COMMERCIAL METALS COMPANY In the following discussion, references to "we," "us," "our" or the "Company" meanCommercial 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 (this "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 endedAugust 31, 2022 (the "2022 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 theSecurities 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 sections entitled "Risk Factors" in Part I, Item 1A of our 2022 Form 10-K. 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 "corresponding period" or "comparable period" relates to the three month period endedNovember 30, 2021 . Any reference in this Form 10-Q to a year refers to the fiscal year endedAugust 31st of that year, unless otherwise noted. 21
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BUSINESS CONDITIONS AND DEVELOPMENTS
OnApril 25, 2022 (the "Tensar Acquisition Date"), we completed the acquisition ofTAC Acquisition Corp. ("Tensar ") for approximately$550 million , net of cash acquired. Through its patented foundation systems,Tensar produces ground stabilization and soil reinforcement solutions that complement our existing concrete reinforcement product lines and broaden our ability to address multiple early phases of commercial and infrastructure construction, including subgrade, foundation and structures. End customers for these products include commercial, industrial and residential site developers, mining and oil and gas companies, transportation authorities, coastal and waterway authorities and waste management companies. The acquired operations withinNorth America are presented within ourNorth America reportable segment and the remaining acquired operations are presented within ourEurope reportable segment. See Note 2, Changes in Business, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information about theTensar acquisition.
Advanced Steel Recovery Acquisition
OnSeptember 15, 2022 , we completed the acquisition ofAdvanced Steel Recovery, LLC ("ASR"), a supplier of recycled ferrous metals located inSouthern California . ASR's primary operations include processing and brokering capabilities that source material for sale into both the domestic and export markets and are presented within ourNorth America reportable segment.
Kodiak Acquisition
On
Capital Expenditures
InJanuary 2022 , we announced the plan to construct a fourth micro mill geographically situated with the intention of primarily serving the Northeast, Mid-Atlantic and Mid-Western U.S. markets, and onDecember 8, 2022 we announced it will be located inBerkeley County, West Virginia . This new micro mill will enhance our steel production capabilities in theU.S. and create meaningful synergies within the existing network of mills and downstream fabrication plants. The construction and commissioning of the planned mill is expected to take approximately two years. InAugust 2020 , we announced the construction of a third micro mill. This micro mill will be the first in the world with the capability to produce merchant bar quality products through a continuous production process and will employ the latest technology in EAF power supply systems which will allow us to directly connect the EAF and the ladle furnace to renewable energy sources such as solar and wind. The new facility, located inMesa, Arizona , will allow us to more efficiently meetWest Coast demand for steel products. We began construction of the third micro mill in 2021 and expect this micro mill to be commissioned in spring 2023. Senior Notes Activity InNovember 2022 , we repurchased$115.9 million in aggregate principal amount of the 4.875% Senior Notes due 2023 ("2023 Notes") through a cash tender offer. The remaining$214.1 million of outstanding principal on the 2023 Notes is due onMay 15, 2023 , and this amount was included in current maturities of long-term debt and short-term borrowings in the condensed consolidated balance sheet as ofNovember 30, 2022 . Russian Invasion ofUkraine The Russian invasion ofUkraine did not have a direct material adverse impact on our business, financial condition or results of operations during the three months endedNovember 30, 2022 . OurEurope segment has not had an interruption in energy supply and was able to identify alternate sources for a limited number of materials previously procured throughRussia . However, we will continue to monitor disruptions in supply of energy and materials and the indirect effects on our operations of inflationary pressures, foreign exchange rate fluctuations, commodity pricing, potential cybersecurity risks and sanctions resulting from the invasion. 22 -------------------------------------------------------------------------------- Table of Contents See Part I, Item 1A, Risk Factors, of our 2022 Form 10-K for further discussion related to the above business conditions.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There have been no material changes to our critical accounting policies and estimates as set forth in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, included in our 2022 Form 10-K.
RESULTS OF OPERATIONS SUMMARY
Business Overview
Our vertically integrated steel-related operations manufacture, recycle and
fabricate steel and metal products and provide related materials and services
through a network of facilities that includes seven electric arc furnace ("EAF")
mini mills, two EAF micro mills, one rerolling mill, steel fabrication and
processing plants, construction-related product warehouses and metal recycling
facilities in the United States and Poland . Through our Tensar operations, CMC
is a leading global provider of innovative ground and soil stabilization
solutions selling into more than 80 national markets through two major product
lines: Tensar® geogrids and Geopier® foundation systems. Our operations are
conducted through two reportable segments: North America and Europe .
Key Performance Indicators
When evaluating our results for the period, we compare net sales, in the
aggregate and for both of our segments, in the current period to net sales in
the corresponding period. In doing so, we focus on changes in average selling
price per ton and tons shipped compared to the prior period for each of our
vertically integrated product categories (raw materials, steel products and
downstream products) as these are the two variables that typically have the
greatest impact on our net sales. Raw materials include ferrous and nonferrous
scrap, steel products include rebar, merchant and other steel products, such as
billets and wire rod, and downstream products include fabricated rebar and steel
fence posts.
Adjusted EBITDA is used by management to compare and evaluate the
period-over-period underlying business operational performance of our segments.
Adjusted EBITDA is the sum of the Company's earnings before interest expense,
income taxes, depreciation and amortization and impairment expense. Although
there are many factors that can impact a segment's adjusted EBITDA and,
therefore, our overall earnings, changes in metal margins of our steel products
and downstream products period-over-period is a consistent area of focus for our
Company and industry. Metal margin is a metric used by management to monitor the
results of our vertically integrated organization. For our steel products, metal
margin is the difference between the average selling price per ton of rebar,
merchant and other steel products and the cost of ferrous scrap per ton utilized
by our steel mills to produce these products. An increase or decrease in input
costs can impact profitability of these products when there is no corresponding
change in selling prices. The metal margin for our downstream products is the
difference between the average selling price per ton of fabricated rebar and
steel fence post products and the scrap input costs to produce these products.
The majority of our downstream products selling prices per ton are fixed at the
beginning of a project and these projects last one to two years on average.
Because the selling price generally remains fixed over the life of a project,
changes in input costs over the life of the project can significantly impact
profitability.
Financial Results Overview
The following discussion of our results of operations is based on our continuing
operations.
Three Months Ended November 30,
(in thousands, except per share data) 2022 2021
Net sales $ 2,227,313 $ 1,981,801
Net earnings 261,774 232,889
Diluted earnings per share $ 2.20 $ 1.90
23-------------------------------------------------------------------------------- Table of Contents Net sales for the three months endedNovember 30, 2022 increased$245.5 million , or 12%, compared to the corresponding period. Net sales in ourNorth America segment increased in the three months endedNovember 30, 2022 , as compared to the corresponding period, primarily due to year-over-year increases in steel products average selling prices and downstream products average selling prices. Net sales in ourEurope segment also increased due to higher shipments of steel products in the three months endedNovember 30, 2022 , compared to the corresponding period. The acquiredTensar operations also contributed to the year-over-year change by providing$61.6 million in net sales during the three months endedNovember 30, 2022 , with no such activity in the corresponding period. During the three months endedNovember 30, 2022 , we achieved net earnings of$261.8 million , which increased$28.9 million , or 12%, compared to the corresponding period. This increase was driven by the significant expansion of steel products metal margins per ton in ourNorth America segment, which resulted from a combination of rising selling prices for steel products and lower input costs of ferrous scrap utilized.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased$33.8 million for the three months endedNovember 30, 2022 , compared to the corresponding period. Contributing to the increase was$22.0 million of selling, general and administrative expenses fromTensar operations' commercial and engineering support in the three months endedNovember 30, 2022 , with no such expenses in the corresponding period. The remaining increase in selling, general and administrative expenses in the three months endedNovember 30, 2022 was a result of many factors, including$7.0 million of increased stock compensation, a$4.2 million pension plan settlement charge, with no such settlement charge in the corresponding period,$3.9 million of increased professional services and$1.6 million of increased travel-related costs. See Note 11, Employees' Retirement Plans, in Part I, Item 1 of this Form 10-Q for more information on the pension plan termination activity. These costs were partially offset by a$7.0 million decrease in labor-related expenses.
Interest Expense
Interest expense increased by$2.0 million during the three months endedNovember 30, 2022 , compared to the corresponding period. Capitalized interest was$4.6 million during the three months endedNovember 30, 2022 , compared to$1.5 million during the corresponding period. The increase in capitalized interest was due to construction of the Company's third micro mill inMesa, Arizona . Offsetting the impact of increased capitalized interest was an increase in long-term debt interest expense of$3.9 million during the three months endedNovember 30, 2022 , compared to the corresponding period, due to the additional long-term debt outstanding.
Income Taxes
The effective income tax rate for the three months endedNovember 30, 2022 was 22.7% compared to 11.0% in the corresponding period. The increase is primarily due to the recognition of a tax benefit on a tax restructuring transaction during the three months endedNovember 30, 2021 that did not recur in the three months endedNovember 30, 2022 . 24
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SEGMENT OPERATING DATA
Unless otherwise indicated, all dollar amounts below are calculated before income taxes. See Note 14, Operating Segments, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information. The operational data by product category presented in the tables below reflects activity from sales of raw materials, steel products and downstream products, as applicable, which comprise the majority of sales inNorth America andEurope . The data is calculated using averages, and therefore, it is not meaningful to quantify the effect that any individual metric had on the segment's net sales or adjusted EBITDA.North America Three Months Ended November 30, (in thousands, except per ton amounts) 2022 2021 Net sales$ 1,816,899 $ 1,653,622 Adjusted EBITDA 377,956 268,524 External tons shipped (in thousands) Raw materials 316 334 Rebar 461 442 Merchant and other 243 257 Steel products 704 699 Downstream products 382 400 Average selling price (per ton) Raw materials $ 824$ 1,034 Steel products 1,020 976 Downstream products 1,399 1,092 Cost of raw materials per ton $ 598$ 766 Cost of ferrous scrap utilized per ton 325
428
Steel products metal margin per ton 695
548
Net sales for the three months endedNovember 30, 2022 increased$163.3 million , or 10%, compared to the corresponding period. These results benefited from increased average selling prices of 5% for steel products and 28% for downstream products, and were offset, in part, by a 20% decrease in raw materials average selling prices compared to the corresponding period. The year-over-year increases in average selling prices for steel products and downstream products were driven by continued strong demand across all of our end-use markets. During the three months endedNovember 30, 2022 , downstream bidding activity improved and led to growth in backlog levels compared to the corresponding period, which were awarded at the improved price levels described above. Volumes remained relatively flat during the three months endedNovember 30, 2022 , compared to the corresponding period, as the construction industry demand was constrained, in part, due to availability of labor at construction sites in certain geographies. The acquiredTensar operations also contributed to the year-over-year change by providing$42.1 million in net sales during the three months endedNovember 30, 2022 , with no such activity in the corresponding period. Adjusted EBITDA for the three months endedNovember 30, 2022 increased$109.4 million , or 41%, compared to the corresponding period. In our vertically integrated business model, the increases in average selling prices for both steel products and downstream products, paired with falling scrap prices, led to significant expansion in the steel products metal margin per ton and downstream products margin over scrap per ton. These expanded margins, coupled with the continued steady demand discussed above, overcame the inflation that we faced during the period and drove the year-over-year growth in adjusted EBITDA. Also contributing to the year-over-year change was$8.1 million of adjusted EBITDA provided by the acquiredTensar operations during the three months endedNovember 30, 2022 , with no such activity in the corresponding period. Adjusted EBITDA included non-cash stock compensation expense of$4.1 million and$2.7 million for the three months endedNovember 30, 2022 and 2021, respectively. 25 -------------------------------------------------------------------------------- Table of Contents Europe Three Months Ended November 30, (in thousands, except per ton amounts) 2022 2021 Net sales$ 406,513 $ 329,056 Adjusted EBITDA 64,505 79,832 External tons shipped (in thousands) Rebar 204 103 Merchant and other 269 262 Steel products 473 365 Average selling price (per ton) Steel products $ 792
Cost of ferrous scrap utilized per ton $ 366$ 434 Steel products metal margin per ton 426
435
Net sales for the three months endedNovember 30, 2022 increased$77.5 million , or 24%, compared to the corresponding period. The 30% increase in shipments of steel products overcame the impact of a$77 per ton year-over-year decrease in steel products average selling prices, which was driven by a low pricing environment acrossEurope . Scheduled maintenance, which decreased shipments in the comparable period, did not impact volumes in the three months endedNovember 30, 2022 . Rising shipment levels were also supported by our optimized cost structure, which positioned us to competitively price our steel products, coupled with our historical investment in operations, which provided the capacity to meet customer demand. The acquiredTensar operations also contributed to the year-over-year change by providing$19.5 million in net sales during the three months endedNovember 30, 2022 , with no such activity in the corresponding period. Net sales for the three months endedNovember 30, 2022 were impacted by an unfavorable foreign currency translation adjustment of$79.6 million , due to the increase in the average value of theU.S. dollar relative to the Polish zloty, compared to an unfavorable foreign currency translation adjustment of$13.5 million , during the corresponding period. Adjusted EBITDA for the three months endedNovember 30, 2022 was$64.5 million , compared to$79.8 million in the corresponding period. While the cost of ferrous scrap utilized decreased$68 per ton year-over-year, the decline in average selling prices slightly outpaced it resulting in a modest decrease in steel products metal margin per ton. During the three months endedNovember 30, 2022 we received a$9.5 million energy credit, which helped mitigate higher energy costs by reducing cost of goods sold, but was$6.0 million lower than the energy credit received in the comparable period. Also contributing to the year-over-year change was$3.3 million of adjusted EBITDA provided by the acquiredTensar operations during the three months endedNovember 30, 2022 , with no such activity in the corresponding period. Adjusted EBITDA for the three months endedNovember 30, 2022 included an unfavorable foreign currency exchange rate impact of$13.5 million , compared to unfavorable foreign currency translation adjustment of$3.0 million during the corresponding period. Adjusted EBITDA included non-cash stock compensation expense of$1.9 million and$1.5 million for the three months endedNovember 30, 2022 and 2021, respectively.
Corporate and Other
Corporate and Other reported an adjusted EBITDA loss of$39.7 million for the three months endedNovember 30, 2022 , compared to an adjusted EBITDA loss of$34.3 million in the corresponding period. The year-over-year increase in adjusted EBITDA loss was driven primarily by a$5.3 million increase in non-cash stock compensation expense and a$4.2 million pension plan settlement charge, with no such settlement charge in the corresponding period. See Note 11, Employees' Retirement Plans, in Part I, Item 1 of this Form 10-Q for more information on the pension plan termination activity. These increases were offset, in part, by a$6.5 million increase in other revenue, driven by short-term investments and gains on benefit restoration plan ("BRP") assets. 26
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LIQUIDITY AND CAPITAL RESOURCES
Sources of Liquidity and Capital Resources
Our cash flows from operating activities are our principal sources of liquidity and result primarily from sales of raw materials, steel products, downstream products and related materials and services, as described in Part I, Item 1, Business, of our 2022 Form 10-K and Note 2, Changes in Business, in Part I, Item 1, Financial Statements, of this Form 10-Q. We have a diverse and generally stable customer base, and regularly maintain a substantial amount of accounts receivable. We actively monitor our accounts receivable and, based on market conditions and customers' financial condition, record allowances when we believe accounts are uncollectible. We use credit insurance internationally 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 14% of total trade receivables atNovember 30, 2022 . 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 8, Derivatives, in Part I, Item 1, Financial Statements, of this Form 10-Q, for further information.
The table below reflects our sources, facilities and availability of liquidity
at
Liquidity
Sources and
(in thousands) Facilities Availability
Cash and cash equivalents $ 582,069 $ 582,069
Notes due from 2023 to 2032 1,114,059 (1)
Revolver 600,000 598,587
Term Loan 200,000 200,000
Series 2022 Bonds, due 2047 145,060 -
Poland credit facilities 66,851 52,296
Poland accounts receivable facility 64,177 64,177
Other 4,026 1,206
__________________________________
(1) We believe we have access to additional financing and refinancing, if needed, although we can make no assurances as to the form or terms of such financing.
We continually review our capital resources to determine whether we can meet our short and long-term goals. We anticipate our current cash balances, cash flows from operations and available sources of liquidity will be sufficient to maintain operations, make necessary capital expenditures, repay current maturities of long-term debt, including our$214.1 million outstanding principal amount of the 2023 Notes, pay dividends and opportunistically repurchase shares for at least the next twelve months. Additionally, we expect our long-term liquidity position will be sufficient to meet our long-term liquidity needs with cash flows from operations and financing arrangements. However, in the event of changes in business conditions or other developments, including a sustained market deterioration, unanticipated regulatory developments, significant acquisitions, competitive pressures, or to the extent our liquidity needs prove to be greater than expected or cash generated from operations is less than anticipated, we may need additional liquidity. To the extent we elect to finance our long-term liquidity needs, we believe that the potential financing capital available to us in the future will be sufficient. We estimate that our 2023 capital spending will range from$500 million to$550 million . We regularly assess our capital spending based on current and expected results and the amount is subject to change.
Our credit arrangements require compliance with certain non-financial and
financial covenants, including an interest coverage ratio and a debt to
capitalization ratio. At
As of
27
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Cash Flows
Operating Activities
Net cash flows from operating activities were $372.4 million for the three
months ended November 30, 2022 , compared to net cash flows from operating
activities of $25.8 million for the corresponding period. Net earnings increased
by $28.9 million year-over-year. A $272.3 million year-over-year net increase in
cash provided by operating assets and liabilities was due in part to falling
scrap prices, which resulted in decreased inventory valuation, compared to
increasing scrap prices in the three months ended November 30, 2021 .
Additionally, accounts payable, accrued expenses and other payables decreased by
$46.9 million and accounts receivable decreased as a result of the falling steel
product selling prices during the three months ended November 30, 2022 , as
compared to the corresponding period.
Investing Activities
Net cash flows used by investing activities were $195.6 million for the three
months ended November 30, 2022 , compared to net cash flows used by investing
activities of $68.7 million for the three months ended November 30, 2021 . The
$126.8 million increase in net cash flows used by investing activities was
primarily driven by capital expenditures and acquisitions. Net cash flows used
by investing activities rose due to $62.9 million of additional capital
expenditures as compared to the corresponding period, primarily from the
construction of our third micro mill, and approximately $63.7 million
attributable to the acquisitions of Advanced Steel Recovery and Kodiak, compared
to no acquisitions in the corresponding period. See Note 2, Changes in Business,
in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information
about these acquisitions.
Financing Activities
Net cash flows used by financing activities were $273.8 million for the three
months ended November 30, 2022 , compared to net cash flows used by financing
activities of $39.3 million for the three months ended November 30, 2021 . The
$234.5 million increase in net cash flows used by financing activities was
primarily due to increased net repayments of long-term debt of $148.1 million
during the three months ended November 30, 2022 , as compared to the
corresponding period, primarily related to the partial repayment of the 2023
Notes. Also contributing to the increase in net cash flows used by financing
activities were increased net repayments of our Polish accounts receivable
facilities of $31.4 million during the three months ended November 30, 2022 , as
compared to the corresponding period. See Note 7, Credit Arrangements, in Part
I, Item 1, Financial Statements, of this Form 10-Q, for more information
regarding our credit arrangements. Additionally, there was a $43.8 million
increase in treasury stock acquired under the share repurchase program. See Note
12, Stockholders' Equity and Earnings per Share, in Part I, Item 1, Financial
Statements, of this Form 10-Q, for more information on the share repurchase
program.
CONTRACTUAL OBLIGATIONS
Our material cash commitments from known contractual and other obligations primarily consist of obligations for long-term debt and related interest, leases for properties and equipment and purchase obligations as part of normal operations. See Note 7, Credit Arrangements, in Part I, Item 1, Financial Statements, of this Form 10-Q, for more information regarding scheduled maturities of our long-term debt.
Our undiscounted purchase obligations due in the twelve months followingNovember 30, 2022 were approximately$889.2 million with$219.8 million due thereafter. Of the purchase obligations due in the twelve months followingNovember 30, 2022 , approximately 22% were for capital expenditures in connection with normal business operations, 21% for the construction of our third micro mill, 20% for commodities, and 17% for consumable production inputs, such as alloys. Of the purchase obligations due thereafter, 85% were for commodities and 3% were for the construction of our third micro mill. Operating lease obligations in the twelve months followingNovember 30, 2022 were$38.2 million with$134.7 million due thereafter. Additionally, leases that have not yet commenced, primarily for vehicles, with aggregate fixed payments over their terms, were approximately$16.3 million , with$8.9 million to commence in 2023 and$7.4 million in 2024. 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. AtNovember 30, 2022 , we had committed$21.7 million under these arrangements, of which$1.4 million reduced availability under the Revolver (as defined in Note 7, Credit Arrangements, in Part I, Item 1, Financial Statements, of this Form 10-Q). CONTINGENCIES 28
-------------------------------------------------------------------------------- Table of Contents 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, in Part I, Item 1, Financial Statements, of this Form 10-Q, 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 impact of the Russian invasion ofUkraine , the effects of ongoing trade actions, the effects of continued pressure on the liquidity of our customers, potential synergies and organic growth provided by acquisitions and strategic investments, demand for our products, metal margins, the ability to operate our steel mills at full capacity, future availability and cost of supplies of raw materials and energy for our operations, share repurchases, legal proceedings, construction activity, international trade, capital expenditures, tax credits, our liquidity and our ability to satisfy future liquidity requirements, estimated contractual obligations, the expected capabilities and benefits of new facilities, the timeline for execution of our growth plan, and our expectations or beliefs concerning future events. The statements in this report that are not historical statements, are forward-looking statements. These forward-looking statements can generally be identified by phrases such as we or our management "expects," "anticipates," "believes," "estimates," "future," "intends," "may," "plans to," "ought," "could," "will," "should," "likely," "appears," "projects," "forecasts," "outlook" or other similar words or phrases, as well as by discussions of strategy, plans, or intentions. Our forward-looking statements are based on management's expectations and beliefs as of the time this Form 10-Q is filed with theSEC 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 our 2022 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;
•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 downstream contracts due to rising commodity pricing;
•excess capacity in our industry, particularly in
•the impact of the Russian invasion of
•increased attention to environmental, social and governance ("ESG") matters, including any targets or other ESG or environmental justice initiatives;
•impacts from COVID-19 on the economy, demand for our products, global supply chain and on our operations, including the responses of governmental authorities to contain COVID-19 and the impact of various COVID-19 vaccines; •compliance with and changes in existing and future laws, regulations and other legal requirements and judicial decisions that govern our business, including increased environmental regulations associated with climate change and greenhouse gas emissions;
•involvement in various environmental matters that may result in fines, penalties or judgments;
•evolving remediation technology, changing regulations, possible third-party
contributions, the inherent uncertainties of the estimation process and other
factors that may impact amounts accrued for environmental liabilities;
29
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•potential limitations in our or our customers' abilities to access credit and
non-compliance of their contractual obligations, including payment obligations;
•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 realize any or all of the anticipated synergies or other benefits of acquisitions;
•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;
•operating and startup risks, as well as market risks associated with the commissioning of new projects could prevent us from realizing anticipated benefits and could result in a loss of all or a substantial part of our investments;
•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 or other indefinite lived intangible asset impairment charges;
•impact of long-lived asset impairment charges;
•currency fluctuations;
•global factors, such as trade measures, military conflicts and political uncertainties, including changes to current trade regulations, such as Section 232 trade tariffs and quotas, tax legislation and other regulations which might adversely impact our business;
•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; and
•civil unrest, protests and riots.
You should refer to the "Risk Factors" disclosed in our periodic and current reports filed with theSEC for specific information regarding additional risks which would cause actual results to be significantly different from those expressed or implied by these forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other important factors that could cause actual results, performance or our achievements, or industry results, to differ materially from historical results, any future results, or performance or achievements expressed or implied by such forward-looking statements. Accordingly, readers of this Form 10-Q are cautioned not to place undue reliance on any forward-looking statements.
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