IRVING, Texas, Oct. 19 /PRNewswire-FirstCall/ -- Commercial Metals Company
(NYSE: CMC) today reported net earnings of $132.0 million or $4.42 per diluted
share on net sales of $4.8 billion for the year ended August 31, 2004. This
compares with net earnings of $18.9 million or $0.66 per diluted share on net
sales of $2.9 billion last year. The previous record annual net earnings were
$47.0 million achieved in 1999. Fourth quarter net earnings were a record
$47.4 million or $1.56 per diluted share on net sales of $1.5 billion. This
compares with $10.7 million or $0.38 per diluted share on net sales of
$805 million in the fourth quarter a year ago, and is the second consecutive
quarter in which net earnings exceeded those for any previous complete fiscal
year.
The current year quarter included a higher than anticipated pre-tax LIFO
expense of $38.9 million ($0.83 per diluted share) compared with LIFO expense
of $1.3 million ($0.03 per diluted share) in the prior year quarter.
Comparable numbers for the year were $74.8 million pre-tax expense ($1.63 per
diluted share) this year and $9.3 million expense ($0.21 per diluted share) in
the previous year.
CMC Chairman, President and Chief Executive Officer Stanley A. Rabin said,
"We continued to benefit in the quarter from the favorable supply/demand
environment for most of our businesses. We continued to achieve outstanding
performance in our Recycling and Domestic Mills segments. Meanwhile, we
attained strong profitability in the Marketing and Distribution segment, and
results for our Polish steel manufacturing operation, CMC Zawiercie (CMCZ),
remained excellent. While markets generally remained strong during the fourth
quarter, they also were very volatile. Part of the volatility appeared to
stem from vacillating perceptions of China's economic growth rate and its
decreased net imports for various materials and products."
Domestic Mills
Rabin added, "Our Domestic Mills segment set all-time annual records for
tons melted, rolled and shipped. The segment's adjusted operating profit of
$28.1 million for the fourth quarter was substantially higher than last year's
fourth quarter, including a pre-tax LIFO expense of $14.9 million in this
year's fourth quarter. Within the segment, quarterly adjusted operating
profit for our steel minimills at $25.3 million was about 250% greater than a
year earlier on the strength of much improved selling prices and strong
shipments, which more than offset the steep rise in steel scrap and other
input costs. On a year-to-year basis, tonnage melted for the fourth quarter
was up 1% to 524,000 tons; tonnage rolled was 533,000 tons, 3% above last
year's fourth quarter; shipments decreased slightly to 595,000 tons because of
lower billet sales. Fourth quarter production at the Texas mill was adversely
affected by the previously reported transformer failure; purchased billets
helped us meet customer demands. Our quarterly average total mill selling
price was $166 per ton above last year's relatively low level and the average
selling price for finished goods was up by $163 per ton to $460 per ton.
Conversely, the average scrap purchase cost rose by $61 per ton versus a year
ago. Additionally, utility costs increased by $1.5 million compared with the
fourth quarter last year, costs for ferroalloys were much higher, and other
supplies increased as well. On balance, though, our margins rose
considerably; the metal spread at $293 per ton was $104 per ton greater than
the fourth quarter of last year.
"The copper tube mill recorded an adjusted operating profit of
$2.8 million compared with a modest profit in the prior year's fourth quarter.
We benefited from stronger demand from commercial as well as residential users
resulting in higher selling prices and margins. Metal spreads improved fourth
quarter-to-quarter by 24 cents per pound to 70 cents per pound despite the
sharp rise in the underlying copper scrap price. Against the same period last
year, copper tube production increased 5% while shipments declined slightly to
16.4 million pounds."
CMCZ
Rabin said, "It was another very strong quarter for CMCZ. The steel
minimill (and related operations) in Poland generated record net sales of
$166 million and recorded an adjusted operating profit of $30.5 million on a
100% owned basis. Market conditions remained favorable, although the average
sales price decreased 4.2% from the third quarter to $431 per short ton. For
the quarter, melted tons equaled 383,000, rolled tons equaled 281,000, and
shipments totaled 364,000 tons, including billets. Meanwhile, the average
scrap purchase cost decreased 3% from the third quarter to $189 per short ton,
resulting in a metal spread of $242 per ton."
Fabrication
Rabin continued, "Gross margins within the Fabrication segment were mostly
higher under increasingly favorable market conditions. We recorded a slight
loss for the fourth quarter in this segment in the face of a $13.1 million
increase in the LIFO reserve and anticipated contract losses as we further
worked through older jobs. By product area, rebar fabrication, construction-
related products (CRP), steel post plants, steel joist manufacturing, and
structural steel fabrication all were penalized by higher steel input costs,
but aided by significant increases in selling prices and better operating
levels. Shipments from our fab plants totaled 388,000 tons, 32% above the
prior year's fourth quarter while the composite average fab selling price
(including stock and buyouts) increased by $168 per ton to $748 per ton."
Recycling
According to Rabin, "The Recycling segment recorded another fantastic
quarter, primarily a result of the vibrant ferrous scrap market on 74% higher
net sales dollars. This compared most favorably with the quarter a year ago;
adjusted operating profit increased fourfold to $21.9 million. LIFO expense
for the quarter was $2.3 million. Gross margins were significantly above last
year while operating costs as a percent of sales declined 17%. Our markets
were characterized by significant price volatility for our major commodities
against a backdrop of continued overall strong demand for our products.
Versus last year, the average ferrous scrap sales price for the quarter
increased by 86% to $195 per ton, and shipments climbed 15% to 486,000 tons.
The average nonferrous scrap sales price for the quarter was approximately 36%
above a year ago while nonferrous shipments were 11% higher. Conversely,
shipments of both ferrous and nonferrous were lower than the third quarter of
fiscal 2004, while prices were 2% higher and 7% lower, respectively. The
total volume of scrap processed, including all our processing plants, equaled
868,000 tons against 732,000 tons in last year's fourth quarter."
Marketing and Distribution
"Adjusted operating profit of $11.8 million for the Marketing and
Distribution segment was another record, 65% above last year's already strong
fourth quarter, reflecting broad-based, robust sales and higher gross margins
across multiple product lines and geographic areas," Rabin said. "This
segment also recorded an increase of $8.7 million in the LIFO reserve for the
fourth quarter of fiscal 2004. Sales were up, especially in the United States
and Europe. China imported less steel than it had been and exported
significant quantities of steel during the quarter as a result of its cooler
economy. Additionally, imports of raw materials into China moderated. Our
profits improved in the United States as margins and shipments in steel,
aluminum, copper and stainless steel increased significantly, while sales and
profits for industrial materials and products hit record levels. Our value-
added downstream processing businesses continued to generate good profits."
Accounting for Trade Finance Agreements
Rabin said, "To facilitate certain trade transactions, we periodically
utilize documentary letters of credit, advances, and non- or limited-recourse
trade financing arrangements to provide assurance of payments and advanced
funding to suppliers. One such agreement is reflected on our balance sheet at
August 31, 2004 as trade financing with a corresponding advance to supplier in
other assets. This contract was entered into in October 2003. We have
determined that similar accounting should have been applied in our fiscal 2004
interim quarterly statements. No change to the consolidated statements of
earnings for each quarter was required. The details of the changes in the
other quarterly financial statements are disclosed in the Form 8-K at Item
4.02 filed today."
Financial Condition
Rabin added, "Our financial position remained strong. At year end, long-
term debt as a percentage of total capitalization was 36%, and the ratio of
total debt to total capitalization plus short-term debt was 38%. Both ratios
include the debt of CMCZ which has recourse only to the assets of CMCZ. Our
working capital was $641 million and the current ratio was 1.8. Our coverage
ratios were strong."
Outlook
Rabin concluded, "As we look forward to fiscal 2005, we anticipate that
the positive factors which have been driving our markets are sustainable and
allow a continuation of healthy pricing and volume for our goods and services.
Our outlook for the first quarter and year remains very positive, although we
must be wary of the dampening effect of high petroleum prices as well as
China's moderating impact on commodity prices. We expect some shift in
profits with a higher proportion coming from the Fabrication segment, although
ferrous scrap prices firmed again in recent weeks. We anticipate first
quarter LIFO diluted net earnings per share between $1.70 and $1.90. The
effective tax rate in the first quarter is projected at 33%.
"A business interruption insurance claim for the previously reported
transformer failure in Texas will be filed. This primary transformer has been
reinstalled and is performing well. An additional claim covering a failure
during start up in August 2003 of a new, higher capacity transformer at South
Carolina is also being prepared. This transformer had been returned for
repair by its manufacturer in Italy and is now scheduled to be reinstalled at
the South Carolina mill during November 2004. Following installation and
start up, the transformer should achieve originally projected increases in
melt shop production. The potential recovery resulting from these claims,
which may be substantial, has not been considered in our earnings estimate
owing to the timing of recovery which may extend beyond the first quarter and
our inability to estimate the minimum recoverable amount."
CMC invites you to listen to a live broadcast of its fourth quarter/year-
end conference call on Tuesday, October 19, at 3:00 p.m. ET. The call will be
hosted by Stan Rabin, Chairman, President and CEO, 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 on CMC's website until November 2, 2004. The replay will be
accessible on the home page 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 paragraphs under the Outlook section and heading 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, inventory levels, tax rates, acquisitions
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," 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,
particularly China.
Three months ended Fiscal year ended
(Short Tons in Thousands) 8/31/04 8/31/03 8/31/04 8/31/03
Domestic Steel Mill Rebar Shipments 247 276 1,014 1,007
Domestic Steel Mill Structural and
Other Shipments 347 332 1,387 1,277
CMCZ Shipments 364 --- 1,082 ---
Total Mill Tons Shipped 958 608 3,483 2,284
Average FOB Mill Domestic Selling
Price (Total Sales) $455 $289 $379 $278
Average FOB Mill Domestic Selling
Price (Finished Goods Only) $460 $297 $385 $287
Average Domestic Ferrous Scrap
Purchase Price $162 $100 $149 $97
Average FOB Mill CMCZ Selling Price
(Total Sales) $431 --- $380 ---
Average CMCZ Ferrous Scrap
Purchase Price $189 --- $179 ---
Fab Plant Rebar Shipments 275 195 890 663
Fab Plant Structural, Joist, and
Post Shipments 113 99 421 365
Total Fabrication Tons Shipped 388 294 1,311 1,028
Average Fab Selling Price (Excluding
Stock & Buyout Sales) $717 $542 $626 $536
Domestic Scrap Metal Tons Processed
and Shipped 868 732 3,411 2,811
BUSINESS SEGMENTS
(in thousands) Three months ended Fiscal year ended
8/31/04 8/31/03 8/31/04 8/31/03
Net Sales:
Domestic Mills $321,662 $213,832 $1,109,236 $770,053
CMCZ 166,461 --- 427,141 ---
Fabrication 328,919 212,419 1,047,321 742,638
Recycling 209,768 120,871 774,175 441,444
Marketing and Distribution 602,281 317,457 1,881,783 1,149,697
Corporate and Eliminations (166,037) (59,841) (471,329) (227,947)
Total Net Sales $1,463,054 $804,738 $4,768,327 $2,875,885
Adjusted Operating Profit
(Loss):
Domestic Mills $28,066 $10,932 $84,156 $19,664
CMCZ 30,533 --- 69,318 ---
Fabrication (248) 2,227 7,288 701
Recycling 21,908 4,685 67,887 15,206
Marketing and Distribution 11,841 7,163 39,427 21,784
Corporate and Eliminations (5,332) (3,764) (26,394) (11,039)
COMMERCIAL METALS COMPANY
Fourth Quarter and Year Operating Results (Unaudited)
(in thousands except share data)
Three months ended August 31,
2004 2003
Net sales $ 1,463,054 $ 804,738
Costs and Expenses:
Cost of goods sold 1,275,684 719,098
Selling, general and administrative expenses 101,669 64,471
Interest expense 8,376 3,904
1,385,729 787,473
Earnings Before Income Taxes
and Minority Interests 77,325 17,265
Income Taxes 23,255 6,521
Earnings Before Minority Interests 54,070 10,744
Minority Interests 6,716 ---
Net Earnings $ 47,354 $ 10,744
Basic earnings per share $ 1.62 $ 0.38
Diluted earnings per share $ 1.56 $ 0.38
Cash dividends per share $ 0.10 $ 0.08
Average basic shares outstanding 29,259,344 27,957,659
Average diluted shares outstanding 30,364,525 28,485,903
Fiscal Year ended August 31,
2004 2003
Net sales $ 4,768,327 $ 2,875,885
Costs and Expenses:
Cost of goods sold 4,160,726 2,586,845
Selling, general and administrative expenses 367,550 243,308
Interest expense 28,104 15,338
4,556,380 2,845,491
Earnings Before Income Taxes
and Minority Interests 211,947 30,394
Income Taxes 65,055 11,490
Earnings Before Minority Interests 146,892 18,904
Minority Interests 14,871 ---
Net Earnings $ 132,021 $ 18,904
Basic earnings per share $ 4.59 $ 0.67
Diluted earnings per share $ 4.42 $ 0.66
Cash dividends per share $ 0.34 $ 0.32
Average basic shares outstanding 28,767,957 28,202,979
Average diluted shares outstanding 29,844,339 28,605,595
COMMERCIAL METALS COMPANY
Consolidated Condensed Balance Sheets (Unaudited)
(in thousands)
August 31,
2004 2003
Assets
Current Assets:
Cash and cash equivalents $ 123,559 $ 75,058
Accounts receivable 607,005 397,490
Inventories 645,484 310,816
Other 48,184 68,902
Total Current Assets 1,424,232 852,266
Net Property, Plant and Equipment 451,490 373,628
Goodwill 30,542 6,837
Other Assets 81,782 50,524
$ 1,988,046 $ 1,283,255
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable - trade $ 385,108 $ 225,705
Accounts payable - documentary
letters of credit 116,698 74,782
Accrued expenses and other payables 248,790 126,971
Income taxes payable 11,343 1,718
Notes payable - CMCZ 530 ---
Short-term trade financing arrangements 9,756 23,025
Current maturities of long-term debt 11,252 640
Total Current Liabilities 783,477 452,841
Deferred Income Taxes 50,433 44,418
Other Long-Term Liabilities 39,568 24,066
Long-Term Trade Financing Arrangement 14,233 ---
Long-Term Debt 393,368 254,997
Minority interests 46,340 ---
Stockholders' Equity 660,627 506,933
$ 1,988,046 $ 1,283,255
COMMERCIAL METALS COMPANY
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
August 31,
2004 2003
Cash Flows From (Used By) Operating Activities:
Net earnings $ 132,021 $ 18,904
Adjustments to reconcile net earnings to cash
from (used by) operating activities:
Depreciation and amortization 71,044 61,203
Minority interests 14,871 ---
Asset impairment charges 6,583 630
Provision for losses on receivables 6,154 5,162
Tax benefits from stock plans 6,148 330
Loss on reacquisition of debt 3,072 ---
Deferred income taxes 2,142 11,568
Net gain on sale of assets and other (1,319) (886)
Changes in operating assets and liabilities,
net of effect of acquisitions and sale
of SMI-Owen:
Accounts receivable (223,845) (65,736)
Accounts receivable sold 77,925 18,662
Inventories (290,474) (36,351)
Other assets 10,001 5,042
Accounts payable, accrued expenses, other
payables and incomes taxes 223,968 (2,947)
Other long-term liabilities 11,403 (1,275)
Net Cash Flows From Operating Activities 49,694 14,306
Cash Flows From (Used by) Investing Activities:
Purchases of property, plant and equipment (51,889) (49,792)
Sales of property, plant and equipment 3,192 1,388
Acquisitions of CMCZ and Lofland,
net of cash acquired (99,401) ---
Acquisitions of other businesses,
net of cash acquired (2,110) (13,416)
Net Cash Used By Investing Activities (150,208) (61,820)
Cash Flows From (Used By) Financing Activities:
Increase in documentary letters of credit 41,916 9,930
Proceeds from trade financing arrangements 35,307 15,000
Payments on trade financing arrangements (34,343) (9,175)
Short-term borrowings, net change (702) ---
Proceeds from issuance of long-term debt 238,400 ---
Payments on long-term debt (132,680) (373)
Stock issued under incentive and purchase plans 19,530 6,216
Treasury stock acquired (4,586) (14,610)
Dividends paid (9,764) (9,039)
Debt reacquisition and issuance costs (4,989) ---
Net Cash From (Used By) Financing Activities 148,089 (2,051)
Effect of Exchange Rate Changes on Cash 926 226
Increase (Decrease) in Cash and Cash Equivalents 48,501 (49,339)
Cash and Cash Equivalents at Beginning of Year 75,058 124,397
Cash and Cash Equivalents at End of Year $ 123,559 $ 75,058
COMMERCIAL METALS COMPANY
Non-GAAP Financial Measures (Unaudited)
(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.
For the year ended August 31, 2004:
Net earnings $ 132,021
Interest expense 28,104
Income taxes 65,055
Depreciation and amortization 71,044
EBITDA $ 296,224
EBITDA to interest coverage for the year ended August 31, 2004:
$ 296,224 / 28,104 = 10.5
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 August 31, 2004 to the nearest GAAP measure,
stockholders' equity:
Stockholders' equity $ 660,627
Long-term debt 407,601
Deferred income taxes 50,433
Total capitalization $ 1,118,661
COMMERCIAL METALS COMPANY
Non-GAAP Financial Measures (Unaudited)
(in thousands)
Other Financial Information
Long-term debt to cap ratio as of August 31, 2004:
Debt divided by capitalization
$ 407,601 / 1,118,661 = 36.4%
Total debt to cap plus short-term debt ratio as of August 31, 2004:
$ 429,139 / (1,118,661 + 21,538) = 37.6%
Current ratio as of August 31, 2004:
Current assets divided by current liabilities
$ 1,424,232 / 783,477 = 1.82
SOURCE Commercial Metals Company
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Company News On-Call:
http://www.prnewswire.com/comp/118231.html
CONTACT:
Debbie Okle, Director, Public Relations of
Commercial Metals Company, +1-214-689-4354
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