CMC Reports Fourth Quarter and Full-Year Results
10/31/2011 - Commercial Metals Company reported a net loss of $120.3 million $1.04 per diluted share on net sales of $2.3 billion for the fourth quarter, and a net loss of $129.6 million on net sales of $7.9 billion for the full year ended August 31, 2011.
Commercial Metals Company reported a net loss of $120.3 million $1.04 per diluted share on net sales of $2.3 billion for the fourth quarter, and a net loss of $129.6 million on net sales of $7.9 billion for the full year ended August 31, 2011.
Fourth Quarter Results — The $120.3 million ($1.04 per diluted share) net loss compares to net earnings of $8.0 million ($0.07 per diluted share) for the year-ago fourth quarter, while net sales of $2.3 billion compares with net sales of $1.8 billion for year-ago fourth quarter.
Results included approximately $144 million in pre-tax restructuring charges, including impairments, related to the company's decision to exit its Sisak mill in Croatia, and to close five rebar fabrication locations and eight construction services (CRP) locations. Excluding these restructuring charges, adjusted profit before tax was $31.3 million, a loss before tax of $112.3 million including restructuring charges, compared with adjusted profit before tax of $11.5 million for the last year's fourth quarter. Results also included after-tax LIFO expense of $6.3 million ($0.05 per diluted share) compared with income of $23.4 million ($0.20 per diluted share) in last year's fourth quarter.
The approximately $144 million of restructuring charges recorded in the fourth quarter of 2011 included: asset impairment charges of $120 million, inventory charges of $9 million, severance charges of $5 million and other closure costs of $10 million.
Full Year Results — The $129.6 million ($1.13 per diluted share) full-year net loss compares to a net loss of $205.3 million ($1.81 per diluted share) for 2010, and net sales of $7.9 billion compare to net sales of $6.3 billion in 2010. Excluding the aforementioned restructuring charges, adjusted profit before tax was $30.5 million for 2011, a loss before taxes of $113.1 million including restructuring charges. The full-year after-tax LIFO expense was $50.0 million ($0.44 per diluted share) compares with LIFO income of $7.4 million ($0.07 per diluted share) for the same period last year.
Cash and short-term investments totaled $222 million as of August 31, 2011. There were no outstanding borrowings against the $400 million revolving credit facility. Coverage ratio tests on the Company's unused revolver and public debt were met. The board declared a quarterly dividend of $0.12 per share on October 7, for shareholders of record on October 18, 2011.
Management Comments — “We achieved another profitable quarter, excluding special restructuring charges for the exit of our Croatian operation and other initiatives,” said Joe Alvarado, President and CEO. “These results were driven in part by relatively stable prices and demand, which contributed to greater overall predictability in our operations. Although the environment in the metals industry remains challenging, we continue to take important steps to focus on our core business, strengthen our competitive position and serve our customers in a more effective manner, all of which will help improve performance and position the company for the future."
Segment Results — Alvarado noted that the company’s Americas Recycling, Americas Mills and International Marketing and Distribution segments as well as the company's Polish mill (CMCZ. Fourth quarter sales and adjusted operating profit for these operations were greater than in the fourth quarter of 2010, with the exception of CMCZ which had a minimal decline in adjusted operating profit.
Americas Recycling had an adjusted operating profit of $10.8 million (an increase of $5.6 million) due to higher average selling prices and tons for both ferrous and nonferrous shipments. Americas Mills increased adjusted operating profit $5.0 million to $45.6 million driven by improved volumes as the company's shipments were the highest of any quarter since the fourth quarter of 2008, driven by seasonal pickups and continued strength in certain regional markets. CMCZ held steady with an adjusted operating profit of $14.6 million, its sixth consecutive quarterly adjusted operating profit. CMCZ benefited from a continued strong Polish economy and improvements in product mix from the company's new flexible rolling mill.
On a year-over-year comparison, the Americas Recycling segment's 2011 adjusted operating profit increased by $31.6 million, compared to the full year 2010. The Americas Mills segment's 2011 adjusted operating profit increased $124.5 million compared to 2010, and CMCZ's 2011 adjusted operating profit increased $79.2 million over 2010.
The company’s International Marketing and Distribution segment remained profitable in the fourth quarter, as it has for each of the last nine quarters. The segment achieved adjusted operating profit of $22.7 million compared to $12.5 million in fourth quarter 2010. Each of its major geographic marketing operations was profitable this quarter, led by the raw materials marketing operations. Additionally, the company's domestic steel import business continued to improve with another solid quarter.
Overall, the company's Australian operations were profitable but its Australian distribution operation was impacted by weakness in Australia's economy. During the fourth quarter of 2011, CMC completed the purchase of G.A.M. Steel Pty. Ltd. (Melbourne, Australia), a leading distributor and processor of steel long products and plate, servicing the structural fabrication, rural and manufacturing segments in the state of Victoria, Australia. The acquisition of G.A.M. will complement CMC's existing national long products distribution investments in Australia.
The Americas Fabrication segment continues to be affected by an overall difficult market for fabricated steel. The segment reported an adjusted operating loss of $42.8 million, including the previously discussed restructuring charges of $21.7 million. Tonnages and selling prices increased, but an $8.3 million unfavorable swing in LIFO expense made it difficult to improve on the fourth quarter 2010 adjusted operating loss of $17.1 million.
CMCS had an adjusted operating loss of $115.1 million, including the previously discussed restructuring charges of $110.6. The company will incur severance and closure costs in 2012 but has forecast that the liquidation of working capital and the cash tax savings will minimize the cash flow impact of these restructuring costs.
Outlook — Alvarado concluded, "Our backlog remains at levels comparable to last quarter and we're pleased to see pricing in the backlog continuing to improve. In the first quarter of 2012, we expect a slowdown in operations, typical with this time of year as we begin to enter the winter months at such businesses as CMCZ.
“As a result of this seasonally weaker first quarter and the costs associated with our exit from the Croatian steel pipe business, we expect to incur a loss before tax from operations; however, expected tax benefits related to CMCS will give us after tax profitability in the first quarter of 2012,” said Alvarado. “Importantly, we remain encouraged as we continue to make progress in reducing our cost structure, improving operations and enhancing cash flows.”
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 international markets.
