Commercial Metals Company Reports First Quarter Earnings Per Share Of $0.39 And Announces Quarterly Dividend Of $0.12 Per Share

IRVING, Texas, Jan. 7, 2014 /PRNewswire/ -- Commercial Metals Company (NYSE: CMC) today announced financial results for its first quarter ended November 30, 2013.  Net earnings for the first quarter were $45.9 million, or $0.39 per diluted share, on net sales of $1.7 billion.  This compares to net earnings of $49.7 million, or $0.42 per diluted share, on net sales of $1.7 billion for the three months ended November 30, 2012. 

Results for the first quarter of fiscal 2014 included an after-tax gain of $15.5 million ($0.13 per diluted share) associated with the sale of the Company's wholly owned copper tube manufacturing operation, Howell Metal Company ("Howell").  Results for the first quarter of fiscal 2013 included an after-tax gain of $17.0 million ($0.14 per diluted share) associated with the sale of the Company's 11% ownership investment in Trinecke Zelezarny, a.s., a Czech Republic joint-stock company. Net earnings for this year's first quarter included after-tax LIFO expense of $2.8 million ($0.02 per diluted share), compared with after-tax LIFO income of $15.2 million ($0.13 per diluted share) for the first quarter of fiscal 2013, an unfavorable change of $18.0 million ($0.15 per diluted share).  Adjusted operating profit was $90.0 million for the first quarter of fiscal 2014, compared with adjusted operating profit of $90.6 million for the prior year's first quarter and $37.1 million for the sequential quarter.  Adjusted EBITDA was $124.3 million for the first quarter of fiscal 2014, compared with adjusted EBITDA of $126.2 million for the prior year's first quarter and $84.5 million for the sequential quarter.

The Company's financial position at November 30, 2013 remained strong with cash and cash equivalents of $515.5 million and total liquidity of $1.2 billion, compared with cash and cash equivalents of $378.8 million and total liquidity of $1.1 billion at August 31, 2013.

Joe Alvarado, Chairman of the Board, President, and CEO, commented, "Our results for the first quarter of $0.39 per diluted share are a significant improvement over the fourth quarter ended August 31, 2013 of $0.03 per diluted share.  In addition, all five of our reporting segments were profitable and we continue to see improvement in the results of our International Mill segment.  The sale of Howell Metal Company demonstrates our continued focus on core competencies and strengthens our balance sheet."

On January 6, 2014, the board of directors of CMC declared a quarterly dividend of $0.12 per share for shareholders of record on January 21, 2014.  The dividend will be paid on February 4, 2014.

First Quarter Fiscal 2014 versus First Quarter Fiscal 2013
Our Americas Recycling segment recorded adjusted operating profit of $0.8 million for the first quarter of this fiscal year, compared with adjusted operating profit of $4.5 million in the prior year's first quarter.  This segment's results were impacted by a $4.9 million unfavorable change in pre-tax LIFO, from LIFO income of $2.4 million in the first quarter of fiscal 2013 to LIFO expense of $2.5 million in the first quarter of fiscal 2014. Although ferrous selling prices increased 1% to $326 per ton during the first quarter of fiscal 2014, metal margins declined 7% and nonferrous selling prices and metal margins declined in the current quarter compared to the same quarter in fiscal 2013.  Lower shipments and metal margins in the first quarter of fiscal 2014 were offset by a gain on sale of real estate and facility relocation reimbursements.  Furthermore, on a sequential quarter basis, for both ferrous and nonferrous shipments, selling prices and metal margins improved.

Our Americas Mills segment recorded adjusted operating profit of $65.8 million for this year's first quarter, a significant improvement over the prior year's first quarter adjusted operating profit of $51.6 million.  Shipments of this segment's higher margin products, such as merchant and rebar, increased, while shipments of lower margin billets declined when compared to the first quarter of fiscal 2013. Furthermore, in the first quarter of fiscal 2013, we incurred approximately $5.5 million of expenses associated with an outage at our South Carolina melt shop for the successful installation of a new electric arc furnace and related equipment.

Our Americas Fabrication segment recorded adjusted operating profit of $2.2 million for this year's first quarter, compared with adjusted operating profit of $10.2 million for the prior year's first quarter.  The decline in profitability is due to a $9.0 million unfavorable change in pre-tax LIFO, from LIFO income of $7.2 million in the first quarter of fiscal 2013 to LIFO expense in the first quarter of fiscal 2014 of $1.8 million.  Compared to the same quarter in the prior year, this segment noted improvements in its key commercial and operating metrics, including tons bid, tons booked and tons shipped as well as a slight increase in the backlog.

Our International Mill segment recorded adjusted operating profit of $15.3 million for this year's first quarter, compared with adjusted operating profit of $0.9 million for the prior year's first quarter.   Volumes increased 4% and metal margin increased nearly 12% for the quarter ended November 30, 2013 when compared to the same period a year ago.  A modest improvement in the Polish and surrounding markets as well as the shift to higher margin merchant products contributed to the improved operating results.  Volumes for this segment's merchant products increased by approximately forty-two thousand tons when compared to the prior year's first quarter.

Our International Marketing and Distribution segment recorded adjusted operating profit of $0.5 million for this year's first quarter, compared with adjusted operating profit of $40.2 million for the prior year's first quarter.  The decline in adjusted operating profit over the first quarter of fiscal 2013 is the result of a $10.7 million unfavorable change in pre-tax LIFO, from LIFO income of $8.8 million in the first quarter of fiscal 2013 to LIFO expense of $1.9 million for the first quarter of fiscal 2014.  Furthermore, results for the first quarter of fiscal 2013 included a pre-tax gain of $26.1 million associated with the sale of the Company's 11% ownership investment in Trinecke Zelezarny, a.s., a Czech Republic joint-stock company.  Within this segment, our U.S.-based trading divisions posted solid results, offset by weakness in our European and Australian trading and distribution groups. 

Outlook
Alvarado concluded, "We anticipate our second fiscal quarter to be seasonally slower as a result of holiday slowdowns and winter weather conditions, which reduce construction activities.  However, many of the economic indicators we highlighted in our prior earnings release for the fiscal fourth quarter of 2013 remain encouraging.  The Architecture Billings Index (ABI) in general is strong despite a dip to 49.8 for November 2013.  Likewise, month over month U.S. GDP figures were revised upward for the third calendar quarter and total U.S. construction spending increased 0.8% in October 2013, driven mostly by non-residential construction.  Economies in Australia and Europe showed modest improvements during the first quarter of fiscal 2014, but many projects have not yet translated to higher steel shipments.  Similar to prior years, we will take advantage of the expected slower business activity during our second fiscal quarter to take planned outages for maintenance and to upgrade equipment." 

Conference Call
CMC invites you to listen to a live broadcast of its first quarter of fiscal 2014 conference call today, Tuesday, January 7, 2014, at 11:00 a.m. ETJoe Alvarado, Chairman of the Board, President and CEO, and Barbara Smith, Senior Vice President and CFO, will host the call.  The call is accessible via our website at www.cmc.com.  In the event you are unable to listen to the live broadcast, the call will be archived and available for replay on our website on the next business day.  Financial and statistical information presented in the webcast will be located on CMC's website under "Investors."

About Commercial Metals Company
Commercial Metals Company and its subsidiaries manufacture, recycle and market steel and metal products, related materials and services through a network including steel minimills, steel fabrication and processing plants, construction-related product warehouses, metal recycling facilities and marketing and distribution offices in the United States and in strategic international markets.

Forward-Looking Statements
This news release contains forward-looking statements regarding the Company's expectations relating to the Company's future results, economic conditions and the Company's operating plans.  These forward-looking statements generally can be identified by phrases such as we, CMC or its management, "expects," "anticipates," "believes," "estimates," "intends," "plans to," "ought," "could," "will," "should," "likely," "appears" or other similar words or phrases. There are inherent risks and uncertainties in any forward-looking statements. 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, the Company undertakes no obligation to update, amend or clarify any forward-looking statements to reflect events, new information or otherwise.

Actual results may differ materially from those projected as a result of certain risks and uncertainties, including, but not limited to, the following: absence of global economic recovery or possible recession relapse and the pace of overall global economic activity; construction activity or lack thereof; decisions by governments affecting the level of steel imports, including tariffs and duties; difficulties or delays in the execution of construction contracts resulting in cost overruns or contract disputes;  metals pricing over which the Company exerts little influence; increased capacity and product availability from competing steel minimills and other steel suppliers, including import quantities and pricing; execution of cost reduction strategies;  industry consolidation or changes in production capacity or utilization;  currency fluctuations;  availability and pricing of raw materials, including scrap metal, energy, insurance and supply prices; passage of new, or interpretation of existing, environmental laws and regulations;  and those factors listed under Item 1A "Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2013.


COMMERCIAL METALS COMPANY

OPERATING STATISTICS AND BUSINESS SEGMENTS (UNAUDITED)



Three Months Ended November 30,

(short tons in thousands)


2013


2012

Americas Recycling tons shipped


559



562







Americas Steel Mills rebar shipments


391



369


Americas Steel Mills structural and other shipments


285



297


Total Americas Steel Mills tons shipped


676



666







International Mill shipments


360



345







Americas Steel Mills average FOB selling price (total sales)


$

657



$

669


Americas Steel Mills average cost ferrous scrap consumed


$

334



$

339


Americas Steel Mills metal margin


$

323



$

330


Americas Steel Mills average ferrous scrap purchase price


$

297



$

294







International Mill average FOB selling price (total sales)


$

603



$

603


International Mill average cost ferrous scrap consumed


$

354



$

380


International Mill metal margin


$

249



$

223


International Mill average ferrous scrap purchase price


$

301



$

310







Americas Fabrication rebar shipments


234



225


Americas Fabrication structural and post shipments


33



35


Total Americas Fabrication tons shipped


267



260







Americas Fabrication average selling price (excluding stock and buyout sales)


$

914



$

934





(in thousands)


Three Months Ended November 30,

Net sales


2013


2012

Americas Recycling


$

338,202



$

351,961


Americas Mills


481,151



456,738


Americas Fabrication


358,218



356,592


International Mill


229,150



222,067


International Marketing and Distribution


511,158



608,588


Corporate


6,185



2,799


Eliminations


(241,173)



(249,230)


Total net sales


$

1,682,891



$

1,749,515







Adjusted operating profit (loss)





Americas Recycling


$

839



$

4,494


Americas Mills


65,814



51,660


Americas Fabrication


2,217



10,192


International Mill


15,268



876


International Marketing and Distribution


503



40,161


Corporate


(18,049)



(17,370)


Eliminations


597



(660)


Adjusted operating profit from continuing operations


67,189



89,353


Adjusted operating profit from discontinued operations


22,845



1,250


Adjusted operating profit


$

90,034



$

90,603


 



COMMERCIAL METALS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)



Three Months Ended November 30,

(in thousands, except share data)


2013


2012

Net sales


$

1,682,891



$

1,749,515


Costs and expenses:





Cost of goods sold


1,501,798



1,562,850


Selling, general and administrative expenses


114,463



124,609


Interest expense


19,578



17,024


Gain on sale of cost method investment




(26,088)




1,635,839



1,678,395







Earnings from continuing operations before income taxes


47,052



71,120


Income taxes


15,091



22,189


Earnings from continuing operations


31,961



48,931







Earnings from discontinued operations before income taxes


22,845



1,250


Income taxes


8,887



462


Earnings from discontinued operations


13,958



788







Net earnings


45,919



49,719


Less net earnings attributable to noncontrolling interests




2


Net earnings attributable to CMC


$

45,919



$

49,717







Basic earnings per share attributable to CMC:





Earnings from continuing operations


$

0.27



$

0.42


Earnings from discontinued operations


0.12



0.01


Net earnings


$

0.39



$

0.43







Diluted earnings per share attributable to CMC:





Earnings from continuing operations


$

0.27



$

0.42


Earnings from discontinued operations


0.12




Net earnings


$

0.39



$

0.42







Cash dividends per share


$

0.12



$

0.12


Average basic shares outstanding


117,070,499



116,336,504


Average diluted shares outstanding


118,156,611



117,093,627


 


COMMERCIAL METALS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)


November 30,
2013


August 31,
2013

Assets





Current assets:





Cash and cash equivalents


$

515,473



$

378,770


Accounts receivable, net


927,100



989,694


Inventories, net


792,763



757,417


Other


180,756



240,314


Total current assets


2,416,092



2,366,195


Net property, plant and equipment


930,352



940,237


Goodwill


69,733



69,579


Other assets


121,532



118,790


Total assets


$

3,537,709



$

3,494,801


Liabilities and stockholders' equity





Current liabilities:





Accounts payable-trade


$

347,354



$

342,678


Accounts payable-documentary letters of credit


131,412



112,281


Accrued expenses and other payables


269,889



314,949


Notes payable


7,993



5,973


Current maturities of long-term debt


6,232



5,228


Total current liabilities


762,880



781,109


Deferred income taxes


53,838



46,558


Other long-term liabilities


120,542



118,165


Long-term debt


1,277,303



1,278,814


Total liabilities


2,214,563



2,224,646


Stockholders' equity attributable to CMC


1,323,072



1,269,999


Stockholders' equity attributable to noncontrolling interests


74



156


Total stockholders' equity


1,323,146



1,270,155


Total liabilities and stockholders' equity


$

3,537,709



$

3,494,801


 

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)



Three Months Ended November 30,

(in thousands)


2013


2012

Cash flows from (used by) operating activities:





Net earnings


$

45,919



$

49,719


Adjustments to reconcile net earnings to cash flows from (used by) operating activities:





Depreciation and amortization


33,860



33,751


Provision for losses on receivables, net


(240)



1,153


Share-based compensation


5,544



4,509


Amortization of interest rate swaps termination gain


(1,900)



(2,908)


Deferred income taxes (benefit)


19,081



23,876


Tax benefits from stock plans


(109)




Net gain on sale of a subsidiary, cost method investment and other


(25,064)



(26,071)


Asset impairment


1,005



3,028


Changes in operating assets and liabilities:





Accounts receivable


73,052



81,217


Accounts receivable sold, net


3,327



(46,614)


Inventories


(29,789)



(99,076)


Other assets


(20,185)



(740)


Accounts payable, accrued expenses and other payables


(31,534)



(56,228)


Other long-term liabilities


505



113


Net cash flows from (used by) operating activities


73,472



(34,271)







Cash flows from (used by) investing activities:





Capital expenditures


(14,085)



(24,757)


Proceeds from the sale of property, plant and equipment and other


2,126



5,956


Proceeds from the sale of a subsidiary


54,265




Proceeds from the sale of cost method investment




28,995


Net cash flows from (used by) investing activities


42,306



10,194







Cash flows from (used by) financing activities:





Increase in documentary letters of credit


18,663



60,217


Short-term borrowings, net change


2,020



(13,045)


Repayments on long-term debt


(1,551)



(1,284)


Payments for debt issuance costs


(430)




Decrease in restricted cash


17,300




Stock issued under incentive and purchase plans, net of forfeitures


(2,089)



(414)


Cash dividends


(14,067)



(13,963)


Tax benefits from stock plans


109




Contribution from (purchase of) noncontrolling interests


(52)



15


Net cash flows from (used by) financing activities


19,903



31,526


Effect of exchange rate changes on cash


1,022



1,525


Increase in cash and cash equivalents


136,703



8,974


Cash and cash equivalents at beginning of year


378,770



262,422


Cash and cash equivalents at end of period


$

515,473



$

271,396


 

COMMERCIAL METALS COMPANY
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
(dollars in thousands)

This press release contains financial measures not derived in accordance with generally accepted accounting principles ("GAAP"). Reconciliations to the most comparable GAAP measures are provided below.

Adjusted Operating Profit is a non-GAAP financial measure. Management uses adjusted operating profit to evaluate the financial performance of the Company.  Adjusted operating profit is the sum of our earnings before income taxes, outside financing costs and discounts on sales of accounts receivable. For added flexibility, we may sell certain accounts receivable both in the U.S. and internationally. We consider sales of receivables as an alternative source of liquidity to finance our operations and we believe that removing these costs provides a clearer perspective of the Company's operating performance. Adjusted operating profit may be inconsistent with similar measures presented by other companies.

 



Three Months Ended November 30,

(in thousands)


2013


2012

Earnings from continuing operations


$

31,961



$

48,931


Income taxes


15,091



22,189


Interest expense


19,578



17,024


Discounts on sales of accounts receivable


559



1,209


Adjusted operating profit


67,189



89,353


Adjusted operating profit from discontinued operations


22,845



1,250


Adjusted operating profit


$

90,034



$

90,603


 

Adjusted EBITDA is a non-GAAP financial measure.  Adjusted EBITDA is the sum of our earnings before outside financing costs, income taxes and net earnings attributable to noncontrolling interests.  It also excludes the Company's largest recurring non-cash charge, depreciation and amortization, as well as impairment charges. As a measure of cash flow before interest expense, adjusted EBITDA is one guideline management uses to assess the Company's ability to pay its current debt obligations as they mature and as a tool to calculate possible future levels of leverage capacity.  Adjusted EBITDA to interest expense is a covenant test in certain of the Company's debt agreements.  Additionally, adjusted EBITDA is one measure used to assess the Company's unleveraged performance return on its investments.  Adjusted EBITDA is also the target benchmark for our annual and long-term cash incentive performance plans for management.  Adjusted EBITDA may be inconsistent with similar measures presented by other companies.

 



Three Months Ended November 30,

(in thousands)


2013


2012

Earnings from continuing operations


$

31,961



$

48,931


Interest expense


19,578



17,024


Income taxes


15,091



22,189


Depreciation, amortization and impairment charges


34,540



36,060


Less net earnings attributable to noncontrolling interests




2


Adjusted EBITDA


101,170



124,202


Adjusted EBITDA from discontinued operations


23,170



1,969


Adjusted EBITDA


$

124,340



$

126,171


 

Adjusted EBITDA to interest expense for the quarter ended November 30, 2013:

$124,340

/

$19,578

=

6.4

Total Capitalization:
Total capitalization is the sum of stockholders' equity attributable to CMC, long-term debt and deferred income taxes. The ratio of debt to total capitalization is a measure of current debt leverage. The following reconciles total capitalization to the most comparable GAAP measure, stockholders' equity attributable to CMC:

 

(in thousands)


November 30, 2013

Stockholders' equity attributable to CMC


$

1,323,072


Long-term debt


1,277,303


Deferred income taxes


53,838


Total capitalization


$

2,654,213


 

OTHER FINANCIAL INFORMATION
Long-term debt to capitalization ratio as of November 30, 2013:

$1,277,303

/

$2,654,213

=

48.1%

Total debt to capitalization plus short-term debt plus notes payable ratio as of November 30, 2013:

($1,277,303

+

$6,232

+

$7,993)

/

($2,654,213

+

$6,232

+

$7,993)

=

48.4%

Current ratio as of November 30, 2013:
Current assets divided by current liabilities

$2,416,092

/

$762,880

=

3.2

 

 

 

 

SOURCE Commercial Metals Company



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