<PAGE> 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, 1994
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, 1994 there were 14,180,417 shares of the Company's
Common Stock issued and outstanding excluding 1,952,166 shares held in
the Company's treasury.
<PAGE> 2
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
---------
<S> <C>
PART I - Financial Statements:
Consolidated Balance Sheets -
May 31, 1994 and August 31, 1993 2 - 3
Consolidated Statements of Earnings -
Three months and nine months ended 4
May 31, 1994 and May 31, 1993
Consolidated Statements of Cash Flows -
Nine months ended May 31, 1994
and May 31, 1993 5
Consolidated Statement of Stockholders'
Equity - May 31, 1994 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Consolidated Financial Statements 8 - 12
PART II - Other Information and Signatures 13 - 14
Exhibit 11 (a) - Calculation of Primary and
Fully Diluted Earnings per Share 15
</TABLE>
Page 1
<PAGE> 3
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
( In thousands except share data )
<TABLE>
<CAPTION>
May 31, August 31,
1994 1993
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and temporary investments $32,263 $47,439
Accounts receivable (less allowance for
collection losses of $3,805 and $3,217) 222,261 163,387
Financial services loans and advances 28,271 35,768
Inventories 131,484 136,601
Other 17,721 15,300
-------- --------
TOTAL CURRENT ASSETS 432,000 398,495
OTHER ASSETS 2,242 4,143
PROPERTY, PLANT, AND EQUIPMENT, at cost:
Land 10,558 10,165
Buildings 31,343 30,695
Equipment 294,321 257,537
Leasehold improvements 14,626 13,252
Construction in process 11,449 15,517
-------- --------
362,297 327,166
Less accumulated depreciation
and amortization (208,136) (187,843)
-------- --------
154,161 139,323
-------- --------
$588,403 $541,961
======== ========
</TABLE>
See notes to consolidated financial statements.
Page 2
<PAGE> 4
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
( In thousands except share data )
<TABLE>
<CAPTION>
May 31, August 31,
1994 1993
---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Commercial paper $25,000 $
Notes payable banks 21,000
Financial services notes payable 58,867 41,003
Accounts payable 78,555 100,587
Other payables and accrued expenses 75,125 64,506
Income taxes payable 4,642 4,109
Current maturities of long-term debt 4,821 4,824
-------- --------
TOTAL CURRENT LIABILITIES 268,010 215,029
DEFERRED INCOME TAXES 14,773 14,773
LONG-TERM DEBT 72,201 76,738
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Capital stock:
Preferred stock -- --
Common stock, par value $5.00 a share;
authorized 20,000,000 shares; issued
16,132,583; outstanding 14,180,417
and 11,060,613 (pre-split) shares. 80,663 60,500
Additional paid-in capital 610 3,919
Retained earnings 185,679 189,865
-------- --------
266,952 254,284
Less treasury stock,
1,952,166 and 1,039,451 (pre-split)
shares at cost (33,533) (18,863)
-------- --------
233,419 235,421
-------- --------
$588,403 $541,961
======== ========
</TABLE>
See notes to consolidated financial statements.
Page 3
<PAGE> 5
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands except share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
May 31, May 31,
-------------------- ---------------------
1994 1993 1994 1993
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Net sales $440,649 $435,041 $1,210,578 $1,171,133
Other revenues 2,170 3,405 6,225 6,889
-------- -------- --------- ---------
442,819 438,446 1,216,803 1,178,022
COST AND EXPENSES:
Cost of goods sold 399,733 399,422 1,100,226 1,071,415
Selling, general and
administrative expenses 27,115 24,323 77,156 71,026
Interest expense 2,713 2,248 6,524 7,496
Employees' pension and
profit sharing plans 2,011 2,047 5,722 5,259
-------- -------- --------- ---------
431,572 428,040 1,189,628 1,155,196
EARNINGS BEFORE INCOME TAXES 11,247 10,406 27,175 22,826
INCOME TAXES 4,102 3,954 10,035 8,674
-------- -------- --------- ---------
NET EARNINGS $7,145 $6,452 $17,140 $14,152
======== ======== ========= =========
Net earnings per share $0.48 $0.43 $1.13 $0.96
Cash dividends per share $0.12 $0.10 $0.34 $0.29
Average shares outstanding 15,026,215 14,950,380 15,136,721 14,720,283
</TABLE>
See notes to consolidated financial statements.
Page 4
<PAGE> 6
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
May 31,
--------------------------
1994 1993
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $17,140 $14,152
Adjustments to earnings not requiring cash:
Depreciation and amortization 22,374 20,454
Provision for losses on receivables 1,211 1,313
Deferred income taxes
Other (129) (251)
------- -------
Cash flows from operations before changes in
operating assets and liabilities 40,596 35,668
Changes in operating assets and liabilities:
Decrease (increase) in receivables (60,085) (20,722)
Decrease (increase) in financial
services loans and advances 7,497 (771)
Decrease (increase) in inventories 5,117 (2,852)
Decrease (increase) in other assets (520) 959
Increase (decrease) in accounts payable,
accrued expenses and income taxes (10,881) 12,957
------- -------
Net Cash Flows from (used by) Operating Activities (18,276) 25,239
CASH FLOWS FROM INVESTING ACTIVITIES:
Temporary investments 9,690 17,440
Purchase of property, plant and equipment (37,212) (22,196)
Sales of property, plant and equipment 129 251
------- -------
Net Cash provided (used) by Investing Activities (27,393) (4,505)
CASH FLOWS FROM FINANCING ACTIVITIES:
Commercial paper - net change 25,000
Notes payable banks - net change 21,000
Financial services notes payable 17,864 (12,141)
Payments on long-term debt (4,539) (6,459)
Stock issued under employee plans 2,972 4,247
Treasury stock acquired (17,120)
Dividends paid (4,994) (4,204)
------- -------
Net Cash provided (used) by Financing Activities 40,183 (18,557)
Increase (Decrease) in Cash and Cash Equivalents (5,486) 2,177
Cash and Cash Equivalents at Beginning of Year 18,780 11,460
------- -------
Cash and Cash Equivalents at End of Period $13,294 $13,637
======= =======
</TABLE>
See notes to consolidated financial statements.
Page 5
<PAGE> 7
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands except share data)
<TABLE>
<CAPTION>
Common Stock Treasury Stock
--------------------------- Add'l -----------------------
Number of Paid-In Retained Number of
Shares Amount Capital Earnings Shares Amount
----------- --------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance September 1, 1993 12,100,064 $60,500 $3,919 $189,865 (1,039,451) ($18,863)
Net earnings for nine months
ended May 31, 1994 17,140
Cash dividends - $.34 a share
( restated for stock split ) (4,994)
Stock split (four-for-three)
Paid 12/27/93 4,032,519 20,163 (3,831) (16,332) (346,318)
Treasury stock acquired (748,100) (17,120)
Stock issued under stock option,
purchase and bonus plans 522 181,703 2,450
---------- ------- ------ -------- ---------- --------
Balance, May 31, 1994 16,132,583 $80,663 $610 $185,679 (1,952,166) ($33,533)
========== ======= ====== ======== ========== ========
</TABLE>
See notes to consolidated financial statements.
Page 6
<PAGE> 8
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - LONG-TERM DEBT (in thousands):
<TABLE>
<CAPTION>
Amount Current Long-Term
Outstanding Maturities Debt
----------- ---------- ---------
<S> <C> <C> <C>
8.49% notes due 2001 $50,000 $ $50,000
8.75% note due 1999 23,571 4,286 19,285
8.15% note due 1996 3,125 417 2,708
Other 326 118 208
------- ------- -------
$77,022 $ 4,821 $72,201
------- ------- -------
</TABLE>
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 - STOCK DIVIDEND:
The Company paid a four-for-three stock split in the form of a 33 1/3%
stock dividend on the Company's common stock to shareholders on December 27,
1993. Prior year's earnings per share, average shares outstanding and dividends
per share have been adjusted for the four-for-three stock split.
NOTE D - 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, 1994, 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
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
(in millions)
3RD QTR 3rd Qtr
FY 1994 FY 1993
------- -------
<S> <C> <C>
Revenues $ 443 $ 438
Net earnings 7.1 6.5
Cash flow 15.5 13.5
LIFO reserve 16.6 12.7
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS Nine Months
FY 1994 FY 1993
----------- -----------
<S> <C> <C>
Revenues $ 1,217 $ 1,178
Net earnings 17.1 14.2
Cash flow 40.6 35.7
</TABLE>
SIGNIFICANT EVENTS AFFECTING THE COMPANY THIS QUARTER:
- Net earnings for the quarter were 11% higher than last year's third
quarter, and year to date earnings were 21% higher.
- Startup of the new $28 million Direct Current melt shop at Birmingham.
- LIFO effect impacted net earnings $1.6 million.
- Acquisition of substantially all the assets of Proler International
Corp.'s Vinton (El Paso), Texas scrap metal processing facility.
- After quarter end acquisition of the assets of CS&W of Utah, Inc in
Brigham City, Utah, a steel fence post manufacturing and marketing
operation.
- Ferrous scrap prices fell sharply while nonferrous prices,
particularly copper, moved higher.
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<PAGE> 10
- Steel demand and prices for our product lines in the U.S. edged upward
whereas prices abroad declined.
- The Company repurchased 748,100 shares of its common
stock.
The LIFO method of inventory valuation decreased net earnings for the quarter
$1.6 million (ten cents per share) compared to an increase of $55 thousand (one
cent per share) last year. For the nine months LIFO reduced net earnings by
$3.1 million (twenty-one cents per share) compared to a decrease of $467
thousand (three cents per share) last year.
The aforementioned acquisitions, either individually or in the aggregate, are
not material relative to the total consolidated assets of the Company.
SEGMENT OPERATING DATA
Revenues and operating profit by business segment are shown in the
following table:
<TABLE>
<CAPTION>
Three months ended Nine months ended
May 31 May 31
------------------- ---------------------
1994 1993 1994 1993
-------- -------- ---------- --------
<S> <C> <C> <C> <C>
Revenues:
Manufacturing $152,546 $127,731 $ 420,895 $ 353,296
Recycling 96,095 75,351 238,924 215,152
Marketing and
Trading 203,033 242,470 580,415 629,094
Financial
Services 581 793 2,126 2,901
Corporate and
Eliminations (9,436) (7,899) (25,557) (22,421)
-------- -------- ---------- -----------
$442,819 $438,446 $1,216,803 $1,178,022
======== ======== ========== ==========
Operating profit:
Manufacturing $ 8,794 $ 9,281 $ 24,507 $ 23,239
Recycling 2,140 212 3,782 (733)
Marketing and
Trading 4,022 4,615 10,262 11,173
Financial
Services 415 436 1,300 1,323
Corporate and
Eliminations (1,913) (2,197) (7,518) (6,167)
-------- -------- ---------- ---------
$ 13,458 $ 12,347 $ 32,333 $ 28,835
======== ======== ========== ==========
</TABLE>
Page 9
<PAGE> 11
MANUFACTURING -
Manufacturing segment revenues for the quarter were up 19% over last year's
same quarter, while operating profit was 5% lower. LIFO reduced operating
profit for the quarter by approximately $2.1 million. For the nine months
revenues were up 19% and operating profit was 5% higher (including the
reduction in operating profit of approximately $4.0 million for LIFO).
CMC Steel Group sales for the quarter were up 25% over last year's same quarter
on a 14% increase in shipping tonnage propelled by private nonresidential and
infrastructure spending. Average selling prices were 10% higher than a year
ago. For the nine months sales were up 24% on a 14% increase in shipping
tonnage. Average selling prices for the nine months were 9% higher than a year
ago.
Steel mill shipments for the quarter were up 9% over the same quarter last
year. Operating profits increased only 2% over last year due to the impact of
rising scrap costs in inventory and approximately $2 million of expenses and
costs associated with the startup of the new melt shop at the Alabama mill.
Steel Fabrication division sales and operating profits were up significantly
over last year's quarter. For the nine months sales and operating profits were
well ahead of a year ago.
Copper Tube division shipments for the quarter were 8% lower than last year.
Sales were 16% lower than the same quarter last year and selling prices were 8%
lower. Operating profits were lower for the quarter and the nine months
compared to the robust third quarter a year ago. Weaker markets narrowed
margins as rising interest rates impacted residential construction.
RECYCLING -
Operations in the Recycling segment during the nine months improved
significantly over last year; shipments were up 14% and sales were up 11%. For
the quarter shipments were up 22% and sales were up 28% compared to the same
quarter last year. While the third quarter last year was profitable, this
year's third quarter was significantly better. Ferrous scrap prices fell
dramatically during the quarter as overseas demand dropped and domestic scrap
supplies increased. Aluminum scrap prices showed continued strength during the
quarter due to exceptional demand and tighter supply sources. Copper scrap
prices moved significantly higher. Generally, demand for nonferrous scrap
remained good as the U.S. economy continued to improve and the German and
Japanese economies showed bottoming signs.
Page 10
<PAGE> 12
MARKETING AND TRADING -
Sales revenues for the quarter were 16% lower than the same quarter a year ago
due principally to the high level of steel shipments into China and other
Pacific Rim markets during last year's third quarter, a level which was not
sustainable. For the nine months sales revenues were 8% lower on a 20% lower
shipping volume. Operating profits for the quarter were 13% lower and were 8%
lower for the nine month period.
FINANCIAL SERVICES -
Revenues for the quarter and the nine months were lower than a year ago due to
reduced margins on financing transactions. Operating profits for the quarter
were slightly lower but were about even with last year for the nine month
period.
ENVIRONMENTAL ACTIVITIES
The Company is subject to federal, state and local pollution control laws and
regulations in all locations where it has operating facilities. It anticipates
that compliance with these laws and regulations will involve continuing capital
expenditures and operating costs.
In the ordinary course of conducting its business, the Company becomes involved
in environmental litigation, administrative proceedings and governmental
investigations. Certain of these environmental matters or other proceedings may
result in fines, penalties or judgments against the Company which may have a
material impact on earnings for a particular quarter. While the Company is
unable to estimate precisely the ultimate dollar amount of exposure to loss 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
Our order flow is good. Although the economic recovery in the U.S.A. appears
to be moderating as a result of the increase in interest rates, most of our
markets, especially the capital goods sector, are behaving satisfactorily.
Private nonresidential and public construction spending have picked up in
recent months. We see signs of a turnaround in Japan led by housing
construction. Western European economies are benefiting from higher auto sales
and exports. We expect China and the rest of the Pacific region to perk up
again later this calendar year. Steel prices should remain firm
Page 11
<PAGE> 13
OUTLOOK - continued
and nonferrous metals supply/demand fundamentals are improving. Progress will
continue with the startup of the Birmingham melt shop through the fourth
quarter, and we expect improved performance in the first quarter of next fiscal
year.
LIQUIDITY
Cash flow from operations before changes in operating assets and liabilities
was $41 million for the nine months compared to $36 million last year.
Depreciation expense was $22 million compared to $20 million a year ago. The
Company's effective tax rate was 36.9% for this year compared to 38% a year
ago.
Net working capital was $164 million at May 31, 1994 compared to $183 million
at August 31, 1993. Short-term borrowings increased to finance expansion of
accounts receivable. The current ratio was 1.6 at May 31, 1994 compared to 1.9
at August 31, 1993.
Capital expenditures for the nine months ended May 31, 1994 were $37 million,
highlighted by our melt shop addition in Birmingham. Capital spending for
fiscal 1994 is projected at approximately $54 million.
Long-term debt as a percent of total capitalization was 23% at May 31, 1994
compared to 24% at August 31, 1993.
Stockholders' equity at May 31, 1994 was $233 million or $16.46 per share. At
May 31, 1994 there were 14,180,417 shares issued and outstanding net of
1,952,166 shares held in the Company's treasury. During the quarter the
Company repurchased 748,100 shares of its common stock for approximately $17
million.
Page 12
<PAGE> 14
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the information incorporated under Item 3. Legal
Proceedings in the Company's Annual Report on Form 10-K for the year ending
August 31, 1993 filed November 26, 1993, with the Securities and Exchange
Commission, and to the information incorporated under Part II, Item 1. Legal
Proceedings in the Company's quarterly report on Form 10-Q for the quarter
ended November 30, 1993, filed January 14, 1994, and for the quarter ended
February 28, 1994, filed April 12, 1994, with the Securities and Exchange
Commission.
On May 17, 1994, the Company was served in a lawsuit filed on behalf
of the State of Florida Department of Environmental Protection (State of
Florida, Department of Environmental Protection v. Allied Scrap Processors,
Inc., et al, No. 94-464-CA, 14th Judicial Circuit Court, Jackson County,
Florida). Plaintiff seeks recovery of approximately $1,900,000 for alleged
unreimbursed removal or remedial expense at the Sapp Battery Superfund Site
near Cottondale, in Jackson County, Florida. The Company and the eight other
corporations named as defendants are alleged to have arranged for the disposal
of hazardous substances at the site by having sold used batteries to the Sapp
Battery Salvage Company, the operator of the site who reclaimed lead. The
Company had previously been named as a Potentially Responsible Party (PRP) at
the site by the E.P.A. and has joined along with approximately twenty six other
PRPs in an agreement providing for cost sharing of certain remedial actions
being undertaken at the site pursuant to a consent decree. That same group of
PRPs have tentatively agreed to share defense costs and any liability resulting
from the State of Florida litigation under the terms of the amended PRP
allocation agreement among the twenty six parties. The Company and the other
defendants who are parties to the PRP agreement have filed a joint Answer
asserting various defenses to the Complaint.
While the Company is unable to estimate the ultimate dollar amount of
exposure to loss in connection with the above described litigation, it is the
opinion of the Company's management that this litigation will not have a
material adverse effect on the business or the consolidated financial position
of the Company.
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Page 13
<PAGE> 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits required by Item 601 of Regulation S-K.
Exhibit No.
11. Computation of Per Share Earnings
(a) Calculation of Primary and
Fully Diluted Earnings Per Share
B. The Corporation did not file a Form 8-K report during
the quarter ended May 31, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMERCIAL METALS COMPANY
/s/ LAWRENCE A. ENGELS
July 12, 1994 Lawrence A. Engels
Vice President, Treasurer
& Chief Financial Officer
/s/ JACK T. MULOS
July 12, 1994 Jack T. Mulos
Controller
Page 14
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INDEX TO EXHIBITS
Exhibit
Number Exhibit
- - ------- -------
11(a) Calculation of Primary and Fully Diluted Earnings Per Share
<PAGE> 1
EXHIBIT 11 (a)
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE*
(In thousands except share data)
<TABLE>
<CAPTION>
Nine months ended
May 31,
--------------------------
1994 1993
---------- ---------
<S> <C> <C>
Net earnings $17,140 $14,152
Weighted average number
of shares outstanding 14,787,290 10,785,070
Dilutive effect of stock option and
purchase plans, after application
of treasury stock method 349,431 255,142
Shares used in calculating primary
net earnings per share before 11,040,212
December 1993 four-for-three
stock split
Adjustment for December 1993
four-for-three stock split 3,680,071
Shares used in calculating primary 15,136,721 14,720,283
net earnings per share
Earnings per share before the
December 1993 four-for-three stock split $1.28
Earnings per share after the
December 1993 four-for-three stock split $1.13 $0.96
</TABLE>
*Fully diluted earnings per share are identical to
primary earnings per share.
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