Commercial Metals to Exit Joist and Deck Business
03/01/2010 - Commercial Metals Co. recently announced its decision to exit the joist and deck business by way of sale and/or closure of those facilities. The company also has amended its agreement regarding its $400 million revolver and its $100 million accounts receivable (A/R) securitization agreement.
Commercial Metals Co. recently announced its decision to exit the joist and deck business by way of sale and/or closure of those facilities.
"We continue to review our product lines, geographic dispersion, and vertical integration consistent with our strategic plan to determine the best allocation of resources for the company,” said Murray R. McClean, Chairman, President, and Chief Executive Officer. “The outlook for joist consumption in the North American markets is weak. This product line has suffered low demand, depressed prices, and shrinking margins—all leading to unacceptable losses. By exiting this business, we believe the capital invested in these operations will be better deployed in our other downstream fabricating operations."
Estimates of costs and losses, the majority of which will be impairments on fixed assets and intangibles, are being developed and depend on a range of factors including, but not limited to, valuations upon sale of the business as a going concern or by individual property, plant, and equipment. Management expects to complete its evaluation within the next two weeks.
The company’s management currently estimates that the costs and the after-tax losses to be recorded in the second fiscal quarter may range from $35 to $50 million.
Commercial Metals plans to release its second quarter earnings and hold its quarterly investor conference call on March 24. The company will issue a pre-release earnings estimate range for its second quarter on March 12, but will withhold further details and comment until the earnings call.
The company also has amended its agreement regarding its $400 million revolver and its $100 million accounts receivable (A/R) securitization agreement. The amendments eliminate the EBITDA to interest coverage covenant test for the second fiscal quarter and set the coverage at 2.5 times for future periods.
"We value the strong relationships with our banking group and appreciate their timely response to our need for an amendment to these agreements for the second fiscal quarter and future periods," said William B. Larson, Senior Vice President and Chief Financial Officer.
Commercial Metals Co. 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, a copper tube mill, metal recycling facilities, and marketing and distribution offices in the United States and in strategic international markets.
