IRVING, Texas, Oct. 25 /PRNewswire-FirstCall/ -- Commercial Metals Company
(NYSE: CMC) today reported record net earnings of $286 million or $4.63 per
diluted share on net sales of $6.6 billion for the year ended August 31, 2005.
This compares with net earnings of $132 million or $2.21 per diluted share on
net sales of $4.8 billion last year, which was the previous record year. The
Company's net earnings return on beginning equity was 43%.
Fourth quarter net earnings were a record for any quarter at $83.7 million
or $1.38 per diluted share on net sales of $1.7 billion. This compares with
$47.4 million or $0.78 per diluted share on net sales of $1.5 billion in the
fourth quarter a year ago.
The fourth quarter results include pre-tax income of $11.6 million for
final settlement of business interruption insurance claims for the transformer
failures in previous years at the Texas and South Carolina mills. For the
year, the business interruption recoveries amounted to pre-tax income of
$20.1 million.
The current year quarter included pre-tax LIFO income of $16.7 million
($0.18 per diluted share) compared with an historically high LIFO expense of
$38.9 million ($0.83 per diluted share) in the prior year quarter. Comparable
numbers for the year were $19.3 million pre-tax expense ($0.20 per diluted
share) this year and $74.8 million expense ($1.63 per diluted share) in the
previous year.
The effective tax rate for the year was 35.7%, up substantially from last
year's 30.7% as profits shifted from low tax jurisdictions such as Poland.
General Conditions
CMC Chairman, President and Chief Executive Officer Stanley A. Rabin said,
"We had thought that fiscal 2004 was a phenomenal year, only to be surpassed
by an even more remarkable fiscal 2005. We continued to benefit in the fourth
quarter from favorable market conditions for most of our businesses and
achieved excellent performance in the Domestic Mills, Domestic Fabrication,
Recycling, and Marketing & Distribution segments. Meanwhile, results for our
Polish steel manufacturing operation, CMC Zawiercie (CMCZ), exhibited
improvement over the third quarter. Some of our markets were softer during
the quarter, although still relatively strong, and they continued to gyrate.
The ferrous scrap market was especially volatile, but on balance moved upward,
notably toward the end of the quarter. Steel mill prices were following the
upswing as the quarter ended."
Domestic Mills
Rabin added, "Our Domestic Mills segment set an all-time earnings record
for a quarter although overall production and shipping levels were mixed
compared with last year's fourth quarter. The segment's adjusted operating
profit of $73.1 million for the fourth quarter was more than double last
year's comparable quarter. This year's quarter included the $11.6 million
business interruption insurance recovery and pre-tax LIFO income of
$11.9 million compared with a $14.9 million pre-tax LIFO expense in last
year's fourth quarter.
"Within the segment, quarterly adjusted operating profit for our steel
minimills at $72.9 million was over 200% greater than a year earlier on the
strength of continued high metal margins and higher shipments. With some
customers still reducing inventories, planned outages reduced production
levels below the third quarter of this year and the fourth quarter of last
year thereby reducing our mill inventories. On a year-to-year basis, tonnage
melted for the fourth quarter was down 4% to 502 thousand tons and tonnage
rolled was 462 thousand tons, 13% lower than last year's fourth quarter.
Shipments, conversely, increased 2% to 606 thousand tons, although this
included a higher proportion of billets than last year's quarter. Further,
total mill shipments in August were a monthly record. Our quarterly average
total mill selling price of $459 per ton was $4 per ton above last year's
strong level on the strength of higher rebar prices. The average scrap
purchase price fell by $28 per ton versus a year ago to $134 per ton. The
metal margin at $291 per ton was $32 per ton greater than the fourth quarter
of last year. Meanwhile, utility costs declined by 2.5% compared with the
same period last year due to a decrease in usage, which more than offset
higher electricity rates and natural gas prices. Supplies generally were
lower in total cost compared with one year ago. Final determination of annual
discretionary incentive plan compensation resulted in lower expense this
quarter."
Rabin continued, "The copper tube mill was slightly above breakeven
compared with an adjusted operating profit of $2.8 million in the prior year's
fourth quarter. Although demand from commercial as well as residential users
was solid, it appears that competition from plastic pipe made further inroads
into the market. FIFO metal margins for copper entering the manufacturing
process fell fourth quarter-to-quarter by 5 cents per pound to 71 cents per
pound because higher copper tube prices could not offset the sharp rise in the
underlying copper scrap price; however, spreads were improving by the end of
the quarter. The average sales price per pound rose 19 cents to $2.09 over
last year; the average cost of copper scrap purchased rose 31 cents to $1.51
versus last year's fourth quarter. Against the same period last year, copper
tube production declined 9% to 15.2 million pounds while shipments increased
slightly to 16.5 million pounds."
CMCZ
Rabin said, "It was a better quarter sequentially for CMCZ although far
below last year's extraordinarily strong fourth quarter. The steel minimill
(and related operations) in Poland generated net sales of $137.5 million and
recorded an adjusted operating profit of $1.9 million on a 100%-owned basis.
Market conditions remained difficult, and the average sales price was 28%
lower than last year at PLN 1,149 per short ton. This price was PLN 164 per
short ton below the third quarter of this year, but operating levels and
shipments picked up substantially. Meanwhile, the average scrap purchase cost
was PLN 27 per short ton below this year's third quarter and decreased 25%
from the fourth quarter last year to PLN 524 per short ton. The metal margin
was PLN 544 per ton compared with fiscal 2004's fourth quarter spread of PLN
834 per ton. For the quarter, melted tons equaled 351 thousand, rolled tons
equaled 264 thousand and shipments totaled 389 thousand tons, including
billets. Comparable data for last year were 383 thousand tons, 281 thousand
tons and 364 thousand tons, respectively."
Domestic Fabrication
Rabin continued, "The excellent results in the Domestic Fabrication
segment continued, buoyed by strong demand and gross margins. Net sales surged
versus the prior year, rising by 29%. We recorded an adjusted operating profit
of $25.4 million in the fourth quarter compared with a slight loss last year.
This year LIFO generated fourth quarter pre-tax income of $2.5 million
compared with last year's fourth quarter LIFO charge of $13.1 million pre-tax.
Profitability, though, was not as strong as the third quarter of fiscal 2005,
as we adjusted expenses upward for final discretionary incentive plan
compensation, profit sharing, and strengthening bad debt reserves. Within the
segment, prices were up across-the-board and volumes within the segment were
mostly higher. All product areas -- rebar fabrication, construction-related
products (CRP), steel fence posts, steel joist manufacturing, cellular beam
manufacturing, structural steel fabrication, and heat treating -- participated
in the improved profitability. The composite average fab selling price
(excluding stock and buyouts) increased by $146 per ton from last year.
Shipments from our fab plants totaled 371 thousand tons, slightly below the
prior year's fourth quarter, but were the highest for the current year."
Recycling
According to Rabin, "The Recycling segment recorded its second best fourth
quarter following last year's record fourth quarter on comparable net sales.
The adjusted operating profit of $15.3 million was more than satisfactory,
although 70% that of the previous year's exceptional quarter. Gross margins
were 26% lower than last year. LIFO expense was negligible this quarter
versus a pre-tax expense of $2.3 million the prior year. The ferrous scrap
market was extraordinarily volatile during the quarter, with the net result
being a moderate increase in price from the beginning to the end of the
quarter. Nonferrous markets remained volatile as well, but our average
selling prices for aluminum, copper, brass and stainless steel scrap did not
vary as much during the quarter.
"Versus last year, the average ferrous scrap sales price for the quarter
decreased by 29% to $139 per short ton while shipments fell 8% to 447 thousand
short tons. The average nonferrous scrap sales price for the quarter was
approximately 19% above a year ago while nonferrous shipments were 13% higher.
Inventory turnover across the board remained extremely high. The total volume
of domestic scrap processed, including all our domestic processing plants,
equaled 812 thousand tons against 868 thousand tons last year."
Marketing and Distribution
"Adjusted operating profit of $22.0 million for the Marketing and
Distribution segment was another record, nearly double last year's already
robust fourth quarter," Rabin said. "This segment recorded LIFO income of
$2.2 million in the fourth quarter of fiscal 2005 versus an $8.7 million
expense last year. Business was good in most of our global markets and
product lines sparked by even stronger results in the International Division
and a pickup in nonferrous semis. China continued to import less steel than
it had been and exported significant quantities of steel during the quarter,
however, it again became a net importer since July 2005. Imports of raw
materials into China began to pick up again. Other markets in Asia,
Australia, and Europe ranged from mixed to good. Our profits improved in the
United States as margins and shipments in steel and aluminum increased
significantly, while sales and profits for other nonferrous semis and
industrial materials and products remained at strong levels. Our value-added
downstream processing businesses continued to generate good profits, albeit
not as strong as the fourth quarter of fiscal 2004."
Financial Condition
Rabin said, "Our financial position remained strong. For the year, we had
net cash flows from operating activities of $201 million. At year end, long-
term debt as a percentage of total capitalization was 29%, and the ratio of
total debt to total capitalization plus short-term debt was 30%. Both ratios
include the debt of CMCZ which has recourse only to the assets of CMCZ. Our
working capital was $809 million and the current ratio was 1.9. Our coverage
ratios were strong. During the quarter we repurchased 1,094,500 shares of the
Company's common stock at an average price of $24.12."
Outlook
Rabin concluded, "As we look forward to fiscal 2006 we are optimistic for
the first quarter and year. We anticipate that the positive factors which
have been driving our markets are sustainable and allow a continuation of
healthy margins and volume for our goods and services, although we must be
concerned about the dampening effect of inflationary pressures on the global
economy, the decline in consumer confidence in the United States, and
significantly increased energy costs for our operations. Still, the U.S.
economy in particular has proven quite resilient and went into September 2005
with significant momentum in the manufacturing and construction sectors.
Additionally, by the end of our fourth quarter it appeared that the issue of
excess inventories in the steel supply chain had been worked through in most
markets. The passage of the multi-year transportation bill in the United
States during August 2005 was especially good news. However, increased
availability of steel globally has had a softening effect on prices, mainly
caused by apparent Chinese overproduction in certain product areas.
"An especially important factor going forward is the impact of Hurricanes
Katrina and Rita on our industry sectors and CMC specifically. We have
experienced some short-term disruptions to our Gulf Coast operations and
markets, including some power outages and transportation difficulties, but
overall effects are not major. Moreover, medium-term and longer-term effects
should be extremely positive because of substantially increased demolition and
recycled metals and the consequent reconstruction requirements in the United
States Gulf area."
Rabin continued, "By segment, we anticipate in the first quarter continued
strong performance from Domestic Mills and Domestic Fabrication, a slight
profit at CMCZ (including scheduled major maintenance), and good results in
Recycling and Marketing & Distribution. Accordingly, we anticipate first
quarter LIFO diluted net earnings per share between $1.10 and $1.25."
CMC invites you to listen to a live broadcast of its fourth quarter/year
end 2005 conference call on Tuesday, October 25, at 3:00 p.m. Eastern. 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.
The Outlook section of this news release contains 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, acquisitions 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 energy and supply prices,
interest rate changes, 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,
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 and decisions by governments
impacting the level of steel imports and pace of overall economic activity,
particularly China.
Three months ended Fiscal year ended
8/31/05 8/31/04 8/31/05 8/31/04
(Short Tons in Thousands)
Domestic Steel Mill Rebar Shipments 260 247 944 1,014
Domestic Steel Mill Structural
and Other Shipments 346 347 1,322 1,387
CMCZ Shipments 389 364 1,092 1,082
Total Mill Tons Shipped 995 958 3,358 3,483
Average FOB Mill Domestic Selling
Price (Total Sales) $459 $455 $473 $379
Average Domestic Ferrous Scrap
Purchase Price $134 $162 $171 $149
Average FOB Mill CMCZ Selling
Price (Total Sales) $344 $431 $418 $380
Average CMCZ Ferrous Scrap
Purchase Price $156 $189 $194 $179
Fab Plant Rebar Shipments 239 260 890 829
Fab Plant Structural, Joist,
and Post Shipments 132 113 452 421
Total Fabrication Tons Shipped 371 373 1,342 1,250
Average Fab Selling Price (Excluding
Stock & Buyout Sales) $863 $717 $850 $626
Domestic Scrap Metal Tons
Processed and Shipped 812 868 3,331 3,411
BUSINESS SEGMENTS
(in thousands)
Three months ended Fiscal year ended
8/31/05 8/31/04 8/31/05 8/31/04
Net Sales:
Domestic Mills $354,827 $321,662 $1,298,421 $1,109,236
CMCZ 137,520 160,815 478,255 427,141
Domestic Fabrication 423,931 328,919 1,473,686 1,047,321
Recycling 213,078 209,768 896,946 774,175
Marketing and Distribution 725,489 602,281 2,926,325 1,881,783
Corporate and Eliminations (114,784) (160,391) (480,936) (471,329)
Total Net Sales $1,740,061 $1,463,054 $6,592,697 $4,768,327
Adjusted Operating
Profit (Loss):
Domestic Mills $73,101 $28,066 $216,875 $84,156
CMCZ 1,850 30,533 (188) 69,318
Domestic Fabrication 25,393 (248) 117,856 7,288
Recycling 15,268 21,908 70,828 67,887
Marketing and Distribution 21,999 11,841 90,417 39,427
Corporate and Eliminations (3,654) (5,332) (17,463) (26,394)
COMMERCIAL METALS COMPANY
Fourth Quarter and Year Operating Results (Unaudited)
(in thousands except share data)
Three months ended
2005 2004
Net sales $1,740,061 $1,463,054
Costs and Expenses:
Cost of goods sold 1,511,864 1,278,756
Selling, general and administrative
expenses 95,367 98,597
Interest expense 7,761 8,376
1,614,992 1,385,729
Earnings Before Income Taxes and
Minority Interests 125,069 77,325
Income Taxes 40,667 23,255
Earnings Before Minority Interests 84,402 54,070
Minority Interests 662 6,716
Net Earnings $83,740 $47,354
Basic earnings per share $1.44 $0.81
Diluted earnings per share $1.38 $0.78
Cash dividends per share $0.06 $0.05
Average basic shares outstanding 58,100,774 58,518,688
Average diluted shares outstanding 60,695,859 60,729,050
Fiscal year ended
2005 2004
Net sales $6,592,697 $4,768,327
Costs and Expenses:
Cost of goods sold 5,693,483 4,160,726
Selling, general and administrative
expenses 424,994 367,550
Interest expense 31,187 28,104
6,149,664 4,556,380
Earnings Before Income Taxes and
Minority Interests 443,033 211,947
Income Taxes 157,996 65,055
Earnings Before Minority Interests 285,037 146,892
Minority Interests (Benefit) (744) 14,871
Net Earnings $285,781 $132,021
Basic earnings per share $4.84 $2.29
Diluted earnings per share $4.63 $2.21
Cash dividends per share $0.23 $0.17
Average basic shares outstanding 59,024,440 57,535,914
Average diluted shares outstanding 61,690,087 59,688,678
Note: All prior year share data adjusted for January 2005 stock split.
COMMERCIAL METALS COMPANY
Consolidated Condensed Balance Sheets (Unaudited)
(in thousands)
Fiscal year ended
2005 2004
Assets:
Current Assets:
Cash and cash equivalents $119,404 $123,559
Accounts receivable, net 829,192 607,005
Inventories 706,951 645,484
Other 45,370 48,184
Total Current Assets 1,700,917 1,424,232
Net Property, Plant and Equipment 505,584 451,490
Goodwill 30,542 30,542
Other Assets 95,879 81,782
$2,332,922 $1,988,046
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable - trade $408,342 $385,108
Accounts payable - documentary
letters of credit 140,986 116,698
Accrued expenses and other payables 293,598 248,790
Income taxes payable 40,126 11,343
Short-term trade financing arrangements 1,667 9,756
Notes payable - CMCZ --- 530
Current maturities of long-term debt 7,223 11,252
Total Current Liabilities 891,942 783,477
Deferred Income Taxes 45,629 50,433
Other Long-Term Liabilities 58,627 39,568
Long-Term Trade Financing Arrangement --- 14,233
Long-Term Debt 386,741 393,368
Minority Interests 50,422 46,340
Stockholders' Equity 899,561 660,627
$2,332,922 $1,988,046
COMMERCIAL METALS COMPANY
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Fiscal year ended
2005 2004
Cash Flows From (Used by) Operating Activities:
Net earnings $285,781 $132,021
Adjustments to reconcile net earnings to cash
from operating activities:
Depreciation and amortization 76,610 71,044
Minority interests (benefit) (744) 14,871
Asset impairment charges 300 6,583
Provision for losses on receivables 6,604 6,154
Tax benefits from stock plans 12,183 6,148
Stock-based compensation 1,115 ---
Loss on reacquisition of debt --- 3,072
Net gain on sale of assets (877) (1,319)
Changes in Operating Assets and Liabilities,
Net of Effect of Acquisitions:
Accounts receivable (217,398) (223,845)
Accounts receivable sold --- 77,925
Inventories (49,313) (290,474)
Other assets (6,997) 10,001
Accounts payable, accrued expenses,
other payables and income taxes 83,757 223,968
Deferred income taxes (8,934) 2,142
Other long-term liabilities 18,499 11,403
Net Cash Flows From Operating Activities 200,586 49,694
Cash Flows From (Used by) Investing Activities:
Purchases of property, plant and equipment (110,214) (51,889)
Sales of property, plant and equipment 5,034 3,192
Acquisitions of CMCZ and Lofland,
net of cash acquired --- (99,401)
Acquisitions of fabrication businesses,
net of cash acquired (12,310) (2,110)
Net Cash Used By Investing Activities (117,490) (150,208)
Cash Flows From (Used by) Financing Activities:
Increase in documentary letters of credit 24,288 41,916
Proceeds from trade financing arrangements --- 35,307
Payments on trade financing arrangements (22,322) (34,343)
Short-term borrowings, net change (586) (702)
Proceeds from issuance of long-term debt --- 238,400
Payments on long-term debt (17,222) (132,680)
Stock issued under incentive and
purchase plans 18,703 19,530
Treasury stock acquired (77,077) (4,586)
Dividends paid (13,652) (9,764)
Debt reacquisition and issuance costs --- (4,989)
Net Cash From (Used By) Financing Activities (87,868) 148,089
Effect of Exchange Rate Changes on Cash 617 926
Increase (Decrease) in Cash and
Cash Equivalents (4,155) 48,501
Cash and Cash Equivalents at Beginning of Year 123,559 75,058
Cash and Cash Equivalents at End of Year $119,404 $123,559
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, 2005:
Net earnings $285,781
Interest expense 31,187
Income taxes 157,996
Depreciation and amortization 76,610
EBITDA $551,574
EBITDA to interest coverage for the year ended August 31, 2005:
$551,574 / $31,187 = 17.7
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, 2005 to the nearest GAAP measure, stockholders'
equity:
Stockholders' equity $899,561
Long-term debt 386,741
Deferred income taxes 45,629
Total capitalization $1,331,931
Other Financial Information
Long-term debt to cap ratio as of August 31, 2005:
Debt divided by capitalization
$386,741 / $1,331,931 = 29.0%
Total debt to cap plus short-term debt ratio as of August 31, 2005:
$395,631 / ($1,331,931 + $8,890) = 29.5%
Current ratio as of August 31, 2005:
Current assets divided by current liabilities
$1,700,917 / $891,942 = 1.9
Working capital as of August 31, 2005:
Current assets $1,700,917
Current liabilities 891,942
Working capital $808,975
SOURCE Commercial Metals Company
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Related links:
http://www.commercialmetals.com
CONTACT:
Debbie Okle, Director, Public Relations of
Commercial Metals Company, +1-214-689-4354
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