<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 February 28, 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 February 28, 1994 there were 14,911,003 shares of the Company's
Common Stock issued and outstanding excluding 1,221,580 shares held in
the Company's treasury.
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
INDEX
Page No.
---------
PART I - Financial Statements:
Consolidated Balance Sheets -
February 28, 1994 and August 31, 1993 2 - 3
Consolidated Statements of Earnings -
Three months and six months ended 4
February 28, 1994 and February 28, 1993
Consolidated Statements of Cash Flows -
Six Months ended February 28, 1994
and February 28, 1993 5
Consolidated Statement of Stockholders'
Equity - February 28, 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 - 15
Exhibit 11 (a) - Calculation of Primary and
Fully Diluted Earnings per Share 16
Page 1
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands except share data)
February 28, August 31,
1994 1993
------------ ----------
CURRENT ASSETS:
Cash and temporary investments $31,093 $47,439
Accounts receivable (less allowance for
collection losses of $3,542 and $3,217) 200,857 163,387
Financial services loans and advances 40,688 35,768
Inventories 124,429 136,601
Other 18,132 15,300
--------- ---------
TOTAL CURRENT ASSETS 415,199 398,495
OTHER ASSETS 2,514 4,143
PROPERTY, PLANT, AND EQUIPMENT, at cost:
Land 10,331 10,165
Buildings 30,890 30,695
Equipment 262,882 257,537
Leasehold improvements 14,575 13,252
Construction in process 31,595 15,517
--------- ---------
350,273 327,166
Less accumulated depreciation
and amortization (201,122) (187,843)
--------- ---------
149,151 139,323
--------- ---------
$566,864 $541,961
========= =========
See notes to consolidated financial statements.
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(In thousands except share data)
February 28, August 31,
1994 1993
------------ ----------
CURRENT LIABILITIES:
Commercial paper $22,000 $
Financial services notes payable 65,478 41,003
Accounts payable 73,810 100,587
Other payables and accrued expenses 63,122 64,507
Income taxes payable 3,595 4,109
Current maturities of long-term debt 4,819 4,824
--------- ---------
TOTAL CURRENT LIABILITIES 232,824 215,030
DEFERRED INCOME TAXES 14,773 14,773
LONG-TERM DEBT 74,329 76,737
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 14,911,003
and 11,060,613 (pre-split) shares. 80,663 60,500
Additional paid-in capital 625 3,919
Retained earnings 180,313 189,865
--------- ---------
261,601 254,284
Less treasury stock,
1,221,580 and 1,039,451 (pre-split)
shares at cost (16,663) (18,863)
--------- ---------
244,938 235,421
--------- ---------
$566,864 $541,961
========= =========
See notes to consolidated financial statements.
Page 3
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands except share data)
Three months ended Six months ended
February 28, February 28,
---------------------- ---------------------
1994 1993 1994 1993
---------- ---------- --------- ---------
REVENUES:
Net sales $389,913 $411,712 $769,929 $736,092
Other revenues 2,311 1,646 4,055 3,484
---------- ---------- --------- ---------
392,224 413,358 773,984 739,576
COSTS AND EXPENSES:
Cost of goods sold 357,083 378,084 700,493 671,993
Selling, general and
administrative expenses 24,632 23,396 50,041 46,703
Interest expense 1,976 2,453 3,811 5,248
Employees' pension and
profit sharing plans 1,836 1,608 3,711 3,212
---------- ---------- --------- ---------
385,527 405,541 758,056 727,156
EARNINGS BEFORE INCOME TAXES 6,697 7,817 15,928 12,420
INCOME TAXES 2,425 2,971 5,933 4,720
---------- ---------- --------- ---------
NET EARNINGS $4,272 $4,846 $9,995 $7,700
========== ========== ========= =========
Net earnings per share $0.28 $0.33 $0.66 $0.53
Cash dividends per share $0.12 $0.10 $0.22 $0.20
Average shares outstanding 15,129,537 14,689,709 15,191,975 14,605,235
See notes to consolidated financial statements.
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six months ended
February 28,
------------------------
1994 1993
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $9,995 $7,700
Adjustments to earnings not requiring cash:
Depreciation and amortization 14,491 13,732
Provision for losses on receivables 756 807
Deferred income taxes
Other (117) (52)
-------- --------
Cash flows from operations before changes in
operating assets and liabilities 25,125 22,187
Changes in operating assets and liabilities:
Decrease (increase) in receivables (38,226) (19,266)
Decrease (increase) in financial
services loans and advances (4,920) 8,345
Decrease (increase) in inventories 12,172 (3,615)
Decrease (increase) in other assets (1,203) (3,878)
Increase (decrease) in accounts payable,
accrued expenses and income taxes (28,677) (2,275)
-------- --------
Net Cash Flows from (used by) Operating Activities (35,729) 1,498
CASH FLOWS FROM INVESTING ACTIVITIES:
Temporary investments 9,828 17,544
Purchase of property, plant and equipment (24,319) (13,319)
Sales of property, plant and equipment 117 52
-------- --------
Net Cash Provided (used) by Investing Activities (14,374) 4,277
CASH FLOWS FROM FINANCING ACTIVITIES:
Commercial paper - net change 22,000 10,000
Financial services notes payable 24,475 (11,664)
Payments on long-term debt (2,413) (3,155)
Stock issued under employee plans 2,737 3,776
Dividends paid (3,214) (2,785)
-------- --------
Net Cash Provided (Used) by Financing Activities 43,585 (3,828)
Increase (Decrease) in Cash and Cash Equivalents (6,518) 1,947
Cash and Cash Equivalents at Beginning of Year 18,780 11,460
-------- --------
Cash and Cash Equivalents at End of Period $12,262 $13,407
======== ========
See notes to consolidated financial statements.
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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 $189,864 (1,039,451) ($18,863)
Net earnings for six months
ended February 28, 1994 9,995
Cash dividends - $.22 a share
(restated for stock split) (3,214)
Stock split (four-for-three)
Paid 12/27/93 4,032,519 20,163 (3,831) (16,332) (346,318)
Stock issued under stock option,
purchase and bonus plans 537 164,189 2,200
---------- ------- ------- -------- ---------- -------
Balance, February 28, 1994 16,132,583 $80,663 $ 625 $180,313 (1,221,580) ($16,663)
========== ======= ======= ======== ========== =======
</TABLE>
See notes to consolidated financial statements.
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - LONG-TERM DEBT (in thousands):
Amount Current Long-Term
Outstanding Maturities Debt
----------- ---------- ---------
8.49% notes due 2001 $50,000 $ $50,000
8.75% note due 1999 25,714 4,286 21,428
8.15% note due 1996 3,125 417 2,708
Other 309 116 193
-------- -------- --------
$79,148 $4,819 $74,329
======== ======== ========
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 February 28, 1994, the results of operations
for the six months then ended and cash flows for the same periods.
The results of operations for the six month periods are not
necessarily indicative of the results to be expected for a full year.
Page 7
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED RESULTS OF OPERATIONS
(in millions)
2nd Qtr 2nd Qtr
FY 1994 FY 1993
------- -------
Revenues $ 392 $ 413
Net earnings 4.3 4.8
Cash flow 11.9 12.3
LIFO reserve 14.2 12.8
Six Months Six Months
FY 1994 FY 1993
---------- ----------
Revenues $ 774 $ 740
Net earnings 10.0 7.7
Cash Flow 25.1 22.2
SIGNIFICANT EVENTS AFFECTING THE COMPANY THIS QUARTER:
- Net earnings for the quarter were 10% lower than last year's
second quarter, but year to date earnings were 30% higher.
- Construction of the new $28 million melt shop at Birmingham
nears completion.
- Severe winter weather caused disruptions in several divisions
and specifically affected production at our steel mill in
Alabama and the copper tube mill in Virginia. The weather
impacted customers in various regions of the country.
- The U.S. economic recovery is continuing. Other major
economies generally remain weak.
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- Ferrous scrap prices were near record highs. Nonferrous
prices were weak but are up slightly from the bottom last
fall.
The LIFO method of inventory valuation decreased net earnings for the quarter
$915 thousand (six cents per share) compared to a decrease of $618 thousand
(four cents per share) last year. For the six months net earnings were $1.6
million lower (ten cents per share) compared to a decrease of $521 thousand
(four cents per share) last year.
SEGMENT OPERATING DATA
Revenues and operating profit by business segment are shown in the
following table:
Three months ended Six months ended
February 28 February 28
------------------- ------------------
1994 1993 1994 1993
-------- -------- -------- -------
REVENUES:
Manufacturing $131,608 $110,598 $268,349 $225,565
Recycling 73,884 67,722 142,829 139,801
Marketing and
Trading 194,175 239,880 377,382 386,624
Financial
Services 833 912 1,545 2,108
Corporate and
Eliminations (8,276) (5,754) (16,121) (14,522)
-------- -------- -------- --------
$392,224 $413,358 $773,984 $739,576
======== ======== ======== ========
OPERATING PROFIT:
Manufacturing $ 6,331 $ 5,992 $ 15,713 $ 13,958
Recycling 1,228 363 1,642 (945)
Marketing and
Trading 2,954 5,158 6,240 6,558
Financial
Services 486 510 885 887
Corporate and
Eliminations (2,786) (2,196) (5,605) (3,970)
-------- -------- -------- --------
$ 8,213 $ 9,827 $ 18,875 $ 16,488
======== ======== ======== ========
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MANUFACTURING -
Manufacturing segment revenues for the quarter were up 19% over last year's
same quarter, while operating profit was 6% higher (despite the severe winter
weather). For the six months revenues were up 19% and operating profit was 13%
higher.
CMC Steel Group sales for the quarter were up 22% over last year's same quarter
on a 10% increase in shipping tonnage. Average selling prices were 12% higher
than a year ago. For the six months sales were up 23% on a 14% increase in
shipping tonnage. Average selling prices for the six months were 5% higher
than a year ago.
Steel mill shipments for the quarter were up 3% over the same quarter last
year. Operating profits were 15% lower than last year due to rising scrap
costs and the recent winter-weather related difficulties particularly at the
SMI-Alabama mill.
Steel Fabrication division sales and operating profits were up sharply over
last year's quarter. For the six months sales and operating profits were well
ahead of a year ago.
Copper Tube division shipments for the quarter were slightly lower compared to
last year. Owing to a 13% decline in selling prices for the quarter, sales
were lower compared to last year. Operating profit was lower for the quarter
and the six months compared to last year. The weaker quarter this year was due
principally to the severe winter weather which impacted costs as well as
shipments.
RECYCLING -
Operations in the Recycling segment during the six months improved
significantly over last year. Shipments were up 9% and sales were up 4%. For
the quarter shipments were up 12% and sales were up 9% compared to the same
quarter last year. While the second quarter last year was profitable, this
year's second quarter was significantly higher. Steel scrap prices were 40%
higher than last year coupled with strong domestic demand and moderate export
demand. During this year's second quarter scrap aluminum and copper prices
were firmer than the first quarter due to increased demand from robust new car
sales, housing starts and production curtailments here and abroad. Current
conditions for the Recycling segment are the most favorable in the past three
years.
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MARKETING AND TRADING -
Sales revenues for the quarter were 20% lower than the same quarter a year ago
due principally to the high level of steel shipments into China during last
year's second quarter, a level which was not sustainable. For the six months
however, sales revenues were only 3% lower on a 22% lower shipping volume.
Operating profits for the quarter were 44% lower but were only 5% lower for the
six month period.
FINANCIAL SERVICES -
Revenues for the quarter and the six months were lower than a year ago due to
lower interest rates and reduced margins on financing transactions. Operating
profits for the quarter were slightly lower but were even with last year for
the six 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.
OTHER
On November 30, 1993 the Federal Energy Regulatory Commission entered an order
that imposes liability upon a subsidiary of the Company for alleged overcharges
for crude oil during the period December 1977 to January 1979. The alleged
overcharges are $1.4 million plus interest approximating $5.4 million. CMC Oil
Company intends to vigorously contest any liability under the FERC order and
has filed a lawsuit in the United States District Court for judicial review of
the FERC order. At this time management of CMC Oil Company cannot reasonably
estimate what, if any, liability may ultimately be incurred.
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OUTLOOK
We expect the recovery in the U.S.A. to proceed at a moderate rate with the
housing, automotive and capital goods sectors performing well, which also bodes
well for steel consumption. Most of the lost production and shipments due to
the recent severe winter weather should be recovered in the third quarter.
China has returned as a modest buyer but continues to be constrained by tight
credit conditions. Infrastructure spending is exhibiting signs of acceleration
here and abroad. Steel prices are expected to firm and nonferrous metals are
likely to improve contingent upon some recovery in the economies of Europe and
Japan.
LIQUIDITY
Cash flow from operations before changes in operating assets and liabilities
was $25 million for the six months compared to $22 million last year.
Depreciation expense was $14 million, about the same as a year ago. The
Company's effective tax rate was 37.25% for this year compared to 38% a year
ago. Net working capital was $182 million at February 28,1994 compared to
$183 million at August 31, 1993. The current ratio was 1.8 at February
28,1994 compared to 1.9 at August 31, 1993.
Capital expenditures for the six months ended February 28, 1994 were $24
million. Capital spending for fiscal 1994 is projected at approximately $54
million.
Long-term debt as a percent of total capitalization was 22% at February 28,
1994 compared to 24% at August 31, 1993.
Stockholder's equity at February 28, 1994 was $245 million or $16.43 per share.
At February 28, 1994 there were 14,911,003 shares issued and outstanding net of
1,221,580 shares held in the Company's treasury.
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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. On March 31, 1994 the Court approved the settlement agreement in
the State of Texas, et al vs. Leslie Simon, Jr., et al litigation providing for
the payment of $60,300 by the Company in resolution of that lawsuit.
Reference is made 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, with the Securities
and Exchange Commission. The Company's subsidiary, CMC Oil Company, filed a
complaint for judicial review of the November 30, 1993, Federal Energy
Regulatory Commission Order (the "FERC Order") finding CMC Oil Company liable
for alleged over charges arising from violations of crude oil reseller
regulations in connection with alleged joint ventures between CMC Oil Company
and RFB Petroleum, Inc. during the period December, 1977 to January, 1979. The
Complaint, which was filed January 27, 1994, in United States District for the
Southern District of Texas (CMC Oil Company v. Federal Energy Regulatory
Commission and Department of Energy. CA No. H-94-0297) seeks to have the FERC
Order reviewed and remanded or enforcement enjoined. The FERC Order finds CMC
Oil Company liable for approximately $1,400,000 plus interest from the dates of
the transactions (December, 1977 to January, 1979), currently estimated to be
approximately $5,400,000.
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the registrant's annual meeting of stockholders held January 27,
1994, a total of 9,649,453 shares of common stock or approximately 87% percent
of those outstanding and entitled to vote were present in person or by proxy.
There was no solicitation in opposition to management's nominees and all such
nominees were elected as set forth in the following tabulation:
Nominee Votes For Votes Withheld
- ------- --------- --------------
Albert A. Eisenstat 9,221,558 427,895
Walter F. Kammann 9,240,119 409,334
C. B. Peterson 9,201,944 447,509
The stockholders also approved a proposal to amend Article Seventeenth
of the Company's Restated Certificate of Incorporation to extend for five years
until January 28, 1999, a provision that contains a minimum price or higher
voting requirements for certain business transactions.
For Against Abstentions and Broker Non-Votes
- --- ------- --------------------------------
5,951,802 2,965,764 731,887
The stockholders approved the ratification of the appointment of
Deloitte & Touche as auditors of the registrant for the fiscal year ending
August 31, 1994, by the following vote:
For Against Abstentions and Broker Non-Votes
- --- ------- --------------------------------
9,612,040 13,487 23,926
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 February 28, 1994.
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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
April 12, 1994 Lawrence A. Engels
Vice President, Treasurer & Chief
Financial Officer
April 12, 1994 Jack T. Mulos
Controller
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EXHIBIT 11 (a)
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE*
(In thousands except share data)
Six months ended
February 28,
----------------------
1994 1993
---------- ---------
Net earnings $9,995 $7,700
Weighted average number
of shares outstanding 14,791,329 10,720,709
Dilutive effect of stock option and
purchase plans, after application
of treasury stock method 400,646 233,217
Shares used in calculating primary
net earnings per share before 10,953,926
December 1993 four-for-three
stock split
Adjustment for December 1993
four-for-three stock split 3,651,309
Shares used in calculating primary 15,191,975 14,605,235
net earnings per share
Earnings per share before the
December 1993 four-for-three stock split $0.70
Earnings per share after the
December 1993 four-for-three stock split $0.66 $0.53
*Fully diluted earnings per share are
identical to primary earnings per share.
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