COMMERCIAL METALS Co (CMC) FY 2024 MD&A

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.

OVERVIEW

CMC is an innovative solutions provider helping build a stronger, safer and more sustainable world. Through an extensive manufacturing network principally located in the U.S. and Central Europe, the Company offers 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. Our operations are conducted through three reportable segments: North America Steel Group, Europe Steel Group and the Emerging Businesses Group. See Part I, Item 1, Business, of this Annual Report for further information regarding our business and reportable segments.

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Key Performance Indicators

When evaluating our results for the period, we compare net sales, in the aggregate and for each of our reportable segments, in the current period to net sales in the corresponding period of the prior year. Specifically, for the North America Steel Group segment and the Europe Steel Group segment we focus on changes in average selling price per ton and tons shipped compared to the prior year period for each of our vertically integrated product categories as these are the two variables that typically have the greatest impact on our net sales for these reportable segments. Of the products evaluated based on changes in average selling price per ton and tons shipped within the North America Steel Group and Europe Steel Group 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 include fabricated rebar, steel fence posts and wire mesh. The evaluations of average selling price per ton and tons shipped for downstream products exclude post-tension cable, which is not measured on a per ton basis.

Adjusted EBITDA is used by management to compare and evaluate the period-over-period underlying business operational performance of our reportable segments. Adjusted EBITDA is the sum of the Company's earnings before interest expense, income taxes, depreciation and amortization and impairment expense. Although there are many factors that can impact a segment’s adjusted EBITDA and, therefore, our overall earnings, changes in metal margins of our steel products and downstream products period-over-period in the North America Steel Group and Europe Steel Group segments are a consistent area of focus for our Company and industry. Metal margin is a metric used by management to monitor the results of our vertically integrated organization. For our steel products, metal margin is the difference between the average selling price per ton of rebar, merchant bar and other steel products and the cost of ferrous scrap per ton utilized by our steel mills to produce these products. An increase or decrease in input costs can impact profitability of these products when there is no corresponding change in selling prices. The metal margin for the North America Steel Group and Europe Steel Group segments' downstream products is the difference between the average selling price per ton of our downstream products and the scrap input costs to produce these products. The majority of the North America Steel Group and Europe Steel Group segments' downstream products selling prices per ton are fixed at the beginning of a project and these projects last one to two years on average. Because the selling price generally remains fixed over the life of a project, changes in input costs over the life of the project can significantly impact profitability.

BUSINESS CONDITIONS AND DEVELOPMENTS

Change in Reportable Segments

During the first quarter of 2024, we changed our reportable segments to reflect a change in the manner in which our business is managed. Based on changes to our organizational structure, the evolution of our solutions offerings outside of traditional steel products, the growing importance of non-steel solutions to our financial results and future outlook and how our chief operating decision maker, our President and Chief Executive Officer, reviews operating results and makes decisions about resource allocation, we now have three reportable segments that represent the primary businesses reported in our consolidated financial statements: North America Steel Group, Europe Steel Group and Emerging Businesses Group. See the section titled "Results of Operations Summary" below and Part I, Item 1, Business for further information regarding our business and reportable segments. As a result of this change in reportable segments, certain prior year amounts have been recast to conform to the current year presentation. Throughout this Form 10-K, unless otherwise indicated, amounts and activity affected by the change in reportable segments have been reclassified.

2023 Acquisitions

On September 15, 2022, we completed the acquisition of Advanced Steel Recovery, LLC ("ASR"), a supplier of recycled ferrous scrap metals located in Southern California. ASR's primary operations include processing and brokering capabilities that source material for sale into both the domestic and export markets.

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.

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.

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.

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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. 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. Following the acquisition, EDSCO was rebranded as CMC Anchoring Systems.

Operating results for ASR, Kodiak, Roane and Tendon are presented within the North America Steel Group segment. Operating results for BOSTD and CMC Anchoring Systems are presented within the Emerging Businesses Group segment. The acquired operations of ASR, Kodiak, Roane, Tendon, BOSTD and CMC Anchoring Systems are collectively referred to as the "2023 Acquisitions."

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. Through its patented foundation systems, Tensar produces ground stabilization and soil reinforcement solutions that complement our existing concrete reinforcement product lines and broaden our ability to address multiple early phases of commercial and infrastructure construction, including subgrade, foundation and structures. End customers for these products include commercial, industrial and residential site developers, mining and oil and gas companies, transportation authorities, coastal and waterway authorities and waste management companies. The acquired operations are presented within our Emerging Businesses Group segment. See Note 2, Changes in Business, in Part II, Item 8 of this Annual Report for more information about the Tensar acquisition.

Capital Expenditures

During the fourth quarter of 2023, our third micro mill was placed into service. 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 meet underlying West Coast and Pacific Northwest demand for steel products. 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. Designed to produce both rebar and merchant bar, this micro mill is the first in the world to produce merchant bar quality products through a continuous production process. Initial commercial production of rebar commenced during commissioning, prior to the startup of merchant bar production, which commenced during the second quarter of 2024. The merchant bar products produced at this facility consist of a wide variety of shapes and sizes of long steel, and, combined with rebar production, the capacity of this micro mill is approximately 40% greater than that of the other micro mills we have constructed. The micro mill was designed with the latest technology in electric arc furnace ("EAF") power supply systems, which can allow us to directly connect the EAF and the ladle furnace to renewable energy sources such as solar and wind. Additionally, this micro mill is the Company’s first micro mill to utilize Q-ONE technology on an EAF, which provides energy efficiencies and precise electrical control during production, creating a stable and consistent output.

In December 2022, we announced that our planned fourth micro mill would be located in Berkeley County, West Virginia. This new micro mill will be geographically situated to serve the Northeast, Mid-Atlantic and Mid-Western U.S. markets and will be supported by our existing network of downstream fabrication plants. Site improvements and foundation work for the micro mill are complete, large portions of supporting infrastructure have been installed and equipment installation is underway. We expect an operational start-up in late calendar 2025.

Chief Executive Officer Transition

Effective September 1, 2023, our Board appointed Peter R. Matt, our then President, as President and Chief Executive Officer, immediately following the retirement of Barbara R. Smith, our then Chief Executive Officer and Chairman of the Board. The Chief Executive Officer transition from Ms. Smith to Mr. Matt followed our formal succession planning process. Mr. Matt has served as our President since April 9, 2023 and continues to serve as a member of the Board, which he joined in June 2020. Ms. Smith was appointed Executive Chairman of the Board, effective September 1, 2023, and retired from such position and from the Board effective August 31, 2024.

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Russian Invasion of Ukraine

The Russian invasion of Ukraine did not have a direct material adverse impact on our business, financial condition or results of operations during 2024, 2023 or 2022. Our Europe Steel Group segment has not experienced an interruption in energy supply and was able to identify alternate sources for a limited number of materials previously procured through Russia. However, the Russian invasion of Ukraine has led to economic slowdowns in Europe, including significant volatility in commodity prices and credit markets, reductions in demand, supply chain interruptions and higher global inflation. 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.

See Part I, Item 1A, Risk Factors, in this Annual Report for further discussion related to the above business conditions and developments.

RESULTS OF OPERATIONS SUMMARY

2024 Compared to 2023

Net sales during 2024 decreased $873.6 million, or 10%, compared to 2023. See discussions below, labeled North America Steel Group, Europe Steel Group and Emerging Businesses Group within the Segment Operating Data section, for further information on our net sales results.

During 2024, we achieved net earnings of $485.5 million, a decrease of $374.3 million, or 44%, compared to 2023. The year-over-year change in net earnings was primarily due to compression in steel products metal margins in both our North America Steel Group and Europe Steel Group segments during 2024 driven by declining steel products average selling prices per ton, while the cost of ferrous scrap utilized per ton decreased at a lesser rate. Net earnings includes $69.4 million of government assistance recognized in the Europe Steel Group segment during 2024, compared to $13.8 million of government assistance recognized in 2023.

Selling, General and Administrative Expenses

SG&A expenses increased $21.5 million in 2024 compared to 2023. Contributing to the year-over-year increase was $10.3 million of incremental SG&A expenses attributable to the 2023 Acquisitions incurred during 2024 compared to a partial year of expenses recorded during 2023 following their respective acquisition dates. The remaining increase in SG&A expenses in 2024 compared to 2023 was primarily due to $10.2 million of increased professional services expenses, $5.9 million of increased benefit restoration plan ("BRP") expenses and $6.1 million of increased information technology expenses. These increases were partially offset by $11.2 million of decreased labor-related expenses in 2024 compared to 2023. Additionally, the results for 2023 included a $4.2 million pension plan settlement charge, with no such settlement charge in 2024. See Note 2, Changes in Business, in Part II, Item 8 of this Annual Report for more information about the 2023 Acquisitions and Note 14, Employees' Retirement Plans, in Part II, Item 8 of this Annual Report for more information on the pension plan termination activity.

Interest Expense

Interest expense increased $7.8 million in 2024 compared to 2023. Although lower average balances of long-term debt outstanding resulted in a $9.2 million decrease in interest expense during 2024 compared to 2023, this decrease was offset by $16.1 million of reduced capitalized interest during 2024 compared to 2023. The decrease in capitalized interest was attributable to the timing of micro mill construction activities, as construction of our third micro mill was nearing completion

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during 2023 and placed into service at the end of 2023, whereas construction of our fourth micro mill was in the beginning stages during most of 2024.

Income Taxes

Our effective income tax rate for 2024 was 23.6%, which was relatively consistent with our effective income tax rate of 23.4% for 2023. See Note 12, Income Tax, in Part II, Item 8 of this Annual Report for further discussion of our effective tax rate.

2023 Compared to 2022

Net sales during 2023 remained relatively flat compared to 2022. See discussions below, labeled North America Steel Group, Europe Steel Group and Emerging Businesses Group within the Segment Operating Data section, for further information on our net sales results.

During 2023, we achieved net earnings of $859.8 million, a decrease of $357.5 million, or 29%, compared to 2022. Included in net earnings during 2022 was a $273.3 million gain on the sale of the Rancho Cucamonga facilities. The remaining year-over-year change in net earnings was primarily due to compression in steel products metal margins in our Europe Steel Group segment during 2023, contrasted by significant expansion in downstream products metal margins over scrap in our North America Steel Group segment during 2023 compared to 2022. See Note 2, Changes in Business, in Part II, Item 8 of this Annual Report for more information on the sale of the Rancho Cucamonga facilities.

Selling, General and Administrative Expenses

SG&A expenses increased $98.6 million in 2023 compared to 2022. Contributing to the year-over-year increase was $60.5 million of incremental SG&A expenses from Tensar operations' commercial and engineering support incurred during 2023, compared to the expenses recorded in the period following the Tensar Acquisition Date to August 31, 2022, as well as $12.8 million of SG&A expenses from the 2023 Acquisitions, with no such expenses in 2022. The remaining increase in SG&A expenses in 2023 compared to 2022 was primarily due to an $11.1 million increase in professional services expenses, a $10.7 million increase in expenses for our BRP and a $4.2 million pension plan settlement charge, with no such settlement charge in the corresponding period. These fluctuations were partially offset by a $16.6 million decrease in labor-related expenses during 2023 compared to 2022. See Note 2, Changes in Business, in Part II, Item 8 of this Annual Report for more information about the Tensar acquisition and the 2023 Acquisitions and Note 14, Employees' Retirement Plans, in Part II, Item 8 of this Annual Report for more information on the pension plan termination activity.

Interest Expense

Interest expense decreased $10.6 million in 2023 compared to 2022, which can be attributed primarily to an increase in capitalized interest of $9.6 million in 2023 compared to 2022 due to construction of our third micro mill, as well as lower average interest rates on the long-term debt outstanding during 2023 compared to 2022.

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. See Note 12, Income Tax, in Part II, Item 8 of this Annual Report for further discussion of our effective tax rate.

SEGMENT OPERATING DATA

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 19, Segment Information, in Part II, 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 North America Steel Group and Europe Steel Group tables below is calculated using averages during each period presented.

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2024 Compared to 2023

North America Steel Group

Net sales to external customers in our North America Steel Group segment decreased $394.6 million, or 6%, in 2024 compared to 2023. Raw materials average selling price per ton increased slightly due to increases in the sales prices of both ferrous and nonferrous scrap metals, and raw materials tons shipped increased, in part, due to a full year of sales from the recycling operations acquired during 2023. See Note 2, Changes in Business, in Part II, Item 8 of this Annual Report for more information about the acquired recycling operations. However, this increase in net sales to external customers from sales of raw materials was offset by decreases in net sales to external customers of steel products and downstream products, primarily due to reductions in steel products and downstream products average selling prices per ton of 10% and 6%, respectively, in 2024 compared to 2023. For both steel products and downstream products, the reductions in selling prices were due to increased competitive pricing in our key markets. Furthermore, the downstream products average selling price per ton during 2023 reflected contracts that were awarded during periods of heightened steel commodity pricing, which has since declined.

During 2024, we achieved adjusted EBITDA of $946.4 million, a decrease of 29% compared to adjusted EBITDA of $1.3 billion in 2023. The decrease in adjusted EBITDA in 2024 compared to 2023 was caused by metal margin compression for both steel products and downstream products. The cost of ferrous scrap utilized per ton, the largest single driver of cost of goods sold for both steel products and downstream products, remained stable year-over-year. However, average selling prices decreased for both steel products and downstream products, as explained above.

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Europe Steel Group

Net sales to external customers in our Europe Steel Group segment decreased $480.2 million, or 36%, in 2024 compared to 2023. This decrease was primarily due to a 29% year-over-year reduction in steel products shipment volumes and a reduction in steel products average selling price per ton of 11% in 2024 as compared to 2023. The slowdown in demand was driven by the sustained indirect impacts of macroeconomic factors affecting the business climate in European end markets, which resulted in lower construction and industrial activity. Additionally, increased imports from neighboring countries contributed to the reduced steel products average selling price per ton in 2024 as compared to 2023. During 2024, overall, the U.S. dollar weakened compared to the Polish zloty. The effect of foreign currency translation was an increase in net sales to external customers of approximately $64.0 million for 2024, determined by using actual results for 2024 measured at the average currency rate during 2023.

Adjusted EBITDA decreased $26.0 million, or 54%, in 2024 compared to 2023, primarily driven by a contraction in steel products metal margin per ton of $74 per ton, or 21%, in 2024 compared to 2023, due to the decline in steel products average selling prices described above, which outpaced the decrease in the cost of ferrous scrap utilized per ton. Adjusted EBITDA was also negatively impacted by lower shipment volumes during 2024 compared to 2023, as described above. Offsetting the impact of the decrease in steel products metal margin per ton and lower shipment volumes, results during 2024 benefited from government assistance programs established to offset the rising costs of electricity and natural gas and the indirect costs of rising carbon emission rights included in energy costs. The government assistance recognized under the programs during 2024 was $69.4 million, compared to $13.8 million of government assistance recognized in 2023. The effect of foreign currency translation was an increase in adjusted EBITDA of approximately $3.8 million during 2024.

Emerging Businesses Group

Net sales to external customers in our Emerging Businesses Group segment remained relatively flat in 2024 compared to 2023. The acquired CMC Anchoring Systems operations provided $38.5 million of incremental net sales to external customers during 2024 compared to the net sales to external customers in 2023 following the acquisition date. See Note 2, Changes in Business, in Part II, Item 8 of this Annual Report for more information on the acquisition of CMC Anchoring Systems. CMC Construction Services' operations experienced a decline in net sales to external customers of $42.6 million, or 13%, in 2024 compared to 2023, due to reduced selling prices across many product lines.

Adjusted EBITDA decreased $9.5 million, or 7%, in 2024 compared to 2023. The year-over-year decrease in adjusted EBITDA was primarily a result of the decline in net sales to external customers for CMC Construction Services caused by reduced

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selling prices as described above, which impacted fixed cost leverage, and more than offset the positive contribution from the acquired CMC Anchoring Systems operations.

Corporate and Other

Corporate and Other adjusted EBITDA loss decreased by $3.4 million in 2024 compared to 2023. Contributing to the decrease in adjusted EBITDA loss during 2024 compared to 2023 was $13.5 million of increased interest income on short-term investments and $7.7 million of decreased labor-related expenses. Additionally, in 2023 we recognized a $4.2 million pension plan settlement charge, with no such settlement charge in 2024. In contrast to these reductions to adjusted EBITDA loss, we incurred $12.4 million of increased professional services expenses and recognized $6.7 million of other revenue from our New Markets Tax Credit (“NMTC”) transactions in 2024, compared to $17.7 million of other revenue from NMTC transactions in 2023. See Note 9, New Markets Tax Credit Transactions, in Part II, Item 8 of this Annual Report, for more information on the NMTC transactions and Note 14, Employees' Retirement Plans, in Part II, Item 8 of this Annual Report, for more information on the pension plan termination activity.

2023 Compared to 2022

North America Steel Group

Net sales to external customers in our North America Steel Group segment remained relatively flat in 2023 compared to 2022. While downstream products average selling prices experienced a significant increase of $207 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. 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. Additionally, the 2023 Acquisitions that are reported in the North America Steel Group segment contributed $152.1 million to net sales to external customers in 2023.

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During 2023, we achieved adjusted EBITDA of $1.3 billion compared to $1.5 billion in 2022. Included in adjusted EBITDA during 2022 was a $273.3 million gain on the sale of the Rancho Cucamonga facilities. The remaining year-over-year change was an increase in adjusted EBITDA due to significant expansion in downstream products margin over scrap per ton, driven by a combination of the high downstream products average selling prices mentioned above and sharp decreases in the cost of ferrous scrap utilized per ton. Additionally, the 2023 Acquisitions that are reported in the North America Steel Group segment contributed $13.2 million to adjusted EBITDA in 2023. 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.

Europe Steel Group

Net sales to external customers in our Europe Steel Group segment decreased $263.5 million, or 17%, in 2023 compared to 2022. This decrease was primarily due to a $147 per ton, or 16%, year-over-year decrease in steel products average selling price per ton, while volumes remained relatively flat year-over-year, as well as unfavorable impacts of foreign currency translation described below. The decrease in steel products average selling price per ton was driven by the indirect impacts of macroeconomic factors affecting the overall business climate in Europe, such as inflation and rising interest rates, which resulted in consumer uncertainties and delayed construction starts across our European end markets near the end of 2023. During 2023, overall, the U.S. dollar strengthened compared to the Polish zloty. The effect of foreign currency translation was a decrease in net sales to external customers of approximately $75.7 million during 2024, determined by using actual results for 2023 measured at the average currency rate during 2022.

Adjusted EBITDA decreased $296.2 million, or 86%, in 2023 compared to 2022, primarily driven by a contraction in steel products metal margin per ton, increased energy costs used in production and unfavorable impacts of foreign currency translation. Steel products metal margin per ton decreased $79 per ton, or 18%, in 2023 compared to 2022, due to the decline in steel products average selling prices per ton described above, which outpaced the decrease in cost of ferrous scrap utilized per ton. In addition to the change in steel products metal margin per ton, our Europe Steel Group segment continued to face an environment of heightened energy costs. The cost of energy increased $51 per ton during 2023 compared to 2022, net of the benefit from our electricity commodity derivative. The electricity commodidty derivative resulted in an $11.8 million realized gain in 2023, recorded as a reduction to cost of goods sold, compared to a $21.7 million realized gain in 2022. See Note 10, Derivatives, in Part II, Item 8 of this Annual Report for further information on the electricity commodity derivative. The effect of foreign currency translation was a decrease in adjusted EBITDA of approximately $18.2 million during 2024.

Emerging Businesses Group

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Net sales to external customers in our Emerging Businesses Group segment increased $196.2 million in 2023 compared to 2022. The acquired Tensar operations provided $159.3 million of incremental net sales to external customers during 2023 compared to the net sales to external customers in 2022 following the Tensar Acquisition Date, and CMC Anchoring Systems' operations contributed $7.6 million of net sales to external customers following their acquisition during 2023. See Note 2, Changes in Business, in Part II, Item 8, of this Annual Report for more information on the acquisitions of Tensar and CMC Anchoring Systems. The remaining increase in net sales to external customers included a $17.0 million increase from CMC Impact Metals in 2023 compared to 2022, due to favorable market conditions that led to both increased shipments and selling prices.

Adjusted EBITDA increased $66.4 million in 2023 compared to 2022. The acquired Tensar operations provided $44.9 million of incremental adjusted EBITDA during 2023 compared to the adjusted EBITDA in 2022 following the Tensar Acquisition Date. Additionally, CMC Anchoring Systems' operations contributed to the year-over-year changes by providing $1.1 million of adjusted EBITDA during 2023, with no such activity in the corresponding period. The remaining growth in adjusted EBITDA in 2023 compared to 2022 was experienced across all product offerings in the Emerging Businesses Group segment, including CMC Impact Metals, which provided an adjusted EBITDA increase of $7.5 million, or 47%, during 2023 compared to 2022.

Corporate and Other

Corporate and Other adjusted EBITDA loss decreased by $22.9 million in 2023 compared to 2022. Contributing to the year-over-year decrease in adjusted EBITDA loss was $18.9 million of increased interest income on short-term investments, compared to 2022, $17.7 million in other revenue from our NMTC transactions, with no such activity in 2022, and $16.1 million in debt extinguishment costs incurred during 2022, compared to immaterial activity in 2023. In contrast to these reductions to adjusted EBITDA loss, during 2023 compared to 2022 we incurred $12.1 million of increased labor-related expenses, $10.6 million of increased professional services expenses and $3.0 million of increased information technology expenses. Additionally, in 2023 we recognized a $4.2 million pension plan settlement charge, with no such settlement charge in 2022. See Note 9, New Markets Tax Credit Transactions, in Part II, Item 8 of this Annual Report, for more information on the NMTC transactions and Note 14, Employees' Retirement Plans, in Part II, Item 8 of this Annual Report, for more information on the pension plan termination activity.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Liquidity and Capital Resources

Our cash flows from operating activities are our principal sources of liquidity and result primarily from sales of products offered by the vertically integrated operations in the North America Steel Group segment and the Europe Steel Group segment, products offered by our Emerging Businesses Group segment and related materials and services, as described in Part I, Item 1, Business, of this Annual Report. Historically, our U.S. operations have generated the majority of our cash. At August 31, 2024, cash and cash equivalents of $30.9 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. 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. 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 13% of total receivables at August 31, 2024.

The table below reflects our sources, facilities and availability of liquidity as of August 31, 2024. See Note 8, Credit Arrangements, in Part II, Item 8 of this Annual Report for additional information.

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(1) We believe we have access to additional financing and refinancing, if needed, although we can make no assurances as to the form or terms of such financing.

We continually review our capital resources to determine whether we can meet our short and long-term goals. For at least the next twelve months, 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, invest in the development of our fourth micro mill, pay dividends and opportunistically repurchase shares. Additionally, we expect our long-term liquidity position will be sufficient to meet our long-term liquidity needs with cash flows from operations and financing arrangements. However, in the event of changes in business conditions or other developments, including a sustained market deterioration, unanticipated regulatory developments, significant acquisitions, competitive pressures, or to the extent our liquidity needs prove to be greater than expected or cash generated from operations is less than anticipated, we may need additional liquidity. To the extent we elect to finance our long-term liquidity needs, we believe that the potential financing capital available to us in the future will be sufficient.

We aim to execute a capital allocation strategy that prioritizes both value-accretive growth and competitive cash returns to stockholders. We estimate that our 2025 capital spending will range from $630 million to $680 million. We regularly assess our capital spending based on current and expected results and the amount is subject to change.

In January 2024, our Board authorized an increase of $500.0 million to the existing share repurchase program. During 2024, 2023 and 2022, we repurchased $182.9 million, $101.4 million and $161.9 million, respectively, of shares of CMC common stock. We had remaining authorization to repurchase $403.8 million of shares of CMC common stock at August 31, 2024. See Note 15, Capital Stock, in Part II, Item 8, of this Annual Report for more information on the share repurchase program.

In March 2024, our Board authorized an increase of $0.02 to our quarterly cash dividend, resulting in a $0.18 per share cash dividend paid during the third and fourth quarters of 2024, compared to a $0.16 per share quarterly cash dividend paid during the first and second quarters of 2024 and during 2023. On October 15, 2024, our Board declared CMC's 240th quarterly cash dividend. The dividend was declared at the rate of $0.18 per share of CMC common stock and is payable on November 14, 2024 to stockholders of record as of the close of business on October 31, 2024. During 2024, 2023 and 2022 we paid $78.9 million, $74.9 million and $67.7 million, respectively, of cash dividends to our stockholders.

Our credit arrangements require compliance with certain non-financial and financial covenants, including an interest coverage ratio and a debt to capitalization ratio. At August 31, 2024, we believe we were in compliance with all covenants contained in our credit arrangements.

As of August 31, 2024 and 2023, 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.

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2024 Compared to 2023

Operating Activities

Net cash flows from operating activities were $899.7 million and $1.3 billion in 2024 and 2023, respectively. Contributing to the year-over-year change was a $374.3 million decrease in net earnings and a $55.7 million decrease in cash from operating assets and liabilities. In general, the fluctuations in cash flows from accounts receivable and inventory were largely driven by continued decreases in the pricing and scrap cost environment during 2024 compared to 2023 as described in the Segment Operating Data section above. Partially offsetting the decreases in cash flows from accounts receivable and inventory was a reduction in cash flows used by accounts payable, accrued expenses and other payables in 2024 compared to 2023. While both periods were affected by declining inventory values and reductions in accrued labor-related expenses, the fluctuations in accounts payable, accrued expenses and other payables were greater in 2023 compared to 2024. Additional changes include a $67.2 million decrease in deferred income taxes and other long-term taxes, partially offset by $61.5 million of additional depreciation and amortization expense. The additional depreciation and amortization expense in 2024 compared to 2023 was largely attributable to placing our third micro mill into service during the fourth quarter of 2023. Lastly, we recorded $6.7 million of non-cash other revenue from the settlement of NMTC transactions during 2024, compared to $17.7 million in 2023. See Note 12, Income Tax, in Part II, Item 8 of this Annual Report for more information on the change in deferred income taxes and Note 9, New Markets Tax Credit Transactions, in Part II, Item 8 of this Annual Report for more information on the NMTC transactions.

Investing Activities

Net cash flows used by investing activities were $323.0 million and $835.2 million in 2024 and 2023, respectively. During 2023, cash flows used by investing activities included $234.7 million of cash used for acquisitions, with no such acquisitions during 2024. Additionally, capital expenditures decreased year-over-year by $282.4 million. The decrease in capital expenditures was largely driven by the timing of micro mill construction, which resulted in greater cash outflows as we neared the completion of our third micro mill during 2023, compared to the expenditures in the early days of construction of our fourth micro mill during 2024. See Note 2, Changes in Business, in Part II, Item 8 of this Annual Report, for more information about our acquisitions completed in 2023.

Financing Activities

Net cash flows used by financing activities were $313.8 million and $599.5 million in 2024 and 2023, respectively. The decrease in net cash flows used by financing activities during 2024 compared to 2023 included a $353.4 million decrease in repayments of long-term debt and a $10.9 million decrease in net repayments under our Polish accounts receivable facility, offset, in part, by an $81.5 million increase in treasury stock acquired under the share repurchase program. See Note 8, Credit Arrangements, in Part II, Item 8 of this Annual Report for more information regarding our credit arrangements and accounts receivable facility and Note 15, Capital Stock, in Part II, Item 8 of this Annual Report for more information on the share repurchase program.

2023 Compared to 2022

Our discussion and analysis of cash flows due to and from operating, investing and financing activities during 2023 as compared to 2022 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, 2023, which was filed with the SEC on October 12, 2023. The change in reportable segments during the first quarter of 2024 did not alter the discussion previously provided.

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. 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. Interest payable on our long-term debt was $43.4 million due in the twelve months following August 31, 2024 and $343.4 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 $5.5 million was due in the twelve months following August 31, 2024 and $6.9 million is due thereafter.

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As of August 31, 2024, our undiscounted purchase obligations were approximately $720 million due in the next twelve months and $340 million due thereafter under purchase orders and "take or pay" arrangements. These purchase obligations include all enforceable, legally binding agreements to purchase goods or services that specify all significant terms, regardless of the duration of the agreement, and exclude agreements with variable terms for which we are unable to estimate the minimum amounts. 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.

Of the purchase obligations due within the twelve months following August 31, 2024, approximately 23% were for consumable production inputs, such as alloys, 21% were for the construction of our fourth micro mill, 19% were for commodities and 14% were for capital expenditures in connection with normal business operations. Of the purchase obligations due thereafter, 69% were for commodities and 9% 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 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. 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.

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, 2024, we had committed $44.8 million under these arrangements, of which $0.9 million reduced availability under the Revolver (as defined in Note 8, Credit Arrangements, in Part II, Item 8 of this Annual Report).

CONTINGENCIES

In the ordinary course of conducting our business, we become involved in litigation, administrative proceedings and governmental investigations, including environmental matters. We may incur settlements, fines, penalties or judgments because of some of these matters. Liabilities and costs associated with litigation-related loss contingencies require estimates and judgments based on our knowledge of the facts and circumstances surrounding each matter and the advice of our legal counsel. We record liabilities for litigation-related losses when a loss is probable and we can reasonably estimate the amount of the loss. We evaluate the measurement of recorded liabilities each reporting period based on the current facts and circumstances specific to each matter. The ultimate losses incurred upon final resolution of litigation-related loss contingencies may differ materially from the estimated liability recorded at a particular balance sheet date. Changes in estimates are recorded in earnings in the period in which such changes occur. See Note 17, Commitments and Contingencies, in Part II, Item 8 of this Annual Report for more information on pending litigation and other matters.

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. We anticipate that compliance with these laws and regulations will involve continuing capital expenditures and operating costs.

Metals recycling was our original business, and it has been one of our core businesses for over a century. In the present era of conservation of natural resources and ecological concerns, we are committed to sound ecological and business conduct. Certain governmental regulations regarding environmental concerns, however well-intentioned, may expose us and our industry to potentially significant risks. We believe that recycled materials are commodities that are diverted by recyclers, such as us, from the solid waste streams because of their inherent value and thus should be treated like products rather than wastes. They are identified, purchased, sorted, processed and sold by us in accordance with carefully established industry specifications.

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We incurred environmental expenses of approximately $54.9 million, $49.3 million and $44.2 million for 2024, 2023 and 2022, 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. In addition, during 2024, we spent approximately $5.0 million in capital expenditures related to costs directly associated with environmental compliance. Our accrued environmental liabilities were $3.4 million and $4.5 million as of August 31, 2024 and 2023, respectively, of which $1.9 million and $2.0 million were classified as other noncurrent liabilities within the Company's consolidated balance sheets as of August 31, 2024 and 2023, respectively.

Solid and Hazardous Waste

We generate wastes, including hazardous wastes, that are subject to the Federal Resource Conservation and Recovery Act and comparable state and local statutes where we operate. These statutes, regulations and laws may limit our disposal options with respect to certain wastes.

We currently own or lease, and in the past we have owned or leased, properties for use in our operations. Although we have used operating and disposal practices that were industry standard at the time, wastes may have been disposed of or released on or under the properties or on or under locations where such wastes have been taken for disposal in a manner that is now understood to pose a contamination threat. We are currently involved in the investigation and remediation of several such properties, and we have been named as a PRP by governmental entities at a number of contaminated sites.

State and federal laws applicable to wastes and contaminated properties have gradually become more strict over time. There is no guarantee that the EPA or individual states will not adopt more stringent requirements for the handling of, or make changes to the exemptions upon which we rely, for the wastes that we generate. Similarly, some materials which are not currently classified as waste may be deemed solid or hazardous waste in the future. Under new laws, we could be required to remediate properties impacted by previously disposed wastes. Any such change could result in an increase in our costs to manage and dispose of waste which could have a material adverse effect on our business, results of our operations and financial condition.

Superfund

The EPA, or an equivalent state agency, has notified us that we are considered a PRP at several sites, none of which involve real estate we ever owned or upon which we have ever conducted operations. We may be obligated under CERCLA, or similar state statutes, to conduct remedial investigation, feasibility studies, remediation and/or removal of alleged releases of hazardous substances or to reimburse the EPA or third parties for such activities and pay costs for associated damages to natural resources. We are involved in litigation or administrative proceedings with regard to several of these sites in which we are contesting, or at the appropriate time may contest, our liability. In addition, we have received information requests with regard to other sites which may be under consideration by the EPA as potential CERCLA sites. Because of various factors, including the ambiguity of the regulations, the difficulty of identifying the responsible parties for any particular site, the complexity of determining the relative liability among them, the uncertainty as to the most desirable remediation techniques and the amount of damages and cleanup costs, and the extended time periods over which such costs may be incurred, we cannot reasonably estimate our ultimate costs of compliance with CERCLA. Based on currently available information, which is in many cases preliminary and incomplete, we had immaterial amounts accrued as of both August 31, 2024 and 2023, 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 2024, 2023 and 2022 were not material. Historically, the amounts that we have ultimately paid for such remediation activities have not been material.

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.

Clean Water Regulation

The Clean Water Act ("CWA") imposes restrictions and strict controls regarding the discharge of wastes into waters of the U.S., a term broadly defined, or into publicly owned treatment works. These controls have become more stringent over time, and it is probable that additional restrictions will be imposed in the future. Permits must generally be obtained to discharge pollutants into federal waters or into publicly owned treatment works and comparable permits may be required at the state level. The CWA and many state statutes provide for civil, criminal and administrative penalties for unauthorized discharges of pollutants. 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.

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Clean Air Act

Our operations are subject to regulations at the federal, state and local level for the control of emissions from sources of air pollution. 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. The EPA has been implementing its stationary emission control program through expanded enforcement of the New Source Review Program. Under this program, new or modified sources may be required to construct emission sources using what is referred to as the Best Available Control Technology, or in any areas that are not meeting NAAQS, using methods that satisfy requirements for the Lowest Achievable Emission Rate. 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. 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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preceding discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent liabilities. We evaluate the appropriateness of these estimates and assumptions, including those related to revenue recognition, income taxes, inventory cost, acquisitions, goodwill and other intangible assets, long-lived assets, derivative financial instruments and contingencies, on an ongoing basis. Estimates and assumptions are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Accordingly, actual results in future periods could differ materially from these estimates. 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. Revenue from contracts where the Company does not provide installation services is recognized over time using an output method based on tons shipped compared to total estimated tons. Significant judgment is required to evaluate total estimated costs used in the input method and total estimated tons in the output method. If total estimated costs on any contract are greater than the net contract revenues, the Company recognizes the entire estimated loss in the period the loss becomes known. The cumulative effect of revisions to estimates related to net contract revenues, costs to complete or total planned quantity is recorded in the period in which such revisions are identified. The Company does not exercise significant judgment in determining the transaction price. See Note 4, Revenue Recognition, in Part II, Item 8 of this Annual Report for further details.

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. 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, 2024 and 2023, we had valuation allowances of $256.8 million and $280.5 million, respectively, against our deferred tax assets. Of these amounts, $10.0 million and $13.3 million at August 31, 2024 and 2023, 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.

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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. Any adjustments required to reduce the carrying value of inventory to net realizable value are recorded as a charge to cost of goods sold within the consolidated statements of earnings. In fiscal 2024, we recorded $5.1 million of inventory write-downs within our Europe Steel Group segment resulting from changes in future demand and market conditions impacting the vertically integrated operations in Poland. A hypothetical 10% decrease to the estimated selling prices used in the calculation of net realizable value of inventory within these operations in Poland would have resulted in a $3.9 million increase to the inventory write-downs recorded as of August 31, 2024.

Acquisitions

The Company accounts for business combinations under the acquisition method of accounting, which requires assets acquired and liabilities assumed to be recorded at their estimated fair value at the date of acquisition. The fair value is estimated by the Company using valuation techniques and Level 3 inputs, including expected future cash flows and discount rates. 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, Changes in Business, in Part II, Item 8 of this Annual Report for more information about the Company's acquisitions.

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"), and between annual tests whenever events or circumstances indicate that the carrying value of a reporting unit, including goodwill, or of an indefinite-lived intangible asset exceeds its fair value. 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. The qualitative evaluation is an assessment of multiple factors, including the current operating environment, historical and future financial performance and industry and market considerations. The Company may elect to bypass this qualitative assessment for some or all of its reporting units or other indefinite-lived intangible assets and perform a quantitative test, based on management's judgment. If the Company chooses to bypass the qualitative assessment, it performs a quantitative test by comparing the fair value of the reporting units or indefinite-lived intangible assets to their respective carrying amounts and records an impairment charge if the carrying amount exceeds the fair value; however, the loss recognized, if any, will not exceed the total amount of the intangible asset or the goodwill allocated to a reporting unit.

When assessing the recoverability of goodwill using a quantitative approach we use an income and a market approach to calculate the fair value of the reporting unit. 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. The market approach estimates fair value based on market multiples of earnings derived from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit. The estimates used during a quantitative approach to test goodwill could be materially impacted by adverse changes in market conditions.

For 2024 and 2023, the annual goodwill impairment analyses did not result in impairment charges. As of the 2024 annual impairment test date, the Company had goodwill of $383.9 million related to three reporting units within the North America Steel Group segment, one reporting unit within the Europe Steel Group segment and four reporting units within the Emerging Businesses Group segment. Six reporting units, which, as of the 2024 annual impairment test date, comprised $5.0 million of goodwill within the North America Steel Group segment, $4.1 million of goodwill within the Europe Steel Group segment and $262.4 million of goodwill within the Emerging Businesses Group segment, were assessed for impairment using a qualitative approach. Management determined it was more likely than not that the fair values of the reporting units which were assessed using a qualitative approach exceeded their respective carrying values.

The remaining two reporting units, both within the North America Steel Group segment, were tested for impairment using a quantitative approach. The fair values of these two reporting units consisting of $71.7 million and $40.7 million of goodwill as of the 2024 annual impairment test date exceeded their carrying values by greater than 30%. The Company believes the fair values of the reporting units tested using a quantitative approach are substantially in excess of their carrying values. An increase

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or decrease of 2% to the discount rate or terminal growth rate used in the quantitative impairment tests for these reporting units would not result in impairment charges. The difference in the value of goodwill between the 2024 annual impairment test date and August 31, 2024 was due to the foreign currency translation adjustments.

As of the 2024 annual impairment test date, the Company had $57.3 million of other indefinite-lived intangible assets within the Emerging Businesses Group segment, of which $54.1 million were tested for impairment using a quantitative approach. To perform the quantitative impairment tests, the Company used an income approach to calculate the fair value of each intangible asset using a relief from royalty method. Significant inputs to measure the fair value of the indefinite-lived intangible assets included projected revenue growth rates, royalty rates and discount rates. The fair values of the indefinite-lived intangible assets exceeded their carrying values in excess of 30%. The difference in the value of indefinite-lived intangible assets between the 2024 annual impairment test date and August 31, 2024 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.

Based on the results of impairment tests performed in 2024, 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.

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. Events or circumstances that could trigger an impairment review of a long-lived asset or asset group include, but are not limited to: (i) a significant decrease in the market price of the asset, (ii) a significant adverse change in the extent or manner that the asset is used or in its physical condition, (iii) a significant adverse change in legal factors or in the business climate that could affect the value of the asset, (iv) an accumulation of costs significantly in excess of original expectation for the acquisition or construction of the asset, (v) a current period operating or cash flow loss combined with a history of operating or cash flow losses or a forecast of continuing losses associated with the use of the asset and (vi) a more-likely-than-not expectation that the asset will be sold or disposed of significantly before the end of its previously estimated useful life. If an impairment exists, the net carrying values are reduced to fair values. We estimate the fair values of these long-lived assets by performing a discounted future cash flow analysis for the remaining useful life of the asset, or the remaining useful life of the primary asset in the case of an asset group. An individual asset within an asset group is not impaired below its estimated fair value.

Our operations are capital intensive. The estimates of undiscounted future cash flows used during an impairment review of a long-lived asset or asset group require judgments and assumptions of future cash flows that are expected to arise as a direct result of the use and eventual disposition of the asset or asset group. 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 2024, there were no events or circumstances that triggered an impairment review.

Derivative Financial Instruments

Our global operations and product lines expose us to risks from fluctuations in metal commodity prices, foreign currency exchange rates, interest rates and natural gas, electricity and other energy prices. To limit the impact of these exposures, we enter into derivative instruments. We do not enter into derivative financial instruments for speculative purposes. 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 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. The company determined the Level 3 fair value inputs as provided for under ASC 820 utilizing information obtained from relevant published indexes and external sources along with management’s own assumptions. Fluctuations in the information used to forecast future energy rates may cause volatility in the fair value estimate and in the unrealized gains and losses in other comprehensive income. See Note 11, Fair Value, in Part II, Item 8 of this Annual Report for more information on the Level 3 commodity derivatives.

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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. 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. The amounts we accrue could vary substantially from amounts we pay due to several factors including the following: evolving remediation technology, changing regulations, possible third-party contributions, the inherent uncertainties of the estimation process and the uncertainties involved in litigation. We believe that we have adequately provided for these contingencies as needed in our consolidated financial statements. See Note 17, Commitments and Contingencies, in Part II, Item 8 of this Annual Report for more information on pending litigation and other matters.

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.

FORWARD-LOOKING STATEMENTS

This Annual Report contains "forward-looking statements" within the meaning of the federal securities laws. 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 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, growth rates in certain reportable segments, product margins within our Emerging Businesses Group, share repurchases, legal proceedings, construction activity, international trade, the impact of geopolitical conditions, 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. These forward-looking statements can generally be identified by phrases such as we or our management "expects," "anticipates," "believes," "estimates," "future," "intends," "may," "plans to," "ought," "could," "will," "should," "likely," "appears," "projects," "forecasts," "outlook" or other similar words or phrases, as well as by discussions of strategy, plans or intentions.

Our forward-looking statements are based on management's expectations and beliefs as of the time this Annual Report is filed with the SEC or, with respect to any document incorporated by reference, as of the time such document was prepared. Although we believe that our expectations are reasonable, we can give no assurance that these expectations will prove to have been correct, and actual results may vary materially. Except as required by law, we undertake no obligation to update, amend or clarify any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or any other changes. Important factors that could cause actual results to differ materially from our expectations include those described in Part I, Item 1A, Risk Factors 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:

•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 downstream contracts within our vertically integrated steel operations 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 geopolitical conditions, including political turmoil and volatility, regional conflicts, terrorism and war on the global economy, inflation, energy supplies and raw materials;

•increased attention to environmental, social and governance ("ESG") matters, including any targets or other ESG, environmental justice or regulatory initiatives;

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•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;

•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;

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•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.

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. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other important factors that could cause actual results, performance or our achievements, or industry results, to differ materially from historical results, any future results, or performance or achievements expressed or implied by such forward-looking statements. Accordingly, readers of this Annual Report are cautioned not to place undue reliance on any forward-looking statements.