COMMERCIAL METALS COMPANY 
IRVING, Texas, Jan. 7, 2013 /PRNewswire/ -- Commercial Metals Company (NYSE: CMC) today announced financial results for the first quarter ended November 30, 2012. Net earnings attributable to CMC for the first quarter were $49.7 million or $0.42 per diluted share on net sales of $1.8 billion. This compares to net earnings of $107.7 million or $0.93 per diluted share on net sales of $2.0 billion for the three months ended November 30, 2011.
First quarter results 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 three months ended November 30, 2011 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 $15.2 million ($0.13 per diluted share) for the three months ended November 30, 2012, compared with after-tax LIFO income of $15.5 million ($0.13 per diluted share) during the prior year's first quarter.
Joe Alvarado, Chairman of the Board, President, and CEO, commented, "We continued to improve our competitive position by adding $29 million of cash as a result of the Trinecke Zelezarny, a.s. share sale. Furthermore, we improved sequential operating results entering the winter season and all of our reporting segments remained profitable for the third quarter in a row."
On January 4, 2013, the board of directors of CMC declared a quarterly dividend of $0.12 for shareholders of record on January 18, 2013. The dividend will be paid on February 1, 2013.
First Quarter Fiscal 2013 versus First Quarter Fiscal 2012
Cash and short-term investments totaled $271.4 million as of November 30, 2012, compared with $262.4 million as of August 31, 2012. Adjusted operating profit was $90.6 million for the three months ended November 30, 2012, compared with adjusted operating profit of $21.1 million during the prior year's first quarter. Adjusted EBITDA was $126.2 million for the three months ended November 30, 2012, compared with adjusted EBITDA of $55.5 million for the three months ended November 30, 2011.
Our Americas Recycling segment recorded an adjusted operating profit of $4.5 million for this year's first quarter, compared with $20.8 million in the prior year's first quarter. Compared to the prior year's first quarter, there was lower demand, which negatively affected ferrous and nonferrous pricing and volumes. Lower domestic mill operating rates and general economic uncertainty contributed to reduced demand in the first quarter of fiscal 2013. LIFO income declined by $8.2 million to $2.4 million in the first quarter of fiscal 2013, from $10.6 million in the prior year's first quarter.
Our Americas Mills segment recorded an adjusted operating profit of $52.5 million for this year's first quarter, $5.4 million less than the prior year's first quarter adjusted operating profit of $57.9 million. Compared to the prior year's first quarter, increased conversion costs offset improvements in both shipping volumes and metal margins. The primary factor contributing to higher costs was an extended outage at our South Carolina melt shop where we installed a new electric arc furnace and related components. We incurred approximately $5.5 million of expenses associated with the outage, which were included in this quarter's results.
Our Americas Fabrication segment recorded an adjusted operating profit of $10.2 million for this year's first quarter, marking a significant improvement of $17.6 million over the prior year's first quarter adjusted operating loss of $7.4 million. The segment continued to benefit from stable material pricing and improved backlog margins.
Our International Mill segment had an adjusted operating profit of $0.9 million for this year's first quarter, compared with an adjusted operating profit of $9.8 million in the prior year's first quarter. We experienced declining volumes and margins as market conditions in Europe continued to erode.
Our International Marketing and Distribution segment recorded an adjusted operating profit of $40.2 million for this year's first quarter, compared with an adjusted operating loss of $4.1 million in last year's first quarter. Included in this segment's results was the $26.1 million pre-tax gain on the November 2012 sale of our Trinecke Zelezarny, a.s. investment. Additionally, within the segment, the raw materials business experienced a profit recovery compared to the prior year's first quarter, which included charges on long positions the Company held on iron ore purchase contracts. Overall this segment continued to lack momentum in terms of volumes and margins as uncertainty continued to exist in most major global markets.
Outlook
Alvarado concluded, "Our second fiscal quarter is normally our weakest period of the year due to holiday slowdowns and winter weather conditions curtailing construction activity. However, there is growing evidence of an emerging recovery in domestic construction end markets, which is encouraging for future quarters. Our customers remain cautious, and stocking levels are low. Within our segments, we expect our Americas Recycling segment to benefit from scrap price improvements, which historically occur during our second fiscal quarter. We believe the scrap price improvements will likely result in near term downstream margin compression in our Americas Mills and Fabrication segments. We believe our International Mill segment will remain challenged by deteriorating conditions in the Euro zone. Further, we expect the International Marketing and Distribution segment to exhibit continued softness until there is more clarity around the economic direction in both domestic and international markets. In response to these near term headwinds, we will take advantage of the holidays and the winter weather conditions to adjust our operating rates and our inventories while retaining full flexibility to respond quickly to any upturn in our markets."
Conference Call
CMC invites you to listen to a live broadcast of its first quarter 2013 conference call today, Monday, January 7, 2013, at 9:00 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 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 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 and their effects, inventory levels, our plans with respect to operating rates, 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
OPERATING STATISTICS AND BUSINESS SEGMENTS (UNAUDITED)
Three months ended
------------------
(short tons in
thousands) 11/30/12 11/30/11
--------------
Americas
Recycling
tons shipped 562 598
Americas Steel
Mills rebar
shipments 369 324
Americas Steel
Mills
structural
and other
shipments 297 317
--- ---
Total Americas
Steel Mills
tons shipped 666 641
International
Mill
shipments 345 378
Americas Steel
Mills average
FOB selling
price (total
sales) $669 $707
Americas Steel
Mills average
cost ferrous
scrap
utilized $339 $385
---- ----
Americas Steel
Mills metal
margin $330 $322
Americas Steel
Mills average
ferrous scrap
purchase
price $294 $344
International
Mill average
FOB selling
price (total
sales) $603 $603
International
Mill average
cost ferrous
scrap
utilized $380 $375
---- ----
International
Mill metal
margin $223 $228
International
Mill average
ferrous scrap
purchase
price $310 $310
Americas
Fabrication
rebar
shipments 225 213
Americas
Fabrication
structural
and post
shipments 35 32
--- ---
Total Americas
Fabrication
tons shipped 260 245
Americas
Fabrication
average
selling price
(excluding
stock and
buyout sales) $934 $880
(in thousands) Three months ended
------------- ------------------
Net sales 11/30/12 11/30/11
--------- -------- --------
Americas
Recycling $351,961 $414,805
Americas Mills 496,449 525,496
Americas
Fabrication 356,592 319,768
International
Mill 222,067 296,181
International
Marketing and
Distribution 608,588 710,071
Corporate 2,799 60
Eliminations (249,230) (279,561)
-------- --------
Total net
sales $1,789,226 $1,986,820
---------- ----------
Adjusted
operating
profit (loss)
--------------
Americas
Recycling $4,494 $20,816
Americas Mills 52,522 57,931
Americas
Fabrication 10,192 (7,380)
International
Mill 876 9,822
International
Marketing and
Distribution 40,161 (4,101)
Corporate (17,370) (23,268)
Eliminations (660) (6,145)
---- ------
Adjusted
operating
profit from
continuing
operations 90,215 47,675
Adjusted
operating
profit (loss)
from
discontinued
operations 388 (26,552)
--- -------
Adjusted
operating
profit $90,603 $21,123
------- -------
COMMERCIAL METALS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended
------------------
(in thousands, except share data) 11/30/12 11/30/11
-------------------------------- -------- --------
Net sales $1,789,226 $1,986,820
Costs and expenses:
Cost of goods sold 1,600,327 1,814,284
Selling, general and
administrative expenses 99,893 126,521
Interest expense 17,024 16,297
------ ------
1,717,244 1,957,102
Earnings from continuing
operations before taxes 71,982 29,718
Income taxes (benefit) 22,515 (95,327)
------ -------
Earnings from continuing
operations 49,467 125,045
------ -------
Earnings (loss) from discontinued
operations before taxes 388 (27,003)
Income taxes (benefit) 136 (9,694)
--- ------
Earnings (loss) from discontinued
operations 252 (17,309)
--- -------
Net earnings 49,719 107,736
Less net earnings attributable to
noncontrolling interests 2 2
--- ---
Net earnings attributable to CMC $49,717 $107,734
------- --------
Basic earnings (loss) per share
attributable to CMC:
Earnings from continuing
operations $0.43 $1.08
Earnings (loss) from discontinued
operations - (0.15)
--- -----
Net earnings $0.43 $0.93
Diluted earnings (loss) per share
attributable to CMC:
Earnings from continuing
operations $0.42 $1.07
Earnings (loss) from discontinued
operations - (0.14)
--- -----
Net earnings $0.42 $0.93
Cash dividends per share $0.12 $0.12
----- -----
Average basic shares outstanding 116,336,504 115,530,545
----------- -----------
Average diluted shares
outstanding 117,093,627 116,449,483
----------- -----------
COMMERCIAL METALS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands) November 30, August 31,
2012 2012
--- ---- ----
Assets
Current assets:
Cash and cash equivalents $271,396 $262,422
Accounts receivable, net 926,409 958,364
Inventories, net 914,289 807,923
Other 191,831 211,122
------- -------
Total current assets 2,303,925 2,239,831
Net property, plant and equipment 990,379 994,304
Goodwill 77,149 76,897
Other assets 126,116 130,214
Total assets $3,497,569 $3,441,246
---------- ----------
Liabilities and stockholders' equity
Current liabilities:
Accounts payable-trade $414,674 $433,132
Accounts payable-documentary letters of credit 156,204 95,870
Accrued expenses and other payables 312,075 343,337
Notes payable 12,555 24,543
Current maturities of long-term debt 204,066 4,252
------- -----
Total current liabilities 1,099,574 901,134
Deferred income taxes 19,546 20,271
Other long-term liabilities 116,562 116,261
Long-term debt 953,530 1,157,073
------- ---------
Total liabilities 2,189,212 2,194,739
Stockholders' equity attributable to CMC 1,308,201 1,246,368
Stockholders' equity attributable to noncontrolling
interests 156 139
--- ---
Total equity 1,308,357 1,246,507
Total liabilities and stockholders' equity $3,497,569 $3,441,246
---------- ----------
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended
------------------
(in thousands) 11/30/12 11/30/11
------------- -------- --------
Cash flows from (used by) operating activities:
Net earnings $49,719 $107,736
Adjustments to reconcile net earnings to cash flows from
(used by) operating activities:
Depreciation and amortization 33,751 35,028
Provision for losses on receivables, net 1,153 239
Share-based compensation 4,509 3,881
Amortization of interest rate swaps termination gain (2,908) -
Deferred income taxes (benefit) 23,876 (112,237)
Net (gain) loss on sale of assets and other (26,071) 374
Write-down of inventory 1,063 5,907
Asset impairment 3,028 1,044
Changes in operating assets and liabilities, net of acquisitions:
Decrease in accounts receivable 81,217 94,061
Accounts receivable sold (repurchased), net (46,614) 47,785
Increase in inventories (100,139) (24,786)
Decrease (increase) in other assets (740) 2,978
Decrease in accounts payable, accrued expenses, other (56,228) (121,167)
payables and income taxes
Increase (decrease) in other long-term liabilities 113 (2,704)
--- ------
Net cash flows from (used by) operating activities (34,271) 38,139
Cash flows from (used by) investing activities:
Capital expenditures (24,757) (29,925)
Proceeds from the sale of property, plant and equipment and other 5,956 7,014
Proceeds from the sale of cost method investment 28,995 -
Increase in deposit for letters of credit - (865)
--- ----
Net cash flows from (used by) investing activities 10,194 (23,776)
Cash flows from (used by) financing activities:
Increase in documentary letters of credit 60,217 13,080
Short-term borrowings, net change (13,045) 44,432
Repayments on long-term debt (1,284) (44,584)
Stock issued under incentive and purchase plans, net of forfeitures (414) (27)
Cash dividends (13,963) (13,863)
Contribution from (purchase of) noncontrolling interests 15 (30)
--- ---
Net cash flows from (used by) financing activities 31,526 (992)
Effect of exchange rate changes on cash 1,525 (7,658)
----- ------
Increase in cash and cash equivalents 8,974 5,713
Cash and cash equivalents at beginning of year 262,422 222,390
Cash and cash equivalents at end of period $271,396 $228,103
-------- --------
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
------------------
(in thousands) 11/30/12 11/30/11
------------- -------- --------
Earnings from continuing
operations $49,467 $125,045
Income taxes (benefit) 22,515 (95,327)
Interest expense 17,024 16,297
Discounts on sales of accounts
receivable 1,209 1,660
Adjusted operating profit from
continuing operations 90,215 47,675
Adjusted operating profit (loss)
from discontinued operations 388 (26,552)
---
Adjusted operating profit $90,603 $21,123
------- -------
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, including impairment charges. As a measure of cash flow before interest expense, it is one guideline management uses 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.
Three months ended
------------------
(in thousands) 11/30/12 11/30/11
------------- -------- --------
Earnings from continuing
operations $49,467 $125,045
Less net earnings attributable to
noncontrolling interests (2) (2)
Interest expense 17,024 16,297
Income taxes (benefit) 22,515 (95,327)
Depreciation, amortization and
impairment charges 36,779 34,479
Adjusted EBITDA from continuing
operations 125,783 80,492
Adjusted EBITDA from discontinued
operations 388 (24,959)
Adjusted EBITDA $126,171 $55,533
-------- -------
Adjusted EBITDA to interest for the quarter ended November 30, 2012:
$126,171 / 17,024 = 7.4
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 November 30, 2012 to the most comparable GAAP measure, stockholders' equity:
Stockholders' equity
attributable to CMC $1,308,201
Long-term debt 953,530
Deferred income taxes 19,546
------
Total capitalization $2,281,277
OTHER FINANCIAL INFORMATION
Long-term debt to capitalization ratio as of November 30, 2012:
$953,530 / 2,281,277 = 41.8%
Total debt to capitalization plus short-term debt plus notes payable ratio as of November 30, 2012:
+ 204,066 + 12,555 ) / + 204,066 + 12,555 ) = 46.8%
( $953,530 ( $2,281,277
Current ratio as of November 30, 2012:
Current assets divided by current liabilities
$2,303,925 / 1,099,574 = 2.1
SOURCE Commercial Metals Company
