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Commercial Metals Co. Reports Eighth Consecutive Quarter of Positive Earnings
10/24/2013 - Commercial Metals Company announced financial results for its fourth quarter and year ended 31 August 2013.
Net earnings for the fourth quarter ended 31 August 2013 were US$4.1 million, or US$0.03 per diluted share, on net sales of US$1.7 billion. This compares to net earnings of US$30.2 million, or US$0.26 per diluted share, on net sales of US$1.8 billion for the three months ended 31 August 2012. Net earnings for the fourth quarter of 2013 included asset impairment charges related to our Australian operations of US$25.9 million, orUS$0.22 per diluted share. For the year ended 31 August 2013, net earnings were US$77.3 million orUS$0.66 per diluted share on net sales of US$6.9 billion; this compares to net earnings of US$207.5 millionor US$1.78 per diluted share on net sales of US$7.7 billion for the year ended 31 August 2012.
Joe Alvarado, chairman of the board, president, and CEO, commented, "We are proud to report our eighth consecutive quarter of positive earnings. We took action in the fourth quarter to strengthen our Australian operations which we believe will yield benefits in the coming quarters. Furthermore, our commitment to focus on our core operations is evidenced by the previously announced sale of our copper tube manufacturing operation, Howell Metal Company."
The board of directors of CMC declared a quarterly dividend of US$0.12 on October 22, 2013 for shareholders of record on 6 November 2013. The dividend will be paid on 20 November 2013.
Fourth Quarter 2013 Review
For this year's fourth quarter, adjusted EBITDA from continuing operations was US$83.4 million and fourth quarter cash flow from operations was at its strongest level this fiscal year. After-tax items included in continuing operations were:
Earnings from discontinued operations in the fourth quarter of 2013 were US$0.3 million (US$0.00 per diluted share), which primarily consisted of earnings related to our copper tube business. We previously announced the sale of this operation for US$58.5 million, subject to customary purchase price adjustments, which will be reflected in earnings for our first quarter of fiscal 2014.
Our Americas Recycling segment recorded an adjusted operating loss of US$6.7 million for the fourth quarter of this fiscal year, compared with an adjusted operating profit of US$8.3 million in the prior year's fourth quarter. LIFO income for the segment decreased US$2.8 million to US$1.3 million in the fourth quarter of 2013, from US$4.1 million in the fourth quarter of 2012. Ferrous volumes, selling prices and margins were all slightly higher during this year's fourth quarter. However, these increases were not enough to overcome declines in nonferrous volumes and pricing resulting in a US$51/ton decline in nonferrous margins. In addition, we recognized a US$2.0 million loss on a long-term supply contract with a customer during the fourth quarter of 2013.
Our Americas Mills segment recorded an adjusted operating profit of US$58.4 million for the fourth quarter of 2013, compared with an adjusted operating profit of US$63.0 million in the fourth quarter of 2012. This segment's volumes were lower by 7% while metal margins declined 2% in the fourth quarter of 2013. LIFO income for the segment decreased US$12.1 million to US$7.4 million in the fourth quarter of 2013, from US$19.5 million in the fourth quarter of 2012. In comparison to the sequential quarter, adjusted operating profit improved by 26% primarily as a result of higher shipments.
Our Americas Fabrication segment recorded an adjusted operating profit of US$8.2 million for the fourth quarter of 2013, marking a significant improvement over the prior year's fourth quarter adjusted operating profit of US$1.5 million. These results were achieved despite a US$2.9 million decrease in LIFO income for the segment when compared to the fourth quarter of 2012. This segment continued to experience margin expansion as input pricing declined while transactional selling prices improved when compared to the fourth quarter of 2012. Bid activity and bookings were also better in the fourth quarter of 2013 when compared to a year ago, resulting in a stronger backlog as we enter fiscal 2014.
Our International Mill segment recorded an adjusted operating profit of US$8.0 million for the fourth quarter of 2013, compared with an adjusted operating profit of US$5.4 million in the prior year's fourth quarter. These results were also a substantial improvement over the adjusted operating loss of US$3.8 million reported in the third quarter of 2013. Total shipments in the fourth quarter of 2013 fell 12% while metal margins expanded 7% when compared to the same quarter in 2012. Market conditions in Europe continued to be soft, with certain countries showing marginal signs of improvement. On a positive note, the effects of the value-added tax (VAT) circumvention schemes that have recently negatively impacted this segment should subside as the long-awaited legislation in Poland went into effect on 1 October 2013.
Our International Marketing and Distribution segment recorded an adjusted operating loss of US$16.2 million for the fourth quarter of 2013, compared with an adjusted operating profit of US$1.5 million in the prior year's fourth quarter. The reduced profitability in the fourth quarter of 2013 was primarily the result of charges related to our Australian operations for goodwill and other asset impairments, as well as one-time exit costs to close unprofitable locations. Our U.S.-based trading divisions recorded improved results for the fourth quarter of 2013 when compared to the prior year's fourth quarter. Furthermore, our European trading division continued to suffer weakened results in response to the poor Euro zone market conditions.
Full Year 2013 Review
Net earnings from continuing operations for fiscal year 2013 were US$75.0 million, or US$0.64 per diluted share. For the year ended 31 August 2013, cash flow from operations was US$147.7 million and adjusted EBITDA from continuing operations was US$353.5 million. After-tax LIFO income from continuing operations for fiscal 2013 was US$34.4 million (US$0.29 per diluted share), compared to after-tax LIFO income of US$27.1 million (US$0.23 per diluted share) in fiscal 2012. As of 31 August 2013, cash and short-term investments totaled US$378.8 million, an increase of 44% from the end of our 2012 fiscal year.
Earnings from discontinued operations for fiscal year 2013 were US$2.4 million, which primarily consisted of earnings related to our copper tube business.
Outlook
Alvarado concluded, "We are encouraged by our ability to post another positive earnings quarter and strong cash flows even after factoring in restructuring charges recorded in our fiscal 2013 fourth quarter. From a U.S. perspective, we are further encouraged by the strength of the Architecture Billings Index (ABI), posting a 53.8 for August, the highest mark since February 2013. In addition, the ABI has been above 50 for 12 of the last 13 months which historically has been a good leading indicator of improved non-residential construction. Our International Mill segment should see an improvement in margins in light of the newly-passed legislation to curb VAT circumvention arrangements in Poland".
Joe Alvarado, chairman of the board, president, and CEO, commented, "We are proud to report our eighth consecutive quarter of positive earnings. We took action in the fourth quarter to strengthen our Australian operations which we believe will yield benefits in the coming quarters. Furthermore, our commitment to focus on our core operations is evidenced by the previously announced sale of our copper tube manufacturing operation, Howell Metal Company."
The board of directors of CMC declared a quarterly dividend of US$0.12 on October 22, 2013 for shareholders of record on 6 November 2013. The dividend will be paid on 20 November 2013.
Fourth Quarter 2013 Review
For this year's fourth quarter, adjusted EBITDA from continuing operations was US$83.4 million and fourth quarter cash flow from operations was at its strongest level this fiscal year. After-tax items included in continuing operations were:
- after-tax LIFO income of US$10.3 million (US$0.09 per diluted share), compared to US$16.9 million(US$0.15 per diluted share) of after-tax LIFO income in the fourth quarter of 2012;
- impairment of goodwill and other assets and a full valuation allowance of tax net operating losses related to our Australian operations of US$25.9 million (US$0.22 per diluted share); and
- a tax benefit of US$7.2 million (US$0.06 per diluted share) related to the reorganization of our Australian legal entities.
Earnings from discontinued operations in the fourth quarter of 2013 were US$0.3 million (US$0.00 per diluted share), which primarily consisted of earnings related to our copper tube business. We previously announced the sale of this operation for US$58.5 million, subject to customary purchase price adjustments, which will be reflected in earnings for our first quarter of fiscal 2014.
Our Americas Recycling segment recorded an adjusted operating loss of US$6.7 million for the fourth quarter of this fiscal year, compared with an adjusted operating profit of US$8.3 million in the prior year's fourth quarter. LIFO income for the segment decreased US$2.8 million to US$1.3 million in the fourth quarter of 2013, from US$4.1 million in the fourth quarter of 2012. Ferrous volumes, selling prices and margins were all slightly higher during this year's fourth quarter. However, these increases were not enough to overcome declines in nonferrous volumes and pricing resulting in a US$51/ton decline in nonferrous margins. In addition, we recognized a US$2.0 million loss on a long-term supply contract with a customer during the fourth quarter of 2013.
Our Americas Mills segment recorded an adjusted operating profit of US$58.4 million for the fourth quarter of 2013, compared with an adjusted operating profit of US$63.0 million in the fourth quarter of 2012. This segment's volumes were lower by 7% while metal margins declined 2% in the fourth quarter of 2013. LIFO income for the segment decreased US$12.1 million to US$7.4 million in the fourth quarter of 2013, from US$19.5 million in the fourth quarter of 2012. In comparison to the sequential quarter, adjusted operating profit improved by 26% primarily as a result of higher shipments.
Our Americas Fabrication segment recorded an adjusted operating profit of US$8.2 million for the fourth quarter of 2013, marking a significant improvement over the prior year's fourth quarter adjusted operating profit of US$1.5 million. These results were achieved despite a US$2.9 million decrease in LIFO income for the segment when compared to the fourth quarter of 2012. This segment continued to experience margin expansion as input pricing declined while transactional selling prices improved when compared to the fourth quarter of 2012. Bid activity and bookings were also better in the fourth quarter of 2013 when compared to a year ago, resulting in a stronger backlog as we enter fiscal 2014.
Our International Mill segment recorded an adjusted operating profit of US$8.0 million for the fourth quarter of 2013, compared with an adjusted operating profit of US$5.4 million in the prior year's fourth quarter. These results were also a substantial improvement over the adjusted operating loss of US$3.8 million reported in the third quarter of 2013. Total shipments in the fourth quarter of 2013 fell 12% while metal margins expanded 7% when compared to the same quarter in 2012. Market conditions in Europe continued to be soft, with certain countries showing marginal signs of improvement. On a positive note, the effects of the value-added tax (VAT) circumvention schemes that have recently negatively impacted this segment should subside as the long-awaited legislation in Poland went into effect on 1 October 2013.
Our International Marketing and Distribution segment recorded an adjusted operating loss of US$16.2 million for the fourth quarter of 2013, compared with an adjusted operating profit of US$1.5 million in the prior year's fourth quarter. The reduced profitability in the fourth quarter of 2013 was primarily the result of charges related to our Australian operations for goodwill and other asset impairments, as well as one-time exit costs to close unprofitable locations. Our U.S.-based trading divisions recorded improved results for the fourth quarter of 2013 when compared to the prior year's fourth quarter. Furthermore, our European trading division continued to suffer weakened results in response to the poor Euro zone market conditions.
Full Year 2013 Review
Net earnings from continuing operations for fiscal year 2013 were US$75.0 million, or US$0.64 per diluted share. For the year ended 31 August 2013, cash flow from operations was US$147.7 million and adjusted EBITDA from continuing operations was US$353.5 million. After-tax LIFO income from continuing operations for fiscal 2013 was US$34.4 million (US$0.29 per diluted share), compared to after-tax LIFO income of US$27.1 million (US$0.23 per diluted share) in fiscal 2012. As of 31 August 2013, cash and short-term investments totaled US$378.8 million, an increase of 44% from the end of our 2012 fiscal year.
Earnings from discontinued operations for fiscal year 2013 were US$2.4 million, which primarily consisted of earnings related to our copper tube business.
Outlook
Alvarado concluded, "We are encouraged by our ability to post another positive earnings quarter and strong cash flows even after factoring in restructuring charges recorded in our fiscal 2013 fourth quarter. From a U.S. perspective, we are further encouraged by the strength of the Architecture Billings Index (ABI), posting a 53.8 for August, the highest mark since February 2013. In addition, the ABI has been above 50 for 12 of the last 13 months which historically has been a good leading indicator of improved non-residential construction. Our International Mill segment should see an improvement in margins in light of the newly-passed legislation to curb VAT circumvention arrangements in Poland".
