2014

Commercial Metals Company Reports Third Quarter Earnings Per Share Of $0.20 And Announces Quarterly Dividend Of $0.12 Per Share

IRVING, Texas, June 27, 2014 /PRNewswire/ -- Commercial Metals Company (NYSE: CMC) today announced financial results for its third quarter ended May 31, 2014. Net earnings attributable to CMC for the third quarter were $23.6 million, or $0.20 per diluted share, on net sales of $1.8 billion. This compares to net earnings attributable to CMC of $19.0 million, or $0.16 per diluted share, on net sales of $1.8 billion for the three months ended May 31, 2013. 

Results for this year's third quarter included after-tax LIFO income of $5.3 million ($0.04 per diluted share), compared with after-tax LIFO income of $10.7 million ($0.09 per diluted share) for the third quarter of fiscal 2013, an unfavorable change of $5.4 million ($0.05 per diluted share). Adjusted operating profit was $57.2 million for the third quarter of fiscal 2014, compared with adjusted operating profit of $55.8 million for the prior year's third quarter. Adjusted EBITDA was $90.0 million for the third quarter of fiscal 2014, compared with adjusted EBITDA of $89.3 million for the prior year's third quarter.

The Company's financial position at May 31, 2014 remained strong with cash and cash equivalents of $437.2 million and approximately $1.0 billion in total liquidity, 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, "The results for the third quarter of fiscal 2014 were lifted by seasonal construction activity. We are particularly pleased with the strong results from our Americas Mills segment which recorded the best quarterly adjusted operating profit since our first quarter of fiscal 2009. During the third quarter of fiscal 2014, we successfully commissioned a new electric arc furnace in Poland. Although final commissioning and debugging is ongoing, we saw positive preliminary results. In June 2014, we acquired a small recycling facility. This acquisition is consistent with our vertically-integrated manufacturing model and will provide a low cost, reliable source of raw material to our steel mill in Seguin, Texas."

On June 25, 2014, the board of directors of CMC declared a quarterly dividend of $0.12 per share for shareholders of record on July 10, 2014.  The dividend will be paid on July 24, 2014.

Business Segments
Our Americas Recycling segment recorded adjusted operating loss of $1.1 million for the third quarter of fiscal 2014, compared with adjusted operating profit of $3.2 million for the third quarter of fiscal 2013. Although ferrous and nonferrous shipments increased 1% and 4%, respectively, a $1.0 million unfavorable change in pre-tax LIFO income and an increase in employee related expenses accounted for the decline in adjusted operating profit when compared to the third quarter of fiscal 2013.

Our Americas Mills segment recorded adjusted operating profit of $74.1 million for this year's third quarter, compared with adjusted operating profit of $46.6 million for the prior year's third quarter. The increase in adjusted operating profit was partially attributed to an $8.8 million favorable change in pre-tax LIFO, from pre-tax LIFO expense of $1.7 million in the third quarter of fiscal 2013 to pre-tax LIFO income of $7.1 million in the third quarter of fiscal 2014.  Additionally, tons shipped increased by 94 thousand tons and the average cost of ferrous scrap consumed decreased $3 per short ton in the third quarter of fiscal 2014 when compared to the third quarter of fiscal 2013, resulting in a $15 per short ton increase in average metal margin.

Our Americas Fabrication segment recorded adjusted operating profit of $1.2 million for this year's third quarter, compared with adjusted operating profit of $13.5 million for the third quarter of fiscal 2013. The decline in adjusted operating profit is primarily due to margin squeeze as input prices increased, partially offset by an increase in shipments. Additionally, for the three months ended May 31, 2014, employee related expenses increased 14% as a result of an increase in volume when compared to the same quarter of fiscal 2013.

Our International Mill segment recorded adjusted operating profit of $2.0 million for this year's third quarter, compared with adjusted operating loss of $3.8 million for the prior year's third quarter. While tons shipped were relatively stable for the current quarter when compared to the same quarter in the prior year, sales prices increased by $28 per short ton and the cost of ferrous scrap consumed decreased by $3 per short ton, resulting in a 13% increase in metal margin, which contributed to the improved operating results.

Our International Marketing and Distribution segment recorded adjusted operating profit of $1.5 million for this year's third quarter, compared with adjusted operating profit of $7.7 million for the prior year's third quarter. The decline in adjusted operating profit compared to the third quarter of fiscal 2013 was primarily attributed to an $11.2 million unfavorable change in pre-tax LIFO associated with our U.S.-based trading divisions, from pre-tax LIFO income of $6.7 million in the third quarter of fiscal 2013 to pre-tax LIFO expense of $4.5 million in the third quarter of fiscal 2014. Additionally, our U.S.-based trading divisions experienced an increase in metal margins, which partially offset the unfavorable change in pre-tax LIFO.

Year to Date Results
Net earnings attributable to CMC for the nine months ended May 31, 2014 were $80.6 million ($0.68 per diluted share) on net sales of $5.1 billion, compared with net earnings attributable to CMC of $73.3 million ($0.62 per diluted share) on net sales of $5.2 billion for the nine months ended May 31, 2013. Results for the nine months ended May 31, 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, and an after-tax charge of approximately $3 million ($0.03 per diluted share) incurred in connection with the Company's final settlement of the Standard Iron Works v. Arcelor Mittal et al. lawsuit. Results for the nine months ended May 31, 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. The Company recorded after-tax LIFO expense of $9.7 million ($0.08 per diluted share) for the nine months ended May 31, 2014, compared with after-tax LIFO income of $26.1 million ($0.22 per diluted share) for the nine months ended May 31, 2013. For the nine months ended May 31, 2014, adjusted operating profit was $182.4 million, compared with $173.0 million for the nine months ended May 31, 2013. Adjusted EBITDA was $282.2 million for the nine months ended May 31, 2014, compared with $275.5 million for the nine months ended May 31, 2013.

Outlook
Alvarado concluded, "We anticipate that our operational results for the fourth quarter of fiscal 2014 will remain consistent with our third quarter of fiscal 2014 results. The American Institute of Architects Architecture Billings Index (ABI) for May rose a full three points over April to 52.6, indicating positive directional growth in the U.S. construction markets.  On the rebar import front, we saw a slow-down from Mexico during the third quarter of fiscal 2014, and we plan to continue monitoring the volume of rebar imports from Turkey and other European and Asian countries until the pending countervailing and anti-dumping decisions are finalized by the U.S. Commerce Department, which we expect to take place in the latter part of 2014. As a result of the new electric arc furnace that our Polish operations successfully commissioned during the third quarter of fiscal 2014, we anticipate that our International Mill segment will begin to benefit from productivity and cost improvements in fiscal 2015."

Conference Call
CMC invites you to listen to a live broadcast of its third quarter of fiscal 2014 conference call today, Friday, June 27, 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 and its impact on a highly cyclical industry; construction activity or lack thereof; decisions by governments affecting the level of steel imports; 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 over which we exert little influence, 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 May 31,


Nine Months Ended May 31,

(short tons in thousands)


2014


2013


2014


2013

Americas Recycling tons shipped


596



588



1,728



1,724















Americas Steel Mills rebar shipments


424



369



1,155



1,066


Americas Steel Mills structural and other shipments


310



271



886



842


Total Americas Steel Mills tons shipped


734



640



2,041



1,908















Americas Steel Mills average FOB selling price (total sales)


$

683



$

671



$

672



$

674


Americas Steel Mills average cost ferrous scrap consumed


$

349



$

352



$

350



$

347


Americas Steel Mills metal margin


$

334



$

319



$

322



$

327


Americas Steel Mills average ferrous scrap purchase price


$

275



$

306



$

298



$

302















International Mill tons shipped


322



325



953



947















International Mill average FOB selling price (total sales)


$

610



$

582



$

613



$

596


International Mill average cost ferrous scrap consumed


$

345



$

348



$

357



$

369


International Mill metal margin


$

265



$

234



$

256



$

227


International Mill average ferrous scrap purchase price


$

287



$

277



$

303



$

299















Americas Fabrication rebar tons shipped


266



234



703



663


Americas Fabrication structural and post tons shipped


44



43



114



115


Total Americas Fabrication tons shipped


310



277



817



778















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


$

921



$

946



$

924



$

945


 

(in thousands)

Three Months Ended May 31,


Nine Months Ended May 31,

Net sales


2014


2013


2014


2013

Americas Recycling


$

335,104



$

341,743



$

1,015,574



$

1,045,078


Americas Mills


527,574



461,772



1,465,574



1,354,087


Americas Fabrication


409,425



383,800



1,093,533



1,058,358


International Mill


207,558



200,752



618,070



602,584


International Marketing and Distribution


604,045



593,804



1,687,010



1,852,328


Corporate


193



3,888



11,544



10,348


Eliminations


(279,125)



(233,217)



(754,542)



(732,069)


Total net sales


$

1,804,774



$

1,752,542



$

5,136,763



$

5,190,714















Adjusted operating profit (loss)










Americas Recycling


$

(1,085)



$

3,155



$

(1,109)



$

9,892


Americas Mills


74,063



46,556



183,939



145,902


Americas Fabrication


1,244



13,499



(1,869)



19,879


International Mill


2,047



(3,831)



25,647



(7,108)


International Marketing and Distribution


1,548



7,728



4,544



51,837


Corporate


(18,227)



(14,834)



(51,340)



(51,398)


Eliminations


(1,930)



2,524



88



780


Adjusted operating profit from continuing operations


57,660



54,797



159,900



169,784


Adjusted operating profit (loss) from discontinued operations


(417)



956



22,529



3,243


Adjusted operating profit


$

57,243



$

55,753



$

182,429



$

173,027


 

COMMERCIAL METALS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)



Three Months Ended May 31,


Nine Months Ended May 31,

(in thousands, except share data)

2014


2013


2014


2013

Net sales


$

1,804,774



$

1,752,542



$

5,136,763



$

5,190,714


Costs and expenses:












Cost of goods sold


1,621,476



1,577,024



4,627,182



4,689,165


Selling, general and administrative expenses


126,756



121,731



352,305



360,975


Interest expense


18,999



18,043



57,756



51,557


Gain on sale of cost method investment








(26,088)




1,767,231



1,716,798



5,037,243



5,075,609















Earnings from continuing operations before income taxes


37,543



35,744



99,520



115,105


Income taxes


13,700



17,379



32,657



43,876


Earnings from continuing operations


23,843



18,365



66,863



71,229















Earnings (loss) from discontinued operations before income taxes


(417)



956



22,529



3,243


Income taxes


(137)



358



8,766



1,213


Earnings (loss) from discontinued operations


(280)



598



13,763



2,030















Net earnings


23,563



18,963



80,626



73,259


Less net earnings (loss) attributable to noncontrolling interests




(1)



1



1


Net earnings attributable to CMC


$

23,563



$

18,964



$

80,625



$

73,258















Basic earnings per share attributable to CMC:










Earnings from continuing operations


$

0.20



$

0.16



$

0.57



$

0.61


Earnings from discontinued operations






0.12



0.02


Net earnings


$

0.20



$

0.16



$

0.69



$

0.63















Diluted earnings per share attributable to CMC:










Earnings from continuing operations


$

0.20



$

0.16



$

0.56



$

0.60


Earnings from discontinued operations






0.12



0.02


Net earnings


$

0.20



$

0.16



$

0.68



$

0.62















Cash dividends per share


$

0.12



$

0.12



$

0.36



$

0.36


Average basic shares outstanding


117,705,133



116,845,542



117,400,198



116,589,382


Average diluted shares outstanding


118,769,675



117,703,590



118,521,816



117,456,756


 


COMMERCIAL METALS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)


May 31, 2014


August 31, 2013

Assets







Current assets:







Cash and cash equivalents


$

437,210



$

378,770


Accounts receivable, net


946,675



989,694


Inventories, net


944,786



757,417


Other


169,340



240,314


Total current assets


2,498,011



2,366,195


Net property, plant and equipment


931,744



940,237


Goodwill


69,786



69,579


Other assets


118,928



118,790


Total assets


$

3,618,469



$

3,494,801


Liabilities and stockholders' equity







Current liabilities:







Accounts payable-trade


$

392,706



$

342,678


Accounts payable-documentary letters of credit


116,189



112,281


Accrued expenses and other payables


297,940



314,949


Notes payable


4,640



5,973


Current maturities of long-term debt


7,147



5,228


Total current liabilities


818,622



781,109


Deferred income taxes


56,727



46,558


Other long-term liabilities


115,745



118,165


Long-term debt


1,276,729



1,278,814


Total liabilities


2,267,823



2,224,646


Stockholders' equity attributable to CMC


1,350,557



1,269,999


Stockholders' equity attributable to noncontrolling interests


89



156


Total stockholders' equity


1,350,646



1,270,155


Total liabilities and stockholders' equity


$

3,618,469



$

3,494,801


 

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



Nine Months Ended May 31,

(in thousands)


2014



2013


Cash flows from (used by) operating activities:







Net earnings


$

80,626



$

73,259


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







Depreciation and amortization


101,130



102,164


Provision for losses on receivables, net


(1,705)



3,349


Share-based compensation


16,054



13,528


Amortization of interest rate swaps termination gain


(5,698)



(8,723)


Loss on debt extinguishment




1,502


Deferred income taxes


28,560



44,371


Tax benefits from stock plans


(625)



(6)


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


(28,032)



(25,999)


Asset impairment


1,227



3,434


Changes in operating assets and liabilities:







Accounts receivable


(59,479)



(12,189)


Accounts receivable sold, net


124,415



(2,292)


Inventories


(176,766)



(30,011)


Other assets


(18,486)



5,128


Accounts payable, accrued expenses and other payables


38,328



(122,482)


Other long-term liabilities


(5,244)



(1,962)


Net cash flows from operating activities


94,305



43,071









Cash flows from (used by) investing activities:







Capital expenditures


(67,718)



(63,008)


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


6,773



11,164


Proceeds from the sale of a subsidiary


52,276




Proceeds from the sale of cost method investment




28,995


Net cash flows used by investing activities


(8,669)



(22,849)









Cash flows from (used by) financing activities:







Increase (decrease) in documentary letters of credit, net


2,985



(25,153)


Short-term borrowings, net change


(1,333)



(25,595)


Repayments on long-term debt


(4,826)



(63,442)


Payments for debt issuance costs


(430)



(4,125)


Decrease in restricted cash


18,037




Stock issued under incentive and purchase plans, net of forfeitures


(860)



1,347


Proceeds from issuance of long-term debt




330,000


Debt extinguishment costs




(1,502)


Cash dividends


(42,290)



(41,990)


Tax benefits from stock plans


625



6


Contribution from (purchase of) noncontrolling interests


(37)



13


Net cash flows from (used by) financing activities


(28,129)



169,559


Effect of exchange rate changes on cash


933



1,066


Increase in cash and cash equivalents


58,440



190,847


Cash and cash equivalents at beginning of year


378,770



262,422


Cash and cash equivalents at end of period


$

437,210



$

453,269


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 from continuing operations before income taxes, interest expense 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 May 31,


Nine Months Ended May 31,

(in thousands)

2014


2013


2014


2013

Earnings from continuing operations


$

23,843



$

18,365



$

66,863



$

71,229


Income taxes


13,700



17,379



32,657



43,876


Interest expense


18,999



18,043



57,756



51,557


Discounts on sales of accounts receivable


1,118



1,010



2,624



3,122


Adjusted operating profit


57,660



54,797



159,900



169,784


Adjusted operating profit (loss) from discontinued operations


(417)



956



22,529



3,243


Adjusted operating profit


$

57,243



$

55,753



$

182,429



$

173,027


Adjusted EBITDA is a non-GAAP financial measure.  Adjusted EBITDA is the sum of our earnings from continuing operations before net earnings attributable to noncontrolling interests, outside financing costs and income taxes. It also excludes the Company's largest recurring non-cash charge, depreciation and amortization, as well as impairment charges, which are also non-cash. Adjusted EBITDA should not be considered as an alternative to net earnings or as a better measure of liquidity than net cash flows from operating activities, as determined by GAAP. However, we believe that adjusted EBITDA provides relevant and useful information, which is often used by analysts, creditors, and other interested parties in our industry. Adjusted EBITDA to interest expense is a covenant test in certain of the Company's debt agreements.  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 May 31,


Nine Months Ended May 31,

(in thousands)

2014


2013


2014


2013

Earnings from continuing operations


$

23,843



$

18,365



$

66,863



$

71,229


Net (earnings) loss attributable to noncontrolling interests




1



(1)



(1)


Interest expense


18,999



18,043



57,756



51,557


Income taxes


13,700



17,379



32,657



43,876


Depreciation and amortization


33,846



33,426



101,130



100,029


Impairment charges




406



902



3,434


Adjusted EBITDA from continuing operations


90,388



87,620



259,307



270,124


Adjusted EBITDA from discontinued operations


(417)



1,657



22,854



5,378


Adjusted EBITDA


$

89,971



$

89,277



$

282,161



$

275,502


Adjusted EBITDA to interest expense for the quarter ended May 31, 2014:

$89,971

/

$18,999

=

4.7

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)


May 31, 2014

Stockholders' equity attributable to CMC


$

1,350,557

Long-term debt


1,276,729

Deferred income taxes


56,727

Total capitalization


$

2,684,013









OTHER FINANCIAL INFORMATION
Long-term debt to capitalization ratio as of May 31, 2014:

$1,276,729

/

$2,684,013

=

47.6%

Total debt to capitalization plus short-term debt plus notes payable ratio as of May 31, 2014:

(

$1,276,729

+

$7,147

+

$4,640

)

/

(

$2,684,013

+

$7,147

+

$4,640

)

=

47.8%

Current ratio as of May 31, 2014:

Current assets divided by current liabilities

$2,498,011

/

$818,622

=

3.1

SOURCE Commercial Metals Company



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