CMC(CMC) - 2025 Q3 - Quarterly Report

PART I — FINANCIAL INFORMATION Financial Statements Presents unaudited condensed consolidated financial statements and key notes, including a significant litigation expense Condensed Consolidated Statements of Earnings (Loss) Highlights | (in thousands, except per share data) | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | Nine Months Ended May 31, 2025 | Nine Months Ended May 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $2,019,984 | $2,078,485 | $5,683,962 | $5,929,823 | | Net earnings (loss) | $83,126 | $119,440 | $(67,119) | $381,560 | | Diluted earnings (loss) per share | $0.73 | $1.02 | $(0.59) | $3.25 | Condensed Consolidated Balance Sheets Highlights | (in thousands) | May 31, 2025 | August 31, 2024 | | :--- | :--- | :--- | | Total current assets | $3,358,709 | $3,292,768 | | Total assets | $6,993,823 | $6,817,839 | | Total current liabilities | $1,175,416 | $834,850 | | Total liabilities | $2,896,061 | $2,517,815 | | Total stockholders' equity | $4,097,762 | $4,300,024 | Condensed Consolidated Statements of Cash Flows Highlights | (in thousands) | Nine Months Ended May 31, 2025 | Nine Months Ended May 31, 2024 | | :--- | :--- | :--- | | Net cash flows from operating activities | $399,865 | $547,891 | | Net cash flows used by investing activities | $(262,621) | $(240,947) | | Net cash flows used by financing activities | $(102,978) | $(202,662) | Notes to Condensed Consolidated Financial Statements (Unaudited) Details accounting policies, segment performance, debt, share repurchases, and a $358.5 million litigation expense - The company is an innovative solutions provider for the global construction sector, with a manufacturing network in the U.S. and Central Europe[22] - A significant litigation expense of $358.5 million was recorded in the nine months ended May 31, 2025, related to the Pacific Steel Group (PSG) lawsuit judgment, which the company is appealing[70] - In May 2025, the company issued $150.0 million in tax-exempt Series 2025 Bonds to finance construction costs for facilities in West Virginia[43] - The company repurchased 2,939,098 shares for $148.9 million during the nine months ended May 31, 2025, with $254.9 million remaining authorized for repurchase[68] Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes decreased net sales and earnings driven by margin compression and a major litigation expense - The decrease in net earnings for the nine months ended May 31, 2025, was primarily due to a litigation-related expense of approximately $271.0 million (net of tax) and margin compression[99] - The company is constructing its fourth micro mill in West Virginia with an expected investment of $550.0 million to $600.0 million, with production to begin in spring 2026[85][86] - On February 10, 2025, President Trump re-imposed Section 232's 25% tariffs on steel imports, later increased to 50% for most countries, creating an uncertain market backdrop[88][89] - The company anticipates 2025 capital spending to range from $425 million to $475 million, primarily for the development of its fourth micro mill[120][121] Results of Operations Summary Reports a 4% decrease in net sales and a net loss of $67.1 million due to litigation costs and lower margins Financial Results Overview (Nine Months Ended May 31) | (in thousands, except per share data) | 2025 | 2024 | | :--- | :--- | :--- | | Net sales | $5,683,962 | $5,929,823 | | Net earnings (loss) | $(67,119) | $381,560 | | Diluted earnings (loss) per share | $(0.59) | $3.25 | - SG&A expenses increased by $23.2 million for the nine months ended May 31, 2025, mainly due to a $21.7 million rise in employee-related expenses[100] - A litigation expense of $358.5 million related to the PSG litigation was recorded during the nine months ended May 31, 2025[102] Segment Operating Data Details varied segment performance, with North America's adjusted EBITDA falling while Europe's saw a slight increase North America Steel Group Performance (Nine Months Ended May 31) | (in thousands, except per ton amounts) | 2025 | 2024 | | :--- | :--- | :--- | | Net sales to external customers | $4,467,771 | $4,750,210 | | Adjusted EBITDA | $503,007 | $735,418 | | Steel products metal margin per ton | $489 | $538 | Europe Steel Group Performance (Nine Months Ended May 31) | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net sales to external customers | $655,026 | $626,481 | | Adjusted EBITDA | $30,184 | $26,139 | Emerging Businesses Group Performance (Nine Months Ended May 31) | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net sales to external customers | $525,733 | $521,826 | | Adjusted EBITDA | $87,091 | $87,011 | - The Corporate and Other adjusted EBITDA loss increased by $355.5 million for the nine-month period, primarily due to the $358.5 million contingent litigation-related loss[113] Liquidity and Capital Resources Confirms sufficient liquidity from operations despite potential adverse effects from the PSG litigation Liquidity Sources (as of May 31, 2025) | (in thousands) | Availability | | :--- | :--- | | Cash and cash equivalents | $892,998 | | Revolver | $599,041 | | Poland credit facilities | $157,632 | | Poland accounts receivable facility | $76,905 | - Capital expenditures for the nine months ended May 31, 2025, increased by $51.1 million year-over-year, mainly for the construction of the fourth micro mill[127] - The company repurchased $148.9 million of its common stock in the nine months ended May 31, 2025, an increase of $20.7 million from the prior year period[122][129] - Unless the PSG litigation verdict is overturned, the judgment would have a material adverse effect on the company's liquidity and financial condition[125] Quantitative and Qualitative Disclosures About Market Risk Indicates no material changes in market risk exposure except for a 20% increase in foreign currency contract commitments - Total gross foreign currency exchange contract commitments increased by $44.4 million, or 20%, to $269.6 million as of May 31, 2025, from August 31, 2024[48][139] Controls and Procedures Confirms the effectiveness of disclosure controls and procedures with no material changes in internal controls - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report (May 31, 2025)[141] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[142] PART II — OTHER INFORMATION Legal Proceedings Details a significant legal proceeding with PSG resulting in a $358.5 million litigation expense, which is under appeal - A jury returned a verdict in favor of PSG for $110.0 million, which was subsequently trebled by law, leading the company to record a $358.5 million litigation expense[143] - The company is vigorously pursuing all available avenues to have the verdict and judgment overturned and has a pending motion for a new trial[143] - A second lawsuit by PSG is ongoing, alleging violations of California state antitrust laws, for which the company has not recorded a liability as a loss is not considered probable[144] Risk Factors Highlights risks from uncertain U.S. trade policies and excess global and domestic steelmaking capacity - Enhanced U.S. tariffs and trade barriers create significant uncertainty, potentially leading to economic decline and reduced demand for the company's products[147][148] - Excess global steelmaking capacity, especially from China, and new domestic projects could lead to lower U.S. steel prices, adversely affecting sales, margins, and profitability[150][152] Unregistered Sales of Equity Securities and Use of Proceeds Reports the repurchase of 1.1 million shares in Q3, with $254.9 million remaining under the buyback program Issuer Purchases of Equity Securities (Quarter Ended May 31, 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares that May Yet Be Purchased | | :--- | :--- | :--- | :--- | | March 2025 | 377,267 | $44.55 | $288,540,680 | | April 2025 | 393,819 | $42.68 | $271,733,312 | | May 2025 | 341,928 | $49.15 | $254,926,656 | | Total | 1,113,014 | | | Other Information States that no directors or executive officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter - No director or executive officer adopted or terminated a Rule 10b5-1 trading arrangement during the third quarter of fiscal 2025[158] Exhibits Lists filed exhibits, including SOX certifications, agreements, and Inline XBRL data files