PR Newswire | Mar 18, 2021 06:45AM EDT

03/18 05:45 CDT

Commercial Metals Company Reports Second Quarter Fiscal 2021 Results- Second quarter Earnings from Continuing Operations of $66.2 million, or $0.54 per diluted share- Adjusted Earnings from Continuing Operations of $79.8 million, or $0.66 per diluted share- Core EBITDA of $171.1 million, a second quarter record, up 18% year-over-year and 9% sequentially- Continued strong controllable cost performance- Achieved stable steel products metal margins despite a rapidly rising scrap cost environment IRVING, Texas, March 18, 2021

IRVING, Texas, March 18, 2021 /PRNewswire/ -- Commercial Metals Company (NYSE: CMC) today announced financial results for its fiscal second quarter ended February 28, 2021. Earnings from continuing operations were $66.2 million, or $0.54 per diluted share, on net sales of $1.5 billion, compared to prior year earnings from continuing operations of $63.6 million, or $0.53 per diluted share, on net sales of $1.3 billion.

During the second quarter of fiscal 2021, the Company incurred $13.5 million in net after-tax charges, chiefly from the previously announced refinancing of long-term debt as well as closure costs associated with the final decommissioning of CMC's Steel California operations, partially offset by a gain on the sale of certain facilities. Excluding these items, second quarter adjusted earnings from continuing operations were $79.8 million, or $0.66 per diluted share, compared to adjusted earnings from continuing operations of $63.6 million, or $0.53 per diluted share, in the prior year period. Details can be found in the non-GAAP reconciliation that follows.

Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, commented, "I am extremely proud of our team's continued hard work, which resulted in outstanding financial results highlighted by record second quarter Core EBITDA. This was achieved amidst a challenging environment of rising scrap costs and weather-related disruptions, demonstrating both the value of CMC's vertically integrated structure and the agility of our commercial, operational, and support teams."

Ms. Smith continued, "CMC's second quarter results also highlight the benefits of managing the operating factors that are within our control, including leveraging opportunities to improve efficiency throughout our organization. From this solid foundation, CMC will further enhance our earnings capability in the coming quarters, as we continue to capitalize on benefits from ongoing network optimization efforts and ramp up our third rolling line in Poland this summer."

The Company's liquidity position as of February 28, 2021 remained strong, with cash and cash equivalents of $367.3 million and availability under the Company's credit and accounts receivable facilities of $693.0 million.

On March 17, 2021, the board of directors declared a quarterly dividend of $0.12 per share of CMC common stock payable to stockholders of record on March 31, 2021. The dividend will be paid on April 14, 2021, and marks 226 consecutive quarterly dividend payments by the Company.

Business Segments - Fiscal Second Quarter 2021 Review

The North America segment generated adjusted EBITDA of $171.6 million for the second quarter of fiscal 2021, an increase of 12% compared to $152.8 million in the prior year period. This improvement reflects solid management of controllable costs at each stage of our vertically integrated value chain. Cost performance at the mills was particularly strong, driven by network efficiencies and lower costs for consumables. Earnings also benefited from expanded margins on sales of raw materials, as well as the impact of selling lower cost inventory within an environment of rising prices for steel products.

Shipment volumes of finished steel, which include steel products and downstream products, increased by 2% from the prior year quarter. Demand for rebar from the mills remained strong, growing year-over-year, supported by resilient construction activity. Single family residential construction within CMC's core geographies has increased significantly over the last year, which has opened additional selling opportunities for the Company, and is a positive indicator of future infrastructure and non-residential spending in these areas. Shipments of merchant and other products increased by 13% from a year ago, driven by rising industrial activity and the construction of warehouses and metal buildings. Downstream products volumes declined 6% year-over-year due to a modest backlog contraction and weather-related job site disruptions in several regional markets.

Margins over scrap cost within the vertical chain declined from the second quarter of fiscal 2020, with compression in both steel products and downstream products. Average selling price for steel products increased $70 per ton year-over-year, which was more than offset by higher scrap costs. Steel products margins improved sequentially throughout the second quarter, and exited February at the highest level in nearly a year. Margin over scrap cost on downstream products declined compared to a year ago, driven by higher input costs and modestly lower pricing in CMC's committed backlog, which led to lower average selling prices.

The Europe segment reported adjusted EBITDA of $16.1 million for the second quarter of fiscal 2021, up 20% compared to adjusted EBITDA of $13.5 million for the prior year quarter. The improvement was driven by a modest expansion in margin over scrap, as well as the impact of selling lower cost inventory within an environment of rising prices for steel products. Demand for steel products from both construction and industrial end markets remained healthy during the quarter. However, shipments declined by 7% year-over-year, due largely to the unusually high volumes that shipped during the second quarter of fiscal 2020. During the quarter, we shifted product mix to capitalize on opportunities with customers of merchant and other products. The reduction in rebar shipments from a year ago reflects the operations commercial agility, rather than any softening of market conditions.

Outlook

"We expect finished steel volumes in both North America and Europe to follow typical seasonal trends during the third quarter, which is historically strong given the start of the spring and summer construction seasons," said Ms. Smith.

"Shipments of steel and downstream products in North America should be supported by our construction backlog, with steel products also benefiting from elevated residential construction spending, continued manufacturing recovery, and anticipated strong highway infrastructure activity. Volumes in Europe are anticipated to remain healthy, driven by growing demand from construction and industrial end markets. We expect margins over scrap on steel products in both North America and Europe to increase sequentially following the realization of price adjustments made throughout the second quarter."

Conference Call

CMC invites you to listen to a live broadcast of its second quarter fiscal 2021 conference call today, Thursday, March 18, 2021, at 11:00 a.m. ET. Barbara 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, a rerolling mill, 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 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 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.

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, 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 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 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; and civil unrest, protests and riots.

COMMERCIAL METALS COMPANY FINANCIAL & OPERATING STATISTICS (UNAUDITED)

Three Months Ended Six Months Ended

(in thousands, except per2/28/2021 11/30/2020 8/31/2020 5/31/2020 2/29/2020 2/28/2021 2/29/2020 ton amounts)

North America

Net sales $1,257,486$1,195,013$1,224,849$1,167,081$1,161,283$2,452,499$2,378,003

Adjusted 171,612 155,634 174,219 159,394 152,831 327,246 327,563 EBITDA



External tons shipped

Raw 302 330 300 288 321 632 641 materials

Rebar 472 486 498 463 461 958 936

Merchant 268 264 234 211 238 532 474 and other

Steel 740 750 732 674 699 1,490 1,410 products

Downstream343 371 429 427 366 714 779 products



Average selling price per ton

Raw $846 $630 $605 $517 $595 $733 $571 materials

Steel 695 612 600 624 625 653 625 products

Downstream929 934 970 966 984 931 979 products



Cost of raw $629 $458 $427 $348 $435 $540 $414 materials per ton

Cost of ferrous scrap 344 266 237 239 256 304 238 utilized per ton



Steel products metal $351 $346 $363 $385 $369 $349 $387 margin per ton





Europe

Net sales $202,066 $194,596 $179,855 $173,817 $180,079 $396,662 $345,468

Adjusted 16,107 14,470 22,927 14,270 13,451 30,577 24,810 EBITDA



External tons shipped

Rebar 78 128 150 122 145 206 267

Merchant 275 269 230 252 235 544 451 and other

Steel 353 397 380 374 380 750 718 products



Average selling price per ton

Steel $532 $461 $446 $437 $449 $495 $455 products



Cost of ferrous scrap $328 $262 $250 $239 $251 $296 $248 utilized per ton



Steel products metal $204 $199 $196 $198 $198 $199 $207 margin per ton

COMMERCIAL METALS COMPANY BUSINESS SEGMENTS (UNAUDITED)

(in Three Months Ended Six Months Ended thousands)

Net sales 2/28/2021 11/30/2020 8/31/2020 5/31/2020 2/29/2020 2/28/2021 2/29/2020

North $1,257,486$1,195,013$1,224,849$1,167,081$1,161,283$2,452,499$2,378,003America

Europe 202,066 194,596 179,855 173,817 180,079 396,662 345,468

Corporate 2,718 2,194 4,428 785 (399) 4,912 2,200 and Other

Total net $1,462,270$1,391,803$1,409,132$1,341,683$1,340,963$2,854,073$2,725,671sales



Adjusted EBITDA from continuing operations

North $171,612 $155,634 $174,219 $159,394 $152,831 $327,246 $327,563 America

Europe 16,107 14,470 22,927 14,270 13,451 30,577 24,810

Corporate (45,986) (26,471) (64,846) (26,882) (28,561) (72,457) (54,847) and Other

COMMERCIAL METALS COMPANY CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)

Three Months Ended Six Months Ended

(in thousands, except share February 28, 2021February 29, 2020February 28, 2021February 29, 2020data)

Net sales $1,462,270 $1,340,963 $2,854,073 $2,725,671

Costs and expenses:

Cost of goods 1,228,343 1,123,096 2,403,162 2,269,610 sold

Selling, general and 115,417 115,538 229,044 226,537 administrative expenses

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

Interest 14,021 15,888 28,280 32,466 expense

Asset 474 - 4,068 530 impairments

1,375,096 1,254,522 2,681,395 2,529,143

Earnings from continuing operations 87,174 86,441 172,678 196,528 before income taxes

Income taxes 20,941 22,845 42,534 50,177

Earnings from continuing 66,233 63,596 130,144 146,351 operations



Earnings from discontinued operations 197 301 447 1,196 before income taxes

Income taxes 73 99 141 401

Earnings from discontinued 124 202 306 795 operations



Net earnings $66,357 $63,798 $130,450 $147,146



Basic earnings per share*

Earnings from continuing $0.55 $0.53 $1.08 $1.23 operations

Earnings from discontinued - - - 0.01 operations

Net earnings $0.55 $0.54 $1.09 $1.24



Diluted earnings per share*

Earnings from continuing $0.54 $0.53 $1.07 $1.22 operations

Earnings from discontinued - - - 0.01 operations

Net earnings $0.55 $0.53 $1.07 $1.22



Cash dividends$0.12 $0.12 $0.24 $0.24 per share

Average basic shares 120,345,432 118,919,455 120,052,459 118,644,823 outstanding

Average diluted shares121,751,859 120,407,256 121,672,194 120,303,259 outstanding

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

COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share data) February 28, 2021August 31, 2020

Assets

Current assets:

Cash and cash equivalents $367,347 $542,103

Accounts receivable (less allowance for 895,604 880,728 doubtful accounts of $7,623 and $9,597)

Inventories, net 776,561 625,393

Prepaid and other current assets 166,124 165,879

Total current assets 2,205,636 2,214,103

Property, plant and equipment, net 1,557,143 1,571,067

Goodwill 66,235 64,321

Other noncurrent assets 235,027 232,237

Total assets $4,064,041 $4,081,728

Liabilities and stockholders' equity

Current liabilities:

Accounts payable $309,413 $266,102

Accrued expenses and other payables 341,903 461,012

Current maturities of long-term debt and 22,777 18,149 short-term borrowings

Total current liabilities 674,093 745,263

Deferred income taxes 126,789 130,810

Other noncurrent liabilities 242,632 250,706

Long-term debt 1,011,035 1,065,536

Total liabilities 2,054,549 2,192,315

Stockholders' equity:

Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued 1,290 1,290 129,060,664 shares; outstanding 120,508,215 and 119,220,905 shares

Additional paid-in capital 354,620 358,912

Accumulated other comprehensive loss (102,140) (103,764)

Retained earnings 1,909,443 1,807,826

Less treasury stock, 8,552,449 and (153,952) (175,063) 9,839,759 shares at cost

Stockholders' equity 2,009,261 1,889,201

Stockholders' equity attributable to 231 212 noncontrolling interests

Total equity 2,009,492 1,889,413

Total liabilities and stockholders' $4,064,041 $4,081,728 equity

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

Six Months Ended

(in thousands) February 28, 2021February 29, 2020

Cash flows from (used by) operating activities:

Net earnings $ 130,450 $ 147,146

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

Depreciation and amortization 83,372 82,338

Stock-based compensation 21,758 15,805

Loss on debt extinguishment 16,841 -

Deferred income taxes and other (8,129) 42,142 long-term taxes

Net gain on disposals of subsidiaries, (5,481) (5,585) assets and other

Asset impairments 4,068 530

Amortization of acquired unfavorable (3,032) (14,328) contract backlog

Other (105) 1,041

Changes in operating assets and (238,539) (15,673) liabilities

Net cash flows from operating 1,203 253,416 activities



Cash flows from (used by) investing activities:

Capital expenditures (87,688) (96,592)

Proceeds from the sale of property, 20,338 14,004 plant and equipment and other

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

Proceeds from insurance - 974

Net cash flows used by investing (67,350) (91,464) activities



Cash flows from (used by) financing activities:

Proceeds from issuance of long-term 296,250 11,299 debt, net

Repayments of long-term debt (357,792) (106,880)

Debt extinguishment costs (13,051) -

Debt issuance costs (1,124) -

Proceeds from accounts receivable 8,848 85,686 programs

Repayments under accounts receivable (8,848) (81,314) programs

Dividends (28,833) (28,480)

Stock issued under incentive and (4,536) (2,463) purchase plans, net of forfeitures

Contribution from noncontrolling 19 16 interest

Net cash flows used by financing (109,067) (122,136) activities

Effect of exchange rate changes on cash(419) 337

Increase (decrease) in cash and cash (175,633) 40,153 equivalents

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

Cash, restricted cash and cash $ 369,331 $ 233,882 equivalents at end of period



Supplemental information:

Cash and cash equivalents $ 367,347 $ 232,442

Restricted cash $ 1,984 $ 1,440

Total cash, cash equivalents and $ 369,331 $ 233,882 restricted cash

COMMERCIAL METALS COMPANYNON-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 Operationsis 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 debt extinguishment costs, non-cash equity compensation, certain gains on sale of assets, certain facility closure costs, acquisition settlement costs and labor cost government refunds. 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 before income taxes to Core EBITDA from continuing operations is provided below:

Three Months Ended Six Months Ended

(in thousands)2/28/2021 11/30/20208/31/2020 5/31/2020 2/29/2020 2/28/2021 2/29/2020

Earnings from continuing $66,233 $63,911 $67,782 $64,169 $63,596 $130,144$146,351operations

Interest 14,021 14,259 13,962 15,409 15,888 28,280 32,466 expense

Income taxes 20,941 21,593 18,495 23,804 22,845 42,534 50,177

Depreciation and 41,573 41,799 41,654 41,765 41,389 83,372 82,330 amortization

Amortization of acquired unfavorable (1,509) (1,523) (10,691) (4,348) (5,997) (3,032) (14,328) contract backlog

Asset 474 3,594 1,098 5,983 - 4,068 530 impairments

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

Non-cash equity 12,696 9,062 9,875 6,170 7,536 21,758 15,805 compensation

Gain on sale (5,877) - - - - (5,877) - of assets

Facility 5,694 5,214 2,903 1,863 - 10,908 6,339 closure

Acquisition - - 32,123 - - - - settlement

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

Core EBITDA from $171,087$156,561$175,994$154,815$145,257$327,648$319,670continuing operations

Adjusted earnings from continuing operationsis a non-GAAP financial measure that is equal to earnings from continuing operations before debt extinguishment costs, certain gains on sale of assets, certain facility closure costs, asset impairments, labor cost government refunds and acquisition settlements, 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 Six Months Ended

(in thousands)2/28/202111/30/20208/31/20205/31/20202/29/20202/28/2021 2/29/2020

Earnings from continuing $66,233$ 63,911$67,782$64,169$63,596$130,144$146,351operations

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

Gain on sale (5,877) - - - - (5,877) - of assets

Facility 5,694 5,214 2,903 1,863 - 10,908 6,339 closure

Asset 474 3,594 1,098 5,983 - 4,068 - impairments

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

Acquisition - - 32,123 - - - - settlement

Total adjustments $17,132$ 7,460 $34,917$7,846 $- $24,592 $6,339 (pre-tax)



Tax Impact

Related tax effects on (3,598) (1,593) (7,392) (1,648) - (5,191) (1,331) adjustments

Total tax (3,598) (1,593) (7,392) (1,648) - (5,191) (1,331) impact

Adjusted earnings from $79,767$ 69,778$95,307$70,367$63,596$149,545$151,359continuing operations



Adjusted earnings from continuing $0.66 $ 0.58 $0.79 $0.59 $0.53 $1.23 $1.26 operations per diluted share

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SOURCE Commercial Metals Company