CMC |  | New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 ("Exchange Act") during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☒ | Accelerated filer | ☐
Non-accelerated filer | ☐ | Smaller reporting company | ☐
|  | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 24, 2020, 119,068,720 shares of the registrant's common stock, par value $0.01 per share, were outstanding.

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION | 3
Item 1. Financial Statements (Unaudited) | 3
Condensed Consolidated Statements of Earnings - Three and nine months ended May 31, 2020 and 2019 | 3
Condensed Consolidated Statements of Comprehensive Income - Three and nine months ended May 31, 2020 and 2019 | 4
Condensed Consolidated Balance Sheets - May 31, 2020 and August 31, 2019 | 5
Condensed Consolidated Statements of Cash Flows - Nine months ended May 31, 2020 and 2019 | 6
Condensed Consolidated Statements of Stockholders' Equity - Three and nine months ended May 31, 2020 and 2019 | 7
Notes to Condensed Consolidated Financial Statements | 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 22
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 30
Item 4. Controls and Procedures | 30
PART II — OTHER INFORMATION | 31
Item 1. Legal Proceedings | 31
Item 1A. Risk Factors | 31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 32
Item 3. Defaults Upon Senior Securities | 32
Item 4. Mine Safety Disclosures | 32
Item 5. Other Information | 32
Item 6. Exhibits | 33
Signature | 34

2

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) |  |  |  |  |  |  |  |
|  | Three Months Ended May 31, |  |  |  | Nine Months Ended May 31, |  |
(in thousands, except share data) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Net sales |  | $ | 1,341,683 |  |  | $ | 1,605,872 |  |  | $ | 4,067,354 |  |  | $ | 4,285,997 |
Costs and expenses: |  |  |  |  |  |  |  |
Cost of goods sold |  | 1,116,353 |  |  | 1,364,242 |  |  | 3,385,963 |  |  | 3,735,168 |
Selling, general and administrative expenses |  | 115,965 |  |  | 115,446 |  |  | 342,502 |  |  | 331,389 |
Interest expense |  | 15,409 |  |  | 18,513 |  |  | 47,875 |  |  | 53,671 |
Asset impairments |  | 5,983 |  |  | 15 |  |  | 6,513 |  |  | 15 |
|  | 1,253,710 |  |  | 1,498,216 |  |  | 3,782,853 |  |  | 4,120,243 |
Earnings from continuing operations before income taxes |  | 87,973 |  |  | 107,656 |  |  | 284,501 |  |  | 165,754 |
Income taxes |  | 23,804 |  |  | 29,105 |  |  | 73,981 |  |  | 52,855 |
Earnings from continuing operations |  | 64,169 |  |  | 78,551 |  |  | 210,520 |  |  | 112,899 |
Earnings (loss) from discontinued operations before income taxes |  | 745 |  |  | (190) |  |  | 1,941 |  |  | (808) |
Income taxes (benefit) |  | 180 |  |  | (29) |  |  | 581 |  |  | 109 |
Earnings (loss) from discontinued operations |  | 565 |  |  | (161) |  |  | 1,360 |  |  | (917) |
Net earnings |  | $ | 64,734 |  |  | $ | 78,390 |  |  | $ | 211,880 |  |  | $ | 111,982 |
Basic earnings per share* |  |  |  |  |  |  |  |
Earnings from continuing operations |  | $ | 0.54 |  |  | $ | 0.67 |  |  | $ | 1.77 |  |  | $ | 0.96 |
Earnings (loss) from discontinued operations |  | — |  |  | — |  |  | 0.01 |  |  | (0.01) |
Net earnings |  | $ | 0.54 |  |  | $ | 0.66 |  |  | $ | 1.78 |  |  | $ | 0.95 |
Diluted earnings per share* |  |  |  |  |  |  |  |
Earnings from continuing operations |  | $ | 0.53 |  |  | $ | 0.66 |  |  | $ | 1.75 |  |  | $ | 0.95 |
Earnings (loss) from discontinued operations |  | — |  |  | — |  |  | 0.01 |  |  | (0.01) |
Net earnings |  | $ | 0.54 |  |  | $ | 0.66 |  |  | $ | 1.76 |  |  | $ | 0.94 |
Average basic shares outstanding |  | 119,192,962 |  |  | 118,045,362 |  |  | 118,828,870 |  |  | 117,762,945 |
Average diluted shares outstanding |  | 120,278,741 |  |  | 119,145,566 |  |  | 120,277,737 |  |  | 119,013,014 |

See notes to condensed consolidated financial statements.
_________________
*Earnings Per Share ("EPS") is calculated independently for each component and may not sum to Net EPS due to rounding.
3

COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) |  |  |  |  |  |  |  |
|  | Three Months Ended May 31, |  |  |  | Nine Months Ended May 31, |  |
(in thousands) |  |  | 2020 |  | 2019 |  | 2020 |  | 2019
Net earnings |  |  | $ | 64,734 |  |  | $ | 78,390 |  |  | $ | 211,880 |  |  | $ | 111,982 |
Other comprehensive income, net of income taxes: |  |  |  |  |  |  |  |  |
Foreign currency translation adjustment |  |  | (8,037) |  |  | (5,135) |  |  | (2,179) |  |  | (14,278) |
Reclassification for translation gain realized upon liquidation of investment in foreign entity |  |  | 2 |  |  | 19 |  |  | — |  |  | 856 |
Foreign currency translation adjustment |  |  | (8,035) |  |  | (5,116) |  |  | (2,179) |  |  | (13,422) |
Net unrealized loss on derivatives: |  |  |  |  |  |  |  |  |
Unrealized holding loss |  | (5,143) |  |  | (145) |  |  | (8,075) |  |  | (267) |
Reclassification for loss included in net earnings |  |  | (81) |  |  | (71) |  |  | (253) |  |  | (154) |
Net unrealized loss on derivatives |  |  | (5,224) |  |  | (216) |  |  | (8,328) |  |  | (421) |
Defined benefit obligation: |  |  |  |  |  |  |  |
Amortization of prior services |  |  | (8) |  |  | (6) |  |  | (24) |  |  | (21) |
Reclassification for settlement losses |  |  | — |  |  | — |  |  | — |  |  | 1,316 |
Defined benefit obligation |  |  | (8) |  |  | (6) |  |  | (24) |  |  | 1,295 |
Other comprehensive loss |  |  | (13,267) |  |  | (5,338) |  |  | (10,531) |  |  | (12,548) |
Comprehensive income |  |  | $ | 51,467 |  |  | $ | 73,052 |  |  | $ | 201,349 |  |  | $ | 99,434 |

See notes to condensed consolidated financial statements.
4

COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) |  |  |  |
(in thousands, except share data) |  | May 31, 2020 |  | August 31, 2019
Assets |  |  |  |
Current assets: |  |  |  |
Cash and cash equivalents |  | $ | 462,110 |  |  | $ | 192,461 |
Accounts receivable (less allowance for doubtful accounts of $8,661 and $8,403) |  | 880,602 |  |  | 1,016,088 |
Inventories, net |  | 644,887 |  |  | 692,368 |
Other current assets |  | 157,390 |  |  | 179,088 |
Total current assets |  | 2,144,989 |  |  | 2,080,005 |
Property, plant and equipment, net |  | 1,513,469 |  |  | 1,500,971 |
Goodwill |  | 64,126 |  |  | 64,138 |
Other noncurrent assets |  | 232,303 |  |  | 113,657 |
Total assets |  | $ | 3,954,887 |  |  | $ | 3,758,771 |
Liabilities and stockholders' equity |  |  |  |
Current liabilities: |  |  |  |
Accounts payable |  | $ | 230,280 |  |  | $ | 288,005 |
Accrued expenses and other payables |  | 363,066 |  |  | 353,786 |
Acquired unfavorable contract backlog |  | 16,726 |  |  | 35,360 |
Current maturities of long-term debt and short-term borrowings |  | 17,271 |  |  | 17,439 |
Total current liabilities |  | 627,343 |  |  | 694,590 |
Deferred income taxes |  | 129,571 |  |  | 79,290 |
Other noncurrent liabilities |  | 243,511 |  |  | 133,620 |
Long-term debt |  | 1,153,800 |  |  | 1,227,214 |
Total liabilities |  | 2,154,225 |  |  | 2,134,714 |
Commitments and contingencies (Note 13) |  |  |  |
Stockholders' equity: |  |  |  |
Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued 129,060,664 shares; outstanding 119,065,133 and 117,924,938 shares |  | 1,290 |  |  | 1,290 |
Additional paid-in capital |  | 356,846 |  |  | 358,668 |
Accumulated other comprehensive loss |  | (134,657) |  |  | (124,126) |
Retained earnings |  | 1,754,491 |  |  | 1,585,379 |
Less treasury stock 9,995,531 and 11,135,726 shares at cost |  | (177,520) |  |  | (197,350) |
Stockholders' equity |  | 1,800,450 |  |  | 1,623,861 |
Stockholders' equity attributable to noncontrolling interests |  | 212 |  |  | 196 |
Total stockholders' equity |  | 1,800,662 |  |  | 1,624,057 |
Total liabilities and stockholders' equity |  | $ | 3,954,887 |  |  | $ | 3,758,771 |

See notes to condensed consolidated financial statements.
5

COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |  |  |  |
|  | Nine Months Ended May 31, |  |
(in thousands) |  | 2020 |  | 2019
Cash flows from (used by) operating activities: |  |  |  |
Net earnings |  | $ | 211,880 |  |  | $ | 111,982 |
Adjustments to reconcile net earnings to cash flows from (used by) operating activities: |  |  |  |
Depreciation and amortization |  | 124,104 |  |  | 117,617 |
Deferred income taxes and other long-term taxes |  | 47,761 |  |  | 36,367 |
Stock-based compensation |  | 21,975 |  |  | 17,350 |
Amortization of acquired unfavorable contract backlog |  | (18,676) |  |  | (58,202) |
Asset impairments |  | 6,513 |  |  | 15 |
Net gain on disposals of subsidiaries, assets and other |  | (5,476) |  |  | (1,334) |
Other |  | 1,933 |  |  | 651 |
Changes in operating assets and liabilities |  | 141,819 |  |  | (75,422) |
Beneficial interest in securitized accounts receivable |  | — |  |  | (367,521) |
Net cash flows from (used by) operating activities |  | 531,833 |  |  | (218,497) |
Cash flows from (used by) investing activities: |  |  |  |
Capital expenditures |  | (134,092) |  |  | (91,753) |
Proceeds from the sale of property, plant and equipment |  | 14,091 |  |  | 2,503 |
Acquisitions, net of cash acquired |  | (9,850) |  |  | (700,941) |
Proceeds from insurance, sale of discontinued operations and other |  | 974 |  |  | 6,298 |
Beneficial interest in securitized accounts receivable |  | — |  |  | 367,521 |
Net cash flows used by investing activities: |  | (128,877) |  |  | (416,372) |
Cash flows from (used by) financing activities: |  |  |  |
Proceeds from issuance of long-term debt |  | 22,566 |  |  | 180,000 |
Repayments of long-term debt |  | (110,470) |  |  | (24,138) |
Proceeds from accounts receivable programs |  | 171,133 |  |  | 223,143 |
Repayments under accounts receivable programs |  | (171,285) |  |  | (209,363) |
Dividends |  | (42,768) |  |  | (42,387) |
Stock issued under incentive and purchase plans, net of forfeitures |  | (1,921) |  |  | (2,364) |
Contribution from noncontrolling interests |  | 16 |  |  | 10 |
Net cash flows from (used by) financing activities |  | (132,729) |  |  | 124,901 |
Effect of exchange rate changes on cash |  | 210 |  |  | (341) |
Increase (decrease) in cash, restricted cash and cash equivalents |  | 270,437 |  |  | (510,309) |
Cash, restricted cash and cash equivalents at beginning of period |  | 193,729 |  |  | 632,615 |
Cash, restricted cash and cash equivalents at end of period |  | $ | 464,166 |  |  | $ | 122,306 |

See notes to condensed consolidated financial statements.

Supplemental information: |  | Nine Months Ended May 31, |  |
(in thousands) |  | 2020 |  | 2019
Cash paid for income taxes |  | $ | 29,566 |  |  | $ | 6,852 |
Cash paid for interest |  | 49,159 |  |  | 53,773 |
Noncash activities: |  |  |  |
Liabilities related to additions of property, plant and equipment |  | 31,881 |  |  | 37,602 |
Cash and cash equivalents |  | $ | 462,110 |  |  | $ | 120,315 |
Restricted cash |  | 2,056 |  |  | 1,991 |
Total cash, restricted cash and cash equivalents |  | $ | 464,166 |  |  | $ | 122,306 |

6

COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) |  |  |  |  |  |  |  |  |
| Three Months Ended May 31, 2020 |  |  |  |  |  |  |  |
| Common Stock |  | Additional | Accumulated Other |  | Treasury Stock |  | Non- |
(in thousands, except share data) | Number of Shares | Amount | Paid-In Capital | Comprehensive Loss | Retained Earnings | Number of Shares | Amount | controlling Interests | Total
Balance, February 29, 2020 | 129,060,664 |  | $ | 1,290 |  | $ | 351,481 |  | $ | (121,390) |  | $ | 1,704,045 |  | (9,998,775) |  | $ | (177,583) |  | $ | 212 |  | $ | 1,758,055 |
Net earnings |  |  |  |  | 64,734 |  |  |  |  | 64,734 |
Other comprehensive loss |  |  |  | (13,267) |  |  |  |  |  | (13,267) |
Dividends ($0.12 per share) |  |  |  |  | (14,288) |  |  |  |  | (14,288) |
Issuance of stock under incentive and purchase plans, net of forfeitures |  |  | 479 |  |  |  | 3,244 |  | 63 |  |  | 542 |
Stock-based compensation |  |  | 4,886 |  |  |  |  |  |  |  | 4,886 |
Contribution of noncontrolling interests |  |  |  |  |  |  |  | — |  | — |
Balance, May 31, 2020 | 129,060,664 |  | $ | 1,290 |  | $ | 356,846 |  | $ | (134,657) |  | $ | 1,754,491 |  | (9,995,531) |  | $ | (177,520) |  | $ | 212 |  | $ | 1,800,662 |
| Nine Months Ended May 31, 2020 |  |  |  |  |  |  |  |
| Common Stock |  | Additional | Accumulated Other |  | Treasury Stock |  | Non- |
(in thousands, except share data) | Number of Shares | Amount | Paid-In Capital | Comprehensive Loss | Retained Earnings | Number of Shares | Amount | controlling Interests | Total
Balance, September 1, 2019 | 129,060,664 |  | $ | 1,290 |  | $ | 358,668 |  | $ | (124,126) |  | $ | 1,585,379 |  | (11,135,726) |  | $ | (197,350) |  | $ | 196 |  | $ | 1,624,057 |
Net earnings |  |  |  |  | 211,880 |  |  |  |  | 211,880 |
Other comprehensive loss |  |  |  | (10,531) |  |  |  |  |  | (10,531) |
Dividends ($0.36 per share) |  |  |  |  | (42,768) |  |  |  |  | (42,768) |
Issuance of stock under incentive and purchase plans, net of forfeitures |  |  | (21,751) |  |  |  | 1,140,195 |  | 19,830 |  |  | (1,921) |
Stock-based compensation |  |  | 19,929 |  |  |  |  |  |  | 19,929 |
Contribution of noncontrolling interests |  |  |  |  |  |  |  | 16 |  | 16 |
Balance, May 31, 2020 | 129,060,664 |  | $ | 1,290 |  | $ | 356,846 |  | $ | (134,657) |  | $ | 1,754,491 |  | (9,995,531) |  | $ | (177,520) |  | $ | 212 |  | $ | 1,800,662 |

7

| Three Months Ended May 31, 2019 |  |  |  |  |  |  |  |
| Common Stock |  | Additional | Accumulated Other |  | Treasury Stock |  | Non- |
(in thousands, except share data) | Number of Shares | Amount | Paid-In Capital | Comprehensive Loss | Retained Earnings | Number of Shares | Amount | controlling Interests | Total
Balance, February 28, 2019 | 129,060,664 |  | $ | 1,290 |  | $ | 346,156 |  | $ | (100,887) |  | $ | 1,449,159 |  | (11,139,594) |  | $ | (197,418) |  | $ | 196 |  | $ | 1,498,496 |
Net earnings |  |  |  |  | 78,390 |  |  |  |  | 78,390 |
Other comprehensive loss |  |  |  | (5,338) |  |  |  |  |  | (5,338) |
Dividends ($0.12 per share) |  |  |  |  | (14,206) |  |  |  |  | (14,206) |
Issuance of stock under incentive and purchase plans, net of forfeitures |  |  | 439 |  |  |  | 3,045 |  | 53 |  |  | 492 |
Stock-based compensation and other |  |  | 6,286 |  |  | 75 |  |  |  |  | 6,361 |
Balance, May 31, 2019 | 129,060,664 |  | $ | 1,290 |  | $ | 352,881 |  | $ | (106,225) |  | $ | 1,513,418 |  | (11,136,549) |  | $ | (197,365) |  | $ | 196 |  | $ | 1,564,195 |
| Nine Months Ended May 31, 2019 |  |  |  |  |  |  |  |
| Common Stock |  | Additional | Accumulated Other |  | Treasury Stock |  | Non- |
(in thousands, except share data) | Number of Shares | Amount | Paid-In Capital | Comprehensive Loss | Retained Earnings | Number of Shares | Amount | controlling Interests | Total
Balance, September 1, 2018 | 129,060,664 |  | $ | 1,290 |  | $ | 352,674 |  | $ | (93,677) |  | $ | 1,446,495 |  | (12,045,106) |  | $ | (213,385) |  | $ | 186 |  | $ | 1,493,583 |
Net earnings |  |  |  |  | 111,982 |  |  |  |  | 111,982 |
Other comprehensive loss |  |  |  | (12,548) |  |  |  |  |  | (12,548) |
Dividends ($0.36 per share) |  |  |  |  | (42,387) |  |  |  |  | (42,387) |
Issuance of stock under incentive and purchase plans, net of forfeitures |  |  | (18,384) |  |  |  | 908,557 |  | 16,020 |  |  | (2,364) |
Stock-based compensation and other |  |  | 18,591 |  |  | 75 |  |  |  |  | 18,666 |
Contribution of noncontrolling interest |  |  |  |  |  |  |  | 10 |  | 10 |
Adoption of ASC 606 adjustment |  |  |  |  | (2,747) |  |  |  |  | (2,747) |
Balance, May 31, 2019 | 129,060,664 |  | $ | 1,290 |  | $ | 352,881 |  | $ | (106,225) |  | $ | 1,513,418 |  | (11,136,549) |  | $ | (197,365) |  | $ | 196 |  | $ | 1,564,195 |

See notes to condensed consolidated financial statements.
8

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") on a basis consistent with that used in the Annual Report on Form 10-K for the year ended August 31, 2019 ("2019 Form 10-K") filed by Commercial Metals Company ("CMC," and together with its consolidated subsidiaries, the "Company") with the Securities and Exchange Commission (the "SEC") and include all normal recurring adjustments necessary to present fairly the condensed consolidated balance sheets and the condensed consolidated statements of earnings, comprehensive income, cash flows and stockholders' equity for the periods indicated. These notes should be read in conjunction with the consolidated financial statements included in the 2019 Form 10-K. The results of operations for the three and nine month periods are not necessarily indicative of the results to be expected for the full fiscal year.
Recently Adopted Accounting Pronouncements
On September 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), as amended, (“ASU 2016-02”), using the modified retrospective transition approach. ASU 2016-02 requires a lessee to recognize a right-of-use ("ROU") asset and a lease liability on its balance sheet for all leases with terms longer than twelve months. The Company’s financial statements for periods prior to September 1, 2019 were not modified for the application of this ASU. Upon adoption of ASU 2016-02, the Company recorded the following amounts associated with operating leases in its condensed consolidated balance sheet at September 1, 2019: $113.4 million of ROU assets in other noncurrent assets, $30.9 million of lease liabilities in accrued expenses and other payables and $84.9 million of lease liabilities in other noncurrent liabilities. There was no impact to the opening balance of retained earnings as a result of implementing ASU 2016-02. The Company elected the package of three practical expedients available under the ASU. Additionally, the Company implemented appropriate changes to internal processes and controls to support recognition, subsequent measurement and disclosures.
The Company's leases are primarily for office space, land and equipment. The Company determines if an arrangement is a lease at inception of a contract if the terms state the Company has the right to direct the use of and obtain substantially all the economic benefits from a specific asset identified in the contract. The ROU assets represent the Company's right to use the underlying assets for the lease term, and the lease liabilities represent the obligation to make lease payments arising from the leases. ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments to be made over the lease term. Certain of the Company's lease agreements contain options to extend the lease. The Company evaluates these options on a lease-by-lease basis, and if the Company determines it is reasonably certain to be exercised, the lease term includes the extension. The Company uses its incremental borrowing rate at lease commencement to determine the present value of lease payments, and lease expense is recognized on a straight-line basis over the lease term. The incremental borrowing rate is the rate of interest the Company could borrow on a collateralized basis over a similar term with similar payments. The Company does not record leases with an initial term of twelve months or less (“short-term leases”) in its condensed consolidated balance sheets.
Certain of the Company's lease agreements include payments for certain variable costs not determinable upon lease commencement, including mileage, utilities, fuel and inflation adjustments. These variable lease payments are recognized in cost of goods sold and selling, general and administrative expenses, but are not included in the ROU asset or lease liability balances. The Company's lease agreements do not contain any material residual value guarantees, restrictions or covenants.
Recently Issued Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 eliminates certain exceptions to the general principles in Accounting Standards Codification 740 and also clarifies and amends existing guidance to improve consistent application. This standard is effective for annual periods beginning after December 15, 2020, including interim periods therein. The Company currently does not expect ASU 2019-12 to have a material effect on its consolidated financial statements; however, the Company will continue to evaluate the impact of this guidance.
9

NOTE 2. CHANGES IN BUSINESS
Fiscal 2020 Acquisition
On February 3, 2020, the Company's subsidiary CMC Poland Sp. z.o.o. ("CMCP") acquired P.P.U. Ecosteel Sp. z.o.o. ("Ecosteel"), a steel mesh producer located in Zawiercie, Poland. This acquisition complements CMCP's existing mesh production and increases sales to other markets in Europe. The operating results of this facility are included in the International Mill reporting segment.
Facility Closures
In May 2020, the Company idled a fabrication facility and recorded $4.8 million of expense related to ROU asset impairments and employee-related charges.
In October 2019, the Company closed the melting operations at its Rancho Cucamonga facility and recorded $7.2 million of expense related to severance, pension curtailment and vendor agreement terminations.
Fiscal 2019 Acquisition
On November 5, 2018 (the "Acquisition Date"), the Company completed the acquisition of 33 rebar fabrication facilities in the United States ("U.S."), as well as four electric arc furnace ("EAF") mini mills located in Knoxville, Tennessee; Jacksonville, Florida; Sayreville, New Jersey and Rancho Cucamonga, California from Gerdau S.A., hereinafter collectively referred to as the "Acquired Businesses." The total cash purchase price, including working capital adjustments, was $701.2 million, and was funded through a combination of domestic cash on-hand and borrowings under a term loan (the "Term Loan").
The purchase price paid was allocated between the acquired mills and fabrication facilities. The results of operations of the Acquired Businesses are reflected in the Company’s condensed consolidated financial statements from the Acquisition Date. The purchase price was allocated among assets acquired and liabilities assumed at fair value and was finalized on November 5, 2019.
Pro Forma Supplemental Information
Supplemental information on an unaudited pro forma basis is presented below as if the acquisition of the Acquired Businesses (the "Acquisition") occurred on September 1, 2017. The pro forma financial information is presented for comparative purposes only, based on significant estimates and assumptions, which the Company believes to be reasonable, but not necessarily indicative of future results of operations or the results that would have been reported if the Acquisition had been completed on September 1, 2017. These results were not used as part of management analysis of the financial results and performance of the Company or the Acquired Businesses. These results are adjusted, where possible, for transaction and integration-related costs.

|  | Three Months Ended May 31, |  |  |  | Nine Months Ended May 31, |  |
(in thousands) |  | 2019 |  | 2018 |  | 2019 |  | 2018
Pro forma net sales* |  | $ | 1,582,478 |  |  | $ | 1,648,962 |  |  | $ | 4,507,485 |  |  | $ | 4,560,929 |
Pro forma net earnings** |  | 63,018 |  |  | 49,402 |  |  | 88,987 |  |  | 40,311 |

_________________
*Pro forma net sales for the three and nine months ended May 31, 2018 includes estimated fair value adjustments related to amortization of unfavorable contract backlog. The impact of the amortization of unfavorable contract backlog has been removed from the pro forma net sales for the three and nine months ended May 31, 2019.
** Pro forma net earnings for the three and nine months ended May 31, 2018 reflects the impact of fair value adjustments related to the amortization of unfavorable contract backlog described above. Pro forma net earnings for the nine months ended May 31, 2018 includes estimated fair value adjustments related to inventory step-up, as well as non-recurring acquisition and integration costs of approximately $49.8 million.
10

NOTE 3. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following tables reflect the changes in accumulated other comprehensive income (loss) ("AOCI"):

|  | Three Months Ended May 31, 2020 |  |  |  |  |  |
(in thousands) |  | Foreign Currency Translation |  | Unrealized Gain (Loss) on Derivatives |  | Defined Benefit Obligation |  | Total AOCI
Balance, February 29, 2020 |  | $ | (115,642) |  |  | $ | (1,998) |  |  | $ | (3,750) |  |  | $ | (121,390) |
Other comprehensive loss before reclassifications |  | (8,037) |  |  | (6,350) |  |  | (10) |  |  | (14,397) |
Amounts reclassified from AOCI |  | 2 |  |  | (98) |  |  | — |  |  | (96) |
Income taxes |  | — |  |  | 1,224 |  |  | 2 |  |  | 1,226 |
Net other comprehensive loss |  | (8,035) |  |  | (5,224) |  |  | (8) |  |  | (13,267) |
Balance, May 31, 2020 |  | $ | (123,677) |  |  | $ | (7,222) |  |  | $ | (3,758) |  |  | $ | (134,657) |
|  | Nine Months Ended May 31, 2020 |  |  |  |  |  |
(in thousands) |  | Foreign Currency Translation |  | Unrealized Gain (Loss) on Derivatives |  | Defined Benefit Obligation |  | Total AOCI
Balance, August 31, 2019 |  | $ | (121,498) |  |  | $ | 1,106 |  |  | $ | (3,734) |  |  | $ | (124,126) |
Other comprehensive loss before reclassifications |  | (2,179) |  |  | (9,969) |  |  | (34) |  |  | (12,182) |
Amounts reclassified from AOCI |  | — |  |  | (312) |  |  | — |  |  | (312) |
Income taxes |  | — |  |  | 1,953 |  |  | 10 |  |  | 1,963 |
Net other comprehensive loss |  | (2,179) |  |  | (8,328) |  |  | (24) |  |  | (10,531) |
Balance, May 31, 2020 |  | $ | (123,677) |  |  | $ | (7,222) |  |  | $ | (3,758) |  |  | $ | (134,657) |

|  | Three Months Ended May 31, 2019 |  |  |  |  |  |
(in thousands) |  | Foreign Currency Translation |  | Unrealized Gain (Loss) on Derivatives |  | Defined Benefit Obligation |  | Total AOCI
Balance, February 28, 2019 |  | $ | (100,943) |  |  | $ | 1,151 |  |  | $ | (1,095) |  |  | $ | (100,887) |
Other comprehensive loss before reclassifications |  | (5,135) |  |  | (86) |  |  | (6) |  |  | (5,227) |
Amounts reclassified from AOCI |  | 19 |  |  | (181) |  |  | — |  |  | (162) |
Income taxes |  | — |  |  | 51 |  |  | — |  |  | 51 |
Net other comprehensive loss |  | (5,116) |  |  | (216) |  |  | (6) |  |  | (5,338) |
Balance, May 31, 2019 |  | $ | (106,059) |  |  | $ | 935 |  |  | $ | (1,101) |  |  | $ | (106,225) |
|  | Nine Months Ended May 31, 2019 |  |  |  |  |  |
(in thousands) |  | Foreign Currency Translation |  | Unrealized Gain (Loss) on Derivatives |  | Defined Benefit Obligation |  | Total AOCI
Balance, August 31, 2018 |  | $ | (92,637) |  |  | $ | 1,356 |  |  | $ | (2,396) |  |  | $ | (93,677) |
Other comprehensive loss before reclassifications |  | (14,278) |  |  | (190) |  |  | (25) |  |  | (14,493) |
Amounts reclassified from AOCI |  | 856 |  |  | (330) |  |  | 1,666 |  |  | 2,192 |
Income taxes (benefit) |  | — |  |  | 99 |  |  | (346) |  |  | (247) |
Net other comprehensive income (loss) |  | (13,422) |  |  | (421) |  |  | 1,295 |  |  | (12,548) |
Balance, May 31, 2019 |  | $ | (106,059) |  |  | $ | 935 |  |  | $ | (1,101) |  |  | $ | (106,225) |

Items reclassified out of AOCI were immaterial for the three and nine months ended May 31, 2020 and 2019. Thus, the corresponding line items in the condensed consolidated statements of earnings to which the items were reclassified are not presented.
11

NOTE 4. REVENUE RECOGNITION
In the Americas Mills, Americas Recycling and International Mill segments, revenue is recognized at a point in time concurrent with the transfer of control, which usually occurs, depending on shipping terms, upon shipment or customer receipt.
In the Americas Fabrication segment, each contract represents a single performance obligation. Revenue is either recognized over time or equal to billing under an available practical expedient. For contracts where the Company provides fabricated product and installation services, revenue is recognized over time using an input method. For the three and nine months ended May 31, 2020, these contracts represented approximately 23% and 25%, respectively, of net sales in the Americas Fabrication segment. For these contracts, the measure of progress is based on contract costs incurred to date compared to total estimated contract costs, which provides a reasonable depiction of the Company’s progress towards satisfaction of the performance obligation as there is a direct relationship between costs incurred by the Company and the transfer of the fabricated product and installation services. Revenue from contracts where the Company does not provide installation services is recognized over time using an output method. For the three and nine months ended May 31, 2020, these contracts represented approximately 25% of net sales in the Americas Fabrication segment. For these contracts, the Company uses tons shipped compared to total estimated tons, which provides a reasonable depiction of the transfer of contract value to the customer, as there is a direct relationship between the units shipped by the Company and the transfer of the fabricated product. Significant judgment is required to evaluate total estimated costs used in the input method and total estimated tons in the output method. If estimated total consolidated costs on any contract are greater than the net contract revenues, the Company recognizes the entire estimated loss in the period the loss becomes known. The cumulative effect of revisions to estimates related to net contract revenues, costs to complete or total planned quantity is recorded in the period in which such revisions are identified. The Company does not exercise significant judgment in determining the transaction price. For the three and nine months ended May 31, 2020, the remaining 52% and 50%, respectively, of net sales in the Americas Fabrication segment was recognized as amounts were billed to the customer.
Payment terms and conditions vary by contract type, although the Company generally requires customers to pay within 30 days of invoice date. The timing of revenue recognition for certain Americas Fabrication contracts, as described above, differs from the timing of invoicing to customers. The Company records an asset when revenue is recognized prior to invoicing and a liability when revenue is recognized after invoicing. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined the contracts do not include a significant financing component.
The following table provides information about assets and liabilities from contracts with customers.

(in thousands) |  | May 31, 2020 |  | August 31, 2019
Contract assets (included in accounts receivable) |  | $ | 55,687 |  |  | $ | 103,805 |
Contract liabilities (included in accrued expenses and other payables) |  | 21,900 |  |  | 37,165 |

The entire contract liability as of August 31, 2019 was recognized in the nine months ended May 31, 2020.
Remaining Performance Obligations
As of May 31, 2020, $732.3 million has been allocated to remaining performance obligations in the Americas Fabrication segment, excluding those contracts where revenue is recognized equal to billing. Of this amount, the Company estimates the remaining performance obligations will be recognized as revenue after May 31, 2020 as follows: 40% in the first twelve months, 48% in the following twelve months, and 12% thereafter. The duration of contracts in the Americas Mills, Americas Recycling and International Mill segments are typically less than one year.
12

Disaggregation of Revenue
The following tables display revenue by reportable segment from external customers, disaggregated by major source. The Company believes disaggregating by these categories depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

|  | Three Months Ended May 31, 2020 |  |  |  |  |  |  |  |  |  |
(in thousands) |  | Americas Recycling |  | Americas Mills |  | Americas Fabrication |  | International Mill |  | Corporate and Other |  | Total
Steel products |  | $ | 204 |  |  | $ | 420,169 |  |  | $ | 494,519 |  |  | $ | 165,626 |  |  | $ | — |  |  | $ | 1,080,518 |
Ferrous scrap |  | 63,735 |  |  | 8,698 |  |  | — |  |  | 61 |  |  | — |  |  | 72,494 |
Nonferrous scrap |  | 83,650 |  |  | 3,091 |  |  | — |  |  | 2,438 |  |  | — |  |  | 89,179 |
Construction materials |  | — |  |  | — |  |  | 72,637 |  |  | — |  |  | — |  |  | 72,637 |
Other |  | 432 |  |  | 19,320 |  |  | 626 |  |  | 5,340 |  |  | 1,137 |  |  | 26,855 |
Total |  | $ | 148,021 |  |  | $ | 451,278 |  |  | $ | 567,782 |  |  | $ | 173,465 |  |  | $ | 1,137 |  |  | $ | 1,341,683 |
|  | Nine Months Ended May 31, 2020 |  |  |  |  |  |  |  |  |  |
(in thousands) |  | Americas Recycling |  | Americas Mills |  | Americas Fabrication |  | International Mill |  | Corporate and Other |  | Total
Steel products |  | $ | 459 |  |  | $ | 1,298,980 |  |  | $ | 1,436,011 |  |  | $ | 494,853 |  |  | $ | — |  |  | $ | 3,230,303 |
Ferrous scrap |  | 188,077 |  |  | 26,320 |  |  | 1 |  |  | 432 |  |  | — |  |  | 214,830 |
Nonferrous scrap |  | 309,730 |  |  | 9,981 |  |  | — |  |  | 6,680 |  |  | — |  |  | 326,391 |
Construction materials |  | — |  |  | — |  |  | 206,225 |  |  | — |  |  | — |  |  | 206,225 |
Other |  | 1,441 |  |  | 61,556 |  |  | 6,303 |  |  | 16,196 |  |  | 4,109 |  |  | 89,605 |
Total |  | $ | 499,707 |  |  | $ | 1,396,837 |  |  | $ | 1,648,540 |  |  | $ | 518,161 |  |  | $ | 4,109 |  |  | $ | 4,067,354 |

|  | Three Months Ended May 31, 2019 |  |  |  |  |  |  |  |  |  |
(in thousands) |  | Americas Recycling |  | Americas Mills |  | Americas Fabrication |  | International Mill |  | Corporate and Other |  | Total
Steel products |  | $ | 238 |  |  | $ | 501,925 |  |  | $ | 554,672 |  |  | $ | 199,431 |  |  | $ | — |  |  | $ | 1,256,266 |
Ferrous scrap |  | 106,404 |  |  | 8,916 |  |  | 2 |  |  | 525 |  |  | — |  |  | 115,847 |
Nonferrous scrap |  | 121,581 |  |  | 4,080 |  |  | — |  |  | 3,212 |  |  | — |  |  | 128,873 |
Construction materials |  | — |  |  | — |  |  | 71,228 |  |  | — |  |  | — |  |  | 71,228 |
Other |  | 563 |  |  | 21,114 |  |  | 3,608 |  |  | 5,854 |  |  | 2,519 |  |  | 33,658 |
Total |  | $ | 228,786 |  |  | $ | 536,035 |  |  | $ | 629,510 |  |  | $ | 209,022 |  |  | $ | 2,519 |  |  | $ | 1,605,872 |
|  | Nine Months Ended May 31, 2019 |  |  |  |  |  |  |  |  |  |
(in thousands) |  | Americas Recycling |  | Americas Mills |  | Americas Fabrication |  | International Mill |  | Corporate and Other |  | Total
Steel products |  | $ | 679 |  |  | $ | 1,294,217 |  |  | $ | 1,392,442 |  |  | $ | 584,735 |  |  | $ | — |  |  | $ | 3,272,073 |
Ferrous scrap |  | 323,311 |  |  | 26,802 |  |  | 2 |  |  | 1,055 |  |  | — |  |  | 351,170 |
Nonferrous scrap |  | 369,660 |  |  | 10,568 |  |  | — |  |  | 8,677 |  |  | — |  |  | 388,905 |
Construction materials |  | — |  |  | — |  |  | 188,589 |  |  | — |  |  | — |  |  | 188,589 |
Other |  | 1,205 |  |  | 50,914 |  |  | 9,713 |  |  | 16,173 |  |  | 7,255 |  |  | 85,260 |
Total |  | $ | 694,855 |  |  | $ | 1,382,501 |  |  | $ | 1,590,746 |  |  | $ | 610,640 |  |  | $ | 7,255 |  |  | $ | 4,285,997 |

13

NOTE 5. INVENTORIES, NET
The majority of the Company's inventories are in the form of semi-finished and finished goods. Under the Company’s business model, products are sold to external customers in various stages, from semi-finished billets through fabricated steel, leading these categories to be combined. As such, at May 31, 2020 and August 31, 2019, work in process inventories were immaterial. At May 31, 2020 and August 31, 2019, the Company's raw materials inventories were $120.1 million and $143.7 million, respectively.
NOTE 6. GOODWILL AND OTHER INTANGIBLES
Goodwill by reportable segment at May 31, 2020 is detailed in the following table:

(in thousands) |  | Americas Recycling |  | Americas Mills |  | Americas Fabrication |  | International Mill |  |  |  | Consolidated
Goodwill, gross* |  | $ | 9,543 |  |  | $ | 4,970 |  |  | $ | 57,428 |  |  | $ | 2,371 |  |  |  |  | $ | 74,312 |
Accumulated impairment losses* |  | (9,543) |  |  | — |  |  | (493) |  |  | (150) |  |  |  |  | (10,186) |
Goodwill, net* |  | $ | — |  |  | $ | 4,970 |  |  | $ | 56,935 |  |  | $ | 2,221 |  |  |  |  | $ | 64,126 |

_________________
* The change in balance from August 31, 2019 was immaterial.
The total gross carrying amounts of the Company's intangible assets subject to amortization were $20.7 million and $20.8 million, and the total net carrying amounts were $11.7 million and $13.3 million at May 31, 2020 and August 31, 2019, respectively. These assets were included in other noncurrent assets on the Company's condensed consolidated balance sheets. Intangible amortization expense from continuing operations related to such intangible assets was $0.5 million and $0.6 million, and $1.6 million and $1.7 million, for the three and nine months ended May 31, 2020 and 2019, respectively. Excluding goodwill, the Company did not have any significant intangible assets with indefinite lives at May 31, 2020.
In connection with the Acquisition, the Company recorded an unfavorable contract backlog liability of $110.2 million. At May 31, 2020 and August 31, 2019, the net carrying amount of the liability was $16.7 million and $35.4 million, respectively. Amortization of the unfavorable contract backlog was $4.4 million and $18.7 million, and $23.4 million and $58.2 million, for the three and nine months ended May 31, 2020 and 2019, respectively, and was recorded as an increase to net sales in the Company’s condensed consolidated statements of earnings.
NOTE 7. LEASES
The following table presents the components of the total leased assets and lease liabilities and their classification in the Company's condensed consolidated balance sheet at May 31, 2020:

(in thousands) |  | Classification in Condensed Consolidated Balance Sheet |  | May 31, 2020
Assets: |  |  |  |
Operating assets |  | Other noncurrent assets |  | $ | 120,931 |
Finance assets |  | Property, plant and equipment, net |  | 43,477 |
Total leased assets |  |  |  | $ | 164,408 |
Liabilities: |  |  |  |
Operating lease liabilities: |  |  |  |
Current |  | Accrued expenses and other payables |  | $ | 28,291 |
Long-term |  | Other noncurrent liabilities |  | 98,903 |
Total operating lease liabilities |  |  |  | 127,194 |
Finance lease liabilities: |  |  |  |
Current |  | Current maturities of long-term debt and short-term borrowings |  | 12,668 |
Long-term |  | Long-term debt |  | 30,837 |
Total finance lease liabilities |  |  |  | 43,505 |
Total lease liabilities |  |  |  | $ | 170,699 |

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The components of lease cost were as follows:

(in thousands) |  | Three Months Ended May 31, 2020 |  | Nine Months Ended May 31, 2020
Operating lease expense |  | $ | 9,129 |  |  | $ | 26,734 |
Finance lease expense: |  |  |  |
Amortization of assets |  | 3,343 |  |  | 8,228 |
Interest on lease liabilities |  | 456 |  |  | 1,322 |
Total finance lease expense |  | 3,799 |  |  | 9,550 |
Variable and short term-lease expense |  | 4,233 |  |  | 12,547 |
Total lease expense |  | $ | 17,161 |  |  | $ | 48,831 |

The weighted-average remaining lease term and discount rate for operating and finance leases are presented in the following table:

|  | May 31, 2020
Weighted-average remaining lease term (years) |  |
Operating leases |  | 6.4
Finance leases |  | 3.8
Weighted-average discount rate |  |
Operating leases |  | 4.178 | %
Finance leases |  | 4.180 | %

Cash flow and other information related to leases is included in the following table:

(in thousands) |  | Nine Months Ended May 31, 2020
Cash paid for amounts included in the measurement of lease liabilities |  |
Operating cash outflows from operating leases |  | $ | 27,003 |
Operating cash outflows from finance leases |  | 1,243 |
Financing cash outflows from finance leases |  | 9,607 |
ROU assets obtained in exchange for lease obligations: |  |
Operating leases |  | 38,363 |
Finance leases |  | 16,277 |

Maturities of lease liabilities at May 31, 2020 are presented in the following table:

(in thousands) |  | Operating Leases |  | Finance Leases
Year 1 |  | $ | 33,064 |  |  | $ | 14,229 |
Year 2 |  | 27,822 |  |  | 12,103 |
Year 3 |  | 22,499 |  |  | 9,728 |
Year 4 |  | 17,549 |  |  | 7,632 |
Year 5 |  | 12,796 |  |  | 3,336 |
Thereafter |  | 32,975 |  |  | 108 |
Total lease payments |  | 146,705 |  |  | 47,136 |
Less: Imputed interest |  | 19,511 |  |  | 3,631 |
Present value of lease liabilities |  | $ | 127,194 |  |  | $ | 43,505 |

Future maturities of lease liabilities at August 31, 2019, prior to adoption of ASU 2016-02, are presented in the following table:
15

|  |  |  | Twelve Months Ended August 31, |  |  |  |  |  |  |  |  |  |
(in thousands) |  | Total |  | 2020 |  | 2021 |  | 2022 |  | 2023 |  | 2024 |  | Thereafter
Capital lease obligations |  | $ | 41,331 |  |  | 13,104 |  |  | 10,004 |  |  | 7,758 |  |  | 5,831 |  |  | 3,904 |  |  | $ | 730 |
Long-term non-cancelable operating leases |  | $ | 124,817 |  |  | 34,511 |  |  | 27,383 |  |  | 22,074 |  |  | 17,433 |  |  | 10,478 |  |  | $ | 12,938 |

NOTE 8. CREDIT ARRANGEMENTS
Long-term debt at May 31, 2020 and August 31, 2019 was as follows:

(in thousands) |  | Weighted Average Interest Rate at May 31, 2020 |  | May 31, 2020 |  | August 31, 2019
2027 Notes |  | 5.375% |  | $ | 300,000 |  |  | $ | 300,000 |
2026 Notes |  | 5.750% |  | 350,000 |  |  | 350,000 |
2023 Notes |  | 4.875% |  | 330,000 |  |  | 330,000 |
Term Loan |  | 3.113% |  | 110,125 |  |  | 210,125 |
Poland credit facilities |  | 1.989% |  | 22,350 |  |  | — |
Short-term borrowings |  | 1.900% |  | 2,765 |  |  | 3,929 |
Other |  | 5.100% |  | 21,329 |  |  | 23,168 |
Finance leases |  |  |  | 43,505 |  |  | 37,699 |
Total debt |  |  |  | 1,180,074 |  |  | 1,254,921 |
Less debt issuance costs |  |  |  | 9,003 |  |  | 10,268 |
Total amounts outstanding |  |  |  | 1,171,071 |  |  | 1,244,653 |
Less current maturities |  |  |  | 14,506 |  |  | 13,510 |
Less short-term borrowings |  |  |  | 2,765 |  |  | 3,929 |
Current maturities of long-term debt and short-term borrowings |  |  |  | 17,271 |  |  | 17,439 |
Long-term debt |  |  |  | $ | 1,153,800 |  |  | $ | 1,227,214 |

The Company had no amounts drawn under the $350.0 million revolving credit facility (the "Revolver") at May 31, 2020 and August 31, 2019. The availability under the Revolver was reduced by outstanding stand-by letters of credit of $3.0 million a t May 31, 2020 and August 31, 2019.
The Company also has credit facilities in Poland through its subsidiary CMCP. At May 31, 2020, CMCP's credit facilities totaled Polish zloty ("PLN") 275.0 million, or $68.6 million. These facilities expire in March 2022. At May 31, 2020, $22.4 million was outstanding under these facilities. No amounts were outstanding as of August 31, 2019. The available balance of these credit facilities was further reduced by outstanding stand-by letters of credit, guarantees, and/or other financial assurance instruments, which totaled $0.8 million and $1.1 million at May 31, 2020 and August 31, 2019, respectively.
The Company's debt agreements require the Company to comply with certain non-financial and financial covenants, including an interest coverage ratio and a debt to capitalization ratio. At May 31, 2020, the Company was in compliance with all covenants contained in its debt agreements.
Accounts Receivable Facilities
The Company had no advance payments outstanding under the U.S. accounts receivable facility at May 31, 2020 or August 31, 2019.
The Poland accounts receivable facility has a limit of PLN 220.0 million ($54.9 million at May 31, 2020). The Company had $2.8 million of advance payments outstanding under the Poland accounts receivable facility at May 31, 2020, and $3.9 million at August 31, 2019.
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NOTE 9. DERIVATIVES
The Company's global operations and product lines expose it to risks from fluctuations in metal commodity prices, foreign currency exchange rates, interest rates and natural gas, electricity and other energy prices. One objective of the Company's risk management program is to mitigate these risks using derivative instruments. The Company enters into (i) metal commodity futures and forward contracts to mitigate the risk of unanticipated changes in gross margin due to price volatility in these commodities, (ii) foreign currency forward contracts that match the expected settlements for purchases and sales denominated in foreign currencies and (iii) energy derivatives to mitigate the risk related to price volatility of electricity and natural gas.
At May 31, 2020, the notional values of the Company's foreign currency and commodity commitments were $80.6 million and $45.3 million, respectively. At August 31, 2019, the notional values of the Company's foreign currency and commodity contract commitments were $94.1 million and $42.6 million, respectively.
The following table provides information regarding the Company's commodity contract commitments at May 31, 2020:

Commodity |  | Long/Short |  | Total |
Aluminum |  | Long |  | 2,300 |  | MT
Aluminum |  | Short |  | 1,100 |  | MT
Copper |  | Long |  | 318 |  | MT
Copper |  | Short |  | 4,990 |  | MT
Electricity |  | Long |  | 2,000,000 |  | MW(h)

_________________
MT = Metric Ton
MW(h) = Megawatt hour
The Company designates only those contracts which closely match the terms of the underlying transaction as hedges for accounting purposes. Certain foreign currency and commodity contracts were not designated as hedges for accounting purposes, although management believes they are essential economic hedges.
The following table summarizes activity related to the Company's derivative instruments not designated as hedging instruments recognized in the condensed consolidated statements of earnings. All other activity related to the Company's derivative instruments and hedged items was immaterial for the periods presented.

|  |  |  | Three Months Ended May 31, |  |  |  | Nine Months Ended May 31, |  |
Derivatives Not Designated as Hedging Instruments (in thousands) |  | Location |  | 2020 |  | 2019 |  | 2020 |  | 2019
Commodity |  | Cost of goods sold |  | $ | 1,465 |  |  | $ | 3,408 |  |  | $ | 1,881 |  |  | $ | 143 |
Foreign exchange |  | SG&A expenses |  | (890) |  |  | (72) |  |  | (870) |  |  | (472) |
Gain (loss) before income taxes |  |  |  | $ | 575 |  |  | $ | 3,336 |  |  | $ | 1,011 |  |  | $ | (329) |

NOTE 10. FAIR VALUE
The Company has established a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels. These levels are determined based on the lowest level input that is significant to the fair value measurement. Levels within the hierarchy are defined as follows:
Level 1 - Unadjusted quoted prices in active markets for identical assets and liabilities;
Level 2 - Quoted prices for similar assets and liabilities in active markets (other than those included in Level 1) which are observable, either directly or indirectly; and
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
The following tables summarize information regarding the Company's financial assets and financial liabilities that were measured at fair value on a recurring basis:
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|  |  |  | Fair Value Measurements at Reporting Date Using |  |  |  |
(in thousands) |  | May 31, 2020 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Assets: |  |  |  |  |  |  |  |
Investment deposit accounts (1) |  | $ | 344,307 |  |  | $ | 344,307 |  |  | $ | — |  |  | $ | — |
Commodity derivative assets (2) |  | 193 |  |  | 193 |  |  | — |  |  | — |
Foreign exchange derivative assets (2) |  | 911 |  |  | — |  |  | 911 |  |  | — |
Liabilities: |  |  |  |  |  |  |  |
Commodity derivative liabilities (2) |  | 10,899 |  |  | 870 |  |  | — |  |  | 10,029 |
Foreign exchange derivative liabilities (2) |  | 893 |  |  | — |  |  | 893 |  |  | — |

|  |  |  | Fair Value Measurements at Reporting Date Using |  |  |  |
(in thousands) |  | August 31, 2019 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Assets: |  |  |  |  |  |  |  |
Investment deposit accounts (1) |  | $ | 66,240 |  |  | $ | 66,240 |  |  | $ | — |  |  | $ | — |
Commodity derivative assets (2) |  | 1,269 |  |  | 1,269 |  |  | — |  |  | — |
Foreign exchange derivative assets (2) |  | 569 |  |  | — |  |  | 569 |  |  | — |
Liabilities: |  |  |  |  |  |  |  |
Commodity derivative liabilities (2) |  | 99 |  |  | 99 |  |  | — |  |  | — |
Foreign exchange derivative liabilities (2) |  | 899 |  |  | — |  |  | 899 |  |  | — |

_________________
(1) Investment deposit accounts are short-term in nature, and the value is determined by principal plus interest. The investment portfolio mix can change each period based on the Company's assessment of investment options.
(2) Derivative assets and liabilities classified as Level 1 are commodity futures contracts valued based on quoted market prices in the London Metal Exchange or New York Mercantile Exchange. Amounts in Level 2 are based on broker quotes in the over-the-counter market. Fair value of Level 3 derivative liabilities is based on unobservable inputs in which there is little or no market data, which requires management’s own assumptions within an internally developed cash flow model. Further discussion regarding the Company's use of derivative instruments is included in Note 9, Derivatives.
There were no material non-recurring fair value remeasurements during the three and nine months ended May 31, 2020.
The carrying values of the Company's short-term items approximate fair value.
The carrying values and estimated fair values of the Company's financial assets and liabilities that are not required to be measured at fair value on the condensed consolidated balance sheets were as follows:

|  |  |  | May 31, 2020 |  |  |  | August 31, 2019 |  |
(in thousands) |  | Fair Value Hierarchy |  | Carrying Value |  | Fair Value |  | Carrying Value |  | Fair Value
2027 Notes (1) |  | Level 2 |  | $ | 300,000 |  |  | $ | 300,495 |  |  | $ | 300,000 |  |  | $ | 303,810 |
2026 Notes (1) |  | Level 2 |  | 350,000 |  |  | 358,145 |  |  | 350,000 |  |  | 363,444 |
2023 Notes (1) |  | Level 2 |  | 330,000 |  |  | 334,970 |  |  | 330,000 |  |  | 342,098 |
Term Loan (2) |  | Level 2 |  | 110,125 |  |  | 110,125 |  |  | 210,125 |  |  | 210,125 |
Poland credit facilities (2) |  | Level 2 |  | 22,350 |  |  | 22,350 |  |  | — |  |  | — |
Short-term borrowings (2) |  | Level 2 |  | 2,765 |  |  | 2,765 |  |  | 3,929 |  |  | 3,929 |

_________________
(1) The fair value of the notes was determined based on indicated market values.
(2) The Term Loan, Poland credit facilities and short-term borrowings contain variable interest rates and carrying value approximates fair value.
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NOTE 11. STOCK-BASED COMPENSATION PLANS
The Company's stock-based compensation plans are described in Note 15, Stock-Based Compensation Plans, to the consolidated financial statements in the 2019 Form 10-K. In general, restricted stock units granted during 2020 vest ratably over a period of three years. Subject to the achievement of performance targets established by the Compensation Committee of CMC's Board of Directors, performance stock units granted during 2020 vest after a period of three years.
During the nine months ended May 31, 2020 and 2019, the Company granted the following awards under its stock-based compensation plans:

|  | May 31, 2020 |  |  |  | May 31, 2019 |  |
(in thousands, except per share data) |  | Shares Granted |  | Weighted Average Grant Date Fair Value |  | Shares Granted |  | Weighted Average Grant Date Fair Value
Equity method |  | 1,521 |  |  | $ | 18.32 |  |  | 1,505 |  |  | $ | 17.75 |
Liability method |  | 426 |  |  | N/A |  |  | 374 |  |  | N/A |

During the three and nine months ended May 31, 2020 and 2019, the Company recorded immaterial mark-to-market adjustments on liability awards. At May 31, 2020, the Company had outstanding 781,508 equivalent shares accounted for under the liability method. The Company expects 742,433 equivalent shares to vest.
The following table summarizes total stock-based compensation expense, including fair value remeasurements, which was mainly included in selling, general and administrative expenses on the Company's condensed consolidated statements of earnings:

|  | Three Months Ended May 31, |  |  |  | Nine Months Ended May 31, |  |
(in thousands) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Stock-based compensation expense |  | $ | 6,170 |  |  | $ | 7,342 |  |  | $ | 21,975 |  |  | $ | 17,350 |

NOTE 12. STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE
The calculations of basic and diluted earnings per share from continuing operations were as follows:

|  | Three Months Ended May 31, |  |  |  | Nine Months Ended May 31, |  |
(in thousands, except share data) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Earnings from continuing operations |  | $ | 64,169 |  |  | $ | 78,551 |  |  | $ | 210,520 |  |  | $ | 112,899 |
Basic earnings per share: |  |  |  |  |  |  |  |
Shares outstanding for basic earnings per share |  | 119,192,962 |  |  | 118,045,362 |  |  | 118,828,870 |  |  | 117,762,945 |
Basic earnings per share from continuing operations |  | $ | 0.54 |  |  | $ | 0.67 |  |  | $ | 1.77 |  |  | $ | 0.96 |
Diluted earnings per share: |  |  |  |  |  |  |  |
Shares outstanding for basic earnings per share |  | 119,192,962 |  |  | 118,045,362 |  |  | 118,828,870 |  |  | 117,762,945 |
Effect of dilutive securities: |  |  |  |  |  |  |  |
Stock-based incentive/purchase plans |  | 1,085,779 |  |  | 1,100,204 |  |  | 1,448,867 |  |  | 1,250,069 |
Shares outstanding for diluted earnings per share |  | 120,278,741 |  |  | 119,145,566 |  |  | 120,277,737 |  |  | 119,013,014 |
Diluted earnings per share from continuing operations |  | $ | 0.53 |  |  | $ | 0.66 |  |  | $ | 1.75 |  |  | $ | 0.95 |

Anti-dilutive shares not included above were immaterial for all periods presented.
Restricted stock is included in the number of shares of common stock issued and outstanding but omitted from the basic earnings per share calculation until the shares vest.
During the first quarter of fiscal 2015, CMC's Board of Directors authorized a share repurchase program under which CMC may repurchase up to $100.0 million of shares of common stock. During the nine months ended May 31, 2020, CMC did not
19

repurchase any shares of common stock. CMC had remaining authorization to repurchase $27.6 million of common stock at May 31, 2020.
NOTE 13. COMMITMENTS AND CONTINGENCIES
Legal and Environmental Matters
In the ordinary course of conducting its business, the Company becomes involved in litigation, administrative proceedings and governmental investigations, including environmental matters. See Note 19, Commitments and Contingencies, to the consolidated financial statements in the 2019 Form 10-K.
The Company has received notices from the U.S. Environmental Protection Agency ("EPA") or state agencies with similar responsibility that it is considered a potentially responsible party at several sites, none of which are owned by the Company, and may be obligated under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA") or similar state statutes to conduct remedial investigations, feasibility studies, remediation and/or removal of alleged releases of hazardous substances or to reimburse the EPA for such activities. The Company is involved in litigation or administrative proceedings with regard to several of these sites in which the Company is contesting, or at the appropriate time may contest, its liability at the sites. In addition, the Company has received information requests with regard to other sites which may be under consideration by the EPA as potential CERCLA sites. Some of these environmental matters or other proceedings may result in fines, penalties or judgments being assessed against the Company. At May 31, 2020 and August 31, 2019, the Company had $0.7 million accrued for cleanup and remediation costs in connection with CERCLA sites. The estimation process is based on currently available information which is, in many cases, preliminary and incomplete. Total environmental liabilities, including CERCLA sites, were $3.4 million and $3.6 million at May 31, 2020 and August 31, 2019, respectively, of which $2.7 million and $1.8 million were classified as other long-term liabilities at May 31, 2020 and August 31, 2019, respectively. These amounts have not been discounted to their present values. Due to evolving remediation technology, changing regulations, possible third-party contributions, the inherent shortcomings of the estimation process and other factors, amounts accrued could vary significantly from amounts paid. Historically, the amounts the Company has ultimately paid for such remediation activities have not been material.
Management believes that adequate provisions have been made in the Company's condensed consolidated financial statements for the potential impact of these contingencies, and that the outcomes of the suits and proceedings described above, and other miscellaneous litigation and proceedings now pending, will not have a material adverse effect on the business, results of operations or financial condition of the Company.
NOTE 14. BUSINESS SEGMENTS
The Company structures its business into the following four reporting segments: Americas Recycling, Americas Mills, Americas Fabrication and International Mill. The Company's reporting segments are based primarily on product lines and secondarily on geographic area. See Note 1, Nature of Operations, of the consolidated financial statements included in the 2019 Form 10-K for more information about the reporting segments, including the types of products and services from which each reporting segment derives its net sales. Corporate and Other contains earnings or losses on assets and liabilities related to the Company's Benefit Restoration Plan assets and short-term investments, expenses of the Company's corporate headquarters, interest expense related to its long-term debt and intercompany eliminations.
The Company uses adjusted EBITDA from continuing operations to compare and evaluate the financial performance of its segments. Adjusted EBITDA is the sum of the Company's earnings from continuing operations before interest expense, income taxes, depreciation and amortization expense and impairment expense. Intersegment sales are generally priced at prevailing market prices. Certain corporate administrative expenses are allocated to the segments based upon the nature of the expense. The accounting policies of the segments are the same as those described in Note 2, Summary of Significant Accounting Policies, of the consolidated financial statements included in the 2019 Form 10-K.
The following is a summary of certain financial information from continuing operations by reportable segment:
20

|  | Three Months Ended May 31, 2020 |  |  |  |  |  |  |  |  |  |
(in thousands) |  | Americas Recycling |  | Americas Mills |  | Americas Fabrication |  | International Mill |  | Corporate and Other |  | Continuing Operations
Net sales-unaffiliated customers |  | $ | 148,021 |  |  | $ | 451,278 |  |  | $ | 567,782 |  |  | $ | 173,465 |  |  | $ | 1,137 |  |  | $ | 1,341,683 |
Intersegment sales |  | 55,134 |  |  | 289,534 |  |  | 1,466 |  |  | 352 |  |  | (346,486) |  |  | — |
Net sales |  | 203,155 |  |  | 740,812 |  |  | 569,248 |  |  | 173,817 |  |  | (345,349) |  |  | 1,341,683 |
Adjusted EBITDA |  | (1,664) |  |  | 133,174 |  |  | 31,896 |  |  | 14,270 |  |  | (30,894) |  |  | 146,782 |
|  | Nine Months Ended May 31, 2020 |  |  |  |  |  |  |  |  |  |
(in thousands) |  | Americas Recycling |  | Americas Mills |  | Americas Fabrication |  | International Mill |  | Corporate and Other |  | Continuing Operations
Net sales-unaffiliated customers |  | $ | 499,707 |  |  | $ | 1,396,837 |  |  | $ | 1,648,540 |  |  | $ | 518,161 |  |  | $ | 4,109 |  |  | $ | 4,067,354 |
Intersegment sales |  | 173,793 |  |  | 844,908 |  |  | 4,303 |  |  | 1,124 |  |  | (1,024,128) |  |  | — |
Net sales |  | 673,500 |  |  | 2,241,745 |  |  | 1,652,843 |  |  | 519,285 |  |  | (1,020,019) |  |  | 4,067,354 |
Adjusted EBITDA |  | 7,507 |  |  | 413,890 |  |  | 65,437 |  |  | 39,080 |  |  | (81,606) |  |  | 444,308 |
Total assets at May 31, 2020* |  | 216,270 |  |  | 1,609,574 |  |  | 1,052,324 |  |  | 506,192 |  |  | 570,527 |  |  | 3,954,887 |

_________________
*Total assets listed in Corporate and Other includes assets from discontinued operations.

|  | Three Months Ended May 31, 2019 |  |  |  |  |  |  |  |  |  |
(in thousands) |  | Americas Recycling |  | Americas Mills |  | Americas Fabrication |  | International Mill |  | Corporate and Other |  | Continuing Operations
Net sales-unaffiliated customers |  | $ | 228,786 |  |  | $ | 536,035 |  |  | $ | 629,510 |  |  | $ | 209,022 |  |  | $ | 2,519 |  |  | $ | 1,605,872 |
Intersegment sales |  | 60,229 |  |  | 330,868 |  |  | 3,537 |  |  | 343 |  |  | (394,977) |  |  | — |
Net sales |  | 289,015 |  |  | 866,903 |  |  | 633,047 |  |  | 209,365 |  |  | (392,458) |  |  | 1,605,872 |
Adjusted EBITDA |  | 12,331 |  |  | 158,114 |  |  | (23,289) |  |  | 24,120 |  |  | (27,305) |  |  | 143,971 |
|  | Nine Months Ended May 31, 2019 |  |  |  |  |  |  |  |  |  |
(in thousands) |  | Americas Recycling |  | Americas Mills |  | Americas Fabrication |  | International Mill |  | Corporate and Other |  | Continuing Operations
Net sales-unaffiliated customers |  | $ | 694,855 |  |  | $ | 1,382,501 |  |  | $ | 1,590,746 |  |  | $ | 610,640 |  |  | $ | 7,255 |  |  | $ | 4,285,997 |
Intersegment sales |  | 183,244 |  |  | 860,964 |  |  | 10,248 |  |  | 947 |  |  | (1,055,403) |  |  | — |
Net sales |  | 878,099 |  |  | 2,243,465 |  |  | 1,600,994 |  |  | 611,587 |  |  | (1,048,148) |  |  | 4,285,997 |
Adjusted EBITDA |  | 37,889 |  |  | 384,383 |  |  | (109,863) |  |  | 77,436 |  |  | (111,005) |  |  | 278,840 |
Total assets at August 31, 2019* |  | 257,517 |  |  | 1,667,366 |  |  | 1,106,420 |  |  | 464,177 |  |  | 263,291 |  |  | 3,758,771 |

_________________
*Total assets listed in Corporate and Other includes assets from discontinued operations.
The following table presents a reconciliation of earnings from continuing operations to adjusted EBITDA from continuing operations:

|  | Three Months Ended May 31, |  |  |  | Nine Months Ended May 31, |  |
(in thousands) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Earnings from continuing operations |  | $ | 64,169 |  |  | $ | 78,551 |  |  | $ | 210,520 |  |  | $ | 112,899 |
Interest expense |  | 15,409 |  |  | 18,513 |  |  | 47,875 |  |  | 53,671 |
Income taxes |  | 23,804 |  |  | 29,105 |  |  | 73,981 |  |  | 52,855 |
Depreciation and amortization |  | 41,765 |  |  | 41,181 |  |  | 124,095 |  |  | 117,602 |
Asset impairments |  | 5,983 |  |  | 15 |  |  | 6,513 |  |  | 15 |
Amortization of acquired unfavorable contract backlog |  | (4,348) |  |  | (23,394) |  |  | (18,676) |  |  | (58,202) |
Adjusted EBITDA from continuing operations |  | $ | 146,782 |  |  | $ | 143,971 |  |  | $ | 444,308 |  |  | $ | 278,840 |

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In the following discussion, references to "we," "us," "our" or the "Company" mean Commercial Metals Company ("CMC") and its consolidated subsidiaries, unless the context otherwise requires. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the notes thereto, which are included in this Quarterly Report on Form 10-Q (the "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, 2019 (the "2019 Form 10-K"). This discussion contains or incorporates by reference "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not historical facts, but rather are based on expectations, estimates, assumptions and projections about our industry, business and future financial results, based on information available at the time this Form 10-Q was filed with the Securities and Exchange Commission ("SEC") or, with respect to any document incorporated by reference, available at the time that such 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 Item 1A of the 2019 Form 10-K and this Form 10-Q. We do not undertake any obligation to update, amend or clarify any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or otherwise, except as required by law.
Any reference in this Form 10-Q to the "third quarter" relates to the three months ended May 31, 2020, to the "year-to-date period" relates to the nine months ended May 31, 2020 and to the "corresponding period" relates to the relevant three-month or nine-month period ended May 31, 2019.
IMPACT OF COVID-19 ON OUR BUSINESS
In March 2020, the World Health Organization characterized the outbreak of COVID-19 as a pandemic, and the President of the United States declared the COVID-19 pandemic ("COVID-19") a national emergency. COVID-19 has resulted in various government actions globally, including governmental actions in both the United States ("U.S.") and Poland designed to slow the spread of the virus. Shelter-in-place or stay-at-home orders ("COVID-19 restrictions") have been implemented in many of the jurisdictions where we operate. However, because we operate in a critical infrastructure industry, our facilities have been allowed to remain open in the U.S. Our facilities in Poland have also remained open. Accordingly, COVID-19 has had limited impact on our operations to date. Due to the impact of COVID-19 on the broader economy, net sales, average selling prices per ton and volumes have decreased in certain segments in the three months ended May 31, 2020, compared to the corresponding period in 2019. However, net sales and volumes for the three months ended May 31, 2020 remained relatively consistent with net sales and volumes for the three months ended February 29, 2020. While we implemented new procedures to support the safety of our employees, the costs were not material.
While COVID-19 may negatively impact our results of operations, cash flows and financial position in the future, the current level of uncertainty over the economic and operational impacts of COVID-19 and the actions to contain the outbreak or treat its impact means the related financial impact cannot be reasonably estimated at this time.
CRITICAL ACCOUNTING POLICIES
There have been no material changes to our critical accounting policies as set forth in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, included in the 2019 Form 10-K.
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RESULTS OF OPERATIONS SUMMARY
Business Overview
As a vertically integrated organization, we manufacture, recycle and market steel and metal products, related materials and services through a network including seven electric arc furnace ("EAF") mini mills, two EAF micro mills, two rerolling mills, steel fabrication and processing plants, construction-related product warehouses, and metal recycling facilities in the U.S. and Poland. On November 5, 2018, the Company completed the acquisition (the "Acquisition") of 33 rebar fabrication facilities in the U.S., as well as four EAF mini mills located in Knoxville, Tennessee; Jacksonville, Florida; Sayreville, New Jersey and Rancho Cucamonga, California from Gerdau S.A., hereinafter collectively referred to as the "Acquired Businesses." Our operations are conducted through four reportable segments: Americas Recycling, Americas Mills, Americas Fabrication and International Mill.
Financial Results Overview
The following discussion of our results of operations is based on our continuing operations and excludes any results of our discontinued operations.

|  | Three Months Ended May 31, |  |  |  | Nine Months Ended May 31, |  |
(in thousands, except per share data) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Net sales |  | $ | 1,341,683 |  |  | $ | 1,605,872 |  |  | $ | 4,067,354 |  |  | $ | 4,285,997 |
Earnings from continuing operations |  | 64,169 |  |  | 78,551 |  |  | 210,520 |  |  | 112,899 |
Diluted earnings per share |  | $ | 0.53 |  |  | $ | 0.66 |  |  | $ | 1.75 |  |  | $ | 0.95 |

Net sales for the three and nine months ended May 31, 2020 decreased $264.2 million, or 16%, and decreased $218.6 million, or 5%, respectively, compared to the corresponding periods in 2019. For the three months ended May 31, 2020, net sales declined year-over-year in all four of our segments, and year-to-date net sales declined in all segments except our Americas Fabrication segment. In the three and nine months ended May 31, 2020, the decreases in net sales were due to a decline in year-over-year average selling prices in our Americas Recycling, Americas Mills and International Mills segments, coupled with a decline in third quarter tons shipped by our Americas Recycling, Americas Mills and Americas Fabrication segments and in year-to-date tons shipped by our Americas Recycling segment. The declines in average selling prices and tons shipped were primarily due to COVID-19 restrictions, which impacted the global economy and customer demand in the third quarter of 2020.
Earnings from continuing operations for the three months ended May 31, 2020 decreased $14.4 million compared to the corresponding period in 2019. The year-over-year decrease was primarily driven by a decrease in third quarter tons shipped by our Americas Recycling segment and compressed metal margin in our Americas Mills segment. Metal margin in our Americas Mills segment is the difference between average selling prices and the average cost of raw materials, primarily ferrous scrap. Earnings from continuing operations for the nine months ended May 31, 2020 increased $97.6 million compared to the corresponding period in 2019. The year-over-year increase was primarily due to expansion in metal margin in our Americas Fabrication segment due to higher average selling prices coupled with recently declining rebar costs, and an increase in tons shipped in our Americas Fabrication and Americas Mills segments, due to two additional months of shipments from the Acquired Businesses in 2020 compared to 2019. Metal margin in our Americas Fabrication segment is the difference between average selling prices and the average cost of raw materials, primarily rebar purchased from our Americas Mills segment.
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Selling, General and Administrative Expenses
Selling, general and administrative expenses were relatively flat for the three months ended May 31, 2020 and increased $11.1 million for the nine months ended May 31, 2020, compared to the corresponding periods in 2019. The year-over-year increase in the nine months ended May 31, 2020 was driven primarily by a $45.7 million year-over-year increase in employee-related expenses, partially offset by a $23.2 million year-over-year decrease in professional fees and legal expenses, primarily related to the Acquisition, and a $4.4 million year-over-year increase in gains on the sale of fixed assets.
Interest Expense
Interest expense for the three and nine months ended May 31, 2020 decreased $3.1 million and $5.8 million, respectively, compared to the corresponding periods in 2019. The year-over-year decreases were the result of a decrease in interest payable on long-term debt primarily due to total prepayments over the past four quarters of $200 million on the Term Loan (as defined in Note 10, Credit Arrangements, to the consolidated financial statements in the 2019 Form 10-K).
Income Taxes
The effective income tax rate from continuing operations for the three and nine months ended May 31, 2020 was 27.1% and 26.0%, respectively, compared with 27.0% and 31.9% in the corresponding periods in 2019. The effective tax rate for the three months ended May 31, 2020 remained relatively flat year-over-year, while the effective tax rate for the nine months ended May 31, 2020 decreased primarily due to discrete tax expense recorded during 2019 as a result of the Tax Cuts and Jobs Act.
SEGMENT OPERATING DATA
Unless otherwise indicated, all dollar amounts below are from continuing operations and calculated before income taxes. See Note 14, Business Segments. The operational data presented in the tables below is calculated using averages and, therefore, it is not meaningful to quantify the effect that any individual component had on the segment's net sales or adjusted EBITDA.
Americas Recycling

|  | Three Months Ended May 31, |  |  |  | Nine Months Ended May 31, |  |
(in thousands) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Net sales |  | $ | 203,155 |  |  | $ | 289,015 |  |  | $ | 673,500 |  |  | $ | 878,099 |
Adjusted EBITDA |  | (1,664) |  |  | 12,331 |  |  | 7,507 |  |  | 37,889 |
Average selling price (per ton) |  |  |  |  |  |  |  |
Ferrous |  | $ | 215 |  |  | $ | 252 |  |  | $ | 208 |  |  | $ | 263 |
Nonferrous |  | 1,748 |  |  | 2,047 |  |  | 1,937 |  |  | 2,009 |
Tons shipped (in thousands) |  |  |  |  |  |  |  |
Ferrous |  | 472 |  |  | 597 |  |  | 1,483 |  |  | 1,746 |
Nonferrous |  | 47 |  |  | 60 |  |  | 162 |  |  | 182 |
Total |  | 519 |  |  | 657 |  |  | 1,645 |  |  | 1,928 |

Net sales for the three and nine months ended May 31, 2020 decreased $85.9 million, or 30%, and $204.6 million, or 23%, respectively, compared to the corresponding periods in 2019. For the three and nine months ended May 31, 2020, the year-over-year declines in net sales were driven by lower average selling prices per ton and tons shipped. These decreases were due to a declining price environment, specifically in the third quarter as a result of COVID-19 restrictions, including the temporary idling of many industrial accounts, such as auto manufacturers, coupled with lower demand. In the three and nine months ended May 31, 2020, year-over-year average ferrous selling prices per ton decreased approximately 15% and 21%, respectively, and year-over-year average non-ferrous selling prices per ton decreased approximately 15% and 4%, respectively. Total year-over-year tons shipped decreased approximately 21% and 15% in the three and nine months ended May 31, 2020, respectively.
Adjusted EBITDA for the three and nine months ended May 31, 2020 decreased $14.0 million and $30.4 million, respectively, compared to the corresponding periods in 2019, as the declining price environment compressed margins. Conversion costs increased approximately $7 and $14 per ton in the three and nine months ended May 31, 2020, respectively, compared to the
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corresponding periods in 2019, due to decreased production levels. Adjusted EBITDA included non-cash stock compensation expense of $0.5 million and $1.3 million for the three and nine months ended May 31, 2020, respectively, and $0.3 million and $1.0 million for the corresponding periods.
Americas Mills

|  | Three Months Ended May 31, |  |  |  | Nine Months Ended May 31, |  |
(in thousands) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Net sales |  | $ | 740,812 |  |  | $ | 866,903 |  |  | $ | 2,241,745 |  |  | $ | 2,243,465 |
Adjusted EBITDA |  | 133,174 |  |  | 158,114 |  |  | 413,890 |  |  | 384,383 |
Average price (per ton) |  |  |  |  |  |  |  |
Total selling price |  | $ | 606 |  |  | $ | 670 |  |  | $ | 604 |  |  | $ | 674 |
Cost of ferrous scrap utilized |  | 239 |  |  | 284 |  |  | 238 |  |  | 297 |
Metal margin |  | 367 |  |  | 386 |  |  | 366 |  |  | 377 |
Tons (in thousands) |  |  |  |  |  |  |  |
Melted |  | 1,150 |  |  | 1,164 |  |  | 3,449 |  |  | 3,199 |
Rolled |  | 1,157 |  |  | 1,118 |  |  | 3,396 |  |  | 3,007 |
Shipped |  | 1,182 |  |  | 1,236 |  |  | 3,535 |  |  | 3,178 |

Net sales for the three months ended May 31, 2020 decreased $126.1 million, or 15%, and net sales for the nine months ended May 31, 2020 were relatively flat, compared to the corresponding periods in 2019. For the three months ended May 31, 2020, the decrease in year-over-year net sales was primarily due to a 10% decrease in average selling prices per ton. Despite the impact of COVID-19 restrictions on the U.S. economy, tons shipped in the third quarter only decreased 4% year-over-year due to continued strength in our core markets. Although there was a 10% decrease in year-over-year average selling prices per ton in the nine months ended May 31, 2020, year-over-year net sales remained relatively flat due to an increase of 357 thousand tons shipped due to two additional months of shipments from the Acquired Businesses.
Adjusted EBITDA for the three months ended May 31, 2020 decreased $24.9 million, compared to the corresponding period in 2019. This decrease in adjusted EBITDA was primarily due to compressed metal margin as the decrease in cost of ferrous scrap utilized only partially offset the decrease in average selling price. Adjusted EBITDA for the nine months ended May 31, 2020 increased $29.5 million, compared to the corresponding period in 2019. This increase in adjusted EBITDA was due primarily to increased shipments in the nine months ended May 31, 2020. Although there was metal margin compression of 3% during the nine months ended May 31, 2020, the impact was more than offset by two additional months of shipments from the Acquired Businesses, as discussed above, and a 5% year-over-year decrease in conversion costs in the same period as a result of increased production levels and synergies from the integration of the Acquired Businesses. Adjusted EBITDA included non-cash stock compensation expense of $1.7 million and $5.2 million for the three and nine months ended May 31, 2020, respectively, and $1.1 million and $3.6 million for the corresponding periods.
Americas Fabrication

|  | Three Months Ended May 31, |  |  |  | Nine Months Ended May 31, |  |
(in thousands) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Net sales |  | $ | 569,248 |  |  | $ | 633,047 |  |  | $ | 1,652,843 |  |  | $ | 1,600,994 |
Adjusted EBITDA |  | 31,896 |  |  | (23,289) |  |  | 65,437 |  |  | (109,863) |
Average selling price (excluding stock and buyout sales) (per ton) |  |  |  |  |  |  |  |
Rebar and other |  | $ | 966 |  |  | $ | 925 |  |  | $ | 976 |  |  | $ | 886 |
Tons shipped (in thousands) |  |  |  |  |  |  |  |
Rebar and other |  | 427 |  |  | 469 |  |  | 1,206 |  |  | 1,184 |

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Net sales for the three and nine months ended May 31, 2020 decreased $63.8 million, or 10%, and increased $51.8 million, or 3%, respectively, compared to the corresponding periods in 2019. The year-over-year decrease in net sales for the three months ended May 31, 2020 was driven by a 9% decrease in tons shipped, partially offset by a 4% increase in average selling prices per ton. The year-over-year increase in net sales for the nine months ended May 31, 2020 was driven by 2% and 10% year-over-year increases in tons shipped and average selling prices per ton, respectively. Tons shipped increased year-over-year due to two additional months of shipments related to the Acquired Businesses. Net sales included amortization benefit of $4.4 million and $18.7 million for the three and nine months ended May 31, 2020, respectively, and $23.4 million and $58.2 million for the corresponding periods, respectively, related to the unfavorable contract backlog of the Acquired Businesses.
Adjusted EBITDA for the three and nine months ended May 31, 2020 increased $55.2 million and $175.3 million, respectively, compared to the corresponding periods in 2019. The primary driver for the year-over-year increases in adjusted EBITDA for the three and nine months ended May 31, 2020 was metal margin expansion. As the majority of rebar fabrication projects are fixed price, the project backlog reflects a lag between current market prices and average selling prices of material shipped. This is beneficial during a time of economic slowdown as the average selling prices per ton fixed at the beginning of a project are typically higher than current market rebar input costs, resulting in metal margin expansion. Adjusted EBITDA does not include the $4.4 million or $18.7 million benefit of the amortization of the unfavorable contract backlog reserve described above. Adjusted EBITDA included non-cash stock compensation expense of $0.7 million and $2.0 million for the three and nine months ended May 31, 2020, respectively, and $0.4 million and $1.7 million for the corresponding periods.
International Mill

|  | Three Months Ended May 31, |  |  |  | Nine Months Ended May 31, |  |
(in thousands) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Net sales |  | $ | 173,817 |  |  | $ | 209,365 |  |  | $ | 519,285 |  |  | $ | 611,587 |
Adjusted EBITDA |  | 14,270 |  |  | 24,120 |  |  | 39,080 |  |  | 77,436 |
Average price (per ton) |  |  |  |  |  |  |  |
Total selling price |  | $ | 437 |  |  | $ | 524 |  |  | $ | 449 |  |  | $ | 539 |
Cost of ferrous scrap utilized |  | 239 |  |  | 288 |  |  | 245 |  |  | 295 |
Metal margin |  | 198 |  |  | 236 |  |  | 204 |  |  | 244 |
Tons (in thousands) |  |  |  |  |  |  |  |
Melted |  | 377 |  |  | 368 |  |  | 1,115 |  |  | 1,135 |
Rolled |  | 326 |  |  | 341 |  |  | 1,001 |  |  | 902 |
Shipped |  | 374 |  |  | 376 |  |  | 1,092 |  |  | 1,072 |

Net sales for the three and nine months ended May 31, 2020 decreased $35.5 million, or 17%, and $92.3 million, or 15%, respectively, compared to the corresponding periods in 2019. The year-over-year decreases in third quarter and year-to-date net sales were primarily driven by decreases of 17% in average selling prices per ton in both periods due to continued pressure caused by high import levels. Net sales for the three and nine months ended May 31, 2020 were also impacted by unfavorable foreign currency translation adjustments of approximately $13.3 million and $24.8 million, respectively, due to the increase in the average value of the U.S. dollar relative to the Polish zloty.
Adjusted EBITDA for the three and nine months ended May 31, 2020 decreased $9.9 million and $38.4 million, respectively, compared to the corresponding periods in 2019, primarily driven by $38 per ton, or 16%, and $40 per ton, or 16%, year-over-year decreases in metal margin, respectively, due to lower average selling prices per ton, as discussed above. Adjusted EBITDA included non-cash stock compensation expense of $0.3 million and $1.1 million for the three and nine months ended May 31, 2020, respectively, and $0.4 million and $0.7 million for the corresponding periods. Adjusted EBITDA for the three and nine months ended May 31, 2020 included an unfavorable foreign currency exchange rate impact of $1.1 million and $2.1 million, respectively.
Corporate and Other
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Corporate and Other reported adjusted EBITDA losses of $30.9 million and $81.6 million for the three and nine months ended May 31, 2020, respectively, compared to adjusted EBITDA losses of $27.3 million and $111.0 million in the corresponding periods. For the three months ended May 31, 2020, adjusted EBITDA was relatively flat on a year-over-year basis. For the nine months ended May 31, 2020, the decrease in adjusted EBITDA loss was primarily driven by a $25.4 million year-over-year decrease in professional fees and legal expenses incurred primarily due to the Acquisition in 2019. Adjusted EBITDA included non-cash stock compensation expense of $3.0 million and $12.4 million for the three and nine months ended May 31, 2020, respectively, and $4.5 million and $10.4 million for the corresponding periods.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Liquidity and Capital Resources
We actively monitor our accounts receivable and, based on market conditions and customers' financial condition, we record allowances as soon as we believe accounts are uncollectible. We use credit insurance in Poland to mitigate the risk of customer insolvency. We estimate that the amount of credit insured receivables (and those covered by export letters of credit) was approximately 13% of total trade receivables at May 31, 2020.
The table below reflects our sources, facilities and available liquidity at May 31, 2020:

(in thousands) |  | Total Facility |  | Availability
Cash and cash equivalents |  | $ | 462,110 |  |  | $ | 462,110 |
Notes due from 2023 to 2027 |  | 980,000 |  |  | *
Revolver |  | 350,000 |  |  | 346,962 |
U.S. accounts receivable facility |  | 200,000 |  |  | 164,547 |
Term Loan |  | 110,125 |  |  | — |
Poland credit facilities |  | 68,625 |  |  | 45,515 |
Poland accounts receivable facility |  | 54,900 |  |  | 47,144 |

_________________
* We believe we have access to additional financing and refinancing, if needed.
Cash Flows
Operating Activities
Our cash flows from operating activities result primarily from the sale of steel, nonferrous metals and related products. We have a diverse and generally stable customer base. From time to time, we use futures or forward contracts to mitigate the risks from fluctuations in commodity prices, foreign currency exchange rates, interest rates and natural gas, electricity and other energy prices. See Note 9, Derivatives, for further information.
Net cash flows from operating activities were $531.8 million for the nine months ended May 31, 2020 compared to $218.5 million of net cash flows used by operating activities for the corresponding period in 2019. Due to the adoption of Accounting Standards Update 2016-15 on September 1, 2018 as described in Note 7, Accounts Receivable Programs of the 2019 Form 10-K, $367.5 million of cash collections of the U.S. and Poland accounts receivable facilities were reflected in investing activities in 2019 rather than operating activities. Also contributing to the increase in net cash flows from operating activities, the Company had a $99.9 million year-over-year increase in net earnings, a $39.5 million year-over-year decrease in amortization of acquired unfavorable contract backlog and a $217.2 million year-over-year increase in cash from operating assets and liabilities ("working capital"). The increase in cash from working capital was primarily due to lower volumes of steel inventory and lower selling prices reflected in accounts receivable as of May 31, 2020. For continuing operations, operating working capital days remained the same year-over-year.
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Investing Activities
Net cash flows used by investing activities were $128.9 million and $416.4 million for the nine months ended May 31, 2020 and 2019, respectively. Cash used by investing activities in the nine months ended May 31, 2020 was lower than the corresponding period primarily due to cash used for the Acquisition in 2019 of $701.2 million, as described in Note 2, Changes in Business, partially offset by $367.5 million in cash collections of the U.S. and Poland accounts receivable facilities in 2019, as described above.
We estimate that our 2020 capital spending will range from $155 million to $170 million. We regularly assess our capital spending based on current and expected results.
Financing Activities
Net cash flows used by financing activities were $132.7 million for the nine months ended May 31, 2020 compared to net cash flows from financing activities of $124.9 million for the corresponding period in 2019. During the nine months ended May 31, 2020, we had net debt repayments of $88.1 million, compared to net borrowings of $169.6 million in the corresponding period which were used to fund the Acquisition.
COVID-19 has not had a material impact on our operations to date, and our cash and cash equivalents increased $230.0 million in the third quarter to $462.1 million as of May 31, 2020. We anticipate our current cash balances, cash flows from operations and our available sources of liquidity will be sufficient to meet our cash requirements for the next twelve months. However, as the impact of COVID-19 on the economy and our operations evolves, we will continue to assess our liquidity needs. In the event of a sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions.
CONTRACTUAL OBLIGATIONS
Our contractual obligations at May 31, 2020 decreased by approximately $190.3 million from August 31, 2019, primarily due to decreases in long-term debt, unconditional purchase obligations and interest obligations. Our estimated contractual obligations for the twelve months ending May 31, 2021 are approximately $376.6 million and primarily consist of expenditures incurred in connection with normal business operations.
Other Commercial Commitments
We maintain stand-by letters of credit to provide support for certain transactions that governmental agencies, our insurance providers and suppliers request. At May 31, 2020, we had committed $27.4 million under these arrangements, of which $3.0 million reduced availability under the Revolver.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements that may have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
CONTINGENCIES
In the ordinary course of conducting our business, we become involved in litigation, administrative proceedings and governmental investigations, including environmental matters. We may incur settlements, fines, penalties or judgments because of some of these matters. Liabilities and costs associated with litigation-related loss contingencies require estimates and judgments based on our knowledge of the facts and circumstances surrounding each matter and the advice of our legal counsel. We record liabilities for litigation-related losses when a loss is probable and we can reasonably estimate the amount of the loss. We evaluate the measurement of recorded liabilities each reporting period based on the current facts and circumstances specific to each matter. The ultimate losses incurred upon final resolution of litigation-related loss contingencies may differ materially from the estimated liability recorded at a particular balance sheet date. Changes in estimates are recorded in earnings in the period in which such changes occur. We do not believe that any currently pending legal proceedings to which we are a party will have a material adverse effect, individually or in the aggregate, on our results of operations, cash flows or financial condition. See Note 13, Commitments and Contingencies, for more information.
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FORWARD-LOOKING STATEMENTS
This Form 10-Q contains or incorporates by reference a number of "forward-looking statements" within the meaning of the federal securities laws with respect to general economic conditions, key macro-economic drivers that impact our business, the effects of ongoing trade actions, the effects of continued pressure on the liquidity of our customers, potential synergies provided by our recent acquisitions, demand for our products, steel margins, the effect of COVID-19 and related governmental and economic responses thereto, the ability to operate our mills at full capacity, future supplies of raw materials and energy for our operations, share repurchases, legal proceedings, the undistributed earnings of our non-U.S. subsidiaries, U.S. non-residential construction activity, international trade, capital expenditures, our liquidity and our ability to satisfy future liquidity requirements, estimated contractual obligations and our expectations or beliefs concerning future events. These forward-looking statements can generally be identified by phrases such as we or our management "expects," "anticipates," "believes," "estimates," "intends," "plans to," "ought," "could," "will," "should," "likely," "appears," "projects," "forecasts," "outlook" or other similar words or phrases. There are inherent risks and uncertainties in any forward-looking statements. We caution readers not to place undue reliance on any forward-looking statements.
Our forward-looking statements are based on management's expectations and beliefs as of the time this Form 10-Q is filed with the SEC or, with respect to any document incorporated by reference, as of the time such document was prepared. Although we believe that our expectations are reasonable, we can give no assurance that these expectations will prove to have been correct, and actual results may vary materially. Except as required by law, we undertake no obligation to update, amend or clarify any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or any other changes. Important factors that could cause actual results to differ materially from our expectations include those described in Part I, Item 1A, Risk Factors, of the 2019 Form 10-K and in Part II, Item 1A, Risk Factors, of our subsequent Quarterly Reports on Form 10-Q as well as the following:
•changes in economic conditions which affect demand for our products or construction activity generally, and the impact of such changes on the highly cyclical steel industry;
•rapid and significant changes in the price of metals, potentially impairing our inventory values due to declines in commodity prices or reducing the profitability of our fabrication contracts due to rising commodity pricing;
•impacts from COVID-19 on the economy, demand for our products and on our operations, including the responses of governmental authorities to contain COVID-19;
•excess capacity in our industry, particularly in China, and product availability from competing steel mills and other steel suppliers including import quantities and pricing;
•compliance with and changes in environmental laws and regulations, including increased regulation associated with climate change and greenhouse gas emissions;
•involvement in various environmental matters that may result in fines, penalties or judgments;
•potential limitations in our or our customers' abilities to access credit and non-compliance by our customers with our contracts;
•activity in repurchasing shares of our common stock under our repurchase program;
•financial covenants and restrictions on the operation of our business contained in agreements governing our debt;
•our ability to successfully identify, consummate, and integrate acquisitions and the effects that acquisitions may have on our financial leverage;
•risks associated with acquisitions generally, such as the inability to obtain, or delays in obtaining, required approvals under applicable antitrust legislation and other regulatory and third party consents and approvals;
•lower than expected future levels of revenues and higher than expected future costs;
•failure or inability to implement growth strategies in a timely manner;
•impact of goodwill impairment charges;
•impact of long-lived asset impairment charges;
•currency fluctuations;
•global factors, including trade measures, political uncertainties and military conflicts;
•availability and pricing of electricity, electrodes and natural gas for mill operations;
•ability to hire and retain key executives and other employees;
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•competition from other materials or from competitors that have a lower cost structure or access to greater financial resources;
•information technology interruptions and breaches in security;
•ability to make necessary capital expenditures;
•availability and pricing of raw materials and other items over which we exert little influence, including scrap metal, energy and insurance;
•unexpected equipment failures;
•losses or limited potential gains due to hedging transactions;
•litigation claims and settlements, court decisions, regulatory rulings and legal compliance risks;
•risk of injury or death to employees, customers or other visitors to our operations;
•civil unrest, protests and riots;
•new and clarifying guidance with regard to interpretation of certain provisions of the Tax Cuts and Jobs Act that could impact our assessment; and
•increased costs related to health care reform legislation.
You should refer to the “Risk Factors” disclosed in our periodic and current reports filed with the SEC for specific risks which would cause actual results to be significantly different from those expressed or implied by these forward-looking statements. It is not possible to identify all of the risks, uncertainties and other factors that may affect future results. In light of these risks and uncertainties, the forward-looking events and circumstances discussed herein may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. Accordingly, readers of this Form 10-Q are cautioned not to place undue reliance on the forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the nine months ended May 31, 2020, the U.S. dollar equivalent of the Company's total gross foreign currency exchange contract commitments decreased $13.5 million, or 14%, compared to August 31, 2019. This decrease was primarily due to forward contracts denominated in euro with a Polish zloty functional currency, which decreased $12.4 million compared to August 31, 2019.
During the nine months ended May 31, 2020, the change in the Company's total commodity contract commitments was relatively flat compared to August 31, 2019.
There were no other material changes to the information set forth in Item 7A, Quantitative and Qualitative Disclosures about Market Risk, included in the 2019 Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. This term refers to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within required time periods, and includes controls and procedures designed to ensure that such information is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and our Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q, and they have concluded that as of that date, our disclosure controls and procedures were effective.
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our quarter ended May 31, 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant in lawsuits associated with the normal conduct of its businesses and operations. It is not possible to predict the outcome of the pending actions, and as with any litigation, it is possible that these actions could be decided unfavorably to the Company. We believe that there are meritorious defenses to these actions and that these actions will not have a material adverse effect upon our results of operations, cash flows or financial condition, and where appropriate, these actions are being vigorously contested.
We are the subject of civil actions, or have received notices from the U.S. Environmental Protection Agency ("EPA") or state agencies with similar responsibility, that we and numerous other parties are considered a potentially responsible party ("PRP") and may be obligated under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), or similar state statutes, to pay for the cost of remedial investigation, feasibility studies and ultimately remediation to correct alleged releases of hazardous substances at eleven locations. The actions and notices refer to the following locations, none of which involve real estate we ever owned or upon which we ever conducted operations: the Sapp Battery Site in Cottondale, Florida, the Interstate Lead Company Site in Leeds, Alabama, the Ross Metals Site in Rossville, Tennessee, the Li Tungsten Site in Glen Cove, New York, the Peak Oil Site in Tampa, Florida, the R&H Oil Site in San Antonio, Texas, the SoGreen/Parramore Site in Tifton, Georgia, the Jensen Drive site in Houston, Texas, the Industrial Salvage site in Corpus Christi, Texas, the Chemetco site in Hartford, Illinois and the Ward Transformer site in Raleigh, North Carolina. We may contest our designation as a PRP with regard to certain sites, while at other sites we are participating with other named PRPs in agreements or negotiations that have resulted or that we expect will result in agreements to remediate the sites. During 2010, we acquired a 70% interest in the real property at Jensen Drive as part of the remediation of that site. We have periodically received information requests from government environmental agencies with regard to other sites that are apparently under consideration for designation as listed sites under CERCLA or similar state statutes. Often we do not receive any further communication with regard to these sites, and as of the date of this Form 10-Q, we do not know if any of these inquiries will ultimately result in a demand for payment from us.
The EPA notified us and other alleged PRPs that under Section 106 of CERCLA, we and the other PRPs could be subject to a maximum fine of $25,000 per day and the imposition of treble damages if we and the other PRPs refuse to clean up the Peak Oil, Sapp Battery and SoGreen/Parramore sites as ordered by the EPA. We are presently participating in PRP organizations at these sites, which are paying for certain site remediation expenses. We do not believe that the EPA will pursue any fines against us if we continue to participate in the PRP groups or if we have adequate defenses to the EPA's imposition of fines against us in these matters.
We believe that adequate provisions have been made in the financial statements for the potential impact of any loss in connection with the above-described legal proceedings and environmental matters. Management believes that the outcome of the proceedings mentioned, and other miscellaneous litigation and proceedings now pending, will not have a material adverse effect on our business, results of operations or financial condition.
ITEM 1A. RISK FACTORS
Except as set forth below, there were no material changes to the risk factors previously disclosed in Part I, Item 1A, Risk Factors, of the 2019 Form 10-K and Part II, Item 1A, Risk Factors, of the Quarterly Report on Form 10-Q for the period ended February 29, 2020:
Our business, financial condition, results of operations, cash flows, liquidity and stock price may be adversely affected by global public health epidemics, including the recent COVID-19 pandemic.
The recent outbreak of COVID-19 has affected, and may continue to adversely affect, our business, financial condition, results of operations, cash flows, liquidity and stock price. Other pandemics, epidemics, widespread illness or other health issues that interfere with the ability of our employees, suppliers, customers, financing sources or others to conduct business or negatively affects consumer confidence or the global economy could also adversely affect us.
In March 2020, the World Health Organization characterized the outbreak of COVID-19 as a pandemic, and the President of the United States declared COVID-19 a national emergency. COVID-19 has resulted in various government actions globally, including governmental actions in both the U.S. and Poland designed to slow the spread of the virus. Shelter-in-place or stay-at-home orders have been implemented in many of the jurisdictions where we operate. However, because we operate in a critical
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infrastructure industry, our operations have been allowed to remain open in the U.S. Our facilities in Poland have also remained open. In spite of our continued operations, COVID-19 may have negative impacts on our operations, supply chain, transportation networks and customers, which may compress our margins, including as a result of preventative and precautionary measures that we, other businesses and governments are taking. COVID-19 is a widespread public health crisis that is adversely affecting financial markets and the economies of many countries. Any resulting economic downturn could adversely affect demand for our products and contribute to volatile supply and demand conditions affecting prices and volumes in the markets for our products and raw materials. The progression of COVID-19 could also negatively impact our business or results of operations through the temporary closure of our operating facilities or those of our customers or suppliers.
In addition, the ability of our suppliers and customers to work may be significantly impacted by individuals contracting or being exposed to COVID-19 or as a result of the control measures noted above, which may negatively impact our production throughout the supply chain and constrict sales channels. Our customers may be directly impacted by business interruptions or weak market conditions and may not be willing or able to fulfill their contractual obligations. Furthermore, the progression of and global response to COVID-19 increases the risk of delays in construction activities and equipment deliveries related to our capital projects, including potential delays in obtaining permits from government agencies. The extent of such delays and other effects of COVID-19 on our capital projects, certain of which are outside of our control, is unknown, but they could impact or delay the timing of anticipated benefits on capital projects. COVID-19 has also caused volatility in the financial and capital markets, which has adversely affected our stock price and may adversely affect our ability to access, and the costs associated with accessing, the debt or equity capital markets, which could adversely affect our liquidity.
The extent to which COVID-19 may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, including new information concerning the severity of the pandemic and the effectiveness of actions globally to contain or mitigate its effects. While we expect COVID-19 to negatively impact our results of operations, cash flows and financial position, the current level of uncertainty over the economic and operational impacts of COVID-19 and the actions to contain the outbreak or treat its impact means the related financial impact cannot be reasonably estimated at this time.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
There were no purchases of equity securities registered by the Company pursuant to Section 12 of the Exchange Act during the quarter ended May 31, 2020.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
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ITEM 6. EXHIBITS

3.1(a) |  | Restated Certificate of Incorporation dated March 2, 1989 (filed as Exhibit 3(i) to Commercial Metals Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2009 and incorporated herein by reference). |  |  |  |  |
3.1(b) |  | Certificate of Amendment of Restated Certificate of Incorporation dated February 1, 1994 (filed as Exhibit 3(i)(a) to Commercial Metals Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2009 and incorporated herein by reference). |  |  |  |  |
3.1(c) |  | Certificate of Amendment of Restated Certificate of Incorporation dated February 17, 1995 (filed as Exhibit 3(i)(b) to Commercial Metals Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2009 and incorporated herein by reference). |  |  |  |  |
3.1(d) |  | Certificate of Amendment of Restated Certificate of Incorporation dated January 30, 2004 (filed as Exhibit 3(i)(d) to Commercial Metals Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 2004 and incorporated herein by reference). |  |  |  |  |
3.1(e) |  | Certificate of Amendment of Restated Certificate of Incorporation dated January 26, 2006 (filed as Exhibit 3(i) to Commercial Metals Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 2006 and incorporated herein by reference). |  |  |  |  |
3.1(f) |  | Certificate of Designation, Preferences and Rights of Series A Preferred Stock (filed as Exhibit 2 to Commercial Metals Company's Form 8-A filed August 3, 1999 and incorporated herein by reference). |  |  |  |  |
3.2 |  | Fourth Amended and Restated Bylaws (filed as Exhibit 3.1 to Commercial Metals Company's Current Report on Form 8-K dated September 23, 2019 and incorporated herein by reference). |  |  |  |  |
10.1 |  | Commercial Metals Company Employee Stock Purchase Plan as Amended and Restated Effective January 1, 2020 (filed herewith). |  |  |  |  |
10.2 |  | Commercial Metals Company 2013 Long-Term Equity Incentive Plan as Amended and Restated Effective November 19, 2019 (filed herewith). |  |  |  |  |
10.3 |  | Form of Restricted Stock Unit Award Agreement (filed herewith). |  |  |  |  |
10.4 |  | Form of Performance Award Agreement (filed herewith). |  |  |  |  |
10.5 |  | Form of Non-Employee Director Restricted Stock Award Agreement (filed herewith). |  |  |  |  |
10.6 |  | Form of Non-Employee Director Restricted Stock Unit Award Agreement (filed herewith). |  |  |  |  |
31.1 |  | Certification of Barbara R. Smith, President and Chief Executive Officer of Commercial Metals Company, pursuant to Section 302 to the Sarbanes-Oxley Act of 2002 (filed herewith). |  |  |  |  |
31.2 |  | Certification of Paul J. Lawrence, Vice President and Chief Financial Officer of Commercial Metals Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). |  |  |  |  |
32.1 |  | Certification of Barbara R. Smith, President and Chief Executive Officer of Commercial Metals Company, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). |  |  |  |  |
32.2 |  | Certification of Paul J. Lawrence, Vice President and Chief Financial Officer of Commercial Metals Company, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). |  |  |  |  |
101.INS | Inline XBRL Instance Document (filed herewith). |  |  |  |  |
101.SCH | Inline XBRL Taxonomy Extension Schema Document (filed herewith). |  |  |  |  |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith). |  |  |  |  |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith). |  |  |  |  |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith). |  |  |  |  |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith). |  |  |  |  |
104 | Cover Page Interactive Data File |  |  |  |  |

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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

| COMMERCIAL METALS COMPANY
June 25, 2020 | /s/ Paul J. Lawrence
| Paul J. Lawrence
| Vice President and Chief Financial Officer
| (Duly authorized officer and principal financial officer of the registrant)

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