News

IRVING, Texas, March 26, 2015 /PRNewswire/ – Commercial Metals Company (NYSE: CMC) today announced financial results for its second quarter ended February 28, 2015. Net earnings attributable to CMC for the three months ended February 28, 2015 were $54.5 million ($0.46 per diluted share) on net sales of $1.4 billion. This compares to net earnings attributable to CMC of $11.1 million ($0.09 per diluted share) on net sales of $1.6 billion for the second quarter ended February 28, 2014.  Results for the second quarter of fiscal 2014 included an after-tax charge of approximately $3.0 million ($0.03 per diluted share) incurred in connection with the Company’s final settlement of the Standard Iron Works v. Arcelor Mittal, et al. lawsuit.

Earnings from continuing operations for the second quarter of fiscal 2015 were $61.7 million ($0.52 per diluted share), compared with earnings from continuing operations of $13.3 million ($0.11 per diluted share) for the second quarter of fiscal 2014.

Results for the three months ended February 28, 2015 included after-tax LIFO income from continuing operations of $47.1 million ($0.40 per diluted share), compared with after-tax LIFO expense from continuing operations of $12.3 million ($0.10 per diluted share) for the second quarter of fiscal 2014. Adjusted operating profit from continuing operations was $112.2 million for the second quarter of fiscal 2015, compared with adjusted operating profit from continuing operations of $37.0 million for the second quarter of fiscal 2014. Adjusted EBITDA from continuing operations was $145.1 million for the second quarter of fiscal 2015, compared with adjusted EBITDA from continuing operations of $69.3 million for the second quarter of fiscal 2014.

The Company’s financial position at February 28, 2015 remained strong with cash and cash equivalents of $313.0 million and nearly $1.0 billion in total liquidity. Pursuant to our share repurchase program that was approved in October 2014, we purchased approximately 2.2 million shares of our common stock for $30.2 million during the second quarter of fiscal 2015.

Joe Alvarado, Chairman of the Board, President, and CEO, commented, “Second quarter financial results represented one of our best second fiscal quarters on record in the Company’s history. Our domestic mills benefited from lower raw material prices as metal margins expanded significantly when compared to one year ago. We experienced normal seasonal effects with holidays and weather affecting a number of our locations’ ability to ship as well as some higher operating cost mainly associated with higher energy cost and curtailments. Conversely, in Poland competitive pressures forced margin compression despite reasonably good market conditions for construction markets in Poland.”

On March 25, 2015, the board of directors of CMC declared a quarterly dividend of $0.12 per share for shareholders of record on April 9, 2015.  The dividend will be paid on April 23, 2015.

Business Segments

Our Americas Recycling segment recorded adjusted operating loss of $0.2 million for the second quarter of fiscal 2015 compared to adjusted operating loss of $0.9 million for the second quarter of fiscal 2014. During the second quarter of fiscal 2015, declines in both average ferrous and nonferrous selling prices of $90 per short ton and $458 per short ton, respectively, outweighed declines in the respective average material cost, which compressed average ferrous and nonferrous metal margins by 20% and 2%, respectively, compared to the same period in the prior fiscal year. However, a $1.7 million gain on sale of assets and a $7.7 million favorable change in pre-tax LIFO during the second quarter of fiscal 2015 partially offset the average metal margin pressure caused by the declines in average ferrous and nonferrous selling prices compared to the same period in fiscal 2014.

Our Americas Mills segment recorded adjusted operating profit of $98.5 million for the second quarter of fiscal 2015 compared to adjusted operating profit of $44.1 million for the same period in the prior fiscal year. During the second quarter of fiscal 2015, the average cost of ferrous scrap consumed declined $66 per short ton, while average selling prices declined $13 per short ton, which resulted in a 17% increase in average metal margins compared to the same period in the prior fiscal year. Additionally, this segment recorded a $50.7 million favorable change in pre-tax LIFO compared to the second quarter of fiscal 2014.

Our Americas Fabrication segment recorded adjusted operating profit of $11.8 million for the second quarter of fiscal 2015 compared to adjusted operating loss of $5.3 million for the second quarter of fiscal 2014. The increase in adjusted operating profit for the second quarter of fiscal 2015 was primarily due to average rebar selling prices increasing at a faster rate than rising average material cost, which resulted in a 5% increase in average rebar metal margin compared to the same period in the prior fiscal year. Additionally, for the second quarter of fiscal 2015, this segment recorded a favorable change in pre-tax LIFO of $22.0 million compared to the same period in fiscal 2014.

Our International Mill segment recorded adjusted operating profit of $0.8 million for the second quarter of fiscal 2015 compared to adjusted operating profit of $8.3 million for the same period in the prior fiscal year. The decrease in adjusted operating profit for the second quarter of fiscal 2015 was due to a 19% decrease in average metal margins on flat volumes compared to the same period in the prior fiscal year. Average metal margin compression for the three months ended February 28, 2015 was the result of a $147 per short ton decrease in average selling prices, which outpaced a $99 per short ton decrease in average cost of ferrous scrap consumed compared to the same period in fiscal 2014.

Our International Marketing and Distribution segment recorded adjusted operating profit of $15.7 million for the second quarter of fiscal 2015 compared to adjusted operating profit of $4.5 million for the same period in the prior fiscal year. The improvement in adjusted operating profit for the second quarter of fiscal 2015 was attributed to an increase in volumes for one of our trading divisions headquartered in the U.S., which more than offset average margin compression at this same division. In addition, for the second quarter of fiscal 2015, one of our trading divisions headquartered in the U.S. recorded a favorable change in pre-tax LIFO of $11.1 million compared to the same period in fiscal 2014.

Year to Date Results

Net earnings attributable to CMC for the six months ended February 28, 2015 were $90.7 million ($0.77 per diluted share) on net sales of $3.1 billion, compared with net earnings attributable to CMC of $57.1 million ($0.48 per diluted share) on net sales of $3.2 billion for the six months ended February 28, 2014. The Company recorded after-tax LIFO income of $51.1 million ($0.43 per diluted share) for the six months ended February 28, 2015, compared with after-tax LIFO expense of $15.1 million ($0.13 per diluted share) for the six months ended February 28, 2014. Additionally, results for the six months ended February 28, 2014 included an after-tax gain of $15.5 million ($0.13 per diluted share) associated with the sale of the Company’s wholly owned copper tube manufacturing operation, Howell Metal Company. For the six months ended February 28, 2015, adjusted operating profit was $176.9 million, compared with $125.2 million for the six months ended February 28, 2014. Adjusted EBITDA was $242.6 million for the six months ended February 28, 2015, compared with $192.2 million for the six months ended February 28, 2014.

Outlook

Alvarado concluded, “Our third fiscal quarter is the start of the spring construction season, and we are carrying healthy backlogs entering the busy time of the year for construction markets. Elevated levels of imports supported by a strong dollar and excess global supply remain our top challenges. The effects of lower oil prices are starting to translate into slower demand for certain raw materials and steel related products that flow through our International Marketing and Distribution segment. Demand remains quite good in Poland while competitive pressures will continue to constrain margins.”

Conference Call

CMC invites you to listen to a live broadcast of its second quarter of fiscal 2015 conference call today, Thursday, March 26, 2015, at 11:00 a.m. ET.  Joe Alvarado, Chairman of the Board, President and CEO, and Barbara Smith, Senior Vice President and CFO, will host the call.  The call is accessible via our website at www.cmc.com.  In the event you are unable to listen to the live broadcast, the call will be archived and available for replay on our website on the next business day.  Financial and statistical information presented in the webcast will be located on CMC’s website under “Investors.”

About Commercial Metals Company

Commercial Metals Company and its 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, metal recycling facilities and marketing and distribution offices in the United States and in strategic international markets.

Forward-Looking Statements

This news release contains forward-looking statements regarding the Company’s expectations relating to economic conditions, prices, volumes and the Company’s operating plans.  These forward-looking statements generally can be identified by phrases such as we, CMC or its management, “expects,” “anticipates,” “believes,” “estimates,” “intends,” “plans to,” “ought,” “could,” “will,” “should,” “likely,” “appears” or other similar words or phrases. There are inherent risks and uncertainties in any forward-looking statements. Although we believe that our expectations are reasonable, we can give no assurance that these expectations will prove to have been correct, and actual results may vary materially.  Except as required by law, the Company undertakes no obligation to update, amend or clarify any forward-looking statements to reflect events, new information or otherwise.

Actual results may differ materially from those projected as a result of certain risks and uncertainties, including, but not limited to, the following: absence of global economic recovery or possible recession relapse and the pace of overall global economic activity and its impact in a highly cyclical industry; construction activity or lack thereof; continued sovereign debt problems in the Euro-zone; success or failure of governmental efforts to stimulate the economy including restoring credit availability and confidence in a recovery; significant reductions in China’s steel consumption or increased Chinese steel production; rapid and significant changes in the price of metals; increased capacity and product availability from competing steel minimills and other steel suppliers including import quantities and pricing; passage of new, or interpretation of existing, environmental laws and regulations; increased legislation associated with climate change and greenhouse gas emissions; solvency of financial institutions and their ability or willingness to lend; customers’ inability to obtain credit and non-compliance with contracts; financial covenants and restrictions on the operation of our business contained in agreements governing our debt; currency fluctuations; global factors including political and military uncertainties; availability of electricity and natural gas for minimill operations; information technology interruptions and breaches in security data; ability to retain key executives; execution of cost reduction strategies; industry consolidation or changes in production capacity or utilization; ability to make necessary capital expenditures; availability and pricing of raw materials over which we exert little influence, including scrap metal, energy, insurance and supply prices; unexpected equipment failures; competition from other materials; losses or limited potential gains due to hedging transactions; litigation claims and settlements, court decisions and regulatory rulings; risk of injury or death to employees, customers or other visitors to our operations; increased costs related to health care reform legislation; and those factors listed under Item 1A. “Risk Factors” included in the Company’s Annual Report filed on Form 10-K for the fiscal year ended August 31, 2014.

 

 

 

 

 

 

 

 

 

COMMERCIAL METALS COMPANY
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
(dollars in thousands)

This press release contains financial measures not derived in accordance with generally accepted accounting principles (“GAAP”). Reconciliations to the most comparable GAAP measures are provided below.

Adjusted Operating Profit is a non-GAAP financial measure. Management uses adjusted operating profit to evaluate the financial performance of CMC.  Adjusted operating profit from continuing operations is the sum of our earnings from continuing operations before income taxes, interest expense and discounts on sales of accounts receivable. Adjusted operating profit is the sum of adjusted operating profit from continuing operations and adjusted operating profit (loss) from discontinued operations. For added flexibility, we may sell certain trade accounts receivable both in the U.S. and internationally. We consider sales of accounts receivable as an alternative source of liquidity to finance our operations, and we believe that removing these costs provides a clearer perspective of CMC’s operating performance. Adjusted operating profit may be inconsistent with similar measures presented by other companies.

Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA from continuing operations is the sum of our earnings from continuing operations before net (earnings) loss attributable to noncontrolling interests, interest expense and income taxes. It also excludes CMC’s largest recurring non-cash charge, depreciation and amortization, as well as impairment charges, which are also non-cash. Adjusted EBITDA is the sum of adjusted EBITDA from continuing operations and adjusted EBITDA from discontinued operations. Adjusted EBITDA should not be considered as an alternative to net earnings or as a better measure of liquidity than net cash flows from operating activities, as determined by GAAP. However, we believe that adjusted EBITDA provides relevant and useful information, which is often used by analysts, creditors and other interested parties in our industry. Adjusted EBITDA to interest expense is a covenant test in certain of CMC’s debt agreements. Adjusted EBITDA is also the target benchmark for our annual and long-term cash incentive performance plans for management. Adjusted EBITDA may be inconsistent with similar measures presented by other companies.

Adjusted EBITDA to interest coverage for the quarter ended February 28, 2015:

Total Liquidity is a non-GAAP financial measure. The table below reflects the Company’s cash and cash equivalents, credit facilities and availability to liquidity at February 28, 2015.

Total Capitalization:

Total capitalization is the sum of stockholders’ equity attributable to CMC, long-term debt and deferred income taxes. The ratio of debt to total capitalization is a measure of current debt leverage. The following reconciles total capitalization to the most comparable GAAP measure, stockholders’ equity attributable to CMC:

OTHER FINANCIAL INFORMATION

Long-term debt to capitalization ratio as of February 28, 2015:

Total debt to capitalization plus short-term debt plus notes payable ratio as of February 28, 2015:

Current ratio as of February 28, 2015:

Current assets divided by current liabilities

 

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SOURCE Commercial Metals Company