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Commerical Metals Reports Third Consecutive Profitable Quarter
06/27/2012 - Commercial Metals Company reported net earnings of $40.7 million on net sales of $2.0 billion for the third quarter ended 31 May 2012.
Commercial Metals Company reported net earnings of $40.7 million, or $0.35 per diluted share, on net sales of $2.0 billion for the third quarter ended 31 May 2012. This earnings performance is improved over the net earnings of $36.2 million, or $0.31 per diluted share, reported in last year's third quarter on net sales of $2.1 billion. Net earnings for this year's third quarter from continuing operations were $39.1 million or $0.34 per diluted share. Included in continuing operations is an after-tax LIFO expense of $3.0 million as compared to $3.9 million of after-tax LIFO expense in the third quarter of 2011. In addition, during the third quarter of 2012, we recorded an $11.5 million ($0.10 per share) research and development tax benefit. Net earnings from discontinued operations, which consist primarily of the Croatian pipe mill, were $1.6 million or $0.01 per diluted share.
Net earnings for the nine months ended May 31, 2012 of $177.3 million, or $1.52 per diluted share, on sales of $6.0 billion compares to a net loss of $9.3 million, or $0.08 per share, on sales of $5.6 billion for the same period last year. Continuing operations for this year's first nine months resulted in net earnings of $191.9 million, or $1.64 per diluted share, while discontinued operations reflected a net loss of $14.7 million, or $0.12 per share. Included in continuing operations is a tax benefit of $113.5 million ($0.97 per share) related to ordinary worthless stock and bad debt deductions from the investment in the company's Croatian subsidiary, as well as the tax benefit for research and development expenditures. Within discontinued operations is approximately $18.0 million of severance costs in the same period of this year. After-tax LIFO income of $11.3 million ($0.10 per share) was recorded in the nine month period ended May 31, 2012, while after-tax LIFO expense of $43.8 million ($0.38 per share) was recognized for the same period last year.
Adjusted EBITDA was $104.3 million for this year's third quarter. For the nine months ended May 31, 2012, cash flow from operating activities was $134.8 million and adjusted EBITDA was $255.1 million which are $178.9 million and $80.4 million higher, respectively, than the same period in the prior year. Cash and short-term investments totaled $233.7 million as of 31 May 2012.
The board of directors of CMC declared a quarterly dividend of $0.12 on June 26th for shareholders of record on July 11, 2012. The dividend will be paid on July 25, 2012.
Joe Alvarado, President and CEO, commented, "Our focused efforts to improve and sustain operating profitability yielded positive results for the third consecutive quarter. Results have improved from prior year's third quarter even as uncertainty remains over the continuity of the Euro zone and the instability in the US markets. Each operating segment reported quarterly adjusted operating profit for the first time since the first quarter of 2008. Notably, our Americas Fabrication segment reported positive adjusted operating profit for the first time in the last 10 sequential quarters."
Alvarado further commented, "On 1 June 2012, we announced the sale of all outstanding shares of our Croatian pipe mill operation, excluding certain assets. On 13 June 2012, we completed the sale of certain assets excluded from the share purchase, and we continue to market the remaining assets. This completes an important step in our strategic plan to reposition the business for improved financial performance and increased shareholder value."
Americas Recycling continued to be profitable, recording an adjusted operating profit of $3.9 million as compared to $13.2 million from prior year's third quarter. The results suffered from lower nonferrous average selling prices and volumes primarily from reduced export demand within the Asian scrap market. Ferrous scrap prices moved down modestly during the quarter.
Americas Mills recorded an adjusted operating profit of $59.3 million, $11.8 million lower than last year's third quarter primarily due to margin compression and additional LIFO expense of $4.6 million.
Our Americas Fabrication segment recorded an adjusted operating profit of $0.2 million in this year's third quarter, marking a significant improvement of $14.9 million over last year's third quarter. The segment benefited from stable material pricing and improved market conditions resulting in stronger volume and higher pricing.
The International Mill segment had an adjusted operating profit of $1.3 million for this year's third quarter compared to an adjusted operating profit of $22.6 million for last year's third quarter. Market conditions have weakened amid fresh economic and political instability in Europe. New infrastructure projects in Poland have decreased but exports remain strong due to the weaker Polish zloty.
The International Marketing and Distribution segment logged an adjusted operating profit of $23.3 million for this year's third quarter compared to an adjusted operating profit of $17.0 million for last year's third quarter. All of the operations in this segment were profitable. The raw materials marketing operation was the largest contributor to the overall results of this segment.
Alvarado concluded, "In the fourth quarter of 2012, we expect scrap prices to decline further from oversupply as the constriction of the export market continues through the summer months. Despite weakness in the scrap markets, we remain encouraged by the strong backlogs for both our domestic and international operations going into the fourth quarter and are optimistic about their performance. We believe our International Mill segment will continue to face difficult market conditions in the fourth quarter. However, we have reduced our higher priced inventory and we believe prices will continue to stabilize for this segment. We remain committed to improving our cost structure and cash flows."
