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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For quarter ended November 30, 1993
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
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( Address of principal executive offices )
( Zip Code )
(214) 689-4300
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( Registrant's telephone number, including area code )
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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 November 30, 1993 there were 11,082,159 (pre-split) 14,775,542
(post-split) shares of the Company's Common Stock issued and outstanding
excluding 1,017,905 (pre-split) 1,357,041 (post-split) shares held in
the Company's treasury.
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
---------
<S> <C>
PART I - Financial Statements:
Consolidated Balance Sheets -
November 30, 1993 and August 31, 1993 2 - 3
Consolidated Statements of Earnings -
Three Months ended November 30, 1993 4
and November 30, 1992
Consolidated Statements of Cash Flows -
Three months ended November 30, 1993
and November 30, 1992 5
Consolidated Statement of Stockholders'
Equity - November 30, 1993 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>
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
(In thousands except share data)
<TABLE>
<CAPTION>
Nov. 30, August 31,
1993 1993
---------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and temporary investments $ 33,843 $ 47,439
Accounts receivable (less allowance for
collection losses of $3,142 and $3,217) 171,492 163,387
Financial services loans and advances 44,538 35,768
Inventories 112,596 136,601
Other 14,163 15,300
-------- --------
TOTAL CURRENT ASSETS 376,632 398,495
OTHER ASSETS 3,780 4,143
PROPERTY, PLANT, AND EQUIPMENT, at cost:
Land 10,163 10,165
Buildings 30,700 30,695
Equipment 259,281 257,537
Leasehold improvements 13,351 13,252
Construction in process 27,267 15,517
-------- --------
340,762 327,166
Less accumulated depreciation
and amortization (194,533) (187,843)
-------- --------
146,229 139,323
-------- --------
$526,641 $541,961
======== ========
</TABLE>
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 )
<TABLE>
<CAPTION>
Nov. 30, August 31,
1993 1993
---------- ---------
<S> <C> <C>
CURRENT LIABILITIES:
Commercial paper $ $
Financial services notes payable 59,554 41,003
Accounts payable 70,566 100,587
Other payables and accrued expenses 56,374 64,507
Income taxes payable 5,901 4,109
Current maturities of long-term debt 4,821 4,824
-------- --------
TOTAL CURRENT LIABILITIES 197,216 215,030
DEFERRED INCOME TAXES 14,773 14,773
LONG-TERM DEBT 74,565 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
12,100,064 shares pre-split and 16,132,583
post-split: outstanding 11,082,159 pre-split,
14,775,542 post-split and 11,060,613 shares 80,663 60,500
Additional paid-in capital -- 3,919
Retained earnings 177,895 189,865
-------- --------
258,558 254,284
Less treasury stock,
1,017,905 pre-split, 1,357,041 post-split
and 1,039,451 shares at cost (18,471) (18,863)
-------- --------
240,087 235,421
-------- --------
$526,641 $541,961
======== ========
</TABLE>
See notes to consolidated financial statements.
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands except share data)
<TABLE>
<CAPTION>
Three Months ended
Nov. 30, Nov. 30,
1993 1992
-------- --------
<S> <C> <C>
REVENUES:
Net sales $380,016 $324,380
Other revenues 1,744 1,838
---------- ----------
381,760 326,218
COSTS AND EXPENSES:
Cost of goods sold 343,410 293,909
Selling, general and
administrative expenses 25,409 23,307
Interest expense 1,835 2,795
Employees' pension and
profit sharing plans 1,875 1,604
---------- ----------
372,529 321,615
EARNINGS BEFORE INCOME TAXES 9,231 4,603
INCOME TAXES 3,508 1,749
---------- ----------
NET EARNINGS $ 5,723 $ 2,854
========== ==========
Net earnings per share $0.38 $0.20
Cash dividends per share $0.10 $0.10
Average shares outstanding 15,254,412 14,520,760
</TABLE>
See notes to consolidated financial statements.
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three months ended
------------------
Nov. 30, Nov. 30,
1993 1992
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 5,723 $ 2,854
Adjustments to earnings not requiring cash:
Depreciation and amortization 7,186 6,809
Provision for losses on receivables 372 285
Deferred income taxes - -
Other (31) (22)
------- -------
Cash flows from operations before changes in
operating assets and liabilities 13,250 9,926
Changes in operating assets and liabilities:
Decrease (increase) in receivables (8,478) (4,124)
Decrease (increase) in financial
services loans and advances (8,770) (3,281)
Decrease (increase) in inventories 24,005 1,036
Decrease (increase) in other assets 1,500 (3,154)
Increase (decrease) in accounts payable,
accrued expenses and income taxes (36,362) (3,672)
------- -------
Net Cash Flows (Used) in Operating Activities (14,855) (3,269)
CASH FLOWS FROM INVESTING ACTIVITIES:
Temporary investments 9,888 17,814
Purchase of property, plant and equipment (14,092) (6,319)
Sales of property, plant and equipment 31 22
------- -------
Net Cash Provided (Used) by Investing Activities (4,173) 11,517
CASH FLOWS FROM FINANCING ACTIVITIES:
Financial services notes payable 18,551 (3,695)
Payments on long-term debt (2,175) (1,657)
Stock issued under bonus plans 384 443
Dividends paid (1,440) (1,387)
------- -------
Net Cash Provided (Used) by Financing Activities 15,320 (6,296)
Increase (Decrease) in Cash and Cash Equivalents (3,708) 1,952
Cash and Cash Equivalents at Beginning of Year 18,780 11,460
------- -------
Cash and Cash Equivalents at End of Period $15,072 $13,412
======= =======
</TABLE>
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 three months
ended November 30, 1993 5,723
Cash dividends - $.10 a share
( restated for stock split ) (1,440)
Stock split (four-for-three)
Payable 12/27/93 4,032,519 20,163 (3,911) (16,252) (339,136)
Stock issued under stock option,
purchase and bonus plans (8) 21,546 392
---------- ------- ------ -------- ---------- --------
Balance, November 30, 1993
16,132,583 $80,663 $ 0 $177,895 (1,357,041) ($18,471)
========== ======= ====== ======== ========== ========
</TABLE>
See notes to consolidated financial statements.
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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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 25,714 4,286 21,428
8.15% note due 1996 3,334 417 2,917
Other 338 118 220
-------- -------- --------
$79,386 $4,821 $74,565
======== ======== ========
</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:
On November 22, 1993 the Board of Directors declared a four-for-
three stock split in the form of a 33 1/3% stock dividend on the Company's
common stock payable December 27, 1993 to shareholders of record December 6,
1993. Earnings per share, average shares out- standing 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
November 30, 1993, the results of operations for the three months then ended
and cash flows for the same periods. The results of operations for the three
month periods are not necessarily indicative of the results to be expected
for a full year.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
( In millions )
1ST QTR 1st Qtr
FY 1994 FY 1993
------- -------
<S> <C> <C>
Revenues $ 382 $ 326
Net earnings 5.7 2.9
Cash flow 13.3 9.9
LIFO reserve 12.7 11.8
</TABLE>
SIGNIFICANT EVENTS AFFECTING THE COMPANY THIS QUARTER:
- Net earnings doubled over the previous year.
- Strong earnings increase in the CMC Steel Group as
shipments continued to increase.
- Recycling segment was profitable for the fourth
consecutive quarter.
- Board of Directors declared a four-for-three stock split
in the form of a 33 1/3% stock dividend.
- Board of Directors increased the quarterly cash dividend
23% to 12 cents per share on the post-split shares.
LIFO
The LIFO method of inventory valuation decreased net earnings for the
quarter $647 thousand (4 cents per share) compared to an increase in net
earnings of $97 thousand (1 cent per share) for the comparable period last
year.
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SEGMENT OPERATING DATA
Revenues and operating profit by business segment are
shown in the following table:
<TABLE>
<CAPTION>
Three months ended November 30,
-------------------------------
1993 1992
---- ----
<S> <C> <C>
REVENUES:
Manufacturing $136,741 $114,967
Marketing and Trading 183,207 146,744
Recycling 68,945 72,079
Financial Services 712 1,196
Corporate and Eliminations (7,845) (8,768)
-------- --------
$381,760 $326,218
======== ========
OPERATING PROFIT:
Manufacturing $ 9,382 $ 7,966
Marketing and Trading 3,286 1,400
Recycling 414 (1,308)
Financial Services 399 377
Corporate and Eliminations (2,819) (1,774)
-------- --------
$ 10,662 $ 6,661
======== ========
</TABLE>
MANUFACTURING -
Manufacturing segment revenues for the quarter were up 19% over last
year as a result of strong demand primarily due to the modestly improved U.S.A.
economy. Operating profits were 18% higher than a year ago.
CMC Steel Group sales for the quarter were up 23% over last year on a
17% increase in shipping tonnage. Operating profit increased 34% from last
year's first quarter.
Steel mill shipments for the quarter were up 12% from a year ago and
operating profits were 49% higher. Average selling prices for the mills
increased 8% over last year but the increase was partially offset by escalating
ferrous scrap prices.
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Steel Fabrication division results for the quarter were slightly below
last year's quarter as average selling prices dropped 10% from last year. In
September concrete related products operations expanded with the purchase of
six Shepler warehousing operations in Texas. These acquisitions were not
significant to the consolidated company.
Copper Tube shipments for the quarter were up 18% over last year as
housing starts continued strong. However, the sharp decline in the copper
market caused lower selling prices and margins compared to the very strong
first quarter last year. Operating profit was 43% below the same period last
year.
MARKETING AND TRADING -
Revenues for the quarter were up 25% due primarily to high levels of
steel shipments by the International Division. Operating profits were more
than double last year's results.
RECYCLING -
Operations in the Recycling segment were slightly profitable for the
quarter compared to last year's operating loss. Revenues for the quarter were
4% lower than last year on a 5% increase in volume. Ferrous volume was 10%
higher than last year and average prices were 41% higher due to strong demand
and tight supplies. Aluminum and copper volume was off 12% and prices fell
19%.
FINANCIAL SERVICES -
Revenues for the quarter were lower than last year and operating
profit was about even with last year. Trade financing activity associated with
our international marketing and trading business increased but net interest
income was slightly lower.
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.
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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 plus applicable interest through January 1993 total
approximately $6,600,000. CMC Oil Company intends to vigorously contest any
liability under the FERC order and will seek review of the FERC order in
federal district court. At this time management of CMC Oil Company cannot
reasonably estimate what, if any, liability may ultimately be incurred.
OUTLOOK
We expect the recovery in the U.S.A. to broaden at a moderate pace
with the housing, motor vehicle and capital goods sectors performing well.
There is an improvement in low-rise commercial construction. The Chinese
government now is attempting to ease China's austerity program. There are some
indications that Europe's economy is bottoming, however, in Japan we see no
reversal yet of the decline in consumption. Infrastructure spending is
increasing around the world, and steel prices should firm further. Nonferrous
metals most likely will remain depressed for several more quarters but we now
see evidence of a cyclical low. We believe that the passage of the North
American Free Trade Agreement is a major long-term positive factor for our
Company.
LIQUIDITY
Cash flow from operations before changes in operating assets and
liabilities for the quarter was $13 million compared to $10 million last year.
Depreciation expense was $7 million, the same as a year ago. The Company's
effective tax rate was 38% for this year and last year.
PAGE 11
<PAGE> 13
Net working capital was $179 million at November 30, 1993 compared to
$183 at August 31, 1993. The current ratio was 1.9 at November 30, 1993 and
August 31, 1993.
Capital expenditures for the first quarter were $14 million. Capital
spending for fiscal 1994 is projected at about $54 million. These expenditures
are expected to be funded from internally generated funds and from cash and
temporary investments.
Long-term debt as a percent of total capitalization was 23% at
November 30, 1993 compared to 24% at August 31, 1993. In November 1993, the
Company renewed its $30 million unsecured revolving credit facility with a
group of five banks.
On November 22, 1993 the Board of Directors declared a dividend on the
Company's common stock payable December 27, 1993. Subsequently the Board of
Directors increased the quarterly cash dividend 23% to 12 cents per share on
the post split shares.
Stockholders' equity at November 30, 1993 was $240 million or $16.25
per share (post-split basis). At November 30, 1993 there were 11,082,159
(pre-split), 16,132,583 (post-split) shares issued and outstanding net of
1,017,905 (pre-split), 1,357,041 (post-split) 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 November 30, 1993, the Federal Energy Regulatory Commission
("FERC") entered an Order (the "FERC Order") affirming in part and reversing in
part the 1989 decision and proposed order of a administrative law judge
affirming in part, reversing in part and remanding a Remedial Order issued in
1986 by the Office of Hearings and Appeals of the Department of Energy to RFB
Petroleum, Inc. (RFB) and CMC Oil Company (CMC Oil) (FERC Docket No.
RO87-2-000, RFB Petroleum, Inc.). The FERC Order finds CMC Oil liable for
alleged overcharges constituting violations of crude oil reseller regulations
arising from the purchase and sale of crude oil in joint ventures between CMC
Oil and RFB totaling approximately $1,400,000 plus interest from their
occurrence (December, 1977, to January, 1979) to present as calculated under
the Department of Energy's interest rate policy. Utilizing that interest
calculation, interest accrued to January, 1993, is estimated to be
approximately $5,200,000. CMC Oil Company intends to vigorously contest its
liability under the FERC Order and will seek review of the FERC Order in
federal district court.
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE ON SECURITY HOLDERS
Not Applicable
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ITEM 5. OTHER INFORMATION
On November 22, 1993, the Board of Directors of the Company
declared a four-for-three stock split in the form of a stock
dividend which was paid on December 27, 1993, to stockholders of
record December 6, 1993. The Company also announced that the
cash dividend rate on the shares outstanding after the stock
dividend would be established at twelve cents a share
resulting in a 23% increase in the cash dividend. In December,
1993 the Board of Directors declared a twelve cent per share cash
dividend to be paid January 27, 1994 to stockholders of record
January 7, 1994.
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 November 30, 1993.
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/
January 13, 1994 Lawrence A. Engels
Vice President, Treasurer
& Chief Financial Officer
/s/
January 13, 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 )
<TABLE>
<CAPTION>
Three Months ended
----------------------
Nov. 30, Nov. 30,
1993 1992
---------- ---------
<S> <C> <C>
Net earnings $5,723 $2,854
Weighted average number
of shares outstanding 11,070,415 10,665,982
Dilutive effect of stock option and
purchase plans, after application
of treasury stock method 370,394 224,588
Shares used in calculating primary
net earnings per share before 11,440,809 10,890,570
December 1993 four-for-three
stock split
Adjustment for December 1993
four-for-three stock split 3,813,603 3,630,190
Shares used in calculating primary 15,254,412 14,520,760
net earnings per share
Earnings per share before the
December 1993 four-for-three stock split $0.50 $0.26
Earnings per share after the
December 1993 four-for-three stock split $0.38 $0.20
</TABLE>
* Fully diluted earnings per share are identical to
primary earnings per share.
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