<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, 1996
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, 1996 there were 15,116,662 shares of the Company's common
stock issued and outstanding excluding 1,015,921 shares held in the Company's
treasury.
<PAGE> 2
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
------------------------------------------
INDEX
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<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I - Financial Statements:
Consolidated Balance Sheets -
November 30, 1996 and August 31, 1996 2 - 3
Consolidated Statements of Earnings -
Three months ended 4
November 30, 1996 and 1995
Consolidated Statements of Cash Flows -
Three months ended
November 30, 1996 and 1995 5
Consolidated Statement of Stockholders'
Equity - November 30, 1996 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>
Page 1
<PAGE> 3
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
( In thousands except share data )
<TABLE>
<CAPTION>
NOV. 30, August 31,
1996 1996
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 11,986 $ 24,260
Accounts receivable (less allowance for
collection losses of $5,803 and $5,501) 302,453 294,611
Inventories 191,194 186,201
Other 34,973 34,411
---------- ----------
TOTAL CURRENT ASSETS 540,606 539,483
OTHER ASSETS 6,478 4,563
PROPERTY, PLANT, AND EQUIPMENT, at cost:
Land 17,371 17,272
Buildings 47,904 45,902
Equipment 415,733 407,286
Leasehold improvements 19,940 19,761
Construction in process 22,693 16,748
---------- ----------
523,641 506,969
Less accumulated depreciation
and amortization (294,641) (284,259)
---------- ----------
229,000 222,710
---------- ----------
$ 776,084 $ 766,756
========== ==========
</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,
1996 1996
--------- ---------
<S> <C> <C>
CURRENT LIABILITIES:
Commercial paper $ -- $ --
Notes payable 35,000
Accounts payable 105,978 116,971
Other payables and accrued expenses 108,755 128,879
Income taxes payable 6,720 6,729
Current maturities of long-term debt 11,498 11,494
--------- ---------
TOTAL CURRENT LIABILITIES 267,951 264,073
DEFERRED INCOME TAXES 21,044 21,044
LONG-TERM DEBT 144,415 146,506
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
15,116,662 and 15,095,964 shares 80,663 80,663
Additional paid-in capital 13,184 13,193
Retained earnings 269,985 262,772
--------- ---------
363,832 356,628
Less treasury stock,
1,015,921 and 1,036,619 shares at cost (21,158) (21,495)
--------- ---------
342,674 335,133
--------- ---------
$ 776,084 $ 766,756
========= =========
</TABLE>
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 )
<TABLE>
<CAPTION>
Three months ended
November 30,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
REVENUES:
Net sales $ 526,859 $ 588,238
Other revenue 4,102 1,981
---------- ----------
530,961 590,219
COSTS AND EXPENSES:
Cost of goods sold 469,307 530,282
Selling, general and
administrative expenses 40,000 35,712
Interest expense 3,471 3,697
Employees' pension and
profit sharing plans 3,674 3,402
---------- ----------
516,452 573,093
EARNINGS BEFORE INCOME TAXES 14,509 17,126
INCOME TAXES 5,332 6,294
---------- ----------
NET EARNINGS $ 9,177 $ 10,832
========== ==========
Net earnings per share $ 0.60 $ 0.70
Cash dividends per share $ 0.13 $ 0.12
Average shares outstanding 15,388,196 15,571,619
</TABLE>
See notes to consolidated financial statements.
Page 4
<PAGE> 6
COMMERCIAL METALS COMPANY AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(In thousands)
<TABLE>
<CAPTION>
Three months ended
November 30,
---------- ----------
1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 9,177 $ 10,832
Adjustments to earnings not requiring cash:
Depreciation and amortization 10,658 10,563
Provision for losses on receivables 268 256
Other (67) (82)
---------- ----------
Cash flows from operations before changes in
operating assets and liabilities 20,036 21,569
Changes in operating assets and liabilities
Decrease (increase) in receivables (8,110) (16,515)
Decrease (increase) in inventories (4,993) 7,301
Decrease (increase) in other assets (2,477) 2,549
Increase (decrease) in accounts payable,
accrued expenses and income taxes (31,126) 2,771
---------- ----------
Net Cash Provided (Used) by Operating Activities (26,670) 17,675
- ---------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Owen Steel -- (2,799)
Purchase of property, plant and equipment (16,948) (9,359)
Sales of property, plant and equipment 67 82
---------- ----------
Net Cash Used by Investing Activities (16,881) (12,076)
- ---------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Commercial paper - net change -- --
Notes payable - net change 35,000 659
Payments on long-term debt (2,087) (2,188)
Stock issued under stock option/bonus plans 328 389
Treasury stock acquired -- (12,759)
Dividends paid (1,964) (1,846)
---------- ----------
Net Cash Provided (Used) by Financing Activities 31,277 (15,745)
- ---------------------------------------------------------------------------------------
Decrease in Cash and Cash Equivalents (12,274) (10,146)
Cash and Cash Equivalents at Beginning of Year 24,260 21,018
---------- ----------
Cash and Cash Equivalents at End of Period $ 11,986 $ 10,872
========== ==========
</TABLE>
See notes to consolidated financial statements.
Page 5
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
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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> <C>
Balance September 1, 1996 16,132,583 $ 80,663 $ 13,193 $ 262,772 (1,036,619) ($ 21,495)
Net earnings for three months
ended November 30, 1996 9,177
Cash dividends - $.13 a share (1,964)
Stock issued under stock option,
purchase and bonus plans (9) 20,698 337
----------- ----------- ----------- ----------- ----------- -----------
Balance, November 30, 1996 16,132,583 $ 80,663 $ 13,184 $ 269,985 (1,015,921) ($ 21,158)
=========== =========== =========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
Page 6
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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>
Long-Term Current Amount
Debt Maturities Outstanding
-------- ---------- -----------
<S> <C> <C> <C>
7.20%notes due 2005 $100,000 $ -- $100,000
8.49%notes due 2001 35,714 7,143 42,857
8.75%note due 1999 8,570 4,286 12,856
Other 131 69 200
-------- -------- --------
$144,415 $ 11,498 $155,913
======== ======== ========
</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, 1996, 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.
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 1997 FY 1996
-- ---- -- ----
<S> <C> <C>
Revenues $ 531 $ 590
Net earnings 9.2 10.8
Cash flow 20.0 21.6
LIFO reserve 29.3 34.0
</TABLE>
SIGNIFICANT EVENTS AFFECTING THE COMPANY THIS QUARTER:
- - Second best first quarter ever, trailing only the record
set in the previous year.
- - Steel Group achieved record tons melted, rolled and shipped
for a first quarter.
- - Copper tube division strong.
- - Steel and scrap selling prices lower than fourth quarter.
- - Settlement of business interruption claim SMI Texas.
- - Technology migration underway.
CONSOLIDATED DATA
The LIFO method of inventory valuation had the effect of increasing net
earnings for the quarter $348 thousand (2 cents per share) compared to an
increase in net earnings of $146 thousand (1 cent per share) last year.
Page 8
<PAGE> 10
During the quarter the Company acquired substantially all the operating
assets of a metal recycling company with locations in Midland and Odessa,
Texas. Subsequent to quarter end, the Company also announced it has entered
into an agreement to acquire substantially all the operating assets of a steel
heat treating facility located in Chicora, Pennsylvania. This transaction was
effective January 1,1997. Neither of the acquisitions individually or combined
were significant to the operations or 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 November 30,
-------------------------------
1996 1995
---- ----
<S> <C> <C>
REVENUES:
Manufacturing $257,959 $244,740
Recycling 96,074 122,628
Marketing and Trading 194,557 236,107
Corporate and Eliminations (17,629) (13,256)
-------- --------
$530,961 $590,219
======== ========
OPERATING PROFIT:
Manufacturing $ 13,997 $ 15,188
Recycling 190 1,514
Marketing and Trading 5,356 4,500
Corporate and Eliminations (1,563) (379)
-------- --------
$ 17,980 $ 20,823
======== ========
</TABLE>
MANUFACTURING -
The segment's operating profit was 8% lower than the prior year. Strong
volume was offset by weaker pricing in the Steel Group, but the Copper Tube
Division benefitted from good production and widening margins. The Steel Group
East companies were about breakeven for the quarter.
First quarter records were set for steel mill tons melted, rolled and
shipped. Shipments by the four mills totaled 428,000 tons or 5% higher than
last year's first quarter. But with average higher scrap costs and slightly
lower average selling prices, operating profit was 13% lower
Page 9
<PAGE> 11
than the previous year. Results included $1.7 million of other income from an
insurance recovery for business interruption losses sustained subsequent to the
October 1995 fire at SMI-Texas.
Results in the Company's steel fabrication businesses continued strong
although operating profit was 12% behind last year. Fabricated shipments were
a record 173,000 tons for the quarter versus 149,000 tons with mixed average
selling prices.
Computer migration costs during the quarter were tracking the expected
annual expense of $6.4 million.
Copper Tube results were excellent as interest rates continued to fuel
the expansion in single family homes. Production increased 9% over the same
period last year. Shipments rose 10% and coupled with declining raw material
costs, produced a significant increase in operating profits.
RECYCLING -
The Recycling segment showed only a small operating profit, reflecting
lower revenues on scrap processed due to the weakest market conditions in over
three years. Selling prices for steel scrap, stainless steel, aluminum, copper
and brass all were significantly lower than 1996's first quarter primarily on
account of much weaker export markets, which in turn impacted domestic prices.
Steel scrap prices were weakened further because of delays in several new
minimill startups. Consequently, scrap flow was impacted negatively and the
volume of ferrous scrap shipped decreased 10% to 269,000 tons while nonferrous
shipments declined 8% to 46,000 tons.
MARKETING AND TRADING -
Operating income for the segment was 19% above last year. Lower
international steel trading revenues were offset by excellent results in ores,
minerals, and industrial materials. Steel marketing and distribution results
were good including a solid improvement in operations in the United Kingdom.
Outside of the U.S.A. many customers were still reducing excessive inventories
amid intense competition and generally poor markets. The segment had pretax
Lifo income of $674,000 compared to $166,000 of expense in the previous year's
quarter.
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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 soft during the second quarter but
consumption in the U.S. should reaccelerate in the spring. Global markets
should improve once inventory levels are further corrected. Underlying
construction, manufacturing, and distributor markets in the U.S. are firm.
Manufacturing margins should show some improvement because of the increased
spread between product and raw materials, although some firming of scrap might
occur. The Company will continue to focus on internal improvements.
LIQUIDITY
Cash flow from operations before changes in operating assets and liabilities
was $20.0 million, down 7% from the previous year due to lower earnings.
Accounts receivable increased $8.1 million since August 31 due to increased
domestic sales of ores, minerals, and industrial materials. Inventories rose
$5.0 million with increased steel mill inventories offset by lower levels in
Marketing and Trading. Accounts payable, accrued expenses, and income taxes
decreased $31.0 million since year end with the payment of incentive
compensation and funding of employee benefit plans.
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<PAGE> 13
The Company financed these working capital needs through internal cash flow and
an increase in short term notes payable of $35 million. The Company invested
$16.9 million in capital expenditures as part of its anticipated $70 million
annual capital program.
Net working capital was $273 million at November 30,1996 compared to $275
million at August 31,1996. The current ratio was maintained at 2.0. The
Company's effective tax rate for the first quarter was 36.8% which was
consistent with last year's comparable quarter as well as last fiscal year.
Long-term debt as a percent of total capitalization was 28.4% at November
30,1996 compared to 29.1% at August 31,1996. The ratio of total debt to total
capitalization plus short-term debt stood at 34.4%. Stockholders' equity at
November 30,1996 was $343 million or $22.67 per share.
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, 1996 filed November 27, 1996, 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
<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
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 13, 1997 Lawrence A. Engels
Vice President, Treasurer
& Chief Financial Officer
/s/William B. Larson
January 13, 1997 William B. Larson
Controller
Page 14
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
11. Computation of Per Share Earnings
(a) Calculation of Primary and Fully Diluted Earnings
Per Share
27. Financial Data Schedule
</TABLE>
<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,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Net earnings $ 9,177 $ 10,832
Weighted average number
of shares outstanding 15,105,722 15,297,899
Dilutive effect of stock option and
purchase plans, after application
of treasury stock method 282,474 273,720
Shares used in calculating primary
net earnings per share 15,388,196 15,571,619
Earnings per share $ 0.60 $ 0.70
</TABLE>
*Fully diluted earnings per share are identical to
primary earnings per share.
Page 15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 11,986
<SECURITIES> 0
<RECEIVABLES> 308,256
<ALLOWANCES> 5,803
<INVENTORY> 191,194
<CURRENT-ASSETS> 540,606
<PP&E> 523,641
<DEPRECIATION> 294,641
<TOTAL-ASSETS> 776,084
<CURRENT-LIABILITIES> 267,951
<BONDS> 144,415
0
0
<COMMON> 80,663
<OTHER-SE> 262,011
<TOTAL-LIABILITY-AND-EQUITY> 776,084
<SALES> 526,859
<TOTAL-REVENUES> 530,961
<CGS> 469,307
<TOTAL-COSTS> 469,307
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 268
<INTEREST-EXPENSE> 3,471
<INCOME-PRETAX> 14,509
<INCOME-TAX> 5,332
<INCOME-CONTINUING> 9,177
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,177
<EPS-PRIMARY> .60
<EPS-DILUTED> 0
</TABLE>
