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| 8-K - 8-K - COMMERCIAL METALS Co | cmc-05312018xearningsrelea.htm |
EXHIBIT 99.1
News Release 
COMMERCIAL METALS COMPANY REPORTS THIRD QUARTER 2018 EARNINGS FROM CONTINUING OPERATIONS OF $0.36 PER SHARE; AND ADJUSTED EARNINGS FROM CONTINUING OPERATIONS OF $0.41 PER SHARE
Irving, TX - June 21, 2018 - Commercial Metals Company (NYSE: CMC) today announced financial results for its third fiscal quarter ended May 31, 2018. Earnings from continuing operations were $42.3 million ($0.36 per diluted share) for the third quarter of 2018, on net sales of $1.2 billion. Adjusted earnings from continuing operations were $49.0 million ($0.41 per diluted share) as detailed in the Non-GAAP reconciliation on page 11. This compares to earnings from continuing operations and adjusted earnings from continuing operations of $31.6 million ($0.27 per diluted share), on net sales of $1.0 billion for the third quarter of 2017. For the nine months ended May 31, 2018, earnings from continuing operations were $84.0 million, compared to $60.2 million for the same period of the prior year.
Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, commented, "The CMC team delivered outstanding results in our third fiscal quarter. In fact, adjusted EBITDA from continuing operations was the highest since the financial crisis and improved by 56% in comparison to our second quarter of 2018. Strong demand across all of our segments was a principal driver of the improved results. Additionally, the start-up of our new micro mill in Durant, Oklahoma contributed to the improved results as we increased shipments from this facility during the quarter. We look forward to this increased capacity helping to better serve our customers with a high quality differentiated product during this period of strong demand."
The Company's liquidity position at May 31, 2018 remained strong with cash and cash equivalents of $600.4 million and availability under the Company's credit and accounts receivable sales facilities of approximately $614.8 million. The cash on hand includes the proceeds received from the issuance of $350 million of 5.75% of Senior Notes due 2026 completed on May 3, 2018. The proceeds from the Senior Notes due 2026, together with cash on hand and the delayed draw term loan under the Company's credit agreement are expected to be used to finance the previously announced acquisition of certain rebar assets from Gerdau S.A., once the transaction closes.
On June 20, 2018, the board of directors of CMC declared a quarterly dividend of $0.12 per share for shareholders of record on July 5, 2018. The dividend will be paid on July 19, 2018.
(CMC Third Quarter Fiscal 2018 - Page 2)
Business Segments-Fiscal Third Quarter 2018 Review
Our Americas Recycling segment recorded adjusted operating profit of $14.4 million for the third quarter of 2018, compared to an adjusted operating profit of $9.2 million for the third quarter of 2017. This was the highest level of profitability in this segment since the third quarter of fiscal 2011. The improvement in adjusted operating profit compared to the same period in the prior year was primarily the result of strong volumes and rising prices in both ferrous and nonferrous markets. Ferrous and nonferrous prices have increased approximately 19% and 12%, respectively, from the same period of the prior year.
Our Americas Mills segment recorded adjusted operating profit of $70.4 million for the third quarter of 2018 compared to adjusted operating profit of $50.7 million for the corresponding period in fiscal 2017. We had a very strong shipping quarter as construction activity remains robust while import levels retreated in comparison to prior years. Shipments increased 12% and metal margins increased by $29 per ton from the same period of the prior year. Included in the segment results were expenses of $6.5 million related to the start-up activities of the Durant, Oklahoma micro mill offset by $3.0 million of incentives that were recorded as income during the quarter. These compare to pre-start up costs of $8.7 million recorded during the second quarter of fiscal 2018. Manufacturing costs at our facilities benefited from high levels of production, which resulted in reductions of $11 per ton in comparison to our fiscal second quarter of 2018 and $4 per ton compared to the same period of the prior fiscal year.
Our Americas Fabrication segment recorded an adjusted operating loss of $16.1 million for the third quarter of 2018 compared to adjusted operating profit of $1.8 million for the third quarter of fiscal 2017. Due to the integrated nature of our business and internal market based transfer prices, as rebar prices have risen over the past six months, our Americas Mill segment has experienced margin expansion on rebar shipped internally to our rebar fabrication shops, while the Americas Fabrication segment has incurred margin compression as it services its mostly fixed price backlog of contract work. However, rebar fabrication bidding activity remains strong. While the average selling price of material shipped remained relatively flat, the average price associated with new contracts rose almost $100 per ton in comparison to the fiscal second quarter of 2018. Also during the third quarter of 2018, the Company completed the sale of its structural fabrication business.
Our International Mill segment in Poland recorded adjusted operating profit of $24.4 million for the third quarter of 2018, compared to adjusted operating profit of $13.0 million for the corresponding period in 2017. Long steel product demand remains strong, and selling prices at this operation have increased significantly in comparison to the same period of the prior fiscal year. In addition, the focus on producing a broader range of higher value merchant products resulted in a significant improvement in margins. Shipment volumes decreased during the quarter due to higher rebar import levels into Poland.
(CMC Third Quarter Fiscal 2018 - Page 3)
Outlook
"We are confident in our outlook of continued strong results for CMC," said Smith. "Leading indicators of macroeconomic and market conditions in both the United States and Poland suggest continuing economic growth and strong long steel product demand. In addition, we applaud the U.S. trade measures implemented by the President and believe they will assist in creating a fair and level playing field."
Conference Call
CMC invites you to listen to a live broadcast of its third quarter of 2018 conference call today, Thursday, June 21, 2018, at 11:00 a.m. ET. Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, and Mary A. Lindsey, Senior 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, including any non-GAAP disclosures, 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 of facilities that includes four electric arc furnace ("EAF") mini mills, two EAF micro mills, a rerolling mill, steel fabrication and processing plants, construction-related product warehouses, and metal recycling facilities in the United States and Poland.
Forward-Looking Statements
This news release contains forward-looking statements regarding CMC's expectations relating to general economic conditions, key macro-economic drivers that impact its business including demand, steel margins, effects of the ongoing trade actions in the U.S. and Poland, and the planned acquisition of substantially all of the U.S. rebar fabrication facilities and the steel mini-mills located in or around Rancho Cucamonga, California, Jacksonville, Florida, Sayreville, New Jersey and Knoxville, Tennessee currently owned by Gerdau S.A. and certain of its subsidiaries (collectively, the “Business”) and the timing thereof, the ability to obtain regulatory approvals and meet other closing conditions for the planned acquisition of the Business. 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.
(CMC Third Quarter Fiscal 2018 - Page 4)
Factors that could cause actual results to differ materially from CMC's expectations include 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; 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; 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; failure to retain key management and employees of the Business; issues or delays in the successful integration of the Business’ operations with those of the Company, including incurring or experiencing unanticipated costs and/or delays or difficulties; difficulties or delays in the successful transition of the Business to the information technology systems of the Company as well as risks associated with other integration or transition of the operations, systems and personnel of the Business; future levels of revenues being lower than expected and costs being higher than expected; failure or inability to implement growth strategies in a timely manner; unfavorable reaction to the acquisition of the Business by customers, competitors, suppliers and employees; currency fluctuations; global factors, including political uncertainties and military conflicts; availability of electricity, electrodes 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; increased costs related to health care reform legislation; and impacts from the Tax Cuts and Jobs Act.
(CMC Third Quarter Fiscal 2018 - Page 5)
COMMERCIAL METALS COMPANY FINANCIAL & OPERATING STATISTICS (UNAUDITED) | ||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||
(in thousands except per ton amounts) | 5/31/2018 | 2/28/2018 | 11/30/2017 | 8/31/2017 | 5/31/2017 | 5/31/2018 | 5/31/2017 | |||||||||||||||||||||
AMERICAS RECYCLING | ||||||||||||||||||||||||||||
Net sales | $ | 364,098 | $ | 320,627 | $ | 319,341 | $ | 317,300 | $ | 294,166 | $ | 1,004,066 | $ | 694,202 | ||||||||||||||
Adjusted operating profit | $ | 14,350 | $ | 12,238 | $ | 9,992 | $ | 2,931 | $ | 9,247 | $ | 36,580 | $ | 11,981 | ||||||||||||||
Tons shipped | ||||||||||||||||||||||||||||
Ferrous | 642 | 560 | 589 | 583 | 590 | 1,791 | 1,416 | |||||||||||||||||||||
Nonferrous | 65 | 63 | 66 | 70 | 61 | 194 | 163 | |||||||||||||||||||||
Total | 707 | 623 | 655 | 653 | 651 | 1,985 | 1,579 | |||||||||||||||||||||
Average selling price (per short ton) | ||||||||||||||||||||||||||||
Ferrous | $ | 314 | $ | 285 | $ | 257 | $ | 255 | $ | 264 | $ | 286 | $ | 236 | ||||||||||||||
Nonferrous | $ | 2,252 | $ | 2,345 | $ | 2,208 | $ | 2,134 | $ | 2,017 | $ | 2,267 | $ | 1,969 | ||||||||||||||
AMERICAS MILLS | ||||||||||||||||||||||||||||
Net sales | $ | 553,063 | $ | 425,887 | $ | 413,518 | $ | 414,419 | $ | 427,276 | $ | 1,392,468 | $ | 1,151,034 | ||||||||||||||
Adjusted operating profit | $ | 70,404 | $ | 31,471 | $ | 40,764 | $ | 29,803 | $ | 50,734 | $ | 142,639 | $ | 139,002 | ||||||||||||||
Short tons shipped | ||||||||||||||||||||||||||||
Rebar | 503 | 405 | 405 | 445 | 444 | 1,313 | 1,248 | |||||||||||||||||||||
Merchant & other | 308 | 279 | 272 | 265 | 278 | 859 | 767 | |||||||||||||||||||||
Average price (per short ton) | ||||||||||||||||||||||||||||
Total selling price | $ | 632 | $ | 571 | $ | 550 | $ | 537 | $ | 540 | $ | 587 | $ | 522 | ||||||||||||||
Cost of ferrous scrap utilized | $ | 329 | $ | 288 | $ | 256 | $ | 257 | $ | 266 | $ | 293 | $ | 239 | ||||||||||||||
Metal margin | $ | 303 | $ | 283 | $ | 294 | $ | 280 | $ | 274 | $ | 294 | $ | 283 | ||||||||||||||
AMERICAS FABRICATION | ||||||||||||||||||||||||||||
Net sales | $ | 378,241 | $ | 312,973 | $ | 332,779 | $ | 353,725 | $ | 379,976 | $ | 1,023,993 | $ | 1,022,202 | ||||||||||||||
Adjusted operating profit (loss) | $ | (16,096 | ) | $ | (27,117 | ) | $ | (4,782 | ) | $ | (4,928 | ) | $ | 1,808 | $ | (47,995 | ) | $ | 9,025 | |||||||||
Total short tons shipped | 302 | 241 | 264 | 286 | 310 | 808 | 836 | |||||||||||||||||||||
Total selling price (per short ton) | $ | 777 | $ | 799 | $ | 778 | $ | 773 | $ | 775 | $ | 784 | $ | 772 | ||||||||||||||
INTERNATIONAL MILL | ||||||||||||||||||||||||||||
Net sales | $ | 201,737 | $ | 211,765 | $ | 220,478 | $ | 200,239 | $ | 167,639 | $ | 633,980 | $ | 437,034 | ||||||||||||||
Adjusted operating profit | $ | 24,370 | $ | 24,490 | $ | 23,437 | $ | 14,620 | $ | 12,971 | $ | 72,297 | $ | 32,517 | ||||||||||||||
Short tons shipped | ||||||||||||||||||||||||||||
Rebar | 79 | 95 | 140 | 129 | 107 | 314 | 333 | |||||||||||||||||||||
Merchant & other | 241 | 251 | 260 | 266 | 247 | 752 | 650 | |||||||||||||||||||||
Average price (per short ton) | ||||||||||||||||||||||||||||
Total selling price | $ | 599 | $ | 578 | $ | 517 | $ | 476 | $ | 443 | $ | 562 | $ | 415 | ||||||||||||||
Cost of ferrous scrap utilized | $ | 329 | $ | 324 | $ | 296 | $ | 269 | $ | 253 | $ | 317 | $ | 229 | ||||||||||||||
Metal margin | $ | 270 | $ | 254 | $ | 221 | $ | 207 | $ | 190 | $ | 245 | $ | 186 | ||||||||||||||
(CMC Third Quarter Fiscal 2018 - Page 6)
COMMERCIAL METALS COMPANY BUSINESS SEGMENTS (UNAUDITED) | ||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||
(in thousands) | 5/31/2018 | 2/28/2018 | 11/30/2017 | 8/31/2017 | 5/31/2017 | 5/31/2018 | 5/31/2017 | |||||||||||||||||||||
Net sales | ||||||||||||||||||||||||||||
Americas Recycling | $ | 364,098 | $ | 320,627 | $ | 319,341 | $ | 317,300 | $ | 294,166 | $ | 1,004,066 | $ | 694,202 | ||||||||||||||
Americas Mills | 553,063 | 425,887 | 413,518 | 414,419 | 427,276 | 1,392,468 | 1,151,034 | |||||||||||||||||||||
Americas Fabrication | 378,241 | 312,973 | 332,779 | 353,725 | 379,976 | 1,023,993 | 1,022,202 | |||||||||||||||||||||
International Mill | 201,737 | 211,765 | 220,478 | 200,239 | 167,639 | 633,980 | 437,034 | |||||||||||||||||||||
Corporate and Other | 2,725 | 4,450 | 4,699 | 67,562 | 8,289 | 11,874 | 51,690 | |||||||||||||||||||||
Eliminations | (295,380 | ) | (221,434 | ) | (214,282 | ) | (269,115 | ) | (232,633 | ) | (731,096 | ) | (596,223 | ) | ||||||||||||||
Total net sales | $ | 1,204,484 | $ | 1,054,268 | $ | 1,076,533 | $ | 1,084,130 | $ | 1,044,713 | $ | 3,335,285 | $ | 2,759,939 | ||||||||||||||
Adjusted operating profit (loss) from continuing operations | ||||||||||||||||||||||||||||
Americas Recycling | $ | 14,350 | $ | 12,238 | $ | 9,992 | $ | 2,931 | $ | 9,247 | $ | 36,580 | $ | 11,981 | ||||||||||||||
Americas Mills | 70,404 | 31,471 | 40,764 | 29,803 | 50,734 | 142,639 | 139,002 | |||||||||||||||||||||
Americas Fabrication | (16,096 | ) | (27,117 | ) | (4,782 | ) | (4,928 | ) | 1,808 | (47,995 | ) | 9,025 | ||||||||||||||||
International Mill | 24,370 | 24,490 | 23,437 | 14,620 | 12,971 | 72,297 | 32,517 | |||||||||||||||||||||
Corporate and Other | (22,678 | ) | (22,296 | ) | (20,674 | ) | (12,384 | ) | (20,281 | ) | (65,648 | ) | (72,176 | ) | ||||||||||||||
Eliminations | (2,941 | ) | 100 | (1,572 | ) | (39,922 | ) | 772 | (4,413 | ) | (22 | ) | ||||||||||||||||
Adjusted operating profit from continuing operations | $ | 67,409 | $ | 18,886 | $ | 47,165 | $ | (9,880 | ) | $ | 55,251 | $ | 133,460 | $ | 120,327 | |||||||||||||
(CMC Third Quarter Fiscal 2018 - Page 7)
COMMERCIAL METALS COMPANY CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) | ||||||||||||||||
Three Months Ended May 31, | Nine Months Ended May 31, | |||||||||||||||
(in thousands, except share data) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Net sales | $ | 1,204,484 | $ | 1,044,713 | $ | 3,335,285 | $ | 2,759,939 | ||||||||
Costs and expenses: | ||||||||||||||||
Cost of goods sold | 1,035,914 | 896,277 | 2,896,531 | 2,357,867 | ||||||||||||
Selling, general and administrative expenses | 101,422 | 93,415 | 306,009 | 282,384 | ||||||||||||
Interest expense | 11,511 | 12,448 | 25,303 | 38,212 | ||||||||||||
1,148,847 | 1,002,140 | 3,227,843 | 2,678,463 | |||||||||||||
Earnings from continuing operations before income taxes | 55,637 | 42,573 | 107,442 | 81,476 | ||||||||||||
Income taxes | 13,312 | 11,006 | 23,465 | 21,231 | ||||||||||||
Earnings from continuing operations | 42,325 | 31,567 | 83,977 | 60,245 | ||||||||||||
Earnings (loss) from discontinued operations before income taxes (benefit) | (3,389 | ) | 9,325 | 5,021 | 19,687 | |||||||||||
Income taxes (benefit) | (1,029 | ) | 1,626 | 2,052 | 4,059 | |||||||||||
Earnings (loss) from discontinued operations | (2,360 | ) | 7,699 | 2,969 | 15,628 | |||||||||||
Net earnings | 39,965 | 39,266 | 86,946 | 75,873 | ||||||||||||
Basic earnings (loss) per share* | ||||||||||||||||
Earnings from continuing operations | $ | 0.36 | $ | 0.27 | $ | 0.72 | $ | 0.52 | ||||||||
Earnings (loss) from discontinued operations | (0.02 | ) | 0.07 | 0.03 | 0.14 | |||||||||||
Net earnings | $ | 0.34 | $ | 0.34 | $ | 0.74 | $ | 0.66 | ||||||||
Diluted earnings (loss) per share* | ||||||||||||||||
Earnings from continuing operations | $ | 0.36 | $ | 0.27 | $ | 0.71 | $ | 0.51 | ||||||||
Earnings (loss) from discontinued operations | (0.02 | ) | 0.07 | 0.03 | 0.13 | |||||||||||
Net earnings | $ | 0.34 | $ | 0.34 | $ | 0.74 | $ | 0.65 | ||||||||
Cash dividends per share | $ | 0.12 | $ | 0.12 | $ | 0.36 | $ | 0.36 | ||||||||
Average basic shares outstanding | 117,111,799 | 115,886,372 | 116,722,504 | 115,574,289 | ||||||||||||
Average diluted shares outstanding | 118,254,791 | 117,205,369 | 118,050,864 | 117,087,341 | ||||||||||||
* EPS is calculated independently for each component and may not sum to Net Earnings EPS due to rounding
(CMC Third Quarter Fiscal 2018 - Page 8)
COMMERCIAL METALS COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||||||
(in thousands) | May 31, 2018 | August 31, 2017 | ||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 600,444 | $ | 252,595 | ||||
Accounts receivable (less allowance for doubtful accounts of $4,648 and $4,146) | 678,343 | 561,411 | ||||||
Inventories, net | 595,231 | 462,648 | ||||||
Other current assets | 109,656 | 140,136 | ||||||
Assets of businesses held for sale & discontinued operations | 11,282 | 297,110 | ||||||
Total current assets | 1,994,956 | 1,713,900 | ||||||
Property, plant and equipment, net | 1,074,357 | 1,051,677 | ||||||
Goodwill | 64,316 | 64,915 | ||||||
Other noncurrent assets | 111,864 | 144,639 | ||||||
Total assets | $ | 3,245,493 | $ | 2,975,131 | ||||
Liabilities and stockholders' equity | ||||||||
Current liabilities: | ||||||||
Accounts payable-trade | $ | 241,584 | $ | 226,456 | ||||
Accrued expenses and other payables | 247,635 | 274,972 | ||||||
Current maturities of long-term debt | 19,874 | 19,182 | ||||||
Liabilities of businesses held for sale & discontinued operations | 2,843 | 87,828 | ||||||
Total current liabilities | 511,936 | 608,438 | ||||||
Deferred income taxes | 30,760 | 49,160 | ||||||
Other long-term liabilities | 110,792 | 111,023 | ||||||
Long-term debt | 1,139,103 | 805,580 | ||||||
Total liabilities | 1,792,591 | 1,574,201 | ||||||
Stockholders' equity | 1,452,716 | 1,400,757 | ||||||
Stockholders' equity attributable to noncontrolling interests | 186 | 173 | ||||||
Total stockholders' equity | 1,452,902 | 1,400,930 | ||||||
Total liabilities and stockholders' equity | $ | 3,245,493 | $ | 2,975,131 | ||||
(CMC Third Quarter Fiscal 2018 - Page 9)
COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||
Nine Months Ended May 31, | ||||||||
(in thousands) | 2018 | 2017 | ||||||
Cash flows from (used by) operating activities: | ||||||||
Net earnings | $ | 86,946 | $ | 75,873 | ||||
Adjustments to reconcile net earnings to cash flows from (used by) operating activities: | ||||||||
Depreciation and amortization | 99,443 | 93,049 | ||||||
Stock-based compensation | 18,247 | 19,716 | ||||||
Asset impairment | 14,265 | 622 | ||||||
Deferred income taxes & other long-term taxes | 5,829 | (2,538 | ) | |||||
Provision for losses on receivables, net | 2,193 | 856 | ||||||
Net gain on disposals of subsidiaries, assets and other | (1,578 | ) | (343 | ) | ||||
Write-down of inventories | 1,358 | 1,820 | ||||||
Amortization of interest rate swaps termination gain | — | (5,698 | ) | |||||
Changes in operating assets and liabilities | (135,058 | ) | (164,443 | ) | ||||
Net cash flows from operating activities | 91,645 | 18,914 | ||||||
Cash flows from (used by) investing activities: | ||||||||
Capital expenditures | (144,268 | ) | (162,082 | ) | ||||
Proceeds from the sale of subsidiaries | 75,483 | — | ||||||
Proceeds from settlement of life insurance policies | 25,000 | — | ||||||
Decrease in restricted cash, net | 23,592 | 7,492 | ||||||
Acquisitions | (6,980 | ) | (54,425 | ) | ||||
Proceeds from the sale of property, plant and equipment and other | 6,315 | 1,884 | ||||||
Net cash flows used by investing activities | (20,858 | ) | (207,131 | ) | ||||
Cash flows from (used by) financing activities: | ||||||||
Proceeds from issuance of long-term debt | 350,000 | — | ||||||
Cash dividends | (42,036 | ) | (41,619 | ) | ||||
Repayments on long-term debt | (15,382 | ) | (8,775 | ) | ||||
Stock issued under incentive and purchase plans, net of forfeitures | (9,836 | ) | (5,516 | ) | ||||
Debt issuance costs | (5,254 | ) | — | |||||
Increase in documentary letters of credit, net | 18 | 569 | ||||||
Contribution from noncontrolling interests | 13 | 14 | ||||||
Proceeds from New Markets Tax Credit transactions | — | 2,141 | ||||||
Net cash flows from (used by) financing activities | 277,523 | (53,186 | ) | |||||
Effect of exchange rate changes on cash | (461 | ) | (363 | ) | ||||
Increase (decrease) in cash and cash equivalents | 347,849 | (241,766 | ) | |||||
Cash and cash equivalents at beginning of year | 252,595 | 517,544 | ||||||
Cash and cash equivalents at end of period | $ | 600,444 | $ | 275,778 | ||||
(CMC Third Quarter Fiscal 2018 - Page 10)
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 (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. However, we believe that adjusted operating profit (loss) from continuing operations provides relevant and useful information, which is often used by analysts, creditors and other interested parties 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 operating profit (loss) 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 (loss) from continuing operations may be inconsistent with similar measures presented by other companies.
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||
(in thousands) | 5/31/2018 | 2/28/2018 | 11/30/2017 | 8/31/2017 | 5/31/2017 | 5/31/2018 | 5/31/2017 | |||||||||||||||||||||
Earnings (loss) from continuing operations | $ | 42,325 | $ | 9,781 | $ | 31,871 | $ | (10,070 | ) | $ | 31,567 | $ | 83,977 | $ | 60,245 | |||||||||||||
Income taxes | 13,312 | 1,728 | 8,425 | (5,955 | ) | 11,006 | 23,465 | 21,231 | ||||||||||||||||||||
Interest expense | 11,511 | 7,181 | 6,611 | 5,939 | 12,448 | 25,303 | 38,212 | |||||||||||||||||||||
Discounts on sales of accounts receivable | 261 | 196 | 258 | 206 | 230 | 715 | 639 | |||||||||||||||||||||
Adjusted operating profit from continuing operations | $ | 67,409 | $ | 18,886 | $ | 47,165 | $ | (9,880 | ) | $ | 55,251 | $ | 133,460 | $ | 120,327 | |||||||||||||
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 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 (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 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 | Nine Months Ended | |||||||||||||||||||||||||||
(in thousands) | 5/31/2018 | 2/28/2018 | 11/30/2017 | 8/31/2017 | 5/31/2017 | 5/31/2018 | 5/31/2017 | |||||||||||||||||||||
Earnings (loss) from continuing operations | $ | 42,325 | $ | 9,781 | $ | 31,871 | $ | (10,070 | ) | $ | 31,567 | $ | 83,977 | $ | 60,245 | |||||||||||||
Interest expense | 11,511 | 7,181 | 6,611 | 5,939 | 12,448 | 25,303 | 38,212 | |||||||||||||||||||||
Income taxes | 13,312 | 1,728 | 8,425 | (5,955 | ) | 11,006 | 23,465 | 21,231 | ||||||||||||||||||||
Depreciation and amortization | 32,949 | 34,050 | 31,899 | 31,880 | 32,116 | 98,898 | 92,610 | |||||||||||||||||||||
Impairment charges | 935 | 12,136 | 461 | 1,182 | 70 | 13,532 | 549 | |||||||||||||||||||||
Adjusted EBITDA from continuing operations | $ | 101,032 | $ | 64,876 | $ | 79,267 | $ | 22,976 | $ | 87,207 | $ | 245,175 | $ | 212,847 | ||||||||||||||
(CMC Third Quarter Fiscal 2018 - Page 11)
Adjusted earnings from continuing operations is a non-GAAP financial measure that is equal to earnings (loss) from continuing operations before certain material acquisition and integration related costs, mill operational start-up costs, CMC Steel Oklahoma incentives, asset impairments, debt restructuring and extinguishment gains and losses and severance expenses, including the estimated income tax effects thereof. Additionally, we adjust adjusted earnings from continuing operations for the effects of the TCJA as well as the tax benefit associated with an international reorganization. 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 | Nine Months Ended | |||||||||||||||||||||||||||
(in thousands, except per share amounts) | 5/31/2018 | 2/28/2018 | 11/30/2017 | 8/31/2017 | 5/31/2017 | 5/31/2018 | 5/31/2017 | |||||||||||||||||||||
Earnings (loss) from continuing operations | $ | 42,325 | $ | 9,781 | $ | 31,871 | $ | (10,070 | ) | $ | 31,567 | $ | 83,977 | $ | 60,245 | |||||||||||||
Acquisition and integration related costs | 4,975 | 5,905 | 3,720 | — | — | 14,600 | — | |||||||||||||||||||||
Mill operational start-up costs | 6,456 | 8,651 | 2,909 | — | — | 18,016 | — | |||||||||||||||||||||
CMC Steel Oklahoma incentives | (3,000 | ) | (3,000 | ) | ||||||||||||||||||||||||
Asset impairments | — | 12,136 | — | — | — | 12,136 | — | |||||||||||||||||||||
Loss (gain) on debt extinguishment | — | — | — | 17,799 | — | — | — | |||||||||||||||||||||
Severance | — | — | — | 8,129 | — | — | — | |||||||||||||||||||||
Total adjustments (pre-tax) | 8,431 | 26,692 | 6,629 | 25,928 | — | 41,752 | — | |||||||||||||||||||||
Related tax effects on adjustments | $ | (1,771 | ) | $ | (6,855 | ) | $ | (2,320 | ) | $ | (9,075 | ) | $ | — | $ | (10,946 | ) | $ | — | |||||||||
TCJA impact | — | 10,600 | — | — | — | 10,600 | — | |||||||||||||||||||||
International reorganization | — | (9,200 | ) | — | — | — | (9,200 | ) | — | |||||||||||||||||||
Total tax impact | $ | (1,771 | ) | $ | (5,455 | ) | $ | (2,320 | ) | $ | (9,075 | ) | $ | — | $ | (9,546 | ) | $ | — | |||||||||
Adjusted earnings from continuing operations | $ | 48,985 | $ | 31,018 | $ | 36,180 | $ | 6,783 | $ | 31,567 | $ | 116,183 | $ | 60,245 | ||||||||||||||
Adjusted earnings from continuing operations per diluted share | $ | 0.41 | $ | 0.26 | $ | 0.31 | $ | 0.06 | $ | 0.27 | $ | 0.98 | $ | 0.51 | ||||||||||||||
Media Contact:
Susan Gerber
214.689.4300