IRVING, Texas, Dec. 21 /PRNewswire-FirstCall/ -- Commercial Metals Company
(NYSE: CMC) today reported first quarter net earnings of $69.6 million or
$1.14 per diluted share on net sales of $1.6 billion for the quarter ended
November 30, 2005. This compares with net earnings of $73.7 million or $1.21
per diluted share for the same period last year on net sales of $1.5 billion,
which is the first quarter record.
The current year quarter included a pre-tax LIFO expense of $21.7 million
($0.23 per diluted share) compared with a LIFO expense of $34.2 million ($0.36
per diluted share) in the prior year quarter. The effective tax rate was
34.9%.
CMC Chairman, President and Chief Executive Officer Stanley A. Rabin said,
"Overall market conditions remained favorable, but more challenging than one
year ago. Nonetheless, with our diverse but related businesses, we achieved
again outstanding results across four of our five segments. Steel and
nonferrous prices were relatively high and shipments especially robust in the
United States. All signs point to relatively low inventories at end users and
distributors. On the other hand, steel prices weakened in Asia and Europe.
Meanwhile, input costs remained high resulting in a higher than expected LIFO
expense. The U.S. dollar strengthened moderately, putting some general
pressure on dollar denominated selling prices."
Domestic Mills
Rabin said, "It was a record first quarter for our Domestic Mills segment.
The adjusted operating profit of $64.9 million for the quarter, on net sales
of $370 million, exceeded last year's excellent first quarter by 20%. This
year's result included a pre-tax LIFO expense of $9.7 million (compared with
$27.1 million LIFO expense last year) of which $8.2 million applied to the
domestic steel mills. Within the segment, quarterly adjusted operating profit
for our domestic steel minimills at $60.7 million also was a first quarter
record and up 25% from that of a year earlier on the strength of improved
margins and strong shipments, which more than offset higher operating costs.
Higher rebar prices compensated for lower merchant bar prices. On a year-to-
year basis, tonnage melted for the first quarter rose by 4% to 573 thousand
tons; tonnage rolled was 522 thousand tons, 4% below last year's first
quarter; and shipments, including billets, increased 14% to 624 thousand tons.
Our quarterly average mill selling price (total sales) of $490 per ton was
$6 per ton or 1% above last year's level, and the average selling price for
finished goods was up by $12 per ton to $510 per ton. Conversely, the average
scrap purchase cost decreased slightly compared with a year ago to $187 per
ton. Our metal margin based on scrap utilized increased by $16 per ton to
$287 per ton. Utility costs increased by $7.9 million or 46% versus the first
quarter last year; electricity costs rose $3.5 million, the result of both
increased usage and price per kwh, while natural gas costs were up over
$4.4 million due solely to higher prices. Changes in costs for supplies were
mixed.
"The copper tube mill recorded an adjusted operating profit of
$4.2 million, about 91% above that of the prior year's first quarter. Demand
from residential and commercial users was relatively steady. First quarter-
to-quarter metal spreads improved by 29 cents per pound to 92 cents per pound,
despite the sharp rise in the underlying copper scrap price, because of a
parallel increase in tube selling prices (for the first time in over a year).
Against the same period last year, copper tube production essentially was
unchanged at 15.9 million pounds while shipments also were virtually the same
at 16.2 million pounds."
CMCZ
According to Rabin, "This year's first quarter's adjusted operating profit
was $1.5 million for CMCZ, the steel minimill and related operations in
Poland, compared with an adjusted operating profit of $12.3 million the prior
year. Market conditions were considerably weaker than the first quarter of
fiscal 2005 with selling prices depressed, especially for billets and wire
rod, and with gross margins much lower, partly attributable to major planned
maintenance during the quarter. Certainly, infrastructure spending by the
Polish government has been slower to develop than we had anticipated. CMCZ
generated net sales of PLN 349 million ($107 million) compared with net sales
of PLN 436 million the previous year. The average sales price decreased by
22% from the first quarter of fiscal 2005 to PLN 1,304 ($398) per short ton
while the average scrap purchase cost decreased by 32% to PLN 569 ($173) per
short ton. This year's metal spread was PLN 631 per ton, which compared with
PLN 700 per ton one year ago. For the quarter, melted tons equaled
284 thousand, rolled tons equaled 237 thousand, and shipments totaled
257 thousand tons, including billets. Prior year numbers were 328 thousand
tons, 202 thousand tons, and 252 thousand tons. Inventories at
November 30, 2005 were nearly half their levels compared to last year.
"In early December 2005, we announced that Ludovit Gajdos succeeded Marek
Rozga as President of the Management Board of CMCZ. Mr. Gajdos has been a
member of the Management Board since acquisition. Start up of the
strategically important 8,000 hp mega-shredder situated at the mill is
expected mid-January 2006. We are scheduled to complete installation of our
initial rebar fabrication operation in Poland by May 2006, also at the mill
site, as we further implement our vertical integration in that market."
Domestic Fabrication
Rabin continued, "The adjusted operating profit of $18.2 million for the
Domestic Fabrication segment on net sales of $401 million compares with an
adjusted operating profit of $21.3 million the previous year's quarter under
increasingly favorable market conditions. This year included a $13.9 million
LIFO expense (compared with a $4.6 million expense last year). Among our
product areas -- rebar fabrication, construction-related products (CRP), steel
post plants, steel joist manufacturing, structural steel fabrication, and heat
treating -- most showed improved profits and benefited from strong selling
prices and shipping levels. Shipments from our fabrication plants totaled
364 thousand tons, 11% above the prior year's first quarter, although specific
product lines were mixed. We were fortunate that the impact of the three
hurricanes in the U.S. Gulf was minimal, while the reconstruction efforts will
provide additional work."
Recycling
Rabin said, "The Recycling segment recorded another very solid quarter on
7% higher net sales dollars ($236 million) in the face of continually volatile
ferrous scrap prices and lower stainless steel scrap prices, partially offset
by some record-high nonferrous prices (although aluminum and copper scrap
markets have moved up less than terminal markets). Adjusted operating profit
declined by 30% to $13.8 million compared with $19.8 million in the very
strong prior year, mainly because gross margins were significantly below last
year. LIFO expense for the quarter was $1.4 million ($2.2 million last year).
Profitability was more balanced between ferrous and nonferrous product lines.
As ever, we focused on rapid inventory turnover. Versus last year, the
average ferrous scrap sales price for the quarter decreased by 11% to $195 per
ton, and shipments decreased slightly to 468 thousand tons. The average
nonferrous scrap sales price for the quarter was approximately 21% above a
year ago while nonferrous shipments were 4% higher at 70 thousand tons. The
total volume of scrap processed, including all our processing operations,
equaled 839 thousand tons against 828 thousand tons in last year's first
quarter."
Marketing and Distribution
Rabin added, "Adjusted operating profit of $23.1 million for the Marketing
and Distribution segment represented another outstanding quarter, slightly
below last year's record first quarter, reflecting diverse business across
multiple product lines and geographic areas in markets that were more
challenging than one year ago. Net sales totaled $685 million, modestly above
the prior year, marked by increased sales in North America and Australia, but
reduced sales in Europe and Asia. Generally, we were able to maintain good
margins. The segment recorded pre-tax LIFO income of $3.3 million (negligible
in prior year). The Chinese continued to impact global markets, although
exports were restrained by the government in various products. Our carbon
steel product sales were down in tonnage but still relatively strong, while
our sales of aluminum, copper, brass and stainless steel semis increased
significantly. Sales, margins and profits for industrial materials and
products continued at near record levels, including traditional and newer
items. Our value-added downstream processing businesses, primarily in
Australia, continued to generate good profits. The impact of the stronger
U.S. dollar and generally softer freight rates was mixed."
Financial Condition
Rabin said, "Our financial position remained strong. At quarter end,
long-term debt as a percentage of total capitalization was 28%. Our working
capital was $876 million and the current ratio was 2.1. Our coverage ratios
were strong. Cash flows from operating activities was $72 million."
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. Still, the non-residential and non-building
construction markets continue to be relatively strong in the United States.
Indeed, the overall economic outlook is positive, led by a continuous string
of good reports in the U.S. and moderate growth in the Pacific Rim. The
outlook for domestic steel mill prices and shipments remains relatively
strong, while these same factors for CMCZ are much less favorable. The
biggest uncertainty for our global steel markets continues to be
overproduction in China, Brazil and Turkey, possibly leading to excessive
exports, although we still believe the Chinese Central Government will
constrain China's steel exports. We are cautiously optimistic for the copper
tube mill results. Domestic Fabrication segment prices have risen and order
books remain robust. Ferrous and nonferrous scrap prices remain high,
especially the latter, but we can anticipate extraordinary volatility with the
likelihood that the average ferrous scrap price will be down in the second
quarter of fiscal 2006. Marketing and Distribution shipments and orders
continue at a very healthy level. We anticipate second quarter LIFO diluted
net earnings per share between $0.85 and $1.05, still strong compared to $0.91
last year, but lower than the first quarter.
"We then expect earnings to reaccelerate in the second half of fiscal
2006, especially since the private and public non-residential construction
outlook in the United States has improved further, and the highway program
should be vibrant."
CMC invites you to listen to a live broadcast of its first quarter 2006
conference call on Wednesday, December 21, at 3:00 p.m. ET. 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.
Paragraphs seven, eight and twelve (Outlook) of this news release contain
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," "outlook,"
"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, and decisions by governments impacting the level of steel imports and
pace of overall economic activity.
COMMERCIAL METALS COMPANY
Condensed Consolidated Statements of Earnings (Unaudited)
(in thousands except share data)
Three months ended
11/30/05 11/30/04
Net sales $ 1,645,698 $ 1,529,072
Costs and Expenses:
Cost of goods sold 1,424,730 1,296,108
Selling, general and administrative expenses 106,734 109,805
Interest expense 6,924 7,301
1,538,388 1,413,214
Earnings Before Income Taxes
and Minority Interests 107,310 115,858
Income Taxes 37,441 39,275
Earnings Before Minority Interests 69,869 76,583
Minority Interests 245 2,858
Net Earnings $ 69,624 $ 73,725
Basic earnings per share $ 1.20 $ 1.26
Diluted earnings per share $ 1.14 $ 1.21
Cash dividends per share $ 0.06 $ 0.05
Average basic shares outstanding 57,967,808 58,705,386
Average diluted shares outstanding 61,053,440 60,922,106
BUSINESS SEGMENTS
(in thousands)
Three months ended
11/30/05 11/30/04
Net Sales:
Domestic Mills $ 369,779 $ 315,762
CMCZ 107,332 123,114
Domestic Fabrication 400,523 326,640
Recycling 236,399 220,470
Marketing and Distribution 684,558 680,595
Corporate and Eliminations (152,893) (137,509)
Total Net Sales $ 1,645,698 $ 1,529,072
Adjusted Operating Profit (Loss):
Domestic Mills $ 64,919 $ 53,941
CMCZ 1,532 12,315
Domestic Fabrication 18,197 21,334
Recycling 13,834 19,775
Marketing and Distribution 23,055 23,369
Corporate and Eliminations (6,527) (6,803)
COMMERCIAL METALS COMPANY
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
November 30, August 31,
2005 2005
Assets:
Current Assets:
Cash and cash equivalents $ 133,478 $ 119,404
Accounts receivable, net 813,263 829,192
Inventories 657,965 706,951
Other 46,959 45,370
Total Current Assets 1,651,665 1,700,917
Net Property, Plant and Equipment 515,167 505,584
Goodwill 30,542 30,542
Other Assets 99,077 95,879
$ 2,296,451 $ 2,332,922
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable - trade $ 392,374 $ 408,342
Accounts payable - documentary
letters of credit 103,097 140,986
Accrued expenses and other payables 208,017 293,598
Income taxes payable
and deferred income taxes 57,106 40,126
Short-term trade financing arrangements --- 1,667
Current maturities of long-term debt 15,019 7,223
Total Current Liabilities 775,613 891,942
Deferred Income Taxes 45,598 45,629
Other Long-Term Liabilities 66,349 58,627
Long-Term Debt 389,859 386,741
Minority Interests 50,379 50,422
Stockholders' Equity 968,653 899,561
$ 2,296,451 $ 2,332,922
Three months ended
(Short Tons in Thousands) 11/30/05 11/30/04
Domestic Steel Mill Rebar Shipments 270 231
Domestic Steel Mill Structural and
Other Shipments 354 314
CMCZ Shipments 257 252
Total Mill Tons Shipped 881 797
Average FOB Mill Domestic Selling Price
(Total Sales) $490 $484
Average Domestic Ferrous Scrap Purchase Price $187 $188
Average FOB Mill CMCZ Selling Price (Total Sales) $398 $470
Average CMCZ Ferrous Scrap Purchase Price $173 $239
Fab Plant Rebar Shipments 237 226
Fab Plant Structural, Joist, and Post Shipments 127 102
Total Fabrication Tons Shipped 364 328
Average Fab Selling Price
(Excluding Stock & Buyout Sales) $844 $821
Domestic Scrap Metal Tons Processed and Shipped 839 828
COMMERCIAL METALS COMPANY
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Three months ended
11/30/05 11/30/04
Cash Flows From (Used By) Operating Activities:
Net earnings $ 69,624 $ 73,725
Adjustments to reconcile net earnings to cash
from (used by) operating activities:
Depreciation and amortization 19,270 19,138
Business interruption insurance recovery --- (3,900)
Minority interests 245 2,858
Provision for losses on receivables 682 955
Share-based compensation 1,933 ---
Net gain on sale of assets and other (1,032) (735)
Changes in Operating Assets and Liabilities,
Net of Effect of Acquisitions:
Accounts receivable 12,102 (46,429)
Accounts receivable sold --- 179
Inventories 47,457 (102,097)
Other assets (4,559) 1,304
Accounts payable, accrued expenses,
other payables and income taxes (82,481) (29,768)
Deferred income taxes 650 (15)
Other long-term liabilities 7,772 4,689
Net Cash Flows From (Used By) Operating Activities 71,663 (80,096)
Cash Flows From (Used By) Investing Activities:
Purchases of property, plant and equipment (27,105) (17,215)
Sales of property, plant and equipment 3,108 1,728
Acquisitions of fabrication businesses (5,117) (2,950)
Net Cash Used by Investing Activities (29,114) (18,437)
Cash Flows From (Used By) Financing Activities:
Increase (decrease) in documentary letters
of credit (37,889) 8,289
Payments on trade financing arrangements (1,612) (5,518)
Short-term borrowings, net change --- 14,450
Payments on long-term debt --- (66)
Proceeds from issuance of long-term debt 11,166 ---
Stock issued under incentive and purchase plans 1,663 1,719
Dividends paid (3,492) (2,932)
Tax benefits from stock plans 2,043 1,592
Net Cash From (Used By) Financing Activities (28,121) 17,534
Effect of Exchange Rate Changes on Cash (354) 1,314
Increase (Decrease) in Cash and Cash Equivalents 14,074 (79,685)
Cash and Cash Equivalents at Beginning of Year 119,404 123,559
Cash and Cash Equivalents at End of Period $ 133,478 $ 43,874
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, 2005:
Net earnings $ 69,624
Interest expense 6,924
Income taxes 37,441
Depreciation and amortization 19,270
EBITDA $ 133,259
EBITDA to interest coverage for the quarter ended November 30, 2005:
$133,259/6,924 = 19.2
Total Capitalization:
Total capitalization is the sum of long-term debt, deferred income taxes,
and stockholders' equity. The ratio of debt to total capitalization is a
measure of current debt leverage. The following reconciles total
capitalization at November 30, 2005 to the nearest GAAP measure, stockholders'
equity:
Stockholders' equity $ 968,653
Long-term debt 389,859
Deferred income taxes 45,598
Total capitalization $ 1,404,110
Other Financial Information
Long-term debt to cap ratio as of November 30, 2005:
Debt divided by capitalization
$389,859/1,404,110 = 27.8%
Total debt to cap plus short-term debt ratio as of November 30, 2005:
$404,878/(1,404,110 + 15,019) = 28.5%
Current ratio as of November 30, 2005:
Current assets divided by current liabilities
$ 1,651,665/775,613 = 2.1
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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