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What changed in COMMERCIAL METALS Co's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of COMMERCIAL METALS Co's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+345 added−323 removedSource: 10-K (2023-10-12) vs 10-K (2022-10-13)

Top changes in COMMERCIAL METALS Co's 2023 10-K

345 paragraphs added · 323 removed · 253 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

51 edited+27 added−23 removed47 unchanged
Biggest changeCMC Impact Metals manufactures high strength bar for the truck trailer industry, special bar quality steel for the energy market and armor plate for military vehicles and is one of North America's premier producers of high strength steel products. Our Tensar operations sell Tensar® geogrids and Geopier® foundation systems.
Biggest changeThe primary end markets are construction and fabricating industries, metals service centers, original equipment manufacturers and agricultural, energy and petrochemical industries. In addition, our CMC Impact Metals operations manufacture high-strength steel products, such as high-strength bar for the truck trailer industry, special bar quality steel for the energy market and armor plate for military vehicles.
For a discussion of important factors that could cause our results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by our forward-looking statements, please refer to Item 1A, Risk Factors and Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report.
For a discussion of important factors that could cause our results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by our forward-looking statements, please refer to Part I, Item 1A, Risk Factors and Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report.
We empower our employees to make the right decisions and have established the CMC Code of Conduct and Business Ethics (the “Code”) to help our employees understand company policies and guide their actions. Employees are required to complete training to reinforce their continued understanding of and compliance with the Code.
We empower our employees to make the right decisions and have established the CMC Code of Conduct and Business Ethics (the "Code") to help our employees understand company policies and guide their actions. Employees are required to complete training to reinforce their continued understanding of and compliance with the Code.
Each EAF mini mill consists of: • a melt shop with an electric arc furnace; • continuous casting equipment that shapes molten metal into billets; • a reheating furnace that prepares billets for rolling; • a rolling line that forms products from heated billets; • a mechanical cooling bed that receives hot products from the rolling line; • finishing facilities that shear, straighten, bundle and prepare products for shipping; and • supporting facilities such as maintenance, warehouse and office areas.
Each EAF mini mill consists of: • a melt shop with an EAF; • continuous casting equipment that shapes molten metal into billets; • a reheating furnace that prepares billets for rolling; • a rolling line that forms products from heated billets; • a mechanical cooling bed that receives hot products from the rolling line; • finishing facilities that shear, straighten, bundle and prepare products for shipping; and • supporting facilities such as maintenance, warehouse and office areas.
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to these reports are made available free of charge through the Investors section of our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission ("SEC").
Our Annual Report, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to these reports are made available free of charge through the Investors section of our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the U.S. Securities and Exchange Commission (the "SEC").
These facilities provide material almost exclusively to our mini mill and operate in order to lower the cost of scrap used by our mini mill. The equipment utilized at these facilities is similar to our North America recycling operations and includes one large capacity scrap metal shredding facility similar to the largest shredder we operate in North America.
These facilities provide material almost exclusively to our mini mill and operate in order to lower the cost of scrap used by our mini mill. The equipment utilized at these facilities is similar to our North America recycling operations and includes one large capacity scrap metal shredder similar to the largest shredder we operate in North America.
In addition, CMC has three facilities capable of producing spooled rebar. The estimated annual capacity for our steel mills, included in Item 2, Properties, of this Annual Report assumes a typical product mix and is not necessarily indicative of the expected production volumes or shipments in any fiscal year.
CMC has three facilities capable of producing spooled rebar. The estimated annual capacity for our steel mills, included in Part I, Item 2, Properties, of this Annual Report assumes a typical product mix and is not necessarily indicative of the expected production volumes or shipments in any fiscal year.
To execute our strategy, we seek to (i) obtain inputs at the 2 Table of Contents lowest possible cost, including materials procured from our recycling facilities, which are operated to provide low-cost scrap to our steel mills, (ii) operate modern, efficient EAF steel mills and (iii) enhance operational efficiency by utilizing our fabrication operations to optimize our steel mill volumes and obtain the highest possible selling prices to maximize metal margin.
To execute our strategy, we seek to (i) obtain inputs at the lowest possible cost, including materials procured from our recycling facilities, which are operated to provide low-cost scrap to our steel mills, (ii) operate modern, efficient EAF steel mills and (iii) enhance operational efficiency by utilizing our fabrication operations to optimize our steel mill volumes and obtain the highest possible selling prices to maximize metal margin.
Ethics and Compliance At CMC, we believe “it’s what’s inside that counts.” It is fundamental to our success that both our leaders and employees observe the highest ethical standards of business conduct in their interactions with our customers, suppliers, communities, investors and each other.
Ethics and Compliance At CMC, we believe "it’s what’s inside that counts." It is fundamental to our success that both our leaders and employees observe the highest ethical standards of business conduct in their interactions with our customers, suppliers, communities, investors and each other.
Geopier® foundation systems are ground improvement solutions that increase the load-bearing characteristics of ground structures and working surfaces and can be applied in soil types and construction situations in which traditional support methods are impractical or would make a project infeasible.
Geopier® 4 Table of Contents foundation systems are ground improvement solutions that increase the load-bearing characteristics of ground structures and working surfaces and can be applied in soil types and construction situations in which traditional support methods are impractical or would make a project infeasible.
Due to the increase in construction activities during the spring and summer months, our net sales are generally higher in our third and fourth quarters than in our first and second quarters. COMPETITION Our North America recycling operations compete with scrap metal processors and primary nonferrous metal producers.
Due to the increase in construction activities during the spring and summer months, our net sales are generally higher in our third and fourth quarters than in our first and second quarters. 5 Table of Contents COMPETITION Our North America recycling operations compete with scrap metal processors and primary nonferrous metal producers.
CMC is committed to providing equal employment opportunities to all employees and applicants for 7 Table of Contents employment without regard to race, color, religion, sex, age, physical or mental disability, national origin, citizenship, military or veteran status, sexual orientation, gender identity and/or expression.
CMC is committed to providing equal employment opportunities to all employees and applicants for employment without regard to race, color, religion, sex, age, physical or mental disability, national origin, citizenship, military or veteran status, sexual orientation, gender identity and/or expression.
In addition, uncertainty regarding adequate control levels, testing and sampling procedures, new pollution control technology and cost benefit analysis based on market conditions impact our future expenditures that are necessary to comply with environmental laws and rules.
In addition, uncertainty regarding adequate control levels, testing and sampling procedures, new pollution control technology and cost benefit analysis based on market conditions impact our future expenditures that are 7 Table of Contents necessary to comply with environmental laws and rules.
We play a key role in returning our primary input, ferrous scrap, into the economy in the form of rebar, merchant bar, wire rod and fence post for use in a wide variety of applications. In 2022, recycled content 5 Table of Contents made up approximately 98% of the raw materials used in our manufactured finished steel.
We play a key role in returning our primary input, ferrous scrap, into the economy in the form of rebar, merchant bar, wire rod and fence post for use in a wide variety of applications. In 2023, recycled content made up approximately 98% of the raw materials used in our manufactured finished steel.
Raw materials margin per ton is defined as the difference between the selling prices for processed and recycled ferrous and nonferrous scrap metals and the price paid to purchase obsolete and industrial scrap. Our steel mill operations consist of six EAF mini mills, two EAF micro mills and one rerolling mill.
Raw materials margin per ton is 3 Table of Contents defined as the difference between the selling prices for processed and recycled ferrous and nonferrous scrap metals and the price paid to purchase obsolete and industrial scrap. Our steel mill operations consist of six EAF mini mills, three EAF micro mills and one rerolling mill.
We believe 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.
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 employs the latest technology in EAF power supply systems, which will allow us to directly connect the electric arc furnace ("EAF") and the ladle furnace to renewable energy sources such as solar and wind.
Our fabricated rebar and steel fence post (collectively referred to as "downstream products") operations shear, bend, weld and fabricate steel and offer innovative products such as Galvabar® (galvanized rebar with a zinc alloy coating that provides corrosion protection and post-fabrication formability), ChromX® (designed for high-strength capabilities, corrosion resistance and a service life of more than 100 years) 3 Table of Contents and CryoSteel® (a cryogenic reinforcing steel that exceeds minimum performance requirements for strength and ductility at extremely low temperatures).
Fabricated rebar operations shear, bend, weld and fabricate steel and offer innovative products such as Galvabar® (galvanized rebar with a zinc alloy coating that provides corrosion protection and post-fabrication formability), ChromX® (designed for high-strength capabilities, corrosion resistance and a service life of more than 100 years) and CryoSteel® (a cryogenic reinforcing steel that exceeds minimum performance requirements for strength and ductility at extremely low temperatures).
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 within North America are presented within our North America reportable segment and the remaining acquired 1 Table of Contents operations are presented within our Europe reportable segment.
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, among others. The acquired operations within North America are presented within our North America reportable segment and the remaining acquired operations are presented within our Europe reportable segment.
ITEM 1. BUSINESS DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K (hereinafter referred to as the "Annual Report") contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
BUSINESS DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K (hereinafter referred to as the "Annual Report") contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the Private Securities Litigation Reform Act of 1995.
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.
("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.
We also conduct periodic surveys and other initiatives with employees, which provide invaluable information about how employees perceive our onboarding, employee training, development and culture and allow us to further enhance the training and resources we offer. INFORMATION ABOUT OUR EXECUTIVE OFFICERS Our Board of Directors annually elects executive officers.
We also conduct periodic surveys and other initiatives with employees, which provide invaluable information about how employees perceive our onboarding, employee training, development and culture and allow us to further enhance the training and resources we offer.
During 2022, we incurred environmental costs, including disposal, permits, license fees, tests, studies, remediation, consultant fees and environmental personnel expense of approximately $44.2 million. In addition, we spent approximately $6.9 million on capital expenditures for environmental projects in 2022. We believe that our facilities are in material compliance with currently applicable environmental laws and regulations.
During 2023, we incurred environmental costs, including disposal, permits, license fees, tests, studies, remediation, consultant fees and environmental personnel expense of approximately $49.3 million. In addition, we spent approximately $5.8 million on capital expenditures for environmental projects in 2023. We believe that our facilities are in material compliance with currently applicable environmental laws and regulations.
EUROPE SEGMENT Our Europe segment is composed primarily of a vertically integrated network of recycling facilities, an EAF mini mill and fabrication operations located in Poland.
EUROPE SEGMENT Our Europe segment is composed primarily of a vertically integrated network of recycling facilities, an EAF mini mill and fabrication operations located in Poland, as well as facilities that provide construction-related solutions.
We compete primarily on the services we provide to our customers and on the quality and price of our products. We believe we are the largest manufacturer, and among the largest fabricators, of rebar in the U.S., as well as the largest manufacturer of steel fence posts in the U.S.
We compete primarily on the services we provide to our customers and on the quality and price of our products. In the U.S., we believe we are the largest manufacturer and fabricator of rebar, the largest manufacturer of steel fence posts and among the largest manufacturers of merchant bar and wire rod.
These facilities purchase processed and unprocessed ferrous and nonferrous metals from a variety of sources including manufacturing and industrial plants, metal fabrication plants, electric utilities, machine shops, factories, refineries, shipyards, demolition businesses, automobile salvage firms, wrecking companies and retail individuals.
Our 43 scrap metal recycling facilities, primarily located in the southeast and central U.S., process ferrous and nonferrous scrap metals. These facilities purchase processed and unprocessed ferrous and nonferrous metals from a variety of sources including manufacturing and industrial plants, metal fabrication plants, electric utilities, machine shops, factories, refineries, shipyards, demolition businesses, automobile salvage firms, wrecking companies and retail individuals.
Demand for our products in the U.S. is highest in the Sun Belt region where most of our steel mills are located, which positions us to capitalize on growth in this region as well as benefit from a longer construction season.
Demand for our products in the U.S. is highest in the Sun Belt region where most of our steel mills are located, which positions us to capitalize on growth in this region as well as benefit from a longer construction season. Our mini mill in Poland also provides strategic benefits as it is well positioned to serve neighboring European economies.
Additionally, we participate in industry association meetings to share expertise and best practices. These surveys and meetings facilitate important discussions that ultimately help further develop our health and safety management systems. Our commitment to safety has resulted in the achievement of a total recordable incident rate ("TRIR") of 1.5 in each of 2022, 2021 and 2020.
These surveys and meetings facilitate important discussions that ultimately help further develop our health and safety management systems. 8 Table of Contents Our commitment to safety has resulted in the achievement of a total recordable incident rate ("TRIR") of 1.3 in 2023 and 1.5 in each of 2022 and 2021.
We also provide installation services of fabricated rebar in certain markets. We obtain steel for our fabrication operations primarily from our own steel mills, and the demand created by our fabrication operations optimizes the production from our steel mills.
We also provide installation services of fabricated rebar in certain markets. We obtain steel for our fabrication operations primarily from our own steel mills, and the demand created by our fabrication operations optimizes the production from our steel mills. Our steel fence posts have many applications, including residential and commercial landscaping and agricultural and livestock containment.
These core values are reinforced daily through our actions and in meetings with employees and serve as a compass for our behaviors and decisions.
At the heart of our culture are our core values of Integrity, Safety, Collaboration and Excellence. These core values are reinforced daily through our actions and in meetings with employees and serve as a compass for our behaviors and decisions.
Segments The following chart summarizes net sales by major product category for each segment: NORTH AMERICA SEGMENT Our North America segment is composed primarily of a vertically integrated network of recycling facilities, steel mills and fabrication operations. Our strategy in North America is to optimize our vertically integrated value chain to maximize profitability while providing industry-leading customer service.
Composed primarily of a vertically integrated network of recycling facilities, steel mills and fabrication operations, our strategy in North America is to optimize our vertically integrated value chain to maximize profitability while providing industry-leading customer service.
The new facility, located in Mesa, Arizona, will replace the rebar capacity at our Rancho Cucamonga, California mill, which was sold during 2022, and will allow us to meet West Coast demand for steel products more efficiently. We began construction of the third micro mill in 2021 and expect this micro mill to be commissioned in calendar 2023.
The new facility, located in Mesa, Arizona, replaced the rebar capacity at our Rancho Cucamonga, California mill, which was sold during 2022, and allows us to more efficiently meet West Coast demand for steel products.
The following table presents the approximate headcount of employees within each reportable segment and Corporate and Other as of August 31, 2022: Segment Number of Employees North America 8,950 Europe 3,157 Corporate and Other 376 Total 12,483 Approximately 15% and 30% of the employees in our North America and Europe segments, respectively, belong to unions.
The following table presents the approximate headcount of employees within each reportable segment and Corporate and Other as of August 31, 2023: Segment Number of Employees North America 9,373 Europe 3,238 Corporate and Other 411 Total 13,022 Approximately 14% and 29% of the employees in our North America and Europe segments, respectively, belong to unions.
Our fiscal year ends August 31st, and any reference in this Annual Report to any year refers to the fiscal year ended August 31st of that year, unless otherwise noted. Any reference in this Annual Report to a ton refers to the U.S. short ton, a unit of weight equal to 2,000 pounds.
Any reference in this Annual Report to a ton refers to the U.S. short ton, a unit of weight equal to 2,000 pounds.
Competitive Advantage We believe our vertically integrated manufacturing platform provides a competitive advantage and maximizes the results of our steel-related operations. Our recycling and fabrication operations are designed to support our steel mills. Our recycling operations provide scrap metal to our steel mills, which in turn use the scrap metal to produce and supply steel required by our fabrication operations.
Our recycling and fabrication operations are designed to support our steel mills. Our recycling operations provide scrap metal to our steel mills, which in turn use the scrap metal to produce and supply steel required by our fabrication operations.
See Item 1A, Risk Factors — Risks Related to the Regulatory Environment, in this Annual Report. Compliance with and changes to various environmental requirements and environmental risks applicable to our industry may adversely affect our business, results of operations and financial condition.
Compliance with and changes to various environmental requirements and environmental risks applicable to our industry may adversely affect our business, results of operations and financial condition.
The downstream products backlog is not a significant factor in evaluating the operations of our Europe segment. 4 Table of Contents The Tensar operations within our Europe segment have similar operations, products and end customers as the Tensar operations within our North America segment. SEASONALITY Many of our facilities serve customers in the construction industry.
The Tensar operations within our Europe segment have similar operations, products and end customers as the Tensar operations within our North America segment. SEASONALITY Our facilities primarily serve customers in the construction industry.
The third rolling line takes advantage of historical excess melting capacity in Poland, expands our overall rolling capacity and allows the rolling lines to now operate independently for each steel product produced by the mini mill (rebar, merchant bar and wire rod). In August 2020, we announced the construction of a third micro mill.
The third rolling line takes advantage of historical excess melting capacity in Poland, expands our overall rolling capacity and allows the rolling lines to now operate independently for each steel product produced by the mini mill (rebar, merchant bar and wire rod). 2 Table of Contents Segments The following chart summarizes net sales by major product category for each segment: NORTH AMERICA SEGMENT Our North America segment provides a diverse offering of products and solutions to support the construction sector.
For further details on the sale of the Rancho Cucamonga, California mill, refer to Note 3, Changes in Business, in Part II, Item 8 of this Annual Report.
For further details on the sale of the Rancho Cucamonga, California mill, refer to Note 2, Changes in Business, in Part II, Item 8 of this Annual Report. In December 2022, we announced that our planned fourth micro mill will be located in Berkeley County, West Virginia.
In addition to sales of downstream products in the Polish market, we also export our downstream products to neighboring countries such as the Czech Republic, Germany and Slovakia.
In addition to sales of downstream products in the Polish market, we also export our downstream products to neighboring countries such as the Czech Republic and Germany. The downstream products backlog is not a significant factor in evaluating the operations of our Europe segment. Our Europe segment also offers construction-related solutions through our Tensar operations.
In comparison, the industry average TRIR for iron and steel mills and ferroalloy manufacturing (North America Industry Classification code 3311), which is based on information provided by the U.S. Bureau of Labor Statistics, was 2.1 in 2020. TRIR is defined as OSHA recordable incidents per 200,000 hours worked.
While industry data is not available at the time of this report for 2023 or 2022, the industry average TRIR for iron and steel mills and ferroalloy manufacturing (North America Industry Classification code 3311), which is based on information provided by the U.S. Bureau of Labor Statistics, was 2.8 in 2021.
In addition to TRIR, we also measure our near miss frequency rate, which we believe is critical to incident avoidance and supports our superior safety rating in the industry. Diversity, Equity and Inclusion We believe having a diverse workforce strengthens our business; because of this, we aim to build a welcoming and inclusive work environment.
Diversity, Equity and Inclusion We believe having a diverse workforce strengthens our business; because of this, we aim to build a welcoming and inclusive work environment.
The primary end markets are construction and fabricating industries, metals service centers, original equipment manufacturers and agricultural, energy and petrochemical industries. Due to the nature of our steel products, we do not have a long lead time between order receipt and delivery. We generally fill orders for steel products from inventory or with products near completion.
Due to the nature of our steel products, we do not have a long lead time between order receipt and delivery. We generally fill orders for steel products from inventory or with products near completion. As a result, we do not believe our steel products backlog is a significant factor in the evaluation of our North America operations.
Business Developments The following business developments summarize our recent strategic acquisitions and capital expenditures that we expect will strategically position us for long-term growth in new and existing customer markets. Tensar Acquisition On April 25, 2022 (the "Acquisition Date"), we completed the acquisition of TAC Acquisition Corp. ("Tensar") for approximately $550 million, net of cash acquired.
Business Developments The following business developments summarize our recent synergistic acquisitions and capital expenditures that we expect will strategically position us for long-term growth in new and existing customer markets. 2023 Acquisitions On September 15, 2022, we completed the acquisition of Advanced Steel Recovery, LLC ("ASR"), a supplier of recycled ferrous metals located in Southern California.
As a result, we do not believe our steel products backlog is a significant factor in the evaluation of our North America operations. Our fabrication operations include 56 facilities engaged in various aspects of steel fabrication. Most of these facilities engage in general fabrication of reinforcing steel. Four of these facilities fabricate steel fence posts.
Our fabrication operations include 55 facilities engaged in various aspects of steel fabrication; 51 of these facilities engage in general fabrication of reinforcing steel and four of these facilities fabricate steel fence posts.
We recognize that each employee brings a diverse background and a unique skill set, and we have fostered a culture that challenges conventional thinking, promotes teamwork, requires accountability and rewards success. At the heart of our culture are our core values of Integrity, Safety, Collaboration and Excellence.
EMPLOYEES AND WORKFORCE CULTURE Our employees are our most important asset and are fundamental to our success. We recognize that our employees bring diverse backgrounds and unique skill sets, and we have fostered a culture that challenges conventional thinking, promotes teamwork, requires accountability and rewards success.
From our inception, our steel production business model has been strategically built on sustainable principles, including recycling metals, manufacturing products from approximately 98% recycled material using energy-efficient technology and employing closed-loop water recycling processes. We maintain our corporate office at 6565 North MacArthur Boulevard, Irving, Texas, 75039. Our telephone number is (214) 689-4300, and our website is http://www.cmc.com.
From our inception, our business model has been strategically built on sustainable principles, including recycling metals, manufacturing products from approximately 98% recycled material using energy-efficient technology and employing closed-loop water recycling processes. As we have evolved, our products have expanded to include diverse and innovative solutions for our customers, while continuing our commitment to sustainability.
Geogrids are polymer-based products used for ground stabilization, soil reinforcement and asphalt optimization in construction applications, including roadways, public infrastructure and industrial facilities. Additional offerings include permanent and bio-degradable rolled mats for the control of soil erosion and sedimentation.
Additional offerings include permanent and bio-degradable rolled mats for the control of soil erosion and sedimentation.
We strive to maximize cash flow generation through increased productivity, high-capacity utilization and optimal product mix. To remain competitive, we regularly make substantial capital expenditures. We have invested approximately 92%, 73% and 68% of total capital expenditures in our North America segment during 2022, 2021 and 2020, respectively.
Furthermore, we provide construction-related solutions to serve markets that are complementary to those served by our vertically integrated operations. We strive to maximize cash flow generation through increased productivity, high-capacity utilization and optimal product mix. To remain competitive, we regularly make substantial capital expenditures.
This new micro mill will enhance our steel production capabilities in the U.S. and create meaningful synergies within our existing network of mills and downstream fabrication plants. Following site selection, permitting and other necessary approvals, the construction and commissioning of the planned micro mill is expected to take roughly two years.
This new micro mill will be geographically situated with the intention of primarily serving the Northeast, Mid-Atlantic and Mid-Western U.S. markets and will enhance our steel production capabilities by achieving synergies within the existing network of mills and downstream fabrication plants.
For logistics, we utilize a fleet of trucks we own or lease as well as private haulers, railcars, export containers and barges. Our 38 scrap metal recycling facilities, primarily located in the Southeast and Central U.S., process ferrous and nonferrous scrap metals.
We have invested approximately 90%, 92% and 73% of total capital expenditures in our North America segment during 2023, 2022 and 2021, respectively. For logistics, we utilize a fleet of trucks we own or lease as well as private haulers, railcars, export containers and barges.
Additionally, approximately 89.5% of all co-products and waste streams from our steel mills are recycled or turned into other products. See Item 1A, Risk Factors — Risks Related to Our Business, of this Annual Report for more information on competitive factors described above. ENVIRONMENTAL MATTERS A significant factor in our business is our compliance with environmental laws and regulations.
Additionally, approximately 89% of all co-products and waste streams from our steel mills are recycled or turned into other products.
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OVERVIEW Founded in 1915 as a single scrap yard in Dallas, Texas, Commercial Metals Company ("CMC") and its subsidiaries (collectively, the "Company," "we," "our" or "us") 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 ("U.S.") and Poland.
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References in this Annual Report to "CMC," "the Company," "we," "our" and "us" refer to Commercial Metals Company and its subsidiaries unless otherwise indicated. OVERVIEW Founded in 1915 as a single scrap yard in Dallas, Texas, CMC is an innovative solutions provider helping build a stronger, safer and more sustainable world.
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Through our Tensar operations, we are 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 operating and reportable segments: North America and Europe.
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Through an extensive manufacturing network principally located in the United States ("U.S.") and Central Europe, we offer products and technologies to meet the critical reinforcement needs of the global construction sector. CMC’s solutions support construction across a wide variety of applications, including infrastructure, non-residential, residential, industrial and energy generation and transmission.
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For further details, refer to Note 2, Acquisition, in Part II, Item 8 of this Annual Report. Capital Expenditures In January 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.
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Our operations are conducted through two operating and reportable segments: North America and Europe. At CMC, we believe "it’s what’s inside that counts." This reflects the nature of our products, which are found in critical infrastructure worldwide, and also applies to our culture and employees.
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Downstream products backlog, defined as the total value of unfulfilled orders, was $1.9 billion and $1.5 billion at August 31, 2022 and 2021, respectively. We also operate Construction Services and CMC Impact Metals businesses. Our Construction Services business sells and rents construction-related products and equipment to concrete installers and other businesses in the construction industry.
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We maintain our corporate office at 6565 North MacArthur Boulevard, Irving, Texas 75039. Our telephone number is (214) 689-4300, and our website is http://www.cmc.com. Our fiscal year ends August 31st, and any reference in this Annual Report to a year refers to the fiscal year ended August 31st of that year, unless otherwise noted.
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Our mini mill in Poland also provides strategic benefits as it is well positioned to serve the growing European economies, particularly Poland and Germany, which are among the most attractive markets in Europe. Finally, our environmentally sustainable operations differentiate us from traditional blast furnace technology.
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ASR's primary operations include processing and brokering capabilities that source material for sale into both the domestic and export markets. 1 Table of Contents On November 14, 2022, we completed the acquisition of a Galveston, Texas area metals recycling facility and related assets (collectively, "Kodiak") from Kodiak Resources, Inc. and Kodiak Properties, L.L.C.
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We anticipate capital expenditures for new environmental projects during 2023 to be approximately $8.8 million. 6 Table of Contents EMPLOYEES AND WORKFORCE CULTURE Our employees are our most important asset and are fundamental to our success.
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On March 3, 2023, we completed the acquisition of all of the assets of Roane Metals Group, LLC ("Roane"), a supplier of recycled metals with two facilities located in eastern Tennessee. The majority of volumes processed by Roane relate to obsolete ferrous scrap metals to be consumed by our steel mill operations.
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Our executive officers continue to serve for terms set by our Board of Directors in its discretion. The table below sets forth the name, current position and offices, age and period served for each of our executive officers as of October 13, 2022. EXECUTIVE NAME CURRENT POSITION & OFFICES AGE OFFICER SINCE Barbara R.
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On March 17, 2023, we completed the acquisition of Tendon Systems, LLC ("Tendon"), a leading provider of post-tensioning, barrier cable and concrete restoration solutions to the southeastern U.S. On May 1, 2023, we completed the acquisition of all of the assets of BOSTD America, LLC ("BOSTD"), a geogrid manufacturing facility located in Blackwell, Oklahoma.
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Smith Chairman of the Board, President and Chief Executive Officer 63 2011 Paul J. Lawrence Senior Vice President and Chief Financial Officer 52 2016 Ty L. Garrison Senior Vice President Operations 51 2021 Jody K. Absher Vice President, Chief Legal Officer and Secretary 45 2020 Jennifer J. Durbin Vice President, Chief Human Resources Officer 41 2020 Barbara R.
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Prior to the acquisition, BOSTD produced several product lines for our Tensar operations under a contract manufacturing arrangement. On July 12, 2023, we completed the acquisition of EDSCO Fasteners, LLC ("EDSCO"), a leading provider of anchoring solutions for the electrical transmission market, with four manufacturing facilities located in North Carolina, Tennessee, Texas and Utah.
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Smith joined the Company in May 2011 as Senior Vice President and Chief Financial Officer. Ms. Smith was appointed Chief Operating Officer in January 2016, President and Chief Operating Officer in January 2017 and President and Chief Executive Officer in September 2017.
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Operating results for ASR, Kodiak, Roane, Tendon, BOSTD and EDSCO (collectively, the "2023 Acquisitions") are presented within the Company's North America reportable segment. For further details, refer to Note 2, Changes in Business, in Part II, Item 8 of this Annual Report. Tensar Acquisition On April 25, 2022 (the "Tensar Acquisition Date"), we completed the acquisition of TAC Acquisition Corp.
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She was appointed to our Board of Directors on September 1, 2017 and was named Chairman of the Board of Directors on January 11, 2018. Prior to joining the Company, Ms.
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For further details, refer to Note 2, Changes in Business, in Part II, Item 8 of this Annual Report. Capital Expenditures During the fourth quarter of 2023, our third micro mill was placed into service. Initial commercial production of rebar commenced during startup, prior to commissioning merchant bar production.
Removed
Smith served as Vice President and Chief Financial Officer of Gerdau Ameristeel Corporation, a mini mill steel producer, from July 2007 to May 2011, after joining Gerdau Ameristeel as Treasurer in July 2006.
Added
Additionally, we have three facilities that supply post-tension cable for use in a variety of projects, such as slab-on-grade foundations, bridges, buildings, parking structures and rock-and-soil anchors. The fabrication and post-tension cable offerings are collectively referred to as "downstream products." Downstream products backlog, defined as the total value of unfulfilled orders, was $1.7 billion at August 31, 2023.
Removed
From February 2005 to July 2006, she served as Senior Vice President and Chief Financial Officer of FARO Technologies, Inc., a developer and manufacturer of 3-D measurement and imaging systems. From 1981 to 2005, Ms.
Added
In addition, our North America segment also has facilities that provide construction-related solutions to serve markets that are complementary to those served by our vertically integrated operations. Our Tensar operations sell Tensar® geogrids and Geopier® foundation systems. Geogrids are polymer-based products used for ground stabilization, soil reinforcement and asphalt optimization in construction applications, including roadways, public infrastructure and industrial facilities.
Removed
Smith was employed by Alcoa Inc., a producer of primary aluminum, fabricated aluminum and alumina, where she held various financial leadership positions, including Vice President of Finance for Alcoa's Aerospace, Automotive & Commercial Transportation Group, Vice President and Chief Financial Officer for Alcoa Fujikura Ltd. and Director of Internal Audit. Paul J.
Added
Our Construction Services business sells and rents construction-related products and equipment to concrete installers and other businesses in the construction industry. Additionally, we have facilities that supply a custom engineered line of anchor cages, bolts and fasteners that are fabricated principally from rebar and are used primarily to secure high voltage electrical transmission poles to concrete foundations.
Removed
Lawrence joined the Company in February 2016 as Vice President of Finance.
Added
Competitive Advantage CMC's diverse product offerings support a wide variety of applications and position us as a global solutions provider to the construction industry, capable of addressing multiple phases of construction. We believe our vertically integrated manufacturing platform provides an advantageous cost structure and maximizes the results of our steel-related operations.
Removed
He was appointed Vice President of Finance and Treasurer in September 2016, Treasurer, Vice President of Financial Planning and Analysis in January 2017, Vice President of Finance in June 2018, Vice President and Chief Financial Officer in September 2019 and Senior Vice President and Chief Financial Officer in November 2021. Prior to joining the Company, Mr.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

76 edited+7 added−9 removed116 unchanged
Biggest changeAchieving the anticipated benefits of any acquisition will depend in significant part upon whether we integrate such acquired businesses in an efficient and effective manner. We may not be able to achieve the anticipated operating and cost synergies or long-term strategic benefits of our acquisitions within the anticipated timing or at all.
Biggest changeAdditionally, even if we are able to acquire suitable targets on agreeable terms, we may not be able to successfully integrate their operations with ours. Achieving the anticipated benefits of any acquisition will depend in significant part upon whether we integrate such acquired businesses in an efficient and effective manner.
At any given time, we may be unable to obtain an adequate supply of critical raw materials at a price and other terms acceptable to us. We depend on ferrous scrap, the primary raw material used by our steel mills, and other inputs such as graphite electrodes and alloys for our steel mill operations.
At any given time, we may be unable to obtain an adequate supply of critical raw materials at a price and on other terms acceptable to us. We depend on ferrous scrap, the primary raw material used by our steel mills, and other inputs such as graphite electrodes and alloys for our steel mill operations.
See the risk factor "Compliance with and changes in environmental compliance requirements and remediation requirements could result in substantially increased capital obligations and operating costs; violations of environmental requirements could result in costs that have a material adverse effect on our business, results of operations and financial condition" of this Annual Report for a description of such risks relating to environmental laws and regulations.
See the risk factor "Compliance with and changes in environmental laws and regulations and remediation requirements could result in substantially increased capital obligations and operating costs; violations of environmental laws and regulations could result in costs that have a material adverse effect on our business, results of operations and financial condition" of this Annual Report for a description of such risks relating to environmental laws and regulations.
Their failure to perform could result in our having to close these hedges without the anticipated underlying transaction and could result in losses if foreign currency exchange rates have changed. There can be no assurance that we will repurchase shares of our common stock at all or in any particular amounts.
Their failure to perform could result in us having to close these hedges without the anticipated underlying transaction and could result in losses if foreign currency exchange rates have changed. There can be no assurance that we will repurchase shares of our common stock at all or in any particular amounts.
Risks of default in contract performance by customers or suppliers as well as an increased risk of bad debts and customer credit exposure could increase during periods of rapid and substantial price changes. Physical impacts of climate change could have a material adverse effect on our costs and operations.
Risks of default in contract performance by customers or suppliers as well as an increased risk of bad debts and customer credit exposure could increase during periods of rapid and substantial price changes. Physical impacts of climate change could have a material adverse effect on our costs and results of operations.
The indentures governing our 4.875% Senior Notes due 2023, our 4.125% Senior Notes due 2030, our 3.875% Senior Notes due 2031 and our 4.375% Senior Notes due 2032 contain restrictions on our ability to create liens, sell assets, enter into sale and leaseback transactions and consummate transactions causing a change of control such as a merger or consolidation.
The indentures governing our 4.125% Senior Notes due 2030, our 3.875% Senior Notes due 2031 and our 4.375% Senior Notes due 2032 contain restrictions on our ability to create liens, sell assets, enter into sale and leaseback transactions and consummate transactions causing a change of control such as a merger or consolidation.
In addition to these restrictions, our Credit Agreement, as defined in Note 9, Credit Arrangements, in Part II, Item 8 of this Annual Report, contains covenants that restrict our ability to, among other things, enter into transactions with affiliates and guarantee the debt of some of our subsidiaries. Our Credit Agreement and U.S.
In addition to these restrictions, our Credit Agreement, as defined in Note 8, Credit Arrangements, in Part II, Item 8 of this Annual Report, contains covenants that restrict our ability to, among other things, enter into transactions with affiliates and guarantee the debt of some of our subsidiaries. Our Credit Agreement and U.S.
We have a significant amount of property, plant and equipment, finite-lived intangible assets and right of use assets that may be subject to impairment testing. Long-lived assets are subject to an impairment assessment when certain triggering events or circumstances indicate that their carrying value may be impaired.
We have a significant amount of property, plant and equipment, finite-lived intangible assets and right-of-use ("ROU") assets that may be subject to impairment testing. Long-lived assets are subject to an impairment assessment when certain triggering events or circumstances indicate that their carrying value may be impaired.
The price of scrap and other inputs has historically been subject to significant fluctuation, and we may not be able to adjust our product prices to recover the costs of rapid increases in material prices, especially over the short-term and in our fixed price contracts.
The price of scrap and other inputs has historically been subject to significant fluctuation, and we may not be able to adjust our product prices to recover the costs of rapid increases in raw material prices, especially over the short-term and in our fixed price contracts.
Facility, as defined in Note 9, Credit Arrangements, in Part II, Item 8 of this Annual Report also require that we meet certain financial tests and maintain certain financial ratios, including maximum debt to capitalization and interest coverage ratios.
Facility, as defined in Note 8, Credit Arrangements, in Part II, Item 8 of this Annual Report also require that we meet certain financial tests and maintain certain financial ratios, including maximum debt to capitalization and interest coverage ratios.
If we were unable to obtain adequate and timely deliveries of our required raw materials, we may be unable to timely manufacture significant quantities of our products. We are vulnerable to the economic conditions in the regions in which our operations are concentrated.
If we are unable to obtain adequate and timely deliveries of our required raw materials, we may be unable to timely manufacture significant quantities of our products. We are vulnerable to the economic conditions in the regions in which our operations are concentrated.
Until the timing, scope and extent of any future regulation becomes known, we cannot predict the effect on our business, results of operations or financial condition, but such effect could be materially adverse to our business, results of operations and financial condition. 20 Table of Contents We are subject to governmental regulatory and compliance risks that expose us to potential litigation and disputes regarding violations, which could adversely affect our business, results of operations and financial condition.
Until the timing, scope and extent of any future regulation becomes known, we cannot predict the effect on our business, results of operations or financial condition, but such effect could be materially adverse to our business, results of operations and financial condition. 19 Table of Contents We are subject to governmental regulatory and compliance risks that expose us to potential litigation and disputes regarding violations, which could adversely affect our business, results of operations and financial condition.
Our stability, growth and profitability are subject to a number of risks inherent in doing business internationally in addition to the currency exchange risk and operating risks discussed above, including: • political, military, terrorist or major pandemic events; • local labor and social issues; • legal and regulatory requirements or limitations imposed by foreign governments (particularly those with significant steel consumption or steel-related production including Turkey, China, Brazil, Russia and India), including quotas, tariffs or other protectionist trade barriers, adverse tax law changes, nationalization or currency restrictions; • disruptions or delays in shipments caused by customs compliance or government agencies; and • potential difficulties in staffing and managing local operations.
Our stability, growth and profitability are subject to a number of risks inherent in doing business internationally in addition to the currency exchange risk and operating risks discussed above, including: • political, military, terrorist or major pandemic events; • differences in demand, production and energy costs; • local labor and social issues; • legal and regulatory requirements or limitations imposed by foreign governments (particularly those with significant steel consumption or steel-related production including Turkey, China, Brazil, Russia and India), including quotas, tariffs or other protectionist trade barriers, adverse tax law changes, nationalization or currency restrictions; • disruptions or delays in shipments caused by customs compliance or government agencies; and • potential difficulties in staffing and managing local operations.
However, the amounts that we accrue could vary significantly from the amounts we actually pay, due to inherent uncertainties, including the inherent uncertainties of the estimation process, the uncertainties involved in litigation and other factors. See Item 3, Legal Proceedings of this Annual Report for a description of our current material legal proceedings.
However, the amounts that we accrue could vary significantly from the amounts we actually pay, due to inherent uncertainties, including the inherent uncertainties of the estimation process, the uncertainties involved in litigation and other factors. See Part I, Item 3, Legal Proceedings of this Annual Report for a description of our current material legal proceedings.
Increased global information technology security requirements, vulnerabilities, threats and a rise in sophisticated and targeted cyber attacks, which may be heightened in times of hostilities or war, computer viruses, phishing attacks, social engineering schemes, malicious code, ransomware attacks, acts of terrorism and physical or electronic security breaches, including breaches by computer hackers, cyber-terrorists and/or unauthorized access to or disclosure of our and/or our employees’ or customers’ data pose a risk to the security of our systems, networks and the confidentiality, availability and integrity of our data.
Increased global information technology security requirements, vulnerabilities, threats and a rise in sophisticated and targeted cyber attacks, 11 Table of Contents which may be heightened in times of hostilities or war, computer viruses, phishing attacks, social engineering schemes, malicious code, ransomware attacks, acts of terrorism and physical or electronic security breaches, including breaches by computer hackers, cyber-terrorists and/or unauthorized access to or disclosure of our and/or our employees’ or customers’ data pose a risk to the security of our systems, networks and the confidentiality, availability and integrity of our data.
The primary factors that affect estimates of future cash flows for these long-lived asset groups are (i) management's raw material price outlook; (ii) market demand; (iii) working capital changes; (iv) capital expenditures; and (v) selling, general and administrative expenses.
The primary factors that affect estimates of future cash flows for these long-lived asset groups are (i) management's raw material price outlook; (ii) market demand; (iii) working capital changes; (iv) capital expenditures; and (v) selling, general and administrative ("SG&A") expenses.
RISKS RELATED TO THE REGULATORY ENVIRONMENT Compliance with and changes in environmental compliance requirements and remediation requirements could result in substantially increased capital obligations and operating costs; violations of environmental requirements could result in costs that have a material adverse effect on our business, results of operations and financial condition.
RISKS RELATED TO THE REGULATORY ENVIRONMENT Compliance with and changes in environmental laws and regulations and remediation requirements could result in substantially increased capital obligations and operating costs; violations of environmental laws and regulations could result in costs that have a material adverse effect on our business, results of operations and financial condition.
See Note 16, Capital Stock, in Part II, Item 8 of this Annual Report for additional information on our share repurchase program. RISKS RELATED TO OUR INDUSTRY Our industry and the industries we serve are vulnerable to global economic conditions.
See Note 15, Capital Stock, in Part II, Item 8 of this Annual Report for additional information on our share repurchase program. RISKS RELATED TO OUR INDUSTRY Our industry and the industries we serve are vulnerable to global economic conditions.
If any of these risks actually occurs, our business, results of operations and financial condition could be materially adversely affected. RISKS RELATED TO OUR BUSINESS Scrap and other inputs for our business are subject to significant price fluctuations and limited availability, which may adversely affect our business, results of operations and financial condition.
If any of these risks actually occur, our business, results of operations and financial condition could be materially adversely affected. RISKS RELATED TO OUR BUSINESS Scrap and other inputs for our business are subject to significant price fluctuations and limited availability, which may adversely affect our business, results of operations and financial condition.
Energy used by our steelmaking operations is a significant input and the largest contributor to our greenhouse gas ("GHG") emissions and there is growing belief that consumption of energy derived from fossil fuels is a major contributor to climate change.
Energy used by our steelmaking operations is a significant input and the largest contributor to our GHG emissions and there is growing belief that consumption of energy derived from fossil fuels is a major contributor to climate change.
This may result in increased scrutiny, protests and negative publicity with respect to our business and operations, which could in turn result in the cancellation or delay of projects, the revocation of 12 Table of Contents permits, termination of contracts, lawsuits, regulatory action and policy change that may adversely affect our business strategy, increase our costs, or adversely affect our reputation and performance.
This may result in increased scrutiny, protests and negative publicity with respect to our business and operations, which could in turn result in the cancellation or delay of projects, the revocation of permits, termination of contracts, lawsuits, regulatory action and policy change that may adversely affect our business strategy, increase our costs, or adversely affect our reputation and performance.
The timing and amount of any repurchases will be determined by 17 Table of Contents the Company's management based on its evaluation of market conditions, capital allocation alternatives and other factors beyond our control. Our share repurchase program may be modified, suspended, extended or terminated by the Company at any time and without notice.
The timing and amount of any repurchases will be determined by the Company's management based on its evaluation of market conditions, capital allocation alternatives and other factors beyond our control. Our share repurchase program may be modified, suspended, extended or terminated by the Company at any time and without notice.
Our EAF mills melt steel scrap in electric arc furnaces and use natural gas to heat steel billets for rolling into finished steel products. As large consumers of electricity and gas, often the largest in the geographic area where our mills are located, we must have dependable delivery of electricity and natural gas in order to operate.
Our EAF mills melt steel scrap and use natural gas to heat steel billets for rolling into finished steel products. As large consumers of electricity and gas, often the largest in the geographic area where our mills are located, we must have dependable delivery of electricity and natural gas in order to operate.
Any such impairment would result in us recognizing a non-cash charge in our consolidated statements of earnings, which could adversely affect our business, results of operations and financial condition. 15 Table of Contents Impairment of long-lived assets in the future could have a material adverse effect on our business, results of operations and financial condition.
Any such impairment would result in us recognizing a non-cash charge in our consolidated statements of earnings, which could adversely affect our business, results of operations and financial condition. Impairment of long-lived assets in the future could have a material adverse effect on our business, results of operations and financial condition.
To the extent the war in Ukraine may adversely affect our business as discussed above, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those relating to data security, supply chain, volatility in prices of scrap and other inputs, and market conditions, any of which could negatively affect our business and financial condition.
To the extent the war in Ukraine may continue to adversely affect our business as discussed above, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those relating to data security, supply chain, volatility in prices of scrap, energy and other inputs, and market conditions, any of which could negatively affect our business, results of operations and financial condition.
The loan agreement related to the Series 2022 Bonds, as defined in Note 9, Credit Arrangements, in Part II, Item 8 of this Annual Report, also restricts our ability to, among other things, enter into certain sale and leaseback transactions, incur certain liens and take certain actions that would adversely affect the tax-exempt status of the Series 2022 Bonds.
The loan agreement related to the Series 2022 Bonds, as defined in Note 8, Credit 13 Table of Contents Arrangements, in Part II, Item 8 of this Annual Report, also restricts our ability to, among other things, enter into certain sale and leaseback transactions, incur certain liens and take certain actions that would adversely affect the tax-exempt status of the Series 2022 Bonds.
Our senior unsecured notes are rated by Standard & Poor's Corporation, Moody's Investors Service and Fitch Group, Inc. In determining our credit ratings, the rating agencies consider a number of both quantitative and qualitative factors.
Our senior unsecured notes are rated by Standard & Poor's Corporation, Moody's Investors Service and Fitch Group, 12 Table of Contents Inc. In determining our credit ratings, the rating agencies consider a number of both quantitative and qualitative factors.
The ongoing conflict in Ukraine has led to market disruptions, including significant volatility in commodity prices and credit markets, as well as supply chain interruptions, and contributed to global inflation. Further, if the conflict intensifies or expands beyond Ukraine, it could have an adverse impact on our operations in Poland.
The ongoing conflict in Ukraine has led to market disruptions, including significant volatility in commodity prices and credit markets, as well as reductions in demand and supply chain interruptions, and contributed to global inflation. Further, if the conflict intensifies or expands beyond Ukraine, it could continue to have an adverse, indirect impact on our operations in Poland.
We, along with others in the recycling industry, interpret federal regulations to require shredder fluff to meet certain criteria and pass a toxic leaching test to avoid classification as a hazardous waste. We also endeavor to remove hazardous contaminants from the feed material prior to shredding.
We, along with others in the recycling industry, interpret federal regulations to require shredder fluff to meet certain criteria and pass a toxic leaching test to avoid 18 Table of Contents classification as a hazardous waste. We also endeavor to remove hazardous contaminants from the feed material prior to shredding.
As a result, we believe the shredder fluff we generate is not normally considered or properly classified as hazardous 19 Table of Contents waste. If the laws, regulations or testing methods change with regard to EAF dust or shredder fluff or other by-products, we may incur additional significant costs.
As a result, we believe the shredder fluff we generate is not normally considered or properly classified as hazardous waste. If the laws, regulations or testing methods change with regard to EAF dust or shredder fluff or other by-products, we may incur additional significant costs.
Since a number of factors may influence determinations of fair value of goodwill, we are unable to predict whether impairments of goodwill will occur in the future, and there can be no assurance that continued conditions will not result in future impairments of goodwill.
Since a number of factors may influence determinations of fair value of goodwill and indefinite-lived intangible assets, we are unable to predict whether impairments will occur in the future, and there can be no assurance that continued conditions will not result in future impairments.
Implementation of our environmental and sustainability initiatives, including the goals set forth in our annual sustainability report, may require certain financial expenditures and employee resources, and the implementation of certain ESG practices or disclosures.
Implementation of our environmental and sustainability initiatives, including the goals set forth in our annual sustainability report requires certain financial expenditures and employee resources, and the implementation of certain ESG practices or disclosures.
In addition, significant changes in the trading price of our common stock and our ability to access capital on terms favorable to us could impact our ability to repurchase shares of our common stock.
In addition, 16 Table of Contents significant changes in the trading price of our common stock and our ability to access capital on terms favorable to us could impact our ability to repurchase shares of our common stock.
We continue to monitor any adverse impact that the outbreak of war in Ukraine and the subsequent institution of sanctions against Russia by the United States and several European and Asian countries may have on the global economy in general, on our business and operations and on the businesses and operations of our suppliers and customers.
We continue to monitor the adverse impact that the outbreak of war in Ukraine and the subsequent institution of sanctions against Russia by the U.S. and several European and Asian countries may continue to have on the global economy in general, on our business and operations and on the businesses and operations of our suppliers and customers.
A prolonged period of low scrap prices or a fall in scrap prices could reduce our ability to obtain, process and sell recycled material, which could have a material adverse effect on our metals recycling operations business, results of operations and financial condition.
A prolonged period of low scrap prices or a fall in scrap prices could impair our ability to obtain, process, sell and consume recycled material, which could have a material adverse effect on our business, results of operations and financial condition.
Operating and startup risks, as well as market risks associated with the commissioning of our third micro mill could prevent us from realizing anticipated benefits and could result in a loss of all or a substantial part of our investment.
Operating and startup risks, as well as market risks associated with the commissioning of our micro mills, could prevent us from realizing anticipated benefits and could result in a loss of all or a substantial part of our investments.
Alternatively, the Company may elect to bypass the qualitative assessment and instead perform a quantitative impairment test to calculate the fair value of the reporting unit in comparison to its associated carrying value. The quantitative impairment tests require us to make an estimate of the fair value of our reporting units.
Alternatively, the Company may elect to bypass the qualitative assessment and instead perform a quantitative impairment test to calculate the fair value of the reporting unit in comparison to its associated carrying value. 14 Table of Contents The quantitative impairment tests require us to make an estimate of the fair value of our reporting units and indefinite-lived intangible assets.
Our business, financial condition, results of operations, cash flows, liquidity and stock price may be adversely affected by global public health epidemics, including the COVID-19 pandemic.
Our business, financial condition, results of operations, cash flows, liquidity and stock price may be adversely affected by global public health epidemics.
There is no assurance that we will be able to compete successfully with these companies. Any of these factors could have a material adverse effect on our business, results of operations and financial condition. Our mills require continual capital investments that we may not be able to sustain.
There is no assurance that we will be able to compete successfully with these companies. Any of these factors could have a material adverse effect on our business, results of operations and financial condition.
If we encounter cost overruns, system or process difficulties during or after startup or quality control restrictions, our capital costs could increase materially, the expected benefits from the development of the facility could be diminished or lost and we could lose all or a substantial portion of our investment.
If we encounter cost overruns, system or process difficulties during commissioning or after startup or quality control restrictions with either or both facilities, our capital costs could increase materially, the expected benefits from the development of the applicable facilities could be diminished or lost, and we could lose all or a substantial portion of our investments.
During fiscal 2022, the current administration converted the tariff on steel imports from the European Union, United Kingdom and Japan to a tariff rate quota.
During 2022, the current administration converted the tariff on steel imports from the European Union, U.K. and Japan to a tariff rate quota.
We believe this facility should be capable of consistently producing high-quality products in sufficient quantities and at a cost that will compare favorably with other similar steel manufacturing facilities; however, there can be no assurance that these expectations will be achieved.
Further, although we believe these facilities should each be capable of consistently producing high-quality products in sufficient quantities and at costs that will compare favorably with other similar steel manufacturing facilities, there can be no assurance that these expectations will be achieved.
The consequences of such adverse effects could include the interruption of production at the facilities of our customers, the reduction, delay or cancellation of customer orders, delays or interruptions of the supply of raw materials we purchase and bankruptcy of customers, suppliers or other creditors.
The consequences of such adverse effects could include the interruption of production at the facilities of our customers, the reduction, delay or cancellation of customer orders, delays or interruptions of the supply of raw materials we purchase and bankruptcy of customers, suppliers or other creditors. Any of these events may adversely affect our business, results of operations and financial condition.
We rely on the availability of large amounts of electricity and natural gas. Disruptions in delivery or substantial increases in energy costs, including crude oil prices, could adversely affect our business, results of operations and financial condition.
As a result, our financial results are substantially dependent upon the overall economic conditions in these areas. We rely on the availability of large amounts of electricity and natural gas. Disruptions in delivery or substantial increases in energy costs, including crude oil prices, could adversely affect our business, results of operations and financial condition.
Changes in tax legislation and regulations in the jurisdictions in which we operate may adversely affect our results of operations. We are subject to taxation at the federal, state and local levels in the U.S., Poland and other countries and jurisdictions in which we operate, including income taxes, sales taxes, value-added (“VAT”) taxes and similar taxes and assessments.
We are subject to taxation at the federal, state and local levels in the U.S., Poland, the U.K. and other countries and jurisdictions in which we operate, including income taxes, sales taxes, value-added (“VAT”) taxes and similar taxes and assessments.
To the extent we finance such acquisitions with additional debt, the incurrence of such debt may result in a significant increase in our interest expense and financial leverage, which could be further exacerbated by volatility in the debt capital markets. Further, an increase in our leverage could lead to deterioration in our credit ratings.
We may fund such acquisitions using cash on hand, drawing under our credit facility or accessing the capital markets. To the extent we finance such acquisitions with additional debt, the incurrence of such debt may result in a significant increase in our interest expense and financial leverage, which could be further exacerbated by volatility in the debt capital markets.
For example, elimination of duplicative costs may not be fully achieved or may take longer than anticipated. The benefits from any acquisition may be offset by the costs incurred in integrating the businesses and operations. We may also assume liabilities in connection with acquisitions to which we would not otherwise be exposed.
The benefits from any acquisition may be offset by the costs incurred in integrating the businesses and operations. We may also assume liabilities in connection with acquisitions to which we would not otherwise be exposed.
Economic downturns in the U.S. and Central Europe, or decisions by governments that have an impact on the level and pace of overall economic activity in one of these regions, could adversely affect demand for our products and, consequently, our sales and profitability. As a result, our financial results are substantially dependent upon the overall economic conditions in these areas.
Economic downturns in the U.S., United Kingdom (the "U.K."), Central Europe and China, or decisions by governments that have an impact on the level and pace of overall economic activity in one of these regions, could adversely affect demand for our products and, consequently, our sales and profitability.
We will incur expenses and dedicate attention and resources associated with the review of acquisition opportunities, whether or not we consummate such acquisitions. Additionally, even if we are able to acquire suitable targets on agreeable terms, we may not be able to successfully integrate their operations with ours.
Even if we are able to identify such candidates, we may not be able to acquire them on terms or financing satisfactory to us. We will incur expenses and dedicate attention and resources associated with the review of acquisition opportunities, whether or not we consummate such acquisitions.
Rapid increases in the price of fuel attributable to increases in crude oil prices would increase our costs and adversely affect many of our customers' financial results, which in turn could result in reduced margins and declining demand for our products. 10 Table of Contents We may encounter labor shortages for skilled labor and/or qualified employees in operational positions, which could adversely impact our operations.
Rapid increases in the price of fuel attributable to increases in crude oil prices would increase our costs and adversely affect many of our customers' financial results, which in turn could result in reduced margins and declining demand for our products.
Although we have successfully commissioned and operated similar technologies, there are some new technological, as well as operational, market and startup risks associated with the construction and commissioning of our third micro mill.
Although we have successfully commissioned and operated similar facilities, there are technological, operational, market and start-up risks associated with the construction and commissioning of our third and fourth micro mills.
The loss or interruption of the services of a number of our key employees could reduce our ability to effectively manage our operations due to the fact that we may not be able to find appropriate replacement personnel in a timely manner should the need arise.
The loss or interruption of the services of a number of our key employees could reduce our ability to effectively manage our operations should we be unable to find appropriate replacement personnel in a timely manner should the need arise. For example, as part of the Company's succession plan, Peter R.
Any economic downturn resulting from the widespread public health impacts of COVID-19 or any future pandemic 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.
Any economic downturn resulting from the widespread public health impacts of COVID-19 or any future public health crisis 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. 15 Table of Contents Fluctuations in the value of the U.S. dollar relative to other currencies may adversely affect our business, results of operations and financial condition.
Prices for most metals in which we deal have experienced increased volatility over the last several years, and such increased price volatility impacts us in several ways.
Rapid and significant changes in the price of metals could adversely impact our business, results of operations and financial condition. Prices for most metals in which we deal have experienced increased volatility over the last several years, and such increased price volatility impacts us in several ways.
In addition to equipment failures, our facilities are also subject to the risk of catastrophic loss due to unanticipated events such as fires, explosions or violent weather conditions.
We have experienced, and may in the future experience, material plant shutdowns or periods of reduced production as a result of such equipment failures. In addition to equipment failures, our facilities are also subject to the risk of catastrophic loss due to unanticipated events such as fires, explosions or violent weather conditions.
Our business faces increasing scrutiny related to ESG issues, including environmental stewardship, supply chain management, climate change, diversity and inclusion, workplace conduct, human rights, philanthropy and support for local communities.
Increasing attention to ESG matters, including any targets or other ESG or environmental justice initiatives, could result in additional costs or risks or adverse impacts on our business. Our business faces increasing scrutiny related to ESG issues, including environmental stewardship, supply chain management, climate change, diversity and inclusion, workplace conduct, human rights, philanthropy and support for local communities.
We compete for such personnel with other companies, including public and private company competitors who may periodically offer more favorable terms of employment.
These employees are integral to our success based on their expertise and knowledge of our business and products. We compete for such personnel with other companies, including public and private company competitors who may periodically offer more favorable terms of employment.
If we were unable to repay debt to our secured lenders or if we incur additional secured debt in the future, these lenders could proceed against the collateral securing such debt.
If we were unable to repay debt to our secured lenders or if we incur additional secured debt in the future, these lenders could proceed against the collateral securing such debt. In addition, acceleration of our other indebtedness may cause us to be unable to make interest payments on our notes.
Our employees contribute to developing and meeting our business goals and objectives, and we depend on a qualified labor force for the manufacture of our products.
We may encounter labor disputes and shortages for skilled labor and/or qualified employees in operational positions, which could adversely impact our operations. Our employees contribute to developing and meeting our business goals and objectives, and we depend on a qualified labor force for the manufacture of our products.
Conversely, increased foreign demand for scrap due to economic expansion in countries such as China, India, Brazil and Turkey can result in an outflow of available domestic scrap as well as higher scrap prices that cannot always be passed on to domestic scrap consumers, further reducing the available domestic scrap flows and margins, all of which could adversely affect our sales and profitability.
Conversely, increased foreign demand for scrap due to economic expansion in countries such as China, India, Brazil and Turkey can result in an outflow of available domestic scrap as well as higher scrap prices that cannot always be passed on to domestic scrap consumers or consumers of our steel products, further reducing the available domestic scrap flows and margins, all of which could adversely affect our sales and profitability. 9 Table of Contents The availability of raw materials may also be negatively affected by new laws and regulations, allocations by suppliers, interruptions in production, accidents or natural disasters, changes in exchange rates, global price fluctuations and the availability and cost of transportation.
Our business, financial condition and results of operations may be adversely impacted by the effects of inflation. Inflation has the potential to adversely affect our business, financial condition and results of operations by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers.
Inflation has the potential to adversely affect our business, financial condition and results of operations by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers. 10 Table of Contents Other inflationary pressures could affect wages, energy prices, the cost and availability of components and raw materials and other inputs and our ability to meet customer demand.
The adverse effects of excess capacity and over-production by foreign producers could be exacerbated by the startup of new steelmaking capacity in the U.S.
The adverse effects of excess capacity and over-production by foreign producers could be exacerbated by the startup of new 17 Table of Contents steelmaking capacity in the U.S. Any of these adverse effects could have a material adverse effect on our business, results of operations and financial condition.
These regulations can also increase our costs of energy, primarily electricity, which we use extensively in the steelmaking process. Moreover, in July 2021, the EPA issued a public statement regarding Clean Air Act violations at metal recycling facilities that operate auto and scrap metal shredders, noting that noncompliant shredders can have an impact on overburdened communities.
Moreover, in July 2021, the EPA issued a public statement regarding Clean Air Act violations at metal recycling facilities that operate auto and scrap metal shredders, noting that noncompliant shredders can have an impact on overburdened communities, and in August 2023, the EPA released federal enforcement priorities, which affirmed the EPA’s continued focus on reducing air toxins.
We may have difficulty competing with companies that have a lower cost structure or access to greater financial resources. We compete with regional, national and foreign manufacturers and traders.
Inflation may further exacerbate other risk factors, including supply chain disruptions, risks related to international operations and the recruitment and retention of qualified employees. We may have difficulty competing with companies that have a lower cost structure or access to greater financial resources. We compete with regional, national and foreign manufacturers and traders.
The pursuit of acquisitions may pose certain risks to us. We may not be able to identify acquisition candidates that fit our criteria for growth and profitability. Even if we are able to identify such candidates, we may not be able to acquire them on terms or financing satisfactory to us.
Further, an increase in our leverage could lead to deterioration in our credit ratings. The pursuit of acquisitions may pose certain risks to us. We may not be able to identify acquisition candidates that fit our criteria for growth and profitability.
Our future success depends, in large part, on the continued service of our officers and other key employees and our ability to continue to attract and retain additional highly qualified personnel. These employees are integral to our success based on their expertise and knowledge of our business and products.
The loss of, or inability to hire, key employees may adversely affect our ability to successfully manage our operations and meet our strategic objectives. Our future success depends, in large part, on the continued service of our officers and other key employees and our ability to continue to attract and retain additional highly qualified personnel.
Many of our facilities are located near coastal areas or waterways where rising sea levels or flooding could disrupt our operations or adversely impact our facilities.
Many of our facilities are located near coastal areas or waterways where rising sea levels or flooding could disrupt our operations or adversely impact our facilities. Additionally, two of our micro mills are located in an arid desert climate, where drought may restrict available water supplies and increase the risk of wildfires.
The availability of external financing depends on many factors outside of our control, including capital market conditions and the overall performance of the economy.
The availability of external financing depends on many factors outside of our control, including capital market conditions and the overall performance of the economy. If funding is insufficient, we may be unable to develop or enhance our mills, take advantage of business opportunities and respond to competitive pressures.
Any of these events may adversely affect our business, results of operations and financial condition. 13 Table of Contents The impact of the Russian invasion of Ukraine on the global economy, energy supplies and raw materials is uncertain, but may prove to negatively impact our business and operations.
The impact of the Russian invasion of Ukraine on the global economy, energy supplies and raw materials is uncertain, but may continue to negatively impact our business and operations. Since early 2022, Russia and Ukraine have been engaged in active armed conflict.
We could also encounter commodity market risk if, during a sustained period, the cost to manufacture is greater than projected. Information technology interruptions and breaches in data security could adversely impact our business, results of operations and financial condition.
Information technology interruptions and breaches in data security could adversely impact our business, results of operations and financial condition.
As our experienced employees retire and we lose their institutional knowledge, we may encounter challenges and may have difficulty replacing them with employees of comparable skill and efficiency. The loss of, or inability to hire, key employees may adversely affect our ability to successfully manage our operations and meet our strategic objectives.
As our experienced employees retire and we lose their institutional knowledge, we may encounter challenges and may have difficulty replacing them with employees of comparable skill and efficiency. Additionally, as of August 31, 2023, 14% and 29% of the employees in our North America and Europe segments, respectively, belong to unions.
We will continue to monitor this fluid situation and develop contingency plans as necessary to address any disruptions to our business operations as they develop.
The Russian invasion of Ukraine did not have a direct material adverse impact on our business, financial condition or results of operations during 2023 or 2022. However, we will continue to monitor this fluid situation and develop contingency plans as necessary to address any disruptions to our business operations.
In addition, acceleration of our other indebtedness may cause us to be unable to make interest payments on our notes. 14 Table of Contents We may not be able to successfully identify, consummate or integrate acquisitions, and acquisitions may adversely affect our financial leverage. Part of our business strategy includes pursuing synergistic acquisitions.
We may not be able to successfully identify, consummate or integrate acquisitions, and acquisitions may adversely affect our financial leverage. Part of our business strategy includes pursuing synergistic acquisitions. We have expanded, and plan to continue to expand, our business by making strategic acquisitions and regularly seeking suitable acquisition targets to enhance our growth.
Interruptions in our production capabilities would adversely affect our production costs, products available for sale and earnings for the affected period. Our manufacturing processes are dependent upon critical pieces of steelmaking equipment, such as our furnaces, continuous casters and rolling equipment, as well as electrical equipment, such as transformers.
Our manufacturing processes are dependent upon critical pieces of steelmaking equipment, such as our furnaces, continuous casters and rolling equipment, as well as electrical equipment, such as transformers. This equipment may, on occasion, be out of service as a result of unanticipated failures.
If funding is insufficient, we may be unable to develop or enhance our mills, take advantage of business opportunities and respond to competitive pressures. 11 Table of Contents Unexpected equipment failures may lead to production curtailments or shutdowns, which may adversely affect our business, results of operations and financial condition.
Unexpected equipment failures may lead to production curtailments or shutdowns, which may adversely affect our business, results of operations and financial condition. Interruptions in our production capabilities would adversely affect our production costs, products available for sale and earnings for the affected period.
We have significant facilities in Poland. Our vertically integrated network of operations located in Poland generated approximately 18% of 2022 consolidated net sales.
We have significant recycling and fabrication facilities and a mini mill in Poland as well as Tensar facilities in China and England. Our Europe segment, which comprises our international operations, generated approximately 16% of 2023 consolidated net sales.
Removed
The availability of raw materials may also be negatively affected by new laws and regulations, allocations by suppliers, interruptions in production, accidents or natural disasters, changes in exchange rates, global price fluctuations and the availability and cost of transportation.
Added
While believe that we have good relations with the union representatives, there can be no assurance that any future labor negotiations will prove successful, which may result in a significant increase in the cost of labor, or may break down and result in the disruption of our business or operations.
Removed
Other inflationary pressures could affect wages, the cost and availability of components and raw materials and other inputs and our ability to meet customer demand. Inflation may further exacerbate other risk factors, including supply chain disruptions, risks related to international operations and the recruitment and retention of qualified employees.
Added
Matt became our Chief Executive Officer effective September 1, 2023. Failure to successfully execute this leadership transition and retain key employees could negatively impact our business and results of operations. Our business, financial condition and results of operations may be adversely impacted by the effects of inflation.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeSegment and Operation Location Site Acreage Owned Site Acreage Leased Approximate Building Square Footage Capacity (Millions of Tons) (6) North America Recycling facilities (1) 709 82 1,530,000 4.7 Steel mills 5.4 Mini mill Birmingham, Alabama 71 — 580,000 Mini mill Cayce, South Carolina 142 — 760,000 Mini mill Jacksonville, Florida 619 — 460,000 Mini mill Knoxville, Tennessee 72 — 460,000 Mini mill Sayreville, New Jersey 116 — 380,000 Mini mill Seguin, Texas 661 — 870,000 Micro mill Durant, Oklahoma 402 4 290,000 Micro mill Mesa, Arizona 273 — 320,000 Rerolling mill Magnolia, Arkansas 123 — 280,000 Fabrication facilities (2) 755 40 3,030,000 2.3 Construction Services (3) 35 51 450,000 Impact Metals (4) 112 — 300,000 Tensar facilities (5) 18 6 240,000 Europe Recycling facilities Twelve locations in Poland 104 4 160,000 0.6 Steel mini mill Zawiercie, Poland 524 — 2,950,000 1.7 Fabrication facilities Five locations in Poland 24 — 260,000 0.5 Tensar facilities (5) 16 — 310,000 __________________________________ (1) Consists of 38 recycling facilities, with 15 locations in Texas, seven locations in South Carolina, four locations in Florida, two locations in each of Alabama, Georgia, Missouri and North Carolina and one location in each of Kansas, Louisiana, Oklahoma and Tennessee.
Biggest changeSegment and Operation Location Site Acreage Owned Site Acreage Leased Approximate Building Square Footage Capacity (Millions of Tons) (8) North America Recycling facilities (1) 772 88 1,650,000 5.1 Steel mills 6.1 Mini mill Birmingham, Alabama 71 1 580,000 Mini mill Cayce, South Carolina 142 — 760,000 Mini mill Jacksonville, Florida 619 — 460,000 Mini mill Knoxville, Tennessee 72 — 460,000 Mini mill Sayreville, New Jersey 116 — 380,000 Mini mill Seguin, Texas 661 — 870,000 Micro mill Durant, Oklahoma 402 4 290,000 Two micro mills Mesa, Arizona 273 — 780,000 Rerolling mill Magnolia, Arkansas 123 — 280,000 Fabrication facilities (2) 752 40 3,000,000 2.1 CMC Impact Metals (3) 112 — 300,000 Construction Services (4) 35 51 450,000 Post-tension cable facilities (5) 3 8 120,000 Tensar facilities (6) 18 20 400,000 Europe Recycling facilities Twelve locations in Poland (7) 104 4 160,000 0.5 Steel mini mill Zawiercie, Poland 524 — 2,950,000 1.6 Fabrication facilities Five locations in Poland (7) 24 — 260,000 0.4 Tensar facilities (6) 16 — 310,000 __________________________________ (1) Consists of 43 recycling facilities, with 17 locations in Texas, seven locations in South Carolina, four locations in Florida, three locations in Tennessee, two locations in each of Alabama, Georgia, Missouri and North Carolina and one location in each of California, Kansas, Louisiana and Oklahoma.
ITEM 2. PROPERTIES The following table describes our principal properties as of August 31, 2022. These properties are either owned by us and not subject to any significant encumbrances or are leased by us. We consider all properties to be appropriately utilized, suitable and adequate to meet the requirements of our present and foreseeable future operations.
ITEM 2. PROPERTIES The following table describes our principal properties as of August 31, 2023. These properties are either owned by us and not subject to any significant encumbrances or are leased by us. We consider all properties to be appropriately utilized, suitable and adequate to meet the requirements of our present and foreseeable future operations.
Our leases expire on various dates over the next five years, with the exception of the leased facilities in our Europe segment. Several of the leases have renewal options. We have generally been able to renew leases prior to their expiration.
Generally, our leases expire on various dates over the next ten years, with the exception of the leased facilities in our Europe segment. Several of the leases have renewal options. We have generally been able to renew leases prior to their expiration.
(2) Consists of 56 fabrication facilities, with 12 locations in Texas, five locations in Florida, four locations in California, three locations in Illinois, two locations in each of Arizona, Colorado, Georgia, Hawaii, Missouri, North Carolina, New Jersey, Nevada, Oklahoma, South Carolina, Tennessee, Utah and Virginia and one location in each of Alabama, Kentucky, Louisiana, New Mexico, Ohio and Washington.
(2) Consists of 55 fabrication facilities, with 12 locations in Texas, five locations in Florida, three locations in each of California and Illinois, two locations in each of Arizona, Colorado, Georgia, Hawaii, Missouri, Nevada, New Jersey, North Carolina, Oklahoma, South Carolina, Tennessee, Utah and Virginia and one location in each of Alabama, Kentucky, Louisiana, New Mexico, Ohio and Washington.
Refer to Item 1, Business included in this Annual Report for a discussion of the nature of our operations.
Refer to Part I, Item 1, Business included in this Annual Report for a discussion of the nature of our operations.
We estimate our minimum annual rental obligation for our real estate operating leases in effect at August 31, 2022, to be paid during 2023, to be approximately $11.3 million.
We estimate our minimum annual rental obligation for our real estate operating leases in effect at August 31, 2023, to be paid during 2024, to be approximately $10.8 million.
The Tensar facilities are not individually material. (6) Refer to Item 1, Business, included in this Annual Report for information about the calculation of capacity for our steel mills. 22 Table of Contents The extent to which we utilize our capacity varies by property and is highly dependent on the specific product mix manufactured.
(7) The recycling facilities and fabrication facilities associated with the Europe segment are not individually material. (8) Refer to Part 1, Item 1, Business, of this Annual Report for information about the calculation of capacity for our steel mills. The extent to which we utilize our capacity varies by property and is highly dependent on the specific product mix manufactured.
(4) Consists of two facilities, with one location in Alabama and one location in Pennsylvania. The Impact Metals facilities associated with the North America segment are not individually material. (5) Consists of one facility within the North America segment, located in Georgia, and two facilities within the Europe segment, located in China and England.
The fabrication facilities associated with the North America segment are not individually material. (3) Consists of two CMC Impact Metals facilities, with one location in Alabama and one location in Pennsylvania. The CMC Impact Metals facilities are not individually material.
Our product mix is determined in response to market conditions, including pricing and demand. We believe our capacity levels are adequate for present and anticipated future needs, and our facilities are capable of producing increased volumes. In addition to the leased facilities described above, we lease the 105,916 square foot office space occupied by our corporate headquarters in Irving, Texas.
Our product mix is determined in response to market conditions, including pricing and demand. We believe our capacity levels are adequate for present and anticipated future needs, and our facilities are capable of producing increased volumes.
The fabrication facilities associated with the North America segment are not individually material. (3) Consists of 24 Construction Services facilities, with 18 locations in Texas, five locations in Louisiana and one location in Oklahoma. The Construction Services facilities associated with the North America segment are not individually material.
(4) Consists of 24 Construction Services facilities, with 18 locations in Texas, five locations in Louisiana and one location in Oklahoma. The Construction Services facilities are not individually material. (5) Consists of three post-tension cable facilities, with two locations in Georgia and one location in California.
Added
The post-tension cable facilities are not individually material. 21 Table of Contents (6) Consists of two Tensar facilities within the North America segment, located in Georgia and Oklahoma, and two facilities within the Europe segment, located in China and England. The Tensar facilities are not individually material.
Added
In addition to the owned facilities described above, we own 208 acres of land in Berkeley County, West Virginia, the site of the Company's planned fourth micro mill. In addition to the leased facilities described above, we lease the 105,916 square foot office space occupied by our corporate headquarters in Irving, Texas.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS The Company is involved in legal and regulatory proceedings, lawsuits, claims and investigations 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.
Biggest changeIt 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.
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 4. MINE SAFETY DISCLOSURES Not applicable. PART II
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 4. MINE SAFETY DISCLOSURES Not applicable. 22 Table of Contents PART II
Added
ITEM 3. LEGAL PROCEEDINGS The Company is involved in legal and regulatory proceedings, lawsuits, claims and investigations (including those related to environmental laws and regulations) associated with the normal conduct of its businesses and operations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe share repurchase program does not require the Company to purchase any dollar amount or number of shares of CMC common stock and may be modified, suspended, extended or terminated by the Company at any time without prior notice. See Note 16, Capital Stock, in Item 8 of this Annual Report for more information on the share repurchase program.
Biggest changeThe share repurchase program does not require the Company to purchase any dollar amount or number of shares of CMC common stock and may be modified, suspended, extended or terminated by the Company at any time without prior notice.
Based on its evaluation of these factors, the Board of Directors may determine not to declare a dividend, or declare dividends at rates that are less than currently anticipated.
Based on its evaluation of these factors, the Board of Directors may determine not to declare a dividend, or to declare dividends at rates that are less than currently anticipated.
While the Company’s Board of Directors currently intends to continue regular quarterly cash dividend payments, the Board of Directors’ determination with respect to any future dividends will depend upon our profitability and financial condition, contractual restrictions, restrictions imposed by applicable law and other factors that the Board of Directors deems relevant at the time of such determination.
While the Board of Directors currently intends to continue regular quarterly cash dividend payments, the Board of Directors’ determination with respect to any future dividends will depend upon our profitability and financial condition, contractual restrictions, restrictions imposed by applicable law and other factors that the Board of Directors deems relevant at the time of such determination.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS The following table provides information about purchases of equity securities registered by the Company pursuant to Section 12 of the Exchange Act, as amended, made by the Company or any affiliated purchasers during the quarter ended August 31, 2022.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS The following table provides information about purchases of equity securities registered by the Company pursuant to Section 12 of the Exchange Act, as amended, made by the Company or any affiliated purchasers during the quarter ended August 31, 2023.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES MARKET, STOCKHOLDERS AND DIVIDENDS Our common stock is traded on the New York Stock Exchange under the symbol CMC. The number of stockholders of record of CMC common stock at October 12, 2022 was 2,151.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES MARKET, STOCKHOLDERS AND DIVIDENDS Our common stock is traded on the New York Stock Exchange under the symbol CMC. The number of stockholders of record of CMC common stock at October 11, 2023 was 2,014.
We paid quarterly dividends in 2022 at the rate of $0.14 per share of CMC common stock, compared to quarterly dividends paid in 2021 at the rate of $0.12 per share of CMC common stock. On October 11, 2022, the Board of Directors declared CMC's 232nd quarterly cash dividend.
We paid quarterly dividends in 2023 at the rate of $0.16 per share of CMC common stock, compared to quarterly dividends paid in 2022 at the rate of $0.14 per share of CMC common stock. On October 10, 2023, the Board of Directors declared CMC's 236th quarterly cash dividend.
The dividend was declared at the rate of $0.16 per share of CMC common stock and is 23 Table of Contents payable on November 10, 2022 to stockholders of record as of the close of business on October 27, 2022.
The dividend was declared at the rate of $0.16 per share of CMC common stock and is payable on November 9, 2023 to stockholders of record as of the close of business on October 26, 2023.
Issuer Purchases of Equity Securities (1) Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs as of the End of Period June 1, 2022 - June 30, 2022 977,309 $ 36.40 977,309 $ 258,834,993 July 1, 2022 - July 31, 2022 1,814,721 34.41 1,814,721 196,394,237 August 1, 2022 - August 31, 2022 203,211 40.68 203,211 188,128,246 2,995,241 2,995,241 __________________________________ (1) On October 13, 2021, the Company announced that the Board of Directors authorized a share repurchase program under which the Company may repurchase up to $350.0 million of the Company's outstanding common stock.
Issuer Purchases of Equity Securities (1) Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs as of the End of Period June 1, 2023 - June 30, 2023 115,500 $ 47.43 115,500 $ 99,811,582 July 1, 2023 - July 31, 2023 110,000 54.75 110,000 93,788,687 August 1, 2023 - August 31, 2023 126,500 55.86 126,500 86,722,118 352,000 352,000 __________________________________ (1) On October 13, 2021, the Company announced that the Board of Directors authorized a share repurchase program under which the Company may repurchase up to $350.0 million of the Company's outstanding common stock.
Added
See Note 15, Capital Stock, in Part II, Item 8 of this Annual Report for more information on the share repurchase program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

98 edited+54 added−38 removed46 unchanged
Biggest changeImportant factors that could cause actual results to differ materially from our expectations include those described in Part I, Item 1A, Risk Factors of this Annual Report 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; • 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; • excess capacity in our industry, particularly in China, and product availability from competing steel mills and other steel suppliers including import quantities and pricing; • the impact of the Russian invasion of Ukraine on the global economy, energy supplies and raw materials, which is uncertain, but may prove to negatively impact our business and operations; • increased attention to environmental, social and governance ("ESG") matters, including any targets or other ESG or environmental justice initiatives; 36 Table of Contents • 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; • 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 37 Table of Contents • civil unrest, protests and riots.
Biggest changeImportant factors that could cause actual results to differ materially from our expectations include those described in Part I, Item 1A, Risk Factors and Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report as well as the following: 36 Table of Contents • 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 China, and product availability from competing steel mills and other steel suppliers including import quantities and pricing; • the impact of the Russian invasion of Ukraine on the global economy, inflation, energy supplies and raw materials; • increased attention to ESG matters, including any targets or other ESG or environmental justice initiatives; • 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; • impacts from global public health crises on the economy, demand for our products, global supply chain and on our operations; • 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; • potential limitations in our or our customers' abilities to access credit and non-compliance with their contractual obligations, including payment obligations; • activity in repurchasing shares of our common stock under our share repurchase program; • financial and non-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; • lower than expected future levels of revenues and higher than expected future costs; • failure or inability to implement growth strategies in a timely manner; • the impact of goodwill or other indefinite-lived intangible asset impairment charges; • the 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; • our ability to hire and retain key executives and other employees; 37 Table of Contents • our ability to manage the transition to a new chief executive officer; • 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; • our 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.
Based on currently available information, which is in many cases preliminary and incomplete, we had immaterial amounts accrued as of both August 31, 2022 and 2021, in connection with CERCLA sites. We have accrued for these liabilities based upon our best estimates. The amounts paid and the expenses incurred on these sites for 2022, 2021 and 2020 were not material.
Based on currently available information, which is in many cases preliminary and incomplete, we had immaterial amounts accrued as of both August 31, 2023 and 2022, in connection with CERCLA sites. We have accrued for these liabilities based upon our best estimates. The amounts paid and the expenses incurred on these sites for 2023, 2022 and 2021 were not material.
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.
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 employs 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.
You should refer to the "Risk Factors" disclosed in our periodic and current reports filed with the SEC for information regarding additional risks which would cause actual results to be significantly different from those expressed or implied by these forward-looking statements.
Refer to the "Risk Factors" disclosed in our periodic and current reports filed with the SEC for information regarding additional risks which would cause actual results to be significantly different from those expressed or implied by these forward-looking statements.
We also believe that the outcomes will not materially affect our results of operations, our financial position or our cash flows. Other Accounting Policies and New Accounting Pronouncements See Note 1, Nature of Operations and Summary of Significant Accounting Policies, in Item 8 of this Annual Report.
We also believe that the outcomes will not materially affect our results of operations, our financial position or our cash flows. Other Accounting Policies and New Accounting Pronouncements See Note 1, Nature of Operations and Summary of Significant Accounting Policies, in Part II, Item 8 of this Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements and the accompanying notes contained in this Annual Report. Our discussion and analysis of fiscal year 2022 compared to fiscal year 2021 is included herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements and the accompanying notes contained in this Annual Report. Our discussion and analysis of fiscal year 2023 compared to fiscal year 2022 is included herein.
Judgments and estimates related to critical accounting policies used in the preparation of the consolidated financial statements include the following. 33 Table of Contents Revenue Recognition Revenue from contracts where the Company provides fabricated rebar and installation services is recognized over time using an input method based on costs incurred compared to total estimated costs.
Judgments and estimates related to critical accounting policies used in the preparation of the consolidated financial statements include the following: Revenue Recognition Revenue from contracts where the Company provides fabricated rebar and installation services is recognized over time using an input method based on costs incurred compared to total estimated costs.
To calculate the fair value of a reporting unit using the income approach, 34 Table of Contents management uses a discounted cash flow model, which includes a number of significant assumptions and estimates regarding future cash flows such as discount rates, volumes, prices, capital expenditures and the impact of current market conditions.
To calculate the fair value of a reporting unit using the income approach, management uses a discounted cash flow model, which includes a number of significant assumptions and estimates regarding future cash flows such as discount rates, volumes, prices, capital expenditures and the impact of current market conditions.
We provide certain eligible employees benefits pursuant to our nonqualified Benefit Restoration Plan ("BRP") equal to amounts that would have been available under our tax qualified plans under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), but for limitations of ERISA, tax laws and regulations.
We provide certain eligible employees benefits pursuant to our nonqualified BRP equal to amounts that would have been available under our tax qualified plans under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), but for limitations of ERISA, tax laws and regulations.
Inventory Cost We state inventories at the lower of cost or net realizable value, which is defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Adjustments to inventory may be due to changes in price levels, obsolescence, damage, physical deterioration and other causes.
Inventory Cost We state inventories at the lower of cost or net realizable value, which is defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Adjustments to inventory may be due to changes in price levels, assumptions about market conditions, obsolescence, damage, physical deterioration and other causes.
Goodwill and Other Intangible Assets Goodwill and indefinite lived intangible assets are tested for impairment annually as of the first day of the Company’s fourth quarter, or more frequently whenever events or circumstances indicate that the carrying value may not be recoverable.
Goodwill and Other Intangible Assets Goodwill and indefinite-lived intangible assets are tested for impairment annually as of the first day of the Company’s fourth quarter (the "annual impairment test date"), or more frequently whenever events or circumstances indicate that the carrying value may not be recoverable.
See Note 11, Derivatives, in Item 8 of this Annual Report for further information. 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.
See Note 10, Derivatives, in Part II, Item 8 of this Annual Report for further information. 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.
See Note 13, Income Tax, in Item 8 of this Annual Report for further discussion of our effective tax rate. SEGMENTS All amounts are computed and presented in a manner that is consistent with the basis in which we internally disaggregate financial information for the purpose of making operating decisions.
See Note 12, Income Tax, in Part II, Item 8 of this Annual Report for further discussion of our effective tax rate. SEGMENTS All amounts are computed and presented in a manner that is consistent with the basis in which we internally disaggregate financial information for the purpose of making operating decisions.
Our discussion and analysis of fiscal year 2021 compared to fiscal year 2020 can be found in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the year ended August 31, 2021, which was filed with the SEC on October 14, 2021.
Our discussion and analysis of fiscal year 2022 compared to fiscal year 2021 can be found in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the year ended August 31, 2022, which was filed with the SEC on October 13, 2022.
See the risk factors entitled “Increased regulation associated with climate change could impose significant additional costs on both our steelmaking and metals recycling operations” and "Physical impacts of climate change could have a material adverse effect on our costs and operations" in Part I, Item 1A, Risk Factors, of this Annual Report.
See the risk factors entitled "Increased regulation associated with climate change could impose significant additional costs on both our steelmaking and metals recycling operations" and "Physical impacts of climate change could have a material adverse effect on our costs and results of operations" in Part I, Item 1A, Risk Factors, of this Annual Report.
The acquired operations within North America are presented within our North America reportable segment and the remaining acquired operations are presented within our Europe reportable segment, in each case since the Acquisition Date. See Note 2, Acquisition, in Item 8 of this Annual Report for more information about the Tensar acquisition.
The acquired operations within North America are presented within our North America reportable segment, and the remaining acquired operations are presented within our Europe reportable segment, in each case since the Tensar Acquisition Date. See Note 2, Changes in Business, in Part II, Item 8 of this Annual Report for more information about the Tensar acquisition.
Historically, our North America operations have generated the majority of our cash. At August 31, 2022, cash and cash equivalents of $36.3 million were held by our non-U.S. subsidiaries. We use futures or forward contracts to mitigate the risks from fluctuations in metal commodity prices, foreign currency exchange rates, interest rates and natural gas, electricity and other energy commodity prices.
Historically, our North America operations have generated the majority of our cash. At August 31, 2023, cash and cash equivalents of $24.9 million were held by our non-U.S. subsidiaries. We use futures or forward contracts to mitigate the risks from fluctuations in metal commodity prices, foreign currency exchange rates, interest rates and natural gas, electricity and other energy commodity prices.
We did not include estimated payments related to the BRP in the above description of contractual obligations and commitments. Refer to Note 15, Employees' Retirement Plans, in Item 8 of this Annual Report for more information on the BRP.
We did not include estimated payments related to the BRP in the above description of contractual obligations and commitments. Refer to Note 14, Employees' Retirement Plans, in Part II, Item 8 of this Annual Report for more information on the BRP.
Of these amounts, $8.4 million and $7.7 million at August 31, 2022 and 2021, respectively, relate to net operating loss and credit carryforwards in certain state jurisdictions that are subject to estimation. The remaining valuation allowance primarily relates to net operating loss carryforwards in certain foreign jurisdictions, which the Company does not expect to realize.
Of these amounts, $13.3 million and $8.4 million at August 31, 2023 and 2022, respectively, relate to net operating loss and credit carryforwards in certain state jurisdictions that are subject to estimation. The remaining valuation allowance primarily relates to net operating loss carryforwards in certain foreign jurisdictions, which the Company does not expect to realize.
We incurred environmental expenses of approximately $44.2 million, $49.8 million and $46.6 million for 2022, 2021 and 2020, respectively. The expenses included the cost of disposal, environmental personnel at various divisions, permit and license fees, accruals and payments for studies, tests, assessments, remediation, consultant fees, baghouse dust removal and various other expenses.
We incurred environmental expenses of approximately $49.3 million, $44.2 million and $49.8 million for 2023, 2022 and 2021, respectively. The expenses included the cost of disposal, environmental personnel at various divisions, permit and license fees, accruals and payments for studies, tests, assessments, remediation, consultant fees, baghouse dust removal and various other expenses.
We base our judgment of the recoverability of our deferred tax assets primarily on historical earnings, our estimate of current and expected future earnings, prudent and feasible tax planning strategies and current and future ownership changes. At August 31, 2022 and 2021, we had a valuation allowance of $268.5 million and $278.1 million, respectively, against our deferred tax assets.
We base our judgment of the recoverability of our deferred tax assets primarily on historical earnings, our estimate of current and expected future earnings, prudent and feasible tax planning strategies and current and future ownership changes. At August 31, 2023 and 2022, we had a valuation allowance of $280.5 million and $268.5 million, respectively, against our deferred tax assets.
Goodwill is tested at the reporting unit level, which represents an operating segment or one level below an operating segment. When assessing the recoverability of goodwill and other indefinite lived intangible assets, the Company may first assess qualitative factors in determining whether it is more likely than not that the respective fair value is less than its carrying amount.
Goodwill is tested at the reporting unit level, which represents an operating segment or one level below an operating segment. When evaluating goodwill and other indefinite-lived intangible assets for impairment, the Company may first assess qualitative factors in determining whether it is more likely than not that the respective fair value is less than its carrying amount.
Based on the results of impairment tests performed in 2022, management does not believe that it is reasonably likely that our reporting units or indefinite lived intangible assets will fail their respective impairment tests in the near term. See Note 7, Goodwill and Other Intangible Assets, in Item 8 of this Annual Report for additional information.
Based on the results of impairment tests performed in 2023, management does not believe that it is reasonably likely that our reporting units or indefinite-lived intangible assets will fail their respective impairment tests in the near term. See Note 6, Goodwill and Other Intangible Assets, in Part II, Item 8 of this Annual Report for additional information.
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 is sufficient. We estimate that our 2023 capital spending will range from $450 million to $500 million. We regularly assess our capital spending based on current and expected results and the amount is subject to change.
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 is sufficient. We estimate that our 2024 capital spending will range from $550 million to $600 million. We regularly assess our capital spending based on current and expected results and the amount is subject to change.
See Note 9, Credit Arrangements, in Item 8 of this Annual Report for more information regarding scheduled maturities of our long-term debt. See Note 8, Leases, in Item 8 of this Annual Report for additional information on leases.
See Note 8, Credit Arrangements, in Part II, Item 8 of this Annual Report for more information regarding scheduled maturities of our long-term debt. See Note 7, Leases, in Part II, Item 8 of this Annual Report for additional information on leases.
Environmental and Other Matters The information set forth in Note 18, Commitments and Contingencies, in Item 8 of this Annual Report is hereby incorporated by reference. 31 Table of Contents General We are subject to federal, state and local pollution control laws and regulations in all locations where we have operating facilities.
Environmental and Other Matters The information set forth in Note 17, Commitments and Contingencies, in Part II, Item 8 of this Annual Report is hereby incorporated by reference. General We are subject to federal, state and local pollution control laws and regulations in all locations where we have operating facilities.
As of August 31, 2022 and 2021, we had 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. 2022 Compared to 2021 Operating Activities Net cash flows from operating activities were $700.3 million and $228.5 million in 2022 and 2021, respectively.
As of August 31, 2023 and 2022, we had 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. 29 Table of Contents 2023 Compared to 2022 Operating Activities Net cash flows from operating activities were $1.3 billion and $700.3 million in 2023 and 2022, respectively.
Raw 24 Table of Contents 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 from continuing operations ("adjusted EBITDA") is used by management to compare and evaluate the period-over-period underlying business operational performance of our segments.
Raw materials include ferrous and nonferrous scrap, steel products include rebar, merchant bar and other steel products, such as billets and wire rod, and downstream products primarily 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.
See Note 9, Credit Arrangements, in Item 8 of this Annual Report for additional information.
See Note 8, Credit Arrangements, in Part II, Item 8 of this Annual Report for additional information.
The dividend was declared at the rate of $0.16 per share of CMC common stock and is payable on November 10, 2022 to stockholders of record as of the close of business on October 27, 2022.
The dividend was declared at the rate of $0.16 per share of CMC common stock and is payable on November 9, 2023 to stockholders of record as of the close of business on October 26, 2023.
We may incur settlements, fines, penalties or judgments in connection with some of these matters. While we are unable to estimate the ultimate dollar amount of exposure or loss in connection with these matters, we make accruals when a loss is probable and the amount can be reasonably estimated.
While we are unable to estimate the ultimate dollar amount of exposure or loss in connection with these matters, we make accruals when a loss is probable and the amount can be reasonably estimated.
DIVIDENDS We paid quarterly dividends in 2022 at the rate of $0.14 per share of CMC common stock, compared to quarterly dividends paid in 2021 at the rate of $0.12 per share of CMC common stock. On October 11, 2022, the Board of Directors declared CMC's 232nd quarterly cash dividend.
DIVIDENDS We paid quarterly dividends in 2023 at the rate of $0.16 per share of CMC common stock, compared to quarterly dividends paid in 2022 at the rate of $0.14 per share of CMC common stock. On October 10, 2023, the Board of Directors declared CMC's 236th quarterly cash dividend.
In addition, during 2022, we spent approximately $6.9 million in capital expenditures related to costs directly associated with environmental compliance. Our accrued environmental liabilities were $5.3 million and $7.1 million as of August 31, 2022 and 2021, respectively, of which $2.0 million and $2.3 million, respectively, were classified as other noncurrent liabilities.
In addition, during 2023, we spent approximately $5.8 million in capital expenditures related to costs directly associated with environmental compliance. Our accrued environmental liabilities were $4.5 million and $5.3 million as of 31 Table of Contents August 31, 2023 and 2022, respectively, of which $2.0 million were classified as other noncurrent liabilities as of both August 31, 2023 and 2022.
As of August 31, 2022, our undiscounted purchase obligations were approximately $802.0 million due in the next twelve months and $138.9 million due thereafter under purchase orders and "take or pay" arrangements.
As of August 31, 2023, our undiscounted purchase obligations were approximately $800 million due in the next twelve months and $340 million due thereafter under purchase orders and "take or pay" arrangements.
One derivative instrument is a commodity derivative for which the fair value estimate is based on an internally developed discounted cash flow model primarily utilizing Level 3 unobservable inputs for which there is little or no market data.
The fair value estimates of the Level 3 commodity derivatives are based on an internally developed discounted cash flow model primarily utilizing unobservable inputs for which there is little or no market data.
Of the purchase obligations due thereafter, 77% are for commodities and 7% are for the construction of our third micro mill. The remainder of the purchase obligations are for goods and services in the normal course of business.
Of the purchase obligations due thereafter, 75% were for commodities and 10% were for the construction of our fourth micro mill. The remainder of the purchase obligations are for goods and services in the normal course of business.
We currently own or lease, and in the past we have owned or leased, properties that have been used in our operations.
We currently own or lease, and in the past we have owned or leased, properties for use in our operations.
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.
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 bar and other steel products and the cost of ferrous scrap per ton utilized by our steel mills to produce these products.
FORWARD-LOOKING STATEMENTS This Annual Report contains "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 of Ukraine, 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 effect of COVID-19 and related governmental and economic responses thereto, 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 and address activities, events or developments that may occur in the future, including (without limitation) such matters as activities related 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 and organic growth provided by acquisitions and strategic investments, demand for our products, shipment volumes, 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, the impact of the Russian invasion of Ukraine, 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.
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 16% of total receivables at August 31, 2022. The table below reflects our sources, facilities and availability of liquidity as of August 31, 2022.
We use credit insurance internationally to mitigate the risk of customer insolvency. We estimate that the amount of credit-insured or financially assured receivables was approximately 14% of total receivables at August 31, 2023. The table below reflects our sources, facilities and availability of liquidity as of August 31, 2023.
Additionally, the Company has a U.S. federal repatriation tax obligation resulting from the repatriation tax provisions of the Tax Cuts and Jobs Act ("TCJA"), of which $2.2 million was due in the twelve months following August 31, 2022 and $16.6 million due thereafter.
Additionally, we have a U.S. federal repatriation tax obligation resulting from the repatriation tax provisions of the Tax Cuts and Jobs Act ("TCJA"), of which $4.2 million was due in the twelve months following August 31, 2023 and $12.5 million due thereafter.
Historically, the amounts that we have ultimately paid for such remediation activities have not been material. 32 Table of Contents Management believes that adequate provisions have been made in the Company's 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.
We believe that adequate provisions have been made in the 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 our business, results of operations or financial condition.
See Part I, Item 1, Business for further information regarding our business and reportable segments. 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 of the prior year.
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 of the prior year.
Long-Lived Assets We evaluate the carrying value of property, plant and equipment and finite-lived intangible assets whenever a change in circumstances indicates that the net carrying value may not be recoverable from the undiscounted future cash flows from operations.
Long-Lived Assets We evaluate the carrying value of property, plant and equipment and finite-lived intangible assets whenever a change in circumstances indicates that the net carrying value may not be recoverable from the entity-specific undiscounted future cash flows expected to result from our use of and eventual disposition of a long-lived asset or asset group.
Interest payable on our long-term debt was $64.7 million due in the twelve months following August 31, 2022 and $433.7 million due thereafter.
Interest payable on our long-term debt was $43.5 million due in the twelve months following August 31, 2023 and $386.8 million due thereafter.
We evaluate the fair value of our derivative financial instruments using an established fair value hierarchy as stated in Note 1, Nature of Operations and Summary of Significant Accounting Policies, in Item 8 of this Annual Report.
We evaluate the fair value of our derivative financial instruments using an established fair value hierarchy as stated in Note 1, Nature of Operations and Summary of Significant Accounting Policies, in Part II, Item 8 of this Annual Report. The Company has three Level 3 commodity derivatives which are bilateral agreements with a counterparty.
The excess of purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed, if any, is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed involves the use of significant estimates and assumptions. See Note 2, Acquisition, in Item 8 of this Annual Report for more information about the Tensar acquisition.
The excess of purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed, if any, is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed involves the use of significant estimates and assumptions.
See Note 12, Fair Value, in Item 8 of this Annual Report for more information on the Level 3 commodity derivative. 35 Table of Contents Contingencies In the ordinary course of conducting our business, we become involved in litigation, administrative proceedings and governmental investigations, including environmental matters.
See Note 11, Fair Value, in Part II, Item 8 of this Annual Report for more information on the Level 3 commodity derivatives. 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 in connection with some of these matters.
Although there are many factors that can impact a segment’s adjusted EBITDA and, therefore, our overall earnings, changes in metal margin 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.
Adjusted EBITDA is the sum of 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 margin of our steel products and downstream products period-over-period is a consistent area of focus for our Company and industry.
Investing Activities Net cash flows used by investing activities were $684.7 million and $162.1 million in 2022 and 2021, respectively, an increase of $522.6 million.
Investing Activities Net cash flows used by investing activities were $835.2 million and $684.7 million in 2023 and 2022, respectively, an increase of $150.5 million.
However, we will continue to monitor 25 Table of Contents 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.
However, the Russian invasion of Ukraine has been an indirect contributor to the deterioration of the economic conditions in Europe, among other macroeconomic factors, and we will continue to monitor disruptions in supply of energy and materials and the indirect effects on our operations of inflationary pressures, reductions in demand, foreign exchange rate fluctuations, commodity pricing, potential cybersecurity risks and sanctions resulting from the invasion.
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. 2022 Compared to 2021 North America Year Ended August 31, (in thousands, except per ton amounts) 2022 2021 Net sales $ 7,298,632 $ 5,670,976 Adjusted EBITDA 1,553,858 746,594 External tons shipped Raw materials 1,375 1,331 Rebar 1,805 1,927 Merchant and other 1,025 1,123 Steel products 2,830 3,050 Downstream products 1,558 1,537 Average selling price per ton Raw materials $ 1,073 $ 877 Steel products 1,060 752 Downstream products 1,217 961 Cost of raw materials per ton $ 807 $ 650 Cost of ferrous scrap utilized per ton 431 355 Steel products metal margin per ton 629 397 Net sales in the North America segment increased $1.6 billion, or 29%, in 2022 compared to 2021.
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. 26 Table of Contents 2023 Compared to 2022 North America Year Ended August 31, (in thousands, except per ton amounts) 2023 2022 Net sales $ 7,347,020 $ 7,298,632 Adjusted EBITDA 1,454,754 1,553,858 External tons shipped Raw materials 1,390 1,375 Rebar 1,967 1,805 Merchant bar and other 943 1,025 Steel products 2,910 2,830 Downstream products 1,466 1,558 Average selling price per ton Raw materials $ 840 $ 1,073 Steel products 978 1,060 Downstream products 1,426 1,217 Cost of ferrous scrap utilized per ton $ 349 $ 431 Steel products metal margin per ton 629 629 Net sales in our North America segment remained relatively flat in 2023 compared to 2022.
The third rolling line takes advantage of historical excess melting capacity in Poland, expands our overall rolling capacity and allows the rolling lines to operate independently for each steel product produced by the mini mill (rebar, merchant bar and wire rod). In August 2020, we announced the construction of a third micro mill.
The third rolling line takes advantage of historical excess melting capacity in Poland, expands our overall rolling capacity and allows the rolling lines to now operate independently for each steel product produced by the mini mill (rebar, merchant bar and wire rod). Chief Executive Officer Transition Effective September 1, 2023, our Board of Directors appointed Peter R.
Income Taxes We periodically assess the likelihood of realizing our deferred tax assets and maintain a valuation allowance to reduce certain deferred tax assets to amounts that we believe are more likely than not to be realized.
See Note 4, Revenue Recognition, in Part II, Item 8 of this Annual Report for further details. 33 Table of Contents Income Taxes We periodically assess the likelihood of realizing our deferred tax assets and maintain a valuation allowance to reduce certain deferred tax assets to amounts that we believe are more likely than not to be realized.
The new facility, located in Mesa, Arizona, will replace the rebar capacity at our Rancho Cucamonga, California mill, which was sold during fiscal 2022, and will allow us to more efficiently meet West Coast demand for steel products. We began construction of the third micro mill in 2021 and expect this micro mill to be commissioned in early calendar 2023.
The new facility, located in Mesa, Arizona, replaces the rebar capacity at our Rancho Cucamonga, California mill, which was sold during 2022, and allows us to more efficiently meet West Coast demand for steel products.
Corporate and Other Year Ended August 31, (in thousands) 2022 2021 Adjusted EBITDA loss $ (154,103) $ (140,568) Corporate and Other adjusted EBITDA loss in 2022 increased by $13.5 million compared to 2021.
Corporate and Other Year Ended August 31, (in thousands) 2023 2022 Adjusted EBITDA loss $ (131,403) $ (154,103) Corporate and Other adjusted EBITDA loss decreased by $22.7 million in 2023 compared to 2022.
See Note 16, Capital Stock in Item 8 of this Annual Report for more information on the share repurchase program. Contractual Obligations and Commitments 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.
Contractual Obligations and Commitments 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.
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.
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 17, Commitments and Contingencies, in Part II, Item 8 of this Annual Report for more information.
See Note 20, Operating Segments, in Item 8 of this Annual Report for further information on how we evaluate financial performance of our segments. 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 in North America and Europe.
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 in North America and Europe.
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 $330.0 million aggregate principal amount of 4.875% Senior Notes due in May 2023, pay dividends and opportunistically repurchase shares for at least the next twelve months.
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, pay dividends and opportunistically repurchase shares for at least the next twelve months.
The $274.7 million increase in net cash flows from financing activities was a result of many actions, including net proceeds from long-term debt of $414.8 million during 2022, compared to net long-term debt repayments of $59.2 million during 2021.
The $764.8 million increase in net cash flows used by financing activities was largely driven by net repayments of long-term debt of $389.8 million during 2023, compared to net proceeds from long-term debt of $414.8 million during 2022.
Additionally, the EPA has implemented, and is continuing to implement, new, more stringent standards for NAAQS, including fine particulate matter. Compliance with new standards could require additional expenditures.
Additionally, the EPA has implemented, and is continuing to implement, new, more stringent standards for NAAQS, including fine particulate matter. Compliance with new standards could require additional expenditures. Climate Change The potential impacts of climate change on our business and results of operations and potential future climate change regulations in the jurisdictions in which we operate are highly uncertain.
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 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.
BUSINESS CONDITIONS AND DEVELOPMENTS Tensar Acquisition On April 25, 2022 (the "Acquisition Date"), we completed the acquisition of TAC Acquisition Corp. ("Tensar") for approximately $550 million, net of cash acquired.
Operating results for the 2023 Acquisitions are presented within our North America reportable segment. Tensar Acquisition On April 25, 2022 (the "Tensar Acquisition Date"), we completed the acquisition of TAC Acquisition Corp. ("Tensar") for approximately $550 million, net of cash acquired.
Additionally, during the second half of 2022, prices of downstream products, many of which are fixed at the beginning of the project, grew to reflect the increased input costs from rising scrap and energy prices during 2021 and 2022.
The increases in average selling prices for downstream products, many of which are fixed at the beginning of the project, reflected the increased input costs from rising scrap and energy prices during 2022 when we entered into the contracts.
Capital Expenditures In January 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. This new micro mill will enhance our steel production capabilities in the U.S. and create meaningful synergies within the existing network of mills and downstream fabrication plants.
This new micro mill will be geographically situated to serve the Northeast, Mid-Atlantic and Mid-Western U.S. markets and will enhance our steel production capabilities by achieving synergies within the existing network of mills and downstream fabrication plants. In July 2021, we completed the construction of and commissioned a third rolling line at our mini mill in Poland.
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.
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.
See Note 18, Commitments and Contingencies, in Item 8 of this Annual Report for more information.
See Note 2, Changes in Business, in Part II, Item 8 of this Annual Report for more information about acquisitions.
Major sources of air pollutants are subject to more stringent requirements, including the potential need for additional permits and to increase scrutiny in the context of enforcement. The EPA has been implementing its stationary emission control program through expanded enforcement of the New Source Review Program.
New and modified sources of air pollutants are often required to obtain permits prior to commencing construction, modification or operations. Major sources of air pollutants are subject to more stringent requirements, including the potential need for additional permits and to increase scrutiny in the context of enforcement.
In 2022, the indefinite lived intangible assets were tested for impairment using a qualitative approach. Based on the Company’s annual impairment testing of the indefinite lived intangible assets, we concluded it is more likely than not that their fair values exceeded the respective carrying values.
The difference in the value of indefinite-lived intangible assets between the 2023 annual impairment test date and August 31, 2023 was due to foreign currency translation adjustments. Based on the Company’s annual impairment testing of the indefinite-lived intangible assets, we concluded it was more likely than not that their fair values exceeded the respective carrying values.
In addition, the EPA's regulations and comparable state statutes may require us to obtain permits to discharge storm water runoff. In the event of an unauthorized discharge or non-compliance with permit requirements, we may be liable for penalties, costs and injunctive relief.
In addition, the EPA's regulations and comparable state statutes may require us to obtain permits to discharge storm water runoff.
In 2022, other than the reporting unit with $56.9 million of goodwill within the North America operating segment, management tested all reporting units using a qualitative approach and determined it was more likely than not that their fair values exceeded the respective carrying values.
Management determined it was more likely than not that the fair values of the reporting units which were tested using a qualitative approach exceeded their respective carrying values. The remaining three reporting units were tested for impairment using a quantitative approach.
If these assets were for sale, our estimates of their values could be significantly different because of market conditions, specific transaction terms and a buyer's perspective on future cash flows. During 2022, there were no events or circumstances that triggered an impairment review.
If these assets were for sale, our estimates of their values could be significantly different because of market conditions, specific transaction terms and a buyer's perspective on future cash flows. During 2023, historical and current period operating losses were determined to be triggering events for three long-lived asset groups associated with downstream fabricated rebar operations.
(in thousands) Total Facility Availability Cash and cash equivalents $ 672,596 $ 672,596 Notes due from 2023 to 2032 1,230,000 (1) Revolver 400,000 398,587 U.S. accounts receivable facility 150,000 150,000 Series 2022 Bonds, due 2047 145,060 — Poland credit facilities 63,865 62,867 Poland accounts receivable facility 61,311 34,921 Poland Term Loan 32,439 — Other 4,065 1,162 __________________________________ (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. 29 Table of Contents We continually review our capital resources to determine whether we can meet our short and long-term goals.
(in thousands) Total Facility Availability Cash and cash equivalents $ 592,332 $ 592,332 Notes due from 2030 to 2032 900,000 (1) Revolver 600,000 599,057 Term Loan 200,000 200,000 Series 2022 Bonds, due 2047 145,060 — Poland credit facilities 145,437 129,159 Poland accounts receivable facility 69,810 61,391 __________________________________ (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.
Europe Year Ended August 31, (in thousands, except per ton amounts) 2022 2021 Net sales $ 1,621,642 $ 1,049,059 Adjusted EBITDA 346,051 148,258 External tons shipped Rebar 622 521 Merchant and other 1,097 1,093 Steel products 1,719 1,614 Average selling price per ton Steel products $ 896 $ 612 Cost of ferrous scrap utilized per ton $ 463 $ 357 Steel products metal margin per ton 433 255 Net sales in the Europe segment increased $572.6 million, or 55%, in 2022 compared to 2021.
See Note 2, Changes in Business, in Part II, Item 8 of this Annual Report for more information about the sale of the Rancho Cucamonga facilities. 27 Table of Contents Europe Year Ended August 31, (in thousands, except per ton amounts) 2023 2022 Net sales $ 1,416,704 $ 1,621,642 Adjusted EBITDA 61,353 346,051 External tons shipped Rebar 684 622 Merchant bar and other 1,043 1,097 Steel products 1,727 1,719 Average selling price per ton Steel products $ 749 $ 896 Cost of ferrous scrap utilized per ton $ 395 $ 463 Steel products metal margin per ton 354 433 Net sales in the Europe segment decreased $204.9 million, or 13%, in 2023 compared to 2022.
The "take or pay" arrangements are multi-year commitments with minimum annual purchase requirements and are entered into primarily for purchases of commodities used in operations such as electrodes and natural gas.
The "take or pay" arrangements are multi-year commitments with minimum annual purchase requirements and are entered into primarily for purchases of commodities used in operations such as electrodes and natural gas. 30 Table of Contents Of the purchase obligations due within the twelve months following August 31, 2023, approximately 23% were for consumable production inputs, such as alloys, 20% were for capital expenditures in connection with normal business operations, 19% were for commodities and 14% were for the construction of our fourth micro mill.
Included in adjusted EBITDA in 2022 was a $273.3 million gain on the sale of the Rancho Cucamonga facilities. The remaining growth in adjusted EBITDA during 2022 was primarily due to expansion of steel products metal margin per ton and downstream products margin over scrap costs compared to 2021.
Included in adjusted EBITDA during 2022 was a $273.3 million non-recurring gain on the sale of the Rancho Cucamonga facilities.
The year-over-year decrease was primarily due to tax benefits recorded during 2022 from the recognition of research and development credits and a capital loss on a restructuring transaction. These decreases were partially offset by an increase in state and local taxes due to a prior year valuation allowance benefit that did not repeat in the current year.
Income Taxes Our effective income tax rate for 2023 was 23.4% compared to 19.7% for 2022. The year-over-year increase was primarily due to a tax benefit recorded during 2022 from a capital loss on a restructuring transaction that did not recur in 2023, as well as a reduction in research and development tax credits in 2023 compared to 2022.
This increase was primarily due to a $284 per ton, or 46%, year-over-year increase in steel products average selling price driven by rising raw materials input costs and growing market demand.
While downstream products average selling prices experienced a significant increase of $209 per ton, or 17%, year-over-year, this fluctuation was offset by decreases in steel products average selling prices and raw materials average selling prices due to a falling scrap price environment.
Other Commercial Commitments We maintain stand-by letters of credit to provide support for certain transactions that governmental agencies, our insurance providers and suppliers require. At August 31, 2022, we had committed $21.6 million under these arrangements, of which $1.4 million reduced availability under the Revolver (as defined in Note 9, Credit Arrangements, in Item 8 of this Annual Report).
Other Commercial Commitments We maintain stand-by letters of credit to provide support for certain transactions that governmental agencies, our insurance providers and suppliers require.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe also enter into energy derivatives to mitigate the risk of unanticipated declines in gross margin due to the price volatility of electricity and natural gas. 38 Table of Contents The fair value of our commodity futures contract commitments as of August 31, 2022 were as follows: Commodity Terminal Exchange Long/ Short Total Contract Volumes Range or Amount of Hedge Rates per unit Total Contract Fair Value (1) (in thousands) Aluminum London Metal Exchange Long 3,700 MT $ 2,388.00 — $ 2,506.00 $ (260) Aluminum London Metal Exchange Short 1,700 MT $ 2,368.50 — $ 2,510.00 136 Copper New York Mercantile Exchange Long 635 MT $ 331.30 — $ 369.90 (35) Copper New York Mercantile Exchange Short 9,310 MT $ 319.60 — $ 476.65 3,515 Electricity N/A (2) Long 1,676,000 MW(h) PLN 234.60 — 274.87 143,500 Natural Gas New York Mercantile Exchange Long 4,850,300 MMBtu $ 3.45 — $ 5.71 12,731 $ 159,587 __________________________________ MT = Metric ton MW(h) = Megawatt hour MMBtu = Metric Million British thermal unit (1) All commodity futures contract commitments mature within one year, except for the electricity and natural gas contract commitments, which have maturity dates of December 31, 2030 and August 31, 2025, respectively.
Biggest changeThe fair value of our commodity futures contract commitments and energy derivatives as of August 31, 2023 were as follows: Commodity Exchange Long/ Short Total Contract Volumes Range or Amount of Hedge Rates per unit Total Contract Fair Value (1) (in thousands) Aluminum London Metal Exchange Long 2,850 MT $ 2,176.95 — $ 2,284.00 $ (23) Aluminum London Metal Exchange Short 1,400 MT $ 2,154.00 — $ 2,196.25 (33) Copper New York Mercantile Exchange Long 147 MT $ 369.40 — $ 383.75 19 Copper New York Mercantile Exchange Short 8,459 MT $ 362.35 — $ 412.90 271 Electricity N/A (2) Long 3,312,000 MW(h) PLN 239.29 — 744.64 194,425 Natural Gas New York Mercantile Exchange Long 5,270,500 MMBtu $ 3.45 — $ 5.75 (3,039) $ 191,620 __________________________________ MT = Metric ton MW(h) = Megawatt hour MMBtu = Metric Million British thermal unit (1) All commodity futures contract commitments mature within one year, except for the electricity and natural gas contract commitments, which have maturity dates extending to December 31, 2034 and August 31, 2026, respectively.
The range of hedge rates represents functional to foreign currency conversion rates. Commodity Futures Contracts Our product lines expose us to risks from fluctuations in metal commodity prices and natural gas, electricity and other energy commodity prices.
The range of hedge rates represents functional to foreign currency conversion rates. 38 Table of Contents Commodity Futures Contracts Our product lines expose us to risks from fluctuations in metal commodity prices and natural gas, electricity and other energy commodity prices.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Approach to Mitigating Market Risk See Note 11, Derivatives, in Item 8 of this Annual Report for disclosure regarding our approach to mitigating market risk and for summarized market risk information by year.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Approach to Mitigating Market Risk See Note 10, Derivatives, in Part II, Item 8 of this Annual Report for disclosure regarding our approach to mitigating market risk and for summarized market risk information by year.
We enter into currency exchange forward contracts as economic hedges of trade commitments denominated in currencies other than our functional currency or the functional currency of our subsidiaries, including commitments denominated in PLN, USD and the Euro ("EUR").
We enter into currency exchange forward contracts as economic hedges of trade commitments denominated in currencies other than our reporting currency or the functional currency of our subsidiaries, including commitments denominated in PLN, USD, the euro ("EUR") and the Canadian dollar ("CAD").
Also, see Note 1, Nature of Operations and Summary of Significant Accounting Policies, in Item 8 of this Annual Report for additional information. We utilized the following types of derivative instruments during 2022 in accordance with our risk management program. None of the instruments were entered into for speculative purposes.
Also, see Note 1, Nature of Operations and Summary of Significant Accounting Policies, in Part II, Item 8 of this Annual Report for additional information. We utilized foreign currency exchange forward contracts and commodity futures contracts during 2023 in accordance with our risk management program. None of the instruments were entered into for speculative purposes.
(2) There is no terminal exchange for electricity as it is a bilateral agreement with a counterparty. 39 Table of Contents
(2) There is no exchange for the electricity derivatives as they are bilateral agreements with a counterparty. 39 Table of Contents
These futures contracts mitigate the risk of unanticipated declines in gross margin due to the price volatility of the underlying commodities.
These futures contracts mitigate the risk of unanticipated declines in gross margin due to the price volatility of the underlying commodities. We also enter into energy derivatives to mitigate the risk of unanticipated declines in gross margin due to the price volatility of electricity and natural gas.
The fair value of our foreign currency exchange forward contract commitments as of August 31, 2022 were as follows: Functional Currency Foreign Currency Type Amount (in thousands) Type Amount (in thousands) Range of Hedge Rates (1) Total Contract Fair Value (in thousands) PLN 930,784 EUR 192,812 4.64 — 5.33 $ 372 PLN 12,646 USD 2,815 4.02 — 4.84 137 USD 3,446 EUR 3,408 1.00 — 1.02 20 USD 43,070 PLN 193,807 0.22 — 0.23 (2,312) $ (1,783) __________________________________ (1) Most foreign currency exchange forward contracts mature within one year.
The fair value of our foreign currency exchange forward contract commitments as of August 31, 2023 were as follows: Functional Currency Foreign Currency Type Amount (in thousands) Type Amount (in thousands) Range of Hedge Rates (1) Total Contract Fair Value (in thousands) PLN 417,086 EUR 91,162 4.44 — 5.33 $ (932) PLN 7,180 USD 1,660 4.00 — 4.49 (41) USD 1,164 CAD 1,556 0.74 — 0.76 13 USD 1,913 EUR 1,789 1.06 — 1.09 35 USD 115,636 PLN 488,393 0.24 — 0.24 257 $ (668) __________________________________ (1) Most foreign currency exchange forward contracts mature within one year.

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