IRVING, Texas, March 22 /PRNewswire-FirstCall/ -- Commercial Metals
Company (NYSE: CMC) today reported net earnings of $56.6 million or $0.91 per
diluted share on net sales of $1.6 billion for the quarter ended
February 28, 2005, ranking it as the strongest second quarter ever reported
for the Company. This compares with net earnings of $21.2 million or
$0.35 per diluted share on net sales of $1.1 billion for the second quarter
last year. This year's second quarter included after-tax LIFO expense of
$2.6 million or $0.04 per diluted share compared to $6.2 million or $0.10 per
share in last year's second quarter.
Net earnings for the six months ended February 28, 2005 were
$130.3 million or $2.11 per diluted share on net sales of $3.1 billion. For
the same period last year, net earnings were $33.8 million or $0.57 per
diluted share on net sales of $1.9 billion. For the six months ended February
28, 2005, after-tax LIFO expense was $24.8 million or $0.40 per share compared
to $7.0 million or $0.12 per share last year.
CMC Chairman, President and Chief Executive Officer Stanley A. Rabin said,
"We again generated excellent profits in what is typically our weakest
quarter, results even better than our expectations. As we anticipated, the
second quarter reflected some seasonal weakening and inventory adjustments by
customers. Profitability was relatively strong in all of our segments except
for the Polish steel operation and was sparked by the anticipated pickup in
our Domestic Fabrication segment. Our outlook for the third quarter and
second half remains very positive. As discussed in more detail later in this
release, we believe end-use demand should accelerate and prices stabilize. We
anticipate third quarter LIFO diluted net earnings per share between $1.10 and
$1.30. Our earnings estimate does not include any additional income from the
business interruption insurance claims."
Domestic Mills
Rabin added, "Our Domestic Mills segment's adjusted operating profit at
$36.0 million was more than double last year's second quarter. The LIFO
expense was $1.0 million pre-tax compared with $5.0 million last year. Within
the segment, adjusted operating profit for our steel minimills was more than
180% greater than a year earlier on the strength of much improved selling
prices and gross margins, which more than offset a decline in finished goods
shipments as well as the rise in steel scrap costs. Customers were working
down inventories ordered in the fall, including imports, in concern over last
summer's tight markets. Compared with last year's second quarter, the metal
spread increased by $73 per ton to $264 per ton. On a year-to-year basis,
tonnage melted for the second quarter was down 6% to 535 thousand tons;
tonnage rolled was 472 thousand tons, 13% below last year's second quarter.
Shipments decreased 17% to 506 thousand tons. Our average total mill selling
price was $135 per ton above last year's level, and the average selling price
for finished goods was up by $144 per ton to $490 per ton. By product line,
the price premium of merchant bar over reinforcing bar remained wide at
$120 per ton. The average scrap purchase cost rose by $34 per ton versus a
year ago to $181 per ton. Total utility costs were essentially unchanged
compared with the second quarter last year with generally lower usage but
higher rates, especially for natural gas. Year-over-year changes for
ferroalloys, graphite electrodes and other supplies were mixed. The copper
tube mill recorded an adjusted operating profit modestly less than that of
last year's second quarter. Good demand from commercial as well as
residential users was offset by a decline in metal spreads of 4 cents per
pound to 54 cents per pound due to the more pronounced rise in the cost of
copper scrap. Against the same period last year, copper tube production was
unchanged while shipments edged higher to 16.0 million pounds.
"During the quarter we filed our initial claim at $20 million for business
interruption reimbursement for the transformer failure at SMI-Texas. We
recorded an advance of $4.5 million in the Domestic Mills segment. Our
ultimate total recovery remains dependent on resolution of issues regarding
lost sales, prices, costs incurred and avoided, deductible amounts, and other
factors. We cannot reasonably estimate the amount of our total recovery at
this time. Discussions continued as well on the previously filed South
Carolina mill business interruption claim; no further recovery was recorded."
CMCZ
Rabin continued, "After a string of outstanding quarters since the
acquisition, it was a difficult quarter for CMCZ. The Polish operation
recorded an adjusted operating loss of $4.5 million on a 100%-owned basis
compared with an adjusted operating profit of $6.2 million the previous year.
Operating levels and shipments were down dramatically compared with the second
quarter of fiscal 2004. Severe weather slowed construction in Poland and,
thereby, impacted sales; the effects of weak construction activity in Germany
spilled over into Poland. Exports were extremely limited because of the
relatively strong Polish Zloty, especially against the Euro. For the quarter,
tons melted equaled 203 thousand, rolled tons equaled 206 thousand, and
shipments totaled 208 thousand tons including billets. Meanwhile, the average
selling price rose to PLN 1,523 per ton (including 7% billets) from PLN 1,083
per ton (including 22% billets) while the average metal cost increased to PLN
904 per ton from PLN 621 per ton."
Fabrication
Rabin said, "As expected, we achieved a significant turnaround in the
Fabrication segment compared with a small loss last year. Prices and volumes
within the segment were mostly higher even though shipments were, typically
for our second quarter, affected by the seasonality. We recorded a
substantial increase in adjusted operating profit to $24.6 million in this
segment, including an increase of $4.6 million pre-tax LIFO expense. Last
year's LIFO charge was $2.6 million. Construction activity was mixed and
varied by geographic region. Public and institutional construction continued
at a solid level, and various sectors of commercial construction showed
improvement. All product areas -- rebar fabrication, construction-related
products (CRP), steel fence posts, steel joist manufacturing, cellular beam
manufacturing, structural steel fabrication, and heat treating -- contributed
to the improvement in profitability. Shipments from our fab plants totaled
307 thousand tons, 7% above the prior year's second quarter, while the
composite average fab selling price (excluding stock and buyouts) increased by
$265 per ton."
Recycling
According to Rabin, "The Recycling segment recorded a record second
quarter with net sales up by 18% compared with one year ago. The adjusted
operating profit of $20.1 million was 13% greater than last year's outstanding
second quarter. LIFO income was $1.0 million pre-tax this quarter versus an
expense of $2.0 million the prior year. Gross margins were 8% above last
year. The ferrous scrap market was still strong (and volatile), although down
from the first quarter of this year, characterized by some lull in consumer
buying. Nonferrous markets remained volatile as well, but with an upward bias
in prices from already high levels. Export demand was mixed. Versus last
year, the average ferrous scrap sales price for the quarter increased by 15%
to $197 per short ton although shipments slipped 6% to 463 thousand short
tons. The average nonferrous scrap sales price for the quarter was
approximately 17% above a year ago while nonferrous shipments were 14% higher.
Inventory turnover across the board remained extremely high. The total volume
of scrap processed, including all our domestic processing plants, equaled
822 thousand tons against 838 thousand tons last year."
Marketing and Distribution
"Adjusted operating profit for the Marketing and Distribution segment of
$23.2 million was more than double last year's already strong second quarter
on much higher net sales despite seasonal factors. Our business was good in
the United States, Australia, China, elsewhere in Asia, and in Europe. A
broad array of product lines contributed to the high volumes and increased
gross margins," Rabin said. "This segment recorded LIFO income of
$500 thousand pre-tax compared with an expense of $17 thousand the year
before. The margins and shipments in steel, aluminum, copper and stainless
steel increased significantly over the prior year. Sales and margins for
industrial materials and products far surpassed previous record levels;
increased activity included minerals, ores, refractories, ferroalloys, and
various metals and alloys. Our value-added downstream and processing
businesses continued to perform very well."
Financial Condition
According to Rabin, "Our financial position remains strong. At
February 28, 2005, our stockholders' equity was $837 million. At quarter end,
our working capital was $796 million, and the current ratio was 2.0. Our
coverage ratios remain strong. Long-term debt as a percentage of total
capitalization was 31%, and the ratio of total debt to total capitalization
plus short-term debt was 33%. Both ratios include the debt of CMCZ which has
recourse only to the assets of CMCZ."
Outlook
Rabin continued, "Overall, our outlook for the third quarter and second
half remains very positive. Some distributors are overstocked, but end-use
demand should accelerate in the U.S., Asia, Central Europe and Latin America
while business should remain strong in Australia. Asia, in particular,
appears to be picking up again. Worldwide non-residential construction is
expected to strengthen beginning this month. The substantial increases in the
calendar year 2005 prices of iron ore and coke (used by blast furnace
steelmakers) bodes well for the international price levels of steel scrap and
steel products. Our domestic steel mill prices are stable at relatively high
levels (although off the peaks) and continue to be underpinned by the growing
U.S. economy and weak U.S. dollar. Additionally, imports of carbon steel bar
products declined in recent months. Our mill shipments should accelerate
during the third quarter. Steel scrap prices remain relatively strong
(although again below the peak) and show signs of stabilizing or even rising
again internationally. The outlook for nonferrous markets remains favorable.
"Accordingly, total earnings from our domestic steel mills should be
strong during the third quarter. The copper tube business should be steady.
Results at CMCZ should improve even though hindered by the strong Polish
currency and what will be a poor shipping level for March 2005. Our
anticipation remains that fabrication profits will expand further as bookings
have been at higher levels, and shipments will be robust. Our Recycling
segment will again post strong results. We expect the Marketing and
Distribution segment to continue to perform well buoyed by healthy volume and
margins in diversified markets and product lines. We anticipate third quarter
LIFO diluted net earnings per share between $1.10 and $1.30. Our earnings
estimate does not include any additional income from the business interruption
insurance claims."
CMC invites you to listen to a live broadcast of its second quarter 2005
conference call on Tuesday, March 22, at 3:00 p.m. ET. The call will be
hosted by Stan Rabin, Chairman, President and CEO, Murray McClean, Executive
Vice President and COO, and Bill Larson, Vice President and CFO, and can be
accessed via our website at http://www.commercialmetals.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."
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 overseas markets.
Paragraphs three, eleven, and twelve (Outlook) of this news release
contains forward-looking statements regarding the outlook for the Company's
financial results including net earnings, product pricing and demand, currency
valuation, production rates, insurance recoveries, 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," "believe," "ought," "should," "likely," "appears," "projected,"
"forecast," "presumes," "will," 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, court decisions, industry
consolidation or changes in production capacity or utilization, global factors
including political and military uncertainties, credit availability, currency
fluctuations, energy prices, disputes as to insurance coverage or the extent
of lost income subject to reimbursement which could result in a lengthy delay
or failure to obtain recovery under business interruption insurance, 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 ended Six months ended
2/28/05 2/29/04 2/28/05 2/29/04
Net sales $1,597,313 $1,068,060 $3,126,385 $1,898,067
Costs and Expenses:
Cost of goods sold 1,388,792 939,445 2,684,900 1,676,933
Selling, general and
administrative expenses 113,630 87,475 223,435 154,887
Interest expense 8,517 6,895 15,818 11,989
1,510,939 1,033,815 2,924,153 1,843,809
Earnings Before Income Taxes
and Minority Interests 86,374 34,245 202,232 54,258
Income Taxes 31,709 11,876 70,984 19,261
Earnings before Minority
Interests 54,665 22,369 131,248 34,997
Minority Interests (1,910) 1,214 948 1,214
Net Earnings $56,575 $21,155 $130,300 $33,783
Basic earnings per share $ 0.95 $ 0.37 $ 2.20 $ 0.59
Diluted earnings per share $ 0.91 $ 0.35 $ 2.11 $ 0.57
Cash dividends per share $ 0.06 $ 0.04 $ 0.11 $ 0.08
Average basic shares
outstanding 59,489,851 57,278,698 59,097,619 56,785,032
Average diluted shares
outstanding 62,427,957 59,756,312 61,664,332 58,878,116
BUSINESS SEGMENTS
(in thousands) Three months ended Six months ended
2/28/05 2/29/04 2/28/05 2/29/04
Net Sales:
Domestic Mills $283,835 $250,963 $599,597 $463,490
CMCZ 107,644 114,491 230,758 114,491
Fabrication 330,886 219,970 657,526 433,598
Recycling 224,510 189,875 444,980 321,767
Marketing and Distribution 749,004 403,117 1,429,599 743,498
Corporate and Eliminations (98,566) (110,356) (236,075) (178,777)
Total Net Sales $1,597,313 $1,068,060 $3,126,385 $1,898,067
Adjusted Operating Profit
(Loss):
Domestic Mills $36,042 $15,985 $86,726 $30,594
CMCZ (4,542) 6,221 7,773 6,221
Fabrication 24,578 (1,224) 49,169 4,492
Recycling 20,073 17,702 39,848 23,436
Marketing and Distribution 23,215 8,825 46,584 15,092
Corporate and Eliminations (3,465) (6,037) (10,268) (13,140)
COMMERCIAL METALS COMPANY
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
February 28, August 31,
2005 2004
Assets:
Current Assets:
Cash and cash equivalents $89,175 $123,559
Accounts receivable, net 685,339 607,005
Inventories 771,574 645,484
Other 52,894 48,184
Total Current Assets 1,598,982 1,424,232
Net Property, Plant and Equipment 479,982 451,490
Goodwill 30,542 30,542
Other Assets 94,850 81,782
$2,204,356 $1,988,046
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable - trade $362,484 $385,108
Accounts payable - documentary
letters of credit 142,905 116,698
Accrued expenses and other payables 228,350 248,790
Income taxes payable 34,418 11,343
Short-term trade financing arrangements 5,777 9,756
Notes payable - CMCZ 10,239 530
Current maturities of long-term debt 18,643 11,252
Total Current Liabilities 802,816 783,477
Deferred Income Taxes 50,520 50,433
Other Long-Term Liabilities 49,808 39,568
Long-term trade financing arrangement 8,800 14,233
Long-Term Debt 397,889 393,368
Minority Interests 57,822 46,340
Stockholders' Equity 836,701 660,627
$2,204,356 $1,988,046
Three months ended Six months Ended
(Short Tons in Thousands) 2/28/05 2/29/04 2/28/05 2/29/04
Domestic Steel Mill Rebar Shipments 188 249 420 502
Domestic Steel Mill Structural
and Other Shipments 318 360 632 673
CMCZ Shipments 208 390 460 390
Total Mill Tons Shipped 714 999 1,512 1,565
Average FOB Mill Domestic
Selling Price (Total Sales) $474 $339 $479 $324
Average FOB Mill Domestic
Selling Price (Finished Goods Only) $490 $345 $494 $330
Average Domestic Ferrous Scrap
Purchase Price $181 $147 $185 $132
Average FOB Mill CMCZ
Selling Price (Total Sales) $494 $286 $481 $286
Average CMCZ Ferrous Scrap
Purchase Price $207 $152 $227 $152
Fab Plant Rebar Shipments 207 192 445 371
Fab Plant Structural, Joist,
and Post Shipments 100 94 203 195
Total Fabrication Tons Shipped 307 286 648 566
Average Fab Selling Price (Excluding
Stock & Buyout Sales) $849 $584 $835 $570
Domestic Scrap Metal Tons
Processed and Shipped 822 838 1,650 1, 572
COMMERCIAL METALS COMPANY
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Six months ended
2/28/05 2/29/04
Cash Flows From (Used by)
Operating Activities:
Net earnings $130,300 $33,783
Adjustments to reconcile net earnings
to cash used by operating activities:
Depreciation and amortization 37,846 33,993
Business interruption insurance recovery (4,500) ---
Minority interests 948 1,214
Loss on reacquisition of debt --- 3,072
Provision for losses on receivables 3,012 3,790
Tax benefits from stock plans 8,168 2,514
Net gain on sale of assets and other (1,000) (116)
Changes in Operating Assets and Liabilities,
Net of Effect of Acquisitions:
Accounts receivable (82,198) (142,728)
Accounts receivable sold 26,238 55,671
Inventories (99,255) (141,517)
Other assets (5,494) (1,501)
Accounts payable, accrued expenses, other
payables and income taxes (50,164) 42,433
Deferred income taxes (30) 974
Other long-term liabilities 8,993 3,820
Net Cash Flows Used By Operating Activities (27,136) (104,598)
Cash Flows From (Used by) Investing Activities:
Purchases of property, plant and equipment (40,141) (14,572)
Sales of property, plant and equipment 2,598 420
Acquisitions of fabrication businesses (2,950) ---
Acquisitions of Lofland and CMCZ,
net of cash acquired --- (99,793)
Net Cash Used By Investing Activities (40,493) (113,945)
Cash Flows From (Used by) Financing Activities:
Increase in documentary letters of credit 26,207 69,113
Proceeds from trade financing arrangements --- 35,307
Payments on trade financing arrangements (11,378) (16,406)
Short-term borrowings, net change 9,583 4,966
Proceeds from issuance of long-term debt --- 200,000
Payments on long-term debt (423) (91,516)
Stock issued under incentive and purchase plans 14,121 11,867
Dividends paid (6,519) (4,520)
Debt reacquisition and issuance costs --- (4,989)
Net Cash From Financing Activities 31,591 203,822
Effect of Exchange Rate Changes on Cash 1,654 (1,209)
Increase (Decrease) in Cash and Cash Equivalents (34,384) (15,930)
Cash and Cash Equivalents at Beginning of Year 123,559 75,058
Cash and Cash Equivalents at End of Period $89,175 $59,128
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
2/28/05 2/28/05
Net earnings $56,575 $130,300
Interest expense 8,517 15,818
Income taxes 31,709 70,984
Depreciation and amortization 18,708 37,846
EBITDA $115,509 $254,948
EBITDA to interest coverage
for the quarter ended February 28, 2005:
$115,509/8,517 = 13.6
for the six months ended February 28, 2005:
$254,948/15,818 = 16.1
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, 2005 to the nearest GAAP measure, stockholders'
equity:
Stockholders' equity $836,701
Long-term debt 406,689
Deferred income taxes 50,520
Total capitalization $1,293,910
Other Financial Information
Long-term debt to cap ratio as of February 28, 2005:
Debt divided by capitalization
$406,689/1,293,910= 31.4%
Total debt to cap plus short-term debt ratio as of February 28, 2005:
$441,348/(1,293,910 + 34,659) = 33.2%
Current ratio as of February 28, 2005:
Current assets divided by current liabilities
$1,598,982/802,816 = 2.0
SOURCE Commercial Metals Company
 back to top
Related links:
http://www.commercialmetals.com
CONTACT:
Debbie Okle, Director, Public Relations of
Commercial Metals Company, +1-214-689-4354
|
