-----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, EwViWwzXbKY8BT3ZG35SmqJL3dE9pRHxNW5bFlUNQtXcliUCfDUoFwz7G4mBl5O4 rNmAXDFKPhnLfGVWvoE0xg== 0000950134-97-005226.txt : 19970711 0000950134-97-005226.hdr.sgml : 19970711 ACCESSION NUMBER: 0000950134-97-005226 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970531 FILED AS OF DATE: 19970710 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: 97638418 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 PERIOD END 5/31/97 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, 1997 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, 1997 there were 14,682,166 shares of the Company's common stock issued and outstanding excluding 1,450,417 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, 1997 and August 31, 1996 2 - 3 Consolidated Statements of Earnings - Nine months and three months ended 4 May 31, 1997 and May 31, 1996 Consolidated Statements of Cash Flows - Nine months ended May 31, 1997 and May 31, 1996 5 Consolidated Statement of Stockholders' Equity - May 31, 1997 6 Notes to Consolidated Financial Statements 7 Management's Discussion and Analysis of the Consolidated Financial Statements 8 - 13 PART II - Other Information and Signatures 14- 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, 1997 1996 --------- --------- CURRENT ASSETS: Cash $ 14,447 $ 24,260 Accounts receivable (less allowance for collection losses of $6,040 and $5,501) 304,216 294,611 Inventories 211,603 186,201 Other 46,864 34,411 --------- --------- TOTAL CURRENT ASSETS 577,130 539,483 OTHER ASSETS 6,603 4,563 PROPERTY, PLANT, AND EQUIPMENT, at cost: Land 17,352 17,272 Buildings 52,659 45,902 Equipment 435,603 407,286 Leasehold improvements 20,395 19,761 Construction in process 30,674 16,748 --------- --------- 556,683 506,969 Less accumulated depreciation and amortization (315,382) (284,259) --------- --------- 241,301 222,710 --------- --------- $ 825,034 $ 766,756 ========= =========
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, 1997 1996 --------- --------- CURRENT LIABILITIES: Commercial paper $ 30,000 $ -- Notes payable 30,300 Accounts payable 132,427 116,971 Other payables and accrued expenses 122,180 128,879 Income taxes payable 224 6,729 Current maturities of long-term debt 11,502 11,494 --------- --------- TOTAL CURRENT LIABILITIES 326,633 264,073 DEFERRED INCOME TAXES 21,044 21,044 LONG-TERM DEBT 135,228 146,506 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 14,682,166 and 15,095,964 shares 80,663 80,663 Additional paid-in capital 13,496 13,193 Retained earnings 282,797 262,772 --------- --------- 376,956 356,628 Less treasury stock, 1,450,417 and 1,036,619 shares at cost (34,827) (21,495) --------- --------- 342,129 335,133 --------- --------- $ 825,034 $ 766,756 ========= =========
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, ------------------------- ------------------------- 1997 1996 1997 1996 ----------- ----------- ----------- ----------- REVENUES: Net sales $ 586,141 $ 634,569 $ 1,636,463 $ 1,737,662 Other revenue 3,505 4,575 9,899 9,882 ----------- ----------- ----------- ----------- 589,646 639,144 1,646,362 1,747,544 COST AND EXPENSES: Cost of goods sold 523,637 572,906 1,460,288 1,560,415 Selling, general and administrative expenses 42,944 39,817 123,499 113,229 Interest expense 3,898 4,215 11,055 12,072 Employees' pension and profit sharing plans 4,247 3,423 10,645 10,094 ----------- ----------- ----------- ----------- 574,726 620,361 1,605,487 1,695,810 EARNINGS BEFORE INCOME TAXES 14,920 18,783 40,875 51,734 INCOME TAXES 5,410 6,771 14,987 18,880 ----------- ----------- ----------- ----------- NET EARNINGS $ 9,510 $ 12,012 $ 25,888 $ 32,854 =========== =========== =========== =========== Net earnings per share $ 0.63 $ 0.79 $ 1.69 $ 2.15 Cash dividends per share $ 0.13 $ 0.12 $ 0.39 $ 0.36 Average shares outstanding 15,177,065 15,231,431 15,326,178 15,276,198
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, -------------------------- 1997 1996 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 25,888 $ 32,854 Adjustments to earnings not requiring cash: Depreciation and amortization 32,634 31,330 Provision for losses on receivables 1,087 1,414 Other (182) (286) ----------- ----------- Cash flows from operations before changes in operating assets and liabilities 59,427 65,312 Changes in operating assets and liabilities Decrease (increase) in receivables (10,692) (44,178) Decrease (increase) in inventories (25,402) 15,530 Decrease (increase) in other assets (14,493) 3,824 Increase (decrease) in accounts payable, accrued expenses and income taxes 2,252 (16,774) ----------- ----------- Net Cash Provided by Operating Activities 11,092 23,714 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of Owen Steel -- (2,799) Purchase of property, plant and equipment (51,225) (32,258) Sales of property, plant and equipment 182 286 ----------- ----------- Net Cash Used by Investing Activities (51,043) (34,771) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Commercial paper - net change 30,000 5,000 Notes payable - net change 30,300 32,291 Payments on long-term debt (11,270) (14,067) Stock issued under stock option/purchase plans 4,698 4,771 Treasury stock acquired (17,727) (13,465) Dividends paid (5,863) (5,436) ----------- ----------- Net Cash Provided by Financing Activities 30,138 9,094 ----------- ----------- Decrease in Cash and Cash Equivalents (9,813) (1,963) Cash and Cash Equivalents at Beginning of Year 24,260 21,018 ----------- ----------- Cash and Cash Equivalents at End of Period $ 14,447 $ 19,055 =========== ===========
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, 1996 16,132,583 $80,663 $13,193 $262,772 (1,036,619) ($21,495) Net earnings for nine months ended May 31, 1997 25,888 Cash dividends - $.39 a share (5,863) Treasury stock acquired (628,993) (17,727) Stock issued under stock option, purchase and bonus plans 303 215,195 4,395 ---------- ------- ------- -------- --------- ------- Balance, May 31, 1997 16,132,583 $80,663 $13,496 $282,797 (1,450,417) ($34,827) ========== ======= ======= ======== ========= =======
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 28,571 7,143 35,714 8.75% note due 1999 6,427 4,286 10,713 Other 230 73 303 -------- -------- -------- $135,228 $ 11,502 $146,730 ======== ======== ========
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, 1997, 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 1997 FY 1996 ------- ------- Revenues $ 590 $ 639 Net earnings 9.5 12.0 Cash flow 20.9 22.6 LIFO reserve 31.3 32.8
NINE MONTHS Nine Months FY 1997 FY 1996 ------- ------- Revenues $ 1,646 $1,748 Net earnings 25.9 32.9 Cash flow 59.4 65.3
SIGNIFICANT EVENTS AFFECTING THE COMPANY THIS QUARTER: - - Strong shipments but an inconsistent pricing climate resulted in earnings lower than last year's record third quarter. - - Steel Group achieved record shipments for a quarter but lower operating profit due to lower selling prices and nonoperating expenses. - - Copper tube division margins squeezed by imports. - - Ferrous scrap prices declined while nonferrous metals were mixed. - - Marketing and Trading consistent with last year. Page 8 10 The Lifo method of inventory valuation decreased net earnings for the quarter $803 thousand (5 cents per share) compared to an increase of $91 thousand (1 cent per share) last year. For the nine months net earnings were $952 thousand lower (6 cents per share) compared to a increase of $959 thousand (6 cents per share) last year. 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 1997 1996 1997 1996 ----------- ----------- ----------- ----------- REVENUES: Manufacturing $ 277,871 $ 266,462 $ 780,920 $ 751,005 Recycling 129,414 122,297 340,695 354,699 Marketing and Trading 198,669 264,215 572,938 677,970 Corporate and Eliminations (16,308) (13,830) (48,191) (36,130) ----------- ----------- ----------- ----------- $ 589,646 $ 639,144 $ 1,646,362 $ 1,747,544 OPERATING PROFIT: Manufacturing $ 13,421 $ 16,804 $ 38,125 $ 45,595 Recycling 1,255 2,638 3,562 6,796 Marketing and Trading 4,745 4,391 13,754 13,102 Corporate and Eliminations (603) (835) (3,511) (1,687) ----------- ----------- ----------- ----------- $ 18,818 $ 22,998 $ 51,930 $ 63,806
MANUFACTURING - Operating profit for the segment was 20% below last year's record third quarter. Record shipments were offset by lower pricing and computer migration and pension expenses. The Copper Tube Division was adversely affected by a margin squeeze precipitated by imports.
3rd Qtr 1997 3rd Qtr 1996 ------------ ------------ Average mill selling price $319.29 $320.87 Average fab selling price 632.12 632.92 Average scrap purchase price 113.60 112.73
Page 9 11 The Steel Group operating profit was down 20% from the prior year quarter. Shipments by the four minimills totaled 517,000 tons or 9% above last year's third quarter resulting in higher operating profits despite slightly lower pricing and minor increases in scrap costs. Especially notable is that SMI South Carolina achieved a record quarter for profitability. Delays on larger structural jobs and moderately lower fabricated rebar shipments resulted in lower operating profit for the Company's steel fabrication businesses. Profits declined in most product lines, including joists and fence posts. Fabricated steel shipments were up slightly, however, average prices were about even with the prior year. The Company's fourth joist manufacturing plant will start operations in June in Nevada. The recently acquired heat treating plant in Pennsylvania is doing well. Computer migration costs during the quarter were $1.7 million. During the quarter the Steel Group terminated the Company's only remaining defined benefit plan. Payment of benefits to participants is expected to occur by May 31,1998. A curtailment loss of $540,000 was accrued during the third quarter. The current annual financial statement pension expense of $1.2 million and cash contribution of $1.5 million will be reduced to an immaterial amount in fiscal 1998 and eliminated altogether thereafter. This expense reduction will be offset by a one time settlement liability at time of payout presently estimated to be no greater than $1.5 million. Therefore pension expense will be substantially equivalent in FY 1998 to the current year but will be eliminated thereafter. The Copper Tube Division operating profit was 28% below last year as gross margins came under pressure due to reduced housing starts and increased imports from Mexico. Shipments were up 6%, building market share and taking advantage of increased productivity. RECYCLING - Although net sales increased modestly, the Recycling segment reported a 52% decrease in operating profit compared with last year's third quarter. The prior year period included a pretax Lifo credit of $522,000 versus a current period charge of $520,000. Gross margins on nonferrous scrap improved whereas ferrous margins were tighter. Total shipments declined slightly. Domestic demand for scrap was good, while exports were weaker except for Mexico. The Page 10 12 average steel scrap price was $123 per ton compared with $125 per ton in the third quarter of last year and shipments were down 4,000 tons to 299,000 tons. Aluminum prices were 6% higher while copper prices were 6% lower and overall nonferrous shipments were up 5% to 56,000 tons. MARKETING AND TRADING - Operating income for the Marketing and Trading segment increased 8% although revenues were 25% lower compared to the prior year. For the third quarter, the segment had pretax Lifo income of $611,000 compared to income of $31,000 in the previous year's quarter. Steel trading margins were pressured by intensely competitive global markets, diminished buying by China and continuing exports from the CIS. The Far East markets, in general, were weaker. The steel and nonferrous marketing and distribution businesses continued to be good on account of strong customer service. Results for other industrial material product lines including primary metals, secondary metals, mineral, refractories and building materials were steady. Toward the end of the quarter a steel supply contract was consummated with Essar Steel in India and CMC Trading AG will market over $100 million of steel products for Essar during the next three years. The Tokyo office was converted to an exclusive representative agency arrangement, and a small office was opened in Germany to facilitate steel imports. OTHER The Company will adopt Statement of Financial Accounting Standards No. 128, Earnings per Share, as of the quarter ending February 28,1998. It is not expected to have a significant impact on reported amounts of earnings per share. 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 Page 11 13 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 generally remains favorable with a number of our markets showing some improvement. 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 are mixed, margins on copper plumbing tube should improve and ferrous scrap markets are steady. The trends in nonferrous metal prices are diverse but demand should remain active. The continued economic pickup in Latin America should be beneficial. This report contains forward-looking statements regarding the outlook for the Company's short-term financial results including shipments, pricing, demand 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, currency fluctuations and decisions by governments impacting the pace of overall economic growth. LIQUIDITY Cash flow from operations before changes in operating assets and liabilities for the nine months was $59 million compared to $65 million last year. The decrease was attributable to lower net earnings. Accounts receivable increased $11 million since August 31 principally due to increased third quarter activity in the Recycling segment. Inventories have increased $25 million since year end principally due to seasonal buildups in the Manufacturing segment. Other assets increased due to funding of a non- qualified employee benefit plan, and advance payments for a salvage job and material purchase. The Company invested $51 million in capital expenditures as part of its anticipated $70 million annual capital program. Page 12 14 Commercial paper and notes payable increased $60 million to supplement current cash flow to fund working capital, capital expenditures, and long-term debt payments. During the quarter, the Company repurchased 628,993 shares of Company stock at an average cost of $28.18 per share. May 31,1997, there were 14,682,166 common shares issued and outstanding with 1,450,417 shares held in the Company's treasury. Stockholders' equity was $342 million or $23.30 per share. Long-term debt as a percent of total capitalization was 27.1% at May 31,1997 compared to 29.1% at August 31,1996. The ratio of total debt to total capitalization plus short- term debt stood at 36.3%. Net working capital was $250 million at May 31,1997 compared to $275 million at August 31,1996. The current ratio was 1.8 compared to 2.0 at August 31,1996. The Company's effective tax rate for the nine months was 36.7%, comparable to the prior period. Page 13 15 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, 1996 filed November 27, 1996, 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 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. 14 16 11. Computation of Per Share Earnings (a) Calculation of Primary and Fully Diluted Earnings Per Share 27. Financial Data Schedule B. No reports on Form 8-K have been filed during the quarter for which this report is filed. 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 July 10, 1997 Lawrence A. Engels Vice President, Treasurer & Chief Financial Officer July 10, 1997 William B. Larson Controller 15 17 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 11 (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 ------------------------- 1997 1996 ----------- ----------- Net earnings $ 25,888 $ 32,854 Weighted average number of shares outstanding 15,021,396 15,116,014 Dilutive effect of stock option and purchase plans, after application of treasury stock method 304,782 160,184 Shares used in calculating primary net earnings per share 15,326,178 15,276,198 Earnings per share $ 1.69 $ 2.15
*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-31-1997 SEP-01-1996 MAY-31-1997 14,447 0 310,256 6,040 211,603 577,130 556,683 315,382 825,034 326,633 135,228 0 0 80,663 261,466 825,034 1,636,463 1,646,362 1,460,288 1,460,288 0 1,087 11,055 40,875 14,987 25,888 0 0 0 25,888 1.69 0
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