Commercial Metals' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Commercial Metals (CMC)

Q1 2012 Earnings Call

January 06, 2012 11:00 am ET

Executives

Joseph Alvarado - Chief Executive Officer and President

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

Analysts

Brian Yu - Citigroup Inc, Research Division

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

Charles A. Bradford - Bradford Research, Inc.

Jeff Cramer

Barry Vogel

Louis Sarkes

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

Michael F. Gambardella - JP Morgan Chase & Co, Research Division

Aldo J. Mazzaferro - Macquarie Research

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

Evan L. Kurtz - Morgan Stanley, Research Division

Sal Tharani - Goldman Sachs Group Inc., Research Division

Presentation

Operator

Hello, everyone, and welcome to today's Commercial Metals Company First Quarter Fiscal 2012 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 included projections concerning the company's future prospects, revenues, expenses or profits. These statements are considered forward-looking statements and may involve speculation and are subject to risks and uncertainties that could cause actual results to differ materially from those -- 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 those 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 in the company's press release. Although CMC believes these statements are made based on management expectations and assumptions, CMC offers no assurance that events or facts will happen as described here or 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 websites. 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, and good morning, everyone. We appreciate you joining us to discuss CMC's first quarter fiscal 2012 results. I'll begin with some highlights on the first quarter and we'll provide an update on the progress we are making on a number of important initiatives we discussed with you last quarter. Barbara will then provide the financial details on the quarter and I will close with some comments on our outlook for the second quarter of fiscal 2012, at which time we will open up the call to questions.

Before proceeding with our discussion on the quarter, as many of you know, Carl Icahn and its affiliated entities announced the intention to nominate 3 candidates for election to CMC's board and make certain other proposals at the company's annual meeting. In December, Mr. Icahn also launched a tender offer to acquire CMC. After a thorough review, our board made the unanimous recommendations that CMC shareholders reject Mr. Icahn's offer and not tender their shares as the board believes the offer is not in the interest of all CMC shareholders.

There have been a number of communications stating our position, and full information is available in our public filings with the SEC. However, I would like to reiterate a few key points: First, our board believes Mr. Icahn's offer substantially undervalues CMC. It is opportunistically timed to a low point in the business cycle. Second, Mr. Icahn's offer has been made at a time when our new management, supported by a strong board that has also undergone significant change, is effectively executing our strategic plan. This plan is yielding positive results and creating momentum as evidenced by our financial performance. Finally, Mr. Icahn has put forth nominees who we believe are not qualified to serve and who will only further Mr. Icahn's attempt to acquire CMC at a low price. In short, we believe there is significant value potential at CMC and that all shareholders should benefit.

Having said that, our focus today is on the business results for the first fiscal quarter 2012 and the good progress we are making. Therefore, we will not be commenting further about this matter on this call.

So turning to our results. As noted in our press release this morning, we reported net sales of $2 billion for fiscal 2012 first quarter ended November 30, 2011, an increase of 12% from first quarter 2011 sales of $1.8 billion. We also reported net earnings of $107.7 million or $0.93 per share in this year's first quarter compared to net earnings of $651,000 or $0.01 per share for last year's first quarter. Barbara will walk you through all the details in a moment including the impact of discontinued operations.

In addition to substantially improved earnings in the quarter, we generated $38 million of cash from operations, which also represents a significant improvement from a year ago. I'm also pleased to report that our board approved our quarterly dividend of $0.12 per share, marking the 189th quarter in a row of consistent dividends. Given industry dynamics, including the fact that we normally see some seasonal slowdown toward the end of the first quarter due to inclement weather and the approaching holiday season, we were pleased to see the volumes of our mills and fabrication operations remain comparable to the fourth quarter of last year. Selling prices for this year's first quarter were higher than last quarter even though scrap prices declined slightly in the period.

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