Commercial Metals Company Reports Second Quarter Earnings Per Share Of $0.04 And Announces Quarterly Dividend Of $0.12 Per Share

Mar 28, 2013, 07:00 ET from Commercial Metals Company

IRVING, Texas, March 28, 2013 /PRNewswire/ -- Commercial Metals Company (NYSE: CMC) today announced financial results for its second quarter ended February 28, 2013.  Net earnings for the second quarter were $4.6 million, or $0.04 per diluted share, on net sales of $1.7 billion.  This compares to net earnings of $28.9 million, or $0.25 per diluted share, on net sales of $2.0 billion for the three months ended February 29, 2012.  Continuing operations for this year's second quarter included after-tax LIFO income of $0.2 million, compared with after-tax LIFO expense of $1.3 million ($0.01 per share) for the second quarter of fiscal 2012.  Adjusted operating profit was $26.7 million for the second quarter of fiscal 2013, compared with adjusted operating profit of $63.1 million for the prior year's second quarter.  Adjusted EBITDA was $60.1 million for the second quarter of fiscal 2013, compared with adjusted EBITDA of $95.3 million for the prior year's second quarter.

Joe Alvarado, Chairman of the Board, President, and CEO, commented, "As anticipated, we experienced the normal seasonal effects of the winter and holiday months as well as the ongoing economic challenges in certain overseas markets.  Despite economic weakness, particularly in international markets, we are pleased to report a sixth consecutive quarter of profitability."

On March 27, 2013, the board of directors of CMC declared a quarterly dividend of $0.12 for shareholders of record on April 9, 2013.  The dividend will be paid on April 23, 2013.

Business Segments Our Americas Recycling segment recorded an adjusted operating profit of $2.2 million for the second quarter of this fiscal year, compared with an adjusted operating profit of $6.4 million in the prior year's second quarter. Ferrous selling prices declined 7% to $336 per ton when compared to the second quarter of fiscal 2012.  Additionally, ferrous and nonferrous margins were lower in this year's second quarter when compared to the prior year's second quarter.  LIFO expense decreased by $3.6 million to $1.0 million in the second quarter of fiscal 2013, from $4.6 million in the second quarter of fiscal 2012.

Our Americas Mills segment recorded an adjusted operating profit of $48.8 million for this year's second quarter, compared with an adjusted operating profit of $54.4 million in the prior year's second quarter.  Shipping volumes declined for our merchant and billet products when compared to the prior year's second quarter.  However, our rebar shipments continued to strengthen when compared to the prior year.  In addition, we experienced lower margins on our merchant products during the quarter due to import pressure, although our rebar margins improved as compared to the prior year's second quarter. 

Our Americas Fabrication segment recorded an adjusted operating loss of $3.8 million for this year's second quarter, compared with an adjusted operating loss of $10.0 million for the prior year's second quarter.  The operating improvement compared with the prior year's second quarter is mostly due to improvements in both shipping volumes and transactional prices.  LIFO income decreased $2.9 million to $0.5 million in the second quarter of fiscal 2013, from $3.4 million in the second quarter of fiscal 2012.

Our International Mill segment recorded an adjusted operating loss of $4.2 million for the second quarter of this year, compared with an adjusted operating profit of $6.6 million in the prior year's second quarter.  Volumes declined 16%, or 54 thousand tons, primarily related to our merchant and wire rod products.  The results continue to reflect the ongoing challenges in the Eurozone.

Our International Marketing and Distribution segment recorded an adjusted operating profit of $3.9 million for this year's second quarter, compared with an adjusted operating profit of $26.6 million in the prior year's second quarter.  Decreased revenues and margins in our raw materials business and our Australian operations adversely affected this segment's results.  The segment continued to suffer from weakness in most of the markets we serve globally.

Year to Date Results Net earnings attributable to CMC for the six months ended February 28, 2013 were $54.3 million, or $0.46 per diluted share, on net sales of $3.5 billion, compared with net earnings attributable to CMC of $136.6 million, or $1.17 per diluted share, on net sales of $3.9 billion for the six months ended February 29, 2012.  Continuing operations for the six months ended February 28, 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 interest in Trinecke Zelezarny, a.s., a Czech Republic joint-stock company.  Continuing operations for the six months ended February 29, 2012 included $102.1 million ($0.88 per diluted share) in tax benefits related to ordinary worthless stock and bad debt deductions from the investment in the Company's former Croatian subsidiary.  The Company recorded after-tax LIFO income of $15.4 million ($0.13 per diluted share) for the six months ended February 28, 2013, compared with after-tax LIFO income of $14.3 million ($0.12 per diluted share) for the six months ended February 29, 2012.  For the six months ended February 28, 2013, adjusted operating profit was $117.3 million, compared with $84.2 million for the six months ended February 29, 2012.  Adjusted EBITDA was $186.2 million, compared with $150.8 million for the six months ended February 29, 2012.

Outlook Alvarado concluded, "Our third quarter historically yields better results as the construction season begins to ramp up.  The American Institute of Architects reported an Architecture Billings Index (ABI) of 54.9 in February 2013, the highest level in over five and a half years.  We believe that the ABI level will eventually translate into increased demand for our domestic operations.  Our International Mill segment anticipates a modest improvement in results over the second quarter of 2013 due to seasonal volume improvements. Although German manufacturing is showing signs of life, we do not anticipate any appreciable improvements in the Eurozone over the near term. We believe that continued weakness in most global markets in which we participate will continue to negatively burden our International Marketing and Distribution segment." 

Conference Call CMC invites you to listen to a live broadcast of its second quarter of fiscal 2013 conference call today, Thursday, March 28, 2013, 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 the webcast on the next business day.  Financial and statistical information presented in the broadcast are 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, a copper tube mill, 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 economic conditions, product pricing and demand and market conditions.  There are inherent risks and uncertainties in any forward-looking statements. 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; 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 the pace of overall economic activity, particularly in China.

COMMERCIAL METALS COMPANY

OPERATING STATISTICS AND BUSINESS SEGMENTS (UNAUDITED)

Three Months Ended

Six Months Ended

(short tons in thousands)

02/28/13

02/29/12

02/28/13

02/29/12

Americas Recycling tons shipped

574

612

1,136

1,210

Americas Steel Mills rebar shipments

328

311

697

635

Americas Steel Mills structural and other shipments

274

333

571

650

Total Americas Steel Mills tons shipped

602

644

1,268

1,285

International Mill shipments

277

331

622

790

Americas Steel Mills average FOB selling price (total sales)

$

682

$

726

$

675

$

716

Americas Steel Mills average cost ferrous scrap utilized

$

350

$

392

$

345

$

389

Americas Steel Mills metal margin

$

332

$

334

$

330

$

327

Americas Steel Mills average ferrous scrap purchase price

$

307

$

353

$

300

$

348

International Mill average FOB selling price (total sales)

$

605

$

613

$

604

$

607

International Mill average cost ferrous scrap utilized

$

379

$

401

$

380

$

389

International Mill metal margin

$

226

$

212

$

224

$

218

International Mill average ferrous scrap purchase price

$

303

$

328

$

307

$

319

Americas Fabrication rebar shipments

204

192

429

405

Americas Fabrication structural and post shipments

37

40

72

72

Total Americas Fabrication tons shipped

241

232

501

477

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

$

950

$

914

$

942

$

897

 

(in thousands)

Three Months Ended

Six Months Ended

Net sales

02/28/13

02/29/12

02/28/13

02/29/12

Americas Recycling

$

351,374

$

419,644

$

703,335

$

834,449

Americas Mills

476,594

525,885

973,043

1,051,381

Americas Fabrication

317,966

301,593

674,558

621,361

International Mill

179,765

217,090

401,832

513,271

International Marketing and Distribution

649,936

723,355

1,258,524

1,433,426

Corporate

3,661

5,291

6,460

5,351

Eliminations

(249,622)

(236,114)

(498,852)

(515,675)

Total net sales

$

1,729,674

$

1,956,744

$

3,518,900

$

3,943,564

Adjusted operating profit (loss)

Americas Recycling

$

2,243

$

6,389

$

6,737

$

27,205

Americas Mills

48,769

54,401

101,291

112,332

Americas Fabrication

(3,812)

(9,969)

6,380

(17,349)

International Mill

(4,153)

6,592

(3,277)

16,414

International Marketing and Distribution

3,948

26,554

44,109

22,453

Corporate

(19,194)

(20,936)

(36,564)

(44,204)

Eliminations

(1,084)

(2,346)

(1,744)

(8,491)

Adjusted operating profit from continuing operations

26,717

60,685

116,932

108,360

Adjusted operating profit (loss) from discontinued operations

(46)

2,387

342

(24,165)

Adjusted operating profit

$

26,671

$

63,072

$

117,274

$

84,195

 

COMMERCIAL METALS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended

Six Months Ended

(in thousands, except share data)

02/28/13

02/29/12

02/28/13

02/29/12

Net sales

$

1,729,674

$

1,956,744

$

3,518,900

$

3,943,564

Costs and expenses:

Cost of goods sold

1,588,016

1,773,966

3,188,343

3,588,250

Selling, general and administrative expenses

115,844

123,891

241,825

250,412

Gain on sale of cost method investment

(26,088)

Interest expense

16,490

16,043

33,514

32,340

1,720,350

1,913,900

3,437,594

3,871,002

Earnings from continuing operations before taxes

9,324

42,844

81,306

72,562

Income taxes (benefit)

4,717

15,015

27,232

(80,312)

Earnings from continuing operations

4,607

27,829

54,074

152,874

Earnings (loss) from discontinued operations before taxes

(46)

1,794

342

(25,209)

Income taxes (benefit)

(16)

770

120

(8,924)

Earnings (loss) from discontinued operations

(30)

1,024

222

(16,285)

Net earnings

4,577

28,853

54,296

136,589

Less net earnings attributable to noncontrolling interests

2

2

Net earnings attributable to CMC

$

4,577

$

28,853

$

54,294

$

136,587

Basic earnings (loss) per share attributable to CMC:

Earnings from continuing operations

$

0.04

$

0.24

$

0.47

$

1.32

Earnings (loss) from discontinued operations

0.01

(0.14)

Net earnings

$

0.04

$

0.25

$

0.47

$

1.18

Diluted earnings (loss) per share attributable to CMC:

Earnings from continuing operations

$

0.04

$

0.24

$

0.46

$

1.31

Earnings (loss) from discontinued operations

0.01

(0.14)

Net earnings

$

0.04

$

0.25

$

0.46

$

1.17

Cash dividends per share

$

0.12

$

0.12

$

0.24

$

0.24

Average basic shares outstanding

116,586,100

115,703,142

116,461,302

115,616,844

Average diluted shares outstanding

117,573,052

116,843,456

117,333,339

116,646,469

 

COMMERCIAL METALS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)

February 28, 2013

August 31, 2012

Assets

Current assets:

Cash and cash equivalents

$

170,097

$

262,422

Accounts receivable, net

988,482

958,364

Inventories, net

892,688

807,923

Other

172,229

211,122

Total current assets

2,223,496

2,239,831

Net property, plant and equipment

980,466

994,304

Goodwill

76,959

76,897

Other assets

128,544

130,214

Total assets

$

3,409,465

$

3,441,246

Liabilities and stockholders' equity

Current liabilities:

Accounts payable-trade

$

412,592

$

433,132

Accounts payable-documentary letters of credit

90,038

95,870

Accrued expenses and other payables

269,619

343,337

Notes payable

47,403

24,543

Current maturities of long-term debt

204,072

4,252

Total current liabilities

1,023,724

901,134

Deferred income taxes

27,363

20,271

Other long-term liabilities

111,089

116,261

Long-term debt

950,407

1,157,073

Total liabilities

2,112,583

2,194,739

Stockholders' equity attributable to CMC

1,296,727

1,246,368

Stockholders' equity attributable to noncontrolling interests

155

139

Total equity

1,296,882

1,246,507

Total liabilities and stockholders' equity

$

3,409,465

$

3,441,246

 

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

Six Months Ended

(in thousands)

02/28/13

02/29/12

Cash flows from (used by) operating activities:

Net earnings

$

54,296

$

136,589

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

Depreciation and amortization

68,037

69,064

Provision for losses (recoveries) on receivables, net

2,463

(616)

Share-based compensation

7,185

5,973

Amortization of interest rate swaps termination gain

(5,815)

Deferred income taxes

29,362

(107,818)

Tax benefits from stock plans

(1)

(32)

Net (gain) loss on sale of cost method investment and other

(26,522)

104

Write-down of inventory

1,784

8,460

Asset impairment

3,028

1,028

Changes in operating assets and liabilities:

Accounts receivable

4,785

(25,620)

Accounts receivable sold (repurchased), net

(37,297)

104,495

Inventories

(84,840)

7,939

Other assets

11,461

22,441

Accounts payable, accrued expenses, other payables and income taxes

(99,312)

(184,090)

Other long-term liabilities

(5,326)

1,157

Net cash flows from (used by) operating activities

(76,712)

39,074

Cash flows from (used by) investing activities:

Capital expenditures

(41,849)

(53,373)

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

6,897

8,097

Proceeds from the sale of cost method investment

28,995

Decrease in deposit for letters of credit

30,404

Net cash flows from (used by) investing activities

(5,957)

(14,872)

Cash flows from (used by) financing activities:

Increase (decrease) in documentary letters of credit

(5,268)

6,121

Short-term borrowings, net change

21,870

40,270

Repayments on long-term debt

(2,402)

(48,202)

Stock issued under incentive and purchase plans, net of forfeitures

2,353

1,559

Cash dividends

(27,963)

(27,752)

Contribution from (purchase of) noncontrolling interests

10

(41)

Tax benefits from stock plans

1

32

Net cash flows from (used by) financing activities

(11,399)

(28,013)

Effect of exchange rate changes on cash

1,743

(2,397)

Decrease in cash and cash equivalents

(92,325)

(6,208)

Cash and cash equivalents at beginning of year

262,422

222,390

Cash and cash equivalents at end of period

$

170,097

$

216,182

 

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 (Loss) is a non-GAAP financial measure. Management uses adjusted operating profit (loss) to evaluate the financial performance of the Company. Adjusted operating profit (loss) is the sum of our earnings (loss) 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 believe that removing these costs provides a clearer perspective of the Company's operating performance. Adjusted operating profit (loss) may be inconsistent with similar measures presented by other companies.

 

Three Months Ended

Six Months Ended

(in thousands)

02/28/13

02/29/12

02/28/13

02/29/12

Earnings from continuing operations

$

4,607

$

27,829

$

54,074

$

152,874

Income taxes (benefit)

4,717

15,015

27,232

(80,312)

Interest expense

16,490

16,043

33,514

32,340

Discounts on sales of accounts receivable

903

1,798

2,112

3,458

Adjusted operating profit from continuing operations

26,717

60,685

116,932

108,360

Adjusted operating profit (loss) from discontinued operations

(46)

2,387

342

(24,165)

Adjusted operating profit

$

26,671

$

63,072

$

117,274

$

84,195

 

Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is the sum of our earnings (loss) before income taxes, outside financing costs 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 is a covenant test in certain of the Company's note agreements. Additionally, adjusted EBITDA is one measure used to assess the Company's unleveraged performance return on our investments. Adjusted EBITDA may be inconsistent with similar measures presented by other companies.

 

Three Months Ended

Six Months Ended

(in thousands)

02/28/13

02/29/12

02/28/13

02/29/12

Earnings from continuing operations

$

4,607

$

27,829

$

54,074

$

152,874

Interest expense

16,490

16,043

33,514

32,340

Income taxes (benefit)

4,717

15,015

27,232

(80,312)

Depreciation, amortization and impairment charges

34,286

34,122

71,065

68,601

Less:  net earnings attributable to noncontrolling interests

2

2

Adjusted EBITDA from continuing operations

60,100

93,009

185,883

173,501

Adjusted EBITDA from discontinued operations

(46)

2,285

342

(22,674)

Adjusted EBITDA

$

60,054

$

95,294

$

186,225

$

150,827

 

Adjusted EBITDA to interest for the quarter ended February 28, 2013:

$ 60,054   /  $ 16,490 =  3.6

Total Capitalization:

Total capitalization is the sum of long-term debt, deferred income taxes, and stockholders' equity. The ratio of debt to total capitalization is a measure of current debt leverage. The following reconciles total capitalization on February 28, 2013 to the most comparable GAAP measure, stockholders' equity:

Stockholders' equity attributable to CMC

$

1,296,727

Long-term debt

950,407

Deferred income taxes

27,363

Total capitalization

$

2,274,497

OTHER FINANCIAL INFORMATION

Long-term debt to capitalization ratio as of February 28, 2013:

$ 950,407  /  $ 2,274,497  = 41.8%

Total debt to capitalization plus short-term debt plus notes payable ratio as of February 28, 2013:

($ 950,407  + $ 204,072 + $ 47,403)  /  ($2,274,497$204,072  +  $ 47,403) = 47.6%

Current ratio as of February 28, 2013:

Current assets divided by current liabilities

$2,223,496  /  $1,023,724  =   2.2

SOURCE Commercial Metals Company



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