CMC Statement Regarding Pacific Steel Group v. Commercial Metals Co. Litigation

Rhea-AI Summary

Commercial Metals Company (NYSE: CMC) received an unfavorable jury verdict in the Pacific Steel Group v. Commercial Metals Co. litigation. Pacific Steel Group's lawsuit alleged various restraints on trade by CMC. The trial, which began on October 21st and concluded on November 5th, 2024, resulted in a $110 million verdict in favor of Pacific Steel. This amount will be trebled as per law, plus attorneys' fees. CMC expressed disappointment with the outcome and plans to appeal the verdict, asserting the integrity of its business practices.

Positive

• None.

Negative

• Lost lawsuit resulting in $110 million verdict against CMC
• Verdict amount will be trebled (tripled) plus attorney fees, significantly increasing financial impact
• Legal setback could affect company reputation and business relationships
• Additional legal expenses expected due to planned appeal process

Insights

Legal Expert

This antitrust verdict represents a significant legal and financial setback for CMC. The $110 million base damages, when trebled under antitrust laws, will result in a potential liability of $330 million plus attorney fees. This amounts to approximately 5.3% of CMC's market capitalization, making it a material financial event.

The verdict suggests the jury found merit in Pacific Steel's allegations of anticompetitive practices, which could have broader implications beyond the immediate financial impact. While CMC plans to appeal, such processes typically take 1-2 years and success rates for overturning jury verdicts are historically low (~20-25%). During the appeal, CMC may need to post a significant bond or reserve, impacting their financial flexibility. This case could also invite scrutiny from regulators and potentially lead to additional private litigation from other market participants.

Financial Analyst

The verdict's financial implications extend beyond the immediate $330 million potential liability. For context, CMC reported $4.16 billion in total assets as of their last filing, making this judgment significant to their balance sheet. The company will likely need to increase legal reserves, potentially impacting near-term earnings and dividend capacity.

The market will be particularly focused on how CMC plans to manage this liability while maintaining its capital allocation strategy and growth investments. The steel industry operates on relatively thin margins and this unexpected liability could constrain CMC's competitive position in pricing and market expansion. Investors should monitor upcoming earnings calls for details on appeal strategy, potential settlement discussions and impact on operational flexibility.

IRVING, Texas, Nov. 5, 2024 /PRNewswire/ -- Commercial Metals Company (NYSE: CMC) today issued a statement in response to the jury verdict reached in the Pacific Steel Group v. Commercial Metals Co. (N.D. Cal.) litigation. Pacific Steel Group ("Pacific Steel") filed this lawsuit claiming, among other things, various restraints on trade by CMC.  A trial on Pacific Steel's claims began on October 21st and concluded today with a verdict in favor of Pacific Steel in the amount of $110 million, which will be trebled as a matter of law, plus attorneys' fees.  We are very disappointed by the outcome, and plan to appeal the verdict.  CMC stands by the strong integrity of its business practices and will vigorously defend its position.

About CMC
CMC is an innovative solutions provider helping build a stronger, safer, and more sustainable world. Through an extensive manufacturing network principally located in the United States and Central Europe, we offer products and technologies to meet the critical reinforcement needs of the global construction sector. CMC's solutions support construction across a wide variety of applications, including infrastructure, non-residential, residential, industrial, and energy generation and transmission.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the federal securities laws with respect to CMC's plans to appeal the verdict and defend its position. The statements in this release that are not historical statements, are forward-looking statements. These forward-looking statements can generally be identified by phrases such as we or our management "expects," "anticipates," "believes," "estimates," "future," "intends," "may," "plans to," "ought," "could," "will," "should," "likely," "appears," "projects," "forecasts," "outlook" or other similar words or phrases, as well as by discussions of strategy, plans or intentions.

The Company's forward-looking statements are based on management's expectations and beliefs as of the time this news release 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 our filings with the Securities and Exchange Commission, including, but not limited to, in Part I, Item 1A, "Risk Factors" of our annual report on Form 10-K for the fiscal year ended August 31, 2024 as well as the following: the timing and the final outcome of the litigation, including the success of any potential appellate proceedings by CMC; entry of a final judgment by the court in the litigation; 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; 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; 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.

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SOURCE Commercial Metals Company

FAQ

What was the verdict amount in the Pacific Steel Group lawsuit against CMC?

The jury verdict was $110 million in favor of Pacific Steel Group, which will be trebled (tripled) as a matter of law, plus attorneys' fees.

When did the Pacific Steel Group v. CMC trial take place?

The trial began on October 21st and concluded on November 5th, 2024.

What were the allegations against CMC in the Pacific Steel Group lawsuit?

Pacific Steel Group filed the lawsuit claiming various restraints on trade by CMC.

How did CMC respond to the Pacific Steel Group lawsuit verdict?

CMC expressed disappointment with the outcome, plans to appeal the verdict, and stands by the integrity of its business practices.