News

IRVING, Texas, June 22, 2017 /PRNewswire/ – Commercial Metals Company (NYSE: CMC) today announced financial results for its third quarter ended May 31, 2017. Net earnings for the third quarter of fiscal 2017 were $39.3 million ($0.34 per diluted share) on net sales of $1.4 billion. This compares to net earnings of $19.3 million ($0.17 per diluted share) on net sales of $1.2 billion for the third quarter of fiscal 2016.  Results for the third quarter of fiscal 2016 included a non-cash impairment charge on businesses held for sale in discontinued operations of $15.8 million ($0.13 per diluted share). Earnings from continuing operations were $39.6 million for the third quarter of fiscal 2017, compared to $35.1 million for the same period of the prior year.

Adjusted operating profit from continuing operations was $64.8 million for the third quarter of fiscal 2017, compared with adjusted operating profit from continuing operations of $60.9 million for the third quarter of fiscal 2016. Adjusted EBITDA from continuing operations was $96.9 million for the third quarter of fiscal 2017, compared with adjusted EBITDA from continuing operations of $92.5 million for the third quarter of fiscal 2016.

The Company’s liquidity position at May 31, 2017 remained strong with cash and cash equivalents of $275.8 million and availability under the Company’s credit and accounts receivables sales facilities of approximately $618.7 million. The Company regularly evaluates the use of its cash in efforts to maximize total shareholder return, including debt repayment, capital deployment, share repurchases and dividends.

Joe Alvarado, Chairman of the Board and CEO, commented, “Continued strength across our markets,  particularly in construction activity in both the United States and Poland, contributed to very strong volumes shipped this quarter and our best quarterly adjusted EBITDA from continuing operations over the past couple of years.  Additionally, our tireless focus on what we control, including minimizing our costs and providing market leading customer service helped offset some of the significant metal margin compression we faced and allowed us to deliver these solid financial results. “

On June 21, 2017, the board of directors of CMC declared a quarterly dividend of $0.12 per share for shareholders of record on July 6, 2017.  The dividend will be paid on July 20, 2017.

Business Segments-Fiscal Third Quarter 2017 Review
Our Americas Recycling segment recorded adjusted operating profit of $9.3 million for the third quarter of fiscal 2017 compared to an adjusted operating loss of $2.0 million for the third quarter of fiscal 2016. The improvement in adjusted operating profit compared to the same period in fiscal 2016 was primarily the result of strong ferrous scrap shipments, improved metal margins, realized efficiency improvements lowering conversion costs and the addition of seven recycling facilities acquired at the beginning of the quarter in the southeastern U.S. 

Our Americas Mills segment recorded adjusted operating profit of $50.7 million for the third quarter of fiscal 2017 compared to adjusted operating profit of $55.0 million for the corresponding period in fiscal 2016. Shipment volumes in this segment were strong.  However, margins have been under significant pressure in 2017 due to continued elevated import levels.  Strong shipments and a solid cost performance helped to mitigate the metal margin squeeze during the third fiscal quarter of 2017.

Our Americas Fabrication segment recorded adjusted operating profit of $1.8 million for the third quarter of fiscal 2017 compared to adjusted operating profit of $22.8 million for the third quarter of fiscal 2016.  This result continues the trend realized over the past few quarters of competitive pressures keeping awarded contract prices low. While the results for the segment on a standalone basis are low, it contributes significantly to the Company’s overall results through our high level of vertically integrated operations and the associated rebar demand drawn from our Americas Mills segment.

Our International Mill segment in Poland recorded adjusted operating profit of $13.0 million for the third quarter of fiscal 2017 compared to adjusted operating profit of $5.5 million for the corresponding period in fiscal 2016.  Increased pricing, supported by continued strength in construction activity and an enhanced product mix of more merchant products leveraging the recently completed capital improvements of our facilities, has resulted in improved margins in this segment during fiscal 2017.

Our International Marketing and Distribution segment recorded adjusted operating profit of $10.2 million for the third quarter of fiscal 2017 compared to an adjusted operating profit of $0.9 million for the same period in the prior fiscal year. The increase in adjusted operating profit was the result of improved margins in our U.S. steel trading business and the elimination of losses from our U.K. operations, which have been wound down.   On June 13, 2017, the Company announced its plan to exit the International Marketing and Distribution segment and it had signed a definitive agreement to sell the CMC Cometals Division.

Year to Date Results
Net earnings for the nine months ended May 31, 2017 were $75.9 million ($0.65 per diluted share) on net sales of $3.6 billion, compared with net earnings of $54.9 million ($0.47 per diluted share) on net sales of $3.4 billion for the nine months ended May 31, 2016. For the nine months ended May 31, 2017, earnings from continuing operations were $76.4 million, compared with $71.6 million for the same period of the prior year.  For the nine months ended May 31, 2017, adjusted operating profit from continuing operations was $140.5 million, compared with $147.0 million for the nine months ended May 31, 2016. Adjusted EBITDA from continuing operations was $233.4 million for the nine months ended May 31, 2017, compared with $241.3 million for the nine months ended May 31, 2016.

Outlook
“We anticipate stability in the key macro economic drivers that impact our business for the remainder of our fiscal 2017, including continued strong demand in both the US and Polish markets and also historically low steel margins in the U.S.,” said Barbara Smith, President and Chief Operating Officer.  “We continue to be optimistic that the ongoing trade actions taken in both the U.S. and Poland, once finalized, will provide some relief from the flood of unfairly priced rebar imports that have impacted our markets.”

Conference Call
CMC invites you to listen to a live broadcast of its third quarter of fiscal 2017 conference call today, Thursday, June 22, 2017, at 11:00 a.m. ET.  Joe Alvarado, Chairman of the Board and CEO, Barbara Smith, President and COO, and Mary Lindsey, 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 broadcast are 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 CMC’s expectations relating to key macro economic drivers that impact its business including demand, steel margins and effects of the ongoing trade actions in the U.S. and Poland.  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,” “potential,” “outlook,” 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, CMC undertakes no obligation to update, amend or clarify any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or otherwise.

Factors that could cause actual results to differ materially from CMC’s expectations include the following: overall global economic conditions, including the ongoing recovery from the last recession, continued sovereign debt problems in the Euro-zone and construction activity or lack thereof, and their impact in a highly cyclical industry; rapid and significant changes in the price of metals, potentially impairing our inventory values due to declines in commodity prices; excess capacity in our industry, particularly in China, and product availability from competing steel mills and other steel suppliers including import quantities and pricing; compliance with and changes in environmental laws and regulations, including increased regulation associated with climate change and greenhouse gas emissions; potential limitations in our or our customers’ abilities to access credit and non-compliance by our customers with our contracts; financial covenants and restrictions on the operation of our business contained in agreements governing our debt; currency fluctuations; global factors, including political uncertainties and military conflicts; availability of electricity and natural gas for mill operations; information technology interruptions and breaches in data security; ability to hire and retain key executives and other employees; our 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 or from competitors that have a lower cost structure or access to greater financial resources; losses or limited potential gains due to hedging transactions; litigation claims and settlements, court decisions, regulatory rulings and legal compliance risks; risk of injury or death to employees, customers or other visitors to our operations; and increased costs related to health care reform legislation.

COMMERCIAL METALS COMPANY
NON-GAAP FINANCIAL MEASURES (UNAUDITED)

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 from Continuing Operations is a non-GAAP financial measure. 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 from continuing operations should not be considered as an alternative to earnings from continuing operations or net earnings, as determined by GAAP. Management uses adjusted operating profit from continuing operations to evaluate our financial performance. 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 our operating performance. Adjusted operating profit from continuing operations may be inconsistent with similar measures presented by other companies.

Adjusted EBITDA from Continuing Operations is a non-GAAP financial measure. Adjusted EBITDA from continuing operations is the sum of earnings from continuing operations before net earnings attributable to noncontrolling interests, interest expense and income taxes. It also excludes our largest recurring non-cash charge, depreciation and amortization, as well as long-lived asset and goodwill impairment charges, which are also non-cash. Adjusted EBITDA from continuing operations should not be considered as an alternative to earnings from continuing operations or 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 from continuing operations provides relevant and useful information, which is often used by analysts, creditors and other interested parties as it allows: (i) comparison of our earnings to those of our competitors; (ii) a supplemental measure of our ongoing core performance; and (iii) the assessment of period-to-period performance trends. Additionally, adjusted EBITDA from continuing operations is the target benchmark for our annual and long-term cash incentive performance plans for management. Adjusted EBITDA from continuing operations may be inconsistent with similar measures presented by other companies.

There were no net earnings attributable to noncontrolling interests during the three and nine months ended May 31, 2017 and 2016.

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SOURCE Commercial Metals Company