IRVING, Texas, Jan. 6, 2020 /PRNewswire/ -- Commercial Metals Company (NYSE: CMC) today announced financial results for its fiscal first quarter ended November 30, 2019.  First quarter earnings from continuing operations were $82.8 million, or $0.69 per diluted share, on net sales of $1.4 billion, compared to prior year period earnings from continuing operations of $19.4 million, or $0.16 per diluted share, on net sales of $1.3 billion. Net sales increased 8% on a year-over-year basis driven by the Company's growth strategy and strong fundamentals in its core markets.

As a result of ongoing network optimization efforts, a decision was made to cease melting operations at our Rancho Cucamonga, CA facility, which resulted in a net after tax charge of $5.0 million.  Excluding these expenses, adjusted earnings from continuing operations were $87.8 million, or $0.73 per diluted share, as detailed in the non-GAAP reconciliation on page 12.  This represents a 109% increase compared to adjusted earnings from continuing operations of $0.35 per diluted share for the three months ended November 30, 2018.

Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, commented, "The first quarter marked the best financial performance from our strategically repositioned portfolio of operations. This milestone reflects the continued health of the U.S. non-residential construction sector, which contributed to strong performances in our Americas Mills and Fabrication segments.  We believe the metal margin performance seen over recent quarters highlights the stability of CMC's rebar and long product offerings compared to the broader steel market."

"Strong earnings and working capital management during the quarter allowed us to further de-lever our balance sheet.  Over the past 12 months, we have made debt repayments of $173.8 million."

The Company's liquidity position as of November 30, 2019 remained strong, with cash and cash equivalents of $224.8 million and availability under the Company's credit and accounts receivable facilities of $659.9 million.

On January 2, 2020, the board of directors of CMC declared a quarterly dividend of $0.12 per share of CMC common stock payable to stockholders of record on January 15, 2020.  The dividend will be paid on January 30, 2020, and marks 221 consecutive quarterly dividend payments.

Business Segments - Fiscal First Quarter 2020 Review
Our Americas Recycling segment recorded adjusted EBITDA of $3.4 million for the first quarter of fiscal 2020 compared to adjusted EBITDA of $15.4 million for the prior year quarter.  The decrease reflected a challenging price environment in which average ferrous prices decreased by 33% on a year-over-year basis.  Low prices also reduced material flows during the quarter.

Our Americas Mills segment recorded adjusted EBITDA of $155.0 million for the first quarter of fiscal 2020, an increase of 36% compared to adjusted EBITDA of $113.9 million for the first quarter of fiscal 2019.  Volumes increased 42% compared to the prior year period, primarily due to additional production from acquired facilities.  Metal margins expanded $10 per ton year-over-year, as a reduction in scrap costs more than offset a $71 per ton decline in average selling prices.  Results in the first quarter also benefited from the achievement of our lowest conversion costs since the November 5, 2018 acquisition.

Our Americas Fabrication segment recorded adjusted EBITDA of $17.5 million for the first quarter of fiscal 2020, marking a significant improvement from an adjusted EBITDA loss of $37.0 million for the first quarter of fiscal 2019.  As in prior quarters, first quarter adjusted EBITDA did not include the benefit of the purchase accounting adjustment related to amortization of the acquired unfavorable contract backlog reserve of $8.3 million.     Average selling price of $976 per ton in the first quarter of fiscal 2020 increased $108 per ton, or 12%, compared to the prior year period.  The increase in average selling price, as well as declining rebar input costs, resulted in a strong increase in margins compared to recent quarters.  Current rebar bidding activity is healthy, and our backlog is priced at levels that we expect to be profitable when shipped.

Our International Mill segment in Poland recorded adjusted EBITDA of $11.4 million for the first quarter of fiscal 2020, compared to adjusted EBITDA of $32.8 million for the comparable prior year quarter.  Safeguard trade measures have thus far been ineffective in deterring a surge of imported product into Europe, resulting in a compression of metal margins during the quarter.  Shipment volumes declined on a year-over-year basis, primarily due to the absence of opportunistic billets sales that were made during the first quarter of fiscal 2019.  Conditions within the Polish construction sector remain healthy and demand for rebar continues to be strong.  Despite lower shipment volumes during the quarter, our Polish operations successfully reduced conversion costs compared to the year-ago period.

Our Corporate and Other segment recorded an adjusted EBITDA loss of $27.5 million for the first quarter of fiscal 2020 compared to an adjusted EBITDA loss of $59.6 million for the prior year quarter.  The current quarter loss did not include any acquisition costs and other legal expenses, while the first quarter of fiscal 2019 included $28.0 million of acquisition costs and other legal expenses.  Excluding these costs, our Corporate and Other costs still declined year-over-year, and we believe, are generally reflective of normalized levels going forward.

Outlook
"We expect construction and infrastructure demand to remain resilient," said Ms. Smith.  "Customer sentiment and our own fabrication backlog both point to a strong outlook for activity, though our second quarter will be impacted by typical seasonality related to holidays and winter weather conditions affecting construction activity."

"We anticipate metal margin will remain above the historical cycle average, but will experience a decline from first quarter levels. We expect our progress in optimizing our expanded domestic mill network during the first quarter will yield benefits going forward.  We anticipate Fabrication will remain profitable, while Recycling should see some benefit from the recent rebound in ferrous scrap prices.  We expect challenges to remain for our Polish operations until the current overhang of imports to the European Union unwinds."

Conference Call
CMC invites you to listen to a live broadcast of its first quarter fiscal 2020 conference call today, Monday, January 6, 2020, at 11:00 a.m. ETBarbara Smith, Chairman of the Board of Directors, President, and Chief Executive Officer, and Paul Lawrence, Vice President and Chief Financial Officer, 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 broadcast are 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 of facilities that includes seven electric arc furnace ("EAF") mini mills, two EAF micro mills, two rerolling mills, steel fabrication and processing plants, construction-related product warehouses, and metal recycling facilities in the U.S. and Poland.

Forward-Looking Statements
This news release contains or incorporates by reference a number of "forward-looking statements" within the meaning of the federal securities laws with respect to general economic conditions, key macro-economic drivers that impact our business, the effects of ongoing trade actions, the effects of continued pressure on the liquidity of our customers, potential synergies provided by our recent acquisitions, demand for our products, steel margins, the ability to operate our mills at full capacity, future supplies of raw materials and energy for our operations, share repurchases, legal proceedings, the undistributed earnings of our non-U.S. subsidiaries, U.S. non-residential construction activity, international trade, capital expenditures, our liquidity and our ability to satisfy future liquidity requirements, estimated contractual obligations, the effects of the Acquisition and our expectations or beliefs concerning future events. These forward-looking statements can generally be identified by phrases such as we or our management "expects," "anticipates," "believes," "estimates," "intends," "plans to," "ought," "could," "will," "should," "likely," "appears," "projects," "forecasts," "outlook" or other similar words or phrases. There are inherent risks and uncertainties in any forward-looking statements. We caution readers not to place undue reliance on any forward-looking statements.

Our forward-looking statements are based on management's expectations and beliefs as of the time this news release is filed with the SEC or, with respect to any document incorporated by reference, as of the time such document was prepared. Although we believe that our expectations are reasonable, we can give no assurance that these expectations will prove to have been correct, and actual results may vary materially. Except as required by law, we undertake no obligation to update, amend or clarify any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or any other changes. Important factors that could cause actual results to differ materially from our expectations include those described in Part I, Item 1A, Risk Factors, of the 2019 Form 10-K as well as the following: changes in economic conditions which affect demand for our products or construction activity generally, and the impact of such changes on the highly cyclical steel industry; rapid and significant changes in the price of metals, potentially impairing our inventory values due to declines in commodity prices or reducing the profitability of our fabrication contracts due to rising commodity pricing; excess capacity in our industry, particularly in China, and product availability from competing steel mills and other steel suppliers including import quantities and pricing; compliance with and changes in environmental laws and regulations, including increased regulation associated with climate change and greenhouse gas emissions; involvement in various environmental matters that may result in fines, penalties or judgments; potential limitations in our or our customers' abilities to access credit and non-compliance by our customers with our contracts; activity in repurchasing shares of our common stock under our repurchase program; financial covenants and restrictions on the operation of our business contained in agreements governing our debt; our ability to successfully identify, consummate, and integrate acquisitions and the effects that acquisitions may have on our financial leverage; risks associated with acquisitions generally, such as the inability to obtain, or delays in obtaining, required approvals under applicable antitrust legislation and other regulatory and third party consents and approvals; failure to retain key management and employees of the Acquired Businesses; issues or delays in the successful integration of the Acquired Businesses' operations, systems and personnel with those of the Company, including the inability to substantially increase utilization of the Acquired Businesses' steel mini mills, and incurring or experiencing unanticipated costs and/or delays or difficulties; unfavorable reaction to the acquisition of the Acquired Businesses by customers, competitors, suppliers and employees; lower than expected future levels of revenues and higher than expected future costs; failure or inability to implement growth strategies in a timely manner; impact of goodwill impairment charges; impact of long-lived asset impairment charges; currency fluctuations; global factors, including trade measures, political uncertainties and military conflicts; availability and pricing of electricity, electrodes and natural gas for mill operations; ability to hire and retain key executives and other employees; competition from other materials or from competitors that have a lower cost structure or access to greater financial resources; information technology interruptions and breaches in security; ability to make necessary capital expenditures; availability and pricing of raw materials and other items over which we exert little influence, including scrap metal, energy and insurance; unexpected equipment failures; losses or limited potential gains due to hedging transactions; litigation claims and settlements, court decisions, regulatory rulings and legal compliance risks; risk of injury or death to employees, customers or other visitors to our operations; new and clarifying guidance with regard to interpretation of certain provisions of the Tax Cuts and Jobs Act that could impact our assessment; and increased costs related to health care reform legislation.

COMMERCIAL METALS COMPANY

FINANCIAL & OPERATING STATISTICS (UNAUDITED)



Three Months Ended

(in thousands, except per ton amounts)


11/30/2019


8/31/2019


5/31/2019


2/28/2019


11/30/2018

Americas Recycling











Net sales


$

222,261



268,447



289,015



287,075



302,009


Adjusted EBITDA


$

3,417



4,235



12,331



10,124



15,434


Tons shipped (in thousands)











 Ferrous


492



559



597



570



579


 Nonferrous


57



61



60



59



63


 Total tons shipped


549



620



657



629



642


Average selling price (per ton)











 Ferrous


$

182



217



252



266



273


 Nonferrous


$

1,983



1,998



2,047



1,998



1,982













Americas Mills











Net sales


$

768,893



824,809



866,903



774,709



601,853


Adjusted EBITDA


$

155,025



160,832



158,114



112,396



113,873


Tons shipped











     Rebar


881



897



913



773



530


     Merchant & Other


325



319



323



322



317


Total tons shipped


1,206



1,216



1,236



1,095



847


Average price (per ton)











Total selling price


$

611



645



670



677



682


Cost of ferrous scrap utilized


$

226



246



284



303



307


Metal margin


$

385



399



386



374



375













Americas Fabrication











Net sales


$

571,847



622,385



633,047



530,836



437,111


Adjusted EBITDA


$

17,481



(13,151)



(23,289)



(49,578)



(36,996)


Tons shipped (in thousands)


413



448



469



396



319


Total selling price (per ton)


$

976



963



925



845



868













International Mill











Net sales


$

165,389



205,461



209,365



175,198



227,024


Adjusted EBITDA


$

11,359



22,666



24,120



20,537



32,779


Tons shipped











     Rebar


122



151



126



66



80


     Merchant & Other


216



237



250



238



312


Total tons shipped


338



388



376



304



392


 Average price (per ton)











Total selling price


$

461



500



524



545



547


Cost of ferrous scrap utilized


$

244



265



288



301



295


Metal margin


$

217



235



236



244



252


 

COMMERCIAL METALS COMPANY

BUSINESS SEGMENTS (UNAUDITED)

(in thousands)


Three Months Ended

Net sales


11/30/2019


8/31/2019


5/31/2019


2/28/2019


11/30/2018

 Americas Recycling


$

222,261



$

268,447



$

289,015



$

287,075



$

302,009


 Americas Mills


768,893



824,809



866,903



774,709



601,853


 Americas Fabrication


571,847



622,385



633,047



530,836



437,111


 International Mill


165,389



205,461



209,365



175,198



227,024


 Corporate and Other


(343,682)



(378,097)



(392,458)



(365,035)



(290,655)


Total Net Sales


$

1,384,708



$

1,543,005



$

1,605,872



$

1,402,783



$

1,277,342













Adjusted EBITDA from continuing operations











 Americas Recycling


$

3,417



$

4,235



$

12,331



$

10,124



$

15,434


 Americas Mills


155,025



160,832



158,114



112,396



113,873


 Americas Fabrication


17,481



(13,151)



(23,289)



(49,578)



(36,996)


 International Mill


11,359



22,666



24,120



20,537



32,779


 Corporate and Other


(27,477)



(29,337)



(27,305)



(24,146)



(59,554)


 

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)



Three Months Ended November 30,

(in thousands, except share data)


2019


2018

Net sales


$

1,384,708



$

1,277,342


Costs and expenses:





Cost of goods sold


1,146,514



1,118,433


Selling, general and administrative expenses


111,529



117,217


Interest expense


16,578



16,663




1,274,621



1,252,313







Earnings from continuing operations before income taxes


110,087



25,029


Income taxes


27,332



5,609


Earnings from continuing operations


82,755



19,420







Earnings from discontinued operations before income taxes


895



457


Income taxes


302



135


Earnings from discontinued operations


593



322







Net earnings


$

83,348



$

19,742







Basic earnings per share*





Earnings from continuing operations


$

0.70



$

0.17


Earnings from discontinued operations


0.01



—


Net earnings


$

0.70



$

0.17







Diluted earnings per share*





Earnings from continuing operations


$

0.69



$

0.16


Earnings from discontinued operations


—



—


Net earnings


$

0.70



$

0.17







Average basic shares outstanding


118,370,191



117,387,038


Average diluted shares outstanding


119,773,538



118,682,473


*Earnings Per Share ("EPS") is calculated independently for each component and may not sum to Net EPS due to rounding

 

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share data)


November 30, 2019


August 31, 2019

Assets





Current assets:





Cash and cash equivalents


$

224,797



$

192,461


Accounts receivable (less allowance for doubtful accounts of $8,348 and $8,403)


961,458



1,016,088


Inventories, net


649,681



692,368


Other current assets


178,647



179,088


Total current assets


2,014,583



2,080,005


Property, plant and equipment, net


1,504,308



1,500,971


Goodwill


64,178



64,138


Other noncurrent assets


225,282



113,657


Total assets


$

3,808,351



$

3,758,771


Liabilities and stockholders' equity





Current liabilities:





Accounts payable


$

243,857



$

288,005


Accrued expenses and other payables


317,455



353,786


Acquired unfavorable contract backlog


26,935



35,360


Current maturities of long-term debt and short-term borrowings


13,717



17,439


Total current liabilities


601,964



694,590


Deferred income taxes


107,069



79,290


Other noncurrent liabilities


218,178



133,620


Long-term debt


1,179,443



1,227,214


Total liabilities


2,106,654



2,134,714


Stockholders' equity


1,701,501



1,623,861


Stockholders' equity attributable to noncontrolling interests


196



196


Total stockholders' equity


1,701,697



1,624,057


Total liabilities and stockholders' equity


$

3,808,351



$

3,758,771


 

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



Three Months Ended November 30,

(in thousands)


2019


2018

Cash flows from (used by) operating activities:





Net earnings


$

83,348



$

19,742


Adjustments to reconcile net earnings to cash flows from (used by) operating activities:





Depreciation and amortization


40,947



35,182


Deferred income taxes


27,939



(352)


Amortization of acquired unfavorable contract backlog


(8,331)



(11,332)


Stock-based compensation


8,269



4,217


Net gain on disposals of subsidiaries, assets and other


(6,733)



(1,271)


Other


1,175



45


Changes in operating assets and liabilities


(196)



(36,333)


Beneficial interest in securitized accounts receivable


—



(367,521)


Net cash flows from (used by) operating activities


146,418



(357,623)







Cash flows from (used by) investing activities:





Capital expenditures


(45,559)



(37,914)


Proceeds from the sale of property, plant and equipment


9,651



1,953


Proceeds from insurance, sale of discontinued operations and other


784



5,798


Acquisitions, net of cash acquired


—



(694,802)


Beneficial interest in securitized accounts receivable


—



367,521


Net cash flows used by investing activities:


(35,124)



(357,444)







Cash flows from (used by) financing activities:





Proceeds from issuance of long-term debt


—



180,000


Repayments of long-term debt


(53,298)



(7,175)


Proceeds from accounts receivable programs


27,050



33,439


Repayments under accounts receivable programs


(31,057)



(45,586)


Dividends


(14,238)



(14,116)


Stock issued under incentive and purchase plans, net of forfeitures


(7,817)



(6,220)


Net cash flows from (used by) financing activities


(79,360)



140,342


Effect of exchange rate changes on cash


196



(353)


Increase (decrease) in cash, restricted cash and cash equivalents


32,130



(575,078)


Cash, restricted cash and cash equivalents at beginning of period


193,729



632,615


Cash, restricted cash and cash equivalents at end of period


$

225,859



$

57,537





Supplemental information:


Three Months Ended November 30,

(in thousands)


2019


2018

Cash and cash equivalents


$

224,797



$

52,352


Restricted cash


1,062



5,185


Total cash, restricted cash and cash equivalents


$

225,859



$

57,537


 

COMMERCIAL METALS COMPANY
NON-GAAP FINANCIAL MEASURES (UNAUDITED)

This press release contains financial measures not derived in accordance with generally accepted accounting principles ("GAAP"). Reconciliations to the most comparable GAAP measures are provided below.

Core EBITDA from Continuing Operations is a non-GAAP financial measure. Core EBITDA from continuing operations is the sum of earnings (loss) from continuing operations before interest expense and income taxes (benefit). It also excludes recurring non-cash charges for depreciation and amortization, asset impairments, and equity compensation. Core EBITDA from continuing operations also excludes certain material acquisition and integration related costs and other legal fees, amortization of acquired unfavorable contract backlog, facility closure costs and purchase accounting adjustments to inventory. Core EBITDA from continuing operations should not be considered an alternative to earnings (loss) from continuing operations or net earnings (loss), or as a better measure of liquidity than net cash flows from operating activities, as determined by GAAP. However, we believe that Core EBITDA from continuing operations provides relevant and useful information, which is often used by analysts, creditors and other interested parties in our industry as it allows: (i) comparison of our earnings to those of our competitors; (ii) a supplemental measure of our ongoing core performance; and (iii) the assessment of period-to-period performance trends. Additionally, Core EBITDA from continuing operations is the target benchmark for our annual and long-term cash incentive performance plans for management. Core EBITDA from continuing operations may be inconsistent with similar measures presented by other companies.

A reconciliation of earnings from continuing operations to Core EBITDA from continuing operations is provided below:



Three Months Ended

(in thousands)


11/30/2019


8/31/2019


5/31/2019


2/28/2019


11/30/2018

Earnings from continuing operations


$

82,755



$

85,880



$

78,551



$

14,928



$

19,420


Interest expense


16,578



17,702



18,513



18,495



16,663


Income taxes


27,332



16,826



29,105



18,141



5,609


Depreciation and amortization


40,941



41,051



41,181



41,245



35,176


Asset impairments


530



369



15



—



—


Non-cash equity compensation


8,269



7,758



7,342



5,791



4,215


Facility closure


6,339



—



—



—



—


Acquisition and integration related costs and other


—



6,177



2,336



5,475



27,970


Amortization of acquired unfavorable contract backlog


(8,331)



(16,582)



(23,394)



(23,476)



(11,332)


Purchase accounting effect on inventory


—



—



—



10,315



—


Core EBITDA from continuing operations


$

174,413



$

159,181



$

153,649



$

90,914



$

97,721


*Net of interest, taxes, depreciation and amortization, impairments, and non-cash equity compensation.

Adjusted earnings from continuing operations is a non-GAAP financial measure that is equal to earnings (loss) from continuing operations before certain acquisition and integration related and costs and other legal expenses, facility closure costs, and purchase accounting adjustments to inventory, including the estimated income tax effects thereof. Additionally, we adjust adjusted earnings from continuing operations for the effects of the Tax Cuts and Jobs Act ("TCJA"). Adjusted earnings from continuing operations should not be considered as an alternative to earnings from continuing operations or any other performance measure derived in accordance with GAAP. However, we believe that adjusted earnings from continuing operations provides relevant and useful information to investors as it allows: (i) a supplemental measure of our ongoing core performance and (ii) the assessment of period-to-period performance trends. Management uses adjusted earnings from continuing operations to evaluate our financial performance. Adjusted earnings from continuing operations may be inconsistent with similar measures presented by other companies. Adjusted earnings from continuing operations per diluted share is defined as adjusted earnings from continuing operations on a diluted per share basis.

A reconciliation of earnings from continuing operations to adjusted earnings from continuing operations is provided below:



Three Months Ended

(in thousands)


11/30/2019


8/31/2019


5/31/2019


2/28/2019


11/30/2018

Earnings from continuing operations


$

82,755



$

85,880



$

78,551



$

14,928



$

19,420


Facility closure


6,339



—



—



—



—


Acquisition and integration related costs and other


—



6,177



2,336



5,475



27,970


Purchase accounting effect on inventory


—



—



—



10,315



—


Total adjustments (pre-tax)


$

6,339



$

6,177



$

2,336



$

15,790



$

27,970













Tax impact











TCJA impact


$

—



$

—



$

—



$

7,550



$

—


Related tax effects on adjustments


(1,331)



(1,297)



(490)



(3,316)



(5,874)


Total tax impact


(1,331)



(1,297)



(490)



4,234



(5,874)


Adjusted earnings from continuing operations


$

87,763



$

90,760



$

80,397



$

34,952



$

41,516













Adjusted earnings from continuing operations per diluted share


$

0.73



$

0.76



$

0.67



$

0.29



$

0.35


 

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SOURCE Commercial Metals Company

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