IRVING, Texas, June 20 /PRNewswire-FirstCall/ -- Commercial Metals
Company (NYSE: CMC) today reported net earnings of $99.4 million or $0.82
per diluted share on net sales of $2.3 billion for the quarter ended May
31, 2007, ranking it as the strongest third quarter ever reported by the
Company. This compares with net earnings of $78.0 million or $0.62 per
diluted share on net sales of $2.0 billion for the third quarter last year.
This year's third quarter included after-tax LIFO expense of $20.1 million
or $0.16 per diluted share. This compares with expense of $28.6 million or
$0.23 per share in last year's third quarter. At quarter end our LIFO
reserve totaled $249 million.
Net earnings for the nine months ended May 31, 2007 were a record
$250.7 million or $2.06 per diluted share on net sales of $6.3 billion. For
the same period last year, net earnings were $227.7 million or $1.84 per
diluted share on net sales of $5.3 billion. For the nine months ended May
31, 2007, after- tax LIFO expense was $39.0 million or $0.32 per share
compared with an expense of $40.0 million or $0.33 per share last year.
Selling, general and administrative expenses in the third quarter
included $13.7 million of costs associated with the investment in the
global deployment of SAP software. For the nine months ended May 31, 2007,
the amount was $24.4 million. There were no comparable costs last year.
Other costs of $17.2 million, mainly software acquisition, have been
capitalized since inception of the project, of which $6.5 million has been
capitalized in the current year.
We remain optimistic in our outlook. As discussed in more detail later
in this release, we anticipate fourth quarter LIFO diluted net earnings per
share between $0.85 to $0.95 (estimated pre-tax LIFO expense of $10
million) compared to last year's all-time record quarter of $1.04 per
diluted share.
General Conditions
CMC President and Chief Executive Officer Murray R. McClean said, "It
was a terrific quarter, a record third quarter for the Company with four of
our five operating segments setting third quarter records. Especially
noteworthy were the performances of CMCZ, our Polish operation, and
Marketing and Distribution. Both set all-time quarterly earnings records.
CMCZ took full advantage of our integrated business model from our mega
shredder, through our mill, and into our fabrication plants. Marketing &
Distribution took advantage of our worldwide network. Ferrous scrap
pricing, and consequently steel finished goods pricing, exhibited intense
volatility in the period. This inevitably leads to erratic customer
purchasing patterns particularly among merchant bar buyers. Volumes are
distorted over any one quarter, but recover over time. Global metal markets
remained vibrant."
Domestic Mills (Steel Minimills and Copper Tube Mill)
McClean said, "Our Domestic Mills segment's adjusted operating profit
at $73.6 million was 6% above last year's third quarter, its previous
record. LIFO expense was $15.3 million pre-tax in this year's third quarter
compared with $14.8 million income last year. Net sales increased 6%."
McClean continued, "Within the segment, adjusted operating profit for
our steel minimills was 15% greater than a year earlier on 8% higher net
sales. Metal margins expanded over $10 a ton third quarter to third quarter
though shipments dropped 4%. Rebar sales remained strong. Merchant bar
tonnages were lower as buyers continued the pattern of overbuying in
periods of anticipated or actual rising price increases and lowering their
activity in periods of anticipated or actual price declines as occurred in
this year's third quarter. On a year-to-year basis, tonnage melted for the
third quarter increased 7% to 596 thousand tons while tonnage rolled was
534 thousand tons, 7% lower than last year's third quarter as planned
outages at CMC Alabama reacted to the weaker merchant market. Shipments
were 613 thousand tons. Our average total selling price was up $60 per ton
to $575 per ton, while the average selling price for finished goods was up
by $71 per ton to $601 per ton. By product line, the price premium of
merchant bar over reinforcing bar was $80 per ton, down $3 from last year.
The average scrap purchase cost increased by $45 per ton a year ago to $239
per ton. Total utility costs decreased by $1.2 million compared with the
third quarter last year with natural gas and electricity both declining.
Year-over-year costs for ferroalloys, graphite electrodes and other
supplies were up $2.9 million.
"The copper tube mill (CMC Howell Metal) recorded an adjusted operating
profit of $3.0 million, 65% below that of last year's third quarter on 4%
lower net sales. Included was a pre-tax LIFO expense of $4.7 million
compared with a $3.9 million expense last year. The overhang of a poor
residential market coupled with cautious buying and the inability of
selling prices to keep up with copper scrap price increases led to the
lower profits. The average selling price increased 57 cents to $3.89 per
pound, but metal spreads dropped 13 cents to $1.08 per pound as scrap
prices rose 70 cents to $2.81. Against the same quarter last year, copper
tube production decreased 12% to 14.9 million pounds while shipments were
down 18% to 16.7 million pounds."
CMCZ
McClean said, "CMCZ, the Polish steel operation, had an all-time record
quarterly adjusted operating profit of $39.8 million, 187% above last
year's third quarter. Poland had the highest steel prices in Europe
throughout most of the quarter, which led to a jump in imported material
and lower prices by quarter end. Shipments were the highest in any third
quarter since acquisition, and the melt shop set a monthly record of
154,000 tons in April. For the quarter, tons melted equaled 392 thousand
versus 375 thousand last year; rolled tons equaled 302 thousand against 300
thousand last year; and shipments totaled 376 thousand tons (including
billets) compared with 330 thousand last year. Meanwhile, the average
selling price rose substantially to PLN 1,663 ($582) per ton (including 28%
billets) from PLN 1,393 ($445) per ton (including 11% billets). The sales
gain exceeded the increase in the cost of purchased scrap utilized.
Accordingly, the average metal margin increased to PLN 703 ($246) per ton
from PLN 640 ($204) per ton. During May 2007, our scrap mega-shredder had a
record month of over 48,000 tons processed leading to melt shop yields of
89%, a 3% improvement over last year."
Domestic Fabrication
McClean added, "Net sales were up 6% from a year ago, but reported
adjusted operating profit fell to $11.1 million, a 37% decrease compared
with last year's $17.5 million profit. Both quarters absorbed large LIFO
expenses, $12.3 million pre-tax this quarter versus an expense of $14.7
million the prior year. Increased material costs continued to squeeze
margins on older backlog work. Compared with the prior year's third
quarter, total shipments from our fab plants decreased 9% to 395 thousand
tons, the fall coming in rebar fab tonnage as projects were delayed
(particularly in Texas) by drought ending rainfall. The composite average
fab selling price (excluding stock and buyouts) rose 16% to $998 per ton,
with realized selling prices up for all products. The Bouras acquisition,
now known as CMC Joist & Deck, contributed $37 million in sales and 19,000
tons shipped (12,000 of deck); operationally it broke even with absorption
of start-up costs, but the remainder of the joist operations exceeded last
year's profits."
Recycling
According to McClean, "The Recycling segment achieved a record third
quarter with net sales up 22% compared with one year ago, a quarter marked
by huge swings in ferrous scrap pricing and nonferrous terminal market
volatility. The adjusted operating profit of $24.7 million was up 10% from
last year's third quarter. LIFO expense was about even at $10.7 million
pre- tax this quarter versus an expense of $10.1 million the prior year.
The ferrous scrap market hit all-time highs in March only to drop by almost
$100 a ton by quarter end, though ending prices of $260 a long ton for
shredded were still historically strong. Versus last year, the average
ferrous scrap sales price for the quarter increased by 20% to $251 per
short ton while stock shipments of ferrous scrap rose 9% to 630 thousand
short tons. The average nonferrous scrap sales price for the quarter
increased 14% compared with a year ago, while nonferrous stock shipments
were 4% higher. The total volume of scrap processed, including all our
domestic processing plants, equaled 1,058 thousand tons against 976
thousand tons last year."
Marketing and Distribution
"Adjusted operating profit for the Marketing and Distribution segment
of $33.0 million was an all-time third quarter record, 66% better than last
year's third quarter on 11% higher net sales," McClean said. "This segment
recorded pre-tax LIFO income of $7.4 million compared with an expense of
$4.6 million the year before. U.S. steel import volumes and operating
profits remained strong although varied by product line. International
steel markets remained vibrant with increased pricing from the prior year.
Australian steel import markets were solid, but conversely there was some
weakness in our domestic sourced distribution operations. German and U. K.
markets improved significantly from last year. Industrial products
including fluorspar, coke, ferro alloys, and iron ore achieved excellent
results. Results from semi- finished nonferrous imports were about even
with last year with stronger results in stainless products offset by weaker
aluminum and copper product lines."
Financial Condition
McClean said, "Our financial position remains excellent. At May 31,
2007, our stockholders' equity approached $1.5 billion. At quarter end, our
working capital was $998 million and the current ratio was 1.8. Our
coverage ratios remain strong, both on domestic borrowings as well as the
separate borrowings of CMCZ. Long-term debt as a percentage of total
capitalization was 17%."
Outlook
McClean continued, "Our fiscal fourth quarter should be our strongest
quarter of the year. Global economic conditions remain favorable.
International steel prices are off their peaks, but should remain
relatively stable. China's export tax on many steel products is a positive.
However, China needs to curb excessive capacity growth and steel exports
through environmental and energy regulations. In the U.S., the
nonresidential construction market should continue to be strong. Merchant
bar shipments should improve as service center destocking winds down. Rebar
shipments should be robust during the peak of the construction season. The
level of imports of both rebar and merchant bar are anticipated to decline
significantly by the end of the fiscal fourth quarter. Ferrous scrap prices
will likely remain relatively stable which would result in stable rebar and
merchant bar prices during the fourth quarter. Recycling should benefit
from good flows and good ferrous scrap prices as well as high demand and
high prices for nonferrous scrap. Our U.S. steel mills should have better
shipments of both rebar and merchant products at relatively stable prices.
Copper tube performance should be good, but not at last year's record
fourth quarter rate. Our domestic fabrication segment, with a strong
backlog, is anticipated to benefit from the stable steel price environment
and have stronger shipments. CMCZ (Poland) likely will benefit from the
strong construction market in Central and Eastern Europe; however, results
may be lower than our third quarter due to reduced prices and shipments.
Our Marketing and Distribution segment looks forward to a very good quarter
though lower than the record third quarter just achieved. In summary, we
anticipate our second best ever fourth quarter."
Conference Call
CMC invites you to listen to a live broadcast of its third quarter 2007
conference call today, Wednesday, June 20, 2007, at 11:00 a.m. ET. The call
will be hosted by Stan Rabin, Chairman; Murray McClean, President and CEO;
and Bill Larson, Senior 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, paragraph four, 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," "outlook," "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
5/31/07 5/31/06 5/31/07 5/31/06
Net Sales $2,345,703 $2,021,299 $6,348,023 $5,306,484
Costs and Expenses:
Cost of goods sold 2,027,843 1,756,734 5,488,259 4,570,347
Selling, general
and administrative
expenses 162,887 130,510 439,609 355,867
Interest expense 9,631 6,940 26,711 20,816
2,200,361 1,894,184 5,954,579 4,947,030
Earnings Before
Income Taxes and
Minority Interests 145,342 127,115 393,444 359,454
Income Taxes 45,514 46,085 133,069 129,030
Earnings Before
Minority Interests 99,828 81,030 260,375 230,424
Minority Interests 387 3,070 9,663 2,737
Net Earnings $99,441 $77,960 $250,712 $227,687
Basic earnings per
share $ 0.84 $ 0.65 $ 2.13 $ 1.93
Diluted earnings per
share $ 0.82 $ 0.62 $ 2.06 $ 1.84
Cash dividends per
share $ 0.09 $ 0.05 $ 0.24 $ 0.11
Average basic shares
outstanding 118,623,424 119,708,857 117,773,618 117,732,084
Average diluted
shares
outstanding 121,956,284 125,085,650 121,600,343 123,550,601
BUSINESS SEGMENTS
(in thousands)
Three months ended Nine months ended
5/31/07 5/31/06 5/31/07 5/31/06
Net Sales:
Domestic Mills $447,183 $422,473 $1,169,607 $1,158,422
CMCZ 233,761 157,884 592,887 377,800
Domestic Fabrication 488,399 459,951 1,341,490 1,268,630
Recycling 471,096 385,475 1,207,705 893,887
Marketing and
Distribution 872,868 783,553 2,558,469 2,110,295
Corporate and
Eliminations (167,604) (188,037) (522,135) (502,550)
Total Net Sales $2,345,703 $2,021,299 $6,348,023 $5,306,484
Adjusted Operating Profit (Loss):
Domestic Mills $73,608 $69,663 $207,918 $205,350
CMCZ 39,752 13,875 91,372 14,823
Domestic Fabrication 11,113 17,521 56,492 74,212
Recycling 24,671 22,476 63,182 54,902
Marketing and
Distribution 32,977 19,896 56,108 55,885
Corporate and
Eliminations (25,689) (8,589) (51,115) (22,542)
COMMERCIAL METALS COMPANY
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
May 31, August 31,
2007 2006
Assets:
Current Assets:
Cash and cash equivalents $73,125 $180,719
Accounts receivable, net 1,153,405 1,134,823
Inventories 1,011,083 762,635
Other 87,379 66,615
Total Current Assets 2,324,992 2,144,792
Net Property, Plant and Equipment 704,254 588,686
Goodwill 37,485 35,749
Other Assets 197,469 129,641
$3,264,200 $2,898,868
Liabilities and Stockholders' Equity:
Current Liabilities:
Commercial paper $146,915 $ -
Notes payable 48,244 60,000
Accounts payable - trade 542,341 526,408
Accounts payable - documentary letters of credit 156,429 141,713
Accrued expenses and other payables 370,593 379,764
Income taxes payable and deferred income taxes 7,793 14,258
Current maturities of long-term debt 54,590 60,162
Total Current Liabilities 1,326,905 1,182,305
Deferred Income Taxes 33,138 34,550
Other Long-Term Liabilities 108,079 78,789
Long-Term Debt 309,552 322,086
Minority Interests 5,441 61,034
Stockholders' Equity 1,481,085 1,220,104
$3,264,200 $2,898,868
Three months ended Nine months Ended
(Short Tons in Thousands) 5/31/07 5/31/06 5/31/07 5/31/06
Domestic Steel Mill Rebar
Shipments 282 285 752 828
Domestic Steel Mill Structural
and Other Shipments 331 355 950 1,039
CMCZ Shipments 376 330 1,057 872
Total Mill Tons Shipped 989 970 2,759 2,739
Average FOB Mill Domestic
Selling Price (Total Sales) $575 $515 $558 $502
Average Cost Domestic Mill
Ferrous Scrap Utilized $267 $217 $231 $209
Domestic Mill Metal Margin $308 $298 $327 $293
Average Domestic Mill Ferrous
Scrap Purchase Price $239 $194 $209 $188
Average FOB Mill CMCZ Selling
Price (Total Sales) $582 $445 $530 $412
Average Cost CMCZ Ferrous
Scrap Utilized $336 $241 $294 $222
CMCZ Mill Metal Margin $246 $204 $236 $190
Average CMCZ Ferrous Scrap
Purchase Price $297 $201 $262 $185
Fab Plant Rebar Shipments 244 290 775 759
Fab Plant Structural, Joist,
Deck and Post Shipments 151 146 390 403
Total Fabrication Tons Shipped 395 436 1,165 1,162
Average Fab Selling Price
(Excluding Stock & Buyout
Sales) $998 $864 $945 $859
Domestic Scrap Metal Tons
Processed and Shipped 1,058 976 2,876 2,677
COMMERCIAL METALS COMPANY
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Nine months ended
5/31/07 5/31/06
Cash Flows From (Used by) Operating Activities:
Net earnings $250,712 $227,687
Adjustments to reconcile net earnings to
cash from (used by)operating activities:
Depreciation and amortization 75,859 61,522
Minority interests 9,663 2,737
Provision for losses on receivables 639 2,162
Share-based compensation 7,381 6,975
Net gain on sale of assets and other 169 (1,584)
Asset impairment 1,390 -
Changes in Operating Assets and Liabilities,
Net of Effect of Acquisitions:
Accounts receivable (59,683) (198,540)
Accounts receivable sold 61,711 10,255
Inventories (149,093) (10,414)
Other assets (81,977) (40,711)
Accounts payable, accrued expenses,
other payables and income taxes (17,859) 26,815
Deferred income taxes (5,179) (2,785)
Other long-term liabilities 28,629 12,629
Net Cash Flows From Operating Activities 122,362 96,748
Cash Flows From (Used by) Investing Activities:
Purchases of property, plant and equipment (121,774) (92,627)
Purchase of interests in CMC Zawiercie and
subsidiaries (60,049) (934)
Sales of property, plant and equipment 1,264 5,039
Acquisitions, net of cash acquired (157,994) (10,980)
Net Cash Used By Investing Activities (338,553) (99,502)
Cash Flows From (Used by) Financing Activities:
Increase (Decrease) in documentary letters
of credit 14,716 (39,883)
Payments on trade financing arrangements - (1,667)
Short-term borrowings, net change 132,787 16,463
Payments on long-term debt (19,025) (9,023)
Proceeds from issuance of long-term debt - 14,182
Stock issued under incentive and purchase
plans 13,801 26,092
Treasury stock acquired (17,744) -
Dividends paid (28,481) (13,022)
Tax benefits from stock plans 11,657 10,644
Net Cash From Financing Activities 107,711 3,786
Effect of Exchange Rate Changes on Cash 886 2,742
Decrease in Cash and Cash Equivalents (107,594) 3,774
Cash and Cash Equivalents at Beginning of Year 180,719 119,404
Cash and Cash Equivalents at End of Period $73,125 $123,178
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
5/31/07 5/31/07
Net earnings $99,441 $250,712
Interest expense 9,631 26,711
Income taxes 45,514 133,069
Depreciation and amortization 26,838 75,859
EBITDA $181,424 $486,351
EBITDA to interest coverage
for the quarter ended May 31, 2007: for the nine months ended May 31,
2007:
$181,424 / 9,631 = 18.8 $486,351 / 26,711 = 18.2
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, 2007 to the nearest GAAP measure, stockholders'
equity:
Stockholders' equity $ 1,481,085
Long-term debt 309,552
Deferred income taxes 33,138
Total capitalization $ 1,823,775
Other Financial Information
Long-term debt to cap ratio as of May 31, 2007:
Debt divided by capitalization
$309,552 / 1,823,775 = 17.0%
Total debt to cap plus short-term debt ratio as of May 31, 2007:
($309,552 + 249,749) / (1,823,775 + 249,749) = 27.0%
Current ratio as of May 31, 2007:
Current assets divided by current liabilities
$2,324,992 / 1,326,905 = 1.8
SOURCE Commercial Metals Company
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Related links:
http://www.cmc.com
CONTACT:
Debbie Okle, Director, Public Relations of
Commercial Metals Company, +1-214-689-4354
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