PR Newswire | Jun 17, 2021 06:45AM EDT

06/17 05:45 CDT

Commercial Metals Company Reports Record Third Quarter Fiscal 2021 Results- Achieves record Earnings from Continuing Operations of $130 million, or $1.07 per diluted share; record Core EBITDA from Continuing Operations of $230 million, up 49% year-over-year and 35% sequentially; and record North America and Europe segment Adjusted EBITDA- Network optimization initiative continues; seventh consecutive quarter of year-over-year reduction in North America controllable costs per ton- Key strategic milestones include commissioning of third Polish rolling line and receipt of air permit for Arizona 2 project IRVING, Texas, June 17, 2021

IRVING, Texas, June 17, 2021 /PRNewswire/ -- Commercial Metals Company (NYSE: CMC) today announced financial results for its fiscal third quarter ended May 31, 2021. Earnings from continuing operations were $130.4 million, or $1.07 per diluted share, on net sales of $1.8 billion, compared to prior year earnings from continuing operations of $64.2 million, or $0.53 per diluted share, on net sales of $1.3 billion.

During the third quarter of fiscal 2021, the Company recorded a net after-tax benefit of $3.3 million, chiefly related to the sale of a small railway track reclamation business. Excluding this item, third quarter adjusted earnings from continuing operations were $127.1 million, or $1.04 per diluted share, compared to adjusted earnings from continuing operations of $70.4 million, or $0.59 per diluted share, in the prior year period. "Adjusted EBITDA from continuing operations", "core EBITDA from continuing operations", "adjusted earnings from continuing operations" and "adjusted earnings from continuing operations per diluted share" are non-GAAP financial measures. Details, including a reconciliation of each such non-GAAP financial measure, to the most directly comparable measure, prepared and presented in accordance with GAAP can be found in the financial tables that follow.

Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, commented, "CMC achieved exceptional results during the third quarter. Demand for our products was robust and our teams executed well, setting new production and shipment records at several of our facilities. We continued to tightly manage the operating factors within our control, and again reduced year-over-year production costs per ton. Our excellent third quarter performance is a testament to the operational flexibility and earnings power of the new, strategically transformed CMC, and I could not be more proud of our many accomplishments."

Ms. Smith continued, "CMC set several operational and financial performance records at the segment as well as consolidated level, and we further enhanced our balance sheet and leverage positions, which are now the most attractive in CMC's history. We are also continuing to build for the future: We made significant progress on key organic growth initiatives, including hot commissioning of our third rolling mill in Poland, the receipt of the air permit for our Arizona 2 mill, and the continuation of network optimization efforts. Future contributions from these key projects are expected to provide the next chapter of growth for our company, building on this quarter's outstanding results."

The Company's liquidity position as of May 31, 2021 remained solid, with cash and cash equivalents of $443.1 million, and availability of $639.0 million under the Company's credit and accounts receivable facilities.

On June 16, 2021, the board of directors declared a quarterly dividend of $0.12 per share of CMC common stock payable to stockholders of record on June 30, 2021. The dividend will be paid on July 14, 2021, and marks 227 consecutive quarterly dividend payments by the Company.

Business Segments - Fiscal Third Quarter 2021 ReviewThe North America segment generated record adjusted EBITDA of $207.3 million for the third quarter of fiscal 2021, an increase of 30% compared to $159.4 million in the prior year period. This improvement was driven by growth in demand and increased margins across multiple products lines, as well as solid management of controllable costs within our vertically integrated value chain. Costs were reduced by continued execution of CMC's network optimization activities.

Shipment volumes of finished steel, which include steel products and downstream products, increased by 9% from the prior year third quarter. Demand for rebar from the mills remained good, growing year-over-year, supported by resilient construction activity. Shipments of merchant and other products increased by 37% from the prior year, driven by the broad reopening of the U.S. economy.

Margins over scrap cost on steel products increased $40 per ton from the prior year period, marking the first year-over-year increase in six quarters. On a sequential basis these margins rose $74 per ton. Market conditions were favorable for each of CMC's key products, leading to mill volume growth of 17% and an increase of $170 per ton in average selling price compared to the third quarter of fiscal 2020. Margin over scrap cost on downstream products declined compared to a year ago, driven by higher scrap input costs and average pricing that was largely unchanged. Future pricing indicators for backlog were positive during the quarter, as average price levels for bids and new awards increased from the prior year quarter.

The Europe segment reported record adjusted EBITDA of $50.0 million for the third quarter of fiscal 2021, up 250% compared to adjusted EBITDA of $14.3 million for the prior year quarter. The improvement was driven by a significant expansion in margin over scrap as well as volume growth, as demand for steel products from both construction and industrial end markets remained strong during the quarter. Resilient construction activity supported a 16% increase in rebar shipments compared to a year ago, while the continuing manufacturing recovery in Poland and Central Europe drove 4% growth in volumes of merchant and other. Average selling price increased by $227 per ton compared to the prior year quarter, and $132 per ton sequentially.

OutlookMs. Smith said, "Strong demand across multiple end-use markets should support robust shipment levels of finished steel during the fourth quarter in both North America and Europe. Construction activity is strong and the industrial sectors are growing in both the U.S. and Central Europe, as both regions continue to recover from the pandemic. We expect margins over scrap on steel products in North America and Europe to be relatively flat or up modestly from third quarter levels."

"Increased willingness of downstream customers in our North America segment to contract new work and the stability of our construction backlog both point to continued demand strength. This view is supported by several widely monitored construction indicators that generally lead activity by nine to twelve months, which have improved significantly in 2021," Ms. Smith added.

Conference CallCMC invites you to listen to a live broadcast of its third quarter of fiscal 2021 conference call today, Thursday, June 17, 2021, at 11:00 a.m. ET. Barbara R. Smith, Chairman of the Board, 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 CompanyCommercial 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, a rerolling mill, steel fabrication and processing plants, construction-related product warehouses, and metal recycling facilities in the U.S. and Poland.

Forward-Looking StatementsThis news release contains 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 COVID-19 and related governmental and economic responses thereto, the ability to operate our steel mills at full capacity, future availability and cost of 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. The statements in this report that are not historical statements, are forward-looking statements. These forward-looking statements can generally be identified by phrases such as we or our management "expects," "anticipates," "believes," "estimates," "future," "intends," "may," "plans to," "ought," "could," "will," "should," "likely," "appears," "projects," "forecasts," "outlook" or other similar words or phrases, as well as by discussions of strategy, plans, or intentions.

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 Part II, Item 1A, "Risk Factors" of our quarterly report on Form 10-Q for the quarter ended February 28, 2021, 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, global supply chain 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 existing and future government laws, regulations and other legal requirements and judicial decisions that govern our business, including increased environmental regulations 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; operating and start-up risks, as well as market risks associated with the commissioning of new projects could prevent us from realizing anticipated benefits and could result in a loss of all or a substantial part of our investment; 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 Biden administration 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; and civil unrest, protests and riots.

COMMERCIAL METALS COMPANY

FINANCIAL & OPERATING STATISTICS (UNAUDITED)

Three Months Ended Nine Months Ended

(in thousands, except per5/31/2021 2/28/2021 11/30/2020 8/31/2020 5/31/2020 5/31/2021 5/31/2020 ton amounts)

North America

Net sales $1,558,068$1,257,486$1,195,013$1,224,849$1,167,081$4,010,567$3,545,084

Adjusted 207,330 171,612 155,634 174,219 159,394 534,576 486,957 EBITDA



External tons shipped

Raw 368 302 330 300 288 1,000 929 materials

Rebar 500 472 486 498 463 1,458 1,399

Merchant 289 268 264 234 211 821 685 and other

Steel 789 740 750 732 674 2,279 2,084 products

Downstream408 343 371 429 427 1,122 1,206 products



Average selling price per ton

Raw $949 $846 $630 $605 $517 $813 $555 materials

Steel 794 695 612 600 624 702 625 products

Downstream963 929 934 970 966 943 976 products



Cost of raw $697 $629 $458 $427 $348 $597 $393 materials per ton

Cost of ferrous scrap 369 344 266 237 239 327 238 utilized per ton



Steel products metal $425 $351 $346 $363 $385 $375 $387 margin per ton





Europe

Net sales $284,107 $202,066 $194,596 $179,855 $173,817 $680,769 $519,285

Adjusted 50,005 16,107 14,470 22,927 14,270 80,582 39,080 EBITDA



External tons shipped

Rebar 141 78 128 150 122 347 389

Merchant 263 275 269 230 252 807 703 and other

Steel 404 353 397 380 374 1,154 1,092 products



Average selling price per ton

Steel $664 $532 $461 $446 $437 $552 $449 products



Cost of ferrous scrap $376 $328 $262 $250 $239 $324 $245 utilized per ton



Steel products metal $288 $204 $199 $196 $198 $228 $204 margin per ton

COMMERCIAL METALS COMPANY

BUSINESS SEGMENTS (UNAUDITED)

(in Three Months Ended Nine Months Ended thousands)

Net sales 5/31/2021 2/28/2021 11/30/2020 8/31/2020 5/31/2020 5/31/2021 5/31/2020

North $1,558,068$1,257,486$1,195,013$1,224,849$1,167,081$4,010,567$3,545,084America

Europe 284,107 202,066 194,596 179,855 173,817 680,769 519,285

Corporate 2,866 2,718 2,194 4,428 785 7,778 2,985 and Other

Total net $1,845,041$1,462,270$1,391,803$1,409,132$1,341,683$4,699,114$4,067,354sales



Adjusted EBITDA from continuing operations

North $207,330 $171,612 $155,634 $174,219 $159,394 $534,576 $486,957 America

Europe 50,005 16,107 14,470 22,927 14,270 80,582 39,080

Corporate (36,214) (45,986) (26,471) (64,846) (26,882) (108,671) (81,729) and Other

COMMERCIAL METALS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)

Three Months Ended May 31,Nine Months Ended May 31,

(in thousands, except 2021 2020 2021 2020 share data)

Net sales $1,845,041$1,341,683$4,699,114$4,067,354

Costs and expenses:

Cost of goods sold 1,533,768 1,116,353 3,936,930 3,385,963

Selling, general and administrative 130,448 115,965 359,492 342,502 expenses

Interest expense 11,965 15,409 40,245 47,875

Loss on debt - - 16,841 - extinguishment

Asset impairments 277 5,983 4,345 6,513

1,676,458 1,253,710 4,357,853 3,782,853

Earnings from continuing operations 168,583 87,973 341,261 284,501 before income taxes

Income taxes 38,175 23,804 80,709 73,981

Earnings from 130,408 64,169 260,552 210,520 continuing operations



Earnings from discontinued - 745 - 1,941 operations before income taxes

Income taxes - 180 - 581

Earnings from discontinued - 565 - 1,360 operations



Net earnings $130,408 $64,734 $260,552 $211,880



Basic earnings per share*

Earnings from $1.08 $0.54 $2.17 $1.77 continuing operations

Earnings from discontinued - - - 0.01 operations

Net earnings $1.08 $0.54 $2.17 $1.78



Diluted earnings per share*

Earnings from $1.07 $0.53 $2.14 $1.75 continuing operations

Earnings from discontinued - - - 0.01 operations

Net earnings $1.07 $0.54 $2.14 $1.76



Cash dividends per $0.12 $0.12 $0.36 $0.36 share

Average basic shares 120,613,652119,192,962120,241,579118,828,870outstanding

Average diluted shares122,193,655120,278,741121,852,144120,277,737outstanding

* Earnings Per Share ("EPS") is calculated independently for each component and may not sum to net earnings EPS due to rounding.

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share data) May 31, 2021August 31, 2020

Assets

Current assets:

Cash and cash equivalents $443,120 $542,103

Accounts receivable (less allowance for doubtful 1,073,115 880,728 accounts of $6,688 and $9,597)

Inventories, net 833,101 625,393

Prepaid and other current assets 169,139 165,879

Total current assets 2,518,475 2,214,103

Property, plant and equipment, net 1,562,503 1,571,067

Goodwill 66,331 64,321

Other noncurrent assets 243,766 232,237

Total assets $4,391,075$4,081,728

Liabilities and stockholders' equity

Current liabilities:

Accounts payable $340,238 $266,102

Accrued expenses and other payables 456,394 461,012

Current maturities of long-term debt and 56,735 18,149 short-term borrowings

Total current liabilities 853,367 745,263

Deferred income taxes 118,335 130,810

Other noncurrent liabilities 242,647 250,706

Long-term debt 1,020,129 1,065,536

Total liabilities 2,234,478 2,192,315

Stockholders' equity:

Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued 129,060,6641,290 1,290 shares; outstanding 120,585,771 and 119,220,905 shares

Additional paid-in capital 361,433 358,912

Accumulated other comprehensive loss (78,850) (103,764)

Retained earnings 2,025,083 1,807,826

Less treasury stock, 8,474,893 and 9,839,759 (152,590) (175,063) shares at cost

Stockholders' equity 2,156,366 1,889,201

Stockholders' equity attributable to 231 212 noncontrolling interests

Total equity 2,156,597 1,889,413

Total liabilities and stockholders' equity $4,391,075$4,081,728

COMMERCIAL METALS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months Ended May 31,

(in thousands) 2021 2020

Cash flows from (used by) operating activities:

Net earnings $260,552$211,880

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

Depreciation and amortization 125,176 124,104

Stock-based compensation 35,558 21,975

Deferred income taxes and other long-term taxes (17,175) 47,761

Loss on debt extinguishment 16,841 -

Net gain on disposals of subsidiaries, assets and (9,390) (5,476) other

Amortization of acquired unfavorable contract backlog(4,540) (18,676)

Asset impairments 4,345 6,513

Other 243 1,933

Changes in operating assets and liabilities (317,378)141,819

Net cash flows from operating activities 94,232 531,833



Cash flows from (used by) investing activities:

Capital expenditures (127,395)(134,092)

Proceeds from the sale of property, plant and 25,890 14,091 equipment and other

Other (2,500) 974

Acquisitions, net of cash acquired - (9,850)

Net cash flows used by investing activities (104,005)(128,877)



Cash flows from (used by) financing activities:

Proceeds from issuance of long-term debt, net 309,187 22,566

Repayments of long-term debt (361,855)(110,470)

Debt extinguishment costs (13,128) -

Debt issuance costs (2,830) -

Proceeds from accounts receivable facilities 145,864 171,133

Repayments under accounts receivable facilities (118,312)(171,285)

Dividends (43,295) (42,768)

Stock issued under incentive and purchase plans, net (3,807) (1,921) of forfeitures

Contribution from noncontrolling interest 19 16

Net cash flows used by financing activities (88,157) (132,729)

Effect of exchange rate changes on cash (423) 210

Increase (decrease) in cash and cash equivalents (98,353) 270,437

Cash, restricted cash and cash equivalents at 544,964 193,729 beginning of period

Cash, restricted cash and cash equivalents at end of $446,611$464,166period



Supplemental information:

Cash and cash equivalents $443,120$462,110

Restricted cash $3,491 $2,056

Total cash, restricted cash and cash equivalents $446,611$464,166

COMMERCIAL METALS COMPANYNON-GAAP FINANCIAL MEASURES (UNAUDITED)

This press release contains financial measures not derived in accordance with U.S. generally accepted accounting principles ("GAAP"). Reconciliations to the most comparable GAAP measure are provided below.

Adjusted EBITDA from continuing operations, core EBITDA from continuing operations, and adjusted earnings from continuing operations are non-GAAP financial measures. Adjusted earnings from continuing operations per diluted share is defined as adjusted earnings from continuing operations on a diluted per share basis.

Non-GAAP financial measures should be viewed in addition to, and not as alternatives for, the most directly comparable measures derived in accordance with GAAP and may not be comparable to similar measures presented by other companies. However, we believe that the non-GAAP financial measures provide relevant and useful information to management, investors, analysts, creditors and other interested parties in our industry as they allow: (i) comparison of our earnings to those of our competitors; (ii) a supplemental measure of our underlying business operational performance; and (iii) the assessment of period-to-period performance trends. Management uses non-GAAP financial measures to evaluate financial performance and set target benchmarks for annual and long-term cash incentive performance plans.

A reconciliation of earnings from continuing operations to adjusted EBITDA from continuing operations and core EBITDA from continuing operations is provided below:

Three Months Ended Nine Months Ended

(in thousands)5/31/2021 2/28/2021 11/30/20208/31/2020 5/31/2020 5/31/2021 5/31/2020

Earnings from continuing $130,408$66,233 $63,911 $67,782 $64,169 $260,552$210,520operations

Interest 11,965 14,021 14,259 13,962 15,409 40,245 47,875 expense

Income taxes 38,175 20,941 21,593 18,495 23,804 80,709 73,981

Depreciation and 41,804 41,573 41,799 41,654 41,765 125,176 124,095 amortization

Amortization of acquired unfavorable (1,508) (1,509) (1,523) (10,691) (4,348) (4,540) (18,676) contract backlog

Asset 277 474 3,594 1,098 5,983 4,345 6,513 impairments

Adjusted EBITDA from 221,121 141,733 143,633 132,300 146,782 506,487 444,308 continuing operations

Non-cash equity 13,800 12,696 9,062 9,875 6,170 35,558 21,975 compensation

Gain on sale (4,457) (5,877) - - - (10,334) - of assets

Loss on debt - 16,841 - 1,778 - 16,841 - extinguishment

Facility - 5,694 5,214 2,903 1,863 10,908 8,202 closure

Acquisition - - - 32,123 - - - settlement

Labor cost government - - (1,348) (2,985) - (1,348) - refund

Core EBITDA from $230,464$171,087$156,561$175,994$154,815$558,112$474,485continuing operations

A reconciliation of earnings from continuing operations to adjusted earnings from continuing operations is provided below:

Three Months Ended Nine Months Ended

(in thousands)5/31/2021 2/28/202111/30/ 8/31/20205/31/20205/31/2021 5/31/2020 2020

Earnings from continuing $130,408$66,233$63,911$67,782$64,169$260,552$210,520operations

Gain on sale (4,457) (5,877) - - - (10,334) - of assets

Asset 277 474 3,594 1,098 5,983 4,345 5,983 impairments

Loss on debt - 16,841 - 1,778 - 16,841 - extinguishment

Facility - 5,694 5,214 2,903 1,863 10,908 8,202 closure

Acquisition - - - 32,123 - - - settlement

Labor cost government - - (1,348) (2,985) - (1,348) - refund

Total adjustments $(4,180)$17,132$7,460 $34,917$7,846 $20,412 $14,185 (pre-tax)



Tax impact

Related tax effects on 878 (3,598) (1,593) (7,392) (1,648) (4,313) (2,979) adjustments

Total tax 878 (3,598) (1,593) (7,392) (1,648) (4,313) (2,979) impact

Adjusted earnings from $127,106$79,767$69,778$95,307$70,367$276,651$221,726continuing operations

Earnings from continuing $1.07 $0.54 $0.53 $0.56 $0.53 $2.14 $1.75 operations per diluted share

Adjusted earnings from continuing $1.04 $0.66 $0.58 $0.79 $0.59 $2.27 $1.84 operations per diluted share

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SOURCE Commercial Metals Company