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Commercial Metals Company Announces Entrance Into Fourth Amended and Restated Credit Agreement
06/27/2014 - Commercial Metals Company (NYSE: CMC) today announced financial results for its third quarter ended May 31, 2014. Net earnings attributable to CMC for the third quarter were $23.6 million, or $0.20 per diluted share, on net sales of $1.8 billion.
This compares to net earnings attributable to CMC of $19.0 million, or $0.16 per diluted share, on net sales of $1.8 billion for the three months ended May 31, 2013.
Results for this year's third quarter included after-tax LIFO income of $5.3 million ($0.04 per diluted share), compared with after-tax LIFO income of $10.7 million ($0.09 per diluted share) for the third quarter of fiscal 2013, an unfavorable change of $5.4 million ($0.05 per diluted share). Adjusted operating profit was $57.2 million for the third quarter of fiscal 2014, compared with adjusted operating profit of $55.8 million for the prior year's third quarter. Adjusted EBITDA was $90.0 million for the third quarter of fiscal 2014, compared with adjusted EBITDA of $89.3 million for the prior year's third quarter.
The Company's financial position at May 31, 2014 remained strong with cash and cash equivalents of $437.2 million and approximately $1.0 billion in total liquidity, compared with cash and cash equivalents of $378.8 million and total liquidity of $1.1 billion at August 31, 2013.
Joe Alvarado, Chairman of the Board, President, and CEO, commented, "The results for the third quarter of fiscal 2014 were lifted by seasonal construction activity. We are particularly pleased with the strong results from our Americas Mills segment which recorded the best quarterly adjusted operating profit since our first quarter of fiscal 2009. During the third quarter of fiscal 2014, we successfully commissioned a new electric arc furnace in Poland. Although final commissioning and debugging is ongoing, we saw positive preliminary results. In June 2014, we acquired a small recycling facility. This acquisition is consistent with our vertically-integrated manufacturing model and will provide a low cost, reliable source of raw material to our steel mill in Seguin, Texas."
On June 25, 2014, the board of directors of CMC declared a quarterly dividend of $0.12 per share for shareholders of record on July 10, 2014. The dividend will be paid on July 24, 2014.
Business Segments
Our Americas Recycling segment recorded adjusted operating loss of $1.1 million for the third quarter of fiscal 2014, compared with adjusted operating profit of $3.2 million for the third quarter of fiscal 2013. Although ferrous and nonferrous shipments increased 1% and 4%, respectively, a $1.0 million unfavorable change in pre-tax LIFO income and an increase in employee related expenses accounted for the decline in adjusted operating profit when compared to the third quarter of fiscal 2013.
Our Americas Mills segment recorded adjusted operating profit of $74.1 million for this year's third quarter, compared with adjusted operating profit of $46.6 million for the prior year's third quarter. The increase in adjusted operating profit was partially attributed to an $8.8 million favorable change in pre-tax LIFO, from pre-tax LIFO expense of $1.7 million in the third quarter of fiscal 2013 to pre-tax LIFO income of $7.1 million in the third quarter of fiscal 2014. Additionally, tons shipped increased by 94 thousand tons and the average cost of ferrous scrap consumed decreased $3 per short ton in the third quarter of fiscal 2014 when compared to the third quarter of fiscal 2013, resulting in a $15 per short ton increase in average metal margin.
Our Americas Fabrication segment recorded adjusted operating profit of $1.2 million for this year's third quarter, compared with adjusted operating profit of $13.5 million for the third quarter of fiscal 2013. The decline in adjusted operating profit is primarily due to margin squeeze as input prices increased, partially offset by an increase in shipments. Additionally, for the three months ended May 31, 2014, employee related expenses increased 14% as a result of an increase in volume when compared to the same quarter of fiscal 2013.
Our International Mill segment recorded adjusted operating profit of $2.0 million for this year's third quarter, compared with adjusted operating loss of $3.8 million for the prior year's third quarter. While tons shipped were relatively stable for the current quarter when compared to the same quarter in the prior year, sales prices increased by $28 per short ton and the cost of ferrous scrap consumed decreased by $3 per short ton, resulting in a 13% increase in metal margin, which contributed to the improved operating results.
Our International Marketing and Distribution segment recorded adjusted operating profit of $1.5 million for this year's third quarter, compared with adjusted operating profit of $7.7 million for the prior year's third quarter. The decline in adjusted operating profit compared to the third quarter of fiscal 2013 was primarily attributed to an $11.2 million unfavorable change in pre-tax LIFO associated with our U.S.-based trading divisions, from pre-tax LIFO income of $6.7 million in the third quarter of fiscal 2013 to pre-tax LIFO expense of $4.5 million in the third quarter of fiscal 2014. Additionally, our U.S.-based trading divisions experienced an increase in metal margins, which partially offset the unfavorable change in pre-tax LIFO.
Year to Date Results
Net earnings attributable to CMC for the nine months ended May 31, 2014 were $80.6 million ($0.68 per diluted share) on net sales of $5.1 billion, compared with net earnings attributable to CMC of $73.3 million ($0.62 per diluted share) on net sales of $5.2 billion for the nine months ended May 31, 2013. Results for the nine months ended May 31, 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, and an after-tax charge of approximately $3 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. Results for the nine months ended May 31, 2013 included an after-tax gain of $17.0 million ($0.14 per diluted share) associated with the sale of the Company's 11% ownership interest in Trinecke Zelezarny, a.s., a Czech Republic joint-stock company. The Company recorded after-tax LIFO expense of $9.7 million ($0.08 per diluted share) for the nine months ended May 31, 2014, compared with after-tax LIFO income of $26.1 million ($0.22 per diluted share) for the nine months ended May 31, 2013. For the nine months ended May 31, 2014, adjusted operating profit was $182.4 million, compared with $173.0 million for the nine months ended May 31, 2013. Adjusted EBITDA was $282.2 million for the nine months ended May 31, 2014, compared with $275.5 million for the nine months ended May 31, 2013.
Outlook
Alvarado concluded, "We anticipate that our operational results for the fourth quarter of fiscal 2014 will remain consistent with our third quarter of fiscal 2014 results. The American Institute of Architects Architecture Billings Index (ABI) for May rose a full three points over April to 52.6, indicating positive directional growth in the U.S. construction markets. On the rebar import front, we saw a slow-down from Mexico during the third quarter of fiscal 2014, and we plan to continue monitoring the volume of rebar imports from Turkey and other European and Asian countries until the pending countervailing and anti-dumping decisions are finalized by the U.S. Commerce Department, which we expect to take place in the latter part of 2014. As a result of the new electric arc furnace that our Polish operations successfully commissioned during the third quarter of fiscal 2014, we anticipate that our International Mill segment will begin to benefit from productivity and cost improvements in fiscal 2015."
Conference Call
CMC invites you to listen to a live broadcast of its third quarter of fiscal 2014 conference call today, Friday, June 27, 2014, 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.
Results for this year's third quarter included after-tax LIFO income of $5.3 million ($0.04 per diluted share), compared with after-tax LIFO income of $10.7 million ($0.09 per diluted share) for the third quarter of fiscal 2013, an unfavorable change of $5.4 million ($0.05 per diluted share). Adjusted operating profit was $57.2 million for the third quarter of fiscal 2014, compared with adjusted operating profit of $55.8 million for the prior year's third quarter. Adjusted EBITDA was $90.0 million for the third quarter of fiscal 2014, compared with adjusted EBITDA of $89.3 million for the prior year's third quarter.
The Company's financial position at May 31, 2014 remained strong with cash and cash equivalents of $437.2 million and approximately $1.0 billion in total liquidity, compared with cash and cash equivalents of $378.8 million and total liquidity of $1.1 billion at August 31, 2013.
Joe Alvarado, Chairman of the Board, President, and CEO, commented, "The results for the third quarter of fiscal 2014 were lifted by seasonal construction activity. We are particularly pleased with the strong results from our Americas Mills segment which recorded the best quarterly adjusted operating profit since our first quarter of fiscal 2009. During the third quarter of fiscal 2014, we successfully commissioned a new electric arc furnace in Poland. Although final commissioning and debugging is ongoing, we saw positive preliminary results. In June 2014, we acquired a small recycling facility. This acquisition is consistent with our vertically-integrated manufacturing model and will provide a low cost, reliable source of raw material to our steel mill in Seguin, Texas."
On June 25, 2014, the board of directors of CMC declared a quarterly dividend of $0.12 per share for shareholders of record on July 10, 2014. The dividend will be paid on July 24, 2014.
Business Segments
Our Americas Recycling segment recorded adjusted operating loss of $1.1 million for the third quarter of fiscal 2014, compared with adjusted operating profit of $3.2 million for the third quarter of fiscal 2013. Although ferrous and nonferrous shipments increased 1% and 4%, respectively, a $1.0 million unfavorable change in pre-tax LIFO income and an increase in employee related expenses accounted for the decline in adjusted operating profit when compared to the third quarter of fiscal 2013.
Our Americas Mills segment recorded adjusted operating profit of $74.1 million for this year's third quarter, compared with adjusted operating profit of $46.6 million for the prior year's third quarter. The increase in adjusted operating profit was partially attributed to an $8.8 million favorable change in pre-tax LIFO, from pre-tax LIFO expense of $1.7 million in the third quarter of fiscal 2013 to pre-tax LIFO income of $7.1 million in the third quarter of fiscal 2014. Additionally, tons shipped increased by 94 thousand tons and the average cost of ferrous scrap consumed decreased $3 per short ton in the third quarter of fiscal 2014 when compared to the third quarter of fiscal 2013, resulting in a $15 per short ton increase in average metal margin.
Our Americas Fabrication segment recorded adjusted operating profit of $1.2 million for this year's third quarter, compared with adjusted operating profit of $13.5 million for the third quarter of fiscal 2013. The decline in adjusted operating profit is primarily due to margin squeeze as input prices increased, partially offset by an increase in shipments. Additionally, for the three months ended May 31, 2014, employee related expenses increased 14% as a result of an increase in volume when compared to the same quarter of fiscal 2013.
Our International Mill segment recorded adjusted operating profit of $2.0 million for this year's third quarter, compared with adjusted operating loss of $3.8 million for the prior year's third quarter. While tons shipped were relatively stable for the current quarter when compared to the same quarter in the prior year, sales prices increased by $28 per short ton and the cost of ferrous scrap consumed decreased by $3 per short ton, resulting in a 13% increase in metal margin, which contributed to the improved operating results.
Our International Marketing and Distribution segment recorded adjusted operating profit of $1.5 million for this year's third quarter, compared with adjusted operating profit of $7.7 million for the prior year's third quarter. The decline in adjusted operating profit compared to the third quarter of fiscal 2013 was primarily attributed to an $11.2 million unfavorable change in pre-tax LIFO associated with our U.S.-based trading divisions, from pre-tax LIFO income of $6.7 million in the third quarter of fiscal 2013 to pre-tax LIFO expense of $4.5 million in the third quarter of fiscal 2014. Additionally, our U.S.-based trading divisions experienced an increase in metal margins, which partially offset the unfavorable change in pre-tax LIFO.
Year to Date Results
Net earnings attributable to CMC for the nine months ended May 31, 2014 were $80.6 million ($0.68 per diluted share) on net sales of $5.1 billion, compared with net earnings attributable to CMC of $73.3 million ($0.62 per diluted share) on net sales of $5.2 billion for the nine months ended May 31, 2013. Results for the nine months ended May 31, 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, and an after-tax charge of approximately $3 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. Results for the nine months ended May 31, 2013 included an after-tax gain of $17.0 million ($0.14 per diluted share) associated with the sale of the Company's 11% ownership interest in Trinecke Zelezarny, a.s., a Czech Republic joint-stock company. The Company recorded after-tax LIFO expense of $9.7 million ($0.08 per diluted share) for the nine months ended May 31, 2014, compared with after-tax LIFO income of $26.1 million ($0.22 per diluted share) for the nine months ended May 31, 2013. For the nine months ended May 31, 2014, adjusted operating profit was $182.4 million, compared with $173.0 million for the nine months ended May 31, 2013. Adjusted EBITDA was $282.2 million for the nine months ended May 31, 2014, compared with $275.5 million for the nine months ended May 31, 2013.
Outlook
Alvarado concluded, "We anticipate that our operational results for the fourth quarter of fiscal 2014 will remain consistent with our third quarter of fiscal 2014 results. The American Institute of Architects Architecture Billings Index (ABI) for May rose a full three points over April to 52.6, indicating positive directional growth in the U.S. construction markets. On the rebar import front, we saw a slow-down from Mexico during the third quarter of fiscal 2014, and we plan to continue monitoring the volume of rebar imports from Turkey and other European and Asian countries until the pending countervailing and anti-dumping decisions are finalized by the U.S. Commerce Department, which we expect to take place in the latter part of 2014. As a result of the new electric arc furnace that our Polish operations successfully commissioned during the third quarter of fiscal 2014, we anticipate that our International Mill segment will begin to benefit from productivity and cost improvements in fiscal 2015."
Conference Call
CMC invites you to listen to a live broadcast of its third quarter of fiscal 2014 conference call today, Friday, June 27, 2014, 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.
