COMMERCIAL METALS COMPANY 
In the following discussion, references to "we," "us," "our" or the "Company"
mean
There have been no material changes to our critical accounting policies as set forth in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, included in the 2019 Form 10-K.
RESULTS OF OPERATIONS SUMMARY
Business Overview
As a vertically integrated organization, we manufacture, recycle, and market
steel and metal products, related materials and services through a network
including seven electric arc furnace ("EAF") mini mills, two EAF micro mills,
two rerolling mills, steel fabrication and processing plants,
construction-related product warehouses, and metal recycling facilities in
Financial Results Overview
The following discussion of our results of operations is based on our continuing operations and excludes any results of our discontinued operations.
Three Months Ended November 30,
(in thousands, except per share data) 2019 2018
Net sales $ 1,384,708 $ 1,277,342
Earnings from continuing operations 82,755 19,420
Diluted earnings per share 0.69 0.16
Net sales for the three months ended
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a year-over-year decrease in net sales in the three months ended
Earnings from continuing operations for the three months ended
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended
Interest Expense
Interest expense for the three months ended
Income Taxes
Our effective income tax rate from continuing operations for the three months
ended
Unless otherwise indicated, all dollar amounts below are from continuing operations and calculated before income taxes. See Note 14, Business Segments. The operational data presented in the tables below is calculated using averages and, therefore, it is not meaningful to quantify the effect that any individual component had on the segment's net sales or adjusted EBITDA.
Americas Recycling Three Months Ended November 30, (in thousands) 2019 2018 Net sales$ 222,261 $ 302,009 Adjusted EBITDA 3,417 15,434
Average selling price (per ton)
Ferrous $ 182$ 273 Nonferrous 1,983 1,982 Tons shipped (in thousands) Ferrous 492 579 Nonferrous 57 63 Total 549 642
Net sales for the three months ended
Adjusted EBITDA for the three months ended
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months ended
Americas Mills
Three Months Ended November 30,
(in thousands) 2019 2018
Net sales $ 768,893 $ 601,853
Adjusted EBITDA 155,025 113,873
Average price (per ton)
Total selling price $ 611 $ 682
Cost of ferrous scrap utilized 226 307
Metal margin 385 375
Tons (in thousands)
Melted 1,182 909
Rolled 1,155 844
Shipped 1,206 847
Net sales for the three months ended
Adjusted EBITDA for the three months ended
Americas Fabrication
Three Months Ended November 30,
(in thousands) 2019 2018
Net sales $ 571,847 $ 437,111
Adjusted EBITDA 17,481 (36,996 )
Average selling price (excluding stock and buyout sales)
(per ton)
Rebar and other $ 976 $ 868
Tons shipped (in thousands)
Rebar and other 413 319
Net sales for the three months ended
Adjusted EBITDA for the three months ended
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input costs. Adjusted EBITDA does not include the$8.3 million or$11.3 million benefit of the amortization of the unfavorable contract backlog reserve described above. Adjusted EBITDA included non-cash stock compensation expense of$0.7 million and$0.6 million for the three months endedNovember 30, 2019 and 2018, respectively.International Mill Three Months Ended November 30, (in thousands) 2019 2018 Net sales$ 165,389 $ 227,024 Adjusted EBITDA 11,359 32,779 Average price (per ton) Total selling price $ 461$ 547 Cost of ferrous scrap utilized 244 295 Metal margin 217 252 Tons (in thousands) Melted 345 392 Rolled 342 263 Shipped 338 392
Net sales for the three months ended
Adjusted EBITDA for the three months ended
Corporate and Other
Corporate and Other reported an adjusted EBITDA loss of
LIQUIDITY AND CAPITAL RESOURCES
Sources of Liquidity and Capital Resources
We have access to the
We actively monitor our accounts receivable and, based on market conditions and
customers' financial condition, we record allowances as soon as we believe
accounts are uncollectible. We use credit insurance in
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The table below reflects our sources, facilities and available liquidity atNovember 30, 2019 : (in thousands) Total Facility Availability Cash and cash equivalents$ 224,797 $ 224,797 Notes due from 2023 to 2027 980,000 * Revolver 350,000 346,962 U.S. accounts receivable facility 200,000 192,695 Term Loan 160,125 - Poland accounts receivable facility 56,174 51,067 Poland credit facilities 70,218 69,159 Finance leases 39,713 * Other 23,168 * _________________
* We believe we have access to additional financing and refinancing, if needed.
Cash Flows
Operating Activities Our cash flows from operating activities result primarily from the sale of steel, nonferrous metals and related products. We have a diverse and generally stable customer base. From time to time, we use futures or forward contracts to mitigate the risks from fluctuations in commodity prices, foreign currency exchange rates, interest rates and natural gas, electricity and other energy prices. See Note 9, Derivatives, for further information.
Net cash flows from operating activities were
Investing Activities
Net cash flows used by investing activities were
We estimate that our fiscal 2020 capital spending will range from
Financing Activities
Net cash flows used by financing activities were
We regularly evaluate the use of our cash in efforts to maximize total shareholder return, including debt repayment, capital deployment, share repurchases and dividends. We anticipate our current cash balances, cash flows from operations and our available sources of liquidity will be sufficient to meet our cash requirements, including our scheduled debt repayments, payments for our contractual obligations, capital expenditures, working capital needs, share repurchases, dividends and other prudent uses of capital, such as future acquisitions. However, in the event of sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions.
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CONTRACTUAL OBLIGATIONS
Our contractual obligations at
Other Commercial Commitments
We maintain stand-by letters of credit to provide support for certain
transactions that governmental agencies, our insurance providers and suppliers
request. At
We have no off-balance sheet arrangements that may have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. CONTINGENCIES
In the ordinary course of conducting our business, we become involved in litigation, administrative proceedings and governmental investigations, including environmental matters. We may incur settlements, fines, penalties or judgments because of some of these matters. Liabilities and costs associated with litigation-related loss contingencies require estimates and judgments based on our knowledge of the facts and circumstances surrounding each matter and the advice of our legal counsel. We record liabilities for litigation-related losses when a loss is probable and we can reasonably estimate the amount of the loss. We evaluate the measurement of recorded liabilities each reporting period based on the current facts and circumstances specific to each matter. The ultimate losses incurred upon final resolution of litigation-related loss contingencies may differ materially from the estimated liability recorded at a particular balance sheet date. Changes in estimates are recorded in earnings in the period in which such changes occur. We do not believe that any currently pending legal proceedings to which we are a party will have a material adverse effect, individually or in the aggregate, on our results of operations, cash flows or financial condition. See Note 13, Commitments and Contingencies, for more information. FORWARD-LOOKING STATEMENTS
This Form 10-Q 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
provided by our recent acquisitions, demand for our products, steel margins, the
ability to operate our mills at full capacity, future supplies of raw materials
and energy for our operations, share repurchases, legal proceedings, the
undistributed earnings of our non-
Our forward-looking statements are based on management's expectations and
beliefs as of the time this Form 10-Q is filed with the
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• 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 fabrication contracts due to rising commodity pricing;
• excess capacity in our industry, particularly in
availability from competing steel mills and other steel suppliers including
import quantities and pricing;
• compliance with and changes in environmental laws and regulations, including
increased regulation 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;
• failure to retain key management and employees of the Acquired Businesses;
• issues or delays in the successful integration of the Acquired Businesses'
operations, systems and personnel with those of the Company, including the
inability to substantially increase utilization of the Acquired Businesses'
steel mini mills, and incurring or experiencing unanticipated costs and/or
delays or difficulties;
• unfavorable reaction to the Acquisition by customers, competitors, suppliers
and employees;
• 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, including trade measures, political uncertainties and
military conflicts;
• 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;
• new and clarifying guidance with regard to interpretation of certain
provisions of the Tax Cuts and Jobs Act that could impact our assessment;
and
• increased costs related to health care reform legislation.
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You should refer to the "Risk Factors" disclosed in our periodic and current
reports filed with the
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