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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, 1995
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
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( 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, 1995 there were 14,902,247 shares of the Company's common
Stock issued and outstanding excluding 1,230,336 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, 1995 and August 31, 1995 2 - 3
Consolidated Statements of Earnings -
Three Months ended November 30, 1995 4
and November 30, 1994
Consolidated Statements of Cash Flows -
Three Months ended November 30, 1995
and November 30, 1994 5
Consolidated Statement of Stockholders'
Equity - November 30, 1995 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of the
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>
November 30, August 31,
1995 1995
---------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash $10,872 $21,018
Accounts receivable (less allowance for
collection losses of $4,965 and $4,743) 284,342 268,657
Inventories 200,813 208,114
Other 33,809 36,316
-------- --------
TOTAL CURRENT ASSETS 529,836 534,105
OTHER ASSETS 4,217 4,259
PROPERTY, PLANT, AND EQUIPMENT, at cost:
Land 16,637 16,629
Buildings 40,366 40,178
Equipment 386,677 372,644
Leasehold improvements 17,746 16,972
Construction in process 12,718 10,282
-------- --------
474,144 456,705
Less accumulated depreciation
and amortization (257,124) (246,966)
-------- --------
217,020 209,739
-------- --------
$751,073 $748,103
======== ========
</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>
November 30, August 31
1995 1995
------------ ---------
<S> <C> <C>
CURRENT LIABILITIES:
Commercial paper $ -- $ --
Notes payable 5,848 5,189
Accounts payable 112,592 107,906
Other payables and accrued expenses 135,213 137,933
Income taxes payable 5,299 3,246
Current maturities of long-term debt 14,084 14,108
-------- --------
TOTAL CURRENT LIABILITIES 273,036 268,382
DEFERRED INCOME TAXES 21,393 18,553
LONG-TERM DEBT 155,840 158,004
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Capital stock:
Preferred stock -- --
Common stock, par value $5.00 a share;
authorized 40,000,000 shares; issued
16,132,583 shares, outstanding
14,902,247 and 15,369,592 shares 80,663 80,663
Additional paid-in capital 12,476 11,946
Retained earnings 232,980 223,994
-------- --------
326,119 316,603
Less treasury stock,
1,230,336 and 762,991 shares at cost (25,315) (13,439)
-------- --------
300,804 303,164
-------- --------
$751,073 $748,103
======== ========
</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
November 30,
----------------------
1995 1994
--------- ----------
<S> <C> <C>
REVENUES:
Net sales $588,238 $411,434
Other revenue 1,981 2,304
--------- ----------
590,219 413,738
COSTS AND EXPENSES:
Cost of goods sold 530,282 365,683
Selling, general and
administrative expenses 35,712 27,324
Interest expense 3,697 3,029
Employees' pension and
profit sharing plans 3,402 2,354
Litigation accrual -- 6,650
--------- ----------
573,093 405,040
EARNINGS BEFORE INCOME TAX 17,126 8,698
INCOME TAXES 6,294 2,326
--------- ----------
NET EARNINGS $10,832 $6,372
========= ==========
Net earnings per share $0.70 $0.44
Cash dividends per share $0.12 $0.12
Average shares outstanding 15,571,619 14,537,716
</TABLE>
See notes to consolidated financial statements.
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands) Three months ended
November 30,
---------------------
1995 1994
- --------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $10,832 $6,372
Adjustments to earnings not requiring cash:
Depreciation and amortization 10,563 8,202
Provision for losses on receivables 256 331
Other (82) (188)
------- -------
Cash flows from operations before changes in
operating assets and liabilities 21,569 14,717
Changes in operating assets and liabilities
net of effect of Owen acquisition:
Decrease (increase) in accounts receivable (17,090) 7,525
Decrease (increase) in inventories 7,301 (4,887)
Decrease (increase) in other assets 2,549 987
Increase (decrease) in accounts payable,
accrued expenses and income taxes 2,779 (12,271)
------- -------
Net Cash Flows from Operating Activities 17,108 6,071
- --------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Owen Steel, net of cash acquired (2,232) (24,994)
Temporary investments -- 13,168
Purchase of property, plant and equipment (9,359) (5,018)
Sales of property, plant and equipment 82 188
------- -------
Net Cash Used by Investing Activities (11,509) (16,656)
- --------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Commercial paper - net change -- (10,000)
Notes payable - net change 659 (6,253)
New long-term debt -- 60,000
Refinance long-term debt of acquisition -- (32,000)
Payments on long-term debt (2,188) (2,181)
Stock issued under stock option/bonus plans 389 (1,315)
Treasury stock acquired (12,759) --
Tax benefits related to stock option plan -- 1,332
Dividends paid (1,846) (1,714)
------- -------
Net Cash Provided (Used by) Financing Activities (15,745) 7,869
- --------------------------------------------------------------------------
Decrease in Cash and Cash Equivalents (10,146) (2,716)
Cash and Cash Equivalents at Beginning of Year 21,018 19,095
------- -------
Cash and Cash Equivalents at End of Period $10,872 $16,379
======= =======
</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, 1995 16,132,583 $80,663 $11,946 $223,994 (762,991) ($13,439)
Net earnings for three months
ended November 30, 1995 10,832
Cash dividends - $.12 a share (1,846)
Treasury stock acquired (527,600) (12,759)
Additonal treasury stock
issued for Owen acquisition 550 37,196 472
Stock issued under stock option,
purchase and bonus plans (20) 23,059 411
---------- ------- ------- -------- --------- -------
Balance, November 30, 1995 16,132,583 $80,663 $12,476 $232,980 (1,230,336) ($25,315)
========== ======= ======= ======== ========= =======
</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 AND EQUITY (in thousands):
<TABLE>
<CAPTION>
Amount Current Long-Term
Outstanding Maturities Debt
----------- ---------- ---------
<S> <C> <C> <C> <C>
7.20% notes due 2005 $100,000 $ -- $100,000
8.49% notes due 2001 42,857 7,143 50,000
8.75% note due 1999 12,856 4,286 17,142
8.15% note due 1996 2,500 2,500
Other 127 155 282
-------- -------- --------
$155,840 $14,084 $169,924
======== ======== ========
</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 - 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, 1995, 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 1996 FY 1995
------- -------
<S> <C> <C>
Revenues $ 590 $ 414
Net earnings 10.8 6.4
Cash flow 21.6 14.7
LIFO reserve 34.0 21.4
</TABLE>
SIGNIFICANT EVENTS AFFECTING THE COMPANY THIS QUARTER:
- - Record first quarter net earnings, an increase of 70% over the same period
last year.
- - Record cash flow from operations, an increase of 47%.
- - Steel Group achieved record sales, shipments, and profit for a first quarter.
- - Marketing and Trading had a strong quarter.
CONSOLIDATED DATA
The LIFO method of inventory valuation had the effect of increasing
net earnings for the quarter $146 thousand (1 cent per share) compared to a
decrease in net earnings of $73 thousand (1 cent per share) last year.
In connection with its November 15,1994 acquisition of Owen Steel
Company, Inc. and affiliates (Owen), the Company settled contingencies related
to the net worth purchase price calculation and certain uncollected accounts
receivable of Owen. The net worth adjustment resulted in the Company
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paying the former shareholders $3.2 million, half in cash and half in the
Company's common stock as a purchase price adjustment. Conversely, the Company
assigned certain uncollected accounts receivable to the former shareholders and
was reimbursed $1.1 million. Under the acquisition agreement, the Company has
until November 15,1996 to present certain claims against the portion of the
purchase price remaining in escrow which was $4.4 million at November 30,1995.
The first quarter of last year included a nonrecurring charge for
litigation which reduced net earnings 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.
SEGMENT OPERATING DATA
Revenues and operating profit by business segment are shown in the
following table:
<TABLE>
<CAPTION>
Three months ended November 30,
-------------------------------
1995 1994
-------- --------
<S> <C> <C>
REVENUES:
Manufacturing $244,740 $161,738
Recycling 122,628 100,821
Marketing and Trading 236,107 162,463
Corporate and Eliminations (13,256) (11,284)
-------- --------
$590,219 $413,738
======== ========
OPERATING PROFIT:
Manufacturing $ 15,188 $ 13,822
Recycling 1,514 2,269
Marketing and Trading 4,500 3,715
Corporate and Eliminations (379) (8,079)
-------- --------
$ 20,823 $ 11,727
======== ========
</TABLE>
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MANUFACTURING -
Led by record Steel Group sales, shipments, and profits for a first quarter,
the segment achieved a 51% increase in revenues and a 10% increase in operating
profits. The SMI Owen companies were profitable for the quarter.
First quarter records were set for steel mill tons melted, rolled and
shipped. Shipments by the four mills totaled 409,000 tons or 31% higher than
last year's first quarter (which excluded SMI South Carolina). SMI Birmingham's
operating profits tripled. SMI Texas had a solid quarter despite a week's melt
shop downtime due to an electrical fire. Estimated loss expenses were accrued
without consideration of insurance recovery which is still pending.
Results in our steel fabrication businesses were excellent with operating
profits about two-thirds above last year. Fabricated shipments were 149,000
tons for the quarter versus 95,000 tons and the average selling price increased
8%.
Copper Tube operating profits were down a third from last year; demand for
plumbing tube weakened early in the quarter and spreads were under pressure.
Shipments were 6% lower than the first quarter last year.
RECYCLING -
The Recycling segment operating profit declined 33% compared with the same
period last year, reflecting lower percentage gross margins on scrap processed.
Prices for steel scrap, aluminum, copper and brass all declined during the
quarter; however, scrap prices were mixed compared with 1995's first quarter.
Scrap flow remained fairly good; the volume of ferrous scrap shipped increased
9% to 300,000 tons while nonferrous shipments increased 15% to 50,000 tons.
MARKETING AND TRADING -
Operating income was 21% above last year on significantly higher revenues.
In September, Dallas Trading exported the largest known single cargo shipment
of steel scrap, 85,000 metric tons. For the quarter Intra-Asia steel trading
was strong and steel marketing and distribution in Australia reported good
results. Demand for nonferrous semis remained good. The global markets
generally have an oversupply imbalance leading to intense competition and lower
prices.
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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 losses
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, are not expected to have a material adverse
effect on the business or consolidated financial position of the Company.
OUTLOOK
It appears that markets will remain weaker during the second quarter but
consumption in the U.S. should reaccelerate once inventory levels are corrected
and the drop in interest rates begins to work its way through the economy.
Underlying construction markets are firm, however, the manufacturing sector is
sluggish. The Southwest and Southeast U.S. markets are expected to continue to
do well. The economies in Asia should pick up after the current pause. Europe
is weaker but interest rate cuts should help.
LIQUIDITY
Cash flow from operations before changes in operating assets and liabilities
was $21.6 million, a record first quarter. Depreciation expense increased from
$8.2 million to $10.6 million due mainly to the SMI Owen acquisition. Accounts
receivable increased $17.1 million since August 31 due to increased business
activity. The Company invested $9.4 million in capital expenditures as part of
its anticipated $61 million annual capital program.
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During the quarter the Company repurchased 527,600 shares of common stock at
an average cost of $24.19 per share including 350,000 shares at $24 per share
from former Owen shareholders. At November 30,1995 there were 14,902,247 shares
issued and outstanding with 1,230,336 shares held in the Company's treasury.
Stockholders' equity at November 30,1995 was $301 million or $20.19 per share.
Net working capital was $257 million at November 30,1995 compared to $266
million at August 31,1995. The current ratio was 1.9 compared to 2.0 at August
31,1995. The Company's effective tax rate for the first quarter was 36.8%; the
rate for the comparable quarter last year was 26.7% due to a credit of $1
million to income tax expense from the favorable resolution of tax issues with
the Internal Revenue Service.
Long-term debt as a percent of total capitalization was 32.6% at November
30,1995 compared to 32.9% at August 31,1995. The ratio of total debt to total
capitalization plus short-term debt stood at 35%.
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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, 1995 filed November 27, 1995, 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 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
27. Financial Data Schedule
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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
/s/ Lawrence A. Engels
January 11, 1996 Lawrence A. Engels
Vice President, Treasurer
& Chief Financial Officer
/s/ William B. Larson
January 11, 1996 William B. Larson
Controller
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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> 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
November 30,
--------------------------
1995 1994
---------- ----------
<S> <C> <C>
Net earnings $10,832 $6,372
Weighted average number
of shares outstanding 15,297,899 14,261,097
Dilutive effect of stock option and
purchase plans, after application
of treasury stock method 273,720 276,619
Shares used in calculating primary
net earnings per share 15,571,619 14,537,716
Earnings per share $0.70 $0.44
</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> 3-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-1-1995
<PERIOD-END> NOV-30-1995
<CASH> 10,872
<SECURITIES> 0
<RECEIVABLES> 289,307
<ALLOWANCES> 4,965
<INVENTORY> 200,813
<CURRENT-ASSETS> 529,836
<PP&E> 474,144
<DEPRECIATION> 257,124
<TOTAL-ASSETS> 751,073
<CURRENT-LIABILITIES> 273,036
<BONDS> 155,840
<COMMON> 80,663
0
0
<OTHER-SE> 220,141
<TOTAL-LIABILITY-AND-EQUITY> 751,073
<SALES> 588,238
<TOTAL-REVENUES> 590,219
<CGS> 530,282
<TOTAL-COSTS> 530,282
<OTHER-EXPENSES> 38,858
<LOSS-PROVISION> 256
<INTEREST-EXPENSE> 3,697
<INCOME-PRETAX> 17,126
<INCOME-TAX> 6,294
<INCOME-CONTINUING> 10,832
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,832
<EPS-PRIMARY> .70
<EPS-DILUTED> 0
</TABLE>
