-----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, Tn0kuHTCsILAyv2FBBA4BSBZHUf+6om7Vt7UZVBetpCG/ZHIXBnkcTfh6EhqusUU FUhgDE+PsdqFSK0HDqr0og== 0000950134-96-003499.txt : 19960715 0000950134-96-003499.hdr.sgml : 19960715 ACCESSION NUMBER: 0000950134-96-003499 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960712 SROS: NYSE 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: 1934 Act SEC FILE NUMBER: 001-04304 FILM NUMBER: 96594267 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 MAY 31, 1996 1 FORM 1O-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 May 31, 1996 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 P. O. Box 1046 Dallas, Texas 75221 - -------------------------------------------------------------------------------- ( 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 May 31, 1996 there were 15,069,251 shares of the Company's common stock issued and outstanding excluding 1,063,332 shares held in the Company's treasury. 2 COMMERCIAL METALS COMPANY AND SUBSIDIARIES __________________________________________ INDEX _____ Page No. ________ PART I - Financial Statements: Consolidated Balance Sheets - May 31, 1996 and August 31, 1995 2 - 3 Consolidated Statements of Earnings - Three months and nine months ended 4 May 31, 1996 and 1995 Consolidated Statements of Cash Flows - Nine months ended May 31, 1996 and 1995 5 Consolidated Statement of Stockholders' Equity - May 31, 1996 6 Notes to Consolidated Financial Statements 7 Management's Discussion and Analysis of the Consolidated Financial Statements 8 - 12 PART II - Other Information and Signatures 13- 15 Exhibit 11 (a) - Calculation of Primary and Fully Diluted Earnings per Share 16 Page 1 3 COMMERCIAL METALS COMPANY AND SUBSIDIARIES __________________________________________ CONSOLIDATED BALANCE SHEETS ___________________________ ASSETS ______ ( In thousands except share data )
May 31, August 31, 1996 1995 ---------- ---------- CURRENT ASSETS: Cash $ 19,055 $ 21,018 Accounts receivable (less allowance for collection losses of $5,395 and $4,743) 310,839 268,657 Inventories 192,584 208,114 Other 31,940 36,316 ---------- ---------- TOTAL CURRENT ASSETS 554,418 534,105 OTHER ASSETS 4,811 4,259 PROPERTY, PLANT, AND EQUIPMENT, at cost: Land 16,665 16,629 Buildings 42,761 40,178 Equipment 400,293 372,644 Leasehold improvements 18,836 16,972 Construction in process 16,370 10,282 ---------- ---------- 494,925 456,705 Less accumulated depreciation and amortization (275,773) (246,966) ---------- ---------- 219,152 209,739 ---------- ---------- $ 778,381 $ 748,103 ========== ==========
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 )
May 31, August 31, 1996 1995 ---------- ---------- CURRENT LIABILITIES: Commercial paper $ 5,000 $ -- Notes payable 37,480 5,189 Accounts payable 104,813 107,906 Other payables and accrued expenses 121,220 137,933 Income taxes payable 7,518 3,246 Current maturities of long-term debt 11,526 14,108 ---------- ---------- TOTAL CURRENT LIABILITIES 287,557 268,382 DEFERRED INCOME TAXES 21,393 18,553 LONG-TERM DEBT 146,519 158,004 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 15,069,251 and 15,369,592 shares 80,663 80,663 Additional paid-in capital 12,837 11,946 Retained earnings 251,412 223,994 ---------- ---------- 344,912 316,603 Less treasury stock, 1,063,332 and 762,991 shares at cost (22,000) (13,439) ---------- ---------- 322,912 303,164 ---------- ---------- $ 778,381 $ 748,103 ========== ==========
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 Nine months ended May 31, May 31, ------------------------- ------------------------- 1996 1995 1996 1995 ----------- ----------- ----------- ----------- REVENUES: Net sales $ 634,569 $ 572,520 $ 1,737,662 $ 1,514,861 Other revenue 4,575 1,632 9,882 5,996 ----------- ----------- ----------- ----------- 639,144 574,152 1,747,544 1,520,857 COSTS AND EXPENSES: Cost of goods sold 572,906 512,150 1,560,415 1,350,536 Selling, general and administrative expenses 39,817 36,685 113,229 101,289 Interest expense 4,215 4,197 12,072 11,394 Employees' pension and profit sharing plans 3,423 3,024 10,094 8,076 Litigation accrual -- -- -- 6,650 ----------- ----------- ----------- ----------- 620,361 556,056 1,695,810 1,477,945 EARNINGS BEFORE INCOME TAXES 18,783 18,096 51,734 42,912 INCOME TAXES 6,771 6,725 18,880 14,892 ----------- ----------- ----------- ----------- NET EARNINGS $ 12,012 $ 11,371 $ 32,854 $ 28,020 =========== =========== =========== =========== Net earnings per share $ 0.79 $ 0.73 $ 2.15 $ 1.85 Cash dividends per share $ 0.12 $ 0.12 $ 0.36 $ 0.36 Average shares outstanding 15,231,431 15,533,894 15,276,198 15,174,264
See notes to consolidated financial statements. Page 4 6 COMMERCIAL METALS COMPANY AND SUBSIDIARIES __________________________________________ CONSOLIDATED STATEMENTS OF CASH FLOWS _____________________________________ (In thousands)
Nine months ended May 31, ----------------------------- 1996 1995 - -------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 32,854 $ 28,020 Adjustments to earnings not requiring cash: Depreciation and amortization 31,330 27,940 Provision for losses on receivables 1,414 1,509 Other (286) (321) -------- -------- Cash flows from operations before changes in operating assets and liabilities 65,312 57,148 Changes in operating assets and liabilities (net of effect of Owen acquisition): Decrease (increase) in receivables (44,745) 4,559 Decrease (increase) in inventories 15,530 (41,495) Decrease (increase) in other assets 3,824 5,498 Increase (decrease) in accounts payable, accrued expenses and income taxes (16,774) 5,617 -------- -------- Net Cash Provided by Operating Activities 23,147 31,327 - ------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of Owen Steel, net of cash acquired (2,232) (24,994) Temporary investments 19,174 Purchase of property, plant and equipment (32,258) (22,412) Sales of property, plant and equipment 286 321 -------- -------- Net Cash Used by Investing Activities (34,204) (27,911) - ------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Commercial paper - net change 5,000 (10,000) Notes payable - net change 32,291 (22,452) New long-term debt 60,000 Refinance long-term debt of acquisition (32,000) Payments on long-term debt (14,067) (4,541) Stock issued under stock option/bonus plans 4,771 1,911 Treasury stock acquired (13,465) Tax benefits related to stock option plan 1,593 Dividends paid (5,436) (5,372) -------- -------- Net Cash Provided by Financing Activities 9,094 (10,861) - ------------------------------------------------------------------------------- Decrease in Cash and Cash Equivalents (1,963) (7,445) Cash and Cash Equivalents at Beginning of Year 21,018 19,095 -------- -------- Cash and Cash Equivalents at End of Period $ 19,055 $ 11,650 ======== ========
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 Treasury Stock -------------------------- Add'l --------------------- Number of Paid-In Retained Number of Shares Amount Capital Earnings Shares Amount ----------- --------- -------- ---------- --------- -------- Balance September 1, 1995 16,132,583 $ 80,663 $ 11,946 $ 223,994 (762,991) ($ 13,439) Net earnings for nine months ended May 31, 1996 32,854 Cash dividends - $.36 a share (5,436) Treasury stock acquired (557,600) (13,465) Additonal treasury stock issued for Owen acquisition 552 37,196 472 Stock issued under stock option, purchase and bonus plans 339 220,063 4,432 ----------- ----------- ----------- ----------- ----------- ----------- Balance, May 31, 1996 16,132,583 $ 80,663 $ 12,837 $ 251,412 (1,063,332) ($ 22,000) =========== =========== =========== =========== =========== ===========
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):
Long-Term Current Amount Debt Maturities Outstanding ------------ ------------ ------------ 7.20% notes due 2005 $ 100,000 $ -- $ 100,000 8.49% notes due 2001 35,714 7,143 42,857 8.75% note due 1999 10,713 4,286 14,999 Other 92 97 189 ------------ ------------ ------------ $ 146,519 $ 11,526 $ 158,045 ============ ============ ============
NOTE B - TAXES ON INCOME: Provision for taxes on income includes estimated United States taxes on undistributed earnings of subsidiaries outside the United States. NOTE C - 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 May 31, 1996, the results of operations for the nine months then ended and cash flows for the same periods. The results of operations for the nine month periods are not necessarily indicative of the results to be expected for a full year. Page 7 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED RESULTS OF OPERATIONS (in millions)
3RD QTR 3rd Qtr FY 1996 FY 1995 ------- ------- Revenues $ 639 $ 574 Net earnings 12.0 11.4 Cash flow 22.6 20.5 LIFO reserve 32.8 26.3
NINE MONTHS Nine Months FY 1996 FY 1995 ------- ------- Revenues $ 1,748 $1,521 Net earnings 32.9 28.0 Cash flow 65.3 57.1
SIGNIFICANT EVENTS AFFECTING THE COMPANY THIS QUARTER: - - Record earnings and cash flow for the quarter and the nine months - - Best third quarter for the CMC Steel Group - - Partial settlement on fire loss at SMI Texas - - Improved operating profit for the Recycling segment - - Consistent quarter for the Marketing and Trading segment The Lifo method of inventory valuation increased net earnings for the quarter $91 thousand (1 cent per share) compared to a decrease of $1.8 million (12 cents per share) last year. For the nine months net earnings were $959 thousand higher (6 cents per share) compared to a decrease of $3.2 million (21 cents per share) last year. Page 8 10 SEGMENT OPERATING DATA Revenues and operating profit by business segment are shown in the following table:
Three months ended Nine months ended May 31 May 31 May 31 May 31 1996 1995 1996 1995 ------------ ------------ ------------ ------------ REVENUES: Manufacturing $ 266,462 $ 249,017 $ 751,005 $ 654,151 Recycling 122,297 138,386 354,699 372,992 Marketing and Trading 264,215 200,694 677,970 531,278 Corporate and Eliminations (13,830) (13,945) (36,130) (37,564) ------------ ------------ ------------ ------------ $ 639,144 $ 574,152 $ 1,747,544 $ 1,520,857 OPERATING PROFIT: Manufacturing $ 16,804 $ 16,464 $ 45,595 $ 41,533 Recycling 2,638 2,393 6,796 11,013 Marketing and Trading 4,391 4,429 13,102 11,877 Corporate and Eliminations (835) (993) (1,687) (10,117) ------------ ------------ ------------ ------------ $ 22,998 $ 22,293 $ 63,806 $ 54,306
MANUFACTURING - With record shipments overcoming generally weaker prices, the Manufacturing segment's operating profits were 2% higher than last year's comparable quarter and significantly ahead of the previous quarter. The CMC Steel Group achieved record revenues, shipments, and profits for a third quarter with results moderately better than the excellent third quarter last year. Shipments by the four minimills totaled a record 474,000 tons or 16% higher than last year's comparable quarter whereas average selling prices decreased 5% and scrap costs were relatively flat. Mill operating profits were well ahead of the previous quarter but slightly behind last year's third quarter. Results included $1.8 million of other income from an insurance recovery for property damage at SMI-Texas last October. A related claim for losses due to business interruption is still outstanding. Page 9 11 The steel fabrication businesses shipped 173,000 tons, 7% higher than last year's third quarter and 12% above the previous quarter. Operating profits were ahead of last year's third quarter, aided by a slight increase in selling prices. The SMI-Owen group was profitable for the quarter and for the year to date. Copper Tube operating profits were up 9% over last year although gross margins remained under pressure. Copper tube shipments were 10% lower than the third quarter last year but encouraging in light of the volatility of the copper market. Demand for plumbing tube is good and sales and spreads have improved recently. RECYCLING - The Recycling segment recorded a 10% increase in operating profit compared with last year's period, reflecting improved gross margins on scrap processed. Domestic demand for scrap was good, but not as strong as last year, and exports were weaker except for Mexico. Intake was below last year. Steel scrap prices were slightly lower than the third quarter of last year but very steady with prices in the previous quarter. Shipments were down 22,000 tons to 303,000 tons. Nonferrous prices gyrated dramatically; aluminum scrap prices declined 16% and copper prices were about 6% lower. Overall nonferrous shipments were down 3% to 53,000 tons. MARKETING AND TRADING - Competition was especially severe in the Marketing and Trading segment. Although revenues and shipments were significantly higher, operating income was unchanged compared to the prior year's third quarter. Unit margins declined as customers continue to reduce inventories in a period of general over supply. The marketing and distribution business continued to be good. Revenues from nonferrous metals and products decreased but profits were about the same. Profits from secondary metals improved. Results for other raw materials including minerals, refractories and building materials were steady. Page 10 12 OTHER On April 30,1996 the Company filed suit against the four representatives (one of whom is a current director of the Company) of the former Owen Steel Company stockholders for failure to release from escrow funds for claims totaling approximately $2,400,000 paid subsequent to acquisition on exposures that existed at the acquisition date. The stockholder representatives have filed a response and counterclaims. ENVIRONMENTAL ACTIVITIES 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. In the ordinary course of conducting its business, the Company becomes involved in environmental litigation, administrative proceedings, and governmental investigations. Certain of these environmental matters or other proceedings may result in fines, penalties or judgments against the Company which may have a material impact on earnings for a particular quarter. While the Company is unable to estimate precisely the ultimate dollar amount of exposure to losses in connection with such matters, it makes timely accruals as warranted. It is the opinion of the Company's management that the outcome of such proceedings, individually or in the aggregate, will not have a material adverse effect on the business or consolidated financial position of the Company. OUTLOOK The outlook remains favorable. The underlying economic conditions appear to be improving, including some recovery in Japan. The necessary inventory correction has been accomplished in the U.S.A. and is underway in most other key markets. Most importantly, during the quarter we began to implement modest price increases in the U.S. on reinforcing bar and merchant shapes. Steel fabrication markets generally are firm, margins on copper tube have widened and ferrous scrap markets are steady. Nonferrous metal prices are weaker and continue to be extremely volatile, particularly copper, but demand is satisfactory. Page 11 13 LIQUIDITY Cash flow from operations before changes in operating assets and liabilities for the nine months was $65 million compared to $57 million last year. Depreciation expense increased from $28 million to $31 million due to the SMI Owen acquisition and current year capital expenditures. Accounts receivable increased $44.7 million since August 31 principally due to increased third quarter activity in the Marketing and Trading segment. Inventories have declined $15.5 million since year end based on strong shipments in the third quarter. Accounts payable and accrued expenses have decreased $16.8 million but short term borrowings increased $37.3 million to fund working capital requirements. The Company invested $32.3 million in capital expenditures as part of its annual capital program which is now estimated to be $45-50 million for this year. At May 31,1996, there were 15,069,251 common shares issued and outstanding with 1,063,332 shares held in the Company's treasury. Stockholders' equity was $323 million or $21.43 per share. Net working capital was $267 million at May 31,1996 compared to $266 million at August 31,1995. The current ratio was 1.9 compared to 2.0 at August 31,1995. The Company's effective tax rate for the nine months was 36.5%; the rate for the comparable period last year was 34.7% due to a credit of $1 million to income tax expense from the favorable resolution of tax issues with the Internal Revenue Service. Long-term debt as a percent of total capitalization was 29.9% at May 31,1996 compared to 32.9% at August 31,1995. The ratio of total debt to total capitalization plus shortterm debt stood at 36.8%. Page 12 14 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 ended August 31, 1995 filed November 27, 1995, with the Securities and Exchange Commission and the Company's Quarterly Report on Form 10-Q, Part II Item I. Legal Proceedings for the quarter ended February 29, 1996, filed April 12, 1996 with the Securities and Exchange Commission. On April 30, 1996, the Company and its subsidiary SMI - Owen Steel Company, Inc. (SMI-Owen) filed a lawsuit seeking to recover approximately $2.4 million from an escrow fund created with a portion of the purchase price in connection with the Company's November, 1994 acquisition of Owen Steel Company, Inc. and affiliates (Owen Steel). The lawsuit seeks recovery of part of a payment made by SMI-Owen to settle a claim in connection with a steel supply and erection contract entered into prior to the acquisition by the predecessor of SMI-Owen. The Company contends the claim was based on events which occurred prior to the acquisition, and the Company is entitled to reimbursement from the former Owen Steel stockholders for the claim settlement under the terms of the escrow agreement. The Complaint alleges breach of contract, breach of the covenant of good faith and fair dealing and seeks a declaratory judgment and damages. Dorothy G. Owen, a director of the Company and former stockholder of Owen Steel is one of four designated representatives of former Owen Steel stockholders. The four representatives have filed an Answer and Counterclaim denying the material allegations of the Complaint, alleging various defenses and setting forth counterclaims for specific performance, breach of contract, breach of fiduciary duty, breach of the covenant of good faith and fair dealing and seeking a declaratory judgment and unspecified actual and punitive damages. It is the opinion of the Company's management that this litigation will not have a material effect on the business or the consolidated financial position of the Company. ITEM 2. CHANGES IN SECURITIES Not Applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable Page 13 15 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable. 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. Exhibit No. 11. Computation of Per Share Earnings (a) Calculation of Primary and Fully Diluted Earnings Per Share 27. Financial Data Schedule Page 14 16 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 /s/ Lawrence A. Engels ----------------------------------- July 12, 1996 Lawrence A. Engels Vice President, Treasurer & Chief Financial Officer /s/ William B. Larson ------------------------------------ July 12, 1996 William B. Larson Controller Page 15 17 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 11 - Computation of Per Share Earnings (a) Calculation of Primary and Fully Diluted Earnings Per Share 27 - Financial Data Schedule
EX-11.A 2 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11(a) _______________ COMMERCIAL METALS COMPANY AND SUBSIDIARIES __________________________________________ CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE* ____________________________________________________________ ( In thousands except share data )
Nine Months ended May 31, ------------------------- 1996 1995 ----------- ----------- Net earnings $ 32,854 $ 28,020 Weighted average number of shares outstanding 15,116,014 14,924,234 Dilutive effect of stock option and purchase plans, after application of treasury stock method 160,184 250,030 Shares used in calculating primary net earnings per share 15,276,198 15,174,264 Earnings per share $ 2.15 $ 1.85
*Fully diluted earnings per share are identical to primary earnings per share. Page 16 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS AUG-31-1996 SEP-01-1995 MAY-31-1996 19,055 0 316,234 5,395 192,584 554,418 494,925 275,773 778,381 287,557 146,519 80,663 0 0 242,249 778,381 1,737,662 1,747,544 1,560,415 1,560,415 0 1,414 12,072 51,734 18,880 32,854 0 0 0 32,854 2.15 0
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