News Release 
COMMERCIAL METALS COMPANY REPORTS THIRD QUARTER FISCAL 2020 RESULTS
•GAAP earnings per diluted share from continuing operations of $0.53 were unchanged sequentially, while adjusted earnings per diluted share from continuing operations of $0.59 increased 11%
•Gross margin increased 3% sequentially to $225.3 million
•Americas Mills metal margin rose $17 per ton sequentially; segment achieved best conversion cost in two years. Americas Fabrication generated highest quarterly adjusted EBITDA in nearly 12 years
•Generated cash from operations of $278 million, bringing year-to-date total to $532 million
Irving, TX - June 18, 2020 - Commercial Metals Company (NYSE: CMC) today announced financial results for its fiscal third quarter ended May 31, 2020. Third quarter earnings from continuing operations were $64.2 million, or $0.53 per diluted share, on net sales of $1.3 billion, compared to prior year period earnings from continuing operations of $78.6 million, or $0.66 per diluted share, on net sales of $1.6 billion.
During the third quarter of fiscal 2020, we incurred a $6.2 million net after-tax charge for facility closure expenses and asset impairments primarily related to the curtailment of a west coast fabrication facility. This decision was made in accordance with our ongoing network optimization efforts and is expected to provide cost benefits in future periods. Excluding these expenses, adjusted earnings from continuing operations for the three months ended May 31, 2020 were $70.4 million, or $0.59 per diluted share, as detailed in the non-GAAP reconciliation on page 12. This compares to adjusted earnings from continuing operations of $0.67 per diluted share for the three months ended May 31, 2019.
Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, commented, "While the effects of the COVID-19 crisis impacted our business throughout the third quarter, CMC acted early and swiftly to ensure the safety of our employees, the continuity of our operations, and the uninterrupted service to our customers. Our entire organization can be proud of these efforts and their results. We were able to keep our workforce fully employed and safe. We also avoided any meaningful disruptions to operations and experienced no loss of productivity, while closely following CDC guidelines at all of our locations."
Ms. Smith continued, “In the face of unprecedented global uncertainty, we concentrated our focus on the elements of our business within our direct control. Because of these efforts, CMC achieved sequential earnings growth while increasing our market share in many products, continuing to reduce our operating costs, and further
(CMC Third Quarter Fiscal 2020 - Page 2)
strengthening our balance sheet. Our success during the quarter underscores several of CMC’s best qualities – a robust business model, focus on providing best-in-class customer service, and commitment to our employees."
The Company's liquidity position as of May 31, 2020 strengthened further, with cash and cash equivalents of $462.1 million and availability under the Company's credit and accounts receivable facilities of $604.2 million.
On June 16, 2020, the board of directors of CMC declared a quarterly dividend of $0.12 per share of CMC common stock payable to stockholders of record on July 6, 2020. The dividend will be paid on July 20, 2020, and marks 223 consecutive quarterly dividend payments.
Business Segments - Fiscal Third Quarter 2020 Review
Our Americas Recycling segment recorded an adjusted EBITDA loss of $1.7 million for the third quarter of fiscal 2020, compared to adjusted EBITDA of $12.3 million for the prior year quarter. The reduction reflected a challenging environment of lower shipments and decreasing average selling prices. Volumes were impacted by sharply reduced demand from third party mill customers. Inflows of material to our yards were slowed by broadly weak manufacturing activity, and low prices that disincentivized collection of obsolete scrap. Compared to the year ago period, ferrous shipping volumes and selling prices were down 21% and 15%, respectively.
Our Americas Mills segment recorded adjusted EBITDA of $133.2 million for the third quarter of fiscal 2020, a decrease of 16% compared to adjusted EBITDA of $158.1 million for the third quarter of fiscal 2019. Despite the impact of COVID-19 on the U.S. economy, volumes declined only 4% compared to the prior year period due to continued strength in construction activity. Metal margins contracted by $19 per ton year-over-year, as a reduction in average selling price of $64 per ton was only partially offset by lower scrap costs. Results in the third quarter of fiscal 2020 benefited from our best conversion cost performance since our November 2018 rebar asset acquisition. Conversion costs per ton were 7% below the post-acquisition average.
Our Americas Fabrication segment recorded adjusted EBITDA of $31.9 million for the third quarter of fiscal 2020, marking a significant improvement from an adjusted EBITDA loss of $23.3 million for the third quarter of fiscal 2019, primarily due to expanded selling price margins over rebar cost. The third quarter of fiscal 2020 marks the segment's best quarterly profit performance in nearly 12 years, and highlights the beneficial impact of the fixed price contract backlog of our fabrication business during a period of economic slowdown. As in prior quarters, third quarter adjusted EBITDA did not include the benefit of the purchase accounting adjustment related to amortization of the acquired unfavorable contract backlog reserve of $4.4 million. The trend of year-over-year increases in selling price continued during the quarter, as we shipped at an average price of $966 per ton. This represented a significant rise of $41 per ton, or 4%, compared to the prior year period. Backlog remains very strong in relation to both quantity and pricing.
(CMC Third Quarter Fiscal 2020 - Page 3)
Our International Mill segment in Poland recorded adjusted EBITDA of $14.3 million for the third quarter of fiscal 2020, compared to adjusted EBITDA of $24.1 million for the prior year quarter. Metal margins were impacted by continued import pressure. Despite market challenges caused by COVID-19, shipment volumes decreased only 1% on a year-over-year basis, driven by resilience in the Polish construction sector and market share gains in merchant products.
Outlook
“We expect construction and infrastructure activity to remain resilient during our fiscal fourth quarter,” said Ms. Smith. “Our finished product volumes are supported by strong fabrication backlogs, which stood near record-high levels at May 31. Customers’ sentiment about their own summer construction workloads is also encouraging. CMC’s net debt-to-EBITDA ratio of 1.2x and substantial cash and equivalents on hand give us great confidence in our ability to withstand these challenging times, and provide us with significant flexibility in our capital allocation decisions.”
Conference Call
CMC invites you to listen to a live broadcast of its third quarter fiscal 2020 conference call today, Thursday, June 18, 2020, at 11:00 a.m. ET. Barbara Smith, Chairman of the Board of Directors, President, and Chief Executive Officer, and Paul Lawrence, Vice President and Chief Financial Officer, will host the call. The call is accessible via our website at www.cmc.com. In the event you are unable to listen to the live broadcast, the call will be archived and available for replay on our website on the next business day. Financial and statistical information presented in the broadcast are located on CMC's website under “Investors”.
About Commercial Metals Company
Commercial Metals Company and its subsidiaries manufacture, recycle and market steel and metal products, related materials and services through a network of facilities that includes seven electric arc furnace ("EAF") mini mills, two EAF micro mills, two rerolling mills, steel fabrication and processing plants, construction-related product warehouses, and metal recycling facilities in the U.S. and Poland.
Forward-Looking Statements
This news release contains or incorporates by reference a number of "forward-looking statements" within the meaning of the federal securities laws with respect to general economic conditions, key macro-economic drivers that impact our business, the effects of ongoing trade actions, the effects of continued pressure on the liquidity of our customers, potential synergies provided by our recent acquisitions, demand for our products, steel margins, the effect of the coronavirus ("COVID-19") and related governmental and economic responses thereto, the ability to operate our mills at full capacity, future supplies of raw materials and energy for our operations, share repurchases, legal proceedings, the undistributed earnings of our non-U.S. subsidiaries,
(CMC Third Quarter Fiscal 2020 - Page 4)
U.S. non-residential construction activity, international trade, capital expenditures, our liquidity and our ability to satisfy future liquidity requirements, estimated contractual obligations and our expectations or beliefs concerning future events. These forward-looking statements can generally be identified by phrases such as we or our management "expects," "anticipates," "believes," "estimates," "intends," "plans to," "ought," "could," "will," "should," "likely," "appears," "projects," "forecasts," "outlook" or other similar words or phrases. There are inherent risks and uncertainties in any forward-looking statements. We caution readers not to place undue reliance on any forward-looking statements.
Our forward-looking statements are based on management's expectations and beliefs as of the time this news release is filed with the Securities and Exchange Commission or, with respect to any document incorporated by reference, as of the time such document was prepared. Although we believe that our expectations are reasonable, we can give no assurance that these expectations will prove to have been correct, and actual results may vary materially. Except as required by law, we undertake no obligation to update, amend or clarify any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or any other changes. Important factors that could cause actual results to differ materially from our expectations include those described in Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended August 31, 2019 and in Part II, Item 1A, Risk Factors of our subsequent Quarterly Reports on Form 10-Q as well as the following: changes in economic conditions which affect demand for our products or construction activity generally, and the impact of such changes on the highly cyclical steel industry; rapid and significant changes in the price of metals, potentially impairing our inventory values due to declines in commodity prices or reducing the profitability of our fabrication contracts due to rising commodity pricing; impacts from COVID-19 on the economy, demand for our products or our operations, including the responses of governmental authorities to contain COVID-19; excess capacity in our industry, particularly in China, and product availability from competing steel mills and other steel suppliers including import quantities and pricing; compliance with and changes in environmental laws and regulations, including increased regulation associated with climate change and greenhouse gas emissions; involvement in various environmental matters that may result in fines, penalties or judgments; potential limitations in our or our customers' abilities to access credit and non-compliance by our customers with our contracts; activity in repurchasing shares of our common stock under our repurchase program; financial covenants and restrictions on the operation of our business contained in agreements governing our debt; our ability to successfully identify, consummate, and integrate acquisitions and the effects that acquisitions may have on our financial leverage; risks associated with acquisitions generally, such as the inability to obtain, or delays in obtaining, required approvals under applicable antitrust legislation and other regulatory and third party consents and approvals; lower than expected future levels of revenues and higher than expected future costs; failure or inability to implement growth strategies in a timely manner; impact of goodwill impairment charges; impact of long-lived asset impairment charges; currency fluctuations; global factors, including trade measures, political uncertainties and military conflicts; availability and pricing of electricity, electrodes and natural gas for mill operations; ability to hire and
(CMC Third Quarter Fiscal 2020 - Page 5)
retain key executives and other employees; competition from other materials or from competitors that have a lower cost structure or access to greater financial resources; information technology interruptions and breaches in security; ability to make necessary capital expenditures; availability and pricing of raw materials and other items over which we exert little influence, including scrap metal, energy and insurance; unexpected equipment failures; losses or limited potential gains due to hedging transactions; litigation claims and settlements, court decisions, regulatory rulings and legal compliance risks; risk of injury or death to employees, customers or other visitors to our operations; civil unrest, protests and riots; new and clarifying guidance with regard to interpretation of certain provisions of the Tax Cuts and Jobs Act that could impact our assessment; and increased costs related to health care reform legislation.
(CMC Third Quarter Fiscal 2020 - Page 6)
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COMMERCIAL METALS COMPANY
FINANCIAL & OPERATING STATISTICS (UNAUDITED) | | | | | | | | | | | | | | |
| | | Three Months Ended | | | | | | | | | | Nine Months Ended | | |
| (in thousands, except per ton amounts) | | 5/31/2020 | | 2/29/2020 | | 11/30/2019 | | 8/31/2019 | | 5/31/2019 | | 5/31/2020 | | 5/31/2019 |
| Americas Recycling | | | | | | | | | | | | | | |
| Net sales | | $ | 203,155 | | | 248,084 | | | 222,261 | | | 268,447 | | | 289,015 | | | 673,500 | | | 878,099 | |
| Adjusted EBITDA | | $ | (1,664) | | | 5,754 | | | 3,417 | | | 4,235 | | | 12,331 | | | 7,507 | | | 37,889 | |
| Tons shipped (in thousands) | | | | | | | | | | | | | | |
| Ferrous | | 472 | | | 519 | | | 492 | | | 559 | | | 597 | | | 1,483 | | | 1,746 | |
| Nonferrous | | 47 | | | 58 | | | 57 | | | 61 | | | 60 | | | 162 | | | 182 | |
| Total tons shipped | | 519 | | | 577 | | | 549 | | | 620 | | | 657 | | | 1,645 | | | 1,928 | |
| Average selling price (per ton) | | | | | | | | | | | | | | |
| Ferrous | | $ | 215 | | | 226 | | | 182 | | | 217 | | | 252 | | | 208 | | | 263 | |
| Nonferrous | | $ | 1,748 | | | 2,044 | | | 1,983 | | | 1,998 | | | 2,047 | | | 1,937 | | | 2,009 | |
| | | | | | | | | | | | | | |
| Americas Mills | | | | | | | | | | | | | | |
| Net sales | | $ | 740,812 | | | 732,040 | | | 768,893 | | | 824,809 | | 866,903 | | 2,241,745 | | | 2,243,465 | |
| Adjusted EBITDA | | $ | 133,174 | | | 125,691 | | | 155,025 | | | 160,832 | | 158,114 | | 413,890 | | | 384,383 | |
| Tons shipped | | | | | | | | | | | | | | |
| Rebar | | 884 | | | 830 | | | 881 | | | 897 | | 913 | | 2,595 | | | 2,216 | |
| Merchant & Other | | 298 | | | 317 | | | 325 | | | 319 | | 323 | | 940 | | | 962 | |
| Total tons shipped | | 1,182 | | | 1,147 | | | 1,206 | | | 1,216 | | 1,236 | | 3,535 | | | 3,178 | |
| Average price (per ton) | | | | | | | | | | | | | | |
| Total selling price | | $ | 606 | | | 606 | | | 611 | | | 645 | | | 670 | | | 604 | | | 674 | |
| Cost of ferrous scrap utilized | | $ | 239 | | | 256 | | | 226 | | | 246 | | | 284 | | | 238 | | | 297 | |
| Metal margin | | $ | 367 | | | 350 | | | 385 | | | 399 | | | 386 | | | 366 | | | 377 | |
| | | | | | | | | | | | | | |
| Americas Fabrication | | | | | | | | | | | | | | |
| Net sales | | $ | 569,248 | | | 511,748 | | | 571,847 | | | 622,385 | | | 633,047 | | | 1,652,843 | | | 1,600,994 | |
| Adjusted EBITDA | | $ | 31,896 | | | 16,060 | | | 17,481 | | | (13,151) | | | (23,289) | | | 65,437 | | | (109,863) | |
| Tons shipped (in thousands) | | 427 | | | 366 | | | 413 | | | 448 | | | 469 | | | 1,206 | | | 1,184 | |
| Total selling price (per ton) | | $ | 966 | | | 984 | | | 976 | | | 963 | | | 925 | | | 976 | | | 886 | |
| | | | | | | | | | | | | | |
| International Mill | | | | | | | | | | | | | | |
| Net sales | | $ | 173,817 | | | 180,079 | | | 165,389 | | | 205,461 | | | 209,365 | | | 519,285 | | | 611,587 | |
| Adjusted EBITDA | | $ | 14,270 | | | 13,451 | | | 11,359 | | | 22,666 | | | 24,120 | | | 39,080 | | | 77,436 | |
| Tons shipped | | | | | | | | | | | | | | |
| Rebar | | 122 | | | 145 | | | 122 | | | 151 | | | 126 | | | 389 | | | 272 | |
| Merchant & Other | | 252 | | | 235 | | | 216 | | | 237 | | | 250 | | | 703 | | | 800 | |
| Total tons shipped | | 374 | | | 380 | | | 338 | | | 388 | | | 376 | | | 1,092 | | | 1,072 | |
| Average price (per ton) | | | | | | | | | | | | | | |
| Total selling price | | $ | 437 | | | 449 | | | 461 | | | 500 | | | 524 | | | 449 | | | 539 | |
| Cost of ferrous scrap utilized | | $ | 239 | | | 251 | | | 244 | | | 265 | | | 288 | | | 245 | | | 295 | |
| Metal margin | | $ | 198 | | | 198 | | | 217 | | | 235 | | | 236 | | | 204 | | | 244 | |
(CMC Third Quarter Fiscal 2020 - Page 7)
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COMMERCIAL METALS COMPANY
BUSINESS SEGMENTS (UNAUDITED) | | | | | | | | | | | | | | |
| (in thousands) | | Three Months Ended | | | | | | | | | | Nine Months Ended | | |
| Net sales | | 5/31/2020 | | 2/29/2020 | | 11/30/2019 | | 8/31/2019 | | 5/31/2019 | | 5/31/2020 | | 5/31/2019 |
| Americas Recycling | | $ | 203,155 | | | $ | 248,084 | | | $ | 222,261 | | | $ | 268,447 | | | $ | 289,015 | | | $ | 673,500 | | | $ | 878,099 | |
| Americas Mills | | 740,812 | | | 732,040 | | | 768,893 | | | 824,809 | | | 866,903 | | | 2,241,745 | | | 2,243,465 | |
| Americas Fabrication | | 569,248 | | | 511,748 | | | 571,847 | | | 622,385 | | | 633,047 | | | 1,652,843 | | | 1,600,994 | |
| International Mill | | 173,817 | | | 180,079 | | | 165,389 | | | 205,461 | | | 209,365 | | | 519,285 | | | 611,587 | |
| Corporate and Other | | (345,349) | | | (330,988) | | | (343,682) | | | (378,097) | | | (392,458) | | | (1,020,019) | | | (1,048,148) | |
| Total Net Sales | | $ | 1,341,683 | | | $ | 1,340,963 | | | $ | 1,384,708 | | | $ | 1,543,005 | | | $ | 1,605,872 | | | $ | 4,067,354 | | | $ | 4,285,997 | |
| | | | | | | | | | | | | | |
| Adjusted EBITDA from continuing operations | | | | | | | | | | | | | | |
| Americas Recycling | | $ | (1,664) | | | $ | 5,754 | | | $ | 3,417 | | | $ | 4,235 | | | $ | 12,331 | | | $ | 7,507 | | | $ | 37,889 | |
| Americas Mills | | 133,174 | | | 125,691 | | | 155,025 | | | 160,832 | | | 158,114 | | | 413,890 | | | 384,383 | |
| Americas Fabrication | | 31,896 | | | 16,060 | | | 17,481 | | | (13,151) | | | (23,289) | | | 65,437 | | | (109,863) | |
| International Mill | | 14,270 | | | 13,451 | | | 11,359 | | | 22,666 | | | 24,120 | | | 39,080 | | | 77,436 | |
| Corporate and Other | | (30,894) | | | (23,235) | | | (27,477) | | | (29,337) | | | (27,305) | | | (81,606) | | | (111,005) | |
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(CMC Third Quarter Fiscal 2020 - Page 8)
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) | | | | | | | | |
| | Three Months Ended May 31, | | | | Nine Months Ended May 31, | | |
| (in thousands, except share data) | | 2020 | | 2019 | | 2020 | | 2019 |
| Net sales | | $ | 1,341,683 | | | $ | 1,605,872 | | | $ | 4,067,354 | | | $ | 4,285,997 | |
| Costs and expenses: | | | | | | | | |
| Cost of goods sold | | 1,116,353 | | | 1,364,242 | | | 3,385,963 | | | 3,735,168 | |
| Selling, general and administrative expenses | | 115,965 | | | 115,446 | | | 342,502 | | | 331,389 | |
| Interest expense | | 15,409 | | | 18,513 | | | 47,875 | | | 53,671 | |
| Asset impairments | | 5,983 | | | 15 | | | 6,513 | | | 15 | |
| | 1,253,710 | | | 1,498,216 | | | 3,782,853 | | | 4,120,243 | |
| | | | | | | | |
| Earnings from continuing operations before income taxes | | 87,973 | | | 107,656 | | | 284,501 | | | 165,754 | |
| Income taxes | | 23,804 | | | 29,105 | | | 73,981 | | | 52,855 | |
| Earnings from continuing operations | | 64,169 | | | 78,551 | | | 210,520 | | | 112,899 | |
| | | | | | | | |
| Earnings (loss) from discontinued operations before income taxes | | 745 | | | (190) | | | 1,941 | | | (808) | |
| Income taxes (benefit) | | 180 | | | (29) | | | 581 | | | 109 | |
| Earnings (loss) from discontinued operations | | 565 | | | (161) | | | 1,360 | | | (917) | |
| | | | | | | | |
| Net earnings | | $ | 64,734 | | | $ | 78,390 | | | $ | 211,880 | | | $ | 111,982 | |
| | | | | | | | |
| Basic earnings per share* | | | | | | | | |
| Earnings from continuing operations | | $ | 0.54 | | | $ | 0.67 | | | $ | 1.77 | | | $ | 0.96 | |
| Earnings (loss) from discontinued operations | | — | | | — | | | 0.01 | | | (0.01) | |
| Net earnings | | $ | 0.54 | | | $ | 0.66 | | | $ | 1.78 | | | $ | 0.95 | |
| | | | | | | | |
| Diluted earnings per share* | | | | | | | | |
| Earnings from continuing operations | | $ | 0.53 | | | $ | 0.66 | | | $ | 1.75 | | | $ | 0.95 | |
| Earnings (loss) from discontinued operations | | — | | | — | | | 0.01 | | | (0.01) | |
| Net earnings | | $ | 0.54 | | | $ | 0.66 | | | $ | 1.76 | | | $ | 0.94 | |
| | | | | | | | |
| Average basic shares outstanding | | 119,192,962 | | | 118,045,362 | | | 118,828,870 | | | 117,762,945 | |
| Average diluted shares outstanding | | 120,278,741 | | | 119,145,566 | | | 120,277,737 | | | 119,013,014 | |
*Earnings Per Share ("EPS") is calculated independently for each component and may not sum to Net EPS due to rounding
(CMC Third Quarter Fiscal 2020 - Page 9)
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | | | | |
| (in thousands, except share data) | | May 31, 2020 | | August 31, 2019 |
| Assets | | | | |
| Current assets: | | | | |
| Cash and cash equivalents | | $ | 462,110 | | | $ | 192,461 | |
| Accounts receivable (less allowance for doubtful accounts of $8,661 and $8,403) | | 880,602 | | | 1,016,088 | |
| Inventories, net | | 644,887 | | | 692,368 | |
| Other current assets | | 157,390 | | | 179,088 | |
| Total current assets | | 2,144,989 | | | 2,080,005 | |
| Property, plant and equipment, net | | 1,513,469 | | | 1,500,971 | |
| Goodwill | | 64,126 | | | 64,138 | |
| Other noncurrent assets | | 232,303 | | | 113,657 | |
| Total assets | | $ | 3,954,887 | | | $ | 3,758,771 | |
| Liabilities and stockholders' equity | | | | |
| Current liabilities: | | | | |
| Accounts payable | | $ | 230,280 | | | $ | 288,005 | |
| Accrued expenses and other payables | | 363,066 | | | 353,786 | |
| Acquired unfavorable contract backlog | | 16,726 | | | 35,360 | |
| Current maturities of long-term debt and short-term borrowings | | 17,271 | | | 17,439 | |
| Total current liabilities | | 627,343 | | | 694,590 | |
| Deferred income taxes | | 129,571 | | | 79,290 | |
| Other noncurrent liabilities | | 243,511 | | | 133,620 | |
| Long-term debt | | 1,153,800 | | | 1,227,214 | |
| Total liabilities | | 2,154,225 | | | 2,134,714 | |
| Stockholders' equity | | 1,800,450 | | | 1,623,861 | |
| Stockholders' equity attributable to noncontrolling interests | | 212 | | | 196 | |
| Total stockholders' equity | | 1,800,662 | | | 1,624,057 | |
| Total liabilities and stockholders' equity | | $ | 3,954,887 | | | $ | 3,758,771 | |
(CMC Third Quarter Fiscal 2020 - Page 10)
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COMMERCIAL METALS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | | | | |
| | | Nine Months Ended May 31, | | |
| (in thousands) | | 2020 | | 2019 |
| Cash flows from (used by) operating activities: | | | | |
| Net earnings | | $ | 211,880 | | | $ | 111,982 | |
| Adjustments to reconcile net earnings to cash flows from (used by) operating activities: | | | | |
| Depreciation and amortization | | 124,104 | | | 117,617 | |
| Deferred income taxes and other long-term taxes | | 47,761 | | | 36,367 | |
| Stock-based compensation | | 21,975 | | | 17,350 | |
| Amortization of acquired unfavorable contract backlog | | (18,676) | | | (58,202) | |
| Asset impairments | | 6,513 | | | 15 | |
| Net gain on disposals of subsidiaries, assets and other | | (5,476) | | | (1,334) | |
| Other | | 1,933 | | | 651 | |
| Changes in operating assets and liabilities | | 141,819 | | | (75,422) | |
| Beneficial interest in securitized accounts receivable | | — | | | (367,521) | |
| Net cash flows from (used by) operating activities | | 531,833 | | | (218,497) | |
| | | | |
| Cash flows from (used by) investing activities: | | | | |
| Capital expenditures | | (134,092) | | | (91,753) | |
| Proceeds from the sale of property, plant and equipment | | 14,091 | | | 2,503 | |
| Acquisitions, net of cash acquired | | (9,850) | | | (700,941) | |
| Proceeds from insurance, sale of discontinued operations and other | | 974 | | | 6,298 | |
| | | | |
| | | | |
| Beneficial interest in securitized accounts receivable | | — | | | 367,521 | |
| Net cash flows used by investing activities: | | (128,877) | | | (416,372) | |
| | | | |
| Cash flows from (used by) financing activities: | | | | |
| Proceeds from issuance of long-term debt | | 22,566 | | | 180,000 | |
| Repayments of long-term debt | | (110,470) | | | (24,138) | |
| Proceeds from accounts receivable programs | | 171,133 | | | 223,143 | |
| Repayments under accounts receivable programs | | (171,285) | | | (209,363) | |
| Dividends | | (42,768) | | | (42,387) | |
| Stock issued under incentive and purchase plans, net of forfeitures | | (1,921) | | | (2,364) | |
| | | | |
| Contribution from noncontrolling interests | | 16 | | | 10 | |
| Net cash flows from (used by) financing activities | | (132,729) | | | 124,901 | |
| Effect of exchange rate changes on cash | | 210 | | | (341) | |
| Increase (decrease) in cash, restricted cash and cash equivalents | | 270,437 | | | (510,309) | |
| Cash, restricted cash and cash equivalents at beginning of period | | 193,729 | | | 632,615 | |
| Cash, restricted cash and cash equivalents at end of period | | $ | 464,166 | | | $ | 122,306 | |
| | | | | | | | | | | | | | |
| Supplemental information: | | Nine Months Ended May 31, | | |
| (in thousands) | | 2020 | | 2019 |
| Cash and cash equivalents | | $ | 462,110 | | | $ | 120,315 | |
| Restricted cash | | 2,056 | | | 1,991 | |
| Total cash, restricted cash and cash equivalents | | $ | 464,166 | | | $ | 122,306 | |
(CMC Third Quarter Fiscal 2020 - Page 11)
COMMERCIAL METALS COMPANY
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
This press release contains financial measures not derived in accordance with generally accepted accounting principles ("GAAP"). Reconciliations to the most comparable GAAP measures are provided below.
Core EBITDA from Continuing Operations is a non-GAAP financial measure. Core EBITDA from continuing operations is the sum of earnings (loss) from continuing operations before interest expense and income taxes (benefit). It also excludes recurring non-cash charges for depreciation and amortization, asset impairments and non-cash equity compensation. Core EBITDA from continuing operations also excludes certain material facility closure costs, amortization of acquired unfavorable contract backlog, acquisition and integration related costs and other legal fees, and the effect of purchase accounting adjustments on inventory. Core EBITDA from continuing operations should not be considered an alternative to earnings (loss) from continuing operations or net earnings (loss), or as a better measure of liquidity than net cash flows from operating activities, as determined by GAAP. However, we believe that Core EBITDA from continuing operations provides relevant and useful information, which is often used by analysts, creditors and other interested parties in our industry as it allows: (i) comparison of our earnings to those of our competitors; (ii) a supplemental measure of our ongoing core performance; and (iii) the assessment of period-to-period performance trends. Additionally, Core EBITDA from continuing operations is the target benchmark for our annual and long-term cash incentive performance plans for management. Core EBITDA from continuing operations may be inconsistent with similar measures presented by other companies.
A reconciliation of earnings from continuing operations to Core EBITDA from continuing operations is provided below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | | | | | | | | Nine Months Ended | | |
| (in thousands) | | 5/31/2020 | | 2/29/2020 | | 11/30/2019 | | 8/31/2019 | | 5/31/2019 | | 5/31/2020 | | 5/31/2019 |
| Earnings from continuing operations | | $ | 64,169 | | | $ | 63,596 | | | $ | 82,755 | | | $ | 85,880 | | | $ | 78,551 | | | $ | 210,520 | | | $ | 112,899 | |
| Interest expense | | 15,409 | | | 15,888 | | | 16,578 | | | 17,702 | | | 18,513 | | | 47,875 | | | 53,671 | |
| Income taxes | | 23,804 | | | 22,845 | | | 27,332 | | | 16,826 | | | 29,105 | | | 73,981 | | | 52,855 | |
| Depreciation and amortization | | 41,765 | | | 41,389 | | | 40,941 | | | 41,051 | | | 41,181 | | | 124,095 | | | 117,602 | |
| Asset impairments | | 5,983 | | | — | | | 530 | | | 369 | | | 15 | | | 6,513 | | | 15 | |
| Non-cash equity compensation | | 6,170 | | | 7,536 | | | 8,269 | | | 7,758 | | | 7,342 | | | 21,975 | | | 17,348 | |
| Amortization of acquired unfavorable contract backlog | | (4,348) | | | (5,997) | | | (8,331) | | | (16,582) | | | (23,394) | | | (18,676) | | | (58,202) | |
| | | | | | | | | | | | | | |
| Facility closure | | 1,863 | | | — | | | 6,339 | | | — | | | — | | | 8,202 | | | — | |
| Acquisition and integration related costs and other | | — | | | — | | | — | | | 6,177 | | | 2,336 | | | — | | | 35,781 | |
| Purchase accounting effect on inventory | | — | | | — | | | — | | | — | | | — | | | — | | | 10,315 | |
| Core EBITDA from continuing operations | | $ | 154,815 | | | $ | 145,257 | | | $ | 174,413 | | | $ | 159,181 | | | $ | 153,649 | | | $ | 474,485 | | | $ | 342,284 | |
(CMC Third Quarter Fiscal 2020 - Page 12)
Adjusted earnings from continuing operations is a non-GAAP financial measure that is equal to earnings (loss) from continuing operations before certain asset impairments, facility closure costs, acquisition and integration related and costs and other legal expenses and effect of purchase accounting adjustments on inventory, including the estimated income tax effects thereof. Additionally, we adjust adjusted earnings from continuing operations for the effects of the Tax Cuts and Jobs Act ("TCJA"). Adjusted earnings from continuing operations should not be considered as an alternative to earnings from continuing operations or any other performance measure derived in accordance with GAAP. However, we believe that adjusted earnings from continuing operations provides relevant and useful information to investors as it allows: (i) a supplemental measure of our ongoing core performance and (ii) the assessment of period-to-period performance trends. Management uses adjusted earnings from continuing operations to evaluate our financial performance. Adjusted earnings from continuing operations may be inconsistent with similar measures presented by other companies. Adjusted earnings from continuing operations per diluted share is defined as adjusted earnings from continuing operations on a diluted per share basis.
A reconciliation of earnings from continuing operations to adjusted earnings from continuing operations is provided below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | | | | | | | | Nine Months Ended | | |
| (in thousands) | | 5/31/2020 | | 2/29/2020 | | 11/30/2019 | | 8/31/2019 | | 5/31/2019 | | 5/31/2020 | | 5/31/2019 |
| Earnings from continuing operations | | $ | 64,169 | | | $ | 63,596 | | | $ | 82,755 | | | $ | 85,880 | | | $ | 78,551 | | | $ | 210,520 | | | $ | 112,899 | |
| Asset impairments | | 5,983 | | | — | | | — | | | — | | | — | | | 5,983 | | | — | |
| Facility closure | | 1,863 | | | — | | | 6,339 | | | — | | | — | | | 8,202 | | | — | |
| Acquisition and integration related costs and other | | — | | | — | | | — | | | 6,177 | | | 2,336 | | | — | | | 35,781 | |
| | | | | | | | | | | | | | |
| Purchase accounting effect on inventory | | — | | | — | | | — | | | — | | | — | | | — | | | 10,315 | |
| Total adjustments (pre-tax) | | $ | 7,846 | | | $ | — | | | $ | 6,339 | | | $ | 6,177 | | | $ | 2,336 | | | $ | 14,185 | | | $ | 46,096 | |
| | | | | | | | | | | | | | |
| Tax impact | | | | | | | | | | | | | | |
| TCJA impact | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 7,550 | |
| | | | | | | | | | | | | | |
| Related tax effects on adjustments | | (1,648) | | | — | | | (1,331) | | | (1,297) | | | (490) | | | (2,979) | | | (9,680) | |
| Total tax impact | | (1,648) | | | — | | | (1,331) | | | (1,297) | | | (490) | | | (2,979) | | | (2,130) | |
| Adjusted earnings from continuing operations | | $ | 70,367 | | | $ | 63,596 | | | $ | 87,763 | | | $ | 90,760 | | | $ | 80,397 | | | $ | 221,726 | | | $ | 156,865 | |
| | | | | | | | | | | | | | |
| Adjusted earnings from continuing operations per diluted share | | $ | 0.59 | | | $ | 0.53 | | | $ | 0.73 | | | $ | 0.76 | | | $ | 0.67 | | | $ | 1.84 | | | $ | 1.32 | |
Media Contact:
Susan Gerber
214.689.4300
