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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM 10-Q 
___________________________________
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2020
OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to            
Commission file number 1-4304
___________________________________
COMMERCIAL METALS COMPANY
(Exact Name of Registrant as Specified in Its Charter)
cmc-20201130_g1.jpg
___________________________________ 
Delaware75-0725338
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification Number)
6565 N. MacArthur Blvd.
Irving, Texas 75039
(Address of Principal Executive Offices) (Zip Code)
(214) 689-4300
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, $0.01 par valueCMCNew York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 ("Exchange Act") during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer  Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of January 8, 2021, 120,068,330 shares of the registrant's common stock, par value $0.01 per share, were outstanding.



COMMERCIAL METALS COMPANY AND SUBSIDIARIES
TABLE OF CONTENTS

 

2


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS


COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Three Months Ended November 30,
(in thousands, except share data)20202019
Net sales$1,391,803 $1,384,708 
Costs and expenses:
Cost of goods sold1,174,819 1,146,514 
Selling, general and administrative expenses113,627 110,999 
Interest expense14,259 16,578 
Asset impairments3,594 530 
1,306,299 1,274,621 
Earnings from continuing operations before income taxes 85,504 110,087 
Income taxes21,593 27,332 
Earnings from continuing operations63,911 82,755 
Earnings from discontinued operations before income taxes250 895 
Income taxes68 302 
Earnings from discontinued operations182 593 
Net earnings$64,093 $83,348 
Basic earnings per share*
Earnings from continuing operations$0.53 $0.70 
Earnings from discontinued operations 0.01 
Net earnings$0.54 $0.70 
Diluted earnings per share*
Earnings from continuing operations$0.53 $0.69 
Earnings from discontinued operations  
Net earnings$0.53 $0.70 
Average basic shares outstanding119,762,706 118,370,191 
Average diluted shares outstanding121,128,044 119,773,538 
See notes to condensed consolidated financial statements.
 _________________
*Earnings Per Share ("EPS") is calculated independently for each component and may not sum to Net EPS due to rounding.

3



COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Three Months Ended November 30,
(in thousands)20202019
Net earnings $64,093 $83,348 
Other comprehensive income (loss), net of income taxes:
Foreign currency translation adjustment(8,388)6,924 
Net unrealized gain on derivatives:
Unrealized holding gain1,164 714 
Reclassification for gain included in net earnings(54)(89)
Net unrealized gain on derivatives1,110 625 
Defined benefit obligation:
Amortization of prior services(13)(8)
Defined benefit obligation(13)(8)
Other comprehensive income (loss)(7,291)7,541 
Comprehensive income$56,802 $90,889 
See notes to condensed consolidated financial statements.
4



COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share data)November 30, 2020August 31, 2020
Assets
Current assets:
Cash and cash equivalents$465,162 $542,103 
Accounts receivable (less allowance for doubtful accounts of $8,407 and $9,597)
869,052 880,728 
Inventories, net653,526 625,393 
Prepaid and other current assets181,465 165,879 
Total current assets2,169,205 2,214,103 
Property, plant and equipment, net1,549,385 1,571,067 
Goodwill64,275 64,321 
Other noncurrent assets233,803 232,237 
Total assets$4,016,668 $4,081,728 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable$252,953 $266,102 
Accrued expenses and other payables339,545 461,012 
Current maturities of long-term debt and short-term borrowings20,701 18,149 
Total current liabilities613,199 745,263 
Deferred income taxes142,686 130,810 
Other noncurrent liabilities260,991 250,706 
Long-term debt1,064,893 1,065,536 
Total liabilities2,081,769 2,192,315 
Commitments and contingencies (Note 13)
Stockholders' equity:
Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued 129,060,664 shares; outstanding 120,068,021 and 119,220,905 shares
1,290 1,290 
Additional paid-in capital348,816 358,912 
Accumulated other comprehensive loss(111,055)(103,764)
Retained earnings1,857,513 1,807,826 
Less treasury stock 8,992,643 and 9,839,759 shares at cost
(161,877)(175,063)
Stockholders' equity1,934,687 1,889,201 
Stockholders' equity attributable to noncontrolling interests212 212 
Total stockholders' equity1,934,899 1,889,413 
Total liabilities and stockholders' equity$4,016,668 $4,081,728 
See notes to condensed consolidated financial statements.
5



COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 Three Months Ended November 30,
(in thousands)20202019
Cash flows from (used by) operating activities:
Net earnings$64,093 $83,348 
Adjustments to reconcile net earnings to cash flows from (used by) operating activities:
Depreciation and amortization41,799 40,947 
Deferred income taxes and other long-term taxes11,720 27,939 
Stock-based compensation9,062 8,269 
Asset impairments3,594 530 
Amortization of acquired unfavorable contract backlog(1,523)(8,331)
Net gain on disposals of subsidiaries, assets and other(69)(6,733)
Other30 645 
Changes in operating assets and liabilities(140,794)(196)
Net cash flows from (used by) operating activities(12,088)146,418 
Cash flows from (used by) investing activities:
Capital expenditures(37,201)(45,559)
Proceeds from the sale of property, plant and equipment743 9,651 
Proceeds from insurance 784 
Net cash flows used by investing activities:(36,458)(35,124)
Cash flows from (used by) financing activities:
Repayments of long-term debt(3,823)(53,298)
Proceeds from accounts receivable programs4,487 27,050 
Repayments under accounts receivable programs(4,487)(31,057)
Dividends(14,406)(14,238)
Stock issued under incentive and purchase plans, net of forfeitures(10,341)(7,817)
Net cash flows used by financing activities(28,570)(79,360)
Effect of exchange rate changes on cash(365)196 
Increase (decrease) in cash, restricted cash and cash equivalents(77,481)32,130 
Cash, restricted cash and cash equivalents at beginning of period544,964 193,729 
Cash, restricted cash and cash equivalents at end of period$467,483 $225,859 
See notes to condensed consolidated financial statements.

Supplemental information:Three Months Ended November 30,
(in thousands)20202019
Cash paid for income taxes$4,743 $2,119 
Cash paid for interest18,691 20,031 
Noncash activities:
Liabilities related to additions of property, plant and equipment20,246 17,569 
Cash and cash equivalents$465,162 $224,797 
Restricted cash2,321 1,062 
Total cash, restricted cash and cash equivalents$467,483 $225,859 

6



COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
Three Months Ended November 30, 2020
 Common StockAdditionalAccumulated
Other
 Treasury Stock Non- 
(in thousands, except share data)Number of
Shares
AmountPaid-In
Capital
Comprehensive
Loss
Retained
Earnings
Number of
Shares
Amountcontrolling
Interests
Total
Balance, September 1, 2020129,060,664 $1,290 $358,912 $(103,764)$1,807,826 (9,839,759)$(175,063)$212 $1,889,413 
Net earnings64,093 64,093 
Other comprehensive loss(7,291)(7,291)
Dividends ($0.12 per share)
(14,406)(14,406)
Issuance of stock under incentive and purchase plans, net of forfeitures(23,527)847,116 13,186 (10,341)
Stock-based compensation8,011 8,011 
Reclassification of share-based liability awards5,420 5,420 
Balance, November 30, 2020129,060,664 $1,290 $348,816 $(111,055)$1,857,513 (8,992,643)$(161,877)$212 $1,934,899 

Three Months Ended November 30, 2019
 Common StockAdditionalAccumulated
Other
 Treasury Stock Non- 
(in thousands, except share data)Number of
Shares
AmountPaid-In
Capital
Comprehensive
Loss
Retained
Earnings
Number of
Shares
Amountcontrolling
Interests
Total
Balance, September 1, 2019129,060,664 $1,290 $358,668 $(124,126)$1,585,379 (11,135,726)$(197,350)$196 $1,624,057 
Net earnings83,348 83,348 
Other comprehensive income7,541 7,541 
Dividends ($0.12 per share)
(14,238)(14,238)
Issuance of stock under incentive and purchase plans, net of forfeitures(20,282)724,927 12,465 (7,817)
Stock-based compensation6,296 6,296 
Reclassification of share-based liability awards2,510 2,510 
Balance, November 30, 2019129,060,664 $1,290 $347,192 $(116,585)$1,654,489 (10,410,799)$(184,885)$196 $1,701,697 
See notes to condensed consolidated financial statements.
7


COMMERCIAL METALS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") on a basis consistent with that used in the Annual Report on Form 10-K for the year ended August 31, 2020 ("2020 Form 10-K") filed by Commercial Metals Company ("CMC," and together with its consolidated subsidiaries, the "Company") with the Securities and Exchange Commission (the "SEC") and include all normal recurring adjustments necessary to present fairly the condensed consolidated balance sheets and the condensed consolidated statements of earnings, comprehensive income, cash flows and stockholders' equity for the periods indicated. These notes should be read in conjunction with the consolidated financial statements included in the 2020 Form 10-K. The results of operations for the three month period are not necessarily indicative of the results to be expected for the full fiscal year.

Any reference in this Form 10-Q to a year refers to the fiscal year ended August 31st of that year, unless otherwise noted.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 eliminates certain exceptions to the general principles in Accounting Standards Codification 740 and also clarifies and amends existing guidance to improve consistent application. The Company adopted ASU 2019-12 on September 1, 2020. ASU 2019-12 did not have a material effect on the Company's condensed consolidated financial statements.
NOTE 2. CHANGES IN BUSINESS

Facility Closures and Dispositions

In October 2019, the Company closed the melting operations at its Rancho Cucamonga facility, which is part of the North America segment. In August 2020, the Company announced plans to sell the Rancho Cucamonga site and the Company ceased production in December 2020. Due to these announcements, the Company recorded $8.0 million and $6.3 million of expense in the three months ended November 30, 2020 and 2019, respectively, related to asset impairments, severance, pension curtailment and vendor agreement terminations. As of November 30, 2020, the disposition does not meet the criteria for discontinued operations or held for sale accounting.
NOTE 3. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables reflect the changes in accumulated other comprehensive income (loss) ("AOCI"):
Three Months Ended November 30, 2020
(in thousands)Foreign Currency TranslationUnrealized Gain (Loss) on DerivativesDefined Benefit ObligationTotal AOCI
Balance, September 1, 2020$(87,933)$(11,334)$(4,497)$(103,764)
Other comprehensive income (loss) before reclassifications(8,388)1,437 (20)(6,971)
Amounts reclassified from AOCI (67) (67)
Income taxes (260)7 (253)
Net other comprehensive income (loss)(8,388)1,110 (13)(7,291)
Balance, November 30, 2020$(96,321)$(10,224)$(4,510)$(111,055)

8


Three Months Ended November 30, 2019
(in thousands)Foreign Currency TranslationUnrealized Gain (Loss) on DerivativesDefined Benefit ObligationTotal AOCI
Balance, September 1, 2019$(121,498)$1,106 $(3,734)$(124,126)
Other comprehensive income (loss) before reclassifications6,924 882 (10)7,796 
Amounts reclassified from AOCI (110) (110)
Income taxes (147)2 (145)
Net other comprehensive income (loss)6,924 625 (8)7,541 
Balance, November 30, 2019$(114,574)$1,731 $(3,742)$(116,585)

Items reclassified out of AOCI were immaterial for the three months ended November 30, 2020 and 2019. Thus, the corresponding line items in the condensed consolidated statements of earnings to which the items were reclassified are not presented.
NOTE 4. REVENUE RECOGNITION

Each fabricated product contract sold by the North America segment represents a single performance obligation. Revenue from contracts where the Company provides fabricated product and installation services is recognized over time using an input measure, and these contracts represented 14% and 12% of net sales in the North America segment in three months ended November 30, 2020 and 2019, respectively. Revenue from contracts where the Company does not provide installation services is recognized over time using an output measure, and these contracts represented 9% and 11% of net sales in the North America segment in three months ended November 30, 2020 and 2019, respectively. The remaining 77% of net sales in the North America segment were recognized at a point in time concurrent with the transfer of control, or as amounts were billed to the customer under an available practical expedient, in three months ended November 30, 2020 and 2019.

The following table provides information about assets and liabilities from contracts with customers.
(in thousands)November 30, 2020August 31, 2020
Contract assets (included in accounts receivable)$46,430 $53,275 
Contract liabilities (included in accrued expenses and other payables)26,462 25,450 
The amount of revenue reclassified from August 31, 2020 contract liabilities during the three months ended November 30, 2020 was approximately $13.1 million.

Remaining Performance Obligations

As of November 30, 2020, $679.8 million has been allocated to remaining performance obligations in the North America segment related to those contracts where revenue is recognized using an input or output measure.
NOTE 5. INVENTORIES, NET

The majority of the Company's inventories are in the form of semi-finished and finished goods. Under the Company’s business model, products are sold to external customers in various stages, from semi-finished billets through fabricated steel, leading these categories to be combined. As such, at November 30, 2020 and August 31, 2020, work in process inventories were immaterial. At November 30, 2020 and August 31, 2020, the Company's raw materials inventories were $152.0 million and $123.9 million, respectively.
9


NOTE 6. GOODWILL AND OTHER INTANGIBLES

Goodwill by reportable segment at November 30, 2020 is detailed in the following table:
(in thousands)North AmericaEuropeConsolidated
Goodwill, gross*$71,941 $2,530 $74,471 
Accumulated impairment losses*(10,036)(160)(10,196)
Goodwill, net*$61,905 $2,370 $64,275 
_________________ 
* The change in balance from August 31, 2020 was immaterial.

The total gross carrying amounts of the Company's intangible assets subject to amortization were $21.8 million and $22.1 million, and the total net carrying amounts were $12.0 million and $12.6 million at November 30, 2020 and August 31, 2020, respectively. These assets were included in other noncurrent assets on the Company's condensed consolidated balance sheets. Intangible amortization expense from continuing operations related to such intangible assets was immaterial for the three months ended November 30, 2020 and 2019. Excluding goodwill, the Company did not have any significant intangible assets with indefinite lives at November 30, 2020.

At November 30, 2020 and August 31, 2020, the net carrying amount of the acquired unfavorable contract backlog liability was $4.5 million and $6.0 million, respectively. Amortization of the acquired unfavorable contract backlog was $1.5 million and $8.3 million for the three months ended November 30, 2020 and 2019, respectively, and was recorded as an increase to net sales in the Company’s condensed consolidated statements of earnings.

NOTE 7. LEASES

The following table presents the components of the total leased assets and lease liabilities and their classification in the Company's condensed consolidated balance sheet:
(in thousands)Classification in Condensed Consolidated Balance SheetsNovember 30, 2020August 31, 2020
Assets:
Operating assetsOther noncurrent assets$117,582 $114,905 
Finance assetsProperty, plant and equipment, net53,561 50,642 
Total leased assets$171,143 $165,547 
Liabilities:
Operating lease liabilities:
CurrentAccrued expenses and other payables$27,030 $27,604 
Long-termOther noncurrent liabilities98,881 95,810 
Total operating lease liabilities125,911 123,414 
Finance lease liabilities:
CurrentCurrent maturities of long-term debt and short-term borrowings15,060 14,373 
Long-termLong-term debt37,421 35,851 
Total finance lease liabilities52,481 50,224 
Total lease liabilities$178,392 $173,638 

The components of lease cost were as follows:
10


Three Months Ended November 30,
(in thousands)20202019
Operating lease expense$8,722 $8,790 
Finance lease expense:
Amortization of assets3,239 2,165 
Interest on lease liabilities555 401 
Total finance lease expense3,794 2,566 
Variable and short term-lease expense4,962 3,933 
Total lease expense$17,478 $15,289 

The weighted-average remaining lease term and discount rate for operating and finance leases are presented in the following table:
November 30, 2020August 31, 2020
Weighted-average remaining lease term (years)
Operating leases6.56.3
Finance leases3.83.8
Weighted-average discount rate
Operating leases4.426 %4.283 %
Finance leases4.302 %4.270 %

Cash flow and other information related to leases is included in the following table:
Three Months Ended November 30,
(in thousands)20202019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash outflows from operating leases$9,047 $8,746 
Operating cash outflows from finance leases560 336 
Financing cash outflows from finance leases3,795 3,298 
Right of use ("ROU") assets obtained in exchange for lease obligations:
Operating leases12,267 6,369 
Finance leases6,300 5,312 

Maturities of lease liabilities at November 30, 2020 are presented in the following table:
(in thousands)Operating LeasesFinance Leases
Year 1$32,040 $17,018 
Year 226,550 14,639 
Year 322,686 12,374 
Year 417,312 9,542 
Year 512,889 3,294 
Thereafter35,301 163 
Total lease payments146,778 57,030 
Less: Imputed interest20,867 4,549 
Present value of lease liabilities$125,911 $52,481 

11


NOTE 8. CREDIT ARRANGEMENTS

Long-term debt was as follows: 
(in thousands)Weighted Average Interest Rate at November 30, 2020November 30, 2020August 31, 2020
2027 Notes5.375%$300,000 $300,000 
2026 Notes5.750%350,000 350,000 
2023 Notes4.875%330,000 330,000 
Poland Term Loan1.720%39,944 40,713 
Other5.100%21,329 21,329 
Finance leases52,481 50,224 
Total debt1,093,754 1,092,266 
     Less debt issuance costs8,160 8,581 
Total amounts outstanding1,085,594 1,083,685 
Less current maturities of long-term debt20,701 18,149 
Long-term debt$1,064,893 $1,065,536 

The Company had no amounts drawn under its $350.0 million revolving credit facility (the "Revolver") at November 30, 2020 and August 31, 2020. The availability under the Revolver was reduced by outstanding stand-by letters of credit totaling $3.0 million at November 30, 2020 and August 31, 2020.

The Company has a Term Loan facility (the "Poland Term Loan") through its subsidiary, CMC Poland Sp. zo.o. (“CMCP”), which allows for a maximum aggregate principal amount of Polish zloty ("PLN") 250.0 million, or $66.6 million, at November 30, 2020. At November 30, 2020 and August 31, 2020, PLN 150.0 million, or $39.9 million, and PLN 150.0 million, or $40.7 million, respectively, was outstanding.

The Company also has credit facilities in Poland through its subsidiary CMCP. At November 30, 2020, CMCP's credit facilities totaled PLN 275.0 million, or $73.2 million. These facilities expire in March 2022. No amounts were outstanding under these facilities as of November 30, 2020 or August 31, 2020. The available balance of these credit facilities was reduced by outstanding stand-by letters of credit, guarantees, and/or other financial assurance instruments, which totaled $0.8 million at November 30, 2020 and August 31, 2020.

The Company's debt agreements require compliance with certain non-financial and financial covenants, including an interest coverage ratio and a debt to capitalization ratio. At November 30, 2020, the Company was in compliance with all covenants contained in its debt agreements.

Accounts Receivable Facilities

The Company had no advance payments outstanding under its U.S. accounts receivable facility at November 30, 2020 or August 31, 2020.

The Poland accounts receivable facility has a limit of PLN 220.0 million ($58.6 million at November 30, 2020). The Company had no advance payments outstanding under the Poland accounts receivable facility at November 30, 2020 or August 31, 2020.
NOTE 9. DERIVATIVES

The Company's global operations and product lines expose it to risks from fluctuations in metal commodity prices, foreign currency exchange rates, interest rates and natural gas, electricity and other energy prices. One objective of the Company's risk management program is to mitigate these risks using derivative instruments. The Company enters into (i) metal commodity futures and forward contracts to mitigate the risk of unanticipated changes in gross margin due to price volatility in these commodities, (ii) foreign currency forward contracts that match the expected settlements for purchases and sales denominated in foreign currencies and (iii) energy derivatives to mitigate the risk related to price volatility of electricity and natural gas.

12


At November 30, 2020, the notional values of the Company's foreign currency and commodity commitments were $257.8 million and $203.3 million, respectively. At August 31, 2020, the notional values of the Company's foreign currency and commodity contract commitments were $138.5 million and $195.8 million, respectively.

The following table provides information regarding the Company's commodity contract commitments at November 30, 2020:
CommodityLong/ShortTotal
AluminumLong1,900  MT
CopperLong714  MT
CopperShort8,686  MT
ElectricityLong2,000,000 MW(h)
_________________ 
MT = Metric Ton
MW(h) = Megawatt hour

The Company designates only those contracts which closely match the terms of the underlying transaction as hedges for accounting purposes. Certain foreign currency and commodity contracts were not designated as hedges for accounting purposes, although management believes they are essential economic hedges.

Commodity derivatives not designated as hedging instruments resulted in a loss, before income taxes, of $5.6 million and $1.3 million in the three months ended November 30, 2020 and 2019, respectively, recorded in cost of goods sold within the condensed consolidated statements of earnings. Commodity derivatives accounted for as cash flow hedging instruments resulted in a net gain of $1.2 million and $0.7 million recognized in accumulated other comprehensive income in the three months ended November 30, 2020 and 2019, respectively. See Note 10, Fair Value, for the fair value of the Company's derivative instruments recorded in the condensed consolidated balance sheets.
NOTE 10. FAIR VALUE

The Company has established a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels. These levels are determined based on the lowest level input that is significant to the fair value measurement. Levels within the hierarchy are defined within the Summary of Significant Accounting Policies footnote in our 2020 Form 10-K.

The following tables summarize information regarding the Company's financial assets and financial liabilities that were measured at fair value on a recurring basis:
  Fair Value Measurements at Reporting Date Using
(in thousands)November 30, 2020Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable  Inputs
(Level 3)
Assets:
Investment deposit accounts (1)
$394,943 $394,943 $ $ 
Commodity derivative assets (2)
291 291   
Foreign exchange derivative assets (2)
1,329  1,329  
Liabilities:
Commodity derivative liabilities (2)
19,496 5,882  13,614 
Foreign exchange derivative liabilities (2)
1,555  1,555  

13


  Fair Value Measurements at Reporting Date Using
(in thousands)August 31, 2020Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable  Inputs
(Level 3)
Assets:
Investment deposit accounts (1)
$449,824 $449,824 $ $ 
Commodity derivative assets (2)
202 202   
Foreign exchange derivative assets (2)
1,484  1,484  
Liabilities:
Commodity derivative liabilities (2)
19,000 3,993  15,007 
Foreign exchange derivative liabilities (2)
459  459  
_________________ 
(1) Investment deposit accounts are short-term in nature, and the value is determined by principal plus interest. The investment portfolio mix can change each period based on the Company's assessment of investment options.
(2) Derivative assets and liabilities classified as Level 1 are commodity futures contracts valued based on quoted market prices in the London Metal Exchange or New York Mercantile Exchange. Amounts in Level 2 are based on broker quotes in the over-the-counter market. Derivative liabilities classified as Level 3 are described below. Further discussion regarding the Company's use of derivative instruments is included in Note 9, Derivatives.

The fair value estimate of the Level 3 commodity derivative is based on an internally developed discounted cash flow model primarily utilizing unobservable inputs in which there is little or no market data. The Company forecasts future energy rates using a range of historical prices ("floating rate"). The floating rate is the only significant unobservable input used in the Company's discounted cash flow model.
November 30, 2020
Unobservable InputsLowHighAverage
Floating rate (PLN)151.66 247.56 203.96 

Below is a reconciliation of the beginning and ending balances of the Level 3 commodity derivative recognized in the condensed consolidated statements of comprehensive income. The fluctuation in energy rates over time may cause volatility in the fair value estimate and is the primary reason for the unrealized gain in other comprehensive income ("OCI") in the three months ended November 30, 2020.

(in thousands)November 30, 2020
Balance at September 1, 2020$(15,007)
Total gains, realized and unrealized
Recognized in OCI(1)
1,393 
Ending balance$(13,614)
_________________
(1) Gains recognized in OCI are included in the unrealized holding gain on the condensed consolidated statements of comprehensive income.

There were no material non-recurring fair value remeasurements during the three months ended November 30, 2020 or 2019.

The carrying values of the Company's short-term items approximate fair value.

The carrying values and estimated fair values of the Company's financial assets and liabilities that are not required to be measured at fair value on the condensed consolidated balance sheets were as follows:
14


 November 30, 2020August 31, 2020
(in thousands)Fair Value HierarchyCarrying ValueFair ValueCarrying ValueFair Value
2027 Notes (1)
Level 2$300,000 $317,835 $300,000 $319,377 
2026 Notes (1)
Level 2350,000 365,803 350,000 367,374 
2023 Notes (1)
Level 2330,000 348,813 330,000 345,335 
Poland Term Loan(2)
Level 239,944 39,944 40,713 40,713 
_________________ 
(1) The fair value of the notes was determined based on indicated market values.
(2) The Poland Term Loan contains variable interest rates, and as a result, the carrying value approximates fair value.
NOTE 11. STOCK-BASED COMPENSATION PLANS

The Company's stock-based compensation plans are described in Note 15, Stock-Based Compensation Plans, to the consolidated financial statements in the 2020 Form 10-K. In general, restricted stock units granted in 2021 vest ratably over a period of three years. Subject to the achievement of performance targets established by the Compensation Committee of CMC's Board of Directors, performance stock units granted in 2021 vest after a period of three years.

During the three months ended November 30, 2020 and 2019, the Company granted the following awards under its stock-based compensation plans:
November 30, 2020November 30, 2019
(in thousands, except per share data)Shares GrantedWeighted Average Grant Date Fair ValueShares GrantedWeighted Average Grant Date Fair Value
Equity method1,399 $20.39 1,465 $18.15 
Liability method324 N/A426 N/A

During the three months ended November 30, 2020 and 2019, the Company recorded immaterial mark-to-market adjustments on liability awards. At November 30, 2020, the Company had outstanding 715,970 equivalent shares accounted for under the liability method. The Company expects 680,171 equivalent shares to vest.

The following table summarizes total stock-based compensation expense, including fair value remeasurements, which was primarily included in selling, general and administrative expenses on the Company's condensed consolidated statements of earnings:
Three Months Ended November 30,
(in thousands)20202019
Stock-based compensation expense$9,062 $8,269 

15


NOTE 12. STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE

The calculations of basic and diluted earnings per share from continuing operations were as follows: 
Three Months Ended November 30,
(in thousands, except share data)20202019
Earnings from continuing operations$63,911 $82,755 
Basic earnings per share:
       Shares outstanding for basic earnings per share119,762,706 118,370,191 
Basic earnings per share from continuing operations$0.53 $0.70 
Diluted earnings per share:
       Shares outstanding for basic earnings per share119,762,706 118,370,191 
Effect of dilutive securities:
Stock-based incentive/purchase plans1,365,338 1,403,347 
Shares outstanding for diluted earnings per share121,128,044 119,773,538 
Diluted earnings per share from continuing operations$0.53 $0.69 

Anti-dilutive shares not included above were immaterial for all periods presented.

Restricted stock is included in the number of shares of common stock issued and outstanding, but omitted from the basic earnings per share calculation until the shares vest.
During the first quarter of 2015, CMC's Board of Directors authorized a share repurchase program under which CMC may repurchase up to $100.0 million of shares of common stock. During the three months ended November 30, 2020, CMC did not repurchase any shares of common stock. CMC had remaining authorization to repurchase $27.6 million of common stock at November 30, 2020.
NOTE 13. COMMITMENTS AND CONTINGENCIES

Legal and Environmental Matters

In the ordinary course of conducting its business, the Company becomes involved in litigation, administrative proceedings and governmental investigations, including environmental matters. See Note 19, Commitments and Contingencies, to the consolidated financial statements in the 2020 Form 10-K.

The Company has received notices from the U.S. Environmental Protection Agency ("EPA") or state agencies with similar responsibility that it is considered a potentially responsible party at several sites, none of which are owned by the Company, and may be obligated under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA") or similar state statutes to conduct remedial investigations, feasibility studies, remediation and/or removal of alleged releases of hazardous substances or to reimburse the EPA for such activities. The Company is involved in litigation or administrative proceedings with regard to several of these sites in which the Company is contesting, or at the appropriate time may contest, its liability at the sites. In addition, the Company has received information requests with regard to other sites which may be under consideration by the EPA as potential CERCLA sites. Some of these environmental matters or other proceedings may result in fines, penalties or judgments being assessed against the Company. At November 30, 2020 and August 31, 2020, the Company had $0.5 million and $0.7 million accrued for cleanup and remediation costs in connection with CERCLA sites, respectively. The estimation process is based on currently available information which is, in many cases, preliminary and incomplete. Total environmental liabilities, including CERCLA sites, were $3.2 million and $3.4 million at November 30, 2020 and August 31, 2020, respectively, of which $2.5 million and $2.7 million were classified as other long-term liabilities at November 30, 2020 and August 31, 2020, respectively. These amounts have not been discounted to their present values. Due to evolving remediation technology, changing regulations, possible third-party contributions, the inherent shortcomings of the estimation process and other factors, amounts accrued could vary significantly from amounts paid. Historically, the amounts the Company has ultimately paid for such remediation activities have not been material.

Management believes that adequate provisions have been made in the Company's condensed consolidated financial statements for the potential impact of these contingencies, and that the outcomes of the suits and proceedings described above, and other
16


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.
NOTE 14. BUSINESS SEGMENTS

The Company structures its business into the following two reportable segments: North America and Europe. See Note 1, Nature of Operations, in the 2020 Form 10-K for more information about the reportable segments, including the types of products and services from which each reportable segment derives its net sales. Corporate and Other contains earnings or losses on assets and liabilities related to the Company's Benefit Restoration Plan assets and short-term investments, expenses of the Company's corporate headquarters, interest expense related to its long-term debt and intercompany eliminations.

The following is a summary of certain financial information from continuing operations by reportable segment:
Three Months Ended November 30, 2020
(in thousands)North AmericaEuropeCorporate and OtherContinuing Operations
Net sales$1,195,013 $194,596 $2,194 $1,391,803 
Adjusted EBITDA155,634 14,470 (26,471)143,633 
Total assets at November 30, 2020*2,871,933 526,023 618,712 4,016,668 

Three Months Ended November 30, 2019
(in thousands)North AmericaEuropeCorporate and OtherContinuing Operations
Net sales$1,216,720 $165,389 $2,599 $1,384,708 
Adjusted EBITDA174,732 11,359 (26,286)159,805 
Total assets at August 31, 2020*
2,862,805 532,850 686,073 4,081,728 
_________________ 
*Total assets listed in Corporate and Other includes assets from discontinued operations.

The following table presents a reconciliation of earnings from continuing operations to adjusted EBITDA from continuing operations:
 Three Months Ended November 30,
(in thousands)20202019
Earnings from continuing operations$63,911 $82,755 
Interest expense14,259 16,578 
Income taxes21,593 27,332 
Depreciation and amortization41,799 40,941 
Asset impairments3,594 530 
Amortization of acquired unfavorable contract backlog(1,523)(8,331)
Adjusted EBITDA from continuing operations$