IRVING, Texas, June 20 /PRNewswire-FirstCall/ -- Commercial Metals
Company (NYSE: CMC) today reported net earnings of $78.0 million or $0.62
per diluted share on net sales of $2.0 billion for the quarter ended May
31, 2006, ranking it as the strongest third quarter ever reported for the
Company. This compares with net earnings of $71.7 million or $0.57 per
diluted share on net sales of $1.7 billion for the third quarter last year.
This year's third quarter included after-tax LIFO expense of $28.6 million
or $0.23 per diluted share, the largest quarterly charge in the Company's
history. This compares with income of $1.5 million or $0.01 per share in
last year's third quarter. At quarter end our LIFO reserve totaled $173
million.
Net earnings for the nine months ended May 31, 2006 were a record
$227.7 million or $1.84 per diluted share on net sales of $5.3 billion. For
the same period last year, net earnings were $202.0 million or $1.63 per
diluted share on net sales of $4.9 billion. For the nine months ended May
31, 2006, after- tax LIFO expense was $40 million or $0.33 per share
compared with an expense of $23.4 million or $0.19 per share last year.
General Conditions
CMC Chairman and Chief Executive Officer Stanley A. Rabin said, "It was
another remarkable quarter. We generated solid to excellent results in each
of our business segments. Market conditions for steel and related products
showed significant further improvement during the quarter, while nonferrous
metal prices hit all-time highs before undergoing some correction. Global
economic growth accelerated, stimulated by strong business investment and
industrial production, including some pickup in Europe. Our outlook for the
fourth quarter remains very positive. As discussed in more detail later in
this release, we believe demand for our products and services will remain
strong, led by favorable markets in our various steel-related and other
businesses. We anticipate fourth quarter LIFO diluted net earnings per
share between $0.70 and $0.80 which, if achieved, would be an all-time
record."
Domestic Mills (Steel Minimills and Copper Tube Mill)
Rabin said, "Our Domestic Mills segment's adjusted operating profit at
$69.7 million was 15% above last year's historically strong third quarter.
Moreover, the LIFO expense was $14.8 million pre-tax in this year's third
quarter compared with $8.0 million income last year. Net sales increased
23%."
Rabin continued, "Within the segment, adjusted operating profit for our
steel minimills was 4% greater than a year earlier, including the big swing
in LIFO, on 15% higher net sales. The strength of higher selling prices
combined with higher finished goods shipments more than offset higher raw
material costs. Compared with last year's third quarter, the metal spread
increased by 8% to $298 per ton. On a year-to-year basis, tonnage melted
for the third quarter was down 5% to 557 thousand tons while tonnage rolled
was 572 thousand tons, 5% above last year's third quarter. Shipments
increased 5% to 640 thousand tons. Our average total selling price was up
$39 per ton to $515 per ton, while the average selling price for finished
goods was up by $40 per ton to $530 per ton. By product line, the price
premium of merchant bar over reinforcing bar was unchanged at $81 per ton.
The average scrap purchase cost increased by $18 per ton a year ago to $194
per ton. Total utility costs increased by $3.6 million compared with the
third quarter last year, with increases both in natural gas and
electricity. Year-over-year costs for ferroalloys, graphite electrodes and
other supplies were mixed, while transportation rates rose significantly.
During the quarter we successfully started up the new continuous caster at
CMC Steel Texas; commissioning will continue over the next several months.
"The copper tube mill (CMC Howell Metal) recorded an adjusted operating
profit of $8.4 million, substantially above that of last year's third
quarter, on net sales that virtually doubled. Included was a pre-tax LIFO
expense of $3.9 million compared with a $1.7 million income last year.
Better market conditions in the industry, particularly stronger commercial
demand, resulted in an increased average selling price to $3.32 per pound
and metal spreads widened dramatically to $1.21 per pound, up from 56 cents
per pound, more than offsetting the substantial yearly rise in the cost of
copper scrap. Sales of line sets (in pounds) were up over 50% from the same
period in 2005. Against the same quarter last year, copper tube production
increased 17% to 16.9 million pounds while shipments were up 13% to 20.3
million pounds."
CMCZ
Rabin said, "CMCZ, the Polish steel operation, had a very satisfactory
quarter and recorded an adjusted operating profit of $13.9 million on a
100%- owned basis compared with an adjusted operating loss of $9.8 million
the previous year. Operating levels and shipments were up significantly
from those of the third quarter of fiscal 2005, including higher exports,
while prices and margins improved markedly. For the quarter, tons melted
equaled 375 thousand versus 219 thousand last year; rolled tons equaled 300
thousand against 198 thousand last year; and shipments totaled 330 thousand
tons (including billets) compared with 244 thousand last year. Meanwhile,
the average selling price rose to PLN 1393 per ton (including 11% billets)
from PLN 1313 per ton (including 11% billets), with gains both in bar
products and wire rod. The sales gain exceeded the increase in the cost of
purchased scrap utilized; accordingly, the average metal margin increased
to PLN 640 per ton from an inadequate PLN 596 per ton. During May 2006, we
began operation of the new scrap mega-shredder, and construction of the
greenfield rebar fabrication plant also at Zawiercie is underway and start
up should occur in July 2006."
Domestic Fabrication
Rabin added, "Net sales were up 17% from a year ago, but reported
adjusted operating profit fell to $17.5 million, a substantial decrease
compared with last year's $39.7 million profit; the largest single item was
a $14.7 million pre-tax LIFO expense whereas last year's LIFO impact was
negligible. Other costs included higher incentive compensation accruals,
administrative expense at new locations, and a larger elimination of profit
on intercompany sales awaiting delivery to outside third parties. Compared
with the prior year's third quarter, total shipments from our fab plants
increased 26% to 436 thousand tons and were up for most of the various
product areas. The composite average fab selling price (excluding stock and
buyouts) essentially was unchanged versus the prior year, with realized
selling prices mixed for specific products. Meanwhile, material costs were
higher, putting some pressure on spreads. Construction activity was
relatively strong in all sectors, led by public and institutional building
and highway construction."
Recycling
According to Rabin, "The Recycling segment achieved a record third
quarter with net sales up 61% compared with one year ago, marked by
historically high nonferrous price levels. The adjusted operating profit of
$22.5 million was up 43% from last year's third quarter. LIFO expense was
$10.1 million pre-tax this quarter versus an expense of $1.8 million the
prior year. The ferrous scrap market was still strong, less volatile, and
prices were higher than the third quarter of last year. Versus last year,
the average ferrous scrap sales price for the quarter increased by 14% to
$210 per short ton while stock shipments of ferrous scrap rose 18% to 577
thousand short tons. The average nonferrous scrap sales price for the
quarter jumped nearly 60% compared with a year ago, while nonferrous stock
shipments were 12% higher. Inventory turnover across the board remained
extremely rapid. The total volume of scrap processed, including all our
domestic processing plants, equaled 976 thousand tons against 869 thousand
tons last year.
"On June 12, 2006, the Company announced that it had closed the
previously announced purchase of substantially all the operating assets of
Yonack Iron & Metal and affiliates."
Marketing and Distribution
"Adjusted operating profit for the Marketing and Distribution segment
of $19.9 million was 9% below last year's very strong third quarter on 2%
higher net sales," Rabin said. "This segment recorded pre-tax LIFO expense
of $4.6 million compared with an expense of $4.0 million the year before.
Steel tonnage was up in most of our markets, especially sales into the
U.S., although sales dollars were mixed in the various markets. Gross
margins overall increased, resulting in increased profitability for this
large product line. Conversely, aluminum, copper and stainless steel semis
were characterized by lower volume, tighter margins and higher transaction
costs. Sales and margins for industrial materials and products were off the
peaks of last year, despite higher volume, reflecting generally lower sales
prices. Our value-added downstream and processing businesses continued to
perform well, although not as profitably as recent quarters."
Financial Condition
Rabin said, "Our financial position remains excellent. At May 31, 2006,
our stockholders' equity approached $1.17 billion. At quarter end, our
working capital was $1.03 billion and the current ratio was 2.1. Our
coverage ratios remain strong. Long-term debt as a percentage of total
capitalization was 24%, and the ratio of total debt to total capitalization
plus short-term debt was 26%. Both ratios include the debt of CMCZ which
has recourse only to the assets of CMCZ."
Stock Split Completed - Increased Cash Dividend Declared
Rabin added, "On May 22, 2006, the Company completed the previously
announced two-for-one stock split in the form of a 100% stock dividend with
the distribution of the additional shares to shareholders of record May 8,
2006. At the time the split was announced, the Company also stated its
intent to institute a quarterly cash dividend of 6 cents per share on the
increased number of shares resulting from the stock dividend. The Board of
Directors has now declared the first quarterly cash dividend at this
increased rate of six cents per share payable July 21, 2006 to shareholders
of record July 7, 2006. After the effect of the additional shares resulting
from the split, this new cash dividend rate represents a 20% increase from
the prior quarterly rate and a 100% increase in the cash dividend rate over
the past six months. This is the 167th consecutive quarterly dividend paid
by Commercial Metals Company."
Outlook
Rabin continued, "Generally robust global economic conditions prevail.
Some deceleration of economic growth is expected, but our key end-use
markets remain strong. The global steel market is firm for virtually all
products, reflecting strong demand and low inventories around the world.
Manufacturing activity continues to expand. While residential construction
in the U.S. has pulled back from its peak, worldwide non-residential
construction is expected to strengthen further. More specifically,
construction materials generally are in strong demand. Our domestic steel
mill markets, if anything, are showing further strengthening. While imports
of carbon steel bar products recently have increased sharply into the U.S.,
strong demand appears to be absorbing the supply. Our mill shipments in the
U.S. and Poland will remain strong during the fourth quarter, and realized
steel prices should move yet higher. Steel scrap prices are at a 12-month
high, both domestically and internationally, and are up again in June. The
outlook for nonferrous markets remains favorable, although varying price
corrections from the record highs occurred recently. Demand for downstream
products and services remains vibrant, but we will experience some
short-term margin squeeze because of the recent rise in mill prices.
"Accordingly, net income from our domestic steel mills should remain
strong during the fourth quarter, and the copper tube business should be
stable at the improved earnings level. Results at CMCZ are expected to
improve further. Our anticipation is that fabrication profits will improve
as long as finished goods prices rise at rates that new contracts can
absorb. Our Recycling segment will again post strong results buoyed by
relatively firm markets with tonnage augmented by the Yonack acquisition.
We expect the Marketing and Distribution segment to have another
satisfactory quarter driven by relatively firm volume and margins in
various steel markets, improved results in nonferrous semis, and steady
performance for industrial materials at a high pace."
Conference Call
CMC invites you to listen to a live broadcast of its third quarter 2006
conference call on Tuesday, June 20, 2006, at 3:00 p.m. ET. The call will
be hosted by Stan Rabin, Chairman and CEO, Murray McClean, President and
COO, and Bill Larson, 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."
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.
The opening caption, the General Conditions and the Outlook sections of
this news release contain forward-looking statements regarding the outlook
for the Company's financial results including net earnings, product pricing
and demand, production rates, energy expense, interest rates, inventory
levels and general market conditions. These forward-looking statements
generally can be identified by phrases such as the company or its
management "expect," "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 construction activity,
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, interest rate changes, 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 and supply prices and decisions
by governments impacting the level of steel imports and pace of overall
economic activity, particularly China.
COMMERCIAL METALS COMPANY
Condensed Consolidated Statements of Earnings (Unaudited)
(in thousands except share data)
Three months ended Nine months ended
5/31/06 5/31/05 5/31/06 5/31/05
Net Sales $2,021,299 $1,726,251 $5,306,484 $4,852,636
Costs and Expenses:
Cost of goods sold 1,756,734 1,496,719 4,570,347 4,181,619
Selling, general and
administrative
expenses 130,510 106,192 355,867 329,627
Interest expense 6,940 7,608 20,816 23,426
1,894,184 1,610,519 4,947,030 4,534,672
Earnings Before Income
Taxes and Minority
Interests 127,115 115,732 359,454 317,964
Income Taxes 46,085 46,345 129,030 117,329
Earnings Before
Minority Interests 81,030 69,387 230,424 200,635
Minority Interests 3,070 (2,354) 2,737 (1,406)
Net Earnings $77,960 $71,741 $227,687 $202,041
Basic earnings
per share $ 0.65 $ 0.60 $ 1.93 $ 1.70
Diluted earnings
per share $ 0.62 $ 0.57 $ 1.84 $ 1.63
Cash dividends
per share $ 0.05 $ 0.03 $ 0.11 $ 0.09
Average basic shares
outstanding 119,708,857 119,603,498 117,732,084 118,664,658
Average diluted shares
outstanding 125,085,650 125,471,648 123,550,601 124,042,992
BUSINESS SEGMENTS
(in thousands)
Three months ended Nine months ended
5/31/06 5/31/05 5/31/06 5/31/05
Net Sales:
Domestic Mills $422,473 $343,997 $1,158,422 $943,594
CMCZ 157,884 109,977 377,800 340,735
Domestic Fabrication 459,951 392,229 1,268,630 1,049,755
Recycling 385,475 238,888 893,887 683,868
Marketing and
Distribution 783,553 771,237 2,110,295 2,200,836
Corporate and
Eliminations (188,037) (130,077) (502,550) (366,152)
Total Net Sales $2,021,299 $1,726,251 $5,306,484 $4,852,636
Adjusted Operating Profit (Loss):
Domestic Mills $69,663 $60,661 $205,350 $153,850
CMCZ 13,875 (9,811) 14,823 (2,038)
Domestic Fabrication 17,521 39,681 74,212 82,387
Recycling 22,476 15,712 54,902 55,560
Marketing and
Distribution 19,896 21,834 55,885 68,418
Corporate and
Eliminations (8,589) (3,541) (22,542) (13,809)
COMMERCIAL METALS COMPANY
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
May 31, August 31,
2006 2005
Assets:
Current Assets:
Cash and cash equivalents $123,178 $119,404
Accounts receivable, net 1,025,734 829,192
Inventories 730,399 706,951
Other 66,759 45,370
Total Current Assets 1,946,070 1,700,917
Net Property, Plant and Equipment 546,655 505,584
Goodwill 32,307 30,542
Other Assets 121,099 95,879
$2,646,131 $2,332,922
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable - trade $473,781 $408,342
Accounts payable - documentary letters of credit 101,103 140,986
Accrued expenses and other payables 302,194 293,598
Income taxes payable and deferred income taxes 8,516 40,126
Short-term trade financing arrangements - 1,667
Notes payable - CMCZ 16,463 -
Current maturities of long-term debt 15,496 7,223
Total Current Liabilities 917,553 891,942
Deferred Income Taxes 45,181 45,629
Other Long-Term Liabilities 72,808 58,627
Long-Term Debt 387,337 386,741
Minority Interests 53,900 50,422
Stockholders' Equity 1,169,352 899,561
$2,646,131 $2,332,922
Three months ended Nine months Ended
(Short Tons in Thousands) 5/31/06 5/31/05 5/31/06 5/31/05
Domestic Steel Mill Rebar
Shipments 285 264 828 684
Domestic Steel Mill
Structural and Other
Shipments 355 344 1,039 975
CMCZ Shipments 330 244 872 704
Total Mill Tons Shipped 970 852 2,739 2,363
Average FOB Mill Domestic
Selling Price (Total Sales) $515 $476 $502 $478
Average Domestic Mill
Ferrous Scrap Purchase Price $194 $175 $188 $182
Average FOB Mill CMCZ Selling
Price (Total Sales) $445 $417 $412 $458
Average CMCZ Ferrous Scrap
Purchase Price $201 $182 $185 $214
Fab Plant Rebar Shipments 290 230 759 651
Fab Plant Structural,
Joist, and Post Shipments 146 117 403 320
Total Fabrication Tons Shipped 436 347 1,162 971
Average Fab Selling Price
(Excluding Stock &
Buyout Sales) $864 $864 $859 $845
Domestic Scrap Metal Tons
Processed and Shipped 976 869 2,677 2,519
COMMERCIAL METALS COMPANY
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Nine months ended
5/31/06 5/31/05
Cash Flows From (Used by) Operating Activities:
Net earnings $227,687 $202,041
Adjustments to reconcile net earnings
to cash from (used by) operating activities:
Depreciation and amortization 61,522 56,756
Minority interests 2,737 (1,406)
Provision for losses on receivables 2,162 3,574
Share-based compensation 6,975 -
Net gain on sale of assets and other (1,584) (1,200)
Changes in Operating Assets and Liabilities,
Net of Effect of Acquisitions:
Accounts receivable (198,540) (212,701)
Accounts receivable sold 10,255 41,063
Inventories (10,414) (84,414)
Other assets (40,711) (6,029)
Accounts payable, accrued expenses, other
payables and income taxes 26,815 12,503
Deferred income taxes (2,785) (45)
Other long-term liabilities 12,629 12,282
Net Cash Flows From Operating Activities 96,748 22,424
Cash Flows From (Used by) Investing Activities:
Purchases of property, plant and equipment (92,627) (67,884)
Purchase of interests in CMC Zawiercie (934) -
Sales of property, plant and equipment 5,039 4,913
Acquisitions, net of cash purchased (10,980) (2,950)
Net Cash Used By Investing Activities (99,502) (65,921)
Cash Flows From (Used by) Financing Activities:
Increase (Decrease) in documentary letters
of credit (39,883) 38,734
Payments on trade financing arrangements (1,667) (16,311)
Short-term borrowings, net change 16,463 (581)
Payments on long-term debt (9,023) (1,441)
Proceeds from issuance of long-term debt 14,182 -
Stock issued under incentive and purchase plans 26,092 17,007
Dividends paid (13,022) (10,146)
Tax benefits from stock plans 10,644 10,809
Treasury stock acquired - (50,675)
Net Cash From (Used By) Financing Activities 3,786 (12,604)
Effect of Exchange Rate Changes on Cash 2,742 749
Increase in Cash and Cash Equivalents 3,774 (55,352)
Cash and Cash Equivalents at Beginning of Year 119,404 123,559
Cash and Cash Equivalents at End of Period $123,178 $68,207
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 Nine Months
Ended Ended
5/31/06 5/31/06
Net earnings $77,960 $227,687
Interest expense 6,940 20,816
Income taxes 46,085 129,030
Depreciation and amortization 21,844 61,522
EBITDA $152,829 $439,055
EBITDA to interest coverage
for the quarter ended May 31, 2006: $152,829 / 6,940 = 22.0
for the nine months ended May 31, 2006: $439,055 / 20,816= 21.1
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 May 31, 2006 to the nearest GAAP measure, stockholders'
equity:
Stockholders' equity $ 1,169,352
Long-term debt 387,337
Deferred income taxes 45,181
Total capitalization $ 1,601,870
Other Financial Information
Long-term debt to cap ratio as of May 31, 2006:
Debt divided by capitalization
$387,337 / 1,601,870 = 24.2%
Total debt to cap plus short-term debt ratio as of May 31, 2006:
($387,337 + 31,959) / (1,601,870 + 31,959) = 25.7%
Current ratio as of May 31, 2006:
Current assets divided by current liabilities
$1,946,070 / 917,553 = 2.1
SOURCE Commercial Metals Company
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Related links:
http://www.commercialmetals.com
http://www.cmc.com
CONTACT:
Debbie Okle, Director, Public Relations,
+1-214-689-4354, for Commercial Metals Company
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