Commercial Metals Company Reports Third Consecutive Profitable Quarter and Announces Quarterly Dividend

IRVING, Texas, June 27, 2012 /PRNewswire/ -- Commercial Metals Company (NYSE: CMC) today reported net earnings of $40.7 million or $0.35 per diluted share on net sales of $2.0 billion for the third quarter ended May 31, 2012.  This earnings performance is improved over the net earnings of $36.2 million or $0.31 per diluted share reported in last year's third quarter on net sales of $2.1 billion.   Net earnings for this year's third quarter from continuing operations were $39.1 million or $0.34 per diluted share.  Included in continuing operations is an after-tax LIFO expense of $3.0 million as compared to $3.9 million of after-tax LIFO expense in the third quarter of 2011. In addition, during the third quarter of 2012, we recorded an $11.5 million ($0.10 per share) research and development tax benefit. Net earnings from discontinued operations, which consist primarily of the Croatian pipe mill, were $1.6 million or $0.01 per diluted share. 

Net earnings for the nine months ended May 31, 2012 of $177.3 million or $1.52 per diluted share on sales of $6.0 billion compares to a net loss of $9.3 million or $0.08 per share on sales of $5.6 billion for the same period last year.  Continuing operations for this year's first nine months resulted in net earnings of $191.9 million or $1.64 per diluted share while discontinued operations reflected a net loss of $14.7 million or $0.12 per share. Included in continuing operations is a tax benefit of $113.5 million ($0.97 per share) related to ordinary worthless stock and bad debt deductions from the investment in the Company's Croatian subsidiary, as well as the tax benefit for research and development expenditures.  Within discontinued operations is approximately $18.0 million of severance costs in the same period of this year.  After-tax LIFO income of $11.3 million ($0.10 per share) was recorded in the nine month period ended May 31, 2012, while after-tax LIFO expense of $43.8 million ($0.38 per share) was recognized for the same period last year.

Adjusted EBITDA was $104.3 million for this year's third quarter. For the nine months ended May 31, 2012, cash flow from operating activities was $134.8 million and adjusted EBITDA was $255.1 million which are $178.9 million and $80.4 million higher, respectively, than the same period in the prior year.  Cash and short-term investments totaled $233.7 million as of May 31, 2012.

The board of directors of CMC declared a quarterly dividend of $0.12 on June 26th for shareholders of record on July 11, 2012.  The dividend will be paid on July 25, 2012.

Joe Alvarado, President and Chief Executive Officer, commented, "Our focused efforts to improve and sustain operating profitability yielded positive results for the third consecutive quarter. Results have improved from prior year's third quarter even as uncertainty remains over the continuity of the Euro zone and the instability in the US markets. Each operating segment reported quarterly adjusted operating profit for the first time since the first quarter of 2008. Notably, our Americas Fabrication segment reported positive adjusted operating profit for the first time in the last 10 sequential quarters."

Alvarado further commented, "On June 1, 2012, we announced the sale of all outstanding shares of our Croatian pipe mill operation, excluding certain assets.  On June 13, 2012, we completed the sale of certain assets excluded from the share purchase, and we continue to market the remaining assets. This completes an important step in our strategic plan to reposition the business for improved financial performance and increased shareholder value." 

Americas Recycling continued to be profitable, recording an adjusted operating profit of $3.9 million as compared to $13.2 million from prior year's third quarter. The results suffered from lower nonferrous average selling prices and volumes primarily from reduced export demand within the Asian scrap market. Ferrous scrap prices moved down modestly during the quarter.

Americas Mills recorded an adjusted operating profit of $59.3 million, $11.8 million lower than last year's third quarter primarily due to margin compression and additional LIFO expense of $4.6 million.

Our Americas Fabrication segment recorded an adjusted operating profit of $0.2 million in this year's third quarter, marking a significant improvement of $14.9 million over last year's third quarter.  The segment benefited from stable material pricing and improved market conditions resulting in stronger volume and higher pricing.

The International Mill segment had an adjusted operating profit of $1.3 million for this year's third quarter compared to an adjusted operating profit of $22.6 million for last year's third quarter. Market conditions have weakened amid fresh economic and political instability in Europe. New infrastructure projects in Poland have decreased but exports remain strong due to the weaker Polish zloty.

The International Marketing and Distribution segment logged an adjusted operating profit of $23.3 million for this year's third quarter compared to an adjusted operating profit of $17.0 million for last year's third quarter.  All of the operations in this segment were profitable.  The raw materials marketing operation was the largest contributor to the overall results of this segment.                             

Outlook

Alvarado concluded, "In the fourth quarter of 2012, we expect scrap prices to decline further from oversupply as the constriction of the export market continues through the summer months. Despite weakness in the scrap markets, we remain encouraged by the strong backlogs for both our domestic and international operations going into the fourth quarter and are optimistic about their performance. We believe our International Mill segment will continue to face difficult market conditions in the fourth quarter. However, we have reduced our higher priced inventory and we believe prices will continue to stabilize for this segment. We remain committed to improving our cost structure and cash flows."

Conference Call

CMC invites you to listen to a live broadcast of its third quarter 2012 conference call today, Wednesday, June 27, 2012, at 11:00 a.m. ET.  The call will be hosted by Joe Alvarado, President and CEO, and Barbara Smith, Senior Vice President and CFO, and can be accessed via our website at www.cmc.com or at www.streetevents.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 can be found on CMC's website under "Investor Relations."

Commercial Metals Company and 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, scrap prices, inventory levels, instability within the Euro zone and general market conditions.  There are inherent risks and uncertainties in any forward-looking statements. Variances will occur and some could be materially different from our current expectations.  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.

Developments that could impact the Company's expectations include 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
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
(dollars in thousands)

This press release uses financial statement 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. Adjusted operating profit (loss) is used to compare and 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 current operating performance. Adjusted operating profit (loss) may be inconsistent with similar measures presented by other companies.

Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is the sum of our earnings (loss) before income taxes, outside financing costs, depreciation, amortization and non-cash impairment charges. It excludes the Company's largest recurring non-cash charge, depreciation and amortization, including impairment charges. As a measure of cash flow before interest expense, it is one guideline used to assess the Company's ability to pay its current debt obligations as they mature and 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 of our investments. Adjusted EBITDA may be inconsistent with similar measures presented by other companies.

Adjusted EBITDA to interest coverage for the

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 at May 31, 2012 to the nearest GAAP measure, stockholders' equity:

Other Financial Information

Long-term debt to cap ratio as of May 31, 2012:

Debt divided by capitalization

Total debt to cap plus short-term debt plus notes payable ratio as of May 31, 2012:

Current ratio as of May 31, 2012:

Current assets divided by current liabilities

SOURCE Commercial Metals Company