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| 8-K - 8-K - COMMERCIAL METALS Co | cmc-8312018pr8xk.htm |
Exhibit No. 99.1
News Release 
COMMERCIAL METALS COMPANY REPORTS FOURTH QUARTER EARNINGS FROM CONTINUING OPERATIONS OF $0.43 PER SHARE AND ADJUSTED EARNINGS FROM CONTINUING OPERATIONS OF $0.51 PER SHARE
Irving, TX - October 25, 2018 - Commercial Metals Company (NYSE: CMC) today announced financial results for its fiscal fourth quarter and year ended August 31, 2018. For the three months ended August 31, 2018, earnings from continuing operations were $51.3 million, or $0.43 per diluted share, on net sales of $1.3 billion, compared to a net loss from continuing operations of $10.1 million, or $0.09 per diluted share, on net sales of $1.1 billion for the three months ended August 31, 2017.
Fourth quarter results include after-tax expenses of $8.6 million related to the announced acquisition of certain rebar assets from Gerdau S.A.. Excluding these expenses, adjusted earnings from continuing operations were $59.9 million, or $0.51 per diluted share, as detailed in the non-GAAP reconciliation on page 12, compared to adjusted earnings from continuing operations of $6.8 million, or $0.06 per diluted share, for the three months ended August 31, 2017.
For the fiscal year ended August 31, 2018, earnings from continuing operations were $135.2 million, or $1.14 per diluted share, on net sales of $4.6 billion. This compares to earnings from continuing operations of $50.2 million, or $0.43 per diluted share, on net sales of $3.8 billion for the fiscal year ended August 31, 2017. Adjusted earnings from continuing operations for the fiscal year ended August 31, 2018 were $176.1 million, or $1.49 per diluted share, which was a 163% increase compared to $67.0 million, or $0.57 per diluted share, in the prior year.
Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, commented, "I am proud of what our team has accomplished during fiscal 2018. In addition to delivering our best financial results since the Great Recession, we also completed construction and commissioning of our second micro mill in Durant, OK, becoming the first producer of hot spooled rebar in the United States. We also had record levels of shipments of steel products from our operations in the U.S. and Poland and achieved our lowest safety incident rate in the history of CMC."
The Company's liquidity position at August 31, 2018 remained strong with cash and cash equivalents of $622.5 million and availability under the Company's credit and accounts receivable sales facilities of $617.8 million.
(CMC Year End 2018 - Page 2)
On October 23, 2018, the board of directors of CMC declared a quarterly dividend of $0.12 per share of CMC common stock payable to stockholders of record on November 7, 2018. The dividend will be paid on November 21, 2018.
Business Segments - Fiscal Fourth Quarter 2018 Review
During the quarter, the Company changed its business segment reporting metric from adjusted operating profit to adjusted EBITDA to evaluate the financial performance of its segments, as the Company believes this provides clear data of period-to-period trends and comparability to other industry participants. The only adjustment made to EBITDA for the metric of adjusted EBITDA is the exclusion of non-cash impairments. In addition we have added a table, on page 11, which contains a new non-GAAP measure regarding core EBITDA from continuing operations, which excludes certain recurring non-cash charges and other non-recurring income and expense items.
Our Americas Recycling segment recorded adjusted EBITDA of $17.0 million for the fourth quarter of fiscal 2018, compared to adjusted EBITDA of $8.8 million for the fourth quarter of fiscal 2017. Adjusted EBITDA increased compared to the same period of the prior year primarily as a result of strong volumes and the rising price environment which took place during the past 12 months.
Our Americas Mills segment recorded adjusted EBITDA of $106.8 million for the fourth quarter of fiscal 2018, an increase of 142% compared to adjusted EBITDA of $44.2 million for the fourth quarter of fiscal 2017. Demand remained strong supported by U.S. construction market strength. In addition, the production ramp up at our Durant, OK facility continues to proceed as planned with the operation contributing positive adjusted EBITDA during the quarter. As a result of the strong global demand for rebar, metal margins have increased by $68 per ton from the same period of the prior year. Meaningful inflationary pressures on the cost of alloys and electrodes were muted by our continued focus on cost control as well as higher mill volumes resulting in an increase in manufacturing costs of approximately 3% as compared to 2017.
Our Americas Fabrication segment recorded an adjusted EBITDA loss of $24.6 million for the fourth quarter of fiscal 2018, compared to adjusted EBITDA of $1.2 million for the fourth quarter of fiscal 2017. Average selling prices rose 9% compared to the fourth fiscal quarter of 2017, significantly outpaced by steel input costs, which increased by 32% causing continued margin pressure in this segment. Rebar fabrication bidding activity remains strong and selling prices for contracted work during the quarter increased approximately 34% compared to the fourth quarter of 2017.
Our International Mill segment in Poland recorded adjusted EBITDA of $36.7 million for the fourth quarter of fiscal 2018, compared to adjusted EBITDA of $22.1 million for the fourth quarter of fiscal 2017. Long steel product
(CMC Year End 2018 - Page 3)
demand continues to be very strong producing record levels of quarterly shipments and adjusted EBITDA during the fourth quarter of 2018.
Outlook
"Our outlook for the coming months remains very positive as we believe the current demand for construction steel will be sustained," said Ms. Smith. "Our team delivered on many key strategic initiatives during 2018 producing record volumes during this period of strong demand and improving margins. As we look forward to the strong economic environment continuing and the opportunities on the horizon, I am confident we will continue to deliver exceptional results for our stakeholders."
Conference Call
CMC invites you to listen to a live broadcast of its fourth quarter fiscal 2018 conference call today, Thursday, October 25, 2018, at 11:00 a.m. ET. Barbara Smith, Chairman of the Board of Directors, President, and Chief Executive Officer, and Mary Lindsey, Senior Vice President and Chief Financial Officer, will host the call. The call is accessible via our website at www.cmc.com. In the event you are unable to listen to the live broadcast, the call will be archived and available for replay on our website on the next business day. Financial and statistical information presented in the broadcast are located on CMC's website under “Investors”.
About Commercial Metals Company
Commercial Metals Company and its subsidiaries manufacture, recycle and market steel and metal products, related materials and services through a network of facilities that includes four electric arc furnace ("EAF") mini mills, two EAF micro mills, a rerolling mill, steel fabrication and processing plants, construction-related product warehouses, and metal recycling facilities in the U.S. and Poland.
Forward-Looking Statements
This news release contains forward-looking statements within the meaning of the federal securities laws with respect to general economic conditions, key macro-economic drivers that impact our business, the effects of ongoing trade actions, the effects of continued pressure on the liquidity of our customers, potential synergies provided by our recent acquisitions, demand for our products, steel margins, the ability to operate our mills at full capacity, future supplies of raw materials and energy for our operations, share repurchases, legal proceedings, renewing the credit facilities of our Polish subsidiary, the reinvestment of undistributed earnings of our non-U.S. subsidiaries, U.S. non-residential construction activity, international trade, capital expenditures, our liquidity and our ability to satisfy future liquidity requirements, our new Oklahoma micro mill, estimated contractual obligations, the planned acquisition of substantially all of the U.S. rebar fabrication facilities and the steel mini-mills located in or around Rancho Cucamonga, California, Jacksonville, Florida, Sayreville, New Jersey and Knoxville, Tennessee currently owned by Gerdau S.A. and certain of its subsidiaries (collectively, the “Business”) and the timing thereof, the ability to obtain regulatory approvals and meet other closing conditions for the planned acquisition of the Business, and our expectations or beliefs concerning future
(CMC Year End 2018 - Page 4)
events. These forward-looking statements can generally be identified by phrases such as we or our management "expects," "anticipates," "believes," "estimates," "intends," "plans to," "ought," "could," "will," "should," "likely," "appears," "projects," "forecasts," "outlook" or other similar words or phrases. There are inherent risks and uncertainties in any forward-looking statements. We caution readers not to place undue reliance on any forward-looking statements.
Although we believe that our expectations are reasonable, we can give no assurance that these expectations will prove to have been correct, and actual results may vary materially. Except as required by law, we undertake no obligation to update, amend or clarify any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or any other changes. Important factors that could cause actual results to differ materially from our expectations include those described in Part I, Item 1A, "Risk Factors" of our annual report on Form 10-K as well as the following: changes in economic conditions which affect demand for our products or construction activity generally, and the impact of such changes on the highly cyclical steel industry; rapid and significant changes in the price of metals, potentially impairing our inventory values due to declines in commodity prices or reducing the profitability of our fabrication contracts due to rising commodity prices; excess capacity in our industry, particularly in China, and product availability from competing steel mills and other steel suppliers including import quantities and pricing; compliance with and changes in environmental laws and regulations, including increased regulation associated with climate change and greenhouse gas emissions; involvement in various environmental matters that may result in fines, penalties or judgments; potential limitations in our or our customers' abilities to access credit and non-compliance by our customers with our contracts; activity in repurchasing shares of our common stock under our repurchase program; financial covenants and restrictions on the operation of our business contained in agreements governing our debt; our ability to successfully identify, consummate, and integrate acquisitions and the effects that acquisitions may have on our financial leverage; risks associated with acquisitions generally, such as the inability to obtain, or delays in obtaining, required approvals under applicable antitrust legislation and other regulatory and third party consents and approvals; failure to retain key management and employees of the Business; issues or delays in the successful integration of the Business’ operations with those of the Company, including the inability to substantially increase utilization of the Business' steel mini mills, and incurring or experiencing unanticipated costs and/or delays or difficulties; difficulties or delays in the successful transition of the Business to the information technology systems of the Company as well as risks associated with other integration or transition of the operations, systems and personnel of the Business; unfavorable reaction to the acquisition of the Business by customers, competitors, suppliers and employees; lower than expected future levels of revenues and higher than expected future costs; failure or inability to implement growth strategies in a timely manner; impact of goodwill impairment charges; impact of long-lived asset impairment charges; currency fluctuations; global factors, including political uncertainties and military conflicts; availability and pricing of electricity, electrodes and natural gas for mill operations; ability to hire and retain key executives and other employees; competition from other materials or from competitors that have a lower cost structure or access to greater financial resources; information technology interruptions and breaches in security; ability to make necessary capital expenditures; availability and pricing of raw materials and other items over which we exert little influence, including scrap metal, energy and insurance; unexpected equipment failures; ability to realize the anticipated benefits of our
(CMC Year End 2018 - Page 5)
investment in our new micro mill in Durant, Oklahoma; losses or limited potential gains due to hedging transactions; litigation claims and settlements, court decisions, regulatory rulings and legal compliance risks; risk of injury or death to employees, customers or other visitors to our operations; impacts of the TCJA; and increased costs related to health care reform legislation.
(CMC Year End 2018 - Page 6)
COMMERCIAL METALS COMPANY FINANCIAL & OPERATING STATISTICS (UNAUDITED) | ||||||||||||||||||||||
Three Months Ended | Fiscal Year Ended | |||||||||||||||||||||
(in thousands, except per ton amounts) | 8/31/2018 | 5/31/2018 | 2/28/2018 | 11/30/2017 | 8/31/2017 | 8/31/2018 | 8/31/2017 | |||||||||||||||
Americas Recycling | ||||||||||||||||||||||
Net sales | $ | 361,363 | 364,098 | 320,627 | 319,341 | 317,300 | 1,365,429 | 1,011,500 | ||||||||||||||
Adjusted EBITDA | $ | 16,996 | 19,477 | 17,216 | 15,005 | 8,812 | 68,694 | 33,541 | ||||||||||||||
Short tons shipped | ||||||||||||||||||||||
Ferrous | 644 | 642 | 560 | 589 | 583 | 2,435 | 1,999 | |||||||||||||||
Nonferrous | 69 | 65 | 63 | 66 | 70 | 263 | 234 | |||||||||||||||
Total short tons shipped | 713 | 707 | 623 | 655 | 653 | 2,698 | 2,233 | |||||||||||||||
Average selling price (per short ton) | ||||||||||||||||||||||
Ferrous | $ | 298 | 314 | 285 | 257 | 255 | 289 | 242 | ||||||||||||||
Nonferrous | $ | 2,155 | 2,252 | 2,345 | 2,208 | 2,134 | 2,238 | 2,019 | ||||||||||||||
Americas Mills | ||||||||||||||||||||||
Net sales | $ | 604,435 | 553,063 | 425,887 | 413,518 | 414,419 | 1,996,903 | 1,565,454 | ||||||||||||||
Adjusted EBITDA | $ | 106,830 | 89,590 | 50,219 | 55,166 | 44,180 | 301,805 | 224,183 | ||||||||||||||
Short tons shipped | ||||||||||||||||||||||
Rebar | 482 | 503 | 405 | 405 | 445 | 1,795 | 1,693 | |||||||||||||||
Merchant & Other | 359 | 308 | 279 | 272 | 265 | 1,218 | 1,032 | |||||||||||||||
Total Short Tons Shipped | 841 | 811 | 684 | 677 | 710 | 3,013 | 2,725 | |||||||||||||||
Average price (per short ton) | ||||||||||||||||||||||
Total selling price | $ | 674 | 632 | 571 | 550 | 537 | 612 | 526 | ||||||||||||||
Cost of ferrous scrap utilized | $ | 326 | 329 | 288 | 256 | 257 | 303 | 243 | ||||||||||||||
Metal margin | $ | 348 | 303 | 283 | 294 | 280 | 309 | 283 | ||||||||||||||
Americas Fabrication | ||||||||||||||||||||||
Net sales | $ | 403,889 | 378,241 | 312,973 | 332,779 | 353,725 | 1,427,882 | 1,375,928 | ||||||||||||||
Adjusted EBITDA | $ | (24,607 | ) | (8,208 | ) | (8,611 | ) | 2,032 | 1,243 | (39,394 | ) | 27,259 | ||||||||||
Total short tons shipped | 307 | 302 | 241 | 264 | 286 | 1,114 | 1,121 | |||||||||||||||
Total selling price (per short ton) | $ | 843 | 777 | 799 | 778 | 773 | 800 | 772 | ||||||||||||||
International Mill | ||||||||||||||||||||||
Net sales | $ | 253,058 | 201,737 | 211,765 | 220,478 | 200,239 | 887,038 | 637,273 | ||||||||||||||
Adjusted EBITDA | $ | 36,654 | 31,987 | 32,135 | 30,944 | 22,141 | 131,720 | 76,068 | ||||||||||||||
Short tons shipped | ||||||||||||||||||||||
Rebar | 145 | 79 | 95 | 140 | 129 | 459 | 463 | |||||||||||||||
Merchant & Other | 289 | 241 | 251 | 260 | 266 | 1,041 | 916 | |||||||||||||||
Total short tons shipped | 434 | 320 | 346 | 400 | 395 | 1,500 | 1,379 | |||||||||||||||
Average price (per short ton) | ||||||||||||||||||||||
Total selling price | $ | 555 | 599 | 578 | 517 | 476 | 560 | 432 | ||||||||||||||
Cost of ferrous scrap utilized | $ | 305 | 329 | 324 | 296 | 269 | 314 | 240 | ||||||||||||||
Metal margin | $ | 250 | 270 | 254 | 221 | 207 | 246 | 192 | ||||||||||||||
(CMC Year End 2018 - Page 7)
COMMERCIAL METALS COMPANY BUSINESS SEGMENTS (UNAUDITED) | ||||||||||||||||||||||||||||
(in thousands) | Three Months Ended | Fiscal Year Ended | ||||||||||||||||||||||||||
Net sales | 8/31/2018 | 5/31/2018 | 2/28/2018 | 11/30/2017 | 8/31/2017 | 8/31/2018 | 8/31/2017 | |||||||||||||||||||||
Americas Recycling | $ | 361,363 | $ | 364,098 | $ | 320,627 | $ | 319,341 | $ | 317,300 | $ | 1,365,429 | $ | 1,011,500 | ||||||||||||||
Americas Mills | 604,435 | 553,063 | 425,887 | 413,518 | 414,419 | 1,996,903 | 1,565,454 | |||||||||||||||||||||
Americas Fabrication | 403,889 | 378,241 | 312,973 | 332,779 | 353,725 | 1,427,882 | 1,375,928 | |||||||||||||||||||||
International Mill | 253,058 | 201,737 | 211,765 | 220,478 | 200,239 | 887,038 | 637,273 | |||||||||||||||||||||
Corporate and Other | 7,463 | 2,725 | 4,450 | 4,699 | 9,311 | 19,337 | 61,001 | |||||||||||||||||||||
Eliminations | (321,770 | ) | (295,380 | ) | (221,434 | ) | (214,282 | ) | (210,864 | ) | (1,052,866 | ) | (807,087 | ) | ||||||||||||||
Total net sales | $ | 1,308,438 | $ | 1,204,484 | $ | 1,054,268 | $ | 1,076,533 | $ | 1,084,130 | $ | 4,643,723 | $ | 3,844,069 | ||||||||||||||
Adjusted EBITDA from continuing operations | ||||||||||||||||||||||||||||
Americas Recycling | $ | 16,996 | $ | 19,477 | $ | 17,216 | $ | 15,005 | $ | 8,812 | $ | 68,694 | $ | 33,541 | ||||||||||||||
Americas Mills | 106,830 | 89,590 | 50,219 | 55,166 | 44,180 | 301,805 | 224,183 | |||||||||||||||||||||
Americas Fabrication | (24,607 | ) | (8,208 | ) | (8,611 | ) | 2,032 | 1,243 | (39,394 | ) | 27,259 | |||||||||||||||||
International Mill | 36,654 | 31,987 | 32,135 | 30,944 | 22,141 | 131,720 | 76,068 | |||||||||||||||||||||
Corporate and Other | (28,827 | ) | (31,814 | ) | (26,083 | ) | (23,880 | ) | (53,402 | ) | (110,604 | ) | (125,229 | ) | ||||||||||||||
(CMC Year End 2018 - Page 8)
COMMERCIAL METALS COMPANY CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) | |||||||||||||||
Three Months Ended | Fiscal Year Ended | ||||||||||||||
(in thousands, except share data) | 8/31/2018 | 8/31/2017 | 8/31/2018 | 8/31/2017 | |||||||||||
Net sales | $ | 1,308,438 | $ | 1,084,130 | $ | 4,643,723 | $ | 3,844,069 | |||||||
Costs and expenses: | |||||||||||||||
Cost of goods sold | 1,125,027 | 964,844 | 4,021,558 | 3,322,711 | |||||||||||
Selling, general and administrative expenses | 108,975 | 105,518 | 401,452 | 387,354 | |||||||||||
Loss on debt extinguishment | — | 22,672 | — | 22,672 | |||||||||||
Impairment of assets | 840 | 1,182 | 14,372 | 1,730 | |||||||||||
Interest expense | 15,654 | 5,939 | 40,957 | 44,151 | |||||||||||
1,250,496 | 1,100,155 | 4,478,339 | 3,778,618 | ||||||||||||
Earnings from continuing operations before income taxes | 57,942 | (16,025 | ) | 165,384 | 65,451 | ||||||||||
Income taxes | 6,682 | (5,955 | ) | 30,147 | 15,276 | ||||||||||
Earnings from continuing operations | 51,260 | (10,070 | ) | 135,237 | 50,175 | ||||||||||
Earnings (loss) from discontinued operations before income taxes | (1,786 | ) | (29,527 | ) | 3,235 | (9,840 | ) | ||||||||
Income taxes (benefit) | (2,086 | ) | (10,057 | ) | (34 | ) | (5,997 | ) | |||||||
Earnings (loss) from discontinued operations | 300 | (19,470 | ) | 3,269 | (3,843 | ) | |||||||||
Net earnings | $ | 51,560 | $ | (29,540 | ) | $ | 138,506 | $ | 46,332 | ||||||
Basic earnings (loss) per share* | |||||||||||||||
Earnings from continuing operations | $ | 0.44 | $ | (0.09 | ) | $ | 1.16 | $ | 0.43 | ||||||
Earnings (loss) from discontinued operations | — | (0.17 | ) | 0.03 | (0.03 | ) | |||||||||
Net earnings | $ | 0.44 | $ | (0.25 | ) | $ | 1.19 | $ | 0.40 | ||||||
Diluted earnings (loss) per share* | |||||||||||||||
Earnings from continuing operations | $ | 0.43 | $ | (0.09 | ) | $ | 1.14 | $ | 0.43 | ||||||
Earnings (loss) from discontinued operations | — | (0.17 | ) | 0.03 | (0.03 | ) | |||||||||
Net earnings | $ | 0.44 | $ | (0.25 | ) | $ | 1.17 | $ | 0.39 | ||||||
Cash dividends per share | $ | 0.12 | $ | 0.12 | $ | 0.48 | $ | 0.48 | |||||||
Average basic shares outstanding | 117,119,557 | 115,892,403 | 116,822,583 | 115,654,466 | |||||||||||
Average diluted shares outstanding | 118,407,316 | 115,892,403 | 118,145,848 | 117,364,408 | |||||||||||
* EPS is calculated independently for each component and may not sum to net earnings EPS due to rounding
(CMC Year End 2018 - Page 9)
COMMERCIAL METALS COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | |||||||
(in thousands) | August 31, 2018 | August 31, 2017 | |||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 622,473 | $ | 252,595 | |||
Accounts receivable, net | 749,484 | 561,411 | |||||
Inventories | 589,005 | 462,648 | |||||
Other current assets | 115,533 | 140,136 | |||||
Assets of businesses held for sale and discontinued operations | 710 | 297,110 | |||||
Total current assets | 2,077,205 | 1,713,900 | |||||
Net property, plant and equipment | 1,075,038 | 1,051,677 | |||||
Goodwill | 64,310 | 64,915 | |||||
Other assets | 111,751 | 144,639 | |||||
Total assets | $ | 3,328,304 | $ | 2,975,131 | |||
Liabilities and stockholders' equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 261,258 | $ | 226,456 | |||
Accrued expenses and other payables | 259,022 | 274,972 | |||||
Current maturities of long-term debt | 19,746 | 19,182 | |||||
Liabilities of businesses held for sale and discontinued operations | 1,917 | 87,828 | |||||
Total current liabilities | 541,943 | 608,438 | |||||
Deferred income taxes | 37,834 | 49,160 | |||||
Other long-term liabilities | 116,325 | 111,023 | |||||
Long-term debt | 1,138,619 | 805,580 | |||||
Total liabilities | 1,834,721 | 1,574,201 | |||||
Stockholders' equity | 1,493,397 | 1,400,757 | |||||
Stockholders' equity attributable to noncontrolling interests | 186 | 173 | |||||
Total equity | 1,493,583 | 1,400,930 | |||||
Total liabilities and stockholders' equity | $ | 3,328,304 | $ | 2,975,131 | |||
(CMC Year End 2018 - Page 10)
COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||
Year Ended August 31, | ||||||||
(in thousands) | 2018 | 2017 | ||||||
Cash flows from (used by) operating activities: | ||||||||
Net earnings | $ | 138,506 | $ | 46,332 | ||||
Adjustments to reconcile net earnings to cash flows from (used by) operating activities: | ||||||||
Depreciation and amortization | 131,659 | 125,071 | ||||||
Share-based compensation | 23,929 | 30,311 | ||||||
Loss on debt extinguishment | — | 22,672 | ||||||
Write-down of inventory | 1,407 | 21,529 | ||||||
Deferred income taxes and other long-term taxes | 14,377 | (14,184 | ) | |||||
Amortization of interest rate swaps termination gain | — | (11,657 | ) | |||||
Asset impairments | 15,053 | 8,238 | ||||||
Net loss (gain) on sales of a subsidiary, assets and other | (1,322 | ) | 6,049 | |||||
Provision for losses on receivables, net | 2,510 | 6,049 | ||||||
Changes in operating assets and liabilities, net of acquisitions | (167,439 | ) | (65,938 | ) | ||||
Net cash flows from operating activities | 158,680 | 174,472 | ||||||
Cash flows from (used by) investing activities: | ||||||||
Capital expenditures | (174,655 | ) | (213,120 | ) | ||||
Proceeds from the sale of discontinued operations and other | 75,482 | 163,449 | ||||||
Proceeds from settlement of life insurance policies | 27,375 | — | ||||||
Proceeds from the sale of property, plant and equipment | 8,103 | 3,164 | ||||||
Acquisitions | (6,980 | ) | (56,080 | ) | ||||
Net cash flows used by investing activities | (70,675 | ) | (102,587 | ) | ||||
Cash flows from (used by) financing activities: | ||||||||
Proceeds from long-term debt transactions | 350,000 | 475,454 | ||||||
Cash dividends | (56,076 | ) | (55,514 | ) | ||||
Repayments of long-term debt | (19,967 | ) | (711,850 | ) | ||||
Stock issued under incentive and purchase plans, net of forfeitures | (9,302 | ) | (5,498 | ) | ||||
Debt issuance costs | (5,254 | ) | (4,449 | ) | ||||
Increase (decrease) in documentary letters of credit, net | 18 | 22 | ||||||
Contribution from noncontrolling interests | 13 | 14 | ||||||
Debt extinguishment costs | — | (22,672 | ) | |||||
Net cash flows from (used by) financing activities | 259,432 | (324,493 | ) | |||||
Effect of exchange rate changes on cash | (703 | ) | (1,213 | ) | ||||
Increase (decrease) in cash and cash equivalents | 346,734 | (253,821 | ) | |||||
Cash, restricted cash and cash equivalents at beginning of year | 285,881 | 539,702 | ||||||
Cash, restricted cash and cash equivalents at end of year | $ | 632,615 | $ | 285,881 | ||||
Supplemental information: | ||||||||
Cash and cash equivalents | $ | 622,473 | $ | 252,595 | ||||
Restricted cash | $ | 10,142 | $ | 33,286 | ||||
Total cash, cash equivalents and restricted cash | $ | 632,615 | $ | 285,881 | ||||
(CMC Year End 2018 - Page 11)
COMMERCIAL METALS COMPANY
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
This press release contains financial measures not derived in accordance with generally accepted accounting principles ("GAAP"). Reconciliations to the most comparable GAAP measures are provided below.
Core EBITDA from Continuing Operations is a non-GAAP financial measure. Core EBITDA from continuing operations is the sum of earnings (loss) from continuing operations before interest expense and income taxes (benefit). It also excludes recurring non-cash charges for depreciation and amortization, asset impairments, and equity compensation. Core EBITDA from continuing operations also excludes certain material acquisition and integration related costs, mill operational start-up costs, CMC Steel Oklahoma incentives, net debt restructuring and extinguishment gains and losses and severance expenses. Core EBITDA from continuing operations should not be considered an alternative to earnings (loss) from continuing operations or net earnings (loss), or as a better measure of liquidity than net cash flows from operating activities, as determined by GAAP. However, we believe that Core EBITDA from continuing operations provides relevant and useful information, which is often used by analysts, creditors and other interested parties in our industry as it allows: (i) comparison of our earnings to those of our competitors; (ii) a supplemental measure of our ongoing core performance; and (iii) the assessment of period-to-period performance trends. Additionally, Core EBITDA from continuing operations is the target benchmark for our annual and long-term cash incentive performance plans for management. Core EBITDA from continuing operations may be inconsistent with similar measures presented by other companies.
A reconciliation of earnings from continuing operations before income taxes to Core EBITDA from continuing operations is provided below:
Three Months Ended | Fiscal Year Ended | ||||||||||||||||||||||||||
(in thousands) | 8/31/2018 | 5/31/2018 | 2/28/2018 | 11/30/2017 | 8/31/2017 | 8/31/2018 | 8/31/2017 | ||||||||||||||||||||
Earnings (loss) from continuing operations | $ | 51,260 | $ | 42,325 | $ | 9,781 | $ | 31,871 | $ | (10,070 | ) | $ | 135,237 | $ | 50,175 | ||||||||||||
Interest expense | 15,654 | 11,511 | 7,181 | 6,611 | 5,939 | 40,957 | 44,151 | ||||||||||||||||||||
Income taxes (benefit) | 6,682 | 13,312 | 1,728 | 8,425 | (5,955 | ) | 30,147 | 15,276 | |||||||||||||||||||
Depreciation and amortization | 32,610 | 32,949 | 34,050 | 31,899 | 31,880 | 131,508 | 124,490 | ||||||||||||||||||||
Asset impairments | 840 | 935 | 12,136 | 461 | 1,182 | 14,372 | 1,730 | ||||||||||||||||||||
Non-cash equity compensation | 5,679 | 5,376 | 8,550 | 4,433 | 4,211 | 24,038 | 21,469 | ||||||||||||||||||||
Acquisition and integration related costs | 10,907 | 4,975 | 5,905 | 3,720 | — | 25,507 | — | ||||||||||||||||||||
Mill operational start-up costs* | — | 1,473 | 6,565 | 5,433 | — | 13,471 | — | ||||||||||||||||||||
CMC Steel Oklahoma incentives | — | (3,000 | ) | — | — | — | (3,000 | ) | — | ||||||||||||||||||
Loss on debt extinguishment | — | — | — | — | 22,672 | — | 22,672 | ||||||||||||||||||||
Severance | — | — | — | — | 8,129 | — | 8,129 | ||||||||||||||||||||
Core EBITDA from continuing operations | $ | 123,632 | $ | 109,856 | $ | 85,896 | $ | 92,853 | $ | 57,988 | $ | 412,237 | $ | 288,092 | |||||||||||||
* Net of interest, taxes, depreciation and amortization, impairments, and non-cash equity compensation
(CMC Year End 2018 - Page 12)
Adjusted earnings from continuing operations is a non-GAAP financial measure that is equal to earnings (loss) from continuing operations before certain acquisition and integration related costs, mill operational start-up costs, CMC Steel Oklahoma incentives, asset impairments, debt restructuring and extinguishment gains and losses and severance expenses, including the estimated income tax effects thereof. Additionally, we adjust adjusted earnings from continuing operations for the effects of the TCJA as well as the tax benefit associated with an international reorganization. Adjusted earnings from continuing operations should not be considered as an alternative to earnings from continuing operations or any other performance measure derived in accordance with GAAP. However, we believe that adjusted earnings from continuing operations provides relevant and useful information to investors as it allows: (i) a supplemental measure of our ongoing core performance and (ii) the assessment of period-to-period performance trends. Management uses adjusted earnings from continuing operations to evaluate our financial performance. Adjusted earnings from continuing operations may be inconsistent with similar measures presented by other companies. Adjusted earnings from continuing operations per diluted share is defined as adjusted earnings from continuing operations on a diluted per share basis.
A reconciliation of earnings from continuing operations to adjusted earnings from continuing operations is provided below:
Three Months Ended | Fiscal Year Ended | ||||||||||||||||||||||||||
(in thousands) | 8/31/2018 | 5/31/2018 | 2/28/2018 | 11/30/2017 | 8/31/2017 | 8/31/2018 | 8/31/2017 | ||||||||||||||||||||
Earnings (loss) from continuing operations | $ | 51,260 | $ | 42,325 | $ | 9,781 | $ | 31,871 | $ | (10,070 | ) | $ | 135,237 | $ | 50,175 | ||||||||||||
Impairment of structural steel assets | — | — | 12,136 | — | — | 12,136 | — | ||||||||||||||||||||
Acquisition and integration related costs | 10,907 | 4,975 | 5,905 | 3,720 | — | 25,507 | — | ||||||||||||||||||||
Mill operational start-up costs | — | 6,456 | 8,651 | 2,909 | — | 18,016 | — | ||||||||||||||||||||
CMC Steel Oklahoma incentives | — | (3,000 | ) | — | — | — | (3,000 | ) | — | ||||||||||||||||||
Loss on debt extinguishment, net* | — | — | — | — | 17,799 | — | 17,799 | ||||||||||||||||||||
Severance | — | — | — | — | 8,129 | — | 8,129 | ||||||||||||||||||||
Total adjustments (pre-tax) | $ | 10,907 | $ | 8,431 | $ | 26,692 | $ | 6,629 | $ | 25,928 | $ | 52,659 | $ | 25,928 | |||||||||||||
Tax impact | |||||||||||||||||||||||||||
TCJA impact | $ | — | $ | — | $ | 10,600 | $ | — | $ | — | $ | 10,600 | $ | — | |||||||||||||
International reorganization | — | — | (9,200 | ) | — | — | (9,200 | ) | — | ||||||||||||||||||
Related tax effects on adjustments | (2,290 | ) | (1,771 | ) | (6,855 | ) | (2,320 | ) | (9,075 | ) | (13,236 | ) | (9,075 | ) | |||||||||||||
Total tax impact | (2,290 | ) | (1,771 | ) | (5,455 | ) | (2,320 | ) | (9,075 | ) | (11,836 | ) | (9,075 | ) | |||||||||||||
Adjusted earnings from continuing operations | $ | 59,877 | $ | 48,985 | $ | 31,018 | $ | 36,180 | $ | 6,783 | $ | 176,060 | $ | 67,028 | |||||||||||||
Adjusted earnings from continuing operations per diluted share | $ | 0.51 | $ | 0.41 | $ | 0.26 | $ | 0.31 | $ | 0.06 | $ | 1.49 | $ | 0.57 | |||||||||||||
* Net of $4.9 million gain related to acceleration of interest rate swaps, which was recorded as a reduction to interest expense
Media Contact:
Susan Gerber
214.689.4300