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MarketScreener Homepage  >  Equities  >  Nyse  >  Commercial Metals Company    CMC

COMMERCIAL METALS COMPANY

(CMC)
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COMMERCIAL METALS : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

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03/25/2020 | 11:00am EDT
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 is 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 this 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 "comparable period" or "corresponding
period" relates to the relevant three-month or six-month period ended
February 28, 2019.
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.

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
United States ("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                                                     Six Months 

Ended

(in thousands, except per share data)               February 29, 2020

February 28, 2019February 29, 2020February 28, 2019 Net sales

                                          $       1,340,963

$ 1,402,783$ 2,725,671$ 2,680,125 Earnings from continuing operations

                           63,596                     14,928                    146,351                    34,348
Diluted earnings per share                         $            0.53          $            0.13          $            1.22          $           0.29



Net sales for the three and six months ended February 29, 2020 decreased $61.8
million, or 4%, and increased $45.5 million, or 2%, respectively, compared to
the corresponding periods in 2019. For the three months ended February 29, 2020,
net sales decreased year-over-year in our Americas Recycling, Americas Mills and
Americas Fabrication segments primarily due to a reduction in the ferrous scrap
pricing environment, a decrease in average selling prices per ton and a decrease
in tons shipped, respectively. These decreases were partially offset by an
increase in year-over-year net sales in our International Mill segment due to an
increase in tons shipped. Year-to-date net sales increased year-over-year in our
Americas Mills and Americas
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Fabrication segments primarily due to an increase in tons shipped in both
segments, coupled with an increase in average selling prices per ton in our
Americas Fabrication segment, as a result of strong demand in our core markets
and two additional months of shipments from the Acquired Businesses. These
increases were partially offset by decreases in year-over-year net sales in our
Americas Recycling segment, due to continued reductions in the ferrous scrap
pricing environment and constrained scrap flow, and in our International Mill
segment due to a decrease in average selling prices per ton.

Earnings from continuing operations for the three and six months ended
February 29, 2020 increased $48.7 million and $112.0 million, respectively, from
the comparable periods in 2019. The increase was primarily driven by
year-over-year expansion in second quarter and year-to-date metal margins in our
Americas Fabrication segment, an increase in second quarter tons shipped in our
Americas Mills segment and an increase in year-to-date tons shipped in our
Americas Fabrication and Americas Mills segments.

Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three and six months ended
February 29, 2020 increased $16.8 million and $11.1 million, respectively, from
the comparable periods in 2019. For the three months ended February 29, 2020,
the year-over-year increase primarily related to a $24.2 million increase in
employee-related expenses, partially offset by $1.5 million, $1.3 million and
$1.2 million decreases in professional services, rent, and insurance expense,
respectively. The year-to-date increase was driven primarily by a $46.6 million
year-over-year increase in employee-related expenses, partially offset by a
$26.1 million year-over-year decrease in professional fees and legal expenses,
primarily related to the Acquisition. In addition, there was a $4.9 million
increase in gains on the sale of fixed assets in the six months ended
February 29, 2020, compared to the corresponding period.

Interest Expense


Interest expense for the three and six months ended February 29, 2020 decreased
$2.6 million and $2.7 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 due to a decline in the floating LIBOR
market, coupled with total prepayments of $200 million on the Term Loan (as
defined in Note 8, Credit Arrangements) over the past four quarters.

Income Taxes


Our effective income tax rate from continuing operations for the three and six
months ended February 29, 2020 was 26.4% and 25.5%, respectively, compared with
54.9% and 40.9% in the corresponding periods in 2019. The decrease in the
effective income tax rate is primarily attributable to discrete tax expense
recorded during the second quarter of 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.

                                       23
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Americas Recycling
                                                         Three Months Ended                                       Six Months Ended
                                                  February 29,        February 28,        February 29,
(in thousands)                                        2020                2019                2020             February 28, 2019
Net sales                                         $  248,084$  287,075$  470,345$        589,084
Adjusted EBITDA                                        5,754              10,124               9,171                    25,558

Average selling price (per ton)

 Ferrous                                          $      226$      266$      204          $            269
 Nonferrous                                            2,044               1,998               2,014                     1,990

Tons shipped (in thousands)
 Ferrous                                                 519                 570               1,011                     1,149
 Nonferrous                                               58                  59                 115                       122
 Total                                                   577                 629               1,126                     1,271



Net sales for the three and six months ended February 29, 2020 decreased $39.0
million, or 14%, and $118.7 million, or 20%, respectively, as compared to the
corresponding periods in 2019. For the three and six months ended February 29,
2020, the primary drivers for the year-over-year decreases in net sales were
lower average ferrous selling prices and ferrous tons shipped due to a declining
price environment which also constrained scrap flows as there was less scrap
available to purchase while prices were falling. Average ferrous selling prices
per ton decreased approximately 15% and 24%, respectively, and ferrous tons
shipped decreased approximately 9% and 12%, respectively, for the three and six
months ended February 29, 2020, in relation to the comparable periods.
Adjusted EBITDA for the three and six months ended February 29, 2020 decreased
$4.4 million and $16.4 million, respectively, as compared to the corresponding
periods in 2019, as the declining price environment compressed margins and
constrained scrap flows, as discussed above. Conversion costs increased
approximately $4 and $7 per ton in the three and six months ended February 29,
2020, respectively, as compared to the corresponding periods in 2019, due to
decreased production levels. Adjusted EBITDA included non-cash stock
compensation expense of $0.4 million and $0.8 million for the three and six
months ended February 29, 2020, respectively, and $0.3 million and $0.6 million
for the comparable periods.

Americas Mills
                                                        Three Months Ended                                              Six Months Ended
                                                 February 29,        February 28,
(in thousands)                                       2020                2019             February 29, 2020          February 28, 2019
Net sales                                        $  732,040$  774,709$       1,500,933$      1,376,562
Adjusted EBITDA                                     125,691             112,396                    280,716                   226,269

Average price (per ton)
Total selling price                              $      606$      677          $             608          $            677
Cost of ferrous scrap utilized                          256                 303                        238                       305
Metal margin                                            350                 374                        370                       372

Tons (in thousands)
Melted                                                1,117               1,126                      2,299                     2,035
Rolled                                                1,084               1,045                      2,239                     1,889
Shipped                                               1,147               1,095                      2,353                     1,942



Net sales for the three and six months ended February 29, 2020 decreased $42.7
million, or 6%, and increased $124.4 million, or 9%, respectively, as compared
to the corresponding periods in 2019. For the three months ended February 29,
2020, the decrease in year-over-year net sales was due to a 10% decrease in
average selling prices per ton, partially offset by an increase of 52 thousand
tons shipped. Despite a 10% decrease in year-over-year average selling prices
per ton in the six months ended February 29, 2020, year-to-date net sales
increased due to an increase of 411 thousand tons shipped as a result of
continued
                                       24
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strength in our core markets and two additional months of shipments from the Acquired Businesses, as well as targeted merchant bar growth opportunities.


Adjusted EBITDA for the three and six months ended February 29, 2020 increased
$13.3 million and $54.4 million, respectively, as compared to the corresponding
periods in 2019. The year-over-year increases in adjusted EBITDA for the three
and six months ended February 29, 2020 were due, in part, to increased shipments
in both periods year-over-year. Although there were metal margin compressions of
6% and 1% during the three and six months ended February 29, 2020, respectively,
the impact was offset by 6% and 4% year-over-year decreases, respectively, in
conversion costs 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 $3.5 million for the three and
six months ended February 29, 2020, respectively, and $1.1 million and $2.3
million for the comparable periods.

Americas Fabrication
                                                        Three Months Ended                                              Six Months Ended
                                                 February 29,        February 28,
(in thousands)                                       2020                2019             February 29, 2020          February 28, 2019
Net sales                                        $  511,748$  530,836$       1,083,595$        967,947
Adjusted EBITDA                                      16,060             (49,578)                    33,541                   (86,574)

Average selling price (excluding stock and
buyout sales) (per ton)
Rebar and other                                  $      984$      845          $             979          $            856

Tons shipped (in thousands)
Rebar and other                                         366                 396                        779                       715



Net sales for the three and six months ended February 29, 2020 decreased $19.1
million, or 4%, and increased $115.6 million, or 12%, respectively, as compared
to the corresponding periods in 2019. The year-over-year decrease in net sales
for the three months ended February 29, 2020 was driven by an approximately 8%
decrease in tons shipped, partially offset by a 16% increase in average selling
prices per ton. The year-over-year increase in net sales for the six months
ended February 29, 2020 was driven by 9% and 14% year-over-year increases in
tons shipped and average selling prices per ton, respectively. Tons shipped
increased year-over-year due, in part, to two additional months of shipments
related to the Acquired Businesses. Net sales included amortization benefit of
$6.0 million and $14.3 million for the three and six months ended February 29,
2020, respectively, and $23.5 million and $34.8 million for the comparable
periods, respectively, related to the unfavorable contract backlog of the
Acquired Businesses.

Adjusted EBITDA for the three and six months ended February 29, 2020 increased
$65.6 million and $120.1 million, respectively, as compared to the corresponding
periods in 2019. The primary driver for the year-over-year increases in adjusted
EBITDA for the three and six months ended February 29, 2020 was metal margin
expansion due to increased average selling prices per ton, as discussed above,
and decreased input and conversion costs. Adjusted EBITDA does not include the
$6.0 million or $14.3 million benefit of the amortization of the unfavorable
contract backlog reserve described above. Adjusted EBITDA included non-cash
stock compensation expense of $0.6 million and $1.3 million for the three and
six months ended February 29, 2020, respectively, and $0.4 million and $1.1
million for the comparable periods.
                                       25
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International Mill

                                                        Three Months Ended                                       Six Months Ended
                                                 February 29,        February 28,        February 29,
(in thousands)                                       2020                2019                2020             February 28, 2019
Net sales                                        $  180,079$  175,198$  345,468$        402,222
Adjusted EBITDA                                      13,451              20,537              24,810                    53,316

 Average price (per ton)
Total selling price                              $      449$      545$      455          $            546
Cost of ferrous scrap utilized                          251                 301                 248                       298
Metal margin                                            198                 244                 207                       248

Tons (in thousands)
Melted                                                  393                 375                 738                       767
Rolled                                                  333                 298                 675                       561
Shipped                                                 380                 304                 718                       696



Net sales for the three and six months ended February 29, 2020 increased $4.9
million, or 3%, and decreased $56.8 million, or 14%, respectively, as compared
to the corresponding periods in 2019. For the three months ended February 29,
2020, the year-over-year increase in net sales was driven by an approximately
25% year-over-year increase in tons shipped due to strong demand in the Polish
construction sector, partially offset by an approximately 18% year-over-year
decrease in average selling prices per ton primarily due to elevated import
levels. The year-over-year decrease in year-to-date net sales was primarily
driven by an approximately 17% year-over-year decrease in average selling prices
per ton. Net sales for the three and six months ended February 29, 2020 were
also impacted by unfavorable foreign currency translation adjustments of
approximately $4.2 million and $11.5 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 six months ended February 29, 2020 decreased
$7.1 million and $28.5 million, respectively, as compared to the corresponding
periods in 2019, primarily driven by $46 per ton, or 19%, and $41 per ton, or
17%, year-over-year decreases in metal margins, respectively. Elevated import
levels in the third quarter of calendar 2019 saturated the market, resulting in
lower average selling prices per ton and compressed margins. Adjusted EBITDA
included non-cash stock compensation expense of $0.3 million and $0.8 million
for the three and six months ended February 29, 2020, respectively, and $0.2
million and $0.3 million for the comparable periods. Foreign currency
translation impact to adjusted EBITDA for the three and six months
ended February 29, 2020 was immaterial.

Corporate and Other


Corporate and Other reported adjusted EBITDA losses of $23.2 million and $50.7
million for the three and six months ended February 29, 2020, respectively, as
compared to adjusted EBITDA losses of $24.1 million and $83.7 million in the
corresponding periods. For the three months ended February 29, 2020, adjusted
EBITDA was relatively flat on a year-over-year basis. For the six months ended
February 29, 2020, the decrease in adjusted EBITDA loss was primarily driven by
a $27.9 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 $4.6 million and $9.4 million for the
three and six months ended February 29, 2020, respectively, and $3.7 million and
$5.7 million for the comparable 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 February 29, 2020.

                                       26
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The table below reflects our sources, facilities and available liquidity at
February 29, 2020:
(in thousands)                            Total Facility       Availability
Cash and cash equivalents                $      232,442$    232,442
Notes due from 2023 to 2027                     980,000                     *
Revolver                                        350,000            346,962
U.S. accounts receivable facility               200,000            169,009
Term Loan                                       110,125                  -
Poland credit facilities                         70,046             58,005
Poland accounts receivable facility              56,037             42,670


_________________

* 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 $253.4 million for the six months
ended February 29, 2020 compared to $352.9 million of net cash flows used by
operating activities for the comparable 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. In addition, for the six months ended
February 29, 2020, the Company had a $113.6 million year-over-year increase in
net earnings, a $30.4 million year-over-year increase in deferred income taxes
and a $65.1 million year-over-year decrease in cash used by operating assets and
liabilities ("working capital"). For continuing operations, operating working
capital days decreased five days year-over-year.

Investing Activities
Net cash flows used by investing activities were $91.5 million and $393.1
million for the six months ended February 29, 2020 and the comparable period in
2019, respectively. Cash used by investing activities in the six months ended
February 29, 2020 was lower than the comparable 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 $160 million to $185
million. We regularly assess our capital spending based on current and expected
results.

Financing Activities
Net cash flows used by financing activities were $122.1 million for the six
months ended February 29, 2020 compared to net cash flows from financing
activities of $181.8 million for the comparable period in 2019. During the six
months ended February 29, 2020, we had net debt repayments of $91.2 million, as
compared to net borrowings of $212.8 million in the corresponding period which
was used to fund the Acquisition.

At this time, the coronavirus ("COVID-19") has not had a material impact on our
operations, and we anticipate our current cash balances, cash flows from
operations and our available sources of liquidity will be sufficient to meet our
cash requirements. 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.

                                       27
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CONTRACTUAL OBLIGATIONS
Our contractual obligations at February 29, 2020 decreased by approximately
$157.8 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 February 28, 2021 are
approximately $391.7 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 February 29, 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.
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 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;

                                       28
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•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 or 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;
•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;
•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.
                                       29

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