-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GITQQbYjOD9+eaBPUVeR0IEaH0E4JYLMm8ndUjrhLo7RRwoYgNJfwya9btG3mXcI sbryeayrUfr+7hiCFC4nWA== 0000950134-00-002348.txt : 20000327 0000950134-00-002348.hdr.sgml : 20000327 ACCESSION NUMBER: 0000950134-00-002348 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000229 FILED AS OF DATE: 20000324 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMERCIAL METALS CO CENTRAL INDEX KEY: 0000022444 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-METALS SERVICE CENTERS & OFFICES [5051] IRS NUMBER: 750725338 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04304 FILM NUMBER: 578350 BUSINESS ADDRESS: STREET 1: 7800 STEMMONS FRWY STREET 2: P O BOX 1046 CITY: DALLAS STATE: TX ZIP: 75221 BUSINESS PHONE: 2146894300 MAIL ADDRESS: STREET 1: 7800 STEMMONS FRWY STREET 2: PO BOX 1046 CITY: DALLAS STATE: TX ZIP: 75221 10-Q 1 FORM 10-Q FOR QUARTER ENDED FEBRUARY 29, 2000 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 2O549 ------------------------------------ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------------------------- For quarter ended February 29, 2000 Commission File Number 1-4304 COMMERCIAL METALS COMPANY ---------------------------------------- (Exact name of registrant as specified in its charter) Delaware 75-0725338 - ------------------------------- ----------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 7800 Stemmons Freeway Dallas, Texas 75247 ---------------------------------------- (Address of principal executive offices) (Zip Code) (214) 689-4300 ------------- (Registrant's telephone number, including area code) ----------------------------------------------------- Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of February 29, 2000 there were 14,216,019 shares of the Company's common stock issued and outstanding excluding 1,916,564 shares held in the Company's treasury. 2 COMMERCIAL METALS COMPANY AND SUBSIDIARIES INDEX
Page No. --------- PART I - Financial Statements: Consolidated Balance Sheets - February 29, 2000 and August 31, 1999 2 - 3 Consolidated Statements of Earnings - Six months ended February 29, 2000 and February 28, 1999 4 Consolidated Statements of Cash Flows - Six months ended February 29, 2000 and February 28, 1999 5 Consolidated Statement of Stockholders' Equity For the six months ended February 29, 2000 6 Notes to Consolidated Financial Statements 7 - 8 Management's Discussion and Analysis of the Consolidated Financial Statements 9 - 15 PART II - Other Information and Signatures 16 - 18
Page 1 3 COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (In thousands except share data)
February 29, August 31, 2000 1999 ------------ ----------- CURRENT ASSETS: Cash $ 17,709 $ 44,665 Accounts receivable (less allowance for collection losses of $8,164 and $7,714) 362,971 304,318 Inventories 280,536 249,688 Other 69,835 63,666 ------------ ----------- TOTAL CURRENT ASSETS 731,051 662,337 PROPERTY, PLANT, AND EQUIPMENT, at cost: Land 26,397 25,927 Buildings 90,250 87,796 Equipment 650,096 635,054 Leasehold improvements 30,712 30,119 Construction in process 25,807 25,351 ------------ ----------- 823,262 804,247 Less accumulated depreciation and amortization (424,761) (401,975) ------------ ----------- 398,501 402,272 OTHER ASSETS 15,479 14,379 ------------ ----------- $ 1,145,031 $ 1,078,988 ============ ===========
See notes to consolidated financial statements. Page 2 4 COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (In thousands except share data)
February 29, August 31, 2000 1999 ------------ ----------- CURRENT LIABILITIES: Commercial paper $ 75,000 $ 10,000 Notes payable 38,428 4,382 Accounts payable 185,597 191,508 Other payables and accrued expenses 126,076 153,889 Income taxes payable 2,949 2,025 Current maturities of long-term debt 7,741 9,873 ------------ ----------- TOTAL CURRENT LIABILITIES 435,791 371,677 DEFERRED INCOME TAXES 23,263 23,263 LONG-TERM DEBT 258,058 265,590 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Capital stock: Preferred stock -- -- Common stock, par value $5.00 a share; authorized 40,000,000 shares; issued 16,132,583 shares, outstanding 14,216,019 and 14,406,260 shares 80,663 80,663 Additional paid-in capital 14,132 14,131 Cumulative translation adjustment (1,065) (774) Retained earnings 385,032 368,177 ------------ ----------- 478,762 462,197 Less treasury stock, 1,916,564 and 1,726,323 shares at cost (50,843) (43,739) ------------ ----------- 427,919 418,458 ------------ ----------- $ 1,145,031 $ 1,078,988 ============ ===========
See notes to consolidated financial statements. Page 3 5 COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (In thousands except share data)
Three months ended Six months ended February 29, February 28, February 29, February 28, -------------------------- -------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ NET SALES $ 637,624 $ 550,065 $ 1,250,051 $ 1,098,896 COSTS AND EXPENSES: Cost of goods sold 558,492 480,266 1,093,485 955,322 Selling, general and administrative expenses 51,179 47,739 102,311 94,257 Interest expense 6,848 4,633 12,672 9,544 Employees' retirement plans 4,598 4,063 8,768 8,861 ------------ ------------ ------------ ------------ 621,117 536,701 1,217,236 1,067,984 ------------ ------------ ------------ ------------ EARNINGS BEFORE INCOME TAXES 16,507 13,364 32,815 30,912 INCOME TAXES 6,149 4,978 12,224 11,515 ------------ ------------ ------------ ------------ NET EARNINGS $ 10,358 $ 8,386 $ 20,591 $ 19,397 ============ ============ ============ ============ Basic earnings per share $ 0.72 $ 0.57 $ 1.43 $ 1.33 Diluted earnings per share $ 0.70 $ 0.57 $ 1.40 $ 1.32 Cash dividends per share $ 0.13 $ 0.13 $ 0.26 $ 0.26 Average basic shares outstanding 14,349,209 14,607,065 14,368,623 14,592,565 Average diluted shares outstanding 14,780,772 14,768,862 14,709,438 14,714,856
See notes to consolidated financial statements. Page 4 6 COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Six months ended ---------------------- Feb. 29, Feb. 28, 2000 1999 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 20,591 $ 19,397 Adjustments to earnings not requiring cash: Depreciation and amortization 32,770 23,485 Provision for losses on receivables 490 1,087 Other (325) (100) --------- --------- Cash flows from operations before changes in current assets and liabilities 53,526 43,869 Changes in current assets and liabilities: Decrease (increase) in receivables (59,143) 6,784 Decrease (increase) in inventories (30,848) (7,794) Decrease (increase) in other assets (9,239) 10,113 Increase (decrease) in accounts payable, accrued expenses and income taxes (32,800) (20,692) --------- --------- Net Cash (Used) Provided by Operating Activities (78,504) 32,280 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (26,104) (84,198) Sales of property, plant and equipment 325 100 Investment in joint venture (1,216) --------- --------- Net Cash Used by Investing Activities (26,995) (84,098) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Commercial paper - net change 65,000 (15,000) Notes payable - net change 34,046 (35,806) New long-term notes 100,000 Payments on long-term debt (9,664) (8,544) Stock issued under stock option and purchase plans 5,506 1,521 Treasury stock acquired (12,609) Dividends paid (3,736) (3,790) --------- --------- Net Cash Provided by Financing Activities 78,543 38,381 --------- --------- Decrease in Cash and Cash Equivalents (26,956) (13,437) Cash and Cash Equivalents at Beginning of Year 44,665 30,985 --------- --------- Cash and Cash Equivalents at End of Period $ 17,709 $ 17,548 ========= =========
See notes to consolidated financial statements. Page 5 7 COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (In thousands except share data)
Common Stock Accumulated Treasury Stock ---------------------- Other Add'l --------------------- Number of Comprehensive Paid-In Retained Number of Shares Amount Loss Capital Earnings Shares Amount Total ----------- ---------- ------------- -------- ---------- ---------- --------- --------- Balance September 1, 1999 16,132,583 $ 80,663 $(774) $ 14,131 $ 368,177 (1,726,323) $ (43,739) $418,458 Comprehensive Income: Net earnings for six months ended February 29, 2000 20,591 20,591 Other comprehensive income- Foreign currency translation adjustment net of taxes of $157 (291) (291) -------- Comprehensive income 20,300 Cash dividends - $.26 a share (3,736) (3,736) Treasury stock acquired (408,400) (12,609) (12,609) Stock issued under stock option, purchase and bonus plans 1 218,159 5,505 5,506 ----------- ---------- ------------- -------- ---------- ---------- --------- -------- Balance, February 29, 2000 16,132,583 $ 80,663 $(1,065) $ 14,132 $ 385,032 (1,916,564) $ (50,843) $427,919 =========== ========== ============= ======== ========== ========== ========= ========
See notes to consolidated financial statements. Page 6 8 COMMERCIAL METALS COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - LONG-TERM DEBT AND EQUITY (in thousands):
Total Long-Term Current Amount Debt Maturities Outstanding --------- ---------- ----------- 6.75% notes due 2009 $ 100,000 $ -- $ 100,000 7.20% notes due 2005 100,000 -- 100,000 6.80% notes due 2007 50,000 -- 50,000 8.49% notes due 2001 7,142 7,143 14,285 Other 916 598 1,514 --------- ---------- ----------- $ 258,058 $ 7,741 $ 265,799 ========= ========== ===========
NOTE B - QUARTERLY FINANCIAL DATA: In the opinion of Management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of February 29, 2000 the results of operations for the six months then ended and the cash flows for the six months. The results of operations for the six month periods are not necessarily indicative of the results to be expected for a full year. NOTE C - RECLASSIFICATIONS Certain reclassifications have been made in the 1999 financial statements to conform to the classifications used in the current year. NOTE D - EARNINGS PER SHARE: There were no adjustments to net earnings to arrive at net income for either the six months ended February 29, 2000 or February 28, 1999. The reconciliation of the denominators of the earnings per share calculations are as follows:
Three months ended Six months ended Feb. 29, 2000 Feb. 28, 1999 Feb. 29, 2000 Feb. 28, 1999 ------------- ------------- ------------- ------------- Shares outstanding for basic earnings per share 14,349,209 14,607,065 14,368,623 14,592,565 Effect of dilutive securities-stock options/purchase plans 431,563 161,797 340,815 122,291 Shares outstanding for dilutive earnings per share 14,780,772 14,768,862 14,709,438 14,714,856
Stock options with total share commitments of 9,000 at February 29, 2000 were anti-dilutive based on the average share price for the quarter of $31.32 per share, and exercise prices of $31.94 per share. The options expire in 2007. Page 7 9 COMMERCIAL METALS COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE E - BUSINESS SEGMENTS (in thousands): The following is a summary of certain financial information by reportable segment:
Three months ended February 29, 2000 ----------------------------------------- MANU- MARKETING CORP CONSOL- FACTURING RECYCLING & TRADING & ELIM IDATED ----------- ----------- ----------- ----------- ----------- Net sales-unaffiliated customers $ 321,857 $ 110,360 $ 205,500 $ (93) $ 637,624 Intersegment sales 1,709 6,817 8,325 (16,851) ----------- ----------- ----------- ----------- ----------- 323,566 117,177 213,825 (16,944) 637,624 Earnings (Loss) before income taxes 15,597 2,270 4,729 (6,089) 16,507
Three months ended February 28, 1999 ----------------------------------------- MANU- MARKETING CORP CONSOL- FACTURING RECYCLING & TRADING & ELIM IDATED ----------- ----------- ----------- ----------- ----------- Net sales-unaffiliated customers $ 287,646 $ 71,042 $ 191,329 $ 48 $ 550,065 Intersegment sales 1,047 5,519 11,495 (18,061) ----------- ----------- ----------- ----------- ----------- 288,693 76,561 202,824 (18,013) 550,065 Earnings (Loss) before income taxes 16,712 (1,745) 4,034 (5,637) 13,364
Six months ended February 29, 2000 ---------------------------------------- MANU- MARKETING CORP CONSOL- FACTURING RECYCLING & TRADING & ELIM IDATED ----------- ----------- ----------- ----------- ----------- Net sales-unaffiliated customers $ 633,587 $ 208,215 $ 408,334 $ (85) $ 1,250,051 Intersegment sales 2,852 11,124 13,573 (27,549) 0 ----------- ----------- ----------- ----------- ----------- 636,439 219,339 421,907 (27,634) 1,250,051 Earnings (Loss) before income taxes 33,297 2,855 8,560 (11,897) 32,815 Total assets 738,059 120,342 255,762 30,868 1,145,031
Six months ended February 28, 1999 ----------------------------------------- MANU- MARKETING CORP CONSOL- FACTURING RECYCLING & TRADING & ELIM IDATED ----------- ----------- ----------- ----------- ----------- Net sales-unaffiliated customers $ 590,325 $ 144,186 $ 364,328 $ 57 $ 1,098,896 Intersegment sales 1,909 10,950 22,660 (35,519) 0 ----------- ----------- ----------- ----------- ----------- 592,234 155,136 386,988 (35,462) 1,098,896 Earnings (Loss) before income taxes 40,303 (5,874) 7,890 (11,407) 30,912 Total assets 665,825 111,386 239,225 25,066 1,041,502
Page 8 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED RESULTS OF OPERATIONS (in millions)
Second quarter Six months ended ----------------- ------------------- Feb. 29, Feb. 28, 2000 1999 2000 1999 ------- ------- -------- -------- Net sales $ 638 $ 550 $ 1,250 $ 1,099 Net earnings 10.4 8.4 20.6 19.4 Cash flows 27.2 20.7 53.5 43.9 EBITDA 39.8 29.6 78.3 63.9 LIFO reserve 5.4 17.6
SIGNIFICANT EVENTS AFFECTING THE COMPANY THIS QUARTER: - - Net earnings increased 24% compared to the prior year period. - - Higher steel shipments and outstanding copper tube profitability sustained the Manufacturing Segment, in spite of a slower ramp up in South Carolina and significant losses on several large structural fabrication contracts. - - Steel minimill operating profits declined from the prior year period due to higher scrap purchase costs and increased depreciation, amortization, and interest. - - The Company acquired the operating assets of Suncoast Steel Corp. of Naples, Florida expanding its rebar fabrication business. - - The Recycling segment sustained a broad turnaround from the prior year's losses. - - Operations improved for the Marketing and Trading segment. Page 9 11 CONSOLIDATED DATA The LIFO method of inventory valuation decreased net earnings for the quarter $1.2 million (8 cents per diluted share) compared to an increase of $1.2 million (8 cents per diluted share) last year. For the six months, net earnings were $1.6 million lower (11 cents per diluted share) compared to an increase of $3.2 million (22 cents per diluted share) last year. SEGMENT OPERATING DATA (in thousands) Net sales and operating profit (loss) by business segment are shown in the following table:
Three months ended Six months ended -------------------------- -------------------------- Feb. 29, Feb. 28, Feb. 29, Feb. 28, 2000 1999 2000 1999 ----------- ----------- ----------- ----------- NET SALES: Manufacturing $ 323,566 $ 288,693 $ 636,439 $ 592,234 Recycling 117,177 76,561 219,339 155,136 Marketing & Trading 213,825 202,824 421,907 386,988 Corporate & Eliminations (16,944) (18,013) (27,634) (35,462) ----------- ----------- ----------- ----------- $ 637,624 $ 550,065 $ 1,250,051 $ 1,098,896 =========== =========== =========== =========== OPERATING PROFIT (LOSS): Manufacturing $ 15,616 $ 16,716 $ 33,336 $ 40,309 Recycling 2,277 (1,731) 2,872 (5,854) Marketing & Trading 5,299 4,693 9,634 9,342 Corporate & Eliminations 163 (1,681) (355) (3,341) ----------- ----------- ----------- ----------- $ 23,355 $ 17,997 $ 45,487 $ 40,456 =========== =========== =========== ===========
MANUFACTURING - The Company's Manufacturing segment consists of the Steel Group and the Copper Tube Division. Operating profit for the segment decreased 7% from last year's second quarter while net sales increased 12%. The Steel Group's operating profit was 31% below last year's second quarter. This was partially offset by significantly better operating profit for the Copper Tube Division. Continuing high levels of low-priced steel imports resulted in relatively low steel mill selling prices. Also, margins were pressured by higher raw material costs as well as lower profits in steel fabrication. Conversely, steel shipments increased over the same period last year. Page 10 12 Steel and scrap prices are as reflected in the table below:
Second Quarter -------------- 2000 1999 ---- ---- Average mill selling price $307 $302 Average fabrication selling price 633 687 Average scrap purchase price 97 74
Operating profit for the Company's four steel minimills was 20% below the prior year. Mill shipments increased 16% to 455,000 from 391,000 tons, and tons rolled were up 38% from last year because of the new rolling mill at SMI South Carolina and stronger demand for steel products. Tons melted also significantly increased. Margins were lower due to higher scrap prices. While the average mill selling price was $5 per ton above last year, average scrap purchase costs were higher by $23 per ton. Start up of the new automatic finishing line at the Alabama minimill went well, whereas results at the new SMI South Carolina rolling mill were weaker than anticipated. Net sales in the fabrication businesses were comparable with the prior year's second quarter. Operating profit, however, decreased due to lower average selling prices (partially a function of product mix), and losses on some large, complex structural steel projects. Fabricated steel shipments totaled 216,000 tons, a 9% increase from the prior year period. The average fab selling price decreased $54 per ton. In December 1999, the Company acquired substantially all of the assets of Suncoast Steel Corp. of Naples, Florida, a rebar fabricator strategically located to serve the metropolitan Tampa Bay and Miami markets. Also, the Company continued to progress with its new castellated beam facility and product line as an adjunct to its steel joist business. Depreciation and amortization expense for the Steel Group increased by $4.6 million pretax from the prior year second quarter due to the new rolling mill in South Carolina and new finishing line at SMI Alabama. The Company's interest expense increased by $2.2 million from the prior year primarily because the completion of these two projects by fiscal year end 1999 substantially ended capitalization of interest expense, and short term rates have edged up. The Copper Tube Division's operating profit more than doubled from the same period last year due to better material spreads. Net sales increased by 47%. Demand for plumbing and refrigeration tube continued to be buoyed by the strong housing sector in the second quarter 2000. Copper tube shipments increased 20% versus the second quarter last year, and production was 24% higher. Page 11 13 RECYCLING - The Recycling segment reported an operating profit of $2.3 million for the second quarter 2000, which represented its third consecutive profitable quarter and a substantial improvement from the prior year period loss of $1.7 million. Domestic demand was stronger because of higher capacity utilization by scrap consumers. Prices were significantly better than the corresponding period last year, although they were tempered by relatively high imports of ferrous raw materials into the U.S. Consequently net sales increased 53% to $117 million. Ferrous scrap tonnage processed and shipped increased 28%, and ferrous sales prices were an average $105 per ton or 33% higher than a year ago. Nonferrous shipments increased 18%, and the average nonferrous scrap price was 29% higher than the prior year period. Total volume of scrap processed, including the Steel Group processing plants, was 592,000 tons, an increase of 25% from the 474,000 tons processed during the prior year period. MARKETING AND TRADING - Operating income for the Marketing and Trading segment was 13% higher than the prior year's second quarter, while net sales increased 5%. Global demand and prices generally continued to recover, but were still mixed during the second quarter 2000. Gross margins in steel marketing and distribution as well as steel trading showed some improvement, however, tonnage was affected by anti-dumping measures around the world. Markets for nonferrous metal products remained highly competitive, but profitability was maintained due to the Company's diverse product lines. Sales of industrial raw materials and products including ores, minerals, ferrous raw materials and primary metals remained steady and profitable despite continued margin pressures. The segment continued to broaden in new product and geographic areas. YEAR 2000 - As described in its Form 10K report for the year ended August 31, 1999, the Company had a comprehensive program to meet anticipated Year 2000 concerns. This program was substantially completed by December 31, 1999. The Company has not encountered any significant year 2000 problems. CONTINGENCIES In the ordinary course of conducting its business, the Company becomes involved in litigation, administrative proceedings, governmental investigations, including environmental matters, and contractual disputes. Some of these matters may result in settlements, fines, penalties or judgments being assessed against the Company. While the Company is unable to estimate precisely the ultimate dollar amount of exposure to loss in connection with the above-referenced matters, it makes accruals as warranted. Page 12 14 Due to evolving remediation technology, changing regulations, possible third-party contributions, the inherent shortcomings of the estimation process, the uncertainties involved in litigation and other factors, amounts accrued could vary significantly from amounts paid. Accordingly, it is not possible to estimate a meaningful range of possible exposure. Management believes that adequate provision has been made in the financial statements for the estimable potential impact of these contingencies, and that the outcomes will not significantly impact the long-term results of operations or the financial position of the Company, although they may have a material impact on earnings for a particular period. The Company is subject to federal, state and local pollution control laws and regulations in all locations where it has operating facilities. It anticipates that compliance with these laws and regulations will involve continuing capital expenditures and operating costs. OUTLOOK - Management continues to believe that the second half fiscal year 2000 will be stronger than the first half, due to both internal and external factors. The Company's biggest challenge is to improve profit performance at the South Carolina mill and the large structural fabrication business. Markets, generally should strengthen. Demand from the construction, manufacturing and distribution sectors of the U.S. economy remains strong, and markets in Europe and Asia are gaining momentum. Because of the global market improvement, potential anti-dumping action on some of the Company's steel mill products, and the seasonal increase in construction, management anticipates steel mill pricing improvements and wider manufacturing margins. Steel mill production and shipments are also expected to increase. The outlook for the Company's downstream steel fabrication and related operations remains favorable, and its strong presence in fabrication continues to provide profit stability. Copper tube consumption in residential construction remains robust; consequently, good demand is expected to continue. As the third quarter began, ferrous and nonferrous scrap prices had declined 5-10% from recent highs, but appear to have stabilized. Domestic demand for scrap should remain good. Export markets are sluggish, but ferrous scrap imports apparently have declined. Competition for unprepared scrap will remain intense but the Recycling segment should continue to produce solid results for the second half of fiscal year 2000. In Marketing and Trading, steel prices have rebounded off the bottom with most of the improvement in flat rolled products. The overall global steel outlook (including nonferrous semis), as well as markets for industrial products should improve. The Company will continue to expand into new product and geographic areas. Page 13 15 Longer term, good demand for construction related products and services is expected to continue. Added spending for the nation's infrastructure (including highways, bridges and airports, as well as schools) has begun to materialize. The Company anticipates relatively high consumption of steel bar and structural steel in the public sector during the next few years. The outlook for private construction also is favorable. The Company's historically high capital investments over the past two years should result in a meaningful increase in revenue growth and earnings power, especially beginning in fiscal year 2001. The Company will continue to profit from its vertical integration and unique business mix, and should be in a more favorable pricing environment. This outlook section contains forward-looking statements regarding the outlook for the Company's financial results including shipments, pricing, demand, production rates, and general market conditions. There is inherent risk and uncertainty in any forward-looking statements. Variances will occur and some could be materially different from management's current opinion. Developments that could impact the Company's expectations include interest rate changes, construction activity, metals pricing over which the Company exerts little influence, new capacity and product availability from competing steel minimills and other steel suppliers including import quantities and pricing, global factors including credit availability, currency fluctuations, and decisions by governments impacting the level and pace of overall economic growth. LIQUIDITY Cash flows from operations before changes in current assets and liabilities for the six months ended February 29, 2000 were $53.5 million compared to $43.9 million last year. Net cash flows used by operating activities was $78.5 million compared with $32.3 million provided by operating activities in the prior year period. Depreciation and amortization increased during the first half of 2000 primarily due to the capital projects at South Carolina and Alabama. Accounts receivable increased partially due to higher sales in the first half of fiscal year 2000 than in the last half of fiscal 1999. The remainder of the increase was primarily due to slower collection of retention and billings for large structural jobs. Accrued expenses decreased $32.8 million primarily due to the payment of incentive compensation and the funding of employee benefit plans accrued at August 31, 1999. Notes payable and commercial paper increased $99.0 million to supplement current cash flows for funding working capital, capital expenditures and treasury stock repurchases. The Company invested $26.1 million in property and equipment primarily in the Steel Group at the South Carolina mill, and in its fabrication operations. This was substantially less than the $84.2 million spent during the prior year first half. Page 14 16 At February 29, 2000, there were 14,216,019 common shares issued and outstanding with 1,916,564 held in the Company's treasury. Stockholders' equity was $428 million or $30.10 per share. During the first half of fiscal 2000, the Company repurchased 408,400 shares of common stock at an average price of $30.87. Net working capital was $295 million at February 29, 2000 compared to $291 million at August 31,1999. The current ratio was 1.7, slightly below August 31,1999. The Company's effective tax rate for the three months was 37.3%, the same as the first half last year. Long-term debt as a percent of total capitalization was 36.4% at February 29, 2000 compared to 37.5% at August 31, 1999. The ratio of total debt to total capitalization plus short-term debt stood at 45.7%, higher than the 39.6% at fiscal 1999 year end due to working capital requirements, capital expenditures and treasury share repurchases. Page 15 17 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Reference is made to the information incorporated by reference from Item 3. Legal Proceedings in the Company's Annual Report on Form 10-K for the year ending August 31, 1999 filed November 24, 1999, with the Securities and Exchange Commission. ITEM 2. CHANGES IN SECURITIES Not Applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the registrant's annual meeting of stockholders held January 27, 2000, a total of 12,578,770 shares of common stock or approximately 87% percent of those outstanding and entitled to vote were present in person or by proxy. There was no solicitation in opposition to management's nominees and all such nominees were elected as set forth in the following tabulation:
Nominee Votes For Votes Withheld ------- --------- -------------- Albert A. Eisenstat 12,218,959 359,811 Anthony A. Massaro 12,215,619 363,151
16 18 Stockholders approved the proposal to adopt the Company's 1999 Non-Employee Director Stock Option Plan by the following vote:
For Against Abstain --- ------- ------- 9,056,632 3,424,191 97,947
Stockholders also approved the ratification of the appointment of Deloitte & Touche LLP as auditors of the registrant for the fiscal year ending August 31, 2000, by the following vote:
For Against Abstain --- ------- ------- 12,518,489 50,204 10,077
ITEM 5. OTHER INFORMATION Not Applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits required by Item 601 of Regulation S-K. 27. Financial Data Schedule B. No reports on Form 8-K were filed during the quarter for which this report is filed. 17 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COMMERCIAL METALS COMPANY March 24, 2000 /s/ William B. Larson Vice President & Chief Financial Officer March 24, 2000 /s/ Malinda G. Passmore Controller 18 20 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27 Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS AUG-31-2000 SEP-01-1999 FEB-29-2000 17,709 0 371,135 (8,164) 280,536 731,051 823,262 (424,761) 1,145,031 435,791 0 0 0 80,663 347,256 1,145,031 1,250,051 1,250,051 1,093,485 1,093,485 0 490 12,672 32,815 12,224 20,591 0 0 0 20,591 1.43 1.40
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