Form 8-K COMMERCIAL METALS Co For: Jun 17
Exhibit No. 99.1
News Release 
COMMERCIAL METALS COMPANY REPORTS RECORD THIRD QUARTER FISCAL 2021 RESULTS
•Achieves record Earnings from Continuing Operations of $130 million, or $1.07 per diluted share; record Core EBITDA from Continuing Operations of $230 million, up 49% year-over-year and 35% sequentially; and record North America and Europe segment Adjusted EBITDA
•Network optimization initiative continues; seventh consecutive quarter of year-over-year reduction in North America controllable costs per ton
•Key strategic milestones include commissioning of third Polish rolling line and receipt of air permit for Arizona 2 project
Irving, TX - June 17, 2021 - Commercial Metals Company (NYSE: CMC) today announced financial results for its fiscal third quarter ended May 31, 2021. Earnings from continuing operations were $130.4 million, or $1.07 per diluted share, on net sales of $1.8 billion, compared to prior year earnings from continuing operations of $64.2 million, or $0.53 per diluted share, on net sales of $1.3 billion.
During the third quarter of fiscal 2021, the Company recorded a net after-tax benefit of $3.3 million, chiefly related to the sale of a small railway track reclamation business. Excluding this item, third quarter adjusted earnings from continuing operations were $127.1 million, or $1.04 per diluted share, compared to adjusted earnings from continuing operations of $70.4 million, or $0.59 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, commented, "CMC achieved exceptional results during the third quarter. Demand for our products was robust and our teams executed well, setting new production and shipment records at several of our facilities. We continued to tightly manage the operating factors within our control, and again reduced year-over-year production costs per ton. Our excellent third quarter performance is a testament to the operational flexibility and earnings power of the new, strategically transformed CMC, and I could not be more proud of our many accomplishments.”
Ms. Smith continued, "CMC set several operational and financial performance records at the segment as well as consolidated level, and we further enhanced our balance sheet and leverage positions, which are now the most attractive in CMC's history. We are also continuing to build for the future: We made significant progress on key
(CMC Third Quarter Fiscal 2021 - 2)
organic growth initiatives, including hot commissioning of our third rolling mill in Poland, the receipt of the air permit for our Arizona 2 mill, and the continuation of network optimization efforts. Future contributions from these key projects are expected to provide the next chapter of growth for our company, building on this quarter’s outstanding results.”
The Company's liquidity position as of May 31, 2021 remained solid, with cash and cash equivalents of $443.1 million, and availability of $639.0 million under the Company's credit and accounts receivable facilities.
On June 16, 2021, the board of directors declared a quarterly dividend of $0.12 per share of CMC common stock payable to stockholders of record on June 30, 2021. The dividend will be paid on July 14, 2021, and marks 227 consecutive quarterly dividend payments by the Company.
Business Segments - Fiscal Third Quarter 2021 Review
The North America segment generated record adjusted EBITDA of $207.3 million for the third quarter of fiscal 2021, an increase of 30% compared to $159.4 million in the prior year period. This improvement was driven by growth in demand and increased margins across multiple products lines, as well as solid management of controllable costs within our vertically integrated value chain. Costs were reduced by continued execution of CMC's network optimization activities.
Shipment volumes of finished steel, which include steel products and downstream products, increased by 9% from the prior year third quarter. Demand for rebar from the mills remained good, growing year-over-year, supported by resilient construction activity. Shipments of merchant and other products increased by 37% from the prior year, driven by the broad reopening of the U.S. economy.
Margins over scrap cost on steel products increased $40 per ton from the prior year period, marking the first year-over-year increase in six quarters. On a sequential basis these margins rose $74 per ton. Market conditions were favorable for each of CMC's key products, leading to mill volume growth of 17% and an increase of $170 per ton in average selling price compared to the third quarter of fiscal 2020. Margin over scrap cost on downstream products declined compared to a year ago, driven by higher scrap input costs and average pricing that was largely unchanged. Future pricing indicators for backlog were positive during the quarter, as average price levels for bids and new awards increased from the prior year quarter.
The Europe segment reported record adjusted EBITDA of $50.0 million for the third quarter of fiscal 2021, up 250% compared to adjusted EBITDA of $14.3 million for the prior year quarter. The improvement was driven by a significant expansion in margin over scrap as well as volume growth, as demand for steel products from both construction and industrial end markets remained strong during the quarter. Resilient construction activity supported a 16% increase in rebar shipments compared to a year ago, while the continuing manufacturing recovery in Poland
(CMC Third Quarter Fiscal 2021 - 3)
and Central Europe drove 4% growth in volumes of merchant and other. Average selling price increased by $227 per ton compared to the prior year quarter, and $132 per ton sequentially.
Outlook
Ms. Smith said, "Strong demand across multiple end-use markets should support robust shipment levels of finished steel during the fourth quarter in both North America and Europe. Construction activity is strong and the industrial sectors are growing in both the U.S. and Central Europe, as both regions continue to recover from the pandemic. We expect margins over scrap on steel products in North America and Europe to be relatively flat or up modestly from third quarter levels."
"Increased willingness of downstream customers in our North America segment to contract new work and the stability of our construction backlog both point to continued demand strength. This view is supported by several widely monitored construction indicators that generally lead activity by nine to twelve months, which have improved significantly in 2021,” Ms. Smith added.
Conference Call
CMC invites you to listen to a live broadcast of its third quarter of fiscal 2021 conference call today, Thursday, June 17, 2021, at 11:00 a.m. ET. Barbara R. Smith, Chairman of the Board, President, and Chief Executive Officer, and Paul Lawrence, Vice President and Chief Financial Officer, will host the call. The call is accessible via our website at www.cmc.com. In the event you are unable to listen to the live broadcast, the call will be archived and available for replay on our website on the next business day. Financial and statistical information presented in the broadcast are located on CMC's website under "Investors."
About Commercial Metals Company
Commercial Metals Company and its subsidiaries manufacture, recycle and fabricate steel and metal products, related materials and services through a network including seven electric arc furnace ("EAF") mini mills, two EAF micro mills, a 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,
(CMC Third Quarter Fiscal 2021 - 4)
international trade, capital expenditures, our liquidity and our ability to satisfy future liquidity requirements, estimated contractual obligations and our expectations or beliefs concerning future events. The statements in this report 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.
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, 2020, and Part II, Item 1A, "Risk Factors" of our quarterly report on Form 10-Q for the quarter ended February 28, 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 from the distribution 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 government 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; potential limitations in our or our customers' abilities to access credit and non-compliance by our customers with our contracts; activity in repurchasing shares of our common stock under our repurchase program; financial covenants and restrictions on the operation of our business contained in agreements governing our debt; our ability to successfully identify, consummate and integrate acquisitions, and the effects that acquisitions may have on our financial leverage; risks associated with acquisitions generally, such as the inability to obtain, or delays in obtaining, required approvals under applicable antitrust legislation and other regulatory and third party consents and approvals; operating and start-up 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 investment; 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 the impact of the Biden administration on current trade regulations, such as Section 232 trade tariffs, tax legislation and other regulations which might adversely impact our business; availability and
(CMC Third Quarter Fiscal 2021 - 5)
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 Third Quarter Fiscal 2021 - 6)
| COMMERCIAL METALS COMPANY FINANCIAL & OPERATING STATISTICS (UNAUDITED) | ||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except per ton amounts) | 5/31/2021 | 2/28/2021 | 11/30/2020 | 8/31/2020 | 5/31/2020 | 5/31/2021 | 5/31/2020 | |||||||||||||||||||||||||||||||||||||
| North America | ||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 1,558,068 | $ | 1,257,486 | $ | 1,195,013 | $ | 1,224,849 | $ | 1,167,081 | $ | 4,010,567 | $ | 3,545,084 | ||||||||||||||||||||||||||||||
| Adjusted EBITDA | 207,330 | 171,612 | 155,634 | 174,219 | 159,394 | 534,576 | 486,957 | |||||||||||||||||||||||||||||||||||||
| External tons shipped | ||||||||||||||||||||||||||||||||||||||||||||
| Raw materials | 368 | 302 | 330 | 300 | 288 | 1,000 | 929 | |||||||||||||||||||||||||||||||||||||
| Rebar | 500 | 472 | 486 | 498 | 463 | 1,458 | 1,399 | |||||||||||||||||||||||||||||||||||||
| Merchant and other | 289 | 268 | 264 | 234 | 211 | 821 | 685 | |||||||||||||||||||||||||||||||||||||
| Steel products | 789 | 740 | 750 | 732 | 674 | 2,279 | 2,084 | |||||||||||||||||||||||||||||||||||||
| Downstream products | 408 | 343 | 371 | 429 | 427 | 1,122 | 1,206 | |||||||||||||||||||||||||||||||||||||
| Average selling price per ton | ||||||||||||||||||||||||||||||||||||||||||||
| Raw materials | $ | 949 | $ | 846 | $ | 630 | $ | 605 | $ | 517 | $ | 813 | $ | 555 | ||||||||||||||||||||||||||||||
| Steel products | 794 | 695 | 612 | 600 | 624 | 702 | 625 | |||||||||||||||||||||||||||||||||||||
| Downstream products | 963 | 929 | 934 | 970 | 966 | 943 | 976 | |||||||||||||||||||||||||||||||||||||
| Cost of raw materials per ton | $ | 697 | $ | 629 | $ | 458 | $ | 427 | $ | 348 | $ | 597 | $ | 393 | ||||||||||||||||||||||||||||||
| Cost of ferrous scrap utilized per ton | 369 | 344 | 266 | 237 | 239 | 327 | 238 | |||||||||||||||||||||||||||||||||||||
| Steel products metal margin per ton | $ | 425 | $ | 351 | $ | 346 | $ | 363 | $ | 385 | $ | 375 | $ | 387 | ||||||||||||||||||||||||||||||
| Europe | ||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 284,107 | $ | 202,066 | $ | 194,596 | $ | 179,855 | $ | 173,817 | $ | 680,769 | $ | 519,285 | ||||||||||||||||||||||||||||||
| Adjusted EBITDA | 50,005 | 16,107 | 14,470 | 22,927 | 14,270 | 80,582 | 39,080 | |||||||||||||||||||||||||||||||||||||
| External tons shipped | ||||||||||||||||||||||||||||||||||||||||||||
| Rebar | 141 | 78 | 128 | 150 | 122 | 347 | 389 | |||||||||||||||||||||||||||||||||||||
| Merchant and other | 263 | 275 | 269 | 230 | 252 | 807 | 703 | |||||||||||||||||||||||||||||||||||||
| Steel products | 404 | 353 | 397 | 380 | 374 | 1,154 | 1,092 | |||||||||||||||||||||||||||||||||||||
| Average selling price per ton | ||||||||||||||||||||||||||||||||||||||||||||
| Steel products | $ | 664 | $ | 532 | $ | 461 | $ | 446 | $ | 437 | $ | 552 | $ | 449 | ||||||||||||||||||||||||||||||
| Cost of ferrous scrap utilized per ton | $ | 376 | $ | 328 | $ | 262 | $ | 250 | $ | 239 | $ | 324 | $ | 245 | ||||||||||||||||||||||||||||||
| Steel products metal margin per ton | $ | 288 | $ | 204 | $ | 199 | $ | 196 | $ | 198 | $ | 228 | $ | 204 | ||||||||||||||||||||||||||||||
(CMC Third Quarter Fiscal 2021 - 7)
| COMMERCIAL METALS COMPANY BUSINESS SEGMENTS (UNAUDITED) | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||
| Net sales | 5/31/2021 | 2/28/2021 | 11/30/2020 | 8/31/2020 | 5/31/2020 | 5/31/2021 | 5/31/2020 | |||||||||||||||||||||||||||||||||||||
| North America | $ | 1,558,068 | $ | 1,257,486 | $ | 1,195,013 | $ | 1,224,849 | $ | 1,167,081 | $ | 4,010,567 | $ | 3,545,084 | ||||||||||||||||||||||||||||||
| Europe | 284,107 | 202,066 | 194,596 | 179,855 | 173,817 | 680,769 | 519,285 | |||||||||||||||||||||||||||||||||||||
| Corporate and Other | 2,866 | 2,718 | 2,194 | 4,428 | 785 | 7,778 | 2,985 | |||||||||||||||||||||||||||||||||||||
| Total net sales | $ | 1,845,041 | $ | 1,462,270 | $ | 1,391,803 | $ | 1,409,132 | $ | 1,341,683 | $ | 4,699,114 | $ | 4,067,354 | ||||||||||||||||||||||||||||||
| Adjusted EBITDA from continuing operations | ||||||||||||||||||||||||||||||||||||||||||||
| North America | $ | 207,330 | $ | 171,612 | $ | 155,634 | $ | 174,219 | $ | 159,394 | $ | 534,576 | $ | 486,957 | ||||||||||||||||||||||||||||||
| Europe | 50,005 | 16,107 | 14,470 | 22,927 | 14,270 | 80,582 | 39,080 | |||||||||||||||||||||||||||||||||||||
| Corporate and Other | (36,214) | (45,986) | (26,471) | (64,846) | (26,882) | (108,671) | (81,729) | |||||||||||||||||||||||||||||||||||||
(CMC Third Quarter Fiscal 2021 - 8)
| COMMERCIAL METALS COMPANY CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) | |||||||||||||||||||||||
| Three Months Ended May 31, | Nine Months Ended May 31, | ||||||||||||||||||||||
| (in thousands, except share data) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Net sales | $ | 1,845,041 | $ | 1,341,683 | $ | 4,699,114 | $ | 4,067,354 | |||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of goods sold | 1,533,768 | 1,116,353 | 3,936,930 | 3,385,963 | |||||||||||||||||||
| Selling, general and administrative expenses | 130,448 | 115,965 | 359,492 | 342,502 | |||||||||||||||||||
| Interest expense | 11,965 | 15,409 | 40,245 | 47,875 | |||||||||||||||||||
| Loss on debt extinguishment | — | — | 16,841 | — | |||||||||||||||||||
| Asset impairments | 277 | 5,983 | 4,345 | 6,513 | |||||||||||||||||||
| 1,676,458 | 1,253,710 | 4,357,853 | 3,782,853 | ||||||||||||||||||||
| Earnings from continuing operations before income taxes | 168,583 | 87,973 | 341,261 | 284,501 | |||||||||||||||||||
| Income taxes | 38,175 | 23,804 | 80,709 | 73,981 | |||||||||||||||||||
| Earnings from continuing operations | 130,408 | 64,169 | 260,552 | 210,520 | |||||||||||||||||||
| Earnings from discontinued operations before income taxes | — | 745 | — | 1,941 | |||||||||||||||||||
| Income taxes | — | 180 | — | 581 | |||||||||||||||||||
| Earnings from discontinued operations | — | 565 | — | 1,360 | |||||||||||||||||||
| Net earnings | $ | 130,408 | $ | 64,734 | $ | 260,552 | $ | 211,880 | |||||||||||||||
| Basic earnings per share* | |||||||||||||||||||||||
| Earnings from continuing operations | $ | 1.08 | $ | 0.54 | $ | 2.17 | $ | 1.77 | |||||||||||||||
| Earnings from discontinued operations | — | — | — | 0.01 | |||||||||||||||||||
| Net earnings | $ | 1.08 | $ | 0.54 | $ | 2.17 | $ | 1.78 | |||||||||||||||
| Diluted earnings per share* | |||||||||||||||||||||||
| Earnings from continuing operations | $ | 1.07 | $ | 0.53 | $ | 2.14 | $ | 1.75 | |||||||||||||||
| Earnings from discontinued operations | — | — | — | 0.01 | |||||||||||||||||||
| Net earnings | $ | 1.07 | $ | 0.54 | $ | 2.14 | $ | 1.76 | |||||||||||||||
| Cash dividends per share | $ | 0.12 | $ | 0.12 | $ | 0.36 | $ | 0.36 | |||||||||||||||
| Average basic shares outstanding | 120,613,652 | 119,192,962 | 120,241,579 | 118,828,870 | |||||||||||||||||||
| Average diluted shares outstanding | 122,193,655 | 120,278,741 | 121,852,144 | 120,277,737 | |||||||||||||||||||
* Earnings Per Share ("EPS") is calculated independently for each component and may not sum to net earnings EPS due to rounding.
(CMC Third Quarter Fiscal 2021 - 9)
COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||||||||||||
| (in thousands, except share data) | May 31, 2021 | August 31, 2020 | ||||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 443,120 | $ | 542,103 | ||||||||||
Accounts receivable (less allowance for doubtful accounts of $6,688 and $9,597) | 1,073,115 | 880,728 | ||||||||||||
| Inventories, net | 833,101 | 625,393 | ||||||||||||
| Prepaid and other current assets | 169,139 | 165,879 | ||||||||||||
| Total current assets | 2,518,475 | 2,214,103 | ||||||||||||
| Property, plant and equipment, net | 1,562,503 | 1,571,067 | ||||||||||||
| Goodwill | 66,331 | 64,321 | ||||||||||||
| Other noncurrent assets | 243,766 | 232,237 | ||||||||||||
| Total assets | $ | 4,391,075 | $ | 4,081,728 | ||||||||||
| Liabilities and stockholders' equity | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 340,238 | $ | 266,102 | ||||||||||
| Accrued expenses and other payables | 456,394 | 461,012 | ||||||||||||
| Current maturities of long-term debt and short-term borrowings | 56,735 | 18,149 | ||||||||||||
| Total current liabilities | 853,367 | 745,263 | ||||||||||||
| Deferred income taxes | 118,335 | 130,810 | ||||||||||||
| Other noncurrent liabilities | 242,647 | 250,706 | ||||||||||||
| Long-term debt | 1,020,129 | 1,065,536 | ||||||||||||
| Total liabilities | 2,234,478 | 2,192,315 | ||||||||||||
| Stockholders' equity: | ||||||||||||||
Common stock, par value $0.01 per share; authorized 200,000,000 shares; issued 129,060,664 shares; outstanding 120,585,771 and 119,220,905 shares | 1,290 | 1,290 | ||||||||||||
| Additional paid-in capital | 361,433 | 358,912 | ||||||||||||
| Accumulated other comprehensive loss | (78,850) | (103,764) | ||||||||||||
| Retained earnings | 2,025,083 | 1,807,826 | ||||||||||||
Less treasury stock, 8,474,893 and 9,839,759 shares at cost | (152,590) | (175,063) | ||||||||||||
| Stockholders' equity | 2,156,366 | 1,889,201 | ||||||||||||
| Stockholders' equity attributable to noncontrolling interests | 231 | 212 | ||||||||||||
| Total equity | 2,156,597 | 1,889,413 | ||||||||||||
| Total liabilities and stockholders' equity | $ | 4,391,075 | $ | 4,081,728 | ||||||||||
(CMC Third Quarter Fiscal 2021 - 10)
| COMMERCIAL METALS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||||||||
| Nine Months Ended May 31, | ||||||||||||||
| (in thousands) | 2021 | 2020 | ||||||||||||
| Cash flows from (used by) operating activities: | ||||||||||||||
| Net earnings | $ | 260,552 | $ | 211,880 | ||||||||||
| Adjustments to reconcile net earnings to cash flows from (used by) operating activities: | ||||||||||||||
| Depreciation and amortization | 125,176 | 124,104 | ||||||||||||
| Stock-based compensation | 35,558 | 21,975 | ||||||||||||
| Deferred income taxes and other long-term taxes | (17,175) | 47,761 | ||||||||||||
| Loss on debt extinguishment | 16,841 | — | ||||||||||||
Net gain on disposals of subsidiaries, assets and other | (9,390) | (5,476) | ||||||||||||
| Amortization of acquired unfavorable contract backlog | (4,540) | (18,676) | ||||||||||||
| Asset impairments | 4,345 | 6,513 | ||||||||||||
| Other | 243 | 1,933 | ||||||||||||
| Changes in operating assets and liabilities | (317,378) | 141,819 | ||||||||||||
Net cash flows from operating activities | 94,232 | 531,833 | ||||||||||||
| Cash flows from (used by) investing activities: | ||||||||||||||
| Capital expenditures | (127,395) | (134,092) | ||||||||||||
| Proceeds from the sale of property, plant and equipment and other | 25,890 | 14,091 | ||||||||||||
| Other | (2,500) | 974 | ||||||||||||
| Acquisitions, net of cash acquired | — | (9,850) | ||||||||||||
Net cash flows used by investing activities | (104,005) | (128,877) | ||||||||||||
| Cash flows from (used by) financing activities: | ||||||||||||||
| Proceeds from issuance of long-term debt, net | 309,187 | 22,566 | ||||||||||||
| Repayments of long-term debt | (361,855) | (110,470) | ||||||||||||
| Debt extinguishment costs | (13,128) | — | ||||||||||||
| Debt issuance costs | (2,830) | — | ||||||||||||
| Proceeds from accounts receivable facilities | 145,864 | 171,133 | ||||||||||||
| Repayments under accounts receivable facilities | (118,312) | (171,285) | ||||||||||||
| Dividends | (43,295) | (42,768) | ||||||||||||
| Stock issued under incentive and purchase plans, net of forfeitures | (3,807) | (1,921) | ||||||||||||
| Contribution from noncontrolling interest | 19 | 16 | ||||||||||||
Net cash flows used by financing activities | (88,157) | (132,729) | ||||||||||||
| Effect of exchange rate changes on cash | (423) | 210 | ||||||||||||
Increase (decrease) in cash and cash equivalents | (98,353) | 270,437 | ||||||||||||
| Cash, restricted cash and cash equivalents at beginning of period | 544,964 | 193,729 | ||||||||||||
| Cash, restricted cash and cash equivalents at end of period | $ | 446,611 | $ | 464,166 | ||||||||||
| Supplemental information: | ||||||||||||||
| Cash and cash equivalents | $ | 443,120 | $ | 462,110 | ||||||||||
| Restricted cash | $ | 3,491 | $ | 2,056 | ||||||||||
| Total cash, restricted cash and cash equivalents | $ | 446,611 | $ | 464,166 | ||||||||||
(CMC Third Quarter Fiscal 2021 - 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 | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 5/31/2021 | 2/28/2021 | 11/30/2020 | 8/31/2020 | 5/31/2020 | 5/31/2021 | 5/31/2020 | ||||||||||||||||||||||||||||||||||
| Earnings from continuing operations | $ | 130,408 | $ | 66,233 | $ | 63,911 | $ | 67,782 | $ | 64,169 | $ | 260,552 | $ | 210,520 | |||||||||||||||||||||||||||
| Interest expense | 11,965 | 14,021 | 14,259 | 13,962 | 15,409 | 40,245 | 47,875 | ||||||||||||||||||||||||||||||||||
| Income taxes | 38,175 | 20,941 | 21,593 | 18,495 | 23,804 | 80,709 | 73,981 | ||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 41,804 | 41,573 | 41,799 | 41,654 | 41,765 | 125,176 | 124,095 | ||||||||||||||||||||||||||||||||||
| Amortization of acquired unfavorable contract backlog | (1,508) | (1,509) | (1,523) | (10,691) | (4,348) | (4,540) | (18,676) | ||||||||||||||||||||||||||||||||||
| Asset impairments | 277 | 474 | 3,594 | 1,098 | 5,983 | 4,345 | 6,513 | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA from continuing operations | 221,121 | 141,733 | 143,633 | 132,300 | 146,782 | 506,487 | 444,308 | ||||||||||||||||||||||||||||||||||
| Non-cash equity compensation | 13,800 | 12,696 | 9,062 | 9,875 | 6,170 | 35,558 | 21,975 | ||||||||||||||||||||||||||||||||||
| Gain on sale of assets | (4,457) | (5,877) | — | — | — | (10,334) | — | ||||||||||||||||||||||||||||||||||
| Loss on debt extinguishment | — | 16,841 | — | 1,778 | — | 16,841 | — | ||||||||||||||||||||||||||||||||||
| Facility closure | — | 5,694 | 5,214 | 2,903 | 1,863 | 10,908 | 8,202 | ||||||||||||||||||||||||||||||||||
| Acquisition settlement | — | — | — | 32,123 | — | — | — | ||||||||||||||||||||||||||||||||||
| Labor cost government refund | — | — | (1,348) | (2,985) | — | (1,348) | — | ||||||||||||||||||||||||||||||||||
| Core EBITDA from continuing operations | $ | 230,464 | $ | 171,087 | $ | 156,561 | $ | 175,994 | $ | 154,815 | $ | 558,112 | $ | 474,485 | |||||||||||||||||||||||||||
(CMC Third Quarter Fiscal 2021 - 12)
A reconciliation of earnings from continuing operations to adjusted earnings from continuing operations is provided below:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 5/31/2021 | 2/28/2021 | 11/30/2020 | 8/31/2020 | 5/31/2020 | 5/31/2021 | 5/31/2020 | ||||||||||||||||||||||||||||||||||
| Earnings from continuing operations | $ | 130,408 | $ | 66,233 | $ | 63,911 | $ | 67,782 | $ | 64,169 | $ | 260,552 | $ | 210,520 | |||||||||||||||||||||||||||
| Gain on sale of assets | (4,457) | (5,877) | — | — | — | (10,334) | — | ||||||||||||||||||||||||||||||||||
| Asset impairments | 277 | 474 | 3,594 | 1,098 | 5,983 | 4,345 | 5,983 | ||||||||||||||||||||||||||||||||||
| Loss on debt extinguishment | — | 16,841 | — | 1,778 | — | 16,841 | — | ||||||||||||||||||||||||||||||||||
| Facility closure | — | 5,694 | 5,214 | 2,903 | 1,863 | 10,908 | 8,202 | ||||||||||||||||||||||||||||||||||
| Acquisition settlement | — | — | — | 32,123 | — | — | — | ||||||||||||||||||||||||||||||||||
| Labor cost government refund | — | — | (1,348) | (2,985) | — | (1,348) | — | ||||||||||||||||||||||||||||||||||
| Total adjustments (pre-tax) | $ | (4,180) | $ | 17,132 | $ | 7,460 | $ | 34,917 | $ | 7,846 | $ | 20,412 | $ | 14,185 | |||||||||||||||||||||||||||
| Tax impact | |||||||||||||||||||||||||||||||||||||||||
| Related tax effects on adjustments | 878 | (3,598) | (1,593) | (7,392) | (1,648) | (4,313) | (2,979) | ||||||||||||||||||||||||||||||||||
| Total tax impact | 878 | (3,598) | (1,593) | (7,392) | (1,648) | (4,313) | (2,979) | ||||||||||||||||||||||||||||||||||
| Adjusted earnings from continuing operations | $ | 127,106 | $ | 79,767 | $ | 69,778 | $ | 95,307 | $ | 70,367 | $ | 276,651 | $ | 221,726 | |||||||||||||||||||||||||||
| Earnings from continuing operations per diluted share | $ | 1.07 | $ | 0.54 | $ | 0.53 | $ | 0.56 | $ | 0.53 | $ | 2.14 | $ | 1.75 | |||||||||||||||||||||||||||
| Adjusted earnings from continuing operations per diluted share | $ | 1.04 | $ | 0.66 | $ | 0.58 | $ | 0.79 | $ | 0.59 | $ | 2.27 | $ | 1.84 | |||||||||||||||||||||||||||
Media Contact:
Susan Gerber
214.689.4300
Q3 FY 2021 SUPPLEMENTAL SLIDES JUNE 17, 2021
CAUTIONARY STATEMENTS This presentation contains or incorporates by reference a number of "forward-looking statements" within the meaning of the federal securities laws with respect to general economic conditions, key macro-economic drivers that impact our business, the effects of ongoing trade actions, the effects of continued pressure on the liquidity of our customers, potential synergies 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, estimated contractual obligations and our expectations or beliefs concerning future events. The statements in this report 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. There are inherent risks and uncertainties in any forward- looking statements. We caution readers not to place undue reliance on any forward-looking statements. Our forward-looking statements are based on management's expectations and beliefs as of the time this document was prepared or, with respect to any document incorporated by reference, as of the time such document was prepared. Although we believe that our expectations are reasonable, we can give no assurance that these expectations will prove to have been correct, and actual results may vary materially. Except as required by law, we undertake no obligation to update, amend or clarify any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or any other changes. Important factors that could cause actual results to differ materially from our expectations include those described in Part I, Item 1A, Risk Factors, of our annual report on Form 10-K for the fiscal year ended August 31, 2020 and in subsequent quarterly reports on Form 10-Q, as well as the following: changes in economic conditions which affect demand for our products or construction activity generally, and the impact of such changes on the highly cyclical steel industry; rapid and significant changes in the price of metals, potentially impairing our inventory values due to declines in commodity prices or reducing the profitability of our 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 from the distribution 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 government 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; potential limitations in our or our customers' abilities to access credit and non-compliance by our customers with our contracts; activity in repurchasing shares of our common stock under our repurchase program; financial covenants and restrictions on the operation of our business contained in agreements governing our debt; our ability to successfully identify, consummate and integrate acquisitions, and the effects that acquisitions may have on our financial leverage; risks associated with acquisitions generally, such as the inability to obtain, or delays in obtaining, required approvals under applicable antitrust legislation and other regulatory and third party consents and approvals; operating and start-up 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 investment; 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 the impact of the Biden administration on current trade regulations, such as Section 232 trade tariffs, 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. 2Q3 FY21 Supplemental Slides | June 17, 2021
A CLEAR PATH TO VALUE CREATION Q3 FY21 Supplemental Slides | June 17, 2021 3 ✓ Leading positions in core product and geographical markets ✓ Focused strategy that centers on key capabilities and competitive strengths ✓ Vertical structure that optimizes returns for the entire value chain ✓ Strong financial position with flexibility to execute on strategy ✓ Disciplined capital allocation focused on maximizing returns for our shareholders
KEY TAKEAWAYS FROM TODAY’S CALL Q3 FY21 Supplemental Slides | June 17, 2021 4 Generated record financial results at the consolidated and segment levels • Record Core EBITDA from continuing operations • Highest-ever adjusted EBITDA for North America and Europe segments Continued execution on in-flight growth initiatives • Record shipments of merchant bar in North America; 16% above trailing two-year average • Achieved targeted cost reduction benefit from closure of Steel CA rolling mill • 7th consecutive quarter of year-over-year reductions in North America controllable cost per ton of finished steel shipped Progress on key strategic growth initiatives • Began hot commissioning of 3rd Polish rolling line • Received air permit for Arizona 2 micro mill; construction underway End markets were strong across all products and geographies • Robust North America construction activity with good project pipeline activity Strong financial position provides continued flexibility to fund growth, weather economic uncertainty, pursue opportunistic M&A, and provide shareholder returns Q3 Core EBITDA1 of $230M Up 49% y/y Q3 Annualized ROIC2 of 18% Adjusted EPS of $1.04 Up 76% y/y Notes: [1] Core EBITDA is a non-GAAP measure. For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures, see the appendix to this document. [2] Return on Invested Capital is a non-GAAP measure. For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures, see the appendix to this document.
Q3 FY21 Supplemental Slides | June 17, 2021 5 SUSTAINABLE FROM THE START, NATURALLY CMC WILL SOON PUBLISH A GREATLY ENHANCED CORPORATE SUSTAINABILITY REPORT Establishes ambitious, environmental targets Expands environmental, social, and governance disclosures Outlines our leadership position on environmental performance
• Will utilize current excess melt capacity, adding roughly 200,000 tons of finished steel output • Helps to leverage fixed costs • Expected to add $20 million of annual EBITDA through-the- cycle 3 R D P O L IS H R O L L IN G L IN E • Total capital spending below original budget • Project timing looks favorable; expect to ramp up in strong market environment • Adds significant production flexibility • Began hot commission of 3rd rolling line in Europe near end of Q3 − Process going well, expect first commercial sale in late Q4 • Received air permit for Arizona 2 project − Project tracking on time; construction underway • Significant increase of steel product margins over scrap in North America and Europe − Margins up $74 per ton sequentially in North America, up $84 in Europe • Strong margins on sales of raw materials; average selling price up for 5th straight quarter • Robust demand activity across North America end markets driving year-over-year increase in shipments of each major steel product category • Solid management of North America controllable costs per ton, achieving year-over-year reduction despite well publicized inflationary pressures • Downstream margin over scrap compressed by rising scrap costs, but indicators of future pricing (i.e. bids) were positive • Strong demand across Europe segment’s various end markets; second highest ever third quarter shipment levels Q3 FY21 Supplemental Slides | June 17, 2021 6 P E R F O R M A N C E D R IV E R S OPERATIONAL UPDATE S T R A T E G IC IT E M S
155 230 48 36 (10) 1 0 50 100 150 200 250 Q3 2020 North America Segment EBITDA Europe Segment EBITDA Corporate & Eliminations Non-Operating Items Q3 2021 Q3 FY21 Supplemental Slides | June 17, 2021 7 CONSOLIDATED OPERATING RESULTS – QUARTERLY Q3 ’20 Q4 ’20 Q1 ‘21 Q2 ‘21 Q3 ‘21 External Finished Steel Tons Shipped1 1,475 1,541 1,518 1,436 1,601 Core EBITDA 154,815 $175,994 $156,561 $171,087 $230,464 Core EBITDA per Ton of Finished Steel Shipped $105 $114 $103 $119 $144 Adjusted Earnings from Continuing Operations $70,367 $95,307 $69,778 $79,767 $127,106 Performance Summary Units in 000’s unless noted otherwise • $4.5 million gain on sale of small railroad track reclamation business Non-Operating Charges / Benefits Figures are pre-tax for Q3 2021 Core EBITDA Bridge – Q3 2020 to Q3 2021 $ Millions [1] External Finished Steel Tons Shipped equal to shipments of Steel Products plus Downstream Products Other Note: Core EBITDA 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.
145 150 139 158 173 710 731 697 663 619 385 363 346 351 425 0 20 40 60 80 100 120 140 160 180 200 0 100 200 300 400 500 600 700 800 Q3 ’20 Q4 ‘20 Q1 '21 Q2 '21 Q3 '21 Adjusted EBITDA per Ton of Finished Steel Shipped Downstream Products Margin Over Scrap (1 Qtr Lag) Steel Products Margin Over Scrap 70 100 130 Q3 ’20 Q4 ‘20 Q1 '21 Q2 '21 Q3 '21 Wgt Avg Finished Steel ASP Wgt Avg Finished Steel Mgn Over Scrap Controllable Costs Adjusted EBITDA per ton Q3 FY21 Supplemental Slides | June 17, 2021 8 NORTH AMERICA – QUARTERLY Q3 ’20 Q4 ’20 Q1 ‘21 Q2 ‘21 Q3 ‘21 External Finished Steel Tons Shipped1 1,101 1,161 1,121 1,083 1,197 Adjusted EBITDA $159,394 $174,219 $155,634 $171,612 $207,330 Adjusted EBITDA per Ton of Finished Steel Shipped $145 $150 $139 $158 $173 Adjusted EBITDA Margin 13.7% 14.2% 13.0% 13.6% 13.3% Performance Summary Units in 000’s unless noted otherwise • Significant increase in steel product margins over scrap − Up $40 per ton y/y and $74 per ton sequentially • Expanded margins on raw material sales • Volumes of finished steel shipped increased 9% from the prior year • Solid cost management led to modest y/y reduction to controllable cost per ton of finished steel shipped Key Performance Drivers Q3 2021 vs Q3 2020 North America – Key Margins $ / ton D P a n d S P M a rg in O v e 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 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 [2] [3]
50 100 150 200 250 300 350 Q3 ’20 Q4 ‘20 Q1 '21 Q2 '21 Q3 '21 Steel Product Margins Over Scrap Controllable Costs Adjusted EBITDA per Ton 38 60 36 46 124 198 196 199 204 288 0 20 40 60 80 100 120 140 100 140 180 220 260 300 Q3 ’20 Q4 ‘20 Q1 '21 Q2 '21 Q3 '21 Adjusted EBITDA per Ton Steel Products Margin Over Scrap 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 Q3 FY21 Supplemental Slides | June 17, 2021 9 EUROPE– QUARTERLY Q3 ’20 Q4 ’20 Q1 ’21 Q2 ‘21 Q3 ‘21 External Finished Steel Tons Shipped1 374 380 397 353 404 Adjusted EBITDA $14,270 $22,927 $14,470 $16,107 $50,005 Adjusted EBITDA per Ton of Finished Steel Shipped $38 $60 $36 $46 $124 Adjusted EBITDA Margin 8.2% 12.7% 7.4% 8.0% 17.6% Performance Summary Units in 000’s unless noted otherwise • Significant increase in margins over scrap − Up $90 per ton y/y and $84 per ton sequentially • Strong demand across all products − Rebar shipments increased 16% from the prior year, merchant and other up 4% • Controllable costs per ton were relatively flat from the prior year Key Performance Drivers Q3 2021 vs Q3 2020 Europe – Key Margins $ / ton S te e l P ro d u c t M a rg in O v e r S c ra p A d ju s te d E B IT D A p e r to n Europe Indexed Margins and Controllable Cost $ / ton of finished product shipped [2]
($4) ($26) ($108) $73 $149 $226 $272 ($150) ($100) ($50) $0 $50 $100 $150 $200 $250 $300 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 LTM Q3 FY'21 ADJUSTED EBITDA LESS CAPITAL EXPENDITURES AND DISBURSEMENTS TO STAKEHOLDERS 1 CMC’s cash flow capabilities have been greatly enhanced through our strategic transformation − Will fund current projects using organic cash generation FY 2021 capital expenditures expected between $200 million to $225 million Source: Public filings, Internal data Notes: 1. Adjusted EBITDA less 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. CASH FLOW PROFILE Q3 FY21 Supplemental Slides | June 17, 2021 10
$330 $300 $300 $400 2021 2022 2023 2024 to 2025 2026 2027 2028 to 2030 2031 26 66 150 397 $443 Revolver BALANCE SHEET STRENGTH U.S. Accounts Receivable Facility Poland Credit Facilities Poland Accounts Receivable Facility (US$ 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 MATURIT Y SCHEDULE Q3 FY’21 LIQUIDIT Y (US$ in millions) Source: Public filings Q3 FY21 Supplemental Slides | June 17, 2021 11 Increased revolving credit facility from $350 million to $400 million and extended maturity to 2026
46% 42% 37% 33% 32% 24% 18% 21% 22% 20% 0% 10% 20% 30% 40% 50% 60% 3.9x 3.2x 2.5x 1.9x 1.6x 1.2x 0.9x 1.1x 1.2x 1.0x NM 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 3.5x 4.0x 4.5x 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. 5. Net Debt to EBITDA and Net Debt to Capitalization are non-GAAP financial measures. For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures, see the appendix to this document. LEVERAGE PROFILE Financial strength gives us the flexibility to fund our announced projects, navigate current economic uncertainties, and pursue opportunistic M&A NET DEBT1,2 / EBITDA3 Q3 FY21 Supplemental Slides | June 17, 2021 12 NET DEBT-TO-CAPITALIZATION4
Q3 FY21 Supplemental Slides | June 17, 2021 13 A P P E N D IX : N O N -G A A P R E C O N C IL IA T IO N S
3 MONTHS ENDED 5/31/2021 Earnings from continuing operations before income taxes $168,583 Plus: interest expense 11,965 Plus: Acquisition and integration related costs prior to acquisition close – Operating profit $180,548 Operating profit $180,548 Less: income tax at effective rate 40,804 Net operating profit after tax $139,744 Annualized net operating profit after tax $558,977 Assets $4,391,075 Less: cash and cash equivalents 443,120 Less: accounts payable 340,238 Less: accrued expenses and other payables 456,394 Invested Capital $3,151,323 Annualized net operating profit after tax $558,977 Invested Capital $3,151,323 Return on Invested Capital 17.7% RETURN ON INVESTED CAPITAL Q3 FY21 Supplemental Slides | June 17, 2021 14 ($ in thousands) Source: Public filings Note: 1. See page 20 for definitions of non-GAAP financial measures
3 MONTHS ENDED 12 MONTHS ENDED 5/31/2021 2/28/2021 11/30/2020 8/31/2020 5/31/2020 2/29/2020 11/30/2019 5/31/2021 8/31/2020 8/31/2019 8/31/2018 8/31/2017 Earnings from continuing operations $130,408 $66,233 $63,911 $67,782 $64,169 $63,596 $82,755 $328,334 $278,302 $198,779 $135,237 $50,175 Interest expense 11,965 14,021 14,259 13,962 15,409 15,888 16,578 54,207 61,837 71,373 40,957 44,151 Income taxes 38,175 20,941 21,593 18,495 23,804 22,845 27,332 99,204 92,476 69,681 30,147 15,276 Depreciation and amortization 41,804 41,573 41,799 41,654 41,765 41,389 40,941 166,830 165,749 158,653 131,508 124,490 Amortization of acquired unfavorable contract backlog (1,508) (1,509) (1,523) (10,691) (4,348) (5,997) (8,331) (15,231) (29,367) (74,784) – – Asset impairments 277 474 3,594 1,098 5,983 – 530 5,443 7,611 384 14,372 1,730 Adjusted EBITDA from continuing operations 2 $221,121 $141,733 $143,633 $132,300 $146,782 $137,721 $159,805 $638,787 $576,608 $424,086 $352,221 $235,822 Loss on debt extinguishment – 16,841 – 1,778 – – – 18,619 1,778 – – 22,672 Non-cash equity compensation 13,800 12,696 9,062 9,875 6,170 7,536 8,269 45,433 31,850 25,106 24,038 21,469 Gain on sale of assets (4,457) (5,877) – – – – – (10,334) – – – – Facility closure – 5,694 5,214 2,903 1,863 – 6,339 13,811 11,105 – – – Acquisition settlement – – – 32,123 – – – 32,123 32,123 – – – Labor cost government refund – – (1,348) (2,985) – – – (4,333) (2,985) – – – Acquisition and integration related costs and other – – – – – – – – – 41,958 25,507 – Purchase accounting effect on inventory – – – – – – – – – 10,315 – – Mill operational start-up costs 1 – – – – – – – – – – 13,471 – CMC Steel Oklahoma incentives – – – – – – – – – – (3,000) – Severance – – – – – – – – – – – 8,129 Core EBITDA from continuing operations 2 $230,464 $171,087 $156,561 $175,994 $154,815 $145,257 $174,413 $734,106 $650,479 $501,465 $412,237 $288,092 ADJUSTED AND CORE EBITDA FROM CONTINUING OPERATIONS RECONCILIATION Q3 FY21 Supplemental Slides | June 17, 2021 15 ($ in thousands) Source: Public filings Notes: 1. Net of interest, taxes, depreciation and amortization, impairments, and non-cash equity compensation 2. See page 20 for definitions of non-GAAP financial measures
3 MONTHS ENDED 12 MONTHS ENDED 5/31/2021 2/28/2021 11/30/2020 8/31/2020 5/31/2020 2/29/2020 11/30/2019 5/31/2021 8/31/2020 8/31/2019 8/31/2018 8/31/2017 Earnings from continuing operations $130,408 $66,233 $63,911 $67,782 $64,169 $63,596 $82,755 $328,334 $278,302 $198,779 $135,237 $50,175 Loss on debt extinguishment – 16,841 – 1,778 – – – 18,619 1,778 – – 17,799 Gain on sale of assets (4,457) (5,877) – – – – – (10,334) – – – – Facility closure – 5,694 5,214 2,903 1,863 – 6,339 13,811 11,105 – – – Asset impairments 277 474 3,594 1,098 5,983 – – 5,443 7,081 – 12,136 – Labor cost government refund – – (1,348) (2,985) – – – (4,333) (2,985) – – – Acquisition settlement – – – 32,123 – – – 32,123 32,123 – – – Acquisition and integration related costs and other – – – – – – – – – 41,958 25,507 – Purchase accounting effect on inventory – – – – – – – – – 10,315 – – Mill operational start-up costs – – – – – – – – – – 18,016 – CMC Steel Oklahoma incentives – – – – – – – – – – (3,000) – Severance – – – – – – – – – – – 8,129 Total adjustments (pre-tax) ($4,180) $17,132 $7,460 $34,917 $7,846 – $6,339 $55,329 $49,102 $52,273 $52,659 $25,928 Tax impact TCJA impact – – – – – – – – – $7,550 $10,600 – International reorganization – – – – – – – – – – (9,200) – Related tax effects on adjustments 878 (3,598) (1,593) (7,392) (1,648) – (1,331) (11,705) (10,371) (10,977) (13,236) (9,075) Total tax impact $878 ($3,598) ($1,593) ($7,392) ($1,648) – ($1,331) ($11,705) ($10,371) ($3,427) ($11,836) ($9,075) Adjusted earnings from continuing operations 1 $127,106 $79,767 $69,778 $95,307 $70,367 $63,596 $87,763 $371,958 $317,033 $247,625 $176,060 $67,028 Average diluted shares outstanding (thousands) 122,194 121,752 121,128 120,645 120,279 120,408 119,774 121,430 120,310 119,125 118,146 117,364 Adjusted earnings from continuing operations per diluted share $1.04 $0.66 $0.58 $0.79 $0.59 $0.53 $0.73 $3.06 $2.64 $2.08 $1.49 $0.57 ADJUSTED EARNINGS FROM CONTINUING OPERATIONS RECONCILIATION Q3 FY21 Supplemental Slides | June 17, 2021 16 ($ in thousands) Source: Public filings Note: 1. See page 20 for definitions of non-GAAP financial measures
3 MONTHS ENDED 5/31/2021 2/28/2021 11/30/2020 8/31/2020 5/31/2020 North America Adjusted EBITDA from continuing operations $207,330 $171,612 $155,634 $174,219 $159,394 North America net sales 1,558,068 1,257,486 1,195,013 1,224,849 1,167,081 North America Adjusted EBITDA Margin 13.3% 13.6% 13.0% 14.2% 13.7% Europe Adjusted EBITDA from continuing operations $50,005 $16,107 $14,470 $22,927 $14,270 Europe net sales 284,107 202,066 194,596 179,855 173,817 Europe Adjusted EBITDA Margin 17.6% 8.0% 7.4% 12.7% 8.2% ADJUSTED SEGMENT EBITDA MARGIN Q3 FY21 Supplemental Slides | June 17, 2021 17 ($ in thousands) Source: Public filings
12 MONTHS ENDED 9 MONTHS ENDED 5/31/2021 8/31/2020 8/31/2019 8/31/2018 8/31/2017 8/31/2016 8/31/2015 5/31/2021 5/31/2020 Earnings from continuing operations $328,334 $278,302 $198,779 $135,237 $50,175 $62,001 $58,583 $260,552 $210,520 Interest expense 54,207 61,837 71,373 40,957 44,151 62,121 76,456 40,245 47,875 Income taxes 99,204 92,476 69,681 30,147 15,276 13,976 36,097 80,709 73,981 Depreciation and amortization 166,830 165,749 158,653 131,508 124,490 127,111 135,559 125,176 124,095 Asset impairments 5,443 7,611 384 14,372 1,730 40,028 2,573 4,345 6,513 Amortization of acquired unfavorable contract backlog (15,231) (29,367) (74,784) – – – – (4,540) (18,676) Adjusted EBITDA from continuing operations $638,787 $576,608 $424,086 $352,221 $235,822 $305,237 $309,268 $506,487 $444,308 Capital expenditures and disbursements to stakeholders Capital expenditures 180,921 187,618 138,836 174,655 213,120 163,332 119,580 127,395 134,092 Interest expense 54,207 61,837 71,373 40,957 44,151 62,121 76,456 40,245 47,875 Cash income taxes 73,974 44,499 7,977 7,198 30,963 50,201 61,000 59,041 29,566 Dividends 57,583 57,056 56,537 56,076 55,514 55,342 55,945 43,295 42,768 Total capital expenditures and disbursements to stakeholders $366,685 $351,010 $274,723 $278,886 $343,748 $330,996 $312,981 $269,976 $254,301 Adjusted EBITDA less capital expenditures and disbursements to stakeholders $272,102 $225,598 $149,363 $73,335 ($107,926) ($25,759) ($3,713) $236,511 $190,007 ADJUSTED EBITDA LESS CAPITAL EXPENDITURES AND DISBURSEMENTS TO STAKEHOLDERS Q3 FY21 Supplemental Slides | June 17, 2021 18 ($ in thousands) Source: Public filings Note: 1. See page 20 for definitions of non-GAAP financial measures
3 MONTHS ENDED 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 $1,020,129 $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 56,735 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 $1,076,864 $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 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 debt $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 $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 11,965 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 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 41,804 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 277 474 3,594 1,098 5,983 – 530 369 15 – – 840 935 Amortization of acquired unfavorable contract backlog (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 operations $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 $638,787 $564,448 $560,436 $576,608 $589,554 $586,743 $518,355 $424,086 $385,886 $342,947 Total debt $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 2,156,597 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 $3,233,461 $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 $2,611,879 Net debt to trailing 12 month adjusted EBITDA from continuing operations 1.0x 1.2x 1.1x 0.9x 1.2x 1.6x 1.9x 2.5x 3.2x 3.9x Net debt to capitalization 20% 22% 21% 18% 24% 32% 33% 37% 42% 46% Source: Public filings Note: 1. See page 20 for definitions of non-GAAP financial measures NET DEBT TO EBITDA AND NET DEBT TO CAPITALIZATION RECONCILIATIONS Q3 FY21 Supplemental Slides | June 17, 2021 19 ($ in thousands)
DEFINITIONS FOR NON-GAAP FINANCIAL MEASURES ADJUSTED EARNINGS FROM CONTINUING OPERATIONS 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. CORE EBITDA FROM CONTINUING OPERATIONS 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 capital expenditures and disbursements to shareholders is defined as Adjusted EBITDA less capital expenditures less interest expense, less cash income taxes less dividend payments. 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 Q3 FY21 Supplemental Slides | June 17, 2021 20
THANK YOU CORPORATE OFFICE 6565 N. MacArthur Blvd Suite 800 Irving, TX 75039 Phone: (214) 689.4300 INVESTOR RELATIONS Phone: (972) 308.5349 Fax: (214) 689.4326 [email protected] Q3 FY21 Supplemental Slides | June 17, 2021 21