<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 November 30, 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 November 30, 1994 there were 15,172,706 shares of the Company's
Common Stock issued and outstanding excluding 959,877 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 -
November 30, 1994 and August 31, 1994 2 - 3
Consolidated Statements of Earnings -
Three Months ended November 30, 1994 4
and November 30, 1993
Consolidated Statements of Cash Flows -
Three months ended November 30, 1994
and November 30, 1993 5
Consolidated Statement of Stockholders'
Equity - November 30, 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
Index to Exhibits 15
Exhibit 11 (a) - Calculation of Primary and
Fully Diluted Earnings per Share
Exhibit 27 - Financial Data Schedule
</TABLE>
Page 1
<PAGE> 3
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
( In thousands except share data )
<TABLE>
<CAPTION>
Nov. 30, August 31,
1994 1994
---------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and temporary investments $22,385 $38,269
Accounts receivable (less allowance for
collection losses of $3,937 and $3,528) 239,239 228,035
Financial services loans and advances 500 19,560
Inventories 138,635 133,748
Net working capital - SMI Owen Steel 20,065
Other 31,980 26,473
--------- ---------
TOTAL CURRENT ASSETS 452,804 446,085
OTHER ASSETS 2,229 1,984
PROPERTY, PLANT, AND EQUIPMENT, at cost:
Land 10,747 10,747
Buildings 32,367 32,367
Equipment 361,521 304,977
Leasehold improvements 15,730 15,585
Construction in process 9,124 6,880
--------- ---------
429,489 370,556
Less accumulated depreciation
and amortization (220,620) (213,748)
--------- ---------
208,869 156,808
--------- ---------
$663,902 $604,877
========= =========
</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>
Nov. 30, August 31,
1994 1994
---------- ---------
<S> <C> <C>
CURRENT LIABILITIES:
Commercial paper $10,000 $20,000
Notes payable 40,000 21,000
Financial services notes payable 25,659 50,912
Accounts payable 83,584 84,644
Other payables and accrued expenses 74,850 85,220
Income taxes payable 3,498 4,338
Current maturities of long-term debt 4,855 4,852
--------- ---------
TOTAL CURRENT LIABILITIES 242,446 270,966
DEFERRED INCOME TAXES 19,077 19,077
LONG-TERM DEBT 129,877 72,061
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 shares, outstanding 15,172,706
and 14,275,007 shares 80,663 80,663
Additional paid-in capital 11,016 1,019
Retained earnings 197,654 192,997
--------- ---------
289,333 274,679
Less treasury stock,
959,877 and 1,857,576 at cost (16,831) (31,906)
--------- ---------
272,502 242,773
--------- ---------
$663,902 $604,877
========= =========
</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
November 30,
----------------------
1994 1993
<S> <C> <C>
REVENUES:
Net sales $411,434 $380,016
Other, primarily interest income 2,304 1,744
--------- ---------
413,738 381,760
COSTS AND EXPENSES:
Cost of goods sold 365,683 343,410
Selling, general and
administrative expenses 27,324 25,409
Interest expense 3,029 1,835
Employees' pension and
profit sharing plans 2,354 1,875
Litigation accrual 6,650
--------- ---------
405,040 372,529
EARNINGS BEFORE INCOME TAXES 8,698 9,231
INCOME TAXES 2,326 3,508
--------- ---------
NET EARNINGS $6,372 $5,723
========= =========
Net earnings per share $0.44 $0.38
Cash dividends per share $0.12 $0.10
Average shares outstanding 14,537,716 15,254,412
</TABLE>
See notes to consolidated financial statements.
Page 4
<PAGE> 6
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands) Three months ended
November 30,
------------------------
1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $6,372 $5,723
Adjustments to earnings not requiring cash:
Depreciation and amortization 8,202 7,186
Provision for losses on receivables 331 372
Other (188) (31)
-------- --------
Cash flows from operations before changes in
operating assets and liabilities 14,717 13,250
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (11,535) (8,478)
Decrease (increase) in financial
services loans and advances 19,060 (8,770)
Decrease (increase) in inventories (4,887) 24,005
Decrease (increase) in other assets 987 1,500
Increase (decrease) in accounts payable,
accrued expenses and income taxes (12,271) (36,362)
-------- --------
Net Cash Flows from (Used by) Operating Activities 6,071 (14,855)
- ----------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquistion of Owen Steel:
Net working capital (26,804)
Property, plant and equipment (55,245)
Temporary investments 13,168 9,888
Purchase of property, plant and equipment (5,018) (14,092)
Sales of property, plant and equipment 188 31
-------- --------
Net Cash Used by Investing Activities (73,711) (4,173)
- ----------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Commercial paper - net change (10,000)
Notes payable - net change 19,000
Financial services notes payable (25,253) 18,551
New long-term debt: 0
Acquisition of Owen Steel 25,055
Refinance Owen Steel long-term debt 31,938
Other 3,007
Treasury stock used to acquire Owen Steel 25,055
Payments on long-term debt (2,181) (2,175)
Stock issued under option/bonus plans (1,315) 384
Tax benefits related to stock option plans 1,332
Dividends paid (1,714) (1,440)
-------- --------
Net Cash Provided by Financing Activities 64,924 15,320
- ----------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents (2,716) (3,708)
Cash and Cash Equivalents at Beginning of Year 19,095 18,780
-------- --------
Cash and Cash Equivalents at End of Period $16,379 $15,072
======== ========
</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, 1994 16,132,583 $80,663 $1,019 $192,996 (1,857,576) ($31,906)
Net earnings for three months
ended November 30, 1994 6,372
Cash dividends - $.12 a share (1,714)
Treasury stock issued in connection
with acquisition of Owen Steel 8,710 932,301 16,345
Stock issued under stock option,
purchase and bonus plans 1,287 (34,602) (1,270)
---------- ------- ------- -------- --------- -------
Balance, November 30, 1994 16,132,583 $80,663 $11,016 $197,654 (959,877) ($16,831)
========== ======= ======= ======== ========= =======
</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 21,428 4,286 17,142
8.15% note due 1996 2,917 417 2,500
Notes due 1997 60,000 60,000
Other 387 152 235
-------- -------- --------
$134,732 $4,855 $129,877
======== ======== ========
</TABLE>
New long-term debt in the form of $60 million notes due 1997 was used
principally to finance the acquisition of Owen Steel Company.
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 - QUARTERLY FINANCIAL DATA:
In the opinion of Management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals except for the item discussed in Note D ) necessary to
present fairly the financial position as of November 30, 1994, 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.
Note D - LITIGATION
On November 22, 1994, the United States District Court for the Southern
District of Texas granted the federal government's motion for summary judgment
and entered a Final Order in the principal amount of $1.3 million against CMC
Oil Company, a subsidiary of the Company. The allegation involves overcharges
for crude oil sales during the late 1970's. With interest, the total judgment
is approximately $6.7 million and has been accrued in the financial statements.
Page 7
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
(in millions)
1ST QTR 1st Qtr
FY 1995 FY 1994
------- -------
<S> <C> <C>
Revenues $ 414 $ 382
Net earnings 6.4 5.7
Cash flow 14.7 13.3
LIFO reserve 21.4 12.7
</TABLE>
SIGNIFICANT EVENTS AFFECTING THE COMPANY THIS QUARTER:
- A record first quarter operating profit, an increase of
65% over the same period last year.
- Steel Group posts record first quarter shipments and
profits.
- Cash flow from operations was $14.7 million compared to
$13.3 million last year.
- The Company added $60 million in new long-term debt.
- Acquisition of Owen Steel Company completed.
- U.S. District Court enters final order denying CMC Oil
Company's motion for summary judgement.
- Income tax provision reduced by resolution of tax
issues.
Page 8
<PAGE> 10
CONSOLIDATED DATA
The LIFO method of inventory valuation reduced net earnings for the
quarter $73 thousand (1 cent per share) compared to a decrease in net earnings
of $647 thousand (4 cents per share) last year.
On November 15, 1994 Commercial Metals Company completed its previously
announced acquisition of Owen Steel Company, Columbia, S.C. and its affiliated
companies. The acquisition will increase CMC's annual steel production
capacity to about 1.7 million tons and steel fabrication capacity to more than
500,000 tons. The purchase price was $50 million, paid in the form of $25
million in cash and 932,301 shares of CMC common stock issued from treasury
shares. CMC also provided funds for the retirement of $32 million of Owen debt
at the closing.
Approximately $9 million of the acquisition price is presently maintained
in a third party escrow account, subject to resolution of the net worth of Owen
Steel at the purchase date and certain contingencies. The escrow account has a
maximum life of two years past the purchase date.
On November 22, 1994, the United States District Court entered a Final
Order denying CMC Oil Company's motion for summary judgement and affirming the
previously reported November, 1993 Remedial Order issued by the Federal Energy
Regulatory Commission alleging that CMC Oil Company overcharged for crude oil
sales during the period December 1977 to January 1979. Judgment was entered in
favor of the government in the principal sum of $1.3 million plus interest
estimated to be approximately $5.4 million. CMC Oil Company is evaluating its
options, including appeal.
Due to the District Court Ruling, a nonrecurring charge for the litigation
reduced net earnings for the quarter by $4.1 million. This was partially
offset by a credit to income tax expense of $1.0 million resulting from the
favorable resolution of tax issues with the Internal Revenue Service for years
audited.
Page 9
<PAGE> 11
SEGMENT OPERATING DATA
Revenues and operating profit by business segment are
shown in the following table:
<TABLE>
<CAPTION>
Three months ended November 30,
-------------------------------
1994 1993
-------- --------
<S> <C> <C>
REVENUES:
Manufacturing $ 161,738 $ 136,741
Recycling 100,821 68,945
Marketing and Trading 161,986 183,207
Financial Services 477 712
Corporate and
Eliminations (11,284) (7,845)
--------- ---------
$ 413,738 $ 381,760
========= =========
OPERATING PROFIT:
Manufacturing $ 13,822 $ 9,382
Recycling 2,269 414
Marketing and Trading 3,025 3,286
Financial Services 353 399
Corporate and
Eliminations (8,190) (2,819)
--------- ---------
$ 11,279 $ 10,662
========= =========
</TABLE>
MANUFACTURING -
Manufacturing segment revenues for the quarter were up 18% over last year
as steel markets continued strong and prices improved. Operating profits were
47% higher than a year ago.
CMC Steel Group sales for the quarter were 16% above last year on an 8%
increase in shipping tonnage. Operating profit increased 50% over last year's
first quarter.
Steel mill shipments for the quarter were higher than a year ago and
operating profits were over 30% higher. Average selling prices for the mills
increased 8% over last year.
Steel Fabrication division results for the quarter were double last year's
quarter. Sales were up 8% and average selling prices increased 10% over last
year. Tonnage shipped increased 7%.
Page 10
<PAGE> 12
Copper Tube results were slightly lower than last year. Average selling
prices were up 20% and shipments were 10% higher, however, margins were
squeezed by the surge in scrap copper prices during the quarter.
RECYCLING -
Revenues were 46% higher than a year ago due to higher volume and prices
principally in the nonferrous group. Ferrous volume was 11% higher and average
prices were up 5%. Copper and aluminum volume was up 32% over a year ago and
average prices were 51% higher. Our markets continued to be strong. Scrap
availability was good while demand was considerably better than last year.
MARKETING AND TRADING -
Revenues for the quarter were 12% lower and operating profit was 8% lower
due primarily to a decline in our global steel shipments. Steel volume was 26%
lower than a year ago. Steel Sales to the Far East were lower mainly on account
of continued weakness in the Chinese market and pricing pressures from high
levels of shipments by the C.I.S.
FINANCIAL SERVICES -
Net interest income for the quarter was slightly higher than a year ago
while operating profit 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.
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.
Page 11
<PAGE> 13
OUTLOOK
The outlook near term is favorable and our order flow continues at a healthy
level. The only major end market which has slowed thus far in the U.S.A. is
single family residential housing, but apartment construction is sharply higher
and demand for building materials still is strong. The manufacturing sector,
especially capital goods, remains robust. Highway spending has picked up in
recent months. Private nonresidential construction is steady and activity in
the Southwest has risen. The turnaround in Japan appears to be taking hold and
the European economies are improving. Most of the balance of the Pacific Rim is
being affected by the near term problems in China, but Australia is strong.
Overall, consumption of steel and nonferrous metals should remain strong and
our product prices firm.
LIQUIDITY
Net working capital was $210 million at November 30, 1994 compared to $175
million at August 31, 1994. The current ratio was 1.9 at November 30, 1994 and
1.6 at August 31, 1994.
Cash flow from operations before changes in operating assets and liabilities
for the quarter was $14.7 million compared to $13.3 million last year.
Depreciation expense was $8 million compared to $7 million a year ago. The
Company's effective tax rate for the quarter was 27% this year compared to 38%
last year. This quarter's lower rate was due to a credit to income tax expense
of $1 million due to the favorable resolution of tax issues with the Internal
Revenue Service for the years audited.
Capital expenditures for the first quarter were $5 million, excluding the
Owen Steel acquisition. Capital spending for fiscal 1995 excluding Owen Steel
is projected at about $38 million.
Long-term debt as a percent of total capitalization was 31% at November 30,
1994 compared to 22% at August 31, 1994. During the quarter long-term debt
increased $60 million to $130 million as a result of new long-term agreements
that were concluded with the Company's banking group. The proceeds were used to
finance the acquisition of Owen Steel Company, Inc. and for other corporate
purposes.
Stockholders' equity at November 30, 1994 was $273 million or $17.96 per
share. At November 30, 1994 there were 15,172,706 shares issued and
outstanding net of 959,877 shares held in the Company's treasury.
Page 12
<PAGE> 14
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the information incorporated by reference from
Item 3. Legal Proceedings in the Company's Annual Report on Form 10-K for the
year ending August 31, 1994 filed November 28, 1994, with the Securities and
Exchange Commission and to the information incorporated by reference from Item
5. Other Events in the Company's Report on Form 8- K filed November 30, 1994,
with the Securities and Exchange Commission.
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
ITEM 5. OTHER INFORMATION
Not Applicable
Page 13
<PAGE> 15
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
27. Financial Data Schedule
B. The Company filed a Report on Form 8-K November 30,
1994, dated November 15, 1994, reporting under Item
2. the acquisition of Owen Steel Company, Inc. and
affiliates and under Item 5. the United States
District Court's action granting the government's
Motion for Summary Judgment against the Company's
subsidiary, CMC Oil Company and the Court's entry of
judgment against CMC Oil Company in the sum of
$1,330,399 plus interest estimated to be
approximately $5,400,000.
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
January 13, 1995 /s/ Lawrence A. Engels
Lawrence A. Engels
Vice President, Treasurer
& Chief Financial Officer
January 13, 1995 /s/ Jack T. Mulos
Jack T. Mulos
Controller
Page 14
<PAGE> 16
INDEX TO EXHIBITS
Exhibit No. Description
----------- -----------
11. Computation of Per Share Earnings
(a) Calculation of Primary and
Fully Diluted Earnings Per Share
27. Financial Data Schedule
Page 15
<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>
Three Months ended
----------------------
Nov. 30, Nov. 30,
1994 1993
---------- ---------
<S> <C> <C>
Net earnings $6,372 $5,723
Weighted average number
of shares outstanding 14,261,097 14,760,553
Dilutive effect of stock option and
purchase plans, after application
of treasury stock method 276,619 493,859
Shares used in calculating primary
net earnings per share 14,537,716 15,254,412
Earnings per share $0.44 $0.38
</TABLE>
*Fully diluted earnings per share are identical to
primary earnings per share.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> QTR-1
<FISCAL-YEAR-END> AUG-31-1994
<PERIOD-START> SEP-01-1994
<PERIOD-END> NOV-30-1994
<CASH> 22,385
<SECURITIES> 0
<RECEIVABLES> 243,176
<ALLOWANCES> 3,937
<INVENTORY> 138,635
<CURRENT-ASSETS> 452,804
<PP&E> 429,489
<DEPRECIATION> 220,620
<TOTAL-ASSETS> 663,902
<CURRENT-LIABILITIES> 242,446
<BONDS> 129,877
<COMMON> 80,663
0
0
<OTHER-SE> 191,839
<TOTAL-LIABILITY-AND-EQUITY> 663,902
<SALES> 411,434
<TOTAL-REVENUES> 413,738
<CGS> 365,683
<TOTAL-COSTS> 365,683
<OTHER-EXPENSES> 35,997
<LOSS-PROVISION> 331
<INTEREST-EXPENSE> 3,029
<INCOME-PRETAX> 8,698
<INCOME-TAX> 2,326
<INCOME-CONTINUING> 6,372
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,372
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
</TABLE>
