NEW MARKETS TAX CREDIT TRANSACTIONS

12 Months Ended

Aug. 31, 2025

NOTE 9. NEW MARKETS TAX CREDIT TRANSACTIONS

During 2016 and 2017, the Company entered into three New Markets Tax Credit ("NMTC") transactions with U.S. Bancorp Community Development Corporation, a Minnesota corporation ("USBCDC"). The NMTC transactions supported the construction and equipping of the micro mill in Durant, Oklahoma, as well as a rebar spooler and an automated T-post shop located on the same site.

The transactions qualified through the New Markets Tax Credit program provided for in the Community Renewal Tax Relief Act of 2000 (the "NMTC Program"), as the micro mill, spooler and T-post shop are located in an eligible zone designated by the Internal Revenue Service ("IRS") and were considered eligible business activities for the NMTC Program. Under the NMTC Program, an investor that makes a capital investment, which, in turn, together with leverage loan sources, is used to make a Qualifying Equity Investment ("QEI") in an entity that (i) qualifies as a Community Development Entity ("CDE"), (ii) has applied for and been granted an allocation of a portion of the total federal funds available to fund the credits (an "NMTC Allocation") and (iii) uses a minimum specified portion of the QEI to make a Qualified Low Income Community Investment up to the maximum amount of the CDE’s NMTC Allocation will be entitled to claim, over a period of seven years, federal nonrefundable tax credits in an amount equal to 39% of the QEI amount. NMTCs are subject to 100% recapture for a period of seven years as provided in the Internal Revenue Code.

In general, the three NMTC transactions were structured similarly. USBCDC made a capital contribution to an investment fund, and Commonwealth Acquisition Holdings, Inc., a wholly owned subsidiary of the Company ("Commonwealth"), made a loan to the investment fund. The investment fund used the proceeds from the capital contribution and the loan to make a QEI into a CDE, which, in turn, made loans of the QEIs to the operating subsidiaries of the Company with terms similar to the loans by Commonwealth.

The following table summarizes the key terms and conditions for each of the three NMTC transactions ($ in millions):


Project	USBCDC Capital Contribution	Commonwealth Loan	Commonwealth Loan Rate / Maturity	Investment Fund(s)	QEI to CDE	CDE Loan
Micro mill	$17.7	$35.3	1.08% / December 24, 2045	USBCDC Investment Fund 156, LLC	$51.5	$50.7
Spooler	6.7	14.0	1.39% / July 26, 2042	Twain Investment Fund 249, LLC	20.0	19.4
T-post shop	5.0	10.4	1.16% / March 23, 2047	Twain Investment Fund 219, LLC Twain Investment Fund 222, LLC	15.0	14.7

By its capital contributions to the investment funds (exclusive of Twain Investment Fund 222) (collectively, the "Funds"), USBCDC was entitled to substantially all the benefits derived from the NMTCs. These transactions included a put/call provision whereby the Company was obligated or entitled to repurchase USBCDC’s interest in the Funds at the end of a seven-year period in the case of USBCDC Investment Fund 156, LLC and Twain Investment Fund 249, LLC and an eight-year period in the case of Twain Investment Fund 219, LLC (each of such periods, an "Exercise Period").

In December 2022, the Exercise Period on the first NMTC transaction, USBCDC Investment Fund 156, ended, and the corresponding $17.7 million USBCDC capital contribution was recognized in net sales in the consolidated statements of earnings. In July 2024, the Exercise Period on Twain Investment Fund 249 ended, and the $6.7 million USBCDC capital contribution was recognized in net sales in the consolidated statements of earnings. In March 2025, the Exercise Period on Twain Investment Fund 219 ended, and the remaining $2.8 million USBCDC capital contribution was recognized in net sales in the consolidated statements of earnings.

Additionally, the $2.2 million of capital contributions to Twain Investment Fund 222 resulted in a $2.1 million QEI, which was repaid by the Company at maturity in March 2024.

Direct costs incurred in structuring the transactions were deferred and recognized as expenses over each Exercise Period. Incremental costs to maintain the structures during the compliance periods were recognized as incurred. All NMTC related transactions were fully unwound, and no NMTC related obligations remained outstanding as of August 31, 2025.