IRVING, Texas, Dec. 20 /PRNewswire-FirstCall/ -- Commercial Metals Company
(NYSE: CMC) today reported record quarterly net earnings of $73.7 million or
$2.42 per diluted share on net sales of $1.53 billion for the quarter ended
November 30, 2004. This compares with net earnings of $12.6 million or
$0.44 per diluted share for the same period last year on net sales of
$830 million. This is the third consecutive quarter in which net earnings
exceeded those for any previous complete fiscal year before fiscal 2004.
The current year quarter included a pre-tax LIFO expense of $34.2 million
($0.73 per diluted share) compared with a LIFO expense of $1.3 million
($0.03 per diluted share) in the prior year quarter. The effective tax rate
was 33.9%.
CMC Chairman, President and Chief Executive Officer Stanley A. Rabin said,
"We continued to benefit in the first quarter from the favorable pricing and
volume environment for most of our businesses and we achieved outstanding
results across all of our segments. But just as certainly, our long enacted
strategy of vertical integration and diversification has placed us in a
position to reap major gains from positive environments. While markets
generally remained strong during the quarter, there was a slowing in China and
inventory adjustments in the U.S. and Europe which created some pressure on
the high global prices for steel, nonferrous metals and industrial raw
materials, as well as some slowing of shipments at the mill level. On the
other hand, input costs remained high, freight rates increased again, and the
U.S. dollar weakened further, all serving to sustain elevated dollar
denominated selling prices."
Domestic Mills
Rabin said, "It was a remarkable quarter for our Domestic Mills segment.
The record adjusted operating profit of $50.7 million for the first quarter on
net sales of $316 million dwarfed last year's first quarter, including a pre-
tax LIFO expense of $27.1 million in this year's first quarter (compared with
$553 thousand LIFO expense last year). Within the segment, quarterly adjusted
operating profit for our domestic steel minimills at $48.5 million also was a
record and quadrupled that of a year earlier on the strength of vastly
improved selling prices and solid shipments, which more than offset the steep
rise in steel scrap and other input costs. Indeed, it was the best ever
quarterly profit for each of the four mills. On a year-to-year basis, tonnage
melted for the first quarter was lower by 2% to 549 thousand tons; tonnage
rolled was 546 thousand tons, 1% above last year's first quarter; and
shipments, including billets, decreased 4% to 545 thousand tons. Our
quarterly average total mill selling price of $484 per ton was $175 per ton or
57% above last year's still depressed level and the average selling price for
finished goods was up by $185 per ton to $498 per ton. Conversely, the
average scrap purchase cost rose by $70 per ton versus a year ago to $188 per
ton. Additionally, utility costs increased by $1.0 million compared with the
first quarter last year, and costs for other supplies increased as well. On
balance, though, our margins rose considerably; the metal spread at $296 per
ton was $105 per ton greater than the first quarter of last year."
Rabin added, "During the quarter we filed our initial claim of $18 million
for business interruption reimbursement for the transformer failure at SMI
South Carolina. We recorded an advance of $4 million in the Domestic Mill
segment. Our ultimate total recovery remains dependent on resolution of
issues regarding lost sales, prices, costs incurred and avoided, deductible
amounts, and other factors. We cannot reasonably estimate the amount of our
total recovery at this time. Our claim for business interruption at SMI-Texas
is still being developed and reviewed and has not been filed.
"The copper tube mill recorded an adjusted operating profit of
$2.2 million, comparable with that of the prior year's first quarter. The
LIFO provision was $1.0 million pre-tax expense ($230 thousand last year).
Demand from residential and commercial users was relatively steady. First
quarter-to-quarter metal spreads improved by 3 cents per pound to 56 cents per
pound despite the sharp rise in the underlying copper scrap price because of a
parallel increase in tube selling prices. Against the same period last year,
copper tube production decreased 1% to 16.0 million pounds while shipments
declined 3% to 16.2 million pounds."
CMCZ
Rabin said, "It was another very solid quarter for CMCZ, the steel
minimill and related operations in Poland. Market conditions were not as
strong as the fourth quarter of fiscal 2004; we experienced a significant
decline in shipments as a result of the strengthening of the Polish Zloty as
well as the seasonal slowdown. CMCZ generated net sales of PLN 424 million
($123 million) and recorded an adjusted operating profit of PLN 42.4 million
($12.3 million) on a 100% owned basis. The average sales price increased from
the fourth quarter to PLN 1,667 per short ton while the average scrap purchase
cost increased from the fourth quarter to PLN 833 per short ton, resulting in
a metal spread of PLN 834 per ton. For the quarter, melted tons equaled
328 thousand, rolled tons equaled 202 thousand, and shipments totaled
252 thousand tons, including billets. Fourth quarter 2004 shipments had
totaled 364 thousand tons."
Domestic Fabrication
Rabin continued, "The adjusted operating profit of $24.6 million for the
Domestic Fabrication segment on net sales of $327 million was more than four
times higher than the previous year's quarter under increasingly favorable
market conditions, notwithstanding a $4.6 million increase in the LIFO reserve
(compared with a $322 thousand increase last year). All product areas --
rebar fabrication, construction-related products (CRP), steel post plants,
steel joist manufacturing, structural steel fabrication, and heat treating --
showed improved profits and benefited from significant increases in selling
prices and good operating levels. Shipments from our fabrication plants,
including Lofland, totaled 340 thousand tons, 22% above the prior year's first
quarter, although specific product lines were mixed. The composite average
fab selling price (excluding stock and buyouts) increased dramatically by
$266 per ton to $821 per ton."
Recycling
According to Rabin, "The Recycling segment recorded another superb quarter
on 67% higher net sales dollars ($220 million), propelled by vibrant ferrous
and nonferrous scrap markets. This compared most favorably with the quarter a
year ago. Adjusted operating profit more than tripled to $19.8 million. LIFO
expense for the quarter was $2.2 million ($367 thousand last year). Most of
the increase in profitability occurred on the ferrous side. Gross margins
were significantly above last year while processing costs, as a percent of
sales, declined to 9.1%. Our markets still were characterized by
extraordinary price volatility for our major commodities against a backdrop of
continued overall strong demand for our products. As ever, we focused on
rapid inventory turnover. Versus last year, the average ferrous scrap sales
price for the quarter increased by 77% to $220 per ton, and shipments climbed
9% to 470 thousand tons. The average nonferrous scrap sales price for the
quarter was approximately 32% above a year ago while nonferrous shipments were
23% higher at 67 thousand tons. The total volume of scrap processed,
including all our processing operations, equaled 828 thousand tons against
734 thousand tons in last year's first quarter."
Marketing and Distribution
"Adjusted operating profit of $23.4 million for the Marketing and
Distribution segment was another record," Rabin said, "close to four times
last year's first quarter reflecting broad-based, robust business across
multiple product lines and geographic areas led by the demand for steel in
many of our markets. The segment recorded pre-tax LIFO expense of
$281 thousand (negligible in prior year). Net sales totaled $681 million and
were strong in the United States, Asia, Europe, and Australia. China imported
less steel than it had been and exported significant quantities of steel
during the quarter as a result of its cooler economy and, in fact, became a
net exporter of steel in September, 2004. Our sales of aluminum, copper,
brass and stainless steel semis increased significantly. Sales and profits
for industrial materials and products continued at record levels, including
traditional and newer items, with especially high demand globally from the
steel industry. Our value-added downstream processing businesses, primarily
in Australia, continued to generate good profits. The impact of the weaker
U.S. dollar and higher freight rates was mixed."
Financial Condition/Stock Dividend
Rabin added, "Our financial position remained strong. At quarter end,
long-term debt as a percentage of total capitalization was 34%, and the ratio
of total debt to total capitalization plus short-term debt was 36%. Our
working capital was $733 million and the current ratio was 1.9. Our coverage
ratios were strong.
"On November 22, 2004, the Company announced a two-for-one stock split in
the form of a 100% stock dividend on the Company's common stock payable
January 10, 2005 to shareholders of record December 13, 2004 and announced a
new quarterly cash dividend of 6 cents per share on the increased number of
shares resulting from the stock dividend. The Board of Directors has
implemented this increase by declaring a cash dividend payment of 6 cents per
share to stockholders of record January 21, 2005. The dividend will be paid
January 31, 2005. This is the 161st consecutive quarterly dividend paid by
Commercial Metals Company. The effect of the stock dividend combined with the
new cash dividend rate results in stockholders receiving a 20% increase in
cash dividend payments, which combined with an earlier raise in the dividend
represents a 50% increase in the last year."
Outlook
Rabin concluded, "Our outlook for the balance of the year remains very
positive, although the second quarter typically is our weakest because of the
seasonal construction slowdown. We expect the shift in profits to continue,
with a higher proportion coming from the Domestic Fabrication segment.
Domestic steel mill prices and shipments have weakened somewhat, while these
same factors for CMCZ [dollar denominated] have declined to a greater extent.
On the other hand, Domestic Fabrication prices have risen and demand remains
strong. Ferrous and nonferrous scrap prices remain high, but extraordinarily
volatile. Marketing and Distribution orders continue at a very healthy level.
We anticipate second quarter LIFO diluted net earnings per share between $1.50
and $1.70, still strong and well above last year, but lower than the first
quarter. We then expect earnings to reaccelerate in the second half of fiscal
2005, especially since the non-residential construction outlook in the United
States has improved further. The additional potential recovery resulting from
the South Carolina and Texas mill transformer business interruption claims,
which may be substantial, has not been considered in our earnings estimate
owing to the timing of recovery which may extend beyond the second quarter and
our inability to estimate the recoverable amount."
CMC invites you to listen to a live broadcast of its first quarter 2005
conference call on Monday, December 20, 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 for two weeks 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.
Paragraph thirteen (Outlook) of this news release contains forward-looking
statements regarding the outlook for the Company's financial results including
net earnings, product pricing and demand, currency valuation, production
rates, insurance recoveries, inventory levels, 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," 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.
BUSINESS SEGMENTS
(in thousands)
Three months ended
11/30/04 11/30/03
Net Sales:
Domestic Mills $ 315,762 $212,527
CMCZ 123,114 ---
Domestic Fabrication 326,640 213,628
Recycling 220,470 131,892
Marketing and Distribution 680,595 340,381
Corporate and Eliminations (137,509) (68,421)
Total Net Sales $1,529,072 $830,007
Adjusted Operating Profit (Loss):
Domestic Mills $ 50,684 $ 14,609
CMCZ 12,315 ---
Domestic Fabrication 24,591 5,716
Recycling 19,775 5,734
Marketing and Distribution 23,369 6,267
Corporate and Eliminations (6,803) (7,103)
COMMERCIAL METALS COMPANY
Condensed Consolidated Statements of Earnings (Unaudited)
(in thousands except share data)
Three months ended
11/30/04 11/30/03
Net sales $1,529,072 $830,007
Costs and Expenses:
Cost of goods sold 1,296,108 737,488
Selling, general and administrative
expenses 109,805 67,412
Interest expense 7,301 5,094
1,413,214 809,994
Earnings Before Income Taxes
and Minority Interests 115,858 20,013
Income Taxes 39,275 7,385
Earnings Before Minority Interests 76,583 12,628
Minority Interests 2,858 ---
Net Earnings $ 73,725 $ 12,628
Basic earnings per share $ 2.51 $ 0.45
Diluted earnings per share $ 2.42 $ 0.44
Cash dividends per share $ 0.10 $ 0.08
Average basic shares outstanding 29,352,693 28,145,679
Average diluted shares outstanding 30,461,053 28,999,960
Proforma effects of stock split
payable January 10, 2005:
Basic earnings per share $ 1.26 $ 0.22
Diluted earnings per share $ 1.21 $ 0.22
Cash dividend per share $ 0.05 $ 0.04
Average basic shares outstanding 58,705,386 56,291,358
Average diluted shares outstanding 60,922,106 57,999,920
Note: Prior to this fiscal year, each quarter we estimated the quantities
and costs for the year in calculating the annual LIFO effect. The
resulting estimate was pro-rated across the current and remaining
quarters of the fiscal year. For greater accuracy, we have refined
our method of estimating and now estimate the LIFO effect using
quantities and costs as of each quarter end. The resulting effect
is recorded in its entirety each quarter. For example, should all
quantities and costs remain the same as they were at November 30,
2004, there would be no marginal LIFO expense or credit in the
remaining quarters of fiscal 2005; under the former method, an
amount equal to the first quarter would have been expected each
quarter thereafter.
COMMERCIAL METALS COMPANY
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
November 30, August 31,
2004 2004
Assets
Current Assets:
Cash and cash equivalents $43,874 $123,559
Accounts receivable, net 671,787 607,005
Inventories 767,825 645,484
Other 53,739 48,184
Total Current Assets 1,537,225 1,424,232
Net Property, Plant and Equipment 467,988 451,490
Goodwill 30,542 30,542
Other Assets 82,256 81,792
$2,118,011 $1,988,046
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable - trade $381,250 $385,108
Accounts payable - documentary
letters of credit 124,987 116,698
Accrued expenses and other payables 207,803 248,790
Income taxes payable 48,850 11,343
Short-term trade financing arrangements 8,338 9,756
Notes payable - CMCZ 15,058 530
Current maturities of long-term debt 18,342 11,252
Total Current Liabilities 804,628 783,477
Deferred Income Taxes 50,531 50,433
Other Long-Term Liabilities 45,041 39,568
Long-Term Trade Financing Arrangement 12,100 14,233
Long-Term Debt 394,817 393,368
Minority Interests 55,881 46,340
Stockholders' Equity 755,013 660,627
$2,118,011 $1,988,046
Three months ended
(Short Tons in Thousands) 11/30/04 11/30/03
Domestic Steel Mill Rebar Shipments 231 253
Domestic Steel Mill Structural and
Other Shipments 314 313
CMCZ Shipments 252 ---
Total Mill Tons Shipped 797 566
Average FOB Domestic Steel Mill Selling
Price (Total Sales) $484 $309
Average FOB Domestic Steel Mill Selling
Price (Finished Goods Only) $498 $313
Average Domestic Ferrous Scrap Purchase Price $188 $118
Average FOB Mill CMCZ Selling
Price (Total Sales) $470 ---
Average CMCZ Ferrous Scrap Purchase Price $239 ---
Domestic Fab Plant Rebar Shipments 238 179
Domestic Fab Plant Structural, Joist, and
Post Shipments 102 101
Total Domestic Fabrication Tons Shipped 340 280
Average Domestic Fab Selling Price
(Excluding Stock & Buyout Sales) $821 $555
Domestic Scrap Metal Tons Processed
and Shipped 828 734
COMMERCIAL METALS COMPANY
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Three months ended
11/30/04 11/30/03
Cash Flows From (Used By) Operating
Activities:
Net earnings $73,725 $12,628
Adjustments to reconcile net earnings
to cash used by operating activities:
Depreciation and amortization 19,138 15,123
Business interruption insurance recovery (3,900) ---
Minority interests 2,858 ---
Loss on reacquisition of debt --- 2,792
Provision for losses on receivables 955 941
Tax benefits from stock plans 1,592 1,042
Deferred income taxes (15) (657)
Net loss (gain) on sale of assets and other (735) (101)
Changes in operating assets and liabilities,
net of effect of acquisitions:
Accounts receivable (46,429) (43,557)
Accounts receivable sold 179 2,657
Inventories (102,097) (43,910)
Other assets 1,304 (24,334)
Accounts payable, accrued expenses,
other payables and income taxes (29,768) (12,789)
Other long-term liabilities 4,689 3,003
Net Cash Flows Used By Operating
Activities (78,504) (87,162)
Cash Flows From (Used By) Investing
Activities:
Purchases of property, plant
and equipment (17,215) (7,143)
Sales of property, plant and equipment 1,728 101
Acquisitions of fabrication businesses (2,950) ---
Net Cash Used by Investing Activities (18,437) (7,042)
Cash Flows From (Used By) Financing
Activities:
Increase in documentary letters of credit 8,289 19,181
Proceeds from trade financing arrangements --- 35,307
Payments on trade financing arrangements (5,518) (11,128)
Short-term borrowings, net change 14,450 ---
Proceeds from issuance of long-term debt --- 200,000
Payments on long-term debt (66) (89,035)
Stock issued under incentive and
purchase plans 1,719 4,648
Dividends paid (2,932) (2,243)
Debt reacquisition and issuance costs --- (4,709)
Net Cash From Financing Activities 15,942 152,021
Effect of Exchange Rate Changes on Cash 1,314 669
Increase (Decrease) in Cash and
Cash Equivalents (79,685) 58,486
Cash and Cash Equivalents at Beginning
of Year 123,559 75,058
Cash and Cash Equivalents at End of Period $43,874 $133,544
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.
For the quarter ended November 30, 2004:
Net earnings $73,725
Interest expense 7,301
Income taxes 39,275
Depreciation and amortization 19,138
EBITDA $139,439
EBITDA to interest coverage for the quarter ended November 30, 2004:
$139,439/7,301 = 19.1
Total Capitalization:
Total capitalization is the sum of long-term debt, deferred income taxes,
and stockholders' equity. The ratio of debt to total capitalization is a
measure of current debt leverage. The following reconciles total
capitalization at November 30, 2004 to the nearest GAAP measure, stockholders'
equity:
Stockholders' equity $755,013
Long-term debt 406,917
Deferred income taxes 50,531
Total capitalization $1,212,461
Other Financial Information
Long-term debt to cap ratio as of November 30, 2004:
Debt divided by capitalization
$406,917/1,212,461 = 33.6%
Total debt to cap plus short-term debt ratio as of November 30, 2004:
$448,655/(1,212,461 + 41,738) = 35.8%
Current ratio as of November 30, 2004:
Current assets divided by current liabilities
$1,537,225/804,628 = 1.9
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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