Financial News

Commercial Metals Company Reports First Quarter Fiscal 2021 Results

IRVING, Texas, Jan. 11, 2021 /PRNewswire/ -- Commercial Metals Company (NYSE: CMC) today announced financial results for its fiscal first quarter ended November 30, 2020.  First quarter earnings from continuing operations were $63.9 million, or $0.53 per diluted share, on net sales of $1.4 billion, compared to prior year period earnings from continuing operations of $82.8 million, or $0.69 per diluted share, on net sales of $1.4 billion.

During the first quarter of fiscal 2021, CMC incurred net after-tax charges of $5.9 million for facility closure expenses and asset impairments primarily related to the decommissioning of the Company's Steel California operations.  The closure of these operations furthers CMC's ongoing network optimization efforts, and is expected to provide cost benefits in future periods.  Excluding these expenses, adjusted earnings from continuing operations for the three months ended November 30, 2020 were $69.8 million, or $0.58 per diluted share, as detailed in the non-GAAP reconciliation that follows, compared to adjusted earnings from continuing operations of $0.73 per diluted share for the three months ended November 30, 2019.

Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, commented, "CMC delivered another quarter of solid performance, marking the seventh consecutive quarter of Core EBITDA near or above the $150 million mark.  Our team achieved these strong results while navigating the unique challenges presented by the COVID-19 pandemic, and also continuing to execute CMC's key strategic growth initiatives, which are already yielding significant benefits."

Ms. Smith continued, "While we faced margin headwinds from rising raw material costs during the first quarter, we were able to offset much of the impact through operational execution that brought our controllable cost levels to multi-year lows.  This performance is a testament to CMC's drive to tightly manage factors within our control and to continue to realize earnings enhancement opportunities from our network optimization efforts."

The Company's liquidity position as of November 30, 2020 remained strong, with cash and cash equivalents of $465.2 million and availability under the Company's credit and accounts receivable facilities of $678.7 million.

On January 7, 2021, 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 21, 2021.  The dividend will be paid on February 4, 2021, and marks 225 consecutive quarterly dividend payments.

Business Segments - Fiscal First Quarter 2021 Review

Our North America segment recorded adjusted EBITDA of $155.6 million for the first quarter of fiscal 2021, compared to adjusted EBITDA of $174.7 million for the prior year quarter.  The reduction reflected lower margins over scrap cost for both steel and downstream products, the impact of which was partially offset by improved controllable costs at each stage of our vertically integrated value chain.  Cost performance at the mills was particularly strong, achieving the lowest conversion cost per ton since before the early fiscal 2019 rebar asset acquisition.

Shipments of finished goods, which include steel and downstream products, were flat compared to the prior year.  Volumes of rebar from the mills increased 2% from a year ago, driven by continued resilience in construction activity.  Shipments of merchant and other products increased 12% compared to the prior year quarter, as our mills strategically focused on this market segment through expanded product offerings and service capabilities.  Downstream product volumes declined year-over-year due to backlog contraction in select geographies, as well as weather related disruptions in the Gulf Coast.

Margins over scrap cost within our vertical chain declined from the first quarter of fiscal 2020, driven primarily by sharply higher scrap costs.  The average selling price for steel products decreased by $14 per ton from a year ago against an increase in the cost of ferrous scrap utilized of $40 per ton.  Downstream products margins also declined on lower average pricing and scrap cost pressure, but remained near historically high levels due to strong price levels in CMC's committed backlog.

Our Europe segment recorded adjusted EBITDA of $14.5 million for the first quarter of fiscal 2021, compared to adjusted EBITDA of $11.4 million for the prior year quarter.  The improvement reflects strong shipment levels and reduced controllable costs.  These factors more than offset an $18 per ton reduction in margin over scrap compared to the prior year period.  Volumes increased 17% year-over-year, with demand growing for each major product category.  Rebar volumes continue to be supported by a resilient Polish construction sector, while shipments of merchant bar and wire rod benefited from an upturn in Central European manufacturing activity.

Outlook

"We expect finished steel volumes for our North America and Europe operations to follow typical seasonal trends in the second quarter, which is historically our slowest quarter for both segments," said Ms. Smith. 

"Shipments of steel and downstream products should be supported by our construction backlog in North America.  We are encouraged by recent trends in residential construction and industrial activity in both North America and Europe, which point toward continuing solid demand for merchant products.  We anticipate margin headwinds will persist in North America during the second quarter in light of recent significant increases in domestic scrap costs.  CMC has acted swiftly to commensurately adjust price levels on rebar and merchant mill products, but these increases have a timing lag relative to the changes in scrap cost levels."

Conference Call

CMC invites you to listen to a live broadcast of its first quarter fiscal 2021 conference call today, Monday, January 11, 2021, 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 fabricate steel and metal products, related materials and services through a network including 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 and organic growth provided by acquisitions and strategic investments, demand for our products, metal margins, the effect of the coronavirus ("COVID-19") and related governmental and economic responses thereto, 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 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 issued. 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 our Annual Report on Form 10-K for the fiscal year ended August 31, 2020 and in Part II, Item 1A, Risk Factors of our subsequent Quarterly Reports on Form 10-Q 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 downstream contracts due to rising commodity pricing; impacts from COVID-19 on the economy, demand for our products and on our operations, including the responses of governmental authorities to contain COVID-19 and the impact from the distribution of various COVID-19 vaccines; 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; 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, such as trade measures, military conflicts and political uncertainties, including the impact of the 2020 U.S. election on current trade regulations, such as Section 232 trade tariffs, tax legislation and other regulations which might adversely impact our business; 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; civil unrest, protests and riots; 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)


11/30/2020


8/31/2020


5/31/2020


2/29/2020


11/30/2019

North America











Net sales


$

1,195,013



$

1,224,849



$

1,167,081



$

1,161,283



$

1,216,720


Adjusted EBITDA


155,634



174,219



159,394



152,831



174,732













External tons shipped (in thousands)











Raw materials


330



300



288



321



320


Rebar


486



498



463



461



475


Merchant and other


264



234



211



238



236


Steel products


750



732



674



699



711


Downstream products


371



429



427



366



413













Average selling price (per ton)











Raw materials


$

630



$

605



$

517



$

595



$

547


Steel products


612



600



624



625



626


Downstream products


934



970



966



984



976













Cost of raw materials per ton


$

458



$

427



$

348



$

435



$

392


Cost of ferrous scrap utilized per ton


266



237



239



256



226













Steel products metal margin per ton


$

346



$

363



$

385



$

369



$

400
























Europe











Net sales


$

194,596



$

179,855



$

173,817



$

180,079



$

165,389


Adjusted EBITDA


14,470



22,927



14,270



13,451



11,359













External tons shipped











Rebar


128



150



122



145



122


Merchant and other


269



230



252



235



216


Steel products


397



380



374



380



338













Average selling price (per ton)











Steel products


$

461



$

446



$

437



$

449



$

461













Cost of ferrous scrap utilized per ton


$

262



$

250



$

239



$

251



$

244













Steel products metal margin per ton


$

199



$

196



$

198



$

198



$

217


 

 

COMMERCIAL METALS COMPANY
BUSINESS SEGMENTS (UNAUDITED)  


(in thousands)


Three Months Ended

Net sales


11/30/2020


8/31/2020


5/31/2020


2/29/2020


11/30/2019

North America


$

1,195,013



$

1,224,849



$

1,167,081



$

1,161,283



$

1,216,720


Europe


194,596



179,855



173,817



180,079



165,389


Corporate and Other


2,194



4,428



785



(399)



2,599


Total Net Sales


$

1,391,803



$

1,409,132



$

1,341,683



$

1,340,963



$

1,384,708













Adjusted EBITDA from continuing operations











North America


$

155,634



$

174,219



$

159,394



$

152,831



$

174,732


Europe


14,470



22,927



14,270



13,451



11,359


Corporate and Other


(26,471)



(64,846)



(26,882)



(28,561)



(26,286)


 


 

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)




Three Months Ended November 30,

(in thousands, except share data)


2020


2019

Net sales


$

1,391,803



$

1,384,708


Costs and expenses:





Cost of goods sold


1,174,819



1,146,514


Selling, general and administrative expenses


113,627



110,999


Interest expense


14,259



16,578


Asset impairments


3,594



530




1,306,299



1,274,621







Earnings from continuing operations before income taxes


85,504



110,087


Income taxes


21,593



27,332


Earnings from continuing operations


63,911



82,755







Earnings from discontinued operations before income taxes


250



895


Income taxes


68



302


Earnings from discontinued operations


182



593







Net earnings


$

64,093



$

83,348







Basic earnings per share*





Earnings from continuing operations


$

0.53



$

0.70


Earnings from discontinued operations




0.01


Net earnings


$

0.54



$

0.70







Diluted earnings per share*





Earnings from continuing operations


$

0.53



$

0.69


Earnings from discontinued operations





Net earnings


$

0.53



$

0.70







Average basic shares outstanding


119,762,706



118,370,191


Average diluted shares outstanding


121,128,044



119,773,538



*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, 2020


August 31, 2020

Assets





Current assets:





Cash and cash equivalents


$

465,162



$

542,103


Accounts receivable (less allowance for doubtful accounts of $8,407 and $9,597)


869,052



880,728


Inventories, net


653,526



625,393


Prepaid and other current assets


181,465



165,879


Total current assets


2,169,205



2,214,103


Property, plant and equipment, net


1,549,385



1,571,067


Goodwill


64,275



64,321


Other noncurrent assets


233,803



232,237


Total assets


$

4,016,668



$

4,081,728


Liabilities and stockholders' equity





Current liabilities:





Accounts payable


$

252,953



$

266,102


Accrued expenses and other payables


339,545



461,012


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


20,701



18,149


Total current liabilities


613,199



745,263


Deferred income taxes


142,686



130,810


Other noncurrent liabilities


260,991



250,706


Long-term debt


1,064,893



1,065,536


Total liabilities


2,081,769



2,192,315


Stockholders' equity


1,934,687



1,889,201


Stockholders' equity attributable to noncontrolling interests


212



212


Total stockholders' equity


1,934,899



1,889,413


Total liabilities and stockholders' equity


$

4,016,668



$

4,081,728


 


 

COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)




Three Months Ended November 30,

(in thousands)


2020


2019

Cash flows from (used by) operating activities:





Net earnings


$

64,093



$

83,348


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





Depreciation and amortization


41,799



40,947


Deferred income taxes and other long-term taxes


11,720



27,939


Stock-based compensation


9,062



8,269


Asset impairments


3,594



530


Amortization of acquired unfavorable contract backlog


(1,523)



(8,331)


Net gain on disposals of subsidiaries, assets and other


(69)



(6,733)


Other


30



645


Changes in operating assets and liabilities


(140,794)



(196)


Net cash flows from (used by) operating activities


(12,088)



146,418







Cash flows from (used by) investing activities:





Capital expenditures


(37,201)



(45,559)


Proceeds from the sale of property, plant and equipment


743



9,651


Proceeds from insurance




784


Net cash flows used by investing activities:


(36,458)



(35,124)







Cash flows from (used by) financing activities:





Repayments of long-term debt


(3,823)



(53,298)


Proceeds from accounts receivable programs


4,487



27,050


Repayments under accounts receivable programs


(4,487)



(31,057)


Dividends


(14,406)



(14,238)


Stock issued under incentive and purchase plans, net of forfeitures


(10,341)



(7,817)


Net cash flows used by financing activities


(28,570)



(79,360)


Effect of exchange rate changes on cash


(365)



196


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


(77,481)



32,130


Cash, restricted cash and cash equivalents at beginning of period


544,964



193,729


Cash, restricted cash and cash equivalents at end of period


$

467,483



$

225,859


 

 

Supplemental information:


Three Months Ended November 30,

(in thousands)


2020


2019

Cash and cash equivalents


$

465,162



$

224,797


Restricted cash


2,321



1,062


Total cash, restricted cash and cash equivalents


$

467,483



$

225,859


 

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 from continuing operations before interest expense and income taxes. It also excludes recurring non-cash charges for depreciation and amortization and asset impairments. Core EBITDA from continuing operations also excludes amortization of acquired unfavorable contract backlog, non-cash equity compensation, certain facility closure costs, labor cost government refunds, acquisition settlement costs and debt extinguishment costs. 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)


11/30/2020


8/31/2020


5/31/2020


2/29/2020


11/30/2019

Earnings from continuing operations


$

63,911



$

67,782



$

64,169



$

63,596



$

82,755


Interest expense


14,259



13,962



15,409



15,888



16,578


Income taxes


21,593



18,495



23,804



22,845



27,332


Depreciation and amortization


41,799



41,654



41,765



41,389



40,941


Asset impairments


3,594



1,098



5,983





530


Amortization of acquired unfavorable contract backlog


(1,523)



(10,691)



(4,348)



(5,997)



(8,331)


Non-cash equity compensation


9,062



9,875



6,170



7,536



8,269


Facility closure


5,214



2,903



1,863





6,339


Labor cost government refund


(1,348)



(2,985)








Acquisition settlement




32,123








Debt extinguishment costs




1,778








Core EBITDA from continuing operations


$

156,561



$

175,994



$

154,815



$

145,257



$

174,413


Adjusted earnings from continuing operations is a non-GAAP financial measure that is equal to earnings from continuing operations before certain facility closure costs, asset impairments, labor cost government refunds, acquisition settlements and debt extinguishment costs, including the estimated income tax effects thereof. 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)


11/30/2020


8/31/2020


5/31/2020


2/29/2020


11/30/2019

Earnings from continuing operations


$

63,911



$

67,782



$

64,169



$

63,596



$

82,755


Facility closure


5,214



2,903



1,863





6,339


Asset impairments


3,594



1,098



5,983






Labor cost government refund


(1,348)



(2,985)








Acquisition settlement




32,123








Debt extinguishment costs




1,778








Total adjustments (pre-tax)


$

7,460



$

34,917



$

7,846



$



$

6,339













Tax impact











Related tax effects on adjustments


$

(1,593)



$

(7,392)



$

(1,648)



$



$

(1,331)


Total tax impact


(1,593)



(7,392)



(1,648)





(1,331)


Adjusted earnings from continuing operations


$

69,778



$

95,307



$

70,367



$

63,596



$

87,763













Adjusted earnings from continuing operations per diluted share


$

0.58



$

0.79



$

0.59



$

0.53



$

0.73


 

Cision View original content:http://www.prnewswire.com/news-releases/commercial-metals-company-reports-first-quarter-fiscal-2021-results-301204823.html

SOURCE Commercial Metals Company

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