CHANGES IN BUSINESS

6 Months Ended

Feb. 29, 2020

NOTE 2. CHANGES IN BUSINESS

Fiscal 2020 Acquisition

On February 3, 2020, the Company's subsidiary CMC Poland Sp. z.o.o. ("CMCP") acquired P.P.U. Ecosteel Sp. z.o.o. ("Ecosteel"), a steel mesh producer located in Zawiercie, Poland. This acquisition complements CMCP's existing mesh production and increases sales to other markets in Europe. The operating results of this facility are included in the International Mill reporting segment.

Facility Closure

In October 2019, the Company closed the melting operations at its Rancho Cucamonga facility and recorded $6.3 million of expense in the first quarter of 2020 related to severance, pension curtailment and vendor agreement terminations. At February 29, 2020, the remaining liability to be paid related to these expenses was $3.8 million and was included in accrued expenses and other payables on the Company's condensed consolidated balance sheets.

Fiscal 2019 Acquisition

On November 5, 2018 (the "Acquisition Date"), the Company completed the acquisition of 33 rebar fabrication facilities in the United States ("U.S."), as well as four electric arc furnace ("EAF") mini mills located in Knoxville, Tennessee; Jacksonville, Florida; Sayreville, New Jersey and Rancho Cucamonga, California from Gerdau S.A., hereinafter collectively referred to as the "Acquired Businesses." The total cash purchase price, including working capital adjustments, was $701.2 million, and was funded through a combination of domestic cash on-hand and borrowings under a term loan (the "Term Loan").

The purchase price paid was allocated between the acquired mills and fabrication facilities. The results of operations of the Acquired Businesses are reflected in the Company’s condensed consolidated financial statements from the Acquisition Date. The purchase price was allocated among assets acquired and liabilities assumed at fair value and was finalized on November 5, 2019.

Pro Forma Supplemental Information

Supplemental information on an unaudited pro forma basis is presented below as if the acquisition of the Acquired Businesses (the "Acquisition") occurred on September 1, 2017. The pro forma financial information is presented for comparative purposes only, based on significant estimates and assumptions, which the Company believes to be reasonable, but not necessarily indicative of future results of operations or the results that would have been reported if the Acquisition had been completed on September 1, 2017. These results were not used as part of management analysis of the financial results and performance of the Company or the Acquired Businesses. These results are adjusted, where possible, for transaction and integration-related costs.


	Three Months Ended February 28,						Six Months Ended February 28,
(in thousands)	2019		2018		2019		2018
Pro forma net sales*	$	1,379,033	$	1,470,603	$	2,925,007	$	2,914,292
Pro forma net earnings (loss)**	10,260		18,786		26,081		(2,187)

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*Pro forma net sales for the three and six months ended February 28, 2018 includes estimated fair value adjustments related to amortization of unfavorable contract backlog. The impact of the amortization of unfavorable contract backlog has been removed from the pro forma net sales for the three and six months ended February 28, 2019.

** Pro forma net earnings (loss) for the three and six months ended February 28, 2018 reflects the impact of fair value adjustments related to the amortization of unfavorable contract backlog described above. Pro forma net loss for the six months ended February 28, 2018 includes estimated fair value adjustments related to inventory step-up, as well as non-recurring acquisition and integration costs of approximately $47.5 million.