EXHIBIT 99.1
COMMERCIAL METALS COMPANY REPORTS FISCAL 2003 EARNINGS
WITH SOLID FOURTH QUARTER; EXPECTS SIGNIFICANTLY IMPROVED 2004
Dallas -- October 14, 2003 -- Commercial Metals Company (NYSE: CMC) today
reported net earnings per diluted share of $0.66 on net earnings of $18.9
million, and net sales of $2.9 billion for the year ended August 31, 2003. This
compares with net earnings per diluted share of $1.43 on net earnings of $40.5
million and net sales of $2.5 billion last year. Fourth quarter net earnings
were $10.7 million or $0.38 per diluted share on net sales of $805 million. This
compares with $9.0 million or $0.31 per diluted share on nets sales of $682
million in the fourth quarter a year ago.
The current year quarter included after-tax LIFO expense of $857 thousand
($0.03 per diluted share) compared to LIFO expense of $1.1 million ($0.04 per
diluted share) in the prior year quarter. Comparable numbers for the year were
$6.1 million expense ($0.21 per diluted share) this year and $1.0 million
expense ($0.04 per diluted share) in the previous year.
CMC Chairman, President and Chief Executive Officer Stanley A. Rabin
said, "It was an off-year, but our diversification enabled us to meet the
challenge. The best news is that the fourth quarter of fiscal 2003 was the
strongest quarter of the year, by far. Throughout much of the year many of our
key markets - particularly those for our Manufacturing segment - remained under
pressure, although we did see improvement as the year progressed. While public
construction and institutional building held up relatively well, commercial
construction in the United States was off sharply for the second consecutive
year which continued to impact our downstream businesses as well as our mills.
Additionally, business spending and the industrial side of the economy remained
soft. Similarly, many of the global markets remained weak. There were exceptions
for us, China and Australia being two notable examples. And during the second
half of the fiscal year we began to see some pickup in demand. We also began to
see some of the expected net benefit from the weaker U.S. dollar. Specifically,
results in our Manufacturing segment were well below par; conversely, it was a
banner year for our Recycling and Marketing and Distribution segments."
(more)
(CMC Year End - Page 2)
According to Rabin, "In the Manufacturing segment, steel mill price
realizations were at extremely low levels for much of the year, while the
increase in input costs (scrap/supplies/utilities) outpaced the improvements in
selling prices which occurred later in the year. Tons melted decreased 1% while
tons rolled decreased 3%. Shipments, however, increased 5% to 2.3 million tons,
although the increase was accounted for mainly by higher billet shipments. Our
average total mill selling price increased $9.5 per ton; however, the average
scrap purchase price rose much faster at $17 per ton. The fourth quarter to
fourth quarter average selling price and shipments for the mills were up 8% and
4%, respectively. Our steel fabrication and related businesses were slightly
profitable versus a solid operating profit in the year earlier. Our average
fabricated selling price dropped $72 per ton for the year. Shipments from our
fab plants totaled 1.0 million tons, 4.5% more than the prior year. Fabricated
rebar shipments were up significantly; however, other categories' shipments were
mostly lower. Rebar fabrication, construction-related products, steel fence post
plants and heat treating reported solid profits, but joists and structural steel
fabrication recorded losses, primarily due to depressed selling prices. Several
acquisitions were consummated during fiscal 2003 in rebar fabrication and
construction-related products as we broadened our geographic presence and market
coverage. Fourth quarter comparisons showed higher shipments because of an
increase in fabricated rebar tonnage, but a significant decrease in the average
fabricated price."
Rabin added, "The Copper Tube division reported only a modest profit
compared with an operating profit of $5.1 million the previous year as net sales
decreased 2%, and we also experienced a margin squeeze in this business.
Although residential construction held up relatively well, other market sectors
were significantly weaker. The average selling price of plumbing tube and
refrigeration tube was down over 7 cents per pound, whereas average copper scrap
prices increased by over 4 cents per pound. Metal spreads were correspondingly
lower. Our copper tube shipments increased 4% compared with the previous fiscal
year. Production and shipments were up in the fourth quarter of fiscal 2003, but
the average sales price decreased compared with the prior year's quarter."
"All four geographic regions in our Recycling segment performed
excellently," according to Rabin. "Net sales dollars for 2003 increased 17% to
$441 million, led by a surge in steel scrap prices. Coupled with good cost
controls, gross margins jumped 24% and operating profits nearly tripled last
year to $15.2 million. Nonferrous markets improved moderately year over year.
Versus last year, the average ferrous scrap sales price rose by $19 per short
ton to $100 per short ton and shipments were 10% higher at 1.64 million short
tons. The average nonferrous scrap sales price increased 8% compared with a year
ago while nonferrous shipments declined 3%. Operating profit for the fourth
quarter was $4.7 million, featured by an average ferrous selling price of $105
per ton. Total volume of scrap processed, including our CMC Steel Group
processing operations, equaled 2.81 million tons against 2.57 million tons last
year."
(more)
(CMC Year End - Page 3)
Rabin continued, "Net sales for the Marketing and Distribution segment
leaped 48% to $1.15 billion in 2003, with the predominant increase outside the
U.S. During the year international steel prices for flat-rolled products rose
for several quarters and then weakened, mainly because of a pullback in China,
but then began to increase again during the fourth quarter. Prices for long
products rose much more slowly. Our steel volume increased, other than for
imports into the U.S. Our business in the U.S. reflected the sub-par economy,
weaker U.S. dollar and import duties. Influenced by similar factors, nonferrous
semis were weaker with respect to volume, price and margins. However, sales and
margins for ores, minerals, ferroalloys and special metals were generally
higher. As previously mentioned, better demand in several of our key markets,
including that for processed material, contributed to the overall improved
results. Our service centers in Australia continued to perform well, and our
relatively new joint venture Europickling facility in Belgium reached record
output levels and became profitable. Meanwhile, the joint venture arrangements
with our 11% investee Trinecke Zelezarny are going well. On July 22, 2003, we
announced that a subsidiary had entered into a definitive agreement to purchase
a controlling interest in Huta Zawiercie, a Polish steel minimill (the purchase
is subject to the approval of various Polish regulatory agencies and
satisfaction of certain conditions, and we anticipate closing by December 15,
2003). Rising freight rates were an issue as the year progressed. Fourth quarter
operating profit was a solid $7.2 million, 11% above fiscal 2002's very strong
fourth quarter."
Rabin said, "Capital spending in fiscal 2003 totaled $63 million. The
capital budget for fiscal 2004 is $61 million excluding the prospective $50
million acquisition cost of the 71.1% of the shares of Huta Zawiercie.
Expenditures are spread across the segments with the bulk in steel
manufacturing. At the end of 2003, our stockholders' equity was $506 million or
$18.08 per share. Year-end net working capital was $399 million and the current
ratio 1.9. Our EBITDA to interest coverage remained strong. Long-term debt as a
percentage of total capitalization was 31.6%, and the ratio of total debt to
total capitalization plus short-term debt stood at 32.9%. During the year we
repurchased 951,410 shares of CMC stock at an average price of $15.36 per share.
For the year we paid quarterly cash dividends totaling 32 cents per share on
common stock, including our 155th consecutive quarterly cash dividend. On August
8, 2003, we signed a new three year revolving credit agreement for $275 million
with a group of sixteen banks which replaced our $174.5 million program. As
previously, the principal function of this agreement is to back up our
commercial paper program.
"We expect fiscal 2004 to be significantly better than fiscal 2003, due
both to internal measures that we have taken to reduce costs and increase
productivity, as well as better economic conditions this fiscal year amid
increasing signs of a recovery, most apparent for global manufacturing. We
expect our first quarter to be comparable to the just
(more)
(CMC Year End - Page 4)
concluded fourth quarter and substantially better than last year's first
quarter. We anticipate FIFO net earnings approaching $9 to $10 million for the
quarter. In the U.S. especially we are seeing increasing signs of the pickup in
the manufacturing sector and pockets of improvement in construction, although
office, lodging and industrial construction will be slower to recover.
Additionally, capital goods orders are higher. Asia is relatively strong and
Europe is showing signs of pulling out of its slump, albeit inconsistently."
In conclusion, Rabin said, "We anticipate better performance in our
Manufacturing segment via improved metal spreads and increases in production,
shipments and prices. We have implemented several steel mill product price
increases on most of our products; the cumulative announced price increases are
$70 per ton for merchant bar and $55 per ton for reinforcing bar. These
increases should become fully effective during the first half of fiscal 2004 and
help restore margins for our steel mills. We expect margins in several of our
downstream businesses to be compressed earlier in the year followed by an
expansion of margins. Strong demand for steel scrap and nonferrous metal scrap
combined with the relatively weak U.S. dollar will lend support to our Recycling
segment. Marketing and Distribution profits are expected to remain very good,
better than last year in the U.S. divisions but not quite as strong in the
International divisions. Prices generally should be firm with good volume. We
anticipate that overall results will be better in the second half of the fiscal
year than in the first half.
"We remain well positioned, both in the U.S. and elsewhere. Long term, we
expect stronger demand, including the increased possibility of a recovery in
demand throughout the major economic blocs and continued growth in developing
countries. Emerging countries often exhibit a higher growth rate for steel and
nonferrous metals consumption. The supply/demand equation is shifting toward
Asia, especially China, as well as Central and Eastern Europe. As an example,
China now consumes about one quarter of the world's steel and produces nearly
one quarter of global crude steel output. Although China appears to be expanding
its steel production too quickly, some analysts maintain that China's growth
will cause a positive inflection in steel and nonferrous metals demand on a
global basis, even though all expect a correction during the next several years.
Meanwhile, our approach remains to get closer to our customers in the supply
chain wherever they are located."
(more)
(CMC Year End - Page 5)
CMC invites you to listen to a live broadcast of its fourth
quarter/year-end conference call on Tuesday, October 14, at 3:00 p.m. ET. The
call will be hosted by Stan Rabin, Chairman, President and CEO, and Bill Larson,
Vice President and CFO, and can be accessed via our website at
www.commercialmetals.com or at www.streetevents.com. In the event you are unable
to listen to the live broadcast, the call will be archived on CMC's website
until October 28, 2003. The replay will be accessible on the home page within
two hours of the webcast. Financial and statistical information presented in the
broadcast can be found on CMC's website under "Investor Relations."
Commercial Metals Company and subsidiaries manufacture, recycle and
market steel and metal products, related materials and services through a
network of over 140 locations including 4 steel minimills, 33 steel fabrication
plants, 5 steel joist plants, a castellated and cellular beam fabricating plant,
4 steel fence post manufacturing plants, 2 heat treating plants, a railcar
rebuilding facility, 29 construction-related product warehouses, a railroad
salvage company, a copper tube mill, 44 metal recycling facilities and 16
marketing and distribution offices in the United States and in strategic
overseas markets.
Paragraphs nine through eleven of this news release contain
forward-looking statements regarding the outlook for the Company's financial
results including net earnings, product pricing and demand, production rates,
energy expense, insurance expense, interest rates, inventory levels,
acquisitions and general market conditions. These forward-looking statements
generally can be identified by phrases such as the company or its management
"expects," "anticipates," "believe," "ought," "should," "likely," "appears,"
"projected," "forecast," or other words or phrases of similar impact. There is
inherent risk and uncertainty in any forward-looking statements. Variances will
occur and some could be materially different from management's current opinion.
Developments that could impact the Company's expectations include interest rate
changes, construction activity, litigation claims and settlements, difficulties
or delays in the execution of construction contracts resulting in cost overruns
or contract disputes, metals pricing over which the Company exerts little
influence, increased capacity and product availability from competing steel
minimills and other steel suppliers including import quantities and pricing,
court decisions, industry consolidation or changes in production capacity or
utilization, global factors including credit availability, currency
fluctuations, scrap, energy, insurance and supply prices, and decisions by
governments impacting the level of steel imports and pace of overall economic
activity.
(more)
(CMC Year End - Page 6)
<Table>
<Caption>
THREE MONTHS ENDED FISCAL YEAR ENDED
-------------------- --------------------
(Short Tons in Thousands) 8/31/03 8/31/02 8/31/03 8/31/02
-------- -------- -------- --------
Steel Mill Rebar Shipments 276 264 1,007 971
Steel Mill Structural and Other Shipments 332 318 1,277 1,200
-------- -------- -------- --------
TOTAL MILL TONS SHIPPED 608 582 2,284 2,171
Average FOB Mill Selling Price (Total Sales) $ 289 $ 267 $ 278 $ 269
Average FOB Mill Selling Price (Finished Goods Only) 297 275 287 275
Average Ferrous Scrap Purchase Price 100 91 97 80
Fab Plant Rebar Shipments 195 145 663 559
Fab Plant Structural, Joist, and Post Shipments 99 100 365 425
-------- -------- -------- --------
TOTAL FABRICATION TONS SHIPPED 294 245 1,028 984
Average Fab Selling Price (Excluding Stock & Buyout Sales) $ 542 $ 577 $ 536 $ 608
SCRAP METAL TONS PROCESSED AND SHIPPED 732 734 2,811 2,568
</Table>
BUSINESS SEGMENTS
(in thousands)
<Table>
<Caption>
MARKETING CORP.
MFG. RECYCLING & DISTRIBUTION & ELIM. CONSOLIDATED
--------------- --------------- --------------- --------------- ---------------
FISCAL YEAR 2003
Net sales $ 1,339,515 $ 441,444 $ 1,149,697 $ (54,771) $ 2,875,885
Operating profit (loss) 20,365 15,206 21,784 (11,039) 46,316
FISCAL YEAR 2002
Net sales $ 1,365,895 $ 378,054 $ 777,012 $ (41,020) $ 2,479,941
Operating profit (loss) 71,447 5,098 14,196 (8,102) 82,639
4TH QUARTER 2003
Net sales $ 381,292 $ 120,871 $ 317,458 $ (14,882) $ 804,739
Operating profit (loss) 13,159 4,685 7,163 (3,764) 21,243
4TH QUARTER 2002
Net sales $ 346,987 $ 110,262 $ 236,771 $ (12,176) $ 681,844
Operating profit (loss) 9,258 3,953 6,456 (1,531) 18,136
</Table>
(more)
(CMC Year End - Page 7)
COMMERCIAL METALS COMPANY
FOURTH QUARTER AND YEAR OPERATING RESULTS (UNAUDITED)
(in thousands except share data)
<Table>
<Caption>
THREE MONTHS ENDED AUGUST 31,
----------------------------
2003 2002
------------ ------------
NET SALES $ 804,739 $ 681,844
COSTS AND EXPENSES:
Cost of goods sold 719,098 609,525
Selling, general and administrative expenses 61,209 51,033
Employees' retirement plans 3,263 3,244
Interest expense 3,904 4,103
------------ ------------
787,474 667,905
------------ ------------
EARNINGS BEFORE INCOME TAXES 17,265 13,939
INCOME TAXES 6,521 4,901
------------ ------------
NET EARNINGS $ 10,744 $ 9,038
============ ============
Basic earnings per share $ 0.38 $ 0.32
Diluted earnings per share $ 0.38 $ 0.31
Cash dividends per share $ 0.08 $ 0.08
Average basic shares outstanding 27,957,659 28,485,325
Average diluted shares outstanding 28,485,903 29,388,066
</Table>
<Table>
<Caption>
FISCAL YEAR ENDED AUGUST 31,
----------------------------
2003 2002
------------ ------------
NET SALES $ 2,875,885 $ 2,479,941
COSTS AND EXPENSES:
Cost of goods sold 2,586,845 2,162,527
Selling, general and administrative expenses 231,037 220,883
Employees' retirement plans 12,271 14,685
Interest expense 15,338 18,708
------------ ------------
2,845,491 2,416,803
------------ ------------
EARNINGS BEFORE INCOME TAXES 30,394 63,138
INCOME TAXES 11,490 22,613
------------ ------------
NET EARNINGS $ 18,904 $ 40,525
============ ============
Basic earnings per share $ 0.67 $ 1.48
Diluted earnings per share $ 0.66 $ 1.43
Cash dividends per share $ 0.32 $ 0.275
Average basic shares outstanding 28,202,979 27,377,083
Average diluted shares outstanding 28,605,595 28,275,291
</Table>
(more)
(CMC Year End - Page 8)
COMMERCIAL METALS COMPANY
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(in thousands)
<Table>
<Caption>
AUGUST 31,
----------------------------
2003 2002
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 75,058 $ 124,397
Accounts receivable 397,490 350,885
Inventories 310,816 268,040
Other 61,053 50,930
------------ ------------
Total Current Assets 844,417 794,252
Net Property, Plant and Equipment 374,382 378,155
Other Assets 56,607 57,669
------------ ------------
$ 1,275,406 $ 1,230,076
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and short-term trade financing arrangements $ 315,662 $ 275,232
Accrued expenses and other payables 126,971 133,608
Income taxes payable 1,718 5,676
Current maturities of long-term debt 640 631
------------ ------------
Total Current Liabilities 444,991 415,147
Deferred Income Taxes 45,261 32,813
Other Long-Term Liabilities 24,066 24,841
Long-Term Debt 254,997 255,969
Stockholders' Equity 506,091 501,306
------------ ------------
$ 1,275,406 $ 1,230,076
============ ============
</Table>
(more)
(CMC Year End - Page 9)
COMMERCIAL METALS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<Table>
<Caption>
AUGUST 31,
-----------------------------
2003 2002
------------ ------------
CASH FLOWS FROM (USED BY) OPERATING ACTIVITIES:
Net earnings $ 18,904 $ 40,525
Adjustments to earnings not requiring cash:
Depreciation and amortization 61,203 61,579
Provision for losses on receivables 5,162 3,985
Deferred income taxes 12,447 2,408
Tax benefits from stock plans 330 4,467
Gain on sale of SMI-Owen -- (5,234)
Other (256) (307)
CHANGES IN OPERATING ASSETS AND LIABILITIES, NET OF EFFECT
OF ACQUISITIONS AND SALE OF SMI-OWEN:
Decrease (increase) in accounts receivable (71,938) (48,690)
Funding from accounts receivable sold 18,662 --
Decrease (increase) in inventories (40,676) (37,206)
Decrease (increase) in other assets (1,870) 912
Increase (decrease) in accounts payable, accrued
expenses, other payables and income taxes 14,594 66,927
Increase (decrease) in other long-term liabilities (1,275) 7,231
------------ ------------
Net Cash Flows From Operating Activities 15,287 96,597
CASH FLOWS FROM (USED BY) INVESTING ACTIVITIES:
Purchases of property, plant and equipment (49,792) (47,223)
Acquisition of Coil Steels Group, net of cash received -- (6,834)
Acquisition of fabrication businesses (13,416) --
Sale of assets of SMI-Owen -- 19,705
Sales of property, plant and equipment 1,388 3,496
------------ ------------
Net Cash Used By Investing Activities (61,820) (30,856)
CASH FLOWS FROM (USED BY) FINANCING ACTIVITIES:
Short-term trade financing arrangement 15,000 --
Short-term borrowings--net change -- (9,981)
Payments on long-term debt (373) (10,101)
Stock issued under incentive and purchase plans 6,216 30,238
Treasury stock acquired (14,610) --
Dividends paid (9,039) (7,521)
------------ ------------
Net Cash From (Used By) Financing Activities (2,806) 2,635
------------ ------------
Increase (Decrease) in Cash and Cash Equivalents (49,339) 68,376
Cash and Cash Equivalents at Beginning of Year 124,397 56,021
------------ ------------
Cash and Cash Equivalents at End of Year $ 75,058 $ 124,397
============ ============
</Table>
(more)
(CMC Year End - page 10)
COMMERCIAL METALS COMPANY
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
(dollars in thousands)
This press release uses financial statement measures not derived in accordance
with generally accepted accounting principles (GAAP). Reconciliations to the
most comparable GAAP measures are provided below.
EBITDA:
Earnings before interest expense, income taxes, depreciation and amortization.
EBITDA is a non-GAAP liquidity measure. It excludes Commercial Metals Company's
largest recurring non-cash charge, depreciation and amortization. As a measure
of cash flow before interest expense, it is one guideline used to assess the
Company's ability to pay its current debt obligations as they mature and a tool
to calculate possible future levels of leverage capacity. EBITDA to interest is
a covenant test in certain of the Company's note agreements.
<Table>
For the year ended August 31, 2003:
Net earnings $ 18,904
Interest expense 15,338
Income taxes 11,490
Depreciation and amortization 61,203
----------
EBITDA $ 106,935
==========
</Table>
EBITDA TO INTEREST COVERAGE FOR THE YEAR ENDED AUGUST 31, 2003:
$106,935 / 15,338 = 7.0
OPERATING PROFIT:
OPERATING PROFIT is earnings before income taxes and external financing costs
including interest expense and A/R securitization fees.
OPERATING PROFIT provides a core operational earnings measurement that compares
segments without the need to adjust for federal, but more specifically, state
and local taxes which have considerable variation between domestic
jurisdictions. Tax regulations in international operations add additional
complexity. Operating profit is also exclusive of interest cost which then
presents the results without consideration of financing alternatives of capital
employed.
<Table>
<Caption>
MARKETING & CORPORATE AND
SEGMENT MANUFACTURING RECYCLING DISTRIBUTION ELIMINATIONS TOTAL
- --------------------------- --------------- --------------- --------------- --------------- ---------------
Year ended August 31, 2003:
Net earnings $ 13,557 $ 10,006 $ 15,529 $ (20,188) $ 18,904
Income taxes 6,477 5,104 4,753 (4,844) 11,490
Interest expense 130 5 1,313 13,890 15,338
A/R securitization fees 201 91 189 103 584
--------------- --------------- --------------- --------------- ---------------
Operating profit $ 20,365 $ 15,206 $ 21,784 $ (11,039) $ 46,316
Year ended August 31, 2002:
Net earnings $ 45,026 $ 3,741 $ 8,085 $ (16,327) $ 40,525
Income taxes 25,739 1,187 3,769 (8,082) 22,613
Interest expense 291 4 2,039 16,374 18,708
A/R securitization fees 391 166 303 (67) 793
--------------- --------------- --------------- --------------- ---------------
Operating profit $ 71,447 $ 5,098 $ 14,196 $ (8,102) $ 82,639
</Table>
(more)
(CMC Year End - page 11)
COMMERCIAL METALS COMPANY
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
(dollars in thousands)
OPERATING PROFIT (CONTINUED):
<Table>
<Caption>
MARKETING & CORPORATE AND
SEGMENT MANUFACTURING RECYCLING DISTRIBUTION ELIMINATIONS TOTAL
- ------------------------------ --------------- --------------- --------------- --------------- ---------------
Quarter ended August 31, 2003:
Net earnings $ 9,174 $ 3,317 $ 4,900 $ (6,647) $ 10,744
Income taxes 3,902 1,342 1,762 (485) 6,521
Interest expense 26 1 452 3,425 3,904
A/R securitization fees 57 25 49 (57) 74
--------------- --------------- --------------- --------------- ---------------
Operating profit $ 13,159 $ 4,685 $ 7,163 $ (3,764) $ 21,243
Quarter ended August 31, 2002:
Net earnings $ 6,608 $ 3,095 $ 4,229 $ (4,894) $ 9,038
Income taxes 2,543 832 1,667 (141) 4,901
Interest expense 60 1 520 3,522 4,103
A/R securitization fees 47 25 40 (18) 94
--------------- --------------- --------------- --------------- ---------------
Operating profit $ 9,258 $ 3,953 $ 6,456 $ (1,531) $ 18,136
</Table>
OTHER FINANCIAL INFORMATION
CURRENT RATIO AS OF AUGUST 31, 2003:
Current assets divided by current liabilities
$844,417 / 444,991 = 1.90
DEBT TO CAP RATIO AS OF AUGUST 31, 2003:
Debt divided by capitalization
Debt is long-term debt
Cap (capitalization) is the sum of long-term debt, stockholders' equity and
deferred income taxes.
<Table>
Debt $254,997
Stockholders' equity 506,091
Deferred income taxes 45,261
--------
Capitalization $806,349
</Table>
$254,997 / 806,349 = 31.6%
-(END)-
Contact: Debbie Okle
Director, Public Relations
214.689.4354
2004-01