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Commercial Metals Company Reports Third Quarter Fiscal 2017 Earnings Per Share Of $0.34

IRVING, Texas, June 22, 2017 /PRNewswire/ -- Commercial Metals Company (NYSE: CMC) today announced financial results for its third quarter ended May 31, 2017. Net earnings for the third quarter of fiscal 2017 were $39.3 million ($0.34 per diluted share) on net sales of $1.4 billion. This compares to net earnings of $19.3 million ($0.17 per diluted share) on net sales of $1.2 billion for the third quarter of fiscal 2016.  Results for the third quarter of fiscal 2016 included a non-cash impairment charge on businesses held for sale in discontinued operations of $15.8 million ($0.13 per diluted share). Earnings from continuing operations were $39.6 million for the third quarter of fiscal 2017, compared to $35.1 million for the same period of the prior year.

Adjusted operating profit from continuing operations was $64.8 million for the third quarter of fiscal 2017, compared with adjusted operating profit from continuing operations of $60.9 million for the third quarter of fiscal 2016. Adjusted EBITDA from continuing operations was $96.9 million for the third quarter of fiscal 2017, compared with adjusted EBITDA from continuing operations of $92.5 million for the third quarter of fiscal 2016.

The Company's liquidity position at May 31, 2017 remained strong with cash and cash equivalents of $275.8 million and availability under the Company's credit and accounts receivables sales facilities of approximately $618.7 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, "Continued strength across our markets,  particularly in construction activity in both the United States and Poland, contributed to very strong volumes shipped this quarter and our best quarterly adjusted EBITDA from continuing operations over the past couple of years.  Additionally, our tireless focus on what we control, including minimizing our costs and providing market leading customer service helped offset some of the significant metal margin compression we faced and allowed us to deliver these solid financial results. "

On June 21, 2017, the board of directors of CMC declared a quarterly dividend of $0.12 per share for shareholders of record on July 6, 2017.  The dividend will be paid on July 20, 2017.

Business Segments-Fiscal Third Quarter 2017 Review
Our Americas Recycling segment recorded adjusted operating profit of $9.3 million for the third quarter of fiscal 2017 compared to an adjusted operating loss of $2.0 million for the third 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 shipments, improved metal margins, realized efficiency improvements lowering conversion costs and the addition of seven recycling facilities acquired at the beginning of the quarter in the southeastern U.S. 

Our Americas Mills segment recorded adjusted operating profit of $50.7 million for the third quarter of fiscal 2017 compared to adjusted operating profit of $55.0 million for the corresponding period in fiscal 2016. Shipment volumes in this segment were strong.  However, margins have been under significant pressure in 2017 due to continued elevated import levels.  Strong shipments and a solid cost performance helped to mitigate the metal margin squeeze during the third fiscal quarter of 2017.

Our Americas Fabrication segment recorded adjusted operating profit of $1.8 million for the third quarter of fiscal 2017 compared to adjusted operating profit of $22.8 million for the third quarter of fiscal 2016.  This result continues the trend realized over the past few quarters of competitive pressures keeping awarded contract prices low. While the results for the segment on a standalone basis are low, it contributes significantly to the Company's overall results through our high level of vertically integrated operations and the associated rebar demand drawn from our Americas Mills segment.

Our International Mill segment in Poland recorded adjusted operating profit of $13.0 million for the third quarter of fiscal 2017 compared to adjusted operating profit of $5.5 million for the corresponding period in fiscal 2016.  Increased pricing, supported by continued strength in construction activity and an enhanced product mix of more merchant products leveraging the recently completed capital improvements of our facilities, has resulted in improved margins in this segment during fiscal 2017.

Our International Marketing and Distribution segment recorded adjusted operating profit of $10.2 million for the third quarter of fiscal 2017 compared to an adjusted operating profit of $0.9 million for the same period in the prior fiscal year. The increase in adjusted operating profit was the result of improved margins in our U.S. steel trading business and the elimination of losses from our U.K. operations, which have been wound down.   On June 13, 2017, the Company announced its plan to exit the International Marketing and Distribution segment and it had signed a definitive agreement to sell the CMC Cometals Division.

Year to Date Results
Net earnings for the nine months ended May 31, 2017 were $75.9 million ($0.65 per diluted share) on net sales of $3.6 billion, compared with net earnings of $54.9 million ($0.47 per diluted share) on net sales of $3.4 billion for the nine months ended May 31, 2016. For the nine months ended May 31, 2017, earnings from continuing operations were $76.4 million, compared with $71.6 million for the same period of the prior year.  For the nine months ended May 31, 2017, adjusted operating profit from continuing operations was $140.5 million, compared with $147.0 million for the nine months ended May 31, 2016. Adjusted EBITDA from continuing operations was $233.4 million for the nine months ended May 31, 2017, compared with $241.3 million for the nine months ended May 31, 2016.

Outlook
"We anticipate stability in the key macro economic drivers that impact our business for the remainder of our fiscal 2017, including continued strong demand in both the US and Polish markets and also historically low steel margins in the U.S.," said Barbara Smith, President and Chief Operating Officer.  "We continue to be optimistic that the ongoing trade actions taken in both the U.S. and Poland, once finalized, will provide some relief from the flood of unfairly priced rebar imports that have impacted our markets."

Conference Call
CMC invites you to listen to a live broadcast of its third quarter of fiscal 2017 conference call today, Thursday, June 22, 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 key macro economic drivers that impact its business including demand, steel margins and effects of the ongoing trade actions in the U.S. and Poland.  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' abilities 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 May 31,


Nine Months Ended May 31,


Three Months Ended

(short tons in thousands)


2017


2016


2017


2016


2/28/2017


11/30/2016


8/31/2016

Americas Recycling















    Ferrous tons shipped


590



423



1,416



1,191



421



405



423


    Nonferrous tons shipped


61



49



163



149



53



49



52


Americas Recycling tons shipped


651



472



1,579



1,340



474



454



475

















Americas Steel Mills















    Rebar shipments


445



462



1,255



1,220



406



404



411


    Merchant and other shipments


277



262



760



752



252



231



247


Americas Steel Mills tons shipped


722



724



2,015



1,972



658



635



658

















    Average selling price (total sales)


$

540



$

501



$

522



$

522



$

524



$

499



$

531


    Average cost ferrous scrap utilized


266



213



239



197



245



201



234


Americas Steel Mills metal margin


$

274



$

288



$

283



$

325



$

279



$

298



$

297

















International Mill















    Tons shipped


354



353



983



913



313



316



341

















    Average selling price (total sales)


$

443



$

378



$

415



$

382



$

402



$

397



$

409


    Average cost ferrous scrap utilized


253



187



229



190



229



202



211


International Mill metal margin


$

190



$

191



$

186



$

192



$

173



$

195



$

198

















Americas Fabrication















    Rebar shipments


275



270



749



744



226



248



284


    Structural and post shipments


35



40



87



97



27



25



30


Americas Fabrication tons shipped


310



310



836



841



253



273



314

















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


$

775



$

827



$

772



$

855



$

756



$

782



$

805


 


COMMERCIAL METALS COMPANY

BUSINESS SEGMENTS (UNAUDITED)

(in thousands)


Three Months Ended May 31,


Nine Months Ended May 31,


Three Months Ended

Net sales


2017


2016


2017


2016


2/28/2017


11/30/2016


8/31/2016

Americas Recycling


$

294,166



$

182,477



$

694,202



$

510,030



$

223,328



$

176,708



$

195,724


Americas Mills


427,276



396,481



1,151,034



1,117,442



376,593



347,165



381,406


Americas Fabrication


379,976



385,080



1,022,202



1,103,538



303,826



338,400



385,917


International Mill


167,629



141,438



436,335



369,344



134,305



134,401



147,842


International Marketing and Distribution


347,113



319,604



897,568



879,517



302,295



248,160



310,079


Corporate


1,909



4,585



7,501



4,109



3,842



1,750



2,973


Eliminations


(235,453)



(202,275)



(601,542)



(582,034)



(194,568)



(171,521)



(215,361)


Total net sales


$

1,382,616



$

1,227,390



$

3,607,300



$

3,401,946



$

1,149,621



$

1,075,063



$

1,208,580

















Adjusted operating profit (loss) from continuing operations















Americas Recycling


$

9,286



$

(1,978)



$

11,954



$

(16,171)



$

7,766



$

(5,098)



$

(45,113)


Americas Mills


50,734



54,976



139,002



164,739



51,319



36,949



45,012


Americas Fabrication


1,808



22,794



9,025



58,964



506



6,711



9,638


International Mill


12,953



5,467



32,356



10,189



9,430



9,973



18,703


International Marketing and Distribution


10,164



892



15,341



(3,570)



6,143



(966)



(3,517)


Corporate


(20,880)



(22,542)



(67,210)



(69,415)



(22,317)



(24,013)



(25,670)


Eliminations


783



1,331



3



2,233



(576)



(204)



3,086


Adjusted operating profit from continuing operations


$

64,848



$

60,940



$

140,471



$

146,969



$

52,271



$

23,352



$

2,139



 

 

COMMERCIAL METALS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)



Three Months Ended May 31,


Nine Months Ended May 31,

(in thousands, except share data)


2017


2016


2017


2016

Net sales


$

1,382,616



$

1,227,390



$

3,607,300



$

3,401,946


Costs and expenses:









Cost of goods sold


1,209,195



1,051,910



3,142,697



2,934,028


Selling, general and administrative expenses


108,803



114,841



324,789



310,667


Interest expense


12,368



14,737



38,108



49,666


Loss on debt extinguishment




115





11,480




1,330,366



1,181,603



3,505,594



3,305,841











Earnings from continuing operations before income taxes


52,250



45,787



101,706



96,105


Income taxes


12,641



10,676



25,284



24,512


Earnings from continuing operations


39,609



35,111



76,422



71,593











Loss from discontinued operations before income taxes (benefit)


(351)



(15,785)



(542)



(16,803)


Income taxes (benefit)


(8)



(2)



7



(103)


Loss from discontinued operations


(343)



(15,783)



(549)



(16,700)











Net earnings


39,266



19,328



75,873



54,893


Less net earnings attributable to noncontrolling interests









Net earnings attributable to CMC


39,266



19,328



75,873



54,893











Basic earnings (loss) per share attributable to CMC:









Earnings from continuing operations


$

0.34



$

0.31



$

0.66



$

0.62


Loss from discontinued operations




(0.14)





(0.14)


Net earnings


$

0.34



$

0.17



$

0.66



$

0.48











Diluted earnings (loss) per share attributable to CMC:









Earnings from continuing operations


$

0.34



$

0.30



$

0.65



$

0.61


Loss from discontinued operations




(0.13)





(0.14)


Net earnings


$

0.34



$

0.17



$

0.65



$

0.47











Cash dividends per share


$

0.12



$

0.12



$

0.36



$

0.36


Average basic shares outstanding


115,886,372



114,677,109



115,574,289



115,373,736


Average diluted shares outstanding


117,205,369



115,995,515



117,087,341



116,758,716


 


COMMERCIAL METALS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)


May 31,
 2017


August 31,
 2016

Assets





Current assets:





Cash and cash equivalents


$

275,778



$

517,544


Accounts receivable, net


869,970



765,784


Inventories, net


798,013



652,754


Other current assets


108,248



112,043


Total current assets


2,052,009



2,048,125


Net property, plant and equipment


1,016,875



895,049


Goodwill


66,764



66,373


Other assets


138,951



121,322


Total assets


$

3,274,599



$

3,130,869


Liabilities and stockholders' equity





Current liabilities:





Accounts payable-trade


$

345,974



$

243,532


Accounts payable-documentary letters of credit


566



5


Accrued expenses and other payables


258,288



264,112


Current maturities of long-term debt


311,654



313,469


Total current liabilities


916,482



821,118


Deferred income taxes


61,492



63,021


Other long-term liabilities


126,864



121,351


Long-term debt


751,676



757,948


Total liabilities


1,856,514



1,763,438


Stockholders' equity attributable to CMC


1,417,912



1,367,272


Stockholders' equity attributable to noncontrolling interests


173



159


Total equity


1,418,085



1,367,431


Total liabilities and stockholders' equity


$

3,274,599



$

3,130,869


 


COMMERCIAL METALS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



Nine Months Ended May 31,

(in thousands)


2017


2016

Cash flows from (used by) operating activities:





Net earnings


$

75,873



$

54,893


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





Depreciation and amortization


93,049



95,423


Stock-based compensation


19,716



19,889


Deferred income taxes


(2,538)



9,744


Amortization of interest rate swaps termination gain


(5,698)



(5,698)


Write-down of inventories


1,820



9,567


Provision for losses on receivables, net


856



3,748


Asset impairment


622



15,842


Net gain on disposals of assets and other


(343)



(1,802)


Loss on debt extinguishment




11,480


Tax benefit from stock plans




(666)


Changes in operating assets and liabilities:





Accounts receivable


(86,668)



146,166


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


(4,327)



1,473


Inventories


(134,720)



205,717


Accounts payable, accrued expenses and other payables


83,355



(64,676)


Changes in other operating assets and liabilities


(22,083)



5,768


Net cash flows from operating activities


18,914



506,868


Cash flows from (used by) investing activities:





Capital expenditures


(162,082)



(104,481)


Acquisitions


(54,425)




Decrease (increase) in restricted cash, net


7,492



(49,094)


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


1,884



3,470


Net cash flows used by investing activities


(207,131)



(150,105)


Cash flows from (used by) financing activities:





Cash dividends


(41,619)



(41,586)


Repayments on long-term debt


(8,775)



(208,605)


Stock issued under incentive and purchase plans, net of forfeitures


(5,516)



(6,036)


Proceeds from New Markets Tax Credit transactions


2,141




Contribution from noncontrolling interests


14



29


Increase (decrease) in documentary letters of credit, net


569



(40,145)


Short-term borrowings, net change




(20,090)


Treasury stock acquired




(30,595)


Debt extinguishment costs




(11,127)


Tax benefit from stock plans




666


Decrease in restricted cash




1


Net cash flows used by financing activities


(53,186)



(357,488)


Effect of exchange rate changes on cash


(363)



(743)


Decrease in cash and cash equivalents


(241,766)



(1,468)


Cash and cash equivalents at beginning of year


517,544



485,323


Cash and cash equivalents at end of period


$

275,778



$

483,855



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 our financial performance. 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 our operating performance. Adjusted operating profit from continuing operations may be inconsistent with similar measures presented by other companies.



Three Months Ended May 31,


Nine Months Ended May 31,


Three Months Ended

(in thousands)


2017


2016


2017


2016


2/28/2017


11/30/2016


8/31/2016

Earnings from continuing operations


$

39,609



$

35,111



$

76,422



$

71,593



$

29,639



$

7,174



$

950


Income taxes


12,641



10,676



25,284



24,512



9,990



2,653



(11,865)


Interest expense


12,368



14,737



38,108



49,666



12,442



13,298



12,565


Discounts on sales of accounts receivable


230



416



657



1,198



200



227



489


Adjusted operating profit from continuing operations


$

64,848



$

60,940



$

140,471



$

146,969



$

52,271



$

23,352



$

2,139


 

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 our largest recurring non-cash charge, depreciation and amortization, as well as long-lived asset and goodwill impairment charges, which are also non-cash. Adjusted EBITDA from continuing operations should not be considered as 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 our competitors; (ii) a supplemental measure of our ongoing core performance; and (iii) the assessment of 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.

There were no net earnings attributable to noncontrolling interests during the three and nine months ended May 31, 2017 and 2016.



Three Months Ended May 31,


Nine Months Ended May 31,


Three Months Ended

(in thousands)


2017


2016


2017


2016


2/28/2017


11/30/2016


8/31/2016

Earnings from continuing operations


$

39,609



$

35,111



$

76,422



$

71,593



$

29,639



$

7,174



$

950


Interest expense


12,368



14,737



38,108



49,666



12,442



13,298



12,565


Income taxes


12,641



10,676



25,284



24,512



9,990



2,653



(11,865)


Depreciation and amortization


32,259



31,883



93,044



95,424



30,499



30,286



31,516


Impairment charges


70



76



549



76



91



388



39,952


Adjusted EBITDA from continuing operations


$

96,947



$

92,483



$

233,407



$

241,271



$

82,661



$

53,799



$

73,118


 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/commercial-metals-company-reports-third-quarter-fiscal-2017-earnings-per-share-of-034-300478000.html

SOURCE Commercial Metals Company

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