Commercial Metals Company Reports Fourth Quarter and Full-Year Results

IRVING, Texas, Oct. 28, 2011 /PRNewswire/ -- Commercial Metals Company (NYSE: CMC) today reported a net loss of $120.3 million or $1.04 per diluted share on net sales of $2.3 billion for the fourth quarter ended August 31, 2011.  This compares with net earnings of $8.0 million or $0.07 per diluted share on net sales of $1.8 billion for the same period in 2010.  In the fourth quarter of 2011, CMC recorded pre-tax restructuring charges, including impairments, of approximately $144 million related to the Company's decision to exit its Sisak mill in Croatia and to close five rebar fabrication locations, including four domestic and one international location, as well as eight construction services (CRP) locations.  Excluding these restructuring charges, adjusted profit before tax for the fourth quarter of 2011 was $31.3 million, a loss before tax of $112.3 million including restructuring charges, compared with adjusted profit before tax of $11.5 million for the last year's fourth quarter.  The fourth quarter of 2011 also included after-tax LIFO expense of $6.3 million or $0.05 per diluted share compared with income of $23.4 million or $0.20 per diluted share in last year's fourth quarter.    

Net loss for the year ended August 31, 2011 was $129.6 million or $1.13 per diluted share on net sales of $7.9 billion.  For the full-year 2010, the Company had a net loss of $205.3 million or $1.81 per diluted share on net sales of $6.3 billion.  Excluding the aforementioned restructuring charges, adjusted profit before tax was $30.5 million for 2011, a loss before taxes of $113.1 million including restructuring charges.  For the year ended August 31, 2011, after-tax LIFO expense was $50.0 million or $0.44 per diluted share compared with LIFO income of $7.4 million or $0.07 per diluted share for the same period last year.  

Cash and short-term investments totaled $222 million as of August 31, 2011.  There were no outstanding borrowings against the $400 million revolving credit facility.  Coverage ratio tests on the Company's unused revolver and public debt were met.  The board declared a quarterly dividend of $0.12 per share on October 7, for shareholders of record on October 18, 2011.

Joe Alvarado, President and Chief Executive Officer, said, "We achieved another profitable quarter, excluding special restructuring charges for the exit of our Croatian operation and other initiatives.  These results were driven in part by relatively stable prices and demand, which contributed to greater overall predictability in our operations. Although the environment in the metals industry remains challenging, we continue to take important steps to focus on our core business, strengthen our competitive position and serve our customers in a more effective manner, all of which will help improve performance and position the Company for the future."

The approximately $144 million of restructuring charges recorded in the fourth quarter of 2011 included: asset impairment charges of $120 million, inventory charges of $9 million, severance charges of $5 million and other closure costs of $10 million.

The Americas Recycling, Americas Mills and International Marketing and Distribution segments as well as the Company's Polish mill (CMCZ), within our International Mills segment, were profitable for the fourth quarter of 2011.  The 2011 fourth quarter sales and adjusted operating profit for these operations were greater than in the fourth quarter of 2010, with the exception of CMCZ which had a minimal decline in adjusted operating profit.  Americas Recycling had an adjusted operating profit of $10.8 million, an increase of $5.6 million, due to higher average selling prices and tons for both ferrous and nonferrous shipments.  Americas Mills increased adjusted operating profit $5.0 million to $45.6 million driven by improved volumes as the Company's shipments were the highest of any quarter since the fourth quarter of 2008, driven by seasonal pickups and continued strength in certain regional markets.  CMCZ held steady with an adjusted operating profit of $14.6 million, its sixth consecutive quarterly adjusted operating profit.  CMCZ benefited from a continued strong Polish economy and improvements in product mix from the Company's new flexible rolling mill.  On a year over year comparison, the Americas Recycling segment's 2011 adjusted operating profit increased by $31.6 million, compared to the full year 2010.  The Americas Mills segment's 2011 adjusted operating profit increased $124.5 million compared to 2010, and CMCZ's 2011 adjusted operating profit increased $79.2 million over 2010.

The International Marketing and Distribution segment remained profitable in the fourth quarter, as it has for each of the last nine quarters.  The segment achieved adjusted operating profit of $22.7 million compared to $12.5 million in fourth quarter 2010. Each of its major geographic marketing operations were profitable this quarter, led by the raw materials marketing operations.  Additionally, the Company's domestic steel import business continued to improve with another solid quarter.  Overall, the Company's Australian operations were profitable but its Australian distribution operation was impacted by weakness in Australia's economy. During the fourth quarter of 2011, CMC completed the purchase of G.A.M. Steel Pty. Ltd. ("G.A.M."), based in Melbourne, Australia.  G.A.M. is a leading distributor and processor of steel long products and plate, servicing the structural fabrication, rural and manufacturing segments in the state of Victoria, Australia. The acquisition of G.A.M. will complement CMC's existing national long products distribution investments in Australia.

The Americas Fabrication segment continues to be affected by an overall difficult market for fabricated steel.  The segment reported an adjusted operating loss of $42.8 million, including the previously discussed restructuring charges of $21.7 million.  Tonnages and selling prices increased, but an $8.3 million unfavorable swing in LIFO expense made it difficult to improve on the fourth quarter 2010 adjusted operating loss of $17.1 million.

CMCS had an adjusted operating loss of $115.1 million, including the previously discussed restructuring charges of $110.6.  The Company will be incurring severance and closure costs in 2012 but has forecast that the liquidation of working capital and the cash tax savings will minimize the cash flow impact of these restructuring costs.  

Outlook

Alvarado concluded, "Our backlog remains at levels comparable to last quarter and we're pleased to see pricing in the backlog continuing to improve.  In the first quarter of 2012, we expect a slowdown in operations, typical with this time of year as we begin to enter the winter months at such businesses as CMCZ.  As a result of this seasonally weaker first quarter and the costs associated with our exit from the Croatian steel pipe business, we expect to incur a loss before tax from operations; however, expected tax benefits related to CMCS will give us after tax profitability in the first quarter of 2012.  Importantly, we remain encouraged as we continue to make progress in reducing our cost structure, improving operations and enhancing cash flows."

Conference Call

CMC invites you to listen to a live broadcast of its fourth quarter 2011 conference call today, Friday, October 28, 2011, at 11:00 a.m. ET.  The call will be hosted by Joe Alvarado, President and CEO, and Barbara Smith, Senior Vice President and CFO, and can be accessed via our website at www.cmc.com or at www.streetevents.com.  In the event you are unable to listen to the live broadcast, the call will be archived and available for replay on the webcast on the next business day.  Financial and statistical information presented in the broadcast can be found on CMC's website under "Investor Relations."

Commercial Metals Company and 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, a copper tube mill, 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 the outlook for the Company's financial results including net earnings (loss), economic conditions, credit availability, product pricing and demand, currency valuation, production rates, energy expense, interest rates, inventory levels, acquisitions, construction and operation of new facilities and general market conditions. These forward-looking statements can generally be identified by phrases such as we, the company or its 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. Variances will occur and some could be materially different from our current expectations.

Developments that could impact the Company's expectations include the following: absence of global economic recovery or possible recession relapse; solvency of financial institutions and their ability or willingness to lend; success or failure of governmental efforts to stimulate the economy, including restoring credit availability and confidence in a recovery; continued sovereign debt problems in Greece and other countries within the euro zone and other foreign zones; customer non-compliance with contracts; construction activity; decisions by governments affecting the level of steel imports, including tariffs and duties; litigation claims and settlements; difficulties or delays in the execution of construction contracts resulting in cost overruns or contract disputes; unsuccessful implementation of new technology; metals pricing over which the Company exerts little influence; increased capacity and product availability from competing steel minimills and other steel suppliers, including import quantities and pricing; execution of cost minimization strategies; ability to retain key executives; court decisions; industry consolidation or changes in production capacity or utilization; global factors, including political and military uncertainties; currency fluctuations; interest rate changes; energy, insurance and supply prices; severe weather, especially in Poland; and the pace of overall economic activity, particularly in China.

COMMERCIAL METALS COMPANY

Non-GAAP Financial Measures (Unaudited)

(dollars in thousands except per share data)

This press release uses financial statement measures not derived in accordance with generally accepted accounting principles (GAAP).  Reconciliations to the most comparable GAAP measures are provided below.

Adjusted Profit (Loss) Before Tax, Adjusted Net Earnings (Loss) and Adjusted Earnings (Loss) Per Share:

Adjusted Profit (Loss) Before Tax, Adjusted Net Earnings (Loss) and Adjusted Earnings (Loss) Per Share are non-GAAP performance measurements. Management believes excluding the restructuring charges listed below from the Company's financial results provides investors with a clearer perspective of the current underlying operating performance of the Company, a clearer comparison to current period results and greater transparency regarding supplemental information used by management in its financial and operational decision making.

The adjustments in the fourth quarter of 2011 relate to restructuring charges associated with the Company's decision to exit our mill in Croatia and the closure of certain rebar fabrication and CRP locations.  The adjustments for 2010 relate to the Company's decision to exit the joist and deck business in the second quarter of 2010.

Adjusted EBITDA and Adjusted EBITDA excluding restructuring charges:

Earnings before interest expense, income taxes, depreciation and amortization, and impairment charges.

Adjusted EBITDA is a non-GAAP liquidity measure. It excludes Commercial Metals Company's largest recurring non-cash charge, depreciation and amortization, including impairment charges. As a measure of cash flow before interest expense, it is one guideline used to assess the Company's ability to pay its current debt obligations as they mature and a tool to calculate possible future levels of leverage capacity. Adjusted EBITDA to interest is a covenant test in certain of the Company's note agreements.

Adjusted EBITDA excluding restructuring charges is used by management to measure liquidity capabilities and management believes it helps investors in the comparison of underlying performance between periods.

The adjustments in the fourth quarter of 2011 relate to restructuring charges associated with the Company's decision to exit our mill in Croatia and the closure of certain rebar fabrication and CRP locations.  The adjustments for 2010 relate to the Company's decision to exit the joist and deck business in the second quarter of 2010.

Important Additional Information

Commercial Metals Company ("CMC"), its directors and certain of its executive officers may be deemed to be participants in the solicitation of proxies from CMC stockholders in connection with the matters to be considered at CMC's 2012 annual meeting of stockholders. CMC intends to file a proxy statement with the U.S. Securities and Exchange Commission (the "SEC") in connection with any such solicitation of proxies from CMC stockholders. CMC STOCKHOLDERS ARE STRONGLY ENCOURAGED TO READ ANY SUCH PROXY STATEMENT AND ACCOMPANYING PROXY CARD WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION. Information regarding the ownership of CMC's directors and executive officers in CMC stock, restricted stock and options is included in their SEC filings on Forms 3, 4 and 5, which can be found at the CMC's website (www.cmc.com) in the section "Investor Relations." More detailed information regarding the identity of potential participants, and their direct or indirect interests, by security holdings or otherwise, will be set forth in the proxy statement and other materials to be filed with the SEC in connection with CMC's 2012 annual meeting of stockholders. Information can also be found in CMC's Annual Report on Form 10-K for the year ended August 31, 2010, filed with the SEC on October 29, 2010. Stockholders will be able to obtain any proxy statement, any amendments or supplements to the proxy statement and other documents filed by CMC with the SEC for no charge at the SEC's website at www.sec.gov.  Copies will also be available at no charge at CMC's website at www.cmc.com or by writing to CMC at 6565 N. MacArthur Blvd., Suite 800, Irving, Texas 75039, Attn: Corporate Secretary.

SOURCE Commercial Metals Company

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