8-K
COMMERCIAL METALS Co (CMC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): January 10, 2022
Commercial Metals Company
(Exact Name of Registrant as Specified in Charter)
| Delaware<br><br>(State or Other Jurisdiction of Incorporation) | |
|---|---|
| 1-4304 | 75-0725338 |
| (Commission File Number) | (IRS Employer Identification No.) |
| 6565 N. MacArthur Blvd. | |
| Irving, Texas | 75039 |
| (Address of Principal Executive Offices) | (Zip Code) |
(214) 689-4300
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
|---|---|---|
| Common Stock, $0.01 par value | CMC | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| Emerging growth company | ☐ |
|---|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02 Results of Operations and Financial Condition.
On January 10, 2022, Commercial Metals Company (the “Company”) issued a press release announcing its financial results for the first quarter of fiscal year 2022. A copy of the press release is attached hereto as Exhibit 99.1. The press release is incorporated by reference into this Item 2.02, and the foregoing description of the press release is qualified in its entirety by reference to Exhibit 99.1.
The information in this Item 2.02 of Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liabilities under that section and is not incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Item 7.01 Regulation FD Disclosure.
On January 10, 2022, the Company made available on its website a financial presentation regarding its financial results for the first quarter of fiscal year 2022. A copy of the financial presentation is attached hereto as Exhibit 99.2. The financial presentation is incorporated by reference into this Item 7.01, and the foregoing description of the financial presentation is qualified in its entirety by reference to Exhibit 99.2.
The information in this Item 7.01 of Form 8-K, including Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to liabilities under that section and is not incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
| Item 9.01 Financial Statements and Exhibits. | |
|---|---|
| (d) | Exhibits |
| The following exhibits are being furnished as part of this Current Report on Form 8-K. | |
| 99.1 | Press Release issued by Commercial Metals Company on January, 10 2022. |
| 99.2 | Financial Presentation |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
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 hereunto duly authorized.
| COMMERCIAL METALS COMPANY | |
|---|---|
| Date: January 10, 2022 | By: /s/ Paul J. Lawrence |
| Name: Paul J. Lawrence | |
| Title: Senior Vice President and Chief Financial Officer |
Document
Exhibit No. 99.1
News Release 
COMMERCIAL METALS COMPANY REPORTS RECORD FIRST QUARTER FISCAL 2022 RESULTS
•Achieved record quarterly Earnings from Continuing Operations of $232.9 million, or $1.90 per diluted share, and record Core EBITDA of $326.8 million
•Both North America and Europe segments reported record Adjusted EBITDA
•Realized significant per ton sequential increase in downstream products’ average selling price from higher new contract pricing
•Continued advancement in CMC's growth strategy — Negotiated acquisition of Tensar Corporation; closed Rancho Cucamonga land sale and received gross proceeds of $313.0 million; and achieved meaningful financial contribution from the new rolling line in Europe
Irving, TX - January 10, 2022 - Commercial Metals Company (NYSE: CMC) today announced financial results for its fiscal first quarter ended November 30, 2021. Earnings from continuing operations were $232.9 million, or $1.90 per diluted share, on net sales of $2.0 billion, compared to prior year earnings from continuing operations of $63.9 million, or $0.53 per diluted share, on net sales of $1.4 billion.
During the first quarter of fiscal 2022, the Company recorded a net after-tax benefit of $33.7 million, primarily related to the capital loss on an international tax restructuring transaction. Excluding this benefit, first quarter adjusted earnings from continuing operations were $199.2 million, or $1.62 per diluted share, compared to adjusted earnings from continuing operations of $69.8 million, or $0.58 per diluted share, in the prior year period. "Adjusted EBITDA from continuing operations," "core EBITDA from continuing operations," "adjusted earnings from continuing operations" and "adjusted earnings from continuing operations per diluted share" are non-GAAP financial measures. Details, including a reconciliation of each such non-GAAP financial measure to the most directly comparable measure prepared and presented in accordance with GAAP, can be found in the financial tables that follow.
Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, said, "Our record first quarter results again demonstrate the earnings power created by our strategic transformation of CMC. The portfolio of assets we have built, together with the exceptional execution by our team members, enabled our Company to fully capitalize on a very strong market environment. Core EBITDA reached record levels for the third consecutive quarter, surpassing our previous record by 28% and totaled nearly $1.0 billion on a trailing 12-month basis. This performance makes clear the enhanced financial and operational capabilities of today's CMC, and I am extremely proud of the efforts by our team that have made this possible.”
(CMC First Quarter Fiscal 2022 - 2)
Ms. Smith continued, "I am equally excited by CMC’s growth projects. Our new rolling line in Europe has significantly enhanced our operational and commercial flexibility, and is performing well above our expectations. We have made solid progress in site preparation and construction of our future Arizona 2 micro mill, and we anticipate its operational startup will coincide with strong incremental demand created by the recently passed Infrastructure Investment and Jobs Act. The new micro mill announced this morning, CMC’s fourth, will enhance our position in the Eastern U.S. and create meaningful synergies within the existing network of mills and downstream fabrication plants. Additionally, the agreement to acquire Tensar Corporation, a leading provider of innovative sub-grade reinforcement solutions, will significantly extend CMC's growth runway and create an unparalleled provider of reinforcement solutions to the domestic and international construction markets.”
The Company's liquidity position as of November 30, 2021 remained solid, with cash and cash equivalents of $415.1 million, and availability of $659.3 million under the Company's credit and accounts receivable facilities.
On January 6, 2022, the board of directors declared a quarterly dividend of $0.14 per share of CMC common stock payable to stockholders of record on January 20, 2022. The dividend to be paid on February 3, 2022 marks 229 consecutive quarterly payments by the Company, and represents a 17% increase from the dividend paid in February 2021.
Business Segments - Fiscal First Quarter 2022 Review
Demand conditions for CMC's finished steel products in North America remained robust during the quarter, with several key indicators pointing toward continued strength. Downstream bid volumes, a key indicator of the construction project pipeline, increased meaningfully from a year ago, while new contract awards and backlog also experienced growth. Demand from industrial end markets trended positively, with most end use applications increasing relative to the prior year.
The North America segment generated record adjusted EBITDA of $268.5 million for the first quarter of fiscal 2022, an increase of 73% compared to $155.6 million in the prior year period. This improvement was driven by increased margins for steel products and raw materials. The beneficial impact of increased margins was offset, to a modest extent, by a year-over-year increase in controllable costs per ton of finished steel shipped, which occurred largely from inflationary pressures for freight, energy, and steelmaking consumables.
Shipment volumes of finished steel, which include steel products and downstream products, followed typical seasonal patterns, and were essentially flat to the prior year first quarter volumes. Growth in CMC's construction backlog drove a year-over-year increase in downstream shipment volumes, marking the first such increase in eight quarters.
(CMC First Quarter Fiscal 2022 - 3)
Margin over scrap cost on steel products increased by $202 per ton from the prior year period and $82 per ton compared to the prior quarter. Favorable market conditions lifted the average selling price by $364 per ton compared to the first quarter of fiscal 2021, against a $162 per ton increase in scrap costs. Margins over purchase cost on sales of raw materials increased significantly from a year ago, rising $96 per ton to $268 per ton, which compares to a long-term average of approximately $160 per ton. For downstream products, margins over scrap cost were essentially flat from the prior year period. Downstream margins were up on a sequential basis, as the average price of contracts in backlog increased throughout the quarter. Future pricing indicators on new work entering the backlog were again positive during the quarter, as average price levels for bids and new awards increased significantly from the prior year period.
The Europe segment reported record adjusted EBITDA of $79.8 million for the first quarter of fiscal 2022, up 452% compared to adjusted EBITDA of $14.5 million for the prior year quarter. The improvement was driven by a significant expansion in margin over scrap, as well as the receipt of a $15.5 million energy credit. Similar to North America, underlying demand for steel products remained robust, however, shipment volumes were impacted by scheduled maintenance during the quarter. Volumes of rebar decreased year-over-year due to a planned outage of the rebar line. Shipments of merchant and other were relatively unchanged from the prior year as sales of higher margin finished products from the new third rolling line replaced sales of semi-finished billets. Average selling price increased by $408 per ton compared to the prior year quarter, and $106 per ton sequentially. This drove significant increases in margin over scrap of $236 per ton and $120 per ton from the prior year and prior quarter, respectively.
Outlook
Ms. Smith said, "We continue to anticipate strong fiscal year 2022 financial and operational performances. Volumes should remain solid, supported by a growing construction backlog in North America, as well as broad strength across key end markets in both North America and Europe."
"The fiscal second quarter has historically seen fewer shipping days due to major holidays and winter weather factors. We expect shipments during the second quarter of fiscal 2022 to follow these typical seasonal trends. Despite additional holidays, we anticipate strong financial results, with margins consistent with, or slightly above, recent levels,” Ms. Smith added.
Conference Call
CMC invites you to listen to a live broadcast of its first quarter of fiscal 2022 conference call today, Monday, January 10, 2022, at 11:00 a.m. ET. Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, and Paul Lawrence, Senior 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."
(CMC First Quarter Fiscal 2022 - 4)
About Commercial Metals Company
Commercial Metals Company and its subsidiaries manufacture, recycle and fabricate steel and metal products and provide related materials and services through a network of facilities that includes seven electric arc furnace ("EAF") mini mills, two EAF micro mills, one rerolling mill, 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 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 and organic growth provided by acquisitions and strategic investments, demand for our products, metal margins, the effect of COVID-19 and related governmental and economic responses thereto, the ability to operate our steel mills at full capacity, future availability and cost of supplies of raw materials and energy for our operations, share repurchases, legal proceedings, the undistributed earnings of our non-U.S. subsidiaries, U.S. non-residential construction activity, international trade, capital expenditures, our liquidity and our ability to satisfy future liquidity requirements, the proposed Tensar acquisition and the timing thereof, estimated contractual obligations, the expected capabilities and benefits of new facilities, the timeline for execution of our growth plan, and our expectations or beliefs concerning future events. The statements in this release that are not historical statements, are forward-looking statements. These forward-looking statements can generally be identified by phrases such as we or our management "expects," "anticipates," "believes," "estimates," "future," "intends," "may," "plans to," "ought," "could," "will," "should," "likely," "appears," "projects," "forecasts," "outlook" or other similar words or phrases, as well as by discussions of strategy, plans, or intentions.
Our forward-looking statements are based on management’s expectations and beliefs as of the time this news release 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, 2021, 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 downstream contracts due to rising commodity pricing; impacts from COVID-19 on the economy, demand for our products, global supply chain and on our operations, including the responses of governmental authorities to contain COVID-19 and the impact of various COVID-19 vaccines; excess capacity in our industry,
(CMC First Quarter Fiscal 2022 - 5)
particularly in China, and product availability from competing steel mills and other steel suppliers including import quantities and pricing; compliance with and changes in existing and future laws, regulations and other legal requirements and judicial decisions that govern our business, including increased environmental regulations associated with climate change and greenhouse gas emissions; involvement in various environmental matters that may result in fines, penalties or judgments; evolving remediation technology, changing regulations, possible third-party contributions, the inherent uncertainties of the estimation process and other factors that may impact amounts accrued for environmental liabilities; potential limitations in our or our customers' abilities to access credit and non-compliance of their contractual obligations, including payment obligations; 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; operating and startup risks, as well as market risks associated with the commissioning of new projects could prevent us from realizing anticipated benefits and could result in a loss of all or a substantial part of our investments; 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, such as trade measures, military conflicts and political uncertainties, including changes to current trade regulations, such as Section 232 trade tariffs and quotas, tax legislation and other regulations which might adversely impact our business; availability and pricing of electricity, electrodes and natural gas for mill operations; ability to hire and 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; and civil unrest, protests and riots.
(CMC First Quarter Fiscal 2022 - 6)
| COMMERCIAL METALS COMPANY<br>FINANCIAL & OPERATING STATISTICS (UNAUDITED) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended | ||||||||||
| (in thousands, except per ton amounts) | 11/30/2021 | 8/31/2021 | 5/31/2021 | 2/28/2021 | 11/30/2020 | |||||
| North America | ||||||||||
| Net sales | $ | 1,653,622 | $ | 1,660,409 | $ | 1,558,068 | $ | 1,257,486 | $ | 1,195,013 |
| Adjusted EBITDA | 268,524 | 212,018 | 207,330 | 171,612 | 155,634 | |||||
| External tons shipped | ||||||||||
| Raw materials | 334 | 331 | 368 | 302 | 330 | |||||
| Rebar | 442 | 469 | 500 | 472 | 486 | |||||
| Merchant and other | 257 | 302 | 289 | 268 | 264 | |||||
| Steel products | 699 | 771 | 789 | 740 | 750 | |||||
| Downstream products | 400 | 415 | 408 | 343 | 371 | |||||
| Average selling price per ton | ||||||||||
| Raw materials | $ | 1,034 | $ | 1,069 | $ | 949 | $ | 846 | $ | 630 |
| Steel products | 976 | 900 | 794 | 695 | 612 | |||||
| Downstream products | 1,092 | 1,014 | 963 | 929 | 934 | |||||
| Cost of raw materials per ton | $ | 766 | $ | 805 | $ | 697 | $ | 629 | $ | 458 |
| Cost of ferrous scrap utilized per ton | 428 | 434 | 369 | 344 | 266 | |||||
| Steel products metal margin per ton | $ | 548 | $ | 466 | $ | 425 | $ | 351 | $ | 346 |
| Europe | ||||||||||
| Net sales | $ | 329,056 | $ | 368,290 | $ | 284,107 | $ | 202,066 | $ | 194,596 |
| Adjusted EBITDA | 79,832 | 67,676 | 50,005 | 16,107 | 14,470 | |||||
| External tons shipped | ||||||||||
| Rebar | 103 | 174 | 141 | 78 | 128 | |||||
| Merchant and other | 262 | 286 | 263 | 275 | 269 | |||||
| Steel products | 365 | 460 | 404 | 353 | 397 | |||||
| Average selling price per ton | ||||||||||
| Steel products | $ | 869 | $ | 763 | $ | 664 | $ | 532 | $ | 461 |
| Cost of ferrous scrap utilized per ton | $ | 434 | $ | 448 | $ | 376 | $ | 328 | $ | 262 |
| Steel products metal margin per ton | $ | 435 | $ | 315 | $ | 288 | $ | 204 | $ | 199 |
(CMC First Quarter Fiscal 2022 - 7)
| COMMERCIAL METALS COMPANY<br>BUSINESS SEGMENTS (UNAUDITED) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | Three Months Ended | |||||||||
| Net sales | 11/30/2021 | 8/31/2021 | 5/31/2021 | 2/28/2021 | 11/30/2020 | |||||
| North America | $ | 1,653,622 | $ | 1,660,409 | $ | 1,558,068 | $ | 1,257,486 | $ | 1,195,013 |
| Europe | 329,056 | 368,290 | 284,107 | 202,066 | 194,596 | |||||
| Corporate and Other | (877) | 1,947 | 2,866 | 2,718 | 2,194 | |||||
| Total net sales | $ | 1,981,801 | $ | 2,030,646 | $ | 1,845,041 | $ | 1,462,270 | $ | 1,391,803 |
| Adjusted EBITDA from continuing operations | ||||||||||
| North America | $ | 268,524 | $ | 212,018 | $ | 207,330 | $ | 171,612 | $ | 155,634 |
| Europe | 79,832 | 67,676 | 50,005 | 16,107 | 14,470 | |||||
| Corporate and Other | (34,334) | (31,897) | (36,214) | (45,986) | (26,471) |
(CMC First Quarter Fiscal 2022 - 8)
| COMMERCIAL METALS COMPANY<br>CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) | ||||
|---|---|---|---|---|
| Three Months Ended November 30, | ||||
| (in thousands, except share and per share data) | 2021 | 2020 | ||
| Net sales | $ | 1,981,801 | $ | 1,391,803 |
| Costs and expenses: | ||||
| Cost of goods sold | 1,586,410 | 1,174,819 | ||
| Selling, general and administrative expenses | 122,595 | 113,627 | ||
| Interest expense | 11,035 | 14,259 | ||
| Asset impairments | — | 3,594 | ||
| 1,720,040 | 1,306,299 | |||
| Earnings from continuing operations before income taxes | 261,761 | 85,504 | ||
| Income taxes | 28,872 | 21,593 | ||
| Earnings from continuing operations | 232,889 | 63,911 | ||
| Earnings from discontinued operations before income taxes | — | 250 | ||
| Income taxes | — | 68 | ||
| Earnings from discontinued operations | — | 182 | ||
| Net earnings | $ | 232,889 | $ | 64,093 |
| Basic earnings per share* | ||||
| Earnings from continuing operations | $ | 1.92 | $ | 0.53 |
| Earnings from discontinued operations | — | — | ||
| Net earnings | $ | 1.92 | $ | 0.54 |
| Diluted earnings per share* | ||||
| Earnings from continuing operations | $ | 1.90 | $ | 0.53 |
| Earnings from discontinued operations | — | — | ||
| Net earnings | $ | 1.90 | $ | 0.53 |
| Cash dividends per share | $ | 0.14 | $ | 0.12 |
| Average basic shares outstanding | 121,129,679 | 119,762,706 | ||
| Average diluted shares outstanding | 122,797,738 | 121,128,044 |
_________________
*Earnings Per Share ("EPS") is calculated independently for each component and may not sum to Net EPS due to rounding.
(CMC First Quarter Fiscal 2022 - 9)
| COMMERCIAL METALS COMPANY AND SUBSIDIARIES<br><br>CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||
|---|---|---|---|---|
| (in thousands, except share and per share data) | November 30, 2021 | August 31, 2021 | ||
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 415,055 | $ | 497,745 |
| Accounts receivable (less allowance for doubtful accounts of $5,550 and $5,553) | 1,095,612 | 1,105,580 | ||
| Inventories, net | 1,071,759 | 935,387 | ||
| Prepaid and other current assets | 178,867 | 173,033 | ||
| Assets held for sale | 25,083 | 25,083 | ||
| Total current assets | 2,786,376 | 2,736,828 | ||
| Property, plant and equipment, net | 1,587,442 | 1,566,123 | ||
| Goodwill | 65,852 | 66,137 | ||
| Other noncurrent assets | 285,588 | 269,583 | ||
| Total assets | $ | 4,725,258 | $ | 4,638,671 |
| Liabilities and stockholders' equity | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 424,919 | $ | 450,723 |
| Accrued expenses and other payables | 410,305 | 475,384 | ||
| Current maturities of long-term debt and short-term borrowings | 56,896 | 54,366 | ||
| Total current liabilities | 892,120 | 980,473 | ||
| Deferred income taxes | 104,193 | 112,067 | ||
| Other noncurrent liabilities | 234,955 | 235,607 | ||
| Long-term debt | 1,007,801 | 1,015,415 | ||
| Total liabilities | 2,239,069 | 2,343,562 | ||
| Stockholders' equity: | ||||
| Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued 129,060,664 shares; outstanding 121,479,939 and 120,586,589 shares | 1,290 | 1,290 | ||
| Additional paid-in capital | 357,413 | 368,064 | ||
| Accumulated other comprehensive loss | (105,329) | (84,820) | ||
| Retained earnings | 2,378,789 | 2,162,925 | ||
| Less treasury stock, 7,580,725 and 8,474,075 shares at cost | (146,206) | (152,582) | ||
| Stockholders' equity | 2,485,957 | 2,294,877 | ||
| Stockholders' equity attributable to noncontrolling interests | 232 | 232 | ||
| Total stockholders' equity | 2,486,189 | 2,295,109 | ||
| Total liabilities and stockholders' equity | $ | 4,725,258 | $ | 4,638,671 |
(CMC First Quarter Fiscal 2022 - 10)
| COMMERCIAL METALS COMPANY AND SUBSIDIARIES<br>CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||
|---|---|---|---|---|
| Three Months Ended November 30, | ||||
| (in thousands) | 2021 | 2020 | ||
| Cash flows from (used by) operating activities: | ||||
| Net earnings | $ | 232,889 | $ | 64,093 |
| Adjustments to reconcile net earnings to cash flows from (used by) operating activities: | ||||
| Depreciation and amortization | 41,226 | 41,799 | ||
| Stock-based compensation | 9,619 | 9,062 | ||
| Deferred income taxes and other long-term taxes | (5,099) | 11,720 | ||
| Other | (583) | (39) | ||
| Asset impairments | — | 3,594 | ||
| Amortization of acquired unfavorable contract backlog | — | (1,523) | ||
| Changes in operating assets and liabilities | (252,273) | (140,794) | ||
| Net cash flows from (used by) operating activities | 25,779 | (12,088) | ||
| Cash flows from (used by) investing activities: | ||||
| Capital expenditures | (70,150) | (37,201) | ||
| Proceeds from the sale of property, plant and equipment and other | 1,418 | 743 | ||
| Net cash flows used by investing activities | (68,732) | (36,458) | ||
| Cash flows from (used by) financing activities: | ||||
| Proceeds from accounts receivable facilities | 150,664 | 4,487 | ||
| Repayments under accounts receivable facilities | (144,706) | (4,487) | ||
| Dividends | (17,025) | (14,406) | ||
| Stock issued under incentive and purchase plans, net of forfeitures | (16,371) | (10,341) | ||
| Repayments of long-term debt | (6,556) | (3,823) | ||
| Treasury stock acquired | (5,311) | — | ||
| Net cash flows used by financing activities | (39,305) | (28,570) | ||
| Effect of exchange rate changes on cash | (550) | (365) | ||
| Decrease in cash and cash equivalents | (82,808) | (77,481) | ||
| Cash, restricted cash and cash equivalents at beginning of period | 501,129 | 544,964 | ||
| Cash, restricted cash and cash equivalents at end of period | $ | 418,321 | $ | 467,483 |
| Supplemental information: | ||||
| Cash and cash equivalents | $ | 415,055 | $ | 465,162 |
| Restricted cash | 3,266 | 2,321 | ||
| Total cash, restricted cash and cash equivalents | $ | 418,321 | $ | 467,483 |
(CMC First Quarter Fiscal 2022 - 11)
COMMERCIAL METALS COMPANY
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
This press release contains financial measures not derived in accordance with U.S. generally accepted accounting principles ("GAAP"). Reconciliations to the most comparable GAAP measure are provided below.
Adjusted EBITDA from continuing operations, core EBITDA from continuing operations and adjusted earnings from continuing operations are non-GAAP financial measures. Adjusted earnings from continuing operations per diluted share is defined as adjusted earnings from continuing operations on a diluted per share basis.
Non-GAAP financial measures should be viewed in addition to, and not as alternatives for, the most directly comparable measures derived in accordance with GAAP and may not be comparable to similar measures presented by other companies. However, we believe that the non-GAAP financial measures provide relevant and useful information to management, investors, analysts, creditors and other interested parties in our industry as they allow: (i) comparison of our earnings to those of our competitors; (ii) a supplemental measure of our underlying business operational performance; and (iii) the assessment of period-to-period performance trends. Management uses non-GAAP financial measures to evaluate financial performance and set target benchmarks for annual and long-term cash incentive performance plans.
A reconciliation of earnings from continuing operations to adjusted EBITDA from continuing operations and core EBITDA from continuing operations is provided below:
| Three Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 11/30/2021 | 8/31/2021 | 5/31/2021 | 2/28/2021 | 11/30/2020 | |||||
| Earnings from continuing operations | $ | 232,889 | $ | 152,313 | $ | 130,408 | $ | 66,233 | $ | 63,911 |
| Interest expense | 11,035 | 11,659 | 11,965 | 14,021 | 14,259 | |||||
| Income taxes | 28,872 | 40,444 | 38,175 | 20,941 | 21,593 | |||||
| Depreciation and amortization | 41,226 | 42,437 | 41,804 | 41,573 | 41,799 | |||||
| Amortization of acquired unfavorable contract backlog | — | (1,495) | (1,508) | (1,509) | (1,523) | |||||
| Asset impairments | — | 2,439 | 277 | 474 | 3,594 | |||||
| Adjusted EBITDA from continuing operations | 314,022 | 247,797 | 221,121 | 141,733 | 143,633 | |||||
| Non-cash equity compensation | 9,619 | 8,119 | 13,800 | 12,696 | 9,062 | |||||
| Acquisition and integration related costs and other | 3,165 | — | — | — | — | |||||
| Gain on sale of assets | — | — | (4,457) | (5,877) | — | |||||
| Loss on debt extinguishment | — | — | — | 16,841 | — | |||||
| Facility closure | — | — | — | 5,694 | 5,214 | |||||
| Labor cost government refund | — | — | — | — | (1,348) | |||||
| Core EBITDA from continuing operations | $ | 326,806 | $ | 255,916 | $ | 230,464 | $ | 171,087 | $ | 156,561 |
(CMC First Quarter Fiscal 2022 - 12)
A reconciliation of earnings from continuing operations to adjusted earnings from continuing operations is provided below:
| Three Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 11/30/2021 | 8/31/2021 | 5/31/2021 | 2/28/2021 | 11/30/2020 | |||||
| Earnings from continuing operations | $ | 232,889 | $ | 152,313 | $ | 130,408 | $ | 66,233 | $ | 63,911 |
| Acquisition and integration related costs and other | 3,165 | — | — | — | — | |||||
| Gain on sale of assets | — | — | (4,457) | (5,877) | — | |||||
| Asset impairments | — | 2,439 | 277 | 474 | 3,594 | |||||
| Loss on debt extinguishment | — | — | — | 16,841 | — | |||||
| Facility closure | — | — | — | 5,694 | 5,214 | |||||
| Labor cost government refund | — | — | — | — | (1,348) | |||||
| Total adjustments (pre-tax) | $ | 3,165 | $ | 2,439 | $ | (4,180) | $ | 17,132 | $ | 7,460 |
| Tax items | ||||||||||
| International restructuring | (36,237) | — | — | — | — | |||||
| Related tax effects on adjustments | (665) | (512) | 878 | (3,598) | (1,593) | |||||
| Total tax items | $ | (36,902) | $ | (512) | $ | 878 | $ | (3,598) | $ | (1,593) |
| Adjusted earnings from continuing operations | $ | 199,152 | $ | 154,240 | $ | 127,106 | $ | 79,767 | $ | 69,778 |
| Earnings from continuing operations per diluted share | $ | 1.90 | $ | 1.24 | $ | 1.07 | $ | 0.54 | $ | 0.53 |
| Adjusted earnings from continuing operations per diluted share | $ | 1.62 | $ | 1.26 | $ | 1.04 | $ | 0.66 | $ | 0.58 |
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q12022-supplementalslide
RE COMMERCIAL METALS COMPANY Q 1 F Y ’ 2 2 S u p p l e m e n t a l S l i d e s
Forward-Looking Statements Q1 FY22 Supplemental Slides │ January 10, 2022 2 This presentation contains “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 and organic growth provided by acquisitions and strategic investments, demand for our products, metal margins, the effect of COVID-19 and related governmental and economic responses thereto, the ability to operate our steel mills at full capacity, future availability and cost of supplies of raw materials and energy for our operations, share repurchases, legal proceedings, the undistributed earnings of our non-U.S. subsidiaries, U.S. non-residential construction activity, international trade, capital expenditures, our liquidity and our ability to satisfy future liquidity requirements, the proposed Tensar acquisition and the timing thereof, estimated contractual obligations, the expected capabilities and benefits of new facilities, the timeline for execution of our growth plan, and our expectations or beliefs concerning future events. The statements in this presentation that are not historical statements, are forward-looking statements. These forward-looking statements can generally be identified by phrases such as we or our management "expects," "anticipates," "believes," "estimates," "future," "intends," "may," "plans to," "ought," "could," "will," "should," "likely," "appears," "projects," "forecasts," "outlook" or other similar words or phrases, as well as by discussions of strategy, plans, or intentions. Our forward-looking statements are based on management’s expectations and beliefs as of the date of this presentation. 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, 2021, 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 downstream contracts due to rising commodity pricing; impacts from COVID-19 on the economy, demand for our products, global supply chain and on our operations, including the responses of governmental authorities to contain COVID-19 and the impact of various COVID-19 vaccines; 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 existing and future laws, regulations and other legal requirements and judicial decisions that govern our business, including increased environmental regulations associated with climate change and greenhouse gas emissions; involvement in various environmental matters that may result in fines, penalties or judgments; evolving remediation technology, changing regulations, possible third-party contributions, the inherent uncertainties of the estimation process and other factors that may impact amounts accrued for environmental liabilities; potential limitations in our or our customers' abilities to access credit and non-compliance of their contractual obligations, including payment obligations; 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; operating and startup risks, as well as market risks associated with the commissioning of new projects could prevent us from realizing anticipated benefits and could result in a loss of all or a substantial part of our investments; 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, such as trade measures, military conflicts and political uncertainties, including changes to current trade regulations, such as Section 232 trade tariffs and quotas, tax legislation and other regulations which might adversely impact our business; availability and pricing of electricity, electrodes and natural gas for mill operations; ability to hire and 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; and civil unrest, protests and riots.
3 ✓ Vertical structure optimizes returns through the entire value chain ✓ Disciplined capital allocation focused on maximizing returns for our shareholders Q1 FY22 Supplemental Slides │ January 10, 2022 ✓ Leading positions in core product and geographical markets ✓ Focused strategy that leverages capabilities and competitive strengths ✓ Strong balance sheet and cash generation provides flexibility to execute on strategy A Clear Path to Value Creation
Unprecedented financial performance • Achieved record quarterly Adjusted Earnings from Continuing Operations and 3rd consecutive quarterly record Core EBITDA • Previous efforts to strategically transform CMC made recent profit levels possible Building for the future • Pending Tensar acquisition – meaningfully extends CMC’s growth runway and creates a unique provider of reinforcement solutions • $313 million gross proceeds from Rancho Cucamonga site sale • Mill investments – strengthen operational footprint and provide significant internal synergies Favorable outlook for FY 2022; business conditions are strong in all major end markets • Positioned to maintain operational momentum Strong financial position • Flexibility to fund growth and provide competitive levels of cash distributions to shareholders Key Takeaways From Today’s Call Q1 FY22 Supplemental Slides │ January 10, 2022 4 $327 million Q1 Core EBITDA(1) 1 Core EBITDA, adjusted earnings from continuing operations, adjusted earnings per share, and return on invested capital are non-GAAP financial measures. For definitions and reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures, see the appendix to this document $199 million $1.62 25% Adjusted Earnings from Continuing Operations(1) Q1 Adjusted EPS(1) Q1 Annualized ROIC(1) ✔ ✔ ✔ ✔
7.8% achieved 2.7 % currently C o n te n t 0.82 MT CO2e / MT 1.89 MT CO2e / MT 20.62 GJ / MT 28.60 m3 / MT 69.5% of content 0.197 0.698 3.710 1.241 2.0% Scope 1 Scope 1-3 Energy Intensity Water Intake Virgin Material G H G E m is s io n s E n e rg y U s e W a te r U s e Industry AverageCMC Performance 63% lower than industry average 96% lower than industry average 67.5 percentage points lower than industry average A Clearly Sustainable Future – Proud of Our Progress 5 Reduce our Scope 1 and 2 GHG emissions intensity by 20% 2030 Goals1 Increase our renewable energy usage by 12% points Reduce our energy consumption intensity by 5% [1] Baseline for progress on environmental goals is fiscal year 2021 Sources: CMC 2021 Sustainability Report; scope 1 emissions based on direct emissions reported to the U.S. Environmental Protection Agency; virgin material content for industry based on data from Bureau of International Recycling; all other industry data sourced from the World Steel Association Q1 FY22 Supplemental Slides │ January 10, 2022 With GHG emissions intensity already below the 2040 Paris Climate Agreement industry target, CMC continues to set new lower emissions targets 82% lower than industry average 6.2% currently Progress on 2030 Goals1 Reduce our water withdrawal intensity by 8% 7.8% currently At CMC, good business always aligns with good environmental practices: • Environmental Stewardship • Product Stewardship • Reducing and managing our environmental impactR E S P E C T FOR OUR ENVIRONMENT
Our People Are Our #1 Asset 6 Source: CMC 2021 Sustainability Report Note: BLS refers to the U.S. Bureau of Labor Statistics; ISRI refers to the Institute of Scrap Recycling Industries; SMA refers to Steel Manufacturers Association Q1 FY22 Supplemental Slides │ January 10, 2022 CMC’s mission is to ensure our team members leave each workday in the same condition in which they started. We strive to not only create a safety focused work environment, but a culture of shared accountability that carries that mission to the shop floor. CMC FY 2021 Total Recordable Incident Rate (TRIR) by Category 2.87 CMC ISRI BLS 1.39 1.89 4.1 Recycling 3.9 CMC BLS Fabrication CMC 1.22 SMA 1.73 BLS Mills In 2021, 103 of our facilities were incident-free │ 77 facilities have gone multiple years without an incident 2.1
Building for the Future – Executing on a Disciplined Growth Plan • CMC’s 3rd micro mill – second at Mesa, AZ site • First merchant bar-capable micro mill in the world • Replaces rebar production from higher- cost former Steel CA plant • Will further optimize mill network and provide access to large West Coast MBQ market • Significant portion of capital investment offset by sale of former Steel CA site • One of the greenest steel plants in the world • State-of-the-art micro mill to serve the Northeast, Mid-Atlantic, and Mid- Western markets • Will complement CMC’s existing operational footprint – significant benefits expected from enhanced production flexibility, customer service capabilities, and logistical efficiencies • Expected to be one of the most environmentally friendly steel mills in the world • Site selection process is underway • Industry leader in specialty early-phase construction reinforcement • Strong and stable margins with unparalleled innovation capabilities, best-in-class customer value proposition • Meaningfully extends CMC’s growth runway; creates a platform for further expansion in complementary high- margin engineered solutions • Under-penetrated markets provide significant growth upside • Acquisition creates a unique provider of reinforcement solutions for the domestic and international construction markets • Utilized previous excess melt capacity to add 200,000 tons of higher-margin finished product output • Leverages fixed cost over larger revenue base • Provides significant commercial and operational flexibility • Has significantly outperformed expectations during first two quarters of operation Micro Mill 4 (MM4)Arizona 2Polish Expansion Tensar Acquisition (pending) Now Operating Early CY 2022 Early CY 2023 Fiscal 2025 CMC is targeting significant growth through a disciplined approach of 1) expanding in markets we know well; 2) growing with a customer base we know well; and 3) adding complementary solutions for applications we know well Q1 FY22 Supplemental Slides │ January 10, 2022 7
• Based on CMC’s current view of the marketplace, FY 2022 financial results are expected to be strong • Volumes in North America should be supported by a replenished backlog, as well as broad end market strength • Backlog is expected to reprice higher throughout fiscal 2022 • Europe volumes should be supported by a robust residential construction market and continued growth in industrial activity • Second quarter FY 2022 finished steel shipments should follow a typical seasonal pattern – declining sequentially from Q1 • Margins in the second quarter FY 2022 are expected to be consistent with, or slightly above, recent levels • Significant increase in steel product margins over scrap in North America and Europe − Margins up $82 per ton sequentially ($202 y/y) in North America, up $120 per ton in Europe ($236 y/y) • Margins per ton on sales of raw materials increased for the fourth consecutive quarter, hitting $268 per ton compared to a longer-term average of $160 • Downstream average selling price increased meaningfully from the prior quarter, a reflection of ongoing repricing of CMC’s backlog driven by higher priced new contracts • Downstream backlog grew on a year-over-year basis for second consecutive quarter • North America controllable costs per ton of finished steel increased from the prior year period, driven primarily by freight, energy, and mill consumables • Europe segment received a $15.5 million energy rebate during Q1 related to costs incurred in prior periods • New third rolling line in Europe running at high utilization, is consuming previous melt shop excess capacity that was formerly sold as third-party billets • Energy costs in Europe segment increased significantly from a year ago, but were more than offset by strong market dynamics − Hedged position led to far lower y/y increase compared to broader European spot electricity market • Major end markets in North America and Europe remained strong P e rf o rm a n c e D ri v e rs O u tl o o k Operational Update 8Q1 FY22 Supplemental Slides │ January 10, 2022 CMC completed the sale of its land parcel in Southern California. Gross proceeds of $313 million have been received.
157 327 113 65 (8) (0) 0 50 100 150 200 250 300 350 Q1 2021 North America Segment EBITDA Europe Segment EBITDA Corporate & Eliminations Non-Operating Items Q1 2022 Consolidated Operating Results 9Q1 FY22 Supplemental Slides │ January 10, 2022 Q1 ‘21 Q2 ‘21 Q3 ‘21 Q4 ‘21 Q1 ‘22 External Finished Steel Tons Shipped1 1,518 1,436 1,601 1,646 1,464 Core EBITDA2 $156,561 $171,087 $230,464 $255,916 $326,806 Core EBITDA per Ton of Finished Steel Shipped2 $103 $119 $144 $155 $223 Adjusted Earnings from Continuing Operations $69,778 $79,767 $127,106 $154,240 $199,152 Performance Summary Units in 000’s unless noted otherwise • $36.2 million tax benefit related to a loss on an international restructuring transaction • $2.5 million of costs incurred related to the pending acquisition of Tensar Corporation Non-Operating Charges / Benefits Figures are after tax for Q1 2022 [1] External Finished Steel Tons Shipped equal to shipments of Steel Products plus Downstream Products [2] Core EBITDA, Core EBITDA per ton of finished steel shipped, and Adjusted earnings from continuing operations are non-GAAP measures. For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures, see the appendix to this document. Core EBITDA Bridge – Q1 2021 to Q1 2022 $ Millions
139 158 173 179 244 697 663 619 645 658 346 351 425 466 548 0 50 100 150 200 250 300 0 100 200 300 400 500 600 700 800 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Adjusted EBITDA per Ton of Finished Steel Shipped Downstream Products Margin Over Scrap (1 Qtr Lag) Steel Products Margin Over Scrap 75 100 125 150 175 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Wgt Avg Finished Steel ASP Wgt Avg Finished Steel Mgn Over Scrap Controllable Costs Adjusted EBITDA per ton Key Performance Drivers Q1 2022 vs Q1 2021 North America 10Q1 FY22 Supplemental Slides │ January 10, 2022 Q1 ‘21 Q2 ‘21 Q3 ‘21 Q4 ‘21 Q1 ‘22 External Finished Steel Tons Shipped1 1,121 1,083 1,197 1,186 1,099 Adjusted EBITDA $155,634 $171,612 $207,330 $212,018 $268,524 Adjusted EBITDA per Ton of Finished Steel Shipped $139 $158 $173 $179 $244 Adjusted EBITDA Margin 13.0% 13.6% 13.3% 12.8% 16.2% Performance Summary Units in 000’s unless noted otherwise • Significant increase in steel product margins over scrap − Up $202 per ton y/y and $82 per ton sequentially • Expanded margins on sales of raw materials − Spread of selling price over purchase cost increased $96 per ton on a y/y basis • Controllable cost negatively impacted by freight, energy, and mill consumables Notes: [1] External Finished Steel Tons Shipped equal to shipments of Steel Products plus Downstream Products [2] Steel Products Margin Over Scrap equals Average Selling Price minus Cost of ferrous scrap utilized [3] Downstream Products Margin Over Scrap equals Average Selling Price minus Cost of ferrous scrap utilized North America – Key Margins $ / ton D P a n d S P M a rg in O ve r S c ra p A d ju s te d E B IT D A p e r to n North America Indexed Margins and Controllable Cost $ / ton of external finished steel shipped [2] [3]
100 300 500 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Spot European Average CMC Europe 36 46 124 147 219 199 204 288 315 435 0 50 100 150 200 250 100 150 200 250 300 350 400 450 500 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Adjusted EBITDA per Ton Steel Products Margin Over Scrap Key Performance Drivers Q1 2022 vs Q1 2021 Europe 11Q1 FY22 Supplemental Slides │ January 10, 2022 Q1 ‘21 Q2 ‘21 Q3 ‘21 Q4 ‘21 Q1 ‘22 External Finished Steel Tons Shipped1 397 353 404 460 365 Adjusted EBITDA $14,470 $16,107 $50,005 $67,676 $79,832 Adjusted EBITDA per Ton of Finished Steel Shipped $36 $46 $124 $147 $219 Adjusted EBITDA Margin 7.4% 8.0% 17.6% 18.4% 24.3% Performance Summary Units in 000’s unless noted otherwise • Significant increase in margin over scrap − Up $236 per ton y/y and $120 per ton sequentially • Receipt of $15.5 million energy credit • Rebar volumes impacted by planned maintenance outage • Volumes of merchant and other products were unchanged from a year ago as higher-margin finished goods produced on the new rolling line replaced third party billet sales • Strong steel market dynamics more than offset impact of significant increase in electricity costs Europe – Key Margins $ / ton A d ju s te d E B IT D A p e r to n Indexed Electricity Price $ / megawatt hour [2] Notes: [1] External Finished Steel Tons Shipped equal to shipments of Steel Products plus Downstream Products [2] Steel Products Margin Over Scrap equals Average Selling Price minus Cost of ferrous scrap utilized [3] Average of day-ahead electricity prices for Germany, France, Northern Italy, and Belgium as sourced from Bundesnetzagentur S te e l P ro d u c t M a rg in O ve r S c ra p [3]
Disciplined Capital Allocation Strategy 12Q1 FY22 Supplemental Slides │ January 10, 2022 $350 million share repurchase program in place 17% increase to quarterly dividend to $0.14 per share in Q4 FY 2021 Shareholder Cash Distribution Programs in Place CMC intends to distribute a meaningful portion of free cash flow to shareholders with share buybacks supplementing an enhanced dividend stream Value-Generating Growth1 Shareholder Distributions2 Debt Management3 Maintain Strong and Flexible Balance Sheet
$5 $37 $11 $140 $155 $279 $380 $541 $0 $100 $200 $300 $400 $500 $600 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 L12M (to Q1 '22) Cash Generation Profile 13Q1 FY22 Supplemental Slides │ January 10, 2022 Adjusted EBITDA Less Sustaining Capital Expenditures and Disbursements to Stakeholders 1 CMC’s cash flow capabilities have been greatly enhanced through our strategic transformation FY 2022 capital expenditures expected in a range of $475 million to $525 million Source: Public filings, Internal data [1] Adjusted EBITDA less Sustaining Capital Expenditures and Disbursements to Stakeholders is a non-GAAP financial measure. For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures, see the appendix to this document.
40 72 150 397 $415 Balance Sheet Strength 14Q1 FY22 Supplemental Slides │ January 10, 2022 [1] Availability as of November 30, 2021 Source: Public filings $330 $300 $300 $400 2021 2022 2023 2024 to 2025 2026 2027 2028 to 2030 2031 Revolver U.S. Accounts Receivable Facility Poland Credit Facilities Poland Accounts Receivable Facility (US$ in millions) Revolving Credit Facility 5.375% Notes Cash and Cash Equivalents 4.875% Notes 3.875% Notes Debt maturity profile provides strategic flexibility Debt Maturity Profile Q1 FY’22 Liquidity1 (US$ in millions)
46% 42% 37% 33% 32% 24% 18% 21% 22% 20% 17% 18% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 3.9x 3.2x 2.5x 1.9x 1.6x 1.2x 0.9x 1.1x 1.2x 1.0x 0.8x 0.7x NM 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 3.5x 4.0x 4.5x Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Leverage Profile 15Q1 FY22 Supplemental Slides │ January 10, 2022 Source: Public filings, Internal data Notes: 1. Total debt is defined as long-term debt plus current maturities of long-term debt and short-term borrowings. 2. Net Debt is defined as total debt less cash & cash equivalents. 3. EBITDA depicted is adjusted EBITDA from continuing operations on a trailing 12-month basis. 4. Net debt-to-capitalization is defined as net debt on CMC’s balance sheet divided by the sum of total debt and shareholders’ equity For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures, see the appendix to this document. Financial strength gives us the flexibility to fund our announced projects, pursue opportunistic M&A, and distribute cash to shareholders Net Debt1,2 / EBITDA3 Net Debt-to-Capitalization4
Q1 FY22 Supplemental Slides │ January 10, 2022 16 Appendix: Non-GAAP Financial Reconciliations
Adjusted EBITDA and Core EBITDA Q1 FY22 Supplemental Slides │ January 10, 2022 17[1] See page 22 for definitions of non-GAAP measures 3 MONTHS ENDED 11/30/2021 8/31/2021 5/31/2021 2/28/2021 11/30/2020 Earnings from continuing operations $232,889 $152,313 $130,408 $66,233 $63,911 Interest expense 11,035 11,659 11,965 14,021 14,259 Income taxes 28,872 40,444 38,175 20,941 21,593 Depreciation and amortization 41,226 42,437 41,804 41,573 41,799 Amortization of acquired unfavorable contract backlog – (1,495) (1,508) (1,509) (1,523) Asset impairments – 2,439 277 474 3,594 Adjusted EBITDA from continuing operations1 $314,022 $247,797 $221,121 $141,733 $143,633 Loss on debt extinguishment – – – 16,841 – Non-cash equity compensation 9,619 8,119 13,800 12,696 9,062 Gain on sale of assets – – (4,457) (5,877) – Facility closure – – – 5,694 5,214 Labor cost government refund – – – – (1,348) Acquisition and integration related costs and other 3,165 – – – – Core EBITDA from continuing operations1 $326,806 $255,916 $230,464 $171,087 $156,561 North America steel product shipments 699 771 789 740 750 North America downstream shipments 400 415 408 343 371 Europe steel product shipments 365 460 404 353 397 Total finished steel shipments 1,464 1,646 1,601 1,436 1,518 Core EBITDA per ton of finished steel shipped 223 155 144 119 103 Figures in thousand $
3 MONTHS ENDED 11/30/2021 8/31/2021 5/31/2021 2/28/2021 11/30/2020 Earnings from continuing operations $232,889 $152,313 $130,408 $66,233 $63,911 Loss on debt extinguishment – – – 16,841 – Gain on sale of assets – – (4,457) (5,877) – Facility closure – – – 5,694 5,214 Asset impairments – 2,439 277 474 3,594 Labor cost government refund – – – – (1,348) Acquisition and integration related costs and other 3,165 – – – – Total adjustments (pre-tax) $3,165 $2,439 ($4,180) $17,132 $7,460 Tax impact International restructuring (36,237) – – – – Related tax effects on adjustments (665) (512) 878 (3,598) (1,593) Total tax impact ($36,902) ($512) $878 ($3,598) ($1,593) Adjusted earnings from continuing operations1 $199,152 $154,240 $127,106 $79,767 $69,778 Average diluted shares outstanding (thousands) 122,798 122,376 122,194 121,752 121,128 Adjusted earnings from continuing operations per diluted share $1.62 $1.26 $1.04 $0.66 $0.58 Adjusted Earnings from Continuing Operations Q1 FY22 Supplemental Slides │ January 10, 2022 18[1] See page 22 for definitions of non-GAAP measures Figures in thousand $
Return on Invested Capital Q1 FY22 Supplemental Slides │ January 10, 2022 19 [1] Federal statutory rate of 21% plus approximate impact of state level income tax [2] See page 22 for definitions of non-GAAP measures Figures in thousand $ 3 MOS ENDED 11/30/2021 Earnings from continuing operations before income taxes $261,761 Plus: interest expense 11,035 Plus: acquisition and integration related costs 3,165 Operating profit $275,961 Operating profit $275,961 Less: income tax at statutory rate1 65,679 Net operating profit after tax $210,282 Assets $4,725,258 Less: cash and cash equivalents 415,055 Less: accounts payable 424,919 Less: accrued expenses and other payables 410,305 Invested capital $3,474,979 Annualized net operating profit after tax $841,129 Invested capital (average of Q1 2022 and Q4 2021 ending amounts) $3,344,899 Return on Invested Capital 2 25.1%
[1] See page 22 for definitions of non-GAAP measures Adjusted EBITDA Less Sustaining Capital Expenditures and Disbursements to Stakeholders Q1 FY22 Supplemental Slides │ January 10, 2022 20 Figures in thousand $ 12 MONTHS ENDED 3 MONTHS ENDED 11/30/2021 8/31/2021 8/31/2020 8/31/2019 8/31/2018 8/31/2017 8/31/2016 8/31/2015 11/30/2021 11/30/2020 Earnings from continuing operations $581,843 $412,865 $278,302 $198,779 $135,237 $50,175 $62,001 $58,583 $232,889 $63,911 Interest expense 48,680 51,904 61,837 71,373 40,957 44,151 62,121 76,456 11,035 14,259 Income taxes 128,432 121,153 92,476 69,681 30,147 15,276 13,976 36,097 28,872 21,593 Depreciation and amortization 167,040 167,613 165,749 158,653 131,508 124,490 127,111 135,559 41,226 41,799 Asset impairments 3,190 6,784 7,611 384 14,372 1,730 40,028 2,573 – 3,594 Amortization of acquired unfavorable contract backlog (4,512) (6,035) (29,367) (74,784) – – – – – (1,523) Adjusted EBITDA from continuing operations 1 $924,673 $754,284 $576,608 $424,086 $352,221 $235,822 $305,237 $309,268 $314,022 $143,633 Sustaining capital expenditures and disbursements to stakeholders Sustaining capital expenditures (depreciation and amortization used as proxy) 167,040 167,613 165,749 158,653 131,508 124,490 127,111 135,559 41,226 41,799 Interest expense 48,680 51,904 61,837 71,373 40,957 44,151 62,121 76,456 11,035 14,259 Cash income taxes 151,503 140,950 44,499 7,977 7,198 30,963 50,201 61,000 15,296 4,743 Dividends 60,385 57,766 57,056 56,537 56,076 55,514 55,342 55,945 17,025 14,406 Less: Equity Compensation (44,234) (43,677) (31,850) (25,106) (23,929) (30,311) (26,355) (24,484) (9,619) (9,062) Total capital expenditures and disbursements to stakeholders $383,374 $374,556 $297,291 $269,434 $211,810 $224,807 $268,420 $304,476 $74,963 $66,145 Adjusted EBITDA less capital expenditures and disbursements to stakeholders 1 $541,299 $379,728 $279,317 $154,652 $140,411 $11,015 $36,817 $4,792 $239,059 $77,488
Net Debt to Adjusted EBITDA and Net Debt to Capitalization Q1 FY22 Supplemental Slides │ January 10, 2022 21 Figures in thousand $ [1] See page 22 for definitions of non-GAAP measures 3 MONTHS ENDED 11/30/2021 8/31/2021 5/31/2021 2/28/2021 11/30/2020 8/31/2020 5/31/2020 2/29/2020 11/30/2019 8/31/2019 5/31/2019 2/28/2019 11/30/2018 8/31/2018 5/31/2018 Long-term debt $1,007,801 $1,015,415 $1,020,129 $1,011,035 $1,064,893 $1,065,536 $1,153,800 $1,144,573 $1,179,443 $1,227,214 $1,306,863 $1,310,150 $1,307,824 $1,138,619 $1,139,103 Current maturities of long-term debt and short-term borrowings 56,896 54,366 56,735 22,777 20,701 18,149 17,271 22,715 13,717 17,439 54,895 88,902 29,083 19,746 19,874 Total debt $1,064,697 $1,069,781 $1,076,864 $1,033,812 $1,085,594 $1,083,685 $1,171,071 $1,167,288 $1,193,160 $1,244,653 $1,361,758 $1,399,052 $1,336,907 $1,158,365 $1,158,977 Less: Cash and cash equivalents 415,055 497,745 443,120 367,347 465,162 542,103 462,110 232,442 224,797 192,461 120,315 66,742 52,352 622,473 600,444 Net debt1 $649,642 $572,036 $633,744 $666,465 $620,432 $541,582 $708,961 $934,846 $968,363 $1,052,192 $1,241,443 $1,332,310 $1,284,555 $535,892 $558,533 Earnings from continuing operations $232,889 $152,313 $130,408 $66,233 $63,911 $67,782 $64,169 $63,596 $82,755 $85,880 $78,551 $14,928 $19,420 $51,260 $42,325 Interest expense 11,035 11,659 11,965 14,021 14,259 13,962 15,409 15,888 16,578 17,702 18,513 18,495 16,663 15,654 11,511 Income taxes 28,872 40,444 38,175 20,941 21,593 18,495 23,804 22,845 27,332 16,826 29,105 18,141 5,609 6,682 13,312 Depreciation and amortization 41,226 42,437 41,804 41,573 41,799 41,654 41,765 41,389 40,941 41,051 41,181 41,245 35,176 32,610 32,949 Asset impairments – 2,439 277 474 3,594 1,098 5,983 – 530 369 15 – – 840 935 Amortization of acquired unfavorable contract backlog – (1,495) (1,508) (1,509) (1,523) (10,691) (4,348) (5,997) (8,331) (16,582) (23,394) (23,476) (11,332) – – Adjusted EBITDA from continuing operations1 $314,022 $247,797 $221,121 $141,733 $143,633 $132,300 $146,782 $137,721 $159,805 $145,246 $143,971 $69,333 $65,536 $107,046 $101,032 Trailing 12 month adjusted EBITDA from continuing operations $924,673 $754,284 $638,787 $564,448 $560,436 $576,608 $589,554 $586,743 $518,355 $424,086 $385,886 $342,947 Total debt $1,064,697 $1,069,781 $1,076,864 $1,033,812 $1,085,594 $1,083,685 $1,171,071 $1,167,288 $1,193,160 $1,244,653 $1,361,758 $1,399,052 $1,336,907 $1,158,365 $1,158,977 Total stockholders' equity 2,486,189 2,295,109 2,156,597 2,009,492 1,934,899 1,889,413 1,800,662 1,758,055 1,701,697 1,624,057 1,564,195 1,498,496 1,489,027 1,493,583 1,452,902 Total capitalization $3,550,886 $3,364,890 $3,233,461 $3,043,304 $3,020,493 $2,973,098 $2,971,733 $2,925,343 $2,894,857 $2,868,710 $2,925,953 $2,897,548 $2,825,934 $2,651,948 $2,611,879 Net debt to trailing 12 month adjusted EBITDA from continuing operations 0.7x 0.8x 1.0x 1.2x 1.1x 0.9x 1.2x 1.6x 1.9x 2.5x 3.2x 3.9x Net debt to capitalization 18% 17% 20% 22% 21% 18% 24% 32% 33% 37% 42% 46%
Definitions for non-GAAP financial measures Q1 FY22 Supplemental Slides │ January 10, 2022 22 A D J U S T E D E A R N I N G S F R O M C O N T I N U I N G O P E R A T I O N S Adjusted earnings from continuing operations is a non-GAAP financial measure that is equal to earnings from continuing operations before debt extinguishment costs, certain gains on sale of assets, certain facility closure costs, asset impairments, labor cost government refunds and acquisition settlements, including the estimated income tax effects thereof. 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. C O R E E B I T D A F R O M C O N T I N U I N G O P E R A T I O N S Core EBITDA from continuing operations is the sum of earnings from continuing operations before interest expense and income taxes. It also excludes recurring non-cash charges for depreciation and amortization and asset impairments. Core EBITDA from continuing operations also excludes debt extinguishment costs, non-cash equity compensation, certain gains on sale of assets, certain facility closure costs, acquisition settlement costs and labor cost government refunds. 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. ADJUSTED EBITDA FROM CONTINUING OPERATIONS Adjusted EBITDA from Continuing Operations is a non-GAAP financial measure. Adjusted EBITDA is the sum of the Company's earnings from continuing operations before interest expense, income taxes, depreciation and amortization expense, impairment expense, and amortization of acquired unfavorable contract backlog. Adjusted EBITDA 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 EBITDA from continuing operations provides relevant and useful information to investors as it allows: (i) a supplemental measure of our ongoing performance and (ii) the assessment of period-to-period performance trends. Management uses adjusted EBITDA from continuing operations to evaluate our financial performance. Adjusted EBITDA from continuing operations may be inconsistent with similar measures presented by other companies. ADJUSTED EBITDA LESS CAPITAL EXPENDITURES AND DISBURSEMENTS TO STAKEHOLDERS Adjusted EBITDA less sustaining capital expenditures and disbursements to shareholders is defined as Adjusted EBITDA less depreciation and amortization (used as a proxy for sustaining capital expenditures) less interest expense, less cash income taxes less dividend payments plus stock-based compensation. NET DEBT Net debt is defined as total debt less cash and cash equivalents. RETURN ON INVESTED CAPITAL Return on Invested Capital is defined as: 1) after-tax operating profit divided by 2) total assets less cash & cash equivalents less non-interest-bearing liabilities
Q1 FY22 Supplemental Slides │ January 10, 2022 23 Thank You