IRVING, Texas, Oct. 30 /PRNewswire-FirstCall/ -- Commercial Metals
Company (NYSE: CMC) today reported net earnings of $355.4 million or $2.92
per diluted share on net sales of $8.3 billion for the year ended August
31, 2007. This compares with net earnings of $356.3 million or $2.89 per
diluted share on net sales of $7.2 billion last year. The Company's net
earnings return on beginning equity was 29.1%.
Fourth quarter net earnings were $104.7 million or $0.86 per diluted
share on net sales of $2.3 billion. This compares with $128.7 million or
$1.04 per diluted share on net sales of $2.2 billion in the fourth quarter
a year ago.
The current year quarter included pre-tax LIFO income of $8.8 million
($0.05 per diluted share) compared with pre-tax LIFO expense of $16.2
million ($0.09 per diluted share) in the prior year quarter. Comparable
LIFO numbers for the year were $51.2 million pre-tax expense ($0.27 per
diluted share) this year and $77.9 million pre-tax expense ($0.41 per
diluted share) in the previous year. LIFO inventory valuation reserves were
$240.5 million at year end.
Selling, general and administrative expenses in the fourth quarter
included $9.4 million of costs associated with the investment in the global
deployment of SAP software. For the year ended August 31, 2007, the amount
was $33.8 million as compared to $1.2 million last year. Other costs of
$33.5 million have been capitalized since inception of the project, of
which $22.3 million has been capitalized in the current year.
The effective tax rate for the quarter was 26.6% compared with last
year's 30.2%, and for the whole year was 31.9% compared with fiscal 2006 at
33.9%. The lower rate was due to a shift in earnings (higher profits in
Poland).
We remain positive in our outlook. As discussed in more detail later in
this release, we anticipate first quarter LIFO diluted net earnings per
share between $0.55 to $0.65 (no LIFO impact assumed in the quarter)
compared to last year's first quarter record of $0.71 per diluted share.
General Conditions
Murray R. McClean, President & CEO, said, "Backed by record fourth
quarters from our Domestic Fabrication and Marketing & Distribution
segments, we achieved our second best quarter ever, eclipsed only by last
year's all- time record fourth quarter. Though not at record levels, our
Recycling segment had its best quarter of the fiscal year, and CMCZ
finished its best year ever. Operating profit for our Domestic Mills
segment was lower, primarily on account of lower production and shipments.
The service centers continued destocking reduced shipments, most notably
merchant bar. The housing slump had some impact on rebar shipments,
particularly in the southeast, although nonresidential construction in the
U.S. continued at strong levels. In addition, record rainfall in Texas
slowed rebar shipments to construction sites. Steel imports have been a
factor, but these declined significantly by quarter end. Internationally,
most markets remained strong although slower due to the summer holiday
period. The overhang of rebar inventories, mainly steel imports, caused by
very robust market conditions in the first two quarters of calendar 2007
impacted many European markets including Poland.
Domestic Mills (Steel Minimills and Copper Tube Mill)
McClean said, "Our Domestic Mills segment's adjusted operating profit
at $67.1 million was 30% below last year's fourth quarter, an all-time
segment record. LIFO expense was negligible this quarter compared with $3.7
million pre-tax expense last year. Net sales were flat."
McClean continued, "Within the segment, adjusted operating profit for
our steel minimills declined 28% compared to last year's fourth quarter on
slightly lower sales. Metal margins were at record levels having increased
$34 a ton fourth quarter to fourth quarter. Our average selling price was
up $43 per ton to $591 per ton, while the average selling price for
finished goods was up $76 per ton to $639 per ton. However, sales volumes
dropped 12% at 548 thousand tons with decreases in both rebar and merchant
bar volumes. Rebar was negatively affected by the wet summer in Texas and
the ripple effect in the residential housing downturn; merchants by
declining inventory levels at service centers. Faced with softening demand,
our mills undertook both maintenance and capital expenditure programs in
the fourth quarter as well as inventory management. Between our four
minimills and three melt shops, we were down 137 days this quarter compared
to 20 in last year's fourth quarter. On a year-to-year basis, tonnage
melted for the fourth quarter was down 25% to 462 thousand tons, while
tonnage rolled was 377 thousand tons, 34% lower than last year's fourth
quarter. The price premium of merchant bar over reinforcing bar was $70,
down $13 from last year. The average scrap purchase cost rose $9 per ton
from a year ago to $209. Total utility costs decreased by $5.1 million
compared with the fourth quarter last year with natural gas and electricity
both declining. Costs for ferroalloys, graphite electrodes, and other
supplies decreased $284 thousand year over year. We have invested $26
million of the expected $155 million total cost of our micro mill project
in Arizona."
According to McClean, "The copper tube mill (CMC Howell Metal) recorded
an adjusted operating profit of $11.1 million on 6% lower sales,
historically a solid performance, but trailing the phenomenal result of
$18.3 million in the prior year fourth quarter. The continued slump in
residential housing overhung the market; however, we continued to shift the
product mix to higher value items. Pre-tax LIFO expense was $636 thousand
this fourth quarter compared to $6.3 million expense last year. The average
selling price dropped 45 cents to $4.65 per pound, and metal spreads
declined $1.01 to $1.55 per pound as scrap prices increased 11 cents to
$3.36 per pound. Copper tube production increased 9% to 15.0 million pounds
while shipments rose 3% to 13.9 million pounds compared to last year's
fourth quarter."
CMCZ
McClean said, "CMCZ, our Polish steel operation, closed out a record
year with fourth quarter adjusted operating profit of $20.8 million, solid
results, but 45% below last year's fourth quarter record. The vibrant
Polish construction market and a strong currency attracted imports, driving
down metal margins and shipments. For the fourth quarter, tons melted were
330 thousand, 2% below last year's 338 thousand; rolled tons equaled 240
thousand against 323 thousand last year; and shipments totaled 309 thousand
tons (including billets) versus 378 thousand last year. Average selling
prices increased 4% to PLN 1,620 per ton (including 18% billets) from PLN
1,552 per ton (including 7% billets). The increase in pricing was not
sufficient to offset the increase in the cost of purchased scrap entering
production. The average metal margin declined in local currency to PLN 727
per ton from PLN 777 per ton. Our mega-shredder processed 502 thousand tons
of scrap for the year, representing 34% of the mill's scrap requirements."
Domestic Fabrication
McClean added, "The margin squeeze occasioned by rising mill prices
significantly abated in the fourth quarter as the rise in average selling
prices worked its way through shipments. Adjusted operating profit rose to
a fourth quarter record of $32.5 million, an increase of 49% over last
year's $21.8 million profit. LIFO income was $2.7 million pre-tax in the
fourth quarter this year compared to an expense of $1.1 million last year.
Total shipments from our fab plants fell 11% to 429 thousand tons from 483
thousand tons last year. Most of the decrease was in rebar shipments,
particularly in Texas where record summer rainfall postponed construction.
In contrast, shipments in joist and deck were up substantially as a result
of our April 2007 acquisition of Bouras; all acquired locations were
profitable. The composite average fab selling price (excluding stock and
buyouts) rose 21% to $1,073 per ton."
Recycling
According to McClean, "Our Recycling segment had its best quarter of
the year with adjusted operating profit of $26.6 million, though off some
41% from last year's all-time record quarterly earnings of $45.1 million.
Ferrous scrap pricing showed some stability in comparison to the volatile
swings exhibited earlier in the year. Nonferrous markets were notable by
extreme price and demand volatility. Nickel dropped almost in half, and
with low terminal inventories, copper reacted to any news influencing
supply or demand. LIFO income was $10.3 million in the fourth quarter
driven by significantly lower inventory quantities; days outstanding of
inventory stood at seven days at year end. Comparative LIFO income in the
prior year was $2.1 million. The average ferrous scrap sales price for the
quarter increased by $2 to $216 per short ton while shipments of ferrous
scrap decreased 4% to 587 thousand short tons. The proliferation of
shredders, especially in the south, has pressured margins. The average
nonferrous scrap sales price for the quarter dropped 1% compared with last
year while nonferrous shipments also declined 8% to 90 thousand tons.
Chinese nonferrous buyers appeared only towards the end of the quarter
after being adversely affected by customs investigations and the resulting
port congestion. The total volume of scrap processed, including all our
domestic processing plants, equaled 969 thousand tons versus 1,020 thousand
tons last year."
Marketing and Distribution
"On the heels of its best quarterly operating profit ever, achieved in
the third quarter, the Marketing and Distribution segment had its best
fourth quarter and second best quarter ever," McClean said. "Adjusted
operating profit of $28.8 million was double the prior year of $13.9
million. LIFO expense of $3.3 million pre-tax versus $13.5 million last
year was a key factor. Each of our major divisions was profitable during
the quarter. U.S. steel import volumes were strong, but declined
significantly by quarter end. Our raw materials product division was steady
and achieved its second best year ever. Our aluminum, copper, and stainless
steel semis business saw an upturn during the quarter. International
markets were profitable, but uneven; inter-Asian markets were solid, but
Australia showed signs of weakening. Great Britain and Germany were good
markets for niche products."
Financial Condition
McClean said, "Our financial position remains strong. Including our
$400 million July bond offering (10 year, 6.50%), our long-term debt as a
percentage of total capitalization was only 31%. We had cash and cash
equivalents of $419 million at year end. Our working capital was $1.4
billion and the current ratio was 2.3. Our coverage ratios remain strong,
both on domestic borrowings as well as the separate borrowings of CMCZ."
Outlook
McClean continued, "The prospects are very good for another strong year
for CMC in 2008. We believe the year will be typical with a good first
quarter followed by a slower second quarter (winter months) and then a
strong finish in the third and fourth quarters. The housing market slump
and the more recent sub prime mortgage crisis/credit squeeze have slowed
the U.S. economy. The global economies remain relatively solid, although in
Europe there are some signs of slowing growth. Nonresidential construction
remains strong in the U.S. and in most global markets. This is the key
driver for our business.
"The strong 2007 results should carry forward into a good first quarter
for 2008. Our domestic mills should have a solid first quarter particularly
if shipments to service centers and rebar fabricators improve. Our U.S.
Recycling segment should have a good quarter based on relatively high
ferrous scrap prices, good shipping volumes and a healthy nonferrous global
scrap market. Margins on shredder ferrous scrap should continue to be
squeezed due to the overcapacity of shredders in the U.S. Our U.S.
fabrication business should have a solid quarter based on a very good
backlog at good prices. Our steel import distribution business in the U.S.
is likely to be negatively impacted by the rapid decline in steel imports.
Our copper tube mill should continue to perform well with shipping volumes
and margins relatively stable."
McClean added, "Internationally, our Polish mill (CMCZ) should have a
profitable quarter, although lower than the fourth quarter of fiscal 2007.
Our newly acquired mill in Croatia (CMC Sisak) is a turnaround situation,
but may have a slight negative impact on first quarter results. The
international fabrication and distribution operations should have a solid
quarter, although down from fourth quarter fiscal 2007 results.
"Steel imports into the U.S. will continue to fall significantly. As
well, consolidation of steel producers in the U.S. has resulted in more
supply discipline. Service centers' inventory levels for most steel
products are the lowest in two years. The combination of lower steel
imports, producer supply discipline and lower inventory levels should
result in stable, if not slowly increasing, shipping levels, stable margins
and prices with an upward bias. Globally, China has reduced steel exports
through removal of VAT tax rebates and new export taxes. The impact should
be higher international steel prices. As well, 2008 contract iron ore
prices are likely to increase significantly which will result in higher
steel prices. Ferrous scrap prices, while remaining volatile, should also
trend upwards. Ocean freight rates should remain at high levels due to the
demand for iron ore, coal and other key raw materials."
McClean concluded, "We anticipate investments for fiscal 2008 will be
$494 million including routine capex ($206 million), ERP ($76 million), the
Arizona micro mill and flexible rolling mill in Poland ($116 million) and
other acquisitions/investments ($96 million)."
Conference Call
CMC invites you to listen to a live broadcast of its fourth
quarter/year- end 2007 conference call on Tuesday, October 30, 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 international markets.
Paragraph six and the Outlook section 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, interest rates, inventory levels, impact of 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," "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,
the ability to integrate acquisitions into operations; 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.
Three months ended Fiscal year ended
(Short Tons in Thousands) 8/31/07 8/31/06 8/31/07 8/31/06
Domestic Steel Mill
Rebar Shipments 220 274 972 1,102
Domestic Steel Mill
Structural and Other
Shipments 328 351 1,278 1,390
CMCZ Shipments 309 378 1,366 1,250
Total Mill Tons Shipped 857 1,003 3,616 3,742
Average FOB Mill Domestic
Selling Price (Total
Sales) $591 $548 $566 $513
Average Cost Domestic Mill
Ferrous Scrap Utilized $239 $230 $233 $214
Domestic Mill Metal Margin $352 $318 $333 $299
Average Domestic Mill
Ferrous Scrap Purchase
Price $209 $200 $211 $191
Average FOB Mill CMCZ
Selling Price (Total
Sales) $580 $500 $542 $437
Average Cost CMCZ Ferrous
Scrap Utilized $321 $250 $302 $229
CMCZ Mill Metal Margin $259 $250 $240 $208
Average CMCZ Ferrous Scrap
Purchase Price $286 $228 $268 $197
Fab Plant Rebar Shipments 239 317 1,014 1,076
Fab Plant Structural, Joist,
Deck and Post Shipments 190 166 581 569
Total Fabrication Tons
Shipped 429 483 1,595 1,645
Average Fab Selling
Price (Excluding Stock
& Buyout Sales) $1,073 $886 $982 $866
Domestic Scrap Metal Tons
Processed and Shipped 969 1,020 3,845 3,697
BUSINESS SEGMENTS
(in thousands)
Three months ended Fiscal year ended
8/31/07 8/31/06 8/31/07 8/31/06
Net Sales:
Domestic Mills $424,279 $441,833 $1,593,886 $1,600,255
CMCZ 196,679 195,920 789,566 573,720
Domestic Fabrication 548,574 503,160 1,890,064 1,771,790
Recycling 433,904 466,570 1,641,609 1,360,457
Marketing and
Distribution 946,500 843,282 3,504,969 2,953,577
Corporate, Discontinued
Operation sand
Eliminations (265,994) (300,530) (1,091,078) (1,047,647)
Total Net Sales $2,283,942 $2,150,235 $8,329,016 $7,212,152
Adjusted Operating
Profit (Loss):
Domestic Mills $67,113 $95,763 $275,031 $301,113
CMCZ 20,823 37,968 112,195 52,791
Domestic Fabrication 32,529 21,787 89,021 95,999
Recycling 26,603 45,061 89,785 99,963
Marketing and
Distribution 28,796 13,870 84,904 69,755
Corporate and
Eliminations (20,894) (9,825) (72,009) (32,367)
COMMERCIAL METALS COMPANY
Fourth Quarter and Year Operating Results (Unaudited)
(in thousands except share data)
Three months ended Fiscal year ended
8/31/07 8/31/06 8/31/07 8/31/06
Net Sales $2,283,942 $2,150,236 $8,329,016 $7,212,152
Costs and Expenses:
Cost of goods
sold 1,975,739 1,807,710 7,167,989 6,138,134
Selling, general and
administrative
expenses 156,386 135,021 583,810 480,282
Interest expense 10,331 8,697 36,334 29,232
2,142,456 1,951,428 7,788,133 6,647,648
Earnings from Continuing
Operations Before Income
Taxes and Minority
Interests 141,486 198,808 540,883 564,504
Income Taxes 37,271 60,175 172,769 191,217
Earnings from Continuing
Operations Before
Minority Interests 104,215 138,633 368,114 373,287
Minority Interests
(Benefit) (76) 7,472 9,587 10,209
Net Earnings from
Continuing
Operations $104,291 $131,161 $358,527 $363,078
Earnings (Loss) from
Discontinued Operations
Before Taxes 1,126 (3,769) (4,827) (10,011)
Income Tax (Benefit) 698 (1,268) (1,731) (3,280)
Net Earnings (Loss) from
Discontinued Operations 428 (2,501) (3,096) (6,731)
Net Earnings $104,719 $128,660 $355,431 $356,347
Basic Earnings (Loss)
per Share:
Earnings from
Continuing Operations $0.88 $1.10 $3.04 $3.08
Earnings (Loss) from
Discontinued Operations - (0.02) (0.03) (0.06)
Net Earnings $0.88 $1.08 $3.01 $3.02
Diluted Earnings (Loss)
per Share:
Earnings from Continuing
Operations $0.86 $1.06 $2.95 $2.94
Earnings (Loss) from
Discontinued Operations - (0.02) (0.03) (0.05)
Net Earnings $0.86 $1.04 $2.92 $2.89
Cash Dividends per Share $0.09 $0.06 $0.33 $0.17
Average Basic Shares
Outstanding 118,735,742 118,763,254 118,014,149 117,989,877
Average Diluted
Shares
Outstanding 121,925,891 123,184,476 121,681,730 123,459,069
COMMERCIAL METALS COMPANY
Consolidated Condensed Balance Sheets (Unaudited)
(in thousands)
Fiscal year ended
2007 2006
Assets:
Current Assets:
Cash and cash equivalents $419,275 $180,719
Accounts receivable, net 1,082,713 1,134,823
Inventories 874,104 762,635
Other 82,760 66,615
Total Current Assets 2,458,852 2,144,792
Net Property, Plant and Equipment 767,353 588,686
Goodwill 37,843 35,749
Other Assets 208,615 129,641
$3,472,663 $2,898,868
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable - trade $484,650 $526,408
Accounts payable - documentary letters of credit 153,431 141,713
Accrued expenses and other payables 425,410 379,764
Income taxes payable and deferred income taxes 4,372 14,258
Notes payable - 60,000
Current maturities of long-term debt 4,726 60,162
Total Current Liabilities 1,072,589 1,182,305
Deferred Income Taxes 31,977 34,550
Other Long-Term Liabilities 109,813 78,789
Long-Term Debt 706,817 322,086
Minority Interests 2,900 61,034
Stockholders' Equity 1,548,567 1,220,104
$3,472,663 $2,898,868
COMMERCIAL METALS COMPANY
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Fiscal year ended
2007 2006
Cash Flows From (Used by) Operating Activities:
Net earnings $355,431 $356,347
Adjustments to reconcile net earnings
to cash from operating activities:
Depreciation and amortization 107,305 85,378
Minority interests (benefit) 9,587 10,209
Asset impairment charges 3,400 -
Provision for losses on receivables (370) 2,676
Share-based compensation 12,499 9,526
Net (gain) loss on sale of assets 474 (2,518)
Changes in Operating Assets and Liabilities,
Net of Effect of Acquisitions:
Accounts receivable (39,695) (297,924)
Accounts receivable sold 115,672 ---
Inventories (10,381) (36,196)
Other assets (89,332) (48,498)
Accounts payable, accrued expenses,
other payables and income taxes (22,179) 171,045
Deferred income taxes (10,603) (34,459)
Other long-term liabilities 29,482 17,797
Net Cash Flows From Operating Activities 461,290 233,383
Cash Flows From (Used by) Investing Activities:
Purchases of property, plant and equipment
and other (206,262) (131,235)
Purchase of interests in CMC Zawiercie and
subsidiaries (62,104) (1,165)
Sales of property, plant and equipment 1,470 11,290
Acquisitions of other businesses, net of
cash acquired (164,017) (44,391)
Net Cash Used By Investing Activities (430,913) (165,501)
Cash Flows From (Used by) Financing Activities:
Increase in documentary letters of credit 11,718 727
Payments on trade financing arrangements - (1,667)
Short-term borrowings, net change (62,088) 60,000
Proceeds from issuance of long-term debt 400,504 14,495
Payments on long-term debt (72,282) (28,800)
Stock issued under incentive and purchase plans 10,849 23,659
Tax benefits from stock plans 16,894 21,240
Treasury stock acquired (59,169) (78,662)
Dividends paid (39,254) (20,212)
Net Cash From (Used By) Financing Activities 207,172 (9,220)
Effect of Exchange Rate Changes on Cash and
Cash Equivalents 1,007 2,653
Decrease in Cash and Cash Equivalents 238,556 61,315
Cash and Cash Equivalents at Beginning of Year 180,719 119,404
Cash and Cash Equivalents at End of Year $419,275 $180,719
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.
Three Months Year
Ended Ended
8/31/07 8/31/07
Net earnings $104,719 $355,431
Interest expense 10,546 37,257
Income taxes 37,969 171,038
Depreciation and amortization 31,446 107,305
EBITDA $184,680 $671,031
EBITDA to interest coverage
for the quarter ended August 31, 2007: for the year ended August 31, 2007:
$184,680 / 10,546 = 17.5 $671,031 / 37,257 = 18.0
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, 2007 to the nearest GAAP measure,
stockholders' equity:
Stockholders' equity $1,548,567
Long-term debt 706,817
Deferred income taxes 31,977
Total capitalization $2,287,361
Other Financial Information
Long-term debt to cap ratio as of August 31, 2007:
Debt divided by capitalization
$706,817 / 2,287,361 = 30.9%
Total debt to cap plus short-term debt ratio as of August 31, 2007:
($706,817 + 4,726) / (2,287,361 + 4,726) = 31.0%
Current ratio as of August 31, 2007:
Current assets divided by current liabilities
$2,458,852 / 1,072,589 = 2.3
SOURCE Commercial Metals Company
 back to top
Related links:
http://www.cmc.com
CONTACT:
Debbie Okle, Director, Public Relations of
Commercial Metals Company, +1-214-689-4354
|
