Commercial Metals Company today announced financial results for its fiscal fourth quarter and year ended August 31, 2017.  For the three months ended August 31, 2017, the loss from continuing operations was $32.7 million, or $0.28 per diluted share, on net sales of $1.3 billion compared to a loss from continuing operations of $2.1 million, or $0.02 per diluted share, on net sales of $1.1 billion for the three months ended August 31, 2016.  For the fiscal year ended August 31, 2017, earnings from continuing operations were $32.6 million, or $0.27 per diluted share, on net sales of $4.6 billion. This compares to earnings from continuing operations of $57.9 million, or $0.50 per diluted share, on net sales of $4.2 billion for the fiscal year ended August 31, 2016.

Included in the loss from continuing operations for the three months ended August 31, 2017 were net after-tax costs associated with the refinancing activities completed in the fourth quarter of $11.6 million or $0.10 per diluted share, costs associated with the exit of the International Marketing and Distribution segment of $23.2 million or $0.20 per diluted share and severance costs of $5.3 million or $0.05 per diluted share.  Included in the results for the three months ended August 31, 2016 were impairment charges on long-lived assets of $24.3 million or $0.21 per diluted share.

As a result of the sale of CMC Cometals, which was completed on August 31, 2017, the results of this division have been reflected as discontinued operations in all reported periods.  Included in the earnings from discontinued operations for the three months ended August 31, 2017 is an after-tax loss on the sale of the CMC Cometals division of $4.5 million or $0.04 per diluted share.

At August 31, 2017, cash and cash equivalents were $252.6 million and available credit  and accounts receivable facilities were $490.6 million.  As a result of the refinancing of notes due in 2017 and 2018 during the most recent fiscal quarter, the Company has reduced its long-term debt by approximately $240 million since May 31, 2017 and, has no significant debt maturities for the next 5 years.  The Company is also positioned to have reduced cash interest costs going forward in excess of $25 million per year.

Barbara Smith, President and CEO, commented, "The Company took action during fiscal 2017 to reallocate capital to our core manufacturing operations and improve our financial profile.  The refinancing activities have strengthened our balance sheet to provide lower debt service cost and extend our debt maturity profile.  We made good progress regarding our decision to exit the International Marketing and Distribution segment in order to focus our resources on the attractive long product markets in the U.S. and Poland.  The Polish operations are taking full advantage of the new furnace and caster investments to produce more and higher value merchant product, and, in the U.S., we look forward to the commissioning of our new micro mill in Durant, Oklahoma, which is scheduled to begin in our fiscal second quarter of 2018."

On October 24, 2017, the board of directors of CMC declared a quarterly dividend of $0.12 per share of CMC common stock for stockholders of record on November 8, 2017.  The dividend will be paid on November 22, 2017.

Business Segments - Fiscal Fourth Quarter 2017 Review

Our Americas Recycling segment recorded adjusted operating profit of $2.9 million for the fourth quarter of fiscal 2017, compared to adjusted operating loss of $45.1 million for the fourth quarter of fiscal 2016. The fourth quarter of fiscal 2016 loss was largely due to a $38.9 million pre-tax impairment charge related to long-lived assets in our Americas Recycling segment. Shipments increased 37% in comparison to the same period of the prior year as flows through the yards remained strong and as a result of the seven recycling yards that were acquired earlier in fiscal 2017.

Our Americas Mills segment recorded adjusted operating profit of $29.8 million for the fourth quarter of fiscal 2017, compared to an adjusted operating profit of $45.0 million for the fourth quarter of fiscal 2016. Despite strong long-steel demand which resulted in an 8% increase in shipments in comparison to the same period of the prior year, cost pressures squeezed margins during the quarter.

Our Americas Fabrication segment recorded an adjusted operating loss of $4.9 million for the fourth quarter of fiscal 2017, compared to adjusted operating profit of $9.6 million for the fourth quarter of fiscal 2016. The decrease in adjusted operating profit for the fourth quarter of fiscal 2017 was due to a very competitive fabrication market.  This has resulted in newly awarded contracts being at lower selling prices than in the prior year despite also incurring higher steel input costs.

Our International Mill segment recorded adjusted operating profit of $14.6 million for the fourth quarter of fiscal 2017, compared to adjusted operating profit of $18.7 million for the fourth quarter of fiscal 2016.  Despite the quarterly results being lower than the prior year, shipped volumes were 16% higher in comparison to the same period of the prior year while producing strong earnings throughout fiscal 2017.  A strong construction market in conjunction with an expansion of higher margin merchant volumes were the main contributor to the results.

Outlook

"Our outlook is somewhat different when we think about our U.S. operations compared to our Polish operations," explained Ms. Smith.

"Our outlook for demand from the U.S. non-residential construction market remains quite positive, in spite of a lack of movement on infrastructure stimulus.  However, market conditions remain very challenging as a result of raw material price changes and escalating input costs.  Metal margins remain under pressure due to the ongoing influx of dumped and subsidized imports.  We saw a temporary pause in rebar imports after the announcement of the Section 232 review into the effect of imports on national security.  However, recent data indicates another surge in rebar imports is on its way.  We believe that no action taken by the current Administration to address these unfair trade practices is likely to result in imports returning to their previous high levels, negatively impacting the industry's operating results or potentially even imperiling the long-term viability of the U.S. steel industry."

"Poland, however, provides a welcome contrast to the U.S. market.  Poland and the E.U. have implemented trade measures necessary to provide a level playing field.  This, coupled with the fact that there is good support and financial funding for infrastructure development provides a good demand outlook for our Polish operations."

Conference Call

CMC invites you to listen to a live broadcast of its fourth quarter fiscal 2017 conference call today, Thursday, October 26, 2017, at 11:00 a.m. ET.  Barbara Smith, President and CEO, and Mary Lindsey, Senior 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".

Commercial Metals Company and its subsidiaries manufacture, recycle and market steel and metal products, related materials and services through a network including four electric arc furnace ("EAF") mini mills, an EAF micro mill, a rerolling mill, 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 cash generated by strategic initiatives, economic conditions, U.S. construction activity, rebar imports and their effects on pricing and U.S. government action to provide trade relief.  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" 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 security data; ability to hire and retain key executives and other employees; our ability to make necessary capital expenditures; our ability to realize the anticipated benefits of our investment in our new micro mill in Durant, Oklahoma; 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								Fiscal Year Ended								Three Months Ended
(short tons in thousands)		8/31/2017				8/31/2016				8/31/2017				8/31/2016				5/31/2017				2/28/2017				11/30/2016
Americas Recycling
Ferrous tons shipped		583				423				1,999				1,614				590				421				405
Non-ferrous tons shipped		70				52				233				201				61				53				49
Americas Recycling tons shipped		653				475				2,232				1,815				651				474				454
Americas Steel Mills
Rebar shipments		448				411				1,703				1,631				445				406				404
Merchant and other shipments		262				247				1,022				999				277				252				231
Total Americas Steel Mills tons shipped		710				658				2,725				2,630				722				658				635
Average FOB selling price (total sales)		$	537			$	531			$	526			$	524			$	540			$	524			$	499
Average cost ferrous scrap utilized		$	257			$	234			$	243			$	207			$	266			$	245			$	201
Americas Steel Mills metal margin		$	280			$	297			$	283			$	317			$	274			$	279			$	298
International Mill
Tons shipped		396				341				1,379				1,254				354				313				316
Average FOB selling price (total sales)		$	476			$	409			$	432			$	391			$	443			$	402			$	397
Average cost ferrous scrap utilized		$	269			$	211			$	240			$	195			$	253			$	229			$	202
International Mill metal margin		$	207			$	198			$	192			$	196			$	190			$	173			$	195
Americas Fabrication
Rebar shipments		260				284				1,009				1,028				275				226				248
Structural and post shipments		26				30				113				127				35				27				25
Total Americas Fabrication tons shipped		286				314				1,122				1,155				310				253				273
Americas Fabrication average selling price (excluding stock and buyout sales)		$	773			$	805			$	772			$	841			$	775			$	756			$	782

 

 

 

 

COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
		Year Ended August 31,
(in thousands)		2017				2016
Cash flows from (used by) operating activities:
Net earnings		$	46,332			$	54,762
Adjustments to reconcile net earnings to cash flows from (used by) operating activities:
Depreciation and amortization		125,071				126,940
Share-based compensation		30,311				26,335
Loss on debt extinguishment		22,672				11,480
Write-down of inventory		21,529				15,555
Deferred income taxes		(14,184)				(3,889)
Amortization of interest rate swaps termination gain		(11,657)				(7,597)
Asset impairments		8,238				55,793
Net loss (gain) on sales of a subsidiary, assets and other		6,049				(2,591)
Provision for losses on receivables, net		6,049				6,878
Tax expense from stock plans		—				1,697
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(78,527)				142,510
Proceeds (payments) on sale of accounts receivable programs, net		81,731				(19,472)
Inventories		(98,835)				209,555
Accounts payable, accrued expenses and other payables		93,478				(43,577)
Other operating assets and liabilities		(63,785)				12,486
Net cash flows from operating activities		174,472				586,865
Cash flows from (used by) investing activities:
Capital expenditures		(213,120)				(163,332)
Proceeds from the sale of subsidiaries		163,449				4,349
Acquisitions		(56,080)				—
Increase in restricted cash, net		(11,128)				(21,777)
Proceeds from the sale of property, plant and equipment		3,164				5,113
Net cash flows used by investing activities		(113,715)				(175,647)
Cash flows from (used by) financing activities:
Repayments of long-term debt		(711,850)				(211,394)
Proceeds from long-term debt transactions		475,454				—
Cash dividends		(55,514)				(55,342)
Debt extinguishment costs		(22,672)				(11,127)
Stock issued under incentive and purchase plans, net of forfeitures		(5,498)				(6,034)
Debt issuance costs		(4,449)				—
Increase (decrease) in documentary letters of credit, net		22				(41,468)
Contribution from noncontrolling interests		14				29
Treasury stock acquired		—				(30,595)
Short-term borrowings, net change		—				(20,090)
Tax expense from stock plans		—				(1,697)
Decrease in restricted cash		—				1
Net cash flows used by financing activities		(324,493)				(377,717)
Effect of exchange rate changes on cash		(1,213)				(1,280)
Increase (decrease) in cash and cash equivalents		(264,949)				32,221
Cash and cash equivalents at beginning of year		517,544				485,323
Cash and cash equivalents at end of year		$	252,595			$	517,544

 

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 (Loss) from Continuing Operations is a non-GAAP financial measure. Adjusted operating profit (loss) from continuing operations is the sum of our earnings (loss) from continuing operations before interest expense, income taxes (benefit) and discounts on sales of accounts receivable. Adjusted operating profit (loss) from continuing operations should not be considered as an alternative to earnings (loss) from continuing operations or net earnings (loss), as determined by GAAP. Management uses adjusted operating profit (loss) 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 (loss) from continuing operations may be inconsistent with similar measures presented by other companies.

 

Three Months Ended								Fiscal Year Ended								Three  Months Ended
(in thousands)	8/31/2017				8/31/2016				8/31/2017				8/31/2016				5/31/2017				2/28/2017				11/30/2016
Earnings (loss) from continuing operations	$	(32,673)			$	(2,072)			$	32,550			$	57,900			$	34,978			$	25,310			$	4,936
Interest expense	5,939				12,563				44,047				62,121				12,368				12,447				13,292
Income taxes (benefit)	(10,989)				(11,447)				12,454				10,810				12,819				8,524				2,100
Discounts on sales of accounts receivable	206				489				863				1,688				230				200				227
Adjusted operating profit (loss) from continuing operations	$	(37,517)			$	(467)			$	89,914			$	132,519			$	60,395			$	46,481			$	20,555

 

Adjusted EBITDA from Continuing Operations is a non-GAAP financial measure. Adjusted EBITDA from continuing operations is the sum of earnings (loss) from continuing operations before interest expense and income taxes (benefit). It also excludes CMC's largest recurring non-cash charge, depreciation and amortization, as well as impairment charges, which are also non-cash. Adjusted 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 adjusted 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, 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								Fiscal Year Ended								Three Months Ended
(in thousands)	8/31/2017				8/31/2016				8/31/2017				8/31/2016				5/31/2017				2/28/2017				11/30/2016
Earnings (loss) from continuing operations	$	(32,673)			$	(2,072)			$	32,550			$	57,900			$	34,978			$	25,310			$	4,936
Interest expense	5,939				12,563				44,047				62,121				12,368				12,447				13,292
Income taxes (benefit)	(10,989)				(11,447)				12,454				10,810				12,819				8,524				2,100
Depreciation and amortization	32,020				31,512				125,053				126,918				32,256				30,496				30,282
Impairment charges	7,615				39,953				8,164				40,028				70				91				388
Adjusted EBITDA from continuing operations	$	1,912			$	70,509			$	222,268			$	297,777			$	92,491			$	76,868			$	50,998

 

Source:prnewswire.com

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