COMMERCIAL METALS COMPANY 
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. ET. Joe 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, August 31,
2013 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
