Commercial Metals Company Reports Record Fourth Quarter And Full Year Fiscal 2021 Results

- Achieved record quarterly Earnings from Continuing Operations of $152.3 million, or $1.24 per diluted share; and record Core EBITDA from Continuing Operations of $255.9 million
Published: Oct. 13, 2021 at 7:48 AM CDT|Updated: Oct. 14, 2021 at 5:45 AM CDT

IRVING, Texas, Oct. 14, 2021 /PRNewswire/ -- Commercial Metals Company (NYSE: CMC) today announced financial results for its fiscal fourth quarter ended August 31, 2021.  Earnings from continuing operations were $152.3 million, or $1.24 per diluted share, on net sales of $2.0 billion, compared to prior year earnings from continuing operations of $67.8 million, or $0.56 per diluted share, on net sales of $1.4 billion.  For the full year, earnings from continuing operations were $412.9 million, or $3.38 per diluted share, compared to $278.3 million, or $2.31 per diluted share in the prior year.

During the fourth quarter of fiscal 2021, the Company recorded a net after-tax charge of $1.9 million related to the impairment of recycling assets.  Excluding this item, fourth quarter adjusted earnings from continuing operations were $154.2 million, or $1.26 per diluted share, compared to adjusted earnings from continuing operations of $95.3 million, or $0.79 per diluted share, in the prior year period.  "Adjusted EBITDA from continuing operations", "core EBITDA from continuing operations", "adjusted earnings from continuing operations" and "adjusted earnings from continuing operations per diluted share" are non-GAAP financial measures. Details, including a reconciliation of each such non-GAAP financial measure, to the most directly comparable measure, prepared and presented in accordance with GAAP can be found in the financial tables that follow.

Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, commented, "CMC's performance during fiscal 2021 was exceptional. Our financial results once again demonstrate CMC's significantly enhanced earnings capabilities following several years of methodical strategic transformation.  Yesterday, we announced our first dividend increase in over a decade and a sizeable new share repurchase program, reflecting the board's confidence in the Company's enhanced financial position and future prospects.  We have built a strong operating platform that will allow us to continue pursuing value accretive growth, while returning a meaningful portion of free cash flow to investors and maintaining a high-quality balance sheet."

Ms. Smith continued, "Looking at the quarter, I am extremely proud of the CMC team's execution on multiple fronts.  Commercially and operationally, we responded to robust market demand with record shipment and production levels at several of our steel mills.  This heightened activity did not detract from our ability to continue building for the future.  Our team in Europe successfully ramped up CMC's new rolling line, and we made meaningful progress at the future Arizona 2 micro mill site in North America. In addition, on September 29th we reached an agreement to sell our Rancho Cucamonga site for an expected $300 million, which will be reinvested directly into Arizona 2.  Importantly, we also maintained focus on keeping our employees safe, with several operations achieving record low incident rates during the year."

The Company's liquidity position as of August 31, 2021 remained solid, with cash and cash equivalents of $497.7 million, and availability of $668.2 million under the Company's credit and accounts receivable facilities.

On October 13, 2021, the board of directors declared a quarterly dividend of $0.14 per share of CMC common stock payable to stockholders of record on October 27, 2021. This represents a 17% increase over the previous dividend. The dividend will be paid on November 10, 2021, and marks 228 consecutive quarterly dividend payments by the Company.

Business Segments - Fiscal Fourth Quarter 2021 Review

The North America segment generated record adjusted EBITDA of $212.0 million for the fourth quarter of fiscal 2021, an increase of 22% compared to $174.2 million in the prior year period.  This improvement was driven by increased margins across multiple products lines, coupled with higher shipments of steel products and raw materials.  These positive factors were partially offset by a year-over-year increase in controllable costs per ton of finished steel shipped, due largely to inflationary pressures for freight and steelmaking consumables.

Shipment volumes of finished steel, which include steel products and downstream products, increased by 2% from the prior year fourth quarter.  Demand for rebar from the mills remained relatively steady, but shipments declined modestly from the prior year due to a shift in mix toward merchant bar and wire rod.  Shipments of merchant and other products increased by 29% from the prior year, driven by the broad reopening of the U.S. economy.

Margins over scrap cost on steel products increased $103 per ton from the prior year period and $41 per ton compared to the prior quarter.  Market conditions were favorable for each of CMC's key products, leading to mill volume growth of 5% and an increase of $300 per ton in average selling price compared to the fourth quarter of fiscal 2020.  Margin over scrap cost on downstream products declined compared to a year ago, driven by fulfillment of fabrication contracts that were booked prior to the fiscal 2021 increase in scrap costs.  Future pricing indicators on new work entering the backlog were positive during the quarter, as average price levels for bids and new awards increased significantly from the prior year quarter.

The Europe segment reported record adjusted EBITDA of $67.7 million for the fourth quarter of fiscal 2021, up 195% compared to adjusted EBITDA of $22.9 million for the prior year quarter.  The improvement was driven by a significant expansion in margin over scrap as well as volume growth, as demand for steel products from both the construction and industrial end markets were solid during the quarter.  Resilient construction activity supported a 16% increase in rebar shipments compared to a year ago, while the start-up of the third rolling line and the continuing manufacturing recovery in Poland and Central Europe drove 24% growth in volumes of merchant and other steel products.  Average selling price increased by $317 per ton compared to the prior year quarter, and $99 per ton sequentially.

Outlook

Ms. Smith said, "Based on our current view of the marketplace, we anticipate our strong operating and financial performance will continue in fiscal 2022.  Volumes should remain solid, supported by a replenished construction backlog in North America, as well as broad strength across key end markets in both North America and Europe."

"In the first quarter of fiscal 2022, we expect finished steel volumes to follow typical seasonal patterns, which have historically declined modestly from our fourth quarter levels.  We expect first quarter margins to remain consistent with the historical high levels earned in the fourth quarter," Ms. Smith added.

Conference Call

CMC invites you to listen to a live broadcast of its fourth quarter of fiscal 2021 conference call today, Thursday, October 14, 2021, at 11:00 a.m. ETBarbara R. Smith, Chairman of the Board, President, and Chief Executive Officer, and Paul Lawrence, 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 fabricate steel and metal products and provide related materials and services through a network including seven electric arc furnace ("EAF") mini mills, two EAF micro mills, one 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 and organic growth provided by acquisitions and strategic investments, demand for our products, metal margins, the effect of COVID-19 and related governmental and economic responses thereto, the ability to operate our steel mills at full capacity, future availability and cost of supplies of raw materials and energy for our operations, share repurchases, legal proceedings, the 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, estimated contractual obligations and our expectations or beliefs concerning future events. The statements in this release that are not historical statements, are forward-looking statements. These forward-looking statements can generally be identified by phrases such as we or our management "expects," "anticipates," "believes," "estimates," "future," "intends," "may," "plans to," "ought," "could," "will," "should," "likely," "appears," "projects," "forecasts," "outlook" or other similar words or phrases, as well as by discussions of strategy, plans, or intentions.

Our forward-looking statements are based on management's expectations and beliefs as of the time this news release was prepared. 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 for the fiscal year ended August 31, 2020, and Part II, Item 1A, "Risk Factors" of our quarterly report on Form 10-Q for the quarter ended February 28, 2021, 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 downstream contracts due to rising commodity pricing; impacts from COVID-19 on the economy, demand for our products, global supply chain and on our operations, including the responses of governmental authorities to contain COVID-19 and the impact of various COVID-19 vaccines; 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 existing and future laws, regulations and other legal requirements and judicial decisions that govern our business, including increased environmental regulations 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; 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 inability to close the sale of our Rancho Cucamonga property, including if the buyer were to terminate the purchase agreement during its 60 day due diligence review period; 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; operating and startup risks, as well as market risks associated with the commissioning of new projects could prevent us from realizing anticipated benefits and could result in a loss of all or a substantial part of our investments; 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, such as trade measures, military conflicts and political uncertainties, including the impact of the Biden administration on current trade regulations, such as Section 232 trade tariffs and quotas, tax legislation and other regulations which might adversely impact our business; 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; 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; and civil unrest, protests and riots.

COMMERCIAL METALS COMPANY
FINANCIAL & OPERATING STATISTICS (UNAUDITED)



Three Months Ended


Year Ended

(in thousands, except per ton amounts)


8/31/2021


5/31/2021


2/28/2021


11/30/2020


8/31/2020


8/31/2021


8/31/2020

North America















Net sales


$

1,660,409



$

1,558,068



$

1,257,486



$

1,195,013



$

1,224,849



$

5,670,976



$

4,769,933


Adjusted EBITDA


212,018



207,330



171,612



155,634



174,219



746,594



661,176

















External tons shipped















Raw materials


331



368



302



330



300



1,331



1,229


Rebar


469



500



472



486



498



1,927



1,897


Merchant and other


302



289



268



264



234



1,123



919


Steel products


771



789



740



750



732



3,050



2,816


Downstream products


415



408



343



371



429



1,537



1,635

















Average selling price per ton















Raw materials


$

1,069



$

949



$

846



$

630



$

605



$

877



$

567


Steel products


900



794



695



612



600



752



618


Downstream products


1,014



963



929



934



970



961



975

















Cost of raw materials per ton


$

805



$

697



$

629



$

458



$

427



$

650



$

402


Cost of ferrous scrap utilized per ton


434



369



344



266



237



355



238

















Steel products metal margin per ton


$

466



$

425



$

351



$

346



$

363



$

397



$

380
































Europe















Net sales


$

368,290



$

284,107



$

202,066



$

194,596



$

179,855



$

1,049,059



$

699,140


Adjusted EBITDA


67,676



50,005



16,107



14,470



22,927



148,258



62,007

















External tons shipped















Rebar


174



141



78



128



150



521



539


Merchant and other


286



263



275



269



230



1,093



933


Steel products


460



404



353



397



380



1,614



1,472

















Average selling price per ton















Steel products


$

763



$

664



$

532



$

461



$

446



$

612



$

448

















Cost of ferrous scrap utilized per ton


$

448



$

376



$

328



$

262



$

250



$

357



$

246

















Steel products metal margin per ton


$

315



$

288



$

204



$

199



$

196



$

255



$

202


COMMERCIAL METALS COMPANY

BUSINESS SEGMENTS (UNAUDITED)

(in thousands)


Three Months Ended


Year Ended

Net sales


8/31/2021


5/31/2021


2/28/2021


11/30/2020


8/31/2020


8/31/2021


8/31/2020

North America


$

1,660,409



$

1,558,068



$

1,257,486



$

1,195,013



$

1,224,849



$

5,670,976



$

4,769,933


Europe


368,290



284,107



202,066



194,596



179,855



1,049,059



699,140


Corporate and Other


1,947



2,866



2,718



2,194



4,428



9,725



7,413


Total net sales


$

2,030,646



$

1,845,041



$

1,462,270



$

1,391,803



$

1,409,132



$

6,729,760



$

5,476,486

















Adjusted EBITDA from continuing operations















North America


$

212,018



$

207,330



$

171,612



$

155,634



$

174,219



$

746,594



$

661,176


Europe


67,676



50,005



16,107



14,470



22,927



148,258



62,007


Corporate and Other


(31,897)



(36,214)



(45,986)



(26,471)



(64,846)



(140,568)



(146,575)


COMMERCIAL METALS COMPANY

CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)


Three Months Ended August 31,


Year Ended August 31,

(in thousands, except share data)

2021


2020


2021


2020

Net sales

$

2,030,646



$

1,409,132



$

6,729,760



$

5,476,486


Costs and expenses:








Cost of goods sold

1,686,973



1,145,725



5,623,903



4,531,688


Selling, general and administrative expenses

136,818



160,292



496,310



502,794


Interest expense

11,659



13,962



51,904



61,837


Loss on debt extinguishment



1,778



16,841



1,778


Asset impairments

2,439



1,098



6,784



7,611



1,837,889



1,322,855



6,195,742



5,105,708


Earnings from continuing operations before income taxes

192,757



86,277



534,018



370,778


Income taxes

40,444



18,495



121,153



92,476


Earnings from continuing operations

152,313



67,782



412,865



278,302










Earnings (loss) from discontinued operations before income taxes



(34)





1,907


Income taxes



125





706


Earnings (loss) from discontinued operations



(159)





1,201










Net earnings

$

152,313



$

67,623



$

412,865



$

279,503










Basic earnings per share








Earnings from continuing operations

$

1.26



$

0.57



$

3.43



$

2.34


Earnings from discontinued operations







0.01


Net earnings

$

1.26



$

0.57



$

3.43



$

2.35










Diluted earnings per share








Earnings from continuing operations

$

1.24



$

0.56



$

3.38



$

2.31


Earnings from discontinued operations







0.01


Net earnings

$

1.24



$

0.56



$

3.38



$

2.32










Cash dividends per share

$

0.12



$

0.12



$

0.48



$

0.48


Average basic shares outstanding

120,625,533



119,198,785



120,338,357



118,921,854


Average diluted shares outstanding

122,376,099



120,645,931



121,983,497



120,309,621


COMMERCIAL METALS COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share data)


August 31, 2021


August 31, 2020

Assets





Current assets:





Cash and cash equivalents


$

497,745



$

542,103


Accounts receivable (less allowance for doubtful accounts of $5,553 and $9,597)


1,105,580



880,728


Inventories


935,387



625,393


Prepaid and other current assets


173,033



165,879


Assets held for sale


25,083




Total current assets


2,736,828



2,214,103


Property, plant and equipment:





Land


123,135



143,567


Buildings and improvements


792,915



786,820


Equipment


2,435,541



2,364,923


Construction in process


147,166



103,776




3,498,757



3,399,086


Less accumulated depreciation and amortization


(1,932,634)



(1,828,019)


Property, plant and equipment, net


1,566,123



1,571,067


Goodwill


66,137



64,321


Other noncurrent assets


269,583



232,237


Total assets


$

4,638,671



$

4,081,728


Liabilities and stockholders' equity





Current liabilities:





Accounts payable


$

450,723



$

266,102


Accrued expenses and other payables


475,384



454,977


Acquired unfavorable contract backlog




6,035


Borrowings under accounts receivable facilities


26,560




Current maturities of long-term debt


27,806



18,149


Total current liabilities


980,473



745,263


Deferred income taxes


112,067



130,810


Other noncurrent liabilities


235,607



250,706


Long-term debt


1,015,415



1,065,536


Total liabilities


2,343,562



2,192,315


Stockholders' equity:





Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued
129,060,664 shares; outstanding 120,586,589 and 119,220,905 shares


1,290



1,290


Additional paid-in capital


368,064



358,912


Accumulated other comprehensive loss


(84,820)



(103,764)


Retained earnings


2,162,925



1,807,826


Less treasury stock, 8,474,075 and 9,839,759 shares at cost


(152,582)



(175,063)


Stockholders' equity


2,294,877



1,889,201


Stockholders' equity attributable to noncontrolling interests


232



212


Total stockholders' equity


2,295,109



1,889,413


Total liabilities and stockholders' equity


$

4,638,671



$

4,081,728







COMMERCIAL METALS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



Year Ended August 31,

(in thousands)


2021


2020

Cash flows from (used by) operating activities:





Net earnings


$

412,865



$

279,503


Adjustments to reconcile net earnings to cash flows from (used by) operating activities:





Depreciation and amortization


167,613



165,758


Stock-based compensation


43,677



31,850


Deferred income taxes and other long-term taxes


(39,873)



49,580


Loss on debt extinguishment


16,841



1,778


Net gain on disposals of subsidiaries, assets and other


(8,807)



(4,213)


Asset impairments


6,784



7,611


Amortization of acquired unfavorable contract backlog


(6,035)



(29,367)


Other


541



2,643


Changes in operating assets and liabilities, net of acquisitions:





Accounts receivable


(228,026)



146,375


Inventories


(316,316)



78,903


Accounts payable, accrued expenses and other payables


194,801



45,718


Other operating assets and liabilities


(15,591)



15,065


Net cash flows from operating activities


228,474



791,204







Cash flows from (used by) investing activities:





Capital expenditures


(184,165)



(187,618)


Proceeds from the sale of property, plant and equipment and other


26,424



11,843


Acquisitions, net of cash acquired


(1,888)



(18,137)


Other


(2,500)



974


Net cash flows used by investing activities


(162,129)



(192,938)







Cash flows from (used by) financing activities:





Proceeds from issuance of long-term debt, net


309,279



62,539


Repayments of long-term debt


(368,527)



(246,523)


Proceeds from accounts receivable facilities


296,586



234,482


Repayments under accounts receivable facilities


(269,858)



(237,828)


Dividends


(57,766)



(57,056)


Stock issued under incentive and purchase plans, net of forfeitures


(3,166)



(3,420)


Debt extinguishment costs


(13,128)




Debt issuance costs


(2,830)




Contribution from noncontrolling interest


20



16


Net cash flows used by financing activities


(109,390)



(247,790)


Effect of exchange rate changes on cash


(790)



759


Increase (decrease) in cash and cash equivalents


(43,835)



351,235


Cash, restricted cash and cash equivalents at beginning of year


544,964



193,729


Cash, restricted cash and cash equivalents at end of year


$

501,129



$

544,964







Supplemental information:





Cash and cash equivalents


$

497,745



$

542,103


Restricted cash


3,384



2,861


Total cash, restricted cash and cash equivalents


$

501,129



$

544,964


COMMERCIAL METALS COMPANY
NON-GAAP FINANCIAL MEASURES (UNAUDITED)

This press release contains financial measures not derived in accordance with U.S. generally accepted accounting principles ("GAAP"). Reconciliations to the most comparable GAAP measure are provided below.

Adjusted EBITDA from continuing operations, core EBITDA from continuing operations, and adjusted earnings from continuing operations are non-GAAP financial measures. Adjusted earnings from continuing operations per diluted share is defined as adjusted earnings from continuing operations on a diluted per share basis.

Non-GAAP financial measures should be viewed in addition to, and not as alternatives for, the most directly comparable measures derived in accordance with GAAP and may not be comparable to similar measures presented by other companies. However, we believe that the non-GAAP financial measures provide relevant and useful information to management, investors, analysts, creditors and other interested parties in our industry as they allow: (i) comparison of our earnings to those of our competitors; (ii) a supplemental measure of our underlying business operational performance; and (iii) the assessment of period-to-period performance trends. Management uses non-GAAP financial measures to evaluate financial performance and set target benchmarks for annual and long-term cash incentive performance plans.

A reconciliation of earnings from continuing operations to adjusted EBITDA from continuing operations and core EBITDA from continuing operations is provided below:


Three Months Ended


Year Ended

(in thousands)

8/31/2021


5/31/2021


2/28/2021


11/30/2020


8/31/2020


8/31/2021


8/31/2020

Earnings from continuing operations

$

152,313



$

130,408



$

66,233



$

63,911



$

67,782



$

412,865



$

278,302


Interest expense

11,659



11,965



14,021



14,259



13,962



51,904



61,837


Income taxes

40,444



38,175



20,941



21,593



18,495



121,153



92,476


Depreciation and amortization

42,437



41,804



41,573



41,799



41,654



167,613



165,749


Amortization of acquired unfavorable contract backlog

(1,495)



(1,508)



(1,509)



(1,523)



(10,691)



(6,035)



(29,367)


Asset impairments

2,439



277



474



3,594



1,098



6,784



7,611


Adjusted EBITDA from continuing operations

247,797



221,121



141,733



143,633



132,300



754,284



576,608


Non-cash equity compensation

8,119



13,800



12,696



9,062



9,875



43,677



31,850


Gain on sale of assets



(4,457)



(5,877)







(10,334)




Loss on debt extinguishment





16,841





1,778



16,841



1,778


Facility closure





5,694



5,214



2,903



10,908



11,105


Labor cost government refund







(1,348)



(2,985)



(1,348)



(2,985)


Acquisition settlement









32,123





32,123


Core EBITDA from continuing operations

$

255,916



$

230,464



$

171,087



$

156,561



$

175,994



$

814,028



$

650,479


A reconciliation of earnings from continuing operations to adjusted earnings from continuing operations is provided below:


Three Months Ended


Year Ended

(in thousands)

8/31/2021


5/31/2021


2/28/2021


11/30/2020


8/31/2020


8/31/2021


8/31/2020

Earnings from continuing operations

$

152,313



$

130,408



$

66,233



$

63,911



$

67,782



$

412,865



$

278,302


Gain on sale of assets



(4,457)



(5,877)







(10,334)




Asset impairments

2,439



277



474



3,594



1,098



6,784



7,081


Loss on debt extinguishment





16,841





1,778



16,841



1,778


Facility closure





5,694



5,214



2,903



10,908



11,105


Acquisition settlement









32,123





32,123


Labor cost government refund







(1,348)



(2,985)



(1,348)



(2,985)


Total adjustments (pre-tax)

$

2,439



$

(4,180)



$

17,132



$

7,460



$

34,917



$

22,851



$

49,102


Related tax effects on adjustments

(512)



878



(3,598)



(1,593)



(7,392)



(4,825)



(10,371)


Adjusted earnings from continuing operations

$

154,240



$

127,106



$

79,767



$

69,778



$

95,307



$

430,891



$

317,033


Earnings from continuing operations per diluted share

$

1.24



$

1.07



$

0.54



$

0.53



$

0.56



$

3.38



$

2.31


Adjusted earnings from continuing operations per diluted share

$

1.26



$

1.04



$

0.66



$

0.58



$

0.79



$

3.53



$

2.64


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SOURCE Commercial Metals Company

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