Commercial Metals (CMC)

Q4 2011 Earnings Call

October 28, 2011 11:00 am ET

Executives

Joseph Alvarado - Chief Executive Officer and President

Barbara R. Smith - Chief Financial Officer and Senior Vice President

Analysts

John Tumazos - Independent Research

Timothy P. Hayes - Davenport & Company, LLC, Research Division

R. Wayne Atwell - Rodman & Renshaw, LLC, Research Division

Brent Thielman - D.A. Davidson & Co., Research Division

Kuni M. Chen - CRT Capital Group LLC, Research Division

Luke Folta - Jefferies & Company, Inc., Research Division

Mark L. Parr - KeyBanc Capital Markets Inc., Research Division

Unknown Analyst -

John Fenn - Citigroup Inc, Research Division

Timna Tanners - BofA Merrill Lynch, Research Division

Evan L. Kurtz - Morgan Stanley, Research Division

Sal Tharani - Goldman Sachs Group Inc., Research Division

Gregory M. Macosko - Lord, Abbett & Co. LLC

Arun S. Viswanathan - Susquehanna Financial Group, LLLP, Research Division

Presentation

Operator

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Hello and welcome everyone, to today's Commercial Metals Company Fourth Quarter and Full Year 2011 Earnings Call. As always, today's call is being recorded. [Operator Instructions] I would like to remind all participants that during the course of this conference call, the company will make statements that provide information other than historical information and will include projections concerning the company's future prospects, revenues, expenses or profits. These statements are considered forward-looking statements under the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995 and may involve speculation and are subject to risks and uncertainties that could cause actual results to differ materially from these projections. These statements reflect the company's beliefs based on current conditions but are subject to certain risks and uncertainties that are detailed in the company's press release and public filings. When possible and as necessary during this call, we will identify these forward-looking statements, which are based on management's current expectations and other information that may be currently available. Some numbers presented will be non-GAAP financial measures and reconciliations can be found on the company's press release. Although CMC believes these statements are made based on management's expectations and assumptions, CMC offers no assurance that events or facts will happen as described here are wholly accurate without exception. More information about risks and uncertainties relating to any forward-looking statements can be found in CMC's latest 10-Q and 10-K, available on both the company's and the SEC's website, and all statements are valid only as of this date. CMC does not assume any obligation to update them as a description of future events, new information or otherwise.

And now for opening remarks and introductions, I will turn the call over to the President and CEO of Commercial Metals Company, Mr. Joe Alvarado.

Joseph Alvarado

Thank you, Amy. Good morning. We appreciate you joining us to discuss CMC's fourth quarter and full year 2011 results. I will begin with some high-level comments on the fourth quarter and full year, and then I will ask Barbara to provide financial details on the quarter and year. I will then wrap up with some comments on our outlook for the first fiscal quarter 2012, followed by a question-and-answer session.

Before reviewing the results, I'll take a moment to discuss safety. Sadly, on September 6, 2011, there was an industrial accident in our Magnolia, Arkansas plant, resulting in the death of our colleague, Gene Drake. Gene was a metal right [ph] in our maintenance organization. I share this with you because of the human impact of this event and to highlight the pain and suffering associated with any industrial accident, especially a fatality. It's a reminder of the many risks in our operations around the world. Our goal is that every CMC employee return home safely at the end of the work day and it's also our goal to never repeat this experience again. On behalf of everyone at Commercial Metals Company, I extend my deepest condolences to the family of Gene Drake.

Turning to our results for the quarter and year end, as noted in our press release this morning, we reported net sales of $2.3 billion for fiscal 2011 fourth quarter, an increase of 25% from fourth quarter 2010 sales of $1.8 billion. Including pretax restructuring charges of approximately $144 million related to the company's decision to exit the Sisak mill in Croatia and other restructuring actions, we reported a net loss of $120.3 million or $1.4 per share in the fiscal fourth quarter ended August 31, 2011.

Excluding restructuring charges, we achieved another quarter with adjusted profit before tax for the quarter. Adjusted pre-tax for the quarter was $31.3 million. A loss before tax of $112.3 million including restructuring charges compared with an adjusted profit before tax of $11.5 million in last year's fourth quarter.

In the long term, the restructuring actions will positively impact operational results by approximately $33 million per year on a pretax annualized run rate basis. In the near term, however, projected savings will be offset by the cost of winding down operations over the next 2 quarters, particularly in Croatia.

As expected, we experienced some seasonal effects in certain regions of the world during the fourth quarter. However, this did not impact our ability to achieve an adjusted operating profit. Our positive results from operations were driven in part by relatively stable prices and demand, combined with continuous focus on improving our product mix, cost efficiency and service to our customers.

For the full fiscal year, net sales increased 26% to $7.9 billion from $6.3 billion in fiscal 2010, driven by improved pricing and slightly higher demand. We reported a net loss of $129.6 million or 113 per diluted share for the year. Excluding the previously mentioned restructuring charges, adjusted profit before tax was $30.5 million for the full fiscal year 2011, a loss before tax of $113.1 million including restructuring charges.

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