Attached files
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| 8-K - 8-K - COMMERCIAL METALS Co | cmc-5312014xpr8xk.htm |
| EX-99.2 - EXHIBIT - COMMERCIAL METALS Co | cmc-5312014xex992.htm |
News Release 
COMMERCIAL METALS COMPANY REPORTS THIRD QUARTER EARNINGS PER SHARE OF $0.20 AND ANNOUNCES QUARTERLY DIVIDEND OF $0.12 PER SHARE
Irving, TX - June 27, 2014 - Commercial Metals Company (NYSE: CMC) today announced financial results for its third quarter ended May 31, 2014. Net earnings attributable to CMC for the third quarter were $23.6 million, or $0.20 per diluted share, on net sales of $1.8 billion. This compares to net earnings attributable to CMC of $19.0 million, or $0.16 per diluted share, on net sales of $1.8 billion for the three months ended May 31, 2013.
Results for this year's third quarter included after-tax LIFO income of $5.3 million ($0.04 per diluted share), compared with after-tax LIFO income of $10.7 million ($0.09 per diluted share) for the third quarter of fiscal 2013, an unfavorable change of $5.4 million ($0.05 per diluted share). Adjusted operating profit was $57.2 million for the third quarter of fiscal 2014, compared with adjusted operating profit of $55.8 million for the prior year's third quarter. Adjusted EBITDA was $90.0 million for the third quarter of fiscal 2014, compared with adjusted EBITDA of $89.3 million for the prior year's third quarter.
The Company's financial position at May 31, 2014 remained strong with cash and cash equivalents of $437.2 million and approximately $1.0 billion in total liquidity, compared with cash and cash equivalents of $378.8 million and total liquidity of $1.1 billion at August 31, 2013.
Joe Alvarado, Chairman of the Board, President, and CEO, commented, "The results for the third quarter of fiscal 2014 were lifted by seasonal construction activity. We are particularly pleased with the strong results from our Americas Mills segment which recorded the best quarterly adjusted operating profit since our first quarter of fiscal 2009. During the third quarter of fiscal 2014, we successfully commissioned a new electric arc furnace in Poland. Although final commissioning and debugging is ongoing, we saw positive preliminary results. In June 2014, we acquired a small recycling facility. This acquisition is consistent with our vertically-integrated manufacturing model and will provide a low cost, reliable source of raw material to our steel mill in Seguin, Texas."
On June 25, 2014, the board of directors of CMC declared a quarterly dividend of $0.12 per share for shareholders of record on July 10, 2014. The dividend will be paid on July 24, 2014.
(CMC Third Quarter Fiscal 2014 - Page 2)
Business Segments
Our Americas Recycling segment recorded adjusted operating loss of $1.1 million for the third quarter of fiscal 2014, compared with adjusted operating profit of $3.2 million for the third quarter of fiscal 2013. Although ferrous and nonferrous shipments increased 1% and 4%, respectively, a $1.0 million unfavorable change in pre-tax LIFO income and an increase in employee related expenses accounted for the decline in adjusted operating profit when compared to the third quarter of fiscal 2013.
Our Americas Mills segment recorded adjusted operating profit of $74.1 million for this year's third quarter, compared with adjusted operating profit of $46.6 million for the prior year's third quarter. The increase in adjusted operating profit was partially attributed to an $8.8 million favorable change in pre-tax LIFO, from pre-tax LIFO expense of $1.7 million in the third quarter of fiscal 2013 to pre-tax LIFO income of $7.1 million in the third quarter of fiscal 2014. Additionally, tons shipped increased by 94 thousand tons and the average cost of ferrous scrap consumed decreased $3 per short ton in the third quarter of fiscal 2014 when compared to the third quarter of fiscal 2013, resulting in a $15 per short ton increase in average metal margin.
Our Americas Fabrication segment recorded adjusted operating profit of $1.2 million for this year's third quarter, compared with adjusted operating profit of $13.5 million for the third quarter of fiscal 2013. The decline in adjusted operating profit is primarily due to margin squeeze as input prices increased, partially offset by an increase in shipments. Additionally, for the three months ended May 31, 2014, employee related expenses increased 14% as a result of an increase in volume when compared to the same quarter of fiscal 2013.
Our International Mill segment recorded adjusted operating profit of $2.0 million for this year's third quarter, compared with adjusted operating loss of $3.8 million for the prior year's third quarter. While tons shipped were relatively stable for the current quarter when compared to the same quarter in the prior year, sales prices increased by $28 per short ton and the cost of ferrous scrap consumed decreased by $3 per short ton, resulting in a 13% increase in metal margin, which contributed to the improved operating results.
Our International Marketing and Distribution segment recorded adjusted operating profit of $1.5 million for this year's third quarter, compared with adjusted operating profit of $7.7 million for the prior year's third quarter. The decline in adjusted operating profit compared to the third quarter of fiscal 2013 was primarily attributed to an $11.2 million unfavorable change in pre-tax LIFO associated with our U.S.-based trading divisions, from pre-tax LIFO income of $6.7 million in the third quarter of fiscal 2013 to pre-tax LIFO expense of $4.5 million in the third quarter of fiscal 2014. Additionally, our U.S.-based trading divisions experienced an increase in metal margins, which partially offset the unfavorable change in pre-tax LIFO.
Year to Date Results
(CMC Third Quarter Fiscal 2014 - Page 3)
Net earnings attributable to CMC for the nine months ended May 31, 2014 were $80.6 million ($0.68 per diluted share) on net sales of $5.1 billion, compared with net earnings attributable to CMC of $73.3 million ($0.62 per diluted share) on net sales of $5.2 billion for the nine months ended May 31, 2013. Results for the nine months ended May 31, 2014 included an after-tax gain of $15.5 million ($0.13 per diluted share) associated with the sale of the Company’s wholly owned copper tube manufacturing operation, Howell Metal Company, and an after-tax charge of approximately $3 million ($0.03 per diluted share) incurred in connection with the Company's final settlement of the Standard Iron Works v. Arcelor Mittal et al. lawsuit. Results for the nine months ended May 31, 2013 included an after-tax gain of $17.0 million ($0.14 per diluted share) associated with the sale of the Company's 11% ownership interest in Trinecke Zelezarny, a.s., a Czech Republic joint-stock company. The Company recorded after-tax LIFO expense of $9.7 million ($0.08 per diluted share) for the nine months ended May 31, 2014, compared with after-tax LIFO income of $26.1 million ($0.22 per diluted share) for the nine months ended May 31, 2013. For the nine months ended May 31, 2014, adjusted operating profit was $182.4 million, compared with $173.0 million for the nine months ended May 31, 2013. Adjusted EBITDA was $282.2 million for the nine months ended May 31, 2014, compared with $275.5 million for the nine months ended May 31, 2013.
Outlook
Alvarado concluded, “We anticipate that our operational results for the fourth quarter of fiscal 2014 will remain consistent with our third quarter of fiscal 2014 results. The American Institute of Architects Architecture Billings Index (ABI) for May rose a full three points over April to 52.6, indicating positive directional growth in the U.S. construction markets. On the rebar import front, we saw a slow-down from Mexico during the third quarter of fiscal 2014, and we plan to continue monitoring the volume of rebar imports from Turkey and other European and Asian countries until the pending countervailing and anti-dumping decisions are finalized by the U.S. Commerce Department, which we expect to take place in the latter part of 2014. As a result of the new electric arc furnace that our Polish operations successfully commissioned during the third quarter of fiscal 2014, we anticipate that our International Mill segment will begin to benefit from productivity and cost improvements in fiscal 2015.”
Conference Call
CMC invites you to listen to a live broadcast of its third quarter of fiscal 2014 conference call today, Friday, June 27, 2014, at 11:00 a.m. ET. Joe Alvarado, Chairman of the Board, President and CEO, and Barbara Smith, Senior Vice President and CFO, 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 webcast will be located on CMC's website under "Investors."
(CMC Third Quarter Fiscal 2014 - Page 4)
About Commercial Metals Company
Commercial Metals Company and its subsidiaries manufacture, recycle and market steel and metal products, related materials and services through a network including steel minimills, steel fabrication and processing plants, construction-related product warehouses, metal recycling facilities and marketing and distribution offices in the United States and in strategic international markets.
Forward-Looking Statements
This news release contains forward-looking statements regarding the Company's expectations relating to the Company's future results, economic conditions and the Company's operating plans. These forward-looking statements generally can be identified by phrases such as we, CMC or its management, "expects," "anticipates," "believes," "estimates," "intends," "plans to," "ought," "could," "will," "should," "likely," "appears" or other similar words or phrases. There are inherent risks and uncertainties in 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, the Company undertakes no obligation to update, amend or clarify any forward-looking statements to reflect events, new information or otherwise.
Actual results may differ materially from those projected as a result of certain risks and uncertainties, including, but not limited to, the following: absence of global economic recovery or possible recession relapse and the pace of overall global economic activity and its impact on a highly cyclical industry; construction activity or lack thereof; decisions by governments affecting the level of steel imports; difficulties or delays in the execution of construction contracts, resulting in cost overruns or contract disputes; metals pricing over which the Company exerts little influence; increased capacity and product availability from competing steel minimills and other steel suppliers, including import quantities and pricing; execution of cost reduction strategies; industry consolidation or changes in production capacity or utilization; currency fluctuations; availability and pricing of raw materials over which we exert little influence, including scrap metal, energy, insurance and supply prices; passage of new, or interpretation of existing, environmental laws and regulations; and those factors listed under Item 1A "Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2013.
(CMC Third Quarter Fiscal 2014 - Page 5)
COMMERCIAL METALS COMPANY OPERATING STATISTICS AND BUSINESS SEGMENTS (UNAUDITED) | ||||||||||||||||
Three Months Ended May 31, | Nine Months Ended May 31, | |||||||||||||||
(short tons in thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Americas Recycling tons shipped | 596 | 588 | 1,728 | 1,724 | ||||||||||||
Americas Steel Mills rebar shipments | 424 | 369 | 1,155 | 1,066 | ||||||||||||
Americas Steel Mills structural and other shipments | 310 | 271 | 886 | 842 | ||||||||||||
Total Americas Steel Mills tons shipped | 734 | 640 | 2,041 | 1,908 | ||||||||||||
Americas Steel Mills average FOB selling price (total sales) | $ | 683 | $ | 671 | $ | 672 | $ | 674 | ||||||||
Americas Steel Mills average cost ferrous scrap consumed | $ | 349 | $ | 352 | $ | 350 | $ | 347 | ||||||||
Americas Steel Mills metal margin | $ | 334 | $ | 319 | $ | 322 | $ | 327 | ||||||||
Americas Steel Mills average ferrous scrap purchase price | $ | 275 | $ | 306 | $ | 298 | $ | 302 | ||||||||
International Mill tons shipped | 322 | 325 | 953 | 947 | ||||||||||||
International Mill average FOB selling price (total sales) | $ | 610 | $ | 582 | $ | 613 | $ | 596 | ||||||||
International Mill average cost ferrous scrap consumed | $ | 345 | $ | 348 | $ | 357 | $ | 369 | ||||||||
International Mill metal margin | $ | 265 | $ | 234 | $ | 256 | $ | 227 | ||||||||
International Mill average ferrous scrap purchase price | $ | 287 | $ | 277 | $ | 303 | $ | 299 | ||||||||
Americas Fabrication rebar tons shipped | 266 | 234 | 703 | 663 | ||||||||||||
Americas Fabrication structural and post tons shipped | 44 | 43 | 114 | 115 | ||||||||||||
Total Americas Fabrication tons shipped | 310 | 277 | 817 | 778 | ||||||||||||
Americas Fabrication average selling price (excluding stock and buyout sales) | $ | 921 | $ | 946 | $ | 924 | $ | 945 | ||||||||
(in thousands) | Three Months Ended May 31, | Nine Months Ended May 31, | ||||||||||||||
Net sales | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Americas Recycling | $ | 335,104 | $ | 341,743 | $ | 1,015,574 | $ | 1,045,078 | ||||||||
Americas Mills | 527,574 | 461,772 | 1,465,574 | 1,354,087 | ||||||||||||
Americas Fabrication | 409,425 | 383,800 | 1,093,533 | 1,058,358 | ||||||||||||
International Mill | 207,558 | 200,752 | 618,070 | 602,584 | ||||||||||||
International Marketing and Distribution | 604,045 | 593,804 | 1,687,010 | 1,852,328 | ||||||||||||
Corporate | 193 | 3,888 | 11,544 | 10,348 | ||||||||||||
Eliminations | (279,125 | ) | (233,217 | ) | (754,542 | ) | (732,069 | ) | ||||||||
Total net sales | $ | 1,804,774 | $ | 1,752,542 | $ | 5,136,763 | $ | 5,190,714 | ||||||||
Adjusted operating profit (loss) | ||||||||||||||||
Americas Recycling | $ | (1,085 | ) | $ | 3,155 | $ | (1,109 | ) | $ | 9,892 | ||||||
Americas Mills | 74,063 | 46,556 | 183,939 | 145,902 | ||||||||||||
Americas Fabrication | 1,244 | 13,499 | (1,869 | ) | 19,879 | |||||||||||
International Mill | 2,047 | (3,831 | ) | 25,647 | (7,108 | ) | ||||||||||
International Marketing and Distribution | 1,548 | 7,728 | 4,544 | 51,837 | ||||||||||||
Corporate | (18,227 | ) | (14,834 | ) | (51,340 | ) | (51,398 | ) | ||||||||
Eliminations | (1,930 | ) | 2,524 | 88 | 780 | |||||||||||
Adjusted operating profit from continuing operations | 57,660 | 54,797 | 159,900 | 169,784 | ||||||||||||
Adjusted operating profit (loss) from discontinued operations | (417 | ) | 956 | 22,529 | 3,243 | |||||||||||
Adjusted operating profit | $ | 57,243 | $ | 55,753 | $ | 182,429 | $ | 173,027 | ||||||||
(CMC Third Quarter Fiscal 2014 - Page 6)
COMMERCIAL METALS COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | ||||||||||||||||
Three Months Ended May 31, | Nine Months Ended May 31, | |||||||||||||||
(in thousands, except share data) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Net sales | $ | 1,804,774 | $ | 1,752,542 | $ | 5,136,763 | $ | 5,190,714 | ||||||||
Costs and expenses: | ||||||||||||||||
Cost of goods sold | 1,621,476 | 1,577,024 | 4,627,182 | 4,689,165 | ||||||||||||
Selling, general and administrative expenses | 126,756 | 121,731 | 352,305 | 360,975 | ||||||||||||
Interest expense | 18,999 | 18,043 | 57,756 | 51,557 | ||||||||||||
Gain on sale of cost method investment | — | — | — | (26,088 | ) | |||||||||||
1,767,231 | 1,716,798 | 5,037,243 | 5,075,609 | |||||||||||||
Earnings from continuing operations before income taxes | 37,543 | 35,744 | 99,520 | 115,105 | ||||||||||||
Income taxes | 13,700 | 17,379 | 32,657 | 43,876 | ||||||||||||
Earnings from continuing operations | 23,843 | 18,365 | 66,863 | 71,229 | ||||||||||||
Earnings (loss) from discontinued operations before income taxes | (417 | ) | 956 | 22,529 | 3,243 | |||||||||||
Income taxes | (137 | ) | 358 | 8,766 | 1,213 | |||||||||||
Earnings (loss) from discontinued operations | (280 | ) | 598 | 13,763 | 2,030 | |||||||||||
Net earnings | 23,563 | 18,963 | 80,626 | 73,259 | ||||||||||||
Less net earnings (loss) attributable to noncontrolling interests | — | (1 | ) | 1 | 1 | |||||||||||
Net earnings attributable to CMC | $ | 23,563 | $ | 18,964 | $ | 80,625 | $ | 73,258 | ||||||||
Basic earnings per share attributable to CMC: | ||||||||||||||||
Earnings from continuing operations | $ | 0.20 | $ | 0.16 | $ | 0.57 | $ | 0.61 | ||||||||
Earnings from discontinued operations | — | — | 0.12 | 0.02 | ||||||||||||
Net earnings | $ | 0.20 | $ | 0.16 | $ | 0.69 | $ | 0.63 | ||||||||
Diluted earnings per share attributable to CMC: | ||||||||||||||||
Earnings from continuing operations | $ | 0.20 | $ | 0.16 | $ | 0.56 | $ | 0.60 | ||||||||
Earnings from discontinued operations | — | — | 0.12 | 0.02 | ||||||||||||
Net earnings | $ | 0.20 | $ | 0.16 | $ | 0.68 | $ | 0.62 | ||||||||
Cash dividends per share | $ | 0.12 | $ | 0.12 | $ | 0.36 | $ | 0.36 | ||||||||
Average basic shares outstanding | 117,705,133 | 116,845,542 | 117,400,198 | 116,589,382 | ||||||||||||
Average diluted shares outstanding | 118,769,675 | 117,703,590 | 118,521,816 | 117,456,756 | ||||||||||||
(CMC Third Quarter Fiscal 2014 - Page 7)
COMMERCIAL METALS COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||||||
(in thousands) | May 31, 2014 | August 31, 2013 | ||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 437,210 | $ | 378,770 | ||||
Accounts receivable, net | 946,675 | 989,694 | ||||||
Inventories, net | 944,786 | 757,417 | ||||||
Other | 169,340 | 240,314 | ||||||
Total current assets | 2,498,011 | 2,366,195 | ||||||
Net property, plant and equipment | 931,744 | 940,237 | ||||||
Goodwill | 69,786 | 69,579 | ||||||
Other assets | 118,928 | 118,790 | ||||||
Total assets | $ | 3,618,469 | $ | 3,494,801 | ||||
Liabilities and stockholders' equity | ||||||||
Current liabilities: | ||||||||
Accounts payable-trade | $ | 392,706 | $ | 342,678 | ||||
Accounts payable-documentary letters of credit | 116,189 | 112,281 | ||||||
Accrued expenses and other payables | 297,940 | 314,949 | ||||||
Notes payable | 4,640 | 5,973 | ||||||
Current maturities of long-term debt | 7,147 | 5,228 | ||||||
Total current liabilities | 818,622 | 781,109 | ||||||
Deferred income taxes | 56,727 | 46,558 | ||||||
Other long-term liabilities | 115,745 | 118,165 | ||||||
Long-term debt | 1,276,729 | 1,278,814 | ||||||
Total liabilities | 2,267,823 | 2,224,646 | ||||||
Stockholders' equity attributable to CMC | 1,350,557 | 1,269,999 | ||||||
Stockholders' equity attributable to noncontrolling interests | 89 | 156 | ||||||
Total stockholders' equity | 1,350,646 | 1,270,155 | ||||||
Total liabilities and stockholders' equity | $ | 3,618,469 | $ | 3,494,801 | ||||
(CMC Third Quarter Fiscal 2014 - Page 8)
COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||
Nine Months Ended May 31, | ||||||||
(in thousands) | 2014 | 2013 | ||||||
Cash flows from (used by) operating activities: | ||||||||
Net earnings | $ | 80,626 | $ | 73,259 | ||||
Adjustments to reconcile net earnings to cash flows from (used by) operating activities: | ||||||||
Depreciation and amortization | 101,130 | 102,164 | ||||||
Provision for losses on receivables, net | (1,705 | ) | 3,349 | |||||
Share-based compensation | 16,054 | 13,528 | ||||||
Amortization of interest rate swaps termination gain | (5,698 | ) | (8,723 | ) | ||||
Loss on debt extinguishment | — | 1,502 | ||||||
Deferred income taxes | 28,560 | 44,371 | ||||||
Tax benefits from stock plans | (625 | ) | (6 | ) | ||||
Net gain on sale of a subsidiary, cost method investment and other | (28,032 | ) | (25,999 | ) | ||||
Asset impairment | 1,227 | 3,434 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (59,479 | ) | (12,189 | ) | ||||
Accounts receivable sold, net | 124,415 | (2,292 | ) | |||||
Inventories | (176,766 | ) | (30,011 | ) | ||||
Other assets | (18,486 | ) | 5,128 | |||||
Accounts payable, accrued expenses and other payables | 38,328 | (122,482 | ) | |||||
Other long-term liabilities | (5,244 | ) | (1,962 | ) | ||||
Net cash flows from operating activities | 94,305 | 43,071 | ||||||
Cash flows from (used by) investing activities: | ||||||||
Capital expenditures | (67,718 | ) | (63,008 | ) | ||||
Proceeds from the sale of property, plant and equipment and other | 6,773 | 11,164 | ||||||
Proceeds from the sale of a subsidiary | 52,276 | — | ||||||
Proceeds from the sale of cost method investment | — | 28,995 | ||||||
Net cash flows used by investing activities | (8,669 | ) | (22,849 | ) | ||||
Cash flows from (used by) financing activities: | ||||||||
Increase (decrease) in documentary letters of credit, net | 2,985 | (25,153 | ) | |||||
Short-term borrowings, net change | (1,333 | ) | (25,595 | ) | ||||
Repayments on long-term debt | (4,826 | ) | (63,442 | ) | ||||
Payments for debt issuance costs | (430 | ) | (4,125 | ) | ||||
Decrease in restricted cash | 18,037 | — | ||||||
Stock issued under incentive and purchase plans, net of forfeitures | (860 | ) | 1,347 | |||||
Proceeds from issuance of long-term debt | — | 330,000 | ||||||
Debt extinguishment costs | — | (1,502 | ) | |||||
Cash dividends | (42,290 | ) | (41,990 | ) | ||||
Tax benefits from stock plans | 625 | 6 | ||||||
Contribution from (purchase of) noncontrolling interests | (37 | ) | 13 | |||||
Net cash flows from (used by) financing activities | (28,129 | ) | 169,559 | |||||
Effect of exchange rate changes on cash | 933 | 1,066 | ||||||
Increase in cash and cash equivalents | 58,440 | 190,847 | ||||||
Cash and cash equivalents at beginning of year | 378,770 | 262,422 | ||||||
Cash and cash equivalents at end of period | $ | 437,210 | $ | 453,269 | ||||
(CMC Third Quarter Fiscal 2014 - Page 9)
COMMERCIAL METALS COMPANY
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
(dollars in thousands)
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.
Adjusted Operating Profit is a non-GAAP financial measure. Management uses adjusted operating profit to evaluate the financial performance of the Company. Adjusted operating profit is the sum of our earnings from continuing operations before income taxes, interest expense and discounts on sales of accounts receivable. For added flexibility, we may sell certain accounts receivable both in the U.S. and internationally. We consider sales of receivables as an alternative source of liquidity to finance our operations and we believe that removing these costs provides a clearer perspective of the Company's operating performance. Adjusted operating profit may be inconsistent with similar measures presented by other companies.
Three Months Ended May 31, | Nine Months Ended May 31, | |||||||||||||||
(in thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Earnings from continuing operations | $ | 23,843 | $ | 18,365 | $ | 66,863 | $ | 71,229 | ||||||||
Income taxes | 13,700 | 17,379 | 32,657 | 43,876 | ||||||||||||
Interest expense | 18,999 | 18,043 | 57,756 | 51,557 | ||||||||||||
Discounts on sales of accounts receivable | 1,118 | 1,010 | 2,624 | 3,122 | ||||||||||||
Adjusted operating profit | 57,660 | 54,797 | 159,900 | 169,784 | ||||||||||||
Adjusted operating profit (loss) from discontinued operations | (417 | ) | 956 | 22,529 | 3,243 | |||||||||||
Adjusted operating profit | $ | 57,243 | $ | 55,753 | $ | 182,429 | $ | 173,027 | ||||||||
Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is the sum of our earnings from continuing operations before net earnings attributable to noncontrolling interests, outside financing costs and income taxes. It also excludes the Company's largest recurring non-cash charge, depreciation and amortization, as well as impairment charges, which are also non-cash. Adjusted EBITDA should not be considered as an alternative to net earnings or as a better measure of liquidity than net cash flows from operating activities, as determined by GAAP. However, we believe that adjusted EBITDA provides relevant and useful information, which is often used by analysts, creditors, and other interested parties in our industry. Adjusted EBITDA to interest expense is a covenant test in certain of the Company's debt agreements. Adjusted EBITDA is also the target benchmark for our annual and long-term cash incentive performance plans for management. Adjusted EBITDA may be inconsistent with similar measures presented by other companies.
Three Months Ended May 31, | Nine Months Ended May 31, | |||||||||||||||
(in thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Earnings from continuing operations | $ | 23,843 | $ | 18,365 | $ | 66,863 | $ | 71,229 | ||||||||
Net (earnings) loss attributable to noncontrolling interests | — | 1 | (1 | ) | (1 | ) | ||||||||||
Interest expense | 18,999 | 18,043 | 57,756 | 51,557 | ||||||||||||
Income taxes | 13,700 | 17,379 | 32,657 | 43,876 | ||||||||||||
Depreciation and amortization | 33,846 | 33,426 | 101,130 | 100,029 | ||||||||||||
Impairment charges | — | 406 | 902 | 3,434 | ||||||||||||
Adjusted EBITDA from continuing operations | 90,388 | 87,620 | 259,307 | 270,124 | ||||||||||||
Adjusted EBITDA from discontinued operations | (417 | ) | 1,657 | 22,854 | 5,378 | |||||||||||
Adjusted EBITDA | $ | 89,971 | $ | 89,277 | $ | 282,161 | $ | 275,502 | ||||||||
Adjusted EBITDA to interest expense for the quarter ended May 31, 2014:
$89,971 | / | $18,999 | = | 4.7 |
(CMC Third Quarter Fiscal 2014 - Page 10)
Total Capitalization:
Total capitalization is the sum of stockholders' equity attributable to CMC, long-term debt and deferred income taxes. The ratio of debt to total capitalization is a measure of current debt leverage. The following reconciles total capitalization to the most comparable GAAP measure, stockholders’ equity attributable to CMC:
(in thousands) | May 31, 2014 | |||
Stockholders' equity attributable to CMC | $ | 1,350,557 | ||
Long-term debt | 1,276,729 | |||
Deferred income taxes | 56,727 | |||
Total capitalization | $ | 2,684,013 | ||
OTHER FINANCIAL INFORMATION
Long-term debt to capitalization ratio as of May 31, 2014:
$1,276,729 | / | $2,684,013 | = | 47.6% |
Total debt to capitalization plus short-term debt plus notes payable ratio as of May 31, 2014:
( | $1,276,729 | + | $7,147 | + | $4,640 | ) | / | ( | $2,684,013 | + | $7,147 | + | $4,640 | ) | = | 47.8% |
Current ratio as of May 31, 2014:
Current assets divided by current liabilities
$2,498,011 | / | $818,622 | = | 3.1 |
Contact: Barbara Smith
Senior Vice President and CFO
214.689.4300