IRVING, Texas, Dec. 21 /PRNewswire-FirstCall/ -- Commercial Metals
Company (NYSE: CMC) today reported first quarter record net earnings of
$85.4 million or $0.71 per diluted share on net sales of $2.0 billion for
the quarter ended November 30, 2006. This compares with net earnings of
$69.6 million or $0.57 per diluted share for the same period last year on
net sales of $1.6 billion.
The current year quarter included a pre-tax LIFO expense of $10.1
million ($0.05 per diluted share) compared with a LIFO expense of $21.7
million ($0.12 per diluted share) in the prior year quarter. LIFO expense
this quarter occurred mainly in the Marketing and Distribution segment. The
effective tax rate was 35.6%.
Our outlook remains positive. As discussed in more detail later in this
release, we anticipate second quarter LIFO diluted net earnings per share
between $0.57 and $0.67 compared to last year's second quarter of $0.65,
which is the current record second quarter.
General Conditions
CMC President and Chief Executive Officer Murray R. McClean said, "The
strong market conditions prevailing in our fourth quarter carried into the
fall resulting in our best first quarter ever. Each of our segments
attained record earnings with the exception of Marketing and Distribution
which absorbed a large LIFO charge. Demand for long products in the U.S.
remains solid, and the continued strength of the non-residential
construction markets, including infrastructure, is further reflected in our
fabrication profitability. Commodity prices remain at high levels, although
copper has retreated. Our Polish operations concentrated on near markets
and rebounded strongly from last year. The weaker U.S. dollar has helped
overall."
Domestic Mills
McClean said, "It was another record first quarter for our Domestic
Mills segment. The adjusted operating profit of $72.6 million for the
quarter, on net sales of $358 million, exceeded last year's record first
quarter by 12%. Within the segment, quarterly adjusted operating profit for
our domestic steel minimills at $69.2 million also was a first quarter
record, up 14% from that of a year earlier on the strength of a 21% higher
metal margin of $349 per ton. This year's result included a pre-tax LIFO
expense of $4.0 million (compared with $8.2 million LIFO expense last year)
for the domestic steel mills. Shipments of 526 thousand tons were down 16%
from the prior year as customers who were understocked last year were
better balanced. Planned melt shop shutdowns at South Carolina (new ladle
crane) and Alabama (new furnace shell) resulted in tonnage melted for the
first quarter declining by 7% to 532 thousand tons. Tonnage rolled was 531
thousand tons, slightly ahead of last year's first quarter. Our quarterly
average mill selling price (total sales) of $557 per ton was $67 per ton or
14% above last year's level, and the average selling price for finished
goods was up by $61 per ton to $571 per ton. Conversely, the average scrap
purchase cost decreased by $4 compared with a year ago to $183 per ton.
Utility costs decreased by $3.7 million or 15% versus the first quarter
last year; electricity costs rose $0.6 million on lower usage but higher
pricing, while natural gas costs dropped $4.3 million due solely to lower
prices. Alloy costs were flat, but electrode costs increased 13%.
"The copper tube mill recorded an adjusted operating profit of $3.4
million, historically strong, but down 19% from the prior year's first
quarter. There was no significant LIFO expense compared with $1.5 million
LIFO expense last year. Demand from residential users weakened further.
First quarter-to-quarter metal spreads improved by $0.29 per pound to $1.12
per pound on the strength of higher copper prices. Against the same period
last year, copper tube production decreased 36% to 10.1 million pounds
while shipments of 10.4 million pounds decreased 36%."
CMCZ
According to McClean, "This year's first quarter adjusted operating
profit was a record $25.8 million for CMCZ, the steel minimill and related
operations in Poland, compared with an adjusted operating profit of $1.5
million the prior year. Market conditions improved throughout the calendar
year. Infrastructure projects are now underway, and the adjacent German
economy has positive growth. Our mega-shredder has improved melt yields and
lowered melt shop operating costs. The relatively new fab shop located at
the mill was profitable. Our combined Polish operations generated net sales
of PLN 503 million ($163 million) compared with net sales of PLN 349
million ($107 million) the previous year. The average sales price increased
by 17% from the first quarter of fiscal 2006 to PLN 1,529 ($496) per short
ton while the average scrap purchase cost increased by 27% to PLN 725
($235) per short ton. This year's metal spread was PLN 714 per ton, which
compared with PLN 631 per ton one year ago. For the quarter, melted tons
equaled 358 thousand, rolled tons equaled 296 thousand, and shipments
totaled 312 thousand tons, including billets. All were substantially ahead
of the prior year numbers of 284 thousand tons, 237 thousand tons, and 257
thousand tons, respectively."
Domestic Fabrication
McClean continued, "The adjusted operating profit of $31.5 million for
the Domestic Fabrication segment on net sales of $449 million compares with
an adjusted operating profit of $18.2 million the previous year's quarter
as nonresidential construction markets remained solid. This year included a
$9.3 million LIFO credit (compared with a $13.9 million expense last year).
Among our product areas, rebar fabrication, construction-related products
(CRP), and steel fence posts had increased profits while steel joist
manufacturing and structural steel fabrication were weaker. There was some
residual margin compression from earlier increases in mill prices.
Shipments from our fabrication plants totaled 404 thousand tons, 11% above
the prior year's first quarter, with rebar fabrication showing the largest
increase."
Recycling
McClean added, "The Recycling segment recorded another excellent
quarter on 62% higher net sales dollars ($383 million) in the face of
(relatively) stable ferrous scrap prices with higher nonferrous prices,
including aluminum, copper, and nickel (soaring). Adjusted operating profit
increased by 28% to $17.6 million compared with $13.8 million in the prior
year, mainly due to higher volumes including material from our Yonack
acquisition. LIFO expense for the quarter was $1.2 million ($1.4 million
last year). Profitability was more balanced between ferrous and nonferrous
product lines compared to the prior year's quarter, heavily influenced by
relative pricing. Our strategy in volatile or steady markets remains the
same; we focused on rapid inventory turnover. Versus last year, the average
ferrous scrap sales price for the quarter decreased by 6% to $184 per ton,
but shipments increased to 573 thousand tons. The average nonferrous scrap
sales price for the quarter was a whopping 60% above a year ago, while
nonferrous shipments were 22% higher at 85 thousand tons. The total volume
of scrap processed, including all our domestic processing operations,
equaled 937 thousand tons against 839 thousand tons in last year's first
quarter."
Marketing and Distribution
"Adjusted operating profit of $7.9 million for the Marketing and
Distribution segment compares unfavorably with the prior year of $23.1
million," McClean said. "However, LIFO expense of $14.3 million in the
current year is a major swing from last year's LIFO credit of $3.3 million.
The LIFO expense results from nonferrous price increases and large
increases in inventory, substantially in transit, which is an indicator of
upcoming strong sales activity. Net sales totaled $798 million, an increase
of 16%. The Chinese increase in exports gave the segment additional
sourcing opportunities in inter-Asian carbon steel products. Our domestic
steel import business was touching record margins, and European imports
were stronger. Our sales of aluminum, copper, brass and stainless steel
semis were steady. Sales, margins and profits for industrial materials and
products remained strong. 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 were overall
negatives for this segment."
Financial Condition
McClean reported, "Our financial position is strong. At quarter end,
long-term debt as a percentage of total capitalization was 19%. Our working
capital was $1.1 billion, and the current ratio was 2.0. Our coverage
ratios were strong. Cash flows from operating activities were $42 million."
Outlook
"Our second fiscal quarter (winter months) is traditionally our weakest
quarter," according to McClean. "Destocking will continue at service
centers and to a lesser extent at fabrication facilities. Rebar imports
will continue to decline significantly. We are poised to reaccelerate in
our third fiscal quarter (spring months) and fourth quarter (summer
months). The fundamentals remain very good with strong demand in
non-residential construction markets both in the U.S. and globally."
McClean continued, "International steel prices appear to be at or near
the bottom of the current cycle and are likely to increase early in
calendar 2007. Ferrous scrap prices will trend upwards based on good
international demand as well as U.S. mills rebuilding inventory of scrap.
"Our domestic steel mills will enjoy excellent metal margins and
shipments to match seasonal demand. The discipline of mill outages will
balance supply and demand and, with significantly reduced steel imports,
steel prices should firm. CMC Howell Metal, our copper tube mill, will
continue to ship at lower levels due to the weaker housing market. Our
Fabrication segment overall will continue to benefit from stable steel
prices. CMCZ faces the usual slowdown in demand during winter and with a
very strong Zloty (2.88 to the U.S. dollar), exports are limited. However,
CMCZ will bounce back strongly in the spring of 2007. CMC Recycling will
benefit from higher ferrous scrap prices although there is some margin
squeeze due to buying pressures on unprepared scrap. Flows will improve
with higher prices and better demand from the mills. Nonferrous will remain
volatile with spreads (to Comex) narrowing. Our Marketing and Distribution
segment will have a steady quarter; however, the impact of LIFO is
difficult to predict."
McClean concluded, "In summary, 2007 is shaping up to be similar to
2006. Our diversification provides a good balance in the current global
market conditions."
CMC invites you to listen to a live broadcast of its first quarter 2007
conference call on Thursday, December 21, at 3:00 p.m. ET. The call will be
hosted by Stan Rabin, Chairman, Murray McClean, President and CEO, and Bill
Larson, 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 overseas markets.
Forward-Looking Statements
Paragraphs 3, 10 and 12 through 15 (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
11/30/06 11/30/05
Net sales $1,986,544 $1,645,698
Costs and Expenses:
Cost of goods sold 1,703,390 1,424,730
Selling, general and administrative expenses 135,179 106,734
Interest expense 8,228 6,924
1,846,797 1,538,388
Earnings Before Income Taxes
and Minority Interests 139,747 107,310
Income Taxes 49,769 37,441
Earnings Before Minority Interests 89,978 69,869
Minority Interests 4,628 245
Net Earnings $85,350 $69,624
Basic earnings per share $ 0.73 $ 0.60
Diluted earnings per share $ 0.71 $ 0.57
Cash dividends per share $ 0.06 $ 0.03
Average basic shares outstanding 117,430,858 115,935,616
Average diluted shares outstanding 121,037,332 122,106,880
BUSINESS SEGMENTS
(in thousands)
Three months ended
11/30/06 11/30/05
Net Sales:
Domestic Mills $357,555 $369,779
CMCZ 162,947 107,332
Domestic Fabrication 448,786 400,523
Recycling 383,061 236,399
Marketing and Distribution 797,810 684,558
Corporate and Eliminations (163,615) (152,893)
Total Net Sales $1,986,544 $1,645,698
Adjusted Operating Profit (Loss):
Domestic Mills $72,639 $64,919
CMCZ 25,794 1,532
Domestic Fabrication 31,496 18,197
Recycling 17,608 13,834
Marketing and Distribution 7,908 23,055
Corporate and Eliminations (6,511) (6,527)
COMMERCIAL METALS COMPANY
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
November 30, August 31,
2006 2006
Assets:
Current Assets:
Cash and cash equivalents $157,351 $180,719
Accounts receivable, net 994,635 1,134,823
Inventories 859,202 762,635
Other 65,377 66,615
Total Current Assets 2,076,565 2,144,792
Net Property, Plant and Equipment 598,382 588,686
Goodwill 35,799 35,749
Other Assets 141,371 129,641
$2,852,117 $2,898,868
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable - trade $493,710 $526,408
Accounts payable - documentary
letters of credit 134,706 141,713
Accrued expenses and other payables 247,973 379,764
Income taxes payable and deferred
income taxes 40,858 14,258
Notes payable - CMC International 49,102 60,000
Current maturities of long-term debt 54,630 60,162
Total Current Liabilities 1,020,979 1,182,305
Deferred Income Taxes 35,293 34,550
Other Long-Term Liabilities 97,437 78,789
Long-Term Debt 309,712 322,086
Minority Interests 69,198 61,034
Stockholders' Equity 1,319,498 1,220,104
$2,852,117 $2,898,868
Three months ended
(Short Tons in Thousands) 11/30/06 11/30/05
Domestic Steel Mill Rebar Shipments 218 270
Domestic Steel Mill Structural and
Other Shipments 308 354
CMCZ Shipments 312 257
Total Mill Tons Shipped 838 881
Average FOB Mill Domestic Selling
Price (Total Sales) $557 $490
Average Domestic Ferrous Scrap Purchase Price $183 $187
Average FOB Mill CMCZ Selling Price (Total Sales) $496 $398
Average CMCZ Ferrous Scrap Purchase Price $235 $173
Fab Plant Rebar Shipments 283 237
Fab Plant Structural, Joist, and Post Shipments 121 127
Total Fabrication Tons Shipped 404 364
Average Fab Selling Price (Excluding Stock &
Buyout Sales) $898 $844
Domestic Scrap Metal Tons Processed and Shipped 937 839
COMMERCIAL METALS COMPANY
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Three months ended
11/30/06 11/30/05
Cash Flows From (Used By)
Operating Activities:
Net earnings $85,350 $69,624
Adjustments to reconcile net earnings to
cash from (used by) operating activities:
Depreciation and amortization 25,166 19,270
Minority interests 4,628 245
Provision for losses on receivables 633 682
Share-based compensation 2,299 1,933
Net gain on sale of assets and other (3) (1,032)
Changes in Operating Assets and Liabilities,
Net of Effect of Acquisitions:
Accounts receivable 138,412 12,102
Accounts receivable sold 12,546 -
Inventories (90,778) 47,457
Other assets (8,927) (4,559)
Accounts payable, accrued expenses, other
payables and income taxes (145,808) (82,481)
Deferred income taxes 326 650
Other long-term liabilities 18,200 7,772
Net Cash Flows From (Used By)
Operating Activities 42,044 71,663
Cash Flows From (Used By)
Investing Activities:
Purchases of property, plant and equipment (26,831) (27,105)
Purchase of interests in CMC Zawiercie
and subsidiaries (61) -
Sales of property, plant and equipment 224 3,108
Acquisitions of fabrication businesses - (5,117)
Net Cash Used by Investing Activities (26,668) (29,114)
Cash Flows From (Used By)
Financing Activities:
Increase (decrease) in documentary
letters of credit (7,007) (37,889)
Payments on trade financing arrangements - (1,612)
Short-term borrowings, net change (10,898) -
Payments on long-term debt (18,512) (240)
Proceeds from issuance of long-term debt - 11,406
Stock issued under incentive and
purchase plans 1,290 1,663
Dividends paid (7,075) (3,492)
Tax benefits from stock plans 2,987 2,043
Net Cash From (Used By) Financing Activities (39,215) (28,121)
Effect of Exchange Rate Changes on Cash 471 (354)
Increase (Decrease) in Cash and
Cash Equivalents (23,368) 14,074
Cash and Cash Equivalents at
Beginning of Year 180,719 119,404
Cash and Cash Equivalents at End of Period $157,351 $133,478
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, 2006:
Net earnings $85,350
Interest expense 8,228
Income taxes 49,769
Depreciation and amortization 25,166
EBITDA $168,513
EBITDA to interest coverage for the quarter ended November 30, 2006:
$168,513 / 8,228 = 20.5
Total Capitalization:
Total capitalization is the sum of long-term debt, deferred income
taxes, and stockholders' equity. The ratio of debt to total capitalization
is a measure of current debt leverage. The following reconciles total
capitalization at November 30, 2006 to the nearest GAAP measure,
stockholders' equity:
Stockholders' equity $1,319,498
Long-term debt 309,712
Deferred income taxes 35,293
Total capitalization $1,664,503
Other Financial Information
Long-term debt to cap ratio as of November 30, 2006:
Debt divided by capitalization
$309,712 / 1,664,503 = 18.6%
Total debt to cap plus short-term debt ratio as of November 30, 2006:
$413,444 / (1,664,503 + 103,732) = 23.4%
Current ratio as of November 30, 2006:
Current assets divided by current liabilities
$2,076,565 / 1,020,979 = 2.0
SOURCE Commercial Metals Company
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Related links:
http://www.cmc.com
CONTACT:
Debbie Okle, Director, Public Relations,
+1-214-689-4354
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