Commercial Metals Company reported for the fourth quarter ended 31 August 2012 net earnings of $30.2 million on net sales of $1.9 billion, a significant improvement compared to a net loss of $120.3 million in the prior year fourth quarter. Net earnings for the year ended 31 August 2012 represent the fifth-best full year performance in CMC’s nearly 100 year history at $207.5 million on sales of $7.8 billion. The fiscal year 2012 performance compares to a net loss of $129.6 million on sales of $7.9 billion for the same period last year.

Joe Alvarado, President and Chief Executive Officer, commented, "We are pleased to report a fourth consecutive quarter of profitability and the fifth-best year in the history of our company, despite a backdrop of weak conditions in most major markets globally. Results have improved dramatically over last year’s fourth quarter. Consistent with the third quarter of this year, each operating segment posted quarterly adjusted operating profit. Our cash flow from operations substantially improved over the prior year."

Fourth Quarter 2012 Review
Net earnings for this year’s fourth quarter from continuing operations were $17.0 million. Adjusted EBITDA was $109.2 million for this year’s fourth quarter and cash flow from operations was $61.2 million. After-tax items included in continuing operations were:

• LIFO income of $18.3 million as compared to $6.3 million of after-tax LIFO expense in the fourth quarter of 2011;
• loss of $2.5 million related to the sale of a rebar fabrication shop in Rosslau, Germany;
• expenses of $2.5 million related to the full valuation of certain state tax losses; and
• expenses of $2.4 million related to our proxy contest and hostile tender offer.

Earnings from discontinued operations were $13.2 million or $0.11 per diluted share, which primarily consists of the share sale of CMC’s Croatian subsidiary for a pre-tax gain of $13.8 million (including a $7.5 million gain in foreign currency translation). Certain assets excluded from the share sale were sold in June and the remaining assets were sold in September 2012. Total net cash proceeds for these transactions will be approximately $41 million.

Alvarado added, "A year ago we committed to exiting unprofitable businesses and as part of executing that plan, as of 21 September 2012 we have completed the sale of our Croatian pipe subsidiary. We expect to receive a net of $41 million in cash as a result of these transactions."

Americas Recycling recorded an adjusted operating profit of $8.3 million as compared to $10.8 million from prior year’s fourth quarter. Due to oversupply and reduced export demand, ferrous scrap prices rapidly declined in the first two months of the fourth quarter of 2012, before partially recovering in August. Lower demand negatively affected both the segment’s margins and volumes. On the nonferrous side, the segment’s volume and pricing declined compared to a year ago.

Americas Mills recorded an adjusted operating profit of $62.3 million, $16.7 million more than last year’s fourth quarter. The segment’s volumes were essentially flat quarter over quarter while margins were better. Due to lower input prices, LIFO for this segment improved $27.4 million to income of $21.6 million during this year’s fourth quarter.

The Americas Fabrication segment recorded an adjusted operating profit of $1.5 million in this year’s fourth quarter, marking a significant improvement of $44.3 million over last year’s fourth quarter adjusted operating loss of $42.8 million. The segment continued to benefit from stable material pricing and improved margins in the backlog. Compared to a year ago, both shipments and bid activity improved for this segment.

The International Mill segment had an adjusted operating profit of $5.4 million for this year’s fourth quarter compared to an adjusted operating profit of $14.6 million during last year’s fourth quarter. Included in this year’s fourth quarter is a pre-tax loss of $3.8 million related to the sale of a rebar fabrication shop in Rosslau, Germany. During this year’s fourth quarter, the segment shipped substantial billet orders, mostly to Asian markets. Market conditions in Europe continue to be soft, putting pressure on margins, and significant uncertainty remains.

Our International Marketing and Distribution segment recorded an adjusted operating profit of $1.5 million for this year’s fourth quarter compared to an adjusted operating profit of $22.7 million for last year’s fourth quarter. Within this segment, the reduced profitability is primarily due to reduced demand in some of our key products marketed by our raw materials division. Uncertainty around the outcome of economic stimulus in China is weighing on this division’s results. Furthermore, our European trading division experienced lower volumes and margins as a result of the continued Euro zone market conditions.

Full Year 2012 Review
Continuing operations for fiscal year 2012 were net earnings of $209.0 million. For the fiscal year ended 31 August 2012, cash flow from operations was $196.0 million and adjusted EBITDA was $364.2 million, which are $168.2 million and $127.0 million higher, respectively, than the prior year. Cash and short-term investments totaled $262.4 million as of 31 August 2012. After-tax items included in continuing operations were:

• LIFO income of $29.6 million as compared to $50.0 million of expense in fiscal 2011;
• a tax benefit of $102.1 million related to ordinary worthless stock and bad debt deductions from the prior investment in CMC’s Croatian subsidiary;
• a tax benefit of $11.5 million for research and experimentation expenditures; and
• expenses of $9.7 million related to our proxy contest and hostile tender offer.

Discontinued operations reflected a net loss of $1.5 million for the full year, attributable to the wind down of the Croatian pipe mill, which was offset by a $13.8 million pre-tax gain on sale of the Croatian subsidiary.

Outlook
Alvarado concluded, "In general we see economic recovery lacking meaningful momentum. Scrap prices continue to move down as we begin our fiscal year 2013 but we do expect a reversal of this trend during the winter months when supply tightens. We believe that, despite weakness in the scrap markets, our Recycling business has done a good job adjusting to the market volatility and maintaining profitability. Domestically, there is clear indication that residential construction is improving, which is a leading indicator of increased non-residential activity. Our International Mill segment continues to face difficult markets due to economic uncertainty in the Euro zone. Lastly, our International Marketing and Distribution segment faces substantial headwinds due to reduced demand in our raw materials division as well as the impact of China’s unclear growth outlook. As always, we remain committed to improving our cost structure and cash flows."