Commercial Metals Company Reports Fourth Quarter Results And Full Year Earnings Per Share Of $1.20, Or $141.6 Million

IRVING, Texas, Oct. 28, 2015 /PRNewswire/ -- Commercial Metals Company (NYSE: CMC) today announced financial results for its fiscal fourth quarter and year ended August 31, 2015. For the year ended August 31, 2015, net earnings attributable to CMC were $141.6 million, or $1.20 per diluted share, on net sales of $6.0 billion. This compares to net earnings attributable to CMC of $115.6 million, or $0.97 per diluted share, on net sales of $6.8 billion for the year ended August 31, 2014. Net loss attributable to CMC for the three months ended August 31, 2015 was $5.8 million, or $0.05 per share, on net sales of $1.4 billion. This compares to net earnings attributable to CMC of $34.9 million, or $0.29 per diluted share, on net sales of $1.8 billion for the three months ended August 31, 2014.

Results for the fourth quarter of fiscal 2015 included after-tax LIFO expense from continuing operations of $23.7 million ($0.20 per share), compared to after-tax LIFO income from continuing operations of $1.0 million ($0.01 per diluted share) for the fourth quarter of fiscal 2014. Additionally, our results from continuing operations for the fiscal fourth quarter included after-tax charges related to goodwill impairment for our Americas Recycling segment of $4.7 million ($0.04 per share), costs associated with exiting our distribution operation in Cardiff, Wales, UK of $2.9 million ($0.03 per share), and other charges including inventory write-downs, severance cost and long-lived asset impairments totaling $4.0 million ($0.03 per share). The sum of these items negatively impacted our earnings from continuing operations for the fourth quarter of our fiscal year by a total of $0.30 per share. Adjusted operating profit from continuing operations was $12.3 million for the fourth quarter of fiscal 2015, compared to adjusted operating profit from continuing operations of $68.8 million for the fourth quarter of fiscal 2014. Adjusted EBITDA from continuing operations was $54.6 million for the fourth quarter of fiscal 2015, compared to adjusted EBITDA from continuing operations of $104.4 million for the fourth quarter of fiscal 2014.

Joe Alvarado, Chairman of the Board, President and CEO, commented, "For our fiscal year ended August 31, 2015, we achieved adjusted EBITDA from continuing operations of $464.6 million, our best since fiscal 2008. In August, construction spending continued to rise for the eighth consecutive month, led by an increase in non-residential construction spending year over year. During the fourth quarter of fiscal 2015, we completed the sale of a majority of our Australian distribution business. Six of the locations were sold, three were shut down, while one remains held for sale. For fiscal 2015, net cash flows from operating activities were $313.5 million."

On October 28, 2015, 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 11, 2015.  The dividend will be paid on November 25, 2015.

Business Segments - Fiscal Fourth Quarter 2015 Review

Our Americas Recycling segment recorded an adjusted operating loss of $15.4 million for the fourth quarter of fiscal 2015, compared to an adjusted operating loss of $2.1 million for the fourth quarter of fiscal 2014. During the fourth quarter of fiscal 2015, ferrous and nonferrous shipments decreased 22% and 14%, respectively, while the average ferrous metal margin was flat, and the average nonferrous metal margin contracted 20%, compared to the fourth quarter of the prior fiscal year. Furthermore, this segment recorded goodwill impairment charges of $7.3 million as a result of the Company's annual goodwill impairment analysis in the fourth quarter of fiscal 2015. Additionally, for the fourth quarter of fiscal 2015, this segment recorded pre-tax LIFO expense of $1.5 million, compared to pre-tax LIFO income of $0.3 million for the fourth quarter of the prior fiscal year.

Our Americas Mills segment recorded an adjusted operating profit of $46.2 million for the fourth quarter of fiscal 2015, compared to an adjusted operating profit of $63.8 million for the fourth quarter of fiscal 2014. The decrease in adjusted operating profit for the fourth quarter of fiscal 2015 was due to a 6% decrease in total shipments, which outpaced a 2% increase in average metal margin compared to the fourth quarter of fiscal 2014. The decrease in total shipments was driven by a 38 thousand short ton decrease in billet shipments and a nine thousand short ton decrease in shipments of our higher margin finished products, including reinforcement bar ("rebar") and merchants, compared to the fourth quarter of fiscal 2014. Additionally, for the fourth quarter of fiscal 2015, this segment recorded pre-tax LIFO expense of $13.9 million, compared to pre-tax LIFO expense of $6.1 million for the fourth quarter of the prior fiscal year.

Our Americas Fabrication segment recorded an adjusted operating profit of $7.5 million for the fourth quarter of fiscal 2015, compared to an adjusted operating profit of $8.1 million for the fourth quarter of fiscal 2014. For the fourth quarter of fiscal 2015, total shipments increased 1%, and the average composite metal margin expanded 23%, compared to the fourth quarter of fiscal 2014. Offsetting these improvements, for the fourth quarter of fiscal 2015, this segment recorded pre-tax LIFO expense of $11.0 million, compared to pre-tax LIFO income of $3.8 million for the fourth quarter of fiscal 2014.

Our International Mill segment recorded an adjusted operating profit of $6.4 million for the fourth quarter of fiscal 2015, compared to an adjusted operating profit of $5.0 million in the prior year's fourth quarter. For the fourth quarter of fiscal 2015, the average selling price decreased $137 per short ton, while the average cost of ferrous scrap consumed decreased $85 per short ton, resulting in a 21% squeeze in average metal margin, compared to the fourth quarter of fiscal 2014. Additionally, during the fourth quarter of fiscal 2015, total shipments decreased 1% compared to the fourth quarter of the prior fiscal year. However, the decreases in average metal margin and total shipments were more than offset by an $8.3 million decline in utilities and repairs and maintenance expenses partially due to efficiencies gained from the commissioning of a new, state-of-the-art electric arc furnace in the third quarter of fiscal 2014. For the fourth quarter of fiscal 2015, adjusted operating profit reflected an unfavorable foreign currency impact of approximately $2.2 million.

Our International Marketing and Distribution segment recorded an adjusted operating loss of $13.7 million for the fourth quarter of fiscal 2015, compared to an adjusted operating profit of $15.5 million in the prior year's fourth quarter. The $29.2 million decline in adjusted operating profit in the fourth quarter of fiscal 2015 was the result of an 18% decrease in volumes coupled with a 31% decrease in average margin, compared to the fourth quarter of fiscal 2014. This segment's results continued to be pressured by the strong U.S. dollar, global steel overcapacity and weak oil and gas tubular demand. In addition, during the fourth quarter of fiscal 2015, we made the decision for an orderly exit of our steel distribution operation in Cardiff, Wales, UK, and this segment recorded an expense of approximately $4.5 million associated with this action. Furthermore, for the fourth quarter of fiscal 2015, this segment recorded pre-tax LIFO expense of $10.1 million, compared to pre-tax LIFO income of $3.5 million for the fourth quarter of the prior fiscal year.

Fiscal 2015 Full Year Review

Earnings from continuing operations for fiscal 2015 were $161.3 million, or $1.37 per diluted share. For the year ended August 31, 2015, net cash flow from operating activities was $313.5 million, and adjusted EBITDA from continuing operations was $464.6 million.  On a continuing operations basis, for fiscal 2015, we recorded after-tax LIFO income of $51.5 million ($0.44 per diluted share), compared to after-tax LIFO expense of $8.8 million ($0.07 per diluted share) in fiscal 2014. As of August 31, 2015, cash and short-term investments totaled $485.3 million, an increase of 12% from the end of our 2014 fiscal year.

Pursuant to our share repurchase program that was approved in October 2014, during fiscal 2015, we purchased approximately 2.9 million shares of our common stock for $41.8 million.

Loss from discontinued operations for fiscal year 2015 was $19.7 million, which primarily consisted of operating losses related to our Australian steel distribution business.                                      

Outlook

Mr. Alvarado concluded, "Non-residential construction spending, which is our primary end use market in the U.S., was up 24% year over year in August. However, we believe our operations will continue to face pressure from historically high steel import activity into the U.S. and Poland, a strong U.S. dollar and continued weakness in the scrap markets. We believe the increased import activity is a result of unfair trading practices by certain foreign producers. While recent legislation passed by the U.S. government has improved the trading landscape, further legislation is necessary to bring global steel trading to a more level playing field. Additionally, we believe that China's inability to consume all of their production will continue to cause a negative effect around the world. In light of these market difficulties, we remain committed to managing the items within our control, namely reducing selling, general and administrative expenses, improving working capital, cost savings through supply chain optimization and prudent allocation of capital.

Our first quarter of the fiscal year historically has been a seasonally slower period as the construction season winds down before the onset of the winter months. We believe that our Americas Mills operations remain strong, and the backlog in our Americas Fabrication business is good."

Conference Call

CMC invites you to listen to a live broadcast of its fourth quarter fiscal 2015 conference call today, Wednesday, October 28, 2015, at 11:00 a.m. ET.  Joe Alvarado, Chairman of the Board, President and CEO, and Barbara Smith, 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 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 economic conditions and CMC's operating plans and segment results.  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 events, new information or otherwise.

Factors that could cause actual results to differ materially from CMC's expectations include the following: overall global economic conditions, including recovery from the recent 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; excess capacity in our industry, particularly in China, and product availability from competing steel minimills 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 and military uncertainties; availability of electricity and natural gas for minimill operations; information technology interruptions and breaches in security data; ability to retain key executives; 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
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
(dollars in thousands)

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 is a non-GAAP financial measure. Management uses adjusted operating profit to evaluate the financial performance of CMC. Adjusted operating profit is the sum of adjusted operating profit from continuing operations and adjusted operating profit (loss) from discontinued operations. Adjusted operating profit from continuing operations is the sum of our earnings (loss) from continuing operations before income taxes (benefit), interest expense and discounts on sales of accounts receivable. Adjusted operating profit (loss) from discontinued operations is the sum of our earnings (loss) from discontinued operations before income taxes (benefit), interest expense and discounts on sales of accounts receivable. For added flexibility, we may sell certain accounts receivable both in the U.S. and internationally. We consider sales of receivables 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 may be inconsistent with similar measures presented by other companies.

Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is the sum of adjusted EBITDA from continuing operations and adjusted EBITDA from discontinued operations. Adjusted EBITDA from continuing operations is the sum of our earnings (loss) from continuing operations before net earnings attributable to noncontrolling interests, 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 discontinued operations is the sum of our earnings (loss) from discontinued operations before net earnings attributable to noncontrolling interests, interest expense and income taxes (benefit). It also excludes the largest recurring non-cash charge from discontinued operations, depreciation and amortization, as well as impairment charges from discontinued operations, which are also non-cash. Adjusted EBITDA should not be considered as an alternative to 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 provides relevant and useful information, which is often used by analysts, creditors and other interested parties in our industry. Adjusted EBITDA to interest expense is a covenant test in certain of CMC's debt agreements. Adjusted EBITDA is also the target benchmark for our annual and long-term cash incentive performance plans for management. Adjusted EBITDA may be inconsistent with similar measures presented by other companies.

Adjusted EBITDA to interest coverage:

Total Capitalization:

Total capitalization is a non-GAAP financial measure and is the sum of stockholders' equity attributable to CMC, long-term debt and deferred income taxes. The ratio of debt to total capitalization is a measure of current debt leverage. The following reconciles total capitalization to the most comparable GAAP measure, stockholders' equity attributable to CMC:

OTHER FINANCIAL INFORMATION
Long-term debt to total capitalization ratio as of August 31, 2015:

Total debt to total capitalization plus short-term debt plus notes payable ratio as of August 31, 2015:

Current ratio as of August 31, 2015:
Current assets divided by current liabilities

SOURCE Commercial Metals Company

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