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Commercial Metals Company Reports Second Quarter Fiscal 2017 Earnings Per Share Of $0.26

IRVING, Texas, March 23, 2017 /PRNewswire/ -- Commercial Metals Company (NYSE: CMC) today announced financial results for its second quarter ended February 28, 2017. Net earnings for the second quarter of fiscal 2017 were $30.3 million ($0.26 per diluted share) on net sales of $1.1 billion. This compares to net earnings of $10.5 million ($0.09 per diluted share) on net sales of $1.0 billion for the second quarter of fiscal 2016.  Results for the second quarter of fiscal 2016 included an after-tax impact of debt extinguishment costs of $7.4 million ($0.06 per diluted share) associated with the tender offers for senior notes completed on February 17, 2016.  Earnings from continuing operations were $29.6 million for the second quarter of fiscal 2017, compared with $10.8 million for the same period of the prior year.

Adjusted operating profit from continuing operations was $52.3 million for the second quarter of fiscal 2017, compared with adjusted operating profit from continuing operations of $30.0 million for the second quarter of fiscal 2016. Adjusted EBITDA from continuing operations was $82.7 million for the second quarter of fiscal 2017, compared with adjusted EBITDA from continuing operations of $61.1 million for the second quarter of fiscal 2016.

The Company's liquidity position at February 28, 2017 remained strong with cash and cash equivalents of $395.5 million and availability under the Company's credit and accounts receivables sales facilities of approximately $575 million. The Company regularly evaluates the use of its cash in efforts to maximize total shareholder return, including debt repayment, capital deployment, share repurchases and dividends.

Joe Alvarado, Chairman of the Board and CEO, commented, "After a slow start in our first fiscal quarter, customers re-entered the market during the most recent quarter with a renewed outlook and optimism for growth.  This, combined with mild winter conditions in the United States along with rising selling prices, resulted in very strong results for our second quarter which is normally a seasonally slower period. The value of our vertical integration was evident during the quarter as the impact of margin compression in our fabrication operations was offset by sharply rising scrap prices contributing to margin expansion in our recycling business."

Alvarado continued, "Our recent acquisitions highlight our commitment to grow our portfolio and extend the vertical integration and geographic reach of our business. We welcome the employees from Continental Concrete Structures, Inc., a supplier of post-tensioning cable and related products, the steel rebar fabrication business of Associated Steel Workers, Limited (ASW) in Hawaii, and the seven recycling facilities in the South East, to CMC."

On March 22, 2017, the board of directors of CMC declared a quarterly dividend of $0.12 per share for shareholders of record on April 5, 2017.  The dividend will be paid on April 20, 2017.

Business Segments-Fiscal Second Quarter 2017 Review
Our Americas Recycling segment recorded adjusted operating profit of $7.8 million for the second quarter of fiscal 2017 compared to an adjusted operating loss of $7.6 million for the second quarter of fiscal 2016. The improvement in adjusted operating profit compared to the same period in fiscal 2016 was primarily the result of strong ferrous scrap demand due to increased industry capacity utilization, sharply rising prices in both ferrous and nonferrous materials, as well as ongoing cost reduction measures.

Our Americas Mills segment recorded adjusted operating profit of $51.3 million for the second quarter of fiscal 2017 compared to adjusted operating profit of $50.7 million for the corresponding period in fiscal 2016. Profitability in this segment remained relatively flat in comparison to the second quarter of fiscal 2016 due to lower metal margins offset by increased shipments.  Some of the increase in shipments was the result of customers buying ahead of announced price increases, however, low service center inventory levels and strength in construction activity in our markets also contributed to the demand. We believe margins will continue to be pressured by imports and result in selling price increases lagging ferrous scrap cost increases in the near term.

Our Americas Fabrication segment recorded adjusted operating profit of $0.5 million for the second quarter of fiscal 2017 compared to adjusted operating profit of $14.8 million for the second quarter of fiscal 2016. The decline in adjusted operating profit for the second quarter of fiscal 2017 continued the effect, seen over the past few quarters, of aggressive competition resulting in lower prices for projects booked running through our fabrication backlog.

Despite the normal winter conditions, our International Mill segment in Poland recorded adjusted operating profit of $9.4 million for the second quarter of fiscal 2017 compared to adjusted operating profit of $2.0 million for the corresponding period in fiscal 2016.  Product mix more heavily weighted to higher margin merchant products, coupled with demand from the construction sector continuing to remain robust, resulted in the third successive quarter of strong results in this segment.

Our International Marketing and Distribution segment recorded adjusted operating profit of $6.1 million for the second quarter of fiscal 2017 compared to an adjusted operating loss of $2.3 million for the same period in the prior fiscal year. The increase in adjusted operating profit was primarily due to improved margins across the steel and raw material trading businesses recorded during a period of rising commodity pricing and some rejuvenated demand in the U.S. oil and gas drilling activities.

Year to Date Results
Net earnings for the six months ended February 28, 2017 were $36.6 million ($0.31 per diluted share) on net sales of $2.2 billion, compared with net earnings of $35.6 million ($0.30 per diluted share) on net sales of $2.2 billion for the six months ended February 29, 2016. For the six months ended February 28, 2017, earnings from continuing operations were $36.8 million compared with $36.5 million for the same period of the prior year.  For the six months ended February 28, 2017, adjusted operating profit from continuing operations was $75.6 million, compared with $86.0 million for the six months ended February 29, 2016. Adjusted EBITDA from continuing operations was $136.5 million for the six months ended February 28, 2017, compared with $148.8 million for the six months ended February 29, 2016.

Outlook
Alvarado concluded, "We anticipate demand will remain robust, supported by strong levels of bidding in our fabrication business, growth oriented leading indicators such as the Architectural Billings Index and overall consumer confidence across all of our product lines.  We anticipate that our shipment levels will continue to grow in our third quarter as we enter the traditionally strong construction season in both the U.S. and Polish markets. However, we anticipate further pressure on our margins as imports continue to make it difficult to increase selling prices for our products in line with scrap cost increases."

"In spite of a mixed reaction to the preliminary countervailing and anti-dumping duties recently announced by the U.S. Department of Commerce, we are pleased that there has finally been some recognition that producers in Japan, Taiwan and Turkey are trading rebar products unfairly.  The final results for these duties will be released in the coming months, and we will continue to work for the enforcement of our trade laws."

"We are also hopeful that the policies of the new administration in the U.S. will support economic growth through tax reform, a reduced regulatory environment, the introduction of an infrastructure regeneration program and more rigorous enforcement of trade actions.  We believe we are well-positioned to capitalize on the benefits from these initiatives, however, it is unknown when and how these policies will be implemented."

Conference Call
CMC invites you to listen to a live broadcast of its second quarter of fiscal 2017 conference call today, Thursday, March 23, 2017, at 11:00 a.m. ETJoe Alvarado, Chairman of the Board and CEO, Barbara Smith, President and COO, and Mary Lindsey, 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 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 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.

Forward-Looking Statements
This news release contains forward-looking statements regarding CMC's expectations relating to demand, shipment levels, economic conditions, changes in political and regulatory conditions, including duties announced by the U.S. Department of Commerce and the effects thereof, the effects of global steel overcapacity and international trade, anticipated finished goods pricing and customer growth, and CMC's margins.  These forward-looking statements generally can be identified by phrases such as we, CMC or its management, "expects," "anticipates," "believes," "estimates," "intends," "plans to," "ought," "could," "will," "should," "likely," "appears," "potential," "outlook," or other similar words or phrases. There are inherent risks and uncertainties in any forward-looking statements. 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, CMC undertakes 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 otherwise.

Factors that could cause actual results to differ materially from CMC's expectations include the following: overall global economic conditions, including the ongoing recovery from the last recession, continued sovereign debt problems in the Euro-zone and construction activity or lack thereof, and their impact in a highly cyclical industry; rapid and significant changes in the price of metals, potentially impairing our inventory values due to declines in commodity prices; 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; potential limitations in our or our customers' ability to access credit and non-compliance by our customers with our contracts; financial covenants and restrictions on the operation of our business contained in agreements governing our debt; currency fluctuations; global factors, including political uncertainties and military conflicts; availability of electricity and natural gas for mill operations; information technology interruptions and breaches in data security; ability to hire and retain key executives and other employees; our ability to make necessary capital expenditures; availability and pricing of raw materials over which we exert little influence, including scrap metal, energy, insurance and supply prices; unexpected equipment failures; competition from other materials or from competitors that have a lower cost structure or access to greater financial resources; 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; and increased costs related to health care reform legislation.


COMMERCIAL METALS COMPANY

OPERATING STATISTICS (UNAUDITED)



Three Months Ended


Six Months Ended


Three Months Ended

(short tons in thousands)


2/28/2017


2/29/2016


2/28/2017


2/29/2016


11/30/2016


8/31/2016


5/31/2016

Americas Recycling















    Ferrous tons shipped


421



379



826



768



405



423



423


    Nonferrous tons shipped


53



48



102



100



49



52



49


Americas Recycling tons shipped


474



427



928



868



454



475



472

















Americas Steel Mills















    Rebar shipments


406



364



810



758



404



411



462


    Merchant and other shipments


252



244



483



490



231



247



262


Americas Steel Mills tons shipped


658



608



1,293



1,248



635



658



724

















    Average selling price (total sales)


$

524



$

510



$

511



$

533



$

499



$

531



$

501


    Average cost ferrous scrap utilized


245



179



223



188



201



234



213


Americas Steel Mills metal margin


$

279



$

331



$

288



$

345



$

298



$

297



$

288

















International Mill















    Tons shipped


313



282



629



560



316



341



353

















    Average selling price (total sales)


$

402



$

363



$

399



$

385



$

397



$

409



$

378


    Average cost ferrous scrap utilized


229



178



215



192



202



211



187


International Mill metal margin


$

173



$

185



$

184



$

193



$

195



$

198



$

191

















Americas Fabrication















    Rebar shipments


226



225



474



474



248



284



270


    Structural and post shipments


27



29



52



57



25



30



40


Americas Fabrication tons shipped


253



254



526



531



273



314



310

















Americas Fabrication average selling price (excluding stock and buyout sales)


$

756



$

842



$

769



$

866



$

782



$

805



$

827


 


COMMERCIAL METALS COMPANY

BUSINESS SEGMENTS (UNAUDITED)

(in thousands)


Three Months Ended


Six Months Ended


Three Months Ended

Net sales


2/28/2017


2/29/2016


2/28/2017


2/29/2016


11/30/2016


8/31/2016


5/31/2016

Americas Recycling


$

223,328



$

148,346



$

400,036



$

327,553



$

176,708



$

195,724



$

182,477


Americas Mills


376,593



336,429



723,758



720,961



347,165



381,406



396,481


Americas Fabrication


303,826



336,144



642,226



718,458



338,400



385,917



385,080


International Mill


134,305



107,458



268,706



227,906



134,401



147,842



141,438


International Marketing and Distribution


302,295



276,876



550,455



559,913



248,160



310,079



319,604


Corporate


3,842



(2,867)



5,592



(476)



1,750



2,973



4,585


Eliminations


(194,568)



(182,689)



(366,089)



(379,759)



(171,521)



(215,361)



(202,275)


Total net sales


$

1,149,621



$

1,019,697



$

2,224,684



$

2,174,556



$

1,075,063



$

1,208,580



$

1,227,390

















Adjusted operating profit (loss) from continuing operations















Americas Recycling


$

7,766



$

(7,645)



$

2,668



$

(14,193)



$

(5,098)



$

(45,113)



$

(1,978)


Americas Mills


51,319



50,699



88,268



109,763



36,949



45,012



54,976


Americas Fabrication


506



14,825



7,217



36,170



6,711



9,638



22,794


International Mill


9,430



1,951



19,403



4,722



9,973



18,703



5,467


International Marketing and Distribution


6,143



(2,293)



5,177



(4,462)



(966)



(3,517)



892


Corporate


(22,317)



(28,801)



(46,330)



(46,873)



(24,013)



(25,670)



(22,542)


Eliminations


(576)



1,232



(780)



902



(204)



3,086



1,331


Adjusted operating profit from continuing operations


$

52,271



$

29,968



$

75,623



$

86,029



$

23,352



$

2,139



$

60,940



 

COMMERCIAL METALS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)



Three Months Ended


Six Months Ended

(in thousands, except share data)


February 28,
 2017


February 29,
 2016


February 28,
 2017


February 29,
 2016

Net sales


$

1,149,621



$

1,019,697



$

2,224,684



$

2,174,556


Costs and expenses:









Cost of goods sold


990,431



884,876



1,933,502



1,882,118


Selling, general and administrative expenses


107,119



93,918



215,986



195,826


Interest expense


12,442



16,625



25,740



34,929


Loss on debt extinguishment




11,365





11,365




1,109,992



1,006,784



2,175,228



2,124,238











Earnings from continuing operations before income taxes


39,629



12,913



49,456



50,318


Income taxes


9,990



2,064



12,643



13,836


Earnings from continuing operations


29,639



10,849



36,813



36,482











Earnings (loss) from discontinued operations before income taxes (benefit)


726



(446)



(191)



(1,018)


Income taxes (benefit)


33



(99)



15



(101)


Earnings (loss) from discontinued operations


693



(347)



(206)



(917)











Net earnings


30,332



10,502



36,607



35,565


Less net earnings attributable to noncontrolling interests









Net earnings attributable to CMC


30,332



10,502



36,607



35,565











Basic earnings (loss) per share attributable to CMC:









Earnings from continuing operations


$

0.25



$

0.09



$

0.32



$

0.32


Earnings (loss) from discontinued operations


0.01







(0.01)


Net earnings


$

0.26



$

0.09



$

0.32



$

0.31











Diluted earnings (loss) per share attributable to CMC:









Earnings from continuing operations


$

0.25



$

0.09



$

0.31



$

0.31


Earnings (loss) from discontinued operations


0.01







(0.01)


Net earnings


$

0.26



$

0.09



$

0.31



$

0.30











Cash dividends per share


$

0.12



$

0.12



$

0.24



$

0.24


Average basic shares outstanding


115,736,369



115,429,550



115,415,662



115,725,896


Average diluted shares outstanding


117,120,208



116,507,591



117,007,958



117,002,822


 


COMMERCIAL METALS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)


February 28,
 2017


August 31,
 2016

Assets





Current assets:





Cash and cash equivalents


$

395,546



$

517,544


Accounts receivable, net


774,286



765,784


Inventories, net


720,786



652,754


Other current assets


96,422



112,043


Total current assets


1,987,040



2,048,125


Net property, plant and equipment


940,344



895,049


Goodwill


66,530



66,373


Other assets


137,919



121,322


Total assets


$

3,131,833



$

3,130,869


Liabilities and stockholders' equity





Current liabilities:





Accounts payable-trade


$

307,488



$

243,532


Accounts payable-documentary letters of credit




5


Accrued expenses and other payables


220,433



264,112


Current maturities of long-term debt


312,200



313,469


Total current liabilities


840,121



821,118


Deferred income taxes


55,625



63,021


Other long-term liabilities


121,930



121,351


Long-term debt


752,137



757,948


Total liabilities


1,769,813



1,763,438


Stockholders' equity attributable to CMC


1,361,848



1,367,272


Stockholders' equity attributable to noncontrolling interests


172



159


Total equity


1,362,020



1,367,431


Total liabilities and stockholders' equity


$

3,131,833



$

3,130,869


 


COMMERCIAL METALS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



Six Months Ended

(in thousands)


February 28, 2017


February 29, 2016

Cash flows from (used by) operating activities:





Net earnings


$

36,607



$

35,565


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





Depreciation and amortization


60,789



63,541


Stock-based compensation


16,156



13,106


Deferred income taxes


(9,380)



(4,614)


Amortization of interest rate swaps termination gain


(3,798)



(3,798)


Provision for losses on receivables, net


1,381



2,740


Write-down of inventories


1,205



7,949


Asset impairment


553




Net gain on sales of assets and other


(195)



(2,767)


Loss on debt extinguishment




11,365


Tax benefit from stock plans




(55)


Changes in operating assets and liabilities:





Accounts receivable


2,162



190,622


Proceeds (payments) on sales of accounts receivable programs, net


(5,102)



11,504


Inventories


(68,456)



111,544


Accounts payable, accrued expenses and other payables


9,374



(115,002)


Changes in other operating assets and liabilities


(29,313)



11,110


Net cash flows from operating activities


11,983



332,810


Cash flows from (used by) investing activities:





Capital expenditures


(90,808)



(62,437)


Acquisitions, net of cash acquired


(25,366)




Decrease (increase) in restricted cash


21,033



(49,145)


Proceeds from the sale of property, plant and equipment and other


700



3,060


Proceeds from the sale of subsidiaries


524




Net cash flows used by investing activities


(93,917)



(108,522)


Cash flows from (used by) financing activities:





Cash dividends


(27,726)



(27,839)


Repayments on long-term debt


(6,148)



(205,816)


Stock issued under incentive and purchase plans, net of forfeitures


(5,408)



(5,671)


Contribution from noncontrolling interests


13



29


Increase (decrease) in documentary letters of credit, net


(5)



(25,815)


Short-term borrowings, net change




(20,090)


Treasury stock acquired




(30,595)


Debt extinguishment costs




(11,013)


Tax benefit from stock plans




55


Decrease in restricted cash




1


Net cash flows used by financing activities


(39,274)



(326,754)


Effect of exchange rate changes on cash


(790)



(1,179)


Increase (decrease) in cash and cash equivalents


(121,998)



(103,645)


Cash and cash equivalents at beginning of year


517,544



485,323


Cash and cash equivalents at end of period


$

395,546



$

381,678



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.

Adjusted Operating Profit from Continuing Operations is a non-GAAP financial measure. Adjusted operating profit from continuing operations is the sum of our earnings from continuing operations before income taxes, interest expense and discounts on sales of accounts receivable. Adjusted operating profit from continuing operations should not be considered as an alternative to earnings from continuing operations or net earnings, as determined by GAAP. Management uses adjusted operating profit from continuing operations to evaluate the financial performance of CMC. For added flexibility, we may sell certain trade accounts receivable both in the U.S. and internationally. We consider sales of accounts receivable as an alternative source of liquidity to finance our operations, and we believe that removing these costs provides a clearer perspective of CMC's operating performance. Adjusted operating profit from continuing operations may be inconsistent with similar measures presented by other companies.



Three Months Ended


Six Months Ended


Three Months Ended

(in thousands)


2/28/2017


2/29/2016


2/28/2017


2/29/2016


11/30/2016


8/31/2016


5/31/2016

Earnings from continuing operations


$

29,639



$

10,849



$

36,813



$

36,482



$

7,174



$

950



$

35,111


Income taxes


9,990



2,064



12,643



13,836



2,653



(11,865)



10,676


Interest expense


12,442



16,625



25,740



34,929



13,298



12,565



14,737


Discounts on sales of accounts receivable


200



430



427



782



227



489



416


Adjusted operating profit from continuing operations


$

52,271



$

29,968



$

75,623



$

86,029



$

23,352



$

2,139



$

60,940


Adjusted EBITDA from Continuing Operations is a non-GAAP financial measure. Adjusted EBITDA from continuing operations is the sum of earnings from continuing operations before net earnings attributable to noncontrolling interests, interest expense and income taxes. It also excludes CMC's largest recurring non-cash charge, depreciation and amortization, as well as long-lived asset and goodwill impairment charges, which are also non-cash. There were no net earnings attributable to noncontrolling interests during the three and six months ended February 28, 2017 and February 29, 2016. Adjusted EBITDA from continuing operations should not be considered an alternative to earnings from continuing operations or net earnings, or as a better measure of liquidity than net cash flows from operating activities, as determined by GAAP. However, we believe that adjusted EBITDA from continuing operations provides relevant and useful information, which is often used by analysts, creditors and other interested parties as it allows: (i) comparison of our earnings to those of other competitors; (ii) a better understanding of our ongoing core performance; and (iii) assessing period-to-period performance trends. Additionally, adjusted EBITDA from continuing operations is the target benchmark for our annual and long-term cash incentive performance plans for management. Adjusted EBITDA from continuing operations may be inconsistent with similar measures presented by other companies.



Three Months Ended


Six Months Ended


Three Months Ended

(in thousands)


2/28/2017


2/29/2016


2/28/2017


2/29/2016


11/30/2016


8/31/2016


5/31/2016

Earnings from continuing operations


$

29,639



$

10,849



$

36,813



$

36,482



$

7,174



$

950



$

35,111


Interest expense


12,442



16,625



25,740



34,929



13,298



12,565



14,737


Income taxes


9,990



2,064



12,643



13,836



2,653



(11,865)



10,676


Depreciation and amortization


30,499



31,550



60,785



63,541



30,286



31,516



31,883


Impairment charges


91





479





388



39,952



76


Adjusted EBITDA from continuing operations


$

82,661



$

61,088



$

136,460



$

148,788



$

53,799



$

73,118



$

92,483


 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/commercial-metals-company-reports-second-quarter-fiscal-2017-earnings-per-share-of-026-300428231.html

SOURCE Commercial Metals Company

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