Irving, Texas, March 20 /PRNewswire-FirstCall/ -- Commercial Metals
Company (NYSE: CMC) today reported net earnings of $65.9 million or $0.54
per diluted share on net sales of $2.0 billion for the quarter ended
February 28, 2007. This compares with net earnings of $80.1 million or
$0.65 per diluted share on net sales of $1.6 billion for the second quarter
last year.
This year's second quarter included after-tax LIFO expense of $12.3
million or $0.10 per diluted share compared with income of $2.6 million or
$0.02 per share in last year's second quarter. LIFO is an inventory costing
method that assumes the most recent inventory purchases or goods
manufactured are sold first which in periods of rising prices results in an
expense that eliminates inflationary profits from net income.
Net earnings for the six months ended February 28, 2007, were $151
million or $1.25 per diluted share on net sales of $4.0 billion. For the
same period last year, net earnings were $150 million or $1.22 per diluted
share on net sales of $3.3 billion. For the six months ended February 28,
2007, after-tax LIFO expense was $18.9 million or $0.16 per share compared
with an expense of $11.5 million or $0.09 per share last year.
Selling, general and administrative expenses in the second quarter
included $9.9 million of costs associated with the investment in the global
deployment of SAP software. For the six months ended February 28, 2007, the
amount was $10.7 million. Other costs of $12.3 million, substantially all
of which represents software acquisition, have been capitalized.
Our outlook remains strong. As discussed in more detail later in this
release, we anticipate a record third quarter LIFO diluted net earnings per
share between $0.70 to $0.80 (estimated pre-tax LIFO expense of $25
million) compared to last year's third quarter of $0.62 per share which is
the current record third quarter.
General Conditions
CMC President and Chief Executive Officer Murray R. McClean said, "We
achieved solid results for a second quarter with a significant improvement
at CMCZ, our Polish operation. The winter quarter (December to February) is
typically our weakest quarter. In the U.S., we took the opportunity to
undertake major maintenance and capital expenditure programs at our
domestic steel mills during the quarter. As a result, our steel shipping
volumes were down by 40 thousand tons. Rising steel prices late in the
quarter caused larger than expected LIFO charges in our Domestic Mills and
Domestic Fabrication segments. With its faster inventory turns, our
Recycling segment benefited more rapidly from higher scrap prices.
Marketing and Distribution continued to take advantage of overall favorable
global metal markets."
Domestic Mills
McClean added, "Our domestic mills achieved the second-best second
quarter in their history, bettered only by last year's record. Adjusted
operating profit of $61.7 million was 13% behind last year. Within the
segment, quarterly adjusted operating profit for our domestic steel
minimills was $59.4 million, down 8% from the prior year. Metal margins
increased by $33 to $326 per ton, as average selling prices (total sales)
rose $41 per ton in conjunction with an increase in the average cost of
scrap used of $8 per ton. Shipments of 563 thousand tons fell 40 thousand
tons compared to last year's second quarter. The largest decline occurred
at CMC Steel Texas due to scheduled maintenance for the melt shop (down 19
days for furnace shell replacement) and the rolling mill (down 13 days for
annual maintenance, including relining of the reheat furnace). Repair and
maintenance expense rose $4.2 million from last year. LIFO expense pre-tax
for the steel mills was $14 million; the prior year number was an expense
of only $686 thousand. The increase was driven by 12% cost increases
coupled with modest inventory quantity increases. Tonnage melted fell 46
thousand tons to 531 thousand tons, and tons rolled fell 17 thousand tons
to 515 thousand tons due to the scheduled maintenance. Utility costs
decreased by $5.7 million, split evenly between electricity and natural gas
with declines in both pricing and usage.
"Pounds shipped at our copper tube mill declined 27% to 11.5 million
pounds compared to last year's second quarter, attributable to the weaker
housing market in the U.S. and destocking at distributors. Operating profit
fell 64%. Copper tube production decreased 38% to 10.4 million pounds.
There was pre-tax LIFO income of $5.4 million compared to a pre-tax LIFO
expense of $1.7 million in the prior year as copper prices fell throughout
the quarter with only a partial recovery near quarter end."
CMCZ (Poland)
McClean continued, "Our Polish steel operation continued to achieve
record profitability as its adjusted operating profit of $25.8 million was
level with the first quarter, a stellar accomplishment in its traditionally
weakest period. It was an all-time record second quarter and stood in stark
contrast to last year's breakeven results. Strong Polish GDP growth,
growing infrastructure work, and an improving German economy all
contributed to the excellent performance. Our mega shredder continues to
sustain higher melt shop yields and lower melt shop costs. Both fab shops,
including our newest acquisition in eastern Germany, were profitable.
Average selling prices rose 20% to 1,486 PLN ($507) per short ton while the
cost of scrap utilized increased 19% to 826 PLN ($282) per short ton
resulting in a 21% increase in metal margin to 660 PLN ($225). The increase
in metal spreads was combined with a 29% increase in short tons shipped,
and the percentage of tons shipped domestically rose to 57%. For the
quarter, melted tons equaled 378 thousand, rolled tons equaled 292
thousand, and shipments totaled 369 thousand, all significantly above the
prior year numbers of 285 thousand melted, 261 thousand rolled, and 285
thousand shipped.
"After the quarter end, we completed the purchase of the State
Treasury's shares for $59.5 million raising our ownership to 99%."
Domestic Fabrication
McClean said, "Rising steel prices had dual negative effects on our
Domestic Fabrication segment. Margins are temporarily squeezed until jobs
currently bid at higher prices reach production, and rising prices
inevitably bring LIFO expense. Adjusted operating profit for the quarter
was $13.9 million, a 64% decline from the prior year's quarter. Pre-tax
LIFO expense for the quarter was $6.3 million compared to last year's
income of $9.7 million, a swing of $16 million. Average pricing was up
across all product areas while shipments were about even with the prior
year. Operating profits were lower in all areas."
Recycling
According to McClean, "In a quarter marked by particularly volatile
metal pricing, our rapid inventory turnover strategy resulted in an
all-time record second quarter for the segment. Operating profit of $20.9
million increased 12% over last year's quarter and just surpassed the
previous record second quarter of fiscal 2005. Profitability was balanced
between ferrous and nonferrous product lines. Ferrous prices were on an
upward tear at the end of the quarter and rose 8% on average for the
quarter compared to last year. Average nonferrous pricing rose 28% over the
previous year as copper prices, though falling during the quarter, were
still significantly higher than last year. Ferrous shipments rose 6% to 517
thousand tons compared to the previous year; nonferrous shipments were up
11% to 82 thousand tons. Reduced tons in inventory led to pre-tax LIFO
income of $2.7 million compared to LIFO expense of $3.2 million. The total
volume of scrap processed, including all our domestic processing
operations, equaled 881 thousand tons against 862 thousand tons in last
year's second quarter."
Marketing and Distribution
"Adjusted operating profit of $15.2 million represents an 18% increase
over the same period last year and stands as the second-best second quarter
in history for the segment," according to McClean. "Underlining the
strength of the global metal markets, the segment achieved these results in
spite of absorbing a pre-tax LIFO expense of $6.7 million (higher prices)
compared to an expense in the prior year of $1.8 million. International
steel markets were notably strong with general increases in prices,
quantities, and profits in Australia, Germany, the U.K. and our inter-Asian
(mainly Chinese export) markets. Industrial materials and products
continued their strong performance, though down slightly from the prior
year. Our nonferrous semi import business gained over the prior year on the
strength of rising profitability from stainless steel products.
Operationally our domestic steel import business continued strongly, but
was the operating unit that was most affected by the LIFO charges."
Financial Condition
McClean added, "Our financial position remains strong. At quarter end,
long-term debt as a percentage of total capitalization was 18%. Our working
capital was $1.0 billion, and the current ratio was 2.1. Our coverage
ratios were strong. Cash flows from operating activities were $88 million."
Outlook
McClean continued, "Our third fiscal quarter is aligned to be our
strongest ever third quarter. Global infrastructure growth is creating
unprecedented demand for rebar and other steel long products, in particular
in the markets of North Africa, Middle East, North Europe, Central and
Eastern Europe, Russia and Asia. In the U.S., the non-residential
construction market should remain strong and robust. The comparatively mild
winter in many northern hemisphere countries, as well as the early
settlement of 2007 iron ore contract prices, set the stage for significant
price increases of most steel products starting in early calendar 2007.
U.S. ferrous scrap prices, in particular obsolete grades, are currently at
record levels due to both international and domestic demand. As ferrous
scrap flow increases, there could be a correction. Rebar prices are likely
to reach record levels in many international markets. The level of rebar
imports into the U.S. should remain at lower levels compared with 2006.
U.S. steel prices, in general, are likely to continue to lag international
prices, and this will continue to curb the level of imports."
In conclusion, McClean said, "We believe our U.S. steel mills will
benefit from higher prices and higher shipments. Our copper tube mill
should improve over the second quarter's performance. Our Domestic
Fabrication segment should increase shipments although there will be some
margin squeeze due to the rapidly rising steel prices. Recycling should
benefit from record ferrous scrap prices and strong nonferrous scrap
prices. CMCZ (Poland) should have an exceptional quarter based on a booming
construction market in Central and Eastern Europe. Our Marketing and
Distribution segment should benefit from strong growth in most global
markets and will have a solid third quarter. In summary, we anticipate a
record third quarter."
Conference Call
CMC invites you to listen to a live broadcast of its second quarter
2007 conference call on Tuesday, March 20, at 11:00 a.m. ET. The call will
be hosted by Stan Rabin, Chairman, Murray McClean, President and CEO, and
Bill Larson, Sr. Vice President and CFO, and can be accessed via our
website at http://www.cmc.com or at http://www.streetevents.com. In the
event you are unable to listen to the live broadcast, the call will be
archived and available for replay within two hours of the webcast.
Financial and
statistical information presented in the broadcast can be found on
CMC's website under "Investor Relations."
Forward-Looking Statements
Paragraphs five, fifteen and sixteen (Outlook) of this news release
contain forward-looking statements regarding the outlook for the Company's
financial results including net earnings, product pricing and demand,
import levels, production rates, inventory levels, and general market
conditions. These forward-looking statements generally can be identified by
phrases such as the company or its management "expects," "anticipates,"
"believes," "ought," "should," "likely," "appears," "outlook," "projects,"
"forecasts," or other words or phrases of similar impact. There is inherent
risk and uncertainty in any forward-looking statements. Variances will
occur and some could be materially different from management's current
opinion. Developments that could impact the Company's expectations include
interest rate changes, construction activity, 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, successful implementation of new
technology, cost of construction, delays due to permitting and regulatory
approvals court decisions, industry consolidation or changes in production
capacity or utilization, global factors including political and military
uncertainties, credit availability, currency fluctuations, energy prices,
and decisions by governments impacting the level of steel imports and pace
of overall economic activity.
COMMERCIAL METALS COMPANY
Condensed Consolidated Statements of Earnings (Unaudited)
(in thousands except share data)
Three months Six months
ended ended
------------------------------------------------
2/28/07 2/28/06 2/28/07 2/28/06
------------------------ ------------------------
Net Sales $2,015,776 $1,639,487 $4,002,320 $3,285,185
Costs and Expenses:
Cost of goods sold 1,757,026 1,388,883 3,460,416 2,813,613
Selling, general and
administrative expenses 141,543 118,623 276,722 225,357
Interest expense 8,852 6,952 17,080 13,876
------------------------------------------------
1,907,421 1,514,458 3,754,218 3,052,846
Earnings Before Income
Taxes and Minority
Interests 108,355 125,029 248,102 232,339
Income Taxes 37,786 45,504 87,555 82,945
Earnings before Minority
Interests 70,569 79,525 160,547 149,394
Minority Interests 4,648 (578) 9,276 (333)
------------------------------------------------
Net Earnings $ 65,921 $ 80,103 $ 151,271 $ 149,727
------------------------------------------------
Basic earnings per
share $ 0.56 $ 0.68 $ 1.29 $ 1.28
Diluted earnings per
share $ 0.54 $ 0.65 $ 1.25 $ 1.22
Cash dividends per share $ 0.09 $ 0.03 $ 0.15 $ 0.06
Average basic shares
outstanding 117,266,573 117,551,782 117,348,716 116,743,700
Average diluted shares
outstanding 121,807,414 123,830,628 121,422,373 122,858,160
BUSINESS SEGMENTS
(in thousands)
Three months Six months
ended ended
------------------------------------------------
2/28/07 2/28/06 2/28/07 2/28/06
------------------------ ------------------------
Net Sales
Domestic Mills $ 364,869 $ 366,170 $ 722,424 $ 735,949
CMCZ 196,179 112,584 359,126 219,916
Domestic Fabrication 404,305 408,156 853,091 808,679
Recycling 353,548 272,013 736,609 508,412
Marketing and
Distribution 887,791 642,184 1,685,601 1,326,742
Corporate and
Eliminations (190,916) (161,620) (354,531) (314,513)
------------------------ ------------------------
Total Net Sales $2,015,776 $1,639,487 $4,002,320 $3,285,185
------------------------ ------------------------
Adjusted Operating Profit (Loss):
Domestic Mills $ 61,671 $ 70,767 $ 134,310 $ 135,686
CMCZ 25,826 (584) 51,620 948
Domestic Fabrication 13,883 38,494 45,379 56,691
Recycling 20,903 18,592 38,511 32,426
Marketing and Distribution 15,223 12,934 23,131 35,989
Corporate and Eliminations (18,915) (7,425) (25,426) (13,952)
COMMERCIAL METALS COMPANY
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
February 28, August 31,
2007 2006
--------------------------
Assets:
Current Assets:
Cash and cash equivalents $ 76,165 $ 180,719
Accounts receivable, net 1,006,493 1,134,823
Inventories 864,592 762,635
Other 80,408 66,615
--------------------------
Total Current Assets 2,027,658 2,144,792
Net Property, Plant and Equipment 627,371 588,686
Goodwill 35,815 35,749
Other Assets 171,878 129,641
--------------------------
$ 2,862,722 $ 2,898,868
--------------------------
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable -- trade $ 488,814 $ 526,408
Accounts payable -- documentary letters of
credit 129,522 141,713
Accrued expenses and other payables 294,851 379,764
Income taxes payable and deferred income taxes 10,286 14,258
Notes payable -- CMC International - 60,000
Current maturities of long-term debt 54,600 60,162
--------------------------
Total Current Liabilities 978,073 1,182,305
Deferred Income Taxes 33,295 34,550
Other Long-Term Liabilities 98,727 78,789
Long-Term Debt 309,170 322,086
Minority Interests 72,195 61,034
Stockholders' Equity 1,371,262 1,220,104
--------------------------
$2,862,722 $2,898,868
Three months Six months
ended ended
------------------------------------------------
2/28/07 2/28/06 2/28/07 2/28/06
------------------------ ------------------------
(Short Tons in Thousands)
Domestic Steel Mill
Rebar Shipments 252 273 470 543
Domestic Steel Mill
Structural and Other
Shipments 311 330 619 684
CMCZ Shipments 369 285 681 542
--- --- ----- -----
Total Mill Tons Shipped 932 888 1,770 1,769
Average FOB Mill Domestic
Selling Price (Total Sales) $541 $500 $549 $495
Average Domestic Mill Ferrous
Scrap Purchase Price $200 $184 $192 $184
Average FOB Mill CMCZ Selling
Price (Total Sales) $507 $381 $502 $389
Average CMCZ Ferrous Scrap
Purchase Price $253 $179 $244 $176
Fab Plant Rebar Shipments 247 232 531 469
Fab Plant Structural, Joist,
and Post Shipments 119 131 239 257
--- --- --- ---
Total Fabrication Tons
Shipped 366 363 770 726
Average Fab Selling Price
(Excluding Stock & Buyout
Sales) $935 $871 $915 $857
Domestic Scrap Metal Tons
Processed and Shipped 881 862 1,818 1,701
COMMERCIAL METALS COMPANY
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Six months ended
------------------------
2/28/07 2/28/06
------------------------
Cash Flows From (Used by) Operating Activities:
Net earnings $ 151,271 $ 149,727
Adjustments to reconcile net earnings to
cash from (used by) operating activities:
Depreciation and amortization 49,021 39,678
Minority interests 9,276 (333)
Provision for losses on receivables 41 1,841
Share-based compensation 5,358 4,424
Net gain on sale of assets and other (28) (1,098)
Asset impairment 1,390 -
Changes in Operating Assets and Liabilities,
Net of Effect of Acquisitions:
Accounts receivable 42,145 (75,138)
Accounts receivable sold 95,255 -
Inventories (92,453) (57,967)
Other assets (57,958) (23,577)
Accounts payable, accrued expenses,
other payables and income taxes (133,079) (24,909)
Deferred income taxes (2,136) (635)
Other long-term liabilities 19,673 13,062
------------------------
Net Cash Flows From Operating Activities 87,776 25,075
Cash Flows From (Used by) Investing Activities:
Purchases of property, plant and equipment (75,100) (59,460)
Purchase of interest in CMC Zawiercie
and subsidiaries (61) -
Sales of property, plant and equipment 467 3,672
Acquisitions of fabrication businesses (10,633) (5,140)
------------------------
Net Cash Used By Investing Activities (85,327) (60,928)
Cash Flows From (Used by) Financing Activities:
Decrease in documentary letters of credit (12,191) (40,877)
Payments on trade financing arrangements - (1,667)
Short-term borrowings, net change (60,000) -
Payments on long-term debt (18,787) -
Proceeds from issuance of long-term debt - 6,040
Stock issued under incentive and purchase plans 14,024 21,172
Treasury stock acquired (17,744) -
Dividends paid (17,748) (7,005)
Tax benefits from stock plans 5,068 9,726
------------------------
Net Cash Used By Financing Activities (107,378) (12,611)
Effect of Exchange Rate Changes on Cash 375 1,171
-------------------------------------------------------------------------
Decrease in Cash and Cash Equivalents (104,554) (47,293)
Cash and Cash Equivalents at Beginning of Year 180,719 119,404
Cash and Cash Equivalents at End of Period $ 76,165 $ 72,111
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.
EBITDA:
Earnings before interest expense, income taxes, depreciation and
amortization.
EBITDA is a non-GAAP liquidity measure. It excludes Commercial Metals
Company's largest recurring non-cash charge, depreciation and amortization.
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.
EBITDA to interest is a covenant test in certain of the Company's note
agreements.
Three Months Six Months
Ended Ended
2/28/07 2/28/07
------------------------------
Net earnings $ 65,921 $ 151,271
Interest expense 8,852 17,080
Income taxes 37,786 87,555
Depreciation and amortization 23,855 49,021
-------------------------------------------------------------
EBITDA $ 136,414 $ 304,927
-------------------------------------------------------------
EBITDA to interest coverage
for the quarter ended February 28, 2007: for the six months ended
February 28, 2007:
$136,414 / 8,852 = 15.4 $304,927 / 17,080 = 17.9
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 February 28, 2007 to the nearest GAAP measure,
stockholders' equity:
Stockholders' equity $ 1,371,262
Long-term debt 309,170
Deferred income taxes 33,295
Total capitalization $ 1,713,727
Other Financial Information
Long-term debt to cap ratio as of February 28, 2007:
Debt divided by capitalization
$309,170 / 1,713,727 = 18.0%
Total debt to cap plus short-term debt ratio as of February 28, 2007:
$363,770 / (1,713,727 + 54,600) = 20.6%
Current ratio as of February 28, 2007:
Current assets divided by current liabilities
$2,027,658 / 978,073 = 2.1
SOURCE Commercial Metals Company
 back to top
Related links:
http://www.cmc.com
http://www.streetevents.com
CONTACT:
Debbie Okle, Director, Public Relations,
+1-214-689-4354
|
